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Item 7. Management’s Discussion and Analysis

2026-02-12 compared with 2025-02-19 · 147 added, 267 removed, 237 unchanged (64% of the section changed)

Management's Discussion and Analysis of Results of Operations and Financial Condition

(Tables present dollars in millions, except per-share data)

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

Management's discussion and analysis of results of operations and financial condition is intended to assist the reader in understanding and assessing significant changes and trends related to our results of operations and financial position.

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Earnings per share - diluted 22.95 11.71 96

Revenue increased in 2024 driven by increased volume and, to a lesser extent, higher realized prices.

The increase in revenue in 2024 was primarily driven by Mounjaro, Zepbound, and Verzenio, partially offset by Trulicity.

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

Revenue increased in 2025 driven primarily by increased volume, partially offset by lower realized prices.

The increased volume and lower realized prices in 2025 were primarily driven by Mounjaro and Zepbound.

Net income and earnings per share increased in 2025, primarily due to higher gross margin, partially offset by increased marketing, selling, and administrative expenses and research and development expenses.

See "Results of Operations" for additional information.

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Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines.

We currently have approximately 55 new medicine candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase.

The following select new molecular entities (NMEs) and new indication line extension (NILEX) products are currently in Phase 2 or Phase 3 clinical trials or have been submitted for regulatory review or have recently received regulatory approval in the United States (U.S.), European Union (EU), or Japan.

The table reflects the status of these NMEs and NILEX products, including certain other developments, up to the time of the filing of this Annual Report on Form 10-K:

The following select new molecular entities (NMEs) and new indication line extension (NILEX) products are currently in clinical trials or have been submitted for regulatory review or have recently received regulatory approval in the U.S., European Union (EU), or Japan.

The table reflects the status of these NMEs and NILEX products, up to the time of the filing of this Annual Report on Form 10-K:

Compound Indication/Study

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Cardiometabolic Health

Tirzepatide (Mounjaro, Zepbound)

Obesity Approved Approved in the U.S.

and the EU in 2023 and in Japan in 2024.

Tirzepatide (Mounjaro, Zepbound) Heart failure with preserved ejection fraction Approved

Approved in the EU.

Pediatric and adolescent type 2 diabetes Approved Approved in the U.S.

Cardiovascular outcomes in type 2 diabetes Submitted Submitted in the U.S.

Metabolic dysfunction-associated steatotic liver disease Phase 3 Phase 3 trial was initiated.

Morbidity and mortality in obesity Phase 3 Phase 3 trial is ongoing.

Type 1 diabetes Phase 3 Phase 3 trials were initiated.

Insulin efsitora alfa

Type 2 diabetes Submitted Submitted in the U.S., the EU, and Japan.

Orforglipron Obesity (1)

Submitted Submitted in the U.S., the EU, and Japan.

Type 2 diabetes Submitted Submitted in the EU.

Phase 3 trials are ongoing.

Obstructive sleep apnea (OSA)

Approved Approved in the U.S.

and the EU in 2024.

Heart failure with preserved ejection fraction Submitted Submitted in the U.S.

and the EU in 2024.

Cardiovascular outcomes in type 2 diabetes

Phase 3 Phase 3 trial is ongoing.

Morbidity and mortality in obesity

Phase 3 Phase 3 trial is ongoing.

Phase 2 Phase 2 trial is ongoing.

Metabolic dysfunction-associated steatohepatitis

Phase 2 Announced in 2024 that a Phase 2 trial met the primary endpoint.

Insulin Efsitora Alfa Type 1 and type 2 diabetes Phase 3 Announced in 2024 that five Phase 3 trials met the primary endpoints.

Lepodisiran Atherosclerotic cardiovascular disease

Phase 3 Phase 3 trial initiated in 2024.

Orforglipron Obesity Phase 3 Phase 3 trials are ongoing.

OSA Phase 3 Phase 3 trials initiated in 2024.

Cardiovascular outcomes Phase 3 Phase 3 trial was initiated.

Hypertension Phase 3 Phase 3 trial was initiated.

Obstructive Sleep Apnea (OSA) Phase 3 Phase 3 trials are ongoing.

Osteoarthritis pain Phase 3 Phase 3 trial was initiated.

Peripheral artery disease Phase 3 Phase 3 trial was initiated.

Stress urinary incontinence Phase 3 Phase 3 trial was initiated.

Eloralintide Obesity Phase 3 Phase 3 trial was initiated.

Lepodisiran Atherosclerotic cardiovascular disease Phase 3 Phase 3 trial is ongoing.

Muvalaplin Atherosclerotic cardiovascular disease Phase 3 Phase 3 trial was initiated.

Retatrutide Cardiovascular / renal outcomes Phase 3 Phase 3 trials are ongoing.

Chronic low back pain Phase 3 Phase 3 trial was initiated.

Metabolic dysfunction-associated steatotic liver disease Phase 3 Phase 3 trial was initiated.

Obesity, osteoarthritis, OSA Phase 3 Phase 3 trial met all primary and key secondary endpoints.

Phase 3 trials are ongoing.

Type 2 diabetes Phase 3 Phase 3 trials are ongoing.

Retatrutide Cardiovascular / renal outcomes

Phase 3 Phase 3 trials initiated in 2024.

Obesity, osteoarthritis, OSA

Phase 3 Phase 3 trials are ongoing.

Type 2 diabetes Phase 3 Phase 3 trials initiated in 2024.

Bimagrumab Obesity Phase 2 Phase 2 trial is ongoing.

Eloralintide Obesity Phase 2 Phase 2 trial initiated in 2024.

GLP-1R NPA II Obesity Phase 2 Phase 2 trial initiated in 2024.

