Eli Lilly and Company

founded: 1876

Contact Information:

headquarters: lilly corporate center
indianapolis, indiana 46285 phone: (317)276-2000 fax: (317)277-6579 toll free: (800)545-5979 url: http://www.lilly.com

OVERVIEW

Headquartered in Indianapolis, Indiana, and incorporated in 1901, Eli Lilly and Company is probably best known for introducing the world to Prozac, a pharmaceutical treatment for clinical depression. However, the organization boasts a large portfolio of products. Eli Lilly and Company is a global, research-based company that discovers, develops, manufactures, and sells products in a large business segment called Pharmaceutical Products. It stresses innovation in its laboratories located around the world. Through its research division, Lilly Research Laboratories, the company discovers, develops, and evaluates therapies and products to help diagnose, prevent, and treat human diseases. The company also manufactures and sells animal health products. All of Lilly's products are sold in approximately 160 countries.

COMPANY FINANCES

In 2001, Eli Lilly's net sales rose 6 percent to $11.54 billion, but its net income fell 8 percent to $2.81 billion. Company earnings were significantly affected by higher research and development expenses and $311.9 million in acquired in-process R&D and asset impairment charges. A substantial portion of its revenues came from increased sales of the products Zyprexa, Evista, Gemzar, Humalog and Actos.

ANALYSTS' OPINIONS

Among the new drugs that Eli Lilly has produced in the last five years, observers speculate that the company could have at least 15 potential "megasellers" including its already established best-sellers. Analysts and investors expressed concerns about Lilly's Prozac problem. In 2001, a, a U.S. Court of Appeals ruled that Lilly would have to cede its Prozac patent in 12 months, rather than in late 2003, as Lilly had hoped. The decision caused the company's stock to drop by almost a third in one day (to $75 a share), which erased a whopping $36.8 billion in equity. A month later, the stock bottomed out at $66. But because of the new products Eli Lilly researchers have been developing, analysts are expecting that annual earnings should increase by 17 percent as profits begin to show in the beginning of 2003. This will put Eli Lilly's profits back up in the double-digit figures. Lilly was expected to only show a 4 percent profit in 2001. As a result, shares of Lilly stock rose to $76. Observers feel that Lilly's prospects look positive.

HISTORY

Before he founded Eli Lilly and Company in Indianapolis, Indiana in 1876, Colonel Eli Lilly had already tried to launch several unsuccessful business ventures. When he started his pharmaceutical company, he found the right formula. From the outset, his goals were to make pharmaceutical products of the highest possible quality, develop only medicines that would be prescribed by physicians, and to base his products on the best scientific knowledge. A veteran of the American Civil War, Colonel Lilly was 38 years old at the time. He was motivated by a frustration with the inadequate medicines then available. From the start, the business flourished, a testimony to Colonel Lilly's continual quality improvement. The company would soon develop an excellent reputation. Consumers not only respected the quality of the products; they respected the quality of the man as well. Colonel Lilly was seen as a generous man with community spirit.

In 1886, Lilly implemented a novel pharmaceutical research program when he hired a chemist, Ernest Eber-hard, who would perform as a full-time scientist to test the quality of products. Eberhard was one of the first graduates of a new pharmacy program at Purdue University. The move would prove significant, as it helped establish what would become a company tradition: dedication to quality and the discovery and development of new and better pharmaceuticals.

Later, Colonel Lilly would bring his family into the business. His two grandsons, Eli Lilly and Josiah K. Lilly Jr., both served as president of the company, forging their own management styles that contributed to the organization's ongoing success. The grandsons were instrumental in helping to establish company policies that regarded employees as its most valuable asset—a philosophy that many U.S. corporations would not adopt until well into the twentieth century.

From these roots the company grew to become a world leader in pharmaceutical-based, integrated health care. Into the next century, the company's history was marked by innovation and achievement. In the 1920s, Lilly's researchers worked with Frederick Banting and Charles Best of the University of Toronto to isolate and purify insulin to treat diabetes. At the time, diabetes was a fatal disease. In 1923, Lilly provided a treatment option where none had existed before when it introduced Iletin, the world's first commercially available insulin product. During the same period, the company started a research program to find a treatment for pernicious anemia. This resulted in the introduction of a liver-extract product that became standard therapy for the disorder. The researchers who developed the product received a Nobel Prize for their efforts.

Developments continued as the century progressed. In the 1940s, Lilly was one of the first companies to develop a way to mass-produce penicillin. In the 1950s, it introduced vancomycin, an antibiotic that treats patients suffering from serious hospital infections associated with resistant bacteria. The company also introduced erythromycin, an antibiotic that proved vital to patients allergic to penicillin.

