Evolution of a deal

The relationship between Applied Molecular Evolution Inc. and Eli Lilly and Co. started out like most between technology companies and big pharma: with selected deals to optimize LLY compounds. But while most technology collaborations go no further, in this case LLY believes the technology is sufficiently useful to apply much more broadly. Last week, the pharma company announced that it would buy AMEV for a net $400 million in cash and stock.

Lilly's move would be the second time the pharma company has folded a technology partner into its value chain, a move that happens less frequently than might be imagined (see "Platform Acquisitions"). ...