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(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.
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 with a new manufacturer discount program. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties, which could be significant.
The IRA has and will 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:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | |
| 2023 | | 2022 | | Percent Change |
| U.S. | $ | 21,791.0 | | | $ | 18,190.0 | | | 20 |
| Outside U.S. | 12,333.1 | | | 10,351.3 | | | 19 |
| Revenue | $ | 34,124.1 | | | $ | 28,541.4 | | | 20 |
Numbers may not add due to rounding.
The following are components of the change in revenue compared with the prior year:
| | | | | | | | | | | |
| 2023 vs. 2022 |
| U.S. | Outside U.S. | Consolidated |
| Volume | 11 | % | 25 | % | 16 | % |
| Price | 9 | % | (4) | % | 4 | % |
| Foreign exchange rates | — | % | (1) | % | — | % |
| Percent change | 20 | % | 19 | % | 20 | % |
Numbers may not add due to rounding.
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 | | Percent Change |
| Product | U.S. | | Outside U.S. | | Total | | Total |
| Trulicity | $ | 5,433.3 | | | $ | 1,699.2 | | | $ | 7,132.6 | | | $ | 7,439.7 | | | (4) |
| Mounjaro | 4,834.2 | | | 328.9 | | | 5,163.1 | | | 482.5 | | | NM |
| Verzenio | 2,509.0 | | | 1,354.3 | | | 3,863.4 | | | 2,483.5 | | | 56 |
| Taltz | 1,831.6 | | | 928.0 | | | 2,759.6 | | | 2,482.0 | | | 11 |
Jardiance(1) | 1,600.4 | | | 1,144.2 | | | 2,744.7 | | | 2,066.0 | | | 33 |
Zyprexa(2) | 79.4 | | | 1,615.4 | | | 1,694.8 | | | 336.9 | | | NM |
Humalog(3) | 863.2 | | | 800.2 | | | 1,663.3 | | | 2,060.6 | | | (19) |
Cyramza® | 402.3 | | | 572.4 | | | 974.7 | | | 971.4 | | | — |
Olumiant® (4) | 225.5 | | | 697.2 | | | 922.6 | | | 830.5 | | | 11 |
Humulin® | 610.1 | | | 242.0 | | | 852.1 | | | 1,019.4 | | | (16) |
Basaglar® (5) | 443.1 | | | 285.2 | | | 728.3 | | | 760.4 | | | (4) |
Emgality® | 482.2 | | | 196.0 | | | 678.3 | | | 650.9 | | | 4 |
| Baqsimi | 645.7 | | | 31.9 | | | 677.6 | | | 139.3 | | | NM |
Erbitux® | 528.9 | | | 67.6 | | | 596.5 | | | 566.5 | | | 5 |
Forteo® | 335.5 | | | 197.7 | | | 533.2 | | | 613.1 | | | (13) |
Cialis® | 26.1 | | | 355.3 | | | 381.5 | | | 587.3 | | | (35) |
| Alimta | 72.9 | | | 144.6 | | | 217.5 | | | 927.7 | | | (77) |
| Zepbound | 175.8 | | | — | | | 175.8 | | | — | | | NM |
COVID-19 antibodies(6) | — | | | — | | | — | | | 2,023.5 | | | NM |
| Other products | 691.8 | | | 1,673.0 | | | 2,364.5 | | | 2,100.2 | | | 13 |
| Revenue | $ | 21,791.0 | | | $ | 12,333.1 | | | $ | 34,124.1 | | | $ | 28,541.4 | | | 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:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Percent Change |
| 2023 | | 2022 | |
| Gross margin | $ | 27,041.9 | | | $ | 21,911.6 | | | 23 |
| Gross margin as a percent of revenue | 79.2 | % | | 76.8 | % | | |
| Research and development | $ | 9,313.4 | | | $ | 7,190.8 | | | 30 |
| Marketing, selling, and administrative | 7,403.1 | | | 6,440.4 | | | 15 |
Acquired IPR&D | 3,799.8 | | | 908.5 | | | NM |
| Asset impairment, restructuring, and other special charges | 67.7 | | | 244.6 | | | (72) |
| Other—net, (income) expense | (96.7) | | | 320.9 | | | NM |
| Income taxes | 1,314.2 | | | 561.6 | | | NM |
| Effective tax rate | 20.1 | % | | 8.3 | % | | |
NM - not meaningful
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:
| | | | | | | | | | | |
| 2023 | | 2022 |
| Sales return, rebate, and discount liabilities, beginning of year | $ | 8,214.1 | | | $ | 6,161.6 | |
Reduction of net sales(1) | 37,866.8 | | | 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 revenue for each of the years presented.
