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Eli lilly & ranbaxy

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  • 1. Eli Lilly & Ranbaxy:A Joint venture Odyssey
  • 2. Global Pharmaceutical industry in the 1990s.
    Mainly concentrated in the United States, Europe, and Japan
    Developing a drug from discovery to launch took 10 to 12 years and cost ???
    Between $500-$800 million.
    Drugs were strictly controlled by government agencies such as the Food and Drug Administration (FDA)
  • 3. Patents
    Product Patent
    Process Patent
    Covered the chemical substance itself
    Offered typically 20 years of protection
    Usually a lag time of 10-12 years by the time the patent was obtained and the launch date
    Covered the method of processing or manufacturing the product
    Very little protection because it was easy to slightly modify the process
  • 4. Problems
    Price Controls in different countries
    Prices more than double in Canada from U.S.
    Parallel Trade: an outside company sells at patented product in a market not designated to sell the drug
    Generic Drugs
  • 5. Indian Pharmaceutical Industry in 1990s
    Health insurance was not commonly available
    First Indian pharmaceutical company not until 1954
    Indian drug prices were estimated to be 5%-20% of U.S. prices due to terrible patent laws
    Prime minister Gandhi in 1982:
    “The idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death.”
  • 6. 1990 figures for per capita annual expenditure on drugs
    $412 in Japan
    $222 in Germany
    $191 in United Kingdom
    ?? In India
    $3
  • 7. Eli Lilly & Company
    Founded in 1876 with $1400 and 4 employees
    Chairman Dick Wood decided to take the company global in the mid-1980s
    By 1992, Lilly manufactured in 25 countries and sold in more than 130 countries
  • 8. Ranbaxy
    Began as a family business in the 1960s
    By the 1990s, it grew to become India’s largest manufacturer of bulk drugs and generic drugs
    Had a domestic market share of 15%
  • 9. Joint Ventures: Why it works
    Sony Ericsson
    http://www.youtube.com/watch?v=97A7JnMDqd8
  • 10. The start of the JV
    Ranbaxy would supply certain products they already made under the JV and finish some of Lilly’s products locally in India. Ranbaxy would also package and distribute Lilly’s products.
    JV signed in November 1992.
    Each had a 50% stake with an initial investment of roughly $10 million
  • 11. How it worked
    Andrew Mascarenhas of Lilly and Rajiv Gulati of Ranbaxy were put in charge
    Hired salespersons and trained them with Lilly’s ethical codes and training programs
    Lilly made their name in India by something very important and different: honesty and integrity
    Ranbaxy was driven by the generics business, Lilly was driven by innovation and discovery
  • 12. And they’re off…
    First products were human insulin from Lilly and a few generics from Ranbaxy
    Very hard to be profitable because of India’s regulations
    Ended up focusing on 2 groups: Off patents drugs where Lilly could add a lot of value and patented where there was a significant barrier
    By 1996, they finally break-even and become profitable
  • 13. Later in the JV
    By 2001, they became the 46th largest pharmaceutical company in India out of 10,000 companies
    Ranbaxy had changed their mission to being a “research-based international pharmaceutical company with $1 billion in sales by 2003.”
    Ranbaxy also made 3 other manufacturing/marketing investments in developed markets
  • 14. Before the Breakup
    In 2005, India granted product patent recognition to all new chemical entities
    There was a slowdown in growth because of intense price competition, a shift toward chronic therapies, and the entry of large players in the generic market.
  • 15. The breakup
    Eli Lilly was well established now in India.
    Ranbaxy had changed their mission and now want to be more like Lilly
    Ranbaxy expected to price its stakes as high as $70 million
    Eli Lilly bought their stake for $17 million.
    They would concentrate mainly on diabetes, cardiovascular, infectious diseases, and cancer.
    Lilly also saw this as a new opportunity for clinical trials