Running head: Eli Lilly & Company Case Study 1 Eli Lilly & Company Case Study 5 Eli Lilly & Company Case Study Name College Course Tutor Abstract From the case 22: Eli Lilly & Company on page 224, the paper is a response to the questions: How should Eli Lilly & Company Position itself for the future? Should it strengthen its retail presence, grow internationally, or move into the void created in the healthcare provision? Develop Projected Financial Statements that fully assess and evaluate the impact of the proposed strategy. How are the acquisitions/growth financed? Will debt be increased further, or ownership of Eli Lilly & Company stock is diluted to raise the capital needed? Charts and graphs are used in the response so as to further clarify the explanations and also as supporting evidence. Eli Lilly & Company Case Study Executive Summary The paper submitted will contain a proposed plan of action using primarily data from the company annual report of Eli Lilly & Company. The acquisition will greatly increase survival of the company in the hard times in the company’s industry. The proposal will combine the benefit of the organization’s lion’s share and the cheap yet technical knowledge of the biotechnology company to come up with the desired drugs. The main reason that various biotechnology companies are acquired is the cost effective nature of the companies, most of which had already began with the production process but stopped or rather, declined during the global credit crunch. Actelion, Shire plc and Onyx pharmaceuticals are among the best targets. The companies are will less likely present a large financial burden in the acquisition process. Should Eli Lilly & Company acquire various biotechnology drug companies? To be on the safe side, depending on the potency of the competitors in the market, Eli Lilly should acquire various biotechnology drug companies. That will ensure that the company enlarges the drug pipelines, reduce its production costs and at the same time produce high quality products. By doing that, the company which is already in the leading position of high quality pharmaceutical and animal health products, will be better placed in current market situation; which is characterized by cheap and low quality generic drugs, government’s approvals of biosimilars, increased taxation and growth of managed care organizations. According to the 2013 Annual Report for Lilly, the company has lost and is bound to lose most of its revenues as a result of their dependence on products with intellectual property protection. Accordingly, the company has lost and will continue to lose significant patent protection in its market (Lilly.com, 2014). As illustrated in the table below, the company has lost and may continue to lose a significant patent protection hence revenues, sooner or later. Product U.S Revenues(2013) ($ Million) Percent World wide revenues(2013) U.s Patent protection Cialis Cymbalta Evi.

1. Running head: Eli Lilly & Company Case Study
1
Eli Lilly & Company Case Study
5
Eli Lilly & Company Case Study
Name
College
Course
Tutor
Abstract
From the case 22: Eli Lilly & Company on page 224, the paper
is a response to the questions: How should Eli Lilly & Company
Position itself for the future? Should it strengthen its retail
presence, grow internationally, or move into the void created in
the healthcare provision? Develop Projected Financial
Statements that fully assess and evaluate the impact of the
proposed strategy. How are the acquisitions/growth financed?
Will debt be increased further, or ownership of Eli Lilly &
Company stock is diluted to raise the capital needed?
Charts and graphs are used in the response so as to further

2. clarify the explanations and also as supporting evidence.
Eli Lilly & Company Case Study
Executive Summary
The paper submitted will contain a proposed plan of action
using primarily data from the company annual report of Eli
Lilly & Company. The acquisition will greatly increase survival
of the company in the hard times in the company’s industry. The
proposal will combine the benefit of the organization’s lion’s
share and the cheap yet technical knowledge of the
biotechnology company to come up with the desired drugs.
The main reason that various biotechnology companies are
acquired is the cost effective nature of the companies, most of
which had already began with the production process but
stopped or rather, declined during the global credit crunch.
Actelion, Shire plc and Onyx pharmaceuticals are among the
best targets.
The companies are will less likely present a large financial
burden in the acquisition process.
Should Eli Lilly & Company acquire various biotechnology
drug companies?
To be on the safe side, depending on the potency of the
competitors in the market, Eli Lilly should acquire various
biotechnology drug companies. That will ensure that the
company enlarges the drug pipelines, reduce its production
costs and at the same time produce high quality products. By
doing that, the company which is already in the leading position
of high quality pharmaceutical and animal health products, will
be better placed in current market situation; which is
characterized by cheap and low quality generic drugs,

