LO9-2 INTERNET CASE 9.5 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 search engine of your choice (e.g., Yahoo, Google). Your search will result in a list of companies that research and develop pharmaceutical prod- ucts. Select three of these companies and obtain their 10-K reports using the SEC's EDGAR sys- tem or going directly to the websites of the companies you choose. Instructions a. For each of the companies you selected, determine the following. 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 expen- diture 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 www.yahoo.com (or another favorite search engine) to find a company's current web address. Answers to Self-Test Questions LO9-2 INTERNET CASE 9.5 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 search engine of your choice (e.g., Yahoo, Google). Your search will result in a list of companies that research and develop pharmaceutical prod- ucts. Select three of these companies and obtain their 10-K reports using the SEC's EDGAR sys- tem or going directly to the websites of the companies you choose. Instructions a. For each of the companies you selected, determine the following. 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 expen- diture 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 www.yahoo.com (or another favorite search engine) to find a company's current web address. Answers to Self-Test Questions