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Transcript of SMOC_Presentation_v2[1]
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Scenario and Strategic PlanningEli Lilly & Co.
● CHEE LIUNG WUN ● LIM SHIEH CHERN ● NG YEE JIE ●
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Preface
• Scenario planning is a tool that can be used to – Explore the impact of different possible futures for
pharmaceutical industry.– Help to avoid overlooking important opportunities
and major threats • This can be done by analysing rapid, turbulent
and uncertain shift in the industry environment, thus the survival of Eli Lilly in the pharmaceutical industry
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Team Members
Chee Liung Wun
2821927Lim Shieh Chern
2821959
Ng Yee Jie2821942
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The Company - Eli Lilly & Co.
4
Abou
t Us Global,
research-based pharmaceutical company and one of the world's largest corporations.
Orig
in Founded in 1876 by a retired colonel & Pharmacist, Eli Lilly. Global headquarter in Indianapolis, United States
Mis
sion To makes
medicines that help people live longer, healthier, more active lives
Source : Eli Lilly and Company (www.lilly.com)
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Eli Lilly & Co.
5
• Today, marketed in 143 countries, 9th largest pharmaceutical company in world. Steadfastly remained independent, but not isolated. Global headquarters in Indianapolis, United States
• Global employees’ number approximately 40,000, and its medicines are marketed in 143 countries.
• Major research and development facilities in 8 countries and conducts clinical trials in more than 50 countries.
Source : Eli Lilly and Company (www.lilly.com)
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Scope and Time Frame
• 7 Years
Duration
• Corporate level, to identify possible challenges
Scope
• To maintain Eli Lilly’s position as one of the top ten elite multinational pharmaceutical firms globally
Aim
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Major Stakeholders• Stakeholders
Internal Stakeholders – Management TeamExternal Stakeholders – Major suppliers, health care providers, regulators and consultants into the process
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Porter’s Five Forces (Current)
Threat of Substitute Products
LOW(Low Value, Risk)
Threat of Substitute Products
LOW(Low Value, Risk)
Threat of New Entrants
LOW(Patent, regulatory
process & Dist System)
Threat of New Entrants
LOW(Patent, regulatory
process & Dist System)
Bargaining Power of BuyersLOW
(Insurance companies, doctors‘& patients’
buying habit)
Bargaining Power of BuyersLOW
(Insurance companies, doctors‘& patients’
buying habit)
Bargaining Power of Suppliers
LOW(Multiple sources)
Bargaining Power of Suppliers
LOW(Multiple sources)
Rivalry Among Competing Firms in
IndustryLOW
(Different niches & Patent Protection)
Rivalry Among Competing Firms in
IndustryLOW
(Different niches & Patent Protection)
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Porter’s Five Forces (Trend)
Threat of Substitute Products
MODERATE(Embryonic Stem Cell,
Alternatives)
Threat of Substitute Products
MODERATE(Embryonic Stem Cell,
Alternatives)
Threat of New Entrants
MODERATE(Increased Biotech
Firms)
Threat of New Entrants
MODERATE(Increased Biotech
Firms)
Bargaining Power of Buyers
MODERATE(Buyer Consolidate,
government & hospitals price sensitive)
Bargaining Power of Buyers
MODERATE(Buyer Consolidate,
government & hospitals price sensitive)
Bargaining Power of SuppliersMODERATE
(Petrochemical cost )
Bargaining Power of SuppliersMODERATE
(Petrochemical cost )
Rivalry Among Competing Firms in
IndustryHIGH
(Generics more common, price
pressure)
Rivalry Among Competing Firms in
IndustryHIGH
(Generics more common, price
pressure)
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Basic Trends
Political
• United States Political Landscape
Economy
• Mergers and Acquisitions (M&A)
Socio
• Demographic - Aging Population
Legal• Expiring Patents
and Stricter Regulation
PESTLE Analysis
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United States Political Landscape
Fact
• In 2008, Democrats won the presidency election
Before
• Republicans protected branded pharmaceuticals
After
• Democrats support generic pharmaceuticals
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Mergers and Acquisitions (M&A)
Mutual BenefitsSharing
ResourcesComplement on
Product PipelinesWork towards
blockbuster drugs
Self Benefits
Improve Sales Cut Cost Increase Competiveness
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Mergers and Acquisitions (M&A)
No Name of Company Merger/Acquisition Year
1 Bayer and Schering AG Acquisition 2006
2 Merck KG aA and Serono Acquisition 2006/2007
3 Nycomed and Altana Pharma Acquisition 2006/2007
4 UCB and Schwarz Pharma Acquisition 2007
5 Mitsubishi and Tanabe Merger 2007
6 Schering-Plough and Organon Acquisition 2007/2008
7 AstraZeneca and Medlmmune Acquisition 2007
8 Mylan and Merck Serono Acquisition 2007
9 Eisai and MGI Pharma Acquisition 2007/2008
10 Takeda and Millennium Acquisition 2008
11 Eli Lilly and ImClone Acquisition 200812 Daiichi-Sankyo and Ranbaxy Acquisition 2008
13 Pfizer and Wyeth Acquisition 2008
14 Merck and Schering-Plough(currently on negotiation)
Merger 2009
List of M&A undertaken
between 2006 - 2009
Source : Report: Mergers and Acquisitions in the Pharmaceuticals Sector, 2009
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Demographic - Aging Population
The average expenditure for prescription drugs for people age 65 & above increased 130%, rising from $819 in 1997 to $1,914 in 2004.
