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Pharmaceutical companies often face a daunting R&D challenge. When a blockbuster drug loses its patent protection, the drain on revenue and profit is immediate. Meanwhile, it takes a huge amount of time (12 to 15 years) and an awfully big budget (approximately $800 million) to bring a major drug to market. Finally, scientists don't have many places to go for help. Most drug research is done in secret; researchers rely on the small, personal networks within their companies.

Eli Lilly and Co. was facing all of those challenges as it prepared to confront "Year X" (2001), the year that its patent for Prozac would expire. Executives knew that Year X would spark a major loss of revenue; at its peak, Prozac accounted for 34% of annual sales. The natural response, which Lilly pursued, was to hunker down and devote armies of scientists and vast amounts of money to the search for the next blockbuster drug.

But Lilly launched another experiment as well. It helped form a wholly owned subsidiary called InnoCentive LLC, which does what the name implies: It creates incentives for innovation. The InnoCentive Web site is designed to tap a global community of scientists who work on critical problems that chemistry-driven companies want to crack but can't. InnoCentive awards as much as $100,000 to scientists who unravel a problem. In return, companies get the intellectual-property rights to the solution, which is often an "intermediate" of a new drug (a substance formed in the middle stage of a series of chemical reactions).

"We're punching a hole in the side of the laboratory and exposing mission-critical problems to the outside world," explains Darren J. Carroll, president and CEO of InnoCentive and an Internet veteran. "This isn't sock puppets or Super Bowl advertising. It's using the Net to communicate, collaborate, and innovate."

Lilly's development team dubbed early iterations of the InnoCentive prototype "BountyChem," and its software logo initially depicted chemical compounds surrounded by a bull's-eye. Although the team was building a Web site for the 21st century, its members were inspired by a 19th-century business model -- that of the bounty hunters of the Wild West.

Here's how the model works: Drug companies, called "seekers," go to the site and put up a kind of "Wanted" poster that describes the target they're trying to nail. Bounty-hunter scientists, called "solvers," sign a confidentiality agreement and then go to a secure "project room," which contains data and product specifications related to the problem. Like the bounty hunters of old, solvers take on much of the risk in hopes that they will be able to earn a reward.

By harnessing the Web, InnoCentive has built a virtual community of scientists that puts the organization "within one or two degrees of separation from every single organic chemist in the world," says Carroll. So far, 7,000 scientists have registered at InnoCentive, and there are 2,400 project rooms in use, organized around 33 problems.

As of early 2002, Werner Mueller, now an independent chemist and formerly head of technology for the specialty-chemicals group of pharmaceutical giant Hoechst/Celanese (before it became part of Clariant), has bagged InnoCentive's biggest bounty. He devised a two-step synthesis for the compound 4-(4-hydroxy-phenyl) butanoic acid, an intermediate for a drug that Lilly is developing.