UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

COMMISSION FILE NUMBER 001-6351

ELI LILLY AND COMPANY

(Exact name of Registrant as specified in its charter)


Indiana						35-0470950
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

Lilly Corporate Center, Indianapolis, Indiana 46285

(Address and zip code of principal executive offices)

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

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


Title of Each Class	Trading Symbols	Name of Each Exchange On Which Registered
Common Stock (no par value)	LLY	New York Stock Exchange
7 1/8% Notes due 2025	LLY25	New York Stock Exchange
1.625% Notes due 2026	LLY26	New York Stock Exchange
2.125% Notes due 2030	LLY30	New York Stock Exchange
0.625% Notes due 2031	LLY31	New York Stock Exchange
0.500% Notes due 2033	LLY33	New York Stock Exchange
6.77% Notes due 2036	LLY36	New York Stock Exchange
1.625% Notes due 2043	LLY43	New York Stock Exchange
1.700% Notes due 2049	LLY49A	New York Stock Exchange
1.125% Notes due 2051	LLY51	New York Stock Exchange
1.375% Notes due 2061	LLY61	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of common stock outstanding as of ~~October 28, 2022:~~August 3, 2023:


Class						Number of Shares Outstanding
Common						~~950,177,900~~949,295,173

Eli Lilly and Company

Form 10-Q

For the Quarter Ended ~~September~~June 30, ~~2022~~2023

Table of Contents


		Page
PART I. Financial Information		5

Item 1.	Financial Statements	5
	Consolidated Condensed Statements of Operations	5
	Consolidated Condensed Statements of Comprehensive Income	6
	Consolidated Condensed Balance Sheets	7
	Consolidated Condensed Statements of Equity	8
	Consolidated Condensed Statements of Cash Flows	10
	Notes to Consolidated Condensed Financial Statements	11
Item 2.	Management's Discussion and Analysis of Results of Operations and Financial Condition	3736
	Executive Overview	3736
	~~Revenue~~Results of Operations	45
	~~Gross Margin, Costs, and Expenses~~	4942
	Financial Condition and Liquidity	5046

	Critical Accounting Estimates	5147
	Available Information on our Website	5147
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	5248

PART II. Other Information		5349

Item 1.	Legal Proceedings	5349
Item 1A.	Risk Factors	5349
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5349
Item 5.	Other Information	49
Item 6.	Exhibits	5450

Signatures		5450

Forward-Looking Statements

This Quarterly Report on Form 10-Q and our other publicly available documents include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act), and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. In particular, information appearing under "Management's Discussion and Analysis of Results of Operations and Financial Condition" includes forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and generally can be identified by the use of words such as "may," "believe," "will," "expect," "project," "estimate," "intend," "anticipate," "plan," "continue," or similar expressions or future or conditional verbs.

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

•the ~~impact of the evolving COVID-19 pandemic or any future pandemic, epidemic, or similar public health threat and the global response thereto;~~

•~~uncertainties related to our efforts to develop, manufacture, and distribute potential treatments for COVID-19;~~

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

•the impact and outcome of acquisitions and business development transactions and related ~~integration~~ costs;

•the expiration of intellectual property protection for certain of our products and competition from generic and/or biosimilar products;

•our ability to protect and enforce patents and other intellectual property;

•changes in patent law or regulations related to data package exclusivity;

•competitive developments affecting current products and our pipeline;

•market uptake of recently launched products;

•information technology system inadequacies, breaches, or operating failures;

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

•the impact of global macroeconomic conditions, trade disruptions, disputes, unrest, war, regional dependencies, or other costs, uncertainties and risks related to engaging in business globally;

•unexpected safety or efficacy concerns associated with our products;

•litigation, investigations, or other similar proceedings involving past, current, or future products or commercial activities as we are largely self-insured;

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

•dependence on certain products for a significant percentage of our total revenue and an increasingly consolidated supply chain;

•reliance on third-party relationships and outsourcing arrangements;

•the impact of public health outbreaks, epidemics, or pandemics, such as the COVID-19 pandemic;

•regulatory changes or other developments;

•regulatory actions regarding ~~currently marketed~~operations and products;

•continued pricing pressures and the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and access to pharmaceuticals;

•devaluations in foreign currency exchange rates or changes in interest rates and inflation;

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

•asset impairments and restructuring charges;

•~~the impact of global macroeconomic conditions, trade disruptions, global disputes, unrest, war, or other costs, uncertainties and risks related to engaging in business in foreign jurisdictions;~~

•changes in accounting and reporting standards promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission (SEC); ~~and~~

•regulatory compliance problems or government ~~investigations.~~investigations; and

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

More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, particularly under the caption "Risk Factors." Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and under Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties.

All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this Quarterly Report on Form 10-Q. Except as is required by law, we expressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of this Quarterly Report on Form 10-Q.

PART I. Financial Information

Item 1. Financial Statements

Consolidated Condensed Statements of Operations

(Unaudited)

ELI LILLY AND COMPANY AND SUBSIDIARIES

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue (Note 2)	Revenue (Note 2)	$	6,941.6	$	6,772.8	$	21,239.6	$	20,318.5	Revenue (Note 2)	$	8,312.1	$	6,488.0	$	15,272.1	$	14,298.0
Costs, expenses, and other:	Costs, expenses, and other:									Costs, expenses, and other:
Cost of sales	Cost of sales	1,579.1		1,430.8		5,081.7		5,262.6		Cost of sales	1,807.4		1,430.5		3,434.1		3,502.6
Research and development	Research and development	1,802.9		1,705.3		5,194.9		5,032.4		Research and development	2,356.5		1,781.9		4,341.6		3,392.0
Marketing, selling, and administrative	Marketing, selling, and administrative	1,614.2		1,577.9		4,797.2		4,839.6		Marketing, selling, and administrative	1,925.4		1,625.1		3,674.6		3,183.0
Acquired in-process research and development and development milestones (Note 3)		62.4		177.6		668.4		532.4
Asset impairment, restructuring, and other special charges (Note 5)		206.5		—		206.5		211.6
Other–net, (income) expense (Note 11)		111.0		635.9		580.9		124.3
Acquired in-process research and development (Note 3)										Acquired in-process research and development (Note 3)	97.1		440.4		202.1		606.0

Other–net, (income) expense (Note 10)										Other–net, (income) expense (Note 10)	36.8		119.2		1.1		469.9
		5,376.1		5,527.5		16,529.6		16,002.9			6,223.2		5,397.1		11,653.5		11,153.5
Income before income taxes	Income before income taxes	1,565.5		1,245.3		4,710.0		4,315.6		Income before income taxes	2,088.9		1,090.9		3,618.6		3,144.5
Income taxes (Note 7)		113.8		135.2		402.9		460.0
Income taxes (Note 6)										Income taxes (Note 6)	325.7		138.4		510.5		289.1
Net income	Net income	$	1,451.7	$	1,110.1	$	4,307.1	$	3,855.6	Net income	$	1,763.2	$	952.5	$	3,108.1	$	2,855.4

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.61	$	1.22	$	4.78	$	4.25	Basic	$	1.96	$	1.06	$	3.45	$	3.17

Diluted	Diluted	$	1.61	$	1.22	$	4.76	$	4.23	Diluted	$	1.95	$	1.05	$	3.44	$	3.16

Shares used in calculation of earnings per share:	Shares used in calculation of earnings per share:									Shares used in calculation of earnings per share:
Basic	Basic	900.7		906.7		901.8		907.7		Basic	899.7		900.3		900.3		902.0
Diluted	Diluted	903.8		910.8		904.5		911.7		Diluted	902.7		902.9		903.0		904.4

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)

ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	1,451.7	$	1,110.1	$	4,307.1	$	3,855.6	Net income	$	1,763.2	$	952.5	$	3,108.1	$	2,855.4
Other comprehensive income (loss), net of tax (Note 10)		(8.1)		114.4		47.3		323.7
Other comprehensive income (loss), net of tax (Note 9)										Other comprehensive income (loss), net of tax (Note 9)	(11.4)		(62.4)		55.9		55.4
Comprehensive income	Comprehensive income	$	1,443.6	$	1,224.5	$	4,354.4	$	4,179.3	Comprehensive income	$	1,751.8	$	890.1	$	3,164.0	$	2,910.8

See notes to consolidated condensed financial statements.

Consolidated Condensed Balance Sheets

ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Current Assets	Current Assets					Current Assets
Cash and cash equivalents (Note 6)		$	2,617.4	$	3,818.5
Short-term investments (Note 6)		124.7		90.1
Accounts receivable, net of allowances of $17.7 (2022) and $22.5 (2021)		6,715.3		6,672.8
Cash and cash equivalents (Note 5)						Cash and cash equivalents (Note 5)	$	2,694.5	$	2,067.0
Short-term investments (Note 5)						Short-term investments (Note 5)	134.6		144.8
Accounts receivable, net of allowances of $13.8 (2023) and $16.0 (2022)						Accounts receivable, net of allowances of $13.8 (2023) and $16.0 (2022)	7,516.1		6,896.0
Other receivables	Other receivables	1,609.5		1,454.4		Other receivables	1,655.3		1,662.9
Inventories	Inventories	3,831.1		3,886.0		Inventories	4,798.7		4,309.7
Prepaid expenses and other		2,741.9		2,530.6
Prepaid expenses and other current assets						Prepaid expenses and other current assets	4,532.4		2,954.1
Total current assets	Total current assets	17,639.9		18,452.4		Total current assets	21,331.6		18,034.5
Investments (Note 6)		2,574.6		3,212.6
Investments (Note 5)						Investments (Note 5)	2,745.1		2,901.8
Goodwill	Goodwill	3,891.6		3,892.0		Goodwill	4,078.9		4,073.0
Other intangibles, net	Other intangibles, net	7,124.1		7,691.9		Other intangibles, net	6,903.5		7,206.6
Deferred tax assets	Deferred tax assets	2,384.3		2,489.3		Deferred tax assets	3,805.9		2,792.9
Property and equipment, net of accumulated depreciation of $10,074.0 (2022) and $9,976.7 (2021)		9,311.3		8,985.1
Property and equipment, net of accumulated depreciation of $10,631.6 (2023) and $10,233.4 (2022)						Property and equipment, net of accumulated depreciation of $10,631.6 (2023) and $10,233.4 (2022)	11,277.4		10,144.0
Other noncurrent assets	Other noncurrent assets	4,535.7		4,082.7		Other noncurrent assets	4,671.6		4,337.0
Total assets	Total assets	$	47,461.5	$	48,806.0	Total assets	$	54,814.0	$	49,489.8
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	$	1,744.6	$	1,538.3	Short-term borrowings and current maturities of long-term debt	$	661.6	$	1,501.1
Accounts payable	Accounts payable	1,683.2		1,670.6		Accounts payable	2,474.2		1,930.6
Employee compensation	Employee compensation	984.1		958.1		Employee compensation	867.7		1,059.8
Sales rebates and discounts	Sales rebates and discounts	8,568.4		6,845.8		Sales rebates and discounts	10,389.9		8,784.1
Dividends payable	Dividends payable	—		885.5		Dividends payable	1,016.2		1,017.2
Income taxes payable	Income taxes payable	685.6		126.9		Income taxes payable	1,233.8		475.1
Other current liabilities	Other current liabilities	1,986.9		3,027.5		Other current liabilities	2,271.6		2,370.3
Total current liabilities	Total current liabilities	15,652.8		15,052.7		Total current liabilities	18,915.0		17,138.2
Other Liabilities	Other Liabilities					Other Liabilities
Long-term debt	Long-term debt	14,143.8		15,346.4		Long-term debt	18,158.4		14,737.5
Accrued retirement benefits (Note 8)		1,832.5		1,954.1
Accrued retirement benefits (Note 7)						Accrued retirement benefits (Note 7)	1,308.8		1,305.1
Long-term income taxes payable	Long-term income taxes payable	3,641.7		3,920.0		Long-term income taxes payable	3,330.7		3,709.6
Deferred tax liabilities		171.9		1,733.7
Other noncurrent liabilities	Other noncurrent liabilities	1,852.9		1,644.3		Other noncurrent liabilities	1,951.8		1,824.0
Total other liabilities	Total other liabilities	21,642.8		24,598.5		Total other liabilities	24,749.7		21,576.2
Commitments and Contingencies (Note 9)
Commitments and Contingencies (Note 8)						Commitments and Contingencies (Note 8)
Eli Lilly and Company Shareholders' Equity	Eli Lilly and Company Shareholders' Equity					Eli Lilly and Company Shareholders' Equity
Common stock	Common stock	594.1		596.3		Common stock	593.6		594.1
Additional paid-in capital	Additional paid-in capital	6,829.0		6,833.4		Additional paid-in capital	6,948.6		6,921.4
Retained earnings	Retained earnings	10,006.5		8,958.5		Retained earnings	10,368.5		10,042.6
Employee benefit trust	Employee benefit trust	(3,013.2)		(3,013.2)		Employee benefit trust	(3,013.2)		(3,013.2)
Accumulated other comprehensive loss (Note 10)		(4,295.8)		(4,343.1)
Accumulated other comprehensive loss (Note 9)						Accumulated other comprehensive loss (Note 9)	(3,788.7)		(3,844.6)
Cost of common stock in treasury	Cost of common stock in treasury	(50.5)		(52.7)		Cost of common stock in treasury	(45.0)		(50.5)
Total Eli Lilly and Company shareholders' equity	Total Eli Lilly and Company shareholders' equity	10,070.1		8,979.2		Total Eli Lilly and Company shareholders' equity	11,063.8		10,649.8
Noncontrolling interests	Noncontrolling interests	95.8		175.6		Noncontrolling interests	85.5		125.6
Total equity	Total equity	10,165.9		9,154.8		Total equity	11,149.3		10,775.4
Total liabilities and equity	Total liabilities and equity	$	47,461.5	$	48,806.0	Total liabilities and equity	$	54,814.0	$	49,489.8

