eli lilly multi-drug resistant tuberculosis...

Eli Lilly Multi-Drug Resistant Tuberculosis Partnership

06/2007-5435

This case was written by Hans H. Wahl, Programme Manager and Bruce Kogut, Professor of Strategy. It is intended to beused as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Financial support from Burgess Fund is gratefully acknowledged.

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Copyright © 2007 INSEAD 1 06/2007-5435

In early September 2006, officials attributed the swift deaths of 52 of 53 victims in the Kwazulu-Natal region of South Africa to tuberculosis. Rather than the normal form of the disease, these deaths were the latest result of the extremely deadly strain of multi-drug resistant dubbed XDR-TB (Extreme Drug Resistant Tuberculosis). Like others that have appeared in a number of “hot spots” around the world, medical experts feared that this strain of TB resulted from inaccurate diagnosis, substandard drugs, or a failure to complete an entire course of treatment.1

Despite the dramatic advances in medicine over the past three decades, the challenge of delivering drugs to those who desperately need them most has remained a vexing problem. While many in the pharmaceutical industry have met this challenge by an increasing commitment to research and technology, they continue to be called upon to do more to address the compelling need. Often, the diseases that have the most devastating impact on the poor and most vulnerable segments of society fail to attract the attention and, consequently, the resources to find effective remedies. The situation is further complicated by the vexing ability of infectious diseases to spawn increasingly treatment-resistant strains of themselves, thereby placing society as a whole at an ever increasing risk.

Tuberculosis is curable. Nearly eradicated two decades ago, it has since re-emerged at the top of the list of world’s most deadly infectious diseases. It claims 1.7 million lives each year; an average of 5,000 a day, and more than at any time in history. TB is able to thrive on weakened immune systems of victims debilitated by complementary scourges such as HIV/AIDS, and the poor sanitation, overcrowding, and poverty in which many of its victims live.2 The emergence of virulent new drug-resistant strains of tuberculosis threatens to increase that number dramatically by making treatment far more difficult and costly.

Many experts lay the blame for this deadly resurgence on inadequate public health policies, insufficient skills and capacity at the national-level point of delivery, and the lack of political will to implement the time-proven eradication protocols. Because of these deficiencies, some strands of TB had become resistant to drugs. Multi-drug resistant tuberculosis (MDR-TB) posed the threat of an epidemic. An effective public health program required not only effective drugs, but also a coordinated effort to assure their proper administration in difficult field conditions and in often very poor regions of the world, including not only Africa but also parts of Asia and Russia.

The difficulty of assuring the delivery and administration of drugs challenged the US-based pharmaceutical company, Eli Lilly, its corporate foundation, and other partners in their efforts to contribute to the control of TB. Eli Lilly and Company Foundation, created in 1968, was the major source of the company's financial support for nonprofit organizations.3 The foundation contributions program was funded by the company and employees through a 1 Medical News Today. MediLexicon International Ltd. (http://www.medicalnewstoday.com/) East Sussex, UK

7 September 2005. 2 Tuberculosis is the most common opportunistic infection among individuals infected with HIV. (Activity

Report of the International Union Against Tuberculosis and Lung Disease: 1 January – 31 December 2005. Paris, 2006: 19 and Expert interview at the 37th Union World Conference on Lung Health, Paris, 31 October – 4 November 2006).

3 The foundation was funded annually by the company based upon an average of consolidated income before taxes over the previous three years, a funding level that placed Eli Lilly in the highest ranks of corporate giving. The Lilly family created in 1937 the Lilly Endowment, which is separate from the Eli Lilly and Company Foundation.


‘matching gift’s’ policy. Consequently, the governance of the foundation included employee participation to determine the distribution of the company’s philanthropic resources.

Under the leadership of its CEO, Randall Tobias at the time, Lilly established its International Aid Unit in Geneva in 1995. The Unit was created to provide guidance and support for Lilly’s work in developing countries, including its philanthropic activities. Dr. Patrizia Carlevaro, a young, aspiring chemist was recruited from a senior post at UNICEF (United Nations Children’s Fund) to assume leadership of the Unit. The following year, working under the tutelage of Lilly’s incoming CEO, Sidney Taurel, Carlevaro brought together international organizations and a broad spectrum of practitioners in the field to develop the MDR-TB Partnership to carry the initiative forward for Lilly.

The Lilly MDR-TB Partnership reflected both the firm’s commitment to social responsibility as well its strategy of building sustainable alliances to tackle complex medical problems. Beginning with its original partners, Médecins Sans Frontières (MSF, or Doctors Without Borders) and Partners in Health and the World Health Organization, the Lilly partnerships grew to include more than 14 international public and private organizations within three years. The partners spanned the full spectrum from diagnosis and awareness to drug production and treatment.

The Lilly commitment to social responsibility had been a transparent policy known to shareholders and investors. Its financial commitment reached US$511 million in charitable contributions in 2005, the highest in the company’s history. Its efforts to contain tuberculosis confronted not so much investor concerns over the legitimacy of corporate social responsibility as the difficulties to leverage its internal capabilities through new alliances with public and non-governmental organizations. These organizations often operated in regions with limited resources at their disposal.

Carlevaro and her colleagues at Lilly knew there were many management challenges that could be anticipated. Would these partnerships be effective? Would competition subvert the pricing of drugs and the careful monitoring of patient treatment? Would the alliance partnerships draw Lilly into growing intervention in the downstream provision of healthcare services? What was the limit to Lilly’s social responsibility?

Eli Lilly and Company

Eli Lilly and Company was founded in 1876 by Colonel Eli Lilly. Starting with three employees, his 14 year-old son and US$1,400, it grew to one of the largest and most profitable pharmaceutical companies in the United States. Lilly used a combination of research and managerial excellence to attain a position at or near the top of the fiercely competitive American pharmaceutical industry throughout much of the last century. Subsequently, massive acquisitions pushed its US and foreign competitors to become mega-giants in the industry, and moved Eli Lilly to 7th place in the US, and 12th place globally. (See exhibit A.)

Lilly held a leading position in pharmaceutical therapies for cancer, cardiovascular disease, central nervous system, diabetic and endocrine system disorders. Its achievements reflect the value placed on innovation. For example, since its ground-breaking work on refining and


purifying insulin in the 1920s, it developed the capability to mass-produce it in the 1950s. In 1982, Lilly introduced Humulin®, an insulin identical to that produced by the human body. It was one of the first pharmaceutical companies to develop a process for the mass production of penicillin, the world’s first antibiotic. William Parry Murphy and George R. Minot were awarded the 1934 Nobel Prize in Medicine for their collaboration with Lilly on the development of a liver diet therapy against the deadly pernicious anemia. Lilly’s ‘ground-breaking and blockbuster’ drugs include Prozac® Ceclor®, Methadone, Humatrope®, Thimerosal, Cialis®, Strattera®, Symbyax®, and Byetta®, for the treatment of type 2 diabetes. (See exhibit B).

