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LupinTRANSCRIPT
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Strategic Alliance Project Report
LUPIN PHARMACEUTICALS
Under the Guidance of Prof. Amita Mittal
Group Code 7A / Section: B
Indian Institute of Management Lucknow
Name Roll Number
Diana Roy PGP 29005
Vidya Nand PGP 29008
Dixant Kumawat PGP 29012
Nupur Rustgi PGP 29022
Ram Moorthy PGP 29023
Debalina Haldar PGP 29030
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Table of Contents
1. Introduction .................................................................................................................................... 4
2. Industry analysis .............................................................................................................................. 4
PESTEL ................................................................................................................................................. 4
Industry Structure Analysis .................................................................................................................. 5
Growth ................................................................................................................................................ 5
3. About Lupin ..................................................................................................................................... 5
History ................................................................................................................................................. 5
Offerings ............................................................................................................................................. 5
Business Mix ........................................................................................................................................ 6
Formulations Business ......................................................................................................................... 6
Key Value Drivers of Lupin ................................................................................................................... 6
Business Analysis: Revenue and Profitability ........................................................................................ 7
Competitor Analysis............................................................................................................................. 7
SWOT Analysis ..................................................................................................................................... 8
Inorganic Growth ................................................................................................................................. 8
4. Alliance Trends ................................................................................................................................ 9
Trends of Alliance in Pharmaceutical Industry ...................................................................................... 9
History of Lupin Alliances ................................................................................................................... 11
Future Alliance: What Lupin should look for? ..................................................................................... 12
Alliance Management by Eli Lilly ........................................................................................................ 12
5. The Eli Lilly Lupin Alliance Rationale ............................................................................................ 12
Competence of Lupin ......................................................................................................................... 12
Competence of Eli Lilly ....................................................................................................................... 13
Alliance Proposal ............................................................................................................................... 13
Scope of the Alliance ......................................................................................................................... 14
Rationale for the Alliance................................................................................................................... 14
Type of Alliance ................................................................................................................................. 15
Logic of Value Creation ...................................................................................................................... 16
6. Lupins Objective for the Alliance ................................................................................................... 17
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7. Alliance Management .................................................................................................................... 18
Reconfiguring the Value Chain ........................................................................................................... 18
Collaboration Capabilities .................................................................................................................. 18
Operational Control ........................................................................................................................... 19
8. Performance Metrics ..................................................................................................................... 20
Strategy Map ..................................................................................................................................... 20
Balanced Score Card .......................................................................................................................... 20
9. References ..................................................................................................................................... 22
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1. Introduction Lupin Limited is a transnational pharmaceutical company. The Company produces a range of generic and
branded formulations and bulk drugs. The Company along with its subsidiaries has manufacturing
locations spread across India and Japan with trading and other incidental and related activities extending
to world markets.
Current business scenario
Lupin has effectively positioned itself as a Transnational Pharmaceutical Company, with an ample global
impact. It has received appreciation as the world's largest producer of Tuberculosis drugs. Gradually, Lupin
has moved up its value chain and has not only learnt the business of certain intermediates and APIs (Active
Pharmaceutical Ingredients), but has also leveraged its advantages to build a formidable formulation
business. Over the years, Lupins business mix has improved.
In terms of geographies, Lupin has retained a stronghold in India. It has grown ahead of the industry and
has developed a generic business and sound brand in the US. The US is the companys major market
overseas. The Company looks forward to reproduce this success in other Advanced Markets like Europe,
Japan and Australia.
