Eli Lilly & Co

Company Overview

Business Model: Eli Lilly and Company discovers, develops, manufactures, and markets human pharmaceutical products globally. The company's long-term success is predicated on its continuous ability to discover or acquire, develop, and commercialize innovative medicines, uniting caring with discovery to improve lives worldwide.

Market Position: Eli Lilly and Company operates in highly competitive global pharmaceutical markets. Key competitive factors include product effectiveness, safety, availability, ease of use, patient experience, formulary placement, pricing, payer coverage, reimbursement rates, cost-effectiveness, regulatory approvals, marketing effectiveness, and research and development of new products, processes, modalities, indications, and uses. Early market entry and rapid patient access are also critical for product acceptance and success. The company's long-term competitive success relies on delivering innovative, cost-effective products that provide improved patient outcomes and value to payers, alongside continuous operational productivity improvements.

Recent Strategic Developments:

• Product Launches & Approvals:
  • Tirzepatide (Mounjaro, Zepbound) was approved in the U.S. and the European Union in 2023 for Obesity, and in Japan in 2024. It was also approved in the U.S. and the European Union in 2024 for Obstructive sleep apnea.
  • Donanemab (Kisunla) received approval in the U.S. and Japan in 2024 for the treatment of early Alzheimer's disease.
  • Mirikizumab (Omvoh) was approved in the U.S. and the European Union in 2025 for Crohn's disease.
  • Pirtobrutinib (Jaypirca) received accelerated approval from the U.S. Food and Drug Administration in 2023 for relapsed or refractory mantle cell lymphoma and chronic lymphocytic leukemia. It was approved in the European Union in 2023 and Japan in 2024 for mantle cell lymphoma.
  • Ebglyss (lebrikizumab) was approved in Europe for the treatment of adult and adolescent patients 12 years or older with moderate to severe atopic dermatitis, in collaboration with Almirall S.A.
• Digital Health Platform: Launched LillyDirect, a direct-to-consumer digital healthcare platform in the U.S. to provide patients with obesity, migraine, and diabetes access to care from independent healthcare providers and home delivery of select prescribed Lilly medicines through third-party pharmacies.
• Manufacturing Expansion: Undertook significant manufacturing expansion initiatives, including new sites in North Carolina, Wisconsin, Ireland, Germany, and two in Indiana, to support anticipated demand for current and prospective products.
• Acquisitions:
  • Acquired Morphic Holding, Inc. in August 2024, adding MORF-057, an inhibitor of α4β7 integrin for inflammatory bowel disease, to the pipeline.
  • Acquired a manufacturing site in Wisconsin in May 2024 for $924.7 million (net of cash acquired) to expand global parenteral product manufacturing.
  • Acquired POINT Biopharma Global Inc. in December 2023 for an aggregate of $1.04 billion (net of cash acquired), enhancing capabilities in radiopharmaceutical discovery, development, and manufacturing.
  • Acquired Akouos, Inc. in December 2022 for an aggregate of $327.2 million (net of cash acquired) plus contingent value rights, adding potential gene therapy treatments for hearing loss and other inner ear conditions.

Geographic Footprint: Eli Lilly and Company manufactures and distributes products through facilities in the U.S. (including Puerto Rico), Europe, and Asia, with products sold in approximately 95 countries. Major production sites are located in Indiana, North Carolina, Puerto Rico, New Jersey, Ireland, France, Spain, Italy, China, and Japan. Research and development facilities are primarily in Indiana, California, Massachusetts, New York, and Colorado in the U.S., and in Spain and Singapore internationally.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 81.3%
• Operating Margin: 27.7%
• Net Margin: 23.5%

Investment in Growth:

• R&D Expenditure: $10,990.6 million (24.4% of revenue)
• Capital Expenditures: $5,057.8 million
• Strategic Investments:
  • Acquired in-process research and development (IPR&D) charges of $3,280.4 million in 2024, primarily related to the acquisition of Morphic Holding, Inc.
  • Acquisition of a manufacturing site in Wisconsin for $924.7 million (net of cash acquired).
  • Unfunded commitments to invest in venture capital funds of approximately $899 million, expected to be paid over up to 10 years.

