Convince Me Why Investing In Alzheimer's R&D Is A Good Idea
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
From The May 2016 Issue
Why Lilly's Derica Rice Isn't Your Typical CFO
At a recent conference I overheard a VC admit that a few years ago if a biotech startup approached their company with an idea, no matter how good the data might seems, if it involved Alzheimer’s disease, his company was not interested in backing it. While his thinking may seem rather closed minded, it is not without good reason. For the past 10 years, the failure rate for Alzheimer’s drugs in Phases 2 and 3 has been 99.6 percent, which is higher than any other indication. With this in mind, I asked Lilly’s CFO, Derica Rice (featured in the May 2016 issue of Life Science Leader magazine), to convince me why the company’s continued focus on this disease area to be a good financial investment. “Clearly, it is a huge unmet need,” he begins. “There is nothing out there today that treats the progression of Alzheimer’s. We believe Lilly is uniquely positioned and has a unique set and depth of expertise that maybe isn’t necessarily replicated in other places.” As such, Rice believes it’s Lilly’s duty to go after this dreaded disease. “We have been investing in Alzheimer’s R&D for over 25 years,” he reminds. “This type of commitment not only has the potential to give Lilly a strategic business advantage, but helps to separate us from the pack.”
But just as any investor wouldn’t invest all their money in just one company, Lilly isn’t investing all their R&D efforts in just one disease “Alzheimer’s is one of five therapeutic areas that we are focused on. What I say to our shareholders is, ‘While we are pursuing finding a drug that affects Alzheimer’s, at the same time we are pursuing opportunities to improve patient lives in the areas of oncology, diabetes, autoimmune diseases, and pain disorders.’” Rice conveys that these are the five core areas where Lilly has deep knowledge and expertise that can be leveraged into meaningful outcomes. “We have tried to be focused on where we are, and are not, playing,” the CFO decrees. “We are not just a one therapeutic area or a one drug bet (i.e., solanezumab, a monoclonal antibody being investigated for Alzheimer’s) company.” Rice realizes that some people view Alzheimer’s R&D as being risky. This is one of the reasons why Lilly takes a diversified portfolio approach to managing its R&D efforts. “Take tech stocks,” he analogizes. “Most people wouldn’t take their entire portfolio and roll the dice on Groupon. You would probably also have Apple, IBM, Facebook, Symantec, or some other stock that may be a little more stable to balance the risk. Similarly, this is how we approach our R&D portfolio from a risk management standpoint.” Though Rice is a finance guy, he co-chairs Lilly’s R&D portfolio subcommittee with Jan Lundberg, Ph.D., EVP science and technology and president of Lilly Research Laboratories. “While we are pursuing interesting science, we are also pursing it through the lens of a portfolio of risk management across a number of different molecular opportunities,” he reiterates.
Rice believes risk management to be one of the biggest challenges biopharmaceutical CFOs face. “Whether a new innovation comes from your internal labs, or you buy it on the open market, you still have to figure out how to pick winners versus losers,” he concludes. Though this CFO knows that it is not possible to get every molecule right, a good way to hedge your R&D investment bets is through a diversified approach to managing your R&D portfolio.