Eli Lilly In India

Individual Case Analysis
Eli Lilly in India: Rethinking the Joint Venture Strategy

Summary
In November 1992 a formal Joint Venture agreement between Eli Lilly, an American-based pharmaceutical,and Ranbaxy, an Indian-based pharmaceutical was signed. The global pharmaceutical industry in the 1990s was concentrated in North American, European and Japan markets. By that time, the leadingfirms of the industry invested 20% of sales in R&D; government agencies played an increasing role in the buying processes; and prices were challenged by the rise of generics and low-cost and stilleffective unbranded drugs. One of the main characteristics of the Indian Pharmaceutical Industry in the 1990s was the product patent-less for all pharmaceuticals and agricultural products. By the late1990s the Joint Venture became profitable with an annualized growth rate of 8%.
Main issues
The major issue of the case was evaluating the future of the Joint Venture. Ranbaxy intentions were todissolve the venture and invest their money on the generics market. On the other hand, Eli Lilly was still very interested to maintain or at least rethink the tenets of the venture.
Significantchanges occur in the Indian business environment that made the Indian market very attractive to foreign pharmaceuticals:
* 1994: India signed the General Agreement on Tariffs and Trade (GATT).
*1996: India became a member of the WTO.
* 2001: 100% of foreign direct investment was allowed in the Indian pharmaceutical industry.
* 2005: India approved product patent recognition.
Dueto the patent protection and India entering the WTO, increased competition was expected in the Indian markets. Another issue was the recent losses of Ranbaxy due to other investments abroad. Andlast but not least, there was a feeling at Ranbaxy that they had created substantial value for Lilly, in other words, the venture has benefitted more Lilly than Ranbaxy.
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