The dramatic changes that characterized the global pharmaceuticals market during the 1980s and 1990s had a profound effect on Lilly’s market position. The seemingly endless stream of mergers and acquisitions, as well as a growing reliance on inexpensive offshore production, found Lilly in a weakened position to leverage its competitive advantages outside the US. India, China and Brazil were quickly developing research and production operations to compete with those in North America and Europe. Rising income levels, medical advances, and longer life expectancies in second- and third-tier markets led to rapidly expanding opportunities outside the US and revealed the wisdom of Lilly’s competitors.

In 1989, when Richard D. Wood was appointed as the first non-family member to head the company in eleven generations, he quickly moved Lilly on a course intended to address these changes. He sought to leverage Lilly’s position as a US top-tier pharmaceutical firm into a comparable role in the international market. With its competitors well ahead of Lilly on this road, Lilly opted to build on its competitive advantage in the innovation of drugs requiring sophisticated and complex manufacturing processes.

As many of the larger companies experienced growth pangs, Lilly achieved $14.6 billion in revenues in 2005, making it the 148th largest company in the United States. In 2006, Fortune magazine listed Eli Lilly as a top 100 company in the United States for which to work. In late 2006, Lilly reported that it had 30 drugs under development and planned to launch an average of one new product per year by the end of the decade. It continued to devote a larger proportion of its revenues to research and development than its competitors. Only Amgen, a US biotech firm, devoted a larger percentage.

Nevertheless, there was investor concern over its drug pipeline and its prospects for future growth. The development of new pharmaceutical products had become more fiercely competitive by the 1990s and early 2000s. The average cost to bring a new drug to the market rose from $115 million in 1970 to $1 billion in 2004, significantly raising the risk that new products would not reach the threshold of profitability. Only 3 out of 10 drugs that reached the market were able to recoup the investment put into them. While a patent provides 20 years of protection, the average commercial period of exclusivity is closer to 10 years. Due to the increasing speed with which competitors could bring similar products to the market, even that period had been shrinking to as little as 3 months in the case of Pfizer’s Celebrex in 1999.

Lilly considered both its highly productive and sophisticated manufacturing capabilities and its research prowess to be a competitive strength. By keeping a relatively high proportion of manufacturing in-house, Lilly maintained careful control of its manufacturing processes. In several important cases, such as insulin, Lilly was able to fend off generic drug competitors in


drugs that had gone off patent due to the high cost and expertise required to replicate the very complex manufacturing process required to produce them.

Lilly’s tuberculosis drugs, cycloserine and capreomycin were a product of that competitive advantage. Although they were developed nearly half a century earlier and their patents had expired, no effective generic drug was being produced. The fermentation process required to produce cycloserine was time-consuming, requiring sophisticated equipment and well-trained personnel. The Lyophilization, or freeze-drying process, used in the manufacture of capreomycin, required even greater precision and adherence to strict production standards. Laxity anywhere in the process could easily diminish the effectiveness of both drugs and contribute to the resistance they were intended to overcome. The stringent quality control of the fermentation process became a principal concern for Lilly when it sought partners for the manufacturing of its TB drugs, as discussed below.

Expanding the Strategic Partnership Model to Non-profit Activities

When Lilly expanded into overseas markets more aggressively, it combined its sophisticated manufacturing capabilities with boldly extending its innovative alliance-building process. To overcome the significant risks that accompany international partnerships, Lilly drew up its own Global External Research and Development Group (GERDG). By 2005, the Group had played a critical role in structuring approximately 120 research and development collaborations for technology, products and services with leading companies and universities and approximately 160 manufacturing alliances.

Lilly had developed a systematic management approach to choosing and designing alliances. Lilly vetted prospected alliance partners by the application of a due diligence assessment of the strategic, operational and cultural fit of all parties prior to a formal agreement. An enhanced cultural assessment was developed for international partnerships so as to better understand how the parties could best work together, recognize and value their differences, and build a complementary relationship that would maximize the contributions of each. The results enabled Lilly to develop long-term, sustainable and mutually beneficial partnerships. It proved to be a successful combination. Lilly’s alliances enabled it and its partners to produce products well beyond the sophistication of its competitors in emerging markets.

Research and development partnerships raise complex issues surrounding ownership of intellectual property, and these issues are often cited as troubling factors in the management of alliances. Realizing that excessive IP concerns could kill the investment in an alliance, Lilly developed a body of management principles for research partners that it labeled research innovation without walls. This management philosophy enhanced the capacity of these alliances to pursue cutting-edge science and technology by joining internal and external sources. The alliances contributed to the full spectrum of Lilly’s products and services; from access to novel molecules and technologies changing health care research to innovative approaches to product delivery, manufacturing and marketing. These partnerships introduced important new medicines for the treatment of cancer, schizophrenia, osteoporosis, diabetes and cardiovascular complications and maintained one of the strongest new drug pipelines in the industry.


The strategic partnership model achieved major results for Eli Lilly in its commercial activities, but was untested in its commitment to socially responsible investments. Under the leadership of Sidney Taurel, Lilly established the International Aid Unit in Geneva in 1995. Dr. Patrizia Carlevaro assumed leadership of the Unit. Within a few years of its founding, the Unit sought to craft an alliance strategy to control a disease most healthcare experts once thought was largely confined. But at the start of the 21st century, tuberculosis was again spreading and evolving new strains that threaten catastrophic epidemics.

Tuberculosis: An Age-old Infection Resurfaces in a Highly Lethal Form

To many, the Red Death, consumption, or the many other names given to tuberculosis over the centuries, appeared to be a threat only to the characters of the 19th Century romances in Puccini’s La Bohème or Thomas Mann’s Magic Mountain. Evidence of tuberculosis in the mummified remains of ancient Egyptians who lived before 3400 BC attests to the age of the disease. Yet this malady had made a startling comeback. More people died of TB in 2002 than in any year prior to that point. Along with AIDS, TB was the leading infectious cause of adult mortality in the world.

More than one in every three people worldwide carry the TB bacterium and new infections occur at a rate of one per second, mostly in the developing world and among the poor.4 While most infections are an asymptomatic and latent form of TB, one in ten of these infections progress to the active form of the disease that destroys the lungs while attacking the circulatory, lymphatic, and central nervous systems. If left untreated, it will kill more than half of its victims.

In 2004, the World Health Organization (WHO) reported that 9 million people had active tuberculosis, the form in which the disease both kills and can be transmitted. Despite the fact that an effective cure has been available for more than half a century, less than half of all TB cases worldwide are diagnosed, and fewer than 60 percent are cured.5 The WHO estimated that while most of the 8.9 million new cases occurred in developing countries, the sharpest increases were observed among people in the developed world. Victims were often those whose immune systems were compromised by drugs, substance abuse, or HIV/AIDS. Poor nutrition and sanitation combine with congestion in urban areas to create a setting in which TB thrives. However, since this deadly infection is mobile enough to be spread by a simple cough or sneeze, the often-perceived social and economic barriers were highly permeable.

