Eli Lilly and Company Annual Report 2023

FY2023 Annual Report · Eli Lilly and Company

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Eli Lilly and Company
2023 Annual Report
on Form 10-K

United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2023

Commission file number 001-06351

ELI LILLY AND COMPANY

(Exact name of Registrant as specified in its charter)

Indiana
(State or other jurisdiction of
incorporation or organization)

35-0470950

(I.R.S. Employer
Identification No.)

Lilly Corporate Center, Indianapolis, Indiana 46285
(Address and zip code of principal executive offices)

Registrant's telephone number, including area code (317) 276-2000

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Common Stock (no par value)
7 1/8% Notes due 2025

1.625% Notes due 2026

2.125% Notes due 2030

0.625% Notes due 2031

0.500% Notes due 2033

6.77% Notes due 2036

1.625% Notes due 2043

1.700% Notes due 2049

1.125% Notes due 2051

1.375% Notes due 2061

Trading Symbol(s)

Name of Each Exchange On Which Registered

LLY

LLY25

LLY26

LLY30

LLY31

LLY33

LLY36

LLY43

LLY49A

LLY51

LLY61

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in
Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Non-accelerated filer ☐

Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
Aggregate market value of the common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the
last business day of the Registrant's most recently completed second fiscal quarter: approximately $398,291,000,000.

Number of shares of common stock outstanding as of February 16, 2024: 950,164,452

Portions of the Registrant's Proxy Statement for the 2024 Annual Meeting of Shareholders have been incorporated by reference into Part III of this Annual
Report on Form 10-K.

Eli Lilly and Company

Form 10-K
For the Year Ended December 31, 2023

Table of Contents

Part I

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 1C.

Cybersecurity

Item 2.

Item 3.

Item 4.

Part II

Item 5.

Item 6.

Item 7.

Properties

Legal Proceedings

Mine Safety Disclosures

Market for the Registrant's Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities

[Reserved]
Management's Discussion and Analysis of Results of Operations and Financial
Condition

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.
Item 9.

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Part III

Item 10.

Directors, Executive Officers, and Corporate Governance

Item 11.
Item 12.

Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accountant Fees and Services

Item 15.

Exhibits and Financial Statement Schedules

Item 16.

Form 10-K Summary

Page

57
113

113

114

115

115
116

116

117

118

Forward-Looking Statements

This Annual Report on Form 10-K and our other publicly available documents include forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (Exchange Act), and are subject to the safe harbor created thereby under the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate
solely to historical or current facts, and generally can be identified by the use of words such as "may," "could,"
"aim," "seek," "believe," "will," "expect," "project," "estimate," "intend," "target," "anticipate," "plan," "continue,"
or similar expressions or future or conditional verbs.

Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to
differ from those expressed in forward-looking statements. Forward-looking statements are based on
management's current plans and expectations, expressed in good faith and believed to have a reasonable
basis. However, we can give no assurance that any expectation or belief will result or will be achieved or
accomplished. Investors therefore should not place undue reliance on forward-looking statements. The
following include some but not all of the factors that could cause actual results or events to differ from those
anticipated:

•

the significant costs and uncertainties in the pharmaceutical research and development process, including
with respect to the timing and process of obtaining regulatory approvals;

the impact and uncertain outcome of acquisitions and business development transactions and related
costs;

intense competition affecting our products, pipeline or industry;

• market uptake of launched products and indications;

•

•
•

•

continued pricing pressures and the impact of actions of governmental and private payers affecting
pricing of, reimbursement for, and patient access to pharmaceuticals, or reporting obligations related
thereto;

safety or efficacy concerns associated with our products;

dependence on relatively few products or product classes for a significant percentage of our total revenue
and an increasingly consolidated supply chain;

the expiration of intellectual property protection for certain of our products and competition from generic
and biosimilar products, and risks from the proliferation of counterfeit or illegally compounded products;

our ability to protect and enforce patents and other intellectual property and changes in patent law or
regulations related to data package exclusivity;

information technology system inadequacies, inadequate controls or procedures, security breaches, or
operating failures;

unauthorized access, disclosure, misappropriation, or compromise of confidential information or other
data stored in our information technology systems, networks, and facilities, or those of third parties with
whom we share our data and violations of data protection laws or regulations;

issues with product supply and regulatory approvals stemming from manufacturing difficulties, disruptions,
or shortages, including as a result of unpredictability and variability in demand, labor shortages, third-
party performance, quality, cyber-attacks, or regulatory actions related to our and third-party facilities;

reliance on third-party relationships and outsourcing arrangements;

the use of artificial intelligence or other emerging technologies in various facets of our operations may
exacerbate competitive, regulatory, litigation, cybersecurity and other risks;

the impact of global macroeconomic conditions, including uneven economic growth or downturns or
uncertainty, trade disruptions, international tension, conflicts, regional dependencies, or other costs,
uncertainties and risks related to engaging in business globally;

devaluations in foreign currency exchange rates or changes in interest rates and inflation;
litigation, investigations, or other similar proceedings involving past, current, or future products or
activities;

changes in tax law and regulation, tax rates, or events that differ from our assumptions related to tax
positions;

regulatory changes and developments;

•

regulatory actions regarding our operations and products;

regulatory compliance problems or government investigations;

actual or perceived deviation from environmental-, social-, or governance-related requirements or
expectations;

asset impairments and restructuring charges; and

changes in accounting and reporting standards.

Investors should also carefully read the factors described under Item 1A, "Risk Factors" in this Annual Report
on Form 10-K for a description of certain risks that could, among other things, cause our actual results to
differ from those expressed in forward-looking statements. Investors should understand that it is not possible
to predict or identify all such factors and should not consider the risks described above and under Item 1A,
"Risk Factors" to be a complete statement of all potential risks and uncertainties.

All forward-looking statements speak only as of the date of this Annual Report and are expressly qualified in
their entirety by the risk factors and cautionary statements included in this Annual Report. Except as is
required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking
statements to reflect events after the date of this Annual Report.

Part I
Item 1. Business

Eli Lilly and Company (referred to as the company, Lilly, we, or us) was incorporated in 1901 in Indiana to
succeed to the drug manufacturing business founded in Indianapolis, Indiana, in 1876 by Colonel Eli Lilly. We
discover, develop, manufacture, and market products in a single business segment—human pharmaceutical
products.

Our purpose is to unite caring with discovery to create medicines that make life better for people around the
world. Most of the products that we sell today were discovered or developed by our own scientists, and our long-
term success depends on our ability to continually discover or acquire, develop, and commercialize innovative
medicines.

We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico,
and in Europe and Asia. Our products are sold in approximately 105 countries.

Products

Our products include:

Therapeutic
area
Diabetes,
Obesity and
Other
Cardiometabolic
products

Products

Basaglar®

Humalog®, Humalog
Mix 75/25, Humalog
U-100, Humalog
U-200, Humalog Mix
50/50, insulin lispro,
insulin lispro
protamine, and insulin
lispro mix 75/25
Humulin®, Humulin
70/30, Humulin N,
Humulin R, and
Humulin U-500
Jardiance®

Mounjaro®

Trulicity®

Zepbound®

Certain Indications

In collaboration with Boehringer Ingelheim, a long-acting human insulin
analog for the treatment of diabetes.

Human insulin analogs for the treatment of diabetes.

Human insulins of recombinant DNA origin for the treatment of
diabetes.

In collaboration with Boehringer Ingelheim, for the treatment of type 2
diabetes; to reduce the risk of cardiovascular death in adult patients
with type 2 diabetes and established cardiovascular disease; to reduce
the risk of cardiovascular death and hospitalizations for heart failure in
adults; and to reduce the risk of sustained decline in estimated
glomerular filtration rate (eGFR), end-stage kidney disease,
cardiovascular death and hospitalization in adults with chronic kidney
disease (CKD) at risk of progression.

A glucose-dependent insulinotropic polypeptide and glucagon-like
peptide-1 receptor agonist, for the treatment of adults with type 2
diabetes in combination with diet and exercise to improve glycemic
control.

For the treatment of type 2 diabetes in adults and pediatric patients 10
years of age and older; and to reduce the risk of major adverse
cardiovascular events in adult patients with type 2 diabetes and
established cardiovascular disease or multiple cardiovascular risk
factors.

For the treatment of adults with obesity or overweight with weight-
related comorbidities as an adjunct to a reduced-calorie diet and
increased physical activity (marketed under Mounjaro in the European
Union (EU) and in various other markets outside the U.S.).

Therapeutic
area
Oncology
products

Products

Alimta®

Cyramza®

Erbitux®

Jaypirca®

Retevmo®

Tyvyt®

Verzenio®

Certain Indications

For the first-line treatment, in combination with two other agents, of
advanced non-small cell lung cancer (NSCLC) for patients with non-
squamous cell histology and no epidermal growth factor receptor or
anaplastic lymphoma kinase genomic tumor aberrations; for the first-
line treatment, in combination with another agent, of advanced non-
squamous NSCLC; for the second-line treatment of advanced non-
squamous NSCLC; as monotherapy for the maintenance treatment of
advanced non-squamous NSCLC in patients whose disease has not
progressed immediately following chemotherapy treatment; and in
combination with another agent for the treatment of malignant pleural
mesothelioma.

For use as monotherapy or in combination with another agent as a
second-line treatment of advanced or metastatic gastric cancer or
gastro-esophageal junction adenocarcinoma; in combination with
another agent as a second-line treatment of metastatic NSCLC; in
combination with another agent as a second-line treatment of
metastatic colorectal cancer; as a monotherapy as a second-line
treatment of hepatocellular carcinoma; and in combination with another
agent as a first-line treatment of adult patients with metastatic NSCLC
with activating epidermal growth factor receptor mutations.

Indicated both as monotherapy and in combination with another agent
for the treatment of certain types of colorectal cancers; and as
monotherapy, in combination with chemotherapy, or in combination with
radiation therapy for the treatment of certain types of head and neck
cancers.

For the treatment of adult patients with relapsed or refractory mantle
cell lymphoma (MCL) after at least two lines of systemic therapy,
including a BTK inhibitor; and for the treatment of adult patients with
chronic lymphocytic leukemia or small lymphocytic lymphoma who have
received at least two prior lines of therapy, including a BTK inhibitor and
a BCL-2 inhibitor.

For the treatment of metastatic NSCLC with a rearranged during
transfection (RET) gene fusion in adult patients; for the treatment of
advanced metastatic medullary thyroid cancer with a RET mutation who
require systemic therapy in adult and pediatric patients; for the
treatment of advanced or metastatic thyroid cancer with a RET gene
fusion in adult and pediatric patients who require systemic therapy and
are radioactive iodine-refractory; and for the treatment of adult patients
with locally advanced or metastatic solid tumors with a RET gene fusion
who have progressed on or following prior systemic treatment or who
have no satisfactory alternative treatment options.

In collaboration with Innovent Biologics, Inc., for the treatment of
relapsed or refractory classic Hodgkin's lymphoma; for the first-line
treatment of non-squamous NSCLC in combination with Alimta and
another agent; for the first-line treatment of squamous NSCLC in
combination with two other agents; for the first-line treatment of
hepatocellular carcinoma in combination with another agent; for the
first-line treatment of esophageal squamous cell carcinoma in
combination with certain other agents; for the first-line treatment of
gastric cancer in combination with two other agents; and, in
combination with two other agents, for patients with epidermal growth
factor receptor (EGFR)-mutated non-squamous NSCLC that
progressed after EGFR-tyrosine kinase inhibitor therapy, each in China.

For use as monotherapy or in combination with endocrine therapy for
the treatment of HR+, HER2- metastatic breast cancer and in
combination with endocrine therapy for treatment of HR+, HER2-, node
positive, early breast cancer at high risk of recurrence.

Therapeutic
area
Immunology
products

Ebglyss®

Olumiant®

OmvohTM

Taltz®

Neuroscience
products

Cymbalta®

Other products
and therapies

Emgality®

Cialis®

Forteo®

Products

Certain Indications

For the treatment of adult and adolescent patients 12 years or older
with moderate to severe atopic dermatitis in Japan and, in collaboration
with Almirall S.A., in Europe.

In collaboration with Incyte Corporation, for the treatment of adults with
moderately to severely active rheumatoid arthritis after treatment with
one or more tumor necrosis factor (TNF) blockers that did not work well
enough or could not be tolerated; moderate to severe atopic dermatitis;
severe alopecia areata; and for the treatment of hospitalized adults with
COVID-19 who require supplemental oxygen, mechanical ventilation, or
extracorporeal membrane oxygenation.

For the treatment of adults with moderately to severely active ulcerative
colitis.

For the treatment of adults and pediatric patients aged 6 years or older
with moderate to severe plaque psoriasis; adults with active psoriatic
arthritis; adults with ankylosing spondylitis; and adults with active non-
radiographic axial spondyloarthritis.

For the treatment of major depressive disorder; diabetic peripheral
neuropathic pain; generalized anxiety disorder; fibromyalgia; and
chronic musculoskeletal pain due to chronic low back pain or chronic
pain due to osteoarthritis.

For migraine prevention and the treatment of episodic cluster headache
in adults.

For the treatment of erectile dysfunction and benign prostatic
hyperplasia.

For the treatment of osteoporosis in men and postmenopausal women
at high risk for broken bones or fracture and for glucocorticoid-induced
osteoporosis in men and women.

Marketing and Distribution

We sell most of our products worldwide. We adapt our marketing methods and product emphasis in various
countries to meet local customer needs and comply with local regulations.

U.S.

We promote our major products in the U.S. through sales representatives who engage with physicians and other
healthcare professionals. We also educate healthcare providers about our products in various other ways,
including promoting in online channels, distributing literature and samples of certain products to physicians, and
exhibiting at medical meetings. In addition, we advertise certain products directly to consumers in the U.S., and
we maintain websites and other media channels (e.g., social media) with information about our major products.
We supplement our employee sales force with contract sales organizations to leverage our resources and reach
additional patients in need.

Our account managers service wholesalers, pharmacy benefit managers, managed care organizations, group
purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.
We enter into arrangements with these organizations to provide discounts or rebates on our products.

In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and
other healthcare professionals, and hospitals. In 2023, 2022, and 2021, three wholesale distributors in the U.S.—
McKesson Corporation, Cencora, Inc. (formerly AmerisourceBergen Corporation), and Cardinal Health, Inc.—
each accounted for a significant percentage of our consolidated revenue. No other customer accounted for more
than 10 percent of our consolidated revenue in any of these years. For additional information, see Item 8,
"Financial Statements and Supplementary Data—Note 2: Revenue."

Outside the U.S.

The products we market and their distribution vary from country to country. Outside the U.S., we promote our
products to healthcare providers through sales representatives and other channels. In most countries in which
we operate, we maintain our own sales organizations, but in some countries we market our products through
third parties, some of which we have engaged through distribution and promotion arrangements.

Marketing Collaborations

Certain of our products are marketed in arrangements with other pharmaceutical companies. For example, we
and Boehringer Ingelheim have a global agreement to develop and commercialize a portfolio of diabetes
products, including Trajenta®, Jentadueto®, Jardiance, Glyxambi®, Synjardy®, Trijardy® XR, Basaglar, and
Rezvoglar®.

For additional information, see Item 8, "Financial Statements and Supplementary Data—Note 4: Collaborations
and Other Arrangements."

Competition

Our products compete globally with many other pharmaceutical products in highly competitive markets.

Important competitive factors include effectiveness, safety, and ease of use; formulary placement, price, payer
coverage and reimbursement rates, and demonstrated cost-effectiveness; regulatory approvals; marketing
effectiveness; and research and development of new products, processes, modalities, and uses. Early market
entry and rapid patient access can also be important to achieve product acceptance and success.

Most new products or uses that we introduce must compete with other branded, biosimilar, or generic products
already on the market or that are later developed by competitors. When competitors introduce new products,
uses, or delivery systems with therapeutic or cost advantages, including by developing new modalities, our
products become subject to decreased sales volumes, progressive price reductions, or both.

We believe our long-term competitive success depends on discovering and developing (either alone or in
collaboration with others) or acquiring innovative, cost-effective products that provide improved outcomes for
patients and deliver value to payers, and continuously improving the productivity of our operations in a highly
competitive environment. There can be no assurance that our efforts will result in commercially successful
products, and it is possible that our products will be, or will become, uncompetitive from time to time as a result
of products or uses developed by our competitors.

Generic Pharmaceuticals and Biosimilars

Generic pharmaceuticals and biosimilars can pose major competitive challenges to our business. In most major
jurisdictions, the regulatory approval process for pharmaceuticals (other than biological products (biologics))
exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing
generic manufacturers to rely on the safety and efficacy of the innovator product. As a result, generic
manufacturers generally invest far fewer resources than we do for our branded products in research and
development and can price their products significantly lower than our branded products. Accordingly, when a
branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from
generic forms of the product, which can result in the loss of a significant portion of the branded product's revenue
in a very short period of time. Moreover, governments in some countries leverage generic entrants to drive price
concessions through the utilization of volume-based procurement bidding and other measures.

Further, public and private payers typically encourage the use of generics as alternatives to branded products.
Laws in the U.S. generally allow, and in many cases require, pharmacists to substitute generics that have been
rated under government procedures to be essentially equivalent to a branded product. Where substitution is
mandatory, it must be made unless the prescribing physician expressly forbids it. In certain countries, intellectual
property protection is weak, and we must compete with generic versions of our products at or relatively shortly
after launch.

In addition, competition for our biologics, which constitute a substantial portion of our products and pipeline, may
be affected by the approval of follow-on biologics, also known as biosimilars. A biosimilar is a subsequent version
of an approved innovator biologic that, due to its analytical and clinical similarity to the innovator biologic, may be
approved based on an abbreviated data package that relies in part on the full testing required of the innovator
biologic.

Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-
ons to innovator biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in

the U.S. A number of biosimilars have been licensed under the BPCIA, as well as in Europe and Japan.
Regulatory interpretation of important aspects of the laws regulating biosimilars continues to evolve, and
therefore the impact of these laws on our business remains subject to substantial uncertainty. For example, the
extent to which a biosimilar, once approved, will be substituted for the innovator biologic in a way that is similar to
traditional generic substitution for non-biologic products will depend on a number of regulatory and marketplace
factors that are still developing.

Biosimilars may present both competitive challenges and opportunities. While competitors have developed
biosimilars that compete with our products, we have developed our own biosimilar and may develop others in the
future.

U.S. Private Sector Dynamics

In the U.S. private sector, consolidation and integration among healthcare organizations significantly affects the
competitive marketplace for pharmaceuticals. Health plans, managed care organizations, pharmacy benefit
managers, wholesalers, pharmacies, and other supply chain entities have been consolidating into fewer, larger
entities, thus enhancing their market power and importance. Private third-party insurers, as well as governments,
typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's
formulary) and reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating
discounts or rebates in exchange for formulary inclusion and placement.

Formulary placement can lead to reduced usage of a product for the relevant patient population due to coverage
restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result
in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and
higher deductibles. Consequently, pharmaceutical companies face increased pressure in negotiations, and
compete fiercely for formulary placement, not only on the basis of product attributes such as efficacy, safety
profile, or patient ease of use, but also by providing rebates or other concessions. As payers and pharmaceutical
companies continue to negotiate formulary placement and rebates, value-based agreements, where rebates may
be based on achievement (or not) of specified outcomes, are another increasingly prevalent tool. Rebates and
net cost are increasingly important factors in formulary decisions, particularly in treatment areas in which the
payer has taken the position that multiple branded products are therapeutically comparable. These pressures
have negatively affected, and could continue to negatively affect, our consolidated results of operations. In
addition to formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing
through high deductible plans, higher co-insurance, or co-pays, including increased utilization of co-pay
accumulator adjustment or maximization programs. Supply chain entities have also increasingly imposed
utilization management tools to favor the use of generic products or otherwise limit access to our products. For
additional information on pricing and reimbursement for our pharmaceutical products, see "—Regulations and
Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access—U.S."

Patents, Trademarks, and Other Intellectual Property Rights

Overview

Intellectual property protection is critical to our ability to successfully commercialize our life sciences innovations
and invest in the search for new medicines and uses. Loss of effective patent protection for pharmaceuticals,
especially for non-biologic products, typically results in the loss of effective market exclusivity for the product,
often leading to a severe and rapid decline in revenues for the product. We own, have applied for, or are licensed
under, a large number of patents in the U.S. and many other countries relating to products, product uses,
formulations, and manufacturing processes. In addition, for some products we have effective intellectual property
protection in the form of data protection under pharmaceutical regulatory laws.

The patent protection anticipated to be of most relevance to pharmaceuticals is provided by patents claiming the
active ingredient (the compound patent) for our products, particularly those in major markets such as the U.S.,
major European countries, and Japan. In general, patents in each relevant country last for a period of 20 years
from their filing date, which is often years prior to the launch of a commercial product. Further patent term
adjustments and restorations may extend the original patent term:

•

Patent term adjustment is available to all U.S. patent applicants to provide relief in the event that a
patent grant is delayed during examination by the U.S. Patent and Trademark Office (USPTO).

Patent term restoration for a single patent for a pharmaceutical product is provided to U.S. patent
holders to compensate for a portion of the time invested in clinical trials and the U.S. Food and Drug
Administration (FDA) review process. There is a five-year cap on any restoration, and no patent's

expiration date may be extended beyond 14 years from FDA approval. Some countries outside the U.S.
similarly offer forms of patent term restoration. For example, Supplementary Protection Certificates are
available to extend the life of a European patent up to an additional five years (subject to a 15-year cap
from European Medicines Agency (EMA) approval) and in Japan patent terms can be extended up to five
years.

In some cases, the innovator company may retain exclusivity despite approval of the generic, biosimilar, or other
follow-on versions of a new medicine beyond the expiration of the compound patent through market dynamics
and challenges, later-expiring patents on manufacturing processes, methods of use or formulations, or data
protection that may be available under pharmaceutical regulatory laws. The primary forms of data protection are
as follows:

•

Data package protection generally prohibits other manufacturers from submitting regulatory applications
for marketing approval in reliance on the innovator company's regulatory submission data for the drug.
The base period is generally five years in the U.S. (12 years for new biologics under the BPCIA, subject
to certain conditions), effectively 10 years in Europe, and eight years in Japan. The period begins on the
date of product approval and runs concurrently with the patent term for any relevant patents.

In the U.S., the FDA has the authority to grant additional data protection for approved drugs where the
sponsor conducts specified testing in pediatric populations within a specified time period. If granted, this
"pediatric exclusivity" provides an additional six months of exclusivity, which is added to the term of data
protection, orphan drug exclusivity and, for products other than biologics, to the term of any relevant and
non-expired patents.

A specific use of a drug or biologic can receive "orphan" designation in the U.S. if it is intended to treat a
disease or condition affecting fewer than 200,000 people in the U.S., or where it is not reasonably
expected to recover development and marketing costs through U.S. sales. Orphan designation entitles a
particular use of the drug to seven years of market exclusivity, which runs in parallel with any applicable
patents.

Outside the major markets, the adequacy and effectiveness of intellectual property protection for
pharmaceuticals vary widely. International and U.S. free trade agreements like the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPs Agreement) administered by the World Trade Organization provide
global protection of certain intellectual property rights. But in a number of markets we are unable to patent our
products or to enforce the patents that we receive for our products. Further, many developing countries, and
some developed countries, do not provide effective data package protection even though it is specified in the
TRIPs Agreement.

Our Intellectual Property Portfolio

We consider intellectual property protection for certain products, processes, uses, and formulations to be
important to our business. In addition to the patents and data protection identified below, we may hold patents on
manufacturing processes, formulations, devices, or uses that extend exclusivity beyond the dates shown below.
For approved products, dates include, where applicable, pending or granted patent term extensions.

The most relevant patent protection or data protection and associated expiry dates for our major or recently
launched patent-protected marketed products are as follows:

Product

Protection

Territory

Expiry Date

Therapeutic
Area

Diabetes,
Obesity and
Cardiometabolic
products

Jardiance

compound patent

U.S.*

Mounjaro/
Zepbound

compound patent

major European countries

Japan

U.S.

major European countries

data protection

Japan

U.S.

Trulicity

compound patent

major European countries

Japan

U.S.

major European countries

Japan

biologics data protection U.S.

data protection

major European countries

Oncology
products

Cyramza

compound patent

Japan

U.S.

major European countries

Japan

biologics data protection U.S.

data protection

major European countries

Jaypirca

compound patent

Japan

U.S.

major European countries

data protection

U.S.

major European countries

Retevmo

compound patent

U.S.

major European countries

data protection

Japan

U.S.

Verzenio

compound patent

major European countries

Japan

U.S.

major European countries

Japan

data protection

major European countries

Japan

2028

2029

2030

2036

2037

2040

2027

2033

2040

2027

2029

2029
2027

2024

2023

2026

2028

2026

2024

2023

2037

2038

2028

2033

2037

2038

2025

2031

2033

2034

2028

2026

Therapeutic
Area

Immunology
products

Product

Protection

Territory

Expiry Date

Ebglyss

compound patent

major European countries

data protection

major European countries

Japan

Olumiant

compound patent

Japan

U.S.

major European countries

Japan

data protection

major European countries

Omvoh

compound patent

Japan

U.S.

major European countries

Japan

biologics data protection U.S.

data protection

Taltz

compound patent

major European countries
Japan
U.S.

major European countries

Japan

biologics data protection U.S.

data protection

major European countries

Neuroscience
products

Emgality

compound patent

Japan

U.S.

major European countries

Japan

biologics data protection U.S.

data protection

major European countries

Reyvow®

compound patent

Japan

U.S.

Japan

data protection

major European countries

Japan

2024

2033

2034

2032

2033

2027

2025

2037

2038

2039

2035

2033
2031
2030

2031

2030

2028

2027

2024

2033

2035

2030

2028

2029

2030

2028

2032

* Jardiance and the related combination product, Glyxambi.

The following product candidates are the most relevant that are currently under regulatory review. Upon
approval, we expect relevant compound patent and data protections to apply:

•

Donanemab has been submitted for regulatory review in the U.S., the EU and Japan for the treatment of
early Alzheimer's disease.

Lebrikizumab has been submitted for regulatory review in the U.S. for the treatment of moderate to
severe atopic dermatitis.

Pirtobrutinib has been submitted for regulatory review in Japan for the treatment of certain patients with
relapsed or refractory mantle cell lymphoma.

Worldwide, we sell all of our major products under trademarks consisting of our product names, logos, and
unique product appearances that we consider in the aggregate to be important to our operations. Trademark
protection varies throughout the world. Trademark protection typically extends beyond the patent and data
protection for a product.

We also rely in some circumstances on trade secrets and other unpatented know-how. We seek to protect our
confidential information in part through confidentiality agreements with our employees, corporate partners,
collaborators, and vendors. These agreements may be breached, and we cannot be certain that we have
adequate remedies. If our trade secrets or confidential information become known or are independently
discovered by competitors, or if we enter into disputes over ownership of inventions, our business and results of
operations could be adversely affected.

Patent Licenses and Collaborations

Some of our products are subject to significant license and collaboration agreements. For information on our
license and collaboration agreements, see Item 8, "Financial Statements and Supplementary Data—Note 4:
Collaborations and Other Arrangements."

Patent Challenges

In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the
Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than
biologics) when the generic manufacturer files an Abbreviated New Drug Application (ANDA).

Absent a patent challenge, the FDA cannot approve an ANDA until after certain of the innovator's patents expire.
However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA
alleging that the patent(s) listed in the innovator's New Drug Application (NDA) are invalid, unenforceable or not
infringed.

Generic manufacturers use this process extensively to challenge patents on innovative pharmaceuticals. In
addition, generic companies have shown willingness to launch "at risk," i.e., after receiving ANDA approval but
before final resolution of their patent challenge.

Under the BPCIA, the FDA cannot approve an application for a biosimilar product until data protection expires,
12 years after initial marketing approval of the innovator biologic, and an application may not be submitted until
four years following the date the innovator biologic was first approved. However, the BPCIA does provide a
mechanism for a prospective biosimilar competitor to challenge the validity of an innovator's patents as early as
four years after initial marketing approval of the innovator biologic.

The patent litigation scheme under the BPCIA, and the BPCIA itself, is complex and continues to be interpreted
and implemented by the FDA, as well as by courts. Courts have held that biosimilar applicants are not required
to engage in the BPCIA patent litigation scheme and patent holders retain the right to bring suit under normal
patent law procedures if a biosimilar applicant attempts to commercialize a product prior to patent expiration. In
addition, there is a procedure in U.S. patent law, known as inter partes review (IPR), which allows any member of
the public to file a petition with the USPTO seeking the review of any issued U.S. patent for validity. IPRs are
conducted before Administrative Patent Judges in the USPTO using a lower standard of proof than used in
federal district court and challenged patents are not accorded the presumption of validity. Generic drug
companies and even some investment firms have engaged in the IPR process in attempts to invalidate our
patents. In addition, in December 2023, the U.S. presidential administration released a proposed framework that
would permit the federal government to consider the price of a drug developed using federal funds as a factor in
determining whether it may exercise "march-in rights" and license it to a third party to manufacture. A comment
period on the proposal runs through February 6, 2024, and we are not able to predict whether a final rule will be
adopted in accordance with the proposed framework.

Outside the U.S., the legal doctrines and processes by which pharmaceutical patents can be challenged vary
widely. In recent years, we have experienced an increase in patent challenges from generic manufacturers in
many countries outside the U.S.

For more information on patent challenges and litigation involving our intellectual property rights, see Item 1A,
"Risk Factors—Risks Related to Our Business—Our long-term success depends on intellectual property
protection; if our intellectual property rights are invalidated, circumvented, or weakened, our business will be
adversely affected." and Item 8, "Financial Statements and Supplementary Data—Note 16: Contingencies."

Government Regulation of Our Operations

Our operations are regulated extensively by numerous government agencies.

Regulation of Products

The lengthy process of laboratory and clinical testing, data analysis, manufacturing development, and regulatory
review necessary for governmental approvals of our products is extremely costly and can significantly delay
product introductions and revenue generation. In addition, our operations are subject to complex federal, state,
local, and foreign laws and regulations concerning relationships with healthcare providers and suppliers, pricing
and reimbursement for our products, the environment, occupational health and safety, data privacy and security,
and other matters. Evolving regulatory priorities have intensified governmental scrutiny of our operations and
those of other healthcare intermediaries, including with respect to current Good Manufacturing Practices (cGMP),
quality assurance, and similar regulations. Regulatory oversight of the pharmaceutical industry entails judgment
and interpretation, which can result in inconsistent administration of laws and regulations by health authorities.
Compliance with the laws and regulations affecting the manufacture and sale of current products and the
discovery, development, and introduction of new products and uses has and will continue to require substantial
effort, expense, and capital investment.

Of particular importance to our business is regulation by the FDA in the U.S. Pursuant to laws and regulations
that include the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA has jurisdiction over all of our products
and devices in the U.S. and administers requirements covering the testing, safety, effectiveness, manufacturing,
quality control, distribution, labeling, marketing, promotion, advertising, dissemination of information, and post-
marketing surveillance of those products and devices. The FDA holds broad discretion under the FDCA and
other statutes to interpret the conditions and evidence necessary for timely approval of our drugs and devices.

Following approval, our products remain subject to regulation by various government and regulatory agencies in
connection with labeling, import, export, sale, storage, recordkeeping, advertising, promotion, and safety
reporting. We conduct extensive post-marketing surveillance of the safety of the products we sell and comply
with notification requirements related to safety and efficacy, product supply, and other aspects of our products
and operations. The FDA may withdraw approval of a product if compliance with regulatory requirements and
standards is not maintained or if problems occur after a product reaches the market, including as may be
identified through market surveillance or third-party studies involving our products. The FDA may also mandate
labeling changes to products at any point in a product's life cycle based on new safety information or as part of a
labeling change to a particular class of products. In addition, the FDA strictly regulates marketing, labeling,
advertising, and promotion of products to prescribers and patients. Pharmaceutical products may be promoted
only for approved indications and in accordance with the provisions of the approved label. The FDA and other
agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

Outside the U.S., our products and operations are subject to similar regulatory requirements, notably by the EMA
in Europe, the Ministry of Health, Labor and Welfare in Japan, and the National Medical Products Administration
in China. Specific regulatory requirements vary from country to country. Regulatory and compliance
requirements, as well as approval processes outside the U.S., may differ from those in the U.S. and may involve
additional costs, uncertainties, and risks.

