LLY 10-K & 10-Q changes, risk factors and insider trading

•Pharmaceutical research and development is very costly and highly uncertain; we may not succeed in developing, licensing, or acquiring commercially successful products sufficient in number or value to replace revenues of products that have lost or will lose intellectual property protection or are displaced by competing products or therapies.

There is a high rate of failure inherent in drug discovery and development. To bring a product from the discovery phase to market takes considerable time and entails significant cost. Failure or results that misalign with expectations can occur at any point in the process, including in later stages after substantial investment andinvestment, following meaningful cost for manufacturing capabilities and inventory to prepare for launch.launch, and after we and others may have attributed significant value for these potential products. As a result, a significant portion of funds invested in research and development programs will not generate direct financial returns. New product candidates that appear promising in development or prior to being acquired may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage, failure to obtain placement on guidelines or recommendations published by third-party organizations that are commensurate with clinical data,organizations, the application of pricing controls, limited scope of approved uses, label changes, changes in the relevant treatment standards or the availability of newer, better, or more cost-effective competitive products, difficulty or excessive costs to manufacture, insufficient infrastructure to support detection, diagnostic or other requisites for treatment, ineffectiveness in connecting with healthcare professionals, including digitally through virtual engagements, or infringement of the patents or intellectual property rights of others. We may also fail to allocate research and development resources efficiently, fail to pursue or invest sufficiently in product candidates or indications that may have been successful, or fail to optimally balance trial design, conduct, and speed to accomplish desired outcomes.

We regularly submit new product candidates and indications to regulatory agencies for approval, including highly anticipated candidates such as orforglipron. Regulatory agencies establish high hurdles for the efficacy and safety of new products and indications. Delay, uncertainty, unpredictability, and inconsistency in drug approval processes across markets and agencies can result in delays in product launches, lost market opportunities, impairment of inventories, and other negative impacts. In addition, it can be very difficult to predict revenue growth rates of, or variability in demand for, new or future products and indications, which in some cases leads to difficulty meeting product demand or, on the other hand, lower volume growth, excess inventoryinventory, and related financial charges.

Through internal innovation and business development we must maintain a flow of successful products and indications or line extensions sufficient both to cover our substantial research and development costs and investments and to replace revenues that are lost as profitable products become subject to pricing controls, lose intellectual property exclusivity, or are displaced by competing productsproducts, or therapies.therapies, or experience a reduction in patient access. Failure to timely replenish our product portfolio and pipeline in a timely manner would have a material adverse effect on our business, results of operations, cash flows, and financial position. Our dependence on, or focus in, one or more key products or product classes exacerbates this risk. In addition, the growth of our business and revenue base increases the risk that products developed or acquired by us may not provide adequate value to sustain further long-term growth.

We engage in various forms of business development activities to enhance or refine our product pipeline,pipeline and development capabilities, including licensing arrangements, co-development agreements, co-promotion arrangements, distribution and promotion agreements, joint ventures, acquisitions, equity investments, and divestitures. There are substantial risks associated with identifying and competing for successful business development targets and consummating related transactions. Continued regulatory focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, and heightened competition for attractive targets has and could continue to delay, jeopardize, or increase the costs or risks of our business development activities. In addition, failures or difficulties in integrating or retaining new personnel or the operations of the businesses, products, or assets we acquire (including related technology, commercial operations, compliance programs, information security, manufacturing, distribution, and general business operations and procedures) may affect our ability to realize the expectedpotential benefits of business development transactions and may result in our incurrence of substantial asset impairment or restructuring charges. We also may fail to generate the expected revenue and pipeline enhancement from business development activities due to limited diligence opportunities,that fails to identify risks or adequately anticipate their magnitude, unsuccessful clinical trials, issues related to the quality, integrity, or broad applicability of data, regulatory impediments, and manufacturing or commercialization challenges. Additionally, business development activity focused on new modalities may entail additional risks and costs.costs given the high levels of scientific uncertainty inherent in novel technologies. Business development transactions may not be completed in a timely manner (if at all), may not result in successful development outcomes or successful commercialization of any product, may require additional unanticipated investments to achieve potential benefits, may give rise to legal proceedings or regulatory scrutiny, and may result in charges that negatively impact our financial position or results of operations in any given period.

•We and our products face intense competition, including from multinational pharmaceutical companies, biotechnology companies, and lower-cost generic and biosimilar manufacturers, and such competition could have a material adverse effect on our business.

We compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies and,and inface intensifying competition worldwide, including from China and other markets where research and development capabilities have expanded and accelerated significantly. In many cases, our products compete against the leading products of one or more of our competitors. To compete successfully,successfully in a highly competitive and increasingly fast-paced global environment, we must continue to deliver innovative, cost-effective products through internal innovation or business development that meet important medical needs, provide improved outcomes and a positive consumer experience for patients, and deliver value to payers. Our product revenues and prospects are adversely affected by patient access issues, the introduction by competitors of branded products that are first to market, have better marketplace access, have greater brand recognitionrecognition, or are perceived as superior by the marketplace, by price competition, by generic or biosimilar versions of our branded products, and by generic or biosimilar versions of other products in the same therapeutic class as our branded products. Our revenues are also adversely affected by treatment innovations, including new or superior modalities, that eliminate or minimize the need for treatment with our existing products, and our existing products could be subject to decreased sales volumes, realized price reductions, or both. In some cases, the introduction of our own innovative products results in these adverse impacts for our preexisting products. Technological innovation has amplified and we expect will continue to amplify competitive aspects of our business, including by enabling additional participation in and breadth of drug discovery and new healthcare delivery models. Business practices or commercial capabilities that we deploy in light of these or other market dynamics may not prove sufficient.

Regulation of generic and biosimilar products varies around the world and such regulation is complex and subject to ongoing interpretation and implementation by regulatory agencies and courts. Particularly for biosimilars, health authority guidelines and legislative actions could continue to make it less burdensome for competitor products to enter the market and further incentivize uptake of biosimilars. Given the importance to us of marketed biologic products and those in our clinical-stage pipeline, such regulation could have a material adverse effect on our business. See Item 1, "Business—Competition" and "Business—Research and Development," for more details. Alternatively, actual or perceived failure of robust generic and biosimilar competition could propel governments to adopt additional policies and legislation that threaten our intellectual property, pricing of our products, or other aspects of our business.

Our success depends on a market that is observant of intellectual property rights and regulatory requirements. Developments that undermine that landscape can significantly impact our business and reputation. For example, we havecontinue seento an increase insee the production, marketing, and sale of counterfeit, misbranded, adulterated, and compoundedmass-compounded incretins in the U.S. and other markets that could materially impact us. In addition to patient safety concerns, improper commercialization and dispensation practices by these actors may inappropriately condition consumer expectations or otherwise disadvantage compliant market participants. Our actions intended to stop or prevent illegal sales of such medicines are costly and may be costly or ineffective. See Item 1, "Business—Government Regulation of Our Operations and Products," for additional information on market risks related to counterfeit, misbranded, adulterated, and compoundedmass-compounded medicines. If inadequately regulated, e-commerce may increase the prevalence of dangerous counterfeit or divertedmass-compounded products and scams, potentially exposing patients to significant risks. Our reputation and business could suffer harm as a result of counterfeit or divertedmass-compounded drugs sold under our brand name, which may also impact our business and financial results.

