Eli Lilly Porter’s 5 Five Forces: 2022 Detailed Overview

Written by nikolastsiri in Porter's Five Forces Analysis

Porter’s Five Forces Analysis of Eli Lilly

 

 

Key Facts

 

Name Eli Lilly and Company pharmaceutical
Industry Drugs & Biotechnology
Founded May 10, 1876
Headquarters Indianapolis, Indiana, United States
CEOs Dave A. Ricks
Revenues US $28.318billion in2021(audited) and US $ 21.24 billion for third quarter 30th September 2022 (unaudited)
Profit US $ 5.582 billion in2021(audited) and US $ 4.307 billion for third quarter 30th September 2022 (unaudited)
Competitors GSK, Bristol Myers Squibb, Merck, Pfizer.

 

 

Company Overview

 

The company is engaged in manufacture, development and sale of pharmaceuticals products.The company was founded by Eli Lilly on May 1876 and has its headquarter in Indianapolis, Indiana. Eli Lilly is one of the top global pharmaceutical companies and the world’s largest manufacturer and distributor of psychiatric medications. In 2021, the company generated US $ 28.3 billion of revenue.In 2021, the company’s total assets amounted to some US $ 48.8 billion.The company manufacture and distribute its products through facilities in the United States (U.S.), including Puerto Rico,and 7 other countries and their products are sold in approximately 120countries. The ranking of the company is 221 in Forbes 2000 list 2022 and the market value of the company is US $ 265.45 billion.

 

Porter’s Five Forces Analysis

 

Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School.

 

Eli Lilly Rivalry among Existing Competitor

 

  • Eli Lilly Business Segments: The company is specialized on one business segment i.e. human pharmaceutical products, which they research, develop, manufacture, and market. At the end of 2021, the company employed approximately 35,000 people, including approximately 19,600 employeesoutside the U.S. About 8,100 employees are engaged in research and developmentactivities.In 2021, the company generated some US $ 2.37 billion of its revenue in Japan.In 2021, Trulicity was Eli Lilly’s biggest revenue generator with about US $ 6.5 billion. The next highest revenue generating drug in 2021 was Humalog with about US $ 2.5 billion.

The company has manufacturing plants located in 8 countries globally including the U.S.A., Ireland, Italy, France and Spain.

  • Eli Lilly Global Operations Year 2021:In 2021, the company generated some US $ 3.03 billion of revenue through its oncology segment. Revenue of Jardiance, a treatment for type 2 diabetes increased30 % in the U.S., primarily driven by increased demand whilerevenue outside the U.S. increased 28 %. Revenue of Verzenio,increased 35 % in the U.S., driven by increased demand whilerevenue outside the U.S. increased 75%, driven by increased volume. Revenue of Olumiant, increased $260.3 million in the U.S., driven by increased volume and, to a lesser extent, higher realized prices while revenue outside the U.S. increased 38 %, driven by increased volume.
  • GlaxoSmithKline(GSK)is also proved to be one of key players by giving a record sale of £ 34.114 billion and a net profit of £ 4.385 billion in the year 2021. Sales of COVID-19 solutions (sales of Xevurdyand pandemic adjuvant) contributed approximately 4 %points to growth in the year.Pharmaceutical turnover in the year was £17,729 million, up4% AER and 10% CER. Sales of Xevudy, the monoclonalantibody treatment for COVID-19 of £958 million contributedapproximately 6 % points to total Pharmaceuticalsgrowth. In 2021,the company had leading Environmental, Social, and Governance(ESG) performance because the company was 1st in the pharmaceutical industry for Dow Jones Sustainability Index, 1st in the Access to Medicine Index and Gold recognition in S&P’s Sustainability Yearbook. In 2011, the number of GlaxoSmithKline employees in Europe totaled about 38.7 thousand. The number of employees in Europe increased to almost 44 thousand in 2015, but dropped since then back to some 38,800.
  • Pfizergave tough competition by generating a record sales of US$ 81.288 billion, with a net income of US$ 21.979 billion in 2021.. Revenues increased $39.6 billion, or 95%, to $81.3 billion in 2021 from $41.7 billion in 2020. In 2021, Pfizer’s top product was COVID-19 vaccine Comirnaty, generating 36.8 billion U.S. dollars in alliance revenues and direct sales. Revenues of Comirnaty and sales of Paxlovid, revenues increased 6%. The New York City-based company generated some 81 billion U.S. dollars of total revenue in 2021, of which around 36%was generated in the United States. As of 2021, Pfizer was among the top three most valuable pharma and biotech companies with a market capitalization of over 260 billion U.S. dollars. In 2021, Pfizer employed approximately 79,000 persons around the world.The company has 39 manufacturing sites and 11 distribution/logistics centersand 28,000 global manufacturing and distribution colleaguessupplying medicines and vaccines to 181 countries,delivering more than 25 billion doses every year.
  • Investment in Research & Development-Marketing Cost and Brand Image :The long-term success of pharmaceutical companies depend on their ability to continually discover or acquire, develop, and commercializeinnovative new medicines.Eli Lilly also needs to focus the marketing cost to increase the brand image and better customer loyalty.