Mazdutide Obesity Phase 2 Phase 2 trial is ongoing.

Muvalaplin Cardiovascular disease Phase 2 Announced in 2024 that a Phase 2 trial met the primary and secondary endpoints.

Solbinsiran Cardiovascular disease Phase 2 Phase 2 trial is ongoing.

Volenrelaxin Heart failure Discontinued In 2025, Phase 2 trial was discontinued based on clinical data readout.

Compound Indication/Study

Status Developments

Mirikizumab (Omvoh) Crohn's disease Approved Approved in the U.S.

and the EU in 2025.

Submitted in Japan in 2024.

Mirikizumab (Omvoh) Crohn's disease Approved Approved in the U.S., the EU, and Japan.

Lebrikizumab (2)

AR (perennial allergens)

Phase 3 Phase 3 trial initiated in 2024.

CD19 Antibody

Multiple sclerosis

Phase 2 Phase 2 trial initiated in 2024.

Eltrekibart Hidradenitis suppurativa Phase 2 Phase 2 trial is ongoing.

Ulcerative colitis Phase 2 Phase 2 trial initiated in 2024.

KV1.3 Antagonist

Psoriasis Phase 2 Phase 2 trial initiated in 2024.

MORF-057 Crohn's disease Phase 2 Acquired in the acquisition of Morphic Holding, Inc.

(Morphic) in 2024.

Phase 2 trials are ongoing.

Ulcerative colitis Phase 2

Ocadusertib Rheumatoid arthritis Phase 2 Phase 2 trial is ongoing.

Simepdekinra (DC-853) Psoriasis

Phase 2 trial initiated in 2024.

Ucenprubart Atopic dermatitis Discontinued In 2024, Phase 2 trial was discontinued based on clinical data readout.

Donanemab (Kisunla) Early Alzheimer's disease Approved Approved in the U.S.

and Japan in 2024.

Submitted in the EU in 2023.

Phase 3 trials are ongoing.

Pre-clinical Alzheimer's disease

Phase 3 Phase 3 trial is ongoing.

Remternetug Early Alzheimer's disease Phase 3 Phase 3 trials are ongoing.

Epiregulin Ab Pain Phase 2 Phase 2 trial initiated in 2024.

GBA1 Gene Therapy Gaucher disease Type 1 Phase 2 Phase 2 trial is ongoing.

Parkinson's disease Phase 2 Granted U.S.

Food and Drug Administration (FDA) Fast Track designation (2) .

Phase 2 trial is ongoing.

GRN Gene Therapy Frontotemporal dementia Phase 2 Granted FDA Fast Track designation (2) .

Phase 2 trial is ongoing.

Mazisotine Pain Phase 2 Phase 2 trials are ongoing.

OTOF Gene Therapy

Phase 2 Phase 2 trial initiated in 2024.

P2X7 Inhibitor Pain Phase 2 Phase 2 trials were completed in 2023.

O-GlcNAcase Inh

Alzheimer's disease Discontinued In 2024, Phase 2 trial was discontinued based on clinical data readout.

Compound Indication/Study

Status Developments

Pirtobrutinib

Chronic lymphocytic leukemia Approved (3)

FDA granted accelerated approval (3) in the U.S.

Submitted in the EU and Japan in 2024.

Phase 3 trials are ongoing.

Mantle cell lymphoma Approved (3)

FDA granted accelerated approval (3) in the U.S.

Approved in the EU in 2023 and in Japan in 2024.

AR (perennial allergens) Phase 3 Phase 3 trial is ongoing.

CRSwNP Phase 3 Phase 3 trial is ongoing.

Donanemab (Kisunla) Early Alzheimer's disease Approved Approved in the U.S., the EU, and Japan.

Pre-clinical Alzheimer's disease Phase 3 Phase 3 trial is ongoing.

Brenipatide Alcohol use disorder Phase 3 Phase 3 trial was initiated.

Ixo-vec Wet age‑related macular degeneration Phase 3 Acquired in the acquisition of Adverum Biotechnologies, Inc.

Phase 3 trial is ongoing.

Imlunestrant ER+HER2- metastatic breast cancer Submitted Submitted in the U.S., the EU, and Japan in 2024.

Remternetug Pre-clinical/MCI Alzheimer's disease Phase 3 Phase 3 trials are ongoing.

(Inluriyo) ER+, HER2-, ESR1-mutated advanced or metastatic breast cancer Approved Approved in the U.S., the EU, and Japan.

Adjuvant breast cancer Phase 3 Phase 3 trial is ongoing.

Olomorasib 1L KRAS G12C+ NSCLC

Phase 3 Phase 3 trial initiated in 2024.

Pirtobrutinib

Chronic lymphocytic leukemia Approved Full approval in the U.S., the EU, and Japan.

Olomorasib (3)

1L KRAS G12C+ NSCLC Phase 3 Phase 3 trial is ongoing.

Resected adjuvant NSCLC Phase 3 Phase 3 trial was initiated.

Unresected adjuvant NSCLC Phase 3 Phase 3 trial was initiated.

Sofetabart mipitecan (FRα ADC) (3)

Platinum-resistant ovarian cancer Phase 3 Phase 3 trial was initiated.

(1) Granted a Commissioner's National Priority Voucher from the FDA.

(2) In collaboration with Almirall, S.A.

(2) Fast Track designation is designed to facilitate the development and expedite the review of medicines to treat serious conditions and fill an unmet medical need.

(3) Continued approval may be contingent on verification and description of clinical benefit in confirmatory Phase 3 trials.