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
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ELI LILLY AND COMPANY AND SUBSIDIARIES (Dollars in millions, except per-share data, and shares in thousands) | | Year Ended December 31 | | 2023 | | 2022 | | 2021 |
| Revenue (Note 2) | | $ | | | | $ | | | | $ | | |
| Costs, expenses, and other: | | | | | | |
| 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 | | $ | | | | $ | | | | $ | | |
| | | | | | |
| Earnings per share: | | | | | | |
| |
| |
| Basic | | $ | | | | $ | | | | $ | | |
| |
| |
| |
| Diluted | | $ | | | | $ | | | | $ | | |
| | | | | | |
| Shares used in calculation of earnings per share: | | | | | | |
| Basic | | | | | | | | | |
| Diluted | | | | | | | | | |
See notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income (Loss)
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ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions) | | Year Ended December 31 | | 2023 | | 2022 | | 2021 |
| Net income | | $ | | | | $ | | | | $ | | |
| Other comprehensive income (loss): | | | | | | |
| 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) | | | | | () | | | () | |
Other comprehensive income (loss), net of tax (Note 17) | | () | | | | | | | |
| |
| |
| Comprehensive income | | $ | | | | $ | | | | $ | | |
See notes to consolidated financial statements.
Consolidated Balance Sheets
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ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, shares in thousands) | | December 31 | | 2023 | | 2022 |
| Assets | | | | |
| Current Assets | | | | |
| Cash and cash equivalents (Note 7) | | $ | | | | $ | | |
| Short-term investments (Note 7) | | | | | | |
Accounts receivable, net of allowances of $ (2023) and $ (2022) | | | | | | |
| Other receivables | | | | | | |
| Inventories (Note 6) | | | | | | |
| Prepaid expenses | | | | | | |
| Other current assets | | | | | | |
| Total current assets | | | | | | |
| Investments (Note 7) | | | | | | |
| Goodwill (Note 8) | | | | | | |
| Other intangibles, net (Note 8) | | | | | | |
| Deferred tax assets (Note 14) | | | | | | |
| Property and equipment, net (Note 9) | | | | | | |
|
| Other noncurrent assets | | | | | | |
|
| Total assets | | $ | | | | $ | | |
| Liabilities and Equity | | | | |
| Current Liabilities | | | | |
| Short-term borrowings and current maturities of long-term debt (Note 11) | | $ | | | | $ | | |
| Accounts payable | | | | | | |
| Employee compensation | | | | | | |
| Sales rebates and discounts | | | | | | |
| Dividends payable | | | | | | |
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| Other current liabilities | | | | | | |
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| Total current liabilities | | | | | | |
| Noncurrent Liabilities | | | | |
| Long-term debt (Note 11) | | | | | | |
| Accrued retirement benefits (Note 15) | | | | | | |
| Long-term income taxes payable (Note 14) | | | | | | |
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| Other noncurrent liabilities | | | | | | |
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| Total noncurrent liabilities | | | | | | |
| Commitments and Contingencies (Note 16) | | | | |
| Eli Lilly and Company Shareholders' Equity (Notes 12 and 13) | | | | |
Common stock—no par value Authorized shares: Issued shares: (2023) and (2022) | | | | | | |
| Additional paid-in capital | | | | | | |
| Retained earnings | | | | | | |
| Employee benefit trust | | () | | | () | |
| Accumulated other comprehensive loss (Note 17) | | () | | | () | |
Cost of common stock in treasury | | () | | | () | |
| Total Eli Lilly and Company shareholders' equity | | | | | | |
| Noncontrolling interests | | | | | | |
| Total equity | | | | | | |
| Total liabilities and equity | | $ | | | | $ | | |
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
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| Equity of Eli Lilly and Company Shareholders | | |
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except per-share data, and shares in thousands) | Common Stock | | Additional
Paid-in
Capital | | Retained
Earnings | | Employee Benefit Trust | | Accumulated Other Comprehensive Loss | | Common Stock in Treasury | | Noncontrolling Interest |
| Shares | | Amount | Shares | | Amount |