Business Segment Analysis

Human Pharmaceutical Products

Financial Performance:

• Revenue: $45,042.7 million (+32.0% YoY)
• Operating Margin: 27.7%
• Key Growth Drivers: The increase in revenue in 2024 was primarily driven by strong demand and increased supply for Mounjaro and Zepbound, and increased demand for Verzenio. This growth was partially offset by decreased volume for Trulicity due to competitive dynamics and supply constraints.

Product Portfolio:

• Cardiometabolic Health: Basaglar, Humalog, Humulin, Jardiance (including Glyxambi, Synjardy, and Trijardy XR), Mounjaro, Trulicity, Zepbound.
• Oncology: Cyramza, Erbitux, Jaypirca, Retevmo, Tyvyt, Verzenio.
• Immunology: Ebglyss, Olumiant, Omvoh, Taltz.
• Neuroscience: Emgality, Kisunla.

New Product Launches or Major Updates:

• Zepbound: U.S. launch in November 2023 for obesity or overweight with weight-related comorbidities. Approved in U.S. and EU in 2024 for obstructive sleep apnea.
• Mounjaro: Approved in U.S. and EU in 2023, and Japan in 2024 for obesity.
• Kisunla (Donanemab): Approved in U.S. and Japan in 2024 for early Alzheimer's disease.
• Omvoh (Mirikizumab): Approved in U.S. and EU in 2025 for Crohn's disease.
• Jaypirca (Pirtobrutinib): FDA accelerated approval in U.S. in 2023 for chronic lymphocytic leukemia and mantle cell lymphoma. Approved in EU in 2023 and Japan in 2024 for mantle cell lymphoma.
• Ebglyss (Lebrikizumab): Approved in Europe for moderate to severe atopic dermatitis.

Market Dynamics: The market is characterized by intense competition, significant pricing pressures, and evolving payer coverage and reimbursement rates. Barriers to patient access, such as exclusions of anti-obesity medicines from many commercial benefit plans and lack of Medicare/international coverage for weight loss, impact sales volumes. The market also faces challenges from generic pharmaceuticals, biosimilars, and an increase in counterfeit, misbranded, adulterated, and compounded incretins. Consolidation among healthcare organizations (health plans, PBMs, wholesalers) has increased their market power, leading to greater pressure on pharmaceutical companies for formulary placement and rebates.

Sub-segment Breakdown (Revenue and Growth YoY):

• Mounjaro: $11,540.1 million (+124% YoY). U.S. revenue was $8,949.9 million (+85% YoY), driven by strong demand and increased supply. Outside U.S. revenue was $2,590.2 million, driven by volume growth in launched markets.
• Verzenio: $5,306.6 million (+37% YoY). U.S. revenue was $3,420.6 million (+36% YoY), driven by increased demand, wholesaler buying patterns, and higher realized prices. Outside U.S. revenue increased 39%, driven by increased demand.
• Trulicity: $5,253.5 million (-26% YoY). U.S. revenue was $3,693.8 million (-32% YoY), driven by decreased volume due to competitive dynamics and supply constraints. Outside U.S. revenue decreased 8%, driven by decreased volume due to competitive dynamics and actions to manage demand.
• Zepbound: $4,925.7 million (U.S. only, launched November 2023).
• Jardiance: $3,340.9 million (+22% YoY). U.S. revenue was $1,597.5 million (relatively flat), as increased demand was offset by lower realized prices. Outside U.S. revenue increased 52%, driven by increased volume and a one-time payment of $300.0 million from an amendment to the collaboration with Boehringer Ingelheim.
• Taltz: $3,260.4 million (+18% YoY). U.S. revenue was $2,152.3 million (+18% YoY), driven by higher realized prices and increased demand. Outside U.S. revenue increased 19%, primarily driven by increased demand.
• Humalog: $2,324.8 million (+40% YoY). U.S. revenue was $1,502.6 million, driven by higher realized prices.
• Tyvyt: $526.0 million (+34% YoY), primarily from China.
• Zyprexa: $116.3 million (-93% YoY), primarily due to the sale of rights for the olanzapine portfolio in 2023.
• Baqsimi: $29.1 million (-96% YoY), due to the sale of rights in 2023.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Eli Lilly and Company repurchased $2.50 billion of shares in 2024, completing a $5.00 billion share repurchase program authorized in May 2021. A new $15.00 billion share repurchase program was authorized in December 2024, with no shares repurchased under it as of December 31, 2024.
• Dividend Payments: $4.68 billion was paid in dividends in 2024, representing $5.20 per share. The quarterly dividend was increased to $1.50 per share effective for the first quarter of 2025, indicating an annual rate of $6.00 per share for 2025.
• Future Capital Return Commitments: A $15.00 billion share repurchase program was authorized in December 2024.

