Eli Lilly JV Eli Lilly and Company

Eli Lilly JV

Eli Lilly and Company has maintained a joint venture in India with Ranbaxy Laboratories Limited. Each firm is a leading pharmaceutical company in their respective countries, and though each offer distinctly different cultures, their joint venture has worked well until just recently. India, like many countries, are changing the business marketplace through regulations and stringent standards that make doing business much more difficult, which affects Ranbaxy's cash flow and bottom line. This is a situation that could lead to trouble for Eli Lilly, and at the very least may affect Eli's bottom line as well as Ranbaxy's. The question then becomes, 'should Eli Lilly be worried about the future of Ranbaxy, and if so, what actions should Eli take to alleviate that concern?'

A recent article on Ranbaxy states that "the company is ranked among the top ten global generic companies and has a presence in 23 of the top 25 pharmaceutical markets of the world" (Industry Watch, 2008, p. 48). The article describes the company as maintaining a "global footprint in 49 countries, world class manufacturing facilities in 11, and a diverse product portfolio" (p. 48). If what the article states is true, then it is likely that Eli does not have a whole lot to worry about, unless of course the joint venture is at risk by Ranbaxy's slowing cash flow, or the regulations that India wishes to implement.

If only John C. Lechleiter could convince the government of India that what is needed is not additional regulations, but more innovation, the joint venture would likely benefit accordingly. Lechleiter is a big proponent of innovation; in a speech he gave in late 2010 he states "with the help of medical innovation, not only have we purchased additional decades of life and health…but the economic payback from these gains is also difficult to overstate" (Lechleiter, 2011, p. 15). Lechleiter is not likely to convince the government of India to change as much as he might hope, but his attitude towards innovation may be a deciding factor in whether to maintain the joint venture with Ranbaxy or terminate the relationship.

As Lechleiter studies the joint venture, he will likely determine that the venture has been profitable for them during its tenure, although the last few years have shown some wear and tear. Since the agreement was initiated in 1995 each company has grown and the joint venture now includes many more products and pharmaceuticals than at the beginning. Ranbaxy has established itself in the United States both with the joint venture and with their purchase of a generic manufacturer in 1996. The venture itself has been quite profitable for both companies and has helped to elevate each firm to even greater status. Lilly's 2010 annual report states that Lilly is always looking "to improve the speed and power of R&D at Lilly: building a network of research capabilities inside and outside our own walls" (Lilly, 2010, p. 6) and some of those research capabilities depend on the assistance of joint ventures such as the one with Ranbaxy,