Balance at January 1, 2021 | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | | | | $ | () | | | $ | | |
| Net income | | | | | | | | | | | | | | | | | | | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | |
Cash dividends declared per share: $ | | | | | | | () | | | | | | | | | | | |
| Retirement of treasury shares | () | | | () | | | | | () | | | | | | | () | | | | | | |
| Purchase of treasury shares | | | | | | | | | | | | | | | | () | | | |
| Issuance of stock under employee stock plans, net | | | | | | | () | | | | | | | | | () | | | | | | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | |
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| Other | | | | | | | () | | | | | | | | | | | () | |
Balance at December 31, 2021 | | | | | | | | | | | | | () | | | () | | | | | | () | | | | |
| Net income (loss) | | | | | | | | | | | | | | | | | | () | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | |
Cash dividends declared per share: $ | | | | | | | () | | | | | | | | | | | |
| Retirement of treasury shares | () | | | () | | | | | () | | | | | | | () | | | | | | |
| Purchase of treasury shares | | | | | | | | | | | | | | | | () | | | |
| Issuance of stock under employee stock plans, net | | | | | | | () | | | | | | | | | () | | | | | | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
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| Other | | | | | | | | | | | | | | | | | | () | |
Balance at December 31, 2022 | | | | | | | | | | | | | () | | | () | | | | | | () | | | | |
| Net income | | | | | | | | | | | | | | | | | | | |
| Other comprehensive loss, net of tax | | | | | | | | | | | () | | | | | | | |
Cash dividends declared per share: $ | | | | | | | () | | | | | | | | | | | |
| 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 | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | | | | $ | () | | | $ | | |
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
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ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions) | | Year Ended December 31 | | 2023 | | 2022 | | 2021 |
| Cash Flows from Operating Activities | | | | | | |
| Net income | | $ | | | | $ | | | | $ | | |
| 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 | | | | | | |
| Dividends paid | | () | | | () | | | () | |
| Net change in short-term borrowings | | | | | | | | () | |
| Proceeds from issuance of long-term debt | | | | | | | | | |
| Repayments of long-term debt | | | | | () | | | () | |
| Purchases of common stock | | () | | | () | | | () | |
| |
| Other financing activities, net | | () | | | () | | | () | |
Net Cash Provided by (Used for) Financing Activities | | | | | () | | | () | |
| Effect of exchange rate changes on cash and cash equivalents | | | | | () | | | () | |
| Net increase (decrease) in cash and cash equivalents | | | | | () | | | | |
| Cash and cash equivalents at beginning of year | | | | | | | | | |
| Cash and Cash Equivalents at End of Year | | $ | | | | $ | | | | $ | | |
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Tables present dollars in millions)
Note 1:
Advertising expenses, comprised primarily of online marketing and television advertising, totaled $ billion, $ million, and $ billion in 2023, 2022, and 2021, respectively, which was less than 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.
The reclassification resulted in an increase to net cash provided by operating activities and net cash used in investing activities of $ million and $ million in 2022 and 2021, respectively.
Note 2:
| | $ | | | | $ | | |
Collaboration and other revenue(1) | | | | | | | | |
| Revenue | $ | | | | $ | | | | $ | | |
(1) Collaboration and other revenue associated with prior period transfers of intellectual property was $ million, $ million, and $ million during the years ended December 31, 2023, 2022, and 2021, respectively.
to 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 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 percent and percent of consolidated revenue. Further, they each accounted for between percent and 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 later. Because of this time lag, in any particular period our net product revenue may incorporate revisions of accruals for several periods.
