Eli Lilly And Company Performance

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Executive Summary Eli Lilly and Company (Lilly) is a global pharmaceutical company, ranked 115 on the Fortune 500. Lilly’s operating performance has been strong in 2011, with ROA and ROE much higher than its competitor, Pfizer. The company has improved sales in the year 2011; however, its net income fell. Lilly’s future performance is challenged by factors such as major patent expirations, which will expose the company to the generic version of their drugs being produced by other manufacturers. Lilly has also experienced some pipeline setbacks, which includes the discontinuation of major experimental drug projects. Lilly has been lately focusing on expanding through the acquisition of other businesses and has been using operating cash…show more content…
I can expect to see major R&D expenses; pharmaceutical companies invest heavily in bringing new drugs into the market to compensate for the ones that go off patent. Thus, a large number of patents, trademarks, and other intellectual property rights can also be found. However, pharmaceutical firms tend to have high profit margins. Apart from hedging against fluctuations in foreign exchange rates, the relatively limited use of derivative instruments and hedges would reduce the inherent risk. Eli Lilly and Co was ranked number 115 on the Fortune 500 list in 2011, making it the 115th largest company in the US in terms of revenue. However, the firm’s ranking dropped in 2011 from being 112 in 2010. Regulatory Factors The pharmaceutical industry is heavily regulated. According to Lilly’s 10-K, their operations are extensively regulated by numerous national, state, and local agencies. FDA mainly regulates all the testing, safety, quality control and post-marketing surveillance of pharmaceutical products. Accounting for liabilities will then be a significant part of any lawsuits, thus, as an auditor, I would have to further look into the contingent liabilities in their balance sheet. They have been subject to increasing government price control measures. Lilly also has international operations hence, is subject to extensive price and market regulations in those regions as well. Economic
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