2. Industry analysis
PESTEL
Total Indian Pharmaceutical market is INR 623 billion. The pharmaceutical sector in India mainly comprises
of three segments: Generics, Patented drugs and OTC. The revenue share breakup of the segments (as
per 2011) is as follows: Generics 72%, Patented Drugs 19%, OTC 9%
Political Factors
1. Increase in public health care schemes 2. RSVY increases market for private
Companies 3. Goods & Services Tax
Economic Factors
1. Increase in MNC acquisition 2. Economic slowdown
Socio-cultural Factors
1. Chronic disease, healthcare needs increase
2. Rising income(affluence) 3. Lifestyle diseases high patient inflow 4. Low cost skilled labor
Technological Factors
1. Speed of trials 2. Biotechnology & biologics 3.
Legal Factors
1. Weak patent regime, compulsory licenses 2. Pricing control Acts 3. Patent cliff, 2015
Environmental
1. Pollution- allergies increase 2. Some Drugs banned on environmental
grounds
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Industry Structure Analysis
As per our analysis the Indian pharmaceutical industry structure is as follows:
Threat of New Entry Threat of Existing Rivalry Threat of Substitutes Bargaining Power of Suppliers Bargaining power of customers
Low High High Moderate Moderate
Growth
The Indian pharmaceutical market is poised to grow to US$ 55 billion by 2020 from the 2009 levels of US$
12.6 billion, according to the report titled India Pharma 2020 by McKinsey & Co.
Factors contributing to the above growth are:
1. Increasing disposable incomes and the number of middle-class households
2. Expansion of medical infrastructure
3. Greater penetration of health insurance
4. Rising prevalence of chronic diseases
5. Aggressive market penetration, driven by the relatively small companies
6. Adoption of product patent
3. About Lupin
History
The company was founded by Dr. Desh Bandhu Gupta in 1968. It was named after the flower Lupin
which can grow even in barren and infertile soil, hence considered a sign of nourished and protected life.
Embedded in this company is an environment with desire of growth, an entrepreneurial spirit, innovation
and a culture of creativity. They have built their existing position in the market based on cutting edge
research, world class manufacturing facilities and a global supply chain. They maintain a culture of trust
and transparency in all their deals and relationships. Through this they aim in delivering consistent high
growth in revenues, margins and returns for the Company as well as its stakeholders. They believe in
growth by enhancing the knowledge, experience and talent of all the employees. They are a truly
transnational company with the motto Built as One, Built to Enrich.
Offerings
Lupin has been the global market leader in Anti-TB and Cephalosporins segment. This segment contributes
10% to companys revenue. It also has significant presence in Cardiovascular segment, respiratory and
anti-diabetic segment.
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The alliance with Eli Lilly was centred on anti-
diabetic segment.
Business Mix
Lupins business is centred on formulations and API business. Lupin's Global Formulations comprises 84%
of Lupin's overall business mix and other 16% comes from API market. USA is the firms major revenue
centre outside India. 67% of the overall business of the Company comes from International Markets,
hence Lupin is successfully racing towards globalization.
Global Active Pharmaceuticals Ingredients
The global API market is witnessing strong growth and is currently valued
at over USD 125 billion. Due to low cost manufacturing availability and
cost competitiveness, India is the main centre of API production. Lupins
API output has been growing significantly in both volume and value. In
financial year 2014 the companys API business raked up 17% growth over
last year.
Lupins portfolio consists of 31 generic products which are ranked number
one in market share.
Formulations Business
The Company's wide product basket comprising formulations from
Cephalosporins CVS CNS
Anti-Asthma Anti-TB Diabetology
GI Dermatology Therapy segments
The formulation business generated a revenue of Rs 13502 million in the last financial year. The Company
has moved up the value chain since inception in terms of its products and geographies. Lupin has
developed a strong foothold in emerging as well as advanced markets like USA, Japan, and Australia etc.
Key Value Drivers of Lupin
1. Regulated geographies: Gaining gradual market share for existing portfolio and also concentrating on new launches.
2. Execution on niche therapies, including ophthals, derma, respiratory, bio-similars, and NDDS.
Business Mix
API (16%)
Formulations (84%)
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3. Domestic market: lucrative therapy areas, critical care, womens health and oncology.
Business Analysis: Revenue and Profitability
Shareholder Value Growth
Competitor Analysis
Lupin Limited is the second largest Indian pharmaceutical company in terms of market capitalization
followed by Sun Pharma. It also occupies 14th position in global market and is 5th largest in the US by
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prescription led market share. It has the distinction of being the fastest growing generic pharmaceutical
player in the two largest pharmaceutical markets of the world US and Japan.