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 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 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 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.
| | $ | | | 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.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | Mounjaro® | | | | | | | | | | | | | | | | | |
Jardiance(1) | | | | | | | | | | | | | | | | | |
Humalog® (2) | | | | | | | | | | | | | | | | | |
Humulin® | | | | | | | | | | | | | | | | | |
Basaglar® (3) | | | | | | | | | | | | | | | | | |
Baqsimi | | | | | | | | | | | | | | | | | |
Zepbound® | | | | | | | | | | | | | | | | | |
| Other diabetes and obesity | | | | | | | | | | | | | | | | | |
| Total diabetes and obesity | | | | | | | | | | | | | | | | | |
| | | | | | |
| Oncology: | | | | | | | | | | | |
Verzenio® | | | | | | | | | | | | | | | | | |
Cyramza® | | | | | | | | | | | | | | | | | |
Erbitux® | | | | | | | | | | | | | | | | | |
Tyvyt® | | | | | | | | | | | | | | | | | |
Alimta® | | | | | | | | | | | | | | | | | |
| Other oncology | | | | | | | | | | | | | | | | | |
| Total oncology | | | | | | | | | | | | | | | | | |
| | | | | | |
| Immunology: | | | | | | | | | | | |
Taltz® | | | | | | | | | | | | | | | | | |
Olumiant® (4) | | | | | | | | | | | | | | | | | |
| Other immunology | | | | | | | | | | | | | | | | | |
| Total immunology | | | | | | | | | | | | | | | | | |
| | | | | | |
| Neuroscience: | | | | | | | | | | | |
Zyprexa(5) | | | | | | | | | | | | | | | | | |
Emgality® | | | | | | | | | | | | | | | | | |
| Other neuroscience | | | | | | | | | | | | | | | | | |
| Total neuroscience | | | | | | | | | | | | | | | | | |
| | | | | | |
| Other: | | | | | | | | | | | |
Forteo® | | | | | | | | | | | | | | | | | |
Cialis® | | | | | | | | | | | | | | | | | |
COVID-19 antibodies(6) | | | | | | | | | | | | | | | | | |
| Other | | | | | | | | | | | | | | | | | |
| Total other | | | | | | | | | | | | | | | | | |
| | | | | | |
| Revenue | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
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.
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 $ 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.
Note 4:
| | $ | | | | $ | | | | Basaglar | | | | | | | | |
| Trajenta | | | | | | | | |
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 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 $ million of additional payments from us in potential sales-based milestones.
| | $ | | | | $ | | | 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.
| | $ | | | | $ | | | 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 $ million contingent upon the achievement of additional success-based regulatory milestones and up to $ 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 $ 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 $ million contingent upon the achievement of success-based regulatory milestones and up to $ 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 $ billion and $ 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.
billion in cash and will receive an additional $ 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 $ million, of which $ 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 $ 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 $ million in cash and will receive an additional $ 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 $ 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.
million in revenue primarily related to the net gain on the sale of rights for Baqsimi.
Note 5:
| | $ | | | | $ | | | | Severance | | | | | | | | |
|
| Total asset impairment, restructuring, and other special charges | $ | | | | $ | | | | $ | | |
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.
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 $ million of intangible asset impairment from the sale of the rights to Qbrexza®
Note 6:
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. | | $ | | | | Work in process | | | | | |
| Raw materials and supplies | | | | | |
| Total (approximates replacement cost) | | | | | |
| Increase to LIFO cost | | | | | |
| Inventories | $ | | | | $ | | |
Inventories valued under the LIFO method comprised $ billion and $ billion of total inventories at December 31, 2023 and 2022, respectively.
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,
Note 7:
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 $() million, $() million, and $ 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.
million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to years. Impairment and credit losses related to available-for-sale securities were not material for the years ended December 31, 2023, 2022, and 2021.
| | $ | | | | $ | | | | $ | | | | $ | | | | | $ | | | | Unrealized gross losses | | | | | |
| Fair value of securities in an unrealized gain position | | | | | |
| Fair value of securities in an unrealized loss position | | | | | |
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 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.
| | $ | | | | $ | | | | Realized gross gains on sales | | | | | | | | |
| Realized gross losses on sales | | | | | | | | |
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.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Corporate debt securities | | | | | | | | | | | | | | | | | |
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| Other securities | | | | | | | | | | | | | | | | | |
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| Short-term investments | $ | | | | | | | | | | | | |
| 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) | | | | | | | | | | | | |
Equity method investments(3) | | | | | | | | | | | | |
| Noncurrent investments | $ | | | | | | | | | | | | |
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| December 31, 2022 | | | | | | | | | | | |
Cash equivalents(2) | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Short-term investments: | | | | | | | | | | | |
| U.S. government and agency securities | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Corporate debt securities | | | | | | | | | | | | | | | | | |
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| Asset-backed securities | | | | | | | | | | | | | | | | | |
| Other securities | | | | | | | | | | | | | | | | | |
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| Short-term investments | $ | | | | | | | | | | | | |
| 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) | | | | | | | | | | | | |
Equity method investments(3) | | | | | | | | | | | | |
| Noncurrent investments | $ | | | | | | | | | | | | |
(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.