(3) The FDA granted Breakthrough Therapy designation for olomorasib for the treatment of certain newly diagnosed metastatic KRAS G12C-mutant lung cancers and for sofetabart mipitecan for the treatment of certain patients with platinum-resistant ovarian cancer.

Breakthrough Therapy designation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition when preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement on a clinically significant endpoint(s) over already available therapies.

There are many difficulties and uncertainties inherent in pharmaceutical research and development, the introduction of new products and indications, business development activities to enhance or refine our product pipeline, and commercialization of our products.

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Other Matters

Patent Matters

We depend on patents or other forms of intellectual property protection for most of our revenue, cash flows, and earnings.

See Note 16 to the consolidated financial statements for a description of legal proceedings currently pending regarding certain of our patents.

See Item 1, "Business—Patents, Trademarks, and Other Intellectual Property Rights," for a discussion of the impacts of trends involving intellectual property on our business and results.

Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access and Certain Other Regulatory Developments

Reforms, including those that may stem from political initiatives, periods of uneven economic growth or downturns, or as a result of inflation or deflation, the emergence or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on pricing and reimbursement for our products.

Global concern over access to, and affordability of, pharmaceutical products continues to drive regulatory and legislative debate and action, as well as cost containment efforts by governmental authorities.

Such measures include the use of mandated discounts, price reporting requirements, mandated reference prices, restrictive formularies, changes to available intellectual property protections, as well as other efforts.

In 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 (IRA).

Among other measures, the IRA requires the U.S.

Department of Health and Human Services (HHS) to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Generally, these government prices apply beginning at nine years (for medicines approved under a New Drug Application) or thirteen years (for medicines approved under a Biologics License Application) following FDA approval or licensure for the molecule and are set at a price that generally represents a significant discount from existing prices to wholesalers and direct purchasers.

While the law specifies a maximum price that HHS can set, it does not set a minimum price.

The Medicare price HHS determines may impact the product's best price determination under the Medicaid Drug Rebate Program and the 340B Drug Pricing Program, potentially leading to a negative impact on both Medicaid and 340B prices.

Global concern over access to, and affordability of, pharmaceutical products continues to drive debate and action, as well as cost containment efforts by governmental authorities and scrutiny of pricing and access disparities.

Cost containment measures include the use of mandated discounts, price reporting requirements, mandated reference prices, restrictive formularies, changes to available intellectual property protections, as well as other efforts.

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

In November 2025, we announced preliminary voluntary agreements with the U.S.

government in which, among other arrangements, we agreed to lower Medicaid and certain other drug prices for U.S.

patients and to launch new medicines with a more balanced pricing approach across developed nations.

We face risks and uncertainty associated with these arrangements and negotiating the definitive agreements, including potential delays and the possibility of unfavorable terms related to pricing, access, and other key objectives.

Among other risks, we may fail to adequately capitalize on the additional U.S.

access to our obesity medicines resulting from these agreements, particularly if the revenues generated from such expanded access are insufficient to offset pricing concessions.

Moreover, the outcome of these arrangements and broader U.S.

policy efforts to align domestic pharmaceutical pricing with international benchmarks from countries with competing healthcare cost containment priorities is uncertain and could negatively impact our pricing strategies, product demand or access, or competitive positioning across global markets, and may result in reduced revenue in certain markets.

Other policies, regulations, legislation, or enforcement, including those proposed or pursued by lawmakers, regulators, and other authorities in the U.S.

and worldwide, have and may continue to adversely impact our business and consolidated results of operations.

The IRA requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D.

Currently, these government prices generally apply beginning at nine years (for medicines approved under a New Drug Application) or thirteen years (for medicines approved under a Biologics License Application) following FDA approval or licensure for the molecule.

In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices effective in 2026.

In August 2024, HHS announced the government-set prices for these medicines with Jardiance subject to a 66% discount compared to the 2023 U.S.

calendar year list price for a 30-day supply and discounts for the other nine medicines ranging from approximately 38% to 79% below list price.

Given our product portfolio, we expect additional significant products will be selected in future years, which would have the effect of accelerating revenue erosion prior to expiry of exclusivities.

The effect of reducing prices and reimbursement for certain of our products could significantly impact our business and consolidated results of operations.

Other IRA provisions require drug manufacturers to provide rebates for Medicare Part B and Part D medicines under certain circumstances.

Also, on January 1, 2025, the Part D benefit redesign replaced the Part D Coverage Gap Discount Program with a new manufacturer discount program.

Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties, which could be significant.

The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors.

In particular, the nine-year timeline to set prices for medicines approved under a New Drug Application reduces the attractiveness of investment in small molecule innovation.

The IRA can cause changes to development approach and timing and investments at-risk.

The full impact of the IRA on our business and the pharmaceutical industry, including the implications to us of a competitor's product being selected for price setting, remains uncertain.

Additional policies, regulations, legislation, or enforcement, including those proposed or pursued by lawmakers, regulators, and other authorities in the U.S.

and worldwide, could adversely impact our business and consolidated results of operations.

For example, the U.S.

House of Representatives recently passed the BIOSECURE Act, which is under consideration in the U.S.

This legislation, if passed, could affect elements of the pharmaceutical supply chain;

although as currently drafted we do not anticipate the bill would have a material impact on our business.

Consolidation and integration of private payers and pharmacy benefit managers in the U.S.

has also significantly impacted the market for pharmaceuticals by increasing payer leverage in negotiating manufacturer price or rebate concessions and pharmacy reimbursement rates.

Furthermore, restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers may adversely impact our business and consolidated results of operations.

We expect that these actions may intensify and could particularly affect certain products, which could adversely affect our business.

In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028.

Given our product portfolio, we expect other significant products will be selected in future years.

