What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-21 · 416 added, 424 removed, 1339 unchanged (39% of the section changed)

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Year Ended December 31,

2024 2023 2022

Revenue (Note 2) $ 45,042.7 $ 34,124.1 $ 28,541.4

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See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions) Year Ended December 31 2023 2022 2021

(Dollars in millions)

Year Ended December 31,

2024 2023 2022

Net income $ 10,590.0 $ 5,240.4 $ 6,244.8

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ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions, shares in thousands) December 31 2023 2022

(Dollars in millions, shares in thousands)

Current Assets

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Consolidated Statements of Shareholders' Equity

Equity of Eli Lilly and Company Shareholders

ELI LILLY AND COMPANY AND SUBSIDIARIES

Equity of Eli Lilly and Company Shareholders

(Dollars in millions, except per-share data, and shares in thousands) Common Stock Additional

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954,116 $ 596.3 $ 6,833.4 $ 8,958.5 $ ( 3,013.2 ) $ ( 4,343.1 ) 463 $ ( 52.7 ) $ 175.6

Net income 5,581.7 3.4

Net income (loss) 6,244.8 ( 20.9 )

Other comprehensive income, net of tax 498.5

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950,632 594.1 6,921.4 10,042.6 ( 3,013.2 ) ( 3,844.6 ) 450 ( 50.5 ) 125.6

Net income (loss) 6,244.8 ( 20.9 )

Other comprehensive income, net of tax 498.5

Net income 5,240.4 11.0

Other comprehensive loss, net of tax ( 482.4 )

Cash dividends declared per share:

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949,781 593.6 7,250.4 10,312.3 ( 3,013.2 ) ( 4,327.0 ) 402 ( 44.2 ) 91.8

Net income 5,240.4 11.0

Other comprehensive loss, net of tax ( 482.4 )

Net income (loss) 10,590.0 ( 6.0 )

Other comprehensive income, net of tax 5.1

Cash dividends declared per share:

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ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions) Year Ended December 31 2023 2022 2021

(Dollars in millions)

Year Ended December 31,

2024 2023 2022

Cash Flows from Operating Activities

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Depreciation and amortization 1,766.6 1,527.3 1,522.5

Debt extinguishment loss (Note 11) — — 405.2

Change in deferred income taxes ( 2,683.1 ) ( 2,341.0 ) ( 2,185.2 )

Stock-based compensation expense 645.6 628.5 371.1

Net investment (gains) losses 23.5 420.0 ( 178.0 )

Investment (gains) losses, net

49.8 23.5 420.0

Gains on sale of product rights ( 223.8 ) ( 1,878.9 ) ( 156.5 )

Acquired in-process research and development (Note 3) 3,799.8 908.5 970.1

Acquired in-process research and development 3,280.4 3,799.8 908.5

Other operating activities, net 777.4 295.5 461.3

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Inventories—(increase) decrease ( 2,507.4 ) ( 1,425.0 ) ( 599.7 )

Other assets—(increase) decrease ( 3,453.4 ) ( 793.5 ) 1,515.4

Prepaid expenses and other assets—(increase) decrease

( 3,331.2 ) ( 3,453.4 ) ( 793.5 )

Accounts payable and other liabilities—increase (decrease) 2,608.8 4,274.4 1,692.0

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Purchases of in-process research and development ( 3,345.8 ) ( 3,944.5 ) ( 1,131.0 )

Cash paid for acquisitions, net of cash acquired (Note 3) ( 1,044.3 ) ( 327.2 ) ( 747.4 )

Cash paid for acquisitions, net of cash acquired ( 947.7 ) ( 1,044.3 ) ( 327.2 )

Other investing activities, net ( 298.2 ) ( 191.9 ) ( 302.2 )

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A global research and development organization and a supply chain organization are responsible for the discovery, development, manufacturing, and supply of our products.

Regional commercial organizations market, distribute, and sell the products.

Our commercial organizations market, distribute, and sell the products.

The business is also supported by global corporate staff functions.

Our determination that we operate as a single segment is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.

See Note 19 for additional information.

Research and Development Expenses and Acquired In-Process Research and Development (IPR&D)

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Earnings Per Share (EPS)

All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis.

All per-share amounts, unless otherwise stated in the notes to the consolidated financial statements, are presented on a diluted basis.

We calculate basic EPS based on the weighted-average number of common shares outstanding plus the effect of incremental shares from potential participating securities.

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Costs associated with advertising are expensed as incurred and are included in marketing, selling, and administrative expenses.

Advertising expenses, comprised primarily of online marketing and television advertising, totaled $ 1.12 billion, $ 966.8 million, and $ 1.24 billion in 2023, 2022, and 2021, respectively, which was less than 5 percent of revenue each year.

Global advertising expenses, comprised primarily of online marketing and television advertising, totaled $ 1.44 billion, $ 1.12 billion, and $ 966.8 million in 2024, 2023, and 2022, respectively, which were less than 5 percent of revenue each year.

Other Significant Accounting Policies

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Certain reclassifications have been made to prior periods in the consolidated financial statements and accompanying notes to conform with the current presentation.

Development milestone payments related to externally developed IPR&D projects, acquired directly in a transaction other than a business combination, were previously included in cash flows from operating activities in the consolidated statements of cash flows and are now included in purchases of IPR&D in cash flows from investing activities.

The reclassification resulted in an increase to net cash provided by operating activities and net cash used in investing activities of $ 501.3 million and $ 105.2 million in 2022 and 2021, respectively.

Implementation of New Financial Accounting Standards

Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Effective January 1, 2024, we adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosures about significant segment expenses and additional interim disclosure requirements.

This standard also requires a single reportable segment company to provide all disclosures required by Topic 280.

See Note 19 for the segment disclosures as required by Topic 280, as amended by ASU 2023-07.

ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid.

This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively.

Early adoption is permitted.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ended December 31, 2025.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025.

We are currently evaluating the potential impact of adopting this standard on our disclosures.

ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, requires disclosures about significant segment expenses and additional interim disclosure requirements.

This standard also requires a single reportable segment to provide all disclosures required by ASC 280.

This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted, and the amendments should be applied retrospectively for all prior periods presented in the consolidated financial statements.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ended December 31, 2024.

ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, requires disaggregation of specific expense categories in the notes to the financial statements and a qualitative description of the remaining expense amounts not separately disaggregated.

This standard is effective for annual reporting periods beginning after December 15, 2026, and requires prospective application with the option to apply it retrospectively.

We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2027.

We are currently evaluating the potential impact of adopting this standard on our disclosures.

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Collaboration and other revenue 4,294.8 5,310.2 3,078.6

5,310.2 3,078.6 2,360.5

Revenue $ 45,042.7 $ 34,124.1 $ 28,541.4

(1) Collaboration and other revenue associated with prior period transfers of intellectual property was $ 191.6 million, $ 163.4 million, and $ 175.0 million during the years ended December 31, 2023, 2022, and 2021, respectively.

We recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and other arrangements.

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See Note 4 for additional information related to our collaborations and other arrangements.

Collaboration and other revenue disclosed above includes the revenue from the Jardiance ® and Trajenta ® families of products resulting from our collaboration with Boehringer Ingelheim, as well as from the sales of rights for the olanzapine portfolio, including Zyprexa ® , and for Baqsimi ® , all of which are discussed in Note 4.

Collaboration and other revenue disclosed above includes the revenue resulting from our collaboration with Boehringer Ingelheim, as well as from the 2023 sales of rights for the olanzapine portfolio, including Zyprexa, and for Baqsimi, all of which are discussed in Note 4.

Substantially all of the remainder of collaboration and other revenue is related to contracts accounted for as contracts with customers.

Collaboration and other revenue associated with intellectual property licensed in prior periods was not material for the years ended December 31, 2024, 2023, and 2022.

Net Product Revenue

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sales returns, rebates, and discounts liability balances for products shipped in previous periods were less than 3 percent of U.S.

revenue during the year ended December 31, 2024, and less than 1 percent of U.S.

revenue during each of the years ended December 31, 2023 and 2022.

Collaboration and Other Arrangements

We recognize several types of revenue from our collaborations and other arrangements, which we discuss in general terms immediately below and more specifically in Note 4 for each of our material collaborations and other arrangements.

Our collaborations and other arrangements are evaluated to determine if the arrangements in their entirety, or contain aspects that, are contracts with customers.

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Changes in contract liabilities are generally due to either receipt of additional advance payments or our performance under the contract.

The following table summarizes contract liability balances:

The following table summarizes contract liability balances at December 31:

Contract liabilities $ 166.3 $ 193.6

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2024 2023 2022 2024 2023 2022

Diabetes and obesity:

$ 5,433.3 $ 5,688.8 $ 4,914.4 $ 1,699.2 $ 1,750.9 $ 1,557.6

4,834.2 366.6 — 328.9 115.9 —

Cardiometabolic Health:

Mounjaro $ 8,949.9 $ 4,834.2 $ 366.6 $ 2,590.2 $ 328.9 $ 115.9

Trulicity 3,693.8 5,433.3 5,688.8 1,559.7 1,699.2 1,750.9

Zepbound 4,925.7 175.8 — — — —

Jardiance (1)

1,597.5 1,600.4 1,194.5 1,743.4 1,144.2 871.5

Humalog ® (2)

1,502.6 863.2 1,191.9 822.2 800.2 868.7

610.1 730.2 832.9 242.0 289.2 389.6

Basaglar ® (3)

443.1 470.7 588.3 285.2 289.7 304.2

645.7 110.4 96.4 31.9 28.9 16.8

175.8 — — — — —

Other diabetes and obesity 175.0 158.0 159.3 355.2 338.9 384.8

Total diabetes and obesity 14,780.8 9,911.1 8,719.3 4,886.8 4,553.7 4,468.8

2,509.0 1,653.2 834.9 1,354.3 830.3 515.0

402.3 351.4 358.1 572.4 620.0 674.8

528.9 500.1 481.8 67.6 66.4 66.4

Humulin 643.4 610.1 730.2 273.7 242.0 289.2

375.4 443.1 470.7 301.5 285.2 289.7

2.5 645.7 110.4 26.7 31.9 28.9

Other cardiometabolic health 159.6 175.0 158.0 353.1 355.2 338.9

Total cardiometabolic health 21,850.4 14,780.8 9,911.1 7,670.5 4,886.8 4,553.7

Verzenio 3,420.6 2,509.0 1,653.2 1,886.0 1,354.3 830.3

Cyramza 442.2 402.3 351.4 531.0 572.4 620.0

Erbitux 562.1 528.9 500.1 65.3 67.6 66.4

Tyvyt — — — 526.0 393.4 293.3

Other oncology 610.9 356.8 713.4 708.3 473.6 638.1

Total oncology 5,035.8 3,797.0 3,218.1 3,716.6 2,861.3 2,448.1

1,831.6 1,724.6 1,542.4 928.0 757.4 670.4

Olumiant ® (4)

Taltz 2,152.3 1,831.6 1,724.6 1,108.1 928.0 757.4

228.7 225.5 148.2 728.7 697.2 682.3

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Neuroscience:

79.4 30.4 39.6 1,615.4 306.5 390.7

Emgality 559.7 482.2 462.8 310.7 196.0 188.1

2.0 79.4 30.4 114.3 1,615.4 306.5

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Total neuroscience 779.9 696.0 612.4 693.5 2,182.5 933.8

335.5 367.3 441.6 197.7 245.8 360.3

26.1 35.2 10.6 355.3 552.1 707.9

COVID-19 antibodies (6)

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(4) Olumiant revenue includes sales for baricitinib that were made pursuant to Emergency Use Authorization (EUA) or similar regulatory authorizations.

(5) Zyprexa revenue includes sale of the rights for the olanzapine portfolio.

(5) Zyprexa revenue includes sale of rights for the olanzapine portfolio in July 2023.

(6) COVID-19 antibodies include sales for bamlanivimab administered alone, for bamlanivimab and etesevimab administered together, and for bebtelovimab and were made pursuant to EUAs or similar regulatory authorizations.

