What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-12 compared with 2025-02-19 · 447 added, 900 removed, 855 unchanged (61% of the section changed)

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ELI LILLY AND COMPANY AND SUBSIDIARIES

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

(Dollars and shares in millions, except per-share data)

Year Ended December 31,

2025 2024 2023

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

Revenue $ 65,179 $ 45,043 $ 34,124

Costs, expenses, and other:

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Marketing, selling, and administrative 11,094 8,594 7,404

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

Acquired in-process research and development 2,910 3,280 3,800

Asset impairment, restructuring, and other special charges 484 861 68

(Note 5) 860.6 67.7 244.6

Other—net, (income) expense (Note 18) 218.6 ( 96.7 ) 320.9

Other—net, (income) expense 571 219 ( 97 )

39,448 32,363 27,570

Income before income taxes 25,731 12,680 6,554

Income taxes (Note 14) 2,090.4 1,314.2 561.6

Income taxes 5,091 2,090 1,314

Net income $ 20,640 $ 10,590 $ 5,240

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Net income $ 20,640 $ 10,590 $ 5,240

Other comprehensive income (loss):

Change in foreign currency translation gains (losses) ( 424.2 ) ( 25.8 ) ( 248.1 )

Change in net unrealized gains (losses) on available-for-sale securities ( 7.1 ) 14.1 ( 53.2 )

Change in retirement benefit plans (Note 15)

651.8 ( 776.5 ) 616.9

Change in net unrealized gains (losses) on cash flow hedges 79.3 109.5 432.9

Other comprehensive income (loss) before income taxes 299.8 ( 678.7 ) 748.5

Benefit (expense) for income taxes related to other comprehensive income (loss) ( 294.7 ) 196.3 ( 250.0 )

Other comprehensive income (loss), net of tax (Note 17)

5.1 ( 482.4 ) 498.5

Other comprehensive income (loss), net of taxes:

Foreign currency translation 1,241 ( 571 ) 55

Retirement benefit plans 192 519 ( 635 )

Other 9 57 98

Total other comprehensive income (loss) 1,442 5 ( 482 )

Comprehensive income $ 22,082 $ 10,595 $ 4,758

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ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions, shares in thousands)

(Dollars and shares in millions)

Current Assets

Cash and cash equivalents (Note 7) $ 3,268.4 $ 2,818.6

Short-term investments (Note 7) 154.8 109.1

Accounts receivable, net of allowances of $ 14.9 (2024) and $ 14.8 (2023)

11,005.7 9,090.5

Cash and cash equivalents $ 7,268 $ 3,268

Accounts receivable 17,760 11,006

Other receivables 2,395 2,270

Inventories (Note 6) 7,589.2 5,772.8

Inventories 13,744 7,589

Prepaid expenses 14,315 8,341

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Total current assets 55,629 32,740

Investments (Note 7) 3,215.9 3,052.2

Goodwill (Note 8) 5,770.3 4,939.7

Other intangibles, net (Note 8) 6,166.3 6,906.6

Deferred tax assets (Note 14) 8,000.6 5,477.3

Property and equipment, net (Note 9) 17,102.4 12,913.6

Noncurrent Assets

Investments 2,802 3,216

Goodwill 5,898 5,770

Other intangibles, net 6,521 6,166

Deferred tax assets 9,959 8,001

Property and equipment, net 24,675 17,102

Other noncurrent assets 6,992 5,720

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Current Liabilities

Short-term borrowings and current maturities of long-term debt (Note 11) $ 5,117.1 $ 6,904.5

Short-term borrowings and current maturities of long-term debt $ 1,635 $ 5,117

Accounts payable 5,379 3,229

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Sales rebates and discounts 17,382 11,539

Dividends payable 1,346.3 1,169.2

Other current liabilities 8,457 6,397

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Noncurrent Liabilities

Long-term debt (Note 11) 28,527.1 18,320.8

Accrued retirement benefits (Note 15) 1,300.5 1,438.8

Long-term income taxes payable (Note 14) 4,060.9 3,849.2

Long-term debt 40,868 28,527

Long-term income taxes payable 5,875 4,061

Other noncurrent liabilities 3,970 3,479

Total noncurrent liabilities 50,713 36,067

Commitments and Contingencies (Note 16)

Eli Lilly and Company Shareholders' Equity (Notes 12 and 13)

Commitments and Contingencies

Common stock—no par value

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Employee benefit trust ( 3,013 ) ( 3,013 )

Accumulated other comprehensive loss (Note 17) ( 4,321.9 ) ( 4,327.0 )

Cost of common stock in treasury

( 49.5 ) ( 44.2 )

Total Eli Lilly and Company shareholders' equity 14,192.1 10,771.9

Noncontrolling interests 79.5 91.8

Accumulated other comprehensive loss ( 2,880 ) ( 4,322 )

Other equity 22 31

Total equity 26,535 14,272

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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

(Dollars and shares in millions, except per-share data)

Common Stock Additional

Capital Retained

Earnings Employee Benefit Trust Accumulated Other Comprehensive Loss Common Stock in Treasury

Noncontrolling Interest

Shares Amount Shares Amount

Earnings Employee Benefit Trust Accumulated Other Comprehensive Loss

Shares Amount

Balance at January 1, 2023

950.6 $ 594 $ 6,921 $ 10,043 $ ( 3,013 ) $ ( 3,845 )

Net income (loss) 6,244.8 ( 20.9 )

Other comprehensive income, net of tax 498.5

Net income 5,240

Other comprehensive loss, net of tax ( 482 )

Cash dividends declared per share:

Retirement of treasury shares ( 5,607 ) ( 3.5 ) ( 1,496.5 ) ( 5,607 ) 1,500.0

Purchase of treasury shares 5,607 ( 1,500.0 )

Purchases of common stock ( 2.3 ) ( 1 ) ( 749 )

Issuance of stock under employee stock plans, net 1.5 1 ( 300 )

Stock-based compensation 629

Other 3.3 ( 29.1 )

Balance at December 31, 2023

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Net income 10,590

Other comprehensive loss, net of tax ( 482.4 )

Other comprehensive income, net of tax 5

Cash dividends declared per share:

Retirement of treasury shares ( 2,299 ) ( 1.4 ) ( 748.6 ) ( 2,299 ) 750.0

Purchase of treasury shares 2,299 ( 750.0 )

Purchases of common stock ( 3.0 ) ( 2 ) ( 2,498 )

Issuance of stock under employee stock plans, net 1.1 — ( 457 )

Stock-based compensation 646

Other ( 0.8 ) ( 2.5 ) ( 44.8 )

Balance at December 31, 2024

947.9 592 7,439 13,545 ( 3,013 ) ( 4,322 )

Net income (loss) 10,590.0 ( 6.0 )

Net income 20,640

Other comprehensive income, net of tax 1,442

Cash dividends declared per share:

Retirement of treasury shares ( 2,964 ) ( 1.8 ) ( 2,498.2 ) ( 2,964 ) 2,500.0

Purchase of treasury shares 2,964 ( 2,500.0 )

Purchases of common stock ( 4.8 ) ( 3 ) ( 4,105 )

Issuance of stock under employee stock plans, net 1.7 1 ( 719 )

Stock-based compensation 626

Other ( 1.6 ) ( 16.8 ) ( 6.3 )

Balance at December 31, 2025

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Stock-based compensation expense 626 646 629

Investment (gains) losses, net

49.8 23.5 420.0

Gains on sale of product rights ( 180 ) ( 224 ) ( 1,879 )

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Purchases of property and equipment ( 7,841 ) ( 5,058 ) ( 3,448 )

Proceeds from sales and maturities of short-term investments 148.9 192.2 121.4

Purchases of short-term investments ( 98.5 ) ( 98.2 ) ( 107.4 )

Proceeds from sales of and distributions from noncurrent investments 964 374 508

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Effect of exchange rate changes on cash and cash equivalents 372 ( 297 ) 169

Net increase (decrease) in cash and cash equivalents 449.8 751.6 ( 1,751.5 )

Net increase in cash and cash equivalents

4,000 449 752

Cash and cash equivalents at beginning of year 3,268 2,819 2,067

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ELI LILLY AND COMPANY AND SUBSIDIARIES

(Tables present dollars in millions)

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

Summary of Significant Accounting Policies and Implementation of New Financial Accounting Standards

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We generally do not have control by means other than voting interests.

Where our ownership of consolidated subsidiaries is less than 100 percent, the noncontrolling shareholders' interests are reflected as a separate component of equity.

All intercompany balances and transactions have been eliminated.

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Actual results could differ from those estimates.

We issued our financial statements by filing with the Securities and Exchange Commission (SEC) and have evaluated subsequent events up to the time of the filing of this Annual Report on Form 10-K.

We issued our financial statements by filing them with the Securities and Exchange Commission (SEC) and have evaluated subsequent events up to the time of the filing of this Annual Report on Form 10-K.

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

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See Note 17 for additional information.

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

Research and Development Expenses and Acquired IPR&D

Research and development costs are expensed as incurred.

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Foreign Currency Translation

Operations in our subsidiaries outside the United States (U.S.) are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash.

Operations in our subsidiaries outside the U.S.

are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash.

The results of operations for our subsidiaries outside the U.S.

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Advertising Expenses

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

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.

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

Global advertising expenses, comprised primarily of online marketing and television advertising, totaled $ 2.9 billion, $ 1.4 billion, and $ 1.1 billion in 2025, 2024, and 2023, respectively, which were less than 5 percent of revenue each year.

Other Significant Accounting Policies

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Implementation of New Financial Accounting Standards

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.

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.

Effective January 1, 2025, we prospectively adopted Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires incremental disaggregation pertaining to the effective tax rate reconciliation and income taxes paid.

See Note 14 for the income tax disclosures as required by Topic 740, as amended by ASU 2023-09.

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

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See Note 3 for additional information related to our collaborations and other arrangements.

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.

Collaboration and other revenue disclosed above includes the revenue resulting from our collaboration with Boehringer Ingelheim, as well as the sale of product rights.

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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Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 70 days from date of shipment.

Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less.

Any exceptions are either not material or we collect interest for payments made after the due date.

Provisions for rebates, discounts, and returns are established in the same period the related product sales are recognized.

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Further, they each accounted for between 20 percent and 29 percent of accounts receivable as of December 31, 2025 and 2024.

As of December 31, 2025 and 2024, our allowance for doubtful accounts was not material.

Significant judgments must be made in determining the transaction price for our sales of products related to anticipated rebates, discounts, and returns.

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• We initially invoice our customers at contractual list prices.

Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract.

As a consequence, 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.

Significant judgments are required in making these estimates.

• The rebate and discount amounts are recorded as a deduction to arrive at our net product revenue.