In addition, we rely on our ability to attract, engage,attract and retain highly qualified and skilled scientific, technical, management, and other personnel in order to compete effectively. To capitalize on the rapid development of next-generation technologies and otherwise effectively compete, we must continue to commercializeenhance ourskill products,sets and advance the research, development, and commercialization of additional modalities, indications, and product candidates, we have expanded, and will likely need to further expand,develop our workforce, both in and outside the U.S. We continue to face intense competition for qualified individuals from numerous multinational pharmaceutical companies, biotechnology companies, academic and other research institutions, as well as employers near our manufacturing and other facilities, which has increased and may continue to increase our labor costs. Our failure to compete effectively for talent could negatively affect salesour ofability to discover, develop, manufacture, and sell our currentmedicines, and any future approved products and indications, and could resultresulting in material financial, legal, commercial, or reputational harm to our business.

•Our business is subject to increasing government price controls and other public and private restrictions on pricing, reimbursement, and access for our drugs, which could have a material adverse effect on our results of operations, reputationreputation, or business.

Public and private payersactors continue to take aggressive steps to control their expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, our medicines. These pressures have negatively affected,affected and we expect will continue to negatively affect,affect our consolidated results of operations. Governments and private payersactors worldwide have intensified their scrutiny of, and actions intended to address, pricing, reimbursement, and access to pharmaceutical products and are demanding greater commercial and clinical value from pharmaceutical companies in the form of strong product differentiation and demonstrated value. We continue to experience scrutiny on the pricing of current and potential diabetes, obesity, and Alzheimer's disease products due toto, among other factors, payer concern over projected growth in these marketsdemand and, for certain of these drugs, the anticipated duration of treatment. We have also observed scrutiny of pricing and access disparities across jurisdictions.

Additional policies, regulations, legislation, or enforcement, including because of the regulatory priorities of the U.S. executive branchbranch, state attorneys general, and regulatory authorities worldwide, could adversely impact our business and consolidated results of operations. For example, in August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices in Medicare (effective beginning in 2026.2026) In August 2024, HHS announced the government-set prices for these first ten medicines with Jardiance subject toat a 66%significant discount compared to the 2023 U.S. calendar year list priceprice. forIn aJanuary 30-day2026, supplyHHS selected Trulicity and discountsVerzenio foras the other nineadditional medicines ranging from approximately 38%subject to 79%government-set belowprices listto price.be effective in 2028. Given our product portfolio, we expect additional products will be selected in future years, which would have the effect of accelerating revenue erosion. The effect of reducing prices and reimbursement for certain of our products could significantly impactimpacts our business and consolidated results of operations. Within the U.S., state level transparency initiatives, importation rules, reporting requirements, and mandated programs, including the establishment of drug affordability boards with the power to set upper payment limits on certain drugs in state-regulated plans,drugs, have also increased administrative costs, in some cases, compromised confidential business practices and otherwise detrimentally impacted our business. CertainContinued statesexpansion of the 340B program and growth of entities claiming entitlement to 340B pricing, including in ways that may be inconsistent with the statutory scheme and through state laws that purport to mandate 340B sales to contract pharmacies, impact our revenue on an increasing percentage of sales. Changes to the calculation of rebates under the Medicaid program could also increase our Medicaid rebate obligations and decrease the prices charged to 340B covered entities, which could have alsoa undertakensignificant effortsimpact toon codifyour 340B contract pharmacies into statute or impose other state law mandates, which increase the cost of 340B programs. To date, several states have passed contract pharmacy legislation, which have been subject to various legal challenges.business. For more details, see Item 1, "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access."

Further, restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers,actors, including in relation to the implementation of the IRA, reference pricing, andor compulsory licensing, may adversely impact our business and financial results. We continue to experience additional pricing pressures, rebates, clawbacks, and other changes in reimbursement policies and programs resulting from periods of uneven economic growth or downturns or uncertainty, and the emergence or escalation of, and responses to, international tension and conflicts.

In addition, government price reporting and payment regulations are complex, and require ongoing assessment of the methods by which we calculate and report pricing. Calculation methodologies are inherently subjective and are subject to review and challenge by government agencies.agencies and, in some cases, by private actors. If agenciesthere disagreeis disagreement with our calculations, or the methodologies and assumptions underlying them, we may need to restate previously reported data and could be subject to financial and legal liability, which may be significant. In addition, changes to calculation methodologies could adversely affect our financial position or consolidated results of operations in any given period.

For more details, see Item 1, "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access," Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access and Certain Other Regulatory DevelopmentsDevelopments," and Item 8, "Financial Statements and Supplementary Data—Note 16: Contingencies."

•Pharmaceutical products can develop safety or efficacy concerns, which could have a material adverse effect on our revenues, income, and reputation.

Pharmaceutical products receive regulatory approval based on data obtained in controlled clinical trials of fixed duration and defined populations. After approval and launch, the products are used for longer periods of time by much larger numbers of patients, which may lead to identifying new or expanded safety or efficacy concerns. We and others (including regulatory agencies and private payers) collect extensive information on the efficacy and safety of our marketed products by continuously monitoring the use of our products in the marketplace. In addition, we or others (including our competitors, in some cases) may conduct post-marketing clinical studies on efficacy and safety of our marketed products. New safety or efficacy data may result in product label changes, or other measures that could reduce the product's market acceptance and result in declining sales. Relatedly, safety or efficacy concerns raised about a product in the same class, compounded or counterfeit versions of our products, or products with the same mechanism of action as one of our products or product candidates could be imputed and have an adverse impact on the availability or commercial viability of our products or approval of product candidates. Serious safety or efficacy issues that arise after product approval have,have resulted and could in the future,future result in voluntary or mandatory product recalls or withdrawals from the market. Safety issues have,have resulted and could in the future,future result in costly product liability claims. Any of these outcomes could result in material financial, legal, commercial, or reputational harm to our business.

•We derive a significant percentage of our total revenue from relatively few products and sell our products through consolidated supply chain entities, which subjects us to various risks.