Source: Drug Spending Increases More Than 2.5 Times in 8 Years
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Expiring Patents
15
“Many branded-name drugs lose patent protection will leading to a WAVE of generic medications entering the market” (Quoted from Article “Flooded Generic Pipeline Looms as Branded Patents Expire”)
About 183 of branded drugs will go off patent starting 2009 until 2013
$60 billion worth of drugs are going off by 2011
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Expiring Patents
51%
17%
22% 3%7%
Brand Name Drug Patent Expirations
2006 2007 2008 Ex-2009 2009
Source: Expiring Patents Ignite Biotech Boom & Flooded Generic Pipeline Looms as Branded Patents Expire
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Key Uncertainties
Emerging Disease
Embryonic Stem Cell Research
Personalized Medicine and
Health IT
Traditional Medicine
Petrochemical Price
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Emerging Disease
Emerging diseases like SARS, Bird Flu, Aids & the
recent type A Influenza H1N1
Roche who own the proprietary drug, Tamiflu that can treat bird flu & type A influenza H1N1 took
full advantage of the situation
Threaten human kind in the form of a global pandemic
Share price of Roche skyrocketed & attracted popular & media attention to the industry
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Embryonic Stem Cell Research
•Able to replicate, divide and produce a variety of specialized cells to repair human body, cure disease, and alleviate suffering.
Capability
•Able to cure spinal cord injuries, multiple sclerosis, diabetes, Parkinson's disease, cancer, Alzheimer's disease, heart disease, age-related macular degeneration, hundreds of rare immune system and genetic disorders
Potential
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Personalized Medicine & Health IT
Personalized Medicine• Tailored to suit personal diagnostic requirement• Aimed to prevent certain diseases and to treat illnesses specifically• Knowing well ahead the conditions and heritage of body will
translate to prevention and lower healthcare bills
Proficient Use of Health Information Technology• Health IT can create, store, transmit and manage individuals’ health
data to improve health care safety, cost and quality• In addition, provides security and privacy of personal health
information• Other technologies include EMR, EHR, PHR, HIE, PBHR, and e-
prescribing
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Traditional MedicineTraditional Chinese Medicine•TCM accounts for 38% of
medical products produced in China in 2007 (Mustapha, 2009)
India’s Ayurveda•65% of Indian population in
rural areas use Ayurveda and medicinal plants to help to meet their primary healthcare need
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Petrochemical Price
• Pharmaceutical products are the derivatives of petrochemical
Overview
• World crude oil prices fluctuate
Situation• Affect the
petrochemical prices and in turn will result higher cost of medicines
Resulted
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Possible Scenario Variables
• Based on the above table, the two most important variables are following:– Political- United States Political Landscapes– Embryonic Stem Cell Research
• Both scored the highest rating at 25 points.
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Initial Scenario Themes
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New Revolutionary Transformation of the Medical Industry
Description
• Embryonic stem cell treatment becomes a reality
• Government support innovative and branded drug
• Whole medical industry would experience an explosive revolution
• New breakthroughs in medical treatments for uncured diseases
Impact
• Pharmaceutical firms would continue to invest heavily in R & D for further new innovations
• Diversify and undergo M & A for biotechnology companies that are specialized in embryonic stem cell research
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The Renaissance of the Pharmaceutical Industry
Description
• No progress in embryonic stem cell research
• Government support innovative and branded drug
Impact
• Pharmaceutical firms still continue to invest heavily in R & D for further new innovations
• Eli Lilly innovate and invent new drugs for emerging diseases in order to gain competitive edge against the other competitors
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New Era of the Medical Industry
Description
• Government support generics rather than branded pharmaceuticals
• Embryonic stem cell research successfully proves its applicability in medical treatment
• Embryonic stem cell gains upper hand over pharmaceutical
Impact
• Pharmaceutical firms will be facing a critical moment
• Eli Lilly should seriously consider diversifying into biotechnology in stem cell or undergo M&A to stay competitive in pharmaceutical industry
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Status Quo of the Pharmaceutical Industry
Description
• No progress in embryonic stem cell research
• No support from government
• Pharmaceutical industry remains the same status quo
• Medical treatments would only be using old technologies or the currently available technologies.
Impact
• Branded and innovative pharmaceutical firms would lose their market share
• No further investment in R & D as the ROI is not attractive
• Eli Lilly needs to reduce price and join the price war with generic drug’s manufacturer
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Consistency and Plausibility
• Are the scenarios plausible?– The constructed scenarios are greatly plausible– The next political election in five years may bring
change to the existing situation. – Stem cell research is an emerging industry and the
future is highly anticipated• Are the scenarios all challenging?
– All constructed scenarios possess a great challenge to Eil Lily to survive and sustain its position as the top multinational pharmaceutical firms
• Rate the importance of the scenarios
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Rate the importance of the scenarios
Variable Outcome Probability %
Political Government supports branded drugs 60%
Government supports generic drugs 40%
Embryonic Stem Cell Research Applicable 70%
Not applicable 30%
Scenario P(P) P(S) P(P and S) %P(P and S)New Revolutionary Transformation of the Medical Industry 0.6 0.7 0.42 42%The Renaissance of the Pharmaceutical Industry 0.6 0.3 0.18 18%New Era of the Medical Industry 0.4 0.7 0.28 28%Status Quo of the Pharmaceutical Industry 0.4 0.3 0.12 12%
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Identify Research Needs
• Identify whether embryonic stem cell research will post real threat to the pharmaceutical firms in the next seven year
• Study or know more about the political situation
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Develop Quantitative Method and Decision Scenarios
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Conclusion• From scenario matrix unfolded four variables
scenario, Eli Lilly would be able to align basic trends especially M&A that shape the future pharmaceutical industry
• The “Explosive” New Revolution Medical Industry appeared to be the highly rated scenario with the probability outcome of 42%
• Although scenario planning cannot predict the definite future, it helps companies to compensate usual errors in decision-making (Schoemaker, 1995)