Item 1. Financial Statements

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Item 1. Financial Statements

Consolidated Condensed Statements of Operations

(Unaudited)

ELI LILLY AND COMPANY

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

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Revenue$22,974$15,558$42,773$28,286
Costs, expenses, and other:
Cost of sales3,2682,4486,8454,672
Research and development3,8193,3367,3296,070
Marketing, selling, and administrative3,4302,7536,3645,221
Acquired in-process research and development2,7761543,3601,726
Asset impairment, restructuring, and other special charges703—98235
Other–net, (income) expense(269)90(204)329
13,7278,78124,67618,053
Income before income taxes9,2476,77718,09710,233
Income taxes2,1521,1163,6061,813
Net income$7,095$5,661$14,491$8,420
Earnings per share:
Basic$7.95$6.30$16.22$9.37
Diluted$7.94$6.29$16.19$9.35
Shares used in calculation of earnings per share:
Basic892.4897.9893.5898.3
Diluted893.7899.8894.8900.2

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)

ELI LILLY AND COMPANY

(Dollars in millions)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Net income$7,095$5,661$14,491$8,420
Other comprehensive income, net of tax7259119606
Comprehensive income$7,167$5,720$14,610$9,026

See notes to consolidated condensed financial statements.

Consolidated Condensed Balance Sheets

ELI LILLY AND COMPANY

(Dollars in millions)

June 30, 2026December 31, 2025
Assets(Unaudited)
Current Assets
Cash and cash equivalents$8,950$7,268
Accounts receivable20,08317,760
Other receivables3,3922,395
Inventories16,79313,744
Prepaid expenses15,36814,315
Other current assets86147
Total current assets64,67255,629
Noncurrent Assets
Investments3,8562,802
Goodwill8,8495,898
Other intangibles, net18,1106,521
Deferred tax assets10,0289,959
Property and equipment, net of accumulated depreciation of $13,103 (2026) and $12,560 (2025)29,28624,675
Other noncurrent assets7,4826,992
Total assets$142,283$112,476
Liabilities and Equity
Current Liabilities
Short-term borrowings and current maturities of long-term debt$7,050$1,635
Accounts payable6,1125,379
Employee compensation1,7982,375
Sales rebates and discounts21,12217,382
Other current liabilities11,6598,457
Total current liabilities47,74135,228
Noncurrent Liabilities
Long-term debt47,85840,868
Long-term income taxes payable5,4615,875
Other noncurrent liabilities7,3443,970
Total noncurrent liabilities60,66350,713
Commitments and Contingencies
Equity
Common stock588590
Additional paid-in capital7,1177,346
Retained earnings31,89324,470
Employee benefit trust(3,013)(3,013)
Accumulated other comprehensive loss(2,761)(2,880)
Other equity5522
Total equity33,87926,535
Total liabilities and equity$142,283$112,476

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

ELI LILLY AND COMPANY

(Dollars in millions)

Six Months Ended June 30,
20262025
Cash Flows from Operating Activities
Net income$14,491$8,420
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:
Depreciation and amortization1,043941
Change in deferred income taxes(433)(1,460)
Stock-based compensation expense362339
Acquired in-process research and development3,3601,726
Other changes in operating assets and liabilities, net of acquisitions and divestitures(2,334)(5,627)
Other operating activities, net(466)414
Net Cash Provided by Operating Activities16,0234,753
Cash Flows from Investing Activities
Purchases of property and equipment(5,259)(3,207)
Purchases of noncurrent investments(604)(368)
Purchases of in-process research and development(3,486)(1,864)
Cash paid for acquisitions, net of cash acquired(9,805)—
Other investing activities, net(158)252
Net Cash Used for Investing Activities(19,312)(5,187)
Cash Flows from Financing Activities
Dividends paid(3,094)(2,693)
Net change in short-term borrowings5,284(246)
Proceeds from issuance of long-term debt8,9416,461
Repayments of long-term debt(1,623)(778)
Purchases of common stock(3,957)(1,892)
Other financing activities, net(595)(717)
Net Cash Provided by Financing Activities4,956135
Effect of exchange rate changes on cash and cash equivalents15407
Net increase in cash and cash equivalents1,682108
Cash and cash equivalents at January 17,2683,268
Cash and Cash Equivalents at June 30$8,950$3,376

See notes to consolidated condensed financial statements.

Notes to Consolidated Condensed Financial Statements

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

Note 1: Basis of Presentation and Implementation of New Financial Accounting Standards

We have prepared the accompanying unaudited consolidated condensed financial statements in accordance with the requirements of Form 10-Q and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the consolidated condensed financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. We issued our financial statements by filing them with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing of this Quarterly Report on Form 10-Q.

