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Pfizer or Eli Lilly: Who Is Controlling Expenses Better?

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Expense guidance for fiscal 2019

In its fourth-quarter earnings investor presentation, Pfizer (PFE) guided for adjusted cost of sales as a percentage of revenues of 20.8% to 21.8% for fiscal 2019. The company expects adjusted selling, information, and advertising (or SI&A) expenses to be $13.5 billion to $14.5 billion and adjusted research and development (or R&D) expenses to be $7.8 billion to $8.3 billion for fiscal 2019.

In its fourth-quarter earnings press release, Eli Lilly (LLY) guided for marketing, selling, and administrative expenses of $6.4 billion to $6.7 billion and R&D expenses of $5.8 billion to $6.0 billion for fiscal 2019.

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Wall Street projections

Analysts expect Pfizer’s adjusted selling, general, and administrative (or SG&A) to sales percentage to drop by 53 basis points YoY to 24.93% in the first quarter, 17 basis points YoY to 26.36% in fiscal 2019, 59 basis points YoY to 25.77% in fiscal 2020, and then by 38 basis points YoY to 25.39% in fiscal 2021.

On the other hand, analysts expect Eli Lilly’s adjusted SG&A to sales percentage to rise by six basis points YoY to 26.38% in the first quarter, then fall 84 basis points YoY to 26.17% in fiscal 2019, then fall 80 basis points YoY to 25.37% in fiscal 2020, and fall 68 basis points YoY to 24.69% in fiscal 2021.

Analysts expect Pfizer’s adjusted R&D to sales percentage to increase by 46 basis points YoY to 13.93% in the first quarter, 39 basis points YoY to 15.23% in fiscal 2019, then fall by one basis point YoY to 15.22% in fiscal 2020, and by 16 basis points YoY to 15.06% in fiscal 2021.

On the other hand, analysts expect Eli Lilly’s adjusted R&D to sales percentage to increase by 207 basis points YoY to 22.72% in the first quarter, then increase by 144 basis points YoY to 23.05% in fiscal 2019, then fell by 11 basis points YoY to 22.94% in fiscal 2020, and then fall by 47 basis points YoY to 22.47% in fiscal 2021.

Eli Lilly is expected to reduce its SG&A expenses to sales percentage at a faster rate as compared to Pfizer from 2019 to 2021. Eli Lilly is also expected to allocate a higher percentage of its sales to research programs from 2019 to 2021.

Next, we’ll discuss dividend and tax rate projections for Pfizer and Eli Lilly in fiscal 2019.

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