Balance Sheet Position:

• Cash and Equivalents: $3,268.4 million as of December 31, 2024.
• Total Debt: $33,644.2 million as of December 31, 2024.
• Net Cash Position: -$30,375.8 million (net debt) as of December 31, 2024.
• Debt Maturity Profile: Aggregate maturities on long-term debt for the next five years are: $780.9 million in 2025, $1,529.1 million in 2026, $2,515.8 million in 2027, $441.6 million in 2028, and $3,076.1 million in 2029. In February 2025, Eli Lilly and Company issued $6.5 billion of fixed-rate notes.

Cash Flow Generation:

• Operating Cash Flow: $8,817.9 million in 2024.
• Free Cash Flow: $3,760.1 million in 2024 (Operating Cash Flow less Capital Expenditures).

Operational Excellence

Production & Service Model: Eli Lilly and Company manufactures and distributes its human pharmaceutical products through facilities in the U.S. (including Puerto Rico), Europe, and Asia. Marketing methods and product emphasis are adapted to meet local customer needs and comply with local regulations. The company has also launched LillyDirect, a direct-to-consumer digital healthcare platform in the U.S. for home delivery of select prescribed medicines. Product quality is ensured through strict control of ingredients, equipment, facilities, manufacturing methods, packaging materials, and labeling, with tests performed at various production stages and on the final product.

Supply Chain Architecture: Eli Lilly and Company sources most principal manufacturing materials from multiple sources, though certain materials are procured from single sources. The company maintains sufficient inventory to ensure production reliability and manage supply variability. Active ingredient manufacturing and finishing operations occur at sites in the U.S. (including Puerto Rico), Ireland, and other global locations. The company is expanding arrangements with third parties for active ingredient manufacturing, filling, finishing operations, and device/component production and assembly. Portions of the supply chain, particularly for integral chemical synthesis, reagents, starting materials, and ingredients, depend on China-based suppliers.

Key Suppliers & Partners:

• Wholesale Distributors (U.S.): McKesson Corporation, Cencora, Inc., and Cardinal Health, Inc. each accounted for between 16% and 24% of consolidated revenue in 2024.
• Collaboration Partners: Boehringer Ingelheim (diabetes products), Incyte Corporation (Olumiant), Innovent Biologics, Inc. (Tyvyt in China), Almirall S.A. (Ebglyss in Europe), Chugai Pharmaceutical Co., Ltd (orforglipron), AbCellera Biologics Inc. (COVID-19 antibodies).
• Contract Manufacturing Organizations: Expanded relationships with CMOs and other third parties for manufacturing capacity.

Facility Network:

• Manufacturing: Key production locations include Indiana, North Carolina, Puerto Rico, New Jersey, Ireland, France, Spain, Italy, China, and Japan. Additional U.S. and international production facilities and expansions are expected to come online in future periods, including sites in North Carolina, Wisconsin, Ireland, Germany, and two in Indiana.
• Research & Development: R&D facilities are primarily located in Indiana, California, Massachusetts, New York, and Colorado in the U.S., and in Spain and Singapore internationally.
• Distribution: Distribution sites are located in the U.S. (including Puerto Rico), Europe, and Asia.

Operational Metrics:

• U.S. wholesaler inventory levels are targeted at an average of approximately one month or less.
• Capitalized pre-launch inventory was $548.1 million as of December 31, 2024, primarily related to orforglipron.

Market Access & Customer Relationships

Go-to-Market Strategy: Eli Lilly and Company employs a multi-channel approach to market its products globally.

• Direct Sales: Educates healthcare providers through online channels, literature, product samples, and medical meetings. Direct-to-consumer advertising is utilized in the U.S. Sales representatives engage with physicians and other healthcare professionals.
• Channel Partners: Account managers service wholesalers, pharmacy benefit managers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies, entering into arrangements for discounts or rebates. Outside the U.S., the company maintains its own sales organizations in many countries and utilizes third parties for commercial sales operations through distribution and promotion arrangements.
• Digital Platforms: Operates LillyDirect, a direct-to-consumer digital healthcare platform in the U.S., and maintains websites and social media channels for product information.