The FDA and other regulatory agencies outside the U.S. extensively regulate all aspects of manufacturing quality
for pharmaceuticals under their cGMP regulations. Regulators assess compliance with these regulations by
inspecting the equipment, facilities, laboratories, and processes used in the manufacturing and testing of our
products prior to marketing approval with periodic reinspection thereafter; this may include inspection of our third-
party business partners. We make substantial investments of capital and operating expenses to implement
comprehensive, company-wide quality systems and controls in our manufacturing, product development, and
process development operations in an effort to maintain sustained compliance with cGMP and other regulations.
Nonetheless, manufacturing quality and other aspects of pharmaceutical regulatory compliance is heavily
scrutinized and results in government investigations, regulatory and legal actions, product recalls and seizures,
fines and penalties, interruption of production leading to product shortages, import bans or denials of import
certifications, delays or denials in new product approvals or line extensions or supplemental approvals of current
products pending resolution of any issues, any of which have and could adversely affect our business and
reputation. Certain of our products, devices and components are manufactured by third parties, and their failure
to comply with these regulations has and could in the future adversely affect us, including through failure to
supply product to us or delays in approvals of new products or indications. For example, in 2023 we received
complete response letters based on FDA observations made during inspections of manufacturing facilities rather
than any issues related to efficacy or safety. These resulted in certain delays in the approval of new products.

Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could
adversely affect our business and reputation. For more information on product regulation challenges, see Item
1A, "Risk Factors—Risks Related to Our Operations—Reliance on third-party relationships and outsourcing
arrangements could adversely affect our business."

Emergency Use Authorizations

The Secretary of Health and Human Services may issue an Emergency Use Authorization (EUA) to authorize
unapproved medical products, or unapproved uses of approved medical products, to be manufactured,
marketed, and sold in the context of an actual or potential emergency that has been designated by the
government. For example, certain of our products were previously made available for the treatment of COVID-19
under respective EUAs. An EUA terminates when the emergency determination underlying the EUA terminates,
and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult
to predict.

Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements
that vary and differ from those in the U.S.

Other Laws and Regulations

The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in
which manufacturers interact with purchasers, prescribers, and patients, are subject to various other U.S. federal
and state laws, as well as analogous foreign laws and regulations, including the federal anti-kickback statute, the
False Claims Act, antitrust laws, and state laws governing kickbacks, false claims, unfair trade practices, and
consumer protection. These laws are administered by, among others, the Department of Justice, the Office of
Inspector General of the U.S. Department of Health and Human Services (HHS), the Federal Trade Commission,
the Office of Personnel Management, and state attorneys general. State, federal, and foreign governments,
agencies, and other regulatory bodies are active in their oversight, enforcement activities, and coordination with
respect to pharmaceutical companies, which has resulted in intensified scrutiny, litigation costs, corporate
criminal sanctions, and substantial civil settlements in the pharmaceutical industry.

The U.S. Foreign Corrupt Practices Act of 1977 (FCPA) prohibits certain individuals and entities, including U.S.
publicly traded companies, from promising, offering, or giving anything of value to foreign officials with the corrupt
intent of influencing the foreign official for the purpose of helping the company obtain or retain business or gain
any improper advantage. The FCPA also imposes specific recordkeeping and internal controls requirements on
U.S. publicly traded companies. As noted above, our business is heavily regulated and therefore involves
significant interaction with officials outside the U.S. Additionally, in many countries outside the U.S., healthcare
providers who prescribe pharmaceuticals are employed by the government and purchasers of pharmaceuticals
are government entities; therefore, our interactions with these prescribers and purchasers are subject to
regulation under the FCPA.

In addition to the U.S. application and enforcement of the FCPA, the various jurisdictions in which we operate
and supply our products have laws and regulations aimed at preventing and penalizing corrupt and
anticompetitive behavior. In recent years, several jurisdictions have enhanced their laws and regulations in this
area, increased their enforcement activities, and/or increased the level of cross-border coordination and
information sharing.

We are, and could in the future become, subject to administrative and legal proceedings and actions, which
could include claims for civil penalties (including treble damages), criminal sanctions, and administrative
remedies, including exclusion from U.S. federal and other healthcare programs. It is possible that an adverse
outcome in future actions could have a material adverse impact on our consolidated results of operations,
liquidity, and financial position in any given period.

We are also subject to a variety of federal, state, local, and foreign environmental, health and safety, and other
laws and regulations that may affect our research, development, or production efforts.

Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access

U.S.

There continues to be considerable public and government scrutiny of pharmaceutical pricing. In addition, U.S.
government actions to reduce federal spending on entitlement programs, including Medicare and Medicaid, may
affect payment for our products or services associated with the provision of our products.

In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (IRA). Among other measures,
the IRA requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under
Medicare Part B and Part D. Generally, these government prices apply nine years (for medicines approved under
an NDA) or thirteen years (for medicines approved under a Biologics License Application (BLA)) following initial
FDA approval and will be set at a price that is likely to represent a significant discount from existing average
prices to wholesalers and direct purchasers. While the law specifies a ceiling price, it does not set a minimum or
floor price. In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim,
as one of the first ten medicines subject to government-set prices effective in 2026. Given our product portfolio,
we expect additional significant products will be selected in future years, which would have the effect of
accelerating revenue erosion prior to expiry of exclusivities. The effect of reducing prices and reimbursement for
certain of our products would significantly impact our business and consolidated results of operations.

Other IRA provisions require drug manufacturers to provide rebates for Medicare Part B and Part D medicines
under certain circumstances. Also, the Part D benefit redesign will replace the Part D Coverage Gap Discount
Program (CGDP) with a new manufacturer discount program. Beginning in January 2025, the 70 percent CGDP
discount will be replaced by a 10 percent manufacturer discount for all Medicare Part D beneficiaries that have
met their deductible and incurred out of pocket drug costs below a $2,000 threshold and a 20 percent discount
for beneficiaries that have incurred out of pocket drug costs above the $2,000 threshold under the Part D benefit
redesign. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil
monetary penalties, which could be significant.

The IRA has and will meaningfully influence our business strategies and those of our competitors. In particular,
the nine-year timeline to set prices for medicines approved under an NDA reduces the attractiveness of
investment in small molecule innovation. The IRA can cause changes to development approach, and timing and
investments at-risk. The full impact of the IRA on our business and the pharmaceutical industry, including the
implications to us of a competitor's product being selected for price setting, remains uncertain.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products
and the practices of pharmacy benefit managers and other supply chain entities has also resulted in several U.S.
Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things,
bring more transparency to product pricing, review the relationship between pricing and manufacturer patient
programs, require advance notice of list price increases, establish upper payment limits or other restrictions by
drug affordability review boards, allow the importation of drugs from other countries, address pharmacy benefit
manager practices, and reform government program reimbursement methodologies for drug products. Restrictive
or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by
governments, regulatory agencies, courts, or private payers could also adversely impact our business and
financial results. Additional policies, regulations, legislation, or enforcement, including those proposed or pursued
by the U.S. Congress, the U.S. executive branch and regulatory authorities worldwide, could intensify these
efforts and adversely impact our business and consolidated results of operations.

In the U.S., we are required to provide rebates to the federal government and state governments on their
purchases of our pharmaceuticals under various federal and state healthcare programs, including state Medicaid
and Medicaid Managed Care programs (a minimum of 23.1 percent plus adjustments for price increases above
the consumer price index over time) and discounts to private entities who treat patients in certain types of
healthcare facilities intended to serve low-income and uninsured patients (known as 340B covered entities).
Additionally, an annual fee is imposed on pharmaceutical manufacturers and importers that sell branded
prescription drugs to specified government programs.

Changes to the 340B program or the Medicaid programs could have a material adverse impact on our business.
For example, continued expansion of the 340B program and growth of entities claiming entitlement to 340B
pricing, including in ways that may be inconsistent with the statutory scheme, impacts our revenue on an
increasing percentage of sales. Changes to the calculation of rebates under the Medicaid program could also
increase our Medicaid rebate obligations and decrease the prices charged to 340B covered entities.

We have implemented a Contract Pharmacy Limited Distribution System applicable to sales through the 340B
program, which generally limits distribution of 340B-priced product to: (i) covered entities and their child sites; (ii)
contract pharmacies wholly owned by the covered entity; or (iii) if a covered entity lacks an in-house outpatient
pharmacy, a single contract pharmacy designated by a covered entity to establish a 340B bill to/ship to
arrangement. Our Contract Pharmacy Limited Distribution System contains certain exceptions that permit
broader contract pharmacy usage, including for "penny priced" insulin products, provided that the covered entity
passes through all discounts to eligible patients at the point of sale and meets other conditions. We believe our
Contract Pharmacy Limited Distribution System complies with the 340B statute, but it remains subject to ongoing
inquiries and litigation that could have a material impact on our business, as discussed in Item 8, "Financial
Statements and Supplementary Data—Note 16: Contingencies." Other aspects of the 340B program, including
the proper definitions of "patient" and "child site" under the 340B statute, are also subject to ongoing litigation by
other parties, the resolution of which could impact the growth and scope of the 340B program.

Rebates are also negotiated in the private sector. We pay rebates to private payers that provide prescription drug
benefits to seniors covered by Medicare and to private payers that provide prescription drug benefits to their
customers. These rebates are affected by the introduction of competitive products and generics in the same
class. Our approach to the rebates we offer to private payers that provide prescription drug benefits to seniors
covered by Medicare may be impacted by the 2020 regulatory amendments to the anti-kickback statute's
discount safe harbor, which have been stayed until at least January 1, 2032.

For a discussion of risks related to how we price our products, see Item 1A, "Risk Factors—Risks Related to Our
Business—We face litigation and investigations related to our products, how we price or commercialize our
products, and other aspects of our business, which could adversely affect our business, and we are self-insured
for such matters."

Outside the U.S.

Globally, public and private payers are increasingly restricting access to pharmaceuticals based on assessments
of comparative effectiveness and value, including through the establishment of formal health technology
assessment processes. In addition, third-party organizations, including professional associations, academic
institutions, and non-profit entities associated with payers, conduct and publish comparative effectiveness and
cost/benefit analyses on medicines, the impact of which can influence pharmaceutical access and pricing.

In most international markets, we operate in an environment of government-mandated cost-containment
programs, which may include price controls, international reference pricing (to other countries' prices), discounts
and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), regulatory hurdles,
restrictions on physician prescription levels, and mandatory generic substitution. In these markets, healthcare
services and the determination of pricing and reimbursement for pharmaceutical products are impacted by
government control at the point of care or as the primary payer.

The European Commission published its draft General Pharmaceutical Legislation in April 2023. While certain
elements in the European Commission draft could expedite regulatory timelines, we anticipate that the overall
market and patient impact would be negative if the legislation is approved as drafted. Implementation timing is
unknown at this time. Health care cost containment remains a focus in the EU, among other jurisdictions. Most
countries in the EU attempt to contain drug costs by engaging in some form of reference pricing in which
authorities examine pre-determined internal or external markets for published prices of a product or national
class of drugs. Member states also have the power to restrict the range of pharmaceutical products for which
their national health insurance systems provide reimbursement and may condition access on agreement of a
reimbursement price or completion of cost-effectiveness or other gating studies.

In Japan, our products generally are subject to government-mandated annual price reductions. The government
may also order re-pricings for specific products or classes of products if certain criteria are met, including
exceeding product use thresholds.

China has introduced and implemented reforms to accelerate access to innovative products and reduce costs. To
drive patient access, we seek inclusion of many of our branded products on China's National Reimbursement
Drug List, a list of drugs fully or partially reimbursed by China’s national basic health insurance. In exchange for
broad access, these products are generally subject to negotiation of significant price concessions. China also
utilizes a value-based procurement program process for products that have generic substitutes. Products that we
choose to tender through this process are similarly subject to price reductions. Our performance in China may be
significantly impacted by the country's evolving pharmaceutical regulatory environment, including access,
intellectual property protection, regulatory enforcement and compliance, and trade policies.

Governments in many emerging markets are also focused on limiting health care costs and have enacted price
controls and measures impacting intellectual property. Reforms in our product markets, including those that may
stem from periods of uneven economic growth or downturns or uncertainty, or as a result of high inflation,
emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting
priorities, may continue to result in added pressure on pricing and reimbursement for our products.

We cannot predict the extent to which our business may be affected by current or potential future legislative,
regulatory, or payer developments. However, in general we expect to see continued focus on regulating pricing,
resulting in additional state, federal, and international legislative and regulatory developments that could have
further negative effects on pricing and reimbursement for our products as well as overall operations.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Trends Affecting
Pharmaceutical Pricing, Reimbursement, and Access" for additional information regarding recent legislative,
administrative, and other pricing initiatives and their impact on our results.

Research and Development

Our commitment to research and development dates back more than 140 years. We invest heavily in research
and development because we believe it is critical to our long-term competitiveness. At the end of 2023, we
employed approximately 10,000 people in pharmaceutical research and development activities, including a
substantial number of physicians, scientists holding graduate or postgraduate degrees, and highly skilled
technical personnel.

Our internal pharmaceutical research focuses primarily on the areas of metabolism (including diabetes, obesity
and cardiovascular), immunology, neuroscience, and oncology. In addition to discovering and developing new
medicines, we seek to expand the value of existing products through new uses, formulations, and therapeutic
approaches, including complementary delivery devices or diagnostic tools, that can provide additional value to
patients.

To supplement our internal efforts, we collaborate with others, including academic institutions and research-
based pharmaceutical and biotechnology companies. We use the services of physicians, hospitals, medical
schools, and other research organizations worldwide to conduct clinical trials to establish the safety and
effectiveness of our medicines. We also invest in external research and technologies that we believe
complement and strengthen our own efforts. These investments can take many forms, including, among others,
licensing arrangements, co-development agreements, co-promotion arrangements, joint ventures, acquisitions,
and equity investments.

Pharmaceutical development is time-consuming, expensive, and risky. Very few of the candidates discovered by
researchers ultimately become approved medicines. The process from discovery to regulatory approval can take
over a decade. Candidates can fail at any stage of the process, and even late-stage candidates sometimes fail to
receive regulatory approval or achieve commercial success. In addition, novel modalities can present more
challenging or lengthy development timelines. The following describes in more detail the research and
development process for pharmaceutical products:

Phases of New Drug Development

• Discovery Phase

In the discovery phase, scientists identify, design, and synthesize promising candidates by analyzing their
effect on biological targets thought to play a role in disease. Targets are often unproven and only candidates
that have the desired effect on the target and meet other design criteria move to the next phase of
development, which includes the initiation of studies in animals to support regulatory and safety
requirements for clinical research in humans. The discovery phase can take years and the probability of any
one candidate becoming a medicine is extremely low.

•

Early Development Phase

Early development includes initial testing for safety and efficacy and early analyses of manufacturing
requirements. Safety testing is initially performed in laboratory tests and animals, as necessary. In general,
the first human tests (often referred to as Phase I) are conducted in small groups of subjects to assess
safety and evaluate the potential dosing range. Subsequently, larger populations of patients are studied
(Phase II) to identify signs of efficacy while continuing to assess safety. In parallel, scientists work to identify
safe, effective, and economical manufacturing processes. Long-term animal studies continue to test for
potential safety issues. Of the candidates that enter the early development phase, approximately 10 percent
move to the late development phase. The early development phase varies but can take several years to
complete.

•

Late Development Phase

Late phase development projects (typically Phase III) have met initial safety requirements and shown initial
evidence of efficacy in earlier studies. As a result, these candidates generally have a higher likelihood of
success and trials include larger patient populations to demonstrate safety and efficacy in the disease.
These studies are designed to demonstrate the benefit and risk of the potential new medicine and may be
compared to competitive therapies, placebo, or both. Phase III studies are generally conducted globally, are
costly, and are designed to support regulatory filings for marketing approval. The duration of Phase III
testing varies by disease and may take years.

•

Submission Phase

Once a potential new medicine is submitted to regulatory agencies, the time to final marketing approval can
vary from several months to several years, depending on the disease state, the strength and complexity of
available data, the degree of unmet need, and the time required for the regulatory agency(ies) to evaluate
the submission, which can depend on prioritization by regulators and other factors. There is no guarantee
that a potential medicine will receive marketing approval, or that decisions on marketing approvals or
indications will be consistent across geographic areas.

See Item 7, "Management's Discussion and Analysis—Executive Overview—Late-Stage Pipeline," for more
information on our late-stage product candidates.

Raw Materials and Product Supply

Most of the principal materials we use in our manufacturing operations are available from more than one source.
However, certain raw or intermediate materials are procured from a single source. We seek to maintain sufficient
inventory to provide reliability of production and manage unforeseen supply variability. However, various
developments have led, and may in the future lead, to interruption or shortages in supply until we establish new
sources, implement alternative processes, bring new manufacturing facilities online, or pause or discontinue
product sales in one or more markets.

The majority of our revenue comes from products produced predominantly in our own facilities. Our principal
active ingredient manufacturing occurs at sites we own in the U.S., including Puerto Rico, and Ireland. Finishing
operations, including formulation, filling, assembling, delivery device manufacturing, and packaging, take place at
a number of sites throughout the world. To support anticipated demand for our current and prospective products,
we have undertaken significant manufacturing expansion initiatives. During 2023, commercial production
commenced at our Research Triangle Park manufacturing site in Durham, North Carolina. Further investments to
increase our manufacturing capacity include planned sites in Concord, North Carolina, Limerick, Ireland, Alzey,
Rhineland-Palatinate, Germany, and two in Lebanon, Indiana. We also utilize and are expanding arrangements
with third parties for certain active ingredient manufacturing, filling, finishing operations, and for device or
component production and assembly.

We manage our supply chain (including our own facilities, contracted arrangements, and inventory) in a way that
is intended to allow us to meet product demand while maintaining flexibility to reallocate manufacturing capacity
to improve efficiency and respond to changes in supply and demand. To maintain supply of our products, we use
a variety of techniques, including comprehensive quality systems, inventory management, and back-up sites.

However, pharmaceutical production processes are complex, highly regulated, and vary widely from product to
product. Shifting or adding manufacturing capacity is a very lengthy process requiring significant capital
expenditures, process modifications, and regulatory approvals. Accordingly, developments such as unanticipated
demand, unplanned plant shutdowns, manufacturing or quality assurance difficulties at one of our facilities or
contracted facilities, failure or refusal of a supplier or contract manufacturer to supply contracted quantities,
increases in demand on a supplier, or difficulties in predicting or variability in demand for our products and those
of our competitors have led, and may in the future lead, to interruption or higher costs in the supply of certain
products, product shortages, or pauses or discontinuations of product sales in one or more markets. For
example, we have experienced challenges in meeting strong demand for our incretin products in recent periods,
partially due to the limited availability of competitor therapies, and expect tight supply to persist while additional
manufacturing capacity is operationalized. Further, cost and wage inflation, availability of adequate capacity in
global transportation, supply chain complexities, including consolidation therein, labor market issues,
international tension and conflicts, uneven economic growth or downturns, an increase in overall demand in our
industry for certain products and materials, and public health outbreaks, epidemics, or pandemics, such as the
COVID-19 pandemic, have caused, and in the future may cause, delays or disruptions in and/or increased costs
related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement
activity, and supplier or contract manufacturer arrangements, as well as other general business impacts. For
more information on the additional risks we face in connection with any difficulties, disruptions, and shortages in
the manufacturing, distribution, and sale of our products, see Item 1A, "Risk Factors—Risks Related to Our
Business—Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could lead to product
supply problems."

Quality Assurance

Our success depends in great measure on customer confidence in the quality of our products and in the integrity
of the data that support their safety and effectiveness. Product quality requires a total commitment to quality in all
parts of our operations, including research and development, purchasing, facilities planning, manufacturing,
distribution, and dissemination of information about our medicines.

Quality of production processes involves strict control of ingredients, equipment, facilities, manufacturing
methods, packaging materials, and labeling. We perform tests at various stages of production processes and on
the final product in an effort to ensure that the product meets all applicable regulatory requirements and our
internal standards. These tests may involve chemical and physical chemical analyses, microbiological testing,
testing in animals, or a combination thereof. Additional assurance of quality is provided by quality assurance
groups that audit and monitor all aspects of quality related to pharmaceutical manufacturing procedures and
systems in company operations and at third-party suppliers.

Executive Officers of the Company

The following table sets forth certain information regarding our current executive officers.

The term of office for each executive officer expires on the date of the annual meeting of the board of directors,
to be held on May 6, 2024 in connection with the company's annual meeting of shareholders, or on the date his
or her successor is chosen and qualified. No director or executive officer has a "family relationship" with any
other director or executive officer of the company, as that term is defined for purposes of this disclosure
requirement. There is no understanding between any executive officer or director and any other person pursuant
to which the executive officer was selected.

Name

David Ricks

Age

Anat Ashkenazi

Eric Dozier

Anat Hakim

Edgardo Hernandez

Patrik Jonsson

Titles and Business Experience

Chair, President, and Chief Executive Officer (CEO) (since 2017). Previously, Mr. Ricks held various
leadership roles with Lilly, including senior vice president and president, Lilly Bio-Medicines. Mr. Ricks has
27 years of service with Lilly.

Executive Vice President and Chief Financial Officer (since 2021). Previously, Ms. Ashkenazi held various
leadership roles with Lilly, including senior vice president, controller and chief financial officer, Lilly
Research Laboratories, and vice president, finance and chief financial officer, Lilly Diabetes and Lilly
global manufacturing and quality. Ms. Ashkenazi has 22 years of service with Lilly.

Executive Vice President, Human Resources and Diversity (since 2022). Previously, Mr. Dozier held
various leadership roles with Lilly, including senior vice president, chief commercial officer for Loxo@Lilly,
and vice president, global ethics and compliance officer. Mr. Dozier has 26 years of service with Lilly.

Executive Vice President, General Counsel and Secretary (since 2020). Prior to joining Lilly, Ms. Hakim
was senior vice president, general counsel and secretary of WellCare Health Plans, Inc. (WellCare) from
2016 to 2018, and executive vice president, general counsel and secretary of WellCare from 2018 to 2020.
Prior to joining WellCare, she served as divisional vice president and associate general counsel of
intellectual property litigation at Abbott Laboratories from 2010 to 2013 and divisional vice president and
associate general counsel of litigation from 2013 to 2016. Ms. Hakim has four years of service with Lilly.

Executive Vice President and President, Manufacturing Operations (since 2021). Previously, Mr.
Hernandez held various leadership roles with Lilly, including senior vice president, global parenteral drug
product, delivery devices and regional manufacturing, and vice president, Fegersheim operations. Mr.
Hernandez has 19 years of service with Lilly.

Executive Vice President and President, Lilly Diabetes and Obesity and President, Lilly USA (since 2024).
Mr. Jonsson has held various leadership roles with Lilly, including, most recently, as Executive Vice
President and President, Lilly Immunology and Lilly USA, and Chief Customer Officer. Previously, he
served as senior vice president and president, Lilly Bio-Medicines and president and general manager,
Lilly Japan. Mr. Jonsson has 33 years of service with Lilly.

Johna Norton

Diogo Rau

Executive Vice President, Global Quality (since 2017). Previously, Ms. Norton held various leadership
roles with Lilly, including vice president, global quality assurance API manufacturing and product research
and development. Ms. Norton has 33 years of service with Lilly.

Executive Vice President and Chief Information and Digital Officer (since 2021). Prior to joining Lilly, Mr.
Rau was senior director of information systems and technology for retail and online stores of Apple Inc.
from 2011 to 2021. Prior to his tenure at Apple, he served as a partner at McKinsey & Company. Mr. Rau
has three years of service with Lilly.

Daniel Skovronsky,
M.D., Ph.D.

Jacob Van Naarden

Alonzo Weems

Anne White

Ilya Yuffa

Executive Vice President, Chief Scientific Officer and President, Lilly Research Laboratories and Lilly
Immunology (since 2024). Prior to assuming his current role, Dr. Skovronsky served as Executive Vice
President, Chief Scientific and Medical Officer, and President, Lilly Research Laboratories since 2018. Dr.
Skovronsky has held other leadership roles with Lilly, including as senior vice president, clinical and
product development and vice president, diabetes research. Dr. Skovronsky has 13 years of service with
Lilly.

Executive Vice President and President, Loxo@Lilly (since 2021). Previously, Mr. Van Naarden served as
chief executive officer-Loxo Oncology at Lilly, and chief operating officer-Loxo Oncology at Lilly. Mr. Van
Naarden joined Lilly in 2019 when the company acquired Loxo Oncology, Inc., where he was the chief
operating officer. In previous roles, Mr. Van Naarden worked in various biotechnology investing, operating,
and advisory capacities, including positions with HealthCor Management, Aisling Capital, and Goldman
Sachs. Mr. Van Naarden has five years of service with Lilly.

Executive Vice President, Enterprise Risk Management, and Chief Ethics and Compliance Officer (since
2021). Previously, Mr. Weems held various leadership roles with Lilly, including vice president and deputy
general counsel for corporate legal functions, general counsel for Lilly USA, and general counsel for
biomedicines and diabetes. Mr. Weems has 26 years of service with Lilly.

Executive Vice President and President, Lilly Neuroscience (since 2021). Previously, Ms. White held
various leadership roles with Lilly, including senior vice president and president, Lilly Oncology, vice
president of Portfolio Management, Chorus, and Next Generation Research and Development. Ms. White
has 28 years of service with Lilly.

Executive Vice President and President, Lilly International (since 2021). Previously, Mr. Yuffa held various
leadership roles with Lilly, including senior vice president and president, Lilly Bio-Medicines, vice president
of U.S. Diabetes, general manager of Italy Hub, and vice president, global ethics and compliance officer
since 2014. Mr. Yuffa has 27 years of service with Lilly.

Human Capital Management

Our core values—integrity, excellence, and respect for people—shape our approach to attracting, retaining,
engaging, and developing a diverse and highly skilled and ethical workforce, which is critical to executing our
strategy. We believe the strength of our workforce significantly contributes to our financial performance and
enables us to make life better for people around the world. For instance, most of the products we sell today were
discovered or developed by our own scientists, and our long-term success depends on our ability to continually
discover or acquire, develop, and commercialize innovative medicines. We believe that fostering a positive
culture that values the contributions of our talented colleagues helps drive our success.

We are committed to creating a safe, supportive, ethical, and rewarding work environment through strategic
focus on our human capital management process, fairness and nondiscrimination in our employment practices,
robust training and development opportunities, and competitive pay and benefits. We believe our dedication to
promoting diversity, equity, and inclusion within our company reflects our values and is a key driver of business
success and growth.

We regularly conduct confidential employee surveys to seek feedback from our workforce on a variety of topics.
These results are reviewed and analyzed by our leaders to identify opportunities to adjust our policies and
benefits to improve our employees' experience. As a result of our efforts, we believe that we have a highly
performing, cohesive workforce and that our employee relations are good.

At the end of 2023, we employed approximately 43,000 people, including approximately 23,000 employees
outside the U.S. Our employees include approximately 10,000 people engaged in research and development
activities.

Strategy and Oversight

We are committed to fairness and nondiscrimination in our employment practices, and we deeply value diverse
backgrounds, skills, and global perspectives. Because dedication to human capital management is also a core
component of our corporate governance, our board of directors regularly engages with management and
facilitates a system of reporting designed to monitor human capital management initiatives and progress as part
of the overarching framework that guides how we attract, retain, engage, and develop a workforce that aligns
with our values and mission.

Across all levels of our workforce, from the end of 2019 through the end of 2023, we have seen positive changes
in representation for minority group members (MGM) in the United States and women globally. In addition, 4 of
13 current members (approximately 31 percent) of our executive committee (which includes our CEO) are
women and 3 are MGMs. In addition, as of the filing of this Annual Report on Form 10-K, the company's 12-
member board of directors includes five women and five members who are MGMs.

Our recruitment strategy focuses on opportunities to expand our pool of candidates to reach more candidates
across a variety of dimensions, including but not limited to race, religion, sexual orientation, gender identity,
national origin, veteran status, disability status, education, and experience. We also strive to provide a diverse
panel of interviewers for open positions. We believe that recruiting in this way helps ensure that everyone will
have an equal opportunity to advance their careers.

We offer training to enable our employees to perform their duties in our highly regulated industry. We also strive
to cultivate a culture that promotes ongoing learning by encouraging employees to seek further education and
growth experiences, helping them build rewarding careers. We have implemented development tools and
resources for all employees, improved our talent programs and processes to provide broader access to
information, and increased transparency regarding career development and advancement at Lilly.

Employee Health and Safety

We strive to foster a healthy, vibrant work environment, which includes keeping our employees safe. We seek to
create a companywide culture where best-in-class safety practices are consistently followed. To do this, we
assess and continuously attempt to improve our companywide safety performance to promote the well-being of
employees and to help safeguard communities where we operate. We believe a holistic approach and dedication
to safety helps us be our best as we deliver on our company purpose to improve lives around the world.

Information Available on Our Website

Our company website is www.lilly.com. None of the information accessible on or through our website is
incorporated into this Annual Report on Form 10-K. We make available through the website, free of charge, our
company filings with the Securities and Exchange Commission (SEC) as soon as reasonably practicable after we
electronically file them with, or furnish them to, the SEC. These include our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements, and
any amendments to those documents. The link to our SEC filings is investor.lilly.com/financial-information/
sec-filings.

Paper copies of the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q that are filed
with the SEC are available without charge upon written request to:

ELI LILLY AND COMPANY
c/o General Counsel and Secretary
Lilly Corporate Center
Indianapolis, Indiana 46285

In addition, the "Governance" section of our website includes our corporate governance guidelines, board of
directors and committee information (including committee charters), and our articles of incorporation and bylaws.
The link to our corporate governance information is lilly.com/leadership/governance.

We routinely post important information for investors in the “Investors” section of our website, www.lilly.com. We
may use our website as a means of disclosing material, non-public information and for complying with our
disclosure obligations under Regulation FD. Accordingly, investors should monitor the “Investors” section of our
website, in addition to following our press releases, filings with the SEC, public conference calls, presentations,
and webcasts. We may also use social media channels to communicate with investors and the public about our
business, products and other matters, and those communications could be deemed to be material information.
The information contained on, or that may be accessed through, our website or social media channels, is not
incorporated by reference into, and is not a part of, this Annual Report on Form 10-K.

Item 1A. Risk Factors

In addition to the other information contained in this Annual Report on Form 10-K, the following risk factors
should be considered carefully in evaluating our company. It is possible that our business, financial condition,
liquidity, cash flows, results of operations, reputation, and prospects could be materially adversely affected by
any of these risks. Additional risks and uncertainties not presently known to us or that we currently believe to
be immaterial could also adversely affect our business, financial condition, liquidity, cash flows, results of
operations, reputation, and prospects.

Risks Related to Our Business and Industry

•

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

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

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

We cannot state with certainty when or whether our products and indications now under development will
be approved or launched; whether, if initially granted, such approval will be maintained; whether we will
be able to develop, license, or otherwise acquire additional product candidates, indications or products; or
whether our products and indications, once launched, will be commercially successful.

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

We engage in various forms of business development activities to enhance or refine our product pipeline,
including licensing arrangements, co-development agreements, co-promotion arrangements, distribution
and promotion agreements, joint ventures, acquisitions, equity investments, and divestitures. There are

substantial risks associated with identifying successful business development targets and consummating
related transactions. Increased focus on business combinations in our industry, including by the Federal
Trade Commission and competition authorities in Europe and other jurisdictions, and heightened
competition for attractive targets has and could continue to delay, jeopardize, or increase the costs of our
business development activities. In addition, failures or difficulties in integrating or retaining new
personnel or the operations of the businesses, products, or assets we acquire (including related
technology, commercial operations, compliance programs, information security, manufacturing,
distribution, and general business operations and procedures) may affect our ability to realize the
expected benefits of business development transactions and may result in our incurrence of substantial
asset impairment or restructuring charges. We also may fail to generate the expected revenue and
pipeline enhancement from business development activities due to limited diligence opportunities,
unsuccessful clinical trials, issues related to the quality, integrity, or broad applicability of data, regulatory
impediments, and manufacturing or commercialization challenges. Additionally, business development
activity focused on new modalities may entail additional risks and costs. Accordingly, business
development transactions may not be completed in a timely manner (if at all), may not result in successful
development outcomes or successful commercialization of any product, may give rise to legal
proceedings or regulatory scrutiny, and may result in charges that negatively impact our financial position
or results of operations in any given period.

See Item 1, "Business—Research and Development—Phases of New Drug Development" and Item 7,
"Management's Discussion and Analysis—Executive Overview—Late-Stage Pipeline," for more details
about our current product pipeline.

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

We compete with a large number of multinational pharmaceutical companies, biotechnology companies,
and generic pharmaceutical companies and, in many cases, our products compete against the leading
products of one or more of our competitors. To compete successfully, we must continue to deliver to the
market innovative, cost-effective products through internal innovation or business development that meet
important medical needs, provide improved outcomes for patients, and deliver value to payers. Our
product revenues and prospects are adversely affected by the introduction by competitors of branded
products that are first to market, have better marketplace access, have greater brand recognition or are
perceived as superior by the marketplace, by generic or biosimilar versions of our branded products, and
by generic or biosimilar versions of other products in the same therapeutic class as our branded products.
Our revenues are also adversely affected by treatment innovations, including new or superior modalities,
that eliminate or minimize the need for treatment with our drugs.