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Equity

(Unaudited)

ELI LILLY AND COMPANY AND SUBSIDIARIES


		Equity of Eli Lilly and Company Shareholders																	Equity of Eli Lilly and Company Shareholders
(Dollars in millions, except per-share data, and shares in thousands)	(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(1)			Noncontrolling Interests		(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(1)			Noncontrolling Interests
		Shares	Amount										Shares	Amount					Shares	Amount										Shares	Amount
Balance at July 1, 2021		957,038	$	598.1	$	6,669.2	$	8,530.1	$	(3,013.2)	$	(6,287.1)	463	$	(52.7)	$	219.1
Net income (loss)							1,110.1									(22.6)
Other comprehensive income, net of tax											114.4

Issuance of stock under employee stock plans, net		14	0.1		(1.3)
Stock-based compensation					90.1

Other							(0.8)									0.6
Balance at September 30, 2021		957,052	$	598.2	$	6,758.0	$	9,639.4	$	(3,013.2)	$	(6,172.7)	463	$	(52.7)	$	197.1

Balance at July 1, 2022		950,619	$	594.1	$	6,746.0	$	8,556.0	$	(3,013.2)	$	(4,287.7)	450	$	(50.5)	$	114.5
Balance at April 1, 2022																		Balance at April 1, 2022	950,605	$	594.1	$	6,656.3	$	9,369.4	$	(3,013.2)	$	(4,225.3)	450	$	(50.5)	$	131.2
Net income (loss)	Net income (loss)						1,451.7									(15.7)		Net income (loss)						952.5									(11.4)
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax										(8.1)							Other comprehensive loss, net of tax										(62.4)

Cash dividends declared per share: $1.96																		Cash dividends declared per share: $1.96						(1,765.9)

Issuance of stock under employee stock plans, net	Issuance of stock under employee stock plans, net	8			(2.1)													Issuance of stock under employee stock plans, net	14			(2.4)
Stock-based compensation	Stock-based compensation				85.1													Stock-based compensation				92.1
Other	Other						(1.2)									(3.0)		Other															(5.3)
Balance at September 30, 2022		950,627	$	594.1	$	6,829.0	$	10,006.5	$	(3,013.2)	$	(4,295.8)	450	$	(50.5)	$	95.8
Balance at June 30, 2022																		Balance at June 30, 2022	950,619	$	594.1	$	6,746.0	$	8,556.0	$	(3,013.2)	$	(4,287.7)	450	$	(50.5)	$	114.5

Balance at April 1, 2023																		Balance at April 1, 2023	949,669	$	593.5	$	6,793.1	$	10,639.3	$	(3,013.2)	$	(3,777.3)	402	$	(45.0)	$	104.5
Net income (loss)																		Net income (loss)						1,763.2									(9.5)
Other comprehensive loss, net of tax																		Other comprehensive loss, net of tax										(11.4)
Cash dividends declared per share: $2.26																		Cash dividends declared per share: $2.26						(2,034.0)

Issuance of stock under employee stock plans, net																		Issuance of stock under employee stock plans, net	19	0.1		(6.0)
Stock-based compensation																		Stock-based compensation				161.5
Other																		Other															(9.5)
Balance at June 30, 2023																		Balance at June 30, 2023	949,688	$	593.6	$	6,948.6	$	10,368.5	$	(3,013.2)	$	(3,788.7)	402	$	(45.0)	$	85.5

(1) As of ~~September~~June 30, ~~2022,~~2023, there was ~~$3.25~~$2.50 billion remaining under our $5.00 billion share repurchase program authorized in May 2021.

See notes to consolidated condensed financial statements.


		Equity of Eli Lilly and Company Shareholders																	Equity of Eli Lilly and Company Shareholders
(Dollars in millions, except per-share data, and shares in thousands)	(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(1)			Noncontrolling Interests		(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(1)			Noncontrolling Interests
		Shares	Amount										Shares	Amount					Shares	Amount										Shares	Amount
Balance at January 1, 2021		957,077	$	598.2	$	6,778.5	$	7,830.2	$	(3,013.2)	$	(6,496.4)	487	$	(55.7)	$	183.6
Net income							3,855.6									25.2
Other comprehensive income, net of tax											323.7
Cash dividends declared per share: $1.70							(1,542.9)
Retirement of treasury shares		(2,467)	(1.5)				(498.5)						(2,467)	500.0
Purchase of treasury shares													2,467	(500.0)
Issuance of stock under employee stock plans, net		2,442	1.5		(287.1)								(24)	3.0
Stock-based compensation					267.5

Other					(0.9)		(5.0)									(11.7)
Balance at September 30, 2021		957,052	$	598.2	$	6,758.0	$	9,639.4	$	(3,013.2)	$	(6,172.7)	463	$	(52.7)	$	197.1

Balance at January 1, 2022	Balance at January 1, 2022	954,116	$	596.3	$	6,833.4	$	8,958.5	$	(3,013.2)	$	(4,343.1)	463	$	(52.7)	$	175.6	Balance at January 1, 2022	954,116	$	596.3	$	6,833.4	$	8,958.5	$	(3,013.2)	$	(4,343.1)	463	$	(52.7)	$	175.6
Net income (loss)	Net income (loss)						4,307.1									(63.7)		Net income (loss)						2,855.4									(48.0)
Other comprehensive income, net of tax	Other comprehensive income, net of tax										47.3							Other comprehensive income, net of tax										55.4
Cash dividends declared per share: $1.96	Cash dividends declared per share: $1.96						(1,765.9)											Cash dividends declared per share: $1.96						(1,765.9)
Retirement of treasury shares	Retirement of treasury shares	(5,607)	(3.5)				(1,496.5)						(5,607)	1,500.0				Retirement of treasury shares	(5,607)	(3.5)				(1,496.5)						(5,607)	1,500.0
Purchase of treasury shares	Purchase of treasury shares												5,607	(1,500.0)				Purchase of treasury shares												5,607	(1,500.0)
Issuance of stock under employee stock plans, net	Issuance of stock under employee stock plans, net	2,118	1.3		(282.6)								(13)	2.2				Issuance of stock under employee stock plans, net	2,110	1.3		(280.5)								(13)	2.2
Stock-based compensation	Stock-based compensation				278.2													Stock-based compensation				193.1
Other	Other						3.3									(16.1)		Other						4.5									(13.1)
Balance at September 30, 2022		950,627	$	594.1	$	6,829.0	$	10,006.5	$	(3,013.2)	$	(4,295.8)	450	$	(50.5)	$	95.8
Balance at June 30, 2022																		Balance at June 30, 2022	950,619	$	594.1	$	6,746.0	$	8,556.0	$	(3,013.2)	$	(4,287.7)	450	$	(50.5)	$	114.5

Balance at January 1, 2023																		Balance at January 1, 2023	950,632	$	594.1	$	6,921.4	$	10,042.6	$	(3,013.2)	$	(3,844.6)	450	$	(50.5)	$	125.6
Net income																		Net income						3,108.1									0.5
Other comprehensive income, net of tax																		Other comprehensive income, net of tax										55.9
Cash dividends declared per share: $2.26																		Cash dividends declared per share: $2.26						(2,034.0)
Retirement of treasury shares																		Retirement of treasury shares	(2,299)	(1.4)				(748.6)						(2,299)	750.0
Purchase of treasury shares																		Purchase of treasury shares												2,299	(750.0)
Issuance of stock under employee stock plans, net																		Issuance of stock under employee stock plans, net	1,355	0.9		(265.5)								(48)	8.8
Stock-based compensation																		Stock-based compensation				292.7
Other																		Other						0.4							(3.3)		(40.6)
Balance at June 30, 2023																		Balance at June 30, 2023	949,688	$	593.6	$	6,948.6	$	10,368.5	$	(3,013.2)	$	(3,788.7)	402	$	(45.0)	$	85.5

(1) As of ~~September~~June 30, ~~2022,~~2023, there was ~~$3.25~~$2.50 billion remaining under our $5.00 billion share repurchase program authorized in May 2021.

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

ELI LILLY AND COMPANY AND SUBSIDIARIES

(Dollars in millions)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income	Net income	$	4,307.1	$	3,855.6	Net income	$	3,108.1	$	2,855.4
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:	Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:					Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:

Depreciation and amortization	Depreciation and amortization	1,147.5		1,101.9		Depreciation and amortization	728.6		784.6
Change in deferred income taxes	Change in deferred income taxes	(2,195.6)		(709.8)		Change in deferred income taxes	(990.5)		(1,125.0)
Debt extinguishment loss (Note 6)		—		405.2

Stock-based compensation expense	Stock-based compensation expense	278.2		267.5		Stock-based compensation expense	292.7		193.1

Net investment (gains) losses		676.4		(271.1)
Net investment losses						Net investment losses	80.0		545.6
Acquired in-process research and development	Acquired in-process research and development	252.0		498.3		Acquired in-process research and development	202.1		606.0
Other changes in operating assets and liabilities, net of acquisitions and divestitures	Other changes in operating assets and liabilities, net of acquisitions and divestitures	821.5		(548.1)		Other changes in operating assets and liabilities, net of acquisitions and divestitures	(676.1)		(104.2)
Other non-cash operating activities, net		217.6		504.7
Other operating activities, net						Other operating activities, net	(382.4)		(49.2)
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	5,504.7		5,104.2		Net Cash Provided by Operating Activities	2,362.5		3,706.3
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Net purchases of property and equipment		(1,353.6)		(1,018.4)
Purchases of property and equipment						Purchases of property and equipment	(1,406.7)		(736.4)
Proceeds from sales and maturities of short-term investments	Proceeds from sales and maturities of short-term investments	83.1		46.6		Proceeds from sales and maturities of short-term investments	109.6		57.6
Purchases of short-term investments	Purchases of short-term investments	(65.0)		(27.9)		Purchases of short-term investments	(59.8)		(32.9)
Proceeds from sales of noncurrent investments		251.6		537.2
Proceeds from sales of and distributions from noncurrent investments						Proceeds from sales of and distributions from noncurrent investments	388.4		168.5
Purchases of noncurrent investments	Purchases of noncurrent investments	(474.1)		(710.1)		Purchases of noncurrent investments	(343.4)		(251.4)
Cash paid for acquisitions, net of cash acquired (Note 3)		—		(747.4)

Purchases of in-process research and development	Purchases of in-process research and development	(574.8)		(460.6)		Purchases of in-process research and development	(333.1)		(958.2)
Other investing activities, net	Other investing activities, net	(268.3)		(2.7)		Other investing activities, net	497.1		(111.3)
Net Cash Used for Investing Activities	Net Cash Used for Investing Activities	(2,401.1)		(2,383.3)		Net Cash Used for Investing Activities	(1,147.9)		(1,864.1)
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Dividends paid	Dividends paid	(2,651.4)		(2,313.5)		Dividends paid	(2,035.0)		(1,769.2)
Net change in short-term borrowings	Net change in short-term borrowings	1,741.3		(1.5)		Net change in short-term borrowings	(1,498.0)		2,117.2
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	—		2,410.8		Proceeds from issuance of long-term debt	3,958.5		—
Repayments of long-term debt	Repayments of long-term debt	(1,560.0)		(1,905.3)		Repayments of long-term debt	—		(1,560.0)
Purchases of common stock	Purchases of common stock	(1,500.0)		(500.0)		Purchases of common stock	(750.0)		(1,500.0)

Other financing activities, net	Other financing activities, net	(295.2)		(295.3)		Other financing activities, net	(296.6)		(290.0)
Net Cash Used for Financing Activities	Net Cash Used for Financing Activities	(4,265.3)		(2,604.8)		Net Cash Used for Financing Activities	(621.1)		(3,002.0)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(39.4)		15.0		Effect of exchange rate changes on cash and cash equivalents	34.0		(35.8)

Net decrease in cash and cash equivalents		(1,201.1)		131.1
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	627.5		(1,195.6)
Cash and cash equivalents at January 1	Cash and cash equivalents at January 1	3,818.5		3,657.1		Cash and cash equivalents at January 1	2,067.0		3,818.5
Cash and Cash Equivalents at September 30		$	2,617.4	$	3,788.2
Cash and Cash Equivalents at June 30						Cash and Cash Equivalents at June 30	$	2,694.5	$	2,622.9

See notes to consolidated condensed financial statements.

Notes to Consolidated Condensed Financial Statements

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

Note 1: Basis of Presentation ~~and Implementation of New Financial Accounting Standard~~

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

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. We ~~issue~~issued our financial statements by filing them with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing of this Quarterly Report on Form 10-Q.

~~Certain reclassifications have been made to prior periods in the consolidated condensed financial statements and accompanying notes to conform with the current presentation.~~

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

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

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

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

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

~~Implementation of New Financial Accounting Standard~~Reclassifications

~~Accounting Standards Update 2021-01,~~ ~~Reference Rate Reform, provides for temporary optional expedients and exceptions~~Certain reclassifications have been made to prior periods in ~~applying current GAAP to contracts, hedging relationships, and other transactions affected by~~ the transition from the use of the London Interbank Offered Rate (LIBOR) to an alternative reference rate. The standard is currently applicable to contracts entered into before January 1, 2023. We adopted the standard in the first quarter of 2022. The adoption did not have a material impact on our consolidated condensed financial ~~statements.~~statements and accompanying notes to conform with the current presentation. Development milestone payments related to externally developed IPR&D projects, acquired directly in a transaction other than a business combination, were previously included in cash flows from operating activities in the consolidated condensed statements of cash flows and are now included in purchases of IPR&D in cash flows from investing activities. The reclassification resulted in an increase to net cash provided by operating activities and net cash used in investing activities of $386.4 million for the six

months ended June 30, 2022.

