Clowes quickly came to an agreement with the University of Toronto for insulin production. The Toronto team was being very careful. They were afraid of fraudulent manufacturers selling ineffective insulin, a significant problem in those days before government regulatory agencies cleaned up the seedier side of pharmaceuticals. Lilly was a for-profit company and had to protect their interests also.
The agreement was revolutionary; the first between a University and a for-profit company. The agreement contained seven main points. [Lily history brochure, by Gene Mcormick 1971].
- Lilly had one year (the experimental period) to develop insulin complying with Toronto’s standards. In return, Lilly had exclusive rights to sell the insulin in the US, Mexico, Cuba, and Central and Latin America only.
- Both parties would agree on a set of physicians and institutions that could receive insulin either for free or at cost.
- Lilly would provide Toronto 28% of each lot that they distributed for free and 12% if they distributed it at cost.
- Clinical reports received by Lilly would be shared with Toronto.
- Lilly and Toronto would share any improvements they made in production or testing of insulin.
- After the one year experimental period, Lilly would be granted a license and pay a 5% royalty on net sales to the University of Toronto.
- The University of Toronto agreed to not divulge any information provided by Lilly and that the licensing of other firms would be on the same terms as it would receive.
The agreement was signed on May 30, 1922. Clowes returned to Indianapolis, appointed a team of engineers led by George Walden, and immediately began work on purifying insulin.