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

In addition, we rely on our ability to attract, engage, and retain highly qualified and skilled scientific,
technical, management, and other personnel in order to compete effectively. To continue to commercialize
our products, and advance the research, development, and commercialization of additional modalities,
indications, and product candidates, we have expanded, and will likely need to further expand, our
workforce, including in the areas of manufacturing, clinical trials management, regulatory affairs, and
sales and marketing, both in and outside the U.S. We continue to face intense competition for qualified
individuals from numerous multinational pharmaceutical companies, biotechnology companies, academic
and other research institutions, as well as employers near our manufacturing and other facilities, which
has and may continue to increase our labor costs. Our ability to attract and retain talent in our increasingly
competitive environment is further complicated by evolving employment trends. Our failure to compete
effectively for talent could negatively affect sales of our current and any future approved products and
indications, and could result in material financial, legal, commercial, or reputational harm to our business.

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

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

Additional policies, regulations, legislation, or enforcement, including because of the regulatory priorities
of the U.S. presidential administration and regulatory authorities worldwide, could adversely impact our
business and consolidated results of operations. For example, in August 2023, HHS selected Jardiance,
which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to
government-set prices effective in 2026. Given our product portfolio, we expect additional significant
products will be selected in future years, which would have the effect of accelerating revenue erosion
prior to exclusivity expiry. The effect of reducing prices and reimbursement for certain of our products
would significantly impact our business and consolidated results of operations. Within the U.S., state level
transparency initiatives, importation rules, reporting requirements, and mandated programs, including the
establishment of drug affordability boards with the power to set upper payment limits on certain drugs in
state-regulated plans, have also increased administrative costs, in some cases, compromised confidential
business practices and otherwise detrimentally impacted our business. Certain states have also
undertaken efforts to codify 340B contract pharmacies into statute which would increase the cost of 340B
programs. For more details, see Item 1, "Business—Regulations and Private Payer Actions Affecting
Pharmaceutical Pricing, Reimbursement, and Access."

Further, restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines
or product candidates by governments, regulatory agencies, courts, or private payers, including in relation
to the implementation of the IRA, reference pricing, and compulsory licensing, may adversely impact our
business and financial results. We continue to experience additional pricing pressures, rebates,
clawbacks, and other changes in reimbursement policies and programs resulting from the financial strain
of the COVID-19 pandemic, periods of uneven economic growth or downturns or uncertainty, and the
emergence or escalation of, and responses to, international tension and conflicts.

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

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

•

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

Pharmaceutical products receive regulatory approval based on data obtained in controlled clinical trials of
fixed duration and defined populations. After approval and launch, the products are used for longer
periods of time by much larger numbers of patients, which may lead to identifying new safety or efficacy
concerns. We and others (including regulatory agencies and private payers) collect extensive information
on the efficacy and safety of our marketed products by continuously monitoring the use of our products in
the marketplace. In addition, we or others (including our competitors, in some cases) may conduct post-
marketing clinical studies on efficacy and safety of our marketed products. New safety or efficacy data

from both market surveillance and post-marketing clinical studies of our products or those of our
competitors may result in product label changes, or other measures that could reduce the product's
market acceptance and result in declining sales. Relatedly, safety or efficacy concerns raised about a
product in the same class or with the same mechanism of action as one of our products or product
candidates could be imputed and have an adverse impact on the availability or commercial viability of our
products or approval of product candidates. Serious safety or efficacy issues that arise after product
approval have, and could in the future, result in voluntary or mandatory product recalls or withdrawals
from the market. Safety issues have, and could in the future, result in costly product liability claims. Any of
these outcomes could result in material financial, legal, commercial, or reputational harm to our business.

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

We derived direct product and/or alliance revenues of more than $2 billion for each of Trulicity, Mounjaro,
Verzenio, Taltz and Jardiance (including Glyxambi, Synjardy, and Trijardy XR) that collectively accounted
for 63 percent of our total revenues in 2023. In particular, Trulicity and Mounjaro accounted for 36 percent
of our total revenues in 2023 and we expect products with GLP-1 receptor agonist activity, including the
recently launched Zepbound, to represent a significant and growing portion of our business, revenues,
and prospects. Loss of patent protection, changes in prescription rates, material product liability or pricing
litigation, unexpected side effects or safety concerns, significant changes in demand, regulatory
proceedings and investigations, negative publicity affecting doctor or patient confidence, pressure from
existing or new competitive products, counterfeit and illegally compounded drugs, changes in labeling,
pricing, and insufficient access, or supply shortages or disruptions for these products or any of our other
major products could materially impact our results of operations.

In addition, in the U.S., most of our products are distributed through wholesalers and if one of these
significant wholesalers should encounter financial or other difficulties, it might decrease the amount of
business the wholesaler does with us or we might be unable to timely collect the amounts that the
wholesaler owes us, which could negatively impact our results of operations. See Item 1, "Business—
Marketing and Distribution," for more details. Challenges to U.S. retail pharmacies due to pharmacy
benefit manager reimbursement pressures, among other things, have resulted in financial difficulties for
some pharmacies that may impact patient experiences, lead to determinations by certain pharmacies to
not carry one or more of our significant products or threaten the viability of these pharmacies, which could
negatively impact our business and results of operations.

Moreover, the negotiating power of health plans, managed care organizations, pharmacy benefit
managers, and other supply chain entities has increased due to consolidation, regulatory, and other
market impacts, and they, along with governments, increasingly employ formularies to control costs and
encourage utilization of certain drugs, including through the use of formulary inclusion, or favorable
formulary placement. Such stakeholders have also increasingly imposed utilization management tools to
favor the use of generic products or otherwise limit access to our products. As these practices expand,
including due to potential further consolidation of U.S. private third-party payers, we may face difficulty in
obtaining or maintaining timely or adequate pricing or formulary placement of our products. We expect
that consolidation of supply chain entities will continue to increase competitive and pricing pressures on
pharmaceutical manufacturers.

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

Risks Related to Our Intellectual Property

• We depend on products with intellectual property protection for most of our revenues, cash flows,

and earnings; the loss of effective intellectual property protection for certain of our products has
resulted, and in the future is likely to continue to result, in rapid and severe declines in revenues
for those products.

In the ordinary course of their lifecycles, our products lose significant patent protection and/or data
protection in the U.S., as well as in key jurisdictions outside the U.S., after a specified period of time.
Some products also lose patent protection as a result of successful third-party challenges. We have
faced, and remain exposed to, generic competition following the expiration or loss of such intellectual
property protection.

For non-biologic products, loss of exclusivity (whether by expiration of legal rights or by termination
thereof as a consequence of litigation) typically results in the entry of one or more generic competitors,
leading to a rapid and severe decline in revenues, especially in the U.S. Generic pharmaceutical
companies have in some cases introduced a generic product before resolution of any related patent
litigation. For biologics, loss of exclusivity may or may not result in the near-term entry of competitor
versions (i.e., biosimilars) due to many factors, including development timelines, manufacturing
challenges, and/or uncertainties regarding the regulatory approval pathways.

There is no assurance that the patents we are seeking will be granted or that the patents we hold will be
found valid and enforceable if challenged. Moreover, patents relating to particular products, uses,
formulations, or processes do not preclude other manufacturers from employing alternative processes or
marketing alternative products or formulations that compete with our patented products. Patents held by
third-parties have also contributed, and may in the future contribute, to a decision by us to not pursue all
potential indications for a product candidate. In addition, competitors or other third parties may assert
claims that our activities infringe patents or other intellectual property rights held by them, or allege a
third-party right of ownership in our existing intellectual property. See Item 7, "Management's Discussion
and Analysis—Executive Overview—Other Matters—Patent Matters," and Item 1, "Business—Patents,
Trademarks, and Other Intellectual Property Rights," for more details.

Patents relating to pharmaceutical products are often obtained early in the development process. Given
the limited duration of patent and data protection, the speed with which we develop products, complete
clinical testing, receive regulatory approval, supply commercial product to the market, and obtain public
and private payer access are important factors in recouping our development costs and generating
financial returns, particularly given regulatory and market dynamics that have and may continue to put
pressure on pricing, exclusivity periods, and competition. Delays in achieving these milestones in some
cases limits our ability to capitalize on the innovative medicines that we develop or acquire.

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

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

In addition, in December 2023, the U.S. presidential administration released a proposed framework that
would permit the federal government to consider the price of a drug developed using federal funds as a
factor in determining whether it may exercise "march-in rights" and license it to a third party to
manufacture. A comment period on the proposal runs through February 6, 2024, and we are not able to
predict whether a final rule will be adopted in accordance with the proposed framework.

Also in the U.S., in addition to the process for challenging patents set forth in the BPCIA, which applies to
biologic products, the Hatch-Waxman Act provides generic companies substantial incentives to seek to
invalidate our patents covering small molecule pharmaceutical products. As a result, we expect that our
U.S. patents on major pharmaceutical products, including biologics, will continue to be routinely
challenged in litigation and may not be upheld. In addition, a separate IPR process currently allows
competitors to seek invalidation of patents at the USPTO without the protections of the BPCIA or Hatch-
Waxman Act. The use of IPR proceedings after the institution of litigation pursuant to the BPCIA or Hatch-
Waxman Act is currently a topic of debate among legislators and the future ability of our competitors to
use IPR proceedings as an alternative to Hatch-Waxman Act or BPCIA litigation procedures to challenge
our patents remains uncertain. The USPTO issued an interim procedure regarding the use of
discretionary denials of IPR proceedings when there is parallel district court litigation. However, it is not
clear how this interim procedure could affect the ability of our competitors to institute IPR proceedings
after institution of litigation. If our patents are challenged through this expedited review process, even if
we prevail in demonstrating the validity of our patent, our win provides limited precedential value at the
PTAB and no precedential value in federal district court, meaning the same patent can be challenged by
other competitors.

We face many generic manufacturer challenges to our patents outside the U.S. as well. The entry of
generic competitors typically results in rapid and severe declines in revenues. In addition, competitors or
other third parties may claim that our activities infringe patents or other intellectual property rights held by
them. If successful, such claims could result in our being unable to market a product in a particular
territory or being required to pay significant damages for past infringement or royalties on future sales. In
addition, intellectual property protection in certain jurisdictions outside the U.S. is weak and we face
heightened risks to our intellectual property rights in these jurisdictions, including competition with generic
or counterfeit versions of our products at or relatively shortly after launch. See Item 1, "Business—
Patents, Trademarks, and Other Intellectual Property Rights," and Item 8, "Financial Statements and
Supplementary Data—Note 16: Contingencies," for more details.

We also face challenges from the distribution of counterfeit and illegally compounded versions of our
genuine drugs, including as related to our products with GLP-1 receptor agonist activity. Counterfeits, and
in some cases illegally compounded drugs, fraudulently claim to be, or claim to contain, genuine branded
medicines. Counterfeit and illegally compounded drugs may not have the same safety, quality, and
effectiveness as approved drugs, and may pose serious health risks to patients. Our reputation and
business could suffer harm from counterfeit or illegally compounded drugs and our actions to stop or
prevent illegal sales of such drugs may be costly or ineffective.

Risks Related to Our Operations

•

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

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

IT systems are inherently vulnerable to system inadequacies, inadequate controls or procedures,
operating failures, unauthorized access, service interruptions or failures, security breaches, malicious
intrusions, theft, exfiltration, ransomware, or cyber-attacks from a variety of sources, which may remain

undetected for significant periods of time. From time to time, we update, transition, acquire, or expand use
of our and third-party IT systems, which may result in heightened vulnerability. Some third-party IT
systems that are necessary for the operation of our business processes are maintained outside of our
control but would impact business operations if compromised as a result of a cyber-attack. In February
2024, we completed the implementation of a new global enterprise resource planning (ERP) system,
which replaced our operating and financial systems, and we recently began our post-implementation
activities. We cannot assure that the ERP system and our post-implementation activities will be free of
significant operating failures, service interruptions, or creation of additional vulnerabilities. See Item 9A,
"Controls and Procedures" for more details. Vulnerabilities, inadequacies, or failures are in many cases
more acute for IT systems associated with recently acquired businesses, and we may be unable to
entirely address such vulnerabilities, inadequacies, or failures immediately after acquiring a business or
ever. As a result, our newly acquired businesses are in some cases more vulnerable to failures,
interruptions, breaches, intrusions, theft, exfiltration, or attacks.

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

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

We are subject to various laws and regulations globally regarding privacy and data protection, including
laws and regulations relating to the collection, storage, handling, use, disclosure, transfer, and security of
personal information. The legislative and regulatory environment regarding privacy and data protection is
continuously evolving and the subject of significant attention by regulators and private parties globally.
Regulators are imposing new data privacy and security requirements, including new and greater
monetary fines or penalties for privacy violations, and jurisdictions where we operate have passed, or
continue to propose, data privacy legislation and/or regulations. For example, we are subject to existing
laws in the EU, United Kingdom, China, and U.S., all of which provide for substantial penalties for

noncompliance. Other jurisdictions where we operate have passed, or continue to propose, similar
legislation and regulations. Failure to comply with these current and future laws could result in significant
penalties and reputational harm and could have a material adverse effect on our business and results of
operations.

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

• Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could lead to

product supply problems.

We are in the midst of a significant expansion of our manufacturing capabilities and substantial
investment in long-term supply agreements to support current and anticipated demand for our products.
Pharmaceutical manufacturing is complex and highly regulated. Manufacturing or quality assurance
difficulties at our facilities or those of our contractors and suppliers, the failure or refusal of a supplier or
contract manufacturer to supply contracted quantities, or increases in demand on a supplier with
constrained capacity could result in delays and disruptions in the manufacturing, distribution, and sale of
our products and/or product shortages, leading to lost revenue or reduced marked opportunities. In select
cases, supply constraints may also lead to pauses, discontinuations, or other product availability issues in
one or more markets, which could have a material adverse effect on our consolidated results of
operations, cash flows, and reputation. Further, cost inflation and global transportation and logistics
challenges, as well as tight labor markets, have caused, and in the future may cause, delays in, and/or
increase costs related to, distribution of our medicines, the construction or other acquisition of additional
manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements. These
disruptions and challenges could result from actual or perceived quality, oversight, or regulatory
compliance problems; natural disasters (including increased instances or severity of natural disasters or
other events that may be due to climate change), public health outbreaks, epidemics, or pandemics;
periods of uneven economic growth or downturns; emergence or escalation of, and responses to
international tension and conflicts; equipment, mechanical, data, or IT system vulnerabilities, such as
system inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service
interruptions or failures, security breaches, malicious intrusions, theft, exfiltration, ransomware or other
cyber-attacks from a variety of sources; labor shortages; challenges and complexities in manufacturing
new drug modalities; contractual disputes with our suppliers and contract manufacturers; vertical
integration by competitors within our supply chain; or inability to obtain single-source or other raw or
intermediate materials. Regional or single source dependencies may in some cases accentuate risks
related to manufacturing and supply. For example, we, and the pharmaceutical industry generally, depend
on China-based partners for integral chemical synthesis, reagents, starting materials, and ingredients.
Finding alternative suppliers if and as necessary due to geopolitical developments or otherwise may not
be feasible or could take a significant amount of time and involve significant expense due to the nature of
our products and the need to obtain regulatory approvals which would cause disruptions to patients and
detrimentally impact our business.

Difficulties in predicting or variability in demand for our products and those of our competitors and the very
long lead times necessary for the expansion and regulatory qualification of pharmaceutical manufacturing
capacity have resulted, and in the future may result, in difficulty meeting demand, or disruptions,
shortages, and higher costs in the supply of, our products. For example, we have experienced challenges

in meeting demand for our incretin products in recent periods, partially due to the limited availability of
competitor therapies, and expect tight supply to persist while additional manufacturing capacity is
operationalized. Despite our ongoing efforts to meet significant expected demand by obtaining additional
internal and contracted manufacturing capacity, there can be no assurances that such capacity increases
will be realized as expected. Delays or challenges in operationalizing additional manufacturing capacity
would limit our ability to capitalize on demand for our products. Conversely, unexpected events that limit
demand for our products would undermine our ability to realize the full benefit of significant capital
expenditures that we have incurred, and expect to continue to incur, to augment manufacturing capacity
and may also subject us to contractual payment obligations, which may be significant. The foregoing risks
and uncertainties could negatively impact our consolidated results of operations and reputation. See Item
1, "Business—Raw Materials and Product Supply," and Item 7, "Management's Discussion and Analysis
—Financial Condition and Liquidity" for more details.

•

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

We rely on third parties, including suppliers, distributors, alliances, and collaborations with other
pharmaceutical and biotechnology companies, and third-party service providers, for selected aspects of
product and clinical development, manufacturing, commercialization, hosting of, and support for, IT
systems, product distribution, and certain financial transactional processes. As examples, we outsource
the day-to-day management and oversight of some of our clinical trials to contract research organizations,
certain active ingredient manufacturing, finishing operations, and device or component production and
assembly to contract manufacturing organizations, and the distribution of our products through logistics
providers. In some cases, product or indication approvals depend on the outcome of regulatory
inspections of third parties on which we rely. For example, in September 2023, the FDA issued a
complete response letter for our lebrikizumab BLA for the treatment of moderate to severe atopic
dermatitis. In the letter, the FDA cited findings that arose during a multi-sponsor inspection of a third-party,
contract manufacturing organization that included the monoclonal antibody drug substance for
lebrikizumab. We may encounter similar difficulties in the future, which could delay or prevent product
launches and otherwise negatively affect our business, results, and reputation.

Outsourcing involves many risks, including the risk that third parties may not perform to our standards or
legal requirements, including applicable requirements for diversity in clinical trials; may not produce
reliable results; may not perform in a timely manner; may not maintain the confidentiality, integrity, and
availability of confidential and proprietary information relating to us, our clinical trial subjects, or patients;
may experience disruption or fail to perform due to IT system vulnerabilities, such as inadequacies,
inadequate controls or procedures, operating failures, unauthorized access, service interruptions or
failures, security breaches, malicious intrusions, theft, exfiltration, ransomware or other cyber-attacks;
may be unable to satisfy their commitments to us in which case we may not be able to achieve
acceptable alternative sourcing; or may fail to perform at all. The foregoing risks may be heightened in
jurisdictions outside the U.S., where we may have fewer alternative providers as well as face additional
costs, uncertainties, and risks. Failure of third parties to meet their contractual, regulatory, confidentiality,
privacy, security, or other obligations to us, our clinical trial subjects, and our patients could have a
material adverse effect on our business.

• Our use of artificial intelligence (AI) or other emerging technologies could adversely impact our

business and financial results.

We have begun to deploy AI and other emerging technologies in various facets of our operations and we
continue to explore further use cases for AI. The rapid advancement of these technologies presents
opportunities for us in research, manufacturing, commercialization, and other business endeavors but
also entails risks, including that AI-generated content, analyses, or recommendations we utilize could be
deficient, that our competitors may more quickly or effectively adopt AI capabilities, or that our use of AI or
other emerging technologies exacerbates regulatory, cybersecurity and other significant risks.

Effective development, management, and use of AI technologies is novel and complex, and there are
technical challenges associated with achieving desired levels of accuracy, efficiency, and reliability. The
algorithms and models utilized in AI systems may have limitations, including biases, errors, or inability to
handle certain data types or scenarios or to render explainable outputs. Furthermore, there are risks
associated with the fact that the platforms providing AI models are in many cases owned and operated by
emerging companies with less contractual and compliance sophistication. These factors may undermine

our ability to effectively utilize AI or create competitive disadvantages should our competitors more
skillfully make use of AI capabilities. Further, if we are unable to effectively manage the use of AI
technologies by our employees, our confidential information, intellectual property, or reputation could be
put at risk.

The emergence of AI and other technologies, particularly generative AI, may exacerbate other risks,
including those related to regulation, litigation, compliance issues, ethical concerns, confidentiality, and
data privacy or security. For example, regulatory uncertainty related to AI or other emerging technologies
may require significant resources to adjust business practices to comply with developing laws. Several
governmental authorities have already proposed or enacted laws and other guidance governing AI, such
as the proposed EU Artificial Intelligence Act. These and other developing obligations may prevent or
make it harder for us to conduct or enhance our business using AI, or lead to regulatory fines, penalties,
or other liability. Further, use of AI technologies could lead to unintended consequences, such as
cybersecurity risks or unintended biases, impact our ability to protect our confidential data and intellectual
property, and expose us to intellectual property infringement claims by third parties.

Risks Related to Doing Business Internationally

•

Uneven economic growth or downturns or international trade and other global disruptions,
geopolitical tensions, or disputes could adversely affect our business and operating results.

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

In addition, significant portions of our business are conducted in Europe, Asia, and other international
geographies. Trade and other global disputes and interruptions, including related to tariffs, trade
protection measures, import or export licensing requirements, the imposition of trade sanctions or similar
restrictions by the U.S. or other governments, international tension and conflicts, as well as cost inflation,
strains on global transportation, manufacturing, and labor markets, and public health outbreaks,
epidemics, or pandemics, such as the COVID-19 pandemic, affect our ability to do business. For
example, tensions between the U.S. and China have led to a series of tariffs and sanctions being
imposed by the U.S. on imports from China mainland, as well as other business restrictions. If geopolitical
tensions were to increase and disrupt our operations in, or related to, China, such disruption would
significantly impact our business. As a further example, the financial impact of higher energy prices,
defense spending, and inflation due, in part, to geopolitical and economic disruptions, has further
exacerbated financial pressures on governments with single-payer or government funded healthcare
systems, leading to increased impetus for increases in rebates, clawbacks, and other reforms to
reimbursement systems, particularly in Europe. These and similar events have adversely affected, and
may continue to adversely affect, us, our business partners, and our customers. For more details, see
Item 1, "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing,
Reimbursement, and Access."

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

•

Changes in foreign currency rates, interest rate risks, and inflation affect our results of
operations.

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates,
interest rate risk from our exposure to floating and variable interest rates, and inflation risk from existing
and expected rates of inflation in the U.S. and other jurisdictions, each of which impacts our results of
operations. In recent periods, significant fluctuations in currency rates and inflation have impacted our
results of operations. We are a net receiver of foreign currencies, and our results of operations are

adversely impacted when the U.S. dollar is strong compared to foreign currencies. Further, in the event of
an extreme devaluation of local currency in a particular market in which we operate, the price of our
products could become unsustainable in the relevant market. Inflationary pressures in recent periods
have also negatively impacted us and may continue to negatively impact us in various ways, including
cost inflation, higher labor costs, and other higher expenses, with some of these higher expenses due in
part to policy actions intended to curb inflation. See Item 7, "Management's Discussion and Analysis—
Financial Condition and Liquidity" and Item 8, "Financial Statements and Supplementary Data—Note 1:
Summary of Significant Accounting Policies and Implementation of New Financial Accounting Standards,"
for more details.

Risks Related to Government Regulation and Litigation

• We face litigation and investigations related to our products, how we price or commercialize our
products, and other aspects of our business, which could adversely affect our business, and we
are self-insured for such matters.

We are subject to a substantial number of claims involving various current and historical products,
litigation, and investigations. These claims relate to how we commercialize and/or how we price our
products, including relating to our 340B drug pricing program, product safety, as well as contractual
matters and other disputes. See Item 8, "Financial Statements and Supplementary Data—Note 16:
Contingencies" for more information on our current product liability litigation, as well as pricing and other
litigation, investigations, and inquiries. Like many companies in our industry, from time to time
investigations into aspects of our business include inquiries, subpoenas, and other types of information
demands from government and regulatory authorities. There continues to be a significant volume of
government and regulatory investigations and litigation against companies operating in our industry, as
well as increasingly robust regulatory enforcement. Because of the nature of pharmaceutical products, we
are, and could in the future become, subject to large numbers of product liability claims for our previous,
current, or future products, or to further litigation or investigations, including related to product safety and
pricing or other commercial practices. Some of these matters involve numerous plaintiffs and parties
seeking large or indeterminate financial claims and may remain unresolved for several years. Such
matters could negatively impact our reputation, affect our results of operations or require us to recognize
substantial charges to resolve and, if involving marketed products, could adversely affect sales of the
product and our consolidated results of operations in any given period. Due to a very restrictive market for
liability insurance, we are predominately self-insured for litigation liability losses for all of our currently
marketed products, as well as for litigation or investigations related to our pricing practices or other similar
matters.

• We are subject to evolving and complex tax laws, which may result in additional liabilities and

affect our results of operations.

We are subject to income taxes in the U.S. and numerous other jurisdictions, and in the course of our
business, we make judgments about the expected tax treatment of various transactions and events.
Changes in tax laws, regulations, administrative practices, principles, disclosure obligations, and
interpretations, as well as events that differ from our expectations, have affected and may adversely affect
our effective tax rates, cash flows, and/or results of operations. In addition, tax authorities in the U.S. and
other jurisdictions in which we do business routinely examine our tax returns and are intensifying their
scrutiny and examinations of cross-border tax issues, which could unfavorably impact our results of
operations. Further, actions taken with respect to tax-related matters by associations such as the
Organisation for Economic Co-operation and Development and the European Commission could
influence tax laws in countries in which we operate, such as the recent enactments by both the EU and
non-EU countries of a global minimum tax. Modifications to key elements of the U.S. or international tax
framework could have a significant impact on our effective tax rate, results of operations, and cash flows.
See Item 7, "Management's Discussion and Analysis—Executive Overview—Other Matters—Tax Matters"
and Item 8, "Financial Statements and Supplementary Data—Note 14: Income Taxes," for more details.

•

Regulatory compliance problems could be damaging to the company.

The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the
manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to
extensive scrutiny and regulation. Many companies, including us, are and have been subject to
investigations, litigation, and claims related to these practices asserted by governmental authorities and

other parties. These investigations, litigation, and claims have resulted in substantial expense and other
significant consequences. The final outcomes of such investigations, litigation, and claims include criminal
charges and fines, penalties, or other monetary or non-monetary remedies, including exclusion from U.S.
federal and other healthcare programs. Such investigations, litigation, and claims have intensified and
may continue to intensify as a result of evolving U.S. and foreign regulatory priorities. New business
practices or commercial capabilities may subject us to additional scrutiny over compliance with applicable
regulatory schemes and compliance obligations or expose us to new regulatory schemes and compliance
obligations entirely. In addition, regulatory issues concerning compliance with cGMP, quality assurance,
evolving standards, and increased scrutiny around excipients and potential impurities such as
nitrosamines, and similar regulations and standards (and comparable foreign regulations and standards)
for our products in some cases lead to regulatory and legal actions, product recalls and seizures, fines
and penalties, interruption of production leading to product shortages, import bans or denials of import
certifications, delays or denials in new product approvals or line extensions or supplemental approvals of
current products pending resolution of the issues, and reputational harm, any of which adversely affects
our business. Regulatory oversight of the pharmaceutical industry entails judgment and interpretation,
which can result in inconsistent administration of laws and regulations by health authorities. Regulatory
compliance and processes in jurisdictions outside the U.S. may be particularly unpredictable and result in
additional costs, uncertainties, and risks.U.S. and foreign governmental authorities are actively
promulgating additional regulations that impact many aspects of our operations. These regulations are in
some cases advanced with short notice. New regulations may undermine our ability to achieve business
objectives, may be costly to implement, may provide only limited time for compliance, may change
accounting and reporting standards, and may carry significant penalties for non-compliance. See Item 1,
"Business—Government Regulation of Our Operations," for more details.

Furthermore, there is an increased focus by foreign, federal, state, and local regulatory and legislative
bodies regarding environmental policies relating to climate change, regulating greenhouse gas emissions,
carbon taxes, emissions trading schemes, sustainability, human rights and equity matters, and disclosure
regarding the foregoing, many of which may be ambiguous, inconsistent, dynamic or conflicting. We
expect to experience increased restrictions and compliance costs, legal costs, and expenses related to
such new or changing legal or regulatory requirements. Moreover, compliance with any such legal or
regulatory requirements would require us to devote substantial time and attention to these matters. In
addition, we may still be subject to penalties or potential litigation if such laws and regulations are
interpreted or applied in a manner inconsistent with our practices.

Additionally, we are subject to increased negative attention from the media, stockholders, activists, and
other stakeholders on climate change, social, and sustainability matters. The perception that we have
failed to act in a socially responsible manner, whether or not valid, results in adverse publicity that can
negatively affect our business, brand, and reputation, as well as result in increased scrutiny from
legislators and regulatory authorities. Moreover, from time to time we establish and publicly announce
goals and commitments, including to reduce our impact on the environment. Our ability to achieve any
stated environmental, social or governance goal, target or objective is subject to numerous factors and
conditions, many of which are outside our control. Examples of such factors include evolving regulatory
requirements affecting sustainability standards or disclosures or imposing different requirements, the
availability of requisite financing, and the availability of suppliers that can meet our sustainability and other
goals. If we fail to achieve, are perceived to have failed or been delayed in achieving, or improperly report
our progress toward achieving these goals and commitments, it could negatively affect our reputation,
brand, or investor confidence, and expose us to enforcement actions and litigation.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Risk Management and Strategy

We manage cybersecurity threats as part of our oversight, evaluation, and mitigation of enterprise-level risks.
We have based our cybersecurity program on industry frameworks with the goal of building enterprise
resilience against an evolving landscape of cybersecurity threats and to respond to cybersecurity threats as
they materialize. Our program includes monitoring, identification, assessment, and management components,
as well as information and escalation components designed to inform management and the board of directors
of prospective risks and developments.

Our information security program encompasses functions dedicated to both proactive and reactive
management of cybersecurity threats. We implement our cybersecurity program internally through established
policies, standards, reference architectures, and the use of enterprise security services that focus on
emerging and ongoing cybersecurity risks. Our proactive management of cybersecurity risks entails many
actions, including the maintenance of system access restrictions, utilization of data security technology,
employee education and training initiatives, and retention of cyber liability insurance, among other measures.
We regularly engage third-party auditors and consultants and leverage our internal audit function to assess
various facets of our cybersecurity program. These engagements include completion of industry-standard
assessments or certifications, maturity model reviews, threat simulations, as well as internal reviews to
assess the effectiveness of our cybersecurity processes. We also maintain enterprise-wide processes to
oversee and identify risks from cybersecurity threats associated with our use of third-party service providers.
As examples, we generally review current and prospective third-party service providers for unacceptable
cybersecurity risks, negotiate contractual provisions that require the establishment of third-party cybersecurity
controls, and deploy communications security measures to protect third-party communications.

We assess cybersecurity contingencies within our overall business continuity risk management planning
process. Our Information Security team utilizes various tools to prevent, detect, monitor, and react to
cybersecurity threats. Our Incident Response Playbook outlines processes, roles, responsibilities,
engagements, escalations, notifications, and other communications applicable to the assessment, mitigation,
and remediation of realized cybersecurity events. The nature and assessed risk of a realized cybersecurity
event dictates the pace and extent of relevant processes, escalations, and communications, including an
evaluation of any necessary or required disclosure. Roles and escalation paths range from within the
Information Security team up to the Executive Committee, and the board of directors and its committees, as
appropriate.

We describe risks faced by us from identified cybersecurity threats in Item 1A, "Risk Factors—Risks Related
to Our Operations— Failure, inadequacy, breach of, or unauthorized access to, our IT systems or those of our
third-party service providers, unauthorized access to our confidential information, or violations of data
protection laws, could each result in material harm to our business and reputation", "Risk Factors—Risks
Related to Our Operations—Manufacturing, quality, or supply chain difficulties, disruptions, or shortages could
lead to product supply problems" and "Risk Factors—Risks Related to Our Operations—Reliance on third-
party relationships and outsourcing arrangements could adversely affect our business."

Governance

Management, under the supervision of our Chief Information Security Officer (CISO), is directly responsible
for assessing and managing cybersecurity risks and otherwise implementing our cybersecurity program,
which includes our Incident Response Playbook. The CISO reports directly to our Chief Information and
Digital Officer (CIDO), who is a member of our Executive Committee and leads our information technology,
cybersecurity, digital health, and advanced analytics and data science functions. Our CIDO in turn regularly
updates our Executive Committee on cybersecurity matters. Our CISO and CIDO have significant experience
managing global cybersecurity threats across the pharmaceutical, technology, entertainment, and defense
industries. In addition to providing regular updates to the CIDO and his staff, the CISO is a member of our
Executive Information Security Governance function (EISG), which meets regularly and is also composed of
executive and senior leadership from a variety of functions, including information security, legal, finance, audit,
and ethics and compliance to assess and manage cybersecurity developments and risks and our internal
programs. Each of the CIDO, the CISO and the EISG may call upon business and legal stakeholders across
our company to manage cybersecurity threats and incidents.

The audit committee of our board of directors is responsible for oversight of the company's programs, policies,
procedures, and risk management activities related to information security and data protection. The audit
committee meets regularly with our CIDO and CISO to discuss threats, risks, and ongoing efforts to enhance
cyber resiliency, as well as changes to the broader cybersecurity landscape. In addition, the ethics and
compliance committee supports the audit committee and board in oversight of legal and regulatory
compliance. Our board of directors also regularly participates in presentations on cybersecurity and
information technology. In addition to regular presentations, management promptly updates our board of
directors regarding significant threats and incidents as they arise.