Note 2: Revenue

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net product revenue	Net product revenue	$	6,119.2	$	6,189.0	$	19,123.0	$	18,579.5	Net product revenue	$	6,979.8	$	5,870.9	$	13,218.0	$	13,003.8
Collaboration and other revenue(1)	Collaboration and other revenue(1)	822.4		583.8		2,116.6		1,739.0		Collaboration and other revenue(1)	1,332.3		617.1		2,054.1		1,294.2
Revenue	Revenue	$	6,941.6	$	6,772.8	$	21,239.6	$	20,318.5	Revenue	$	8,312.1	$	6,488.0	$	15,272.1	$	14,298.0

(1) Collaboration and other revenue associated with prior period transfers of intellectual property was ~~$43.3~~$30.3 million and ~~$130.9~~$55.4 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~$62.1~~$34.4 million and ~~$136.1~~$87.6 million during the three and ~~nine~~ sixmonths ended ~~September~~June 30, ~~2021,~~2022, respectively.

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

Adjustments to Revenue

Adjustments to ~~increase~~ revenue recognized as a result of changes in estimates for our most significant United States (U.S.) sales returns, rebates, and discounts liability balances for products shipped in previous periods were ~~3 percent of U.S. revenue for the three months ended September 30, 2022 and~~ less than 1 percent of U.S. revenue during ~~the nine months ended September 30, 2022 and~~each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2023 and 2022.

Contract Liabilities

Our contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not include sales returns, rebates, and discounts. Changes in contract liabilities are generally due to either receipt of additional advance payments or our performance under the contract.

The following table summarizes contract liability balances:

September 30, 2022 December 31, 2021
Contract liabilities $ 232.5 $ 262.6


	June 30, 2023		December 31, 2022
Contract liabilities	$	211.1	$	219.2

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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.

Disaggregation of Revenue

The following table summarizes revenue, including net product revenue and collaboration and other revenue, by product for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,													Three Months Ended June 30,
		2022						2021							2023						2022
		U.S.		Outside U.S.		Total		U.S.		Outside U.S.		Total			U.S.		Outside U.S.		Total		U.S.		Outside U.S.		Total
Revenue—to unaffiliated customers:

Diabetes:	Diabetes:													Diabetes:
Trulicity®	Trulicity®	$	1,418.3	$	432.0	$	1,850.4	$	1,201.4	$	398.8	$	1,600.1	Trulicity®	$	1,371.3	$	441.2	$	1,812.5	$	1,430.1	$	481.7	$	1,911.9
Mounjaro®														Mounjaro®	915.7		64.0		979.7		12.6		3.4		16.0
Jardiance(1)	Jardiance(1)	350.9		222.4		573.3		221.2		169.2		390.4		Jardiance(1)	386.1		282.2		668.3		250.7		210.3		461.0
Baqsimi														Baqsimi	606.2		7.7		613.9		21.8		7.2		29.0
Humalog® (2)	Humalog® (2)	248.1		198.8		447.0		347.3		279.4		626.7		Humalog® (2)	229.8		210.6		440.4		238.8		208.3		447.1
Humulin®	Humulin®	169.5		68.7		238.2		193.4		93.4		286.7		Humulin®	144.3		61.0		205.3		202.3		71.7		274.0
Basaglar®		124.8		68.1		193.0		114.7		78.1		192.8
Mounjaro®		97.3		90.0		187.3		—		—		—
Basaglar® (3)														Basaglar® (3)	83.0		71.2		154.2		95.8		78.4		174.2
Other diabetes	Other diabetes	79.7		94.0		173.4		65.0		112.2		177.4		Other diabetes	45.0		91.6		136.6		40.1		85.0		125.0
Total diabetes	Total diabetes	2,488.6		1,174.0		3,662.6		2,143.0		1,131.1		3,274.1		Total diabetes	3,781.4		1,229.5		5,010.9		2,292.2		1,146.0		3,438.2

Oncology:	Oncology:													Oncology:
Verzenio®	Verzenio®	414.8		202.9		617.7		199.6		135.9		335.5		Verzenio®	588.6		338.2		926.8		384.3		204.2		588.5
Cyramza®	Cyramza®	87.5		144.6		232.1		84.8		168.6		253.4		Cyramza®	115.0		145.3		260.3		92.6		138.6		231.3
Erbitux®	Erbitux®	126.3		18.7		144.9		114.0		20.3		134.3		Erbitux®	145.5		17.0		162.5		125.1		15.7		140.8
Alimta®	Alimta®	64.6		54.8		119.4		297.2		159.8		457.0		Alimta®	17.9		43.1		60.9		171.7		56.1		227.7
Tyvyt®		—		76.8		76.8		—		125.6		125.6
Other oncology	Other oncology	39.5		62.8		102.4		35.3		65.1		100.3		Other oncology	68.0		192.4		260.5		45.3		135.2		180.4
Total oncology	Total oncology	732.7		560.6		1,293.3		730.9		675.3		1,406.1		Total oncology	935.0		736.0		1,671.0		819.0		549.8		1,368.7

Immunology:	Immunology:													Immunology:
Taltz®	Taltz®	493.8		186.1		679.9		422.2		170.9		593.1		Taltz®	472.3		231.6		703.9		411.6		194.7		606.2
Olumiant® ~~(3)~~(4)	Olumiant® ~~(3)~~(4)	22.9		160.0		182.9		194.0		212.9		406.9		Olumiant® ~~(3)~~(4)	50.8		168.1		218.9		10.4		175.8		186.2
Other immunology	Other immunology	—		3.6		3.6		—		4.9		4.9		Other immunology	—		5.7		5.7		—		4.0		4.0
Total immunology	Total immunology	516.7		349.7		866.4		616.2		388.7		1,004.9		Total immunology	523.1		405.4		928.5		422.0		374.5		796.5

Neuroscience:	Neuroscience:													Neuroscience:
Emgality®	Emgality®	114.0		54.6		168.5		99.9		40.1		140.0		Emgality®	118.8		50.5		169.3		108.6		48.9		157.5
Zyprexa®		8.0		73.4		81.4		13.0		88.7		101.7
Cymbalta®		7.8		54.9		62.7		7.0		125.1		132.0

Other neuroscience	Other neuroscience	16.0		44.5		60.6		24.7		51.6		76.5		Other neuroscience	42.1		175.8		217.9		36.2		196.3		232.4
Total neuroscience	Total neuroscience	145.8		227.4		373.2		144.6		305.5		450.2		Total neuroscience	160.9		226.3		387.2		144.8		245.2		389.9

Other:	Other:													Other:
COVID-19 antibodies~~(4)~~(5)		386.6		—		386.6		215.5		1.6		217.1
Forteo®	Forteo®	112.7		64.4		177.1		109.6		91.3		200.9		Forteo®	97.4		50.6		148.0		78.5		60.0		138.5
Cialis®	Cialis®	8.1		107.7		115.7		(6.5)		137.4		130.9		Cialis®	9.2		106.4		115.6		10.8		136.2		147.0
COVID-19 antibodies~~(4)~~(5)														COVID-19 antibodies~~(4)~~(5)	—		—		—		129.1		—		129.1
Other	Other	30.9		35.7		66.6		36.3		52.4		88.8		Other	24.4		26.5		51.0		38.5		41.7		80.1
Total other	Total other	538.3		207.8		746.0		354.9		282.7		637.7		Total other	131.0		183.5		314.6		256.9		237.9		494.7
Revenue	Revenue	$	4,422.1	$	2,519.4	$	6,941.6	$	3,989.6	$	2,783.3	$	6,772.8	Revenue	$	5,531.4	$	2,780.7	$	8,312.1	$	3,934.8	$	2,553.3	$	6,488.0

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.

~~(4)~~(5) COVID-19 antibodies include sales for bamlanivimab administered alone, for bamlanivimab and etesevimab administered together, and for bebtelovimab and were made pursuant to EUAs or similar regulatory authorizations.

The following table summarizes revenue, including net product revenue and collaboration and other revenue, by product for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Nine Months Ended September 30,													Six Months Ended June 30,
		2022						2021							2023						2022
		U.S.		Outside U.S.		Total		U.S.		Outside U.S.		Total			U.S.		Outside U.S.		Total		U.S.		Outside U.S.		Total
Revenue—to unaffiliated customers:

Diabetes:	Diabetes:													Diabetes:
Trulicity	Trulicity	$	4,162.4	$	1,341.1	$	5,503.5	$	3,465.7	$	1,122.5	$	4,588.2	Trulicity	$	2,918.7	$	871.0	$	3,789.6	$	2,744.1	$	909.1	$	3,653.2
Humalog(1)		855.8		656.4		1,512.3		1,009.0		842.3		1,851.3
Mounjaro														Mounjaro	1,452.2		96.0		1,548.2		12.6		3.4		16.0
Jardiance~~(2)~~(1)	Jardiance~~(2)~~(1)	831.4		622.4		1,453.7		566.8		492.1		1,058.9		Jardiance~~(2)~~(1)	715.6		530.2		1,245.8		480.4		400.0		880.4
Humalog(2)														Humalog(2)	501.4		400.0		901.4		607.7		457.6		1,065.3
Baqsimi														Baqsimi	629.3		16.1		645.4		44.3		13.9		58.2
Humulin	Humulin	562.3		223.1		785.4		633.5		290.3		923.8		Humulin	343.1		114.2		457.3		392.8		154.5		547.2
Basaglar		339.9		218.8		558.7		423.3		226.8		650.1
Mounjaro		109.9		93.3		203.2		—		—		—
Basaglar(3)														Basaglar(3)	218.4		145.2		363.5		215.1		150.6		365.7
Other diabetes	Other diabetes	195.6		276.5		472.2		185.7		302.6		488.3		Other diabetes	77.7		172.2		250.1		71.7		168.5		240.3
Total diabetes	Total diabetes	7,057.3		3,431.6		10,489.0		6,284.0		3,276.6		9,560.6		Total diabetes	6,856.4		2,344.9		9,201.3		4,568.7		2,257.6		6,826.3

Oncology:	Oncology:													Oncology:
Verzenio	Verzenio	1,100.5		575.1		1,675.6		582.1		363.7		945.8		Verzenio	1,049.6		628.0		1,677.7		685.7		372.1		1,057.9
Cyramza	Cyramza	259.3		434.3		693.6		266.3		496.3		762.5		Cyramza	215.6		281.4		497.0		171.8		289.7		461.5
Erbitux														Erbitux	264.2		28.1		292.4		234.7		28.7		263.4
Alimta	Alimta	490.5		200.5		691.1		911.9		714.7		1,626.6		Alimta	38.0		81.2		119.1		425.9		145.8		571.7
Erbitux		361.0		47.4		408.3		357.7		45.9		403.7
Tyvyt		—		235.8		235.8		—		340.2		340.2
Other oncology	Other oncology	124.1		186.5		310.6		83.7		169.9		253.6		Other oncology	121.0		319.9		440.8		84.6		282.7		367.2
Total oncology	Total oncology	2,335.4		1,679.6		4,015.0		2,201.7		2,130.7		4,332.4		Total oncology	1,688.4		1,338.6		3,027.0		1,602.7		1,119.0		2,721.7

Immunology:	Immunology:													Immunology:
Taltz	Taltz	1,212.6		561.6		1,774.2		1,071.6		493.8		1,565.4		Taltz	784.5		446.3		1,230.8		718.8		375.5		1,094.3
Olumiant~~(3)~~(4)	Olumiant~~(3)~~(4)	104.6		520.1		624.7		236.5		572.6		809.1		Olumiant~~(3)~~(4)	93.1		354.6		447.8		81.7		360.1		441.8
Other immunology	Other immunology	0.1		12.1		12.1		15.2		14.5		29.7		Other immunology	—		27.7		27.7		—		8.5		8.5
Total immunology	Total immunology	1,317.3		1,093.8		2,411.0		1,323.3		1,080.9		2,404.2		Total immunology	877.6		828.6		1,706.3		800.5		744.1		1,544.6

Neuroscience:	Neuroscience:													Neuroscience:
Emgality	Emgality	330.8		144.4		475.2		313.5		102.2		415.7		Emgality	227.5		96.1		323.6		216.9		89.8		306.7
Zyprexa		26.2		235.5		261.7		28.3		264.5		292.8
Cymbalta		25.0		194.3		219.3		30.3		454.0		484.3

Other neuroscience	Other neuroscience	62.0		142.7		204.7		81.0		154.0		235.0		Other neuroscience	77.9		346.2		424.1		81.2		399.7		481.0
Total neuroscience	Total neuroscience	444.0		716.9		1,160.9		453.1		974.7		1,427.8		Total neuroscience	305.4		442.3		747.7		298.1		489.5		787.7

Other:	Other:													Other:
Forteo														Forteo	168.0		102.3		270.3		148.7		127.2		275.9
Cialis														Cialis	16.8		199.1		215.9		17.7		347.0		364.7
COVID-19 antibodies~~(4)~~(5)	COVID-19 antibodies~~(4)~~(5)	1,970.9		14.7		1,985.5		949.5		226.7		1,176.2		COVID-19 antibodies~~(4)~~(5)	—		—		—		1,584.3		14.7		1,598.9
Cialis		25.8		454.7		480.4		(3.1)		541.8		538.7
Forteo		261.4		191.7		453.0		330.1		287.7		617.8
Other	Other	119.4		125.1		244.8		96.5		164.3		260.8		Other	55.0		48.7		103.7		88.5		89.6		178.2
Total other	Total other	2,377.5		786.2		3,163.7		1,373.0		1,220.5		2,593.5		Total other	239.8		350.1		589.9		1,839.2		578.5		2,417.7
Revenue	Revenue	$	13,531.5	$	7,708.1	$	21,239.6	$	11,635.1	$	8,683.4	$	20,318.5	Revenue	$	9,967.6	$	5,304.6	$	15,272.1	$	9,109.4	$	5,188.7	$	14,298.0

Numbers may not add due to rounding.