We derived direct product and/or collaboration and other revenues of more than $3 billion for each of Mounjaro, Zepbound, Verzenio, Trulicity, Zepbound,Taltz, and Jardiance (including Glyxambi, Synjardy, and Trijardy XR), and Taltz that collectively accounted for 7582 percent of our total revenues in 2024.2025. In particular, Mounjaro, Trulicity,Mounjaro and Zepbound accounted for 4856 percent of our total revenues in 20242025, and we expect cardiometabolic health products will continue to represent a significant and growing portion of our business, revenues, and prospects. LossFactors such as loss of patent protection, changes in prescription rates, material product liability or pricing claims or litigation, unexpected side effects or safety concerns, significant changes or fluctuations in demand, channel dynamics, regulatory proceedings and investigations, negative publicity affecting doctor or patient confidence, pressure from existing or new competitive products, pipeline developments by us or our competitors, counterfeit and illegally compounded drugs, changes in labeling, pricing, and insufficient access, or reimbursement, or actual or perceived supply shortagesshortages, imbalances, or disruptions for these products or any of our other major products could materially impact our results of operations or result in significant and sudden declines or volatility in the trading price of our common stock and market capitalization.

In addition, in the U.S., most of our products are distributed through a limited number of wholesalers. If one of these significant wholesalers encounters financial or other difficulties or otherwise is unable or unwilling to support distribution of our products, it could cause disruption to our supply chain or we might be unable to timely collect the amounts that the wholesaler owes us, which could negatively impact our results of operations. See Item 1, "Business—Marketing and Distribution," for more details. Challenges to U.S. retail pharmacies due to pharmacy benefit manager reimbursement pressures, among other things, have resulted and may result in financial difficulties for some pharmacies that may impact patient experiences, lead to determinations by certain pharmacies to not carry one or more of our significant products or threaten the viability of these pharmacies, which could negatively impact our business and results of operations.

Moreover, the negotiating power of health plans, managed care organizations, pharmacy benefit managers, and other supply chain entities has increased due to consolidation, regulatory, and other market impacts,increased, and they, along with governments, increasingly employ formularies and other methods to control costs and encourage utilization of certain drugs, including through the use of formulary inclusion,inclusion or favorable formulary placement. Such stakeholders have also increasingly imposed utilization management and other tools to limit access to our products. As theseThese practices expand,in includingsome duecases to potential further consolidation of U.S. private third-party payers, we may facecreate difficulty in obtaining or maintaining timely or adequate pricing or formulary placement of our products. For example, in July 2025, CVS Caremark, the pharmacy benefit management division of CVS Health, stopped covering Zepbound as a preferred obesity management medicine on some insurance plans, which has negatively impacted access for patients covered under these plans. We expect that consolidation of supply chain entities will continue to increaseexert competitive and pricing pressures on pharmaceutical manufacturers.

Pharmacy benefit manager practices have come under increased scrutiny from U.S. policymakers at the federal and state levellevels who have proposed and enacted legislation or administrative rules, or undertaken enforcement actions intended to address concerns regarding the impact that these intermediaries have on drug pricing and patients’ out of pocket costs. IfSuch promulgated,legislation, suchrules, legislationor enforcement could have resultant implications, costs, or consequences for our business and how we interact with these entities. For additional information on pricing and reimbursement for our pharmaceutical products, see Item 1, "Business—U.S. Private Sector Dynamics" and "Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access—U.S."

•We depend on products with intellectual property protection for most of our revenues, cash flows, and earnings; the loss of effective intellectual property protection for certain of our products has resulted, and in the future is likely to continue to result, in rapid and severe declines in revenues for those products.

In the ordinary course of their lifecycles, our products lose significant patent protection and/or data protection in the U.S., as well as in key jurisdictions outside the U.S., after a specified period of time. For example, Trulicity will lose significant patent and remaining data protections in the next few years. Some products also lose patent protection as a result of successful third-party challenges. We have faced, and remain exposed to, generic or biosimilar competition following the expiration or loss of such intellectual property protection. Patent expirations of competitive products may also shift market conditions for our products by contracting the market for branded products, impacting product access, or otherwise intensifying pricing pressures across similar treatments.

For non-biologic products, loss of exclusivity typically results in the entry of one or more generic competitors, leading to a rapid and severe decline in revenues, especially in the U.S. Generic pharmaceutical companies have in some cases introduced a generic product before resolution of any related patent litigation. For biologics, loss of exclusivity may or may notalso result in the near-term entry of competitor versions (i.e., biosimilars) due to many factors, including development timelines, manufacturing challenges, and/or uncertainties regarding the regulatory approval pathways..

Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and often involve complex legal, scientificscientific, and factual questions. There is no assurance that the patents we are seeking will be granted or that the patents we hold will be found valid and enforceable if challenged. Third parties have and may challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates, and technologies. In addition, our patent positions might not protect us against competitors with similar products or technologies because competing products or technologies may not be deemed to infringe our patents. Moreover, patents relating to particular products, uses, formulations, or processes may not preclude other manufacturers from employing alternative processes or marketing alternative products or formulations that compete with our patented products. Patents held by third-partiesthird parties have also contributed, and may in the future contribute, to a decision by us to not pursue all potential indications for a product candidate. In addition, competitors or other third parties may assert claims that our activities infringe patents or other intellectual property rights held by them, or allege a third-party right of ownership in our existing intellectual property. See Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Patent Matters" and Item 1, "Business—Patents, Trademarks, and Other Intellectual Property Rights,Rights" and Item 8, "Financial Statements and Supplementary Data—Note 16: Contingencies," for more details.

•Our long-term success depends on intellectual property protection; if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected.

Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines. Without strong intellectual property protection, we would be unable to generate the returns necessary to support our significant investments in research and development, as well as the other expenditures required to bring new medicines and indications to the market. Intellectual property protection varies throughout the world and is subject to change over time, depending on local laws and regulations. Changes to such laws, regulations, and enforcement practices could reduce protections for our innovative products and indications. For example, aan proposalagreement-in-principle byannounced in December 2025 between the European CommissionCommission, Council and Parliament to revise the EU's general pharmaceutical legislation threatenswould make conditional the predictability and length of certain pharmaceutical intellectual property incentives, including by proposed reductions in maximum data protection periods. Changes proposed by the USPTO and by certain bills in Congress to limit the number of, and differences between, patents obtained could also affect the scope of patent protection for our products in the U.S.

Also in the U.S., in addition to the process for challenging patents set forth in the BPCIA, which applies to biological products, the Hatch-Waxman Act provides generic companies substantial incentives to seek to invalidate our patents covering small molecule pharmaceutical products. As a result, we expect that our U.S. patents on major pharmaceutical products, including biologics, will continue to be routinely challenged in litigation and may not be upheld. In addition, a separate IPR process currently allows competitors or others to seek invalidation of patents at the USPTO without the protections of the BPCIA or Hatch-Waxman Act. The use of IPR proceedings after the institution of litigation pursuant to the BPCIA or Hatch-Waxman Act is currently a topic of debate among legislators and the future ability of our competitors to use IPR proceedings as an alternative to Hatch-Waxman Act or BPCIA litigation procedures to challenge our patents remains uncertain. The USPTO issued an interim procedureprocedures regarding the usediscretionary denial by the Director of discretionary denialsinstitution of IPR proceedings whenbased thereon the agency's workload and priorities. The USPTO's ability to apply these procedures is parallelbeing districtchallenged, court litigation. However,and it is not clear how thisthese interimprocedures procedure couldwill affect the ability of our competitors to institute IPR proceedings after institution of litigation.proceedings. If our patents are challenged through this expedited review process, even if we prevail in demonstrating the validity of our patent, our win may not preclude future challenges at the PTABPatent Trial and isAppeal Board and would not be binding on federal district courts, meaning the same patent can be challenged by other competitors.

