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Eli Lilly: Life after Prozac

As the drug goes off-patent, all-out R&D is paying off

Thanks to Prozac, Sidney Taurel has had it pretty easy. No, he doesn't take it himself. But until recently, the chief executive of Eli Lilly & Co. (LLY ) could depend on the antidepressant to give a steady lift to his company's numbers. Prozac, with 40 million users, accounted for a quarter of Lilly's $10.8 billion in sales and more than a third of its $3 billion profit last year. With Prozac's U.S. patent set to expire on Aug. 3, however, Lilly will no longer be protected from cheaper generics. Within weeks, the company could see two-thirds of its global market for Prozac--and much of its profit--vanish.

That would indeed be a bitter pill to swallow. But foreseeing the end of the Prozac monopoly, Taurel, a 30-year Lilly veteran (and a director of the McGraw-Hill Companies, corporate parent of BusinessWeek), furiously ramped up new-drug development after becoming CEO and chairman in 1998. He increased the research and development budget about 30%, to more than $2.2 billion, hired 700 scientists in the last year alone, and in a search for the next blockbuster, ordered Lilly's 6,900 researchers not to bother with any drug unlikely to top $500 million in annual sales. The payoff: Lilly now has a medicine cabinet stocked full of promising new drugs, including treatments for schizophrenia and for sepsis--a potentially fatal form of bacterial infection. Provided that management is able to handle some significant challenges from regulators and competitors, those new products could more than offset Prozac's loss in just 12 months.