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Analysis on Eli Lilly stock portfolio performance, including the company's history, main competitors, full SWOT analysis, and key takeaways from the project...

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History and Founding Eli Lilly was founded in May 1876 by Colonel Eli Lilly in Indianapolis, Indiana. He was a pharmacist, chemist, and veteran of the American Civil War who was very discontent with the ineffective medicines during his day. Hence, he established a company that would manufacture the highest quality products and develop medicines dispensed only at a doctor’s recommendation. Lilly is currently a Fortune 500 company that employs 38,500 people across 125 countries, and has its products available in 140 countries. Mission Statement: Eli Lilly’s mission is to make medicines that help people live longer, healthier, more active lives. Competition: The company's main rivals are Pfizer, Sanofi, AstraZeneca, GlaxoSmithKline, and Merck & Co Inc. Product Line Eli Lilly’s product line is widely divided into two categories, human and animal. The company is currently offering products for bone muscle joint, cardiovascular, diabetes, endocrine, immunology, men’s health, neuroscience, and oncology. While striving to improve people’s lives through caring and discovery, Eli Lilly also helps animals to live longer and healthier lives. For more than half a century, Elanco, a division of the company, has been developing products for livestock and companion animal health, as well as food safety. Distribution Channel In order to provide medicines through a safe and uninterrupted supply chain, Eli Lilly partners with agencies across the world and complies with the Drug Supply Chain Security Act (DSCSA). SWOT Analysis Operating in over 140 countries, Eli Lilly has several strengths in the industry. Its global presence creates strategic international alliances and marketing partnerships expedited by the company’s diverse management. Native employees represent different areas in order to better understand local demands and produce accordingly. Another advantage that Lilly has is its

advanced technology to manufacture standardized products. This allows them to meet the needs of their customers in an incomparable manner. Due to customer satisfaction and inelastic demand, Eli Lilly has pricing power, which enables the company to charge higher prices for its products. However, these prices are a disadvantage. Its sales growth from the second to third quarter of 2016 has dropped primarily due to its high costs per unit of output, as well as the development of new generic products in the market. Moreover, there have been distribution losses from the expiration of several patents. This harms the company, resulting in lost market share for discontinued medicine, and minimized revenue and worldwide demand. Although there is a huge demand for its medicines in developing countries such as India, Pakistan, and Bangladesh, it is still reluctant to invest, expand, and diversify. Eli Lilly has numerous opportunities from which it can improve on, one being its presence in such developing countries that can allow for growth. Another aspect it can improve on is its development of new medicines, as well as the formulation of innovative products for different therapies. For example, in August of 2016, Eli Lilly and its partner AstraZeneca secured a Fast Track Designation from the FDA for AZD3293, a Phase III clinical trial product for Alzheimer’s disease. This accelerated its development and review of new therapies. Such a product has a potential to combat one of the biggest challenges facing medical science today, which may lead to exponential growth. Other possibilities for improvement include the funding of new pharmaceutical equipment including robot surgeons or blood pressure checkers, along with investing more in R&D. However, Eli Lilly needs to proceed with caution when taking on new objectives. Since the company has to plan carefully for scenarios where costs skyrocket, this may take up time and lead to delays in development that can be threatening. For instance, legal restrictions could increase costs and interfere with processes. Other companies within the industry may also release similar products

ahead of time, giving them first mover advantage. The slight growth in the market share of competitors can put Eli Lilly into trouble. In addition, a bad economy can hurt the company’s business by decreasing the number of potential customers, causing them to turn to cheaper alternatives. MetLife’s Surprising Performance For the last quarter, the financial sector has been the worst performing S&P sector of 2016. MetLife's revenues and earnings per share fell short of the analyst’s projection for the last two quarters. For example, for the June 2016 quarter, the company generated $0.83 in earnings per share and $16.96B in revenue, missing the consensus estimate of $1.35 and $17.26B, respectively. Therefore, we thought its price projections would not be as good. It was a surprise to see that the stock price grew from $40.30 to $46.34. Since September 26, the stock price has fallen by less than a dollar but has led to an overall growth from month to month. Great Company Performance Amazon’s stock has been showing great performance and is one of the few stocks in the portfolio that has had a significant increase in price. When first investing, the price was $759.48, and as of November 2016, it grew to $765.56. Analysts say that Amazon is the best long-term growth stock available to buy. Although Amazon’s EPS is not very high, it has been increasing throughout each quarter. It ended with a 66.06% increase in the second quarter, and from last year, net sales increased by 29% to $32.7B. Operating margin for their web services climbed to 31.6%, up from 29.9% in the previous quarter. Overall, investors should continue to buy the Amazon stock, as the estimates and current trends give the company a promising future. Recommendation Among all the challenges faced by the pharmaceutical industry, improving R&D productivity is essential for Eli Lilly. This will allow the company to reduce its current

high costs per unit of output and keep it competitive to new generic products in the market. Improving R&D efficiency and productivity will strongly depend on reducing attrition during Phase II and III, while simultaneously maintaining work in process and reducing the cycle time and cost. In order for the company to increase its pipeline work in process without dramatically raising the cost, it needs to verify that it has sufficient work in process in the early stages of drug development. Additionally, the funding for new early-stage, Phase I and II, compounds can partially come by redirecting resources from molecules that failed in Phase III, ultimately driving costs down. Fully understanding the value of a project can improve the efficacy of R&D as well by raising the benefit-to-risk ratio. More specifically, the higher the ratio, the higher the potential value of that treatment, which can be maximized by personalizing the use of the therapy. This increase in the benefit-to-risk ratio and thus the overall value of a project can assist in the growth of the market share. Furthermore, reducing both Phase II and Phase III cycle times are important levers for enhancing R&D efficiency. This is best achieved by minimizing or even eliminating non-value added tasks and wait times associated with completing the value-added tasks. Improving R&D productivity can allow Eli Lilly to not only reduce their costs, but sustain a viable business model. Lessons Learned from Stock Portfolio Project In terms of price, our stock portfolio underperformed. With an initial investment of $500,000 in August 2016, we ended with a net loss of $6,321.72. What this taught us is that not only is it important to do research on the individual stocks but on the industry as well. The stock price itself is not the sole factor in choosing an investment, and neither is the overall industry. The number of shares one should have in a stock varies depending on the company. Therefore, we should look for undervalued stocks to invest in to maximize profits in the stock market....