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China 1,660.4 1,539.7 1,452.8

Other foreign countries 2,946.2 2,852.0 2,702.2

Rest of world 4,271.4 2,946.2 2,852.0

Revenue $ 45,042.7 $ 34,124.1 $ 28,541.4

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In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the development process.

In December 2023, December 2022, and January 2021, we completed the acquisitions of POINT Biopharma Global Inc.

(POINT), Akouos, Inc.

(Akouos), and Prevail Therapeutics Inc.

(Prevail), respectively.

These transactions, as further discussed below in Acquisitions of Businesses, were accounted for as business combinations under the acquisition method of accounting.

Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated financial statements.

We account for each arrangement as either a business combination or an asset acquisition in accordance with GAAP.

Business Combinations

When an acquisition met the definition of a business under GAAP, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated financial statements.

The determination of estimated fair value required management to make significant estimates and assumptions.

The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill.

The results of operations of these acquisitions have been included in our consolidated financial statements from the date of acquisition.

We also acquired assets in development in 2023, 2022, and 2021, which are further discussed below in Asset Acquisitions.

Upon each acquisition, the cost allocated to acquired IPR&D was immediately expensed as acquired IPR&D if the compound has no alternative future use.

Milestone payment obligations incurred prior to regulatory approval of the compound are expensed when the event triggering an obligation to pay the milestone occurs.

We recognized acquired IPR&D charges of $ 3.80 billion, $ 908.5 million, and $ 970.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Acquisitions of Businesses

The excess of the purchase price over the fair value of the acquired net assets was recorded as goodwill.

The results of operations of the acquisition are included in our consolidated financial statements from the date of acquisition.

Manufacturing Facility Acquisition

Overview of Transaction

In May 2024, we acquired all outstanding membership interests of NexPharm Parent HoldCo, LLC and Isopro Holdings, LLC, which together own the assets of a manufacturing site in Wisconsin, for a purchase price of $ 924.7 million, net of cash acquired.

The facility is intended to further expand our global parenteral (injectable) product manufacturing network.

Assets Acquired and Liabilities Assumed

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

Estimated Fair Value at May 23, 2024

Property and equipment 108.5

Other assets and liabilities, net ( 0.3 )

Acquisition date fair value of consideration transferred 927.0

Cash acquired ( 2.3 )

Cash paid, net of cash acquired $ 924.7

(1) The goodwill recognized from this acquisition is primarily attributable to the synergies between the manufacturing capabilities of the site and our products as well as the assembled workforce of the site, which is deductible for tax purposes.

The results of operations attributable to this acquisition for the year ended December 31, 2024 were not material.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the year ended December 31, 2024.

POINT Acquisition

Overview of Transaction

In December 2023, we acquired all shares of POINT for a purchase price of $ 12.50 per share in cash (or an aggregate of $ 1.04 billion, net of cash acquired).

Under the terms of the agreement, we acquired capabilities to advance our radiopharmaceutical discovery, development, and manufacturing efforts, as well as clinical and pre-clinical radioligand therapies in development for the treatment of cancer.

In December 2023, we acquired all shares of POINT Biopharma Global Inc.

(POINT) for a purchase price of $ 12.50 per share in cash (or an aggregate of $ 1.04 billion, net of cash acquired).

POINT has capabilities in radiopharmaceutical discovery, development, and manufacturing efforts, as well as clinical and pre-clinical radioligand therapies in development for the treatment of cancer.

Assets Acquired and Liabilities Assumed

Our access to POINT information was limited prior to the acquisition.

As a consequence, we are in the process of determining fair values and tax bases of a significant portion of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets and tax exposures.

The final determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date.

The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.

The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

Estimated Fair Value at December 27, 2023

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Cash paid, net of cash acquired $ 1,035.8

(1) The goodwill recognized from this acquisition is attributable primarily to the radiopharmaceutical discovery, development, and manufacturing capabilities and the assembled workforce for POINT, which is not deductible for tax purposes.

The results of operations attributable to POINT for the year ended December 31, 2023 were immaterial.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 2023 and 2022.

(1) The goodwill recognized from this acquisition is primarily attributable to the radiopharmaceutical discovery, development, and manufacturing capabilities and the assembled workforce for POINT, which is not deductible for tax purposes.

The results of operations attributable to POINT for the years ended December 31, 2024 and 2023 were not material.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the year ended December 31, 2023.

Akouos Acquisition

Overview of Transaction

In December 2022, we acquired all shares of Akouos for a purchase price that included $ 12.50 per share in cash (or an aggregate of $ 327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share.

In December 2022, we acquired all shares of Akouos, Inc.

(Akouos) for a purchase price that included $ 12.50 per share in cash (or an aggregate of $ 327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share.

The CVR entitles the Akouos shareholders up to an additional $ 3.00 per share in cash (or an aggregate of approximately $ 122 million) payable, subject to certain terms and conditions, upon the achievement of certain specified milestones prior to December 2028.

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(1) Acquired IPR&D intangibles primarily relate to GJB2.

(2) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax purposes.

(3) See Note 7 for a discussion on the estimation of the CVR liability.

The results of operations attributable to Akouos for the year ended December 31, 2023 and 2022 were immaterial.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the years ended December 31, 2022 and 2021.

Prevail Acquisition

Overview of Transaction

In January 2021, we acquired all shares of Prevail for a purchase price that included $ 22.50 per share in cash (or an aggregate of $ 747.4 million, net of cash acquired) plus one non-tradable CVR per share.

The CVR entitles Prevail stockholders up to an additional $ 4.00 per share in cash (or an aggregate of approximately $ 160 million) payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail product in one of the following countries:

U.S., Japan, United Kingdom, Germany, France, Italy, or Spain.

To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024.

If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire without payment.

Under the terms of the agreement, we acquired potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases.

The acquisition established a new modality for drug discovery and development, extending our research efforts through the creation of a gene therapy program that is being anchored by Prevail's portfolio of assets.

The lead gene therapies in clinical development that we acquired were PR001 (GBA1 Gene Therapy) for patients with Parkinson's disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations.

Both PR001 and PR006 were granted Fast Track designation from the U.S.

Food and Drug Administration.

Assets Acquired and Liabilities Assumed

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

Estimated Fair Value at January 22, 2021

Acquired IPR&D (1)

Deferred tax liabilities ( 106.0 )

Other assets and liabilities, net ( 31.5 )

Acquisition date fair value of consideration transferred 903.8

Cash acquired ( 90.5 )

Fair value of CVR liability (3)

Cash paid, net of cash acquired $ 747.4

(1) Acquired IPR&D intangibles primarily relate to PR001 (GBA1 Gene Therapy).

In 2022, we impaired the intangible asset related to GBA1 Gene Therapy.

See Note 5 for additional information.

(2) The goodwill recognized from this acquisition is not deductible for tax purposes.

(2) The goodwill recognized from this acquisition is primarily attributable to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax purposes.

(3) See Note 7 for a discussion on the estimation of the CVR liability.

The results of operations attributable to Prevail for the years ended December 31, 2023, 2022, and 2021 were immaterial.

The results of operations attributable to Akouos for the years ended December 31, 2024, 2023 and 2022 were not material.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated statements of operations for the year ended December 31, 2022.

Asset Acquisitions

Upon each asset acquisition, the cost allocated to acquired IPR&D was immediately expensed as acquired IPR&D if the compound has no alternative future use.

Milestone payment obligations incurred prior to regulatory approval of the compound were expensed when the event triggering an obligation to pay the milestone occurred.

We recognized acquired IPR&D charges of $ 3.28 billion, $ 3.80 billion, and $ 908.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The following table summarizes our significant asset acquisitions during 2024, 2023, and 2022.

Counterparty Compound(s),Therapy, or Asset Acquisition Month Phase of Development (1)

Acquired IPR&D Expense

Mablink Biosciences SAS MBK-103, a folate receptor alpha antibody drug conjugate for the treatment of ovarian cancer

December 2023 Pre-clinical $ 256.6

Counterparty Compound, Therapy, or Asset

Acquisition Month Phase of Development (1)

Acquired IPR&D Charge

Morphic Holding, Inc.

MORF-057, inhibitor of α4β7 integrin for the treatment of inflammatory bowel disease August 2024 Phase 2 $ 2,548.5

Mablink Biosciences SAS MBK-103, a folate receptor alpha antibody drug conjugate for the treatment of ovarian cancer December 2023 Pre-clinical 256.6

Beam Therapeutics Inc.

Opt-in right for programs targeting PCSK9, ANGPTL3 and an undisclosed liver-mediated, cardiovascular target October 2023 Phase I 216.3

Opt-in right for programs targeting PCSK9, ANGPTL3 and an undisclosed liver-mediated, cardiovascular target October 2023 Phase 1 216.3

DICE Therapeutics, Inc.

DC-806, an oral IL-17 inhibitor for the treatment of chronic diseases in immunology August 2023 Phase II 1,915.5

(DICE) DC-806, an oral IL-17 inhibitor for the treatment of chronic diseases in immunology (2)

August 2023 Phase 2 1,915.5

Versanis Bio, Inc.

Bimagrumab, a monoclonal antibody for the treatment of people living with obesity and obesity-related complications August 2023 Phase II 604.1

Emergence Therapeutics AG ETx-22, a Nectin-4 antibody-drug conjugate for the treatment of urothelial cancer August 2023 Pre-clinical 406.5

(Versanis) Bimagrumab, a monoclonal antibody for the treatment of people living with obesity and obesity-related complications August 2023 Phase 2 604.1

Emergence Therapeutics AG (Emergence)

ETx-22, a Nectin-4 antibody-drug conjugate for the treatment of urothelial cancer August 2023 Pre-clinical 406.5

BioMarin Pharmaceutical Inc.

Priority Review Voucher February 2022 Not applicable 110.0

Foghorn Therapeutics Inc.

Pre-clinical targets that could lead to potential new oncology medicines December 2021 Pre-clinical 316.6

Rigel Pharmaceuticals, Inc.

R552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for the potential treatment of autoimmune and inflammatory diseases March 2021 Phase I 125.0

Precision Biosciences, Inc.

Potential in vivo therapies for genetic disorders January 2021 Pre-clinical 107.8

(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired, where applicable.

(2) In 2024, we discontinued development of this molecule in favor of another molecule in development.

In connection with our acquisition of Petra Pharma Corporation (Petra) in 2020, we were required to make milestone payments to Petra shareholders contingent upon the occurrence of certain future events linked to the success of the mutant-selective PI3Kα inhibitor.

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Each arrangement is unique in nature, and our more significant arrangements are discussed below.

Boehringer Ingelheim Diabetes Collaboration

We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of diabetes compounds.

Currently included in the collaboration are Boehringer Ingelheim's oral diabetes products:

Jardiance, Glyxambi, Synjardy, Trijardy XR, Trajenta, and Jentadueto ® as well as our basal insulins, Basaglar and Rezvoglar.

Boehringer Ingelheim Collaboration

We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of compounds.

Significant product families included in the collaboration are Boehringer Ingelheim's Jardiance product family and our Basaglar product family.

Glyxambi, Synjardy, and Trijardy XR are included in the Jardiance product family.

Jentadueto is included in the Trajenta product family.

Rezvoglar is included in the Basaglar product family.

In connection with the regulatory approvals of Jardiance, Trajenta, and Basaglar in the U.S., Europe, and Japan, milestone payments made for Jardiance and Trajenta were capitalized as intangible assets and are being amortized to cost of sales, and milestone payments received for Basaglar were recorded as contract liabilities and are being amortized to collaboration and other revenue.

Net milestones capitalized with respect to Jardiance and Trajenta and net milestones deferred with respect to Basaglar are not material.

For the Jardiance product family, we and Boehringer Ingelheim generally share equally the ongoing development and commercialization costs in the most significant markets, and we record our portion of the development and commercialization costs as research and development expense and marketing, selling, and administrative expense, respectively.

We receive a royalty on net sales of Boehringer Ingelheim's products in the most significant markets and recognize the royalty as collaboration and other revenue.