We face many generic manufacturer challenges to our patents outside the U.S. as well. The entry of generic competitors typically results in rapid and severe declines in revenues. In addition, competitors or other third parties may claim that our activities infringe patents or other intellectual property rights held by them. If successful, such claims could result in our being unable to market a product in a particular territory or beingrequire requiredpayment to payof significant damages for past infringement or royalties on future sales. InIntellectual addition,property threats across international markets include policies which favor domestic competitors or are otherwise disadvantageous to our products, challenges to our patents’ validity in foreign courts, and government policies that force technology transfer or undermine or nullify patent protections under the guise of health emergencies or other public interests. Furthermore, intellectual property protection in certain jurisdictions is weak and we face heightened risks to our intellectual property rights in these jurisdictions, including competition with generic or counterfeit versions of our products at or relatively shortly after launch.launch as well as the risk of diversion of generic or counterfeit products from these jurisdictions into others. See Item 1, "Business—Patents, Trademarks, and Other Intellectual Property RightsRights," and Item 8, "Financial Statements and Supplementary Data—Note 16: Contingencies," for more details.

•Failure, inadequacy, breach of, or unauthorized access to, our IT systems or those of our third-party service providers, unauthorized access to our confidential information, or violations of data protection laws, could each result in material harm to our business and reputation.

Important confidential information owned by us, our business partners, or other third parties is stored in our information systems, networks, and facilities or those of third parties. This includes valuable trade secrets and intellectual property, clinical trial information, corporate strategic plans, marketing plans, customer information, and personal information, such as employee and patient information (collectively, confidential information). We also rely, to a large extent, on the efficient and uninterrupted operation of complex information technology systems, infrastructure, cloud technologies, and hardware (together, IT systems), some of which are within our control and some of which are within the control of third parties, to accumulate, process, store, and transmit large amounts of confidential information and other data. We are subject to a variety of evolving and developing laws and regulations around the world related to privacy, data protection, and data security. Maintaining the security, confidentiality, integrity, and availability of our IT systems and confidential information is vital to our business. OurA failure,failure in the protection or the failuremaintenance of our third-party service providers, to protect and maintain the security, confidentiality, integrity, and availability of our (or theirour third-party service providers') IT systems and confidential information and other data could significantly harm our reputation as well as result in significant costs, including those related to fines, penalties, litigation, and obligations to comply with applicable data breach laws. A cybersecurity incident could also impose business costs through lost productivity, disruption to manufacturing, and costs to remediate and recover from the incident.

Cyber-attacks are growing in their frequency, sophistication, and intensity, and are becoming increasingly difficult to detect, mitigate, or prevent. Cyber-attacks come in many forms, including the deployment of harmful malware, exploitation of vulnerabilities (including those of third-party software or systems), denial-of-service attacks, the use of social engineering (including phishing), and other means to compromise the confidentiality, integrity, and availability of IT systems, confidential information, and other data. Breaches resulting in the compromise, disruption, degradation, manipulation, loss, theft, exfiltration, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized access to, disruption of, interference with, or attack of, our IT systems, products and services, can occur in a variety of ways, including negligent or wrongful conduct by employees or others with permitted access to our systems and information, or wrongful conduct by hackers, competitors, organized criminal groups, nation-states, state-sponsored or affiliated groups, current or former company personnel, and other actors. Our third-party partners, including third-party providers of data hosting or cloud services, as well as suppliers, distributors, alliances, and other third parties with whom we may share data, face similar risks, which could affect us directly or indirectly. Third-party access to our proprietary data may also enable such party's development of competing products or enhancement of services sold to competitors, thereby eroding our competitive advantage. Unassociated third parties present further risks, including by propagating and amplifying misinformation related to our products, business, and industry, including through social media. We and others in the healthcare industry have been and continue to be targets for cyber-attacks, and the number of threats has increased over time. Numerous government agencies that monitor and regulate internet and cyber-crime have issued guidance, alerts and directives warning of software vulnerabilities that require immediate patching, malicious actors targeting healthcare-related systemssystems, and nation-state sponsored hacking designed to steal valuable information.

The failure, inadequacy, or breach of our IT systems or business processes or controls or procedures, the compromise, disruption, degradation, manipulation, loss, theft, exfiltration, destruction, or unauthorized access to, disclosure of, or use of,of confidential information, or the unauthorized access to, disruption of, or interference with our products and services that rely on IT systems or business processes, could impair our ability to secure and maintain intellectual property rights; result in a product manufacturing interruption or failure, or in the interruption or failure of products or services that rely on IT systems or business processes; damage our operations, patient and other relationships, or reputation; undermine integration activities or otherwise delay or prevent the launch of products; result in unfavorable clinical trial results by virtue of incorrect or unreliable data; expose us to ransom payment, other demands, or paralyze our operations; give rise to legal liability and regulatory action under data protection and privacy laws; require disclosure to government authorities and/or regulators; expose us to civil and criminal investigations; and/or cause us to lose trade secrets or other competitive advantages, any of which effects could endure for a long period of time. Unauthorized disclosure of personally identifiable information could further expose us to significant sanctions for violations of data privacy laws and regulations around the world, subject us to litigation, andor damage public trust in our company. In addition, IT system security in jurisdictions outside the U.S. is in many cases weaker and may result in additional costs, uncertainties, and risks.

We are subject to various laws and regulations globally regarding privacy and data protection, including laws and regulations relating to the collection, storage, handling, use, disclosure, transfer, and security of personal information. The legislative and regulatory environment regarding privacy and data protection is continuously evolving and the subject of significant attention by regulators and private parties globally. Regulators are imposing new data privacy and security requirements, including new and greater monetary fines or penalties for privacy violations, and jurisdictions where we operate have passed, orand continue to propose, privacy and data privacyprotection legislation and/or regulations. For example, we are subject to existing laws in the EU, United Kingdom, China, and U.S., all of which provide for substantial penalties for noncompliance. Other jurisdictions where we operate have passed, or continue to propose, similar legislation and regulations. Many jurisdictions, including the U.S., the EU, and China have passed, or expect to pass, restrictions on international data transfers.transfers and local access requirements. Compliance with current and future laws and regulations requires implementing potentially costly new controls and processes andprocesses, may restrict certain core activities, including impacting our ability to carry out research and clinical studies across multiple geographies.geographies, and creates the potential for data misuse or espionage. Failure to comply with these current and future laws and regulations could result in significant penalties and reputational harm and could have a material adverse effect on our business and results of operations.