More troubling than the speed of its modern-day proliferation were the new multi-drug resistant strains of tuberculosis (MDR-TB) that emerged in recent years. While standard forms of TB are relatively simple to treat through a regime of inexpensive drugs, these insidious new forms of the disease have emerged largely through patients who do not complete a full course of treatment or are treated with sub-standard drugs. Once drug-resistant strains of tuberculosis develop (generally defined as strains resistant to treatment

4 World Health Organization (WHO). Tuberculosis Fact sheet N°104 - Global and regional incidence. March

2006, Retrieved on 6 October 2006. 5 Murray CJ, Lopez AD. Alternative projections of mortality and disability by cause 1990-2020: Global

Burden of Disease Study. Lancet.1997; 349:1498-504.


with at least the two most powerful “first line” drugs: Rifampin and Isoniazid), the treatment process becomes far more complex, costly and invasive.6 However, it is passed on to others just as easily as “normal” TB. The WHO estimates that the average MDR-TB patient infects up to 20 victims in his or her lifetime, leading to more than 400,000 new cases of MDR-TB each year.

Further complicating the situation is that those most likely to develop MDR-TB were also those most difficult to treat; the poor, transient and those in ill-health, for whom the extra burden of a strict regime of powerful drugs is most difficult to sustain, especially since symptoms disappear soon after the treatment begins, thus leading patients to believe they have been cured long before the infectious bacteria are actually destroyed.

Half a century ago, TB eradication measures matched the severity of the disease itself. Persons with active forms of TB were held in isolation in “sanatoria” described as hotels, hospitals and prisons to varying degrees, often depending on the patient’s income and class. Once confined, patients were treated with a combination of sunlight, diet and gentle exercise and early antibiotics, most commonly rifampicin and isoniazid. Both required extended periods of treatment (6 to 12 months) and had considerable side effects that required careful monitoring. In the former Soviet Union, X-ray treatment and surgery were often added to the regime to remove infected lung tissue, sometimes to the extent of collapsing part of the lung itself. Despite the risks and side effects, by the end of World War II, universal childhood immunization programs had been established in many European and North American countries.

Radical as they were, these measures proved effective and nearly wiped out the disease. They were, however, also very costly. With the advent of more effective drug treatments and budgetary pressures to slash healthcare expenses, governments replaced these draconian treatments with a patchwork of treatment approaches. The collapse of the Soviet Union also damaged the prior policy regime without establishing a new set of institutions. The result was a dramatic increase in tuberculosis by the late 1980s and the emergence of drug-resistant strains of the bacteria appearing in as many as 17% of new cases and 58% in previously treated cases.

In 1993, the World Health Organization declared TB a global emergency and launched an aggressive, comprehensive community-based program known as DOTS (Directly Observed Treatment, Short course) to eliminate the epidemic. The new standardized treatment regimen required patients to visit an out-patient clinic daily where they swallowed their medication under the supervision of trained medical staff.

While the DOTS strategy proved to be very effective, three specific problems quickly became apparent.

6 The cost of curing MDR-TB can be significant. In one analysis of expenditures for drugs and

hospitalization alone in the United States, the cost of treating drug-susceptible TB averages roughly US$2,000 per patient. However, the cost of treatment for patients with MDR-TB rises to as much as US$150,000 per patient. (Iseman M.D., Cohn D.L., Sbarbaro J.A.. Directly observed treatment of tuberculosis. We can't afford not to try it. N Engl J Med. 1993;328:576-8; Farmer P.E.; Bayona J.; Becerra M.; Kim J.Y., and Shin S. Reducing transmission through community-based treatment of multidrug-resistant tuberculosis. Int J Tuberc Lung Dis. 1998; 2(11 Suppl. 1):S190.)


• Since the initial drugs to treat TB were developed in 1944, the problem of drug resistance gradually emerged. To overcome resistance, combinations of drugs were introduced as early as the 1940s. However, higher levels of expertise and training were required to administer these combinations as well as manage the side effects that accompanied them. Where this administration was carried out ineffectively, drug resistance emerged and thrived.

• In implementing DOTS, the World Health Organization encountered resistance from doctors and healthcare systems geared toward operating under the earlier sanitaria system, especially in the former Soviet Union. This contradiction led to compromises in the DOTS protocols that weakened its effectiveness and facilitated the development of resistant strains of TB.

• In the absence of custodial care, the most difficult patients to treat became the most resilient carriers. Transient populations and those for whom frequent visits to clinics were most difficult (the poor, migrants, released prisoners, discharged soldiers, etc.), often received treatment only until symptoms disappeared and failed to complete the full course of required drugs to kill the tuberculosis bacteria. The result was a pool of ever-increasing drug resistant strains of TB.

In studies conducted by the World Health Organization in 1997 and 2000, the organization found that MDR-TB strains were present in 102 of the 109 countries or regions surveyed.7 Eighty percent of those cases are in the 22 countries the WHO designates as “high burden countries”. The WHO designates those sites with above a 3% MDR-TB rate as “hot spots”, and some locations were found to have MDR-TB rates of 14% or more among previously treated cases (see Exhibit C). However, these designations are highly transitory since these drug-resistant strains of TB demonstrated the capacity to spread very rapidly within regions and across them.8 Both pan-susceptible and drug-resistant TB strains can spread rapidly across regional and national borders. Multi-drug resistant strains of TB can be transmitted through commercial air travel. TB and its drug-resistant strains can behave like influenza to create epidemics that are trans-national and trans-continental.

Since MDR-TB strains were resistant to the leading low-cost “first line” DOTS drugs, far more complex and costly options were required. These requirements raised serious concerns in poor countries over the cost-effectiveness of implementing expensive, powerful and difficult-to-administer “second-line” drugs. In these countries, access to funding, expertise, and clinical management were most difficult due to a lack of infrastructure. Furthermore, the infection rates reported in the survey were likely to be underestimated. The authors of the WHO study noted that countries most likely to participate in the study were those with more

7 Ditiu, L. Tuberculosis in the World and in the WHO European Region: Challenges and Strategies. WHO

presentation in Salzburg, 5 February 2007. 8 Agerton T.B., Valway S.E., Blinkhorn R.J., et al. Spread of strain W, a highly drug-resistant strain of

Mycobacterium tuberculosis, across the United States. Clin Infect Dis. 1999;29:85-92; discussion 93-5; Kenyon T.A.; Valway S.E.; Ihle W.W.; et al. Transmission of multidrug-resistant Mycobacterium tuberculosis during a long airplane flight. N. Engl J Med. 1996; 334(15):933–938. Bifani P.J., Plikaytis B.B., Kapur V., et al. Origin and interstate spread of a New York City multidrug-resistant Mycobacterium tuberculosis clone family. JAMA. 1996;275:452–7; Casper C., Singh S.P., Rave S., et al. The transcontinental transmission of tuberculosis: A molecular epidemiological assessment. Am J Public Health. 1996;86:551-3.


effective TB-control programs in place, leaving vast regions of the globe with large and threatening question marks.9

An Alliance-based Strategy to Overcome Drug Resistance

The story of the Lilly campaign to fight MDR-TB strains began in the impoverished town of Carabayllo, one of hundreds of favelas that form a crescent of poverty around Lima, Peru. Father Jack Roussin, an irreverent and resourceful priest, had taken up the challenge of improving public health in the midst of poverty. In the early to mid-1990s, he had established a series of public health programs, prevention initiatives and access to treatment built upon non-professional community health workers with the basic training to move from home to home to identify and address these diseases and the problems that underlie them. They became known as Socios en Salud and served as a model for public health delivery throughout Latin America. However, as increasing numbers of patients failed to respond to standard drug treatment, he recruited Partners in Health (PIH), a non-governmental organization founded by Drs. Paul Farmer and Jim Yong Kim, and linked to Harvard University’s School of Medicine, to help.

