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Eli Lilly - The Biggest R&D Spenders In Biopharma

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Company: Eli Lilly
2011 spending: $5 billion
2010 spending: $4.88 billion
Change: +3%
Percentage of revenue: 20.6%

Eli Lilly ($LLY) started 2011 with a burst of enthusiasm for its new partnership with Boehringer Ingelheim, which focused on developing new diabetes drugs. But the next 12 months proved a rocky road for Eli Lilly, where the stakes on its multibillion-dollar R&D gamble keep going higher and higher.

The key event for Eli Lilly was the patent expiration on Zyprexa. With generic competition eating into its fourth quarter profits, the heat is on to get new products to the market. But Lilly has had little to boast about on that score in recent times. The Boehringer pact proved so troublesome for longtime Lilly partner Amylin Pharmaceuticals ($AMLN) that the biotech--which had sued Lilly over the deal--opted to buy Lilly out of its partnership on Bydureon shortly after its approval.

Despite the slow progress on the development front, Eli Lilly CEO John Lechleiter has been a consistent standard bearer for the R&D division, steadfastly maintaining that the R&D division will deliver new products. The company ended 2011 with 11 products in late-stage development.

Of all those Phase III programs, though, the spotlight is squarely on solanezumab, Lilly's second try at coming up with a new treatment for Alzheimer's. Semagacestat failed in the clinic, and now Lilly is closing in on the definitive results for this new effort to clear beta amyloid, a toxic protein considered a possible trigger for the disease.

A win here would provide Lilly with all the boasting rights it would need for some time. With no treatments available to modify the disease, even a relatively small benefit for patients would translate into massive sales. But analysts are keenly aware that Lilly's chances of a positive outcome here are extremely slim. No one clearly understands the cause of the disease, or how to treat it.

Lilly acquired Avid Radiopharmaceuticals in an $800 million deal so it could lay claim to the Alzheimer's diagnostic test ahead of a likely approval. As usual, things didn't work out quite like Lilly expected, with a regulatory win delayed by the FDA's uncertainties over whether doctors would really understand how to use it. Now that the approval finally arrived, Lilly is left with a test that's primarily going to be useful in ruling out the disease or for testing experimental meds.

Lechleiter has consistently sought more time to prove that the R&D group can produce. But a late-stage failure for solanezumab would ratchet up the pressure to fever pitch, making this program a make or break event for top management at Lilly. A late-stage success will silence its critics, but failure here would be met with a raucous chorus of jeers.