Item 2. Properties

Our principal domestic and international executive offices are located in Indianapolis. At December 31, 2023,
we owned eleven production, distribution, and corporate administrative sites in the United States (U.S.),
including Puerto Rico. These facilities contain an aggregate of approximately 9.0 million square feet of floor
area dedicated to production, distribution, and administration. Major production sites include Indianapolis,
Indiana; Carolina, Puerto Rico; Durham, North Carolina; and Branchburg, New Jersey.

We also own production and distribution sites in Europe and Asia, containing an aggregate of approximately
4.7 million square feet of floor area. Major production sites include facilities in Ireland, France, Spain, Italy,
and China. Additional U.S. and international production facilities and expansions of production facilities are
expected to come online in future periods.

In the U.S., our research and development facilities contain an aggregate of approximately 4.9 million square
feet of floor area, primarily consisting of owned facilities located in Indianapolis and smaller leased sites
primarily in Boston, Massachusetts; San Diego, California; San Francisco, California; and New York, New
York. Outside the U.S., we own a small research and development facility in Spain and lease a small site in
Singapore.

We believe that none of our properties is subject to any encumbrance, easement, or other restriction that
would detract materially from its value or impair its use in the operation of the business. The buildings we own
are of varying ages and in good condition.

Item 3. Legal Proceedings

We are a party to various currently pending legal actions, government investigations, and environmental
proceedings. Information pertaining to legal proceedings is described in Item 8, "Financial Statements and
Supplementary Data - Note 16: Contingencies," and incorporated by reference herein.

Item 4. Mine Safety Disclosures

Not applicable.

Part II
Item 5. Market for the Registrant's Common Equity,

Related Stockholder Matters, and Issuer
Purchases of Equity Securities

Information relating to the principal market for our common stock, dividends, and related stockholder matters
is described in Item 7, "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters." This information is incorporated herein by reference.

As of February 16, 2024, there were approximately 18,871 holders of record of our common stock based on
information provided by EQ Shareowner Services, our transfer agent. Our common stock is listed under the
ticker symbol LLY on the New York Stock Exchange (NYSE).

The following table summarizes the activity related to repurchases of our equity securities during the fourth
quarter ended December 31, 2023:

Total Number of
Shares Purchased
(in thousands)

Average Price Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
(in thousands)

Period
October 2023 . . . . . .
November 2023 . . .
December 2023 . . .
Total . . . . . . . . . . . . .

— $
—
—
—

—
—
—
—

Approximate Dollar Value
of Shares that May Yet Be
Purchased Under the
Plans or Programs
(dollars in millions)
2,500.0
2,500.0
2,500.0

— $
—
—
—

During the three months ended December 31, 2023, we did not repurchase any shares under our $5.00 billion
share repurchase program authorized in May 2021.

PERFORMANCE GRAPH

The following graph compares the return on Lilly stock with that of the Standard & Poor's (S&P) 500 Stock
Index and our peer group for the years 2019 through 2023. The graph assumes that, on the last business day
of 2018, a person invested $100 each in Lilly stock, the S&P 500 Stock Index, and the peer group's collective
common stock. The graph measures total shareholder return, which takes into account both stock price and
dividends. It assumes that dividends paid by a company are immediately reinvested in that company's stock.

Value of $100 Invested on Last Business Day of 2018 Comparison of Five-Year Cumulative Total
Shareholder Return Among Lilly, S&P 500 Stock Index, and Peer Group(1)

Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23

Lilly
$ 100.00
116.15
152.23
252.82
339.38
546.08

Peer Group
$ 100.00
118.31
121.00
145.23
158.70
158.45

S&P 500
$ 100.00
131.49
155.68
200.37
164.08
207.21

(1) We constructed the peer group as the industry index for this graph. It is comprised of the following companies in the pharmaceutical and
biotechnology industries: AbbVie Inc.; Amgen Inc.; AstraZeneca PLC; Biogen Inc.; Bristol-Myers Squibb Company; Gilead Sciences Inc.;
GlaxoSmithKline plc; Johnson & Johnson; Merck & Co., Inc.; Novartis AG; Novo Nordisk A/S; Pfizer Inc.; Roche Holding AG; Sanofi S.A.; and
Takeda Pharmaceutical Company Limited. The peer group used for performance benchmarking aligns with the peer group used for executive
compensation purposes for 2023.

LillyPeer GroupS&P 500Dec-18Dec-19Dec-20Dec-21Dec-22Dec-23$100$200$300$400$500$600Item 6. [Reserved]

Item 7. Management's Discussion and Analysis of

Results of Operations and Financial Condition

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

General

Management's discussion and analysis of results of operations and financial condition is intended to assist the
reader in understanding and assessing significant changes and trends related to our results of operations and
financial position. This discussion and analysis should be read in conjunction with Item 8, "Financial
Statements and Supplementary Data." Certain statements in this Item 7 constitute forward-looking
statements. Various risks and uncertainties, including those discussed in "Forward-Looking Statements" and
Item 1A, "Risk Factors," may cause our actual results, financial position, and cash generated from operations
to differ from these forward-looking statements.

EXECUTIVE OVERVIEW

This section provides an overview of our financial results, late-stage pipeline developments, and other matters
affecting our company and the pharmaceutical industry.

Financial Results

The following table summarizes certain financial information:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share - diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2023
34,124.1 $

5,240.4
5.80

2022
28,541.4
6,244.8
6.90

Percent
Change
20
(16)
(16)

Revenue increased in 2023 driven by increased volume and higher realized prices. The increase in revenue
in 2023 was primarily driven by sales of Mounjaro®, Verzenio®, and Jardiance®, as well as the sales of the
rights for the olanzapine portfolio, including Zyprexa®, and for Baqsimi®, partially offset by the absence of
revenue from COVID-19 antibodies and lower sales of Alimta® following the entry of multiple generics in the
first half of 2022.

Net income and earnings per share decreased in 2023, driven primarily by higher acquired in-process
research and development (IPR&D) charges and increased research and development expenses, marketing,
selling, and administrative expenses, and income taxes, partially offset by increased revenue.

See "Results of Operations" for additional information.

Late-Stage Pipeline

Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize
innovative medicines. We currently have approximately 50 new medicine candidates in clinical development
or under regulatory review, and a larger number of projects in the discovery phase.

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

Indication/Study

Compound
Diabetes, Obesity, and Other Cardiometabolic Diseases
Empagliflozin
(Jardiance)(1)

Chronic kidney
disease

Approved

Status

Obesity

Approved

Developments

Approved in the U.S. and the EU in 2023.
Submitted in Japan in 2022.

Approved in the U.S. and the EU in 2023.
Phase III trials are ongoing.

Cardiovascular
outcomes in type 2
diabetes

Heart failure with
preserved ejection
fraction

Morbidity and
mortality in obesity

Obstructive sleep
apnea (OSA)

Higher doses
Nonalcoholic
steatohepatitis
Type 1 and type 2
diabetes
Obesity

Type 2 diabetes
Obesity,
osteoarthritis, OSA
Type 2 diabetes

Tirzepatide
(Mounjaro,
Zepbound®)

Insulin Efsitora Alfa

Orforglipron

Retatrutide

Phase III

Phase III trial is ongoing.

Phase III

Phase III trial is ongoing.

Phase III

Phase III trial is ongoing.

Phase III

Phase II

Granted U.S. Food and Drug Administration
(FDA) Fast Track designation(2). Phase III trial
is ongoing.

Phase II trial initiated in 2023.
Announced in 2024 that a Phase II trial met its
primary endpoint.

Phase III

Phase III trials are ongoing.

Phase III

Phase III trials initiated in 2023.

Phase III

Phase III trials initiated in 2023.

Phase II

Phase II trial was completed.

Bimagrumab

Obesity

Phase II

Acquired in the acquisition of Versanis Bio,
Inc. (Versanis) in 2023. Phase II trial is
ongoing.

Lepodisiran

Mazdutide

Muvalaplin

Solbinsiran

Volenrelaxin

Cardiovascular
disease
Obesity
Cardiovascular
disease
Cardiovascular
disease
Heart failure

Phase II

Phase II trial is ongoing.

Phase II trial initiated in 2023.

Phase II trial is ongoing.

Phase II trial initiated in 2023.

Indication/Study

Status

Developments

Compound
Immunology

Lebrikizumab(3)
(Ebglyss®)

Atopic dermatitis

Approved

Mirikizumab

Crohn's Disease

Phase III

DC-806

Psoriasis

Phase II

Approved in the EU in 2023 and in Japan in
2024. Submitted in the U.S. in 2022. We
received a complete response letter from the
FDA in 2023. We anticipate regulatory action
by the end of 2024. Phase III trials are
ongoing.

Announced in 2023 that a Phase III trial met
the co-primary and all major secondary
endpoints compared to placebo. Phase III
trials are ongoing.

Acquired in the acquisition of DICE
Therapeutics, Inc. (DICE) in 2023. Phase II
trial is ongoing.

Eltrekibart

KV1.3 Antagonist
Ocadusertib
(RIPK1 inhibitor)
Peresolimab

Ucenprubart

Neuroscience

Donanemab

Remternetug

GBA1 Gene Therapy

Hidradenitis
suppurativa
Psoriasis

Phase II

Phase II trial is ongoing.

Phase II trial initiated in 2024.

Rheumatoid arthritis Phase II

Phase II trial initiated in 2023.

Rheumatoid arthritis Phase II

Phase II trial is ongoing.

Atopic dermatitis

Phase II

Phase II trial initiated in 2023.

Early Alzheimer's
disease

Submitted

Submitted for approval in the U.S., the EU,
and Japan in 2023. Granted FDA
Breakthrough Therapy designation(4). Phase III
trials are ongoing.

Preclinical
Alzheimer's disease
Early Alzheimer's
disease
Gaucher disease
Type 1

Phase III

Phase III trial is ongoing.

Phase III

Phase III trial is ongoing.

Phase II

Phase II trial initiated in 2023.

Parkinson's disease Phase II

GRN Gene Therapy

O-GlcNAcase Inh

Frontotemporal
dementia
Alzheimer's disease Phase II

Phase II

Granted FDA Fast Track designation(2). Phase
II trial is ongoing.
Granted FDA Fast Track designation(2). Phase
II trial is ongoing.
Phase II trial is ongoing.

OTOF Gene Therapy Hearing loss

P2X7 Inhibitor
SSTR4 Agonist

Pain
Pain

Phase II

Phase II
Phase II

Phase II trial initiated in 2024.

Phase II trials were completed.
Phase II trials are ongoing.

Compound
Oncology

Pirtobrutinib
(Jaypirca®)

Imlunestrant

Olomorasib

Indication/Study

Status

Developments

Chronic lymphocytic
leukemia

Approved(5)

Mantle cell
lymphoma

Approved(5)

FDA granted accelerated approval(5) in the
U.S. in 2023. Phase III trials are ongoing.
FDA granted accelerated approval(5) in the
U.S. in 2023. Approved in the EU in 2023.
Submitted in Japan in 2023. Phase III trial is
ongoing.

Adjuvant breast
cancer

ER+HER2-
metastatic breast
cancer

KRAS G12C-mutant
NSCLC

Phase III

Phase III trial is ongoing.

Phase III

Phase III trial is ongoing.

Phase II

Phase II trial initiated in 2023.

Abemaciclib

Prostate cancer

Discontinued

In 2024, Phase III trials did not meet primary
endpoints or were terminated for futility.

(1) In collaboration with Boehringer Ingelheim.
(2) Fast Track designation is designed to facilitate the development and expedite the review of medicines to treat serious conditions and fill

an unmet medical need.

(3) In collaboration with Almirall, S.A. in Europe.
(4) Breakthrough Therapy designation is designed to expedite the development and review of potential medicines that are intended to treat
a serious condition where preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement over
available therapy on a clinically significant endpoint.

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

There are many difficulties and uncertainties inherent in pharmaceutical research and development, the
introduction of new products and indications, business development activities to enhance or refine or product
pipeline, and commercialization of our products. There is a high rate of failure inherent in drug discovery and
development. To bring a product from the discovery phase to market takes considerable time and entails
significant cost. Failure can occur at any point in the process, including in later stages after substantial
investment. As a result, most funds invested in research and development programs will not generate
financial returns. New product candidates that appear promising in development or prior to being acquired
may fail to reach the market or may have only limited commercial success because of efficacy or safety
concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage,
failure to obtain placement on guidelines or recommendations published by third-party organizations that are
commensurate with clinical data, the application of pricing controls, limited scope of approved uses, label
changes, changes in the relevant treatment standards or the availability of newer, better, or more cost-
effective competitive products, difficulty or excessive costs to manufacture, insufficient infrastructure to
support detection, diagnostic or other requisites for treatment, ineffectiveness in reaching healthcare
professionals, including digitally given the increase in virtual engagements, or infringement of the patents or
intellectual property rights of others. We may also fail to allocate research and development resources
efficiently, fail to pursue or invest sufficiently in product candidates or indications that may have been
successful, or fail to optimally balance trial design, conduct, and speed to accomplish desired outcomes.
Regulatory agencies establish high hurdles for the efficacy and safety of new products and indications. Delay,
uncertainty, unpredictability, and inconsistency in drug approval processes across markets and agencies can
result in delays in product launches, lost market opportunities, impairment of inventories, and other negative
impacts. In addition, it can be very difficult to predict revenue growth rates of, or variability in demand for, new
products and indications which in some cases leads to difficulty meeting product demand or, on the other
hand, excess inventory and related financial charges.

We manage research and development spending across our portfolio of potential new medicines and
indications. A delay in, or termination of, any one project will not necessarily cause a significant change in our
total research and development spending. Due to the risks and uncertainties involved in the research and
development process, we cannot reliably estimate the nature, timing, and costs of the efforts necessary to
complete the development of our research and development projects, nor can we reliably estimate the future
potential revenue that will be generated from any successful research and development project. Each project
represents only a portion of the overall pipeline, and none is individually material to our consolidated research
and development expense. While we do accumulate certain research and development costs on a project
level for internal reporting purposes, we must make significant cost estimations and allocations, some of
which rely on data that are neither reproducible nor validated through accepted control mechanisms.
Therefore, we do not have sufficiently reliable data to report on total research and development costs by
project, by preclinical versus clinical spend, or by therapeutic category.

Other Matters

Patent Matters

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

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

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

Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access

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

Global concern over access to and affordability of pharmaceutical products continues to drive regulatory and
legislative debate and action, as well as worldwide cost containment efforts by governmental authorities. Such
measures include the use of mandated discounts, price reporting requirements, mandated reference prices,
restrictive formularies, changes to available intellectual property protections, as well as other efforts. In August
2022, the U.S. government enacted the Inflation Reduction Act of 2022 (IRA). Among other measures, the IRA
requires the U.S. Department of Health and Human Services (HHS) to effectively set prices for certain single-
source drugs and biologics reimbursed under Medicare Part B and Part D. Generally, these government
prices apply nine years (for medicines approved under a New Drug Application) or thirteen years (for
medicines approved under a Biologics License Application) following initial FDA approval and will be set at a
price that is likely to represent a significant discount from existing average prices to wholesalers and direct
purchasers. While the law specifies a ceiling price, it does not set a minimum or floor price. In August 2023,
the HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first
ten medicines subject to government-set prices effective in 2026. Given our product portfolio, we expect
additional significant products will be selected in future years, which would have the effect of accelerating
revenue erosion prior to expiry of exclusivities. The effect of reducing prices and reimbursement for certain of
our products would significantly impact our business and consolidated results of operations.

The IRA has and will meaningfully influence our business strategies and those of our competitors. In
particular, the nine-year timeline to set prices for medicines approved under a new drug application reduces
the attractiveness of investment in small molecule innovation. The IRA can cause changes to development
approach and timing and investments at-risk. The full impact of the IRA on our business and the
pharmaceutical industry, including the implications to us of a competitor's product being selected for price
setting, remains uncertain.

Additional policies, regulations, legislation, or enforcement, including those proposed or pursued by the U.S.
Congress, the U.S. executive branch, and regulatory authorities worldwide, could adversely impact our
business and consolidated results of operations.

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

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

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

Product Supply

We have faced challenges, and expect to continue to face challenges, meeting strong demand for our incretin
products. In the U.S., given the strong uptake of Mounjaro, the recent launch of Zepbound, and continuing
demand for Trulicity®, we have experienced intermittent delays in fulfilling certain orders for incretin products.
Outside the U.S., we have implemented actions to manage demand amid tight supply, including measures to
minimize impact to existing Trulicity patients. We have also progressed efforts to bring tirzepatide to patients
via different delivery presentations outside the U.S., such as single-use vials and multi-use pens. We expect
to continue to experience disruptions in our supply of incretin products and for demand and supply
considerations to influence the timing of tirzepatide launches in new markets, if approved.

We anticipate tight supplies of our incretin products will persist while additional manufacturing capacity is
operationalized. We expect additional internal and contracted manufacturing capacity will become fully
operational around the world in the next several years as part of our ongoing efforts to meet the significant
demand for our incretin medicines. For example, in 2023 we began production at our Research Triangle Park
site in North Carolina and expect to continue significant capacity expansion over time as we increase
production at this site and others.

Tax Matters

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

In response to the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (Framework), which
set forth a two-pillar solution to reform the international tax framework, and the EU's adoption of Directive
2022/2523 (known as "Pillar Two") (Directive) within the EU to implement the Framework, multiple countries,
both within and outside of the EU, have enacted legislation that provides for a minimum level of taxation of
multinational companies. The Directive required EU member states to enact legislation effective for years
beginning on or after December 31, 2023. For certain provisions within the Framework, the OECD published
guidance during 2023 that extends the effective dates for enactment. While we expect an increase in future
years’ tax expense as a result of the global minimum tax, we do not anticipate a material impact to our 2024
consolidated results of operations. Our assessment of the impact for 2024 and subsequent years could be
affected by legislative guidance, future enactment of additional provisions within the Pillar Two framework,
and U.S. tax changes scheduled to occur in 2026 as part of the Tax Cuts and Jobs Act (2017 Tax Act).

A bipartisan tax bill, the Tax Relief for American Families and Workers Act, was passed by the U.S. House of
Representatives in January 2024. The bill contains certain business tax provisions including the retroactive
repeal for 2022 and 2023 and deferral of the requirement to capitalize U.S. research and development
expenses for tax purposes that was a provision enacted in the 2017 Tax Act. Uncertainty exists as to whether
the bill will be enacted into law; however, if the bill is enacted as currently drafted, we would expect our
effective tax rate for 2024 to be moderately higher, and a net discrete tax detriment in the quarter of
enactment related to 2022 and 2023. In addition, we would expect a decrease in cash tax payments.

Acquisitions

We invest in external research and technologies that we believe complement and strengthen our own efforts.
These investments can take many forms, including acquisitions, collaborations, investments, and licensing
arrangements. We view our business development activity as a way to enhance or refine our pipeline and
strengthen our business.

For investments that were accounted for as asset acquisitions, we paid $3.94 billion in 2023 for acquired
IPR&D primarily related to acquisitions of DICE, Versanis, Emergence Therapeutics AG (Emergence), and
Mablink Biosciences SAS (Mablink). For investments that were accounted for as business combinations, we
paid $1.04 billion in 2023 primarily related to the acquisition of POINT Biopharma Global Inc. (POINT).

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

For discussion of risks related to business development activities, see Item 1A, "Risk Factors—
Pharmaceutical research and development is very costly and highly uncertain; we may not succeed in
developing, licensing, or acquiring commercially successful products sufficient in number or value to replace
revenues of products that have lost or will lose intellectual property protection or are displaced by competing
products or therapies."

Foreign Currency Exchange Rates

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

Other Factors

Other factors have had, and may continue to have, an impact on our consolidated results of operations.
These factors include cost and wage inflation, availability of adequate capacity in global transportation, supply
chain and labor market complexities, international tension and conflicts, uneven economic growth or
downturns or uncertainty, and an increase in overall demand in our industry for certain products and
materials.

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

RESULTS OF OPERATIONS

Operating Results—2023

Revenue

The following table summarizes our revenue activity by region:

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Outside U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Numbers may not add due to rounding.

Year Ended December 31,

2023
21,791.0 $
12,333.1
34,124.1 $

2022
18,190.0
10,351.3
28,541.4

Percent Change
20
19
20

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

Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Numbers may not add due to rounding.

2023 vs. 2022

U.S.

Outside U.S.

Consolidated

11 %
9 %
— %
20 %

25 %
(4) %
(1) %
19 %

16 %
4 %
— %
20 %

In the U.S. the increase in volume in 2023 was primarily driven by Mounjaro, Verzenio, Jardiance, Trulicity,
Taltz®, and Zepbound and $579.0 million from the sale of the rights for Baqsimi, partially offset by the absence
of revenue from COVID-19 antibodies and decreased volume from Alimta following the entry of multiple
generics in the first half of 2022. In the U.S. the higher realized prices in 2023 were primarily driven by
Mounjaro, due to decreased utilization of savings card programs as access continued to expand, partially
offset by Trulicity, due to higher contracted rebates and unfavorable segment mix, as well as changes to
estimates for rebates and discounts, and Humalog®, primarily due to a one-time impact related to the
implementation of list price decreases and unfavorable segment mix.

Outside the U.S. the increase in volume in 2023 was primarily driven by $1.45 billion from the sale of the
rights for the olanzapine portfolio, including Zyprexa, as well as increased volume for Verzenio and Jardiance.
Outside the U.S. the lower realized prices in 2023 were primarily driven by a new supply arrangement
associated with the sale of the rights for the olanzapine portfolio and lower realized prices from Trulicity,
Verzenio, and Humalog.

The following table summarizes our revenue, including net product revenue and collaboration and other
revenue, by product in 2023 compared with 2022:

Year Ended December 31,

2023

2022

U.S.

Total

Outside U.S.

Product
Trulicity . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,433.3 $ 1,699.2 $ 7,132.6 $ 7,439.7
Mounjaro . . . . . . . . . . . . . . . . . . . . . . . . . .
482.5
4,834.2
Verzenio . . . . . . . . . . . . . . . . . . . . . . . . . .
2,483.5
2,509.0
Taltz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,482.0
1,831.6
Jardiance(1)
. . . . . . . . . . . . . . . . . . . . . . . .
2,066.0
1,600.4
Zyprexa(2) . . . . . . . . . . . . . . . . . . . . . . . . .
79.4
336.9
Humalog(3) . . . . . . . . . . . . . . . . . . . . . . . .
2,060.6
863.2
Cyramza®
. . . . . . . . . . . . . . . . . . . . . . . . .
971.4
402.3
Olumiant® (4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
830.5
225.5
Humulin®
. . . . . . . . . . . . . . . . . . . . . . . . . .
1,019.4
610.1
Basaglar® (5) . . . . . . . . . . . . . . . . . . . . . . .
760.4
443.1
Emgality® . . . . . . . . . . . . . . . . . . . . . . . . .
650.9
482.2
Baqsimi . . . . . . . . . . . . . . . . . . . . . . . . . . .
139.3
645.7
Erbitux®
. . . . . . . . . . . . . . . . . . . . . . . . . . .
566.5
528.9
Forteo® . . . . . . . . . . . . . . . . . . . . . . . . . . .
613.1
335.5
Cialis®
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
587.3
26.1
Alimta . . . . . . . . . . . . . . . . . . . . . . . . . . . .
927.7
72.9
Zepbound . . . . . . . . . . . . . . . . . . . . . . . . .
175.8
—
COVID-19 antibodies(6)
2,023.5
—
. . . . . . . . . . . . . . . . .
Other products . . . . . . . . . . . . . . . . . . . . .
2,100.2
691.8
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,791.0 $ 12,333.1 $ 34,124.1 $ 28,541.4

5,163.1
3,863.4
2,759.6
2,744.7
1,694.8
1,663.3
974.7
922.6
852.1
728.3
678.3
677.6
596.5
533.2
381.5
217.5
175.8
—
2,364.5

328.9
1,354.3
928.0
1,144.2
1,615.4
800.2
572.4
697.2
242.0
285.2
196.0
31.9
67.6
197.7
355.3
144.6
—
—
1,673.0

Percent
Change
(4)
NM
56
11
33
NM
(19)
—
11
(16)
(4)
4
NM
5
(13)
(35)
(77)
NM
NM
13
20

Numbers may not add due to rounding.
NM - not meaningful
(1) Jardiance revenue includes Glyxambi®, Synjardy®, and Trijardy® XR.
(2) Zyprexa revenue includes sale of the rights for the olanzapine portfolio.
(3) Humalog revenue includes insulin lispro.
(4) Olumiant revenue includes sales for baricitinib that were made pursuant to Emergency Use Authorization (EUA) or similar regulatory

authorizations.

(5) Basaglar revenue includes Rezvoglar®.
(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.

Revenue of Trulicity decreased 4 percent in the U.S., driven by lower realized prices due to higher contracted
rebates and unfavorable segment mix, as well as changes to estimates for rebates and discounts, partially
offset by increased demand. We have experienced and continue to expect intermittent delays fulfilling orders
of Trulicity. These delays have impacted and are expected to continue to impact volume. Revenue outside the
U.S. decreased 3 percent, primarily driven by lower realized prices, partially offset by increased volume.
Volumes in international markets continue to be affected by actions we have taken to manage demand amid
tight supply, including measures to minimize impact to existing patients.

Revenue of Mounjaro in the U.S. in 2023 was $4.83 billion, compared to $366.6 million in 2022, reflecting
higher realized prices due to decreased utilization of savings card programs as access continued to expand
and increased demand. We have experienced and continue to expect intermittent delays fulfilling orders of
certain Mounjaro doses given significant demand, which has affected and is expected to continue to affect
volume.

Revenue of Verzenio increased 52 percent in the U.S., driven by increased demand, and, to a lesser extent,
higher realized prices. Revenue outside the U.S. increased 63 percent, driven by increased demand, partially
offset by lower realized prices and the unfavorable impact of foreign exchange rates.

Revenue of Taltz increased 6 percent in the U.S., driven by increased demand, partially offset by lower
realized prices. Revenue outside the U.S. increased 23 percent, driven by increased volume, partially offset
by lower realized prices.

Revenue of Jardiance increased 34 percent in the U.S., primarily driven by increased demand. Revenue
outside the U.S. increased 31 percent, primarily driven by increased volume. See Note 4 to the consolidated
financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.

There was no worldwide revenue from COVID-19 antibodies in 2023, and we do not anticipate any future
revenue from COVID-19 antibodies.

Gross Margin, Costs, and Expenses

The following table summarizes our gross margin, costs, and expenses:

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross margin as a percent of revenue . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Marketing, selling, and administrative . . . . . . . . . . . . . . . . . . . . .
Acquired IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment, restructuring, and other special charges . .
Other—net, (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NM - not meaningful

Year Ended December 31,

2023

2022

27,041.9

21,911.6

79.2 %

76.8 %

Percent
Change
23

9,313.4
7,403.1

3,799.8
67.7
(96.7)
1,314.2

7,190.8
6,440.4

908.5
244.6
320.9
561.6

20.1 %

8.3 %

30
15

NM
(72)
NM
NM

Gross margin as a percent of revenue in 2023 increased 2.4 percentage points compared with 2022, primarily
driven by the absence of COVID-19 antibodies sales in 2023, higher realized prices, and the sales of the
rights for the olanzapine portfolio and Baqsimi, partially offset by increased manufacturing expenses related to
labor costs and investments in capacity expansion.

Research and development expenses increased 30 percent in 2023, primarily driven by development
expenses for late-stage assets and additional investments in early-stage research.

Marketing, selling, and administrative expenses increased 15 percent in 2023, primarily driven by costs
associated with launches of new products and indications, as well as compensation and benefits costs.

Acquired IPR&D charges recognized in 2023 primarily related to acquisitions of DICE, Versanis, Emergence,
and Mablink and from a business development transaction with Beam Therapeutics Inc. Acquired IPR&D
charges recognized in 2022 included the buy-out of substantially all future obligations that were contingent
upon the occurrence of certain events linked to the success of our mutant-selective PI3kα inhibitor and a
purchase of a Priority Review Voucher. See Note 3 to the consolidated financial statements for additional
information.

Asset impairment, restructuring, and other special charges recognized in 2022 primarily related to an
intangible asset impairment for GBA1 Gene Therapy due to changes in estimated launch timing. See Note 5
to the consolidated financial statements for additional information.

Other—net, (income) expense included net investment losses on equity securities of $20.2 million and
$410.7 million for the years ended 2023 and 2022, respectively. See Note 18 to the consolidated financial
statements for additional information.

Our effective tax rate was 20.1 percent in 2023, compared with an effective tax rate of 8.3 percent in 2022.
The higher effective tax rate for 2023 was primarily driven by the tax impacts of non-deductible acquired
IPR&D charges, the new Puerto Rico tax regime, and a lower net discrete tax benefit compared to 2022.

Operating Results—2022

For a discussion of our results of operations pertaining to 2022 and 2021 see Item 7, "Management's
Discussion and Analysis of Results of Operations and Financial Condition" in our Annual Report on Form 10-K
for the year ended December 31, 2022.

FINANCIAL CONDITION AND LIQUIDITY

We believe our available cash and cash equivalents, together with our ability to generate operating cash flow
and our access to short-term and long-term borrowings, are sufficient to fund our existing and planned capital
requirements, which include:

•

working capital requirements, including related to employee payroll and benefits, clinical trials,
manufacturing materials, and taxes;

capital expenditures;

share repurchases and dividends;

repayment of outstanding short-term and long-term borrowings;

• milestone and royalty payments;

•

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

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

Our management continuously evaluates our liquidity and capital resources, including our access to external
capital, to ensure we can adequately and efficiently finance our capital requirements. As of December 31,
2023, our material cash requirements primarily related to purchases of goods and services to produce our
products and conduct our operations, capital expenditures, dividends, repayment of outstanding borrowings,
milestone and royalty payments, business development activities, and the remaining obligations for the one-
time repatriation transition tax (also known as the 'Toll Tax') from the 2017 Tax Act, (see Notes 11, 4, 3, and 14
to the consolidated financial statements). We anticipate our cash requirements related to ordinary course
purchases of goods and services will be consistent with our past levels relative to revenues.

Capital expenditures were $3.45 billion during 2023, compared to $1.85 billion in 2022. We are making
investments in new facilities in Indiana, North Carolina, Alzey, Rhineland-Palatinate, Germany, and Limerick,
Ireland to manufacture existing and future products. These investments, and other capital investments that
support our operations, have increased our capital expenditures and will result in higher capital expenditures
over the next several years.

Cash and cash equivalents increased to $2.82 billion as of December 31, 2023, compared with $2.07 billion
at December 31, 2022. Net cash provided by operating activities decreased to $4.24 billion in 2023,
compared with $7.59 billion in 2022. The decrease in net cash provided by operating activities was primarily
driven by an increase in cash payments for income taxes. See Note 14 to the consolidated financial
statements for additional information. Refer to the consolidated statements of cash flows for additional
information on the significant sources and uses of cash for the years ended December 31, 2023 and 2022.

In addition to our cash and cash equivalents, we held total investments of $3.16 billion and $3.05 billion as of
December 31, 2023 and 2022, respectively. See Note 7 to the consolidated financial statements for additional
information.

In 2023, we received cash proceeds of $1.60 billion for the sale of product rights, primarily related to the sales
of the rights for the olanzapine portfolio, including Zyprexa, and Baqsimi. See Note 4 to the consolidated
financial statements for additional information.

For investments that were accounted for as asset acquisitions, we paid $3.94 billion in 2023 for acquired
IPR&D primarily related to acquisitions of DICE, Versanis, Emergence, and Mablink. For investments that
were accounted for as business combinations, we paid $1.04 billion in 2023 primarily related to the acquisition
of POINT. See Note 3 to the consolidated financial statements for additional information.

As of December 31, 2023, total debt was $25.23 billion, an increase of $8.99 billion compared with
$16.24 billion at December 31, 2022. See Note 11 to the consolidated financial statements for additional
information.

In February 2024, we issued $1.00 billion of 4.500 percent fixed-rate notes due in 2027, $1.00 billion of 4.500
percent fixed-rate notes due in 2029, $1.50 billion of 4.700 percent fixed-rate notes due in 2034, $1.50 billion
of 5.000 percent fixed-rate notes due in 2054, and $1.50 billion of 5.100 percent fixed-rate notes due in 2064,
all with interest to be paid semi-annually. We used, or will be using, the net cash proceeds from the offering of
$6.45 billion for general business purposes, including the repayment of outstanding commercial paper,
repayment of current maturities of long-term debt, and repayment of the $750.0 million of 5.000 percent fixed-
rate notes due in 2026, which are callable at par beginning February 27, 2024.