SWOT Analysis
Strengths
Worldwide leader in Cephalosporin and Anti TB drugs Considerable presence in market for drugs against Asthma, Pediatrics, Diabetes, and CNS boosts
the sales In the US and Japanese market it is the largest generic player Acquisition of Irom pharma helped to increase its product list and in turn sales Wide global footprint as it is present in over 70 countries
Weakness High dependence on global formulation business with 84% revenue coming from US market Forecasting done on technological level is less It operates in low growth segments such CNS, respiratory diseases
Opportunities Increased health awareness Emerging technological trends in drug delivery Increasing prevalence of TB in developing countries
Threats Unsuccessful assimilation of questions Rigid opposition both from locals and global company Soaring cost of discovering novel products
Inorganic Growth
1. Capitalize on opportunities provided by Indian market
The emergence of chronic diseases like cancer, diabetes, CVS and CNS disorders is likely to drive
demand for newer therapies.
Indias economy continues to show signs of robust growth. The increased spending on
healthcare needs is expected to drive revenue growth for pharma companies.
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2. Make the most of Indias capabilities in drug discovery, product development and sourcing to
serve overseas markets
With increasing pressures on curbing healthcare costs in the US, Indias low-cost manufacturing
capabilities coupled with attention to quality (India has the highest number of FDA-approved
manufacturing plants outside the US.) will be sought by MNCs.
India has a large pool of scientific manpower which can be used in drug discovery &
development
Indias diverse genetic pool of treatment-naive population is attractive for clinical trials
3. Less technological know-how in lucrative lifestyle segments like cardiovascular, anti-depressant,
anti-diabetes and anti-cancers.
Soaring cost of discovering novel products
4. Alliance Trends
Trends of Alliance in Pharmaceutical Industry
Pharmaceutical companies have been a prominent in globalisation, partly through international Mergers.
There are several reasons for the growth of alliances. The key drivers are:
Enhance the significance of core technologies;
Increase the interdependence between distinctive technologies for joint supply of a particular product;
Truncate the product life cycle;
Upgrade core competencies as a means of improving global competitive advantages;
Entry into emerging markets
Sharing R&D costs
Product licensing and co-marketing
Economies of scale
Benefitting from partners reputation
Cost effective sourcing While pharmaceutical alliances have been under discussion and academic study for more than a decade
it is only in the last few years that their number has increased to a significant level. The number of alliances
has increased almost fourfold since 1997. The largest increase, 59.4% has occurred in 2001 to about 1000.
For the large pharmaceutical companies this means entering into one new alliance about every month,
although one company, Glaxo was on average announcing two new alliances every month in 2001. Some
renowned alliances are discussed below.
Merck Alnylam is a non equity strategic alliance.
Merck would provide Alnylam with a series of proprietary drug target for validation purposes.
Merck would inject cash in RNAi based drug development, giving it financial control over the
research and would help in commercialization of products.
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Alnylam would provide the technical know-how in RNAi based therapeutics, which Merck lacked.
Alnylam would test and develop RNAi based drugs for Merck to commercialize, helping it remain
an innovation leader. Alnylam scientists would head the operational aspects
GSK Dong A is an equity strategic alliance
Dong-A would lend its local marketing expertise in South Korea where it had become the industry
leader with lesser products. Dong-A would also help increase GSKs product penetration in South
Korea through its efficient distribution network. GSK would be able to tap the healthy image
created by Dong-A
GSK would impart its experience of managing other dynamic markets to Dong-A to help it
maintain its domestic leadership. Dong-A would be able to learn of the processes followed by GSK
to help it become a global player in the industry. GSKs proven product portfolio would help Dong-
A enter new markets within South Korea
Hisun-Pfiser is a joint venture
Hisun would provide local production & distribution expertise for the joint venture. Local demand
& environment based R&D would be imparted by Hisun. Pfizer would gain entry into the growing
Chinese branded generics market and increase its global reach.