PIH, together with Harvard Medical School’s Brigham and Women’s Hospital and Father Jack’s Socios en Salud recruited the Peruvian Ministry of Health to join a small research consortium. Together, they began uncovering the emergence of drug-resistant strains of TB and experimenting with new drug cocktails to which this infection would respond. They enrolled 75 patients who were found to have drug-resistant strains of TB. The test revealed that a combination of Eli Lilly’s cycloserine and capreomycin proved to be most effective in treating MDR-TB. The resulting protocol was labeled DOTS-Plus.

While some of the tests showed impressive results, especially when linked to a comprehensive community-based delivery program, the success was too late for Father Jack. He had contracted a strain of MDR-TB himself. When he was finally persuaded to return to Boston for care, his lungs were so consumed by TB that little could be done to save his life.

Meanwhile, the severity and complexity of MDR-TB were becoming clearer as medical and public health experts began to focus their attention on the problem in another part of the world. In the mid-1990s, Médecins Sans Frontières, the Paris-based non-governmental organization devoted to sending trained doctors and public health workers to crisis situations, had noticed a critical problem building in the prisons of the former Soviet Union. MDR-TB cases were spreading from a highly infected prison population to the surrounding community with astounding speed.

MSF had also identified Lilly’s cycloserine and capreomycin as very promising. Since both drugs were out of patent, MSF approached Lilly with a request to provide heavily discounted drugs. Lilly’s CEO Sidney Taurel took a keen interest in the project and delegated Carlevaro to structure an agreement through which both drugs could be made available at an appropriate price level (approximately 1% of the market price).

9 Anti-tuberculosis drug resistance in the world: the WHO/IUATLD global project on anti-tuberculosis drug-

resistance surveillance 1994-1997. Geneva: World Health Organization, 1997.


However, the production and administration of these two Lilly drugs depended upon specialized equipment and highly trained staff. In addition to the substantial risk of non-compliant production, both drugs required well-trained medical workers to administer them because of the risk of side effects. Despite these obstacles, Lilly’s drugs offered hope where none had existed. Her experience at UNICEF led Carlevaro to recognize an opportunity to do more than simply provide discounted drugs.

Lima’s shantytowns and the prisons of Siberia provided important lessons. Dr. Carlevaro explained that, “While effective drugs are important, they are only one aspect of a meaningful strategy for combating an epidemic.” Effective treatment required a well-integrated partnership among the actors concerned in the chain of providers involved in delivering both the drugs and the healthcare to support their use. Dr. Carlevaro set out to build an MDR-TB partnership that would draw upon Lilly’s experience and well-developed methodology and go considerably beyond simply making drugs available.

Applying expertise was not straightforward. Complicating factors such as pattern of HIV and TB co-infection would have to be addressed. The role of hospital workers and nurses in transmission of these infections was a challenge. The public and professional stigma associated with tuberculosis served to deter patients from seeking treatment and medical staff from wanting to treat the disease. Furthermore, the customer base, the manufacturing and distribution chain, and the partners were all radically different from those engaged in Lilly’s more traditional ventures. Production in developing countries required a transfer of technology. Supply and delivery depended upon efficiency and timeliness. Treatment, training and surveillance would have to be upgraded considerably. Community support, patient advocacy, and workplace awareness and prevention emerged as critical issues that required higher levels of attention. Given the complex nature of the drug resistance, each aspect of the problem would be analyzed within the overall challenge, and a partnership built around it.

In 2000, Lilly convened a meeting with Partners in Health and Médecins Sans Frontières in an effort to develop a coherent approach for the use of its tuberculosis drugs to tackle MDR-TB. The result was a plan to build a comprehensive public-private partnership to include the full chain of product and service providers involved in implementing a MDR-TB eradication program of the highest standard.

All parties agreed that it was important to establish an independent platform comprising the key parties involved in addressing MDR-TB. The World Health Organization, national TB programs, research institutes, professional associations, and delivery agencies were all to be included. Integrated in this platform was a structure with responsibility for the development, control and management of an effective DOTS-Plus program on a global scale. This structure came to be known as the Green Light Committee (GLC). It would be housed within the WHO and would work alongside the existing “first line” TB eradication efforts of the World Health Organization and the Stop TB Partnership.

In June 2003, Eli Lilly and the Lilly Foundation announced a $70 million partnership with the World Health Organization; the US Department of Health and Human Services’ Centers for Disease Control and Prevention (CDC); Brigham and Women's Hospital, an affiliate of Harvard Medical School; Purdue University; and the International Council of Nurses. At the core of the partnership was the supply and proper use of its TB drugs, capreomycin and


cycloserine, supporting efforts to enhance disease surveillance and healthcare worker training, and transferring proprietary Lilly manufacturing technology to countries where MDR-TB was most prevalent.

The partnership included the sale of its two TB drugs to the Green Light Committee of the WHO at a discounted price. The value of this discount was estimated by Lilly to be around $25 million over the six years of the agreement. The greater challenge was to construct a viable structure to assure the manufacture and administration of the drugs. By 2003, the first comprehensive programs were already launched in Russia, Peru and the Philippines with the Partnership providing technical support for national level DOTS-Plus programs. By 2006, 40 national MDR-TB programs were under way.

The Design of the Alliance

The speed of this implementation reflected Lilly’s expertise in the systematic process of alliance building. A Lilly Governance Council, comprising eight members from various corporate departments of the company, oversaw the Lilly MDR-TB Partnership’s activities. An MDR-TB Partnership Summit was convened annually to bring together Lilly and its 14 partners to review accomplishments, assess potential new activities, and scale up for the future. They discussed monthly by phone the project proposals, implementation and new ideas for development. The Council was chaired by Dr. Carlevaro, with each member assuming responsibility for a specific area activity (i.e., medical, communications, legal, manufacturing). In this way, the governance could oversee each critical link in the flow of drugs to the monitoring of patients.

Five areas of activity were deemed to be essential in establishing an effective MDR-TB treatment program: a) transfer of technology and drug supply; b) treatment, training and surveillance; c) community support, d) patient advocacy, and e) workplace awareness and prevention. Each of these areas demanded partnerships with either private or public and non-government organizations in order to assure effective delivery of drugs and monitoring of the patients.

a). Technology Transfer and Drug Supply

Based on WHO projections of the need to treat more than 400,000 MDR-TB cases annually, Lilly understood that meeting this goal required that production of cycloserine and capreomycin be scaled up significantly and at a price point well below what its current US-based production would allow. However, the difficulty of manufacturing these two drugs meant that outsourcing to low-cost production centers would involve the transfer of advanced technology and skills to new partners. In addition, components such as the glass containers, seals and the packaging would need to be produced to specific standards. The distribution channels used to transport the drugs would have to operate efficiently, and trained personnel required to administer and monitor the use of these drugs were required to be of an equally high standard.