(1)~~Humalog revenue includes insulin lispro.~~

~~(2)~~ 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 EUA or similar regulatory authorizations.

The following table summarizes revenue by geographical area:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue—to unaffiliated customers(1):
Revenue(1):										Revenue(1):
U.S.	U.S.	$	4,422.1	$	3,989.6	$	13,531.5	$	11,635.1	U.S.	$	5,531.4	$	3,934.8	$	9,967.6	$	9,109.4
Europe	Europe	1,056.4		1,098.6		3,224.8		3,629.6		Europe	1,177.6		1,101.1		2,268.5		2,168.4
Japan	Japan	487.7		595.0		1,352.3		1,832.2		Japan	455.6		454.4		842.8		864.6
China	China	343.4		400.3		1,102.0		1,285.0		China	399.0		352.1		771.7		758.5
Other foreign countries	Other foreign countries	632.0		689.4		2,029.1		1,936.7		Other foreign countries	748.5		645.7		1,421.5		1,397.2
Revenue	Revenue	$	6,941.6	$	6,772.8	$	21,239.6	$	20,318.5	Revenue	$	8,312.1	$	6,488.0	$	15,272.1	$	14,298.0

Numbers may not add due to rounding.

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

Note 3: Acquisitions

We engage in various forms of business development activities to enhance our product pipeline, including acquisitions, collaborations, investments, and licensing arrangements. In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the development process.

In ~~January 2021,~~December 2022, we completed the acquisition of ~~Prevail Therapeutics~~Akouos, Inc. ~~(Prevail)~~(Akouos). This transaction, as further discussed below in Acquisition of a Business, was accounted for as a business combination under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of this acquisition is included in our consolidated condensed financial statements from the date of acquisition.

We also acquired assets in development which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to acquired IPR&D iswas immediately expensed if the compound has no alternative future use. Milestone payment obligations incurred prior to regulatory approval of the compound are expensed as acquired IPR&D when the event triggering an obligation to pay the milestone occurs. We recognized acquired IPR&D ~~and development milestone~~ charges of ~~$62.4~~$97.1 million and ~~$668.4~~$202.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, and ~~$177.6~~$440.4 million and ~~$532.4~~$606.0 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively.

Acquisition of a Business

~~Prevail~~Akouos Acquisition

Overview of Transaction

In ~~January 2021,~~December 2022, we acquired all shares of ~~Prevail~~Akouos for a purchase price that included ~~$22.50~~$12.50 per share in cash (or an aggregate of ~~$747.4~~$327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles ~~Prevail stockholders~~the Akouos shareholders up to an additional ~~$4.00~~$3.00 per share in cash (or an aggregate of approximately ~~$160~~$122 million) payable, subject to certain terms and conditions, upon the ~~first regulatory approval~~achievement of a Prevail product in one of the following countries: U.S., Japan, United Kingdom, Germany, France, Italy, or Spain. To achieve the full value of the CVR, such regulatory approval must occur by December 31, 2024. If such regulatory approval occurs after December 31, 2024, the value of the CVR will be reduced by approximately 8.3 cents per month until December 1, 2028, at which point the CVR will expire without payment.certain specified milestones.

Under the terms of the agreement, we acquired potentially disease-modifying AAV9-based gene therapies for patients with neurodegenerative diseases. The acquisition established a new modality for drug discovery and development, extending our research efforts through the creation of apotential gene therapy ~~program that is being anchored by Prevail's portfolio of assets.~~treatments for hearing loss and other inner ear conditions. The lead gene therapies in clinical development that we acquired ~~were PR001~~included GJB2 (which encodes connexin 26) for ~~patients with Parkinson's disease with GBA1~~a common form of monogenic deafness and hearing loss; AK-OTOF for hearing loss due to mutations in the otoferlin gene; AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and ~~neuronopathic Gaucher disease~~vision; and ~~PR006~~AK-antiVEGF for ~~patients with frontotemporal dementia with GRN mutations. Both PR001 and PR006 were granted Fast Track designation from the U.S. Food and Drug Administration (FDA).~~vestibular schwannoma.

Assets Acquired and Liabilities Assumed

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

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


Estimated Fair Value at ~~January 22, 2021~~December 1, 2022
Cash	$	~~90.5~~153.2
Acquired IPR&D(1)	~~824.0~~184.0
Goodwill(2)	~~126.8~~187.1
~~Deferred tax liabilities~~	~~(106.0)~~
Other assets and liabilities, net	~~(31.5)~~23.0
Acquisition date fair value of consideration transferred	~~903.8~~547.3
Less:
Cash acquired	~~(90.5)~~(153.2)
Fair value of CVR liability(3)	~~(65.9)~~(66.9)
Cash paid, net of cash acquired	$	~~747.4~~327.2

(1) Acquired IPR&D intangibles primarily relate to ~~PR001. In the third quarter of 2022, we impaired the intangible asset related to PR001. See Note 5 for additional information.~~GJB2.

(2) The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax purposes.

(3) See Note 65 for a discussion on the estimation of the CVR liability.

~~We are unable to provide the~~The results of operations attributable to Akouos for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021 attributable to Prevail as those operations~~2023 were ~~substantially integrated into our legacy business.~~immaterial.

Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

Asset Acquisitions

~~The following table summarizes our significant asset acquisitions during the nine months ended September 30,~~In February 2022, ~~and 2021:~~

~~Counterparty~~

~~Compound(s), Therapy or Asset~~

~~Acquisition Month~~

~~Phase of Development(1)~~

~~Acquired IPR&D Expense~~

~~BioMarin Pharmaceutical Inc.~~

~~Priority Review Voucher~~

~~February 2022~~

~~Not applicable~~

~~110.0~~

~~Rigel Pharmaceuticals, Inc.~~

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

~~March 2021~~

~~Phase I~~

~~125.0~~

~~Precision Biosciences, Inc.~~

~~Potential in vivo therapies for genetic disorders~~

~~January 2021~~

~~Pre-clinical~~

~~107.8~~

~~(1)The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset~~we acquired ~~where applicable.~~

a Priority Review Voucher from BioMarin Pharmaceutical Inc. for $110.0 million.

In connection with our acquisition of Petra Pharma Corporation (Petra), 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 the second quarter of 2022, we entered into agreements with substantially all Petra shareholders to acquire their rights to receive any future milestone payments in exchange for a one-time payment. As a result of these agreements, we recognized a charge of $333.8 million as ~~a development milestone~~acquired IPR&D during the ~~nine~~three and six months ended ~~September~~June 30, 2022. Any remaining contingent milestones payments linked to the success of the mutant-selective PI3Kα inhibitor are not expected to be material.

We recognized no other significant ~~development milestones~~acquired IPR&D charges during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~

2022.

Subsequent ~~Event - Akouos, Inc. (Akouos) Acquisition~~Events

~~On October 17, 2022,~~In June 2023, we ~~entered into a definitive~~announced an agreement to acquire ~~Akouos. Pursuant to the terms of the agreement, we have commenced a tender offer to acquire all outstanding shares of Akouos~~DICE Therapeutics, Inc. (DICE) for a purchase price of ~~$12.50~~$48 per share in cash (an aggregate of approximately ~~$487 million),~~$2.4 billion) payable at closing, plus one non-tradable CVR per share that will entitle the holder to receive up to an additional $3.00 per CVR in cash (an aggregate of up to approximately $123 million) upon the achievement of certain specified milestones.closing. The proposed acquisition ~~will expand our gene therapy portfolio to include potential treatments for hearing loss and other inner ear conditions. The acquisition is not subject to any financing condition and~~ is expected to close in the ~~fourth~~third quarter of ~~2022,~~2023, subject to customary closing conditions, including the receipt of required antitrust clearance and the tender of at least a majority of the outstanding shares of ~~Akouos's~~DICE's common ~~stock.~~stock as of the expiration of the tender offer.

As of June 30, 2023, potential amounts payable for other pending business development acquisitions were approximately $1 billion in aggregate, subject to closing conditions and/or regulatory approvals.

Note 4: Collaborations and Other Arrangements

Collaborations and Other Similar Arrangements

We often enter into collaborative and other similar arrangements to develop and commercialize drug candidates. Collaborative activities may include research and development, marketing and selling (including promotional activities and physician detailing), manufacturing, and distribution. These arrangements often require milestone as well as royalty or profit-share payments, contingent upon the occurrence of certain future events linked to the success of the asset in development, as well as expense reimbursements from or payments to the collaboration partner. ~~See Note 2 for amounts of collaboration and other revenue recognized from these types of arrangements.~~

Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Each ~~collaboration~~arrangement is unique in nature, and our more significant arrangements are discussed below.

Boehringer Ingelheim Diabetes Collaboration

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

In connection with the regulatory approvals of Jardiance, Trajenta, and Basaglar in the U.S., Europe, and Japan, milestone payments made for Jardiance and Trajenta were capitalized as intangible assets and are being amortized to cost of sales, and milestone payments received for Basaglar were recorded as contract liabilities and are being amortized to collaboration and other revenue. The milestones pertaining to Jardiance and Trajenta are being amortized through their respective term under the collaboration, which, depending on country or region, is determined based on the latest to occur of (a) a defined number of years following launch date, (b) the expiration of the compound patent, or (c) the expiration of marketing authorization exclusivity. The milestones pertaining to Basaglar are being amortized through 2029. The table below summarizes the net milestones capitalized with respect to the Jardiance and Trajenta families of products and the net milestones deferred with respect to the Basaglar product family as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		Net Milestones Capitalized (Deferred)(1)					Net Milestones Capitalized (Deferred)(1)
		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Jardiance	Jardiance	$	121.2	$	136.1	Jardiance	$	106.3	$	116.2
Trajenta	Trajenta	69.6		88.5		Trajenta	51.2		63.5
Basaglar	Basaglar	(135.3)		(149.3)		Basaglar	(121.3)		(130.6)

(1) This represents the amounts that have been capitalized (deferred) from the start of this collaboration through the end of the reporting period, net of amount amortized.

For the Jardiance product family, we and Boehringer Ingelheim generally share equally the ongoing development and commercialization costs in the most significant markets, and we record our portion of the development and commercialization costs as research and development expense and marketing, selling, and administrative expense, respectively. We receive a royalty on net sales of Boehringer Ingelheim's products in the most significant markets and recognize the royalty as collaboration and other revenue. Boehringer Ingelheim is entitled to potential performance payments depending on the net sales of the Jardiance product family; therefore, our reported revenue for Jardiance may be reduced by any potential performance payments we make related to this product family. The royalty received by us related to the Jardiance product family may also be increased or decreased depending on whether net sales for this product family exceed or fall below certain thresholds. We pay to Boehringer Ingelheim a royalty on net sales for the Basaglar product family in the U.S. We record our sales of the Basaglar product family to third parties as net product revenue with the royalty payments made to Boehringer Ingelheim recorded as cost of sales.

The following table summarizes our collaboration and other revenue recognized with respect to the Jardiance and Trajenta families of products and net product revenue recognized with respect to ~~Basaglar:~~the Basaglar product family:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Jardiance	Jardiance	$	573.3	$	390.4	$	1,453.7	$	1,058.9	Jardiance	$	668.3	$	461.0	$	1,245.8	$	880.4
Basaglar	Basaglar	193.0		192.8		558.7		650.1		Basaglar	154.2		174.2		363.5		365.7
Trajenta	Trajenta	103.8		96.1		293.0		279.9		Trajenta	103.6		97.1		189.5		189.2

Olumiant

We have a worldwide license and collaboration agreement with Incyte Corporation (Incyte), which provides us the development and commercialization rights to baricitinib, which is branded and trademarked as Olumiant, and certain follow-on compounds, for the treatment of inflammatory and autoimmune diseases and COVID-19. Incyte has the right to receive tiered, double digit royalty payments on worldwide net sales with rates ranging up to 20 percent. Incyte has the right to receive an additional royalty ranging up to the low teens on worldwide net sales for the treatment of COVID-19 that exceed a specified aggregate worldwide net sales threshold. The agreement calls for payments by us to Incyte associated with certain development, success-based regulatory, and sales-based milestones.

In connection with the regulatory approvals of Olumiant in the U.S., Europe, and Japan, as well as achievement of a sales-based milestone, milestone payments of $330.0 million ~~and $260.0 million~~ were capitalized as intangible assets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022 and are being amortized to cost of sales through the term of the collaboration. This represents the cumulative amounts that have been capitalized from the start of this collaboration through the end of each reporting period.

As of ~~September~~June 30, ~~2022,~~2023, Incyte is eligible to receive up to $100.0 million of additional payments from us in potential sales-based milestones.

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Olumiant $ 182.9 $ 406.9 $ 624.7 $ 809.1


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Olumiant	$	218.9	$	186.2	$	447.8	$	441.8

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 has the right to receive tiered royalty payments on worldwide net sales of bamlanivimab and bebtelovimab with percentages ranging in the mid-teens to mid-twenties. Royalty payments made to AbCellera ~~are~~were recorded as cost of sales.

We have a license and collaboration agreement with Shanghai Junshi Biosciences Co., Ltd. (Junshi Biosciences) to co-develop therapeutic antibodies for the potential prevention and treatment of COVID-19, including etesevimab, for which we hold development and commercialization rights outside of mainland China and the Special Administrative Regions of Hong Kong and Macau, and for which Junshi Biosciences currently maintains all rights in mainland China and the Special Administrative Regions of Hong Kong and Macau. Junshi Biosciences has the right to receive royalty payments in the mid-teens on our net sales of etesevimab. Junshi Biosciences received certain development, success-based regulatory and sales-based milestones. Capitalized regulatory and sales-based milestones were fully amortized to cost of sales as of September 30, 2022.