Pfizer would lend its global marketing expertise for the penetration of the new products among
the masses. Pfizer would impart managerial assistance in scaling up Hisuns operations within
China and also surrounding regions. Hisun would be able to achieve its strategic goals of becoming
the Chinese pharmaceutical leader by a margin.
Intrexon Sun Pharmaceuticals Joint Venture
Sun Pharma would lend its past experience in developing and manufacturing complex dosage
forms. Sun Pharma would impart its marketing & production capabilities in specialty
pharmaceuticals in niche areas. Intrexon would gain easy access to an emerging market like India.
Intrexon would lend its biotechnology capabilities to the JV for development of methods to deal
with ocular diseases. Sun Pharma would be able to leverage cutting edge technology to become
an innovation leader in a virgin field in India. Intrexon would also allow JV to use its RTS platform
helping Sun gain knowledge of such technology.
Other prominent alliances and acquisitions are given below
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History of Lupin Alliances
In the year 1989, the company established a joint venture in Thailand, namely Lupin Chemicals (Thailand)
Ltd.
In the year 2007, the company acquired Vadodara based Rubamin Laboratories Ltd (rechristened to
Novodigm Ltd). Also, they acquired Kyowa Pharmaceutical Industry Company Limited, a leading Generic
Company in Japan.
During the year 2008-09, the company expanded their product basket in Japan-Kyowa and received ten
products approval from Ministry of Health & Labour Welfare, Japan. They acquired 100% stake in
Hormosan Pharma GmbH, a generic company in Germany. Also, they acquired 36.65% stake in Generic
Health Pty Ltd., in Australia, 60% stake in Pharma Dynamics in South Africa and 51% stake in Multicare
Pharmaceuticals Philippines Inc in Philippines.
During the year 2009-10, Lupin (Europe) Ltd, UK and Lupin Pharma Canada Ltd, Canada were incorporated
on June 5, 2009 and June 18, 2009 respectively. Lupin Holding B V, the Netherlands transferred their
holdings in Max Pharma Pty Ltd, Australia, a wholly owned subsidiary of the company to Generic Healthy
Pty Ltd, Australia, an associated of the company upon which Max Pharma Pty Ltd ceased to be a subsidiary
of the company with effect from May 31, 2009. In January 2010, as per the scheme of amalgamation,
Novodigm Ltd, Lupin Pharmacare Ltd and Lupin Herbal Ltd, wholly owned subsidiaries of the company
were amalgamated with the company with effect from April 1, 2009. In August 23, 2010, the company
incorporated Lupin Mexico SA de CV, Mexico as a subsidiary company. The company increased their stake
in Generic Health Pty Ltd., (Generic), Australia, from 49.91% to 76.65% and thus Generic became a
subsidiary of the company with effect from September 27, 2010. Consequently, Bellwether Pharma Pty
Ltd., Australia, Generic Health Inc., U.S.A. and Max Pharma Pty Ltd., Australia, which were subsidiaries of
Generic, became subsidiaries of the company with effect from September 27, 2010. The company
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incorporated Lupin Philippines, Inc., Philippines and Lupin Healthcare Ltd., India, as subsidiaries on
December 20, 2010 and March 17, 2011 respectively. In June 2011, the company's Generic Healthy Pty
Ltd acquired worldwide rights for the Goanna Brand and the complete range of premium therapeutic oils,
rubs and ointments marketed under the brand.
In July 2011, the company entered into a research and development agreement with Medicis
Pharmaceutical Corporation (Medicis) to apply Lupin technologies to multiple therapeutic compounds. In
November 2011, the company acquired I'rom Pharmaceuticals through their Japanese subsidiary.
Future Alliance: What Lupin should look for?
Strategic partner who has proved competency in Diabetic drugs and Obesity, which has huge potential in India
Alliance partner who has reputation in global market especially US, as Lupins wants to move more inside patented drugs thereby having more revenue leading to better research facilities. Lupin expects partners to have same commitment towards innovation and technology.
South Asian market especially India is moving towards health conscious drugs, due to increase in disposable income of rising middle class. Lupin aims at Wellness drugs like vitamins, energy boosters, skin care etc.