Sales rebates and discounts that require the use of judgment in the establishment of the accrual include managed care, Medicare, Medicaid, chargebacks, long-term care, hospital, patient assistance programs, and various other programs.

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

We estimate these accruals using an expected value approach.

• 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.

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

• In the U.S., 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 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.

• Most of our rebates outside the U.S.

are contractual or legislatively mandated and are estimated and recognized in the same period as the related sales.

In some large European countries, government rebates are based on the anticipated budget for pharmaceutical payments in the country.

An estimate of these rebates, updated as governmental authorities revise budgeted deficits, is recognized in the same period as the related sale.

are contractual or legislatively mandated.

Contractual rebates are generally provided as part of reimbursement programs for products.

Government rebates are generally based on the anticipated budget for pharmaceutical payments in the country.

Sales Returns - Background and Uncertainties

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This estimate is based on several factors, including:

historical return rates, expiration date by product (on average, approximately 24 months after the initial sale of a product to our customer), and estimated levels of inventory in the wholesale and retail channels, as well as any other specifically identified anticipated returns due to known factors such as the loss of patent exclusivity, product recalls and discontinuations, or a changing competitive environment.

We maintain a returns policy that allows most U.S.

customers to return most of our products for dating issues within a specified period prior to and subsequent to the product's expiration date.

Following the loss of exclusivity for a patent-dependent product, we expect to experience an elevated level of product returns as product inventory remaining in the wholesale and retail channels expires.

Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions.

historical return rates, expiration date by product, estimated levels of inventory in the wholesale and retail channels, patent exclusivity, product recalls and discontinuations, or a changing competitive environment.

We record the return amounts as a deduction to arrive at our net product revenue.

Once the product is returned, it is destroyed;

we do not record a right of return asset.

Our returns policies outside the U.S.

are generally more restrictive than in the U.S.

as returns are not allowed for reasons other than failure to meet product specifications in many countries.

Our reserve for future product returns for product sales outside the U.S.

is not material.

• As a part of our process to estimate a reserve for product returns, we regularly review the supply levels of our significant products at the major wholesalers in the U.S.

and in major markets outside the U.S., primarily by reviewing periodic inventory reports supplied by our major wholesalers and available prescription volume information for our products, or alternative approaches.

We attempt to maintain U.S.

wholesaler inventory levels at an average of approximately one month or less.

Causes of unusual wholesaler buying patterns include actual or anticipated product-supply issues, weather patterns, anticipated changes in the transportation network, redundant holiday stocking, and changes in wholesaler business operations.

In the U.S., the current structure of our arrangements provides us with data on inventory levels at our wholesalers;

however, our data on inventory levels in the retail channel is more limited.

Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.

• Actual U.S.

product returns have been less than 1 percent of our U.S.

revenue during each of the past three years and have not fluctuated significantly as a percentage of revenue, although fluctuations are more likely in periods following loss of patent exclusivity for major products in the U.S.

revenue during each of the past three years.

Adjustments to Revenue

Adjustments to revenue recognized as a result of changes in estimates for our most significant U.S.

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.

sales returns, rebates, and discounts liability balances for products shipped in previous periods were less than 1 percent, 3 percent, and 1 percent of U.S.

revenue during the years ended December 31, 2025, 2024, and 2023, respectively.

Collaboration and Other Arrangements

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

• Revenue related to products we sell pursuant to these arrangements is included in net product revenue at the earlier of when control of the asset transfers to the other party or when the product has no alternative use to us and we have right to payment.

• Profit-sharing due from our collaboration partners, which is based upon gross margins reported to us by our partners, is recognized as collaboration and other revenue as earned.

Royalty revenue from licensees and certain of our collaboration partners, which is based on sales to third parties of licensed products and technology, is recorded when the third-party sale occurs and the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

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For arrangements that involve variable consideration where we have sold intellectual property, we recognize revenue based on estimates of the amount of consideration we believe we will be entitled to receive from the other party, but only to the extent a significant reversal in the amount of revenue recognized is not probable of occurring when the uncertainties associated with the variable consideration are subsequently resolved.

These estimates are adjusted to reflect the actual amounts to be collected when those facts and circumstances become known.

Significant judgments must be made in determining the transaction price for our sales of intellectual property.

Because of the risk that products in development will not receive regulatory approval, we generally do not recognize any contingent payments that would be due to us upon or after regulatory approval.

• For arrangements involving multiple goods or services (e.g., research and development, marketing and selling, manufacturing, and distribution), each required good or service is evaluated to determine whether it is distinct.

If a good or service does not qualify as distinct, it is combined with the other non-distinct goods or services within the arrangement and these combined goods or services are treated as a single performance obligation for accounting purposes.

The arrangement's transaction price is then allocated to each performance obligation based on the relative standalone selling price of each performance obligation.

Contract Liabilities

Our contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not include sales returns, rebates, and discounts.

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 at December 31:

Contract liabilities $ 166.3 $ 193.6

The contract liabilities balances disclosed above as of December 31, 2024 and 2023 were primarily related to the remaining license period of symbolic intellectual property and obligations to supply product for a defined period of time.

During the years ended December 31, 2024, 2023, and 2022, revenue recognized from contract liabilities as of the beginning of the respective year was not material.

Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not expected to be material in any one year.

Disaggregation of Revenue

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Mounjaro $ 13,651 $ 8,950 $ 4,834 $ 9,315 $ 2,590 $ 329

13,484 4,926 176 58 — —

Trulicity 2,914 3,694 5,433 1,362 1,560 1,699

Zepbound 4,925.7 175.8 — — — —

Jardiance (2)

1,582 1,598 1,600 1,849 1,743 1,144

1,502.6 863.2 1,191.9 822.2 800.2 868.7

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 2,233 2,682 2,738 1,773 1,778 1,715

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Verzenio 3,464 3,421 2,509 2,259 1,886 1,354

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 1,888 1,615 1,288 1,765 1,831 1,507

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Taltz 2,333 2,152 1,832 1,230 1,108 928

228.7 225.5 148.2 728.7 697.2 682.3

Other immunology 631 306 226 1,053 827 812

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Neuroscience 997 780 696 394 694 2,183

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

Other neuroscience 218.2 134.4 119.2 268.5 371.1 439.2

Total neuroscience 779.9 696.0 612.4 693.5 2,182.5 933.8

COVID-19 antibodies (6)

— — 2,008.9 — — 14.7

Other 304 251 459 639 652 663

Total other 251.4 459.3 2,555.7 651.6 662.9 964.0

Revenue $ 43,481 $ 30,375 $ 21,791 $ 21,698 $ 14,668 $ 12,333

Numbers may not add due to rounding.

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

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

(2) Humalog revenue includes insulin lispro.

(3) Basaglar revenue includes Rezvoglar.

(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 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.

The following table summarizes revenue by geographical area:

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Revenue $ 65,179 $ 45,043 $ 34,124

Numbers may not add due to rounding.

(1) Revenue is attributed to the countries based on the location of the customer or other party .

Collaborations and Other Arrangements

We often enter into collaborative and other arrangements to develop and commercialize drug candidates or to sell the rights of a product.

See Note 2 for a discussion of our recognition of revenue from our collaborations and other arrangements.

Collaborative activities may include research and development, marketing and selling, manufacturing, and distribution for which we may receive from or pay to the collaboration partner expense reimbursements.

Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay.

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

Boehringer Ingelheim Collaboration

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

Boehringer Ingelheim's Jardiance product family, which includes Glyxambi, Synjardy, and Trijardy XR, is the significant product family included in the collaboration.

For the Jardiance product family in the most significant markets, which remains in the collaboration through December 31, 2028, we receive a share of net sales depending on performance of the product, which we recognize as collaboration and other revenue.

The following table summarizes our revenue recognized:

2025 2024 2023

Jardiance $ 3,432 $ 3,341 $ 2,745

In 2025 and 2024, we and Boehringer Ingelheim entered into amendments to our collaboration to adjust commercialization responsibilities for the Jardiance product family in certain markets, resulting in our recognition of one-time benefits of $ 370 million and $ 300 million as Jardiance revenue during the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2025, we recognized a $ 200 million sales-based milestone for Jardiance.

As of December 31, 2025, we have the right to receive up to $ 910 million in potential sales-based milestones related to the Jardiance product family in certain markets in 2026.

We have a license agreement with F.

Hoffmann-La Roche Ltd and Genentech, Inc.

(collectively, Roche), which provides us the worldwide development and commercialization rights to lebrikizumab, which is branded and trademarked as Ebglyss.

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, 2025, Roche is eligible to receive additional payments from us, including up to $ 975 million in potential sales-based milestones.

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

(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.

As of December 31, 2025, we are eligible to receive additional payments up to $ 1.2 billion in a series of sales-based milestones.

We have a license agreement with Chugai Pharmaceutical Co., Ltd (Chugai), which provides us with the worldwide development and commercialization rights to orforglipron.

In addition to milestone payment rights which are not material, Chugai has the right to receive tiered royalty payments on future worldwide net sales from mid single digits to low teens if the product is successfully commercialized.

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

During the year ended December 31, 2023, we recognized $ 1.4 billion in revenue primarily related to the net gain on the sale of rights for the olanzapine portfolio.

In 2023, we sold the rights for Baqsimi, a cardiometabolic health product, to Amphastar Pharmaceuticals, Inc.

During the year ended December 31, 2023, we recognized $ 579 million in revenue primarily related to the net gain on the sale of rights for Baqsimi.

As of December 31, 2025, we are eligible to receive payments of up to $ 450 million in a series of sales-based milestones.

We engage in various forms of business development activities to enhance or refine our product pipeline, including acquisitions, collaborations, investments, and licensing arrangements.

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

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

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

Manufacturing Facility Acquisition

Verve 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.

In July 2025, we acquired all shares of Verve Therapeutics, Inc.

(Verve) for a purchase price of $ 10.50 per share in cash (or an aggregate of $ 549 million, net of cash acquired), plus one non-tradeable contingent value right (CVR) per share that entitles the holder to receive up to an additional $ 3.00 per share (or an aggregate of up to approximately $ 300 million) payable, subject to certain terms and conditions, upon the achievement of a certain specified milestone.

Verve is developing genetic medicines for cardiovascular disease.

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

Our access to information was limited prior to this acquisition.

As a consequence, we are in the process of determining fair values and tax bases 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:

Estimated Fair Value at July 25, 2025

Acquired IPR&D (1)

Other assets and liabilities, net 39

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Cash acquired ( 389 )

Fair value of CVR liability ( 177 )

Fair value of equity interest in Verve held before the business combination ( 48 )

Cash paid, net of cash acquired $ 549

(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.

(1) Acquired IPR&D intangibles primarily relate to VERVE-102 (PCSK9 Editor).

