Lilly forges multi million dollar supply chain deal

The Indiana-based firm will be providing global materials management services for Lilly's pipeline of products.

In order to facilitate this, BioConvergence has invested in new equipment and made a 21,000 square foot expansion to its existing facility.

Company CEO Alisa Wright said the contract has so far created 15 new jobs - an increase of over 50 per cent - and over the duration of the relationship this is expected to balloon to 170 positions by 2011.

Further facility expansions are also intended.

Commenting on the arrangement, Lilly's vice president of Product Research and Development, Bill Heath, said that his company "recognises the growing need to develop fully integrated networks with external partners".

"This deal is part of our ongoing transformation of moving Lilly from a fully integrated pharmaceutical company to a fully integrated pharmaceutical network".

He added that the partnership will allow Lilly to lower the cost of its pipeline's development process by introducing efficiencies within the global supply chain.

In December the drug giant became the latest big pharma company to signal plans of a vigorous commitment to outsourcing in a bid to prevent its fortunes fading.

The company said it is intending to take on a new, leaner shape, forming itself into a "network structure" made up of third party service providers and contract firms, in its quest to ensure a rosy bottom line in these turbulent pharma times.

The firm was slower off the mark than most of its larger rivals in announcing such plans - in the past two years over ten of the big guns have announced similar restructuring and externalisation strategies, complete with plant closures and ensuing planned job cuts, ranging from 1,000 to 10,000 in the case of the drug don Pfizer.

However, Lilly is insisting that it won't be going down that road in such a bold manner: "We are not doing it with big, flashy announcements of a reduction of 5,000 heads," said company CEO and chairman Sidney Taurel said at the time.

Lilly is no stranger to outsourcing, and already relies on more than 80 contactors to perform various functions across its business.

The majority of its auxiliary staff (such as cleaners) are contractors, while 20 per cent of its manufacturing and its sales representatives and 40 per cent of its IT work is also outsourced.

5,000 internal jobs have slowly been eroded over the past few years in this manner.

Its latest resolve to step up the practice will see an increase in the number of back office and support roles pushed out the door, such as human resources and finance, and a huge proportion - up to half - of its precious preclinical and clinical research and development will also be entrusted to third parties by 2010 in a bid to slash costs and increase productivity.

Indeed the company has since formed partnerships with two Indian research firms, Suven Life Sciences, in a deal that will focus on preclinical research of molecules in the therapeutic area of central nervous system (CNS) disorders; along with Nicholas Piramal's research arm, in a 'risk and reward' sharing alliance where the two firms will both independently but simultaneously carry out early clinical development programmes on two different, unidentified compounds directed against the same target.