About this Author
DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

Chemistry and Drug Data: Drugbank
Chempedia Lab
Synthetic Pages
Organic Chemistry Portal
Not Voodoo

Chemistry and Pharma Blogs:
Org Prep Daily
The Haystack
A New Merck, Reviewed
Liberal Arts Chemistry
Electron Pusher
All Things Metathesis
C&E News Blogs
Chemiotics II
Chemical Space
Noel O'Blog
In Vivo Blog
Terra Sigilatta
BBSRC/Douglas Kell
Realizations in Biostatistics
ChemSpider Blog
Organic Chem - Education & Industry
Pharma Strategy Blog
No Name No Slogan
Practical Fragments
The Curious Wavefunction
Natural Product Man
Fragment Literature
Chemistry World Blog
Synthetic Nature
Chemistry Blog
Synthesizing Ideas
Eye on FDA
Chemical Forums
Symyx Blog
Sceptical Chymist
Lamentations on Chemistry
Computational Organic Chemistry
Mining Drugs
Henry Rzepa

Science Blogs and News:
Bad Science
The Loom
Uncertain Principles
Fierce Biotech
Blogs for Industry
Omics! Omics!
Young Female Scientist
Notional Slurry
Nobel Intent
SciTech Daily
Science Blog
Gene Expression (I)
Gene Expression (II)
Adventures in Ethics and Science
Transterrestrial Musings
Slashdot Science
Cosmic Variance
Biology News Net

Medical Blogs
DB's Medical Rants
Science-Based Medicine
Respectful Insolence
Diabetes Mine

Economics and Business
Marginal Revolution
The Volokh Conspiracy
Knowledge Problem

Politics / Current Events
Virginia Postrel
Belmont Club
Mickey Kaus

Belles Lettres
Uncouth Reflections
Arts and Letters Daily
In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

« Good Advice: Get Lost! | Main | The NIH's Drug Repurposing Program Gets Going »

July 19, 2013

Salary Freeze at Lilly

Email This Entry

Posted by Derek

We now return to our regularly schedule program around here - or at least, Eli Lilly is now returning to theirs. The company announced that they're freezing salaries for most of the work force, in an attempt to save hundreds of millions of dollars in advance of their big patent expirations. Some bonuses will be reduced as well, they say, but that leaves a lot of room. Higher-ups don't look for increases in base pay as much as they look for bonuses, options, and restricted shares (although, to be fair, these are often awarded as a per cent of salary).

‘‘This action is necessary to withstand the impact of upcoming patent expirations and to support the launch of our large phase III pipeline,’’ Chief Executive Officer John Lechleiter, 59, said in a letter to employees today, a copy of which was obtained by Bloomberg. ‘‘The current situation requires us to take the appropriate action now to secure our company’s future. We can’t allow ourselves to let up and fail to make the tough choices.”

Lechleiter himself has not had a raise since 2010, it appears, although I'm not sure if his non-salary compensation follows the same trend. If anyone has the time to dig through the company's last few proxy statements, feel free, but actually figuring out what a chief executive is really paid is surprisingly difficult. (I remember an article a few years ago where several accountants and analysts were handed the same batch of SEC filings and all of them came out with different compensation numbers).

But there's not doubt that Lilly is in for it, something that has been clear for some time now. The company's attempts to shore up its clinical pipeline haven't gone well, and it looks like (more and more) they're putting a lot of their hopes on a success in Alzheimer's. If they see anything, that will definitely turn the whole situation around - between their diagnostic branch and a new therapeutic, they'll own the field, and a huge field it is. But the odds of this happening are quite low. The most likely outcome, it seems to me, is equivocal data that will be used to put pressure on the FDA, etc., to approve something, anything, for Alzheimer's.

It's worth remembering that it wasn't very long ago at all that the higher-ups at Lilly were telling everyone that all would be well, that they'd be cranking out two big new drugs a year by now. Hasn't happened. Since that 2010 article, they've had pretty much squat - well, Jentadueto, which is Boehringer Ingleheim's linagliptin, which Lilly is co-marketing, with metformin added. Earlier this year, they were talking up plans for five regulatory submissions in the near future, but that figure is off now that enzastaurin has already bombed in Phase III. Empagliflozin and ramucirumab are still very much alive, but will be entering crowded markets if they make it through. Dulaglutide is holding up well, though.