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

Manufacturing Facility Acquisition

Overview of Transaction

In May 2024, we acquired NexPharm Parent HoldCo, LLC and Isopro Holdings, LLC, which together own the assets of a manufacturing site in Wisconsin, for a purchase price of $ 925 million, net of cash acquired.

The facility expands our global parenteral (injectable) product manufacturing network.

Assets Acquired and Liabilities Assumed

In connection with this acquisition, we recognized $ 817 million of goodwill, which 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 and is deductible for tax purposes, as well as $ 109 million of property and equipment.

POINT Acquisition

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(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, 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.

Under the terms of the agreement, we acquired potential gene therapy treatments for hearing loss and other inner ear conditions.

The lead gene therapies in clinical development that we acquired included GJB2 (which encodes connexin 26) for a common form of monogenic deafness and hearing loss;

AK-OTOF for hearing loss due to mutations in the otoferlin gene;

AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision;

and AK-antiVEGF for vestibular schwannoma.

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 December 1, 2022

Acquired IPR&D (1)

Other assets and liabilities, net 24.5

Acquisition date fair value of consideration transferred 547.3

Cash acquired ( 153.2 )

Fair value of CVR liability (3)

Cash paid, net of cash acquired $ 327.2

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

(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 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.

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

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

We recognized acquired IPR&D charges of $ 2.9 billion, $ 3.3 billion, and $ 3.8 billion for the years ended December 31, 2025, 2024, and 2023, respectively.

The following table summarizes our significant acquired IPR&D charges during 2025, 2024, and 2023.

Counterparty Compound, Therapy, or Asset

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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 1 216.3

SiteOne STC-004, Nav1.8 inhibitor for the treatment of pain July

2025 Phase 1 $ 494

Scorpion STX-478, PI3Kα inhibitor for the treatment of breast cancer and other advanced solid tumors March 2025 Phase 1 1,412

Morphic MORF-057, inhibitor of α4β7 integrin for the treatment of inflammatory bowel disease August 2024 Phase 2 2,549

DICE Therapeutics, Inc.

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ETx-22, a Nectin-4 antibody-drug conjugate for the treatment of urothelial cancer August 2023 Pre-clinical 407

BioMarin Pharmaceutical Inc.

Priority Review Voucher February 2022 Not applicable 110.0

(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.

In 2022, we entered into agreements with substantially all Petra shareholders to acquire their rights to receive any future milestone payments in exchange for a one-time payment.

As a result of these agreements, we recognized a charge of $ 333.8 million as acquired IPR&D in 2022.

Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα inhibitor are not expected to be material.

We recognized no other significant acquired IPR&D charges during the years ended December 31, 2024, 2023, and 2022.

Collaborations and Other Arrangements

We often enter into collaborative and other arrangements to develop and commercialize drug candidates or to sell the rights of a product.

See Note 2 for a discussion of our recognition of revenue from our collaborations and other arrangements.

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

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.

Rezvoglar is included in the Basaglar product family.

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 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;

therefore, our reported revenue for Jardiance may be reduced by any potential performance payments we make related to this product family.

The royalty received by us related to the Jardiance product family may also be increased or decreased depending on whether net sales for this product family exceed or fall below certain thresholds.

We pay to Boehringer Ingelheim a royalty on net sales for the Basaglar product family in the U.S.

We record our sales of the Basaglar product family to third parties as net product revenue with the royalty payments made to Boehringer Ingelheim recorded as cost of sales.

The following table summarizes our revenue recognized:

2024 2023 2022

Jardiance $ 3,340.9 $ 2,744.7 $ 2,066.0

Basaglar 676.9 728.3 760.4

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.

Incyte has the right to receive tiered, double digit royalty payments on worldwide net sales with rates ranging up to 20 percent.

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.

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.

The following table summarizes our net product revenue recognized:

2024 2023 2022

Olumiant $ 957.4 $ 922.6 $ 830.5

We have a collaboration agreement with Innovent Biologics, Inc.

(Innovent) to jointly develop and commercialize sintilimab injection in China, where it is branded and trademarked as Tyvyt.

We record our sales of Tyvyt to third parties as net product revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales.

We report as collaboration and other revenue our portion of the gross margin for Tyvyt sales made by Innovent to third parties.

The following table summarizes our revenue recognized:

2024 2023 2022

Tyvyt $ 526.0 $ 393.4 $ 293.3

We have a license agreement with F.

Hoffmann-La Roche Ltd and Genentech, Inc.

(collectively, Roche), which provides us the worldwide development and commercialization rights to lebrikizumab, which is branded and trademarked as Ebglyss.

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, 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.

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

(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.

During the years ended December 31, 2024, 2023, and 2022, collaboration and other revenue recognized under this license agreement was not material.

As of December 31, 2024, we are eligible to receive additional payments up to $ 1.25 billion in a series of sales-based milestones.

We have a license agreement with Chugai Pharmaceutical Co., Ltd (Chugai), which provides us with the worldwide development and commercialization rights to orforglipron.

Chugai has the right to receive tiered royalty payments on future worldwide net sales from mid single digits to low teens if the product is successfully commercialized.

As of December 31, 2024, Chugai is eligible to receive up to $ 140.0 million contingent upon the achievement of success-based regulatory milestones and up to $ 250.0 million in a series of sales-based milestones, contingent upon the commercial success of orforglipron.

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

COVID-19 Antibodies

We have a worldwide license and collaboration agreement with AbCellera Biologics Inc.

(AbCellera) to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including bamlanivimab and bebtelovimab, for which we hold development and commercialization rights.

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 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 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.

As the product we are manufacturing under this supply agreement has no alternative use to us and we have right to payment, we recognize net product revenue over time as we manufacture the product.

During the year ended December 31, 2023, we recognized $ 1.45 billion in revenue primarily related to the net gain on the sale of rights for the olanzapine portfolio.

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 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.

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

As the product we are manufacturing under this supply agreement has no alternative use to us and we have right to payment, we recognize net product revenue over time as we manufacture the product.

During the year ended December 31, 2023, we recognized $ 579.0 million in revenue primarily related to the net gain on the sale of rights for Baqsimi.

Asset Impairment, Restructuring, and Other Special Charges

Asset impairment, restructuring, and other special charges were $ 484 million, $ 861 million, and $ 68 million for the years ended December 31, 2025, 2024, and 2023, 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.

Asset impairment, restructuring, and other special charges recognized during the year ended December 31, 2025 were primarily related to a litigation charge and acquisition and integration costs associated with the acquisition of Verve.

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

See Note 4 for additional information related to our acquisition of Verve and Note 16 for additional information related to litigation charges.

We use the last-in, first-out (LIFO) method for the majority of our inventories located in the continental U.S., which results in a better matching of costs and revenues.

Other inventories are valued by the first-in, first-out (FIFO) method.

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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.

Pre-launch inventories capitalized as of December 31, 2025 were $ 1.5 billion, primarily related to orforglipron.

Financial Instruments

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Any change in fair value is recognized in other-net, (income) expense.

We adjust our equity investments without readily determinable fair values based upon changes in the equity instruments' values resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Downward adjustments resulting from an impairment are recorded based upon impairment considerations, including the financial condition and near-term prospects of the issuer, general market conditions, and industry specific factors.

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

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.

As of December 31, 2024, we had approximately $ 899 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years.

We record our available-for-sale debt securities at fair value, with changes in fair value reported as a component of accumulated other comprehensive income (loss).

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

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.

Impairment and credit losses related to available-for-sale securities were not material for the years ended December 31, 2024, 2023, and 2022.

The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of December 31, 2024:

Maturities by Period

Total Less Than

Years More Than 10 Years

Fair value of debt securities $ 668.8 $ 95.2 $ 225.5 $ 93.3 $ 254.8

A summary of the amount of unrealized gains and losses in accumulated other comprehensive loss and the fair value of available-for-sale securities in an unrealized gain or loss position follows:

Unrealized gross gains $ 1.6 $ 3.4

Unrealized gross losses 43.2 37.9

Fair value of securities in an unrealized gain position 142.6 159.2

Fair value of securities in an unrealized loss position 491.2 452.0

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.

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.

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

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

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Fair Value Measurements Using

Amount Cost (1)

Quoted Prices in Active Markets for Identical Assets

Amount Cost Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant

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Short-term investments:

government and agency securities $ 29.2 $ 29.3 $ 29.2 $ — $ — $ 29.2

Corporate debt securities 65.3 65.4 — 65.3 — 65.3

Asset-backed securities 0.6 0.7 — 0.6 — 0.6

Available-for-sale debt securities (2)

$ 16 $ 16 $ 9 $ 7 $ — $ 16

Other securities 89 89 — 12 78 89

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Noncurrent investments:

government and agency securities $ 140.2 $ 156.4 $ 140.2 $ — $ — $ 140.2

Corporate debt securities 211.4 225.0 — 211.4 — 211.4

Mortgage-backed securities 165.3 177.2 — 165.3 — 165.3

Asset-backed securities 56.7 57.5 — 56.7 — 56.7

Available-for-sale debt securities (2)

$ 360 $ 368 $ 69 $ 291 $ — $ 360

Other securities 85 54 — 2 83 85

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Short-term investments:

government and agency securities $ 32.1 $ 32.3 $ 32.1 $ — $ — $ 32.1

Corporate debt securities 52.0 52.1 — 52.0 — 52.0

Available-for-sale debt securities (2)

$ 95 $ 95 $ 29 $ 66 $ — $ 95

Other securities 60 60 — 17 43 60

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Noncurrent investments:

government and agency securities $ 148.1 $ 161.0 $ 148.1 $ — $ — $ 148.1

Corporate debt securities 214.3 226.6 — 214.3 — 214.3

Mortgage-backed securities 157.3 167.1 — 157.3 — 157.3

Asset-backed securities 53.5 54.4 — 53.5 — 53.5

Available-for-sale debt securities (2)

$ 573 $ 616 $ 140 $ 433 $ — $ 573

Other securities 150 103 — 6 144 150

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Noncurrent investments $ 3,216

(1) For available-for-sale debt securities, amounts disclosed represent the securities' amortized cost.

(1) We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents.

The cost of these investments approximates fair value.

(2) For available-for-sale debt securities, amounts disclosed represent the securities' amortized cost.

(3) Fair value disclosures are not applicable for equity method investments and investments accounted for under the measurement alternative for equity investments.

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Fair Value of Debt

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

Fair Value Measurements Using

Amount Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Fair

The following table summarizes the carrying amount and fair value using Level 2 inputs for our short-term and long-term debt as of December 31:

Amount Fair Value Carrying

Amount Fair Value

Short-term commercial paper borrowings $ — $ — $ 4,338 $ 4,319

December 31, 2024 $ 4,337.6 $ — $ 4,319.4 $ — $ 4,319.4

December 31, 2023 6,189.4 — 6,166.4 — 6,166.4

Long-term debt, including current portion 42,503 39,799 29,307 26,249

December 31, 2024 29,306.7 — 26,249.0 — 26,249.0

December 31, 2023 19,035.9 — 17,221.7 — 17,221.7

Risk Management and Related Financial Instruments

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

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

collateral is generally not required.