As of December 31, 2023, we had a total of $7.42 billion of unused committed bank credit facilities,
$7.00 billion of which is available to support our commercial paper program. See Note 11 to the consolidated
financial statements for additional information. We believe that amounts accessible through existing
commercial paper markets should be adequate to fund short-term borrowing needs.

Dividends of $4.52 per share and $3.92 per share were paid in 2023 and 2022, respectively. The quarterly
dividend was increased to $1.30 per share effective for the dividend to be paid in the first quarter of 2024,
resulting in an indicated annual rate for 2024 of $5.20 per share.

In 2023, we repurchased $750.0 million of shares under our $5.00 billion share repurchase program that our
board authorized in May 2021. As of December 31, 2023, we had $2.50 billion remaining under this program.
See Note 13 to the consolidated financial statements for additional information.

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

Both domestically and abroad, we continue to monitor the potential impacts of the economic environment and
international tension and conflicts; the creditworthiness of our wholesalers and other customers, including
foreign government-backed agencies and suppliers; the uncertain impact of healthcare legislation; and
various international government funding levels.

In the normal course of business, our operations are exposed to fluctuations in interest rates, currency values,
and fair values of equity securities. These fluctuations impact the costs of financing, investing, and operating
our business. 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 this risk management program is to
limit the impact on earnings of fluctuations in interest and currency exchange rates. All derivative activities are
for purposes other than trading.

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 positions and in some cases we enter into interest rate derivatives to help maintain that
balance. As of December 31, 2023, all of our total long-term debt is at a fixed rate. We have converted
approximately 12 percent of our long-term fixed-rate notes to floating rates through the use of interest rate
swaps. Based on our overall interest rate exposure at December 31, 2023 and 2022, including derivatives
and other interest rate risk-sensitive instruments, a hypothetical 10 percent change in interest rates applied to
the fair value of the instruments as of December 31, 2023 and 2022, respectively, would not have a material
impact on earnings, cash flows, or fair values of interest rate risk-sensitive instruments over a one-year
period.

Our foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S. dollar
against the euro, Japanese yen, and Chinese yuan. We face foreign currency exchange exposures when we
enter into transactions arising from subsidiary trade and loan payables and receivables denominated in
foreign currencies. We also face currency exposure that arises from translating the results of our global
operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We in
some cases enter into foreign currency forward or option derivative contracts to reduce the effect of
fluctuating currency exchange rates (primarily the euro, Chinese yuan, and Japanese yen). Our corporate
risk-management policy outlines the minimum and maximum hedge coverage of such exposures. Gains and
losses on these derivative contracts offset, in part, the impact of currency fluctuations on the existing assets
and liabilities. We periodically analyze the fair values of the outstanding foreign currency derivative contracts
to determine their sensitivity to changes in foreign exchange rates. A hypothetical 10 percent change in
exchange rates (primarily against the U.S. dollar) applied to the fair values of our outstanding foreign currency
derivative contracts as of December 31, 2023 and 2022, would not have a material impact on earnings, cash
flows, or financial position over a one-year period. This sensitivity analysis does not consider the impact that
hypothetical changes in exchange rates would have on the underlying foreign currency denominated
transactions.

Our fair value risk exposure relates primarily to our public equity investments and to our equity investments
that do not have readily determinable fair values. As of December 31, 2023 and 2022, our carrying values of
these investments were $1.32 billion and $1.16 billion, respectively. A hypothetical 20 percent change in fair
value of the equity instruments would have impacted other-net, (income) expense by $263.9 million and
$232.4 million as of December 31, 2023 and 2022, respectively.

We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to
have a material future effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures, or capital resources. We acquire and collaborate on
potential products still in development and enter into research and development arrangements with third
parties that often require milestone and royalty payments to the third party contingent upon the occurrence of
certain future events linked to the success of the asset in development. Milestone payments may be required
contingent upon the successful achievement of an important point in the development life cycle of the
pharmaceutical product (e.g., approval for marketing by the appropriate regulatory agency or upon the
achievement of certain sales levels). If required by the arrangement, we may make royalty payments based
upon a percentage of the sales of the product in the event that regulatory approval for marketing is obtained.

Individually, these arrangements are generally not material in any one annual reporting period. However, if
milestones for multiple products covered by these arrangements were reached in the same reporting period,
the aggregate expense or aggregate milestone payments made could be material to our results of operations
or cash flows, respectively, in that period. See Note 4 to the consolidated financial statements for additional
information. These arrangements often give us the discretion to unilaterally terminate development of the
product, which would allow us to avoid making the contingent payments; however, we are unlikely to cease
development if the compound successfully achieves milestone objectives. We view these payments as
positive because they signify that the product is successfully moving through development and is now
generating or is more likely to generate cash flows from sales of products.

As we expand our manufacturing capacity in order to meet existing and expected demand of our incretin
products, we have entered, and expect to continue to enter, into various agreements for contract
manufacturing and for supply of materials. The executed agreements could, under certain circumstances,
require us to pay up to approximately $10 billion if we do not purchase specified amounts of goods or services
over the durations of the agreements, which generally range from 2 to 8 years.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

In preparing our financial statements in accordance with accounting principles generally accepted in the U.S.,
we must often make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses, and related disclosures. Some of those judgments can be subjective and complex, and
consequently actual results could differ from those estimates. For any given individual estimate or assumption
we make, it is possible that other people applying reasonable judgment to the same facts and circumstances
could develop different estimates. We believe that, given current facts and circumstances, it is unlikely that
applying any such other reasonable judgment would cause a material adverse effect on our consolidated
results of operations, financial position, or liquidity for the periods presented in this Annual Report on Form
10-K. Our most critical accounting estimates have been discussed with our audit committee and are
described below.

Revenue Recognition and Sales Return, Rebate, and Discount Accruals

Background and Uncertainties

We recognize revenue primarily from two different types of contracts, product sales to customers (net product
revenue) and collaborations and other arrangements. For product sales to customers, provisions for returns,
rebates and discounts are established in the same period the related product sales are recognized. To
determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct
customer, we estimate any rebates or discounts that ultimately will be due to the direct customer and other
customers in the distribution chain under the terms of our contracts. Significant judgments are required in
making these estimates. The largest of our sales rebate and discount amounts include rebates associated
with sales covered by managed care, Medicare, Medicaid, and chargeback programs, as well as reductions in
revenue related to our patient assistance programs, in the U.S. In determining the appropriate accrual
amount, we consider our historical rebate payments for these programs, as well as patient assistance
program costs, by product as a percentage of our historical sales as well as any significant changes in sales
trends (e.g., patent expiries and product launches), an evaluation of the current contracts for these programs,
the percentage of our products that are sold via these programs, and our product pricing. Although we accrue
a liability for revenue reductions related to these programs at the time we record the sale, the reduction
related to that sale is typically paid up to six months later. Because of this time lag, in any particular period our
net product revenue may incorporate revisions of accruals for several periods.

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

Revenue recognized from collaborations and other arrangements includes our share of profits from the
collaborations, as well as royalties, upfront and milestone payments we receive under these types of
contracts.

Financial Statement Impact

We believe that our accruals for sales returns, rebates, and discounts are reasonable and appropriate based
on current facts and circumstances. Our rebate and discount liabilities are included in sales rebates and
discounts on our consolidated balance sheet. Our sales return liability is included in other current liabilities
and other noncurrent liabilities on our consolidated balance sheet. As of December 31, 2023, a 5 percent
change in our consolidated sales return, rebate, and discount liability would result in a change in revenue of
approximately $615 million.

The portion of our consolidated sales return, rebate, and discount liability resulting from sales of our products
in the U.S. was approximately 90 percent as of December 31, 2023 and 2022.

The following represents a roll-forward of our most significant U.S. sales return, rebate, and discount liability
balances, including managed care, Medicare, Medicaid, chargeback, and patient assistance programs:

Sales return, rebate, and discount liabilities, beginning of year . . . . . . . . . . . . . . . . . . $ 8,214.1 $ 6,161.6
Reduction of net sales(1)
28,398.4
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,413.4) (26,345.9)
Sales return, rebate, and discount liabilities, end of year . . . . . . . . . . . . . . . . . . . . . . . . $ 10,667.5 $ 8,214.1
(1) Adjustments of the estimates for these returns, rebates, and discounts to actual results were less than 1 percent of consolidated

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,866.8

revenue for each of the years presented.

2023

2022

The increase in reduction of net sales in 2023 was primarily driven by our incretin products due to the
increase in volume of rebates for managed care, Medicare, chargebacks, and Medicaid programs.

Litigation Liabilities and Other Contingencies

Background and Uncertainties

Litigation liabilities and other contingencies are, by their nature, uncertain and based upon complex
judgments and probabilities. The factors we consider in developing our litigation liability reserves and other
contingent liability amounts include the merits and jurisdiction of the litigation, the nature and the number of
other similar current and past matters, the nature of the product and the current assessment of the science
subject to the litigation, as applicable, and the likelihood of settlement and current state of settlement
discussions, if any. In addition, we accrue for certain product liability claims incurred but not filed to the extent
we can formulate a reasonable estimate of their costs based primarily on historical claims experience and
data regarding product usage.

We also consider the insurance coverage we have to diminish the exposure for periods covered by insurance.
In assessing our insurance coverage, we consider the policy coverage limits and exclusions, the potential for
denial of coverage by the insurance company, the financial condition of the insurers, and the possibility of and
length of time for collection. Due to a very restrictive market for liability insurance, we are predominantly self-
insured for liability losses for all our currently and previously marketed products, as well as for litigation or
investigations related to our pricing practices or other similar matters. In addition to insurance coverage, we
consider any third-party indemnification to which we are entitled or under which we are obligated. With
respect to our third-party indemnification rights, these considerations include the nature of the indemnification,
the financial condition of the indemnifying party, and the possibility of and length of time for collection.

The 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.

Acquisitions

Background and Uncertainties

To determine whether acquisitions or licensing transactions should be accounted for as a business
combination or as an asset acquisition, we make certain judgments, which include assessing whether the
acquired set of activities and assets would meet the definition of a business under the relevant accounting
rules.

If the acquired set of activities and assets meets the definition of a business, assets acquired and liabilities
assumed are required to be recorded at their respective fair values on our consolidated balance sheet as of
the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, where
applicable, is recorded as goodwill. If the acquired set of activities and assets does not meet the definition of a
business, the transaction is recorded as an acquisition of assets and, therefore, any acquired IPR&D that
does not have an alternative future use is charged to acquired IPR&D on our consolidated statement of
operations at the acquisition date, and goodwill is not recorded. See Note 3 to the consolidated financial
statements for additional information.

The judgments made in determining estimated fair values assigned to assets acquired and liabilities assumed
in a business combination, as well as estimated asset lives, can materially affect our consolidated results of
operations. The fair values of intangible assets, including acquired IPR&D, are determined using information
available near the acquisition date based on estimates and assumptions that are deemed reasonable by
management. Significant estimates and assumptions include, but are not limited to, probability of technical
success, revenue projections, and discount rate. Depending on the facts and circumstances, we may deem it
necessary to engage an independent valuation expert to assist in valuing significant assets and liabilities.

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

The fair value of any contingent consideration liability that results from a business combination is primarily
determined using a discounted cash flow analysis, as described in Note 7 to the consolidated financial
statements. Estimating the fair value of contingent consideration requires the use of significant estimates and
judgments, including, but not limited to, probability of technical success, timing of the potential milestone
event, and the discount rate.

Financial Statement Impact

As of December 31, 2023, a 5 percent change in the contingent consideration liabilities would result in a
change in income before income taxes of $5.2 million.

Impairment of Indefinite-Lived and Long-Lived Assets

Background and Uncertainties

We review the carrying value of long-lived assets (both intangible and tangible) for potential impairment
whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may
not be recoverable. We identify impairment by comparing the projected undiscounted cash flows to be
generated by the asset (or asset group) to its carrying value. If an impairment is identified, a loss is recorded
equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted.

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

Several methods may be used to determine the estimated fair value of acquired IPR&D, all of which require
multiple assumptions. We utilize the "income method," as described in Note 8 to the consolidated financial
statements.

For acquired IPR&D assets, the risk of failure has been factored into the fair value measure and there can be
no certainty that these assets ultimately will yield a successful product, as discussed previously in "—
Executive Overview—Late-Stage Pipeline." The nature of the pharmaceutical business is high-risk and
requires that we invest in a large number of projects to maintain a successful portfolio of approved products.
As such, it is likely that some acquired IPR&D assets will become impaired in the future.

Estimates of future cash flows, based on what we believe to be reasonable and supportable assumptions and
projections, require management's judgment. Actual results could vary materially from these estimates.

Retirement Benefits Assumptions

Background and Uncertainties

Defined benefit pension plan and retiree health benefit plan costs include assumptions for the discount rate,
expected return on plan assets, and retirement age. These assumptions have a significant effect on the
amounts reported. In addition to the analysis below, see Note 15 to the consolidated financial statements for
additional information regarding our retirement benefits.

Annually, we evaluate the discount rate and the expected return on plan assets in our defined benefit pension
and retiree health benefit plans. We use an actuarially determined, plan-specific yield curve of high quality,
fixed income debt instruments to determine the discount rates. In evaluating the expected return on plan
assets, we consider many factors, with a primary analysis of current and projected market conditions, asset
returns and asset allocations (approximately 70 percent of which are growth investments), and the views of
leading financial advisers and economists. We may also review our historical assumptions compared with
actual results, as well as the discount rates and expected return on plan assets of other companies, where
applicable. In evaluating our expected retirement age assumption, we consider the retirement ages of our
past employees eligible for pension and medical benefits together with our expectations of future retirement
ages.

Annually, we determine the fair value of the plan assets in our defined benefit pension and retiree health
benefit plans. Approximately 48 percent of our plan assets are in hedge funds and private equity-like
investment funds (collectively, alternative investments). We value these alternative investments primarily
using net asset values (NAVs) reported by the counterparty and adjusted for known cash flows and significant
events.

Financial Statement Impact

If the 2023 discount rate for the U.S. defined benefit pension and retiree health benefit plans (U.S. plans)
were to change by a quarter percentage point, income before income taxes would change by $13.4 million. If
the 2023 expected return on plan assets for U.S. plans were to change by a quarter percentage point, income
before income taxes would change by $31.3 million. If our assumption regarding the 2023 expected age of
future retirees for U.S. plans were adjusted by one year, our income before income taxes would be affected
by $35.1 million. The U.S. plans, including Puerto Rico, represent approximately 80 percent for total projected
benefit obligation and 85 percent for total plan assets at December 31, 2023.

Adjustments to the fair value of plan assets are not recognized in pension and retiree health benefit expense
in the year that the adjustments occur. Such changes are deferred, along with other actuarial gains and
losses, and are amortized into expense over the expected remaining service life of employees.

Income Taxes

Background and Uncertainties

We file tax returns based upon our interpretation of tax laws and regulations, and we record estimates in our
financial statements based upon these interpretations at the applicable tax rates in the jurisdictions in which
we operate. Our tax returns are routinely subject to examination by taxing authorities, which could result in
future tax, interest, and penalty assessments. Inherent uncertainties also exist in estimates of many tax
positions due to the complexity of tax laws. We recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained upon examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the financial statements from
such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of
being realized upon ultimate resolution. The amount of unrecognized tax benefits is adjusted for changes in
facts and circumstances such as changes to existing tax law, the issuance of regulations by taxing authorities,
new information obtained during a tax examination, or resolution of a tax examination. We believe our
estimates for uncertain tax positions are both appropriate and sufficient to pay assessments that may result
from examinations of our tax returns. We recognize both accrued interest and penalties related to
unrecognized tax benefits in income tax expense.

We have recorded valuation allowances against certain of our deferred tax assets, primarily those that have
been generated from net operating losses, tax credits, and other tax carryforwards and carrybacks in certain
taxing jurisdictions. In evaluating whether we would more likely than not recover these deferred tax assets, we
have not assumed future taxable income in the jurisdictions associated with these carryforwards where
history does not support such an assumption. Implementation of tax planning strategies to recover these
deferred tax assets or to generate future taxable income in these jurisdictions could lead to the reversal of all
or a portion of these valuation allowances and a reduction of income tax expense.

Financial Statement Impact

As of December 31, 2023, a 5 percent change in the amount of uncertain tax positions and the valuation
allowance would result in a change in net income of $88.7 million and $45.7 million, respectively.

LEGAL AND REGULATORY MATTERS

Information relating to certain legal proceedings can be found in Note 16 to the consolidated financial
statements and is incorporated here by reference.

Item 7A. Quantitative and Qualitative Disclosures About

Market Risk

You can find quantitative and qualitative disclosures about market risk (e.g., interest rate risk) at Item 7,
"Management's Discussion and Analysis - Financial Condition and Liquidity." That information is incorporated
by reference herein.

Item 8. Financial Statements and Supplementary Data
Consolidated Statements of Operations

ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data, and
shares in thousands)
Year Ended December 31
Revenue (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,124.1 $ 28,541.4 $ 28,318.4
Costs, expenses, and other:

2022

2021

2023

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketing, selling, and administrative . . . . . . . . . . . . . . . . . . . . . . .
Acquired in-process research and development (Note 3) . . . . . .
Asset impairment, restructuring, and other special charges
(Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other—net, (income) expense (Note 18) . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

7,082.2
9,313.4
7,403.1
3,799.8

6,629.8
7,190.8
6,440.4
908.5

7,312.8
6,930.7
6,431.6
970.1

67.7
(96.7)

27,569.5
6,554.6
1,314.2
5,240.4 $

244.6
320.9
21,735.0
6,806.4
561.6
6,244.8 $

316.1
201.6
22,162.9
6,155.5
573.8
5,581.7

Earnings per share: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

5.82 $
5.80 $

6.93 $
6.90 $

6.15
6.12

Shares used in calculation of earnings per share: . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

900,181
903,284

901,736
904,619

906,963
911,681

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income (Loss)

ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,240.4 $ 6,244.8 $ 5,581.7
Other comprehensive income (loss):

Year Ended December 31

2021

2022

2023

(25.8)

Change in foreign currency translation gains (losses) . . . . . . . . . . . .
Change in net unrealized gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in retirement benefit plans (Note 15) . . . . . . . . . . . . . . . . . . .
Change in net unrealized gains (losses) on cash flow hedges . . . . .
Other comprehensive income (loss) before income taxes . . . . . . . . .
Benefit (expense) for income taxes related to other comprehensive
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(695.3)
Other comprehensive income (loss), net of tax (Note 17) . . . . . . . . . . .
2,153.3
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,758.0 $ 6,743.3 $ 7,735.0

14.1
(776.5)
109.5
(678.7)

(15.9)
2,699.4
151.6
2,848.6

(53.2)
616.9
432.9
748.5

196.3
(482.4)

(250.0)
498.5

(248.1)

13.5

See notes to consolidated financial statements.

Consolidated Balance Sheets

ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, shares in thousands)
Assets
Current Assets

December 31

2023

2022

Cash and cash equivalents (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,067.0
Short-term investments (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
144.8
Accounts receivable, net of allowances of $14.8 (2023) and $16.0 (2022) . . .
6,896.0
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,662.9
Inventories (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,309.7
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,946.8
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,034.5
Investments (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,901.8
Goodwill (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,073.0
Other intangibles, net (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,206.6
Deferred tax assets (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,792.9
Property and equipment, net (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,144.0
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,337.0
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,006.3 $ 49,489.8
Liabilities and Equity
Current Liabilities

2,818.6 $
109.1
9,090.5
2,245.7
5,772.8
5,540.8
149.5
25,727.0
3,052.2
4,939.7
6,906.6
5,477.3
12,913.6
4,989.9

Short-term borrowings and current maturities of long-term debt (Note 11) . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales rebates and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent Liabilities

Long-term debt (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued retirement benefits (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term income taxes payable (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingencies (Note 16)
Eli Lilly and Company Shareholders' Equity (Notes 12 and 13)

6,904.5 $
2,598.8
1,650.4
11,689.0
1,169.2
3,281.3
27,293.2

1,501.1
1,930.6
1,059.8
8,784.1
1,017.2
2,845.4
17,138.2

18,320.8
1,438.8
3,849.2
2,240.6
25,849.4

14,737.5
1,305.1
3,709.6
1,824.0
21,576.2

Common stock—no par value
Authorized shares: 3,200,000
Issued shares: 949,781 (2023) and 950,632 (2022) . . . . . . . . . . . . . . . . . . . . . . .
594.1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,921.4
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,042.6
Employee benefit trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,013.2)
Accumulated other comprehensive loss (Note 17) . . . . . . . . . . . . . . . . . . . . . . . .
(3,844.6)
Cost of common stock in treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50.5)
Total Eli Lilly and Company shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,649.8
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125.6
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,775.4
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,006.3 $ 49,489.8

593.6
7,250.4
10,312.3
(3,013.2)
(4,327.0)
(44.2)

10,771.9
91.8
10,863.7

See notes to consolidated financial statements.

Consolidated Statements of Shareholders' Equity

ELI LILLY AND COMPANY
AND SUBSIDIARIES
(Dollars in millions, except
per-share data, and shares in
thousands)

Common Stock

Amount

Additional
Paid-in
Capital

Retained
Earnings

Employee
Benefit
Trust

Accumulated
Other
Comprehensive
Loss

Common Stock in
Treasury

Amount

Noncontrolling
Interest

Balance at January 1, 2021

957,077 $

598.2 $ 6,778.5 $ 7,830.2 $ (3,013.2) $

(6,496.4)

487 $

(55.7) $

183.6

Equity of Eli Lilly and Company Shareholders

Net income

Other comprehensive
income, net of tax

Cash dividends declared
per share: $3.53

Retirement of treasury
shares

Purchase of treasury shares

Issuance of stock under
employee stock plans, net

Stock-based compensation

Other

Balance at December 31,
2021

Net income (loss)

Other comprehensive
income, net of tax

Cash dividends declared
per share: $4.07

Retirement of treasury
shares

Purchase of treasury shares

Issuance of stock under
employee stock plans, net

Stock-based compensation

Other

Balance at December 31,
2022

Net income

Other comprehensive loss,
net of tax

Cash dividends declared
per share: $4.69

Retirement of treasury
shares

Purchase of treasury shares

Issuance of stock under
employee stock plans, net

Stock-based compensation

Other

Balance at December 31,
2023

5,581.7

(3,201.7)

2,153.3

(5,412)

(3.4)

(1,246.6)

2,451

1.5

(287.9)

342.8

(5.1)

(5,412)

1,250.0

5,412

(1,250.0)

(24)

3.0

954,116

596.3

6,833.4

8,958.5

(3,013.2)

(4,343.1)

463

(52.7)

6,244.8

(3,667.5)

498.5

(5,607)

(3.5)

(1,496.5)

2,123

1.3

(283.1)

371.1

3.3

(5,607)

1,500.0

5,607

(1,500.0)

(13)

2.2

950,632

594.1

6,921.4

10,042.6

(3,013.2)

(3,844.6)

450

(50.5)

5,240.4

(4,221.3)

(482.4)

3.4

(11.4)

175.6

(20.9)

(29.1)

125.6

11.0

(2,299)

(1.4)

(748.6)

1,448

0.9

(299.5)

628.5

(0.8)

(2,299)

750.0

2,299

(750.0)

(48)

8.8

(2.5)

(44.8)

949,781 $

593.6 $ 7,250.4 $ 10,312.3 $ (3,013.2) $

(4,327.0)

402 $

(44.2) $

91.8

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
Cash Flows from Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,240.4 $ 6,244.8 $ 5,581.7

Year Ended December 31

2022

2021

2023

Adjustments to Reconcile Net Income to Cash Flows from
Operating Activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt extinguishment loss (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gains on sale of product rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired in-process research and development (Note 3) . . . . . . .
Other operating activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other changes in operating assets and liabilities, net of
acquisitions and divestitures:

Receivables—(increase) decrease . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories—(increase) decrease . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets—(increase) decrease . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities—increase (decrease) . . .
Net Cash Provided by Operating Activities . . . . . . . . . . . . . . . . . . . .
Cash Flows from Investing Activities

Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term investments . .
Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of and distributions from noncurrent
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of noncurrent investments . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of product rights . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of in-process research and development . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired (Note 3) . . . . . . .
Other investing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Used for Investing Activities . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Financing Activities

1,527.3
—

1,522.5
—

(2,341.0)
628.5
23.5
(1,878.9)
3,799.8
295.5

(2,185.2)
371.1
420.0
(156.5)
908.5
461.3

1,547.6
405.2
(802.3)
342.8
(178.0)
(216.0)
970.1
727.4

(2,451.0)
(1,425.0)
(3,453.4)
4,274.4
4,240.1

(299.6)
(599.7)
(793.5)
1,692.0
7,585.7

(1,278.3)
(235.9)
1,515.4
(1,013.8)
7,365.9

(3,447.6)
192.2
(98.2)

(1,854.3)
121.4
(107.4)

(1,309.8)
47.4
(83.5)

508.1
(730.8)
1,604.3
(3,944.5)
(1,044.3)
(191.9)
(7,152.7)

342.2
(600.2)
95.8
(1,131.0)
(327.2)
(302.2)
(3,762.9)

800.0
(929.9)
216.0
(668.6)
(747.4)
(191.7)
(2,867.5)

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,086.8)
Net change in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . .
(4.0)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . .
2,410.8
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,905.4)
Purchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,250.0)
Other financing activities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(295.9)
Net Cash Provided by (Used for) Financing Activities . . . . . . . . . .
(4,131.3)
Effect of exchange rate changes on cash and cash equivalents . . . . .
(205.7)
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . .
161.4
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . .
3,657.1
Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . $ 2,818.6 $ 2,067.0 $ 3,818.5

(4,069.3)
4,691.4
3,958.5
—
(750.0)
(335.0)
3,495.6
168.6
751.6
2,067.0

(1,560.0)
(1,500.0)
(308.9)
(5,406.7)
(167.6)
(1,751.5)
3,818.5

(3,535.8)
1,498.0
—

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Tables present dollars in millions)

Note 1: Summary of Significant Accounting Policies and Implementation of New Financial Accounting
Standards

Basis of Presentation

The accompanying consolidated financial statements include Eli Lilly and Company and all subsidiaries and
have been prepared in accordance with accounting principles generally accepted in the United States
(GAAP). We consider majority voting interests, as well as effective economic or other control over an entity
when deciding whether or not to consolidate an entity. 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.

The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related
disclosures at the date of the financial statements and during the reporting period. 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 operate as a single operating segment engaged in the discovery, development, manufacturing, marketing,
and sales of pharmaceutical products worldwide. A global research and development organization and a
supply chain organization are responsible for the discovery, development, manufacturing, and supply of our
products. Regional commercial organizations market, distribute, and sell the products. The business is also
supported by global corporate staff functions. Our determination that we operate as a single segment is
consistent with the financial information regularly reviewed by the chief operating decision maker for purposes
of evaluating performance, allocating resources, setting incentive compensation targets, and planning and
forecasting for future periods.

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

Research and development costs are expensed as incurred. Research and development costs consist of
expenses incurred in performing research and development activities, including but not limited to,
compensation and benefits, facilities and overhead expense, clinical trial expense and fees paid to contract
research organizations.

Acquired IPR&D includes the initial costs and development milestones incurred related to externally
developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not
have an alternative future use. Development milestones are milestone payment obligations that are incurred
prior to regulatory approval of the compound and are expensed when the event triggering an obligation to pay
the milestone occurs.

Earnings Per Share (EPS)

All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis. We
calculate basic EPS based on the weighted-average number of common shares outstanding plus the effect of
incremental shares from potential participating securities. We calculate diluted EPS based on the weighted-
average number of common shares outstanding plus the effect of incremental shares from our stock-based
compensation programs.

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. The results of operations for our subsidiaries outside the U.S. are translated from functional
currencies into U.S. dollars using the weighted-average currency rate for the period. Assets and liabilities are
translated using the period end exchange rates. The U.S. dollar effects that arise from translating the net
assets of these subsidiaries are recorded in other comprehensive income (loss).

Advertising Expenses

Costs associated with advertising are expensed as incurred and are included in marketing, selling, and
administrative expenses. Advertising expenses, comprised primarily of online marketing and television
advertising, totaled $1.12 billion, $966.8 million, and $1.24 billion in 2023, 2022, and 2021, respectively, which
was less than 5 percent of revenue each year.

Other Significant Accounting Policies

Our other significant accounting policies are described in the remaining appropriate notes to the consolidated
financial statements.

Reclassifications

Certain reclassifications have been made to prior periods in the consolidated financial statements and
accompanying notes to conform with the current presentation. Development milestone payments related to
externally developed IPR&D projects, acquired directly in a transaction other than a business combination,
were previously included in cash flows from operating activities in the consolidated statements of cash flows
and are now included in purchases of IPR&D in cash flows from investing activities. The reclassification
resulted in an increase to net cash provided by operating activities and net cash used in investing activities of
$501.3 million and $105.2 million in 2022 and 2021, respectively.

Implementation of New Financial Accounting Standards

Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures, establishes incremental disaggregation of income tax disclosures pertaining to the effective tax
rate reconciliation and income taxes paid. This standard is effective for fiscal years beginning after December
15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is
permitted. We intend to adopt this standard in our Annual Report on Form 10-K for the year ended December
31, 2025. We are currently evaluating the potential impact of adopting this standard on our disclosures.

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requires
disclosures about significant segment expenses and additional interim disclosure requirements. This standard
also requires a single reportable segment to provide all disclosures required by ASC 280. This standard is
effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning
after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively
for all prior periods presented in the consolidated financial statements. We intend to adopt this standard in our
Annual Report on Form 10-K for the year ended December 31, 2024. We are currently evaluating the
potential impact of adopting this standard on our disclosures.

Note 2: Revenue

The following table summarizes our revenue recognized in our consolidated statements of operations:

Net product revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Collaboration and other revenue(1)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Collaboration and other revenue associated with prior period transfers of intellectual property was $191.6 million, $163.4 million, and

. . . . . . . . . . . . . . . . . . . .

28,541.4 $

34,124.1 $

5,310.2

3,078.6

2023
28,813.9 $

2022
25,462.8 $

2021
25,957.9
2,360.5
28,318.4

$175.0 million during the years ended December 31, 2023, 2022, and 2021, respectively.

We recognize revenue primarily from two different types of contracts, product sales to customers (net product
revenue) and collaborations and other arrangements. Revenue recognized from collaborations and other
arrangements includes our share of profits from the collaborations, as well as royalties, upfront and milestone
payments we receive under these types of contracts. See Note 4 for additional information related to our
collaborations and other arrangements. Collaboration and other revenue disclosed above includes the
revenue from the Jardiance® and Trajenta® families of products resulting from our collaboration with
Boehringer Ingelheim, as well as from the sales of rights for the olanzapine portfolio, including Zyprexa®, and
for Baqsimi®, all of which are discussed in Note 4. Substantially all of the remainder of collaboration and other
revenue is related to contracts accounted for as contracts with customers.

Net Product Revenue

Revenue from sales of products is recognized at the point where the customer obtains control of the goods
and we satisfy our performance obligation, which generally is at the time we ship the product to the customer.
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.
We generally ship product shortly after orders are received; therefore, we generally only have a few days of
orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are
considered to be fulfillment activities and are not considered to be a separate performance obligation. We
exclude from the measurement of the transaction price all taxes assessed by a governmental authority that
are imposed on our sales of product and collected from a customer.

Most of our products are sold to wholesalers that serve pharmacies, physicians and other healthcare
professionals, and hospitals. For the years ended December 31, 2023, 2022, and 2021, our three largest
wholesalers each accounted for between 16 percent and 21 percent of consolidated revenue. Further, they
each accounted for between 18 percent and 29 percent of accounts receivable as of December 31, 2023 and
2022.

Significant judgments must be made in determining the transaction price for our sales of products related to
anticipated rebates, discounts, and returns. The following describe the most significant of these judgments:

Sales Rebates and Discounts - Background and Uncertainties

• 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. 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.

• 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.

Sales Returns - Background and Uncertainties

• When product sales occur, to determine the appropriate transaction price for our sales, we estimate a
reserve for future product returns related to those sales using an expected value approach. 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. 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 2 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.
market.

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 1
percent of U.S. revenue during each of the years ended December 31, 2023, 2022, and 2021.

Collaboration and Other Arrangements

We recognize several types of revenue from our collaborations and other arrangements, which we discuss in
general terms immediately below and more specifically in Note 4 for each of our material collaborations and
other arrangements. Our collaborations and other arrangements are evaluated to determine if the
arrangements in their entirety, or contain aspects that, are contracts with customers.

•

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). This royalty revenue is included in collaboration and other revenue.

The net gain or loss related to the sale of rights of a product is included in collaboration and other
revenue when control of the asset transfers to the other party.

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:

Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

193.6 $

219.2

The contract liabilities balances disclosed above as of December 31, 2023 and 2022 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, 2023, 2022, and 2021, 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.