But will these be enough to keep Lilly from getting into trouble? That salary freeze is your answer: no, they will not. All the stops must be pulled out, and the ones after this will be even less enjoyable.

Comments (19) + TrackBacks (0) | Category: Business and Markets | Drug Development


1. Lane Simonian on July 19, 2013 9:53 AM writes...

Eli Lilly is indeed betting the farm on solanezumab for Alzheimer's disease and on its amyloid imaging drug. Here is why it is not a good bet.

Lilly is trying to get the FDA to approve its drug based on any signs of delay in the progression of the disease. To do so it has cut out 25 percent of the people who had symptoms of Alzheimer's disease but no plaques. This includes people with Alzheimer's disease who only have amyloid oligomers or the amyloid precursor protein.

So the drug does not help about a quarter of the people with Alzheimer's disease. What about the other 75 percent? By lowering plaque levels, the drug may remove copper and zinc entombed in the plaques and this would increase the number of superoxide anions converted into hydrogen peroxide instead of combining with inducible to nitric oxide to produce the principal cause of Alzheimer's disease: peroxynitrites. Go after peroxynitrites and you effectively treat the disease.

This is just a small sample of the evidence that peroxynitrites and not amyloid plaques are the cause of Alzheimer's disease.

J Neurochem. 2001 Jul;78(1):109-20.
C-terminal fragment of amyloid precursor protein induces astrocytosis.
Bach JH, Chae HS, Rah JC, Lee MW, Park CH, Choi SH, Choi JK, Lee SH, Kim YS, Kim KY, Lee WB, Suh YH, Kim SS.
SourceDepartment of Anatomy, College of Medicine, BioGrand Inc., and MRC, Chung-Ang University, 221 Huksuk-dong, Dongjak-ku, Seoul 156-756, Korea.

One of the pathophysiological features of Alzheimer's disease is astrocytosis around senile plaques. Reactive astrocytes may produce proinflammatory mediators, nitric oxide, and subsequent reactive oxygen intermediates such as peroxynitrites. In the present study, we investigated the possible role of the C-terminal fragment of amyloid precursor protein (CT-APP), which is another constituent of amyloid senile plaque and an abnormal product of APP metabolism, as an inducer of astrocytosis. We report that 100 nM recombinant C-terminal 105 amino acid fragment (CT105) of APP induced astrocytosis morphologically and immunologically. CT105 exposure resulted in activation of mitogen-activated protein kinase (MAPK) pathways as well as transcription factor NF-kappaB. Pretreatment with PD098059 and/or SB203580 decreased nitric oxide (NO) production and nuclear factor-kappa B (NF-kappaB) activation. But inhibitors of NF-kappaB activation did not affect MAPKs activation whereas they abolished NO production and attenuated astrocytosis. Furthermore, conditioned media derived from CT105-treated astrocytes enhanced neurotoxicity and pretreatment with NO and peroxynitrite scavengers attenuated its toxicity. These suggest that CT-APP may participate in Alzheimer's pathogenesis through MAPKs- and NF-kappaB-dependent astrocytosis and iNOS induction.

J Exp Med. 2005 Nov 7;202(9):1163-9. Epub 2005 Oct 31.
Protection from Alzheimer's-like disease in the mouse by genetic ablation of inducible nitric oxide synthase.
Nathan C, Calingasan N, Nezezon J, Ding A, Lucia MS, La Perle K, Fuortes M, Lin M, Ehrt S, Kwon NS, Chen J, Vodovotz Y, Kipiani K, Beal MF.
SourceDepartment of Microbiology and Immunology, Weill Cornell Medical College, New York, NY 10021, USA.

Brains from subjects who have Alzheimer's disease (AD) express inducible nitric oxide synthase (iNOS). We tested the hypothesis that iNOS contributes to AD pathogenesis. Immunoreactive iNOS was detected in brains of mice with AD-like disease resulting from transgenic expression of mutant human beta-amyloid precursor protein (hAPP) and presenilin-1 (hPS1). We bred hAPP-, hPS1-double transgenic mice to be iNOS(+/+) or iNOS(-/-), and compared them with a congenic WT strain. Deficiency of iNOS substantially protected the AD-like mice from premature mortality, cerebral plaque formation, increased beta-amyloid levels, protein tyrosine nitration, astrocytosis, and microgliosis. Thus, iNOS seems to be a major instigator of beta-amyloid deposition and disease progression. Inhibition of iNOS may be a therapeutic option in AD.