) | | $ | | | | $ | () | | | $ | | | | $ | () | | | December 31, 2022 | () | | | | | | () | | | | | | () | |
| Long-term debt, including current portion | | | | | | | | | |
| December 31, 2023 | $ | () | | | $ | | | | $ | () | | | $ | | | | $ | () | |
| December 31, 2022 | () | | | | | | () | | | | | | () | |
Risk Management and Related Financial Instruments
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 $ million and $ 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.
Forward contracts generally have maturities not exceeding months. days:
| Euro | | | Euro | | | U.S. dollars | |
| British pounds | | | U.S. dollars | |
| U.S. dollars | | | Chinese yuan | |
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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 $ billion and $ billion as of December 31, 2023 and 2022, respectively, of which $ billion and $ 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 $ million swapping U.S. dollars to euro and $ 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 billion euro and to sell billion Chinese yuan, with settlement dates ranging through 2024, which have been designated as, and are effective as, economic hedges of net investments.
At December 31, 2023, all of our total long-term debt is at a fixed rate. We have converted approximately percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.
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 $ billion, which have settlement dates ranging through 2025.The Effect of Risk Management Instruments on the Consolidated Statements of Operations
| | $ | () | | | $ | () | |
| Effect from interest rate contracts | () | | | | | | | |
| 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 | $ | () | | | $ | | | | $ | | |
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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.
Note 8:
The change in goodwill during 2023 was primarily related to our acquisition of POINT. See Note 3 for additional information. impairments occurred with respect to the carrying value of goodwill for the years ended December 31, 2023, 2022, and 2021.
Other Intangibles
| | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | |
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| Indefinite-lived intangible assets: | | | | | | | | | | | |
| Acquired IPR&D | | | | — | | | | | | | | | — | | | | |
| Other intangibles | $ | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | |
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.
Acquired IPR&D consists of the fair values of acquired IPR&D projects acquired in business combination, adjusted for subsequent impairments, if any.
The increase in marketed products and the decrease in acquired IPR&D in 2023 primarily relates to the reclassification of our $ 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.
Intangible assets with finite lives are capitalized and are amortized primarily to cost of sales over their estimated useful lives, ranging from one to years. As of December 31, 2023, the remaining weighted-average amortization period for finite-lived intangible assets was approximately years.
| | $ | | | | $ | | | | | $ | | | | $ | | | | $ | | | | $ | | |
Note 9:
to years for buildings and three to 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. | | $ | | | | Buildings | | | | | |
| Equipment | | | | | |
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| Construction in progress | | | | | |
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| Less accumulated depreciation | () | | | () | |
| Property and equipment, net | $ | | | | $ | | |
Depreciation expense related to property and equipment was as follows:
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| 2023 | | 2022 | | 2021 |
| Depreciation expense | $ | | | | $ | | | | $ | | |
Capitalized interest costs were not material for the years ended December 31, 2023, 2022, and 2021.
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| | | 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 $ billion of unused committed bank credit facilities, which consisted primarily of a $ billion credit facility that expires in December 2027 and a $ billion -day facility that expires in September 2024, both of which are available to support our commercial paper program. We have not drawn against the $ billion and $ 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.
billion of percent fixed-rate notes due in 2027, $ billion of percent fixed-rate notes due in 2029, $ billion of percent fixed-rate notes due in 2034, $ billion of percent fixed-rate notes due in 2054, and $ billion of 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 $ billion for general business purposes, including the repayment of outstanding commercial paper, repayment of current maturities of long-term debt, and repayment of the $ million of percent fixed-rate notes due in 2026, which are callable at par beginning February 27, 2024.In February 2023, we issued $ million of percent fixed-rate notes due in 2026, which are callable at par after one year, $ billion of percent fixed-rate notes due in 2033, $ billion of percent fixed-rate notes due in 2053, and $ billion of 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 $ billion for general business purposes, including the repayment of outstanding commercial paper.