To date, system inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, theft, exfiltration, ransomware, cyber-attacks, and the compromise, disruption, degradation, manipulation, loss, theft, exfiltration, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized access to, disruption of, interference with, or attack of, our IT systems, products and services that we have encountered have not had a material impact on our business strategy, results of operations or financial condition. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, operational, legal, business, or reputational losses that may result from an interruption or breach of our IT systems. We continue to implement measures in an effort to protect, detect, respond to, remediate, and minimize or prevent these risks and to enhance the resiliency of our IT systems; however, these measures may not be successful, and we may fail to detect or remediate system inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, theft, exfiltration, ransomware, cyber-attacks, or other compromises of our systems. Any of these events could result in material financial, operational, legal, business, or reputational harm to our business. For a discussion of our management of cybersecurity risks, see Item 1C, "Cybersecurity—Risk Management and Strategy" and "Cybersecurity—Governance."

•Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could lead to product supply problems.problems or other negative outcomes.

Difficulties in predicting or variability in demand and supply for our products and those of our competitors and the very long lead times necessary for the expansion and regulatory qualification of pharmaceutical manufacturing capacity have resulted, and in the future may result, in difficulty meeting demand, orcausing disruptions, shortages, andor higher costs in the supply of,of our products. For example, at various times during 2024 demand for our incretin medicines exceeded production. While tirzepatide supply currently exceeds demand in the U.S., demand remains dynamic and could be impacted by a variety of factors. Supply considerations will continue to influence the timing and approach (including available presentations) of tirzepatide launches in new markets. Despite our ongoing efforts to meet projected futureworldwide demand for our products by obtaining additional internal and contracted manufacturing capacity, there can be no assurances that such capacity increases that we expect will be needed to meet future demand will be realized as expected or that we will meet demand in launched markets in the future. Delays or challenges in operationalizing additional manufacturing capacity could limit our ability to capitalize on demand for our products. Conversely, unexpectedoverestimation of demand or events that limit demand for our products or anticipated demand for product candidates would undermine our ability to realize the full benefit of significant capital expenditures that we have incurred, and expect to continue to incur, to augment manufacturing capacity, may render built or in process manufacturing capacity unnecessary, andmay result in supply imbalances, or may also subject us to contractual payment obligations, which may be significant. The foregoing risks and uncertainties could negatively impact our consolidated results of operations and reputation. See Item 1, "Business—Raw Materials and Product SupplySupply," and Item 7, "Management's Discussion and Analysis—Financial Condition and Liquidity," for more details.

•Reliance on third-party relationships and outsourcing arrangements could adversely affect our business.

We rely on third parties, including suppliers, distributors, alliances,alliances and collaborations with other pharmaceutical and biotechnology companies, and third-party service providers, for selected aspects of product and clinical development, manufacturing, commercialization, hosting of,of and support for,for IT systems, product distribution, and certain financial transactional processes. As examples, we outsource the day-to-day management and oversight of some of our clinical trials to contract research organizations, some product testing to contract laboratories, certain active ingredient manufacturing, finishing operations, and device or component production and assemblyassembly, and packaging to contract manufacturing organizations, and the distribution of our products through logistics providers. To support anticipated demand for our current and prospective products,products and further other business initiatives, we have expanded relationships with contract manufacturing organizationsorganizations, entities supporting consumer directed access channels, artificial intelligence vendors, and other third parties in recent periods.

Outsourcing involves many risks, including the risk that third parties may not perform to our standards or legal requirements; may not produce reliable results; may not perform in a timely manner; may misuse or not maintain the confidentiality, integrity, and availability of confidential and proprietary information relating to us, our clinical trial subjects, or patients; may experience disruption or fail to perform due to IT system vulnerabilities, such as inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, fraud, theft, exfiltration, ransomware or other cyber-attacks; may be unable to satisfy their commitments to us in which case we may not be able to achieve acceptable alternative sourcing; or may fail to perform at all. The foregoing risks may be heightened in jurisdictions outside the U.S., where we may have fewer alternative providers as well as face additional costs, uncertainties, and risks. Among other third-party providers, we, and the pharmaceutical industry generally, depend on China-based suppliers for portions of our supply chain. U.S. officials arehave increasinglyenacted consideringand continue to consider legislation or other actions that are intended to limit supply chain reliance on China, including the BIOSECURE Act. In Februaryaddition, historically, geopolitical tensions between the U.S. and China have led to the imposition of tariffs, sanctions, and certain other business restrictions between the U.S. and China. In 2025, the U.S. presidential administrationgovernment imposed new tariffs on Chinese goods and China responded with tariffs on select U.S. goods. Tariffs have been imposed or proposed on a variety of other geographies in which we have third-party suppliers. If enacted, additional measures could result in supply disruptions or delays, increase costs more significantly, or invite further retaliatory measures, any of which could negatively impact our business.business See,and results of operations. See Item 1A, "Risk Factors—Risks Related to Doing Business Internationally—UnevenOur global operations subject us to risks, including as related to uneven economic growth or downturns ordownturns, international tradetrade, and other global disruptions, geopolitical tensions, or disputes could adversely affect our business and operating results" for additional information. In some cases, product or indication approvals depend on the outcome of regulatory inspections of third parties on which we rely. Third-party inspection outcomes have and may in the future delay or prevent product launches and otherwise negatively affect our business. Failure of third parties to meet their contractual, regulatory, confidentiality, privacy, security, or other obligations to us, our clinical trial subjects, and our patients could have a material adverse effect on our business and could also result in non-compliance with legal or regulatory requirements or industry standards or subject us to reputational harm.

•Our use of artificial intelligence (AI) or other emerging technologies could adversely impact our business and financial results.us.

We deploy AI and other emerging technologies in various facets of our operations and we continue to explore furtherthe development and use casesof forAI AI.technologies. We have also entered into, and may continue to enter into, partnerships and collaborations relating to the use of AI technology to aid in drug discovery and other efforts. The rapid advancement of these technologies presents opportunities for us in research, manufacturing, commercialization, and other business endeavors but also entails risks, including that AI-generated content, analyses, or recommendations we utilize could be deficient,inadequate, or that our competitors may more quickly or effectively adopt AI capabilities. There are significant risks involved in developing and deploying AI, and there can be no assurance that our usage of AI or our significant investments in AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability. Our use of AI or other emerging technologies could also exacerbate regulatory, cybersecuritycybersecurity, and other significant risks.

Effective development, management, and use of AI technologies is novel and complex, and there are technical challenges associated with achieving desired levels of accuracy, efficiency, and reliability. The algorithms and models utilized in AI systems may have limitations, including biases, errors, insufficient or erroneous training data, or inability to handle certain data types or scenarios or to render explainable or effective outputs. Furthermore, there are risks associated with the fact that the platforms providing AI models are in manysome cases owned and operated by emerging companies with less contractualcontractual, business, and compliance sophistication. These factors may undermine our ability to effectively utilize AI or create competitive disadvantages should our competitors more skillfully make use of AI capabilities. Further, if we are unable to effectively manage the use of AI technologies by our employees, our confidential information, intellectual property, or reputation could be put at risk.

