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Are Lilly & Covance Trend Setters?

GSK said today that it had finalized plans to sell its Medicines Research R&D center in Verona, Italy, to contract research organization Aptuit. Normally a change of ownership causes fear in the hearts of employees, but in this case, all 500 workers in Verona will be transferred to GSK. They can do that because GSK is hiring Aptuit to perform R&D services at the site.

This kind of arrangement sounds awfully familiar. Readers may recall that in 2008, Eli Lilly sold its Greenfield, Ind., operations to drug development firm Covance. A good chunk of the Lilly staff came with the deal, as did a nice, fat, ten-year R&D contract worth some $1.6 billion. Covance is conducting toxicology testing and providing some other R&D functions for Lilly, and more recently signed a three-year pact to conduct analytical testing of Lilly’s bioproducts.

So why farm out what you previously owned? Lilly has said its Covance collaboration is about risk sharing and cost savings. The big pharma company thinks it can save tens of millions of dollars each year by putting the ball in Covance’s hands. Meanwhile, the goal is to reduce the amount of time it takes to choose a lead candidate and advance it through proof-of-concept studies in humans.

If rumors are true, Sanofi-Aventis will be the next to adopt this type of arrangement. Dow Jones reported this week that Sanofi would sell its Porcheville, France, and Alnwick, U.K., sites, along with 300 or so employees, to Covance. I’m going to go out on a limb and guess that the deal will also include an R&D contract.

In the press release, GSK’s R&D head Moncef Slaoui said the Aptuit deal “a modern option for drug discovery expertise to remain as part of the science research community in Italy.” Clealry, GSK had its hands tied by the Italian labor union, and couldn’t just shut down the site or compromise jobs in its sale. But I’m wondering how much money it will save by putting the work in other hands—well, the same hands under a new employer. How much of an impact can this strategy have?

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