3. government’s approvals of biosimilars, increased taxation and
growth of managed care organizations.
According to the 2013 Annual Report for Lilly, the company
has lost and is bound to lose most of its revenues as a result of
their dependence on products with intellectual property
protection. Accordingly, the company has lost and will continue
to lose significant patent protection in its market (Lilly.com,
2014). As illustrated in the table below, the company has lost
and may continue to lose a significant patent protection hence
revenues, sooner or later.
Product
U.S Revenues(2013)
($ Million)
Percent World wide revenues(2013)
U.s Patent protection
Cialis
Cymbalta
Evista
942.8
3, 960.8
772.0
4%
17%
3%
Compound patent 2017
Compound patent plus pediatric exclusivity December 2013
Use patent March 2014

4. Product
Revenues Outside U.S(2013)($ in millions)
Percent of Worldwide Revenues(2013)
Patent Protection-Major Europe/Japan
Cialis
Cymbalta
Zyprexa
1, 216.6
1,123.6
1,071.2
5%
5%
5%
Major European Countries: Compound patent 2017
Major European Countries: data package protection 2014
Japan: Compound patent 2015
How can Lilly best enter global markets, which together
comprise less than 50% of company sales?
Lilly can best enter the global market by selling its products
through Acquisition of the companies with a large market share
in a region. That will make the company enjoy the historical
presence which the acquired company had. It should also put up
a well structured website. A good and interactive website is the
simplest and cost effective way for the company to do so.
Through the Website, the company’s customers around the
world will be able to visit the website at any time to place

5. orders for the desired products. the Website should be designed
to suite various territories in terms of language and design. The
website should mainly be used for business to business due to
the fact that drugs need prescription from a specialist.
Financial Statements that fully assess and evaluate the impact of
the proposed strategy
Below is the Projected Combined Balance Sheet and Income
Statement. This acquisition would give Eli Lilly & Company
about 4 % increments in revenues.
NB: Expected growth rate in the coming year= 4%
Period Ending
Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Assets
Current Assets
Cash And Cash Equivalents
3,830,200
4,018,800
5,922,500
Short Term Investments
1,567,100
1,665,500
974,600
Net Receivables
4,022,800
3,888,300
4,237,900
Inventory
2,928,800

6. 2,643,800
2,299,800
Other Current Assets
755,800
822,300
813,400
Total Current Assets
13,104,700
13,038,700
14,248,200
Long Term Investments
7,624,900
6,313,900
4,029,800
Property Plant and Equipment
7,975,500
7,760,200
7,760,300
Goodwill
-
-
-
Intangible Assets
4,331,100
4,752,700
5,128,100
Accumulated Amortization
-
-
-
Other Assets
2,212,500
2,533,400
2,493,400

7. Deferred Long Term Asset Charges
-
-
-
Total Assets
35,248,700
34,398,900
33,659,800
Liabilities
Current Liabilities
Accounts Payable
3,633,900
3,861,500
3,156,100
Short/Current Long Term Debt
1,012,600
11,900
1,522,300
Other Current Liabilities
4,270,100
4,516,100
4,252,500
Total Current Liabilities
8,916,600
8,389,500
8,930,900
Long Term Debt
4,200,300
5,519,400
5,464,700

8. Other Liabilities
4,491,100
5,716,100
5,728,600
Deferred Long Term Liability Charges
-
-
-
Minority Interest
9,300
8,700
(6,100)
Negative Goodwill
-
-
-
Total Liabilities
17,608,000
19,625,000
20,124,200
Stockholders' Equity
Misc Stocks Options Warrants
-
-
-
Redeemable Preferred Stock
-
-
-
Preferred Stock
-
-
-
Common Stock