The emergence and continued expansion of AI and other technologies may exacerbate other risks, including those related to competition, regulation, litigation, compliance issues, ethical concerns, confidentiality, and data privacy or security. ForAI example,may regulatoryenable uncertaintynew competitors in drug discovery and enhance the capabilities of existing competitors, thereby broadening and intensifying competitive dynamics. In addition, developing laws and regulations related to AI or other emerging technologies create uncertainty, may require significant resources to adjust business practices for compliance, and in some cases, may limit our ability to complyuse withAI-based developing laws.software. Several governmental authorities have already proposed or enacted laws and other guidance governing AI, such as the EU Artificial Intelligence Act. These and other developing obligations create uncertainty and may prevent or make it harder for us to conduct or enhance our business using AI, or lead to regulatory fines, penalties, or other liability. Further, use of AI technologies could lead to unintended consequences, such as data leakage, healthcare fraud and abuse, cybersecurity incidents, intellectual property infringement, or unintended biases.

•UnevenOur global operations subject us to risks, including as related to uneven economic growth or downturns ordownturns, international tradetrade, and other global disruptions, geopolitical tensions, or disputes could adversely affect our business and operating results.disputes.

Economic slowdowns could lead to decreased utilization of our products,products globally or in specific markets, affecting our sales. Declining tax revenues and increased government spending on other programs attributable to uneven economic growth or downturns may increase the pressure on governments to reduce healthcare spending, leading to increased control of drug prices or lower utilization. Additionally, some customers, including governments or other entities reliant upon government funding and cash-pay patients, may be unable to pay for our products fully or in a timely manner. Also, if our customers, suppliers, or collaboration partners experience financial difficulties, we could experience slower customer collections, greater bad debt expense, andor performance defaults by suppliers or collaboration partners. Similarly, uneven economic growth or downturns could limit our ability to access capital markets.

In addition to developments related to our business or financial results, or those of our competitors, uneven economic growth, downturns, or other negative global developments,developments could also undermine our growth or result in significant and sudden declines in the trading price of our common stock and market capitalization.

(Tables present dollars in millions, except per-share datadata, and numbers may not add due to rounding)

Revenue increased in 20242025 driven primarily by increased volumevolume, and,partially tooffset aby lesser extent, higherlower realized prices. The increaseincreased volume and lower realized prices in revenue2025 in 2024 waswere primarily driven by Mounjaro, Zepbound,Mounjaro and Verzenio, partially offset by Trulicity.Zepbound.

Net income and earnings per share increased in 2024,2025, primarily due to higher gross margin, partially offset by increased research and development expenses, marketing, selling, and administrative expenses,expenses and asset impairment, restructuring,research and otherdevelopment special charges.expenses.

Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines. We currently have approximately 55 new medicine candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase.

The following select new molecular entities (NMEs) and new indication line extension (NILEX) products are currently in Phase 2 or Phase 3 clinical trials or have been submitted for regulatory review or have recently received regulatory approval in the United States (U.S.),U.S., European Union (EU), or Japan. The table reflects the status of these NMEs and NILEX products, including certain other developments, up to the time of the filing of this Annual Report on Form 10-K:

Reforms, initiatives, and other actions, including those that may stem from political initiatives, periods of uneven economic growth or downturns, or as a result of inflation or deflation, trade and other global disputes and interruptions including related to tariffs, trade protection measures, and similar restrictions, the emergence or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on pricingcost, pricing, reimbursement, and reimbursementaccess for our products.

AdditionalOther policies, regulations, legislation, or enforcement, including those proposed or pursued by lawmakers, regulators, and other authorities in the U.S. and worldwide, couldhave and may continue to adversely impact our business and consolidated results of operations. For example, the U.S. House of Representatives recently passed the BIOSECURE Act, which is under consideration in the U.S. Senate. This legislation, if passed, could affect elements of the pharmaceutical supply chain; although as currently drafted we do not anticipate the bill would have a material impact on our business.

Consolidation and integration of privatePrivate payers and pharmacy benefit managers in the U.S. hascontinue alsoto significantly impactedimpact the market for pharmaceuticals bythrough increasingnegotiation payerof leverage in negotiatingaccess, manufacturer price or rebate concessions and pharmacy reimbursement rates. Furthermore, restrictiveRestrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payersactors have and may continue to adversely impact our business and consolidated results of operations. We expect that these actions may intensify and could particularly affect certain products, which could adversely affect our business. In addition, we are engaged in litigation and investigations related to the 340B program, access to insulin, pricing, product safety, and other matters that, if resolved adversely to us, could negatively impact our business and consolidated results of operations. It is not currently possible to predict the overall potential adverse impact to us or the general pharmaceutical industry of continued cost containment efforts worldwide.

We havecontinue seento an increase insee the production, marketing, and sale of counterfeit, misbranded, adulterated, and compoundedmass-compounded incretins. These practices may impact patient safety and undermine regulatory drug approval processes. While the FDA confirmed in late 2024 that the previous shortage of tirzepatide had ended and that compounding pharmacies are required to cease mass production, we cannot guarantee adequate regulation or compliance. Lilly will continue to consider all options, including filing lawsuits where appropriate, to address unlawful practices and the patient safety risks of unapproved, untested, and manipulated drugs.

We are subject to income taxes and various other taxes in the U.S. and in many foreign jurisdictions; therefore, changes in both domestic and international tax laws or regulations have affected and may affect our effective tax rate, results of operations, and cash flows. The U.S. and countries around the world are actively proposing and enacting tax law changes. Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development (OECD) and the European Commission could influence tax laws in countries in which we operate. Tax authorities in the U.S. and other jurisdictions in which we do business routinely examine our tax returns and are expected to increase their scrutiny of cross-border tax issues. Changes to existing U.S. and foreign tax laws and increased scrutiny by tax authorities in the U.S. and other jurisdictions could have a material adverse impact on our future consolidated results of operations and cash flows.

Continued regulatory focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, could continue to delay, jeopardize, or increase the costs of our business development activities and may negatively impact our consolidated financial position or results of operations. For discussion of risks related to business development activities, see Item 1A, "Risk Factors—Risks Related to Our Business and Industry—Pharmaceutical research and development is very costly and highly uncertain; we may not succeed in developing, licensing, or acquiring commercially successful products sufficient in number or value to replace revenues of products that have lost or will lose intellectual property protection or are displaced by competing products or therapies."