In September 2021, we issued euro-denominated notes totaling € billion and British pound-denominated notes totaling £ million. We paid $ 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 $ billion, resulting in a debt extinguishment loss of $ million. This loss was included in other-net, (income) expense in our consolidated statement of operations for the year ended December 31, 2021.
| | $ | | | | $ | | | | $ | | | | $ | | |
We have converted approximately 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 percent and percent, respectively.
| | $ | | | | $ | | | 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:
| | $ | | | | $ | | | | Tax benefit | | | | | | | | |
At December 31, 2023, stock-based compensation awards may be granted under the 2002 Lilly Stock Plan for not more than million additional shares.
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 $, $, and $, 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 million, million, and million shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively. Approximately 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 $ million, which will be amortized over the weighted-average remaining requisite service period of 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 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. , $, and $, respectively, determined using the following assumptions:
% | | | % | | | % | | Risk-free interest rate | | | | | | | | |
| Volatility | | | | | | | | |
Pursuant to this program, approximately million, million, and million shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively. Approximately 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 $ million, which will be amortized over the weighted-average remaining requisite service period of 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 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. , $, and $, respectively, determined using the following assumptions:
% | | | % | | | % | | Risk-free interest rate | | | | | | | | |
| Volatility | | | | | | | | |
million shares were issued during the year ended December 31, 2023. Approximately 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 $ million, which will be amortized over the weighted-average remaining requisite service period of 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 . The weighted-average fair values of RSU awards granted during the years ended December 31, 2023, 2022, and 2021 were $, $, and $, respectively. The number of shares ultimately issued for the RSU program remains constant with the exception of forfeitures. Pursuant to this program, million, million, and million shares were granted and approximately million, million, and million shares were issued during the years ended December 31, 2023, 2022, and 2021, respectively. Approximately 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 $ million, which will be amortized over the weighted-average remaining requisite service period of months.
Note 13:
million, $ billion, and $ billion, respectively, of shares associated with our share repurchase programs. As of December 31, 2023, we had $ billion remaining under our $ billion share repurchase program that our board authorized in May 2021. We have million authorized shares of preferred stock. As of December 31, 2023 and 2022, preferred stock was issued.
We have an employee benefit trust that held 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 $ 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:
| | $ | | | | $ | | | | Foreign | | | | | | | | |
| State | | | | | | | () | |
| Total current tax expense | | | | | | | | |
| Deferred: | | | | | |
| Federal | () | | | () | | | () | |
| Foreign | | | | () | | | | |
| State | () | | | () | | | | |
| Total deferred tax benefit | () | | | () | | | () | |
| Income taxes | $ | | | | $ | | | | $ | | |
million, $ million, and $ million of tax benefit, respectively, from utilization of net operating loss and other tax carryforwards.
| | $ | | | | 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 | | | | | |
| 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 | $ | | | | $ | | |
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 $ billion available to reduce future income taxes; $ million, if unused, will expire in 2026, and $ million, if unused, will expire between 2029 and 2043. The remaining portion of the tax credit carryforwards is related to federal tax credits of $ million, international tax credits of $ million, and state tax credits of $ million, all of which are fully reserved.
billion: $ million will expire by 2028; $ million will expire between 2029 and 2043; and $ 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 $ million are fully reserved as of December 31, 2023.At December 31, 2023 and 2022, prepaid expenses included prepaid taxes of $ billion and $ billion, respectively.
Domestic and Puerto Rican companies contributed approximately percent, percent, and 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.
| | $ | | | | $ | | | 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.
| $ | | | $ | | | As of December 31, 2023, we have additional noncurrent income tax payables of $ billion unrelated to the Toll Tax; we cannot reasonably estimate the timing of future cash outflows associated with these liabilities.
| | $ | | | | $ | | | | Add (deduct): | | | | | |
Non-deductible acquired IPR&D(1) | | | | | | | | |
| General business credits | () | | | () | | | () | |
| Foreign-derived intangible income deduction | () | | | () | | | () | |
International operations, including Puerto Rico(2) | () | | | () | | | () | |
Stock-based compensation(3) | () | | | () | | | () | |
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| 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 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.
| | $ | | | | $ | | | | 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 | $ | | | | $ | | | | $ | | |
The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $ billion and $ 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 $ million and $ million at December 31, 2023 and 2022, respectively.