We receive a royalty on net sales of the Jardiance product family in the most significant markets and recognize the royalty as collaboration and other revenue.

Boehringer Ingelheim is entitled to potential performance payments depending on the net sales of the Jardiance product family;

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Basaglar 676.9 728.3 760.4

Trajenta 386.9 383.7 372.5

2024 revenue from Jardiance included a one-time payment received of $ 300.0 million associated with an amendment to our collaboration with Boehringer Ingelheim.

Pursuant to the amendment, we and Boehringer Ingelheim adjusted commercialization responsibilities for Jardiance within certain smaller markets.

We have a worldwide license and collaboration agreement with Incyte Corporation (Incyte), which provides us the development and commercialization rights to baricitinib, which is branded and trademarked as Olumiant, and certain follow-on compounds, for the treatment of inflammatory and autoimmune diseases and COVID-19.

1 unchanged sentence

Incyte has the right to receive an additional royalty ranging up to the low teens on worldwide net sales for the treatment of COVID-19 that exceed a specified aggregate worldwide net sales threshold.

The agreement calls for payments by us to Incyte associated with certain development, success-based regulatory, and sales-based milestones.

In connection with the regulatory approvals of Olumiant in the U.S., Europe, and Japan, as well as achievement of a sales-based milestone, milestone payments were capitalized as intangible assets and are being amortized to cost of sales through the term of the collaboration.

Net milestones capitalized are not material.

As of December 31, 2023, Incyte is eligible to receive up to $ 100.0 million of additional payments from us in potential sales-based milestones.

We record our sales of Olumiant, including sales of baricitinib that were made pursuant to EUA or similar regulatory authorizations, to third parties as net product revenue with the royalty payments made to Incyte recorded as cost of sales.

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Roche receives tiered royalty payments on worldwide net sales ranging in percentages from high single digits to high teens, which we recognize as cost of sales.

As of December 31, 2023, Roche is eligible to receive additional payments from us, including up to $ 115.0 million contingent upon the achievement of additional success-based regulatory milestones and up to $ 1.03 billion in potential sales-based milestones.

As of December 31, 2024, Roche is eligible to receive additional payments from us, including up to $ 1.03 billion in potential sales-based milestones.

During the years ended December 31, 2024, 2023, and 2022, milestone payments to Roche were not material.

There were no milestone payments to Roche during the year ended December 31, 2021.

We have a license agreement with Almirall, S.A.

(Almirall), under which Almirall licensed the rights to develop and commercialize lebrikizumab for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis in Europe.

(Almirall), under which Almirall licensed the rights to develop and commercialize Ebglyss for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis in Europe.

We receive tiered royalty payments on net sales in Europe ranging in percentages from low double digits to low twenties, which we recognize as collaboration and other revenue.

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AbCellera received royalty payments, recorded as cost of sales, in the mid-teens to mid-twenties on worldwide net sales of bamlanivimab and bebtelovimab.

Pursuant to EUAs or similar regulatory authorizations, we recognized net product revenue associated with our sales of our COVID-19 antibodies of $ 2.02 billion and $ 2.24 billion during the years ended December 31, 2022 and 2021, respectively.

We had no sales of our COVID-19 antibodies during the year ended December 31, 2023.

Pursuant to EUAs or similar regulatory authorizations, we recognized net product revenue associated with our sales of our COVID-19 antibodies of $ 2.02 billion during 2022.

We had no sales of our COVID-19 antibodies during the years ended December 31, 2024 and 2023.

Olanzapine Portfolio (including Zyprexa)

In July 2023, we sold the rights for the olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel GmbH (Cheplapharm), a European company.

Under the terms of the agreement, we received $ 1.05 billion in cash and will receive an additional $ 305.0 million in cash upon the one year anniversary of closing.

We included both in the transaction price as of December 31, 2023.

We are eligible to receive milestone payments of up to $ 50.0 million, of which $ 25.0 million has not been included in the transaction price as of December 31, 2023.

Under the terms of the agreement, we received $ 1.05 billion in cash in 2023 and an additional $ 305.0 million in cash in 2024.

We included both in the transaction price in 2023.

We entered into a supply agreement with Cheplapharm that obligates Cheplapharm to purchase Zyprexa product we are manufacturing at an amount which represents a standalone selling price.

2 unchanged sentences

In June 2023, we sold the rights for Baqsimi to Amphastar Pharmaceuticals, Inc.

Under the terms of the agreement, we received $ 500.0 million in cash and will receive an additional $ 125.0 million in cash upon the one year anniversary of closing.

We included both in the transaction price as of December 31, 2023.

Under the terms of the agreement, we received $ 500.0 million in cash in 2023 and an additional $ 125.0 million in cash in 2024.

We included both in the transaction price in 2023.

We are eligible to receive payments of up to $ 450.0 million in a series of sales-based milestones, that have not been included in the transaction price as of December 31, 2024.

3 unchanged sentences

Asset Impairment, Restructuring, and Other Special Charges

The components of the charges included in asset impairment, restructuring, and other special charges in our consolidated statements of operations are described below:

2023 2022 2021

Asset impairment and other special charges $ 22.2 $ 221.6 $ 303.1

Severance 45.5 23.0 13.0

Total asset impairment, restructuring, and other special charges $ 67.7 $ 244.6 $ 316.1

Asset impairment, restructuring, and other special charges recognized during the year ended December 31, 2022 were primarily related to an intangible asset impairment for GBA1 Gene Therapy, acquired in the Prevail acquisition, as a result of changes in key assumptions used in the valuation due to delays in estimated launch timing.

During the year ended December 31, 2021, we recognized $ 128.0 million of intangible asset impairment as a result of the decision by Bayer AG to discontinue the development of a Phase I molecule related to a contract-based intangible asset from our acquisition of Loxo Oncology, Inc.

Additionally, we recognized $ 108.1 million of intangible asset impairment from the sale of the rights to Qbrexza ® , as well as acquisition and integration costs associated with the acquisition of Prevail.

Asset impairment, restructuring, and other special charges were $ 860.6 million, $ 67.7 million, and $ 244.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Asset impairment, restructuring, and other special charges recognized during the year ended December 31, 2024 were primarily related to a $ 435.0 million litigation charge and an intangible asset impairment for Vitrakvi, driven by expected commercial projections.

See Note 16 for additional information related to the litigation charge.

Asset impairment, restructuring, and other special charges recognized during the year ended December 31, 2022 were primarily related to an intangible asset impairment driven by delays in estimated launch timing.

We use the last-in, first-out (LIFO) method for the majority of our inventories located in the continental U.S.

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Inventories valued under the LIFO method comprised $ 2.70 billion and $ 1.77 billion of total inventories at December 31, 2024 and 2023, respectively.

We recognized a net inventory impairment charge related to our COVID-19 antibodies of $ 339.7 million during the year ended December 31, 2021 in cost of sales in our consolidated statements of operations primarily due to the combination of changes to demand from U.S.

and international governments, including changes to our agreement with the U.S.

government, and near-term expiry dates of COVID-19 antibodies.

When we believe that future commercialization is probable and the future economic benefit is expected to be realized, we capitalize pre-launch inventory prior to regulatory approval.

A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, viability of commercialization, and marketplace trends.

Pre-launch inventory capitalized as of December 31, 2024 was $ 548.1 million, primarily related to orforglipron.

Financial Instruments

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Adjustments recorded for the years ended December 31, 2024, 2023, and 2022 were not material.

The net gains (losses) recognized in our consolidated statements of operations for equity securities were $( 20.2 ) million, $( 410.7 ) million, and $ 176.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The net losses recognized in our consolidated statements of operations for equity securities were $ 49.5 million, $ 20.2 million, and $ 410.7 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The net gains (losses) recognized for the years ended December 31, 2024, 2023, and 2022 on equity securities sold during the respective periods were not material.

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We periodically assess our investment in available-for-sale securities for impairment losses and credit losses.

The amount of credit losses are determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost.

The amount of credit losses is determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost.

Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration.

11 unchanged sentences

As of December 31, 2024, the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions.

Approximately 99 percent of the fixed-rate debt securities in a loss position are investment-grade debt securities.

Substantially all of the fixed-rate debt securities in a loss position are investment-grade debt securities.

As of December 31, 2024, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of a material default on interest or principal payments for our debt securities.

Activity related to our available-for-sale securities was as follows:

2023 2022 2021

Proceeds from sales $ 145.6 $ 132.9 $ 174.7

Realized gross gains on sales 0.7 0.4 2.8

Realized gross losses on sales 4.0 9.7 1.7

Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings.

Proceeds from sales of available-for-sale investments were $ 98.0 million, $ 145.6 million, and $ 132.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Fair Value of Investments

12 unchanged sentences

Corporate debt securities 65.3 65.4 — 65.3 — 65.3

Asset-backed securities 0.6 0.7 — 0.6 — 0.6

Other securities 59.7 59.7 — 16.7 43.0 59.7

16 unchanged sentences

Corporate debt securities 52.0 52.1 — 52.0 — 52.0

Asset-backed securities 2.0 2.0 — 2.0 — 2.0

Other securities 25.0 25.0 — 13.6 11.4 25.0

18 unchanged sentences

Fair Value of Debt

The following table summarizes certain fair value information at December 31, 2023 and 2022 for our short-term and long-term debt:

The following table summarizes certain fair value information for our short-term and long-term debt:

Fair Value Measurements Using

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Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments.

Wholesale distributors of life science products account for a substantial portion of our trade receivables;

Wholesale distributors of our products account for a substantial portion of our trade receivables;

collateral is generally not required.

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These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over, and risk related to, the receivables to the buyers.

Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold.

We derecognized $ 421.6 million and $ 431.9 million of accounts receivable as of December 31, 2024 and 2023, respectively, under these factoring arrangements.

The costs of factoring such accounts receivable were not material for the years ended December 31, 2023, 2022, and 2021.

The costs of factoring such accounts receivable as well as estimated credit losses were not material for the years ended December 31, 2024, 2023, and 2022.

Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and are intended to offset losses and gains on the assets, liabilities, and transactions being hedged.

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Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized in earnings during the period of change.

We may enter into foreign currency forward or option contracts to reduce the effect of fluctuating currency exchange rates (primarily the euro, Chinese yuan, and Japanese yen).

Foreign currency exchange risk is managed through the use of foreign currency debt, cross-currency interest rate swaps, and foreign currency forward contracts.

Our foreign currency-denominated notes had carrying amounts of $ 6.03 billion and $ 7.14 billion as of December 31, 2024 and 2023, respectively, of which $ 5.34 billion and $ 5.67 billion have been designated as, and are effective as, hedges of net investments in certain of our foreign operations as of December 31, 2024 and 2023, respectively.

At December 31, 2024, we had outstanding cross-currency interest rate swaps with notional amounts of $ 218.0 million swapping U.S.

dollars to euro and 402.0 million Swiss francs swapping to U.S.

dollars, with settlement dates ranging through 2028.

Our cross-currency interest rate swaps have been designated as, and are effective as, net investment and cash flow hedges, respectively.

At December 31, 2024, we had outstanding foreign currency forward contracts to sell 7.59 billion euro and to sell 4.20 billion Chinese yuan, with settlement dates ranging through 2025, which have been designated as, and are effective as, hedges of net investments.

We may also enter into foreign currency forward or option contracts as economic hedges to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies (primarily the euro and Japanese yen).

Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures.

Forward and option contracts are principally used to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies.

These contracts are recorded at fair value with the gain or loss recognized in other–net, (income) expense.

Forward contracts generally have maturities not exceeding 12 months.

At December 31, 2023, we had outstanding foreign currency forward commitments as follows, all of which have settlement dates within 180 days:

At December 31, 2024, our significant outstanding foreign currency forward commitments were as follows, all of which have settlement dates within 180 days:

December 31, 2024

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(in millions)

dollars 4,779.4 Euro 4,352.2

Euro 7,522.1 U.S.

dollars 7,905.8

British pounds 237.7 U.S.

dollars 7,095.3 Euro 6,803.9

dollars 468.3 Japanese yen 72,355.7

Japanese yen 49,713.2 U.S.

dollars 316.1

dollars 165.3 Chinese yuan 1,172.7

Foreign currency exchange risk is also managed through the use of foreign currency debt, cross-currency interest rate swaps, and foreign currency forward contracts.