Pursuant to EUAs or similar regulatory authorizations, we recognized net product revenue associated with our sales of our COVID-19 antibodies of ~~$386.6~~$129.1 million and ~~$1.99~~$1.60 billion, primarily related to bebtelovimab, for the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~respectively, and $217.1 million and $1.18 billion for~~respectively. We did not have sales of our COVID-19 antibodies during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively.~~

~~Sintilimab Injection~~

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. In connection with regulatory approvals for Tyvyt in China, milestone payments of $120.0 million and $40.0 million were capitalized as intangible assets as of September 30, 2022 and December 31, 2021, respectively, and are being amortized to cost of sales through the term of the collaboration. This represents the cumulative amounts that have been capitalized from the start of this collaboration through the end of each reporting period. As of September 30, 2022, Innovent is eligible to receive up to $115.0 million in success-based regulatory and sales-based milestones.

We record our sales of Tyvyt to third parties as net product revenue, with payments made to Innovent for its portion of the gross margin reported as cost of sales. We report as collaboration and other revenue our portion of the gross margin for Tyvyt sales made by Innovent to third parties. The following table summarizes our revenue recognized in China with respect to Tyvyt:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Tyvyt $ 76.8 $ 125.6 $ 235.8 $ 340.2

In 2020, we obtained an exclusive license for sintilimab injection from Innovent for geographies outside of China, which was subsequently terminated and rights have reverted to Innovent in October 2022.2023.

Lebrikizumab

We have a worldwide license agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc. (collectively, Roche), which provides us the worldwide development and commercialization rights to lebrikizumab. Roche has the right to receive tiered royalty payments on future worldwide net sales ranging in percentages from high single digits to high teens if the product is successfully commercialized. As of ~~September~~June 30, ~~2022,~~2023, Roche is eligible to receive up to ~~$180.0~~$160.0 million of payments from us contingent upon the achievement of success-based regulatory milestones and up to $1.03 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab.

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 have the right to receive tiered royalty payments on future net sales in Europe ranging in percentages from low double digits to low twenties if the product is successfully commercialized. As of ~~September~~June 30, ~~2022,~~2023, we are eligible to receive ~~additional~~ payments of ~~$85.0~~$65.0 million from Almirall contingent upon the achievement of success-based regulatory milestones and up to $1.25 billion in a series of sales-based milestones, contingent upon the commercial success of lebrikizumab. ~~There were no remaining contract liabilities as of September 30, 2022. As of December 31, 2021, contract liabilities were not material.~~ During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, collaboration and other revenue recognized under this license agreement was not material.

Divestitures

We periodically enter into arrangements to sell the rights of a product. We recognize the net gain or loss associated with the sale of rights of a product as collaboration and other revenue when control of the asset transfers to the other party.

We may be eligible to receive milestone payments contingent upon the occurrence of certain future events linked to the success of the divested product. Milestones are included in the transaction price only to the extent a significant reversal in the amount of revenue recognized is not probable of occurring when the uncertainties associated with the milestones are subsequently resolved.

We may enter into a supply arrangement as part of a divestiture of product rights. Our sale of product inventory under the supply agreement is recognized as 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.

Baqsimi

In June 2023, we sold the rights for Baqsimito Amphastar Pharmaceuticals, Inc. (Amphastar). Under the terms of the agreement, we received $500.0 million in cash and will receive an additional $125.0 million in cash upon the one year anniversary of closing. We included both in the transaction price as of June 30, 2023. We are eligible to receive payments of up to $450.0 million in a series of sales-based milestones, that have not been included in the transaction price as of June 30, 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 stand alone 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 will recognize net product revenue over time as we manufacture the product.

For the three and six months ended June 30, 2023, we recognized $579.0 million in revenue primarily related to the net gain on the sale of rights for Baqsimi. Cash received from the sale of rights for Baqsimi was included in cash flows from investing activities for the six months ended June 30, 2023.

Olanzapine (including Zyprexa®)

In July 2023, we sold the rights for the olanzapine portfolio, including Zyprexa, to Cheplapharm Arzneimittel GmbH (Cheplapharm). Under the terms of the agreement, we received $1.05 billion in cash and will receive an additional $305.0 million in cash upon the one year anniversary of closing. We are eligible to receive milestone payments of up to $50.0 million. We also entered into a supply agreement with Cheplapharm that obligates Cheplapharm to purchase Zyprexa product we are manufacturing at an amount which represents a stand alone selling price.

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

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Severance $ — $ — $ — $ 11.5
Asset impairment and other special charges 206.5 — 206.5 200.1
Total asset impairment, restructuring, and other special charges $ 206.5 $ — $ 206.5 $ 211.6

Asset impairment, restructuring, and other special charges recognized during the three and nine months ended September 30, 2022 were primarily related to an intangible asset impairment for GBA1 Gene Therapy (PR001), acquired in the Prevail acquisition, as a result of changes in key assumptions used in the valuation due to delays in estimated launch timing.

Asset impairment, restructuring, and other special charges recognized during the nine months ended September 30, 2021 were primarily related to an intangible asset impairment of $108.1 million resulting from the sale of the rights to Qbrexza®~~, as well as acquisition and integration costs associated with the acquisition of Prevail.~~

We recognized a net inventory impairment charge related to our COVID-19 antibodies of $435.1 million during the nine months ended September 30, 2021 in cost of sales in our consolidated condensed statements of operations. As part of our response to the COVID-19 pandemic, and at the request of the U.S. and international governments, we invested in large-scale manufacturing of COVID-19 antibodies at risk, in order to ensure rapid access to patients around the world. As the COVID-19 pandemic evolved during 2021, we incurred a net inventory impairment charge primarily due to the combination of changes to demand from U.S. and international governments, including changes to our agreement with the U.S. government, and near-term expiry dates of COVID-19 antibodies.

Note 6:5: Financial Instruments

~~Financial instruments that potentially subject us to credit risk consist principally of trade receivables~~Investments in Equity and interest-bearing investments. Wholesale distributors of life science products account for a substantial portion of our trade receivables; collateral is generally not required. We seek to mitigate the risk associated with this concentration through our ongoing credit-review procedures and insurance. A large portion of our cash is held by a few major financial institutions. We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations. In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one financial institution or corporate issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect any counterparties to fail to meet their obligations given their investment grade credit ratings.

~~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.~~Debt Securities

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

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

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

•Our public equity investments are measured and carried at fair value. Any change in fair value is recognized in other-net, (income) expense.

We ~~review~~adjust our equity investments ~~other than public~~without readily determinable fair values based upon changes in the equity ~~investments for indications of impairment and~~instruments' values resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Downward adjustments resulting from an impairment are recorded based upon impairment considerations, including the financial condition and near-term prospects of the issuer, general market conditions, and industry specific factors. Adjustments recorded for the three and six months ended June 30, 2023 and 2022 were not material.

The net losses recognized in our consolidated condensed statements of operations for equity securities were $64.9 million and $78.6 million for the three and six months ended June 30, 2023, respectively, and $118.9 million and $544.3 million for the three and six months ended June 30, 2022, respectively. The net gains (losses) recognized for the three and six months ended June 30, 2023 and 2022 on equity securities sold during the respective periods were not material.

As of June 30, 2023, we had approximately $925 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a ~~regular basis.~~period of up to 10 years.

We record our available-for-sale debt securities at fair value, with changes in fair value reported as a component of accumulated other comprehensive income (loss). We periodically assess our investment in available-for-sale securities for impairment losses and credit losses. The amount of credit losses are determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration. Impairment and credit losses related to available-for-sale securities were not material for the three and six months ended June 30, 2023 and 2022.

The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of June 30, 2023:


	Maturities by Period
	Total		Less Than 1 Year		1-5 Years		6-10 Years		More Than 10 Years
Fair value of debt securities	$	663.6	$	86.1	$	213.2	$	117.0	$	247.3

A summary of the amount of unrealized gains and losses in accumulated other comprehensive loss and the fair value of available-for-sale securities in an unrealized gain or loss position follows:


	June 30, 2023		December 31, 2022
Unrealized gross gains	$	0.6	$	0.6
Unrealized gross losses	44.6		49.2
Fair value of securities in an unrealized gain position	54.6		46.8
Fair value of securities in an unrealized loss position	570.6		568.7

As of June 30, 2023, the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varying maturities, which are sensitive to changes in the yield curve and other market conditions. Approximately 99 percent of the fixed-rate debt securities in a loss position are investment-grade debt securities. As of June 30, 2023, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of a material default on interest or principal payments for our debt securities.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Proceeds from sales	$	34.2	$	29.9	$	61.8	$	65.1
Realized gross gains on sales	0.1		0.1		0.3		0.2
Realized gross losses on sales	1.0		0.7		1.7		1.5

Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial cost adjusted for any other-than-temporary declines in fair value that were recorded in earnings.

Fair Value of Investments

The following table summarizes certain fair value information at June 30, 2023 and December 31, 2022 for investment assets measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of certain other investments:


					Fair Value Measurements Using
	Carrying Amount		Cost(1)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
June 30, 2023
Cash equivalents(2)	$	1,340.9	$	1,340.9	$	1,333.7	$	7.2	$	—	$	1,340.9

Short-term investments:
U.S. government and agency securities	$	19.5	$	19.9	$	19.5	$	—	$	—	$	19.5
Corporate debt securities	65.3		65.6		—		65.3		—		65.3

Asset-backed securities	1.3		1.3		—		1.3		—		1.3
Other securities	48.5		48.5		—		23.5		25.0		48.5

Short-term investments	$	134.6

Noncurrent investments:
U.S. government and agency securities	$	150.2	$	164.7	$	150.2	$	—	$	—	$	150.2

Corporate debt securities	211.5		230.7		—		211.5		—		211.5
Mortgage-backed securities	158.3		170.8		—		158.3		—		158.3
Asset-backed securities	57.5		59.2		—		57.5		—		57.5
Other securities	166.2		69.5		—		6.2		160.0		166.2
Marketable equity securities	577.6		460.6		577.6		—		—		577.6
Equity investments without readily determinable fair values(3)	535.4
Equity method investments(3)	888.4
Noncurrent investments	$	2,745.1

December 31, 2022
Cash equivalents(2)	$	657.4	$	657.4	$	650.4	$	7.0	$	—	$	657.4

Short-term investments:
U.S. government and agency securities	$	30.8	$	31.1	$	30.8	$	—	$	—	$	30.8
Corporate debt securities	53.4		53.5		—		53.4		—		53.4

Asset-backed securities	2.0		2.0		—		2.0		—		2.0
Other securities	58.6		58.6		—		39.1		19.5		58.6

Short-term investments	$	144.8

Noncurrent investments:
U.S. government and agency securities	$	146.4	$	163.2	$	146.4	$	—	$	—	$	146.4
Corporate debt securities	213.9		235.8		—		213.9		—		213.9
Mortgage-backed securities	149.2		161.5		—		149.2		—		149.2
Asset-backed securities	50.6		52.5		—		50.6		—		50.6
Other securities	398.6		34.5		—		311.0		87.6		398.6
Marketable equity securities	683.6		484.7		683.6		—		—		683.6
Equity investments without readily determinable fair values(3)	478.4
Equity method investments(3)	781.1
Noncurrent investments	$	2,901.8

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

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

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

We determine our Level 1 and Level 2 fair value measurements based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. Level 3 fair value measurements for other investment securities are determined using unobservable inputs, including the investments' cost adjusted for impairments and price changes from orderly transactions. Fair values are not readily available for certain equity investments measured under the measurement alternative.

Debt

In February 2023, we issued $750.0 million of 5.000 percent fixed-rate notes due in 2026, which are callable at par after one year, $1.00 billion of 4.700 percent fixed-rate notes due in 2033, $1.25 billion of 4.875 percent fixed-rate notes due in 2053, and $1.00 billion of 4.950 percent fixed-rate notes due in 2063, all with interest to be paid semi-annually. We used the net cash proceeds from the offering of $3.96 billion for general business purposes, including the repayment of outstanding commercial paper.

Fair Value of Debt

The following table summarizes certain fair value information at June 30, 2023 and December 31, 2022 for our short-term and long-term debt:


			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
Short-term commercial paper borrowings
June 30, 2023	$	—	$	—	$	—	$	—	$	—
December 31, 2022	(1,498.0)		—		(1,492.0)		—		(1,492.0)
Long-term debt, including current portion
June 30, 2023	$	(18,820.0)	$	—	$	(16,589.9)	$	—	$	(16,589.9)
December 31, 2022	(14,740.6)		—		(12,329.3)		—		(12,329.3)

Risk Management and Related Financial Instruments

Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life science products account for a substantial portion of our trade receivables; collateral is generally not required. We seek to mitigate the risk associated with this concentration through our ongoing credit-review procedures and insurance. The majority of our cash is held by a few major financial institutions that have been identified as Global Systemically Important Banks (G-SIBs) by the Financial Stability Board. G-SIBs are subject to rigorous regulatory testing and oversight and must meet certain capital requirements. We monitor our exposures with these institutions and do not expect any of these institutions to fail to meet their obligations. In accordance with documented corporate risk-management policies, we monitor the amount of credit exposure to any one financial institution or corporate issuer based on credit rating of our counterparty. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect significant counterparties to fail to meet their obligations given their investment grade credit ratings.

We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S. accounts receivable. These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effective control over, and risk related to, the receivables to the buyers. Our factoring agreements do not allow for recourse in the event of uncollectibility, and we do not retain any interest in the underlying accounts receivable once sold. We derecognized $429.5 million and $422.1 million of accounts receivable as of June 30, 2023 and December 31, 2022, respectively, under these factoring arrangements. The costs of factoring such accounts receivable on our consolidated condensed results of operations for the three and six months ended June 30, 2023 and 2022 were not material.

Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and are intended to offset losses and gains on the assets, liabilities, and transactions being hedged. Management reviews the correlation and effectiveness of our derivatives on a quarterly basis.

For derivative instruments that are designated and qualify as fair value hedges, the derivative instrument is marked to market, with gains and losses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure. For derivative instruments that are designated and qualify as cash flow hedges, gains and losses are reported as a component of accumulated other comprehensive ~~loss~~income (loss) (see Note 9) and reclassified into earnings in the same period the hedged transaction affects earnings. For derivative and non-derivative instruments that are designated and qualify as net investment hedges, the foreign currency translation gains or losses due to spot rate fluctuations are reported as a component of accumulated other comprehensive ~~loss.~~income (loss) (see Note 9). Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized in earnings during the period of change.

We may enter into foreign currency forward or option contracts to reduce the effect of fluctuating currency exchange rates (principally the euro, British pound, Chinese yuan, Japanese yen, and ~~Japanese yen)~~Swiss franc). Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlying exposures. Forward and option contracts are principally used to manage exposures arising from subsidiary trade and loan payables and receivables denominated in foreign currencies. These contracts are recorded at fair value with the gain or loss recognized in other–net, (income) expense. ~~We may enter into foreign currency forward and option contracts and currency swaps as fair value hedges of firm commitments.~~ Forward contracts generally have maturities not exceeding 12 months. At ~~September~~June 30, ~~2022,~~2023, we had outstanding foreign currency forward commitments to purchase 1.69 billion U.S. dollars and sell 1.71 billion euro; commitments to purchase 2.24 billion euro and sell 2.24 billion U.S. dollars; commitments to purchase 239.5 million U.S. dollars and sell 1.63 billion Chinese yuan; commitments to purchase 82.1 million U.S. dollars and sell 11.86 billion Japanese yen; and commitments to purchase 182.1 million British pounds and sell 206.9 million U.S. dollars,as follows, all of which ~~all~~ have settlement dates within 180 ~~days.~~days:

June 30, 2023

Purchase

Sell

Currency

Amount
(in millions)

Currency

Amount
(in millions)

Euro

3,373.9

U.S. dollars

3,683.6

U.S. dollars

2,617.8

Euro

2,394.7

British pounds

182.9

U.S. dollars

234.4

U.S. dollars

151.4

Chinese yuan

1,084.8

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 ~~$6.23~~$6.95 billion and ~~$7.90~~$6.83 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, of which ~~$4.94~~$5.57 billion and ~~$5.79~~$5.45 billion have been designated as, and are effective as, economic hedges of net investments in certain of our foreign operations as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. At ~~September~~June 30, ~~2022,~~2023, we had outstanding cross-currency swaps with notional amounts of ~~$1.56~~$1.01 billion swapping U.S. dollars to euro and $1.00 billion swapping Swiss francs to U.S. dollars which have settlement dates ranging through 2028. Our cross-currency interest rate swaps, for which a majority convert a portion of our U.S. dollar-denominated fixed-rate debt to foreign-denominated fixed-rate debt, have also been designated as, and are effective as, economic hedges of net investments. At ~~September~~June 30, ~~2022,~~2023, we had outstanding foreign currency forward contracts to sell ~~1.34~~2.08 billion euro and to sell 1.80 billion Chinese yuan with settlement dates ranging through 2023, which have been designated as, and are effective as, economic hedges of net investments.

In the normal course of business, our operations are exposed to fluctuations in interest rates which can vary the costs of financing, investing, and operating. We seek to address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings. Our primary interest-rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage interest-rate exposures, we strive to achieve an acceptable balance between fixed- and floating-rate debt and investment positions and may enter into interest rate swaps or collars to help maintain that balance.

Interest rate swaps or collars that convert our fixed-rate debt to a floating rate are designated as fair value hedges of the underlying instruments. Interest rate swaps or collars that convert floating-rate debt to a fixed rate are designated as cash flow hedges. Interest expense on the debt is adjusted to include the payments made or received under the swap agreements. Cash proceeds from or payments to counterparties resulting from the termination of interest rate swaps are classified as operating activities in our consolidated condensed statements of cash flows. At ~~September~~June 30, ~~2022, substantially~~2023, all of our total long-term debt is at a fixed rate. We have converted approximately 1012 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.

2124

We also may enter into forward-starting interest rate swaps, which we designate as cash flow hedges, as part of any anticipated future debt issuances in order to reduce the risk of cash flow volatility from future changes in interest rates. The change in fair value of these instruments is recorded as part of other comprehensive income (loss) (see Note 9) and, upon completion of a debt issuance and termination of the swap, is amortized to interest expense over the life of the underlying debt. As of ~~September~~June 30, ~~2022,~~2023, the total notional amounts of forward-starting interest rate contracts in designated cash flow hedging instruments were ~~$1.75~~$1.00 billion, which have settlement dates ranging ~~between 2023 and~~through 2025.

Effective September 15, 2022, we increased our 364-day credit facility from $2.00 billion to $4.00 billion, which will expire in September 2023, and is available to support our commercial paper program. We have not drawn against the $4.00 billion 364-day credit facility as of September 30, 2022.

In September 2021, we issued euro-denominated notes consisting of €600.0 million of 0.50 percent fixed-rate notes due in September 2033, with interest to be paid annually. The net proceeds from the offering have been, and will continue to be, used to fund, in whole or in part, eligible projects designed to advance one or more of our environmental, social, and governance objectives.

In September 2021, we issued euro-denominated notes consisting of €500.0 million of 1.125 percent fixed-rate notes due in September 2051 and €700.0 million of 1.375 percent fixed-rate notes due in September 2061, with interest to be paid annually, and British pound-denominated notes consisting of £250.0 million of 1.625 percent fixed-rate notes due in September 2043, with interest to be paid annually. We paid $1.91 billion of the net cash proceeds from the offering to purchase and redeem certain higher interest rate U.S. dollar-denominated notes with an aggregate principal amount of $1.50 billion, resulting in a debt extinguishment loss of $405.2 million. This loss was included in other net, (income) expense in our consolidated condensed statement of operations during the three and nine months ended September 30, 2021. The $1.50 billion principal amount of higher interest rate U.S. dollar-denominated notes that were redeemed primarily included $541.8 million of 3.95 percent notes due 2049, $408.7 million of 4.15 percent notes due 2059, and $219.4 million of 3.375 percent notes due 2029. We used the remaining net proceeds from the offering to prefund certain 2022 debt maturities and for general corporate purposes.

The Effect of Risk-Management Instruments on the Consolidated Condensed Statements of Operations

The following effects of risk-management instruments were recognized in other–net, (income) expense:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Fair value hedges:	Fair value hedges:									Fair value hedges:
Effect from hedged fixed-rate debt	Effect from hedged fixed-rate debt	$	(62.9)	$	(10.1)	$	(215.7)	$	(60.5)	Effect from hedged fixed-rate debt	$	(34.4)	$	(58.2)	$	0.9	$	(152.8)
Effect from interest rate contracts	Effect from interest rate contracts	62.9		10.1		215.7		60.5		Effect from interest rate contracts	34.4		58.2		(0.9)		152.8
Cash flow hedges:	Cash flow hedges:									Cash flow hedges:
Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss	Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss	4.1		4.2		12.3		12.5		Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss	3.3		4.1		7.1		8.2
Cross-currency interest rate swaps	Cross-currency interest rate swaps	33.1		10.0		75.0		58.1		Cross-currency interest rate swaps	(17.1)		33.6		(30.0)		41.9
Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments	Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments	129.6		50.8		280.7		110.6		Net (gains) losses on foreign currency exchange contracts not designated as hedging instruments	29.6		151.1		(23.2)		145.0
Total	Total	$	166.8	$	65.0	$	368.0	$	181.2	Total	$	15.8	$	188.8	$	(46.1)	$	195.1

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the amortization of losses related to the portion of our risk management hedging instruments, fair value hedges, and cash flow hedges that was excluded from the assessment of effectiveness was not material.

The Effect of Risk-Management Instruments on Other Comprehensive Income (Loss)

The effective portion of risk-management instruments that was recognized in other comprehensive income (loss) is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net investment hedges:	Net investment hedges:									Net investment hedges:
Foreign currency-denominated notes	Foreign currency-denominated notes	$	435.1	$	119.0	$	822.8	$	268.8	Foreign currency-denominated notes	$	10.6	$	333.3	$	(121.2)	$	387.7
Cross-currency interest rate swaps	Cross-currency interest rate swaps	92.1		66.7		171.4		170.8		Cross-currency interest rate swaps	(7.8)		68.5		(19.6)		79.3
Foreign currency forward contracts	Foreign currency forward contracts	107.8		—		121.4		—		Foreign currency forward contracts	27.7		13.6		(18.4)		13.6
Cash flow hedges:	Cash flow hedges:									Cash flow hedges:
Forward-starting interest rate swaps	Forward-starting interest rate swaps	57.5		19.4		337.7		149.3		Forward-starting interest rate swaps	33.3		157.7		57.1		280.2
Cross-currency interest rate swaps	Cross-currency interest rate swaps	19.9		3.1		38.4		22.5		Cross-currency interest rate swaps	21.9		1.4		14.1		18.5

During the next 12 months, we expect to reclassify ~~$16.7~~$13.1 million of pretax net losses on cash flow hedges from accumulated other comprehensive loss to other–net, (income) expense. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the amounts excluded from the assessment of hedge effectiveness recognized in other comprehensive income (loss) were not material.

2325

Fair Value of ~~Financial~~Risk-Management Instruments

The following ~~tables summarize~~table summarizes certain fair value information at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 for risk management assets and liabilities measured at fair value on a recurring ~~basis, as well as the carrying amount and amortized cost of certain other investments:~~basis:

Fair Value Measurements Using
Carrying
Amount
Cost(1)
Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair
Value
September 30, 2022
Cash equivalents $ 1,246.8 $ 1,246.8 $ 1,239.2 $ 7.6 $ — $ 1,246.8
Short-term investments:
U.S. government and agency securities $ 43.0 $ 43.5 $ 43.0 $ — $ — $ 43.0
Corporate debt securities 51.7 51.8 — 51.7 — 51.7
Asset-backed securities 3.0 3.0 — 3.0 — 3.0
Other securities 27.0 27.0 — 14.8 12.2 27.0
Short-term investments $ 124.7
Noncurrent investments:
U.S. government and agency securities $ 131.4 $ 148.3 $ 131.4 $ — $ — $ 131.4
Corporate debt securities 206.4 232.5 — 206.4 — 206.4
Mortgage-backed securities 143.1 156.1 — 143.1 — 143.1
Asset-backed securities 43.6 45.5 — 43.6 — 43.6
Other securities 152.5 96.3 — 39.5 113.0 152.5
Marketable equity securities 549.1 416.1 549.1 — — 549.1
Equity investments without readily determinable fair values(2)
583.7
Equity method investments(2)
764.8
Noncurrent investments $ 2,574.6
December 31, 2021
Cash equivalents $ 2,379.5 $ 2,379.5 $ 2,361.0 $ 18.5 $ — $ 2,379.5
Short-term investments:
U.S. government and agency securities $ 25.7 $ 25.6 $ 25.7 $ — $ — $ 25.7
Corporate debt securities 43.7 43.7 — 43.7 — 43.7
Mortgage-backed securities 0.2 0.2 — 0.2 — 0.2
Asset-backed securities 6.2 6.2 — 6.2 — 6.2
Other securities 14.3 14.3 — — 14.3 14.3
Short-term investments $ 90.1
Noncurrent investments:
U.S. government and agency securities $ 137.0 $ 136.8 $ 137.0 $ — $ — $ 137.0
Corporate debt securities 235.3 232.7 — 235.3 — 235.3
Mortgage-backed securities 109.8 108.1 — 109.8 — 109.8
Asset-backed securities 23.1 23.1 — 23.1 — 23.1
Other securities 108.1 22.2 — — 108.1 108.1
Marketable equity securities 1,279.7 487.0 1,279.7 — — 1,279.7
Equity investments without readily determinable fair values(2)
548.1
Equity method investments(2)
771.5
Noncurrent investments $ 3,212.6

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

~~(2)~~ ~~Fair value disclosures are not applicable for equity method investments and investments accounted for under the measurement alternative for equity investments.~~

Fair Value Measurements Using
Carrying
Amount Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant
Other Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair
Value
Short-term commercial paper borrowings
September 30, 2022 $ (1,741.3) $ — $ (1,738.0) $ — $ (1,738.0)
December 31, 2021 — — — — —
Long-term debt, including current portion
September 30, 2022 $ (14,147.1) $ — $ (11,848.6) $ — $ (11,848.6)
December 31, 2021 (16,884.7) — (18,157.7) — (18,157.7)