Customer Portfolio:

• Customer Concentration: In 2024, three wholesale distributors in the U.S.—McKesson Corporation, Cencora, Inc., and Cardinal Health, Inc.—each accounted for between 16% and 24% of consolidated revenue. No other single customer accounted for more than 10% of consolidated revenue in 2024.

Geographic Revenue Distribution (2024):

• U.S.: 67.4% of total revenue ($30,375.2 million)
• Europe: 15.4% of total revenue ($6,920.7 million)
• Japan: 4.0% of total revenue ($1,814.9 million)
• China: 3.7% of total revenue ($1,660.4 million)
• Rest of world: 9.5% of total revenue ($4,271.4 million)

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The pharmaceutical industry is highly competitive, with success driven by product effectiveness, safety, availability, ease of use, patient experience, formulary placement, pricing, payer coverage, reimbursement rates, cost-effectiveness, regulatory approvals, marketing effectiveness, and R&D of new products. Early market entry and rapid patient access are crucial. The market is significantly impacted by the consolidation and integration of healthcare organizations, which enhances their market power and negotiation leverage. Generic pharmaceuticals and biosimilars pose major competitive challenges due to abbreviated regulatory pathways and lower pricing. The company also faces risks from the increasing production and sale of counterfeit, misbranded, adulterated, and compounded incretins.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Eli Lilly and Company competes with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies. The peer group for performance benchmarking includes AbbVie Inc., Amgen Inc., AstraZeneca PLC, Biogen Inc., Bristol-Myers Squibb Company, Gilead Sciences Inc., GlaxoSmithKline plc, Johnson & Johnson, Merck & Co., Inc., Novartis AG, Novo Nordisk A/S, Pfizer Inc., Roche Holding AG, Sanofi S.A., and Takeda Pharmaceutical Company Limited. Specific competitors mentioned in litigation include Teva Pharmaceuticals International GmbH, Teva Pharmaceuticals USA, Inc., Sanofi-Aventis U.S., LLC, Novo Nordisk Inc., and AstraZeneca Pharmaceuticals LP.

Emerging Competitive Threats: New entrants, disruptive technologies, and alternative solutions, including new or superior modalities, can decrease sales volumes and lead to price reductions for existing products. The proliferation of counterfeit, misbranded, adulterated, and compounded incretins also presents a significant threat.

Competitive Response Strategy: Eli Lilly and Company's strategy focuses on discovering and developing or acquiring innovative, cost-effective products that meet medical needs, provide improved patient outcomes, and deliver value to payers. The company continuously aims to improve operational productivity. It also actively pursues legal actions to protect intellectual property and address unlawful practices, such as the sale of unapproved or manipulated drugs.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company faces significant risks from intense competition, continued pricing pressures, and restrictions on formulary placement, payer coverage, and reimbursement rates. Anti-obesity medicines, a significant portion of revenue, often face exclusion from commercial benefit plans and lack of coverage by Medicare and international payers. The Inflation Reduction Act of 2022 (IRA) mandates government-set prices for certain single-source drugs under Medicare, with Jardiance facing a 66% discount from its 2023 U.S. list price starting in 2026. This legislation is expected to accelerate revenue erosion for selected products and reduce the attractiveness of investment in small molecule innovation. Consolidation among healthcare organizations increases payer leverage, intensifying pricing and rebate negotiations. Technology Disruption: The introduction of new products, uses, or delivery systems with therapeutic, convenience, or cost advantages by competitors can lead to decreased sales volumes and price reductions for existing products. The company's use of artificial intelligence (AI) and other emerging technologies, while offering opportunities, also exacerbates competitive, regulatory, litigation, and cybersecurity risks due to potential deficiencies in AI-generated content, biases, or the rapid adoption of AI by competitors. Customer Concentration: Eli Lilly and Company relies on a limited number of wholesale distributors in the U.S. (McKesson Corporation, Cencora, Inc., and Cardinal Health, Inc.) for a substantial portion of its revenue. Financial or operational difficulties experienced by any of these key wholesalers could disrupt the supply chain or impact timely collection of receivables.