Our foreign currency-denominated notes had carrying amounts of $ 7.14 billion and $ 6.83 billion as of December 31, 2023 and 2022, respectively, of which $ 5.67 billion and $ 5.45 billion have been designated as, and are effective as, economic hedges of net investments in certain of our foreign operations as of December 31, 2023 and 2022, respectively.

At December 31, 2023, we had outstanding cross currency swaps with notional amounts of $ 728.6 million swapping U.S.

dollars to euro and $ 1.00 billion swapping Swiss francs to U.S.

dollars which have settlement dates ranging through 2028.

Our cross-currency interest rate swaps, for which a majority convert a portion of our U.S.

dollar-denominated fixed-rate debt to foreign-denominated fixed rate debt, have also been designated as, and are effective as, economic hedges of net investments.

At December 31, 2023, we had outstanding foreign currency forward contracts to sell 3.20 billion euro and to sell 1.80 billion Chinese yuan, with settlement dates ranging through 2024, which have been designated as, and are effective as, economic hedges of net investments.

In the normal course of business, our operations are exposed to fluctuations in interest rates which can vary the costs of financing, investing, and operating.

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The change in fair value of these instruments is recorded as part of other comprehensive income (loss) (see Note 17) and, upon completion of a debt issuance and termination of the instrument, is amortized to interest expense over the life of the underlying debt.

As of December 31, 2023, the total notional amounts of forward-starting interest rate and treasury lock contracts in designated cash flow hedging instruments were $ 1.10 billion, which have settlement dates ranging through 2025.

Cash proceeds or payments from the termination of these instruments are classified as operating activities in our consolidated statements of cash flows.

The Effect of Risk Management Instruments on the Consolidated Statements of Operations

20 unchanged sentences

Cross-currency interest rate swaps 24.9 15.2 29.8

During the next 12 months, we expect to reclassify $ 13.0 million of pretax net losses on cash flow hedges from accumulated other comprehensive loss to other–net, (income) expense.

During the years ended December 31, 2024, 2023, and 2022, the amounts excluded from the assessment of hedge effectiveness recognized in other comprehensive income (loss) were not material.

As of December 31, 2024, the amount of pre-tax gains or losses on cash flow hedges expected to be reclassified from accumulated other comprehensive income (loss) to other–net, (income) expense over the next 12 months is not material.

Fair Value of Risk-Management Instruments

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Other noncurrent liabilities ( 117.8 ) — ( 117.8 ) — ( 117.8 )

Interest rate contracts designated as cash flow hedges:

Other noncurrent assets 291.2 — 291.2 — 291.2

Cross-currency interest rate contracts designated as net investment hedges:

Other current liabilities ( 28.4 ) — ( 28.4 ) — ( 28.4 )

Other noncurrent liabilities ( 3.5 ) — ( 3.5 ) — ( 3.5 )

Cross-currency interest rate contracts designated as cash flow hedges:

Other receivables 10.3 — 10.3 — 10.3

Cross-currency interest rate contracts designated as cash flow hedges:

Other noncurrent assets 50.7 — 50.7 — 50.7

Foreign exchange contracts designated as hedging instruments:

Other current liabilities ( 115.8 ) — ( 115.8 ) — ( 115.8 )

Foreign exchange contracts designated as net investment hedges:

Other receivables 297.0 — 297.0 — 297.0

Foreign exchange contracts not designated as hedging instruments:

2 unchanged sentences

Contingent consideration liabilities:

Other current liabilities ( 39.5 ) — — ( 39.5 ) ( 39.5 )

Other noncurrent liabilities ( 32.3 ) — — ( 32.3 ) ( 32.3 )

7 unchanged sentences

Interest rate contracts designated as fair value hedges:

Other current liabilities $ ( 2.4 ) $ — $ ( 2.4 ) $ — $ ( 2.4 )

Other noncurrent liabilities ( 100.3 ) — ( 100.3 ) — ( 100.3 )

Interest rate contracts designated as cash flow hedges:

Other receivables 162.9 — 162.9 — 162.9

Other noncurrent assets

1 unchanged sentence

Cross-currency interest rate contracts designated as net investment hedges:

Other receivables 67.6 — 67.6 — 67.6

Other current liabilities ( 28.4 ) — ( 28.4 ) — ( 28.4 )

Other noncurrent liabilities ( 3.5 ) — ( 3.5 ) — ( 3.5 )

Cross-currency interest rate contracts designated as cash flow hedges:

Other receivables 113.8 — 113.8 — 113.8

Other noncurrent assets 63.1 — 63.1 — 63.1

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If we conclude it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value to its carrying value is performed to determine the amount of any impairment.

The change in goodwill during 2023 was primarily related to our acquisition of POINT.

The change in goodwill during 2024 was primarily related to our acquisition of a manufacturing site in Wisconsin.

See Note 3 for additional information.

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For transactions other than a business combination, we capitalize milestone payments incurred at or after the product has obtained regulatory approval for marketing.

Acquired IPR&D consists of the fair values of acquired IPR&D projects acquired in business combination, adjusted for subsequent impairments, if any.

Acquired IPR&D consists of the fair values of acquired IPR&D projects acquired in business combinations, adjusted for subsequent impairments, if any.

The costs of acquired IPR&D projects acquired directly in a transaction other than a business combination are capitalized as other intangible assets if the projects have an alternative future use;

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The acquired IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are tested for impairment and amortized over the remaining useful life or written off, as appropriate.

The increase in marketed products and the decrease in acquired IPR&D in 2023 primarily relates to the reclassification of our $ 1.03 billion intangible asset for lebrikizumab (Ebglyss) from indefinite-lived to finite-lived as it was approved in Europe in the fourth quarter of 2023.

This decrease in acquired IPR&D in 2023 was partially offset by acquired IPR&D assets recognized from the acquisition of POINT.

See Note 3 for additional information.

Indefinite-lived intangible assets are reviewed for impairment at least annually, or more frequently if impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the asset is less than its carrying amount.

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Ireland 3,205.0 2,722.6

Other foreign countries 1,784.2 1,625.9

Rest of world 2,158.9 1,784.2

Long-lived assets $ 18,765.4 $ 14,500.0

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Short-term lease expense was not material during the years ended December 31, 2024, 2023, and 2022.

Supplemental balance sheet information related to operating leases as of December 31, 2023 and 2022 was as follows:

Supplemental balance sheet information related to operating leases as of December 31 was as follows:

Operating lease right-of-use assets

$ 1,050.1 $ 1,024.2

Operating lease liabilities, current portion

Operating lease liabilities, noncurrent portion

Weighted-average remaining lease term 9 years 9 years

Weighted-average discount rate 4.6 % 4.4 %

Supplemental cash flow information related to operating leases during the years ended December 31, 2023, 2022, and 2021 was as follows:

Supplemental cash flow information related to operating leases was as follows:

2024 2023 2022

1 unchanged sentence

Right-of-use assets obtained in exchange for new operating lease liabilities 210.0 590.0 155.4

The right-of-use assets obtained in exchange for new operating lease liabilities in 2023 primarily related to the addition of our research and development facility in Boston, Massachusetts.

The annual minimum lease payments of our operating lease liabilities as of December 31, 2024 were as follows:

After 2028 614.7

Total lease payments 1,447.0

15 unchanged sentences

0.15 % Swiss franc denominated notes due 2024

$ 714.6 $ 649.5

7.125 % notes due 2025

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5.5 % notes due 2027

3.1 % notes due 2027

4.150 % notes due 2027

0.45 % Swiss franc denominated notes due 2028

4.500 % notes due 2029

3.375 % notes due 2029

4.200 % notes due 2029

0.42 % Japanese yen denominated notes due 2029

2 unchanged sentences

4.7 % notes due 2033

1,000.0 1,000.0

0.50 % euro denominated notes due 2033

4.700 % notes due 2034

4.600 % notes due 2034

0.56 % Japanese yen denominated notes due 2034

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4.875 % notes due 2053

1,250.0 1,250.0

5.000 % notes due 2054

5.050 % notes due 2054

4.15 % notes due 2059

2.50 % notes due 2060

1.375 % euro denominated notes due 2061

4.95 % notes due 2063

1,000.0 1,000.0

5.100 % notes due 2064

5.200 % notes due 2064

Unamortized note discounts ( 130.7 ) ( 121.2 )

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Compensating balances and commitment fees are not material, and there are no conditions that are probable of occurring under which the lines may be withdrawn.

In February 2025, we issued $ 1.00 billion of 4.550 percent fixed-rate notes due in 2028, $ 1.25 billion of 4.750 percent fixed-rate notes due in 2030, $ 1.00 billion of 4.900 percent fixed-rate notes due in 2032, $ 1.25 billion of 5.100 percent fixed-rate notes due in 2035, $ 1.25 billion of 5.500 percent fixed-rate notes due in 2055, and $ 750.0 million of 5.600 percent fixed-rate notes due in 2065, all with interest to be paid semi-annually.

We expect to use the net cash proceeds from the offering to fund potential business development activities, as well as general business purposes, including the repayment of outstanding commercial paper.

In August 2024, we issued $ 750.0 million of 4.150 percent fixed-rate notes due in 2027, $ 1.00 billion of 4.200 percent fixed-rate notes due in 2029, $ 1.25 billion of 4.600 percent fixed-rate notes due in 2034, $ 1.25 billion of 5.050 percent fixed-rate notes due in 2054, and $ 750.0 million of 5.200 percent fixed-rate notes due in 2064, all with interest to be paid semi-annually.

We used a portion of the net cash proceeds from the offering of $ 4.96 billion to fund the acquisition of Morphic and related fees and expenses, with any remaining funds used for general business purposes, including the repayment of outstanding commercial paper.

In February 2024, we issued $ 1.00 billion of 4.500 percent fixed-rate notes due in 2027, $ 1.00 billion of 4.500 percent fixed-rate notes due in 2029, $ 1.50 billion of 4.700 percent fixed-rate notes due in 2034, $ 1.50 billion of 5.000 percent fixed-rate notes due in 2054, and $ 1.50 billion of 5.100 percent fixed-rate notes due in 2064, all with interest to be paid semi-annually.

We used, or will be using, the net cash proceeds from the offering of $ 6.45 billion for general business purposes, including the repayment of outstanding commercial paper, repayment of current maturities of long-term debt, and repayment of the $ 750.0 million of 5.000 percent fixed-rate notes due in 2026, which are callable at par beginning February 27, 2024.

In February 2023, we issued $ 750.0 million of 5.000 percent fixed-rate notes due in 2026, which are callable at par after one year, $ 1.00 billion of 4.700 percent fixed-rate notes due in 2033, $ 1.25 billion of 4.875 percent fixed-rate notes due in 2053, and $ 1.00 billion of 4.950 percent fixed-rate notes due in 2063, all with interest to be paid semi-annually.

We used, or may be using, the net cash proceeds from the offering of $ 6.45 billion for general business purposes, including the repayment of outstanding commercial paper, repayment of current maturities of long-term debt, and repayment of the $ 750.0 million of 5.000 percent fixed-rate notes due in 2026.

In February 2023, we issued $ 750.0 million of 5.000 percent fixed-rate notes due in 2026, $ 1.00 billion of 4.700 percent fixed-rate notes due in 2033, $ 1.25 billion of 4.875 percent fixed-rate notes due in 2053, and $ 1.00 billion of 4.950 percent fixed-rate notes due in 2063, all with interest to be paid semi-annually.

We used the net cash proceeds from the offering of $ 3.96 billion for general business purposes, including the repayment of outstanding commercial paper.

In September 2021, we issued euro-denominated notes totaling € 1.80 billion and British pound-denominated notes totaling £ 250.0 million.

We paid $ 1.91 billion of the net cash proceeds from the offering to purchase and redeem certain higher interest rate U.S.

dollar-denominated notes with an aggregate principal amount of $ 1.50 billion, resulting in a debt extinguishment loss of $ 405.2 million.

