1. Scenario and Strategic Planning
Eli Lilly & Co.
● CHEE LIUNG WUN ● LIM SHIEH CHERN ● NG YEE JIE ●

2. 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

3. Team Members
Chee Liung Wun
2821927
Lim Shieh Chern
2821959
Ng Yee Jie
2821942

4. The Company - Eli Lilly & Co.
4
AboutUs
Global,
research-based
pharmaceutical
company and
one of the
world's largest
corporations.
Origin
Founded in
1876 by a
retired colonel
& Pharmacist,
Eli Lilly. Global
headquarter in
Indianapolis,
United States
Mission
To makes
medicines that
help people live
longer,
healthier, more
active lives
Source : Eli Lilly and Company (www.lilly.com)

5. 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)

6. 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

7. Major Stakeholders
• Stakeholders
Internal Stakeholders – Management Team
External Stakeholders – Major suppliers, health care
providers, regulators and consultants into the process

8. Porter’s Five Forces (Current)
Threat of Substitute
Products
LOW
(Low Value, Risk)
Threat of New
Entrants
LOW
(Patent, regulatory
process & Dist
System)
Bargaining Power of
Buyers
LOW
(Insurance companies,
doctors‘& patients’
buying habit)
Bargaining Power of
Suppliers
LOW
(Multiple sources)
Rivalry Among
Competing Firms in
Industry
LOW
(Different niches &
Patent Protection)

9. Porter’s Five Forces (Trend)
Threat of Substitute
Products
MODERATE
(Embryonic Stem Cell,
Alternatives)
Threat of New
Entrants
MODERATE
(Increased Biotech
Firms)
Bargaining Power of
Buyers
MODERATE
(Buyer Consolidate,
government & hospitals
price sensitive)
Bargaining Power of
Suppliers
MODERATE
(Petrochemical cost )
Rivalry Among
Competing Firms in
Industry
HIGH
(Generics more
common, price pressure)

10. 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

11. United States Political Landscape
Fact
• In 2008,
Democrats won
the presidency
election
Before
• Republicans
protected
branded
pharmaceuticals
After
• Democrats
support generic
pharmaceuticals

12. Mergers and Acquisitions (M&A)
Mutual Benefits
Sharing
Resources
Complement on
Product Pipelines
Work towards
blockbuster drugs
Self Benefits
Improve Sales Cut Cost
Increase
Competiveness

13. 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 2008
12 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

14. 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

15. 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

16. 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

17. Key Uncertainties
Emerging
Disease
Embryonic
Stem Cell
Research
Personalized
Medicine and
Health IT
Traditional
Medicine
Petrochemical
Price

18. 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

19. 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

20. 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

21. Traditional Medicine
Traditional 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

22. Petrochemical Price
• Pharmaceutic
al 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

23. 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.

24. Initial Scenario Themes

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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%

31. 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

32. Develop Quantitative Method and
Decision Scenarios

33. 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)