Eli Lilly and Company (LLY) FY2025 10-K and Q2 FY2026 10-Q Summary

Business

From the FY2025 Form 10-K, accession 0000059478-26-000013.

Eli Lilly was incorporated in Indiana in 1901, succeeding a drug manufacturing business founded in Indianapolis in 1876. It discovers, develops, manufactures, and markets human pharmaceutical products and reports as a single operating and reportable segment. Products are sold in approximately 90 countries; manufacturing and distribution run through facilities in the U.S. (including Puerto Rico), Europe, and Asia. At the end of 2025 the company employed roughly 50,000 people, about 27,000 of them outside the U.S., including approximately 12,000 in research and development.

Therapeutic franchises and marketed products

• Cardiometabolic health, Mounjaro (tirzepatide, type 2 diabetes), Zepbound (tirzepatide, obesity/overweight and obstructive sleep apnea; marketed under the Mounjaro brand for those indications in various markets outside the U.S.), Trulicity, Jardiance (Boehringer Ingelheim collaboration, including Glyxambi, Synjardy, Trijardy XR), Basaglar (Boehringer Ingelheim), Humalog and Humulin insulin families.
• Oncology, Verzenio, Jaypirca, Retevmo, Inluriyo, Cyramza, Erbitux, Tyvyt (Innovent collaboration, China).
• Immunology, Taltz, Omvoh, Ebglyss (licensed from Roche/Genentech; Almirall holds European dermatology rights), Olumiant (Incyte collaboration).
• Neuroscience, Emgality, Kisunla.

How revenue is earned. Most revenue is net product revenue; a smaller "collaboration and other" line captures the company's share of collaboration profits, royalties, and upfront and milestone payments. In the U.S., most products move through wholesalers, McKesson, Cencora, and Cardinal Health each accounted for a significant percentage of consolidated revenue in 2023, 2024, and 2025, with no other customer above 10 percent. Gross-to-net is a large and judgment-heavy item: contracts with direct and indirect customers carry managed care, Medicare, Medicaid, chargeback, and patient-assistance rebates and discounts recognized as revenue reductions at the time of sale. As of December 31, 2025 a 5 percent change in the consolidated sales return, rebate, and discount liability would change revenue by approximately $897 million, and roughly 87 percent of that liability balance related to U.S. sales.

LillyDirect, the company's direct-to-patient digital platform, delivers select medicines dispensed by third-party pharmacies and represented a growing portion of the business in 2025. Direct-to-employer channels are being built alongside it as a response to unfavorable private-sector access dynamics.

Competition and access. Lilly competes with multinational pharmaceutical, biotechnology, and generic companies, and explicitly flags intensifying competition from China and other markets whose R&D capability has expanded, with companies there increasingly licensing assets to multinationals and competing directly. Access is a structural constraint for the obesity franchise: U.S. self-insured employers must generally opt in to cover anti-obesity medicines, and payers in various international markets do not cover them for weight loss at all. Counterfeit, misbranded, adulterated, and mass-compounded incretins remain a live commercial and patient-safety problem.

Intellectual property. The compound patent is the central protection, with data protection, pediatric exclusivity, and orphan exclusivity layered on. Key estimated expiries disclosed in the 10-K:

Manufacturing. To meet expected incretin demand the company has undertaken a large capacity build, with new sites in North Carolina, Wisconsin, Indiana, Virginia, Texas, Alabama, Pennsylvania, Ireland, Germany, and the Netherlands. It also relies on third parties for portions of active-ingredient manufacturing, fill-finish, and device assembly, and, like the industry generally, on China-based suppliers for parts of its chemical supply chain.

Pricing and policy environment. In November 2025 Lilly announced preliminary voluntary agreements with the U.S. government: lower Medicaid and certain other drug prices, a more balanced launch-pricing approach across developed nations, Medicare beneficiary access to discounted obesity medicines by July 1, 2026, an option for states to expand Medicaid access, and participation in a government direct-to-patient purchasing platform. The agreements also provide a three-year grace period during which products under a Section 232 investigation would not face tariffs, conditioned on meeting U.S. manufacturing investment commitments. Under the Inflation Reduction Act, HHS selected Jardiance for government-set Medicare prices effective 2026 (announced at a 66 percent discount to the 2023 list price for a 30-day supply) and, in January 2026, selected Trulicity and Verzenio for prices effective 2028.

Risk factors

Condensed from Item 1A of the FY2025 Form 10-K, accession 0000059478-26-000013.