We seek to mitigate the risk associated with this concentration through our ongoing credit-review procedures and insurance.

The majority of our cash is held by a few major financial institutions that have been identified as Global Systemically Important Banks (G-SIBs) by the Financial Stability Board.

G-SIBs are subject to rigorous regulatory testing and oversight and must meet certain capital requirements.

We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations.

In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one financial institution or corporate issuer based on credit rating of our counterparty.

We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect significant counterparties to fail to meet their obligations given their investment grade credit ratings.

We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S.

accounts receivable.

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.

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 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.

To manage foreign currency and interest rate risk, we may enter into derivative instruments intended to offset losses and gains on the assets, liabilities, and transactions being hedged.

Such instruments are entered into in accordance with documented corporate risk-management policies.

Management reviews the correlation and effectiveness of our derivatives on a quarterly basis.

For derivative instruments that are designated and qualify as fair value hedges, the derivative instrument is marked to market, with gains and losses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure.

For derivative instruments that are designated and qualify as cash flow hedges, gains and losses are reported as a component of accumulated other comprehensive income (loss) (see Note 17) and reclassified into earnings in the same period the hedged transaction affects earnings.

For derivative and non-derivative instruments that are designated and qualify as net investment hedges, the foreign currency translation gains or losses due to spot rate fluctuations are reported as a component of accumulated other comprehensive income (loss) (see Note 17).

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.

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.

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

Derivative instruments are recorded at fair value, with gains and losses recognized as follows:

• For derivative instruments designated as fair value hedges, gains and losses are recognized in earnings to offset the respective losses and gains recognized on the underlying exposure.

• For derivative instruments designated as cash flow hedges, gains and losses are reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings as an offset in the same period the hedged transaction affects earnings.

• For derivative and non-derivative instruments designated as net investment hedges, gains and losses are reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings upon the sale or substantial liquidation of our net investments.

• For derivative contracts not designated as hedging instruments, gains and losses are recognized in earnings to offset the respective losses and gains recognized on the underlying exposure.

Cash settlements of our derivative instruments are classified as operating activities in our consolidated statements of cash flows.

Foreign Currency Risk

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

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

We manage foreign currency risk primarily through the use of foreign currency debt and foreign currency forward contracts.

Our foreign currency-denominated notes designated as accounting hedges had carrying amounts of $ 6.0 billion and $ 5.3 billion as of December 31, 2025 and 2024, respectively.

Below summarizes the aggregate outstanding notional amounts of our foreign currency forward contracts in U.S.

dollar equivalent as of December 31:

Purchase Sell Purchase Sell

Designated as accounting hedges $ 67 $ — $ 8,909 $ —

Not designated as accounting hedges 14,281 9,264 8,755 8,848

Forward contracts generally have maturities not exceeding 12 months.

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

Purchase Sell

Currency Amount

(in millions) Currency Amount

(in millions)

Euro 7,522.1 U.S.

dollars 7,905.8

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

Interest Rate Risk

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.

We seek to address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments.

The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings.

Our primary interest-rate risk exposure results from changes in short-term U.S.

dollar interest rates.

In an effort to manage interest-rate exposures, we strive to achieve an acceptable balance between fixed- and floating-rate debt and investment positions and may enter into interest rate swaps or collars to help maintain that balance.

Interest rate swaps or collars that convert our fixed-rate debt to a floating rate are designated as fair value hedges of the underlying instruments.

Interest rate swaps or collars that convert floating-rate debt to a fixed rate are designated as cash flow hedges.

Interest expense on the debt is adjusted to include the payments made or received under the swap agreements.

Cash proceeds from or payments to counterparties resulting from the termination of interest rate swaps are classified as operating activities in our consolidated statements of cash flows.

At 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.

We also may enter into forward-starting interest rate swaps and treasury locks, which we designate as cash flow hedges, as part of any anticipated future debt issuances in order to reduce the risk of cash flow volatility from future changes in interest rates.

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.

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

The following effects of risk-management instruments were recognized in other–net, (income) expense:

2024 2023 2022

Fair value hedges:

Effect from hedged fixed-rate debt $ ( 16.3 ) $ 31.5 $ ( 209.8 )

Effect from interest rate contracts 16.3 ( 31.5 ) 209.8

Cash flow hedges:

Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss 7.2 13.5 16.5

Cross-currency interest rate swaps 93.0 ( 108.6 ) 8.6

Net losses on foreign currency exchange contracts not designated as hedging instruments 288.3 26.4 191.3

$ 388.5 $ ( 68.7 ) $ 216.4

During the years ended December 31, 2024, 2023, and 2022, the amortization of losses related to the portion of our risk management hedging instruments, fair value hedges, and cash flow hedges that was excluded from the assessment of effectiveness was not material.

The Effect of Risk-Management Instruments on Other Comprehensive Income (Loss)

The effective portion of risk-management instruments that was recognized in other comprehensive income (loss) is as follows:

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.

For 2025, 2024, and 2023, the impact of our interest rate contracts on our consolidated financial statements was not material.

Financial instruments that potentially subject us to credit risk include the following:

• Trade receivables:

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

collateral is generally not required.

We seek to mitigate the risk through our ongoing credit-review procedures and insurance.

• Interest-bearing investments:

In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one issuer based on credit rating of our counterparty.

• Derivatives:

In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one counterparty based on the credit rating of our counterparty.

The majority of our cash is held by a few major financial institutions that have been identified as Global Systemically Important Banks (G-SIBs) by the Financial Stability Board.

G-SIBs are subject to rigorous regulatory testing and oversight and must meet certain capital requirements.

We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations.

Impact of Significant Risk Management Programs on the Financial Statements

The following table summarizes the effects of significant risk-management programs:

2025 2024 2023

Net investment hedges:

Recognized in other–net, (income) expense:

Foreign currency forward contracts not designated as accounting hedges $ 489 $ 288 $ 26

Recognized in other comprehensive income (loss):

Foreign currency-denominated notes:

Cross-currency interest rate swaps 16.4 ( 27.4 ) 52.0

Designated as accounting hedges ( 690 ) 338 ( 220 )

Foreign currency forward contracts:

Cash flow hedges:

Forward-starting interest rate swaps 53.8 85.6 391.5

Cross-currency interest rate swaps 24.9 15.2 29.8

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

The following table summarizes certain fair value information at December 31, 2024 and 2023 for risk-management assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements Using

Amount Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Fair

December 31, 2024

Risk-management instruments

Interest rate contracts designated as fair value hedges:

Other current liabilities $ ( 2.0 ) $ — $ ( 2.0 ) $ — $ ( 2.0 )

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

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

Other receivables 297.0 — 297.0 — 297.0

Foreign exchange contracts not designated as hedging instruments:

Other receivables 39.5 — 39.5 — 39.5

Other current liabilities ( 93.4 ) — ( 93.4 ) — ( 93.4 )

Contingent consideration liabilities:

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

Fair Value Measurements Using

Amount Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Fair

December 31, 2023

Risk-management instruments

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 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:

Designated as accounting hedges ( 643 ) 343 ( 107 )

The following table summarizes the fair value of assets and liabilities on a gross basis for significant risk-management programs using Level 2 inputs as of December 31:

Foreign currency forward contracts:

Designated as accounting hedges:

Other receivables $ — $ 297

Other noncurrent assets 63.1 — 63.1 — 63.1

Foreign exchanges contracts designated as hedging instruments:

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

Foreign exchange contracts not designated as hedging instruments:

Not designated as accounting hedges:

Other receivables 39 40

Other current liabilities ( 329 ) ( 93 )

Contingent consideration liabilities:

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

Other noncurrent liabilities ( 64.4 ) — — ( 64.4 ) ( 64.4 )

Risk-management instruments above are disclosed on a gross basis.

There are various rights of setoff associated with certain of the risk-management instruments above that are subject to enforceable master netting arrangements or similar agreements.

Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-management instruments above, individually, these financial rights are not material.

Contingent consideration liabilities relate to our liabilities arising in connection with the CVRs issued as a result of acquisitions of businesses.

The fair values of the CVR liabilities were estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participant's view of the expected cash payments associated with the agreed upon regulatory milestones based on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates.

Goodwill and Other Intangibles

2 unchanged sentences

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 2024 was primarily related to our acquisition of a manufacturing site in Wisconsin.

The change in goodwill during 2025 was primarily related to our acquisition of Verve.

See Note 4 for additional information.

53 unchanged sentences

Depreciation expense $ 1,314 $ 1,058 $ 902

Capitalized interest costs were not material for the years ended December 31, 2024, 2023, and 2022.

The following table summarizes long-lived assets by geographical area:

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(1) Long-lived assets consist of property and equipment, net, operating lease assets, and unamortized computer software costs.

We determine if an arrangement is a lease at inception.

We have leases with terms up to 15 years primarily for corporate offices, research and development facilities, vehicles, and equipment, including some of which have options to extend and/or early-terminate the leases.

We determine the lease term by assuming the exercise of any renewal and/or early-termination options that are reasonably assured.

Operating lease right-of-use assets are presented as other noncurrent assets in our consolidated balance sheets, and the current and long-term portions of operating lease liabilities are included in other current liabilities and other noncurrent liabilities, respectively, in our consolidated balance sheets.

Short-term leases, which are deemed at inception to have a lease term of 12 months or less, are not recorded on the consolidated balance sheets.

Operating lease assets represent our right to use an underlying asset for the lease term, and operating lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lease expense for operating lease assets, which is recognized on a straight-line basis over the lease term, was $ 209.6 million, $ 171.2 million, and $ 148.8 million during the years ended December 31, 2024, 2023, and 2022, respectively.

Variable lease payments, which represent non-lease components such as maintenance, insurance and taxes, and which vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the payment obligation is incurred and were not material during the years ended December 31, 2024, 2023, and 2022.

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 was as follows:

We primarily have leases for corporate offices, research and development facilities, vehicles, and equipment.

Information related to operating leases as of December 31 was as follows:

2025 2024 Balance Sheet Classification

Operating lease right-of-use assets

$ 1,050.1 $ 1,024.2

$ 1,260 $ 1,050 Other noncurrent assets

Operating lease liabilities, current portion

222 176 Other current liabilities

Operating lease liabilities, noncurrent portion

1,140 971 Other noncurrent liabilities

Weighted-average remaining lease term 8 years 9 years

Weighted-average discount rate 4.7 % 4.6 %

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

2024 2023 2022

Operating cash flows from operating leases $ 201.8 $ 171.0 $ 149.7

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

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

Total lease payments 1,447.0

Less imputed interest 300.4

Total $ 1,146.6

Finance leases are included in property and equipment, short-term borrowings and current maturities of long-term debt, and long-term debt in our consolidated balance sheets.

