Lilly Outlines Innovation Strategy, and Looks to China for Test Tubes

Eli Lilly has mapped out its "innovation strategy" going forward . . . The summary from Lilly is here, with the segment on emerging markets pasted below. Reporting on the announcement, investment site Seeking Alpha notes that Lilly commented that it is "proud that it does not own a single test tube in the PRC." In other words, it has no plans to establish its own R&D in China.

 

Emerging Markets

The emerging markets business unit will include many of the world's fastest-growing markets, including six of the so-called "pharmerging markets" - China, Russia, Brazil, Mexico, South Korea, and Turkey. Lilly aims to increase its presence in these countries and others where strong growth rates for pharmaceuticals are projected over the next decade.

The creation of an emerging markets business unit will increase the company's focus on these areas and best position Lilly to serve growing patient needs among two-thirds of the world's population. This opportunity comes as the established pharmaceutical markets face slower growth. According to an analysis published by IMS, the seven pharmerging markets (the six named above plus India) will contribute over a third of global pharmaceutical market growth through 2013. Currently, these markets accounted for 9 percent of the company's revenue in the first nine months of 2009.

The company has a three-part strategy aimed at driving profitable growth in the emerging markets:

1. Maximize Lilly's core assets, including both patented and post-patent medicines. Two key tactics are to accelerate new product launches and to capitalize on longer product lifecycles in select countries such as China.

2. Add select non-Lilly medicines to build upon core therapeutic areas, especially diabetes, oncology and neuroscience, to accelerate top-line growth. This could include product acquisitions and co-promotion or co-marketing agreements.

3. Establish local alliances to more effectively access fast-growing market segments in select countries where the company's current infrastructure is not well suited to capture growth.

The company's top emerging market priority is China. In 2009, the company significantly expanded its presence in China. Lilly is currently the 11th ranked multi-national pharmaceutical company in China, with sales of over $200 million in 2008. Through the first nine months of 2009, Lilly's sales in China grew 20 percent, the company doubled the size of its affiliate from 1,100 to about 2,200 employees, and is currently building a second manufacturing plant in Suzhou to produce insulin.

--Paul Thomas