Concentration in a few products, and in one product class. Mounjaro, Zepbound, Verzenio, Trulicity, Taltz, and Jardiance each generated more than $3 billion of revenue and together accounted for 82 percent of total 2025 revenue; Mounjaro and Zepbound alone were 56 percent. The company expects cardiometabolic health to remain a growing share of the business. Loss of exclusivity, safety findings, demand or channel swings, or access setbacks in these products could materially affect results, and, the filing notes, could produce sudden declines or volatility in the stock price and market capitalization.

R&D is costly and fails often. A significant portion of R&D spending will not generate direct financial returns; candidates fail late, after manufacturing capacity and launch inventory have been committed. The company must keep replenishing the portfolio to cover R&D cost and replace revenue lost to pricing controls, exclusivity expiry, and competitive displacement, and it notes that its own growth increases the size of the hole future products must fill.

Business development risk. Lilly is an active acquirer, and flags competition for targets, regulatory focus on pharmaceutical combinations (FTC and European and other authorities), integration and retention failures, diligence that misses or under-sizes risk, and the resulting possibility of impairment or restructuring charges. Business development in novel modalities carries additional scientific uncertainty.

Government price controls, and the specific U.S. arrangements. The filing is unusually direct that the November 2025 voluntary agreements are themselves a risk: the definitive agreements may be delayed or land on unfavorable terms, and the company may fail to capitalize on expanded U.S. obesity access if the revenue from it does not offset the pricing concessions. Broader efforts to align U.S. pricing with international benchmarks could pressure pricing strategy, demand, access, and competitive position across global markets and reduce revenue in certain markets. IRA price-setting is expected to reach additional Lilly products in future years, accelerating revenue erosion ahead of exclusivity expiry; the nine-year NDA timeline is described as reducing the attractiveness of small-molecule investment.

Private-payer and channel power. Consolidated health plans, PBMs, wholesalers, and pharmacies use formularies, utilization management, and cost-sharing design to control spend. A named example: in July 2025 CVS Caremark stopped covering Zepbound as a preferred obesity management medicine on some plans, negatively affecting access for patients on those plans. Continued expansion of the 340B program, including state laws purporting to mandate 340B sales to unlimited contract pharmacies, affects an increasing percentage of sales.

Intellectual property. Trulicity will lose significant patent and remaining data protection within the next few years. U.S. patents on major products are expected to be routinely challenged under Hatch-Waxman, the BPCIA, and inter partes review; the December 2025 EU pharmaceutical legislation agreement-in-principle would make certain IP incentives conditional and cut maximum data protection by a year. Proposals for government "march-in rights" and USPTO/Congressional limits on patent families are also flagged.

Safety and efficacy after launch. Post-approval use in far larger populations can surface new safety or efficacy signals, leading to label changes, recalls, withdrawals, and product liability claims. Concerns raised about same-class, compounded, counterfeit, or same-mechanism products can be imputed to Lilly's products.

Manufacturing and supply. The capacity expansion cuts both ways: shortages and disruptions cost revenue and invite market entrants, while overestimating demand would strand large capital expenditures, create supply imbalances, and trigger contractual payment obligations. Regional and single-source dependencies, China-based suppliers in particular, add tariff and geopolitical exposure, and qualifying alternative suppliers is slow and regulator-gated.

Third parties, AI, and IT. Lilly outsources clinical trial management, testing, certain manufacturing and fill-finish, device assembly, and distribution, and has expanded relationships with contract manufacturers, consumer-access channel operators, and AI vendors. It deploys AI in drug discovery and operations and warns that AI may enable new competitors, that its own AI investments may not pay off, and that AI use compounds regulatory, cybersecurity, litigation, and data-privacy risk. IT and cybersecurity failures are called out as potentially material; to date none encountered has had a material impact on strategy, results, or financial condition.

International, currency, and tax. Significant operations in Europe and Asia expose the company to cost-containment regimes where governments are the dominant payer (EU, Japan, China), tariffs and trade restrictions, and geopolitical escalation. Lilly is a net receiver of most foreign currencies and is hurt by a strong dollar; principal exposures are the euro, yen, yuan, and sterling. Tax positions face routine examination and increasing scrutiny of cross-border issues.

Litigation. The company is predominantly self-insured for liability losses on all currently and previously marketed products because the liability insurance market is very restrictive.