Dr. Carlevaro and Lilly’s Governance Council and the Manufacturing team joined forces to identify four drug manufacturers: Aspen Pharmacare (South Africa), Hisun Pharmaceutical (China), Shasun Chemicals and Drugs (India), and SIA International (Russian Federation) to


fulfill the drug production component of the alliance’s operations. In the US, Purdue University and its Chao Center of Industrial Pharmacy were brought in as a fifth manufacturing partner with additional responsibility. The strategy was for Lilly to transfer technology to Chao Center to produce both drugs in US. By monitoring and learning from this transfer, Lilly and the Chao Center assisted in the transfer of technology to manufacture, package and test these drugs to partners in other countries. In the first five years of the program, Lilly’s supplied one million vials of capreomycin and five million capsules of cycloserine under careful quality control.

b.) Treatment, Training, Surveillance

A crucial problem the partnership set out to address was that of the inefficiency in delivering treatment to the patient. Poor and inconsistent treatment had consistently been identified as a factor contributing to the rise in drug resistance.10 Consequently, the partnership set out to create a well-managed network of healthcare professionals capable of providing both access to treatment and expertise tailoring the MDR-TB programs to local resistance issues. Partners involved in this aspect of the alliance included: Harvard Medical School and Partners in Health, the International Council of Nurses, the International Hospital Federation, the US Centers for Disease Control and Prevention, the World Medical Association and the World Health Organization and its Stop TB Partnership.

c.) Community Support

A key element in The Global Plan to Stop TB, 2006-201511 focused on the need for advocacy, communication and social mobilization (ACSM) to address the critical social issues surrounding tuberculosis. The Stop TB strategy report of 2002 noted, “Tuberculosis is a social, economic and political disease as well as a medical problem.”12 The Lilly Partnership’s strategy recognized this social dimension and built a network of organizations committed to strengthening community support and related issues of patient advocacy and prevention. The International Federation of the Red Cross and Red Crescent Societies were at the heart of this effort. This effort included patient support programs, especially among the poor, to promote a better understanding of the disease and its treatment among the community, and reducing the stigma attached to TB.

d.) Patient Advocacy

The patient advocacy component of the program was carried out through an innovative network formed by a TB survivor,13 Paul Thorn. Thorn became one of MDR-TB’s most articulate spokespeople as he sought to provide patients with practical support to cope with the disease. His TB Survivor group works closely with UK-based partner, TB Alert, that focuses on community level awareness and advocacy. 10 Farmer, Paul. Pathologies of power: Health, human rights, and the new war on the poor. University of

California Press, Berkeley. 2005. 11 See item 2.3 of actions for life: Towards a world free of tuberculosis. The global plan to stop TB, 2006-

2015. The World Health Organization, Geneva 2006. Page 37. 12 Anti-tuberculosis drug resistance in the world: Third Global Report the WHO/IUATLD Global Project on Anti-

tuberculosis Drug-Resistance Surveillance 1999–2002. Geneva: World Health Organization, Geneva 2004. 13 TB Alert’s web site http://www.tbalert.org/, and www.tbsurvivalproject.org, provide profiles of TB and

MDR-TB cases from many parts of the world and many walks of life.


e.) Workplace Awareness and Prevention

The partnership recognized the importance of raising awareness among employers so that the workplace could serve as a setting to support understanding and treatment of TB and MDR-TB. To this end, Dr. Carlevaro and Lilly played a key role in establishing a Business Alliance to Stop TB through the World Economic Forum. The Alliance promoted awareness that with proper treatment, patients could continue to be productive members of the workforce.

Systematic Planning, Management and Quality Control of Drugs

The increasing presence of the Global Fund to Fight AIDS, Tuberculosis and Malaria became a significant factor in the environment within which the Lilly Partnership works. The Global Fund, the largest single recipient of funds from the Bill and Melinda Gates Foundation, strove to join governments, the private sector, and international organizations, to form private-public partnerships to assist national and local programs to address these three deadly diseases. In the area of tuberculosis, the Fund committed to distribute $1.8 billion in five years. This money was largely destined for partnerships operating at national and local levels and aimed at providing the much needed infrastructure, training, and materials to assure the delivery and patient care required for effective drug treatments. The grants required strict management and oversight capabilities to ensure both transparency and efficiency.

The Lilly MDR-TB Partnership, the WHO, and the Global Fund cooperated to introduce a number of systems designed to improve the efficiency of delivering high-quality treatment programs and drugs to patients. The Green Light Committee (GLC) assumed the role of a centralized mechanism to review national TB program proposals for DOTS-Plus funding and concessional drug pricing. The GLC also provided technical assistance to countries seeking to develop well-functioning programs. The increasing role of public-private partnerships in many of these programs offers other opportunities for those involved in TB eradication to build essential skills to implement such programs. Once approved, national TB programs have access to drugs through a consolidated procurement facility operated initially by MSF and subsequently by the IDA Foundation. Although often criticized as a cumbersome and overly centralized model, Amsterdam-based IDA was able to negotiate low bulk prices with a range of suppliers, carry out quality assurance testing both on-site and on delivery, and arrange for transport and product registration at the point of delivery. IDA distributed 14 MDR-TB drugs, ten generic and four branded. Lilly’s cycloserine and capreomycin were considered by many in the field to be of the highest quality available.14 IDA evaluated the cost and quality of the drugs produced, and decided which ones to buy.

While the systems at the top end of the chain functioned well, the national level – the point at which most programs are implemented – was far more troubled. Tuberculosis programs were developed and implemented through national-level TB programs, or NTPs, usually within a country’s ministry of health. These programs vary considerably in capacity. A Global Fund official explained:

14 Expert interviews with representatives of national TB Programs, at the 37th Union World Conference on

Lung Health, Paris, 31 October – 4 November 2006.


Program planning, forecasting and management remain persistent weaknesses among national TB programs. To make matters worse, nearly all assume they have these skills and it is not until they are well into the project that the depth of these weaknesses becomes clear.15

Inefficiency at this critical nexus consistently proved to be problematic and the source of waste and frustration. Pervasive problems of poor planning, forecasting and management at the national TB program level were magnified by the extended production schedule required for fermentation drugs such as cycloserine. For these time-sensitive drugs, the channel inefficiencies were devastating.

In response, many major donors to DOTS-Plus established their own program monitoring and technical support mechanisms to spot problems and intervene as quickly as possible. Still, forecasting drug needs and planning implementation remain ongoing problems that have led to the destruction of costly and highly time-sensitive drugs.

On procurements, at every stage there is potential for gains or losses and there are important trade-offs – e.g., between speed and economy, quality of products and fairness of competition. Distribution and storage are important elements of the supply management. Losses can result from theft, bad weather (especially at temperatures above 40oC), poor inventories, expiration of drugs, etc.16

Dramatic increases in funding for TB and HIV drugs increased the number of TB and HIV drug producers. However, the complexity of manufacturing of capreomycin and cycloserine, combined with the need for individualized TB treatment regimens challenged drug producers. Inadequate planning and forecasting capacity among the national implementing agencies left producers, including the generic partners mentored by Lilly, faced with a considerable investment in expiring drugs. The incentive to cut costs and corners was hard to counter in countries where financial management and control and regulation were weak. In some cases, producers diluted active ingredients or extended the expiration date to allow greater flexibility for the delivery of their products. Taking into account these elements, the risk of ineffective drugs reaching patients rose, and with it the possibility of spawning additional drug-resistant strains.

