R&D in the Pharmaceutical Industry
The pharmaceutical industry spends billions of dollars each year on research and development. Rather than capitalize these R&D expenditures as intangible assets, companies are required to charge them to expense in the year incurred.
Perform a keyword search of Pharmaceutical Companies using the following search engine: http://www.yahoo.comYour search will result in a list of companies that research and develop pharmaceutical products. Select five of these companies and obtain their 10-K reports (using EDGAR) at the following Internet address: www.sec.govInstructions| a. | For each of the companies you selected, determine:
| 1. | Total R&D expense for the most current year. | | 2. | Total R&D expense as a percentage of total operating costs and expenses. | | 3. | Total R&D expense as a percentage of net sales. | | 4. | The percentage by which operating income would have increased had the entire R&D expenditure been recorded as an intangible asset instead of being charged to expense. |
| | b. | Using information from the 10-K reports, summarize briefly the kinds of drugs being researched and developed by each of these companies. To a potential investor, which company appears to be the most innovative and promising? Explain. |
Internet sites are time and date sensitive. It is the purpose of these exercises to have you explore the Internet. You may need to use the Yahoo! search engine http://www.yahoo.com (or another favorite search engine) to find a company's current Web address | 