The pharmaceutical industry spends billions each year on research and development. rather than capitalize these R&D expenditures as intangible assests, companies are required to charge them to expense in the year incurred. Perform a keyword search of Pharmaceutical Companies using the search engine of choice. Your search will result in a list of companies that research and develope pharmaceutical products. (Select 3 J&J- Pfizer- and Bayer) obtain their 10-K reports using Sec Edgar system. a) Determine the following: The total R&D expense for the most current year is The total R&D expense as a percentage of total operating costs and expenses Total R&D expense as a percentage of net sales 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 found, summarize briefly to a potential investor which company appears to be the most innovative and promising? explain. and put in spreadsheet format

Pfizer (2015): * Total R&D Expense: $7,690 Million (p. 19) * $7,690 Million Total R&D Expense (p. 19) / $8,965 Million Total Operating Costs & Expenses (p. 66) = 0.86% Total Operating Costs & Expenses * $7,690 Million Total R&D Expense (p. 19) / $48,851 Million Net Sales (p. 66) = 0.16% Net Sales * $7,690 Million Total R&D Expense (p. 19) / $14,512 Million Operating Income (p. 70) = 0.53%

Operating Income Merck & Co., Inc. (2016, February 26). Form 10-K. Retrieved from http://investors.merck.com/investors/financial-reports/sec-filings/default.aspx Bayer

(2015): * Total R&D Expense: $4,281 Million $ 4,281 Million Total R&D Expense /$ 7,069 Million Total Operating Costs & Expenses = 0.61% Total Operating Costs & Expenses * $4,281 Million Total R&D Expense /$46,324 Million Net Sales = 0.09% Net Sales * $4, 281 Million Total R&D Expense /$10,266 Million Operating Income = 0.42% Operating Income Bayer. (2016). Bayer AG 2015 Bayer Communication on Progress (Annual Report Augmented Version plus Bayer UNGC Blueprint Report) | UN Global Compact. Retrieved November 12, 2016, from https://www.unglobalcompact.org/participation/report/cop/create-and-submit/detail/233921

Johnson & Johnson (2015): * Total R&D Expense: $9,046 Million (p. 17) * $9,046 Million Total R&D Expense (p. 17) / $15,409 Million Total Operating Costs & Expenses (p. 8) = 0.59% Total Operating Costs & Expenses * $9,046 Million Total R&D Expense (p. 17) / $70,074 Million Net Sales (p. 8) = 13% Net Sales * $9,046 Million Total R&D Expense (p. 17) / $ 19,279 Operating Income (p. 33) = 0.47% Operating Income