Lower similarity and Revise Grammar (2 hours due)

BASIC INFORMATION

Eli Lilly and Company is one of the largest global pharmaceutical companies in the world. Eli Lilly also has offices in Puerto Rico and 17 other countries, and its products are sold to about 125 countries. It was founded by Eli Lilly, a pharmacist, in 1876. Eli Lilly ’s main products include Ractopamine, Prozac, the antipsychotic drug, Zyprexa, and ADHD drugs Strattera, etc. The company’s ticker symbol is NYSE：LLY, the S&P 500 Index is the primary exchange upon which its shares are traded. In 2019, the company achieved revenue of US $ 22.319 billion, a year-on-year increase of 3.8%. Achieve continuous net operating profit was US $ 4.638 billion, a year-on-year increase of 47.2%. The current EPS (GAAP) reached 8.89 USD. I think it is time to invest and overweight stocks. Now the current stock price is 161.29 and the target stock price is 184.29 with the increasing market share and development of the pharmaceutical industry due to Covid-19.

INVESTMENT SUMMARY

"Lilly is in the early phase of an exciting period of growth for the company. The combination of strong revenue growth from our newer medicines and prudent expense control across our business enabled Lilly to invest more in our R&D pipeline and still deliver impressive earnings growth in the fourth quarter and full-year 2019," said David A. Ricks, Lilly's chairman, and CEO.

According to the DCF model, it displays the stock price can be reached 184.29. However, the stock price is 161.29 now. Our stock price estimate is higher than the S&P 500 market price(161.29), indicating that we believe that the stock is slightly undervalued. Lilly announced a definitive agreement to acquire Dermira, Inc. for approximately $1.1 billion in 2020. The acquisition will expand Lilly's immunology pipeline with the addition of lebrikizumab, a novel, investigational, monoclonal antibody. At the same time, Lilly's first lower-priced insulin, Insulin Lispro Injection, was made available in May 2019 at a 50 percent lower list price than Humalog. Lily also announced a global commercialization agreement to integrate DexCom, Inc. products into Lilly's personalized diabetes management system, currently in development to advance the treatment of diabetes. Under the terms of the non-exclusive agreement, Lilly will use Dexcom's continuous glucose monitoring (CGM) devices in both the pen- and pump-based platforms of the system being designed to help improve diabetes management. And Lilly and Boehringer Ingelheim modernized their alliance to focus their combined expertise and investment on the continued development and commercialization of Jardiance in type 2 diabetes, heart failure, and chronic kidney disease. The development prospects bring the company higher market space and competitiveness.

BUSINESS DESCRIPTION

The company's core product lines include: Basaglar (Insulin Glargine), Jardiance (Engligliflozin), Trulicity (Duraglutide), Cyramza (ramucirumab), Emgality (galcanezumab), Olumiant (baricitinib), Taltz (ixekizumab) and Verzenio (Abemaciclib), mainly covering endocrine (diabetes), autoimmune diseases (psoriasis, rheumatoid arthritis), tumors (lung cancer, stomach cancer), migraine and other diseases. The contribution of the core product line to the overall revenue growth has gradually increased.

Among them, Trulicity, as a GLP-1 type diabetes drug, has continued to maintain a considerable growth rate. By 2019, it will achieve sales of 4.128 billion US dollars, an increase of 29% year-on-year. Jardiance also benefits from SGLT-2's industry growth. Sales continue to increase and continue to maintain its market leading position. By 2019, it will achieve sales of 944 million US dollars, an increase of 43% year-on-year. It is also gratifying that in the fiercely competitive field of basal insulin, the company Basaglar has also maintained a relatively high growth rate, with a year-on-year growth of 39% in 2019.