2023

2022

Disaggregation of Revenue

The following table summarizes revenue, including net product revenue and collaboration and other revenue,
by product:

2023

U.S.

2022

2021

2023

2022

2021

Outside U.S.

Diabetes and obesity:

Trulicity® . . . . . . . . . . . . . . $ 5,433.3 $ 5,688.8 $ 4,914.4 $ 1,699.2 $ 1,750.9 $ 1,557.6
Mounjaro®
—
Jardiance(1)
683.5
Humalog® (2) . . . . . . . . . . .
1,132.3
Humulin®
389.6
Basaglar® (3) . . . . . . . . . . .
304.2
Baqsimi . . . . . . . . . . . . . . .
16.8
Zepbound® . . . . . . . . . . . .
—
Other diabetes and
obesity . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . 4,834.2
. . . . . . . . . . . . 1,600.4
863.2
610.1
443.1
645.7
175.8

—
807.3
1,320.7
832.9
588.3
96.4
—

366.6
1,194.5
1,191.9
730.2
470.7
110.4
—

328.9
1,144.2
800.2
242.0
285.2
31.9
—

115.9
871.5
868.7
289.2
289.7
28.9
—

. . . . . . . . . . . . . .

175.0
Total diabetes and obesity . . . 14,780.8

158.0
9,911.1

159.3
8,719.3

355.2
4,886.8

338.9
4,553.7

384.8
4,468.8

Oncology:

. . . . . . . . . . . . . . .

Verzenio® . . . . . . . . . . . . .
Cyramza® . . . . . . . . . . . . .
Erbitux®
Tyvyt® . . . . . . . . . . . . . . . .
Alimta®
. . . . . . . . . . . . . . . .
Other oncology . . . . . . . . .

2,509.0
402.3
528.9
—
72.9
283.9
Total oncology . . . . . . . . . . . . . 3,797.0

Immunology:

Taltz®
Olumiant® (4) . . . . . . . . . . .
Other immunology . . . . . .

. . . . . . . . . . . . . . . . . 1,831.6
225.5
0.8
2,057.9

Total immunology . . . . . . . . . .

1,653.2
351.4
500.1
—
543.7
169.7
3,218.1

834.9
358.1
481.8
—
1,233.9
120.1
3,028.8

1,354.3
572.4
67.6
393.4
144.6
329.0
2,861.3

830.3
620.0
66.4
293.3
384.0
254.1
2,448.1

515.0
674.8
66.4
418.1
827.5
210.7
2,712.5

1,724.6
148.2
20.0
1,892.8

1,542.4
324.1
15.3
1,881.8

928.0
697.2
114.4
1,739.6

757.4
682.3
12.1
1,451.8

670.4
791.0
17.6
1,479.0

Neuroscience:

Zyprexa(5) . . . . . . . . . . . . .
Emgality®
. . . . . . . . . . . . . .
Other neuroscience . . . . .

Total neuroscience . . . . . . . . .

79.4
482.2
134.4
696.0

30.4
462.8
119.2
612.4

39.6
434.5
140.7
614.8

1,615.4
196.0
371.1
2,182.5

306.5
188.1
439.2
933.8

390.7
142.7
750.3
1,283.7

Other:

Forteo® . . . . . . . . . . . . . . .
Cialis® . . . . . . . . . . . . . . . .
COVID-19 antibodies(6)
Other . . . . . . . . . . . . . . . . .

360.3
367.3
707.9
35.2
261.4
2,008.9
233.9
144.2
1,563.5
2,555.7
Revenue . . . . . . . . . . . . . . . . . . . . . . . $ 21,791.0 $ 18,190.0 $ 16,811.0 $ 12,333.1 $ 10,351.3 $ 11,507.4

441.6
10.6
1,978.0
136.1
2,566.4

245.8
552.1
14.7
151.3
964.0

197.7
355.3
—
109.9
662.9

335.5
26.1
—
97.7
459.3

Total other . . . . . . . . . . . . . . . . .

. .

Numbers may not add due to rounding.
(1) 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 the rights for the olanzapine portfolio.
(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:

Revenue(1):

2023

2022

2021

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,791.0 $ 18,190.0 $ 16,811.0
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,776.8
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,367.0
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,661.4
Other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,702.2
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,124.1 $ 28,541.4 $ 28,318.4

4,299.2
1,747.3
1,452.8
2,852.0

6,174.7
1,672.6
1,539.7
2,946.2

Numbers may not add due to rounding.
(1) Revenue is attributed to the countries based on the location of the customer or other party.

Note 3: Acquisitions

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 December 2023, December 2022, and January 2021, we completed the acquisitions of POINT Biopharma
Global Inc. (POINT), Akouos, Inc. (Akouos), and Prevail Therapeutics Inc. (Prevail), respectively. These
transactions, as further discussed below in Acquisitions of Businesses, were accounted for as business
combinations under the acquisition method of accounting. Under this method, the assets acquired and
liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated
financial statements. The determination of estimated fair value required management to make significant
estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets,
where applicable, has been recorded as goodwill. The results of operations of these acquisitions have been
included in our consolidated financial statements from the date of acquisition.

We also acquired assets in development in 2023, 2022, and 2021, which are further discussed below in Asset
Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D was immediately expensed as
acquired IPR&D if the compound has no alternative future use. Milestone payment obligations incurred prior
to regulatory approval of the compound are expensed when the event triggering an obligation to pay the
milestone occurs. We recognized acquired IPR&D charges of $3.80 billion, $908.5 million, and $970.1 million
for the years ended December 31, 2023, 2022, and 2021, respectively.

Acquisitions of Businesses

POINT Acquisition

Overview of Transaction

In December 2023, we acquired all shares of POINT for a purchase price of $12.50 per share in cash (or an
aggregate of $1.04 billion, net of cash acquired). Under the terms of the agreement, we acquired capabilities
to advance our radiopharmaceutical discovery, development, and manufacturing efforts, as well as clinical
and pre-clinical radioligand therapies in development for the treatment of cancer.

Assets Acquired and Liabilities Assumed

Our access to POINT information was limited prior to the acquisition. As a consequence, we are in the
process of determining fair values and tax bases of a significant portion of the assets acquired and liabilities
assumed, including the identification and valuation of intangible assets and tax exposures. The final
determination of these amounts will be completed as soon as possible but no later than one year from the
acquisition date. The final determination may result in asset and liability fair values and tax bases that differ
from the preliminary estimates and require changes to the preliminary amounts recognized.

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

Estimated Fair Value at December 27, 2023
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Acquired IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition date fair value of consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:

302.7
196.0
859.1
(19.3)
1,338.5

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) The goodwill recognized from this acquisition is attributable primarily to the radiopharmaceutical discovery, development, and

(302.7)
1,035.8

manufacturing capabilities and the assembled workforce for POINT, which is not deductible for tax purposes.

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

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

Akouos Acquisition

Overview of Transaction

In December 2022, we acquired all shares of Akouos for a purchase price that included $12.50 per share in
cash (or an aggregate of $327.2 million, net of cash acquired) plus one non-tradable contingent value right
(CVR) per share. 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
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Acquired IPR&D(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition date fair value of consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of CVR liability(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash paid, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Acquired IPR&D intangibles primarily relate to GJB2.
(2) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled

workforce for Akouos and is not deductible for tax purposes.
(3) See Note 7 for a discussion on the estimation of the CVR liability.

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

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

153.2
184.0
185.6
24.5
547.3

(153.2)
(66.9)
327.2

Prevail Acquisition

Overview of Transaction

In January 2021, we acquired all shares of Prevail for a purchase price that included $22.50 per share in cash
(or an aggregate of $747.4 million, net of cash acquired) plus one non-tradable CVR per share. The CVR
entitles Prevail stockholders up to an additional $4.00 per share in cash (or an aggregate of approximately
$160 million) payable, subject to certain terms and conditions, upon the first regulatory approval of a Prevail
product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy, or Spain. To
achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such
regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately
8.3 cents per month until December 1, 2028, at which point the CVR will expire without payment.

Under the terms of the agreement, we acquired potentially disease-modifying AAV9-based gene therapies for
patients with neurodegenerative diseases. The acquisition established a new modality for drug discovery and
development, extending our research efforts through the creation of a gene therapy program that is being
anchored by Prevail's portfolio of assets. The lead gene therapies in clinical development that we acquired
were PR001 (GBA1 Gene Therapy) for patients with Parkinson's disease with GBA1 mutations and
neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations.
Both PR001 and PR006 were granted Fast Track designation from the U.S. Food and Drug Administration.

Assets Acquired and Liabilities Assumed

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

Estimated Fair Value at January 22, 2021
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Acquired IPR&D(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition date fair value of consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:

90.5
824.0
126.8
(106.0)
(31.5)
903.8

(90.5)
(65.9)
747.4

Cash paid, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Acquired IPR&D intangibles primarily relate to PR001 (GBA1 Gene Therapy). In 2022, we impaired the intangible asset related to

GBA1 Gene Therapy. See Note 5 for additional information.

(2) The goodwill recognized from this acquisition is not deductible for tax purposes.
(3) See Note 7 for a discussion on the estimation of the CVR liability.

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

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, 2021.

Asset Acquisitions

The following table summarizes our significant asset acquisitions during 2023, 2022, and 2021.

Counterparty

Compound(s),Therapy, or Asset

Acquisition
Month

Phase of
Development(1)

Acquired IPR&D
Expense

Mablink Biosciences SAS

Beam Therapeutics Inc.

DICE Therapeutics, Inc. (DICE)

Versanis Bio, Inc. (Versanis)

Emergence Therapeutics AG

MBK-103, a folate receptor
alpha antibody drug conjugate
for the treatment of ovarian
cancer
Opt-in right for programs
targeting PCSK9, ANGPTL3
and an undisclosed liver-
mediated, cardiovascular
target

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

Bimagrumab, a monoclonal
antibody for the treatment of
people living with obesity and
obesity-related complications

ETx-22, a Nectin-4 antibody-
drug conjugate for the
treatment of urothelial cancer

December
2023

Pre-clinical

256.6

October
2023

August
2023

Phase I

216.3

Phase II

1,915.5

Phase II

604.1

Pre-clinical

406.5

BioMarin Pharmaceutical Inc.

Priority Review Voucher

February
2022

Not
applicable

110.0

Foghorn Therapeutics Inc.

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

December
2021

Pre-clinical

316.6

Rigel Pharmaceuticals, Inc.

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

March
2021

Phase I

125.0

Precision Biosciences, Inc.

Potential in vivo therapies for
genetic disorders

January
2021

Pre-clinical

107.8

(1) The phase of development presented is as of the date of the arrangement and represents the phase of development of the most

advanced asset acquired, where applicable.

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, 2023,
2022, and 2021.

Note 4: 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 Diabetes Collaboration

We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of
diabetes compounds. Currently included in the collaboration are Boehringer Ingelheim's oral diabetes
products: Jardiance, Glyxambi, Synjardy, Trijardy XR, Trajenta, and Jentadueto® as well as our basal insulins,
Basaglar and Rezvoglar. Glyxambi, Synjardy, and Trijardy XR are included in the Jardiance product family.
Jentadueto is included in the Trajenta product family. Rezvoglar is included in the Basaglar product family.

In connection with the regulatory approvals of Jardiance, Trajenta, and Basaglar in the U.S., Europe, and
Japan, milestone payments made for Jardiance and Trajenta were capitalized as intangible assets and are
being amortized to cost of sales, and milestone payments received for Basaglar were recorded as contract
liabilities and are being amortized to collaboration and other revenue. Net milestones capitalized with respect
to Jardiance and Trajenta and net milestones deferred with respect to Basaglar are not material.

For the Jardiance product family, we and Boehringer Ingelheim generally share equally the ongoing
development and commercialization costs in the most significant markets, and we record our portion of the
development and commercialization costs as research and development expense and marketing, selling, and
administrative expense, respectively. We receive a royalty on net sales of Boehringer Ingelheim's products in
the most significant markets and recognize the royalty as collaboration and other revenue. 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:

Jardiance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Basaglar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trajenta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023
2,744.7 $
728.3
386.9

2022
2,066.0 $
760.4
383.7

2021
1,490.8
892.5
372.5

Olumiant

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

In connection with the regulatory approvals of Olumiant in the U.S., Europe, and Japan, as well as
achievement of a sales-based milestone, milestone payments were capitalized as intangible assets and are
being amortized to cost of sales through the term of the collaboration. Net milestones capitalized are not
material. As of December 31, 2023, Incyte is eligible to receive up to $100.0 million of additional payments
from us in potential sales-based milestones.

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

Olumiant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

922.6 $

830.5 $

2023

2022

2021
1,115.1

Tyvyt

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:

Tyvyt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

393.4 $

293.3 $

418.1

2023

2022

2021

Ebglyss®

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,
2023, Roche is eligible to receive additional payments from us, including up to $115.0 million contingent upon
the achievement of additional success-based regulatory milestones and up to $1.03 billion in potential sales-
based milestones. During the years ended December 31, 2023 and 2022, milestone payments to Roche were
not material. There were no milestone payments to Roche during the year ended December 31, 2021.

We have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop
and commercialize lebrikizumab for the treatment or prevention of dermatology indications, including, but not
limited to, atopic dermatitis in Europe. 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, 2023, 2022, and 2021, collaboration and other revenue recognized
under this license agreement was not material. As of December 31, 2023, we are eligible to receive additional
payments up to $1.25 billion in a series of sales-based milestones.

Orforglipron

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, 2023, 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, 2023, 2022, and 2021, 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 and $2.24 billion during the years ended December 31,
2022 and 2021, respectively. We had no sales of our COVID-19 antibodies during the year ended
December 31, 2023.

Divestitures

Olanzapine Portfolio (including Zyprexa)

In July 2023, we sold the rights for the olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel
GmbH (Cheplapharm), a European company. Under the terms of the agreement, we received $1.05 billion in
cash and will receive an additional $305.0 million in cash upon the one year anniversary of closing. We
included both in the transaction price as of December 31, 2023. We are eligible to receive milestone
payments of up to $50.0 million, of which $25.0 million has not been included in the transaction price as of
December 31, 2023.

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.

Baqsimi

In June 2023, we sold the rights for Baqsimi to Amphastar Pharmaceuticals, Inc. (Amphastar). Under the
terms of the agreement, we received $500.0 million in cash and will receive an additional $125.0 million in
cash upon the one year anniversary of closing. We included both in the transaction price as of December 31,
2023. 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, 2023.

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.

Note 5: Asset Impairment, Restructuring, and Other Special Charges

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

Asset impairment and other special charges . . . . . . . . . . . . . . . . . . . $
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total asset impairment, restructuring, and other special charges . . $

22.2 $
45.5
67.7 $

221.6 $

23.0

244.6 $

303.1
13.0
316.1

2023

2022

2021

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

During the year ended December 31, 2021, we recognized $128.0 million of intangible asset impairment as a
result of the decision by Bayer AG to discontinue the development of a Phase I molecule related to a contract-
based intangible asset from our acquisition of Loxo Oncology, Inc. Additionally, we recognized $108.1 million
of intangible asset impairment from the sale of the rights to Qbrexza®, as well as acquisition and integration
costs associated with the acquisition of Prevail.

Note 6: Inventories

We use the last-in, first-out (LIFO) method for the majority of our inventories located in the continental U.S.
Other inventories are valued by the first-in, first-out (FIFO) method. FIFO cost approximates current
replacement cost. Inventories measured using LIFO must be valued at the lower of cost or market. Inventories
measured using FIFO must be valued at the lower of cost or net realizable value.

Inventories at December 31 consisted of the following:

Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (approximates replacement cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase to LIFO cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2023

2022

791.7 $

3,248.6
1,630.1
5,670.4
102.4
5,772.8 $

901.2
2,597.7
801.9
4,300.8
8.9
4,309.7

Inventories valued under the LIFO method comprised $1.77 billion and $1.23 billion of total inventories at
December 31, 2023 and 2022, respectively.

We recognized a net inventory impairment charge related to our COVID-19 antibodies of $339.7 million during
the year ended December 31, 2021 in cost of sales in our consolidated statements of operations primarily due
to the combination of changes to demand from U.S. and international governments, including changes to our
agreement with the U.S. government, and near-term expiry dates of COVID-19 antibodies.

Note 7: Financial Instruments

Investments in Equity and Debt Securities

Our equity investments are accounted for using three different methods depending on the type of equity
investment:

•

Investments in companies over which we have significant influence but not a controlling interest are
accounted for using the equity method, with our share of earnings or losses reported in other-net,
(income) expense.

For equity investments that do not have readily determinable fair values, we measure these
investments at cost, less any impairment, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or similar investment of the same issuer. Any change
in recorded value is recorded in other-net, (income) expense.

• Our public equity investments are measured and carried at fair value. 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,
2023, 2022, and 2021 were not material.

The net gains (losses) recognized in our consolidated statements of operations for equity securities were
$(20.2) million, $(410.7) million, and $176.9 million for the years ended December 31, 2023, 2022, and 2021,
respectively. The net gains (losses) recognized for the years ended December 31, 2023, 2022, and 2021 on
equity securities sold during the respective periods were not material.

As of December 31, 2023, we had approximately $930 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 are
determined by comparing the difference between the present value of future cash flows expected to be
collected on these securities and the amortized cost. 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, 2023, 2022, and 2021.

The table below summarizes the contractual maturities of our investments in debt securities measured at fair
value as of December 31, 2023:

Maturities by Period

Total

Less Than
1 Year

1-5
Years

6-10
Years

More Than
10 Years

Fair value of debt securities . . . . . . . . . . . . . . . . $

657.2 $

84.1 $

227.9 $

98.4 $

246.8

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrealized gross losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of securities in an unrealized gain position . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of securities in an unrealized loss position . . . . . . . . . . . . . . . . . . . . . . . . .

3.4 $

37.9
159.2
452.0

0.6
49.2
46.8
568.7

2023

2022

As of December 31, 2023, the available-for-sale securities in an unrealized loss position include primarily
fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other
market conditions. Approximately 99 percent of the fixed-rate debt securities in a loss position are investment-
grade debt securities. As of December 31, 2023, we do not intend to sell, and it is not more likely than not that
we will be required to sell, the securities in a loss position before the market values recover or the underlying
cash flows have been received, and there is no indication of a material default on interest or principal
payments for our debt securities.

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

Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Realized gross gains on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gross losses on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

145.6 $
0.7
4.0

132.9 $
0.4
9.7

174.7
2.8
1.7

2023

2022

2021

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.

Fair Value of Investments

The following table summarizes certain fair value information at December 31, 2023 and 2022 for investment
assets measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of
certain other investments:

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

Carrying
Amount

Cost (1)

December 31, 2023
Cash equivalents(2) . . . . . . . . . . . . . . $ 1,088.4 $ 1,088.4 $ 1,079.3 $
Short-term investments:

9.1 $

— $ 1,088.4

U.S. government and agency
securities . . . . . . . . . . . . . . . . . . . . . $
Corporate debt securities . . . . . . .
Other securities . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . $

32.1 $
52.0
25.0
109.1

Noncurrent investments:

U.S. government and agency
securities . . . . . . . . . . . . . . . . . . . . . $
Corporate debt securities . . . . . . .
Mortgage-backed securities . . . . .
Asset-backed securities . . . . . . . . .
Other securities . . . . . . . . . . . . . . . .
Marketable equity securities . . . . .
Equity investments without readily
determinable fair values(3)
. . . . . . .
608.0
Equity method investments(3) . . . .
962.3
Noncurrent investments . . . . . . . . . $ 3,052.2

148.1 $
214.3
157.3
53.5
197.4
711.3

32.3 $
52.1
25.0

32.1 $
—
—

— $

52.0
13.6

— $
—
11.4

32.1
52.0
25.0

161.0 $
226.6
167.1
54.4
100.2
493.2

148.1 $
—
—
—
—
711.3

— $

214.3
157.3
53.5
23.5
—

— $
—
—
—
173.9
—

148.1
214.3
157.3
53.5
197.4
711.3

December 31, 2022
Cash equivalents(2) . . . . . . . . . . . . . . $
Short-term investments:

U.S. government and agency
securities . . . . . . . . . . . . . . . . . . . . . $
Corporate debt securities . . . . . . .
Asset-backed securities . . . . . . . . .
Other securities . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . $

Noncurrent investments:

657.4 $

650.4 $

7.0 $

— $

657.4

30.8 $
53.4
2.0
58.6
144.8

31.1 $
53.5
2.0
58.6

30.8 $
—
—
—

— $

53.4
2.0
39.1

— $
—
—
19.5

30.8
53.4
2.0
58.6

U.S. government and agency
securities . . . . . . . . . . . . . . . . . . . . . $
Corporate debt securities . . . . . . .
Mortgage-backed securities . . . . .
Asset-backed securities . . . . . . . . .
Other securities . . . . . . . . . . . . . . . .
Marketable equity securities . . . . .
Equity investments without readily
determinable fair values(3)
. . . . . . .
478.4
Equity method investments(3) . . . .
781.1
Noncurrent investments . . . . . . . . . $ 2,901.8

146.4 $
213.9
149.2
50.6
398.6
683.6

163.2 $
235.8
161.5
52.5
34.5
484.7

146.4 $
—
—
—
—
683.6

— $

213.9
149.2
50.6
311.0
—

— $
—
—
—
87.6
—

146.4
213.9
149.2
50.6
398.6
683.6

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

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

alternative for equity investments.

We determine our Level 1 and Level 2 fair value measurements 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. Level 3 fair value measurements for other investment securities are
determined using unobservable inputs, including the investments' cost adjusted for impairments and price
changes from orderly transactions. Fair values are not readily available for certain equity investments
measured under the measurement alternative.

Debt

Fair Value of Debt

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

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Carrying
Amount

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

Short-term commercial paper borrowings

December 31, 2023 . . . . . . . . . . . . . . . . . $ (6,189.4) $
December 31, 2022 . . . . . . . . . . . . . . . . .

(1,498.0)

— $ (6,166.4) $
—

(1,492.0)

— $ (6,166.4)
(1,492.0)
—

Long-term debt, including current portion

December 31, 2023 . . . . . . . . . . . . . . . . . $ (19,035.9) $
December 31, 2022 . . . . . . . . . . . . . . . . . (14,740.6)

— $ (17,221.7) $
—

(12,329.3)

— $ (17,221.7)
(12,329.3)
—

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 life science 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. Our factoring agreements do not allow for recourse in the event of uncollectibility,
and we do not retain any interest in the underlying accounts receivable once sold. We derecognized
$431.9 million and $422.1 million of accounts receivable as of December 31, 2023 and 2022, respectively,
under these factoring arrangements. The costs of factoring such accounts receivable were not material for the
years ended December 31, 2023, 2022, and 2021.

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.
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.

We may enter into foreign currency forward or option contracts to reduce the effect of fluctuating currency
exchange rates (primarily the euro, Chinese yuan, and Japanese yen). Foreign currency derivatives used for
hedging are put in place using the same or like currencies and duration as the underlying exposures. Forward
and option contracts are principally used to manage exposures arising from subsidiary trade and loan
payables and receivables denominated in foreign currencies. These contracts are recorded at fair value with
the gain or loss recognized in other–net, (income) expense. Forward contracts generally have maturities not
exceeding 12 months. At December 31, 2023, we had outstanding foreign currency forward commitments as
follows, all of which have settlement dates within 180 days:

December 31, 2023

Purchase

Sell

Currency
U.S. dollars . .
Euro . . . . . . . .
British pounds
U.S. dollars . .

Amount
(in millions)

Currency

Amount
(in millions)

4,779.4 Euro . . . . . . . .
3,940.4 U.S. dollars . .
237.7 U.S. dollars . .
165.3 Chinese yuan

4,352.2
4,250.9
299.2
1,172.7

Foreign currency exchange risk is also managed through the use of foreign currency debt, cross-currency
interest rate swaps, and foreign currency forward contracts. Our foreign currency-denominated notes had
carrying amounts of $7.14 billion and $6.83 billion as of December 31, 2023 and 2022, respectively, of which
$5.67 billion and $5.45 billion have been designated as, and are effective as, economic hedges of net
investments in certain of our foreign operations as of December 31, 2023 and 2022, respectively. At
December 31, 2023, we had outstanding cross currency swaps with notional amounts of $728.6 million
swapping U.S. dollars to euro and $1.00 billion swapping Swiss francs to U.S. dollars which have settlement
dates ranging through 2028. Our cross-currency interest rate swaps, for which a majority convert a portion of
our U.S. dollar-denominated fixed-rate debt to foreign-denominated fixed rate debt, have also been
designated as, and are effective as, economic hedges of net investments. At December 31, 2023, we had
outstanding foreign currency forward contracts to sell 3.20 billion euro and to sell 1.80 billion Chinese yuan,
with settlement dates ranging through 2024, which have been designated as, and are effective as, economic
hedges of net investments.

In the normal course of business, our operations are exposed to fluctuations in interest rates which can vary
the costs of financing, investing, and operating. 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, 2023, all of our total long-term debt is at a fixed rate. We have converted
approximately 12 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. As of December 31, 2023,
the total notional amounts of forward-starting interest rate and treasury lock contracts in designated cash flow
hedging instruments were $1.10 billion, which have settlement dates ranging through 2025.

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:

2023

2022

2021

Fair value hedges:

Effect from hedged fixed-rate debt . . . . . . . . . . . . . . . . . . . . . . . . . . $
Effect from interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .

31.5 $
(31.5)

(209.8) $
209.8

(78.5)
78.5

Cash flow hedges:

Effective portion of losses on interest rate contracts reclassified
from accumulated other comprehensive loss . . . . . . . . . . . . . . . . .
Cross-currency interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . .
Net losses on foreign currency exchange contracts not designated
as hedging instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

13.5
(108.6)

16.5
8.6

16.6
41.8

26.4
(68.7) $

191.3
216.4 $

204.6
263.0

During the years ended December 31, 2023, 2022, and 2021, 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:

2023

2022

2021

Net investment hedges:

Foreign currency-denominated notes . . . . . . . . . . . . . . . . . . . . . . . . $
Cross-currency interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forward contracts . . . . . . . . . . . . . . . . . . . . . . . . .

(219.9) $
(27.4)
(107.1)

324.9 $

52.0
(15.4)

Cash flow hedges:

Forward-starting interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . .
Cross-currency interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . .

85.6
15.2

391.5
29.8

435.0
213.7
—

97.6
42.3

During the next 12 months, we expect to reclassify $13.0 million of pretax net losses on cash flow hedges
from accumulated other comprehensive loss to other–net, (income) expense. During the years ended
December 31, 2023, 2022, and 2021, the amounts excluded from the assessment of hedge effectiveness
recognized in other comprehensive income (loss) were not material.

Fair Value of Risk-Management Instruments

The following table summarizes certain fair value information at December 31, 2023 and 2022 for risk-
management assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Carrying
Amount

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

(2.4) $

(100.3)

— $
—

(2.4) $

(100.3)

— $
—

(2.4)
(100.3)

December 31, 2023
Risk-management instruments

Interest rate contracts designated as fair
value hedges:

Other current liabilities . . . . . . . . . . . . . . . . $
Other noncurrent liabilities . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . .

(28.4)
(3.5)

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

Other receivables . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . .

113.8
63.1

Foreign exchange contracts designated as
hedging instruments:

—
—

(28.4)
(3.5)

113.8
63.1

—
—

(28.4)
(3.5)

113.8
63.1

Other current liabilities . . . . . . . . . . . . . . . .

(115.8)

—

(115.8)

—

(115.8)

Foreign exchange contracts not
designated as hedging instruments:

Other receivables . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . .

129.6
(55.9)

Contingent consideration liabilities:

Other current liabilities . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . .

(39.5)
(64.4)

—
—

129.6
(55.9)

—
—

129.6
(55.9)

—
—

(39.5)
(64.4)

Fair Value Measurements Using

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Carrying
Amount

Significant
Unobservable
Inputs
(Level 3)

Fair
Value

December 31, 2022
Risk-management instruments

Interest rate contracts designated as fair
value hedges:

Other noncurrent liabilities . . . . . . . . . . . . $

(134.3) $

— $

(134.3) $

— $

(134.3)

Interest rate contracts designated as cash
flow hedges:

Other receivables . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . .

162.9
246.0

—
—

162.9
246.0

—
—

162.9
246.0

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

Other receivables . . . . . . . . . . . . . . . . . . . .

67.6

—

67.6

—

67.6

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

Other noncurrent assets . . . . . . . . . . . . . .

53.1

—

53.1

—

53.1

Foreign exchanges contracts designated
as hedging instruments:

Other current liabilities . . . . . . . . . . . . . . . .

(38.3)

—

(38.3)

—

(38.3)

Foreign exchange contracts not
designated as hedging instruments:

Other receivables . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . .

26.6
(21.5)

Contingent consideration liabilities:

Other current liabilities . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . .

(39.5)
(70.6)

—
—

26.6
(21.5)

—
—

26.6
(21.5)

—
—

(39.5)
(70.6)

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.

Note 8: Goodwill and Other Intangibles

Goodwill

Goodwill results from excess consideration in a business combination over the fair value of identifiable net
assets acquired. Goodwill is not amortized but is reviewed for impairment at least annually, or more frequently
if impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely
than not that the fair value is less than its carrying amount. If we conclude it is more likely than not that the fair
value is less than the carrying amount, a quantitative test that compares the fair value to its carrying value is
performed to determine the amount of any impairment. The change in goodwill during 2023 was primarily
related to our acquisition of POINT. See Note 3 for additional information.

No impairments occurred with respect to the carrying value of goodwill for the years ended December 31,
2023, 2022, and 2021.

Other Intangibles

The components of intangible assets other than goodwill at December 31 were as follows:

2023

2022

Carrying
Amount,
Gross

Accumulated
Amortization

Carrying
Amount,
Net

Carrying
Amount,
Gross

Accumulated
Amortization

Carrying
Amount,
Net

Finite-lived intangible assets:

Marketed products . . . . . . . $ 8,216.8 $ (2,277.0) $ 5,939.8 $ 7,957.5 $ (2,622.7) $ 5,334.8

Indefinite-lived intangible
assets:

Acquired IPR&D . . . . . . . . .

1,871.8
—
Other intangibles . . . . . . . . . . $ 9,183.6 $ (2,277.0) $ 6,906.6 $ 9,829.3 $ (2,622.7) $ 7,206.6

1,871.8

966.8

—

Marketed products consist primarily of the amortized cost of the rights to assets acquired in business
combinations and approved for marketing in a significant global jurisdiction (U.S., Europe, and Japan) and
capitalized milestone payments. For transactions other than a business combination, we capitalize milestone
payments incurred at or after the product has obtained regulatory approval for marketing.

Acquired IPR&D consists of the fair values of acquired IPR&D projects acquired in business combination,
adjusted for subsequent impairments, if any. The costs of acquired IPR&D projects acquired directly in a
transaction other than a business combination are capitalized as other intangible assets if the projects have
an alternative future use; otherwise, they are expensed immediately. See Note 3 for significant acquired
IPR&D projects that had no alternative future use.

Several methods may be used to determine the estimated fair value of other intangibles acquired in a
business combination. We utilize the "income method," which is a Level 3 fair value measurement and applies
a probability weighting that considers the risk of development and commercialization to the estimated future
net cash flows that are derived from projected revenues and estimated costs. These projections are based on
factors such as relevant market size, patent protection, historical pricing of similar products, analyst
expectations, and expected industry trends. The estimated future net cash flows are then discounted to the
present value using an appropriate discount rate. This analysis is performed for each asset independently.
The acquired IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment
of the projects, at which time the assets are tested for impairment and amortized over the remaining useful life
or written off, as appropriate.

The increase in marketed products and the decrease in acquired IPR&D in 2023 primarily relates to the
reclassification of our $1.03 billion intangible asset for lebrikizumab (Ebglyss) from indefinite-lived to finite-
lived as it was approved in Europe in the fourth quarter of 2023. This decrease in acquired IPR&D in 2023
was partially offset by acquired IPR&D assets recognized from the acquisition of POINT. See Note 3 for
additional information.

Indefinite-lived intangible assets are reviewed for impairment at least annually, or more frequently if
impairment indicators are present, by first assessing qualitative factors to determine whether it is more likely
than not that the fair value of the asset is less than its carrying amount. 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 of the
intangible asset to its carrying value is performed to determine the amount of any impairment. Finite-lived
intangible assets are reviewed for impairment when an indicator of impairment is present. When required, a
comparison of fair value to the carrying amount of assets is performed to determine the amount of any
impairment. When determining the fair value of indefinite-lived acquired IPR&D as well as the fair value of
finite-lived intangible assets for impairment testing purposes, we utilize the "income method" discussed
above.

