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Is Eli Lilly in Good Hands?

Investing isn't just buying shares in a hot ticker; it is putting your hard-earned money in the future of a business -- and, often overlooked, trusting management to execute on that vision of success. When it comes to Eli Lilly, are investors in good hands or is their faith misplaced?

In order to help you answer this question, our senior biotech analyst has composed a brand-new premium research report that explains Eli Lilly's market opportunity, risks, and reasons to both buy and sell today. The following excerpt from the report takes an in-depth look at Eli Lilly's man in charge.

Management
Eli Lilly's chairman, president, and CEO, John Lechleiter, is a rarity in the pharmaceutical industry.

Those three titles (or at least chairman and CEO) seem to be disappointingly standard these days. Any checks and balances at the highest corporate level have been lost.

Instead, Lechleiter is uncommon because he's a scientist. He started at Eli Lilly back in 1979 as an organic chemist in process research and development. As he worked his way up the ladder, Lechleiter supervised both product development and regulatory affairs. He inherited the top job in 2008 after Sidney Taurel retired.

Merck's CEO was a lawyer. Ian Read came to Pfizer as an accountant. Johnson & Johnson's new CEO, Alex Gorsky, started with the company in sales, as did his predecessor Bill Weldon. Novartis' Joseph Jimenez came to the company via H.J. Heinz -- yep, the ketchup company.

But having a scientist at the helm isn't necessarily all it's cracked up to be. Sure, having a Ph.D. can help Lechleiter understand the basic science behind why a drug works the way it does. But how many direct scientific decisions is he really making? I doubt he's down in the lab helping the scientists figure out how to synthesize a compound with an extra methyl group on it.

Lechleiter should be making higher-order decisions that will have a direct effect on margins and cash flow and have the final say on whether to approve licensing deals and acquisitions.

My worry is that scientists tend to be dreamers...


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Comments from our Foolish Readers

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  • Report this Comment On December 27, 2012, at 12:46 AM, DoctorLewis4 wrote:

    Sure! Why would anyone want a CEO who actually understands the business he's working in! What a terrible mistake COSTCO made by hiring Jim Sinegal. He started working in the business in high school. What does he know? And Apple did very well all those years ago by bringing in the CEO from Pepsi, instead of staying with a tech nerd who started the business. How did that one work out? Yes all companies should be run by lawyers and accountants with degrees from Harvard and Yale. We can only dream, can't we...

  • Report this Comment On December 27, 2012, at 5:33 AM, DannyHaszard wrote:

    Remember the Zyprexa scandal.

    The Eli Lilly company made an astounding $67 BILLION on Zyprexa that they PUSHED on the elderly and underage children (*Viva Zyprexa* Lilly sales rep slogan) with wanton disregard for the side effects

    *FIVE at FIVE*

    The Zyprexa antipsychotic drug,whose side effects can include weight gain and diabetes, was sold to Veterans,children in foster care, elderly in nursing homes.

    *Five at Five* was the Zyprexa sales rep slogan, meaning *5mg dispensed at 5pm would keep patients quiet*.

    *Tell the truth don't be afraid*-- Daniel Haszard

  • Report this Comment On December 27, 2012, at 9:33 AM, roscoe1663 wrote:

    Well, despite the Prozac ($5 bil/yr sales) and the Zyprexa ($6 bil/yr sales) patent losses, Lilly is still returning dividends to investors. John (Bill Gates) Lechleiter has got to be doing something right.

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