Eli Lilly 2012 Annual Report Download - page 24

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care reform. At the state level, budget pressures are causing various states to impose cost-control measures
such as higher rebates and more restrictive formularies.
International operations are also generally subject to extensive price and market regulations, and there are
many proposals for additional cost-containment measures, including proposals that would directly or
indirectly impose additional price controls, limit access to or reimbursement for our products, or reduce the
value of our intellectual property protection. Recently, several governments have implemented across-the-
board price cuts of branded human pharmaceuticals as part of austerity measures in the face of the global
financial crisis and severe national budget deficits.
We cannot predict the extent to which our business may be affected by these or other potential future
legislative or regulatory developments. However, in general we expect that state, federal, and international
legislative and regulatory developments could negatively affect our pricing and rebates.
Research and Development
Our commitment to research and development dates back more than 100 years. Our research and
development activities are responsible for the discovery and development of most of the products we offer
today. We invest heavily in research and development because we believe it is critical to our long-term
competitiveness. At the end of 2012, we employed approximately 7,700 people in pharmaceutical and animal
health research and development activities, including a substantial number of physicians, scientists holding
graduate or postgraduate degrees, and highly skilled technical personnel. Our research and development
expenses were $5.28 billion in 2012, $5.02 billion in 2011, and $4.88 billion in 2010.
Our human pharmaceutical research and development focuses on five therapeutic categories: cancer;
endocrine diseases, including diabetes and musculoskeletal disorders; central nervous system and related
diseases; autoimmune diseases; and cardiovascular diseases. However, we remain opportunistic, selectively
pursuing promising leads in other therapeutic areas. We are also investing in molecules with multi-pathway
pharmacological efficacy to expand the potential of our therapeutic portfolio. We have a strong biotechnology
research program, with approximately half of our clinical-stage pipeline, and more than half of our late-stage
pipeline, currently consisting of biotechnology molecules. In addition to discovering and developing new
molecular entities, we seek to expand the value of existing products through new uses, formulations, and
therapeutic approaches that provide additional value to patients. Across all our therapeutic areas, we are
increasingly focusing our efforts on tailored therapeutics, seeking to identify and use advanced diagnostic
tools and other information to identify specific subgroups of patients for whom our medicines—or those of
other companies—will be the best treatment option.
To supplement our internal efforts, we collaborate with others, including educational institutions and
research-based pharmaceutical and biotechnology companies. We use the services of physicians, hospitals,
medical schools, and other research organizations worldwide to conduct clinical trials to establish the safety
and effectiveness of our human pharmaceutical products. We actively seek out investments in external
research and technologies that hold the promise to complement and strengthen our own research efforts.
These investments can take many forms, including licensing arrangements, co-development and co-
marketing agreements, co-promotion arrangements, joint ventures, and acquisitions.
Our Elanco animal health innovation strategy is focused on identifying and developing promising technologies
and potential products from internal and external sources to meet unmet veterinary needs. Our animal health
scientists leverage discoveries from our human health laboratories to develop products to enhance the health
and wellbeing of livestock and pets.