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro, Japanese yen, Chinese yuan, and ChineseBritish yuan.pound sterling. While we seek to manage a portion of these exposures through hedging and other risk management techniques, significant fluctuations in currency rates can have a material impact, either positive or negative, on our consolidated results of operations in any given period. There is uncertainty in the future movements in foreign currency exchange rates, and fluctuations in these rates have and could adversely impact our consolidated results of operations and cash flows.

Other factors have had, and may continue to have, an impact on our consolidated results of operations. These factors include cost and wage inflation, supply chain and labor market complexities, international tension and conflicts, uneven economic growth orgrowth, downturns or uncertainty, andrisks anrelated increaseto engaging in overallbusiness demandglobally, including legislation and regulatory action in ouror industryregarding foreign jurisdictions, and fluctuations due to channel dynamics or demand for certain products and materials.products.

See Item 1, "Business" and Item 1A, "Risk Factors," and Notes 4, 14, and 16 to the consolidated financial statements for additional information onand riskrisks factorsand uncertainties that could impact our business and operations.operations, including the matters described within this Executive Overview.

In the U.S.U.S., the increase in volume in 2024 was primarily driven by Zepboundincrease and Mounjaro, partially offset by Trulicity. In the U.S. the higherlower realized prices in 20242025 were primarily driven by Humalog, Mounjaro, Verzenio,Mounjaro and Zepbound.

Revenue of Mounjaro increased 8553 percent in the U.S., primarily driven by strong demanddemand, andpartially increasedoffset supply.by lower realized prices. Revenue outside of the U.S. was $2.59$9.3 billion in 20242025 compared to $328.9$2.6 millionbillion in 2023,2024, primarily driven by volume growth in launched markets.growth.

Revenue of VerzenioZepbound increased 36174 percent in the U.S., driven by increased demand, wholesalerpartially buyingoffset patternsby and, to a lesser extent, higherlower realized prices. Revenue outside the U.S. increased 39 percent, driven by increased demand.

Revenue of TaltzVerzenio increased 181 percent in the U.S., driven by higher realized prices due to changes in estimates for rebates and discounts, as well as increased demand.U.S. Revenue outside the U.S. increased 1920 percent, primarily driven by increasedvolume demand.growth.

Gross margin as a percent of revenue in 20242025 increased 2.11.7 percentage points compared with 2023,2024, primarily driven by favorable product mix and higherimproved cost of production, partially offset by lower realized prices.

Marketing, selling, and administrative expenses increased 1629 percent in 2024,2025, primarily driven by promotional efforts supporting ongoing and futureplanned launches.

Our effective tax rate was 16.519.8 percent in 2024,2025 compared with an effective tax rate of 20.116.5 percent in 2023.2024, primarily driven by unfavorable impacts related to the jurisdictional mix of earnings and U.S. tax law changes in 2025 relative to 2024. The effective tax rates for 2024both and 2023periods were both unfavorably impacted by non-deductible acquired IPR&D charges, with a larger impact occurring in 2023.2024. See Note 14 to the consolidated financial statements for additional information.

•milestone and royalty payments; and

Revenue increased for the three and six months ended MarchJune 31,30, 2026, driven primarily by increased volume, partially offset by lower realized prices. The increased volume and the lower realized prices during the three and six months ended MarchJune 31,30, 2026 were primarily driven by Mounjaro and Zepbound.

Net income and earnings per share for the three months ended MarchJune 31,30, 2026 increased primarily due to higher gross marginmargin, andpartially loweroffset by higher acquired IPR&D charges, partiallyasset offsetimpairment, by higher researchrestructuring, and developmentother expensesspecial charges, and marketing, selling, and administrative expenses. Net income and earnings per share for the six months ended June 30, 2026 increased primarily due to higher gross margin, partially offset by higher acquired IPR&D charges, research and development expenses, and marketing, selling, and administrative expenses.

( (1) The FDA granted Breakthrough Therapy designation for sofetabart mipitecan for the treatment of certain patients with platinum-resistant ovarian cancer. Breakthrough Therapy designation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition when preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement on a clinically significant endpoint(s) over already available therapies.

InWe thehave firstentered quarter of 2026, we finalizedinto voluntary agreements with the U.S. government in which, among other arrangements, we agreed to lower Medicaid and certain other drug prices for U.S. patients and to launch new medicines with a more balanced pricing approach across developed nations. Under the Medicare GLP-1 Bridge program (Bridge Program), Medicare beneficiaries will haveobtained access to discounted Lilly obesity medicines byeffective July 1, 2026 through December 31, 2027, and individual state Medicaid programs willseparately have the option to expand access to these medicines. We continue to engage with the Centers for Medicare & Medicaid Services on long-term Medicare access to obesity medicines. The uptake from this expanded access is unknown. Moreover, the outcome of these arrangements and broader U.S. policy efforts to align domestic pharmaceutical pricing with international benchmarks from countries with competing healthcare cost containment priorities is uncertain and could negatively impact our pricing strategies, product demand or access, or competitive positioning across global markets, and may result in reduced revenue in certain markets.

The Inflation Reduction Act of 2022 (IRA) requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D. Currently, these government prices generally apply beginning at nine years (for medicines approved under a New Drug Application) or thirteen years (for medicines approved under a Biologics License Application) following FDA approval or licensure for the molecule. In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, in August 2023 (effective 2026), and selected Trulicity and Verzenio in January 2026 (to be effective 2028), as one of the first ten medicines subject to government-set prices effective in 2026. In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028.prices. Given our product portfolio, we expect other significant products will be selected in future years. The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors and could significantly impact our business and consolidated results of operations.

The U.S. and other countries have imposed or reached alignment on tariffs. In some cases, imposed tariffs have been paused but may come into effect quickly and unpredictably. While Lilly and pharmaceuticals are exempt from certain of these tariffs, such exemptions may expire, be terminated or may not apply to any future tariffs. The precise impact of tariffs, trade protection measures, and other restrictions dependdepends on their ultimate scope, timing, and other factors. If enacted, additional restrictions could result in supply disruptions or delays, further increase costs, or otherwise have a negative impact on our business. Given the nature of pharmaceutical regulation and commercialization, we may not be able to share the burden of increased costs from tariffs and related impacts to any meaningful degree.

Private payers and pharmacy benefit managers in the U.S. continue to significantly impact the market for pharmaceuticals through negotiation of access, manufacturer price or rebate concessions and pharmacy reimbursement rates. Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private actors have and may continue to adversely impact our business and consolidated results of operations. In addition, we are engaged in litigationlitigation, investigations, and investigationsdiscussions with government entities related to government programs (including the 340B program,program), access to insulin,medicine, pricing, product safety, and other matters that could negatively impact our business and consolidated results of operations. It is not currently possible to predict the overall potential adverse impact to us or the general pharmaceutical industry of continued cost containment efforts worldwide.

