Eli lilly & ranbaxy


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Eli lilly & ranbaxy

  1. 1. Eli Lilly & Ranbaxy:A Joint venture Odyssey<br />
  2. 2. Global Pharmaceutical industry in the 1990s.<br />Mainly concentrated in the United States, Europe, and Japan<br />Developing a drug from discovery to launch took 10 to 12 years and cost ???<br />Between $500-$800 million. <br />Drugs were strictly controlled by government agencies such as the Food and Drug Administration (FDA)<br />
  3. 3. Patents <br />Product Patent <br />Process Patent<br />Covered the chemical substance itself <br />Offered typically 20 years of protection<br />Usually a lag time of 10-12 years by the time the patent was obtained and the launch date<br />Covered the method of processing or manufacturing the product<br />Very little protection because it was easy to slightly modify the process<br />
  4. 4. Problems <br />Price Controls in different countries<br />Prices more than double in Canada from U.S.<br /> Parallel Trade: an outside company sells at patented product in a market not designated to sell the drug<br />Generic Drugs<br />
  5. 5. Indian Pharmaceutical Industry in 1990s<br />Health insurance was not commonly available<br />First Indian pharmaceutical company not until 1954<br />Indian drug prices were estimated to be 5%-20% of U.S. prices due to terrible patent laws<br />Prime minister Gandhi in 1982:<br /> “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.” <br />
  6. 6. 1990 figures for per capita annual expenditure on drugs<br />$412 in Japan<br />$222 in Germany <br />$191 in United Kingdom<br />?? In India<br />$3<br />
  7. 7. Eli Lilly & Company<br />Founded in 1876 with $1400 and 4 employees<br />Chairman Dick Wood decided to take the company global in the mid-1980s<br />By 1992, Lilly manufactured in 25 countries and sold in more than 130 countries<br />
  8. 8. Ranbaxy<br />Began as a family business in the 1960s<br />By the 1990s, it grew to become India’s largest manufacturer of bulk drugs and generic drugs <br />Had a domestic market share of 15%<br />
  9. 9. Joint Ventures: Why it works<br />Sony Ericsson <br />http://www.youtube.com/watch?v=97A7JnMDqd8<br />
  10. 10. The start of the JV<br />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.<br />JV signed in November 1992. <br />Each had a 50% stake with an initial investment of roughly $10 million <br />
  11. 11. How it worked<br />Andrew Mascarenhas of Lilly and Rajiv Gulati of Ranbaxy were put in charge<br />Hired salespersons and trained them with Lilly’s ethical codes and training programs<br />Lilly made their name in India by something very important and different: honesty and integrity<br />Ranbaxy was driven by the generics business, Lilly was driven by innovation and discovery <br />
  12. 12. And they’re off…<br />First products were human insulin from Lilly and a few generics from Ranbaxy<br />Very hard to be profitable because of India’s regulations<br />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<br />By 1996, they finally break-even and become profitable<br />
  13. 13. Later in the JV <br />By 2001, they became the 46th largest pharmaceutical company in India out of 10,000 companies<br />Ranbaxy had changed their mission to being a “research-based international pharmaceutical company with $1 billion in sales by 2003.” <br />Ranbaxy also made 3 other manufacturing/marketing investments in developed markets<br />
  14. 14. Before the Breakup<br />In 2005, India granted product patent recognition to all new chemical entities<br />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.<br />
  15. 15. The breakup<br />Eli Lilly was well established now in India.<br />Ranbaxy had changed their mission and now want to be more like Lilly<br />Ranbaxy expected to price its stakes as high as $70 million<br />Eli Lilly bought their stake for $17 million.<br />They would concentrate mainly on diabetes, cardiovascular, infectious diseases, and cancer.<br />Lilly also saw this as a new opportunity for clinical trials<br />