Strategic Alliance for collaborative advantage in value net addition
Alliance Management by Eli Lilly
Eli Lilly had been engaged in alliances since the 1920s while working with University of Toronto scientist
Frederick D. Banting, MD, and Charles H. Best, PhD, who had isolated insulin and demonstrated its value
in managing insulin dependent diabetes.
Other partners included Greentech Inc., Takeda Chemical Industries Ltd and Alkerms Inc. Outside their
diabetes work they had collaborations with National Research and Development Council.
A survey by PwC confirmed that Lilly had some work to do if they were to become number one in alliance
management. The survey showed that Lilly was better than the average company in most attributes and
categories that went into being a good partner trustworthiness and credibility; organization and
management; culture and values. But the survey also showed that the company needed to improve in
order to be the leading firm in the industry on any of the attributes in these categories.
5. The Eli Lilly Lupin Alliance Rationale
Competence of Lupin
Lupin Pharmaceuticals, Inc. is committed to bringing innovative products for the healthcare professional
to improve the health and well-being of individuals. Lupin's mission is to become a transnational
pharmaceutical company through the development and introduction of a wide portfolio of branded and
generic products in key markets. Lupin Pharmaceuticals, Inc. is dedicated to delivering high-quality,
branded and generic medications trusted by healthcare professionals and patients across geographies.
Competitive advantages of Lupin are:
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Cephalosporin and Anti TB drugs.
R&D Advanced Drug Delivery Systems (ADDS) Research, Novel Drug Discovery and Development (NDDD),
Robust Distribution Network
Patient Education
Manufacturing and supplying APIs and formulations
Competence of Eli Lilly
Lillys mission is to create and deliver superior health care solutions in order to provide customers around
the world with optimal clinical and economic outcomes. Additionally, Lillys mission and values are
expressed in the companys desire to provide innovative medicines that enable people to live longer,
healthier, and more active lives
The firms core competencies relate to its ability to discover, develop, manufacture and sell a broad line
of human health and agricultural products. Lilly has five specific core competencies:
Established markets
Oncology
Diabetes
Emerging markets
Animal health The companys years of experience, commitment to scientific and managerial excellence as well as its
global reach and strategic leveraging has promoted its continued success.
Lillys competitive advantage is linked to its ability to innovate. Specifically, the integration of highly
sophisticated technologies in combination with an interdisciplinary approach to research and
development have created a new model for Lilly that gives the company a competitive advantage in
bringing breakthrough medicines to patients in a more efficient, productive, and dependable manner.
Alliance Proposal
The deal between Eli Lilly India and Lupin would be for the promotion and distribution of Lilly's Huminsulin
range of products, including Huminsulin R, Huminsulin NPH, Huminsulin 50/50, Huminsulin 30/70 and
Humapen Ergo II. Lupin India's formulations business will promote and distribute the range of products in
India and Nepal, virtually doubling the number of sales representatives behind the diabetes care product.
Scope in Diabetes Sector
The following are the factors that advocate for the partnership in the diabetes sector:
Eli Lilly has a history in insulin production since1923
The country has an estimated 51 million people with diabetes currently
An estimated 85 million by 2030, or nearly one-fifth of all patients with diabetes globally.
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According to IMS June 2011 data, the total Indian insulin market is valued at Rs 975 crore and Huminsulin is the second biggest brand portfolio in the same.
Analysts and industry observers point out strategic collaborations, like the Lilly-Lupin deal, would
lead to a possible increase of the insulin market size in India. Insulin is the fastest growing segment
in India showing a 20 per cent year-on-year growth. With this alliance, we might see an
approximate increase of 10-20 percent in the insulin market in India due to high reach of
Huminsulin in the country.
In the insulin market, Novo Nordisk India is leading with close to 60 percent of the market share
followed by Eli Lilly with about 26 percent share. The other major players in the market include
Aventis, Biocon, Wockhardt and Shreya Life Sciences (The BioSpectrum-ABLE Top 20 survey
2011).