Intangible assets with finite lives are capitalized and are amortized primarily to cost of sales over their
estimated useful lives, ranging from one to 20 years. As of December 31, 2023, the remaining weighted-
average amortization period for finite-lived intangible assets was approximately 12 years.

Amortization expense related to finite-lived intangible assets was as follows:

Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

505.6 $

579.7 $

628.8

2023

2022

2021

The estimated amortization expense for each of the next five years associated with our finite-lived intangible
assets as of December 31, 2023 is as follows:

Estimated amortization expense . . . . . . . . . . . . . . . . . . . $ 542.5 $ 530.3 $ 519.7 $ 517.7 $ 511.6

2024

2025

2026

2027

2028

Note 9: Property and Equipment

Property and equipment is stated on the basis of cost. Provisions for depreciation of buildings and equipment
are computed generally by the straight-line method at rates based on their estimated useful lives (12 to 50
years for buildings and three to 25 years for equipment). We review the carrying value of long-lived assets for
potential impairment on a periodic basis and whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. Impairment is determined by comparing projected
undiscounted cash flows to be generated by the asset to its carrying value. If an impairment is identified, a
loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is
adjusted.

At December 31, property and equipment consisted of the following:

2023

2022

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

256.6
7,915.9
9,406.3
2,798.6
20,377.4
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,233.4)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,913.6 $ 10,144.0

8,280.0
10,329.0
5,084.1
24,012.9
(11,099.3)

319.8 $

Depreciation expense related to property and equipment was as follows:

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

901.9 $

816.6 $

787.0

2023

2022

2021

Capitalized interest costs were not material for the years ended December 31, 2023, 2022, and 2021.

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

Long-lived assets(1):

2023

2022

U.S. and Puerto Rico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,709.7
1,898.5
1,625.9
Long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,500.0 $ 11,234.1
(1) Long-lived assets consist of property and equipment, net, operating lease assets, and unamortized computer software costs.

9,993.2 $
2,722.6
1,784.2

Note 10: Leases

We determine if an arrangement is a lease at inception. We have leases with terms up to 16 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 $171.2 million, $148.8 million, and $159.4 million during the years ended December 31, 2023, 2022, and
2021, 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, 2023, 2022, and 2021.
Short-term lease expense was not material during the years ended December 31, 2023, 2022, and 2021.

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

Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023

2022

9 years
4.4 %

7 years
3.6 %

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

Operating cash flows from operating leases . . . . . . . . . . . . . . . . . . . . $
Right-of-use assets obtained in exchange for new operating lease
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023

2022

2021

171.0 $

149.7 $

156.7

590.0

155.4

163.5

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

The annual minimum lease payments of our operating lease liabilities as of December 31, 2023 were as
follows:

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

197.0
180.2
153.9
138.2
108.1
614.7
1,392.1
284.8
1,107.4

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.

Note 11: Borrowings

Debt at December 31 consisted of the following:

2022
Short-term commercial paper borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,498.0
Long-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,815.3
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.9
Unamortized debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(77.2)
Fair value adjustment on hedged long-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4.4)
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,238.6
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,501.1)
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,320.8 $ 14,737.5

19,104.6
6.5
(90.5)
15.3
25,225.3
(6,904.5)

2023
6,189.4 $

The weighted-average effective borrowing rates on short-term commercial paper borrowings were 5.39
percent and 4.20 percent at December 31, 2023 and 2022, respectively.

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

2023

2022

0.15% Swiss franc denominated notes due 2024 . . . . . . . . . . . . . . . . . . . . . . . $
7.125% notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.75% notes due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.0% notes due 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.625% euro denominated notes due 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5% notes due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1% notes due 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.45% Swiss franc denominated notes due 2028 . . . . . . . . . . . . . . . . . . . . . . .
3.375% notes due 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.50% euro denominated notes due 2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.97% Japanese yen denominated notes due 2049 . . . . . . . . . . . . . . . . . . . .
2.25% notes due 2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.125% euro denominated notes due 2051 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.875% notes due 2053 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.15% notes due 2059 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.50% notes due 2060 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.375% euro denominated notes due 2061 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.95% notes due 2063 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized note discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

714.6 $
217.5
560.6
750.0
830.7
364.3
401.5
476.4
930.6
162.5
830.7
664.6
1,000.0
664.6
65.8
158.6
444.7
266.8
240.3
318.5
38.3
386.8
347.0
958.2
1,107.6
54.2

1,250.0
553.8
1,250.0
591.3
850.0
775.3
1,000.0
(121.2)
19,104.6 $

649.5
217.5
560.6
—
799.3
364.3
401.5
433.0
930.6
172.1
799.3
639.4
—
639.4
69.7
158.6
444.7
266.8
240.3
301.2
38.3
386.8
347.0
958.2
1,065.7
57.4

1,250.0
532.9
—
591.3
850.0
746.0
—
(96.1)
14,815.3

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

At December 31, 2023, we had a total of $7.42 billion of unused committed bank credit facilities, which
consisted primarily of a $3.00 billion credit facility that expires in December 2027 and a $4.00 billion 364-day
facility that expires in September 2024, both of which are available to support our commercial paper program.
We have not drawn against the $3.00 billion and $4.00 billion facilities as of December 31, 2023. Of the
remaining committed bank credit facilities, the outstanding balances as of December 31, 2023 and 2022 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 2023, we issued $750.0 million of 5.000 percent fixed-rate notes due in 2026, which are callable
at par after one year, $1.00 billion of 4.700 percent fixed-rate notes due in 2033, $1.25 billion of 4.875 percent
fixed-rate notes due in 2053, and $1.00 billion of 4.950 percent fixed-rate notes due in 2063, all with interest
to be paid semi-annually. We used the net cash proceeds from the offering of $3.96 billion for general
business purposes, including the repayment of outstanding commercial paper.

In September 2021, we issued euro-denominated notes totaling €1.80 billion and British pound-denominated
notes totaling £250.0 million. We paid $1.91 billion of the net cash proceeds from the offering to purchase and
redeem certain higher interest rate U.S. dollar-denominated notes with an aggregate principal amount of
$1.50 billion, resulting in a debt extinguishment loss of $405.2 million. This loss was included in other-net,
(income) expense in our consolidated statement of operations for the year ended December 31, 2021.

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

Maturities on long-term debt . . . . . . . . . . . . . . . . . . . . . . . $ 717.5 $ 778.1 $ 1,580.7 $ 765.8 $ 476.4

2024

2025

2026

2027

2028

We have converted approximately 12 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, 2023 and 2022, including the effects of interest rate swaps for
hedged debt obligations, were 3.37 percent and 2.87 percent, respectively.

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

Cash payments for interest on borrowings . . . . . . . . . . . . . . . . . . . . . $

404.2 $

323.7 $

338.0

2023

2022

2021

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.

Note 12: Stock-Based Compensation

Our stock-based compensation expense consists of performance awards (PAs), shareholder value awards
(SVAs), relative value awards (RVAs), and restricted stock units (RSUs). We recognize the fair value of stock-
based compensation as expense over the requisite service period of the individual grantees, which generally
equals the vesting period. We provide newly issued shares of our common stock and treasury stock to satisfy
the issuance of PA, SVA, RVA, and RSU shares.

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

Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

628.5 $
132.0

371.1 $

77.9

342.8
72.0

2023

2022

2021

At December 31, 2023, stock-based compensation awards may be granted under the 2002 Lilly Stock Plan
for not more than 49.1 million additional shares.

Performance Award Program

PAs are granted to officers and management and are payable in shares of our common stock. The number of
PA shares actually issued, if any, varies depending on the achievement of certain pre-established earnings-
per-share targets over a two-year period. PA shares are accounted for at fair value based upon the closing
stock price on the date of grant and fully vest at the end of the measurement period. The fair values of PAs
granted for the years ended December 31, 2023, 2022, and 2021 were $335.86, $234.93, and $198.57,
respectively. The number of shares ultimately issued for the PA program is dependent upon the EPS achieved
during the vesting period. Pursuant to this program, approximately 0.5 million, 0.7 million, and 0.7 million
shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively. Approximately
0.4 million shares are expected to be issued in 2024. As of December 31, 2023, the total estimated remaining
unrecognized compensation cost related to nonvested PAs was $111.6 million, which will be amortized over
the weighted-average remaining requisite service period of 12 months.

Shareholder Value Award Program

SVAs 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 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, 2023, 2022, and 2021 were $349.63, $203.88, and $230.19,
respectively, determined using the following assumptions:

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023

1.07 %
4.08
29.87

2022

1.60 %
1.57
32.99

2021

2.50 %
0.19
31.42

Pursuant to this program, approximately 0.3 million, 0.5 million, and 1.0 million shares were issued during the
years ended December 31, 2023, 2022, and 2021, respectively. Approximately 0.2 million shares are
expected to be issued in 2024. As of December 31, 2023, the total estimated remaining unrecognized
compensation cost related to nonvested SVAs was $51.1 million, which will be amortized over the weighted-
average remaining requisite service period of 21 months.

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. 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 value of
the RVA units granted during the years ended December 31, 2023, 2022 and 2021 were $397.95, $230.00,
and $286.71, respectively, determined using the following assumptions:

2023

1.07 %
4.08
31.25

2022

1.60 %
1.57
32.86

2021

2.50 %
0.19
30.95

Pursuant to this program, approximately 0.1 million shares were issued during the year ended December 31,
2023. Approximately 0.1 million shares are expected to be issued in 2024. As of December 31, 2023, the total
estimated remaining unrecognized compensation cost related to nonvested RVAs was $21.1 million, which
will be amortized over the weighted-average remaining requisite service period of 22 months.

Restricted Stock Units

RSUs are granted to certain employees and are payable in shares of our common stock. RSU shares are
accounted for at fair value based upon the closing stock price on the date of grant. The corresponding
expense is amortized over the vesting period, typically three years. The weighted-average fair values of RSU
awards granted during the years ended December 31, 2023, 2022, and 2021 were $339.30, $239.88, and
$196.30, respectively. The number of shares ultimately issued for the RSU program remains constant with the
exception of forfeitures. Pursuant to this program, 1.0 million, 1.0 million, and 0.7 million shares were granted
and approximately 0.5 million, 0.8 million, and 0.6 million shares were issued during the years ended
December 31, 2023, 2022, and 2021, respectively. Approximately 0.4 million shares are expected to be
issued in 2024. As of December 31, 2023, the total estimated remaining unrecognized compensation cost
related to nonvested RSUs was $275.3 million, which will be amortized over the weighted-average remaining
requisite service period of 22 months.

Note 13: Shareholders' Equity

In 2023, 2022, and 2021, we repurchased $750.0 million, $1.50 billion, and $1.25 billion, respectively, of
shares associated with our share repurchase programs. As of December 31, 2023, we had $2.50 billion
remaining under our $5.00 billion share repurchase program that our board authorized in May 2021.

We have 5.0 million authorized shares of preferred stock. As of December 31, 2023 and 2022, 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,
2023 and 2022, 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 $3.01 billion at both December 31, 2023 and
2022, and is shown as a reduction of shareholders' equity. Any dividend transactions between us and the trust
are eliminated. Stock held by the trust is not considered outstanding in the computation of EPS. 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, 2023, 2022, and 2021.

Note 14: Income Taxes

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. Deferred taxes related to global intangible low-
taxed income (GILTI) are also recognized for the future tax effects of temporary differences.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax
position, based on its technical merits, will be sustained upon examination by the taxing authority. The tax
benefits recognized in the financial statements from such a position are measured based on the largest
benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Following is the composition of income tax expense:

Current:

Federal(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,017.9 $
613.0
24.3
3,655.2

2,153.6 $
547.7
45.5
2,746.8

938.5
466.0
(28.4)
1,376.1

2023

2022

2021

Deferred:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(977.5)
174.6
0.6
(802.3)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
573.8
(1) The 2023, 2022, and 2021 current tax expense includes $69.3 million, $189.5 million, and $64.7 million of tax benefit, respectively, from

(2,369.0)
34.2
(6.2)
(2,341.0)
1,314.2 $

(1,992.4)
(78.2)
(114.6)
(2,185.2)

561.6 $

utilization of net operating loss and other tax carryforwards.

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

2023

2022

Deferred tax assets:

Capitalized research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchases of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales rebates and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Correlative tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss and other tax carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax redeterminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,997.5 $
1,981.9
1,632.5
1,031.3
577.0
527.2
521.4
323.7
253.3
463.4
10,309.2

(913.5)
9,395.7

1,615.4
2,071.3
1,312.9
752.5
477.6
626.0
427.9
267.8
147.5
361.0
8,059.9
(775.1)
7,284.8

Deferred tax liabilities:

Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings of foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax assets - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

(1,338.2)
(796.6)
(619.5)
(495.2)
(460.6)
(237.1)
(75.1)
(4,022.3)
5,373.4 $

(1,387.9)
(1,226.0)
(639.5)
(433.5)
(546.5)
(130.7)
(215.0)
(4,579.1)
2,705.7

The deferred tax asset and related valuation allowance amounts for U.S. federal, international, and state net
operating losses and tax credits shown above have been reduced for differences between financial reporting
and tax return filings.

At December 31, 2023, based on filed tax returns we have tax credit carryforwards and carrybacks of
$1.00 billion available to reduce future income taxes; $148.8 million, if unused, will expire in 2026, and
$60.8 million, if unused, will expire between 2029 and 2043. The remaining portion of the tax credit
carryforwards is related to federal tax credits of $55.3 million, international tax credits of $109.9 million, and
state tax credits of $629.3 million, all of which are fully reserved.

At December 31, 2023, based on filed tax returns we had net operating losses and other carryforwards for
international and U.S. federal income tax purposes of $1.35 billion: $284.6 million will expire by 2028;
$35.0 million will expire between 2029 and 2043; and $1.03 billion of the carryforwards will never expire. Net
operating losses and other carryforwards for U.S. federal income tax purposes are partially reserved.
Deferred tax assets related to state net operating losses and other carryforwards of $261.9 million are fully
reserved as of December 31, 2023.

At December 31, 2023 and 2022, prepaid expenses included prepaid taxes of $4.26 billion and $2.37 billion,
respectively.

Domestic and Puerto Rican companies contributed approximately 14 percent, 33 percent, and 28 percent for
the years ended December 31, 2023, 2022, and 2021, respectively, to consolidated income before income
taxes. We have a subsidiary operating in Puerto Rico under a tax incentive grant effective through the end of
2046. The tax incentive grant was amended in 2022 to apply the alternate tax regime established by Puerto
Rico legislation starting in 2023.

Substantially all of the unremitted earnings of our foreign subsidiaries are considered not to be indefinitely
reinvested for continued use in our foreign operations. At December 31, 2023 and 2022, 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. 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:

Cash payments of income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2023
5,558.8 $

2022
2,672.9 $

2021
1,598.8

In December 2017, the Tax Cuts and Job Act (2017 Tax Act) was signed into law. The 2017 Tax Act included
significant changes to the U.S. corporate income tax system, including a one-time repatriation transition tax
(also known as the 'Toll Tax') on unremitted foreign earnings. The 2017 Tax Act provided an election to
taxpayers subject to the Toll Tax to make payments over an eight-year period beginning in 2018 through 2025.
Having made this election, our future cash payments relating to the Toll Tax as of December 31, 2023 are as
follows:

2017 Tax Act Toll Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Total
1,427.0 $

2024

2025

634.2 $

792.8

As of December 31, 2023, we have additional noncurrent income tax payables of $3.06 billion unrelated to the
Toll Tax; we cannot reasonably estimate the timing of future cash outflows associated with these liabilities.

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:

Income tax at the U.S. federal statutory tax rate . . . . . . . . . . . . . . . . $
Add (deduct):

2023
1,376.5 $

2022
1,429.3 $

2021
1,292.6

Non-deductible acquired IPR&D(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
General business credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign-derived intangible income deduction . . . . . . . . . . . . . . . . .
International operations, including Puerto Rico(2) . . . . . . . . . . . . . .
Stock-based compensation(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) Non-deductible acquired IPR&D was primarily related to the acquisitions of DICE, Versanis, and Emergence in 2023. See Note 3 for

677.2
(258.0)
(236.7)
(187.1)
(79.9)
(4.2)
26.4
1,314.2 $

68.3
(155.0)
(287.5)
(299.5)
(48.9)
(116.4)
(28.7)
561.6 $

10.5
(100.5)
(86.7)
(447.5)
(55.7)
(19.0)
(19.9)
573.8

additional information related to acquisitions.

(2) Includes the impact of GILTI tax, Puerto Rico Excise Tax (for 2022 and 2021), 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:

Beginning balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions based on tax positions related to the current year . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses of statutes of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes related to the impact of foreign currency translation . . . . .
Ending balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2023
2,987.0 $
364.3
78.2
(39.0)
(4.7)
(21.5)
30.7
3,395.0 $

2022
2,798.3 $
274.2
34.6
(10.9)
(44.8)
(11.8)
(52.6)
2,987.0 $

2021
2,551.9
310.3
98.6
(8.1)
(38.5)
(49.7)
(66.2)
2,798.3

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

We file U.S. federal, foreign, and various state and local income tax returns. We are no longer subject to U.S.
federal income tax examination for years before 2016. In most major foreign and state jurisdictions, we are no
longer subject to income tax examination for years before 2012.

The U.S. examination of tax years 2016-2018 began in 2019 and remains ongoing. The Internal Revenue
Service commenced its examination of tax years 2019-2021 during the third quarter of 2023. The resolution of
both audit 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, 2023, 2022, and 2021. Our accrued interest and penalties
related to unrecognized tax benefits were $414.9 million and $271.5 million at December 31, 2023 and 2022,
respectively.

Note 15: Retirement Benefits

We use a measurement date of December 31 to determine the change in benefit obligation, change in plan
assets, funded status, and amounts recognized in the consolidated balance sheets at December 31 for our
defined benefit pension and retiree health benefit plans, which were as follows:

Change in benefit obligation:

Defined Benefit
Pension Plans

Retiree Health
Benefit Plans

2023

2022

2023

2022

Benefit obligation at beginning of year . . . . . . . . . . . . . . . $ 13,222.0 $ 17,565.0 $ 1,258.8 $ 1,663.8
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46.6
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37.8
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(395.9)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(86.8)
Foreign currency exchange rate changes and other
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117.3
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . 14,257.9

351.7
398.1
(4,158.9)
(608.9)

290.4
648.2
590.5
(610.5)

31.8
61.3
34.5
(80.6)

(6.7)
1,258.8

4.5
1,310.3

13,222.0

(325.0)

Change in plan assets:

Fair value of plan assets at beginning of year . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes and other
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120.9
Fair value of plan assets at end of year . . . . . . . . . . . . . . 13,708.7

13,195.8
881.9
120.6
(610.5)

—
2,492.5
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,233.7
Unrecognized net actuarial (gain) loss . . . . . . . . . . . . . . . .
54.5
Unrecognized prior service (benefit) cost . . . . . . . . . . . . .
(62.2)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,815.1 $ 2,669.4 $ 1,370.1 $ 1,226.0

(549.2)
3,357.9
6.4

2,580.3
1,270.0
109.6

2,687.2
8.4

13,195.8

(341.3)

(26.2)

(9.5)

(0.1)

16,416.0

(2,388.1)
118.1
(608.9)

2,492.5
166.8
1.7
(80.6)

3,361.4
(796.0)
13.9
(86.8)

Amounts recognized in the consolidated balance sheet
consisted of:

Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued retirement benefits . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive (income) loss
before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7.7)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,815.1 $ 2,669.4 $ 1,370.1 $ 1,226.0

810.6 $ 1,208.0 $ 1,427.7 $ 1,383.4
(8.4)
(70.4)
(141.3)
(1,289.4)

(70.4)
(1,163.8)

(8.3)
(149.4)

3,364.3

2,695.6

100.1

The unrecognized net actuarial (gain) loss and unrecognized prior service (benefit) cost have not yet been
recognized in net periodic pension costs and were included in accumulated other comprehensive loss at
December 31, 2023 and 2022.

The $1.09 billion increase in benefit obligation in 2023 is primarily driven by decreases in the discount rates.
The $4.75 billion decline in benefit obligation in 2022 is primarily driven by increases in the discount rates.

The following represents our weighted-average assumptions:

Weighted-average assumptions used to determine net
periodic benefit costs:

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average assumptions used to determine benefit
obligation as of December 31:

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . .

Defined Benefit
Pension Plans

Retiree Health
Benefit Plans

2023

2022

2021

2023

2022

2021

5.1 % 2.8 % 2.4 % 5.2 % 3.0 % 2.6 %
4.3
8.1

3.3
6.8

3.5
8.1

7.3

5.0

7.3

4.8 % 5.1 % 2.8 % 5.0 % 5.2 % 3.0 %
4.3

4.3

3.5

We annually evaluate the expected return on plan assets in our defined benefit pension and retiree health
benefit plans. In evaluating the expected rate of return, we consider many factors, with a primary analysis of
current and projected market conditions; asset returns and asset allocations; and the views of leading
financial advisers and economists. 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:

Defined benefit pension plans . . $
Retiree health benefit plans . . . .

661.2 $

671.4 $

695.0 $

722.5 $

93.8

94.5

94.7

95.2

746.5 $ 4,160.7
475.9

95.6

2024

2025

2026

2027

2028

2029-2033

Amounts relating to defined benefit pension plans with projected benefit obligations in excess of plan assets
were as follows at December 31:

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023
2,395.3 $
1,035.4

2022
2,211.2
977.1

Amounts relating to defined benefit pension plans and retiree health benefit plans with accumulated benefit
obligations in excess of plan assets were as follows at December 31:

Defined Benefit
Pension Plans

Retiree Health
Benefit Plans

2023

2022

2023

2022

Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . $ 1,659.5 $ 1,721.7 $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

564.3

652.7

157.7 $
—

149.8
—

The total accumulated benefit obligation for our defined benefit pension plans was $12.74 billion and
$12.01 billion at December 31, 2023 and 2022, respectively.

Net periodic (benefit) cost included the following components:

Defined Benefit
Pension Plans

Retiree Health
Benefit Plans

2023

2022

2021

2023

2022

2021

Components of net periodic (benefit)
cost:

Service cost . . . . . . . . . . . . . . . . . . . . . . . . $ 290.4 $ 351.7 $ 369.2 $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . (1,055.0)
Amortization of prior service (benefit)
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized actuarial (gain) loss . . . . . .
Net periodic (benefit) cost . . . . . . . . . . . . $

337.8
(949.3)

398.1
(947.6)

2.4
122.0

2.4
342.4

4.2
487.7

648.2

(59.6)
3.2
8.0 $ 147.0 $ 249.6 $ (147.7) $ (121.6) $ (120.9)

(54.8)
0.9

(52.9)
(5.8)

31.8 $
61.3
(182.1)

46.6 $
37.8
(152.1)

49.2
32.5
(146.2)

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

Defined Benefit
Pension Plans

Retiree Health
Benefit Plans

2023

2022

2021

2023
(49.8) $ (552.2) $ 142.5

2022

2021

Actuarial gain (loss) arising during period . $ (763.9) $ 823.6 $ 2,072.4 $
Amortization of prior service (benefit) cost
included in net income . . . . . . . . . . . . . . . . .
Amortization of net actuarial (gain) loss
included in net income . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes
and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income (loss)
during period . . . . . . . . . . . . . . . . . . . . . . . . . $ (668.7) $ 1,223.9 $ 2,611.5 $ (107.8) $ (607.0) $

(52.9)

(54.8)

(29.2)

(0.9)

(5.8)

342.4

122.0

487.7

55.5

47.2

2.4

0.9

4.2

0.7

(59.6)

3.2

1.9

88.0

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 $222.6 million, $170.6 million, and $167.3 million for the years
ended December 31, 2023, 2022, and 2021, respectively.

We provide certain other postemployment benefits primarily related to disability benefits and accrue for the
related cost over the service lives of employees. Expenses associated with these benefit plans for the years
ended December 31, 2023, 2022, and 2021 were not material.

Benefit Plan Investments

Our benefit plan investment policies are set with specific consideration of return and risk requirements in
relationship to the respective liabilities. U.S. and Puerto Rico plans represent approximately 85 percent of our
global investments. Given the long-term nature of our liabilities, these plans have the flexibility to manage an
above-average degree of risk in the asset portfolios. At the investment-policy level, there are no specifically
prohibited investments. However, within individual investment manager mandates, restrictions and limitations
are contractually set to align with our investment objectives, ensure risk control, and limit concentrations.

We manage our portfolio to minimize concentration of risk by allocating funds within asset categories. In
addition, within a category we use different managers with various management objectives to eliminate any
significant concentration of risk.

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 75 percent growth investments and 25 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. 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. 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. 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. 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.

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, 2023 by
asset category were as follows:

Fair Value Measurements Using

Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)

Total

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Investments
Valued at Net
Asset Value(1)

Asset Class
Defined Benefit Pension Plans
Public equity securities:

U.S. . . . . . . . . . . . . . . . . . . . . . . . . $
International . . . . . . . . . . . . . . . . .

1,379.7 $
1,408.9

490.5 $
441.2

0.3 $

333.4

— $
—

Fixed income:

Developed markets . . . . . . . . . . .
Developed markets -
repurchase agreements . . . . . . .
Emerging markets . . . . . . . . . . . .

Private alternative investments:

2,783.9

21.2

2,597.3

(772.8)
295.6

13.2
10.4

(786.0)
35.7

0.1

—
—

888.9
634.3

165.3

—
249.5

Hedge funds . . . . . . . . . . . . . . . . .
Equity-like funds . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,708.7 $

3,125.9
4,093.7
369.7
1,024.1

—
—
261.9
170.8
1,409.2 $

—
—
—
42.6
2,223.3 $

—
25.1
—
—

3,125.9
4,068.6
107.8
810.7
25.2 $ 10,051.0

Retiree Health Benefit Plans
Public equity securities:

U.S. . . . . . . . . . . . . . . . . . . . . . . . . $
International . . . . . . . . . . . . . . . . .

127.0 $

89.9

44.2 $
38.2

— $
—

Fixed income:

Developed markets . . . . . . . . . . .
Emerging markets . . . . . . . . . . . .

Private alternative investments:

Hedge funds . . . . . . . . . . . . . . . . .
Equity-like funds . . . . . . . . . . . . .

74.9
23.4

281.2
335.1

—
—

74.9
—

—
—

—
2.4

82.8
51.7

—
23.4

281.2
332.7

Cash value of trust owned
insurance contract . . . . . . . . . . . . .
—
Real estate . . . . . . . . . . . . . . . . . . .
—
Other . . . . . . . . . . . . . . . . . . . . . . . . .
72.5
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
844.3
(1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been

1,526.5
—
2.1
1,603.5 $

1,526.5
24.5
97.8
2,580.3 $

—
—
—
2.4 $

—
24.5
23.2

130.1 $

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.

The fair values of our defined benefit pension plan and retiree health plan assets as of December 31, 2022 by
asset category were as follows:

Fair Value Measurements Using

Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)

Total

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Investments
Valued at Net
Asset Value(1)

Asset Class
Defined Benefit Pension Plans
Public equity securities:

U.S. . . . . . . . . . . . . . . . . . . . . . . . . $
International . . . . . . . . . . . . . . . . .

1,132.4 $
1,177.1

396.6 $
369.4

0.1 $

300.9

— $
—

Fixed income:

Developed markets . . . . . . . . . . .
Developed markets -
repurchase agreements . . . . . . .
Emerging markets . . . . . . . . . . . .

Private alternative investments:

2,445.5

19.8

2,058.2

(706.6)
273.5

6.4
10.6

(713.0)
32.0

0.1

—
—

735.7
506.8

367.4

—
230.9

Hedge funds . . . . . . . . . . . . . . . . .
Equity-like funds . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,195.8 $

3,249.0
4,014.1
349.1
1,261.7

—
—
234.9
251.0
1,288.7 $

—
—
—
(131.8)
1,546.4 $

—
25.4
—
—

3,249.0
3,988.7
114.2
1,142.5
25.5 $ 10,335.2

Retiree Health Benefit Plans
Public equity securities:

U.S. . . . . . . . . . . . . . . . . . . . . . . . . $
International . . . . . . . . . . . . . . . . .

104.2 $

72.0

35.7 $
31.9

— $
—

Fixed income:

Developed markets . . . . . . . . . . .
Emerging markets . . . . . . . . . . . .

Private alternative investments:

Hedge funds . . . . . . . . . . . . . . . . .
Equity-like funds . . . . . . . . . . . . .

63.1
21.0

294.9
332.8

—
—

63.1
—

—
—

—
2.4

68.5
40.1

—
21.0

294.9
330.4

Cash value of trust owned
insurance contract . . . . . . . . . . . . .
—
Real estate . . . . . . . . . . . . . . . . . . .
—
Other . . . . . . . . . . . . . . . . . . . . . . . . .
107.8
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
862.7
(1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been

1,470.8
—
(19.9)
1,514.0 $

1,470.8
21.6
112.1
2,492.5 $

—
—
—
2.4 $

—
21.6
24.2

113.4 $

classified in the fair value hierarchy.

No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31,
2022. The activity in the Level 3 investments during the year ended December 31, 2022 was not material.

In 2024, we expect to contribute approximately $40 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 2024.

Note 16: 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, 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 we cannot reasonably estimate the maximum
potential exposure or the range of possible loss in excess of amounts accrued for any of these matters;
however, we believe that the resolution of all such matters will not have a material adverse effect on our
consolidated financial position or liquidity, but could possibly be material to our consolidated results of
operations in any one accounting period.

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.

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.

Patent Litigation

Emgality Patent Litigation

We are a named defendant in litigation filed by Teva Pharmaceuticals International GMBH and Teva
Pharmaceuticals USA, Inc. (collectively, Teva) in the U.S. District Court for the District of Massachusetts
seeking a ruling that various claims in three different Teva patents would be infringed by our launch and
continued sales of Emgality for the prevention of migraine in adults.

Following a trial, in November 2022, a jury returned a verdict in favor of Teva. In September 2023, the court
granted our motion to overrule the jury verdict and found all asserted claims of the three patents invalid. Teva
has appealed the decision. This matter is ongoing.

In June 2021, we were named as a defendant in a second litigation filed by Teva in the U.S. District Court for
the District of Massachusetts seeking a ruling that two of Teva's patents, which are directed toward use of the
active ingredient in Emgality to treat migraine, would be infringed by our continued sales of Emgality. We
challenged these two patents by filing requests for Inter Partes Review with the Patent Trial and Appeal Board
(PTAB) and in October 2022, the PTAB granted our requests. In September 2023, the PTAB issued decisions
finding all claims of both patents invalid. Teva has agreed not to appeal the decisions and has dismissed the
corresponding district court litigation. This matter is closed.

Environmental Proceedings

Under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as
"Superfund," we have been designated as one of several potentially responsible parties with respect to the
cleanup of fewer than 10 sites. Under Superfund, each responsible party may be jointly and severally liable
for the entire amount of the cleanup.

100

Other Matters

Actos® Litigation

We are named along with Takeda Chemical Industries, Ltd. and Takeda affiliates (collectively, Takeda) in a
third party payor class action in the U.S. District Court for the Central District of California. Plaintiffs claim that
they and similarly situated class members are entitled to recover money paid for or to reimburse Actos
prescriptions because of alleged concealment of bladder cancer risk. Our agreement with Takeda calls for
Takeda to defend and indemnify us against our losses and expenses with respect to U.S. litigation arising out
of the manufacture, use, or sale of Actos and other related expenses in accordance with the terms of the
agreement. In August 2023, the Ninth Circuit granted our and Takeda's petition for permission to appeal the
class certification order, and briefing was submitted in January 2024. This matter is ongoing.

Mounjaro and Trulicity Product Liability Litigation

We, along with Novo Nordisk A/S (Novo) and other related Novo entities, are named in numerous lawsuits by
plaintiffs alleging injuries following purported use of incretin products. Certain complaints name us and allege
injuries that plaintiffs claim are associated with the use of Mounjaro and/or Trulicity. These lawsuits were filed
beginning in August 2023 and are pending in various federal courts. In February 2024, the Judicial Panel on
Multi-District Litigation established Multi-District Litigation for coordinated and consolidated pretrial
proceedings in the Eastern District of Pennsylvania. This matter is ongoing.