Fair Value Measurements Using
Carrying
Amount Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant
Other Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Fair
Value
September 30, 2022
Risk-management instruments:
Interest rate contracts designated as fair value hedges:
Other noncurrent liabilities $ (140.2) $ — $ (140.2) $ — $ (140.2)
Interest rate contracts designated as cash flow hedges:
Other noncurrent assets 355.2 — 355.2 — 355.2
Cross-currency interest rate contracts designated as net investment hedges:
Other receivables 81.6 — 81.6 — 81.6
Other noncurrent assets 116.9 — 116.9 — 116.9
Cross-currency interest rate contracts designated as cash flow hedges:
Other noncurrent assets 8.3 — 8.3 — 8.3
Other noncurrent liabilities (12.9) — (12.9) — (12.9)
Foreign exchange contracts designated as net investment hedges:
Other receivables 108.2 — 108.2 — 108.2
Other current liabilities (2.9) — (2.9) — (2.9)
Foreign exchange contracts not designated as hedging instruments:
Other receivables 48.1 — 48.1 — 48.1
Other current liabilities (93.5) — (93.5) — (93.5)
Contingent consideration liability:
Other noncurrent liabilities (42.1) — — (42.1) (42.1)
December 31, 2021
Risk-management instruments:
Interest rate contracts designated as fair value hedges:
Other receivables $ 4.8 $ — $ 4.8 $ — $ 4.8
Other noncurrent assets 78.3 — 78.3 — 78.3
Other noncurrent liabilities (7.6) — (7.6) — (7.6)
Interest rate contracts designated as cash flow hedges:
Other noncurrent assets 49.2 — 49.2 — 49.2
Other noncurrent liabilities (31.7) — (31.7) — (31.7)
Cross-currency interest rate contracts designated as net investment hedges:
Other noncurrent assets 31.3 — 31.3 — 31.3
Other current liabilities (1.2) — (1.2) — (1.2)
Cross-currency interest rate contracts designated as cash flow hedges:
Other noncurrent assets 33.2 — 33.2 — 33.2
Other noncurrent liabilities (1.3) — (1.3) — (1.3)
Foreign exchange contracts not designated as hedging instruments:
Other receivables 9.9 — 9.9 — 9.9
Other current liabilities (35.3) — (35.3) — (35.3)
Contingent consideration liabilities:
Other noncurrent liabilities (70.5) — — (70.5) (70.5)


			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
June 30, 2023
Risk-management instruments:
Interest rate contracts designated as fair value hedges:


Other current liabilities	$	(8.7)	$	—	$	(8.7)	$	—	$	(8.7)
Other noncurrent liabilities	(124.8)		—		(124.8)		—		(124.8)


Interest rate contracts designated as cash flow hedges:
Other noncurrent assets	261.9		—		261.9		—		261.9

Cross-currency interest rate contracts designated as net investment hedges:
Other receivables	42.7		—		42.7		—		42.7



Cross-currency interest rate contracts designated as cash flow hedges:
Other receivables	69.5		—		69.5		—		69.5
Other noncurrent assets	27.6		—		27.6		—		27.6

Foreign exchange contracts designated as net investment hedges:
Other receivables	17.3		—		17.3		—		17.3
Other current liabilities	(15.2)		—		(15.2)		—		(15.2)
Foreign exchange contracts not designated as hedging instruments:
Other receivables	15.3		—		15.3		—		15.3
Other current liabilities	(17.8)		—		(17.8)		—		(17.8)


Contingent consideration liabilities:
Other current liabilities	(38.9)		—		—		(38.9)		(38.9)
Other noncurrent liabilities	(72.3)		—		—		(72.3)		(72.3)


			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
December 31, 2022
Risk-management instruments:
Interest rate contracts designated as fair value hedges:



Other noncurrent liabilities	$	(134.3)	$	—	$	(134.3)	$	—	$	(134.3)
Interest rate contracts designated as cash flow hedges:
Other receivables	162.9		—		162.9		—		162.9
Other noncurrent assets	246.0		—		246.0		—		246.0

Cross-currency interest rate contracts designated as net investment hedges:
Other receivables	67.6		—		67.6		—		67.6



Cross-currency interest rate contracts designated as cash flow hedges:
Other noncurrent assets	53.1		—		53.1		—		53.1

Foreign exchange contracts designated as hedging instruments:
Other current liabilities	(38.3)		—		(38.3)		—		(38.3)
Foreign exchange contracts not designated as hedging instruments:
Other receivables	26.6		—		26.6		—		26.6
Other current liabilities	(21.5)		—		(21.5)		—		(21.5)
Contingent consideration liabilities:
Other current liabilities	(39.5)		—		—		(39.5)		(39.5)
Other noncurrent liabilities	(70.6)		—		—		(70.6)		(70.6)

Risk-management instruments above are disclosed on a gross basis. There are various rights of setoff associated with certain of the risk-management instruments above that are subject to enforceable master netting arrangements or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-management instruments above, individually, these financial rights are not material.

~~As of September 30, 2022, we had approximately $854 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years.~~

Contingent consideration ~~liability relates~~liabilities relate to our ~~liability~~liabilities arising in connection with the ~~CVR~~CVRs issued as a result of ~~the Prevail acquisition.~~acquisitions of businesses. The fair ~~value~~values of the CVR ~~liability was~~liabilities were estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participant's view of the expected cash ~~payment~~payments associated with the ~~first potential~~agreed upon regulatory ~~approval of a Prevail compound in the applicable countries~~milestones based on probabilities of technical success, timing of the potential ~~approval~~milestone events for the compounds, and an estimated discount ~~rate. See Note 3 for additional information related to the CVR arrangement.~~

~~The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of September 30, 2022:~~

Maturities by Period
Total Less Than
1 Year 1-5
Years 6-10
Years More Than
10 Years
Fair value of debt securities $ 622.2 $ 97.7 $ 197.8 $ 121.0 $ 205.7

The net gains (losses) recognized in our consolidated condensed statements of operations for equity securities were $(123.3) million and $(667.6) million for the three and nine months ended September 30, 2022, respectively, and $(246.8) million and $270.1 million for the three and nine months ended September 30, 2021, respectively. The net gains (losses) recognized for the three and nine months ended September 30, 2022 and 2021 on equity securities sold during the respective periods were not material.

We adjust our equity investments without readily determinable fair values based upon changes in the equity instruments' values resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Downward adjustments resulting from an impairment are recorded based upon impairment considerations, including the financial condition and near term prospects of the issuer, general market conditions, and industry specific factors. Adjustments recorded for the three and nine months ended September 30, 2022 and 2021 were not material.

~~A summary of the amount of unrealized gains and losses in accumulated other comprehensive loss and the fair value of available-for-sale securities in an unrealized gain or loss position follows:~~

September 30, 2022 December 31, 2021
Unrealized gross gains $ 0.1 $ 9.7
Unrealized gross losses 51.6 5.2
Fair value of securities in an unrealized gain position 13.8 250.7
Fair value of securities in an unrealized loss position 578.8 290.2

We periodically assess our investment in available-for-sale securities for impairment losses and credit losses. The amount of credit losses are determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration. Impairment and credit losses related to available-for-sale securities were not material for the three and nine months ended September 30, 2022 and 2021.

As of September 30, 2022, 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 95 percent of the fixed-rate debt securities in a loss position are investment-grade debt securities. As of September 30, 2022, we do not intend to sell, and it is not more likely than not that we will be required to sell, the securities in a loss position before the market values recover or the underlying cash flows have been received, and there is no indication of a material default on interest or principal payments for our debt securities.

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Proceeds from sales $ 50.5 $ 49.6 $ 115.6 $ 137.3
Realized gross gains on sales — 0.4 0.2 2.2
Realized gross losses on sales 7.5 0.3 9.0 1.1

~~Accounts Receivable Factoring Arrangements~~

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 $356.8 million and $550.5 million of accounts receivable as of September 30, 2022 and December 31, 2021, respectively, under these factoring arrangements. The costs of factoring such accounts receivable on our consolidated condensed results of operations for the three and nine months ended September 30, 2022 and 2021 were not material.rates.

Note 7:6: Income Taxes

The effective tax rates were ~~7.3~~15.6 percent and ~~8.6~~14.1 percent for the three and ~~nine~~six months ended ~~September~~June 30, 2023, respectively, reflecting the tax impacts of the new Puerto Rico tax regime and the sale of rights for Baqsimi. The effective tax rates were 12.7 percent and 9.2 percent for the three and six months ended June 30, 2022, respectively, reflecting the favorable tax impact of the implementation of a provision in the Tax Cuts and Jobs Act (2017 Tax Act) that requires capitalization and amortization of research and development expenses for tax purposes starting in 2022, net investment losses on equity securities, and an intangible asset impairment charge. We expect our effective tax rate to be approximately 13 percent to 14 percent for 2022 if the capitalization and amortization of research and development expenses provision of the 2017 Tax Act is deferred or repealed by the U.S. Congress effective for 2022.

~~The effective tax rate was 10.9 percent for the three months ended September 30, 2021, reflecting the favorable tax impact of a debt extinguishment loss and~~ of net investment losses on equity securities, partially offset by ~~a net discrete tax detriment. The effective tax rate was 10.7 percent for~~ the ~~nine months ended September 30, 2021, reflecting the favorable~~ tax impact of ~~a net discrete tax benefit, a debt extinguishment loss, and a net inventory impairment charge related to our COVID-19 antibodies.~~non-deductible acquired IPR&D charges.

The U.S. examination of tax years 2016-2018 began in ~~the fourth quarter of~~ 2019 and remains ongoing. ~~The resolution~~While it is reasonably possible that the Internal Revenue Service examination of ~~this audit period will likely extend beyond~~these tax years could conclude within the next 12 ~~months.~~months, final resolution of certain matters is dependent upon several factors, including the potential for formal administrative proceedings. As a result, an estimate of the range of reasonably possible changes in unrecognized tax benefits cannot be made.

2827

Note 8:7: Retirement Benefits

Net pension and retiree health ~~benefit (income)~~(benefit) cost included the following components:


		Defined Benefit Pension Plans									Defined Benefit Pension Plans
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Components of net periodic benefit cost:
Components of net periodic cost:										Components of net periodic cost:
Service cost	Service cost	$	87.1	$	92.5	$	264.4	$	277.8	Service cost	$	74.9	$	88.2	$	145.3	$	177.3
Interest cost	Interest cost	98.9		84.5		299.0		253.6		Interest cost	162.6		99.6		323.7		200.1
Expected return on plan assets	Expected return on plan assets	(235.1)		(237.5)		(711.6)		(712.7)		Expected return on plan assets	(264.2)		(237.0)		(527.5)		(476.5)
Amortization of prior service cost	Amortization of prior service cost	0.6		1.0		1.9		3.2		Amortization of prior service cost	0.6		0.6		1.2		1.3
Recognized actuarial loss	Recognized actuarial loss	85.3		121.9		256.8		366.3		Recognized actuarial loss	30.9		84.5		60.9		171.5

Net periodic benefit cost		$	36.8	$	62.4	$	110.5	$	188.2
Net periodic cost										Net periodic cost	$	4.8	$	35.9	$	3.6	$	73.7


		Retiree Health Benefit Plans									Retiree Health Benefit Plans
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Components of net periodic benefit income:
Components of net periodic benefit:										Components of net periodic benefit:
Service cost	Service cost	$	11.7	$	12.4	$	35.0	$	37.0	Service cost	$	8.2	$	12.1	$	15.9	$	23.3
Interest cost	Interest cost	9.4		8.1		28.4		24.4		Interest cost	15.3		9.6		30.7		19.0
Expected return on plan assets	Expected return on plan assets	(38.0)		(36.5)		(114.1)		(109.6)		Expected return on plan assets	(45.6)		(38.2)		(91.1)		(76.1)
Amortization of prior service benefit	Amortization of prior service benefit	(13.7)		(14.9)		(41.1)		(44.7)		Amortization of prior service benefit	(13.2)		(13.7)		(26.4)		(27.4)
Recognized actuarial loss		0.2		0.8		0.7		2.4
Recognized actuarial (gain) loss										Recognized actuarial (gain) loss	(2.0)		0.3		(2.9)		0.5

Net periodic benefit income		$	(30.4)	$	(30.1)	$	(91.1)	$	(90.5)
Net periodic benefit										Net periodic benefit	$	(37.3)	$	(29.9)	$	(73.8)	$	(60.7)

Note 9:8: Contingencies

We are involved in various lawsuits, claims, government investigations and other legal proceedings that arise in the ordinary course of business. These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. These matters may involve patent infringement, antitrust, securities, pricing, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage, among others. The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. Legal proceedings that are significant or that we believe could become significant or material are described below.

We believe the legal proceedings in which we are named as defendants are without merit and we are defending against them vigorously. It is not possible to determine the final outcome of these matters, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for any of these matters; however, we believe that the resolution of all such matters will not have a material adverse effect on our consolidated financial position or liquidity, but could possibly be material to our consolidated results of operations in any one accounting period.

Litigation accruals, environmental liabilities, and the related estimated insurance recoverables are reflected on a gross basis as liabilities and assets, respectively, on our consolidated ~~condensed~~ balance sheets. With respect to the product liability claims currently asserted against us, we have accrued for our estimated exposures to the extent they are both probable and reasonably estimable based on the information available to us. We accrue for certain product liability claims incurred but not filed to the extent we can formulate a reasonable estimate of their costs. We estimate these expenses based primarily on historical claims experience and data regarding product usage. Legal defense costs expected to be incurred in connection with significant product liability loss contingencies are accrued when both probable and reasonably estimable.

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

2928

Patent Litigation

Alimta European Patent Litigation

In Europe, Alimta (pemetrexed) was protected by a patent through June 2021. A number of legal proceedings that were initiated prior to patent expiration are ~~ongoing.~~ongoing.

Emgality Patent Litigation

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

Following a trial, in ~~October 2022.~~ November 2022, a jury returned a verdict in favor of Teva. The parties have filed post-trial motions on which the court will rule and then enter final judgment in the case. We intend to appeal the jury verdict if necessary. Pursuant to agreement by the parties, the award, if any, will not become due until completion of the appeal process. This matter is ongoing.

In June 2021, we were named as a defendant in a second litigation filed by Teva in the U.S. District Court for the District of Massachusetts seeking a ruling that two of Teva's patents, which are directed toward use of the active ingredient in Emgality to treat migraine, would be infringed by our continued sales of Emgality. We challenged these two patents by filing requests for Inter Partes Review with the Patent Trial and Appeal Board (PTAB) and in October 2022, the PTAB granted our ~~requests.The~~requests. The corresponding district court litigation is stayed while this PTAB proceeding is ongoing.