Introduction of new products in the insulin market will offer consumers more choices in terms of
selecting the appropriate medicine and should help in the disease management.
This is also a wake-up call for other companies operating in the insulin market space. We will see
companies working towards various models like introduction of new products and price drops in
their products. Eli Lilly has a strong presence in the insulin pen space. We might see companies
introducing insulin pen products into the market
Scope of the Alliance
1. Product Expansion: The strategic collaboration will achieve major synergy arising from the
strength of the product portfolio of Eli Lilly and the promotion and distribution capabilities of
Lupin in India and Nepal.
2. Geographic Expansion: Establishment of a wider reach in terms of sales and distribution will
ensure a stronger foothold for Eli Lilly in the growing insulin market in India. This will become a
foundation to expand their diabetes business not only for current products, but also for the future
pipeline.
3. Learning effect: Lupin is well-aligned with Lilly's goal of expansion in India and other emerging
markets. For Lupin, this alliance is a platform towards augmenting its growth in the diabetes
market in India. Lupin launched its own insulin brand, Lupinsulin, with sales of 25 crore. Lupin
Diabetes Care was carved out of the Pinnacle division in 2004, with an objective to focus on the
diabetes market. The division recorded a strong growth of 31 percent during FY 2011. It has built
brands like Gluconorm, Telista, Lupisulin and Matilda.
Thus, Lupin will try its best to learn from Eli Lilly resources so as to ensure that in future Eli Lilly product
portfolio strength in the diabetes market is transferred to Lupin. Thus, Lupin will no longer need Eli Lilly
for production, making Lupin technologically equipped.
Rationale for the Alliance
1. Resource Dependence Theory: Eli Lilly currently lacks in the distribution capabilities pertaining to
India and Nepal. Thus by allying with Lupin, it will gain access to the Indian market. Thus, giving
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an upper hand to Lupin. Whereas, for Lupin, it wants to get associated with a trusted brand in the
Indian market as far as the diabetes portfolio is concerned.
2. Resource Based Theory: VRIO - Lupin does not hold a strong position in the R & D segment. Eli
Lillys competitive advantage is its product innovation especially in the diabetes product line,
which makes innovation a valuable and rare resource for the organization. Thus, with passage of
time, Lupin can try to imitate these resources thus making it its competitive advantage.
3. Strategic Choice Theory: Both the companies will combine their core competencies for this
alliance, with Lupin bringing its distribution network to the table and Eli Lilly bringing its vast
product portfolio. Hence, making this combination non imitable by the competitors and creating
high entry barriers in the industry strategically.
4. Learning Theory: The basic agenda for Lupin to get into this deal is to learn from its partner. Eli
Lilly is known for its R & D and product innovation. Thus Lupin will try to learn the technology
oriented parameters though this alliance, so that in future it can independently run this segment.
5. Increasing Returns Theory: In an industry like pharmaceutical, the R & D cost pertaining to
product innovation are quite high, which eventually is a sunk cost for the company. Thus, with
Lupin getting the access to Eli Lillys technology and R & D activities, it will help them save their
sunk cost. Also, the distribution channel for Lupinis quite established in the country. Therefore,
circulating an extra product through its channel will not be difficult for Lupin. Thus, increasing its
returns on the already invested parameters.
Type of Alliance
Lupin has a history of both alliances and acquisitions. Once we have decided on partnering with Eli Lilly,
we need to decide on the type of alliance. On evaluating our internal competencies, we see that we do
not have adequate competence for the development of drugs for diabetes. This means that we essentially
need to partner with a company for plugging our skill gap.
Resources & Synergies
The synergies of Eli Lilly & Lupin on allying will be modular. While Lilly looks for a distribution network in
India, we look for R&D development. The resources hence will be managed independently and fall under
modular synergies. The synergies of the alliance favour non-equity alliance.