Finance leases are not material to our consolidated financial statements.

We determine the lease term by assuming the exercise of any renewal and/or early-termination options that are reasonably assured.

We generally use our incremental borrowing rate in determining the present value of lease payments.

Debt at December 31 consisted of the following:

Short-term commercial paper borrowings $ 4,337.6 $ 6,189.4

Stated Interest Rate 2025 2024

Long-term notes:

Other long-term debt 6.8 6.5

Unamortized debt issuance costs ( 160.8 ) ( 90.5 )

Fair value adjustment on hedged long-term notes ( 13.4 ) 15.3

Total debt 33,644.2 25,225.3

Less current portion ( 5,117.1 ) ( 6,904.5 )

Long-term debt $ 28,527.1 $ 18,320.8

The weighted-average effective borrowing rates on short-term commercial paper borrowings were 4.61 percent and 5.39 percent at December 31, 2024 and 2023, respectively.

The following table summarizes long-term notes at December 31:

0.15 % Swiss franc denominated notes due 2024

Notes due 2025 2.750 % - 7.125 %

1 unchanged sentence

Notes due 2027 3.100 % - 5.500 %

1.625 % euro denominated notes due 2026

Notes due 2028 0.450 % - 4.550 % (1)

2 unchanged sentences

Notes due 2031 - 2040 0.500 % - 6.770 %

0.45 % Swiss franc denominated notes due 2028

Notes due 2041 - 2050 0.970 % - 4.650 %

1 unchanged sentence

Notes due 2061 - 2070 1.375 % - 5.650 %

0.42 % Japanese yen denominated notes due 2029

2.125 % euro denominated notes due 2030

0.625 % euro denominated notes due 2031

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

6.77 % notes due 2036

5.55 % notes due 2037

5.95 % notes due 2037

3.875 % notes due 2039

1.625 % British pound denominated notes due 2043

4.65 % notes due 2044

3.7 % notes due 2045

3.95 % notes due 2047

3.95 % notes due 2049

1.70 % euro denominated notes due 2049

1,038.7 1,107.6

0.97 % Japanese yen denominated notes due 2049

2.25 % notes due 2050

1,250.0 1,250.0

1.125 % euro denominated notes due 2051

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 )

Total long-term notes $ 29,474.0 $ 19,104.6

The weighted-average effective borrowing rate for each issuance of the long term-notes approximates the stated interest rate.

At December 31, 2024, we had a total of $ 8.45 billion of unused committed bank credit facilities, which consisted primarily of a $ 3.00 billion credit facility that expires in December 2028 and a $ 5.00 billion 364 -day facility that expires in September 2025, both of which are available to support our commercial paper program.

We have not drawn against the $ 3.00 billion and $ 5.00 billion facilities as of December 31, 2024.

Of the remaining committed bank credit facilities, the outstanding balances as of December 31, 2024 and 2023 were not material.

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 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.

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

2025 2026 2027 2028 2029

Maturities on long-term debt $ 780.9 $ 1,529.1 $ 2,515.8 $ 441.6 $ 3,076.1

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

The weighted-average effective borrowing rates based on long-term debt obligations and interest rates at December 31, 2024 and 2023, including the effects of interest rate swaps for hedged debt obligations, were 3.95 percent and 3.37 percent, respectively.

The aggregate amount of cash payments for interest on borrowings, net of capitalized interest, are as follows:

Other long term debt and adjustments ( 339 ) ( 298 )

Short-term commercial paper borrowings — 4,338

Total debt 42,503 33,644

Less current portion ( 1,635 ) ( 5,117 )

Long-term debt $ 40,868 $ 28,527

(1) Included in the 2028 tranche is $ 750 million of floating-rate notes issued in August 2025, with interest reset and paid quarterly using the Secured Overnight Financing Rate (SOFR) plus .530 percent.

The weighted-average effective borrowing rate on short-term commercial paper borrowings was 4.61 percent at December 31, 2024.

At December 31, 2025, we had $ 10.1 billion of unused committed bank credit facilities, which consisted primarily of a $ 4.0 billion credit facility that expires in December 2029 and a $ 6.0 billion 364 -day facility that expires in August 2026, both of which are available to support our commercial paper program.

Below are the details of our issuances of long-term debt for the periods presented, from which the cash proceeds were used for business development activities and general business purposes, including the repayment of commercial paper:

Date of Issuance Amount Maturity Stated Interest Rate

August 2025 $ 6,750 2028-2065 4.000 %- 5.650 % (1)

February 2025 6,500 2028-2065 4.550 %- 5.600 %

August 2024 5,000 2027-2064 4.150 %- 5.200 %

February 2024 6,500 2027-2064 4.500 %- 5.100 %

February 2023 4,000 2026-2063 4.700 %- 5.000 %

(1) Included in the 2028 tranche is $ 750 million of floating-rate notes, with interest reset and paid quarterly using SOFR plus .530 percent.

The following table summarizes information related to interest on borrowings, net of capitalized interest:

2025 2024 2023

Interest expense on borrowings $ 895 $ 781 $ 486

Cash payments for interest on borrowings 633 578 404

In accordance with the requirements of derivatives and hedging guidance, the portion of our fixed-rate debt obligations that is hedged as a fair value hedge is reflected in the consolidated balance sheets as an amount equal to the sum of the debt's carrying value plus the fair value adjustment representing changes in fair value of the hedged debt attributable to movements in market interest rates subsequent to the inception of the hedge.

Stock-Based Compensation

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

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

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 RSU, SVA, PA, and RVA shares.

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

Stock-based compensation expense was as follows:

2025 2024 2023

Stock-based compensation expense $ 626 $ 646 $ 629

Tax benefit 135.6 132.0 77.9

As of December 31, 2025, the total estimated remaining unrecognized compensation cost of $ 554 million was primarily related to 2.3 million of nonvested RSUs and will be amortized over the weighted-average remaining requisite service period of 21 months.

We provide newly issued shares of our common stock to satisfy the issuance of shares under our stock-based compensation awards.

At December 31, 2025, stock-based compensation awards may be granted under the 2002 Lilly Stock Plan for not more than 42.4 million additional shares.

Restricted Stock Units

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

RSUs are granted to certain employees with a vesting period of typically three years .

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

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

RVAs are granted to officers and management.

The number of shares actually issued, if any, varies depending on the growth of our stock price at the end of the three-year vesting period compared to our peers.

We measure the fair value of the RVA unit on the grant date using a Monte Carlo simulation model.

SVAs have been granted to officers and management.

The number of shares actually issued, if any, varies depending on our stock price at the end of the three-year vesting period compared to pre-established target stock prices.

We measure the fair value of the SVA unit on the grant date using a Monte Carlo simulation model.

The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award.

Expected volatilities utilized in the model are based on implied volatilities from traded options on our stock, historical volatility of our stock price, and other factors.

Similarly, the dividend yield is based on historical experience and our estimate of future dividend yields.

The risk-free interest rate is derived from the U.S.

Treasury yield curve in effect at the time of grant.

The weighted-average fair values of the SVA units granted during the years ended December 31, 2024, 2023, and 2022 were $ 1,030.87 , $ 349.63 , and $ 203.88 , respectively, determined using the following assumptions:

PAs were granted to officers and management prior to 2024, as we discontinued the program.

The number of PA shares actually issued 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.

The following table summarizes the weighted-average grant date fair value per share:

2025 2024 2023

Expected dividend yield 0.70 % 1.07 % 1.60 %

Risk-free interest rate 4.26 4.08 1.57

Volatility 28.64 29.87 32.99

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.

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

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

The number of shares actually issued, if any, varies depending on the growth of our stock price at the end of the three-year vesting period compared to our peers.

We measure the fair value of the RVA unit on the grant date using a Monte Carlo simulation model.

The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award.

Expected volatilities utilized in the model are based on implied volatilities from traded options on our stock, historical volatility of our stock price and our peers' stock price, and other factors.

RSUs $ 844.85 $ 749.74 $ 339.30

RVAs 1,154.90 1,106.40 397.95

SVAs 1,056.09 1,030.87 349.63

For RVAs and SVAs, the Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award.

Expected volatilities utilized in the model are based on implied volatilities from traded options on our stock, historical volatility of our stock price, historical volatility of our peers' stock price for RVAs, and other factors.

Similarly, the dividend yield is based on historical experience and our estimate of future dividend yields.

1 unchanged sentence

Treasury yield curve in effect at the time of grant.

The weighted-average fair value of the RVA units granted during the years ended December 31, 2024, 2023 and 2022 were $ 1,106.40 , $ 397.95 , and $ 230.00 , respectively, determined using the following assumptions:

The following table summarizes the assumptions used in determining the weighted-average grant date fair value for the RVAs and SVAs:

2025 2024 2023 2025 2024 2023

2 unchanged sentences

Volatility 29.10 27.69 31.25 31.54 28.64 29.87

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.

Shareholders' Equity

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.

In 2025, 2024, and 2023, we repurchased $ 4.1 billion, $ 2.5 billion, and $ 750 million, respectively, of shares associated with our share repurchase programs.

As of December 31, 2025, we had $ 10.9 billion remaining under our $ 15.0 billion share repurchase program authorized in December 2024.

We retire shares once we repurchase them.

We have 5 million authorized shares of preferred stock.

As of December 31, 2025 and 2024, no preferred stock was issued.

We have an employee benefit trust that held 50.0 million shares of our common stock at both December 31, 2024 and 2023, to provide a source of funds to assist us in meeting our obligations under various employee benefit plans.

We have an employee benefit trust that hel d 50 million shares of our common stock at both December 31, 2025 and 2024, to provide a source of funds to assist us in meeting our obligations under various employee benefit plans.

The cost basis of the shares held in the trust was $ 3.0 billion at both December 31, 2025 and 2024, and is shown as a reduction of shareholders' equity.

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The assets of the trust were not used to fund any of our obligations under these employee benefit plans during the years ended December 31, 2025, 2024, and 2023.

The following table summarizes the activity related to each component of accumulated other comprehensive income (loss):

Foreign Currency Translation (1)

Benefit Plans Other Accumulated Other Comprehensive Loss

Beginning balance at January 1, 2023

$ ( 1,874 ) $ ( 2,062 ) $ 91 $ ( 3,845 )

Other comprehensive income (loss) 55 ( 635 ) 98 ( 482 )

Balance at December 31, 2023

( 1,819 ) ( 2,697 ) 189 ( 4,327 )

Other comprehensive income (loss) ( 571 ) 519 57 5

Balance at December 31, 2024

( 2,390 ) ( 2,179 ) 246 ( 4,322 )

Other comprehensive income (loss) 1,241 192 9 1,442

Ending balance at December 31, 2025

$ ( 1,149 ) $ ( 1,987 ) $ 255 $ ( 2,880 )

(1) Includes the impact of foreign currency transactions designated as net investment hedges.