During the next decade, Lilly launched a line of oral and injectable antibiotics in a new class called cephalosporins. It also introduced two anti-cancer drugs, vincristine and vinblastine. In the 1970s, it launched Ceclor, which would become the world's best-selling oral antibiotic, and Dobutrex, a cardiovascular product.

In the 1980s, Lilly engineered a breakthrough in diabetes treatment when it developed Humulin, insulin that was identical to that produced by the human body. Introduced in 1982, it was the world's first human-healthcare product created with recombinant DNA technology. Lilly later used the same technology when it developed Humatrope, a therapy for growth hormone deficiency in children. In 1988, it produced perhaps its best known product when it developed Prozac, the first drug of its kind to treat clinical depression.

Eli Lilly continued to innovate as the century drew to a close. In the 1990s, Lilly introduced Gemzar, a drug to treat pancreatic and non-small-cell lung cancer; ReoPro, a cardiovascular drug that prevents blood clots following certain heart procedures; Zyprexa, an anti-psychotic drug used to treat schizophrenia; Humalog, a highly improved insulin product; and Evista, the first of a new class of drugs used for the prevention and treatment of postmenopausal osteoporosis. In 1999, working with Takeda Chemical Industries, Ltd., Lilly successfully introduced the oral anti-diabetes agent Actos.

Toward the end of the twentieth century, the appointment of Sidney Taurel would have a great impact on the organization. Taurel became chief executive officer in July 1998 and chairman of the board of directors in 1999. Taurel had been president and chief operating officer since February 1996 and a member of the Lilly board of directors since July 1991. He is chairman of the company's policy committee and senior management forum.

STRATEGY

Beginning with Colonel Lilly's initial vision, the strategy of Eli Lilly and Company has been to apply the latest research and encourage scientific collaboration toward the development of new product. This tact fostered innovation, led to the company's continually growing portfolio of products, and contributed greatly to its success. The company also strived to identify and understand the world's most pressing medical needs. Research has been its focal point, as the company has established major research and development facilities in nine countries and conducts clinical trials for its drugs in more than 30 countries.

Lilly also attributes a great deal of its success to the development and adherence to a core set of values, which include respecting people (both its customers and its employees, as well as its business associates and communities) and maintaining integrity in all elements of its enterprises. It has dedicated itself to the pursuit of excellence, and it seeks ways to continually improve its business and, thus, its products. Along the way the company developed a two-fold purpose: to save lives and to cut overall healthcare costs.

Those purposes are integrated into its specific strategic initiatives. To help save lives, Eli Lilly uses new technology as a driving force in the discovery of new drugs. Believing that the latest technologies provide the key to understanding, treatment, and cure of diseases, the company seeks out and applies advances such as genomics, combinatorial chemistry, molecular biology, and informatics. To help cut healthcare costs, and thus make its products more available to the people who need them most, it employs access and cost-containment measures.

As part of its future direction, Eli Lilly will continue exploring strategic partnerships with academic research institutions and biotechnology firms. This, the company feels, enables it to apply new technologies in the production of new and better drugs.

INFLUENCES

Eli Lilly and Company's stated goal is to become the industry's "partner of choice." To this end, it has committed itself to establishing relationships with third parties to supplement and enhance its internal capabilities, and it aggressively seeks to establish strategic alliances toward the development and marketing of new products. The intent is to create mutually beneficial relationships for both Lilly and its partners.

So far, the company has become involved in more than 140 research and development collaborations with leading companies and universities. Collaboration has been a company hallmark since the 1920s when it partnered with the University of Toronto to introduce insulin to the market.

One recent significant collaboration involved Takeda Pharmaceuticals of America that resulted, in 1999, in the successful launching of Takeda's oral anti-diabetes agent Actos, a therapy for the treatment of Type II diabetes. Current collaborations include a partnership with Vertex Pharmaceuticals. Working with this company, Eli Lilly is seeking a treatment for chronic infection caused by the hepatitis C virus, a potentially deadly disease. Eli Lilly is also collaborating with Ribozyme Pharmaceuticals, Inc., to pursue treatments for hepatitis C. Together with Stanford University, Eli Lilly has formed the Lilly/Stanford Program for Excellence in Hepatitis Research, which brings together the world's leading experts in the area of hepatitis research.

Eli Lilly continues to encourage pharmaceutical and biotechnology organizations to contact the company for possible collaborations that could lead to potential products or new research technologies. This approach is in keeping with the company's philosophy of "research without walls," which means that it seeks out the latest in science and technology from external and internal sources.