Mounjaro and Zepbound accounted for 65 percent of our total revenue for the threesix months ended MarchJune 31,30, 2026, and we expect cardiometabolic health products will continue to represent a significant and growing portion of our business, revenue, and prospects. In the first quarter of 2026, we finalized drug pricing agreements with the U.S. government, including Medicare access to discounted Lilly obesity medicines under the Bridge Program.

In Aprilthe second quarter of 2026, we received U.S. FDA approval forlaunched Foundayo (orforglipron) in the U.S. for the treatment of obesity.obesity and submitted orforglipron to the FDA for type 2 diabetes. Internationally, we have launched Mounjaro and submitted orforglipron for the treatment of obesity and/or launchedtype Mounjaro2 diabetes in all major markets. To support anticipated demand for our current and prospective products, we have undertaken significant manufacturing expansion initiatives. Additional capacity is expected to become operational over the next several years.

We are subject to income taxes and various other taxes in the U.S. and in many foreign jurisdictions; therefore, changes in both domestic and international tax laws or regulations have affected and may affect our effective tax rate, results of operations, and cash flows. The U.S. and countries around the world are actively proposing and enacting tax law changes. Further, actions taken with respect to tax-related matters by associations such as the OECDOrganisation for Economic Co-operation and Development and the European Commission could influence tax laws in countries in which we operate. Tax authorities in the U.S. and other jurisdictions in which we do business routinely examine our tax returns and are expected to increase their scrutiny of cross-border tax issues. Additionally, we are subject to increasing tax disclosure obligations globally that could heighten our audit risk. Changes to existing U.S. and foreign tax laws and increased scrutiny by tax authorities in the U.S. and other jurisdictions could have a material adverse impact on our future consolidated results of operations and cash flows.

We invest in external research and technologies and manufacturing capabilities that we believe complement and strengthen our own efforts. These investments can take many forms, including acquisitions, collaborations, investments, and licensing arrangements. We view our business development activity as aan wayimportant tocomponent enhance or refineof our pipelineresearch and strengthendevelopment our business.strategy.

In the U.S. for the three and six months ended MarchJune 31,30, 2026, the volume increase was primarily driven by Zepbound and Mounjaro,Mounjaro. In the U.S. for the three and six months ended June 30, 2026, the lower realized prices were primarily driven by Zepbound and Taltz.Mounjaro, partially offset by adjustments to estimates for rebates and discounts primarily driven by Trulicity, Mounjaro, and Zepbound.

Outside the U.S. for the three and six months ended MarchJune 31,30, 2026, the volume increase was driven by Mounjaro, and the lower realized prices were primarily driven by the addition of Mounjaro to the National ReimbursedReimbursement Drug List (NRDL) in China.

The following table summarizes our revenue, including net product revenue and collaboration and other revenue, by product for the three months ended MarchJune 31,30, 2026 and 2025:

Revenue of Mounjaro increased 5945 percent and 51 percent in the U.S. during the three and six months ended MarchJune 31,30, 2026, respectively, reflecting strong demand, partially offset by lower realized prices. Lower realized prices in the U.S. were partially offset by a favorable one-time adjustmentadjustments to estimates for rebates and discounts during the three and six months ended MarchJune 31,30, 2026. Revenue outside the U.S. during the three and six months ended MarchJune 31,30, 2026 was $4.4$5.2 billion and $9.6 billion, respectively, compared to $1.2$1.9 billion and $3.1 billion during the three and six months ended MarchJune 31,30, 2025, respectively, primarily driven by volume growth, partially offset by lower realized prices driven by the addition of Mounjaro to the NRDL in China.

Revenue of Zepbound increased 7944 percent and 58 percent in the U.S. during the three and six months ended MarchJune 31,30, 2026, respectively, primarily driven by strong demand, partially offset by lower realized prices, including previously announced reductions in cash paycash-pay prices. Lower realized prices were partially offset by a favorable one-time adjustmentadjustments to estimates for rebates and discounts during the three and six months ended MarchJune 31,30, 2026.

Research and development expenses increased 2814 percent and 21 percent for the three and six months ended MarchJune 31,30, 2026, respectively, driven by continued investments in our early and late-stage portfolio.

Marketing, selling, and administrative expenses increased 1925 percent and 22 percent for the three and six months ended MarchJune 31,30, 2026, respectively, primarily driven by promotional efforts supporting ongoing and planned launches.

Acquired IPR&D charges for the three and six months ended MarchJune 31,30, 2026 were primarily related to the acquisitions of Orna and Ajax. Acquired IPR&D charges for the six months ended June 30, 2025 were primarily related to the acquisition of Scorpion Therapeutics, Inc.'sScorpion's PI3Kα inhibitor programprogram, STX-478. See Note 4 to the consolidated condensed financial statements for additional information.

The effective tax raterates waswere 16.423.3 percent and 16.5 percent for the three months ended MarchJune 31,30, 2026,2026 comparedand to2025, 20.2respectively. percentThe higher tax rate for the three months ended MarchJune 31,30, 2025,2026 was primarily driven by the unfavorable tax impact of a non-deductiblenondeductible acquired IPR&D chargecharges and, to a lesser extent, a mix of earnings in 2025.higher Thetax 2026jurisdictions and 2025the effectiveunfavorable tax ratesimpact wereof impactedasset byimpairment, netrestructuring, discreteand taxother benefitsspecial in each period.charges.

Cash and cash equivalents decreasedincreased to $5.3$9.0 billion as of MarchJune 31,30, 2026, compared with $7.3 billion as of December 31, 2025. Refer to the consolidated condensed statements of cash flows for additional information on the significant sources and uses of cash for the threesix months ended MarchJune 31,30, 2026 and 2025.

In addition to our cash and cash equivalents, we held total investments of $3.3$3.9 billion and $2.9 billion as of MarchJune 31,30, 2026 and December 31, 2025, respectively. As of MarchJune 31,30, 2026, we had approximately $850$806 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years. See Note 78 to the consolidated condensed financial statements for additional information.

AsWe paid $13.3 billion in 2026 related to business development activity, primarily driven by the acquisitions of MarchCentessa, 31,Kelonia, 2026,Orna, totalVentyx, debtand was $43.4 billion, an increase of $0.9 billion compared with $42.5 billion as of December 31, 2025.Ajax. See Note 74 to the consolidated condensed financial statements for additional information.

As of MarchJune 31,30, 2026, we had a total of $10.1 billion of unused committed bank credit facilities, $10.0 billion of which is available to support our commercial paper program. See Note 7 to the consolidated condensed financial statements for additional information. We believe that amounts accessible through existing commercial paper markets or other sources should be adequate to fund short-term borrowing needs.

During the threesix months ended MarchJune 31,30, 2026, we repurchased $2.3$4.0 billion of shares under our $15.0 billion share repurchase program authorized in December 2024. As of MarchJune 31,30, 2026, we had $8.6$7.0 billion remaining under this program.

During the threesix months ended MarchJune 31,30, 2026, we paid dividends of $1.5$3.1 billion, or $1.73$3.46 per share, to our shareholders.