9. 698,500
716,600
724,100
Retained Earnings
16,992,400
16,088,200
14,897,800
Treasury Stock
(93,600)
(192,400)
(95,300)
Capital Surplus
5,050,000
4,963,100
4,886,800
Other Stockholder Equity
(5,015,900)
(6,810,300)
(6,871,700)
Total Stockholder Equity
17,631,400
14,765,200
13,541,700
Net Tangible Assets
13,300,300
10,012,500
8,413,600
Retrieved from
https://www.sec.gov/Archives/edgar/data/59478/0000059478140
00078/lly-20131231x10k.htm

10. Eli Lilly & Co., Consolidated Income Statement
USD $ in thousands
12 months ended
Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Dec 31, 2010
Dec 31, 2009
Revenue
23,113,100
22,603,400
24,286,500
23,076,000
21,836,000
Cost of sales
(4,908,100)
(4,796,500)
(5,067,900)
(4,366,200)
(4,247,000)
Gross margin
18,205,000
17,806,900
19,218,600
18,709,800
17,589,000
Research and development
(5,531,300)
(5,278,100)

11. (5,020,800)
(4,884,200)
(4,326,500)
Marketing, selling, and administrative
(7,125,600)
(7,513,500)
(7,879,900)
(7,053,400)
(6,892,500)
Acquired in-process research and development
(57,100)
–
(388,000)
(50,000)
(90,000)
Asset impairments, restructuring, and other special charges
(120,600)
(281,100)
(401,400)
(192,000)
(692,700)
Operating income
5,370,400
4,734,200
5,528,500
6,530,200
5,587,300
Income related to termination of the exenatide collaboration
with Amylin
495,400
787,800

12. –
–
–
Interest expense
(160,100)
(177,800)
(186,000)
(185,500)
(261,300)
Interest income
119,700
105,000
79,900
51,900
75,200
Other income (expense)
63,900
(41,000)
(72,900)
128,600
(43,400)
Other, net, income (expense)
518,900
674,000
(179,000)
(5,000)
(229,500)
Income before income taxes
5,889,300
5,408,200
5,349,500

13. 6,525,200
5,357,800
Income taxes
(1,204,500)
(1,319,600)
(1,001,800)
(1,455,700)
(1,029,000)
Net income
4,684,800
4,088,600
4,347,700
5,069,500
4,328,800
Retrieved from http://www.stock-analysis-
on.net/NYSE/Company/Eli-Lilly-Co/Financial-
Statement/Income-Statement
The combined company would effectively merge with the
biotechnology firms further expand consumer options and
reduce the cost of production as the smaller biotechnology firm
is will produce the needed drugs rather cheaply.
How are the acquisitions/growth financed?
The acquisition is best financed through common stock
financing. In the example below, the company’s good
performance indicates that the path of financing is the best. In
the five year return on the company’s stock is compared with
Standard & poor’s 500 stock index and with peer group for a
period from 2009 to 2013. The dividends invested in the
company are presumably reinvested in the company’s stock.

14. Retrieved from
https://www.sec.gov/Archives/edgar/data/59478/0000059478140
00078/lly-20131231x10k.htm
Will debt be increased further, or ownership of Lilly stock be
diluted to raise the capital needed?
Ownership of Lilly will be diluted as the financing will be done
through distributing the ownership of the company so as to
finance the acquisition. The overwhelming strength of the
company will however make it difficult to notice the dilution.
References
Lilly.com, (2014). Eli Lilly & Company website. Retrieved
from http://www.lilly.com/Pages/Home.aspx
Stock Analysis on net.com, (2014).StockAnalysis on net: 100
U.S Stock Market Leaders. Retrieved from http://www.stock-
analysis-on.net/NYSE/Company/Eli-Lilly-Co/Financial-
Statement/Income-Statement