Eli Lilly bonuses now tied to its troubled R&D effort

Eli Lilly ($LLY) employees now have a big stake in the success of their R&D programs--whether they like it or not. Faced with a dramatic need to come up with some blockbusters to make up for the impending loss of patent protection for Zyprexa, the company is now tying its cash bonus program for all workers to its success in the pipeline.

Unlike most other big pharma companies, Eli Lilly CEO John Lechleiter has insisted on concentrating its focus on its own R&D programs rather than big buyouts that include marketed products alongside late-stage therapies. But Lilly has been handed a series of setbacks as its late-stage therapies failed to live up to expectations. Now employees will see every victory and defeat reflected in their bank accounts. In a regulatory filing the company said that bonuses will be triggered as drugs move into late-stage trials or achieve regulatory approval, a personal milestone plan that would not have been worth much over the last year.

"Advancing our drug pipeline is a critical part of our strategy," a Lilly spokesperson told Bloomberg. "This gives additional incentive to support that strategy."

Lechleiter hasn't excused himself from the pain of its research failures. The CEO's pay last year fell to $16.5 million, down 21 percent. And he's getting no increase in base pay or incentives for 2011 as the company faces the first onslaught of generic competition to Zyprexa.

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