CURRENT TRENDS

When Sidney Taurel took over as CEO of Eli Lilly and Company in 1998, he immediately sought to increase the company's new drug development by increasing the research and development budget by 30 percent (or $2.2 billion). As part of this plan, he hired 700 scientists in the span of one year. Further, he told the company's researchers not to pursue the development of any drug that would seem likely to create less than $500 million in annual sales. This strategy resulted in the creation of numerous new and highly marketable drugs.

FAST FACTS: About Eli Lilly and Company

Ownership: Eli Lilly and Company is a publicly owned company traded on the New York, London, and Canadian Stock Exchanges.

Ticker Symbol: LLY

Officers: Sidney Taurel, Chmn, CEO, and Pres., 62, 2000 salary $6,100,000; Charles Golden, CFO, EVP, Dir., 54, 2000 salary $2,400,000; August Watanabe, MD, EVP Science & Technology, 59, 2000 salary $2,400,000; John Lechleiter, EVP Pharmaceutical Products and Corporate Development, 47; Gerhard Mayr, EVP Pharmaceutical Operations, 54, 2000 salary $2,200,000

Employees: 35,000

Principal Subsidiary Companies: Lilly has subdivisions and facilities in 18 countries. Its research division, Lilly Research Laboratories, is responsible for the discovery, development, and clinical evaluation of pharmaceutical products. Research and development locations in the United States include four sites in Indiana and a subdivision in North Carolina, as well as international facilities in eight countries. Also, the company markets animal health care products through its division called Elanco Animal Health. Division facilities are located in North America, Europe, the Middle East, Africa, the Asia-Pacific area and Latin America.

Chief Competitors: Eli Lilly's major competitors include companies in the healthcare sector and drug manufacturing industry. Some of its primary competitors include Abbott Laboratories, AstraZeneca, Aventis, Bayer, Johnson & Johnson, Merck & Co., Inc., Novartis, Pfizer Inc., and Wyeth.

Research and development has always been an integral part of the company's success. Colonel Lilly himself once described research as "the heart of the business, the soul of the enterprise." The company has held to that stance in the twentieth century and its sees no reason to alter this line of thinking in the twenty first century. Today, the company is recognized as one of the industry leaders in research and development. Its all-important research division, Lilly Research Laboratories, includes more 6,000 employees working in a variety of scientific disciplines, and the company invests substantial sums of money into research. In 1999, it spent approximately $1.8 billion in the development of new medicines. In 2000, it increased that figure to $2 billion.

PRODUCTS

Eli Lilly and Company's main products are pharmaceuticals designed to treat patients and reduce total health care costs. Specifically, through its pharmaceuticals, the company strives to eliminate the need for surgery and hospitalization, and to slow, reverse, or prevent disease. The company focuses research in the areas of neuroscience, endocrinology, infectious diseases, oncology, and cardiovascular diseases. In recent years, it has introduced new and successful drugs to treat cancer, schizophrenia, osteoporosis, diabetes, and cardiovascular complications.

Eli Lilly's neuroscience products include the well-known Prozac, a treatment for clinical depression; Zyprexa, for treatment of schizophrenia and acute bipolar mania; Darvon, a line of analgesic products; Permax, a treatment for Parkinson's disease; and Sarafem, for the treatment of pre-menstrual dysphoric disorder. Endocrine products include Humulin, human insulin produced through recombinant DNA technology; Humalog, an injectable human insulin analog of recombinant DNA origin; Iletin, animal-source insulin; Actos, an oral agent for Type II diabetes; Evista, for the prevention and treatment of osteoporosis in post-menopausal women; and Humatrope, a human growth hormone produced by recombinant DNA technology. Products to treat infectious disease include the oral antibiotics: Ceclor, Dynabac, Keflex, Keftab and Lorabid. They also include the injectable antibiotics: Vancocin HCl, Nebcin, Tazidime, Kefurox and Kefzol. Cardiovascular products include ReoPro, an antibody product for use as an adjunct to percutaneous coronary intervention; Dobutrex, an agent for cardiac decompensation and Cynt, for treatment of hyper-tension. Oncology products include Gemzar, for treatment of pancreatic cancer and non-small-cell lung cancer; Oncovin, for treatment of acute leukemia and advanced cancers; Velban, used in a variety of cancers; Eldisine, for treatment of acute childhood leukemia, and Axid, an antiulcer agent.