See Note 7 for additional information.

Where our ownership of consolidated subsidiaries is less than 100 percent, the noncontrolling shareholders' interests are reflected in other equity as of December 31, 2025 and 2024 and are not material to our consolidated financial statements.

Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates.

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Foreign 2,159 1,430 613

State 31.2 24.3 45.5

Total current tax expense

Federal ( 2,178.7 ) ( 2,369.0 ) ( 1,992.4 )

6,798 4,773 3,655

( 1,149 ) ( 2,210 ) ( 2,375 )

Foreign ( 558 ) ( 473 ) 34

State ( 31.3 ) ( 6.2 ) ( 114.6 )

Total deferred tax benefit ( 1,707 ) ( 2,683 ) ( 2,341 )

Income taxes $ 5,091 $ 2,090 $ 1,314

(1) The 2024, 2023, and 2022 current tax expense includes $ 129.9 million, $ 69.3 million, and $ 189.5 million of tax benefit, respectively, from utilization of net operating loss and other tax carryforwards.

Cash payments of U.S.

federal, state, and foreign income taxes, net of refunds, were as follows:

2025 2024 2023

Cash payments of income taxes (1)

$ 10,814 $ 6,562 $ 5,559

(1) 2025 included U.S.

federal cash payments of $ 3.3 billion and cash payments to Ireland of $ 6.6 billion.

Cash payments of income taxes increased $ 4.3 billion in 2025 compared with 2024, driven primarily by a $ 4.2 billion increase in Ireland resulting from higher production activity to meet growing global demand for our medicines and a prior year tax payment.

federal cash payments decreased from $ 3.8 billion in 2024 to $ 3.3 billion in 2025, driven primarily by immediate deductibility of U.S.

research and development expenses, a prior year tax refund, and accelerated depreciation on U.S.

capital investments, partially offset by higher U.S.

Refer to the composition of income tax expense above regarding current income tax expense on current-year income.

At December 31, 2025 and 2024, prepaid expenses included prepaid taxes of $ 12.9 billion and $ 7.1 billion, respectively.

Prepaid taxes largely reflect taxes paid on intercompany profit not yet recognized, primarily related to Ireland.

As of December 31, 2025, we have long-term income taxes payables of $ 1.1 billion that we expect to pay in 2027 and $ 4.8 billion that we cannot reasonably estimate the timing of future cash outflows.

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

federal statutory rate to income before income taxes to the reported consolidated income tax expense for 2025:

federal statutory tax rate $ 5,404 21.0 %

Foreign tax effects:

Statutory tax rate difference between Ireland and the U.S.

( 346 ) ( 1.3 ) %

Other 269 1.0 %

Other foreign jurisdictions ( 53 ) ( 0.2 ) %

Effect of cross-border tax laws (2)

Foreign-derived intangible income

( 334 ) ( 1.3 ) %

Other ( 149 ) ( 0.5 ) %

( 327 ) ( 1.3 ) %

Nontaxable or nondeductible items:

Non-deductible acquired IPR&D (3)

Other ( 121 ) ( 0.5 ) %

Other adjustments (4)

Income taxes $ 5,091 19.8 %

(1) Unrecognized tax benefits related to the current year are presented on a net basis in the category where the tax position is presented.

(2) The effect of cross-border tax laws includes the tax effects of both the cross-border tax and the related foreign tax credit allowed.

(3) Non-deductible acquired IPR&D was primarily related to the acquisitions of Scorpion and SiteOne in 2025.

See Note 4 for additional information related to acquisitions.

(4) Other adjustments include individually immaterial amounts for effects of changes in tax laws or rates enacted in the current period, changes in unrecognized tax benefits related to prior years, state and local income tax, and changes in valuation allowances.

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 (OBBBA) in 2025.

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

In July 2025, the 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.

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

federal statutory rate to income before income taxes to the reported consolidated income tax expense for 2024 and 2023:

Income tax at the U.S.

federal statutory tax rate $ 2,663 $ 1,377

Non-deductible acquired IPR&D (1)

Foreign-derived intangible income

( 307 ) ( 237 )

International operations, including Puerto Rico (2)

( 302 ) ( 187 )

General business credits ( 291 ) ( 258 )

Other ( 239 ) ( 58 )

Income taxes $ 2,090 $ 1,314

(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 4 for additional information related to acquisitions.

(2) Includes the impact of GILTI tax and other U.S.

taxation of foreign income.

Domestic and Puerto Rican companies contributed approximately 54 percent, 20 percent, and 14 percent for the years ended December 31, 2025, 2024, and 2023, respectively, to consolidated income before income taxes.

Significant components of our deferred tax assets and liabilities as of December 31 were as follows:

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Capitalized research and development $ 4,518 $ 4,599

Purchases of intangible assets 1,781.4 1,981.9

Sales rebates and discounts 2,779 1,776

Correlative tax adjustments 2,392 1,604

Purchases of intangible assets 1,721 1,781

Tax loss and other tax carryforwards

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Foreign tax redeterminations 367 335

Operating lease liabilities 240.5 253.3

Other 1,004 599

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Deferred tax liabilities:

Intangibles ( 1,176.4 ) ( 1,338.2 )

Earnings of foreign subsidiaries ( 1,291 ) ( 773 )

Prepaid employee benefits ( 611.0 ) ( 460.6 )

Intangibles ( 1,258 ) ( 1,176 )

Property and equipment ( 907 ) ( 558 )

Operating lease assets ( 219.1 ) ( 237.1 )

Financial instruments ( 137.3 ) ( 75.1 )

Inventories ( 58.2 ) ( 619.5 )

Prepaid employee benefits ( 707 ) ( 611 )

( 381 ) ( 414 )

Total deferred tax liabilities ( 4,544 ) ( 3,532 )

Deferred tax assets, net

$ 9,841 $ 7,927

The deferred tax asset and related valuation allowance amounts for U.S.

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At December 31, 2025, based on filed tax returns we have tax credit carryforwards and carrybacks of $ 1.4 billion available to reduce future income taxes;

$ 148.8 million, if unused, will expire in 2026, and $ 53.6 million, if unused, will expire between 2030 and 2044.

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.

$ 253 million will expire if unused.

The remaining portion of the tax credit carryforwards are fully reserved and primarily related to state tax credits of $ 899 million.

At December 31, 2025, based on filed tax returns we have net operating losses and other carryforwards for U.S.

federal and international tax purposes of $ 2.9 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.

$ 1.6 billion will never expire.

The remaining portion of the U.S.

federal and international net operating losses and other carryforwards are substantially reserved.

Deferred tax assets related to state net operating losses and other carryforwards of $ 357 million are fully reserved as of December 31, 2025.

At December 31, 2024 and 2023, prepaid expenses included prepaid taxes of $ 7.13 billion and $ 4.26 billion, respectively.

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.

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

At December 31, 2024 and 2023, we accrued an immaterial amount of foreign withholding taxes and state income taxes that would be owed upon future distributions of unremitted earnings of our foreign subsidiaries that are not indefinitely reinvested.

At December 31, 2025 and 2024, we accrued an immaterial amount of U.S.

federal tax, foreign withholding taxes, and state income tax that would be owed upon future distributions of unremitted earnings of our foreign subsidiaries that are not indefinitely reinvested.

For the amount considered to be indefinitely reinvested, it is not practicable to determine the amount of the related deferred income tax liability due to the complexities in the tax laws and assumptions we would have to make.

Cash payments of U.S.

federal, state, and foreign income taxes, net of refunds, were as follows:

2024 2023 2022

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

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.

federal statutory rate to income before income taxes to reported consolidated income tax expense:

2024 2023 2022

Income tax at the U.S.

federal statutory tax rate $ 2,662.9 $ 1,376.5 $ 1,429.3

Add (deduct):

Non-deductible acquired IPR&D (1)

566.0 677.2 68.3

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

International operations, including Puerto Rico (2)

( 302.1 ) ( 187.1 ) ( 299.5 )

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

Stock-based compensation (3)

( 184.7 ) ( 79.9 ) ( 48.9 )

Valuation allowance release ( 23.9 ) ( 4.2 ) ( 116.4 )

Other ( 30.2 ) 26.4 ( 28.7 )

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

(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 other U.S.

taxation of foreign income.

(3) Includes excess tax benefits from stock-based compensation and non-deductible stock-based compensation.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

Following is a reconciliation of the beginning and ending amount of gross unrecognized tax benefits:

2025 2024 2023

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Additions based on tax positions related to the current year 1,020 694 364

Additions for tax positions of prior years 41.7 78.2 34.6

Reductions for tax positions of prior years ( 63.1 ) ( 39.0 ) ( 10.9 )

Settlements ( 33.4 ) ( 4.7 ) ( 44.8 )

Lapses of statutes of limitation ( 8.9 ) ( 21.5 ) ( 11.8 )

Changes related to the impact of foreign currency translation ( 49.7 ) 30.7 ( 52.6 )

Other adjustments (1)

86 ( 113 ) 44

Ending balance at December 31 $ 5,082 $ 3,976 $ 3,395

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

(1) Other adjustments include individually immaterial changes related to prior-year positions, settlements, lapses of statutes of limitation, and foreign currency translation impacts.

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $ 3.2 billion and $ 2.6 billion at December 31, 2025 and 2024, respectively.

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

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In most major foreign and state jurisdictions, we are no longer subject to income tax examination for years before 2015.

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

examination of tax years 2019-2021 remains ongoing.

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.

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

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense and were not material for the years ended December 31, 2025, 2024, and 2023.

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Other current liabilities ( 73 ) ( 71 ) ( 9 ) ( 8 )

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

Other noncurrent liabilities ( 1,226 ) ( 1,167 ) ( 146 ) ( 133 )

Accumulated other comprehensive loss

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Net amount recognized $ 3,059 $ 2,910 $ 1,584 $ 1,489

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.

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 unrecognized net actuarial loss has not yet been recognized in net periodic pension costs and was included in accumulated other comprehensive loss at December 31, 2025 and 2024.

Unrecognized net actuarial loss for the U.S.

and Puerto Rico defined benefit pension and retiree health benefit plans is 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 $ 898 million increase in benefit obligation in 2025 was primarily driven by service and interest costs in excess of benefit payments.

The $ 930 million decrease in benefit obligation in 2024 was primarily driven by increases in the discount rates primarily reflected in actuarial (gain) loss.

The following represents our weighted-average assumptions:

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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.