340B Litigation and Investigations

We are the plaintiff in a lawsuit filed in January 2021 in the U.S. District Court for the Southern District of
Indiana against the U.S. Department of Health and Human Services (HHS), the Secretary of HHS, the Health
Resources and Services Administration (HRSA), and the Administrator of HRSA. The lawsuit challenges
HHS's December 30, 2020 advisory opinion stating that drug manufacturers are required to deliver discounts
under the 340B program to all contract pharmacies and HHS's Administrative Dispute Resolution regulations.
We seek a declaratory judgment that the defendants violated the Administrative Procedure Act and the U.S.
Constitution, a preliminary injunction enjoining implementation of the administrative dispute resolution process
created by defendants and, with it, their application of the advisory opinion, and other related relief. In March
2021, the court entered an order preliminarily enjoining the government's enforcement of the administrative
dispute resolution process against us. In May 2021, HRSA sent us an enforcement letter notifying us that it
determined that our policy was contrary to the 340B statute. In response, in May 2021, we amended our
complaint to bring claims related to HRSA's determination. In June 2021, the defendants withdrew the HHS
December 30, 2020 advisory opinion. In July 2021, the court held oral argument on the parties' cross motions
for summary judgment and the defendants' motion to dismiss. In October 2021, the court denied the
defendants' motion to dismiss, and granted in part and denied in part the parties' cross motions for summary
judgment. Both parties filed notices of appeal related to the court's summary judgment order. In October 2022,
the U.S. Court of Appeals for the Seventh Circuit held oral argument. This matter is ongoing.

We, along with other pharmaceutical manufacturers, have been named as a defendant in petitions filed in
2021 and 2023 and currently pending before the HHS Administrative Dispute Resolution Panel. Petitioners
seek declaratory, injunctive, and/or monetary relief related to the 340B program. The U.S. District Court for
the Southern District of Indiana has entered a preliminary injunction enjoining the government's enforcement
of this administrative dispute resolution process against us.

In July 2021, we, along with Sanofi-Aventis U.S., LLC (Sanofi), Novo Nordisk Inc. (Novo Nordisk), and
AstraZeneca Pharmaceuticals LP (AstraZeneca), were named as a defendant in a purported class action
lawsuit filed in the U.S. District Court for the Western District of New York by Mosaic Health, Inc. alleging
antitrust and unjust enrichment claims related to the defendants' 340B distribution programs. We, with Sanofi,
Novo Nordisk, and AstraZeneca, filed a motion to dismiss the lawsuit, which was granted in September 2022.
In October 2022, the plaintiffs filed a motion for leave to amend their complaint. In January 2024, the court
denied the motion for leave to amend and dismissed the case.

We 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 this subpoena.

101

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.

Brazil Litigation – Cosmopolis Facility

Labor Attorney Litigation

First initiated in 2008, Eli Lilly do Brasil Limitada (Lilly Brasil) is named in a Public Civil Action brought by the
Labor Public Attorney (LPA) alleging harm to employees and former employees caused by alleged exposure
to soil and groundwater contaminants at a former manufacturing facility in Cosmopolis, operated by the
company between 1977 and 2003. In May 2014, the trial Court ruled against Lilly Brasil, ordering it to
undertake several remedial and compensatory actions, including health coverage for a class of individuals
and certain of their children. In July 2018, the appeals court generally affirmed the trial Court's ruling, which
included a liquidated award of 300 million Brazilian reais, which, when adjusted for inflation, is approximately
1.26 billion Brazilian reais (approximately $260 million as of December 31, 2023). In August 2019, Lilly Brasil
appealed to the superior labor court (TST) and in June 2021, the majority of the elements of Lilly Brasil's
appeal were admitted; elements not proceeding are subject to an interlocutory appeal to the TST that was
filed in June 2021. Mediation hearings are ongoing.

In July 2019, at the LPA's request, the trial Court ordered a freeze of Lilly Brasil’s immovable property in the
amount of 500 million Brazilian reais, which was reduced on Lilly Brasil's appeal and, when adjusted for
inflation, is approximately 131 million Brazilian reais (approximately $27 million as of December 31, 2023).
The parties appealed to the TST, which appeal is under review. The trial Court is currently assessing the
status of Lilly Brasil’s compliance with the obligations as to the land and an inspection in the industrial plant
occurred in October 2023. These matters are ongoing.

Individual Former Employee Litigation

Lilly Brasil is also named in various pending lawsuits filed in the trial Court by individual former employees
making related claims. These individual lawsuits are at various stages in the litigation process.

Puerto Rico Tax Matter

In May 2013, the Municipality of Carolina in Puerto Rico (Municipality) filed a lawsuit against us alleging
noncompliance with respect to a contract with the Municipality and seeking a declaratory judgment. In
December 2020, the Puerto Rico Appellate Court (AP) reversed the summary judgment previously granted by
the Court of First Instance (CFI) in our favor, dismissing the Municipality's complaint in its entirety. The AP
remanded the case to the CFI for trial on the merits. The trial began in May 2022; however, the Municipality
filed a new motion requesting the CFI to execute an alleged judgment. The request was denied by the CFI in
our favor and the Municipality filed for revision at the AP, which we opposed, staying the case. The AP denied
the Municipality's motion for revision. This matter is ongoing and trial has been scheduled for August 2024.

Average Manufacturer Price Litigation

In November 2014, we, along with another pharmaceutical manufacturer, were named as co-defendants in
United States et al. ex rel. Streck v. Takeda Pharm. Am., Inc., et al., which was filed in November 2014 and
unsealed in the U.S. District Court for the Northern District of Illinois. The complaint alleges that the
defendants should have treated certain credits from distributors as retroactive price increases and included
such increases in calculating average manufacturer prices. Following a trial in August 2022, the jury returned
a verdict in favor of the plaintiff. Lilly appealed to the Seventh Circuit and the appeal is pending. This matter is
ongoing.

Health Choice Alliance

We are named as a defendant in two lawsuits filed in Texas and New Jersey state courts in October 2019
seeking damages under the Texas Medicaid Fraud Prevention Act and New Jersey Medicaid False Claims
Act, respectively, for certain patient support programs related to our products Humalog, Humulin, and Forteo.
The Texas state court action has been stayed. The New Jersey state court action was dismissed with
prejudice pending an ongoing appeal before the Appellate Division of the New Jersey Superior Court. This
matter is ongoing.

102

Pricing Litigation

We, along with Sanofi, Novo Nordisk, and, in some matters, certain pharmacy benefit managers, have been
named in numerous lawsuits, including putative class actions, by states and state attorneys general, counties,
municipalities, third-party payers, consumers, and other parties related to insulin pricing and rebates paid by
manufacturers to pharmacy benefit managers. These lawsuits assert various theories, including consumer
protection and deceptive trade practice, fraud, false advertising, unjust enrichment, civil conspiracy, federal
and state RICO statutes, antitrust, and unfair competition claims. These lawsuits have been brought in various
state and federal courts since 2017 and are at various stages in the litigation process. Starting in August 2023
after a ruling by the Judicial Panel for Multi-District Litigation, several of these cases were transferred to or
filed in the District of New Jersey for coordinated or consolidated pre-trial proceedings. In May 2023, we
reached a settlement in the In re Insulin Pricing Litigation consumer class action. A motion for preliminary
approval of our settlement is pending. In January 2024, the Multi-District Litigation court denied the consumer
class plaintiffs’ motion for class certification and ordered the parties to submit briefs addressing the impact of
that denial on the motion for preliminary approval of the settlement. In February 2024, we entered into a non-
monetary settlement with the Minnesota Attorney General's Office that resolved all matters related to
Minnesota's insulin pricing lawsuit.

Investigations, Subpoenas, and Inquiries

We have been subject to various investigations and received subpoenas, civil investigative demand requests,
information requests, interrogatories, and other inquiries from various governmental entities related to pricing
issues, including the pricing and sale of insulins and other products and calculations of AMP and best price.
These include subpoenas from the Vermont Attorney General Office, civil investigative demands from the
Washington, New Mexico, Colorado, Louisiana, Texas and Ohio Attorney General Offices, the U.S.
Department of Justice, and the U.S. Federal Trade Commission, as well as information requests from the
Mississippi, Washington D.C., California, Florida, Hawaii, and Nevada Attorney General Offices.

In January 2022, the Michigan Attorney General filed a petition in Michigan state court seeking authorization
to investigate Lilly for potential violations of the Michigan Consumer Protection Act (MCPA), and a complaint
seeking a declaratory judgment that the Attorney General has authority to investigate Lilly's sale of insulin
under the MCPA. The court authorized the proposed investigation and the issuance of civil investigative
subpoenas. In April 2022, the parties entered into a stipulation providing that the State of Michigan will not
issue any civil investigative subpoena to us under the MCPA until the declaratory judgment action is resolved.
In July 2022, the court dismissed the case in its entirety. In June 2023, the Michigan Court of Appeals affirmed
the judgment in our favor. In August 2023, the Michigan Attorney General filed an application for leave to
appeal to the Michigan Supreme Court, which is being set for argument.

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

Research Corporation Technologies, Inc.

In April 2016, we were named as a defendant in litigation filed by Research Corporation Technologies, Inc.
(RCT) in the U.S. District Court for the District of Arizona. RCT is seeking damages for breach of contract,
unjust enrichment, and conversion related to processes used to manufacture certain products, including
Humalog and Humulin. In October 2021, the court issued a summary judgment decision in favor of RCT on
certain issues, including with respect to a disputed royalty. Trial is scheduled for August 2024. Potential
damages payable under the litigation, if finally awarded after an appeal, could be material but are not
currently reasonably estimable. This matter is ongoing.

103

Note 17: Other Comprehensive Income (Loss)

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

(Amounts presented net of taxes)
Beginning balance at January 1, 2021 . . . . . . $ (1,427.5) $

Net
Unrealized
Gains
(Losses)
on Available-
For-Sale
Securities

Foreign
Currency
Translation
Gains (Losses)

Net
Unrealized
Gains
(Losses) on
Cash Flow
Hedges

Accumulated
Other
Comprehensive
Loss

Retirement
Benefit
Plans

14.8 $ (4,751.0) $ (332.7) $

(6,496.4)

Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Net amount reclassified from accumulated
other comprehensive loss . . . . . . . . . . . . . . . .
Net other comprehensive income (loss) . . . .

Balance at December 31, 2021 . . . . . . . . . . . .
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Net amount reclassified from accumulated
other comprehensive loss . . . . . . . . . . . . . . . .
Net other comprehensive income (loss) . . . .

Balance at December 31, 2022 . . . . . . . . . . . .
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . . .
Net amount reclassified from accumulated
other comprehensive loss . . . . . . . . . . . . . . . .
Net other comprehensive income (loss) . . . .

(122.7)

(11.9) 1,823.4

106.6

1,795.4

—

0.8

344.0

(122.7)

(11.1) 2,167.4

13.1

119.7

357.9

2,153.3

(1,550.2)

3.7

(2,583.6)

(213.0)

(4,343.1)

(324.4)

(52.2)

291.5

332.8

247.7

0.4

11.4

(324.0)

(40.8)

229.8

521.3

9.2

342.0

250.8

498.5

(1,874.2)

(37.1) (2,062.3)

129.0

(3,844.6)

78.9

10.1

(686.9)

79.7

(518.2)

(23.7)

55.2

0.8

10.9

51.9

(635.0)

6.8

86.5

35.8

(482.4)

Ending balance at December 31, 2023 . . . . . . $ (1,819.0) $

(26.2) $ (2,697.3) $ 215.5 $

(4,327.0)

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)
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 . . . . . . . . . . . . . . .
Benefit (expense) for income taxes related to other
comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2023

2022

2021

81.0 $
(3.2)

141.5
(23.0)

(75.9) $
12.4
(95.6)
(90.9)

(136.2)
4.7
(532.0)
(31.8)

196.3 $

(250.0) $

(695.3)

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.

104

Reclassifications out of accumulated other comprehensive loss were as follows:

Year Ended December 31,

2023

2022

2021

Affected Line Item in the Consolidated
Statements of Operations

Amortization of retirement
benefit items:

Prior service benefits, net . . . . $
Actuarial losses . . . . . . . . . . . .
Total before tax . . . . . . . . . . .
Tax benefit . . . . . . . . . . . . . . . . .
Net of tax . . . . . . . . . . . . . . . .

(50.5) $
116.2
65.7
(13.8)
51.9

(52.4) $
343.3
290.9
(61.1)
229.8

(55.4) Other—net, (income) expense
490.9 Other—net, (income) expense
435.5
(91.5)
344.0

Income taxes

Other, net of tax . . . . . . . . . . . . . .
Total reclassifications for the
period, net of tax . . . . . . . . . . . . . . $

(16.1)

21.0

13.9 Other—net, (income) expense

35.8 $

250.8 $

357.9

Note 18: Other–Net, (Income) Expense

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

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment (gains) losses on equity securities (Note 7) . . . . . .
Debt extinguishment loss (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other–net, (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2023

2022

2021

485.9 $
(173.6)
20.2
—
(461.9)
32.7
(96.7) $

331.6 $
(62.8)
410.7
—
(372.9)
14.3

320.9 $

339.8
(25.4)
(176.9)
405.2
(289.7)
(51.4)
201.6

105

Management's Reports

Management's Report for Financial Statements—Eli Lilly and Company and Subsidiaries

Management of Eli Lilly and Company and subsidiaries is responsible for the accuracy, integrity, and fair
presentation of the financial statements. The statements have been prepared in accordance with generally
accepted accounting principles in the United States and include amounts based on judgments and estimates
by management. In management's opinion, the consolidated financial statements present fairly our financial
position, results of operations, and cash flows.

In addition to the system of internal accounting controls, we maintain a code of conduct (known as "The Red
Book") that applies to all employees worldwide, requiring proper overall business conduct, avoidance of
conflicts of interest, compliance with laws, and confidentiality of proprietary information. All employees must
take training annually on The Red Book and are required to report suspected violations. A hotline number is
available on our lilly.com website and on the internal LillyNow website to enable reporting of suspected
violations anonymously. Employees who report suspected violations are protected from discrimination or
retaliation by the company. In addition to The Red Book, the chief executive officer and all financial
management must sign a financial code of ethics, which further reinforces their ethical and fiduciary
responsibilities.

The consolidated financial statements have been audited by Ernst & Young LLP, an independent registered
public accounting firm (PCAOB ID: 42). Their responsibility is to examine our consolidated financial
statements in accordance with generally accepted auditing standards of the Public Company Accounting
Oversight Board (United States). Ernst & Young's opinion with respect to the fairness of the presentation of
the statements is included in Item 8 of our Annual Report on Form 10-K. Ernst & Young reports directly to the
audit committee of the board of directors.

Our audit committee includes four nonemployee members of the board of directors, all of whom are
independent from our company. The committee charter, which is available on our website, outlines the
members' roles and responsibilities. It is the audit committee's responsibility to appoint an independent
registered public accounting firm subject to shareholder ratification, pre-approve both audit and non-audit
services performed by the independent registered public accounting firm, and review the reports submitted by
the firm. The audit committee meets several times during the year with management, the internal auditors,
and the independent public accounting firm to discuss audit activities, internal controls, and financial reporting
matters, including reviews of our externally published financial results. The internal auditors and the
independent registered public accounting firm have full and free access to the committee.

We are dedicated to ensuring that we maintain the high standards of financial accounting and reporting that
we have established. We are committed to providing financial information that is transparent, timely, complete,
relevant, and accurate. Our culture demands integrity and an unyielding commitment to strong internal
practices and policies. Finally, we have the highest confidence in our financial reporting, our underlying
system of internal controls, and our people, who are objective in their responsibilities, operate under a code of
conduct and are subject to the highest level of ethical standards.

Management's Report on Internal Control Over Financial Reporting—Eli Lilly and Company and
Subsidiaries

Management of Eli Lilly and Company and subsidiaries is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Securities Exchange Act of 1934. We have global financial policies that govern critical areas, including internal
controls, financial accounting and reporting, fiduciary accountability, and safeguarding of corporate assets.
Our internal accounting control systems are designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's authorization and are properly
recorded, and that accounting records are adequate for preparation of financial statements and other financial
information. A staff of internal auditors regularly monitors, on a worldwide basis, the adequacy and
effectiveness of internal accounting controls. The general auditor reports directly to the audit committee of the
board of directors.

We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in "Internal Control—Integrated Framework" (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

106

Based on our evaluation under this framework, we concluded that our internal control over financial reporting
was effective as of December 31, 2023. However, because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of internal control over financial reporting as of December 31, 2023 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in their attestation report,
which appears herein. Their responsibility is to evaluate whether internal control over financial reporting was
designed and operating effectively.

David Ricks
Chair, President, and Chief Executive Officer

Anat Ashkenazi
Executive Vice President and Chief Financial Officer

February 21, 2024

107

Report of Independent Registered Public Accounting Firm

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

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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.
generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21,
2024, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.

108

Description of the
Matter

How We
Addressed the
Matter in Our
Audit

Medicaid, Managed Care, and Medicare sales rebate accruals
As described in Note 2 to the consolidated financial statements under the caption "Net
Product Revenue," the Company establishes provisions for sales rebate and discounts
in the same period as the related sales occur. At December 31, 2023, the Company had
$11,689.0 million in sales rebate and discount accruals. A large portion of these accruals
are rebates associated with sales in the United States for which payment for purchase
of the product is covered by Medicaid, Managed Care, and Medicare.

Auditing the Medicaid, Managed Care, and Medicare sales rebate and discount liabilities
is challenging because of the subjectivity of certain assumptions required to estimate
the rebate liabilities. In calculating the appropriate accrual amount, the Company
considers historical Medicaid, Managed Care, and Medicare rebate payments by
product as a percentage of their historical sales as well as any significant changes in
sales trends, the lag in payment timing, changes in rebate contracts, an evaluation of
the current Medicaid and Medicare laws and interpretations, the percentage of products
that are sold via Medicaid, Managed Care, and Medicare, and product pricing. Given
variability in prescription drug costs, continued historical year over year increases in
enrollees and variability in prescription data, historical rebate information may not be
predictive for management to estimate the rebate accrual and thus, management
supplements its historical data analysis with qualitative adjustments based upon current
expectations, particularly for select products which contribute the largest portion of the
Company's revenue.

We tested the Company's controls addressing the identified risks of material
misstatement related to the valuation of the sales rebate and discount liabilities. This
included testing controls over management's review of the significant assumptions used
to calculate the Medicaid, Managed Care, and Medicare rebate liabilities, including the
significant assumptions discussed above. This testing also included management's
control to compare actual activity to forecasted activity and controls to ensure the data
used to evaluate the significant assumptions was complete and accurate.

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

109

Description of the
Matter

Retirement Benefits - Valuation of Alternative Investments
As described in Note 15 to the consolidated financial statements under the caption
"Benefit Plan Investments," the Company's benefit plan investment policies are set with
specific consideration of return and risk requirements in relationship to the respective
liabilities. At December 31, 2023, the Company had $16,289.0 million in plan assets
related to the defined benefit pension plans and retiree health benefit plans.
Approximately 48 percent of the total pension and retiree health assets are in hedge
funds and private equity-like investment funds ("alternative investments"). These
alternative investments are valued primarily at net asset value (NAV) reported by the
counterparty, adjusted as necessary.

Auditing the fair value of these alternative investments is challenging because of the
higher estimation uncertainty of the inputs to the fair value calculations, particularly the
underlying determination of net asset values ("NAVs"). Additionally, certain information
regarding the fair value of these alternative investments is based on unaudited
information available to management at the time of valuation.

How We
Addressed the
Matter in Our
Audit

We tested the Company's controls addressing the risks of material misstatement relating
to valuation of alternative investments. This included testing management's controls
over alternative investment valuation, which included a comparison of returns to
benchmarks and monitoring investment firms' valuation policies and procedures, as well
as portfolio performance.

Our audit procedures included, among others, comparing fund returns to selected
relevant benchmarks and understanding variations, and obtaining the latest audited
financial statements and comparing to the Company's estimated fair values. We also
inquired of management about changes to the investment portfolio and/or related
investment strategies and considerations. We assessed the historical accuracy of
management's estimates by comparing actual activity to previous estimates. We
evaluated for contrary evidence by confirming the fair value of the investments and
ownership interest directly with the custodian and a sample of fund managers at year
end.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 1940.

Indianapolis, Indiana

February 21, 2024

110

Report of Independent Registered Public Accounting Firm

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

Opinion on Internal Control Over Financial Reporting

We have audited Eli Lilly and Company and subsidiaries' internal control over financial reporting as of
December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
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, 2023, 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, 2023 and
2022, 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, 2023, and the related notes and
our report dated February 21, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company's internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.

111

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Indianapolis, Indiana

February 21, 2024

112

Item 9. Changes in and Disagreements with

Accountants on Accounting and Financial
Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under applicable Securities and Exchange Commission (SEC) regulations, management of a reporting
company, with the participation of the principal executive officer and principal financial officer, must
periodically evaluate the company's "disclosure controls and procedures," which are defined generally as
controls and other procedures designed to ensure that information required to be disclosed by the reporting
company in its periodic reports filed with the SEC (such as this Form 10-K) is recorded, processed,
summarized, and reported on a timely basis.

Our management, with the participation of David Ricks, president and chief executive officer, and Anat
Ashkenazi, executive vice president and chief financial officer, evaluated our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934) as of December 31, 2023, and concluded that they were effective.

Management's Report on Internal Control over Financial Reporting

Mr. Ricks and Ms. Ashkenazi provided a report on behalf of management on our internal control over financial
reporting, in which management concluded that the company's internal control over financial reporting is
effective at December 31, 2023 based on the framework in "Internal Control—Integrated Framework" (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles in the United States. Due to the inherent limitations, no evaluation over internal control
can provide absolute assurance that no material misstatements or fraud exist.

In addition, Ernst & Young LLP, the company's independent registered public accounting firm, issued an
attestation report on the company's internal control over financial reporting as of December 31, 2023.

You can find the full text of management's report and Ernst & Young's attestation report in Item 8.

Changes in Internal Control over Financial Reporting

During the fourth quarter of 2023, there were no changes in our internal control over financial reporting that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We
rely extensively on information systems and technology to manage our business, including integrated supply
chain operations, and global consolidated financial results. In February 2024, we completed the
implementation of a new global enterprise resource planning (ERP) system, which replaced our operating and
financial systems. We recently began our post-implementation activities. The ERP system is designed to
accurately maintain our financial records, support integrated supply chain and other operational functionality,
and provide timely information to our management team related to the operation of the business. During the
implementation and post-implementation activities, we have made, and will have to make, changes to certain
of our processes and procedures, and we will evaluate quarterly whether the changes materially affect our
internal control over financial reporting.

113

Item 9B. Other Information

On November 16, 2023, Donald Zakrowski, senior vice president, finance, and chief accounting officer,
adopted a sales plan (Plan). The Plan was entered into during an open trading window and is intended to
satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act of 1934 and our policies
regarding trading in our securities. The Plan calls for the sale of up to 3,150 shares of company common
stock between March 11, 2024 and November 14, 2024 subject to the terms and conditions of the Plan.

Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections

Not applicable.

114

Part III
Item 10. Directors, Executive Officers, and Corporate

Governance

Directors and Executive Officers

Information relating to our board of directors is found in our Definitive Proxy Statement, to be dated on or
about March 22, 2024 (Proxy Statement), under "Governance - How We Build an Effective Board" and is
incorporated in this Annual Report on Form 10-K by reference.

Information relating to our executive officers is found at Item 1, "Business - Executive Officers of the
Company" and is incorporated by reference herein.

Code of Ethics

Information relating to our code of ethics is found in our Proxy Statement under "Governance - How We
Operate an Effective Board - Governance Practices - Board Oversight - Key Areas of Oversight by the Board
and Its Committees - Governance - Code of Ethics" and is incorporated in this Annual Report on Form 10-K
by reference.

Corporate Governance

Information about the procedures by which shareholders can recommend nominees to our board of directors
is found in our Proxy Statement under "Governance - How We Build an Effective Board - Director
Nominations - Shareholder Director Candidates" and is incorporated in this Annual Report on Form 10-K by
reference.

The board of directors has appointed an audit committee consisting entirely of independent directors in
accordance with applicable Securities and Exchange Commission and New York Stock Exchange
requirements for audit committees. Information about our audit committee is found in our Proxy Statement
under "Governance - How We Operate an Effective Board - Board Structure - Meetings of the Board and Its
Committees - Committees of the Board - Audit Committee" and is incorporated in this Annual Report on Form
10-K by reference.

Section 16(a) Reporting Compliance

Information about our compliance with Section 16(a) is found in our Proxy Statement under "Ownership of
Company Stock - Delinquent Section 16(a) Reports" and is incorporated in this Annual Report on Form 10-K
by reference.

Item 11. Executive Compensation

Information on director compensation, executive compensation, and talent and compensation committee
matters can be found in the Proxy Statement under "Governance - How We Operate an Effective Board -
Board Alignment - Director Compensation," "- How We Operate an Effective Board - Board Structure -
Meetings of the Board and Its Committees - Committees of the Board - Talent and Compensation Committee,"
"Compensation - Compensation Discussion and Analysis," "- Talent and Compensation Committee Matters,"
and "- Executive Compensation." Such information is incorporated in this Annual Report on Form 10-K by
reference.

115

Item 12. Security Ownership of Certain Beneficial

Owners and Management and Related
Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

Information relating to ownership of the company's common stock by management and by persons known by
the company to be the beneficial owners of more than five percent of the outstanding shares of common stock
is found in the Proxy Statement under "Ownership of Company Stock" and incorporated in this Annual Report
on Form 10-K by reference.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents information as of December 31, 2023 regarding the company's compensation
plans under which shares of the company's common stock have been authorized for issuance.

Plan category
Equity compensation plans approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plan not approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a) Number of
securities to be
issued upon
exercise of
outstanding
options, warrants,
and rights (1)

(b) Weighted-
average exercise
price of
outstanding
options, warrants,
and rights

(c) Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

— $

—
—

—

—
—

49,082,012

—
49,082,012

(1) 3,599,883 shares are underlying outstanding equity awards other than options.

Item 13. Certain Relationships and Related Transactions,

and Director Independence

Related Person Transactions

Information relating to the policies and procedures for approval of related person transactions by our board of
directors can be found in the Proxy Statement under "Governance - How We Operate an Effective Board -
Board Alignment - Conflicts of Interest and Transactions with Related Persons." Such information is
incorporated in this Annual Report on Form 10-K by reference.

Director Independence

Information relating to director independence can be found in the Proxy Statement under "Governance - How
We Build an Effective Board - Director Qualifications - Independence" and is incorporated in this Annual
Report on Form 10-K by reference.

Item 14. Principal Accountant Fees and Services

Information related to the fees and services of our principal independent accountants, Ernst & Young LLP, can
be found in the Proxy Statement under "Audit Matters - Item 3. Ratification of the Appointment of the
Independent Auditor - Services Performed by the Independent Auditor" and "- Independent Auditor Fees."
Such information is incorporated in this Annual Report on Form 10-K by reference.

116

Item 15. Exhibits and Financial Statement Schedules

(a)1. Financial Statements

The following consolidated financial statements of the company and its subsidiaries are found at Item 8:

•

Consolidated Statements of Operations—Years Ended December 31, 2023, 2022, and 2021

Consolidated Statements of Comprehensive Income (Loss)—Years Ended December 31, 2023, 2022,
and 2021

Consolidated Balance Sheets—December 31, 2023 and 2022

Consolidated Statements of Shareholders' Equity—Years Ended December 31, 2023, 2022, and 2021

Consolidated Statements of Cash Flows—Years Ended December 31, 2023, 2022, and 2021

Notes to Consolidated Financial Statements

(a)2. Financial Statement Schedules

The consolidated financial statement schedules of the company and its subsidiaries have been omitted
because they are not required, are inapplicable, or are adequately explained in the financial statements.

Financial statements of interests of 50 percent or less, which are accounted for by the equity method, have
been omitted because they do not, considered in the aggregate as a single subsidiary, constitute a significant
subsidiary.

(a)3. Exhibits

The following documents are filed as part of this Annual Report on Form 10-K:

Exhibit

Description

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

Amended Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on May 4, 2022

Bylaws, as amended, incorporated by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K filed on May 4, 2022

Indenture, dated February 1, 1991, between the Company and Deutsche Bank Trust
Company Americas, as successor trustee to Citibank, N.A., as Trustee, incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3,
Registration No. 333-186979

Tripartite Agreement, dated September 13, 2007, appointing Deutsche Bank Trust
Company Americas as Successor Trustee under the Indenture listed in Exhibit 4.1,
incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2008

Description of the Company's Common Stock*

Description of the Company's 1.625% Notes due 2026 and 2.125% Notes due 2030,
incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2019

Description of the Company's 6.77% Notes due 2036, incorporated by reference to
Exhibit 4.5 to the Company's Annual Report on Form 10-K for the year ended December
31, 2019

Description of the Company's 7 1/8% Notes due 2025, incorporated by reference to
Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended December
31, 2019

Description of the Company's 0.625% Notes due 2031 and 1.700% Notes due 2049,
incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2019

117

4.8

4.9

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

Description of the Company's 0.500% Notes due 2033, 1.125% Notes due 2051, and
1.375% Notes due 2061, incorporated by reference to Exhibit 4.8 to the Company's
Annual Report on Form 10-K for the year ended December 31, 2021

Description of the Company's 1.625% Notes due 2043, incorporated by reference to
Exhibit 4.9 to the Company's Annual Report on Form 10-K for the year ended December
31, 2021

Amended and Restated 2002 Lilly Stock Plan(1), incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018

Form of Performance Award under the 2002 Lilly Stock Plan(1) incorporated by reference
to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2022

Form of Shareholder Value Award under the 2002 Lilly Stock Plan(1)*

Form of Relative Value Award under the 2002 Lilly Stock Plan(1)*

Form of Restricted Stock Unit Award under the 2002 Lilly Stock Plan(1)*

Form of Non-Compete Payment Agreement(1), incorporated by reference to Exhibit 10.5
to the Company's Annual Report on Form 10-K for the year ended December 31, 2022

The Lilly Deferred Compensation Plan, as amended(1), incorporated by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December
31, 2013

The Lilly Directors' Deferral Plan, as amended(1), incorporated by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017

The Eli Lilly and Company Bonus Plan, as amended(1), incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2020

10.10

2007 Change in Control Severance Pay Plan for Select Employees, as amended(1)*

31.1

31.2

101

104

List of Subsidiaries*

Consent of Independent Registered Public Accounting Firm*

Rule 13a-14(a) Certification of David Ricks, Chair, President, and Chief Executive Officer*

Rule 13a-14(a) Certification of Anat Ashkenazi, Executive Vice President and Chief
Financial Officer*

Section 1350 Certification*

Executive Compensation Recovery Policy*

Interactive Data File*

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)*

(1) Indicates management contract or compensatory plan.
* Filed herewith.

Long-term debt instruments under which the total amount of securities authorized does not exceed 10 percent of our consolidated
assets are not filed as exhibits to this Annual Report. We will furnish a copy of these agreements to the Securities and Exchange
Commission upon request.

Item 16. Form 10-K Summary

Not applicable.

118

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Eli Lilly and Company

By /s/ David Ricks
David Ricks
Chair, President, and Chief Executive Officer

February 21, 2024

119

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
February 21, 2024 by the following persons on behalf of the Registrant and in the capacities indicated.

Signature

/s/ David Ricks
DAVID RICKS

/s/ Anat Ashkenazi
ANAT ASHKENAZI

/s/ Donald Zakrowski
DONALD ZAKROWSKI

/s/ Ralph Alvarez
RALPH ALVAREZ

/s/ Katherine Baicker, Ph.D.
KATHERINE BAICKER, Ph.D.

/s/ Erik Fyrwald
ERIK FYRWALD

/s/ Mary Lynne Hedley, Ph.D.
MARY LYNNE HEDLEY, Ph. D.

/s/ Jamere Jackson
JAMERE JACKSON

/s/ Kimberly Johnson
KIMBERLY JOHNSON

/s/ William Kaelin, Jr., M.D.
WILLIAM KAELIN, JR., M.D.

/s/ Juan Luciano
JUAN LUCIANO

/s/ Marschall Runge, M.D., Ph.D.
MARSCHALL RUNGE, M.D., Ph.D.

/s/ Gabrielle Sulzberger
GABRIELLE SULZBERGER

/s/ Karen Walker
KAREN WALKER

Title

Chair, President, and Chief Executive Officer
(principal executive officer)

Executive Vice President and Chief Financial
Officer (principal financial officer)

Senior Vice President, Finance, and Chief
Accounting Officer (principal accounting officer)

Director

120

Trademarks Used In this Annual Report on Form 10-K

Trademarks or service marks owned by Eli Lilly and Company or its affiliates, when first used in each item of
this Annual Report on Form 10-K, appear with an initial capital and are followed by the symbol ® or ™, as
applicable. In subsequent uses of the marks in the item, the symbols may be omitted.

Actos® is a registered trademark of Takeda Pharmaceutical Company Limited.

Baqsimi® is a registered trademark of Amphastar Pharmaceuticals, Inc.

Glyxambi®, Jardiance®, Jentadueto®, Synjardy®, Trajenta®, and Trijardy® are trademarks of Boehringer
Ingelheim International GmbH.

Tyvyt® is a registered trademark of Innovent Biologics (Suzhou) Co., Ltd.

Qbrexza® is a registered trademark of Journey Medical Corporation.

Zyprexa® is a registered trademark of Cheplapharm Arzneimittel GmbH.

121

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