How Eli Lilly Let a Billion-Dollar Molecule Slip Away and Make a Fortune for Vertex

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Around the time telaprevir started nearing its first human studies, Lilly tried to renegotiate the original deal it had struck with Aldrich that heavily favored Vertex, according to Tung. Lilly had agreed to pay for clinical development of the drug, tiered royalties to Vertex on potential North American sales of the treatment in the 20-percent range, as well as a portion of funding for Vertex’s planned specialty drug sales force, Aldrich says.

“I assume Lilly’s projections for producing that molecule and running the clinical program got very high as the drug advanced,” says Aldrich, who left Vertex in 2001, the year before the company and Lilly terminated their collaboration. “Add in the projected cost of a big launch in a new area, and the royalty and marketing support built into the deal with Vertex; at some point the projected return-on-investment must have turned negative.”

Tung, who remained at Vertex until 2005, says that unspecified personnel changes at Lilly also factored into the pharma giant’s decision to nix its partnership with Vertex. “Within Lilly, there were personnel issues that led toward this not being one of their more favored programs,” Tung says. “Some of the champions of the program within Lilly eventually got sidelined, so their political ability to push this forward was compromised.” Tung didn’t name who the telaprevir champions were at Lilly, or identify who put the kibosh on the program at Lilly later on.

Eli Lilly did not return a phone call seeking comment on its former partnership with Vertex this week.

In the ultimate pact to end the deal with Lilly, Vertex kept exclusive worldwide rights to telaprevir and Lilly was granted unspecified royalties on potential sales of the drug and others discovered in their collaboration. In the years that followed, Vertex went on to form separate deals to co-develop the drug with Janssen Pharmaceutica, a unit of New Jersey-based health products giant Johnson & Johnson (NYSE:JNJ), and the Japanese drugmaker Mitsubishi Tanabe, for markets outside the United States. Vertex retains exclusive rights to the drug in this country.

Vertex aims to confirm the results of its Phase III study in data from two other late-stage trials, the first of which will be revealed this month and the second in September. As of March 31, the company has spent more than $2.8 billion since its founding in 1989, much of it on the development of telaprevir. So expectations for the drug are quite high.

“Vertex has spent a lot of money to get to this point,” says Aldrich, who still works closely with Tung as co-founder and chairman of Concert. “If telaprevir had failed or just stumbled at any point along they way, they would have been in big trouble. At this point, it looks like the bet will pay off big for Vertex.”

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3 responses to “How Eli Lilly Let a Billion-Dollar Molecule Slip Away and Make a Fortune for Vertex”

  1. I cannot wait until this medicine comes out! I am excited and you have given me HOPE that I might actually defeat Hep-C that has been killing me for years.

  2. Stephen Randolph says:

    It’s about time!!! I wish the fda would get off their butts and get this drug going. I have had hep c since 1984 and it is a lot of fun having it. Mr doctor tells me 06/11 it will be available but that is not soon enough for me. Let me try it now before any further damage is done. What is the worst thing that could happen to me…..the drug does not work so I think I should be the option to take it now or not.