Operational & Execution Risks

Supply Chain Vulnerabilities: While most principal materials are available from multiple sources, certain critical materials are procured from single sources. Dependence on China-based suppliers for portions of the supply chain, including integral chemical synthesis and ingredients, poses risks, especially with potential U.S. legislation (e.g., BIOSECURE Act) and geopolitical tensions aiming to limit reliance on China. Disruptions could lead to supply delays, increased costs, or retaliatory measures. Capacity Constraints: Demand for incretin medicines exceeded production at various times in 2024, and while tirzepatide supply currently exceeds U.S. demand, future demand dynamics and the complex supply chain may lead to periodic unavailability of certain presentations and dose levels. Delays in operationalizing additional manufacturing capacity could limit the ability to capitalize on demand, while unexpected events limiting demand could undermine the benefit of significant capital expenditures in manufacturing expansion.

Financial & Regulatory Risks

Demand Volatility: Predicting revenue growth rates and demand variability for new or future products and indications is challenging. Unanticipated demand, plant shutdowns, manufacturing difficulties, or supply chain disruptions can lead to product shortages, lost revenue, and reduced market opportunities. Foreign Exchange: As a global company, Eli Lilly and Company is exposed to foreign currency risk from fluctuating exchange rates, primarily the U.S. dollar against the euro, Japanese yen, and Chinese yuan. A strong U.S. dollar adversely impacts results, and extreme local currency devaluations could render product pricing unsustainable. Regulatory & Compliance Risks: The company's operations are extensively regulated by numerous government agencies globally, including the FDA in the U.S., EMA in Europe, and NMPA in China. The lengthy and costly regulatory approval process, evolving regulatory priorities, and intensified scrutiny of manufacturing quality (cGMP), marketing practices, and data privacy laws (e.g., EU Artificial Intelligence Act) pose significant risks. Non-compliance can lead to product recalls, fines, production interruptions, delays in approvals, and reputational harm. The increase in counterfeit and compounded incretins, if inadequately regulated, could impact patient safety, undermine regulatory processes, and negatively affect business and reputation.

Geopolitical & External Risks

Geopolitical Exposure: Significant portions of the business are conducted in Europe, Asia, and other international geographies, exposing the company to risks from uneven economic growth, trade disputes, tariffs, sanctions, and international conflicts. Tensions between the U.S. and China, including new tariffs imposed in February 2025, could disrupt operations and supply chains. Trade Relations: Global trade disputes and protectionist measures, such as tariffs and import/export restrictions, increase costs and can impact clinical trials or sales.

Innovation & Technology Leadership

Research & Development Focus: Eli Lilly and Company heavily invests in R&D, which is considered critical for long-term competitiveness. Internal pharmaceutical research primarily focuses on immunology, metabolism (including diabetes, obesity, and cardiovascular), neuroscience, and oncology. The company also seeks to expand the value of existing products through new uses, formulations, and therapeutic approaches, including complementary delivery devices or diagnostic tools.

Core Technology Areas:

• Immunology: Focus on developing treatments for inflammatory and autoimmune diseases.
• Metabolism: Extensive pipeline in diabetes, obesity, and cardiovascular health, including incretin medicines.
• Neuroscience: Developing treatments for neurological conditions such as Alzheimer's disease and pain.
• Oncology: Researching and developing therapies for various cancers, including targeted therapies.

Innovation Pipeline: The company has approximately 55 new medicine candidates in clinical development or under regulatory review, with a larger number of projects in the discovery phase. Key candidates in Phase 2 or Phase 3 clinical trials or under regulatory review include Tirzepatide (obesity, OSA, heart failure, cardiovascular outcomes), Insulin Efsitora Alfa (diabetes), Lepodisiran (atherosclerotic cardiovascular disease), Orforglipron (obesity, OSA, type 2 diabetes), Retatrutide (cardiovascular/renal outcomes, obesity, osteoarthritis, OSA, type 2 diabetes), Donanemab (early Alzheimer's disease), Mirikizumab (Crohn's disease), Lebrikizumab (allergic rhinitis, CRSwNP), Pirtobrutinib (CLL, MCL), and Imlunestrant (ER+HER2- metastatic breast cancer).

Intellectual Property Portfolio: Intellectual property protection is crucial for commercializing innovations and supporting R&D investments. Eli Lilly and Company holds numerous patents in the U.S. and other countries covering products, uses, formulations, and manufacturing processes, supplemented by data protection under pharmaceutical regulatory laws.