This loss was included in other-net, (income) expense in our consolidated statement of operations for the year ended December 31, 2021.

The aggregate amounts of maturities on long-term debt for the next five years are as follows:

8 unchanged sentences

Stock-Based Compensation

Our stock-based compensation expense consists of performance awards (PAs), shareholder value awards (SVAs), relative value awards (RVAs), and restricted stock units (RSUs).

Our stock-based compensation expense consists of restricted stock units (RSUs), shareholder value awards (SVAs), performance awards (PAs), and relative value awards (RVAs).

We recognize the fair value of stock-based compensation as expense over the requisite service period of the individual grantees, which generally equals the vesting period.

We provide newly issued shares of our common stock and treasury stock to satisfy the issuance of PA, SVA, RVA, and RSU shares.

We provide newly issued shares of our common stock and treasury stock to satisfy the issuance of RSU, SVA, PA, and RVA shares.

Stock-based compensation expense and the related tax benefits were as follows:

3 unchanged sentences

At December 31, 2024, stock-based compensation awards may be granted under the 2002 Lilly Stock Plan for not more than 48.8 million additional shares.

Performance Award Program

PAs are granted to officers and management and are payable in shares of our common stock.

The number of PA shares actually issued, if any, varies depending on the achievement of certain pre-established earnings-per-share targets over a two-year period.

PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement period.

The fair values of PAs granted for the years ended December 31, 2023, 2022, and 2021 were $ 335.86 , $ 234.93 , and $ 198.57 , respectively.

The number of shares ultimately issued for the PA program is dependent upon the EPS achieved during the vesting period.

Pursuant to this program, approximately 0.5 million, 0.7 million, and 0.7 million shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively.

Approximately 0.4 million shares are expected to be issued in 2024.

As of December 31, 2023, the total estimated remaining unrecognized compensation cost related to nonvested PAs was $ 111.6 million, which will be amortized over the weighted-average remaining requisite service period of 12 months.

Restricted Stock Units

RSUs are granted to certain employees and are payable in shares of our common stock.

RSU shares are accounted for at fair value based upon the closing stock price on the date of grant.

The corresponding expense is amortized over the vesting period, typically three years .

The weighted-average fair values of RSU awards granted during the years ended December 31, 2024, 2023, and 2022 were $ 749.74 , $ 339.30 , and $ 239.88 , respectively.

The number of shares ultimately issued for the RSU program remains constant with the number of shares originally granted less forfeitures.

Pursuant to this program, 0.9 million, 1.0 million, and 1.0 million shares were granted and approximately 0.3 million, 0.5 million, and 0.8 million shares were issued during the years ended December 31, 2024, 2023, and 2022, respectively.

We expect to issue approximately 0.5 million shares in 2025.

As of December 31, 2024, the total estimated remaining unrecognized compensation cost related to nonvested RSUs was $ 485.1 million, which will be amortized over the weighted-average remaining requisite service period of 23 months.

Shareholder Value Award Program

13 unchanged sentences

Pursuant to this program, approximately 0.2 million, 0.3 million, and 0.5 million shares were issued during the years ended December 31, 2024, 2023, and 2022, respectively.

Approximately 0.2 million shares are expected to be issued in 2024.

We expect to issue approximately 0.3 million shares in 2025.

As of December 31, 2024, the total estimated remaining unrecognized compensation cost related to nonvested SVAs was $ 61.4 million, which will be amortized over the weighted-average remaining requisite service period of 21 months.

Performance Award Program

PAs were granted to officers and management prior to 2024 and are payable in shares of our common stock.

The number of PA shares actually issued, if any, varied depending on the achievement of certain pre-established earnings-per-share targets over a two-year period.

PA shares were accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement period.

The fair values of PAs granted for the years ended December 31, 2023 and 2022 were, $ 335.86 and $ 234.93 , respectively.

Pursuant to this program, approximately 0.4 million, 0.5 million, and 0.7 million shares were issued during the years ended December 31, 2024, 2023, and 2022, respectively.

We expect to issue approximately 0.6 million shares in 2025.

As of December 31, 2024, there was no remaining unrecognized compensation cost related to PAs, as we discontinued the program.

Relative Value Award Program

12 unchanged sentences

Volatility 27.69 31.25 32.86

Pursuant to this program, approximately 0.1 million shares were issued during the year ended December 31, 2023.

Approximately 0.1 million shares are expected to be issued in 2024.

Pursuant to this program, approximately 0.1 million shares were issued during each of the years ended December 31, 2024 and 2023.

We expect to issue approximately 0.1 million shares in 2025.

As of December 31, 2024, the total estimated remaining unrecognized compensation cost related to nonvested RVAs was $ 27.5 million, which will be amortized over the weighted-average remaining requisite service period of 22 months.

Restricted Stock Units

RSUs are granted to certain employees and are payable in shares of our common stock.

RSU shares are accounted for at fair value based upon the closing stock price on the date of grant.

The corresponding expense is amortized over the vesting period, typically three years .

The weighted-average fair values of RSU awards granted during the years ended December 31, 2023, 2022, and 2021 were $ 339.30 , $ 239.88 , and $ 196.30 , respectively.

The number of shares ultimately issued for the RSU program remains constant with the exception of forfeitures.

Pursuant to this program, 1.0 million, 1.0 million, and 0.7 million shares were granted and approximately 0.5 million, 0.8 million, and 0.6 million shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively.

Approximately 0.4 million shares are expected to be issued in 2024.

As of December 31, 2023, the total estimated remaining unrecognized compensation cost related to nonvested RSUs was $ 275.3 million, which will be amortized over the weighted-average remaining requisite service period of 22 months.

Shareholders' Equity

In 2023, 2022, and 2021, we repurchased $ 750.0 million, $ 1.50 billion, and $ 1.25 billion, respectively, of shares associated with our share repurchase programs.

As of December 31, 2023, we had $ 2.50 billion remaining under our $ 5.00 billion share repurchase program that our board authorized in May 2021.

In 2024, 2023, and 2022, we repurchased $ 2.50 billion, $ 750.0 million, and $ 1.50 billion, respectively, of shares associated with our share repurchase programs.

In 2024, we repurchased $ 2.50 billion of shares, which completed our $ 5.00 billion share repurchase program that our board authorized in May 2021.

Our board authorized a $ 15.00 billion share repurchase program in December 2024.

No shares were repurchased under this new program as of December 31, 2024.

We have 5.0 million authorized shares of preferred stock.

27 unchanged sentences

Correlative tax adjustments 1,604.3 1,031.3

Tax credit carryforwards 577.0 477.6

Tax loss and other tax carryforwards

Tax credit carryforwards 577.0 577.0

Compensation and benefits 565.2 521.4

8 unchanged sentences

Earnings of foreign subsidiaries ( 773.1 ) ( 796.6 )

Inventories ( 619.5 ) ( 639.5 )

Property and equipment ( 495.2 ) ( 433.5 )

Prepaid employee benefits ( 611.0 ) ( 460.6 )

Property and equipment ( 557.6 ) ( 495.2 )

Operating lease assets ( 219.1 ) ( 237.1 )

Financial instruments ( 137.3 ) ( 75.1 )

Inventories ( 58.2 ) ( 619.5 )

Total deferred tax liabilities ( 3,532.7 ) ( 4,022.3 )

5 unchanged sentences

The remaining portion of the tax credit carryforwards is related to federal tax credits of $ 68.0 million, international tax credits of $ 109.4 million, and state tax credits of $ 754.8 million, all of which are fully reserved.

At December 31, 2023, based on filed tax returns we had net operating losses and other carryforwards for international and U.S.

federal income tax purposes of $ 1.35 billion:

$ 284.6 million will expire by 2028;

$ 35.0 million will expire between 2029 and 2043;

and $ 1.03 billion of the carryforwards will never expire.

Net operating losses and other carryforwards for U.S.

federal income tax purposes are partially reserved.

At December 31, 2024, based on filed tax returns we have net operating losses and other carryforwards for U.S.

federal and international tax purposes of $ 1.74 billion available to reduce future income taxes:

$ 5.8 million will expire by 2029, $ 355.7 million will expire between 2030 and 2044, and $ 861.5 million of the carryforwards will never expire.

The remaining net operating losses and other carryforwards for U.S.

federal and international tax purposes of $ 481.0 million and $ 32.4 million, respectively, are fully reserved.

Deferred tax assets related to state net operating losses and other carryforwards of $ 282.6 million are fully reserved as of December 31, 2024.

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Domestic and Puerto Rican companies contributed approximately 20 percent, 14 percent, and 33 percent for the years ended December 31, 2024, 2023, and 2022, respectively, to consolidated income before income taxes.

We have a subsidiary operating in Puerto Rico under a tax incentive grant effective through the end of 2046.

The tax incentive grant was amended in 2022 to apply the alternate tax regime established by Puerto Rico legislation starting in 2023.

Substantially all of the unremitted earnings of our foreign subsidiaries are considered not to be indefinitely reinvested for continued use in our foreign operations.

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Cash payments of income taxes $ 6,562.1 $ 5,558.8 $ 2,672.9

In December 2017, the Tax Cuts and Job Act (2017 Tax Act) was signed into law.

The 2017 Tax Act included significant changes to the U.S.

corporate income tax system, including a one-time repatriation transition tax (also known as the 'Toll Tax') on unremitted foreign earnings.

The 2017 Tax Act provided an election to taxpayers subject to the Toll Tax to make payments over an eight-year period beginning in 2018 through 2025.

Having made this election, our future cash payments relating to the Toll Tax as of December 31, 2023 are as follows:

Total 2024 2025

2017 Tax Act Toll Tax $ 1,427.0 $ 634.2 $ 792.8

As of December 31, 2023, we have additional noncurrent income tax payables of $ 3.06 billion unrelated to the Toll Tax;

we cannot reasonably estimate the timing of future cash outflows associated with these liabilities.

As of December 31, 2024, we have noncurrent income tax payables of $ 490.7 million that we expect to pay in 2026 and $ 3.57 billion that we cannot reasonably estimate the timing of future cash outflows.

Following is a reconciliation of the consolidated income tax expense applying the U.S.

6 unchanged sentences

566.0 677.2 68.3

General business credits ( 258.0 ) ( 155.0 ) ( 100.5 )

Foreign-derived intangible income deduction ( 307.0 ) ( 236.7 ) ( 287.5 )

1 unchanged sentence

( 302.1 ) ( 187.1 ) ( 299.5 )

General business credits ( 290.6 ) ( 258.0 ) ( 155.0 )

Stock-based compensation (3)

3 unchanged sentences

Income taxes $ 2,090.4 $ 1,314.2 $ 561.6

(1) Non-deductible acquired IPR&D was primarily related to the acquisitions of DICE, Versanis, and Emergence in 2023.

(1) Non-deductible acquired IPR&D was primarily related to the acquisitions of Morphic in 2024, and DICE, Versanis, and Emergence in 2023.

See Note 3 for additional information related to acquisitions.

(2) Includes the impact of GILTI tax, Puerto Rico Excise Tax (for 2022 and 2021), and other U.S.

(2) Includes the impact of GILTI tax, Puerto Rico Excise Tax (for 2022), and other U.S.

taxation of foreign income.

10 unchanged sentences

Ending balance at December 31 $ 3,975.8 $ 3,395.0 $ 2,987.0

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $ 1.77 billion and $ 1.70 billion at December 31, 2023 and 2022, respectively.

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $ 2.62 billion at December 31, 2024.

federal, foreign, and various state and local income tax returns.

3 unchanged sentences

examination of tax years 2019-2021 began in 2023 and remains ongoing.

The Internal Revenue Service commenced its examination of tax years 2019-2021 during the third quarter of 2023.

For tax years 2016-2018, we are pursuing competent authority assistance through the Mutual Agreement Procedure (MAP) process for the pricing of certain intercompany transactions.

The resolution of both audit periods will likely extend beyond the next 12 months.