The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors and could significantly impact our business and consolidated results of operations.

and other countries have recently imposed or reached alignment on new tariffs.

In some cases, imposed tariffs have been paused but may come into effect quickly and unpredictably.

While pharmaceuticals are exempt from certain of these tariffs, such exemptions may be terminated or may not apply to any future tariffs.

The precise impact of tariffs, trade protection measures, and other restrictions depend on their ultimate scope, timing, and other factors.

If enacted, additional restrictions could result in supply disruptions or delays, further increase costs, or otherwise have a negative impact on our business.

Given the nature of pharmaceutical regulation and commercialization, we may not be able to share the burden of increased costs from tariffs and related impacts to any meaningful degree.

Private payers and pharmacy benefit managers in the U.S.

continue to significantly impact the market for pharmaceuticals through negotiation of access, manufacturer price or rebate concessions and pharmacy reimbursement rates.

Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private actors have and may continue to adversely impact our business and consolidated results of operations.

In addition, we are engaged in litigation and investigations related to the 340B program, access to insulin, pricing, product safety, and other matters that, if resolved adversely to us, could negatively impact our business and consolidated results of operations.

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In addition, regulatory issues concerning compliance with current Good Manufacturing Practices, quality assurance, safety signals, evolving standards, and increased scrutiny around excipients and potential impurities such as nitrosamines, and similar regulations and standards (and comparable foreign regulations and standards) for our products in some cases lead to regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, inability to realize the benefit of capital expenditures, or delays or denials in new product approvals, line extensions or supplemental approvals of current products pending resolution of the issues, or other negative impacts, any of which result in reputational harm or adversely affect our business.

See Item 1, "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access," Item 1A, "Risk Factors," and Note 16 to the consolidated financial statements for additional information.

Incretin Medicines

At various times during 2024, demand for our incretin medicines exceeded production.

Supply and channel dynamics have also contributed to variability in quarter-over-quarter revenue growth rates for tirzepatide.

Tirzepatide supply currently exceeds demand in the U.S.

Demand in launched markets remains dynamic, and increases or changes in demand, by dose or overall, as well as the complex supply chain, may result in periodic unavailability of certain presentations and dose levels at certain locations even when total tirzepatide supply can meet demand.

Supply considerations will continue to influence the timing and approach (including available presentations) of tirzepatide launches in new markets.

We continue to expand manufacturing capacity and progress efforts to bring tirzepatide to patients via different delivery presentations, such as single-use vials and multi-use pens.

Production increases will continue, and additional capacity is expected to be operational over the next several years.

We have seen an increase in the production, marketing, and sale of counterfeit, misbranded, adulterated, and compounded incretins.

Mounjaro and Zepbound accounted for 56 percent of our total revenues in 2025 and we expect cardiometabolic health products will continue to represent a significant and growing portion of our business, revenues, and prospects.

In 2025, we reached preliminary drug pricing agreements with the U.S.

As part of these agreements, Medicare beneficiaries will have access to discounted Lilly obesity medicines by July 1, 2026 and individual state Medicaid programs will have the option to expand access to these medicines.

Also in 2025, we received a U.S.

Commissioner’s National Priority Voucher for our product candidate orforglipron for the treatment of obesity, and we submitted to the FDA under that expedited review pathway.

Internationally, we launched Mounjaro in all major markets.

To support anticipated demand for our current and prospective products, we have undertaken significant manufacturing expansion initiatives.

Additional capacity is expected to become operational over the next several years.

We expect our near-term financial performance will be impacted by, among other factors, the timing of potential regulatory approvals for orforglipron and U.S.

Medicare access for Zepbound (and, if approved, orforglipron), as well as the demand and pace of uptake in new incretin channels and markets.

More generally, incretin volume fluctuations due to channel dynamics or demand can have a disproportionate impact on our results of operations in any given period.

Longer term, the durability of our cardiometabolic health product offerings and sustainability of our growth and prospects will depend on our ability to maintain or strengthen our competitive position as the therapeutic landscape evolves and to deliver further innovations that provide sufficient value to sustain our growth momentum.

We continue to see the production, marketing, and sale of counterfeit, misbranded, adulterated, and mass-compounded incretins.

These practices may impact patient safety and undermine regulatory drug approval processes.

While the FDA confirmed in late 2024 that the previous shortage of tirzepatide had ended and that compounding pharmacies are required to cease mass production, we cannot guarantee adequate regulation or compliance.

Lilly will continue to consider all options, including filing lawsuits where appropriate, to address unlawful practices and the patient safety risks of unapproved, untested, and manipulated drugs.

See Item 1, "Business—Government Regulation of Our Operations and Products” and Item 1A, "Risk —Risks Related to Our Business and Industry—We and our products face intense competition, including from multinational pharmaceutical companies, biotechnology companies, and lower-cost generic and biosimilar manufacturers, and such competition could have a material adverse effect on our business," for additional information.

We are subject to income taxes and various other taxes in the U.S.

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and countries around the world are actively proposing and enacting tax law changes.

Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development (OECD) and the European Commission could influence tax laws in countries in which we operate.

Further, actions taken with respect to tax-related matters by associations such as the OECD and the European Commission could influence tax laws in countries in which we operate.

Tax authorities in the U.S.

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and foreign tax laws and increased scrutiny by tax authorities in the U.S.

and other jurisdictions could have a material adverse impact our future consolidated results of operations and cash flows.

Effective January 1, 2024, several EU and non-EU countries enacted legislation (known as "Pillar Two") that provided for a minimum level of taxation of multinational companies.

The increase to income tax expense as a result of the global minimum tax was not material in 2024 and is not expected to be material in current and future years.