If you inhibit inducible nitric oxide (which again combines with superoxide anions to produce peroxynitrites), you basically prevent all the major features of Alzheimer's disease and if you use peroxynitrite scavengers you limit the toxicity of the amyloid precursor protein, amyloid oligomers, and amyloid plaques.

Look at the human clinical trials with peroxynitrites scavengers and Alzheimer's disease (Jimbo, et al. Effect of aromatherapy on patients with Alzheimer's disease; Akhondzadeh, et al. Melissa officinalis extract in the treatment with nild to moderate Alzheimer's disease: a double blind, randomised, placebo controlled study; Heo, et al. Heat-processed ginseng enhances the cognitive function in patients with moderately severe Alzheimer's disease). In each case, the peroxynitrite scavenger (eugenol in rosemary essential oil, ferulic acid and eugenol in lemon balm essential oil, and ferulic acid, syringic acid, and vanillic acid in heat-processed ginseng) led to significant improvements in cognitive abilities and also in behavior in the case of lemon balm essential oil and heat-processed ginseng.

The late Mark A. Smith was one of the founders of the peroxynitrite hypothesis for Alzheimer's disease noting that it was critical for the pathogenesis of the disease. Here is what he said about his critics:

"Everything comes down to how one interprets data. There is a lot of scientific noise out there and most people like to play “follow the leader”. The structure of granting agencies actually discourages anything else. I sense the tide turning but think that the dead horse will be likely flogged for a while yet. For example, the Alzheimer’s field is already moving toward earlier and earlier “diagnosis”. Until these people are subjected to anti-amyloid approaches the field will continue [to support the amyloid theory].

I have received a lot of stick for my scientific talks where for over a decade I have challenged the amyloid hypothesis. I typically tell the audience that my views are controversial and that I would really appreciate someone pointing out a flaw in my logic or presenting evidence that shows that I am wrong. Neither has ever happened."

There are two things preventing effective treatments for Alzheimer's disease: one is an insistence that amyloid is the cause of the disease and two (in the United States at least)the dictum that natural products cannot be used to treat diseases. If anyone out there is interested in synthesizing natural compounds to treat Alzheimer's disease, go for it. You might be able to save a company and more importantly lives.

Permalink to Comment

2. Rock on July 19, 2013 10:26 AM writes...

I still would rather see the company do this, than lay off hundreds or thousands of people. That way, employees can decide for themselves whether to stay or go. (Yes, I do know they have already cut in the past).

Permalink to Comment

3. Lane Simonian on July 19, 2013 10:58 AM writes...

The author of this article (David R. Hoffman, Problems developing effective Alzheimer's therapies) brillaintly describes the gamble that Lilly and some other giant pharmaceutical companies are making with anti-amyloid drugs. If they can get a marginal drug approved for the treatment of Alzheimer's disease and a better understanding of the disease does not develop until many years later than their gamble with pay off. Good for Eli Lilly and its employees but not so good for Alzheimer's patients.

Permalink to Comment

4. Anon on July 19, 2013 11:27 AM writes...

@3 "Good for Eli Lilly and its employees but not so good for Alzheimer's patients."

I feel that the FDA's advisory boards are increasingly pushing back from this. I think they recognize that their actions affect how future therapies are pursued. Especially in a era where we are recognizing that a marginal improvement in trial based efficacy may not be an incremental step forward.

Permalink to Comment

5. Hap on July 19, 2013 12:05 PM writes...

Salary freezes are better than pay cuts (actual, not nominal) or firings, although that is not much comfort. I'd probably feel better if I thought that everyone shared in the pain in remote correspondence to their responsibility, but that is exceedingly unlikely.

Would pressure to approve a likely unuseful Alzheimer's drug work? In most places, the governments are the paymasters, and having an expensive drug that lots of people will be taking with little likely effect is not a recipe for fiscal balance. Insurance companies are easier to pressure, but they could always go to their customers and say "Either pay more to cover people taking this drug that isn't likely helpful or allow us not to cover its cost."