• Patent Strategy: Focuses on compound patents for active ingredients, with additional protection from later-expiring patents on manufacturing processes, methods of use, or formulations. Patent term adjustments and restorations (e.g., up to 5 years in the U.S., 14 years from FDA approval) extend exclusivity.
• Licensing Programs: Engages in significant license and collaboration agreements, such as with Boehringer Ingelheim for diabetes products, Incyte Corporation for Olumiant, and Almirall S.A. for Ebglyss in Europe.
• IP Litigation: Routinely faces patent challenges from generic manufacturers in the U.S. (under Hatch-Waxman Act and BPCIA) and internationally. The inter partes review (IPR) process at the USPTO also allows for patent validity challenges.

Technology Partnerships: Eli Lilly and Company collaborates with academic institutions and research-based pharmaceutical and biotechnology companies. These collaborations take various forms, including licensing arrangements, co-development agreements, co-promotion arrangements, joint ventures, acquisitions, and equity investments, to supplement internal R&D efforts.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The term of office for each executive officer expires on the date of the annual meeting of the board of directors, to be held on May 5, 2025, or on the date his or her successor is chosen and qualified.

Board Composition: The audit committee of the board of directors consists of four nonemployee members, all of whom are independent. The board regularly receives presentations on cybersecurity and information technology.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 47,000 people at the end of 2024.
• Geographic Distribution: Approximately 25,000 employees are located outside the U.S.
• Skill Mix: Approximately 11,000 employees are engaged in pharmaceutical research and development activities, including physicians, scientists with graduate or postgraduate degrees, and highly skilled technical personnel.

Talent Management:

• Acquisition & Retention: Eli Lilly and Company is committed to attracting, retaining, engaging, and developing a diverse, highly skilled, and ethical workforce by fostering a positive culture, ensuring fairness and nondiscrimination in employment practices, providing robust training and development opportunities, and offering competitive pay and benefits. The company aims to hire the most qualified candidates and believes its employee relations are good.
• Retention Metrics: Confidential employee surveys are regularly conducted to gather feedback, which leaders review to identify opportunities for improving the employee experience.

Diversity & Development: The company deeply values diverse backgrounds, skills, and global perspectives, believing that promoting inclusion strengthens innovation. It provides robust training and development opportunities to its workforce.

Culture & Engagement: Eli Lilly and Company strives to create a healthy, vibrant, and safe work environment, fostering a company-wide culture of best-in-class safety practices.

Environmental & Social Impact

Social Impact Initiatives: Eli Lilly and Company's purpose is to unite caring with discovery to create medicines that make life better for people globally. This includes offering programs to assist patients in adhering to treatment plans, such as those available through LillyDirect. The company is committed to fairness and nondiscrimination in its employment practices and strives to foster a healthy, vibrant, and safe work environment for its employees, assessing and continuously improving company-wide safety performance to promote employee well-being and safeguard communities.

Business Cyclicality & Seasonality

Demand Patterns: Supply and channel dynamics contribute to variability in financial results for products from period to period. The company faces difficulties in predicting or managing variability in demand and supply for its products and those of competitors. Economic Sensitivity: Economic slowdowns can lead to decreased utilization of products. Declining tax revenues and increased government spending on other programs during economic downturns increase pressure on governments to reduce healthcare spending, potentially leading to increased drug price controls or lower utilization. Customers, including governments and cash-pay patients, may also face challenges in paying for products fully or in a timely manner. Planning & Forecasting: Eli Lilly and Company manages its supply chain, including internal facilities, contracted arrangements, and inventory, to meet product demand while maintaining flexibility to reallocate manufacturing capacity, improve efficiency, and respond to changes in supply and demand. Techniques include comprehensive quality systems, inventory management, and back-up sites.

Regulatory Environment & Compliance

Regulatory Framework: Eli Lilly and Company's operations are extensively regulated by numerous government agencies worldwide, including the U.S. Food and Drug Administration (FDA), the European Medicines Agency (EMA) in Europe, the Ministry of Health, Labor and Welfare in Japan, and the National Medical Products Administration in China.