Our assessment of the impact for 2025 and subsequent years could be affected by legislative guidance and future enactment of additional provisions.

and other jurisdictions could have a material adverse impact on our future consolidated results of operations and cash flows.

In July 2025, the One Big Beautiful Bill Act (OBBBA), which implemented certain U.S.

tax law changes, was enacted into law.

The OBBBA modified and made permanent several provisions of the Tax Cuts and Jobs Act, including reductions in scheduled increases for the rate of taxation of foreign income, immediate deductibility of U.S.

research and development expenses, and reinstatement of 100 percent bonus depreciation for capital assets.

We invest in external research and technologies and manufacturing capabilities that we believe complement and strengthen our own efforts.

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We view our business development activity as a way to enhance or refine our pipeline and strengthen our business.

See Note 3 to the consolidated financial statements for further discussion regarding our recent acquisitions.

Continued regulatory focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, could continue to delay, jeopardize, or increase the costs of our business development activities and may negatively impact our consolidated financial position or results of operations.

For discussion of risks related to business development activities, see Item 1A, "Risk Factors—Risks Related to Our Business and Industry—Pharmaceutical research and development is very costly and highly uncertain;

we may not succeed in developing, licensing, or acquiring commercially successful products sufficient in number or value to replace revenues of products that have lost or will lose intellectual property protection or are displaced by competing products or therapies."

Foreign Currency Exchange Rates

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S.

dollar against the euro, Japanese yen, and Chinese yuan.

dollar against the euro, Japanese yen, Chinese yuan, and British pound sterling.

While we seek to manage a portion of these exposures through hedging and other risk management techniques, significant fluctuations in currency rates can have a material impact, either positive or negative, on our consolidated results of operations in any given period.

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Other factors have had, and may continue to have, an impact on our consolidated results of operations.

These factors include cost and wage inflation, supply chain and labor market complexities, international tension and conflicts, uneven economic growth or downturns or uncertainty, and an increase in overall demand in our industry for certain products and materials.

See Item 1A, "Risk Factors," for additional information on risk factors that could impact our business and operations.

These factors include cost and wage inflation, supply chain and labor market complexities, international tension and conflicts, uneven economic growth, downturns or uncertainty, risks related to engaging in business globally, including legislation and regulatory action in or regarding foreign jurisdictions, and fluctuations due to channel dynamics or demand for certain products.

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

RESULTS OF OPERATIONS

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Revenue $ 65,179 $ 45,043 45

Numbers may not add due to rounding.

The following are components of the change in revenue compared with the prior year:

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Percent change 43 % 48 % 45 %

Numbers may not add due to rounding.

the increase in volume in 2024 was primarily driven by Zepbound and Mounjaro, partially offset by Trulicity.

the higher realized prices in 2024 were primarily driven by Humalog, Mounjaro, Verzenio, and Zepbound.

Outside the U.S.

the increase in volume in 2024 was primarily driven by Mounjaro and, to a lesser extent, Verzenio, as well as a one-time payment received of $300.0 million related to Jardiance associated with an amendment to our collaboration with Boehringer Ingelheim.

Outside the U.S.

the increase in volume in 2024 was partially offset by the 2023 sale of rights for the olanzapine portfolio.

In the U.S., the volume increase and the lower realized prices in 2025 were primarily driven by Mounjaro and Zepbound.

Outside the U.S., the volume increase in 2025 was primarily driven by Mounjaro.

The following table summarizes our revenue, including net product revenue and collaboration and other revenue, by product in 2025 compared with 2024:

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Mounjaro $ 13,651 $ 9,315 $ 22,965 $ 11,540 99

Verzenio 3,420.6 1,886.0 5,306.6 3,863.4 37

Trulicity 3,693.8 1,559.7 5,253.5 7,132.6 (26)

Zepbound 4,925.7 — 4,925.7 175.8 NM

Jardiance (1)

13,484 58 13,542 4,926 175

Taltz 2,152.3 1,108.1 3,260.4 2,759.6 18

1,502.6 822.2 2,324.8 1,663.3 40

Cyramza 442.2 531.0 973.3 974.7 —

228.7 728.7 957.4 922.6 4

Humulin 643.4 273.7 917.1 852.1 8

Emgality 559.7 310.7 870.4 678.3 28

375.4 301.5 676.9 728.3 (7)

Erbitux 562.1 65.3 627.4 596.5 5

Tyvyt — 526.0 526.0 393.4 34

2.0 114.3 116.3 1,694.8 (93)

Baqsimi 2.5 26.7 29.1 677.6 (96)

Verzenio 3,464 2,259 5,723 5,307 8

Other products 12,882 10,066 22,949 23,270 (1)

Revenue $ 43,481 $ 21,698 $ 65,179 $ 45,043 45

Numbers may not add due to rounding.

NM - not meaningful

(1) Jardiance revenue includes Glyxambi, Synjardy, and Trijardy XR.

(2) Humalog revenue includes insulin lispro.

(3) Basaglar revenue includes Rezvoglar.

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

Revenue of Mounjaro increased 85 percent in the U.S., primarily driven by strong demand and increased supply.

(1) Tirzepatide is marketed for obesity under the brand name Zepbound in Canada, Japan, and the U.S.

Revenue of Mounjaro increased 53 percent in the U.S., driven by strong demand, partially offset by lower realized prices.

Revenue outside of the U.S.

was $2.59 billion in 2024 compared to $328.9 million in 2023, primarily driven by volume growth in launched markets.

Revenue of Verzenio increased 36 percent in the U.S., driven by increased demand, wholesaler buying patterns and, to a lesser extent, higher realized prices.

