Evaluating this case, and seeing how stringent the pharmaceutical industry is, was eye opening experience, especially having had worked on it in a group.

1. TEAM CASE
Professor Christopher Myers
MGMT 201
Group members: Pedram Keyvani; Michael Martinez; Tilda Yildirim; Harsh Bhathal; Vraj
Vyas; Peniel Onyukwu
Eli Lilly and Company: Drug Development Strategy(A)
Eli Lilly, a leading pharmaceutical company specializing in treatment of diseases like
depression, diabetes, infections, osteoporosis among others, has a main issue expiring of key
patent, Prozac, an anti-depression drug, which on some aspects could be because of the
controlled operating structure that did not allow room for failure. In a highly competitive and
constantly changing market, it has become a major challenge for the leading pharmaceutical
companies to manage their development costs and generate profitable returns, while funding for
their R&D departments in order to develop new drugs, which is an important part of staying in
business for these types of companies.
Certain critical changes have been taking place in the pharmaceutical industry that have
increased competition and narrowed room for revenue stream. Some of these included,
encouragement of generic prescriptions, enablement of bulk discount rate, and price controls.
These changes forced the pharmaceutical manufacturers to reduce the price of their drugs.
However, the cost of developing a new drug has been increasing drastically since the 1980’s
and 1990’s, as a result of the increased time required to conduct the pre-clinical trials per new
drug application.
All these facts have led to reduced profits, increased costs, higher risks, and increased
competition for the pharmaceutical firms. As a result, Eli Lilly knew that improvements had to
be made in its abilities to develop and introduce new drugs both efficiently and effectively.
Hence, pondering on the best strategy to launch the new Migraine drug they have been
developing. Among the three proposed options, despite having a higher standard deviation,
higher risk, and minimal increased chances in passing clinical trials (as shown in Exhibit 10),
we would recommend Eli Lilly to wait and spend some more time working on the drug to
ensure that the drug successfully passes through its clinicals and is brought into the market.
Scenario 2 must be incorporated to have less time delay (compared to Scenario 3) and finish the

2. process in time before Prozac Patent finishes in 2003 (Exhibit 11) to ensure that the drug
successfully passes through its clinicals and is brought into the market.
In our process on deciding which of the three options is most suitable we evaluated the
pros and cons (tradeoffs) for each; either take the lead migraine compound directly into clinicals
and bring it to market as quickly as possible, Spend more time to refine the current lead migraine
compound [using combinatorial chemistry], or go back to basic research and spend significantly
more time to search for a new migraine drug platform [using combinatorial chemistry]. The
choice between each course of action came down to three baseline issues: Time to market,
Diversity of leads, and Method of chemistry used. Each choice would mean sacrificing focus on
different aspects of the key issues.
If we were to opt for the first course of action — Take the lead migraine compound
directly into clinical and bring it to market as quickly as possible — Lilly would reduce risk of
revenue loss associated with additional months delay as well as losses to opportunity cost
associated with allowing additional time for competitors to take advantage of the market. In a
highly competitive market, every additional month increases risk exponentially. To a different
tone, taking the compound directly to trials runs a higher risk of not passing. While there is
potential to save time and increase revenue, pushing a compound through too quickly in its
development cycle could result in the product failing before it makes it to market. This option
also eliminates the possibility to find alternative leads that may be more successful in clinical
trials than the existing compound.
If we were to opt for the second course of action — Spend more time to refine the current
lead migraine compound [using combinatorial chemistry] — Lilly increases risk of revenue loss
and competitor entry to the market. With Lilly’s team of experts assuming an additional
development time of about nine months, we would run a sizable risk of competitor consolidation
and market entry which could hinder our potential earnings. However, allowing more time to
refine the compound would decrease risk of failure in resource intensive clinical trials, and
increase chance to move product to market. Additionally, using the emerging technology,
combinatorial chemistry, as the refinement and research method would further its own
development and contribute to Lilly’s ability to deploy the technology throughout its business.
As the method has the opportunity to shave significant time off of the development cycle, this
could give Lilly a significant competitive edge down the road.

3. Lastly, if we were to opt for the third course of action — Go back to basic research and
spend significantly more time to search for a new migraine drug platform [using combinatorial
chemistry] — we would see a significant increase in the probability that we find a compound that
is successful in clinical trials and makes it to market. With clinical trials having such a low
likelihood of successful performance, the more time a company spends on development,
diversifying leads and patent opportunity, the better off the compound and competitive edge will
be. Additionally, the added development time will also lead to more time spent working with the
combinatorial chemistry method, furthering Lilly’s ability to use it on a greater scale. On the flip
side, the added months of research could lead to a large loss in revenue and allow significant
time for competitors to take advantage of the market with similar products. This risk could push
Lilly out of the market completely.
All of the trade offs considered, we decided to go with the second course of action: to
spend more time to refine the current lead migraine compound, using combinatorial chemistry.
We encourage Eli Lilly to maintain in developing the platform they formed already instead of
searching for a new platform due to various reasons.
Firstly, as seen in Exhibit 1, the Central Nervous System market share was projected to
increase by 63% in 2000 amounting to $13.1 billion. If this estimate is correct, it indicates that
there is real value in exploring to confirm the correct method for developing the drug to tackle
migraines. This will improve Eli Lilly’s chances of taking over this new market. Also drug
development process is a long and highly costly process to deal with. As stated in the Exhibit 2,
pharmaceutical companies spend approximately $230 million and 14.8 years on developing a
new compound for a single drug.If Eli Lilly decides to invest in another drug making process
they would acknowledge to spend millions and years on an idea that doesn’t exist. Instead of
doing this, spending that time and money on something they already have will be more profitable
in long term.
One drawback they might face would be in terms of money. Although spending more
would mean that the company would lose money and may have to pay out-of-pocket, it would
be in their benefit if Eli Lilly waited for a little bit longer and continued to refine the migraine
compound they already have. A company does not need to always reinvent the wheel, but
instead refine the wheel. Renovating the migraine compound could take out chances of
possible flaws/error, and continue time in research/development. This would save the company

4. time and resources when they release the product to market. In the current time period, it is
difficult to reach the number one position if one was not the first to release it. However, as an
established pharmaceutical company, the chances are better. Taking Apple as an example, we
can approach the same problem from the technology industry. Apple was not the first to
market in the smartwatch category, in fact it was one of the later contenders, coming out three
years after some of the first big smartwatches came out. Today, Apple dominates the
smartwatch category by a whopping 59% in the cellular connectivity category. Additionally,
the Apple Watch was the 4th best selling gadget of 2017. We can take this information from
the technology industry and position it for the pharmaceutical industry. At the end of the day,
it is the consumer market, where most industries have similar consumer logic.
All in all, after considering the progress that has been made thus far, using combinatorial
chemistry, we believe that a few additional months of development will best position Eli Lilly to
introduce a successful compound to clinical trials, further develop the emerging technology, and
handle marginal risk associated with added time.