Nature of Resources
There are relatively lesser number of hard resources and a greater amount of soft resources will be
allotted in the alliance. Lilly will use the distribution network of Lupin which mainly consists of soft
resources such as medical sales personnel. Lupin and Lilly will together use one of the manufacturing
plants of Lupin as an R&D centre. Main resources that will be used by the alliance is the skill set of existing
employees i.e. soft resources. The nature of resources utilized hence favour non-equity alliance.
Extent of Redundant Resources
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Though both the companies are pharmaceutical companies, the amount of redundant resources are
surprisingly low. Lilly lacks a robust distribution network and Lupin lacks necessary skills to foray into the
diabetics market, hence favouring Non-equity alliance.
Factor Type
Synergies Modular (R&D, distribution)
Nature of Resources Low
Extent of redundant resources Low
Level of Competition for resources Low
Ally or Acquire Ally (Non-Equity)
Logic of Value Creation
The logic of value creation is quite straightforward and easy to interpret. Lilly is looking at entering the
Indian Market. It lacks the local market knowledge and a distribution network to market its products. It
will leverage the robust distribution network of Lupin post- alliance.
Lupin is looking at a two pronged gain. Firstly they will plug in the existing skill gaps they have by building
their competence by learning from Lilly. Secondly, by setting up a plant dedicated to R&D with joint
investment, they can build new competencies and develop new drugs for the market by closely following
the operations of Lilly on a day to day basis. For the new drugs, Lupin gets access to the low cost sources
of Lilly and Lilly in return gets to manufacture at a low operational cost plus has access to the distribution
network of Lupin.
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6. Lupins Objective for the Alliance Following are the top three goals which we want to achieve in this alliance.
Executive Sales & Distribution Rights: By this strategic alliance, we need executive sales and
distribution rights in India (Preferably Indian Sub-continent) for next 10 years with a margin of 5%.
By nature of this alliance, we want full rights in sales of Huminsulin product line of Eli Lilly. We
dont want them to give sales rights to other company as well which will result in direct
competition to us.
R&D: We are ready to invest 50:50 partnership on future drug discovery with initial 10 million
USD. But location of R&D center should be in India. The products will be new composition which
may be extension on Huminsulin products or entirely new field of medicine. The product
developed by the joint R&D will be owned by both the companies. In case there is break away in
alliance, the patent has to buy by any of the company on future NPV value.
Joint Bidding for Govt. procurement: For the period of contract, we would like to go for co-
bidding of Govt. Procurement. Since we have local govt. contacts we will act as a bridge for the
same. This is to ensure we dont directly compete with each other and all sales are routed through
our distribution channel.
Following are the top three offerings which we can provide to Eli Lilly as part of our agreement
Sales Force: We are ready to provide sales force to cover nearly 50000 doctors across the country
and introduce Eli Lilly product Huminsulin range to them. This sales force is entirely managed by
Lupin with review from Senior board members from both Lupin & Eli Lilly.
Low Cost Manufacturing: We are ready to allocate parts of our manufacturing capacity to Eli Lilly
with a commitment of next 5 years for manufacturing of Huminsulin, Oncology & Neuroscience
drugs. We will help Eli Lilly to set up physical manufacturing facilities in India and also provide
sources for vendors supplies.
Branding & Name: We are ready to accept the use of Eli Lilly branding & promotion in our selling
process. Since the name of Eli Lilly is famous among Indian doctors, this will give a great advantage
for alliance to leverage the brand and also brings in trust among medical society.
Following are few things which we cant afford to lose by making this alliance. We will try to include the
maximum control over these parameters and suitable exit clauses will be designed for the same.
Poaching of Distributors: We are very sure that the nature of alliance is not about tapping our
S&D network to Eli Lilly favor. We would include the same in our agreement. We will have more
operational control on sales reps who will be responsible for taking over the product to doctors.
Cross Functional Learning: As part of strengthen our alliance, we want to form a cross functional
team of scientists from both companies to work on future development of products in both US &
India Labs. We are committed towards mutual learning, as part of our contract we will have
movement of scientist from both companies to partner location and bring in combined synergy.
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7. Alliance Management
Reconfiguring the Value Chain
Collaboration Capabilities
Both the companies have significant experience in managing alliances and acquisitions. For this alliance
we will create a separate team just to handle the post alliance functioning of the organization.