Revenue outside the U.S.

increased 39 percent, driven by increased demand.

Revenue of Trulicity decreased 32 percent in the U.S., driven by decreased volume primarily due to competitive dynamics and supply constraints during the first half of 2024.

Revenue outside the U.S.

decreased 8 percent, driven by decreased volume primarily due to competitive dynamics and actions we have taken to manage demand.

Revenue of Zepbound in the U.S.

in 2024 was $4.93 billion, compared to $175.8 million in 2023.

Zepbound launched in the U.S.

for the treatment of adult patients with obesity or overweight with weight-related comorbidities in November 2023.

Revenue of Jardiance remained relatively flat in the U.S.

as increased demand was offset by lower realized prices.

Revenue outside the U.S.

increased 52 percent, driven by increased volume and 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.

See Note 4 to the consolidated financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.

Revenue of Taltz increased 18 percent in the U.S., driven by higher realized prices due to changes in estimates for rebates and discounts, as well as increased demand.

was $9.3 billion in 2025 compared to $2.6 billion in 2024, primarily driven by volume growth.

Revenue of Zepbound increased 174 percent in the U.S., driven by increased demand, partially offset by lower realized prices.

Revenue of Verzenio increased 1 percent in the U.S.

Revenue outside the U.S.

increased 19 percent, primarily driven by increased demand.

increased 20 percent, driven by volume growth.

Gross Margin, Costs, and Expenses

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2,910 3,280 (11)

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

Other—net, (income) expense 218.6 (96.7) NM

Income taxes 5,091 2,090 144

Effective tax rate 19.8 % 16.5 %

NM - not meaningful

Gross margin as a percent of revenue in 2024 increased 2.1 percentage points compared with 2023, primarily driven by favorable product mix and higher realized prices.

Gross margin as a percent of revenue in 2025 increased 1.7 percentage points compared with 2024, primarily driven by favorable product mix and improved cost of production, partially offset by lower realized prices.

Research and development expenses increased 21 percent in 2025, primarily driven by continued investments in our early and late-stage portfolio.

Marketing, selling, and administrative expenses increased 16 percent in 2024, primarily driven by promotional efforts supporting ongoing and future launches.

Acquired in-process research and development (IPR&D) charges recognized in 2024 primarily related to the acquisition of Morphic.

Acquired IPR&D charges recognized in 2023 primarily related to acquisitions of DICE Therapeutics, Inc., Versanis Bio, Inc., Emergence Therapeutics AG, and Mablink Biosciences SAS and from a business development transaction with Beam Therapeutics Inc.

Marketing, selling, and administrative expenses increased 29 percent in 2025, primarily driven by promotional efforts supporting ongoing and planned launches.

Acquired in-process research and development (IPR&D) charges recognized in 2025 were primarily related to the acquisitions of Scorpion Therapeutics, Inc.'s (Scorpion) PI3Kα inhibitor program STX-478 and of SiteOne Therapeutics, Inc.

Acquired IPR&D charges recognized in 2024 were primarily related to the acquisition of Morphic Holding, Inc.

See Note 4 to the consolidated financial statements for additional information.

Asset impairment, restructuring, and other special charges recognized in 2024 primarily related to a $435.0 million litigation charge and an intangible asset impairment for Vitrakvi, driven by expected commercial projections.

See Notes 5 and 16 to the consolidated financial statements for additional information.

Our effective tax rate was 16.5 percent in 2024, compared with an effective tax rate of 20.1 percent in 2023.

The effective tax rates for 2024 and 2023 were both unfavorably impacted by non-deductible acquired IPR&D charges, with a larger impact occurring in 2023.

Our effective tax rate was 19.8 percent in 2025 compared with an effective tax rate of 16.5 percent in 2024, primarily driven by unfavorable impacts related to the jurisdictional mix of earnings and U.S.

tax law changes in 2025 relative to 2024.

The effective tax rates for both periods were unfavorably impacted by non-deductible acquired IPR&D charges, with a larger impact occurring in 2024.

See Note 14 to the consolidated financial statements for additional information.

For additional information for other–net, (income) expense, see Note 18 to the consolidated financial statements.

Operating Results—2024

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• potential business development activities, including acquisitions, collaborations, investments, and licensing arrangements.

• contributions to our defined benefit pension and retiree health benefit plans.

Our management continuously evaluates our liquidity and capital resources, including our access to external capital, to ensure we can adequately and efficiently finance our capital requirements.

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We are making investments in global facilities to manufacture existing and future products.

These investments, and other capital investments that support our operations, have increased our capital expenditures and will result in meaningfully higher capital expenditures over the next several years.

These investments, and other capital investments that support our operations, have increased our capital expenditures and will result in meaningfully higher capital expenditures in the near term.

As we expand our manufacturing capacity in order to meet existing and expected demand of our medicines, we have entered, and expect to continue to enter, into various agreements for contract manufacturing and for supply of materials.

The executed agreements could, under certain circumstances, require us to pay up to approximately $14 billion if we do not purchase specified amounts of goods or services primarily related to our incretin medicines, including medicines in development, over the durations of the agreements, which are generally up to 8 years.

Executed agreements related to our medicines in development could, under certain circumstances, require us to pay up to approximately $10 billion if we do not purchase specified amounts of goods or services over the durations of the agreements, which are generally up to 8 years.

Cash and cash equivalents increased to $7.3 billion as of December 31, 2025, compared with $3.3 billion at December 31, 2024.

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In addition to our cash and cash equivalents, we held total investments of $2.9 billion and $3.4 billion as of December 31, 2025 and 2024, respectively.

As of December 31, 2025, we had approximately $902 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years.