All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis; that is, based on the weighted-average number of common shares outstanding plus the effect of incremental shares from our stock-based compensation programs, if dilutive.

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. Our commercial organizations market, distribute, and sell the products. The business is also supported by global corporate staff functions. See Note 11 for additional information.

Implementation of New Financial Accounting Standards

Accounting Standards Update 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requires disaggregation of specific expense categories in the notes to the financial statements and a qualitative description of the remaining expense amounts not separately disaggregated. This standard is effective for annual reporting periods beginning after December 15, 2026, and requires prospective application with the option to apply it retrospectively. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2027. We are currently evaluating the potential impact of adopting this standard on our disclosures.

Note 2: Revenue

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

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Net product revenue$21,403$14,726$39,856$26,327
Collaboration and other revenue1,5718322,9171,959
Revenue$22,974$15,558$42,773$28,286

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 3 for additional information related to our collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue resulting from our collaboration with Boehringer Ingelheim, as well as the sale of product rights. Substantially all of the remainder of collaboration and other revenue is related to contracts accounted for as contracts with customers.

Adjustments to Revenue

Adjustments to revenue recognized as a result of changes in estimates for our most significant United States (U.S.) sales returns, rebates, and discounts liability balances for products shipped in previous periods were 3 percent and 2 percent of U.S. revenue during the three and six months ended June 30, 2026, respectively, and 1 percent and less than 1 percent of U.S. revenue during the three and six months ended June 30, 2025, respectively.

Disaggregation of Revenue

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

Three Months Ended June 30,
20262025
U.S.Outside U.S.TotalU.S.Outside U.S.Total
Cardiometabolic Health:
Mounjaro$4,791$5,152$9,943$3,302$1,897$5,199
Zepbound*(1)*4,873554,9283,38023,381
Jardiance(2)6166151,232382308690
Trulicity9083121,2197443481,092
Other cardiometabolic health5544771,031556425980
Total cardiometabolic health11,7426,61118,3538,3632,98011,343
Oncology:
Verzenio8456291,4749295601,489
Other oncology6284681,096490434924
Total oncology1,4731,0972,5701,4199942,414
Immunology:
Taltz539317856549299848
Other immunology251310561152256408
Total immunology7906271,4177015551,256
Neuroscience32510442924896344
Other8412220583119202
Revenue$14,413$8,561$22,974$10,814$4,743$15,558

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

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

The following table summarizes revenue, including net product revenue and collaboration and other revenue, by product for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,
20262025
U.S.Outside U.S.TotalU.S.Outside U.S.Total
Cardiometabolic Health:
Mounjaro$9,024$9,582$18,605$5,958$3,083$9,041
Zepbound*(1)*9,006819,0885,68585,693
Jardiance(2)1,1281,2182,3466921,0121,704
Trulicity1,5086302,1381,5146732,187
Other cardiometabolic health1,0009361,9361,0918351,925
Total cardiometabolic health21,66612,44734,11314,9405,61120,551
Oncology:
Verzenio1,5511,2242,7761,5871,0622,648
Other oncology1,1499142,0628798351,713
Total oncology2,7002,1384,8382,4651,8964,361
Immunology:
Taltz9566321,5881,0255841,610
Other immunology4535791,032254480734
Total immunology1,4091,2112,6201,2791,0652,344
Neuroscience617194811437179616
Other140252392182232414
Revenue$26,532$16,241$42,773$19,304$8,983$28,286

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

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

The following table summarizes revenue by geographical area:

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Revenue(1):
U.S.$14,413$10,814$26,532$19,304
Europe4,1152,5747,7604,963
China9414661,635917
Japan6285211,199923
Rest of world2,8771,1825,6482,180
Revenue$22,974$15,558$42,773$28,286

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

Note 3: Collaborations and Other Arrangements

We often enter into collaborative and other arrangements to develop and commercialize drug candidates or to sell the rights of a product. See Note 2 for a discussion of our recognition of revenue from our collaborations and other arrangements.

Collaborative activities may include research and development, marketing and selling, manufacturing, and distribution for which we may receive from or pay to the collaboration partner expense reimbursements. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Each arrangement is unique in nature, and our more significant arrangements are discussed below.

Boehringer Ingelheim Collaboration

We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of compounds. Boehringer Ingelheim's Jardiance product family, which includes Glyxambi, Synjardy, and Trijardy XR, is the significant product family included in the collaboration.

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

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Jardiance$1,232$690$2,346$1,704

During the three and six months ended June 30, 2026, we recognized $250 million and $500 million of sales-based milestones for Jardiance, respectively. During the six months ended June 30, 2025, we recognized a one-time benefit of $370 million for Jardiance. As of June 30, 2026, we have the right to receive up to $410 million in potential sales-based milestones related to the Jardiance product family in certain markets in 2026.

