* Eli Lily in India * What is their Motivation? * Wanted to establish a presence in India, GDP was incredibly low in India * Strengthen their existing business * Cost reduction through supply of cheap source of intermediate ingredients * Shared development of generics, diversification by Lilly – not pursued * Reduced financial risk (investment only 50%) * Take existing products to new markets * Formulating and selling Lilly’s products in India? Already offered by Indian manufacturers * Investing in the market of the future (growth possibility in per capita) * Was the country wrong? * CAGE Demand Considerations * Economic – Buying Power * Admin – IPR protections, Regulatory issues such as price controls * Geography – Soft infrastructure, impact on distribution considerations * Cultural – Views towards the medicine, views towards the foreign competitors * Porter Supply Considerations * Arbitrage opportunities given generic Pharma industry environment * Choice of JV * Competitive pressures facing Lilly * Price controls, generics, HMO, high costs of discovery – eroding margins for firms * Opportunity in Indian Market * Economic liberalization, sizable market, developing economy - Plus Diamond attributes * Choice of JV * FDI restrictions * Overcoming liability of foreignness * Indian gov’t regulations * Access to partners political and regulatory connections, countrywide distribution network and experience and customer relationships * Needed strategic assets * Geography, cultural barriers * Less risky mode of entry for Lilly * JV Performance * Success of JV reflected in growth and achievement of profitability (but slim margins compared to Ranbaxy), contrast with other multinational subsidiaries * Commitment to high ethical standards in country with lax regulatory environment * Establishment of medical infrastructure and expertise to run clinical trials to international standards * JV source of talent and best practices for Lilly worldwide * Penetration in therapeutic areas (diabetes, oncology) and pioneering concept of licensing molecules * Built regulatory unit (medical/corporate affairs) * Future of the Partnership * Status Quo – Not likely (Ranbaxy seems to want to move on) * Motivation for JV isn’t as strong for either partner * Lilly has necessary experience in mkt, change in IP regime in India, regulations permit full investment * Ranbaxy is a global player with significiant R&D investment, resource constraint * Liquidate – Giving up on the mkt at its most promising * Acquire – Possible * Bring in new partner – Possible, but not necessary * Eli Lilly bought the 50% stake owned by Ranbaxy Labs in the JV in 2001 * Lilly India continues to have several strategic alliances in India including a manufacturing alliance with Ranbaxy * Recently * Acquiring development partners – Icos, SGX Pharma * Outsourcing Clinical Trials, Testing - Covance * Why Strategic Alliances? * Primary Drivers * Technology Exchange * Timeliness * Lack of Capability * Global Competition * Global footprint is needed to “level the playing field” *
