Financial Risk Management at Eli Lilly and Company


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Case Details:

Case Code : FINA016
Case Length : 15 Pages
Period : 2003
Pub. Date : 2003
Teaching Note :Not Available
Organization : Eli Lilly and Company
Industry : Pharmaceutical
Countries : Global

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Business Overview

Pharmaceutical products dominated Lilly's business. The largest category of products was the neurosciences group, which included Zyprexa, Prozac, Permax, and Strat-tera. Endocrinology products consisted primarily of Humulin, Humalog, Actos, Evista, Forteo, and Humatrope. Oncology products consisted primarily of Gemzar...

Credit Risk

Lilly was exposed to credit risk mainly due to trade receivables and interest-bearing investments. Wholesale distributors of life-sciences products and managed care organizations accounted for a substantial portion of trade receivables...

Market Risk

Interest Rate Risk
Lilly faced interest rate risk exposure due to changes in short-term US dollar interest rates. The company attempted to achieve an acceptable balance between fixed and floating rate debt positions and used interest rate derivatives to help maintain that balance...

Financial Instruments: Accounting & Valuation

Derivative activities were initiated within the guidelines of documented corporate risk-management policies. Lilly believed derivatives did not create additional risk because gains and losses on derivative contracts offset losses and gains on the assets, liabilities, and transactions being hedged...

Exhibits

Exhibit I: Lilly: Financial Highlights
Exhibit II: Lilly: Segment Information
Exhibit III: Lilly: Consolidated Statements of Cashflows
Exhibit IV: Lilly: Fair Values of Options
Exhibit V: Lilly: Fair Value of Financial Instruments
Exhibit VI: Lilly: Summary of the Unrealized Gains & Losses
Annexure A: Accounting for Financial Instruments under US GAAP

 

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