• Industry-Specific Regulations: Compliance is required with laws such as the Federal Food, Drug, and Cosmetic Act (FDCA) and the Public Health Service Act (PHS) in the U.S., covering testing, safety, effectiveness, manufacturing, quality control, distribution, labeling, marketing, promotion, advertising, and post-marketing surveillance. The company is also subject to current Good Manufacturing Practices (cGMP), federal anti-kickback statute, False Claims Act, antitrust laws, and state laws governing kickbacks, false claims, unfair trade practices, and consumer protection. The U.S. Foreign Corrupt Practices Act of 1977 (FCPA) applies to interactions with foreign officials. The European Commission's draft General Pharmaceutical Legislation, if approved, could impact market and patient access.
• International Compliance: Regulatory requirements and approval processes outside the U.S. differ and may involve additional costs, uncertainties, and risks. Many jurisdictions, including the U.S., the European Union, and China, have enacted or are proposing restrictions on international data transfers.

Trade & Export Controls: U.S. federal lawmakers are considering legislation, such as the proposed BIOSECURE Act, to limit supply chain reliance on China. Geopolitical tensions between the U.S. and China have led to tariffs, sanctions, and business restrictions. In February 2025, the U.S. presidential administration imposed new tariffs on Chinese goods, with China responding with tariffs on select U.S. goods. These measures could result in supply disruptions, increased costs, or retaliatory actions.

Legal Proceedings: Eli Lilly and Company is a party to various lawsuits, claims, and government investigations.

• Patent Litigation: Involved in patent litigation with Teva Pharmaceuticals International GmbH and Teva Pharmaceuticals USA, Inc. regarding Emgality, currently pending appeal.
• Environmental Matters: Defending against a public civil action in Brazil by the state Labor Public Attorney concerning alleged harm from contaminants at a former manufacturing facility in Cosmopolis, with a liquidated award of approximately $226 million (adjusted for inflation) against Lilly do Brasil Limitada, pending appeal.
• 340B Litigation and Investigations: Engaged in litigation against the U.S. Department of Health and Human Services (HHS) challenging the 340B program's advisory opinion and administrative dispute resolution (ADR) regulations, with a preliminary injunction against the ADR process. Also facing civil investigative subpoenas from state attorneys general and class action lawsuits related to 340B programs. In November 2024, Lilly sued the Health Resources and Services Administration (HRSA) over its rejection of Lilly’s plan to implement a cash replenishment model for 340B pricing.
• Insulin Pricing Litigation: Subject to numerous lawsuits, including putative class actions, from consumers, states, and other entities alleging issues with insulin pricing and rebates. Non-monetary settlements were reached with the Minnesota and New York attorney generals.
• Average Manufacturer Price Litigation: Appealing a jury verdict in a qui tam action alleging improper calculation of average manufacturer prices.
• Product Liability Litigation: Facing lawsuits regarding Mounjaro and Trulicity, alleging injuries following purported use of incretin medicines, with cases coordinated in a federal multidistrict litigation (MDL).
• Government Investigations: Subject to a subpoena from the U.S. Department of Justice regarding its Branchburg, New Jersey manufacturing site.

Tax Strategy & Considerations

Tax Profile: Eli Lilly and Company is subject to income taxes in the U.S. and numerous foreign jurisdictions.

• Effective Tax Rate: The effective tax rate was 16.5% in 2024, compared to 20.1% in 2023. Both years were unfavorably impacted by non-deductible acquired in-process research and development (IPR&D) charges, with a larger impact in 2023.
• Geographic Tax Planning: Substantially all unremitted earnings of foreign subsidiaries are considered not indefinitely reinvested.
• Tax Reform Impact: Effective January 1, 2024, several EU and non-EU countries enacted "Pillar Two" legislation for a global minimum tax, which was not material to income tax expense in 2024 and is not expected to be material in current and future years. The U.S. examination of tax years 2019-2021 is ongoing, and competent authority assistance is being pursued for intercompany transactions for tax years 2016-2018.

Insurance & Risk Transfer

Risk Management Framework: Eli Lilly and Company manages market risks (interest rates, currency values, equity securities) through a controlled program of risk management, including the use of derivative financial instruments, with all derivative activities for purposes other than trading. The company also uses accounts receivable factoring agreements to sell certain non-U.S. accounts receivable. Insurance Coverage: Due to a restrictive market for liability insurance, Eli Lilly and Company is predominately self-insured for litigation liability losses across all current and previously marketed products, as well as for litigation or investigations related to pricing practices. While cyber liability insurance is maintained, it may not be sufficient to cover all potential losses from IT system interruptions or breaches.