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 June 30, 2026, Roche is eligible to receive additional payments from us, including up to $975 million in potential sales-based milestones.

We have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop and commercialize Ebglyss, for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis, in Europe. We receive tiered royalty payments on net sales in Europe ranging in percentages from low double digits to low twenties, which we recognize as collaboration and other revenue. As of June 30, 2026, we are eligible to receive additional payments up to $1.2 billion in a series of sales-based milestones.

Foundayo

We have a license agreement with Chugai Pharmaceutical Co., Ltd (Chugai), which provides us the worldwide development and commercialization rights to orforglipron, which is branded and trademarked as Foundayo. In addition to milestone payment rights which are not material, Chugai receives tiered royalty payments on worldwide net sales ranging in percentages from mid single digits to low teens, which we recognize as cost of sales.

Note 4: 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 if the products are approved for commercialization and/or milestones based on the successful progress of compounds through the development process. We account for each arrangement as either a business combination or an asset acquisition in accordance with GAAP.

Business Combinations

When an acquisition met the definition of a business under GAAP, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed 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 was recorded as goodwill. The results of operations of the acquisition are included in our consolidated condensed financial statements from the date of acquisition.

For the six months ended June 30, 2026 and 2025, our significant acquisitions that were accounted for as business combinations were Kelonia Therapeutics, Inc. (Kelonia), Centessa Pharmaceuticals plc (Centessa), and Ventyx Biosciences, Inc. (Ventyx) and are summarized in the following table:

KeloniaCentessaVentyx
Acquisition dateJune 25, 2026June 24, 2026March 4, 2026
Business descriptionIn vivo chimeric antigen receptor T-cell (CAR-T) therapiesOrexin receptor 2 agonists for sleep-wake disordersOral therapies for inflammatory-mediated diseases
Estimated fair value as of acquisition date:
Cash$46$233$120
Acquired in-process research and development (IPR&D)4,6956,058977
Goodwill(1)1,0521,655232
Deferred tax liabilities, net(822)(1,279)(150)
Other assets and liabilities, net(74)(74)(1)
Acquisition date fair value of consideration4,8976,5931,178
Less:
Cash acquired(46)(233)(120)
Fair value of contingent consideration(1,765)(402)N/A
Cash consideration paid or to be paid, net of cash acquired(2)$3,086$5,958$1,058
Contingent consideration(3)$3,750$1,542N/A
Primary acquired IPR&D intangibleKLN-1010ORX750VTX3232

(1) The goodwill recognized from these acquisitions is primarily attributable to future unidentified projects and products, the assembled workforce for the companies, and the recognition of deferred tax liabilities, which is not deductible for tax purposes.

(2) As of June 30, 2026, cash consideration unpaid for Kelonia and Centessa was $208 million and $88 million, respectively.

(3) These amounts represent the maximum amount of potential payments and are subject to the achievement of certain specified milestones. See Note 8 for additional information related to contingent consideration amounts.

N/A - Not applicable

We are in the process of determining fair values and tax bases of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets and tax exposures, as our access to information was limited prior to each acquisition. The final determination of these amounts will be completed as soon as practicable but no later than one year from each 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.

Asset Acquisitions

Upon each asset acquisition, the cost allocated to acquired IPR&D was immediately expensed as acquired IPR&D if the compound had no alternative future use. Milestone payment obligations incurred prior to regulatory approval of the compound were expensed as acquired IPR&D when the event triggering an obligation to pay the milestone occurred. We recognized acquired IPR&D charges of $2.8 billion and $3.4 billion for the three and six months ended June 30, 2026, respectively, and $154 million and $1.7 billion for the three and six months ended June 30, 2025, respectively.

The following table summarizes our significant acquired IPR&D charges during 2026 and 2025:

CounterpartyCompound, Therapy, or AssetAcquisition MonthPhase of Development**(1)**Acquired IPR&D Charge
Ajax Therapeutics, Inc. (Ajax)AJ1-11095, oral, Type II JAK2 inhibitor for the treatment of myelofibrosis and polycythemia veraJune 2026Phase 1$909
Orna Therapeutics, Inc. (Orna)ORN-252, CD19 targeting in vivo CAR-T therapy designed to treat B cell-driven autoimmune diseasesMay 2026Phase 11,233
Scorpion Therapeutics, Inc. (Scorpion)STX-478, PI3Kα inhibitor for the treatment of breast cancer and other advanced solid tumorsMarch 2025Phase 11,412

(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.