Permalink to Comment

6. DrSnowboard on July 19, 2013 2:52 PM writes...

I note Lechleiter is not going the Jobs route of offering to work for a dollar because he believes the company performance will support him....

Permalink to Comment

7. anchor on July 19, 2013 6:19 PM writes...

Lane Simonian: Did you copy it from your one of your previous messages? We get it that the pathogenesis of AZ involves peroxy-nitrates! Please do not clobber us. The folks at Lilly do not want to hear that. Pay cut is better than out right firing that many companies have done it in the past.

Permalink to Comment

8. Lane Simonian on July 19, 2013 6:42 PM writes...

I understand that Lilly does not want to hear it, but maybe someone reading this site for the first time might. Each message that I post while containing some common elements is altered to take into account research that I have not seen before. The message keeps getting refined and contains additional evidence to the point where hopefully even the most hardened critic will have trouble refuting it.

The author of the article that I recommended really hits the crux of the matter.

In Alzheimer's it appears that researchers must complete substantially more work in basic science to understand the fundamental disease process. That means the question facing Merck, Lilly and the other pharmas with beta-amyloid compounds in their pipelines is whether they want to spend another four to seven years and billions of dollars developing products that can be obsolesced shortly after approval.

If the past offers a guide, these pharmas probably figure they can get their products to market before basic science research uncovers the definitive pathway. Even at that point, any clinical development based on a thorough understanding of the Alzheimer's process would require many more years to develop a truly effective drug. In the meantime the marginally effective BACEs and MAb's can still make a ton of money in their role as pacifiers for patients' families.

I am just offering the pathway and the primary causal agent. I don't like to see a lot of money and time wasted on a largely misplaced understanding of the disease, especially when much better alternatives already exist.

Permalink to Comment

9. The Aqueous Layer on July 20, 2013 5:20 PM writes...

I still would rather see the company do this, than lay off hundreds or thousands of people. That way, employees can decide for themselves whether to stay or go. (Yes, I do know they have already cut in the past).

As Derek implied, the next stop gap cost cutting measures will be people. The current freeze is to simply try to hold things over until more clinical data comes in. If it's bad, then the blade will get sharpened. Everyone at Lilly knows this.

Also, with salary freezes, the top performers tend to be the ones to get fed up and leave, not the ones who are simply happy not to be getting RIFed.

Permalink to Comment

10. Anonymous on July 20, 2013 10:28 PM writes...

Ah yes, "the top performers will leave if we don't fire everyone but them" rationalization. Where have I heard that lame excuse before? Why not go all in and just fire everyone but the top 10%? It's a win-win for big pharma. Only the "top performers" contribute to drug development candidates anyway so all you need to run a successful drug company are a few US based "top performers" and a bunch of FTEs in Shanghai or Bangalore. Just think how pleased the Wall Street Banksters would be with such a business model.

Permalink to Comment

11. Gulliver on July 21, 2013 8:21 AM writes...

So. Everyone's jobs and the survival of now depend on a single clinical trial?

I'm sure honesty will prevail in Lilliput.

Permalink to Comment

12. Buyandbye on July 21, 2013 3:28 PM writes...

@lane. Please don't spam these comments. We're all working and hoping that someone can provide benefit to AD patients. When that happens, everyone benefits. As an industry and community of scientists we have failed these patients thus far.

Unfortunately, when pharma get in financial trouble they tend to eat the seed corn (R&D folks).

Permalink to Comment

13. Lane Simonian on July 21, 2013 4:00 PM writes...

I am not unsympathetic to people working on research and development at pharmaceutical companies. I do not like to see them being fired or having their pay frozen or cut back. I don't like to see them being punished for mistakes made by higher-ups.

I also don't like to see Alzheimer's patients and their families being dangled along with false promises and by companies massaging every ounce of the data to maneuver the FDA to approving a drug of very limited benefit. To effectively treat a disease, it is very helpful to know its cause not its "hallmarks." Otherwise you end up spending a decade or more prescribing drugs like Aricept and Namenda that offer symptomatic relief for awhile without fundamentally changing the course of the disease. If you can develop synthetic versions of natural products that actually treat the cause of the disease then everyone wins. Otherwise, Alzheimer's patients and their loved ones are sure to lose, and those working for pharmaceutical companies have a good chance of losing as well.

Permalink to Comment

14. anon the II on July 21, 2013 9:38 PM writes...