Eli Lilly produces animal health products through its division called Elanco Animal Health. The products are marketed primarily to cattle, poultry, and swine producers, and are sold throughout the world. The current product line focuses on four therapeutic classes including: antibacterials, parasiticides, anticoccidials, and productivity enhancers. Products include Tylan, an antibiotic used to control certain diseases in cattle, swine, and poultry, and to improve feed efficiency and growth, and Rumensin, a cattle feed additive that improves feed efficiency and growth. The portfolio also includes Coban, Monteban, and Maxiban, which are anticoccidial agents for use in poultry. Other products include Apralan, an antibiotic used to control enteric infections in calves and swine; Micotil and Pulmotil, antibiotics used to treat respiratory disease in cattle and swine; Surmax, a performance-enhancer for swine and poultry, and Paylean, a leanness and performance enhancer for swine.

CHRONOLOGY: Key Dates for Eli Lilly & Company

1876:

Eli Lilly and Company is founded in Indianapolis, Indiana by Colonel Eli Lilly

1886:

Lilly implements a first-ever pharmaceutical research program

1923:

Lilly introduces the world's first commercially available insulin product

1982:

Lilly introduces Humulin, insulin that is identical to that produced by the human body

1988:

Lilly introduces Prozac, the first drug of its kind

1998:

Sidney Taurel becomes CEO

1999:

Lilly collaborateswith Takeda Chemical Industries, Ltd., to produce the oral antidiabetes agent Actos

CORPORATE CITIZENSHIP

Eli Lilly takes a strong pro-environmental stance. It has adopted environmental quality indicators that include, among many others, organic solvent emissions as a percent of usage, water and energy usage, global warming emissions and acidification potential emissions (CO2 and SO2), and waste generation. It also tracks the number and amount of fines imposed by government agencies for environmental deviations, and the number of complaints from the public registered for environmental concerns.

As part of its community service initiatives, the company has established the Eli Lilly and Company Foundation, a non-profit corporation made possible by the profits of Eli Lilly and Company. It is the major source of the company's support for non-profit organizations. For its employees it has set up community involvement opportunities including the "Now for the Future Program," an educational program that seeks volunteers to acts as tutor/mentors for young people ages 10 to 17; and a crisis and suicide intervention service, that uses volunteer clinical associates to staff a 24-hour telephone hotline.

GLOBAL PRESENCE

Eli Lilly has research and development facilities in Australia, Belgium, Canada, England, Germany, Japan, Singapore, Spain, and the United States. It conducts clinical research in approximately 70 countries around the world. Manufacturing facilities are located in Australia, Brazil, China, Egypt, England, France, Germany, Ireland, Italy, Japan, Korea, Mexico, Pakistan, Puerto Rico, Spain, Taiwan, and the United States. It operates 14 administrative, research and development, and manufacturing plants in the United States and Puerto Rico.

HEALTHY HERBS

Eli Lilly and company has come a long way from its modest beginning to human insulin production, recombinant DNA technology, and human growth hormones. The company's very first products, produced by Colonel Lilly himself, were herbal preparations extracted from Bear's Foot, Black Haw, Cramp Bark, Hardhack, Life Root, Skullcap, Sea Wrack, Squaw Vine, Wahoo, and Wormseed.

EMPLOYMENT

Eli Lilly and Company has often been recognized as one of the top employers in the United States. For three years (1999-2001), it was selected by Forbes magazine as one of the country's "100 Best Companies to Work For." In making the selection, the magazine cited the company's many employee benefits, including a stock-option grant program and on-site child-care centers. Lilly also provides its employees with career path development. Eli Lilly actively encourages employees to enhance their skills, look for learning opportunities, and explore career opportunities within the company.

SOURCES OF INFORMATION

Bibliography

arndt, michael. "eli lilly: life after prozac." business week online, 23 july 2001. available at http://www.businessweek.com.

biospace.com. "eli lilly and company new from the biospace beat" biospace news, 2002. available at http://www.biospace.com.

hamilton, joan. "interneuron is listening to prozac." signals magazine, 19 january 1998. available at http://www.signalsmag.com.

lilly.com. "lilly makes magazine list again as top employer in the united states." lilly newsroom, 23 january 2002. available at http://newsroom.lilly.com/news/story.

petersen, lynn, betsy porter, and jitesh tank. "a day in the life: eli lilly." themsj.com, 1 april 2002. available at http://www.themsj.com.

yahoo! finance. "eli lilly & company." yahoo market guide, 28 march 2002. available at http://biz.yahoo.com.

For an annual report:

on the internet at: http://www.lilly.com/about/investor.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. eli lilly and company's primary sic is:

2834 pharmaceutical preparations

also investigate companies by their north american industrial classification system codes, also known as naics codes. eli lilly and company's primary naics code is:

325412 pharmaceutical preparation manufacturing