23 unchanged sentences

Funded status 243.0 ( 549.2 ) 1,343.1 1,270.0

Unrecognized net actuarial (gain) loss 3,357.9 2,687.2 109.6 54.5

Unrecognized net actuarial loss 2,662.9 3,357.9 149.3 109.6

Unrecognized prior service (benefit) cost 4.1 6.4 ( 3.7 ) ( 9.5 )

Net amount recognized $ 2,910.0 $ 2,815.1 $ 1,488.7 $ 1,370.1

Amounts recognized in the consolidated balance sheet consisted of:

Amounts recognized in the consolidated balance sheets consisted of:

Other noncurrent assets $ 1,481.6 $ 810.6 $ 1,484.6 $ 1,427.7

1 unchanged sentence

Accrued retirement benefits ( 1,167.2 ) ( 1,289.4 ) ( 133.3 ) ( 149.4 )

Accumulated other comprehensive (income) loss before income taxes 3,364.3 2,695.6 100.1 ( 7.7 )

Accumulated other comprehensive loss

2,667.0 3,364.3 145.6 100.1

Net amount recognized $ 2,910.0 $ 2,815.1 $ 1,488.7 $ 1,370.1

The unrecognized net actuarial (gain) loss and unrecognized prior service (benefit) cost have not yet been recognized in net periodic pension costs and were included in accumulated other comprehensive loss at December 31, 2024 and 2023.

The $ 1.09 billion increase in benefit obligation in 2023 is primarily driven by decreases in the discount rates.

The $ 4.75 billion decline in benefit obligation in 2022 is primarily driven by increases in the discount rates.

Unrecognized net actuarial (gain) loss for the U.S.

and Puerto Rico defined benefit pension and retiree health benefit plans are amortized over the average remaining service period of active employees in the plan.

The amortization of actuarial (gains) losses for U.S.

and Puerto Rico defined benefit pension plans are determined by using a 10% corridor of the greater of the market related value of assets or the projected benefit obligations.

The $ 930.1 million decrease in benefit obligation in 2024 was primarily driven by increases in the discount rates.

The $ 1.09 billion increase in benefit obligation in 2023 was primarily driven by decreases in the discount rates.

The following represents our weighted-average assumptions:

14 unchanged sentences

We annually evaluate the expected return on plan assets in our defined benefit pension and retiree health benefit plans.

In evaluating the expected rate of return, we consider many factors, with a primary analysis of current and projected market conditions;

In evaluating the expected return on plan assets, we consider many factors, with a primary analysis of current and projected market conditions;

asset returns and asset allocations;

and the views of leading financial advisers and economists.

and Puerto Rico, the expected return on plan assets uses a market-related value of assets.

dollar denominated investment grade debt securities and derivatives, the market-related value of assets is the actual fair value.

For all other asset categories, the market-related value of assets uses a method that recognizes investment gains and losses arising from the difference between expected and actual returns on plan assets over a five-year period.

We may also review our historical assumptions compared with actual results, as well as the assumptions and trend rates utilized by similar plans, where applicable.

27 unchanged sentences

Net periodic (benefit) cost $ 15.4 $ 8.0 $ 147.0 $ ( 103.0 ) $ ( 147.7 ) $ ( 121.6 )

The following represents the amounts recognized in other comprehensive income (loss) for the years ended December 31, 2023 , 2022, and 2021:

The following represents the amounts recognized in other comprehensive income (loss) for the years ended December 31:

Defined Benefit

11 unchanged sentences

Expenses under the plans totaled $ 249.7 million, $ 222.6 million, and $ 170.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.

We provide certain other postemployment benefits primarily related to disability benefits and accrue for the related cost over the service lives of employees.

Expenses associated with these benefit plans for the years ended December 31, 2023, 2022, and 2021 were not material.

Benefit Plan Investments

124 unchanged sentences

The activity in the Level 3 investments during the year ended December 31, 2023 was not material.

In 2024, we expect to contribute approximatel y $ 40 million t o our defined benefit pension plans to satisfy minimum funding requirements for the year.

In 2025, we expect to contribute approximately $ 30 million to our defined benefit pension plans to satisfy minimum funding requirements for the year.

We do not currently expect to make material discretionary contributions in 2025.

1 unchanged sentence

We are involved in various lawsuits, claims, government investigations and other legal proceedings that arise in the ordinary course of business.

These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others.

These claims or proceedings can involve various types of parties, including governments, regulatory agencies, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others.

These matters may involve patent infringement, antitrust, securities, pricing, access, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability, insurance coverage, and regulatory compliance, among others.

2 unchanged sentences

We are defending against the legal proceedings in which we are named as defendants vigorously.

It is not possible to determine the final outcome of these matters, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for any of these matters;

It is not possible to determine the final outcome of these matters, and, unless otherwise noted, we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for any of these matters;

however, we believe that the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.

6 unchanged sentences

Due to a very restrictive market for litigation liability insurance, we are self-insured for litigation liability losses for all our currently and previously marketed products.

Patent Litigation

Patent Matters

Emgality Patent Litigation

We are a named defendant in litigation filed by Teva Pharmaceuticals International GMBH and Teva Pharmaceuticals USA , Inc.

(collectively, Teva) in the U.S.

District Court for the District of Massachusetts seeking a ruling that various claims in three different Teva patents would be infringed by our launch and continued sales of Emgality for the prevention of migraine in adults.

Following a trial, in November 2022, a jury returned a verdict in favor of Teva.

In September 2023, the court granted our motion to overrule the jury verdict and found all asserted claims of the three patents invalid.

Teva has appealed the decision.

This matter is ongoing.

In June 2021, we were named as a defendant in a second litigation filed by Teva in the U.S.

District Court for the District of Massachusetts seeking a ruling that two of Teva's patents, which are directed toward use of the active ingredient in Emgality to treat migraine, would be infringed by our continued sales of Emgality.

We challenged these two patents by filing requests for Inter Partes Review with the Patent Trial and Appeal Board (PTAB) and in October 2022, the PTAB granted our requests.

In September 2023, the PTAB issued decisions finding all claims of both patents invalid.

Teva has agreed not to appeal the decisions and has dismissed the corresponding district court litigation.

This matter is closed.

Environmental Proceedings

In September 2018, Teva Pharmaceuticals International GmbH and Teva Pharmaceuticals USA, Inc.

(collectively, Teva) filed a complaint in the U.S.

District Court for the District of Massachusetts alleging that Lilly's launch and continued sales of Emgality infringed various claims in three Teva patents.

In November 2022, following a trial, a jury returned a verdict in favor of Teva.

In September 2023, the trial court overruled the jury verdict, found all asserted claims invalid, and entered judgment in Lilly's favor.

In October 2023, Teva appealed to the U.S.

Court of Appeals for the Federal Circuit.

The appeal is pending.

Environmental Matters

Superfund Matters

Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as "Superfund," we have been designated as one of several potentially responsible parties with respect to the cleanup of fewer than 10 sites.

Under Superfund, each responsible party may be jointly and severally liable for the entire amount of the cleanup.

Brazil Litigation – Cosmopolis Facility

Labor Attorney Litigation

In March 2008, the state Labor Public Attorney (LPA) filed a public civil action against Eli Lilly do Brasil Limitada (Lilly Brasil) in the Labor Court of Paulinia, State of Sao Paulo, alleging harm to employees and former employees from alleged exposure to soil and groundwater contaminants at a former manufacturing facility in Cosmopolis, operated by the company between 1977 and 2003.

In May 2014, the trial court ruled against Lilly Brasil, ordering it to undertake several remedial and compensatory actions, including health coverage for a class of individuals and certain of their children.

The trial court's ruling included a liquidated award of 300 million Brazilian reais, which, when adjusted for inflation, is approximately 1.4 billion Brazilian reais (approximately $ 226 million as of December 31, 2024).

In July 2018, the appeals court generally affirmed the trial court's ruling.

Lilly Brasil has appealed to the superior labor court (TST).

In July 2019, at the LPA's request, the trial court ordered a freeze of Lilly Brasil's immovable property in the amount of 500 million Brazilian reais, which was reduced on Lilly Brasil's appeal and, when adjusted for inflation, is approximately 145 million Brazilian reais (approximately $ 23 million as of December 31, 2024).

Both parties have appealed this order to the TST.

The trial court is currently assessing the status of Lilly Brasil's compliance with the obligations as to the land, and an inspection in the industrial plant occurred in October 2023.

Former Employee Litigation

Various former employees have filed related claims against Lilly Brasil in the trial court.

These lawsuits are at various stages in the litigation process.

Pricing Matters

340B Litigation and Investigations

In January 2021, we filed a lawsuit in the U.S.

District Court for the Southern District of Indiana against the U.S.

Department of Health and Human Services (HHS), the Secretary of HHS, the Health Resources and Services Administration (HRSA), and the Administrator of HRSA.

The lawsuit challenges HHS's December 2020 advisory opinion that the 340B program requires drug manufacturers to deliver discounts to all contract pharmacies, as well as HHS's December 2020 administrative dispute resolution (ADR) regulations.

It seeks a declaratory judgment that the defendants violated the Administrative Procedure Act (APA) and the U.S.

Constitution, a preliminary injunction enjoining implementation of the ADR process and application of the advisory opinion, and other related relief.

In March 2021, the court preliminarily enjoined the government's use of the ADR process as to us.

In May 2021, we amended the complaint to add claims related to a May 2021 letter from HRSA asserting that Lilly's contract pharmacy policy violated the 340B statute.

In October 2021, the court granted in part and denied in part the parties' cross-motions for summary judgment.

Both parties appealed to the U.S.

Court of Appeals for the Seventh Circuit.

The appeal remains pending.

We received a civil investigative subpoena in February 2021 from the Office of the Attorney General for the State of Vermont relating to the sale of pharmaceutical products to Vermont covered entities under the 340B program.

We are cooperating with the subpoena.

We have been named in various ADR petitions, filed in 2021, 2023, and 2024, seeking declaratory, injunctive, and/or monetary relief related to the 340B program.

In light of the preliminary injunction order described above, these petitions are being held in abeyance as to us.

In July 2021, Mosaic Health, Inc.

filed a putative class action lawsuit in the U.S.

District Court for the Western District of New York against us, Sanofi-Aventis U.S., LLC (Sanofi), Novo Nordisk Inc.

(Novo Nordisk), and AstraZeneca Pharmaceuticals LP (AstraZeneca), alleging antitrust and unjust enrichment claims related to the defendants' 340B programs.

In October 2021, an amended complaint added Central Virginia Health Services, Inc.

as a plaintiff.

In September 2022, the court dismissed the amended complaint for failure to state a claim but allowed the plaintiffs to move for leave to file a second amended complaint.

In January 2024, the court denied the plaintiffs' motion for leave to amend and dismissed the case.

In February 2024, the plaintiffs appealed to the U.S.

Court of Appeals for the Second Circuit.

The appeal remains pending.

We have multiple other challenges against HHS and related parties related to interpretations and actions under the 340B program.

Insulin Pricing Litigation

Since 2017, various plaintiffs, including consumers, states and state attorneys general, counties, municipalities, Native American tribes, school districts, wholesalers, third-party payers, and others, have filed lawsuits, including putative class actions, against us, other manufacturers, pharmacy benefit managers, and others, relating to the pricing of insulin medications, and in some cases other diabetes medications, and rebates paid by manufacturers to pharmacy benefit managers.

The complaints in the various lawsuits assert a variety of claims, including among others consumer protection, unfair or deceptive trade practices, fraud, false advertising, unjust enrichment, civil conspiracy, racketeering, antitrust, and unfair competition claims.

Most cases have been coordinated or consolidated for pretrial proceedings in a multidistrict litigation (MDL) pending in the U.S.

District Court for the District of New Jersey.

The lawsuits are at various stages in the litigation process.

In the first-filed case, a putative consumer class action, we and the plaintiffs reached a proposed settlement in May 2023.

In January 2024, the court denied the plaintiffs' motion for class certification.

We and the plaintiffs subsequently terminated our proposed settlement and stipulated that the court's ruling denying class certification applied to Lilly.