To ensure top management support, the alliance team will have the marketing & sales director as well as
the learning and R&D director of both the companies. As the alliance progresses, additional directors
would be incorporated in the team.
The directors will have under them executive managers of every functional domain. The role of these
managers would be to ease into the alliance in their respective domains. Informal & Formal training
programs will be conducted that would help Lupin learn from Lillys well known molecule development
and innovation.
Firm InfrastructureManufacturing Facilities provided by Lupin to Lilly in India
Joint R&D facilities developed by both companies in India
Human Resource Management
Absorptive capacity to be increased for maximum learning
Proper team to be formed to help ease into alliance
Technology Lilly to help Lupin develop its R&D
Procurement Lilly to let Lupin access their sources of ingredients
Marketing & SalesLilly gets access to Lupins distribution networks
Lupin gets exclusive sales rights
Lilly Lupin
Alliance Management Committee
Director of Marketing & Sales, Lupin
Director of Marketing &
Sales, Lilly
Director of R&D, Lupin
Director of R&D, Lilly
Financial Analyst
Medical Director
Sales Manager
HRM
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Operational Control
As decided by both partners, both Lupin & Eli Lilly senior management board member will overlook the
alliance. Following control mechanism will be carried out by Lupin to ensure mutual learning takes place
and keep in check the parameters we cant afford to lose out.
Sales Target for sales representatives: Sales Reps are our front door connect with doctors, since
we are taking our partner Eli Lillys product Huminsulin to doctors, we should make sure that our
Sales Represataives dont have indiaivudal ally with Eli llilly and give presefernce to tiehr product
only. Monthly sales data for each saels agent will be checked that 80:20 ratio is maintained with
our existing product forms 80% of their sales target and 20% will come from Huminsulin product.
In case of change from the mentioned ratio, each case will be handled on case by case basis by
Area Sales Manager.
Joint R&D effort: Since joint R&D effort forms a major core of the alliance and there is movement
of our scientist to their location, there is a need to ensure that scientist switches to our partner
company. We will include an undertaking by all scientist who will be moved to partner location to
serve our company for a notice period of 2 years upon their assignment is over. Their will
rotational basis in movement of scientist with initial 1 year allocation. On requirement basis, the
extension of stay can be decided by mutual consent of both partners.
Half Yearly Review: Senior Board of members will meet every 6 months to review the past
performances and to layout action plan for next 6 months. All revenues and value additions to the
alliance will be discussed in detailed.
Joint Bidding Panel: A panel of 6 members, 3 each from partner will be constituted consisting of
Sales Team head, financial head and Administration head will decide upon the process of Joint
bidding for Govt. procurement. This committee will decided on lease price and other expenses in
lieu with the bidding process. A detailed report will be submitted to board members on quarterly
basis on bidding effort and revenue from the same.
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8. Performance Metrics
Strategy Map
Balanced Score Card
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Financial perspective:
Revenue Growth Strategy Productivity Growth Strategy
Customer Perspective:
Product Attributes and Image Authencity
Internal Process perspective:
Learning and Growth perspective
Increase ROI and ROE
Learn about the
Indian Market
Establish relations
with distributors
R & D sharing
Develop R&D
capacity for future
products
Share target market,
Establish distribution
network
Promotion of the
Huminsulin product
category
Awareness of the
product use by
promotions
Trusted brand Safe and effective
insulin products
Easy access cheap medicine
Recommendations
by doctors and
hospitals
Increase revenue
from the insulin
products cateory
Become industry
leader Increase in ratio of
premium to regular
products
Sales volume
increase
Tap the insulin
market of $1.49
billion
Maximise the
ROCE on the
distribution
network
Reduction in
production cost
Reduction in
distribution cost
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9. References
1. www.business-standard.com
2. www.corporate.indbankonline.com
3. www.lupinworld.com
4. www.mbaskool.com/business-articles
5. http://businesstoday.intoday.in
6. https://investor.lilly.com