Principal named legal matters (from Note 9 of the Form 10-Q, accession 0000059478-26-000081):

• Emgality patent litigation (Teva). After a 2022 jury verdict for Teva and a 2023 judgment for Lilly holding the asserted claims invalid, the Federal Circuit reversed the invalidity finding in April 2026 and remanded; Lilly recognized a charge in Q1 2026 and petitioned for rehearing en banc in June 2026.
• Verzenio Hatch-Waxman. Cipla filed an ANDA in April 2026; Lilly sued in Delaware in June 2026.
• Tirzepatide Hatch-Waxman. In July 2026 multiple generic companies filed ANDAs against Mounjaro and/or Zepbound patents; Lilly intends to sue.
• 340B litigation. Lilly's Seventh Circuit appeal over HHS's contract-pharmacy advisory opinion and ADR regulations remains pending; the Mosaic Health antitrust class action was revived by the Second Circuit and Lilly petitioned the Supreme Court in March 2026; multiple state and provider suits continue. Separately, Lilly appealed to the D.C. Circuit after a May 2025 district court ruling backing HRSA's position that its cash-replenishment model requires preapproval.
• Insulin pricing. A multidistrict litigation in New Jersey plus state, municipal, tribal, and payer suits; in July 2026 the Michigan Supreme Court reversed the appellate decision that had been in Lilly's favor in the state's Consumer Protection Act matter. Lilly previously settled with New York (2023) and Minnesota (2024) without monetary payments or admissions.
• Average manufacturer price qui tam. After a 2022 jury verdict for the relator and a September 2025 Seventh Circuit affirmance (charge recognized), the Supreme Court denied review in May 2026.
• Incretin product liability. Two federal MDLs in the Eastern District of Pennsylvania (gastrointestinal injuries; NAION), plus state proceedings in Delaware, Indiana, and New Jersey and class petitions in Israel and Canada.
• Brazil (Cosmopolis). The superior labor court significantly reduced the liquidated award in December 2025; appeals continue.
• Health Choice Alliance. A Texas Medicaid Fraud Prevention Act qui tam; in August 2025 the relator purported to dismiss the first suit and filed a second adding the State of Texas and expanding claims from three to fifteen products.

Management's discussion and analysis, fiscal year 2025

From Item 7 of the FY2025 Form 10-K, accession 0000059478-26-000013.

Headline results

Revenue drivers. U.S. revenue rose 43 percent to $43,481 million and revenue outside the U.S. rose 48 percent to $21,698 million. Consolidated growth decomposed to volume +50 percent, price −6 percent, foreign exchange +1 percent; in the U.S. the split was volume +53 percent and price −10 percent. Both the volume gain and the price decline were driven principally by Mounjaro and Zepbound.

Mounjaro grew 53 percent in the U.S. on demand, partly offset by lower realized prices; outside the U.S. it went from $2.6 billion to $9.3 billion on volume. Zepbound grew 174 percent in the U.S. Verzenio grew 1 percent in the U.S. and 20 percent outside it.

Margins and expenses. Gross margin was $54,127 million, or 83.0 percent of revenue, up 1.7 points on favorable mix and improved cost of production against lower realized prices. R&D rose 21 percent to $13,337 million on early- and late-stage portfolio investment; marketing, selling, and administrative rose 29 percent to $11,094 million on launch support. Acquired IPR&D charges were $2,910 million (2024: $3,280 million), chiefly Scorpion's PI3Kα program STX-478 and SiteOne Therapeutics. The effective tax rate was 19.8 percent versus 16.5 percent, driven by jurisdictional earnings mix and 2025 U.S. tax law changes; both years were hurt by non-deductible acquired IPR&D.

Cash and capital. Operating cash flow rose to $16.8 billion from $8.8 billion; cash and equivalents ended 2025 at $7.3 billion versus $3.3 billion, with $2.9 billion of additional investments. Capital expenditures were $7.8 billion versus $5.1 billion, and management expects meaningfully higher capex near term. Contract manufacturing and supply agreements for medicines in development could require up to approximately $10 billion in payments if specified purchase volumes are not taken, over terms generally up to eight years; unfunded venture capital fund commitments were about $902 million. Total debt rose $8.9 billion to $42.5 billion, against $10.1 billion of unused committed bank facilities. Dividends paid were $6.00 per share (2024: $5.20), with the quarterly rate raised to $1.73 effective in the first quarter of 2026, an indicated annual rate of $6.92. Lilly repurchased $4.1 billion of stock under the $15.0 billion December 2024 authorization, leaving $10.9 billion. The 10-K also disclosed that 2026 business development agreements already signed and subject to closing conditions carried potential amounts payable at closing of less than $3 billion.