The MDL court has issued various case management orders, including but not limited to orders establishing separate tracks for state attorney general claims (State AG Track), putative class actions (Class Action Track), and non-class suits by self-funded payers (Self-Funded Payer Track).

In January 2022, the Michigan attorney general filed a petition in Michigan state court seeking authorization to investigate Lilly for potential violations of the Michigan Consumer Protection Act (MCPA), along with a complaint seeking a declaratory judgment that the state has authority to investigate Lilly's sale of insulin under the MCPA.

The court authorized the proposed investigation and the issuance of civil investigative subpoenas.

In April 2022, however, the parties entered into a stipulation providing that the state will not issue any civil investigative subpoena to us under the MCPA until the declaratory judgment action is resolved, and in July 2022, the court dismissed the case in its entirety.

In June 2023, the Michigan Court of Appeals affirmed the judgment in our favor.

In August 2023, the state filed an application for leave to appeal to the Michigan Supreme Court, and oral argument was held in October 2024.

The state's request for leave to appeal remains pending.

Lilly has entered into settlement agreements with two states to resolve allegations relating to insulin pricing.

In particular, in February 2024, after discovery, Lilly entered into a non-monetary settlement with the Minnesota attorney general's office that resolved a lawsuit filed by Minnesota in 2018;

and Lilly entered into a similar non-monetary settlement with the New York attorney general’s office in May 2023.

These agreements involved no monetary payments and no admission of wrongdoing or liability.

Insulin and Other Pricing Investigations

We have been subject to various investigations and received subpoenas, civil investigative demands, information requests, interrogatories, and other inquiries from various governmental entities related to pricing issues, including the pricing and sale of insulin medications, and in some instances certain other diabetes medications, and/or calculations of average manufacturer price and best price.

These include subpoenas from the Vermont attorney general office, civil investigative demands from the U.S.

Department of Justice, the U.S.

Federal Trade Commission, and the Colorado, Indiana, Louisiana, Oregon, Texas, and Washington attorney general offices, as well as information requests from the California, Florida, Hawaii, Mississippi, New Mexico, Nevada, and Washington D.C.

attorney general offices.

To the extent the foregoing governmental entities have not filed lawsuits, we are cooperating with the various investigations, subpoenas, and inquiries.

Average Manufacturer Price Litigation

In November 2014, a relator filed a qui tam action in the U.S.

District Court for the Northern District of Illinois against us and Takeda Pharmaceuticals America, Inc.

The relator's complaint alleges that the defendants should have treated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices.

In August 2022, following a trial, the jury returned a verdict in favor of the relator.

Lilly has appealed to the U.S.

Court of Appeals for the Seventh Circuit, and the appeal remains pending.

Other Matters

Actos Litigation

We are named along with Takeda Chemical Industries, Ltd.

and Takeda affiliates (collectively, Takeda) in a third party payor class action in the U.S.

We, along with Takeda Chemical Industries, Ltd.

and Takeda affiliates (collectively, Takeda), are named in a third party payer class action in the U.S.

District Court for the Central District of California.

Plaintiffs claim that they and similarly situated class members are entitled to recover money paid for or to reimburse Actos prescriptions because of alleged concealment of bladder cancer risk.

Our agreement with Takeda calls for Takeda to defend and indemnify us against our losses and expenses with respect to U.S.

The plaintiffs allege that bladder cancer risk was concealed from them and claim that as a result they and a proposed class of third-party payers are entitled to recover money paid for Actos prescriptions.

Our agreement with Takeda calls for Takeda to defend and indemnify us against losses and expenses with respect to U.S.

litigation arising out of the manufacture, use, or sale of Actos and other related expenses in accordance with the terms of the agreement.

In August 2023, the Ninth Circuit granted our and Takeda's petition for permission to appeal the class certification order, and briefing was submitted in January 2024.

This matter is ongoing.

In May 2023, the district court granted class certification.

In August 2023, the U.S.

Court of Appeals for the Ninth Circuit granted our and Takeda's petition for permission to appeal the class certification order.

That appeal remains pending.

Mounjaro and Trulicity Product Liability Litigation

We, along with Novo Nordisk A/S (Novo) and other related Novo entities, are named in numerous lawsuits by plaintiffs alleging injuries following purported use of incretin products.

Certain complaints name us and allege injuries that plaintiffs claim are associated with the use of Mounjaro and/or Trulicity.

These lawsuits were filed beginning in August 2023 and are pending in various federal courts.

In February 2024, the Judicial Panel on Multi-District Litigation established Multi-District Litigation for coordinated and consolidated pretrial proceedings in the Eastern District of Pennsylvania.

This matter is ongoing.

340B Litigation and Investigations

We are the plaintiff in a lawsuit filed in January 2021 in the U.S.

District Court for the Southern District of Indiana against the U.S.

Department of Health and Human Services (HHS), the Secretary of HHS, the Health Resources and Services Administration (HRSA), and the Administrator of HRSA.

The lawsuit challenges HHS's December 30, 2020 advisory opinion stating that drug manufacturers are required to deliver discounts under the 340B program to all contract pharmacies and HHS's Administrative Dispute Resolution regulations.

We seek a declaratory judgment that the defendants violated the Administrative Procedure Act and the U.S.

Constitution, a preliminary injunction enjoining implementation of the administrative dispute resolution process created by defendants and, with it, their application of the advisory opinion, and other related relief.

In March 2021, the court entered an order preliminarily enjoining the government's enforcement of the administrative dispute resolution process against us.

In May 2021, HRSA sent us an enforcement letter notifying us that it determined that our policy was contrary to the 340B statute.

In response, in May 2021, we amended our complaint to bring claims related to HRSA's determination.

In June 2021, the defendants withdrew the HHS December 30, 2020 advisory opinion.

In July 2021, the court held oral argument on the parties' cross motions for summary judgment and the defendants' motion to dismiss.

In October 2021, the court denied the defendants' motion to dismiss, and granted in part and denied in part the parties' cross motions for summary judgment.

Both parties filed notices of appeal related to the court's summary judgment order.

In October 2022, the U.S.

Court of Appeals for the Seventh Circuit held oral argument.

This matter is ongoing.

We, along with other pharmaceutical manufacturers, have been named as a defendant in petitions filed in 2021 and 2023 and currently pending before the HHS Administrative Dispute Resolution Panel.

Petitioners seek declaratory, injunctive, and/or monetary relief related to the 340B program.

District Court for the Southern District of Indiana has entered a preliminary injunction enjoining the government's enforcement of this administrative dispute resolution process against us.

In July 2021, we, along with Sanofi-Aventis U.S., LLC (Sanofi), Novo Nordisk Inc.

(Novo Nordisk), and AstraZeneca Pharmaceuticals LP (AstraZeneca), were named as a defendant in a purported class action lawsuit filed in the U.S.

District Court for the Western District of New York by Mosaic Health, Inc.

alleging antitrust and unjust enrichment claims related to the defendants' 340B distribution programs.

We, with Sanofi, Novo Nordisk, and AstraZeneca, filed a motion to dismiss the lawsuit, which was granted in September 2022.

In October 2022, the plaintiffs filed a motion for leave to amend their complaint.

In January 2024, the court denied the motion for leave to amend and dismissed the case.

We are cooperating with this subpoena.

Since August 2023, various plaintiffs have filed lawsuits against us, Novo Nordisk A/S (Novo), and other related Novo entities, alleging injuries following purported use of incretin medicines, including Mounjaro and Trulicity.

The complaints assert a variety of claims and generally seek damages, medical monitoring, or other relief.

Most of these lawsuits have been coordinated or consolidated for pretrial proceedings in a federal MDL pending in the U.S.

District Court for the Eastern District of Pennsylvania;

cases outside the MDL include one case pending in Georgia state court, as well as a class action petition in Israel.

In November 2024, the MDL plaintiffs filed a master complaint.

Branchburg Manufacturing Facility

2 unchanged sentences

We are cooperating with the subpoena.

Brazil Litigation – Cosmopolis Facility

Labor Attorney Litigation

First initiated in 2008, Eli Lilly do Brasil Limitada (Lilly Brasil) is named in a Public Civil Action brought by the Labor Public Attorney (LPA) alleging harm to employees and former employees caused by alleged exposure to soil and groundwater contaminants at a former manufacturing facility in Cosmopolis, operated by the company between 1977 and 2003.

In May 2014, the trial Court ruled against Lilly Brasil, ordering it to undertake several remedial and compensatory actions, including health coverage for a class of individuals and certain of their children.

In July 2018, the appeals court generally affirmed the trial Court's ruling, which included a liquidated award of 300 million Brazilian reais, which, when adjusted for inflation, is approximately 1.26 billion Brazilian reais (approximately $ 260 million as of December 31, 2023).

In August 2019, Lilly Brasil appealed to the superior labor court (TST) and in June 2021, the majority of the elements of Lilly Brasil's appeal were admitted;

elements not proceeding are subject to an interlocutory appeal to the TST that was filed in June 2021.

Mediation hearings are ongoing.

In July 2019, at the LPA's request, the trial Court ordered a freeze of Lilly Brasil’s immovable property in the amount of 500 million Brazilian reais, which was reduced on Lilly Brasil's appeal and, when adjusted for inflation, is approximately 131 million Brazilian reais (approximately $ 27 million as of December 31, 2023).

The parties appealed to the TST, which appeal is under review.

The trial Court is currently assessing the status of Lilly Brasil’s compliance with the obligations as to the land and an inspection in the industrial plant occurred in October 2023.

These matters are ongoing.

Individual Former Employee Litigation

Lilly Brasil is also named in various pending lawsuits filed in the trial Court by individual former employees making related claims.

These individual lawsuits are at various stages in the litigation process.

Puerto Rico Tax Matter

In May 2013, the Municipality of Carolina in Puerto Rico (Municipality) filed a lawsuit against us alleging noncompliance with respect to a contract with the Municipality and seeking a declaratory judgment.

In December 2020, the Puerto Rico Appellate Court (AP) reversed the summary judgment previously granted by the Court of First Instance (CFI) in our favor, dismissing the Municipality's complaint in its entirety.

The AP remanded the case to the CFI for trial on the merits.

The trial began in May 2022;

however, the Municipality filed a new motion requesting the CFI to execute an alleged judgment.

The request was denied by the CFI in our favor and the Municipality filed for revision at the AP, which we opposed, staying the case.

In June 2019, the Court of First Instance (CFI) granted summary judgment in our favor, dismissing the Municipality's complaint in its entirety.

In December 2020, the Puerto Rico Appellate Court (AP) reversed and remanded the case to the CFI for trial on the merits.

After trial began in May 2022, the Municipality filed a motion requesting the CFI to execute an alleged judgment.

The CFI denied the request, and the Municipality filed for revision at the AP, which we opposed, staying the case.

The AP denied the Municipality's motion for revision.

This matter is ongoing and trial has been scheduled for August 2024.

Average Manufacturer Price Litigation

In November 2014, we, along with another pharmaceutical manufacturer, were named as co-defendants in United States et al.

Takeda Pharm.

Am., Inc., et al.

, which was filed in November 2014 and unsealed in the U.S.

District Court for the Northern District of Illinois.

The complaint alleges that the defendants should have treated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices.

Following a trial in August 2022, the jury returned a verdict in favor of the plaintiff.

Lilly appealed to the Seventh Circuit and the appeal is pending.

This matter is ongoing.

Trial resumed in October 2024.

Health Choice Alliance

We are named as a defendant in two lawsuits filed in Texas and New Jersey state courts in October 2019 seeking damages under the Texas Medicaid Fraud Prevention Act and New Jersey Medicaid False Claims Act, respectively, for certain patient support programs related to our products Humalog, Humulin, and Forteo.

The Texas state court action has been stayed.

The New Jersey state court action was dismissed with prejudice pending an ongoing appeal before the Appellate Division of the New Jersey Superior Court.

This matter is ongoing.

Pricing Litigation

We, along with Sanofi, Novo Nordisk, and, in some matters, certain pharmacy benefit managers, have been named in numerous lawsuits, including putative class actions, by states and state attorneys general, counties, municipalities, third-party payers, consumers, and other parties related to insulin pricing and rebates paid by manufacturers to pharmacy benefit managers.