While IDA’s quality assurance procedures were designed to limit this risk, oversight at the local level was thin. In addition, self-funded TB programs had the latitude to buy cheaper drugs directly and avoid testing, thereby increasing the risk. IDA’s centralized approach has additional downsides. Unlike Lilly’s initial arrangement with Médecins Sans Frontières, IDA required a payment by the national program in advance and all drugs, regardless of their point of production and destination, had to pass through Amsterdam for testing and quality assurance. Both steps served to delay time-sensitive drugs from reaching the intended users.

15 Weber, Urban, Ph.D., Team Leader, Eastern Europe and Central Asia, The Global Fund to Fight AIDS,

Tuberculosis, and Malaria, Geneva, from interview at the 37th Union World Conference on Lung Health, Paris, 31 October – 4 November 2006.

16 Dr. Dumitru Laticevschi, Fund Portfolio Manager, Eastern Europe and Central Asia., Geneva, The Global Fund to Fight AIDS, Tuberculosis and Malaria, from correspondence with the author.


From Lilly’s perspective, the difficulty of controlling supply chain efficiency raised questions as to the long-term benefits and efficiency of their efforts. Lilly’s experience of transferring technical skills to drug producers through the Partnership demonstrates the contribution that private-sector expertise could make to improving management, efficiency and effectiveness of national TB programs. However, the role of global pharmaceutical companies in this realm is often viewed with suspicion and, at times, a treat to the independence of national programs or the interests of local pharmaceutical firms.

Eli Lilly’s Strategy and the Politics of National Development

After having come so far, Dr. Carlevaro knew that many difficulties threatened the efficacy of the program. She looked back on the many successes: the creation of an alliance which sought to have a far broader impact on the problem of MDR-TB than pharmaceutical firms generally sought with such charitable ventures, and of a partnership that was both dynamic and sustainable in an effort to reach deeper into the implementation of MDR-TB treatment than ever before. Its efforts in alliance building, capacity building and technology transfer were far more influential than its contribution of the drugs themselves.

Despite the success in putting together many new and effective partnerships, Lilly could not control and maintain quality of the delivery of service and treatment in the context of the many divergent interests and rapidly changing environment: The drugs were just a vehicle for the more fundamental changes in approaching TB that accompanied them. One of the most important aspects of Lilly’s program was its attention to the “social dimension” of TB. There were many experienced practitioners who argued that TB was a social problem, and that pharmaceutical solutions could only be effective by addressing these social dimensions. They noted that tuberculosis drugs were readily available in both China and India and yet they had among the world’s highest TB infection rates.17 By advancing an innovative community-based healthcare model, Lilly took into account the importance of this view.

Yet, the capability to implement such a model on a global scale, one that required the involvement of state institutions, community organizations, and often impoverished populations, frequently proved to be beyond the capacity of both Lilly and its partners. To make such a partnership function effectively, its efforts required a clear focus among all those in the drug supply chain. Building coherence around challenging issues and often divergent interests of the many players (e.g., IDA, the national TB programs, competing generic drug producers, and even at times, the WHO) required substantial investment.

Lilly and its work on MDR-TB were approaching a transition. Spurred on by advances made in the treatment of HIV, intensive efforts were under way to develop new generations of TB drugs that offered the promise of extremely short-course treatment, perhaps as short as several days rather than several months. TB diagnostic technology was also advancing at a similar pace, enabling far more reliable testing in a much shorter time. Combined, these two developments could dramatically reduce, if not eliminate, the current problem of drug resistance. However, these products were unlikely to reach the market in less than a decade.

17 Veen, Dr. Jaap M.D., Ph.D., TB Technical Director, Central Asia, Project Hope, Almaty and various expert

interviews at the 37th Union World Conference on Lung Health, Paris, 31 October – 4 November 2006.


With Lilly’s research priorities having shifted in line with its strategic priorities, the treatment of infectious disease had fallen out of Lilly’s research portfolio. Consequently, Lilly played no significant research role in the development of this new generation of treatment and diagnosis tools. In an October 2006 analysis of tuberculosis research funding, Eli Lilly ranked last among the list of the top 40. All but three of the 40 were public sector organizations, generally domestic and international health and development organizations.

Lilly had invested substantially in the manufacturing capacity in China, India, South Africa, and most recently in Russia. In the case of China and India, the reduction of the cost of production was very promising. Lilly’s partner in South Africa, Aspen Pharmacare, had been moving toward achieving similar levels of efficiency, and its drugs had been registered for the treatment of MDR-TB within South Africa. However, the possibility of export competition between the Aspen, the Russian and Chinese operations, upset the national industrial policies that favored domestic development of pharmaceutical production.

Over the years of its involvement in the MDR-TB Partnership, Lilly shied away from a role in influencing government policy on TB treatment. Still, its expertise in the field and its access to high-level officials offered promising opportunities. There was a compelling need for Lilly to work with national health authorities as it has with the others involved in the Partnership, to develop stronger, more coherent policies. Such policies and regulatory reforms would steer national programs toward choosing the best tools to address the escalating MDR-TB threat. Such reforms would focus on the effectiveness of the overall healthcare delivery system to treat MDR-TB, including ensuring that quality drugs are available rather than simply opting for a low-cost solution.

Conclusion

By 2007, Lilly’s business priorities appeared to prevent it from assuming a leading role in the development of a new generation of tuberculosis drugs and diagnostic tools. In the light of the changing circumstances, Dr. Carlevaro defined three options for the future direction of the International Aid Unit’s MDR-TB program.

• Bow Out and Build on Technology Transfer: Lilly could gradually bow out of its TB work in 10-15 years as the anticipated new generation of more effective drugs and diagnostic tools become available. It demonstrated its multi-sector partnership model to be a successful approach, which could serve as a foundation for future initiatives to address social health problems. Furthermore, the technology transfer component of the MDR-TB Partnership positioned both Lilly and its manufacturing partners well for future growth in rapidly expanding pharmaceutical markets. Its investment in the Partnership’s four manufacturing partners in India, China, South Africa and the Russian Federation offers opportunities to build a significant competitive advantage in the production of high-margin drugs.

• Maintain and Reform Option: Lilly could maintain its current level of activity in the Partnership, continuing to support the transfer of technology, capacity building and local activities, with no significant growth in its financial outlay. Instead, Lilly would seek to leverage the credibility and experience it had gained to strengthen national-level policy-


making, planning and management. Special attention would be focused on the supply chain which had been a point of weakness.

• Scale-Up Option: Lilly would draw from the lessons learned in the implementation of the MDR-TB Partnership and scale up to a broader application of the model, especially the community health components that have proven to be critical in addressing this disease. Scaling up would entail a more intensive infection management program, local testing and treatment facilities, and increased funding for capacity training of the primary actors implementing the program at a national and local level, especially doctors, nurses, national and local healthcare agencies. The horizontal integration of healthcare delivery agencies would be improved, including NGOs and community groups to move the delivery closer to the target communities and make the program more sustainable. These efforts would focus on increasing cure rate and would be evaluated by a 360-degree evaluation of the implementing agents against clearly identifiable targets. As new drugs and testing tools were developed, this option would provide a firm community-based implementation structure prepared to take on the role of putting them to use.