Subsequent Events

In July 2026, we acquired three companies to build an infectious disease portfolio for up to $3.9 billion in aggregate, inclusive of upfront payments and additional potential payments based upon the achievement of certain clinical, regulatory, and commercial milestones. Our access to information was limited prior to the acquisitions. As a consequence, we are in the process of determining the fair values of the assets acquired and liabilities assumed and the associated accounting treatments.

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

Asset impairment, restructuring, and other special charges recognized during the three and six months ended June 30, 2026 were $703 million and $982 million, respectively, primarily related to the accelerated vesting of employee equity awards and other acquisition and integration costs associated with the closing of our acquisitions of business combinations. See Note 4 for additional information. In addition, asset impairment, restructuring, and other special charges recognized during the six months ended June 30, 2026 included charges related to litigation matters. See Note 9 for additional information related to litigation matters.

Note 6: Income Taxes

The effective tax rates were 23.3 percent and 16.5 percent for the three months ended June 30, 2026 and 2025, respectively. The higher tax rate for the three months ended June 30, 2026 was primarily driven by the unfavorable tax impact of nondeductible acquired IPR&D charges and, to a lesser extent, a mix of earnings in higher tax jurisdictions and the unfavorable tax impact of asset impairment, restructuring, and other special charges.

The effective tax rates were 19.9 percent and 17.7 percent for the six months ended June 30, 2026 and 2025, respectively. The higher tax rate for the six months ended June 30, 2026 was primarily driven by a mix of earnings in higher tax jurisdictions and the unfavorable tax impact of asset impairment, restructuring, and other special charges. The effective tax rates in both periods were unfavorably impacted by nondeductible acquired IPR&D charges.

At June 30, 2026 and December 31, 2025, prepaid expenses included prepaid taxes of $13.6 billion and $12.9 billion, respectively.

The U.S. examination of tax years 2019-2021 remains ongoing. For tax years 2016-2018, we are pursuing competent authority assistance through the Mutual Agreement Procedure (MAP) process for the pricing of certain intercompany transactions. The resolution of both audit periods will likely extend beyond the next 12 months.

Note 7: Inventories

The following table summarizes components of inventories:

June 30, 2026December 31, 2025
Finished products$2,630$1,931
Work in process9,9978,183
Raw materials and supplies4,1283,587
Total (approximates replacement cost)16,75513,701
Increase to last-in, first-out cost3843
Inventories$16,793$13,744

Note 8: Financial Instruments

Investments in Equity and Debt Securities

The following table summarizes certain fair value information at June 30, 2026 and December 31, 2025 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
Carrying AmountCostQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Fair Value
June 30, 2026
Cash equivalents(1)$4,410$4,410$4,410$—$—$4,410
Short-term investments:
Available-for-sale debt securities(2)$14$14$5$9$—$14
Other securities4646—123446
Short-term investments$60
Noncurrent investments:
Available-for-sale debt securities(2)$367$379$67$300$—$367
Other securities8352—28183
Marketable equity securities796527796——796
Equity investments without readily determinable fair values(3)1,073
Equity method investments(3)1,537
Noncurrent investments$3,856
December 31, 2025
Cash equivalents(1)$4,392$4,392$4,392$—$—$4,392
Short-term investments:
Available-for-sale debt securities(2)$16$16$9$7$—$16
Other securities8989—127889
Short-term investments$105
Noncurrent investments:
Available-for-sale debt securities(2)$360$368$69$291$—$360
Other securities8554—28385
Marketable equity securities223292223——223
Equity investments without readily determinable fair values(3)846
Equity method investments(3)1,288
Noncurrent investments$2,802

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

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

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

Debt

Below are the details of our issuance of long-term debt in 2026. The cash proceeds were used for general corporate purposes, including the repayment of outstanding commercial paper and the funding of a portion of the upfront cash consideration and related fees and expenses payable in connection with our acquisitions of Centessa and Kelonia.

Date of IssuanceAmountMaturityStated Interest Rate
May 2026$9,0002028-20664.150%-5.700%(1)

(1) Included in the 2028 and 2029 tranches are an aggregate $1.3 billion of floating-rate notes, with interest reset and paid quarterly using Secured Overnight Financing Rate (SOFR) plus 0.350 and 0.460 percent, respectively.

