Eli Lilly and Company is a global pharmaceutical company founded in 1876 that produces medications including insulin, antibiotics, and psychiatric drugs. In the 1990s, the pharmaceutical industry was highly profitable but developing new drugs took over 10 years on average. Combinatorial chemistry and high-throughput screening were beginning to accelerate drug discovery by allowing many compounds to be tested simultaneously. For its migraine drug project, Lilly considered three innovation strategies: directly marketing the lead compound, further refining it using combinatorial techniques, or starting over with a new drug platform. The project team recommended refining the lead compound as it offered the best balance of risks and potential rewards.

1. Group 1

2. Eli Lilly and Company
• Eli Lilly and Company is an American global pharmaceutical
company with headquarters located in the United States.
• Founded in 1876 by Col. Eli Lilly, a pharmaceutical chemist and
veteran of the American Civil War, after whom the company was
named.
• Sold in approximately 125 countries.
• Among other specialties, Lilly was the first company to mass-
produce penicillin, the Salk polio vaccine, and insulin, including one
of the first pharmaceutical companies to produce human insulin
using recombinant DNA.
• Lilly is also the world's largest manufacturer and distributor of
psychiatric medications.

3. Pharmaceutical Industry in 1994
• 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
• 7 out 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

4. Drug Development Lifecycle
Basic Research
(about 2 years)
Pre-Clinical
(Biological)
Screening
(about 3 years)
Human Clinical
Trials (About 6 years)
•Phase I Safety Trials (1
year)
•Phase II Efficacy Trials (2
tears)
•Phase III Long-Term
Efficacy Trials (3 years)
FDA Review
(about 2-3 years)

5. Changes in the Industry
• Entrants of new players due to patent expirations
• Lead to 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

6. Synthetic Chemistry
Made possible the development of
compounds never before seen in nature,
including more powerful and potent
variations of naturally occurring
compounds
Combinatorial chemistry
Enabled a large collection or “library” of
related chemical compounds to be quickly
generated simultaneously
High-throughput screening
Was aimed at solving problem. Using this
technology high-speed robots would perform
a series of biological tests or “assay” on all
member of a chemical library virtually
simultaneously.
Innovation in Drug Development Process

7. The Drug Discovery Process
The Conventional Approach

8. The Pharma Value Chain
Gene or Genome
Sequencing
Target
Validation
Target
Discovery
Lead
Discovery
Pre-
Clinical
Manufac
-turing
Clinical
Phase I
Clinical
Phase II
Clinical
Phase III Distribution
Drug Discovery Animal
Studies
Clinical Tests Commercialization

9. Combinatorial Chemistry
Basic idea of combinatorial chemistry:
• Preparation of a large number of different compounds at the same
time
• High throughput screening provides the most promising substances
Combinatorial Libraries:
• Collection of finally synthesized compounds

10. An illustration : Synthesis using combinatorial chemistry

11. How is combinatorial chemistry changing the drug discovery process
Helped expedite the process of synthesis
High throughput
screening helps
boost the
selection
process

12. Affect on Stakeholders
COMPANY
•Market
Capitalization
•Early Delivery
•First Mover
Advantage
•Patents
•Investment loss
•Loss of goodwill
SHAREHOLDER
•Share value decline
•Psychological impact
CONSUMERS
•Vasoconstriction
removed
•Purity Concerns
•Degree of
effectiveness
•Side effects
COMPETITION
•First mover
advantage
•Innovators &
Imitators
•Market Share
CHEMISTS
•Field of research
•Prospective uses
•Goodwill
•Patents
SPHINX
•Recent acquisition
•No role in current
proceedings but
future depends on
the outcome of
migraine drug and
combinatorial
chemistry

13. MIGRAINE PROJECT
“Migraine”, a French word derived the Greek hemicrania, referred to pain in
half the head at a time.
Characteristics – Unilateral pulsating headaches often severe enough to
restrict physical and mental activities.
Market – 12% of the population.
Competition – IMITREX, launched in 1992 by Glaxo was a mildly effective drug
yet enjoyed 75% of the market with more than a 300% increase in 3 years
between 1993-1996.

14. INITIATION -
• In mid-summer 1994 Schaus and Kaldor met in the “Contemplative Garden” and as a
result Kaldor agreed to make 30-40 compounds, study them, modify the search and
make another 30-40.
• The first batch showed that the efforts have to be focussed on one subclass of
derivatives, consequently the second batch made a significant finding.
• Traditional chemists saw combinatorial chemistry as a threat to their jobs.
• Sept-1994 – Lilly’s acquisition of “Sphinx”, an indirect support.
• As combinatorial compounds were only 80-90% pure there were still several questions
on this product.
• PROJECT TEAM ADVISORY COMMITTEE – “pee-tack”
Comprised of managers, presidents, VP’s and high level scientists.
It was an interdisciplinary effort that helped clarify issues of resource requirements and
allallocations given constraint of time and money of the company.

15. Innovation Development Strategy – 3 Issues
• Lead Migraine drug directly to the market.
• Spend more time to refine the current lead migraine compound
(using combinatorial chemistry).
• Go back to basic research and spend significantly more time to search
for a new migraine drug platform (using combinatorial chemistry).

16. Directly to the market
• Early mover advantage, as only around 30% of the market share was there to capture.
• Patent of “Prozac”, their best selling drug was expiring in 2003.
• Increase in net income of the company and combatting the decrease in net income
PROS
• More competitive market as Lily will be third or fourth to come up with this product.
• As we were early movers, chosen compound may not be the best one.CONS

17. Refinement of the Product
• Higher chances of passing clinical trials as we are refining the product.
• A better product with significant improvement in the market than LY334370.
• 28% of the total users felt cost reduction was important.
PROS
• First three drugs would capture 80% of the market share.
• Delay in time will incur heavy losses as market competition will increase.CONS

18. Redesign on a new Migraine drug platform
• As there were many unresolved problems in the previous products a new platform could correct them.
• Knowledge gained after significant research will lead to a better products than already in the market.PROS
• A lot of time, money and effort required to create a whole new product.
• Profit margin will considerable reduce due to an existing large firms already in the market.CONS

19. CONCLUSION
Scenario 2 is the best way to go because of the following reasons:-
• Refined product is better to launch in the market instead of launching a drug that hasn’t
been fully tested.
• Rather than creating a new product from scratch it is better to improve the already
created drug.
• Second fast-followers has a better success rate than the early movers.
• A lot of time, money and effort will be wasted if we redesign the whole product instead
of just refining it.
• Chances of passing the clinical trials and the time taken in months delayed are best
optimized for the scenario 2.