Regardless of the option chosen, Lilly, Dr. Carlevaro and the International Aid Unit can take pride in what they have achieved through the MDR-TB Partnership. One of the most important challenges that lies ahead for Lilly and the International Aid Unit is to ensure that the lessons learned through this initiative can be retained within Lilly as well as by others engaged in the fight to put an end to tuberculosis.


Exhibit A Top 50 Pharmaceutical Companies

Rank 2004 Company Country

Healthcare Rev. 2004

(US$ million)

Healthcare R&D 2004 (US$ million)

Net Income/

(Loss) 2004 (US$ million)

Employees 2004

1 Pfizer USA 52,516 7,684 11,361 115,000

2 Johnson & Johnson USA 47,348 5,203 8,509 109,900

3 GlaxoSmithKline UK 37,318 5,204 7,886 100,619

4 Sanofi-Aventis France 31,615 4,927 6,526 96,439

5 Novartis Switzerland 28,247 4,207 5,767 81,392

6 Hoffmann-La Roche Switzerland 25,163 4,098 5,344 64,703

7 Merck & Co. USA 22,939 4,010 5,813 62,600

8 AstraZeneca UK 21,427 3,803 3,813 64,200

9 Abbott Laboratories USA 19,680 1,697 3,236 50,600

10 Bristol-Myers Squibb USA 19,380 2,500 2,388 43,000

11 Wyeth USA 17,358 2,461 1,234 51,401

12 Eli Lilly and Company USA 13,858 2,591 1,810 44,500

13 Bayer Germany 10,554 1,299 750 113,060

14 Amgen USA 10,550 2,028 2,363 14,400

15 Boehringer Ingelheim Germany 10,146 1,532 1,104 35,529

Source: Top 50 pharmaceutical companies, September 2005.


Exhibit B Lilly Trademarks

Lilly trademarks, product generic name or chemical entity, and producing company listed on this Web site

1. Actos® (pioglitazone hydrochloride, Takeda) 2. Alimta® (pemetrexed, Lilly) 3. Byetta® (exenatide injection, Amylin) 4. Ceclor® (cefaclor, Lilly) 5. Cialis® (tadalafil, ICOS), Lilly-ICOS LLC 6. Coban® (monensin sodium, Elanco) 7. Cymbalta® (duloxetine hydrocholoride, Lilly) 8. Dobutrex® (dobutamine hydrochloride, Lilly) 9. Evista® (raloxifene hydrochloride, Lilly) 10. Forteo® (teriparatide of recombinant DNA origin, Lilly) 11. Gemzar® (gemcitabine hydrochloride, Lilly) 12. Humalog® (insulin lispro injection of recombinant DNA origin, Lilly) 13. Humatrope® (somatropin of recombinant DNA origin, Lilly) 14. Humulin® (human insulin of recombinant DNA origin, Lilly) 15. Iletin® (insulin, Lilly) 16. Keflex® (cephalexin, Dista) 17. Kefzol® (cefazolin sodium, Lilly) 18. Micotil® (tilmicosin, Elanco) 19. Paylean® (ractopamine, Elanco) 20. Prozac® (fluoxetine hydrochloride, Dista) 21. Pulmotil® (tilmicosin phosphate (for swine), Elanco) 22. ReoPro® (abciximab, Centocor), Lilly 23. Rumensin® (monensin sodium, Elanco) 24. Sarafem® (fluoxetine hydrochloride, Galen (Chemicals) Ltd.) 25. Strattera® (atomoxetine hydrochloride, Lilly) 26. Symbyax® (olanzapine/fluoxetine hydrochloride, Lilly) 27. Tylan® (tylosin, Elanco) 28. Xigris® (drotrecogin alfa (activated), Lilly) 29. Zyprexa® (olanzapine, Lilly)

Actos® is a trademark of Takeda Chemical Industries, Ltd.� Byetta® is a trademark of Amylin Pharmaceuticals, Inc. � Cialis® is a trademark of Lilly ICOS LLC.� Sarafem® is a trademark of Galen (Chemicals) Limited. N.B. A blockbuster drug is one that generates more than $1 billion of revenue for its owner each year.


Annex C Multi-drug Resistant Tuberculosis Hot Spots

Countries/Regions with MDR-TB Prevalence Higher than 6.5 percent: 1999-2002

Country Survey Year

MDR Prevalence (%)

Number of MDR-TB cases in sample

Kazakhstan 2002 14.2 51

Israel 2001 14.2 36

Tomsk (Russia) 2002 13.7 73

Uzbekistan 2000 13.2 14

Estonia 2000 12.2 50

Lianoning (China) 2002 10.4 85

Lithuania 2001 9.4 77

Latvia 2000 9.3 83

Henan (China) 2001 7.8 95

Ecuador 2002 6.6 26

The burden of MDR-TB can be described in terms of prevalence, absolute number of cases as well as the capacity of the country to address the problem. In many countries where the population of TB cases is low, a high MDR prevalence does not necessarily reflect high absolute numbers of cases. Conversely, a low prevalence of MDR in high-burden countries, such as China or India, could reflect a considerable number of MDR cases that the national TB program must treat and cure. To take the absolute number into consideration, the sample findings need to be extrapolated.

South Africa and Kazakhstan were estimated to have the highest MDR burden in terms of absolute numbers, with around 3,000 MDR cases each, followed by three provinces in China (Hubei, Henan and Liaoning). Green Light Committee’s DOTS-Plus funding review process can be viewed as an overall indicator of those countries that carry the greatest MDR-TB burden.

GLC Operations: June 2000 – November 2004

Countries with DOTS-Plus approved projects Countries with projects under review Pipeline

Estonia Latvia Azerbaijan Kosovo Russia (Tomsk) Russia (Orel) Dominican Republic Tajikistan Russia (Arkhangelsk) Russia (Ivanovo) Moldova Ecuador Philippines Mexico Kenya Viet Nam Malawi Bolivia India (Delhi) Morocco Haiti Costa Rica Tunisia Paraguay Uzbekistan Nepal Mongolia Lebanon El Salvador South Africa Egypt Nicaragua India Romania Honduras Iran Kyrgyzstan Abkhazia Syria Jordan Kenya Georgia

Source: World Health Organization. Anti-tuberculosis drug resistance in the world: Third Global Report. .WHO/IUATLD Global Project on Anti-tuberculosis Drug-Resistance Surveillance 1999-2002. Geneva: World Health Organization, Geneva 2004.