Pipeline as of the 10-K. Tirzepatide approvals in the EU for HFpEF and in the U.S. and EU for pediatric/adolescent type 2 diabetes, with cardiovascular outcomes submitted in the U.S. and Phase 3 programs in MASLD, morbidity/mortality in obesity, and type 1 diabetes. Insulin efsitora alfa submitted in the U.S., EU, and Japan for type 2 diabetes. Orforglipron submitted in the U.S., EU, and Japan for obesity, carrying an FDA Commissioner's National Priority Voucher, and in the EU for type 2 diabetes, with Phase 3 programs across cardiovascular outcomes, hypertension, OSA, osteoarthritis pain, peripheral artery disease, and stress urinary incontinence. Retatrutide Phase 3 across cardiovascular/renal outcomes, chronic low back pain, MASLD, obesity/osteoarthritis/OSA, and type 2 diabetes. Also in Phase 3: eloralintide, lepodisiran, muvalaplin, brenipatide (alcohol use disorder), remternetug, ixo-vec, olomorasib, sofetabart mipitecan, imlunestrant in adjuvant breast cancer, and lebrikizumab line extensions. Approvals in the period included Omvoh in Crohn's disease, Kisunla in early Alzheimer's, Inluriyo, and full approval of Jaypirca in CLL.

Other matters. The One Big Beautiful Bill Act, enacted July 2025, made permanent several Tax Cuts and Jobs Act provisions including immediate deductibility of U.S. R&D expense and 100 percent bonus depreciation. A 5 percent change in uncertain tax positions or in the valuation allowance would change net income by $160 million and $61 million respectively.

Current quarter, three and six months ended June 30, 2026

From the Form 10-Q, accession 0000059478-26-000081, and the second-quarter earnings release furnished on Form 8-K, accession 0000059478-26-000077.

Results

U.S. revenue rose 33 percent to $14,413 million and revenue outside the U.S. rose 80 percent to $8,561 million. The quarter's consolidated split was volume +60 percent, price −13 percent, foreign exchange +1 percent. Outside the U.S. the price effect was −36 percent, driven primarily by the addition of Mounjaro to China's National Reimbursement Drug List. U.S. price was −3 percent, held up by favorable adjustments to rebate and discount estimates on Trulicity, Mounjaro, and Zepbound; the earnings release states that excluding those adjustments U.S. price would have declined about 9 percent.

Mounjaro revenue outside the U.S. was $5.2 billion in the quarter against $1.9 billion a year earlier. Jardiance revenue outside the U.S. included a $250 million sales-based milestone under the Boehringer Ingelheim collaboration. Newer launches contributed: Ebglyss $201 million, Jaypirca $192 million, Kisunla $167 million, Omvoh $102 million, Foundayo (orforglipron) $98 million in its first quarter, and Inluriyo $75 million. Mounjaro and Zepbound together were 65 percent of first-half revenue, up from 56 percent of full-year 2025.

Margins and charges. Gross margin was $19,706 million, 85.8 percent of revenue, up 1.5 points. R&D rose 14 percent to $3,819 million; marketing, selling, and administrative rose 25 percent to $3,430 million. Acquired IPR&D charges were $2,776 million versus $154 million a year earlier, principally the Orna Therapeutics ($1,233 million, ORN-252) and Ajax Therapeutics ($909 million, AJ1-11095) asset acquisitions, and asset impairment, restructuring, and other special charges were $703 million (none in Q2 2025), mostly accelerated vesting of employee equity awards and other acquisition and integration costs from the Kelonia and Centessa closings. Those two items pushed the effective tax rate to 23.3 percent from 16.5 percent. Acquired IPR&D charges equated to $3.03 of EPS in the quarter versus $0.14 a year earlier; non-GAAP EPS was $8.38, up 33 percent.

Business development in the period. Business combinations closed in the first half were Ventyx Biosciences (March 4, 2026; oral therapies for inflammatory-mediated diseases; lead asset VTX3232), Centessa Pharmaceuticals (June 24, 2026; orexin receptor 2 agonists for sleep-wake disorders; lead asset ORX750), and Kelonia Therapeutics (June 25, 2026; in vivo CAR-T; lead asset KLN-1010). Cash paid for business development in 2026 through the quarter was $13.3 billion, across Centessa, Kelonia, Orna, Ventyx, and Ajax. Contingent consideration liabilities rose to $2,518 million across current and noncurrent balances, from $251 million at year-end, chiefly from Kelonia.

