Eli Lilly And Company And Insulin Business

Case II Report

Eli Lilly and Company and Insulin Business

Eli Lilly, the global research-based pharmaceutical company which was found in 1876, now enters its 130th year of business. From a starting up company that was like dozens, maybe hundreds of other drug companies making and selling sugar-coated pills, fluid extracts, syrups and with hand work constituting the primary method of production to one of the major pharmaceutical company that dominated the industry in the world, Eli Lilly and Company has witnessed a momentous success. And one of the primary causes of Lilly's success was its dedication to energetically introducing improved methods of production and encouraging development of new products.

Given Lilly's great success and innovation orientation, In this case study, as we can see, Lilly has given ground to Novo-Nordisk in the battle for Insulin Global and domestic market share. At least, we can say Lilly has made a series of strategic mistakes that lead to substantial profit losses.

Despite Lilly's huge investment ($700 million) in the new genetically engineered human insulin--Humulin®, Lilly failed to market the new product right. The price was set too low: on realizing the mistake they set out to increase the price quickly--more that 30% in two years in US. However, this action wasn't possible in Europe's price controlled countries; clearly, the perceived value and future potential of the product had not been recognized or properly communicated prior to launch.

The global market for Insulin hasn't been extensively explored; looking back in history, Lilly should have done a much better job in promoting the new product than it did. And In order to expand the market, Lilly shouldn't just concentrate in North-American market; instead, a global vision of marketing strategy should have been developed. Unfortunately, till 1980 Lilly's Insulin product haven't successfully launched in Europe. From1980 to1995, Lilly's Market share in the world has dropped from 53% to 46%, whereas Novo has jumped from 24% to 45% in the same period.

The support for continued investment in the insulin business at Lilly was decreasing. Lilly was the leader in the insulin business, one of its major challenge was to sustain its leadership in this special area using whatever "weapon" possible including: more aggressive marketing plan, intellectual property protection, and continuous research and development plans. Take the portable Blood Glucose Meter and strips as an example; this industry had grown to almost the same size as insulin by 1995. Obviously, without any Technology road mapping, Lilly has lagged behind in this Arena. Technology road mapping, as its definition, is needed to identify and develop the technologies required in the company. Once these technology enhancements or new technologies are identified they can be developed internally or collaboratively with external partners. If Lilly wasn't near-sighted and continue to invest into this area, At least, a greater share of market and more profit will be generated and Lilly could have protected its leadership much better. At one point Lilly's researchers and management was determined that "we can't get any better than Humulin, and we can't grow the business. It's time to do something else". But is that true? The answer is absolutely no. New diagnostic devices, new formulations and new drug delivery system was under development (Table1). For example: It was widely believed that Insulin cannot be taken by mouth, However recently Emisphere Technologies, Inc. has successfully demonstrated in clinical studies, absorption of insulin from the gastrointestinal tract, and substantial reductions in blood glucose levels following administration of an oral formulation containing an delivery agent in combination with insulin. Insulin pen was just another Lilly's business strategy failure. People maybe argue that, Lilly have to justify the profit margin of shifting from vial version to cartridge version providing the large share of this market. It's probably just an excuse for lacking a profound technology roadmap at that particular period.

Aside from Business strategy, organizational structures also play a key role in a company's success. Although Lilly's country based organizational structures has advantage over some other form of structures, it