In the field of oncology, Cyramza achieved sales of US $ 925 million in 2019, a year-on-year increase of 13%. The product is currently approved for the first-line treatment of EGFR + non-small cell lung cancer in Europe, and is expected to further promote sales growth. Verzenio, the first CDK4 & 6 inhibitor to be marketed, was approved by the FDA in February 2018 as a treatment for advanced or metastatic breast cancer in postmenopausal women with HR + and HER2-. In 2019, Verzenio's sales were US $ 580 million, an increase of more than 100% year-on-year in the direction of autoimmune diseases. Taltz and Olumiant also performed well, with sales of US $ 1.366 billion and US $ 427 million, respectively.

MANAGEMENT & GOVERNANCE

Lilly retains independent compensation and benefits consultants to assist them in evaluating executive compensation programs. The use of independent consultants provides additional assurance that our programs are reasonable and consistent with the Company’s objectives.

Components of Executive Compensation

Annual Compensation: base salaries based on Company and individual performance for the previous year, internal relativity, and market conditions, including pay at the Peer Group companies. As part of the Company’s efforts to control expenses during the period following the loss of Prozac patent protection in the U.S., the Company will not provide merit increases in the base salaries of members of management worldwide in 2002.

Cash bonuses for management are paid under the EVA Plan, a formula-based plan based on the concept of Economic Value Added.

Long-Term Incentives. We employ two forms of long-term equity incentives granted under the 1998 Lilly Stock Plan: stock options and performance awards.

Stock options align employee incentives with shareholders because options have value only if the stock price increases over time.

Performance awards provide employees shares of Lilly stock if certain Company performance goals are achieved. The awards, normally granted annually, are structured as a schedule of shares of Lilly stock based on the Company’s achievement of specific earnings-per-share (“EPS”) levels.

These incentives foster the long-term focus necessary for continued success in our business. They also ensure that our leaders are properly focused on shareholder value.

In addition, the timing of annual stock option grants to senior management was moved from December to February, in order to better reflect business results in individual compensation awards and to coincide with the timing of the annual grant to all other members of management.

INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING

The US biopharmaceutical industry has developed rapidly after World War II, and it has established an absolute advantage worldwide. Biotechnology has become one of the core driving forces for the development of the US high-tech industry. About half of the biopharmaceutical companies and half of the biopharmaceutical patents. After reform and opening up, China's biopharmaceutical industry has also entered a fast-track of growth. In the past 40 years, the compound annual growth rate has been much higher than the national industrial and GDP growth rate over the same period, becoming one of the fastest growing industries. The S & P 500 pharmaceutical industry index has been rising since 2000

The share price performance of the pharmaceutical sector has been greatly affected by policies. On October 25, 2018, Trump announced a plan to reform medical insurance to pay for drugs, and proposed to reduce the cost of medical insurance for expensive drugs to treat cancer and other diseases. . On February 2 this year, the Trump administration called on Congress to pass its new proposal to prohibit pharmaceutical companies from paying certain “backdoor” rebates to medical insurance intermediaries. Policies may become the trigger for a sharp decline in pharmaceutical companies and even the medical sector.

Eli Lilly is one of the top ten pharmaceutical companies in the world, Pfizer, Novartis, Roche are the main competitors of Lilly. Eli Lilly's business model is to continuously provide patients with innovative drugs, rather than seeking profits from products with expired patents. On the one hand, Eli Lilly has invested a lot of money for new drug research and development; on the other hand, Lilly has expanded its product line through external mergers and acquisitions. In the pharmaceutical industry, having a patent right means having everything. In the future, the US patents for many drugs will expire, and other pharmaceutical companies will copy the drugs, which will have a huge impact on the market share of Eli Lilly. Eli Lilly has always maintained the top three of the global R & D investment of multinational pharmaceutical companies. In the past two years, Eli Lilly became the beneficiary of new drug research and development and harvested Engligliflozin (SGLT-2), Dulaglutide (GLP-1), and ixekizumab (IL-17A). Emgality (galcanezumab), a drug used to prevent migraine Also approved by the FDA. Lilly still has room for development in the future.