See Note 7 to the consolidated financial statements for additional information.

We paid $3.0 billion in 2025 for acquired IPR&D primarily related to the acquisitions of Scorpion's PI3Kα inhibitor program STX-478 and of SiteOne.

We paid $3.3 billion in 2024 for acquired IPR&D primarily related to the acquisition of Morphic.

We paid $947.7 million in 2024 primarily related to the acquisition of a manufacturing site in Wisconsin.

See Note 4 to the consolidated financial statements for additional information.

As part of our business development activities in 2026, we have entered into acquisition agreements, subject to closing conditions.

Potential amounts payable at closing for these pending acquisitions would be less than $3 billion.

As of December 31, 2025, total debt was $42.5 billion, an increase of $8.9 billion compared with $33.6 billion at December 31, 2024.

In February 2025, we issued $6.5 billion of fixed-rate notes.

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.

See Note 11 to the consolidated financial statements for additional information.

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The quarterly dividend was increased to $1.73 per share effective for the dividend to be paid in the first quarter of 2026, resulting in an indicated annual rate for 2026 of $6.92 per share.

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.

In 2025, we repurchased $4.1 billion of shares under our $15.0 billion share repurchase program that our board authorized in December 2024.

As of December 31, 2025, we had $10.9 billion remaining under this program.

See Note 13 to the consolidated financial statements for additional information.

See "—Executive Overview—Other Matters—Patent Matters" for information regarding losses of patent protection.

Both domestically and abroad, we monitor the potential impacts of the economic environment and international tension and conflicts;

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dollar interest rates.

In an effort to manage interest rate exposures, we strive to achieve an acceptable balance between fixed and floating rate debt positions and in some cases we enter into interest rate derivatives to help maintain that balance.

As of December 31, 2024, all of our total long-term debt is at a fixed rate.

We have converted approximately 5 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.

In an effort to manage interest-rate exposures, we may enter into derivative contracts to achieve an acceptable balance between fixed- and floating-rate debt or to reduce cash flow variability from changes in interest rates as part of anticipated debt issuances.

Based on our overall interest rate exposure at December 31, 2025 and 2024, including derivatives and other interest rate risk-sensitive instruments, a hypothetical 10 percent change in interest rates applied to the fair value of the instruments as of December 31, 2025 and 2024, respectively, would not have a material impact on earnings, cash flows, or fair values of interest rate risk-sensitive instruments over a one-year period.

Our foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S.

dollar against the euro, Japanese yen, and Chinese yuan.

dollar against the euro, Japanese yen, Chinese yuan, and British pound sterling.

We face foreign currency exchange exposures when we enter into transactions arising from subsidiary trade and loan payables and receivables denominated in foreign currencies.

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dollar at exchange rates that have fluctuated from the beginning of the period.

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

We in some cases enter into foreign currency forward or option derivative contracts to reduce the effect of fluctuating currency exchange rates.

Our corporate risk-management policy outlines the minimum and maximum hedge coverage of such exposures.

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We periodically analyze the fair values of the outstanding foreign currency derivative contracts to determine their sensitivity to changes in foreign exchange rates.

A hypothetical 10 percent change in exchange rates (primarily against the U.S.

dollar) applied to the fair values of our outstanding foreign currency derivative contracts as of December 31, 2024 and 2023, would not have a material impact on earnings, cash flows, or financial position over a one-year period.

This sensitivity analysis does not consider the impact that hypothetical changes in exchange rates would have on the underlying foreign currency denominated transactions.

As of December 31, 2025 and 2024, a hypothetical 10 percent change in currency exchange rates (primarily against the U.S.

dollar) applied to the fair values of our outstanding foreign currency derivative contracts and the underlying assets and liabilities would not have a material impact on earnings, cash flows, or financial position over a one-year period.

Our fair value risk exposure relates primarily to our public equity investments and to our equity investments that do not have readily determinable fair values.

As of December 31, 2024 and 2023, our carrying values of these investments were $1.35 billion and $1.32 billion, respectively.

A hypothetical 20 percent change in fair value of the equity instruments would have impacted other-net, (income) expense by $269.9 million and $263.9 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2025 and 2024, a hypothetical 10 percent change in fair value of the equity instruments would not have a material impact on earnings, cash flows, or financial position over a one-year period.

We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

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Our most critical accounting estimates have been discussed with our audit committee and are described below.

Revenue Recognition and Sales Return, Rebate, and Discount Accruals

Revenue Recognition and Sales Rebate, Discount, and Return Accruals

Background and Uncertainties

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

For product sales to customers, provisions for returns, rebates and discounts are established in the same period the related product sales are recognized.

To determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts.

For product sales to customers, provisions for rebates, discounts, and returns are established in the same period the related product sales are recognized.

Contracts with direct and indirect customers may provide for various rebates and discounts, which we estimate as a reduction of net product revenue at the time we recognize a sale to a direct customer.

Significant judgments are required in making these estimates.

The largest of our sales rebate and discount amounts include rebates associated with sales covered by managed care, Medicare, Medicaid, and chargeback programs, as well as reductions in revenue related to our patient assistance programs, in the U.S.

In determining the appropriate accrual amount, we consider our historical rebate payments for these programs, as well as patient assistance program costs, by product as a percentage of our historical sales as well as any significant changes in sales trends (e.g., patent expiries and product launches), an evaluation of the current contracts for these programs, the percentage of our products that are sold via these programs, and our product pricing.

Although we accrue a liability for revenue reductions related to these programs at the time we record the sale, the reduction related to that sale is typically paid up to six months later.

Because of this time lag, in any particular period our net product revenue may incorporate revisions of accruals for several periods.