 

Eli Lilly Threat of New Entrants

 

  • Global Pharmaceutical IndustryRevenue in the Pharmaceuticals market is projected to reach US$1,163.00bn in 2023.The market’s largest segment is Oncology Drugs with a projected market volume of US$202.30bn in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 5.39%, resulting in a market volume of US$1,435.00bn by 2027.
  • High Capital Investment- Trained Human ResourcesThe new entrant will be requiring high capital investment, with extensive and sophisticated manufacturing-assembling structure so it is discouraging barrier for any new entrant. As due to the specialized nature of the product only limited human resource can handle such high-end products.
  • High Research & Development Cost: High research and development cost is required for launching any new product in the current pharmaceutical industry.Eli Lilly spent approximately US $ 7 billion on research and development in the year 2021.
  • Technological Advancement:Due to the changing trend in pharmaceuticals industry towards AR/VR, artificial intelligence (AI), and additive manufacturing, onlyhighly technological advance companies or groups can enter such a market.

 

Eli Lilly Bargaining Power of Suppliers

 

  • Low Influence of Suppliers:The suppliers have low bargaining power in the industry, because the industry’s only requires the raw materials for the medicines and the packaging materials necessary for the finished commodity. All of these goods can be easily obtained from a variety of cooperative manufacturers, putting the suppliers in a weak position to negotiate or control prices.
  • Suppliers Collaboration:The company maintains its collaborations with suppliers by proactively and continuously partner with advocacy organizations to connect with small or diverse suppliers through outreach and mentorship opportunities. With the help of a large network of global external manufacturing partners the company supply medication to nearly 125 countries. In 2016, the company spentmore than US $558.4 million with 1,500-plus suppliers classified as small businesses.Hence the company has close ties and collaboration with the suppliers.

 

Eli Lilly Bargaining Power of Buyers

 

  • Bargaining Power of Buyers:The bargaining power of buyers is low to moderate in the industry because the buyers prefer to buy their medicines from the firms as per their prescription, even when charged high prices. Furthermore, big customers like hospitals are somewhat capable of negotiating as they purchase in bulk, but individual customers have very little to none.
  • Customer Satisfaction – After Sales ServicesThe requirements of pharmaceutical industry is better defined as a circle of complete experience included the after sales services. As it is a high-end product customer feedback, customer satisfaction and continuous innovation is important to retain the market share. Eli Lilly and Company has an overall Product Quality score of 3.9 out of 5 stars rated by its users and customers.

 

Eli Lilly Threat of Substitute Products or Services

 

  • The threat of having substitutes is typically low to moderate in the Pharmaceutical Industry because drugs and medications involve a massive amount of capital, investments, and research work, which usually takes years to break through. There is a minor threat of alternative medications and treatments which are given in the form of meditations, herbal medicines, and different therapies.

 

 

References

 

  1. Basic Information of Eli Lilly| Available at Forbes
  2. Eli Lilly Annual Financial Statements 2021| Available at Eli Lilly
  3. Lilly Reports Solid Third-Quarter 2022 Financial Results and Continued Pipeline Progress| Available at Eli Lilly
  4. Lilly at a Glance| Available at Eli Lilly
  5. Eli Lilly’s total assets from 2013 to 2021(Feb 24, 2022)| Available at Statista
  6. Eli Lilly’s number of employees from 2013 to 2021(Feb 24, 2022)| Available at Statista
  7. Net income of Eli Lilly and Company from 2007 to 2021(Feb 24, 2022)| Available at Statista
  8. Revenue of Eli Lilly and Company from 2016 to 2021, by segment(Feb 24, 2022)| Available at Statista
  9. Revenue of Eli Lilly and Company from 2016 to 2021, by region(Feb 24, 2022)| Available at Statista
  10. Eli Lilly and Company’s top products based on revenue in 2020 and 2021(Feb 24, 2022)| Available at Statista
  11. Eli Lilly and Company’s expenditure on research and development from 2007 to 2021( Feb 24, 2022)| Available at Statista
  12. Revenue of Eli Lilly and Company from 2007 to 2021( Feb 24, 2022)| Available at Statista
  13. Pharmaceuticals – Worldwide(Jan 2023) | Available at Statista
  14. GSK Annual Report2021| Available atGSK
  15. Number of employees at GlaxoSmithKline from 2011 to 2021, by world region(Mar 14, 2022)| Available at Statista
  16. GlaxoSmithKline’s revenue from 2006 to 2021, by division(Mar 14, 2022) | Available at Statista
  17. Global revenue of GlaxoSmithKline from 2013 to 2021, by region(Mar 14, 2022) | Available at Statista
  18. PfizerAnnual Report 2021| Available atPfizer
  19. Global Manufacturing, Supply & Distribution| Available at Pfizer
  20. Pfizer’s number of employees from 2006 to 2021(Mar 2, 2022)| Available at Statista
  21. Pfizer’s top 10 products based on revenue in 2021(Jul 27, 2022)| Available at Statista
  22. Pfizer – Statistics & Facts(Mar 3, 2022)| Available at Statista
  23. Forbes Global 2000 List 2022(May 12, 2022)| Available at Forbes

 

 

 

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