@ # 1, 3, 8 and 13

You may have some good points and most of us are confused on how an antibody will work even if the amyloid hypothesis is correct. But for all that typing you've done, all you have as an alternative is aromatherapy.

Aromatherapy? Really?

Permalink to Comment

15. Lane Simonian on July 21, 2013 11:01 PM writes...

It's rare that anyone says anything good about anything I write, so thank you. There are two ways of looking at amyloid antibodies. They do not make it to the brain at all or at least not in sufficeint amounts to affect amyloid levels. Or the amyloid hypothesis is largely wrong. The evidence for the latter is that some people with Alzheimer's disease have only oligomers or the amyloid precursor protein and still have Alzheimer's disease.

It is even rarer for anyone to say anything good about aromatherapy, but aromatherapy is simply inhaling a series of chemicals into the brain. Some of these chemicals (especially eugenol) scavenge and reverse part of the damage done by peroxynitrites in the brain. See for example, Irie, Effect of Eugenol on the Central Nervous System: Its Possible Application to Treatment of Älzheimer's Disease, Depression, and Parkinson's Disease.

Unfortunately, eugenol can also increase agitation by increasing adrenaline levels. Other essential oils (such as lavender, rose, patchouli, sweet orange, for instance) act as sedatives and reduce agitation by reducing adrenaline levels. On the other hand, they probably do not improve cognition. Lemon balm (Melissa officinalis) is unusual because it contains one compound that improves cognition in dementia patients (eugenol) and one that improves behavior (ferulic acid).

I am not wedded to aromatherapy as the only treatment for Alzheimer's disease. Heat-processed ginseng (which contains ferulic acid, syringic acid, and vanillic acid), for instance, has led to improvements in cognition and behavior in patients with moderately severe Alzheimer's disease. Curcumin shows promise as well, but is not well-absorbed into the bloodstream. Several teams including one at UCLA are working on a more bioavailable form of curcumin for Alzheimer's disease. Indeed, altering biochemicals in natural products such as curcumin or ferulic acid may eventually lead to more effective treatments for Alzheimer's disease than aromatherapy alone.

The advantage of aromatherapy at this point is that the beneficial chemicals can easily reach the hippocampus (even with a diminished sense of smell), they are highly concentrated, and a few of the compounds are effective peroxynitrite scavengers.

Permalink to Comment

16. anon the II on July 22, 2013 7:06 AM writes...

Lane, all this stuff you've described is merely a milder form of that ammonia ampule that coach cracked under your nose when you got knocked silly by a crazed linebacker.

Heat-processed ginseng? Seriously?

I'll bet resveratrol works pretty good too.

Permalink to Comment

17. sgcox on July 22, 2013 8:44 AM writes...

Speaking about resveratrol:

Permalink to Comment

18. Doug Steinman on July 22, 2013 8:51 AM writes...

I really don't want to make this comment personal but I guess that is what I am doing. I have an aged parent with advanced dementia who is using a combination of Namenda and Aricept without much benefit. As scientists who work (or worked) in the med chem field, we have spent our lives trying to make the lives of others better. Dementia and Alzheimer's rob people of the most basic component of humanity, their ability to think and to reason effectively. The strain on them and on their families is extreme and does not end until they die. There is so much more work that needs to be done on the basic biochemistry and physiology of these diseases that it is not unreasonable to try whatever clinical trials that people are willing to fund. That being said, these trials must be performed according to the highest standards because giving people false hope is worse than giving them no hope at all.

Permalink to Comment

19. Hap on July 23, 2013 3:44 PM writes...

I wonder why a CEO's compensation is so hard to determine.

Is it because 1) there is so much competition for CEO positions that any advantage companies can get in information makes CEOs cheaper for them, or 2) they don't want their shareholders (or anyone else) to know how much they actually pay their CEO, and how well his pay aligns with the company's performance? I wonder...

Permalink to Comment


Remember Me?


Email this entry to:

Your email address:

Message (optional):

The Last Post
The GSK Layoffs Continue, By Proxy
The Move is Nigh
Another Alzheimer's IPO
Cutbacks at C&E News
Sanofi Pays to Get Back Into Oncology
An Irresponsible Statement About Curing Cancer
Oliver Sacks on Turning Back to Chemistry