Meds4u Ltd and Hope Ltd are two leading producers of pharmaceutical drugs. Each has considerable assets and expends considerable fund each year in developing new products. The development of new pharmaceutical drugs is often very expensive and risky. New products must often undergo considerable testing before they are approved for distribution to the public. For example, it took Hope Ltd 5 years and $800 million to develop a new blood pressure drugs.

Here are some basic data compiled from 2016 financial statements of these entities.

($ in millions)Meds4u LtdHope Ltd

Total assets$54422$63706

Total revenue4731453796

Profit611810496

Research and Development exp48663624

Intangible assets1441816574

Q. Suppose that, by eliminating research and development expenditures, Hope Ltd could have reported $3.6 billion in profit in 2016. Much of the research never results in products or the products take years to develop, but shareholders are eager for higher returns. Therefore, the entity is considering eliminating research and development expenditures for at least a couple of years. What would you advise?