In determining the appropriate accrual amount, we consider our historical payments for these programs by product as a percentage of our historical sales, any significant changes in sales trends, an evaluation of the current contracts for these programs, the percentage of our products that are sold via these programs, and our product pricing.

Since there is a timing lag between the product sale and the settlement of accruals related to these programs, our net product revenue may incorporate revisions of accruals for several periods.

Refer to Note 2 to the consolidated financial statements for further information on revenue recognition and sales return, rebate, and discount accruals.

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Financial Statement Impact

We believe that our accruals for sales returns, rebates, and discounts are reasonable and appropriate based on current facts and circumstances.

We believe that our accruals for sales rebates, discounts, and returns are reasonable and appropriate based on current facts and circumstances.

Our rebate and discount liabilities are included in sales rebates and discounts on our consolidated balance sheet.

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As of December 31, 2025, a 5 percent change in our consolidated sales return, rebate, and discount liability would result in a change in revenue of approximately $897 million.

The portion of our consolidated sales return, rebate, and discount liability resulting from sales of our products in the U.S.

was approximately 90 percent as of December 31, 2024 and 2023.

The portion of our consolidated sales rebate, discount, and return liability balances resulting from sales of our products in the U.S.

was approximately 87 percent and 90 percent as of December 31, 2025 and 2024, respectively.

The following represents a roll-forward of our most significant U.S.

sales return, rebate, and discount liability balances, including managed care, Medicare, Medicaid, chargeback, and patient assistance programs:

Sales return, rebate, and discount liabilities, beginning of year $ 10,667.5 $ 8,214.1

sales rebate, discount, and return liability balances, including managed care, Medicare, Medicaid, chargeback, and patient assistance programs:

Sales rebate, discount, and return liabilities, beginning of year $ 10,313 $ 10,668

Reduction of net sales (1)

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Cash payments (57,299) (41,807)

Sales return, rebate, and discount liabilities, end of year $ 10,312.8 $ 10,667.5

(1) Adjustments of the estimates for these returns, rebates, and discounts to actual results were less than 2 percent of consolidated revenue for each of the years presented.

Sales rebate, discount, and return liabilities, end of year $ 15,148 $ 10,313

(1) Adjustments of the estimates for these rebates, discounts, and returns to actual results were less than 2 percent of consolidated revenue for each of the years presented.

Litigation Liabilities and Other Contingencies

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In assessing our insurance coverage, we consider the policy coverage limits and exclusions, the potential for denial of coverage by the insurance company, the financial condition of the insurers, and the possibility of and length of time for collection.

Due to a very restrictive market for liability insurance, we are predominantly self-insured for liability losses for all our currently and previously marketed products, as well as for litigation or investigations related to our pricing practices or other similar matters.

The ability to insure against such exposures is limited, and due to a very restrictive market for liability insurance we are predominantly self-insured for liability losses for all our currently and previously marketed products.

In addition to insurance coverage, we consider any third-party indemnification to which we are entitled or under which we are obligated.

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The fair values of identifiable intangible assets are primarily determined using the "income method," as described in Note 8 to the consolidated financial statements.

The fair value of any contingent consideration liability that results from a business combination is primarily determined using a discounted cash flow analysis, as described in Note 7 to the consolidated financial statements.

The fair value of any contingent consideration liability that results from a business combination is primarily determined using a discounted cash flow analysis.

Estimating the fair value of contingent consideration requires the use of significant estimates and judgments, including, but not limited to, probability of technical success, timing of the potential milestone event, and the discount rate.

Financial Statement Impact

As of December 31, 2024, a 5 percent change in the contingent consideration liabilities would result in a change in income before income taxes of $1.6 million.

As of December 31, 2025, a 5 percent change in the contingent consideration liabilities would not result in a material impact on earnings or financial position.

Impairment of Indefinite-Lived and Long-Lived Assets

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As of December 31, 2025, a 5 percent change in the amount of uncertain tax positions and the valuation allowance would result in a change in net income of $160 million and $61 million, respectively.

Retirement Benefits Assumptions

Background and Uncertainties

Defined benefit pension plan and retiree health benefit plan costs include assumptions for the discount rate, expected return on plan assets, and retirement age.

These assumptions have a significant effect on the amounts reported.

In addition to the analysis below, see Note 15 to the consolidated financial statements for additional information regarding our retirement benefits.

Annually, we evaluate the discount rate and the expected return on plan assets in our defined benefit pension and retiree health benefit plans.

We use an actuarially determined, plan-specific yield curve of high quality, fixed income debt instruments to determine the discount rates.

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 (approximately 75 percent of which are growth investments), and the views of leading financial advisers and economists.

We may also review our historical assumptions compared with actual results, as well as the discount rates and expected return on plan assets of other companies, where applicable.

In evaluating our expected retirement age assumption, we consider the retirement ages of our past employees eligible for pension and medical benefits together with our expectations of future retirement ages.

Financial Statement Impact

If the 2024 discount rate for the U.S.

defined benefit pension and retiree health benefit plans (U.S.

plans) were to change by a quarter percentage point, income before income taxes would change by $15.0 million.

If the 2024 expected return on plan assets for U.S.

plans were to change by a quarter percentage point, income before income taxes would change by $33.2 million.

If our assumption regarding the 2024 expected age of future retirees for U.S.

plans were adjusted by one year, our income before income taxes would be affected by $35.9 million.

plans, including Puerto Rico, represent approximately 80 percent for total projected benefit obligation and 85 percent for total plan assets at December 31, 2024.

LEGAL AND REGULATORY MATTERS

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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 7. Management’s Discussion and Analysis