Note 15:
| | $ | | | | $ | | | | $ | | | | Service cost | | | | | | | | | | | |
| Interest cost | | | | | | | | | | | |
| Actuarial (gain) loss | | | | () | | | | | | () | |
| Benefits paid | () | | | () | | | () | | | () | |
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| Foreign currency exchange rate changes and other adjustments | | | | () | | | | | | () | |
| Benefit obligation at end of year | | | | | | | | | | | |
| 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 | | | | () | | | () | | | | |
| Fair value of plan assets at end of year | | | | | | | | | | | |
| | |
| Funded status | () | | | () | | | | | | | |
| Unrecognized net actuarial (gain) loss | | | | | | | | | | | |
| Unrecognized prior service (benefit) cost | | | | | | | () | | | () | |
| Net amount recognized | $ | | | | $ | | | | $ | | | | $ | | |
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| 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 | | | | | | | | | | () | |
| Net amount recognized | $ | | | | $ | | | | $ | | | | $ | | |
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 $ billion increase in benefit obligation in 2023 is primarily driven by decreases in the discount rates. The $ billion decline in benefit obligation in 2022 is primarily driven by increases in the discount rates.
% | | % | | % | | | % | | % | | % | 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 | | | | | | | | | | |
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.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Retiree health benefit plans | | | | | | | | | | | | | | | | | |
| | $ | | | | Fair value of plan assets | | | | | |
| | $ | | | | $ | | | | $ | | | | Fair value of plan assets | | | | | | | | | | | |
The total accumulated benefit obligation for our defined benefit pension plans was $ billion and $ billion at December 31, 2023 and 2022, respectively.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Interest cost | | | | | | | | | | | | | | | | | |
| Expected return on plan assets | () | | | () | | | () | | | () | | | () | | | () | |
| Amortization of prior service (benefit) cost | | | | | | | | | | () | | | () | | | () | |
| Recognized actuarial (gain) loss | | | | | | | | | | () | | | | | | | |
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| Net periodic (benefit) cost | $ | | | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | () | |
) | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | | | | | | |
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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) | 2023 | | 2022 | | 2021 |
| 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) | $ | | | | $ | () | | | $ | () | |
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.
) | | $ | () | | | $ | () | | Other—net, (income) expense | | Actuarial losses | | | | | | | | | Other—net, (income) expense |
| Total before tax | | | | | | | | | |
| Tax benefit | () | | | () | | | () | | Income taxes |
| Net of tax | | | | | | | | | |
| | | | | | |
| Other, net of tax | () | | | | | | | | Other—net, (income) expense |
| Total reclassifications for the period, net of tax | $ | | | | $ | | | | $ | | | |
Note 18:
| | $ | | | | $ | | | | 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 | $ | () | | | $ | | | | $ | | |
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: ). 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.
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 | | Anat Ashkenazi |
| Chair, President, and Chief Executive Officer | | Executive Vice President and Chief Financial Officer |
February 21, 2024
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.
| | | | | | | | |
| | Medicaid, Managed Care, and Medicare sales rebate accruals |
| Description of the Matter | | As described in Note 2 to the consolidated financial statements under the caption "Net Product Revenue," the Company establishes provisions for sales rebate and discounts in the same period as the related sales occur. At December 31, 2023, the Company had $11,689.0 million in sales rebate and discount accruals. A large portion of these accruals are rebates associated with sales in the United States for which payment for purchase of the product is covered by Medicaid, Managed Care, and Medicare.
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. |
| How We Addressed the Matter in Our Audit | | We tested the Company's controls addressing the identified risks of material misstatement related to the valuation of the sales rebate and discount liabilities. This included testing controls over management's review of the significant assumptions used to calculate the Medicaid, Managed Care, and Medicare rebate liabilities, including the significant assumptions discussed above. This testing also included management's control to compare actual activity to forecasted activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.