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

June 30, 2026December 31, 2025
Carrying AmountFair ValueCarrying AmountFair Value
Short-term commercial paper borrowings$5,284$5,280$—$—
Long-term debt, including current portion49,62446,55542,50339,799

Contingent Consideration

Contingent consideration is additional consideration payable as a result of an acquisition accounted for as a business combination that is contingent on the achievement of certain development, success-based regulatory, or sales-based milestones. Contingent consideration liabilities are carried at fair value, estimated using a discounted cash flow analysis and Level 3 inputs. These inputs include projections of expected cash payments associated with the agreed upon milestones based primarily on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates. The following table summarizes the fair value for our contingent consideration liabilities:

June 30, 2026December 31, 2025
Other current liabilities$814$34
Other noncurrent liabilities1,704217

During 2026, the increase in contingent consideration liabilities primarily related to our acquisition of Kelonia. See Note 4 for additional information.

Hedging

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. We manage foreign currency risk primarily through the use of foreign currency debt and foreign currency forward contracts. Our foreign currency-denominated notes designated as accounting hedges had carrying amounts of $3.6 billion and $6.0 billion as of June 30, 2026 and December 31, 2025, respectively. The following table summarizes the aggregate outstanding notional amounts of our foreign currency forward contracts in U.S. dollar equivalent:

June 30, 2026December 31, 2025
PurchaseSellPurchaseSell
Designated as accounting hedges$246$—$67$—
Not designated as accounting hedges17,86910,12314,2819,264

The following table summarizes the effects of significant hedging activity on our consolidated condensed financial statements:

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Recognized in other–net, (income) expense:
Foreign currency forward contracts not designated as accounting hedges$(53)$(651)$(150)$(639)
Recognized in other comprehensive income (loss):
Foreign currency-denominated notes:
Designated as accounting hedges17(485)132(688)
Foreign currency forward contracts:
Designated as accounting hedges—(965)(30)(1,293)

Note 9: Contingencies

We are and may become involved in various lawsuits, claims, government investigations and other legal proceedings that arise from time to time in the course of our business, including patent, environmental, commercial, contractual, licensing, employment, health and safety, consumer protection, pricing, access, consumer, sales and marketing, product liability, insurance, antitrust, securities, and regulatory compliance matters, among others. Such matters may involve inquiries from or disputes with various types of parties, including governments, regulatory agencies, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. We cannot predict the final outcome of these proceedings, and while we intend to vigorously prosecute or defend our position as appropriate, there can be no assurance that we will be successful or obtain any requested relief. Matters often develop over a long period of time and expectations can change as a result of new findings, rulings, appeals, settlements, legal or regulatory changes, or other factors. From time to time we may discontinue or settle and compromise matters as appropriate in our best interest.

Legal proceedings that we believe are significant or could become significant or material are described below. For proceedings in which we are named as defendants, unless otherwise noted, we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued; however, we believe that the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.

Litigation accruals and environmental liabilities and any related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated balance sheets. We accrue for estimated exposures to the extent they are both probable and reasonably estimable based on the then available information. We accrue for certain unfiled product liability claims to the extent we can formulate a reasonable estimate of their exposure. We estimate these exposures based primarily on historical claims experience and data regarding product usage. Legal defense costs expected to be incurred in connection with significant liability loss contingencies are accrued when both probable and reasonably estimable.

Because of the nature of pharmaceutical products, it is possible that we could become subject to large numbers of additional product liability and related claims in the future. Due to a very restrictive market for litigation liability insurance, we are predominantly self-insured for litigation liability losses for all our currently and previously marketed products.

Patent Matters

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

Emgality Patent Litigation

In September 2018, Teva Pharmaceuticals International GmbH and Teva Pharmaceuticals USA, Inc. (collectively, Teva) filed a complaint in the U.S. District Court for the District of Massachusetts alleging that Lilly's launch and continued sales of Emgality infringed various claims in three Teva patents. In November 2022, following a trial, a jury returned a verdict in favor of Teva. In September 2023, the trial court overruled the jury verdict, found all asserted claims invalid, and entered judgment in Lilly's favor. In April 2026, the U.S. Court of Appeals for the Federal Circuit issued an opinion reversing the trial court's finding that the patents are invalid and remanding to the district court, and we recognized a charge related to the matter during the three months ended March 31, 2026. In June 2026, we filed a petition for rehearing en banc.

Verzenio Hatch-Waxman Litigation

In April 2026, Lilly received notice that Cipla Ltd. had filed an Abbreviated New Drug Application (ANDA) seeking approval for a generic version of Verzenio (abemaciclib) tablets before expiration of the compound patent listed in the U.S. Food and Drug Administration's (FDA) Orange Book. In June 2026, Lilly filed a patent infringement action against Cipla Ltd. and its subsidiary Cipla USA Inc. in the U.S. District Court for the District of Delaware.

Tirzepatide Hatch-Waxman Litigation

In July 2026, Lilly received notice that multiple generic companies had filed ANDAs seeking approval to market generic versions of Mounjaro and/or Zepbound before the expiration of some or all of the patents listed for those products in the FDA’s Orange Book. We intend to file suit for patent infringement.