Financial condition. Operating cash flow in the first half was $16.0 billion, against $16.8 billion for the whole of 2025, and capital expenditures were $5.3 billion (full-year 2025: $7.8 billion), leaving free cash flow of $10.8 billion. During the quarter the company committed an additional $4.5 billion to expand its Indiana manufacturing sites. Cash and equivalents rose to $9.0 billion from $7.3 billion, with investments of $3.9 billion. Total debt was $54.9 billion, up $12.4 billion from year-end, comprising $49.6 billion of long-term debt (carrying amount) and $5.3 billion of commercial paper; the increase funded a portion of the Centessa and Kelonia consideration and repaid commercial paper. Unused committed bank facilities remained $10.1 billion. The company repurchased $4.0 billion of stock in the first half, leaving $7.0 billion of the $15.0 billion authorization, and paid $3.1 billion, or $3.46 per share, of dividends. Unfunded venture capital commitments were about $806 million.

Pipeline and regulatory changes since the 10-K. The FDA approved orforglipron for obesity, launched in the U.S. as Foundayo in the second quarter, and Lilly submitted orforglipron for type 2 diabetes in the U.S., EU, and Japan and for obesity and/or type 2 diabetes across all major international markets. CHMP issued a positive opinion for insulin efsitora alfa in type 2 diabetes in the EU. Retatrutide Phase 3 trials in obesity met their primary endpoints, as did a Phase 3 type 2 diabetes trial; the earnings release states the clinical data package is complete to support global registrations in obesity, obstructive sleep apnea, and knee osteoarthritis pain, with a U.S. Biologics License Application planned for the first quarter of 2027. New Phase 3 starts included baricitinib in type 1 diabetes; eloralintide as an incretin add-on for obesity, for OSA, and for osteoarthritis pain; brenipatide in major depressive disorder; and sofetabart mipitecan in platinum-sensitive ovarian cancer, which also received FDA Breakthrough Therapy designation in platinum-resistant disease. Regulatory approvals in the quarter included Ebglyss for eight-week maintenance dosing in moderate-to-severe atopic dermatitis (U.S.) and Jaypirca as monotherapy for CLL across all lines of therapy (European Commission).

Access. The U.S. government pricing agreements were finalized in the first quarter of 2026. Under the resulting Medicare GLP-1 Bridge Program, Medicare beneficiaries obtained access to discounted Lilly obesity medicines effective July 1, 2026 through December 31, 2027, with state Medicaid programs separately able to expand access. Lilly continues to engage CMS on long-term Medicare access and states that the uptake from this expanded access is unknown.

Guidance. Full-year 2026 revenue guidance was raised to $85.0–$87.0 billion (prior: $82–$85 billion) and performance margin guidance to 49.0–50.5 percent (prior: 47.0–48.5 percent). Non-GAAP EPS guidance is $35.50–$36.50: underlying business strength added $2.78 at the midpoint, more than offset by the $3.03 of second-quarter acquired IPR&D charges. Tax rate guidance was unchanged at 18–19 percent. Guidance excludes acquired IPR&D incurred after June 30, 2026 and assumes about 894 million shares and exchange rates of 1.14 (euro), 153 (yen), and 7.1 (yuan).

Management's stated near-term swing factors. Timing of additional orforglipron approvals; demand and pace of uptake in new incretin channels and markets, including U.S. Medicare for Zepbound and Foundayo; and incretin volume fluctuations from channel dynamics or demand, which the company says can have a disproportionate effect on results in any given period. Longer term, management ties durability to maintaining competitive position as the therapeutic landscape evolves and delivering further innovation.

Subsequent events

From Note 4 and Item 2 of the Form 10-Q, accession 0000059478-26-000081, and Note 9 of the same filing.

• Infectious disease acquisitions (July 2026). Lilly acquired three companies to build an infectious disease portfolio for up to $3.9 billion in aggregate, inclusive of upfront payments and additional potential payments contingent on clinical, regulatory, and commercial milestones. It paid approximately $2.0 billion in July 2026 in connection with these acquisitions. The targets are not named in the filing, and because access to information was limited before closing, the fair values of assets acquired and liabilities assumed and the associated accounting treatments had not yet been determined.
• AtaiBeckley Inc. (pending). Lilly entered into an agreement to acquire AtaiBeckley Inc., subject to closing conditions. The potential amount payable at closing is approximately $2.8 billion. The earnings release describes the transaction as advancing therapies for treatment-resistant depression and other mental health conditions.
• Tirzepatide generic challenges (July 2026). Generic filers challenged Mounjaro and/or Zepbound patents, as set out under legal matters above.
• Insulin pricing, Michigan (July 2026). The Michigan Supreme Court reversed the appellate ruling that had been in Lilly's favor, as set out under legal matters above.

The company states it evaluated subsequent events through the time of filing the quarterly report on August 5, 2026.