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. |
| | | | | | | | |
| | Retirement Benefits - Valuation of Alternative Investments |
| Description of the Matter | | As described in Note 15 to the consolidated financial statements under the caption "Benefit Plan Investments," the Company's benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. At December 31, 2023, the Company had $16,289.0 million in plan assets related to the defined benefit pension plans and retiree health benefit plans. Approximately 48 percent of the total pension and retiree health assets are in hedge funds and private equity-like investment funds ("alternative investments"). These alternative investments are valued primarily at net asset value (NAV) reported by the counterparty, adjusted as necessary.
Auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, particularly the underlying determination of net asset values ("NAVs"). Additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation. |
| How We Addressed the Matter in Our Audit | | We tested the Company's controls addressing the risks of material misstatement relating to valuation of alternative investments. This included testing management's controls over alternative investment valuation, which included a comparison of returns to benchmarks and monitoring investment firms' valuation policies and procedures, as well as portfolio performance.
Our audit procedures included, among others, comparing fund returns to selected relevant benchmarks and understanding variations, and obtaining the latest audited financial statements and comparing to the Company's estimated fair values. We also inquired of management about changes to the investment portfolio and/or related investment strategies and considerations. We assessed the historical accuracy of management's estimates by comparing actual activity to previous estimates. We evaluated for contrary evidence by confirming the fair value of the investments and ownership interest directly with the custodian and a sample of fund managers at year end. |
/s/
We have served as the Company's auditor since 1940.
February 21, 2024
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.
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.
Indianapolis, Indiana
February 21, 2024
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.
Item 9B.Other Information
, , , a sales plan (Plan). The Plan was entered into during an open trading window and is intended to satisfy the affirmative defense conditions of of the Exchange Act of 1934 and our policies regarding trading in our securities. The Plan calls for the sale of up to 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.
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.
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 | (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)) |
| Equity compensation plans approved by security holders | — | | $ | — | 49,082,012 | |
| Equity compensation plan not approved by security holders | — | | — | — | |
| Total | — | | — | 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.
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:
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| 4.8 | | |
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| 4.9 | | |
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| 10.1 | | |
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| 10.2 | | |
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| 10.3 | | |
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| 10.7 | | |
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| 10.8 | | |
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| 10.9 | | |
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| 10.10 | | |
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| 21 | | |
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| 23 | | |
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| 31.1 | | |
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| 31.2 | | |
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| 32 | | |
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| 97 | | |
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| 101 | | Interactive Data File* |
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| 104 | | 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.
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
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 | | Title |
| | |
| /s/ David Ricks | | Chair, President, and Chief Executive Officer (principal executive officer) |
| DAVID RICKS | |
| | |
| /s/ Anat Ashkenazi | | Executive Vice President and Chief Financial Officer (principal financial officer) |
| ANAT ASHKENAZI | |
| | |
| /s/ Donald Zakrowski | | Senior Vice President, Finance, and Chief Accounting Officer (principal accounting officer) |
| DONALD ZAKROWSKI | |
| | |
| /s/ Ralph Alvarez | | Director |
| RALPH ALVAREZ | | |
| | |
| /s/ Katherine Baicker, Ph.D. | | Director |
| KATHERINE BAICKER, Ph.D. | | |
| | |
| /s/ Erik Fyrwald | | Director |
| ERIK FYRWALD | | |
| | |
| /s/ Mary Lynne Hedley, Ph.D. | | Director |
| MARY LYNNE HEDLEY, Ph. D. | | |
| | |
| /s/ Jamere Jackson | | Director |
| JAMERE JACKSON | | |
| | |
| /s/ Kimberly Johnson | | Director |
| KIMBERLY JOHNSON | | |
| | |
| /s/ William Kaelin, Jr., M.D. | | Director |
| WILLIAM KAELIN, JR., M.D. | | |
| | |
| /s/ Juan Luciano | | Director |
| JUAN LUCIANO | | |
| | |
| /s/ Marschall Runge, M.D., Ph.D. | | Director |
| MARSCHALL RUNGE, M.D., Ph.D. | | |
| | |
| /s/ Gabrielle Sulzberger | | Director |
| GABRIELLE SULZBERGER | | |
| | |
| /s/ Karen Walker | | Director |
| KAREN WALKER | | |
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.
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