Given the design of our retiree health benefit plans, healthcare-cost trend rates do not have a material impact on our financial condition or results of operations.

Expected benefit payments, which reflect expected future service, are as follows:

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Actuarial gain (loss) arising during period $ 138 $ 555 $ ( 764 ) $ 65 $ ( 37 ) $ ( 50 )

Amortization of prior service (benefit) cost included in net income 2.1 2.4 2.4 ( 5.6 ) ( 52.9 ) ( 54.8 )

Amortization of net actuarial (gain) loss included in net income 76 125 122 ( 4 ) ( 3 ) ( 6 )

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Total other comprehensive income (loss) during period $ 166 $ 697 $ ( 669 ) $ 62 $ ( 46 ) $ ( 108 )

We have defined contribution savings plans that cover our eligible employees worldwide.

The purpose of these plans is generally to provide additional financial security during retirement by providing employees with an incentive to save.

Our contributions to the plans are based on employee contributions and the level of our match.

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.

Benefit Plan Investments

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Our global benefit plans may enter into contractual arrangements (derivatives) to implement the local investment policy or manage particular portfolio risks.

Derivatives are principally used to increase or decrease exposure to a particular public equity, fixed income, commodity, or currency market more rapidly or less expensively than could be accomplished through the use of the cash markets.

The plans utilize both exchange-traded and over-the-counter instruments.

The maximum exposure to either a market or counterparty credit loss is limited to the carrying value of the receivable, and is managed within contractual limits.

We expect all of our counterparties to meet their obligations.

The gross values of these derivative receivables and payables are not material to the global asset portfolio, and their values are reflected within the tables below.

The defined benefit pension and retiree health benefit plan allocation for the U.S.

and Puerto Rico currently comprises approximately 85 percent growth investments and 15 percent fixed-income investments.

The growth investment allocation encompasses U.S.

and international public equity securities, hedge funds, private equity-like investments, and real estate.

The growth investment allocation encompasses public equity securities, hedge funds, private equity-like investments, and real estate.

These portfolio allocations are intended to reduce overall risk by providing diversification, while seeking moderate to high returns over the long term.

Public equity securities are well diversified and invested in U.S.

and international small-to-large companies across various asset managers and styles.

The remaining portion of the growth portfolio is invested in private alternative investments.

Fixed-income investments primarily consist of fixed-income securities in U.S.

Public equity securities - Securities are well diversified and invested in U.S.

and international companies across various asset managers and styles.

Fixed-income investments - These investments primarily consist of fixed-income securities in U.S.

treasuries and agencies, emerging market debt obligations, corporate bonds, bank loans, mortgage-backed securities, commercial mortgage-backed obligations, and any related repurchase agreements.

Hedge funds are privately owned institutional investment funds that generally have moderate liquidity.

Hedge funds seek specified levels of absolute return regardless of overall market conditions, and generally have low correlations to public equity and debt markets.

Hedge funds often invest substantially in financial market instruments (stocks, bonds, commodities, currencies, derivatives, etc.) using a very broad range of trading activities to manage portfolio risks.

Hedge fund strategies focus primarily on security selection and seek to be neutral with respect to market moves.

Common groupings of hedge fund strategies include relative value, tactical, and event driven.

Relative value strategies include arbitrage, when the same asset can simultaneously be bought and sold at different prices, achieving an immediate profit.

Tactical strategies often take long and short positions to reduce or eliminate overall market risks while seeking a particular investment opportunity.

Event strategy opportunities can evolve from specific company announcements such as mergers and acquisitions, and typically have little correlation to overall market directional movements.

Our hedge fund investments are made through limited partnership interests in fund-of-funds structures and directly into hedge funds.

Hedge funds - Our hedge fund investments are made through limited partnership interests in fund-of-funds structures and directly into hedge funds.

Plan holdings in hedge funds are valued based on net asset values (NAVs) calculated by each fund or general partner, as applicable, and we have the ability to redeem these investments at NAV.

Private equity-like investment funds typically have low liquidity and are made through long-term partnerships or joint ventures that invest in pools of capital invested in primarily non-publicly traded entities.

Underlying investments include venture capital (early stage investing), buyout, special situations, private debt, and private real estate investments.

Private equity management firms typically acquire and then reorganize private companies to create increased long term value.

Private equity-like funds usually have a limited life of approximately 10-15 years, and require a minimum investment commitment from their limited partners.

Our private equity-like investments are made both directly into funds and through fund-of-funds structures to ensure broad diversification of management styles and assets across the portfolio.

Plan holdings in private equity-like investments are valued using the value reported by the partnership, adjusted for known cash flows and significant events through our reporting date.

Values provided by the partnerships are primarily based on analysis of and judgments about the underlying investments.

Inputs to these valuations include underlying NAVs, discounted cash flow valuations, comparable market valuations, and may also include adjustments for currency, credit, liquidity and other risks as applicable.

The vast majority of these private partnerships provide us with annual audited financial statements including their compliance with fair valuation procedures consistent with applicable accounting standards.

Real estate is composed of public holdings.

Real estate investments in registered investment companies that trade on an exchange are classified as Level 1 on the fair value hierarchy.

Private equity-like investments - Private equity-like investments are made through long-term partnerships or joint ventures with limited liquidity and typical fund lives of 10 to 15 years.

Underlying investments include venture capital, buyout, special situations, private debt, and private real estate.

These investments are made both directly into funds and through fund-of-funds structures to ensure broad diversification across management styles and asset types.

Plan holdings in private equity-like investments are valued using partnership-reported values, adjusted for known cash flows and significant events through the reporting date.

Valuation inputs include underlying NAVs, discounted cash flow analyses, and comparable market data, with adjustments for currency, credit, liquidity, and other risks as applicable.

The majority of these partnerships provide annual audited financial statements confirming compliance with fair valuation procedures consistent with applicable accounting standards.

Real estate - Real estate investments in registered investment companies that trade on an exchange are classified as Level 1 on the fair value hierarchy.

Real estate investments in funds measured at fair value on the basis of NAV provided by the fund manager are classified as such.

These NAVs are developed with inputs including discounted cash flow, independent appraisal, and market comparable analyses.

Other assets include cash and cash equivalents and mark-to-market value of derivatives.

Other assets - Other assets include cash and cash equivalents and mark-to-market value of derivatives.

The cash value of the trust-owned insurance contract is primarily invested in investment-grade publicly traded equity and fixed-income securities.

Other than hedge funds, private equity-like investments, and a portion of the real estate holdings, which are discussed above, we determine fair values based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses.

The fair values of our defined benefit pension plan and retiree health plan assets as of December 31, 2024 by asset category were as follows:

The fair values of our defined benefit pension plan assets by asset category were as follows:

Fair Value Measurements Using

Asset Class Total Quoted Prices in Active Markets for

Total Quoted Prices in Active Markets for

Identical Assets

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(Level 3) Investments Valued at Net Asset Value (1)

Defined Benefit Pension Plans

As of December 31, 2025

Public equity securities $ 4,277 $ 1,179 $ 403 $ — $ 2,695

Fixed-income investments

2,083 55 1,517 — 511

International 1,517.3 453.7 336.7 — 726.9

Fixed income:

Developed markets 2,343.2 20.6 2,161.9 0.1 160.6

Developed markets - repurchase agreements ( 641.0 ) — ( 641.0 ) — —

Emerging markets 320.4 21.0 34.9 — 264.5

Private alternative investments:

Hedge funds 3,240 — — — 3,240

Equity-like funds 3,931.5 — — 9.4 3,922.1

Private equity-like investments

3,927 — — 6 3,921

Real estate 460 312 — — 148

Other 772.9 10.2 25.9 — 736.8

833 49 103 — 681

Total $ 14,820 $ 1,595 $ 2,023 $ 6 $ 11,196

Retiree Health Benefit Plans

As of December 31, 2024

Public equity securities $ 3,423 $ 1,056 $ 337 $ — $ 2,030

Fixed-income investments

2,023 42 1,556 — 425

International 103.7 41.0 — — 62.7

Fixed income:

Developed markets 63.0 — 63.0 — —

Emerging markets 26.0 — — — 26.0

Private alternative investments:

Hedge funds 3,058 — — — 3,058

Equity-like funds 346.1 — — 0.9 345.2

Cash value of trust owned insurance contract 1,464.9 — 1,464.9 — —

Private equity-like investments

3,931 — — 9 3,922

Real estate 451 301 — — 150

Other 64.3 3.6 ( 7.0 ) — 67.7

773 10 26 — 737

Total $ 13,658 $ 1,409 $ 1,919 $ 9 $ 10,321

(1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2024.

The activity in the Level 3 investments during the year ended December 31, 2024 was not material.

The fair values of our defined benefit pension plan and retiree health plan assets as of December 31, 2023 by asset category were as follows:

The fair values of our retiree health plan assets by asset category were as follows:

Fair Value Measurements Using

Asset Class Total Quoted Prices in Active Markets for Identical Assets

Total Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Observable Inputs

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(Level 3) Investments Valued at Net Asset Value (1)

Defined Benefit Pension Plans

As of December 31, 2025

Public equity securities $ 383 $ 114 $ — $ — $ 269

$ 1,379.7 $ 490.5 $ 0.3 $ — $ 888.9

International 1,408.9 441.2 333.4 — 634.3

Fixed income:

Developed markets 2,783.9 21.2 2,597.3 0.1 165.3

Developed markets - repurchase agreements ( 772.8 ) 13.2 ( 786.0 ) — —

Emerging markets 295.6 10.4 35.7 — 249.5

Private alternative investments:

Fixed-income investments

Hedge funds 314 — — — 314

Equity-like funds 4,093.7 — — 25.1 4,068.6

Private equity-like investments

363 — — 1 362

Cash value of trust owned insurance contract 1,529 — 1,529 — —

Real estate 30 30 — — —

Other 1,024.1 170.8 42.6 — 810.7

Total $ 2,775 $ 156 $ 1,577 $ 1 $ 1,041

Retiree Health Benefit Plans

As of December 31, 2024

Public equity securities $ 288 $ 98 $ — $ — $ 190

$ 127.0 $ 44.2 $ — $ — $ 82.8

International 89.9 38.2 — — 51.7

Fixed income:

Developed markets 74.9 — 74.9 — —

Emerging markets 23.4 — — — 23.4

Private alternative investments:

Fixed-income investments

Hedge funds 285 — — — 285

Equity-like funds 335.1 — — 2.4 332.7

Private equity-like investments

346 — — 1 345

Cash value of trust owned insurance contract 1,465 — 1,465 — —

Real estate 28 28 — — —

Other 97.8 23.2 2.1 — 72.5

64 4 ( 7 ) — 68

Total $ 2,566 $ 130 $ 1,521 $ 1 $ 914

(1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2023.