Environmental Matters

Superfund Matters

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

Brazil Litigation – Cosmopolis Facility

Labor Attorney Litigation

In March 2008, the state Labor Public Attorney (LPA) filed a public civil action against Eli Lilly do Brasil Limitada (Lilly Brasil) in the Labor Court of Paulinia, State of Sao Paulo, alleging harm to employees and former employees from alleged exposure to soil and groundwater contaminants at a former manufacturing facility in Cosmopolis, operated by the company between 1977 and 2003. In May 2014, the trial court ruled against Lilly Brasil, ordering several remedial and compensatory actions, including health coverage for a class of individuals and certain of their children, and imposing a liquidated award. In December 2025, the superior labor court (TST) significantly reduced the liquidated award. Further appeals are ongoing.

In July 2019, at the LPA's request, the trial court ordered a freeze of certain of Lilly Brasil's immovable property, which amount was reduced on Lilly's appeal. Both parties have appealed this order to the TST.

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

Pricing Matters

340B Litigation and Investigations

In January 2021, we filed a lawsuit in the U.S. District Court for the Southern District of Indiana against the U.S. Department of Health and Human Services (HHS), the Secretary of HHS, the Health Resources and Services Administration (HRSA), and the Administrator of HRSA. The lawsuit challenges HHS's December 2020 advisory opinion that the 340B program requires drug manufacturers to deliver discounts to all contract pharmacies, as well as HHS's December 2020 administrative dispute resolution (ADR) regulations. It seeks declaratory, injunctive, and other related relief. In March 2021, the court preliminarily enjoined the government's use of the ADR process as to us. In May 2021, we amended the complaint to add claims related to a May 2021 letter from HRSA asserting that Lilly's contract pharmacy policy violated the 340B statute. In October 2021, the court granted in part and denied in part the parties' cross-motions for summary judgment. Both parties appealed to the U.S. Court of Appeals for the Seventh Circuit. The appeal remains pending.

We have been named in various ADR petitions, filed between 2021 and 2024, seeking declaratory, injunctive, and/or monetary relief related to the 340B program. In light of the preliminary injunction order described above, these petitions are being held in abeyance as to us.

In July 2021, Mosaic Health, Inc. filed a putative class action lawsuit in the U.S. District Court for the Western District of New York against us, Sanofi-Aventis U.S., LLC, Novo Nordisk Inc., and AstraZeneca Pharmaceuticals LP, alleging antitrust and unjust enrichment claims related to the defendants' 340B programs. In October 2021, an amended complaint added Central Virginia Health Services, Inc. as a plaintiff. After the district court dismissed the case for failure to state a claim, the U.S. Court of Appeals for the Second Circuit reversed. We filed a petition seeking U.S. Supreme Court review in March 2026. The matter is ongoing.

Various state and 340B provider plaintiffs have filed lawsuits against us, and in some cases other manufacturers and third parties, relating to the 340B program, including our policies regarding contract pharmacies, submission of claims data, and our compliance with state laws purporting to regulate the 340B program. The complaints in these lawsuits assert a variety of claims, including consumer protection, unfair or deceptive trade practices, unfair competition, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violations of state statutes governing 340B pricing. The lawsuits generally seek damages, civil penalties, and/or injunctive relief, and are at various stages in the litigation process. We are also involved in other ongoing litigation and inquiries related to the 340B program, including lawsuits Lilly has filed challenging aspects of the 340B program.

Insulin Pricing Litigation

Since 2017, various plaintiffs, including consumers, states and state attorneys general, counties, municipalities, Native American tribes, school districts, wholesalers, third-party payers, and others, have filed lawsuits, including putative class actions, against us, other manufacturers, pharmacy benefit managers, and others, relating to the pricing of insulin medications, and in some cases other diabetes medications, and rebates paid by manufacturers to pharmacy benefit managers. The complaints in the various lawsuits assert a variety of claims, including among others consumer protection, unfair or deceptive trade practices, fraud, false advertising, unjust enrichment, civil conspiracy, racketeering, antitrust, and unfair competition claims. Most cases have been coordinated or consolidated for pretrial proceedings in a multidistrict litigation (MDL) pending in the U.S. District Court for the District of New Jersey. The lawsuits are at various stages in the litigation process.

The MDL court has issued various case management and other orders, including but not limited to orders establishing separate tracks for state attorney general claims, putative class actions, and non-class suits by self-funded payers; orders dismissing certain claims; and an order setting a constructive notice date of January 14, 2021 for statute of limitations purposes.

