Companies inked a 10-year agreement under which Covance will provide expanded drug development services.

Covance is acquiring Eli Lilly’s 450-acre early drug development campus in Greenfield, Indiana for $50 million. Covance will use this facility to provide Lilly as well as other firms with services. The service contract with Lilly is for the next years and is valued at $1.6 billion.

About 260 Lilly employees are impacted by the sale of the site. These employees will receive an offer for a position with Covance. They also have the option of appling for limited roles within Lilly. Employees who depart Lilly will reportedly each receive a competitive severance package. An additional 225 Lilly employees currently based in Greenfield will move to Lilly sites in Indianapolis.

Covance will assume ownership of the site and operations on or about October 1, 2008. Covance, which already conducts preclinical toxicology and early-stage clinical work for Lilly, will gain responsibility for Lilly’s non-GLP toxicology, in vivo pharmacology, quality control laboratory, and imaging services. The contract also includes a committed level of clinical pharmacology, central laboratory, GLP toxicology studies, and clinical Phase II-IV services.

Lilly reports that this agreement is part of a series of actions the company is taking to restructure its R&D organization. “Covance has proven they can help accelerate drug development timelines and improve efficiencies with Lilly,” points out John Lechleiter, Lilly CEO. “This collaboration will help us make our fixed cost infrastructure more flexible.”

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