Exhibit D The Lilly MDR-TB Partnership

TB Alert, TB Survival Project

World Economic Forum, Business Alliance to Stop

TB

Aspen Parmacare, Hisun Pharmaceutical, Shasun

Chemicals and Drugs, SIA International, Purdue

University

Treatment, Training and Surveillance

Community Support

Transfer of Technology and Drug Supply

Patient Advocacy

Workplace Awareness and Prevention

Harvard Medical School, Partners in Health, International Council of Nurses, International Hospital Federation, US Centers for Disease

Control and Prevention, World Health Organization, Stop TB Partnership, World Medical Association

International Federation of the Red Cross and Red

Crescent Societies

International Funding, Review and Logistical Mechanisms

(i.e., Global Fund, Green Light Committee, IDA Foundation)

National TB Programs


Exhibit E: Income Statement: 2002-2005

Financial Snapshot: Eli Lilly and Company: 2005 $ 14.6 B $ 2.0 B $ 1.81 $ 4.4 B $ 5.8 B

2004 2003 2002

13,857.90 12,582.50 11,077.5013,857.90 12,582.50 11,077.50

2,626.40 2,126.60 1,683.50

3,223.90 2,675.10 2,176.5011,231.50 10,455.90 9,394.00

2,691.10 2,350.20 2,149.304,284.20 4,055.40 3,424.00

4,256.20 4,050.30 3,820.70597.5 548.5 493

3,658.70 3,501.80 3,327.70330 203.1 293.7

-392.2 0 -84-603 -382.2 0

2,993.50 3,322.70 3,537.4051.6 61 79.7

2,941.90 3,261.70 3,457.701,131.80 700.9 749.8

1,810.10 2,560.80 2,707.90

1,810.10 2,560.80 2,707.90

0 0 01,810.10 2,560.80 2,707.902,805.30 2,943.00 2,791.90

1,810.10 2,560.80 2,707.90

1.67 2.38 2.51

1.67 2.38 2.51

0 0 01.67 2.38 2.51

2.59 2.74 2.59

1.66 2.37 2.5

0 0 01.66 2.37 2.5

2.57 2.72 2.581.42 1.34 1.24

1,083.89 1,076.55 1,076.87

1,088.94 1,082.23 1,085.09

Source: MarketWatch, Inc

Diluted Weighted Shares Outstanding 1,092.15

Revenue Total Net Income Earnings Per ShareEBITDA Long Term Debt

Basic Weighted Shares Outstanding 1,088.75

Additional Data

Annual Financials Income Statement: 2002-2005

Dividends Paid per Share 1.52

Diluted EPS from Cum Effect of Accounting Chg -0.02

Diluted EPS from Total Operations 1.83

Basic Normalized Net Income/Share

Diluted EPS Total 1.81

Diluted Normalized Net Income/Share 2.97

2.98

Basic EPS Total 1.82Basic EPS from Cum Effect of Accounting Chg -0.02

Basic EPS from Total Operations 1.84

Per Share Data

Basic EPS from Continuing Ops. 1.84

Normalized Income 3,246.90

Net Income Available for Common 2,001.60

Total Net Income 1,979.60Income from Cum. Effect of Acct Chg -22

Net Income from Total Operations 2,001.60

Net Income from Continuing Operations 2,001.60

Income Before Tax (EBT) 2,717.50Income Taxes 715.9

Total Income Avail for Interest Expense (EBIT) 2,822.70Interest Expense 105.2

Other Special Charges -1,245.30

Other Income, Net 419.4

Income Acquired in Process R&D 0

Operating Income After Depreciation 3,648.60

Operating Profit before Depreciation (EBITDA) 4,375.00Depreciation 726.4

R&D 3,025.50SG&A 4,497.00

Gross Operating Profit 11,897.50

Cost of Sales 2,747.80

Cost of Sales with Depreciation 3,474.20

Total Revenue 14,645.30

All amounts in millions except per share amounts. 2005

Operating Revenue 14,645.30


Exhibit F Balance Sheet: 2002-2005.

Annual Financials All amounts in millions except per share amounts. 2005 2004 2003 2002

Cash and Equivalents 3,006.70 5,365.30 2,756.30 1,945.90 Marketable Securities 2,031.00 2,099.10 957 1,708.80 Accounts Receivable 2,313.30 2,058.70 1,864.90 1,670.30 Other Receivable 448.4 494.3 477.6 403.9 Receivables 2,761.70 2,553.00 2,342.50 2,074.20 Raw Materials 214.7 305.7 315.9 242.7 Work In Progress 1,272.40 1,356.30 1,169.00 816.3 Finished Goods 471.3 717.5 542.1 482.9 Inventories -Adj Allowances -80.4 -87.9 -64 -46.5 Inventories 1,878.00 2,291.60 1,963.00 1,495.40 Prepaid Expenses 362 271.5 249.5 248.1 Current Deferred Income Taxes 756.4 255.3 500.6 331.7Total Current Assets 10,795.80 12,835.80 8,768.90 7,804.10 Gross Fixed Assets (Plant, Prop. & Equip.) 13,136.00 12,338.90 11,068.00 9,546.10 Accumulated Depreciation & Depletion 5,223.50 4,788.00 4,529.00 4,253.10 Net Fixed Assets 7,912.50 7,550.90 6,539.00 5,293.00 Other Non-Current Assets 5,872.50 4,480.30 6,380.40 5,944.90 Total Non Current Assets 13,785.00 12,031.20 12,919.40 11,237.90Total Assets 24,580.80 24,867.00 21,688.30 19,042.00

Accounts Payable 781.3 648.6 875.9 676.9 Short Term Debt 734.7 2,020.60 196.5 545.4 Other Current Liabilities 4,200.30 4,924.50 4,488.40 3,841.20 Total Current Liabilities 5,716.30 7,593.70 5,560.80 5,063.50 Long Term Debt 5,763.50 4,491.90 4,687.80 4,358.20 Deferred Income Taxes 695.1 620.4 0 0 Other Non-Current Liabilities 1,614.00 1,241.10 1,674.90 1,346.70 Total Non-Current Liabilities 8,072.60 6,353.40 6,362.70 5,704.90Total Liabilities 13,788.90 13,947.10 11,923.50 10,768.40

Common Stock Equity 10,791.90 10,919.90 9,764.80 8,273.60 Common Par 706.9 708 702.3 702.1 Additional Paid In Capital 3,323.80 3,119.40 2,610.00 2,610.00 Retained Earnings 10,027.20 9,724.60 9,470.40 8,500.10 Treasury Stock -104.1 -103.8 -104.2 -109.5 Other Equity Adjustments -3,161.90 -2,528.30 -2,913.70 -3,429.10Total Equity 10,791.90 10,919.90 9,764.80 8,273.60Total Capitalization 16,555.40 15,411.80 14,452.60 12,631.80Total Liabilities & Stock Equity 24,580.80 24,867.00 21,688.30 19,042.00

Cash Flow 2,728.00 2,407.60 3,109.30 3,200.90Working Capital 5,079.50 5,242.10 3,208.10 2,740.60Free Cash Flow -1,039.40 -640.1 497.1 -396Invested Capital 16,555.40 15,411.80 14,452.60 12,631.80

Shares Outstanding Common Class Only 1,130.14 1,131.94 1,123.73 1,122.44Total Common Shares Outstanding 1,130.14 1,131.94 1,123.73 1,122.44Treasury Shares 0.93 0.94 0.95 1.01

Source: MarketWatch, Inc

Additional Data

Share Data

Balance Sheet: 2002-2005

Assets

Liabilities

Stockholder's Equity

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