In January 2022, the Michigan attorney general filed a petition in Michigan state court seeking authorization to investigate Lilly for potential violations of the Michigan Consumer Protection Act (MCPA), along with a complaint seeking a declaratory judgment that the state has authority to investigate Lilly's sale of insulin under the MCPA. The court authorized the proposed investigation and the issuance of civil investigative subpoenas. In April 2022, however, the parties entered into a stipulation providing that the state will not issue any civil investigative subpoena to us under the MCPA until the declaratory judgment action is resolved, and in July 2022, the court dismissed the case in its entirety. In June 2023, the Michigan Court of Appeals affirmed the judgment in our favor. In July 2026, the Michigan Supreme Court reversed the Michigan Court of Appeals decision.

Lilly entered into settlement agreements with New York and Minnesota to resolve allegations relating to insulin pricing in 2023 and 2024, respectively. These agreements involved no monetary payments and no admission of wrongdoing or liability.

Pricing Investigations

We have been subject to various investigations and received subpoenas, civil investigative demands, information requests, interrogatories, and other inquiries from various governmental entities related to the pricing and sale of our medications, and/or calculations of average manufacturer price and best price. These include subpoenas, civil investigative demands, or information requests from the U.S. Department of Justice, the U.S. Federal Trade Commission, and attorneys general from various states and the District of Columbia.

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

Average Manufacturer Price Litigation

In November 2014, a relator filed a qui tam action in the U.S. District Court for the Northern District of Illinois against us and Takeda Pharmaceuticals America, Inc. The relator's complaint alleged that the defendants should have treated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices. In August 2022, following a trial, the jury returned a verdict in favor of the relator. In September 2025, the U.S. Court of Appeals for the Seventh Circuit affirmed, and we recognized a charge related to the matter. In May 2026, the U.S. Supreme Court denied further review.

Other Matters

Actos Litigation

We, along with Takeda Chemical Industries, Ltd. and Takeda affiliates (collectively, Takeda), are named as defendants in a third-party payer class action in the U.S. District Court for the Central District of California. The plaintiffs allege that bladder cancer risk was concealed from them and claim that as a result they and a proposed class of third-party payers are entitled to recover money paid for Actos prescriptions. Our agreement with Takeda calls for Takeda to defend and indemnify us against losses and expenses with respect to U.S. litigation arising out of the manufacture, use, or sale of Actos and other related expenses in accordance with the terms of the agreement. In May 2023, the district court certified the class. The U.S. Court of Appeals for the Ninth Circuit subsequently affirmed, and the U.S. Supreme Court denied our petition for certiorari. The matter is ongoing.

Mounjaro, Trulicity, and Zepbound Product Liability Litigation

Since August 2023, various plaintiffs have filed lawsuits against us, Novo Nordisk A/S, and other related entities, alleging various injuries following purported use of incretin medicines, including Mounjaro, Trulicity, and Zepbound. The complaints assert a variety of claims and generally seek damages and/or other relief. Most of these lawsuits in the United States have been coordinated or consolidated for pretrial proceedings in two federal MDLs: one focused on alleged gastrointestinal injuries, and the other relating to claims of non-arteritic anterior ischemic optic neuropathy (NAION). Both MDLs are pending in the U.S. District Court for the Eastern District of Pennsylvania. There are also similar proceedings pending in Delaware, Indiana, and New Jersey state courts. In addition to the cases in the United States, there are two class action petitions in Israel and two class action petitions in Canada alleging various injuries and claims.

Health Choice Alliance

In October 2019, a relator filed a qui tam lawsuit against us in Texas state court asserting claims under the Texas Medicaid Fraud Prevention Act (TMFPA) based on allegations about certain patient support programs related to three of our products. The relator sought to recover the value of payments by the Texas Medicaid Program for these products, as well as civil penalties and other relief. In August 2025, the relator purported to dismiss the first lawsuit and filed a second lawsuit in a different Texas state court adding the State of Texas as a party and expanding claims under the TMFPA to fifteen of our products. We are opposing the relator's purported dismissal of the first lawsuit.

