Sec B Group 7A Lupin

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

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

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

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

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.

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%)

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

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.

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.

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

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

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:

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.

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

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

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.

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.

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

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.

8. Performance Metrics

Strategy Map

Balanced Score Card

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

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