This document discusses Eli Lilly and Company's drug development strategy. It notes that the pharmaceutical industry is very profitable but also high-risk and capital intensive. Eli Lilly aims to shorten its drug development cycle through acquisitions and adopting new technologies like combinatorial chemistry. The document then focuses on Eli Lilly's migraine drug project and evaluates three scenarios for developing its lead compound, considering factors like market share, patent expiration, and clinical trial success rates. Experts provide varying estimates of clinical trial success under each scenario. The document concludes by recommending that Eli Lilly continue investing in new technologies to cut development times while also maintaining a large CNS drug portfolio and pipeline to mitigate risks.

1. ELI LILLY AND COMPANY:
DRUG DEVELOPMENT
STRATEGY
Presentedby:
(Group4)
ManasSingh:72
ManvendraP.S.Bisht:73
Mohd.Mohtashim:78
NiteshDalal:87
PrateekDharSharma:99
PrateekKanchan:100

2. Pharmaceutical Industry
 Most profitable industry with annual worldwide pharmaceutical sales of
around $250billion
 Drugs targeted towards depression, peptic ulcer disease, hypertension.
 First mover advantage: First three drugs introduced captured 80% of the
market
 Effort and Capital intensive: 15-20% of sales spent in R&D
 Each drug has to pass 3 phases of clinical safety: Average time to market-
14.8 years
 7out of 10 product failed to return on investment
 Price slashed (80%) after expiry of patent (20 years)
 Priority was to shorten lead time
 Acquisition of innovative and cost effective firms
 Incorporate breakthrough technologies like combinatorial chemistry

3. Environmental Changes
 Entrants of new players due to patent expirations
 In turn increased competition in future and monopolistic
competition
 Innovation and cost benefits at the heart of product design
and development
 Technical advancements like combinatorial chemistry,
genetic engineering ,etc.
 Pressure to reduce drug development cycle

4. Eli Lilly Company
 Founded in Indianapolis, Indiana in 1876
 By 1994 it expanded in over 150 countries with sales of
$5.7billion
 Gained prominence by introducing human insulin in 1980 and
developing innovative anti depressant Prozac
 Company expanded into allied business such as diagnostics
and animal products
 An $11billion drop in company stock value between March
1991 and April 1993
 1993 Tobias, CEO, sold medical device and diagnostic unit to
focus on core business
 Acquired Sphinx Pharmaceuticals: Increase the synthesizing
capability by 50 times and capacity to screen compounds by 8
times

5. INNOVATION IN PHARMACEUTICAL
INDUSTRY

6. Synthetic chemistry
 More powerful than the naturally occurring compounds
 Made possible to develop compounds never seen before
 Cumbersome process: Drugs were made one at a time.
 Costs: $5000-$10000 per compound
 Only 10 out of 10000 made into human clinical trials
 Genetic engineering and rational drug discovery
 R&D process shifted from random screening process towards
a rational drug discovery

7. Combinatorial Chemistry
 A library of related molecules was created simultaneously
with base remaining the same
 Various combination of compounds tried clinically
 Slow pace of screening: Often jump on early leads
High Throughput screening
•Testing by Robots
•The fit was defined through a colour change or any
other receptor

8. CNS Diseases
 CNS accounted for about 10% lifetime years lost
 Lilly was spending around 1billion US$ on research for
diseases like insomnia, migraine, clinical depression,
which affected over 10% of population
 CNS market was around 11.1 billion US$ 80 % from
G7nations
 Success of serotonin based Prozac(coined as billion dollar
blockbuster drug)
 Imitrex (Glaxo Wellcome’s) for Migraine : Adverse effect
on heart vessels

9. Lilly’s Migraine Project
 Focus on the side effects and drawback of Imitrex
 After 4 years of screening over 1000 serotonin like
compound a good lead was found: LY329511
 Combichem to quicken process
 Combichem generated compounds that were only 80-90 %
pure
 Generating a library of millions of compounds could
outstrip the capacity of a screen capable of processing
only a thousand compounds

10. Take the leadmigraine compound directlyintoclinicaland bring it to
market as quickly as possible.
Scenario 1

11.  Serotonin 1f based compound will hit market in 2001
 By 2005 market share could be around $300-$500 million
annually (projected)
 Patent expiration in 2012
 Only 55% of migraineurs sought medical treatment
 40% of non consulters could be motivated to seek treatment
 70% felt avoidance of cardiovascular adverse effects were
important

12. Impact of Drug on Life-time cost
time
Start
R&D
Commercialization
Cost
If not successful cost will increase

13. Pros:
 Early mover advantage
 Combat the decrease in net income
Cons:
 Each month’s delay will result in revenue losses
 More competitive market: Opportunity loss
 Chosen compound may not be the best one
Expert estimates for Migraine Project

14. FOR PROCESS 2 AND 3
PROS
 Optimistic approach-Higher chances of Passing clinical
trials
 Pessimistic approach-100-200 best-selling drugs includes
many fast followers
 Realistic approach-Among migraineur preferences
 70% concerned with cardio adverse effects
 28% felt cost reduction as important
Which justify importance of quality of product
=>Hence importance of basic research process can’t be ignored

15. COMBICHEM GROUP CENTRAL NERVOUS
SYSTEM
SALES AND MARKETING
LEE 8 BOURELL 12 PIMENTEL 10
PAN 9 WRECKER 11 PECK 10
COMBICHEM GROUP CENTRAL NERVOUS
SYSTEM
SALES AND MARKETING
LEE 15 BOURELL 11 PIMENTEL 10
PAN 14 WRECKER 11 PECK 11
COMBICHEM GROUP CENTRAL NERVOUS
SYSTEM
SALES AND MARKETING
LEE 20 BOURELL 13 PIMENTEL 14
PAN 19 WRECKER 13 PECK 11
CHANCE OF PASSING CLINICAL(%) From
scenario 1 to 3 as per experts:
Scenario 1
Scenario 2
Scenario 3

16. Findings based on Responses
 Only two members from Combichem group shows strong
variation among group
 Other departments’ experts seem to be more ambiguous
It highlights the importance of combinatorial chemistry from
all 6 responses
It’s a high risk-high return industry so probability of passing
clinical trials is important.
Why?
 Passing clinical trials take 6 years and basic research
approximately1 to 2 years !

17. CONS
 Prozac patent ends on 2003, a major lifeline for the company
 Delay in time to launch new product would lead to
opportunity cost loss
 Biased responses among experts leads to no concrete
conclusion
 No past record of Application of Combinatorial Chemistry in
pharmaceutical industry

18. RECOMMENDATIONS
 Huge CNS market size and aging population in
industrialized nations will create high demand for drugs
like Prozac
 New technical advancements are required to cut product
development cycle time
 Combinatorial chemistry adoption can increase patent
claims many folds
 Matrix organization structure can improve process
standardization
 Cross function teams can drastically decrease the time
required for R&D