Added by Gary Dunn on November 13, 2010
The CEO of Eli Lilly has refused to follow the strategy of merging or buying companies to prevent losses caused by expiration of patents.
Eli Lilly currently holds patents on 4 drugs that shall lapse between now and 2014. Other manufacturers will be permitted to provide generic alternatives and this will affect the company’s revenue considering that the four medicines – Gemzar, Zyprexa, Cymbalta and Evista currently generate half the revenue of the company.
Competitors like Merck and Pfizer have purchased different drug manufacturers to enjoy temporary profits, cost savings and stability in income. Drug manufacturers often criticize such mergers for being anti innovative but utilize these solutions to escape loss of investor confidence.
Eli Lilly is counting on some of the 70 drugs under testing to clear clinical trials. This is expected to resurrect the company’s fortunes and help it continue earning despite patents expiration. The CEO believes that mergers will only harm innovation in the long run.
Analysts and shareholders do not share the same optimism considering the poor record of the company as far as releasing new products is concerned. Analysts attribute the approach towards the roots of the CEO rather than any real or logical business plan.