NOTES FROM CASE STUDY

ELI LILLY - RANBAXY IN INDIA

Key Management Team Gist of the case study

Name Designation Company > Drugs were available in India at 5% to 20% of their price
Colonel Eli Lilly Founder Eli Lilly and Company in US
Dr. Lorenzo Tallarigo President of Intercontinental Operations Eli Lilly and Company (during 2000) > Market share of multinational companies dropped from 80
Richard Wood CEO Eli Lilly and Company (during 1992) per cent in 1970 to 35 per cent in the mid-1990s as those
Sidney Taurel & Gerhard MayHead(s) of the company Lilly International (during 1992) companies exited the market due to the lack of patent
Joint managing director Ranbaxy (during 1977) protection in India
Dr. Parvinder Singh Managing director Ranbaxy (during 1982) > Mayr wanted to expand Lilly’s operations in Asia, where
Vice-chairman and managing director Ranbaxy (during 1987) several countries, including India, were opening up their
Rajiv Gulati General manager of business development & marketing contro
Ranbaxy (during 1992) markets for foreign investment.
D. S. Brar Chairman and CEO Ranbaxy Laboratories Limited (Ranbaxy), India > Ranbaxy - Singh’s visionary management, along with the
Managing director ELR JV in India (during 1993) operational leadership provided by Brar, who joined the firm
Andrew Mascarenhas
Managing director Eli Lilly Italy (During 1996) in 1977, was instrumental in turning the family business into
Chris Shaw Managing director ELR JV in India (during 1996) a global corporation.
Rajiv Gulati Head - Business development Eli Lilly Corporate office, Indinapolis >Ranbaxy - The company’s capital costs were typically 50
per cent to 75 per cent lower than those of comparable U.S.
Chris Shaw Management role Eli Lilly’s Polish subsidiary (during 1999)
plants and were meant to serve foreign markets in addition
Rajiv Gulati Managing director ELR JV in India (during 1999) to the Indian market
Vice-chairman Ranbaxy (during 2001) > Higher prices in other countries provided the impetus for
Vinay Kaul
Chairman of board ELR ( Since 2000 ) Ranbaxy to pursue international markets
> Ranbaxy - R&D expenditures ranged from two per cent to
five per cent of the annual sales with future targets of seven
Sequence of events per cent to eight per cent.
When What Where > Ranbaxy was the second largest exporter of all products in
India and the second largest pharmaceutical company in
1960 Ranbaxy began as family business India India after Glaxo (a subsidiary of the U.K.-based firm).
> Lilly retained the right to appoint the CEO for the JV, who
End of 1970 Ranbaxy’s R&D efforts began -
would
> The be responsible
agreement alsofor the day-to-day
provided operations.
for transfer of shares, in the
1979 Ranbaxy’s had only 12 scientists -
event any one of the partners desired to dispose some or its
1876 Eli Lilly was found The US entire share in the company
The Patent and Designs Act of 1911, multinational firms’
1911 subsidiaries in India, wanted to import drugs from their - > Much of the success of the joint venture is attributed to
respective countries of origin the strong and cohesive working relationship of
Mascarenhas and Gulati.
1954 First public sector drug company, Hindustan Antibiotics Ltd India
1961 Indian Drugs and Pharmaceutical Limited (IDPL) India > As per the WTO, from the year 2005, India would grant
Patents Act 1970 (effective April 1972) and the Drug Price product patent recognition to all new chemical entities
1970 India (NCEs) (i.e., bulk drugs developed from then onward)
Control Order (DPCO).
India PM Indira Gandhi said " The idea of a better-ordered
world is one in which medical discoveries will be free of > The Indian pharmaceutical market had grown at an
1982 World Health Assembly
patents and there will be no profiteering from life and average of 15 per cent through the 1990s, but the trends
death." indicated a slowdown in growth during 2000
1985 One of the largest pharmaceutical companies in the US
Chairman Dick Wood of Eli Lilly began a significant move
Mid 1980
toward global markets
42 drugs (which accounted for 72 per cent of the turnover of
1987 India
the industry) were controlled by DPCO
1990 First meeting between Ranbaxy & Eli Lilly Indinapolis, US
1990 Liberalization, FDI India
Pre Independence 1947 No indigenous capability to produce pharmaceuticals, India
Ranbaxy grew to become India’s largest manufacturer of
Early 1990's bulk drugs5 and generic drugs, with a domestic market India
share of 15 per cent
Drug discovery was expensive and lengthy process.
1990's Leading firms spending more than 20 per cent of their sales -
on research and development (R&D).
Health care costs soared in the 1990s
1990's Prices for the same drugs varied between the United States -
and Canada by a factor of 1.2 to 2.5.
Ranbaxy approached Lilly to provide low-cost sources of
1992 -
intermediate pharmaceutical ingredients
Lilly’s products were manufactured and distributed through
1992 25
countries and sold in more than 130 countries
Developing a drug, from discovery to launch in a major
1992 market, took 10 to 12 years and typically cost US$500 In developed countries (US and Europe)
million to S$800 million
Formal JV agreement between Lilly & Ranbaxy. Authorized
Nov 1992 capital of Rs200 million, equal contribution from Ranbaxy &
Lilly
March 1993 Incorporation of Eli Lilly-Ranbaxy Private Limited (ELR) India
End of 1993 JV moved to an independent place
India signed the General Agreement on Tariffs and Trade
April 1994
(GATT)
1995 India became a World Trade Organization (WTO)member

ELR JV had reached the break-even and was becoming

End of 1996
profitable.
The venture was recording an excellent growth rate,
Early 2001 surpassing the average growth rate in the Indian India
pharmaceutical industry
2001 ELR employed 500+ people
Indian government had made the decision to allow 100 per
2001 cent foreign direct investment into the drugs and
pharmaceutical industry
August 2001 Tallarigo bmeting with Brar regarding future plans of JV NY, US