Note 10: Equity

The following table summarizes components of equity with significant changes during the three months ended June 30, 2026 and 2025:

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Loss
SharesAmount
Balance at March 31, 2026943.5$590$6,921$29,514$(2,833)
Net income7,095
Other comprehensive income, net of tax72
Cash dividends declared per share: $3.46(3,088)
Purchases of common stock(2.0)(2)(1,628)
Issuance of stock under employee stock plans, net——(5)
Stock-based compensation201
Balance at June 30, 2026941.5$588$7,117$31,893$(2,761)
Balance at March 31, 2025948.1$593$6,910$15,100$(3,775)
Net income5,661
Other comprehensive income, net of tax59
Cash dividends declared per share: $3.00(2,692)
Purchases of common stock(0.9)(1)(692)
Issuance of stock under employee stock plans, net——(6)
Stock-based compensation185
Balance at June 30, 2025947.2$592$7,089$17,376$(3,716)

The following table summarizes components of equity with significant changes during the six months ended June 30, 2026 and 2025:

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Loss
SharesAmount
Balance at December 31, 2025944.8$590$7,346$24,470$(2,880)
Net income14,491
Other comprehensive income, net of tax119
Cash dividends declared per share: $3.46(3,088)
Purchases of common stock(4.4)(3)(3,984)
Issuance of stock under employee stock plans, net1.11(591)
Stock-based compensation362
Other4
Balance at June 30, 2026941.5$588$7,117$31,893$(2,761)
Balance at December 31, 2024947.9$592$7,439$13,545$(4,322)
Net income8,420
Other comprehensive income, net of tax606
Cash dividends declared per share: $3.00(2,692)
Purchases of common stock(2.3)(1)(1,891)
Issuance of stock under employee stock plans, net1.61(689)
Stock-based compensation339
Other(6)
Balance at June 30, 2025947.2$592$7,089$17,376$(3,716)

As of June 30, 2026, we had $7.0 billion remaining under our $15.0 billion share repurchase program authorized in December 2024. We retire shares once we repurchase them.

The following table summarizes the activity related to each component of accumulated other comprehensive income (loss) during the three months ended June 30, 2026 and 2025:

Foreign Currency Translation**(1)**Retirement Benefit PlansOtherAccumulated Other Comprehensive Loss
Balance at March 31, 2026$(1,099)$(1,989)$254$(2,833)
Other comprehensive income (loss)4432(4)72
Balance at June 30, 2026$(1,055)$(1,957)$250$(2,761)
Balance at March 31, 2025$(1,824)$(2,182)$230$(3,775)
Other comprehensive income (loss)66(12)559
Balance at June 30, 2025$(1,758)$(2,193)$235$(3,716)

(1) Includes the impact of foreign currency transactions designated as net investment hedges. See Note 8 for additional information.

The following table summarizes the activity related to each component of accumulated other comprehensive income (loss) during the six months ended June 30, 2026 and 2025:

Foreign Currency Translation**(1)**Retirement Benefit PlansOtherAccumulated Other Comprehensive Loss
Balance at December 31, 2025$(1,149)$(1,987)$255$(2,880)
Other comprehensive income (loss)9430(5)119
Balance at June 30, 2026$(1,055)$(1,957)$250$(2,761)
Balance at December 31, 2024$(2,390)$(2,179)$246$(4,322)
Other comprehensive income (loss)632(15)(12)606
Balance at June 30, 2025$(1,758)$(2,193)$235$(3,716)

(1) Includes the impact of foreign currency transactions designated as net investment hedges. See Note 8 for additional information.

Note 11: Segment Information

We operate as a single reportable segment engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide. A global research and development organization and a supply chain organization are responsible for the discovery, development, manufacturing, and supply of our products. Our commercial organizations market, distribute, and sell the products. The business is also supported by global corporate staff functions. Our determination that we operate as a single segment is consistent with the nature of our operations and the financial information regularly reviewed by the chief executive officer, in his capacity as the chief operating decision maker (CODM), for the purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods.

Our purpose is to unite caring with discovery to create medicines that make life better for people around the world. Our long-term success is significantly dependent on our ability to research and develop innovative medicines. The CODM uses consolidated net income to assess performance of our company, ensuring that we are investing in future research and development while efficiently delivering products to patients. The CODM allocates research and development resources based upon several factors, including the likelihood of technical success, unmet medical needs, and the viability of commercial success. A significant component of the CODM’s decision-making process is to ensure a balanced investment in our research and development portfolio to drive near-term success and sustain for the long-term.

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

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
Revenue$22,974$15,558$42,773$28,286
Less:
Cost of sales3,2682,4486,8454,672
Early-stage research and development(1)1,4501,1562,7152,146
Late-stage research and development(1)2,3682,1804,6133,924
Marketing, selling, and administrative3,4302,7536,3645,221
Acquired in-process research and development2,7761543,3601,726
Other segment items(2)2,5871,2074,3842,177
Net income$7,095$5,661$14,491$8,420
Interest expense$345$249$677$493
Expenditures for long-lived assets(3)2,9061,9855,3443,502

(1) Early-stage research and development primarily includes costs incurred from discovery through Phase 2 clinical trials. Late-stage research and development primarily includes costs incurred from Phase 3 clinical trials.

(2) Other segment items primarily include income taxes.

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

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