Eli Lilly: Developing Cymbalta Harvard Case Solution & Analysis

ELI LILLY: DEVELOPING CYMBALTA

1.      Identification of the Strategic Issues and Problems:

a.      Problem Statement

Prozac, an antidepressant was developed by Eli Lilly to cure depression, but its patent was expiring in December 2003. This has created urgency in the organization to introduce a successor for Prozac before the patent expires. In addition to this, Prozac is also subject to threats from the generic version of the antidepressants produced by generic brands. In the market it is speculated that the generic version will sell on a price as low as 20% of the original price of Eli Lilly’s Prozac. Now Eli Lilly has several alternatives to consider to launch the new successor namely Cymbalta.

b.     SWOT Analysis

• Strengths

1. Established brand image for producing quality drugs e.g. the launch of Prozac helped Eli Lilly to attract consumer attention span as a Prozac Company.
2. Strong Research and Development sector.
3. Eli Lilly’s association with strong brand names such as Prozac and Evisa.
4. Excellent management team, which helped Eli Lilly in its progressive growth.
5. Widespread distribution network and strong marketing team.
6. The creation of new product planning division and continuous focus on product innovation.

• Weaknesses

1. High product development costs will be useless if the product didn’t go well with consumers’ expectations.
2. Weak environmental along with trend analysis of competitors and the technological advancements results in declining sales.
3. Lower environmental adaptability will focus on one product at a time for revenues.
4. Inability to have a good grasp over the number of years for patent protection.

• Opportunities

1. Expanding or investing more in the marketing efforts to gain a wider presence in consumers’ subconscious.
2. Patients’ awareness on the pain associated with the depression.
3. Targeted promotional activities to reach a broad customer base taking advantage of the wider presence in the market place.
4. According to the case, pain has been identified as serious co-morbidity that is untapped by major pharmaceutical companies Research and Development.

• Threats

1. Approval from the court and FDA is speculative and subject to change time by time.
2. Consumer dosage preferences are one per day so this should be kept in mind before launching Cymbalta in the market.
3. The Research and Development costs and the time it takes to finally develop the product is gross.
4. Threat from major pharmaceuticals nationally, internationally and from generic brands.

c.      Resources Availability and Limitations in Solving the Problem

2.      Analysis and evaluation:

a.       Porter five Forces for Pharmaceutical Industry

• Bargaining Power of Buyer (Medium)

Hospitals and major pharmacies buy medicines in bulk quantities and negotiate on prices. In addition to this, due to fast development in the generic versions of the products manufacturers are forced to push prices down. Moreover, the lower prices from the generic versions have reduced demand for the original product. This has further strengthened buyer power in the industry if the product does not hold patent protection.

• Bargaining Power of Supplier (Low)

The bargaining power of supplier is low as there are huge numbers of suppliers in this industry. The switching costs associated with supplier stands low, therefore, increasing chances of high competition amongst suppliers. The raw material used to develop a product is also low priced adding to the low supplier power in this industry.

• Threat of new entrants (Low)

The industry is highly speculative of the government regulations, the restrictions imposed on drug testing and due to national barriers in the form of legal structures. Government regulation by the FDA is also a major hurdle for new companies to enter the market place. However, the costs associated to the development and then, patenting and launching of the new product is the major obstacle for the new entrant in this industry.

• Threat of new substitutes (High)

The industry is subject to the rising demands for low priced medicines due to which generic versions of the original product are now being produced. As the Research and Development for the product has already been done; therefore, for the generic brands there are no costs related to Research and Development. This is the reason that they are now able to sell the versions at cheaper prices.

• Rivalry amongst existing firms (High)

Rivalry is high in the pharmaceutical industry, but to some extent it is sustained once the patent for the newly developed drug is held. In addition to that, the growth rate in this industry is high and the industry size is large, which increases forces of competition in the industry.

·         Alternative courses of actions with pros and cons displayed for each alternative

• Pursuing a Twice-a-day Dosage Pain Claim

The plan for launching Cymbalta in the market place is one that needs emphasis on seizing the opportunity of Cymbalta being a drug....................

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In anticipation of the expiration of his patent Prozac, Eli Lilly has to make tough decisions regarding the development of a new generation of antidepressants. In particular, the company must decide whether to first establish that the once-daily dosing for Cymbalta (duloxetine) is effective in the treatment of major depressive disorder, and only after you start to get FDA approval for the treatment of painful physical symptoms, or the first set are effective in treating pain and then get approval from the FDA for once-daily dosing. The decision must take into account how Cymbalta can be differentiated in the market relative to other antidepressants and marketing problems, to gain acceptance that the new drug will be facing. Lilly's new antidepressant team this decision has some market research input to doctors and patients at its disposal. "Hide
by Elie Ofek and Ron Laufer Source: Harvard Business School 28 pages. Publication Date: November 27, 2006. Prod. #: 507044-PDF-ENG

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