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

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.

Contingencies

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, 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.

The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements.

Legal proceedings that are significant or that we believe could become significant or material are described below.

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, 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;

We are and may become involved in various lawsuits, claims, government investigations and other legal proceedings that arise from time to time in the course of our business, including patent, environmental, commercial, contractual, licensing, employment, health and safety, consumer protection, pricing, access, consumer, sales and marketing, product liability, insurance, antitrust, securities, and regulatory compliance matters, among others.

Such matters may involve inquiries from or disputes with various types of parties, including governments, regulatory agencies, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others.

We cannot predict the final outcome of these proceedings, and while we intend to vigorously prosecute or defend our position as appropriate, there can be no assurance that we will be successful or obtain any requested relief.

Matters often develop over a long period of time, and expectations can change as a result of new findings, rulings, appeals, settlements, legal or regulatory changes, or other factors.

From time to time we may discontinue or settle and compromise matters as appropriate in our best interest.

Legal proceedings that we believe are significant or could become significant or material are described below.

For proceedings in which we are named as defendants, unless otherwise noted, we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued;

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.

Litigation accruals and environmental liabilities and the related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated balance sheets.

With respect to the product liability claims currently asserted against us, we have accrued for our estimated exposures to the extent they are both probable and reasonably estimable based on the information available to us.

We accrue for certain product liability claims incurred but not filed to the extent we can formulate a reasonable estimate of their costs.

We estimate these expenses based primarily on historical claims experience and data regarding product usage.

Legal defense costs expected to be incurred in connection with significant product liability loss contingencies are accrued when both probable and reasonably estimable.

Litigation accruals and environmental liabilities and any related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated balance sheets.

We accrue for estimated exposures to the extent they are both probable and reasonably estimable based on the then available information.

We accrue for certain unfiled product liability claims to the extent we can formulate a reasonable estimate of their exposure.

We estimate these exposures based primarily on historical claims experience and data regarding product usage.

Legal defense costs expected to be incurred in connection with significant liability loss contingencies are accrued when both probable and reasonably estimable.

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of additional product liability and related claims in the future.

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.

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

Patent Matters

In the course of our business, we are subject to actions and proceedings by third parties that seek to challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates, and technologies, including the matter described below.

Emgality Patent Litigation

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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).

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

In December 2025, the superior labor court (TST) significantly reduced the liquidated award.

Further appeals are possible.

In July 2019, at the LPA's request, the trial court ordered a freeze of certain of Lilly Brasil's immovable property, which amount was reduced on Lilly's appeal.

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.

The trial court is currently assessing the status of Lilly Brasil's compliance with the obligations as to the land.

Former Employee Litigation

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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.

Department of HHS, the Secretary of HHS, the 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.

It seeks declaratory, injunctive, and other related relief.

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

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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.

We have been named in various ADR petitions, filed between 2021 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.

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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.

District Court for the Western District of New York against us, Sanofi-Aventis U.S., LLC, Novo Nordisk Inc., and AstraZeneca Pharmaceuticals LP, 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.

After the district court dismissed the case for failure to state a claim, the U.S.

Court of Appeals for the Second Circuit reversed.

In the second half of 2025, the Second Circuit denied our petitions for rehearing.

This matter is ongoing.

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

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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).

The MDL court has issued various case management and other orders, including but not limited to orders establishing separate tracks for state attorney general claims, putative class actions, and non-class suits by self-funded payers;

orders dismissing certain claims;

and an order setting a constructive notice date of January 14, 2021 for statute of limitations purposes.

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.

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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.

The state's appeal to the Michigan Supreme Court remains pending.

Lilly entered into settlement agreements with New York and Minnesota to resolve allegations relating to insulin pricing in 2023 and 2024, respectively.

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

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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.

These include subpoenas, civil investigative demands, or information requests 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.

Federal Trade Commission, and attorneys general from various states and the District of Columbia.

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

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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.

In September 2025, the U.S.

Court of Appeals for the Seventh Circuit affirmed and we recognized a charge related to the matter.

In December 2025, the Seventh Circuit denied our petition for rehearing en banc.

We are assessing next steps.

Other Matters

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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

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.

In June 2025, the U.S.

Court of Appeals for the Ninth Circuit denied our appeal of the class certification order, and in August 2025 it denied our petition for rehearing en banc.

In November 2025, we and Takeda filed a petition for certiorari to the U.S.

Supreme Court.

Mounjaro, Trulicity, and Zepbound Product Liability Litigation

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

The complaints assert a variety of claims and generally seek damages and/or other relief.

Most of these lawsuits have been coordinated or consolidated for pretrial proceedings in two federal MDLs:

one focused on alleged gastrointestinal injuries, and the other relating to claims of non-arteritic anterior ischemic optic neuropathy (NAION).

Both MDLs are 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

In May 2021, we received a subpoena from the U.S.

Department of Justice requesting the production of certain documents relating to our manufacturing site in Branchburg, New Jersey.

We are cooperating with the subpoena.

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 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.

Trial resumed in October 2024.

There are also cases pending in various other federal and state courts.

In addition to the cases in the United States, there are two class action petitions in Israel, as well as a class action petition in Quebec, Canada.

Health Choice Alliance

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.

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 (TMFPA) based on allegations about certain patient support programs related to three of our products.

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

In August 2025, the relator purported to dismiss the first lawsuit and filed a second lawsuit in a different Texas state court adding the State of Texas as a party and expanding claims under the TMFPA to fifteen of our products.

We are opposing the relator's purported dismissal of the first lawsuit.

Research Corporation Technologies, Inc.

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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)

The following table summarizes the activity related to each component of other comprehensive income (loss):

(Amounts presented net of taxes) Foreign Currency Translation Gains (Losses) Net Unrealized Gains (Losses) on Available-For-Sale Securities Retirement Benefit Plans Net Unrealized Gains (Losses) on Cash Flow Hedges Accumulated Other Comprehensive Loss

Beginning balance at January 1, 2022

$ ( 1,550.2 ) $ 3.7 $ ( 2,583.6 ) $ ( 213.0 ) $ ( 4,343.1 )

Other comprehensive income (loss) before reclassifications ( 324.4 ) ( 52.2 ) 291.5 332.8 247.7

Net amount reclassified from accumulated other comprehensive loss 0.4 11.4 229.8 9.2 250.8

Net other comprehensive income (loss) ( 324.0 ) ( 40.8 ) 521.3 342.0 498.5

Balance at December 31, 2022

( 1,874.2 ) ( 37.1 ) ( 2,062.3 ) 129.0 ( 3,844.6 )

Other comprehensive income (loss) before reclassifications 78.9 10.1 ( 686.9 ) 79.7 ( 518.2 )

Net amount reclassified from accumulated other comprehensive loss ( 23.7 ) 0.8 51.9 6.8 35.8

Net other comprehensive income (loss) 55.2 10.9 ( 635.0 ) 86.5 ( 482.4 )

Balance at December 31, 2023

( 1,819.0 ) ( 26.2 ) ( 2,697.3 ) 215.5 ( 4,327.0 )

Other comprehensive income (loss) before reclassifications ( 580.2 ) ( 5.0 ) 424.6 62.0 ( 98.6 )

Net amount reclassified from accumulated other comprehensive loss 9.6 ( 0.5 ) 94.0 0.6 103.7

Net other comprehensive income (loss) ( 570.6 ) ( 5.5 ) 518.6 62.6 5.1

Ending balance at December 31, 2024

$ ( 2,389.6 ) $ ( 31.7 ) $ ( 2,178.7 ) $ 278.1 $ ( 4,321.9 )

The tax effects on the net activity related to each component of other comprehensive income (loss) for the years ended December 31, were as follows:

Tax benefit (expense) 2024 2023 2022

Foreign currency translation gains/losses $ ( 146.4 ) $ 81.0 $ ( 75.9 )

Net unrealized gains/losses on available-for-sale securities 1.6 ( 3.2 ) 12.4

Retirement benefit plans ( 133.2 ) 141.5 ( 95.6 )

Net unrealized gains/losses on cash flow hedges ( 16.7 ) ( 23.0 ) ( 90.9 )

Benefit (expense) for income taxes related to other comprehensive income (loss) $ ( 294.7 ) $ 196.3 $ ( 250.0 )

Except for the tax effects of foreign currency translation gains and losses related to our foreign currency-denominated notes, cross-currency interest rate swaps, and other foreign currency exchange contracts designated as net investment hedges (see Note 7), income taxes were not provided for foreign currency translation.

Generally, the assets and liabilities of foreign operations are translated into U.S.

dollars using the current exchange rate.

For those operations, changes in exchange rates generally do not affect cash flows;

therefore, resulting translation adjustments are made in shareholders' equity rather than in the consolidated statements of operations.

Reclassifications out of accumulated other comprehensive loss were as follows:

Affected Line Item in the Consolidated Statements of Operations

2024 2023 2022

Amortization of retirement benefit items:

Prior service benefits, net $ ( 3.5 ) $ ( 50.5 ) $ ( 52.4 ) Other—net, (income) expense

Actuarial losses 122.5 116.2 343.3 Other—net, (income) expense

Total before tax 119.0 65.7 290.9

Tax benefit ( 25.0 ) ( 13.8 ) ( 61.1 ) Income taxes

Net of tax 94.0 51.9 229.8

Other, net of tax 9.7 ( 16.1 ) 21.0 Other—net, (income) expense

Total reclassifications for the period, net of tax $ 103.7 $ 35.8 $ 250.8

Other–Net, (Income) Expense

Other–net, (income) expense consisted of the following:

2024 2023 2022

Interest expense $ 780.6 $ 485.9 $ 331.6

Interest income ( 175.2 ) ( 173.6 ) ( 62.8 )

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

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

Other (income) expense 25.4 32.7 14.3

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

Segment Information

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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:

The following table summarizes information for our single reportable segment, including significant segment expenses:

2025 2024 2023

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Net income $ 20,640 $ 10,590 $ 5,240

Expenditures for long-lived assets (3)

$ 8,672 $ 5,561 $ 3,830

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

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(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

(3) 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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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Eli Lilly and Company and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Eli Lilly and Company and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S.

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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, 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.

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, 2025, the Company had $17,382 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 accruals 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.

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

Our testing involved assessing the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performing analytical procedures, based on internal and external data sources, to evaluate the completeness of the reserves.

Our testing involved assessing the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performing analytical procedures to evaluate the completeness of the reserves.

Additionally, our procedures included reviewing a sample of contracts, testing a sample of rebate payments and testing the underlying data used in management’s evaluation.

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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 Internal Control Over Financial Reporting

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In our opinion, Eli Lilly and Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 19, 2025, expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 12, 2026, expressed an unqualified opinion thereon.

Basis for Opinion

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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