Changing Face of CRO's

As we remarked upon earlier on this blog post, Covance Inc. entered a deal with Eli Lilly and Co. to purchase Greenfield Laboratories in Indiana for $50 million, while also entering a contract research deal for $1.6 billion. This new business model for Contract Research Organization and Drug companies was recently discussed in this article from redOrbit. As the article quotes:

"The Covance deal represents the next phase," says Douglas Peddicord, executive director of the Association of Clinical Research Organizations in Washington, D.C. "It marks a move from a contract research organization providing outsourced, disintegrated services to one where it is in fact going to be a strategic partner in Eli Lilly's drug development work."

The article further quotes Peddicord as saying:

"Development projects that used a higher degree of clinical research outsourcing got to the finish line, as in submitting a new drug application to the FDA [Food and Drug Administration], 30 days faster than others without any diminishing in quality,"

It will be interesting to see if more and more companies will reach similar agreements if the Covance/Eli Lilly deal prove fruitfull.

Eli Lilly and Co. To Sell Greenfield Laboratories

In an update from a previous post, Eli Lilly, after deciding to cut costs as a result of the current economic climate, choose to sell their Greenfield Laboratories in Hancock County, Indiana. Covance, a contract research organization will be purchasing the lab for $50 million. While the lab was previously off limits for use by outside sources, with the change of hands, Covance will allow outsiders to come in and use the facilities for a fee. This article quotes Joe Herring, CEO and Chairman of Covance:

“Today's announcement represents an innovative approach to the R&D productivity challenges our pharmaceutical clients are facing,

Herring was also quoted as saying that it

"carves a new path to growth for both Covance and the CRO industry.”

The article continues by mentioning that Herring also was noted as stating that this marks a shift in dynamic where companies are changing from being a “fully-integrated pharmaceutical company” to a “fully-integrated pharmaceutical network”.

This new development is in line with what many of our previous posts have said about the changing environment for pharmaceutical companies who are starting to outsource more of their research and development to contract research organizations.