These lawsuits assert various theories, including consumer protection and deceptive trade practice, fraud, false advertising, unjust enrichment, civil conspiracy, federal and state RICO statutes, antitrust, and unfair competition claims.

These lawsuits have been brought in various state and federal courts since 2017 and are at various stages in the litigation process.

Starting in August 2023 after a ruling by the Judicial Panel for Multi-District Litigation, several of these cases were transferred to or filed in the District of New Jersey for coordinated or consolidated pre-trial proceedings.

In May 2023, we reached a settlement in the In re Insulin Pricing Litigation consumer class action.

A motion for preliminary approval of our settlement is pending.

In January 2024, the Multi-District Litigation court denied the consumer class plaintiffs’ motion for class certification and ordered the parties to submit briefs addressing the impact of that denial on the motion for preliminary approval of the settlement.

In February 2024, we entered into a non-monetary settlement with the Minnesota Attorney General's Office that resolved all matters related to Minnesota's insulin pricing lawsuit.

Investigations, Subpoenas, and Inquiries

We have been subject to various investigations and received subpoenas, civil investigative demand requests, information requests, interrogatories, and other inquiries from various governmental entities related to pricing issues, including the pricing and sale of insulins and other products and calculations of AMP and best price.

These include subpoenas from the Vermont Attorney General Office, civil investigative demands from the Washington, New Mexico, Colorado, Louisiana, Texas and Ohio Attorney General Offices, the U.S.

Department of Justice, and the U.S.

Federal Trade Commission, as well as information requests from the Mississippi, Washington D.C., California, Florida, Hawaii, and Nevada Attorney General Offices.

In January 2022, the Michigan Attorney General filed a petition in Michigan state court seeking authorization to investigate Lilly for potential violations of the Michigan Consumer Protection Act (MCPA), and a complaint seeking a declaratory judgment that the Attorney General has authority to investigate Lilly's sale of insulin under the MCPA.

The court authorized the proposed investigation and the issuance of civil investigative subpoenas.

In April 2022, the parties entered into a stipulation providing that the State of Michigan will not issue any civil investigative subpoena to us under the MCPA until the declaratory judgment action is resolved.

In July 2022, the court dismissed the case in its entirety.

In June 2023, the Michigan Court of Appeals affirmed the judgment in our favor.

In August 2023, the Michigan Attorney General filed an application for leave to appeal to the Michigan Supreme Court, which is being set for argument.

We are cooperating with all of the aforementioned investigations, subpoenas, and inquiries.

In October 2019, a relator filed a qui tam lawsuit against us in Texas state court asserting claims under the Texas Medicaid Fraud Prevention Act based on allegations about certain patient support programs related to our products Humalog, Humulin, and Forteo.

The lawsuit seeks to recover the value of payments by the Texas Medicaid Program for these products, as well as civil penalties and other relief.

The action has been stayed since 2020.

Research Corporation Technologies, Inc.

In April 2016, we were named as a defendant in litigation filed by Research Corporation Technologies, Inc.

(RCT) in the U.S.

District Court for the District of Arizona.

RCT is seeking damages for breach of contract, unjust enrichment, and conversion related to processes used to manufacture certain products, including Humalog and Humulin.

In April 2016, Research Corporation Technologies, Inc.

(RCT) filed a lawsuit against us in the U.S.

District Court for the District of Arizona asserting damages claims for breach of contract, unjust enrichment, and conversion related to processes used to manufacture certain products, including Humalog and Humulin.

In October 2021, the court issued a summary judgment decision in favor of RCT on certain issues, including with respect to a disputed royalty.

Trial is scheduled for August 2024.

Potential damages payable under the litigation, if finally awarded after an appeal, could be material but are not currently reasonably estimable.

This matter is ongoing.

In July 2024, we reached a confidential agreement with RCT that requires different payments based on various litigation outcomes as determined on appeal.

The settlement agreement is not an admission of liability or fault, and is subject to conditions.

Pursuant to the agreement, the court entered final judgment, Lilly filed a notice of appeal to the U.S.

Court of Appeals for the Ninth Circuit, and Lilly made an initial payment under the agreement.

Lilly's appeal remains pending.

The remaining amount payable under the agreement, if any, should not have a material impact on our financial position, liquidity or results of operations.

Other Comprehensive Income (Loss)

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Reclassifications out of accumulated other comprehensive loss were as follows:

Year Ended December 31, Affected Line Item in the Consolidated Statements of Operations

Affected Line Item in the Consolidated Statements of Operations

2024 2023 2022

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Interest income ( 175.2 ) ( 173.6 ) ( 62.8 )

Net investment (gains) losses on equity securities (Note 7) 20.2 410.7 ( 176.9 )

Debt extinguishment loss (Note 11) — — 405.2

Net investment losses on equity securities (Note 7) 49.5 20.2 410.7

Retirement benefit plans ( 461.7 ) ( 461.9 ) ( 372.9 )

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Other–net, (income) expense $ 218.6 $ ( 96.7 ) $ 320.9

Segment Information

We operate as a single reportable segment engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide.

A global research and development organization and a supply chain organization are responsible for the discovery, development, manufacturing, and supply of our products.

Our commercial organizations market, distribute, and sell the products.

The business is also supported by global corporate staff functions.

Our determination that we operate as a single segment is consistent with the nature of our operations and the financial information regularly reviewed by the chief executive officer, in his capacity as the chief operating decision maker (CODM), for the purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.

Our purpose is to unite caring with discovery to create medicines that make life better for people around the world.

Our long-term success is significantly dependent on our ability to research and develop innovative medicines.

The CODM uses consolidated net income to assess performance of our company, ensuring that we are investing in future research and development while efficiently delivering products to patients.

The CODM allocates research and development resources based upon several factors, including the likelihood of technical success, unmet medical needs, and the viability of commercial success.

A significant component of the CODM’s decision-making process is to ensure a balanced investment in our research and development portfolio to drive near-term success and sustain for the long-term.

The following table summarizes our segment revenue, significant segment expenses, and segment profit:

2024 2023 2022

Revenue $ 45,042.7 $ 34,124.1 $ 28,541.4

Cost of sales 8,418.3 7,082.2 6,629.8

Early-stage research and development (1)

3,916.9 3,092.5 2,406.6

Late-stage research and development (1)

7,073.7 6,220.9 4,784.2

Marketing, selling, and administrative 8,593.8 7,403.1 6,440.4

Acquired in-process research and development 3,280.4 3,799.8 908.5

Other segment items (2)

3,169.6 1,285.2 1,127.1

Net income $ 10,590.0 $ 5,240.4 $ 6,244.8

(1) Early-stage research and development primarily includes costs incurred from discovery through Phase 2 clinical trials.

Late-stage research and development primarily includes costs incurred from Phase 3 clinical trials.

(2) Other segment items primarily include income taxes and asset impairment, restructuring, and other special charges.

The following tables summarize additional segment information:

2024 2023 2022

Interest income $ 175.2 $ 173.6 $ 62.8

Interest expense 780.6 485.9 331.6

Depreciation and amortization 1,766.6 1,527.3 1,522.5

Asset impairment, restructuring, and other special charges 860.6 67.7 244.6

Earnings (loss) in equity method investments

89.8 ( 10.1 ) ( 138.0 )

Income taxes 2,090.4 1,314.2 561.6

Expenditures for long-lived assets (1)

5,560.8 3,830.2 2,289.2

(1) Includes expenditures for property and equipment and computer software costs.

Total assets $ 78,714.9 $ 64,006.3

Equity method investments

1,142.7 962.3

Management's Reports

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Their responsibility is to evaluate whether internal control over financial reporting was designed and operating effectively.

David Ricks Anat Ashkenazi

David Ricks Lucas Montarce

Chair, President, and Chief Executive Officer Executive Vice President and Chief Financial Officer

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Eli Lilly and Company

To the Shareholders and the Board of Directors of Eli Lilly and Company

Opinion on the Financial Statements

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Medicaid, Managed Care, and Medicare sales rebate accruals

Description of the Matter As described in Note 2 to the consolidated financial statements under the caption "Net Product Revenue," the Company establishes provisions for sales rebate and discounts in the same period as the related sales occur.

At December 31, 2023, the Company had $11,689.0 million in sales rebate and discount accruals.

A large portion of these accruals are rebates associated with sales in the United States for which payment for purchase of the product is covered by Medicaid, Managed Care, and Medicare.

Description of the Matter As described in Note 2 to the consolidated financial statements under the caption “Net

Product Revenue,” the Company establishes provisions for sales rebate and discounts in the same period as the related sales occur.

At December 31, 2024, the Company had

$11,539.3 million in sales rebate and discount accruals.

A large portion of these accruals

are rebates associated with sales in the United States for which payment for purchase of the product is covered by Medicaid, Managed Care, and Medicare.

Auditing the Medicaid, Managed Care, and Medicare sales rebate and discount liabilities is challenging because of the subjectivity of certain assumptions required to estimate the rebate liabilities.

In calculating the appropriate accrual amount, the Company considers historical Medicaid, Managed Care, and Medicare rebate payments by product as a percentage of their historical sales as well as any significant changes in sales trends, the lag in payment timing, changes in rebate contracts, an evaluation of the current Medicaid and Medicare laws and interpretations, the percentage of products that are sold via Medicaid, Managed Care, and Medicare, and product pricing.

Given variability in prescription drug costs, continued historical year over year increases in enrollees and variability in prescription data, historical rebate information may not be predictive for management to estimate the rebate accrual and thus, management supplements its historical data analysis with qualitative adjustments based upon current expectations, particularly for select products which contribute the largest portion of the Company's revenue.

Given variability in prescription drug costs and variability in prescription data, historical rebate information may not be predictive for management to estimate the rebate accrual and thus, management supplements its historical data analysis with qualitative adjustments based upon current expectations, particularly for select products which contribute the largest portion of the Company's revenue.

How We Addressed the Matter in Our Audit We tested the Company’s controls addressing the identified risks of material misstatement related to the valuation of the sales rebate and discount liabilities.

This included testing controls over management’s review of the significant assumptions used to calculate the Medicaid, Managed Care, and Medicare rebate liabilities, including the significant assumptions discussed above.

This testing also included management's control to compare actual activity to forecasted activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.

This testing also included management’s control to compare actual activity to estimated activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.

Our audit procedures included, among others, evaluating for reasonableness the significant assumptions in light of economic trends, product profiles, and other regulatory factors.

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For Medicaid, we involved our professionals with an understanding of the statutory reimbursement requirements to assess the consistency of the Company’s calculation methodologies with the applicable government regulations and policy.

Retirement Benefits - Valuation of Alternative Investments

Description of the Matter As described in Note 15 to the consolidated financial statements under the caption "Benefit Plan Investments," the Company's benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities.

At December 31, 2023, the Company had $16,289.0 million in plan assets related to the defined benefit pension plans and retiree health benefit plans.

Approximately 48 percent of the total pension and retiree health assets are in hedge funds and private equity-like investment funds ("alternative investments").

These alternative investments are valued primarily at net asset value (NAV) reported by the counterparty, adjusted as necessary.

Auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, particularly the underlying determination of net asset values ("NAVs").

Additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation.

How We Addressed the Matter in Our Audit We tested the Company's controls addressing the risks of material misstatement relating to valuation of alternative investments.

This included testing management's controls over alternative investment valuation, which included a comparison of returns to benchmarks and monitoring investment firms' valuation policies and procedures, as well as portfolio performance.

Our audit procedures included, among others, comparing fund returns to selected relevant benchmarks and understanding variations, and obtaining the latest audited financial statements and comparing to the Company's estimated fair values.

We also inquired of management about changes to the investment portfolio and/or related investment strategies and considerations.

We assessed the historical accuracy of management's estimates by comparing actual activity to previous estimates.

We evaluated for contrary evidence by confirming the fair value of the investments and ownership interest directly with the custodian and a sample of fund managers at year end.

/s/ Ernst & Young LLP

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data