Strong medicine: pharmaceutical giant Eli Lilly turns Brazil into a springboard for value-added products.

The last two years have been good to U.S. pharmaceutical company Eli Lilly's Brazilian unit, Eli Lilly do Brasil. The drug maker grew more than any other drug company in Brazil. In 2004, Lilly revenues jumped 53% while the market average grew 22%.

Last year, total revenues hit US$150 million, doubling what it sold three years earlier. Such strong results made it possible for the company to make an announcement in July of last year that it achieved a goal originally set for this year: To be counted among the top 15 pharmaceutical laboratories in Brazil.

The president of Eli Lilly's Brazilian and Southern Cone operations, Philippe Prufer, turned the company around by dramatically changing the focus of his business: He halted production of antibiotics, which represented more than two-thirds of sales, and began instead to manufacture and sell innovative drugs. "Our antibiotics were excellent, but they weren't patented because they were made before patenting laws came into effect, so they left most of our business vulnerable in the competition with generics," says Prufer, who is also president of the company's units in Argentina, Chile, Uruguay and Paraguay. "The company decided then to bet on the Brazilian innovation, and to focus its efforts on innovative drugs."

The bet paid off. While the Brazilian drug market opened up to generics, which target the less-wealthy segments of the population, Lilly headed in the opposite direction, taking on patented products with more added value and which had no domestic equivalents. Other drugs were designed to be simply superior to those of the competition. Among these are Zyprexa, an antipsychotic; Cialis, for erectile dysfunction; Evista, for osteoporosis; Prozac and Cymbalta, antidepressants; and insulin, among others.

Eli Lilly do Brasil invested $10 million retooling its Brazilian operations. The company bought equipment and remodeled its plant, which was inaugurated in 2004. Today, Lilly's four most-popular products in Brazil are produced in-country: Zyprexa, Cialis, Prozac, and Evista, which combined represent 70% of its Brazilian sales. The rest is imported from the company's U.K. unit. Manufacturing locally also positioned the company to make another leap--exporting to the Southern Cone, which began this year. "At first, we will be the production center for the Southern Cone, but if we have cost and quality, we could get ourselves ready to also go to Andean and Central American countries," Prufer says.

While there is more room for growth in the Brazilian drug market, the industry needs to communicate more with the population to relay the true value of these products, Prufer says. "Each product that begins circulating in the market demands $900 million in investments. For 10,000 researched molecules, only one becomes a drug, after at least 10 to 15 years," says Prufer.

Eli Lilly says it's ready to meet greater demand for innovative medicines in Brazil. The Brazilian drug industry can produce 50 million pills a year but Lilly's Brazilian operations has the capacity to pump out 120 million units in just one shift. "It means that we can triple this capacity," says Claudio Sombini, manufacturing director for Lilly do Brasil. "Demand is not only going to increase this year due to the expansion of the local market but also due to exportation. We plan to have 25% growth." The plant operates with 137 employees, 80% of which have a college-level education relating to pharmaceuticals, chemistry and engineering. The Brazilian unit's profile is like just four other Lilly units in the 138 countries where the drug company operates. "Our challenge for 2006 is to be the best Lilly exporter in the world," says Sombini.

Eli Lilly wants to be among the top 10 pharmaceutical companies in Brazil by 2007. For Lilly's Brazilian marketing director, Antonio Alas, that objective is perfectly achievable given that the company has been growing faster than its competitors. "The fast rate of expansion is due to the fact that this is a laboratory that launches the most innovative products, and that many of them are recent, with much room to grow," say Alas. "Cialis is an example, with sales increasing 30% in 2005." Brazil is the largest market in the world, after the United States, for erectile dysfunction treatments, Alas says.

Icon. Customers seem happy too. "From the medical point of view, it is Lilly's innovation regarding drugs that change the paradigm for the treatment of illnesses that is so noteworthy," says psychiatrist Miguel Roberto Jorge, a former president of the Brazilian Association of Psychiatry. "Prozac, for example, became a worldwide icon among antidepressants," Jorge says.

The numbers add up too, says Gabriel Tannus, president of Interfarma, an association of pharmaceutical research industries. "The results show that Lilly took a courageous strategic turn and got it right," says Tannus. The market of new drugs has a lot of room for development in the country, says Tannus. "Today, this market accounts for 60% of a $5 billion sector, which is less than 1% of the $552 billion global market."

MARGARIDA O. PFEIFER * SAO PAULO