Jardiance Patent Litigation

In November 2018, Boehringer Ingelheim, our partner in marketing and development of Jardiance, initiated U.S. patent litigation in the U.S. District Court for the District of Delaware alleging infringement arising from submissions of Abbreviated New Drug Applications (ANDA) by a number of generic companies seeking approval to market generic versions of Jardiance, Glyxambi, and Synjardy in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act). Particularly with respect to Jardiance, the generic companies' ANDAs seek approval to market generic versions of Jardiance prior to the expiration of the relevant patents, and allege that certain patents ~~including in some allegations the compound patent,~~ are invalid or would not be infringed. We are not a party to this litigation. This ~~litigation has been stayed.~~

~~Taltz Patent Litigation~~

In April 2021, we petitioned the High Court of Ireland to declare invalid a patent that Novartis Pharma AG (Novartis) purchased from Genentech, Inc. in 2020. Novartis responded by filing a claim against us alleging patent infringement related to our commercialization of Taltz and seeking damages for past infringement and an injunction against future infringement.

In April 2021, Novartis petitioned the Court of Rome Intellectual Property Division for a preliminary injunction (PI) against us related to our commercialization of Taltz in Italy. In May 2021, We commenced patent revocation proceedings against Novartis before the Court of Milan’s IP Division where we also sought a declaration of non-infringement. Novartis counter-claimed for patent infringement and sought a permanent injunction. A hearing on the PI request before the Court of Rome Intellectual Property Division took place in May 2022 and in July 2022, the court rejected Novartis' request.

In November 2021, Novartis petitioned the Swiss Federal Patent Court for a PI and a permanent injunction in main infringement proceedings against us related to our commercialization of Taltz in Switzerland. We petitioned the court to revoke the patent and for a declaration of non-infringement. In April 2022, Novartis withdrew its PI request.

~~In January 2022, we commenced an action in the Hague District Court asking for a judgment that a Novartis Dutch patent~~matter is ~~not infringed by our commercialization of Taltz in the Netherlands and is invalid. In October 2022, Novartis filed a counterclaim for infringement and sought a permanent injunction.~~

In October 2022, we entered into a settlement and mutual release agreement with Novartis, which resolves the above-described disputes. Without any admission of liability or wrongdoing, we and Novartis have agreed to mutual releases for past claims and mutual covenants not to sue the other in relation to Taltz and the patents Novartis purchased from Genentech.

ongoing.

Zyprexa Canada Patent Litigation

Beginning in the mid-2000s, several generic companies in Canada challenged the validity of our Zyprexa compound patent. In 2012, the Canadian Federal Court of Appeals denied our appeal of a lower court's decision that certain patent claims were invalid for lack of utility. In 2013, Apotex Inc. and Apotex Pharmachem Inc. (collectively, Apotex) brought claims against us in the Ontario Superior Court of Justice atin Toronto for damages related to our enforcement of the Zyprexa compound patent under Canadian regulations governing patented drugs. Apotex seeks compensation based on novel legal theories under the Statute of Monopolies, Trademark Act, and common law. In March 2021, the Ontario Superior Court granted our motion for summary judgment, thereby dismissing Apotex's case. Apotex appealed that ruling to the Court of Appeal for Ontario in April 2021. In August 2022, the Court dismissed the appeal and in October 2022, Apotex appealed the ~~decision. This~~decision to the Supreme Court of Canada (SCC). In April 2023, the SCC denied Apotex's appeal petition and this matter is ~~ongoing.~~now closed.

Product Liability Litigation

~~Byetta® Product Liability~~Actos® Litigation

We ~~have been~~are named ~~as a defendant in over 500 Byetta product liability lawsuits in the U.S. that were first initiated in March 2009~~along with Takeda Chemical Industries, Ltd. and involved over 800 plaintiffs. These lawsuits have been filed in various state and federal jurisdictions, including California state court (coordinated in Los Angeles County Superior Court), and various federal courts, the majority of which are coordinatedTakeda affiliates (collectively, Takeda) in a ~~multi-district litigation (MDL)~~third party payor class action in the U.S. District Court for the ~~Southern~~Central District of ~~California. The majority~~California (Painters et al. v. Takeda et al.). Plaintiffs claim that they and similarly situated class members are entitled to recover money paid for or to reimburse Actos prescriptions because of ~~these suits contain allegations that Byetta caused or contributed~~alleged concealment of bladder cancer risk. Our agreement with Takeda calls for Takeda to ~~the plaintiffs' cancer (primarily pancreatic cancer or thyroid cancer). The federal MDL~~defend and ~~coordinated California state trial courts granted summary judgment in~~indemnify us against our ~~favor on claims pertaining~~losses and expenses with respect to ~~pancreatic cancer, and the plaintiffs have dismissed Lilly from their appeal~~U.S. litigation arising out of the ~~MDL ruling (the parties still await~~manufacture, use, or sale of Actos and other related expenses in accordance with the ~~order of judgment in the Los Angeles County Superior Court). Most~~terms of the ~~MDL~~agreement. In June 2023, we and ~~state court lawsuits have been dismissed as~~Takeda filed a petition for permission to appeal the class certification order. This matter is ongoing. Actos is a registered trademark of ~~November 2022.~~Takeda Pharmaceutical Company Limited.

Environmental Proceedings

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

Other Matters

340B Litigation and Investigations

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

In January 2021, we, along with other pharmaceutical manufacturers, were named as a defendant in a petition currently pending before the HHS Administrative Dispute Resolution Panel. Petitioner seeks declaratory and other injunctive relief related to the 340B program. As described above, the U.S. District Court for the Southern District of Indiana has entered a preliminary injunction enjoining the government's enforcement of this administrative dispute resolution process against us.

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

We received a civil investigative subpoena in February 2021 from the Office of the Attorney General for the State of Vermont relating to the sale of pharmaceutical products to Vermont covered entities under the 340B program. We are cooperating with this subpoena.

Branchburg Manufacturing Facility

In May 2021, we received a subpoena from the U.S. Department of Justice requesting the production of certain documents relating to our manufacturing site in Branchburg, New Jersey. We are cooperating with the subpoena.

Brazil Litigation – Cosmopolis Facility

Labor Attorney Litigation

First initiated in 2008, our subsidiary in Brazil, Eli Lilly do Brasil Limitada (Lilly Brasil), is named in a Public Civil Action brought by the Labor Public Attorney (LPA) for the 15th Region in the Labor Court of Paulinia, State of Sao Paulo, Brazil, (the Labor Court) alleging possible harm to employees and former employees caused by alleged exposure to soil and groundwater contaminants at a former Lilly Brasil manufacturing facility in Cosmopolis, Brazil, operated by the company between 1977 and 2003. In May 2014, the Labor Court judge ruled against Lilly Brasil, ordering it to undertake several remedial and compensatory actions including health coverage for a class of individuals and certain of their children. In July 2018, the appeals court (TRT) generally affirmed our appeal of the Labor Court's ruling, which included a liquidated award of 300 million Brazilian ~~real,~~reais, which, when adjusted for inflation and the addition of pre and post judgment interest using the current Central Bank of Brazil's special system of clearance and custody rate, is approximately ~~one~~1.15 billion Brazilian ~~real~~reais (approximately ~~$185~~$238 million as of ~~September~~June 30, ~~2022)~~2023). In August 2019, Lilly Brasil filed an appeal to the superior labor court (TST) and in June 2021, the TRT published its decision on the admissibility of Lilly Brasil's appeal, allowing the majority of the elements, which were allowed to proceed in June 2021; elements not proceeding are subject to an interlocutory appeal to the TST that was filed in June 2021. In September 2019, the TRT stayed a number of elements of its trial court decision pending the determination of Lilly Brasil's appeal to the TST. A mediation hearing is scheduled for August 2023.

In June 2019 and September 2020, the LPA filed applications in the Labor Court for enforcement of certain remedies granted by the TRT in its July 2018 decision, requested restrictions on Lilly Brasil’s assets in Brazil, and required Lilly Brasil and Antibióticos do Brasil Ltda. (ABL) to submit a list of potential beneficiaries of the Public Civil Action. In July 2019, the Labor Court issued a ruling requiring a freeze of Lilly Brasil’s immovable property or, alternatively, a security deposit or lien of 500 million Brazilian ~~real,~~reais, which ruling in June 2021 was ~~subsequently~~ limited in scope and the security was reduced to 100 million Brazilian ~~real.~~reais (approximately $21 million as of June 30, 2023). ABL and LPA appealed the June 2021 Labor Court ruling to the TST, which appeal is under review. The Labor Court is currently assessing the status of Lilly Brasil’s and ABL’s compliance with such portion of the July 2018 TRT decision and an inspection in the industrial plant is expected. These matters are ongoing.

Individual Former Employee Litigation

Lilly Brasil is also named in ~~over 20~~various pending lawsuits filed in the Labor Court by individual former employees making ~~similar~~related claims. These individual lawsuits are at various stages in the litigation process.

Puerto Rico Tax Matter

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

~~Eastern District of Pennsylvania Pricing (Average~~Average Manufacturer ~~Price) Inquiry~~Price Litigation

In November 2014, we, along with another pharmaceutical manufacturer, were named as co-defendants in United States et al. ex rel. Streck v. Takeda Pharm. Am., Inc., et al., which was filed in November 2014 and unsealed in the U.S. District Court for the Northern District of Illinois. The complaint alleges that the defendants should have treated certain credits from distributors as retroactive price increases and included such increases in calculating average manufacturer prices. Following a trial in August 2022, the jury returned a verdict in favor of the plaintiff. ~~The case~~Lilly filed its notice of appeal to the Seventh Circuit in June 2023, and briefing is ~~proceeding with post-trial motions after which the court will enter final judgment in the case.~~currently suspended. This matter is ongoing.

Health Choice Alliance

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

Pricing Litigation

~~In December 2017 and February 2018, we,~~We, along with Sanofi, ~~and~~ Novo Nordisk, ~~were~~and in some matters certain pharmacy benefit managers, have been named ~~as defendants~~ in ~~a consolidated purported class action lawsuit,~~lawsuits related to insulin pricing that assert various theories, including consumer protection, fraud, false advertising, unjust enrichment, civil conspiracy, federal and state RICO statutes, deceptive trade practices, antitrust, and unfair competition claims. These lawsuits include In re. Insulin Pricing Litigation, ~~and in~~ a putative consumer class action (U.S. District Court for the District of New Jersey, 2017); MSP Recovery Claims,Series, LLC et al. v. Sanofi Aventis U.S. LLC et al.~~, both filed in the U.S.~~ (U.S. District Court for the District of New Jersey. The cases relate to insulin pricing and seek damages or other relief under various theories, including state consumer protection laws, common law fraud, unjust enrichment, and the Federal Racketeer Influenced and Corrupt Organization Act (federal RICO Act). In both cases, the court dismissed claims under the federal RICO Act and certain state laws. In April 2021, the plaintiffs in In re. Insulin Pricing Litigation amended their complaint to allege additional state law claims for civil conspiracy and violations of state RICO statutes. The court allowed the Arizona RICO statute and certain state civil conspiracy law claims to proceed. Additionally in 2020, we, along with Sanofi, Novo Nordisk, CVS, Express Scripts, and Optum, have been sued in a putative class action, Jersey, 2018); FWK Holdings, LLC v. Novo Nordisk Inc., et al., ~~filed in the same court, for alleged violations~~a putative class action brought by direct purchasers of the federal RICO Act as well as the New Jersey RICO Act and antitrust law. The same group of defendants, along with Medco Health and United Health Group, also have been sued in other purported class actions in the same court, Rochester Drug Co-Operative Inc. v. Eli Lilly & Co. et al. and Value Drug Co. v. Eli Lilly & Co. et al., which were both initiated in March 2020, with the plaintiffs seeking damages for alleged violations of the federal RICO Act. In September 2020, the U.S.insulin (U.S. District Court for the District of New Jersey, ~~granted plaintiffs' motion to consolidate FWK Holdings,~~2020), Sistema Integrado De Salud Del Oeste, LLC ~~v. Novo Nordisk Inc.,~~ et al.~~, Rochester Drug Co-Operative Inc.~~ v. Eli Lilly ~~& Co.~~and Company et al., (U.S. District Court for the District of Puerto Rico, 2023) and ~~Value Drug Co. v. Eli Lilly & Co. et al. In July 2021,~~suits brought by the ~~U.S.~~State of Minnesota (U.S. District Court for the District of New Jersey, ~~dismissed the three antitrust claims alleged by plaintiffs in the consolidated litigation and denied dismissal of the federal RICO Act claims.~~

~~In October 2018, the Minnesota Attorney General's Office initiated litigation against us, Sanofi, and Novo Nordisk,~~2018), State of ~~Minnesota v. Sanofi-Aventis U.S. LLC et al.~~Kentucky (Franklin County Circuit Court, 2019), State of Mississippi (U.S. District Court for the Southern District of Mississippi, 2021), State of Arkansas (U.S. District Court for the Eastern District of Arkansas, 2022), County of Albany, New York (U.S. District Court for the Northern District of New York, 2022), State of Montana (U.S. District Court for the District of Montana, 2022), State of Kansas (U.S. District Court for the District of Kansas, 2022), State of Illinois (U.S. District Court for the Northern District of Illinois, 2022), State of California (Los Angeles County Superior Court, 2023), Jackson County, Missouri in a putative class action on behalf of Missouri counties and municipalities (U.S. District Court for the ~~U.S.~~Western District of Missouri), the Government of Puerto Rico (Court of First Instance Superior Court, San Juan, 2023), Lake County, Illinois (U.S. District Court for the Northern District of Illinois, 2023), County of Monmouth, New Jersey (U.S. District Court for the District of New Jersey, ~~seeking damages for unjust enrichment, violations~~2023), City of ~~various Minnesota state consumer protection laws, and the federal RICO Act. In March 2021, the U.S.~~Cleveland, Ohio (U.S. District Court for the Northern District of Ohio, 2023), and Bossier Parish, Louisiana (U.S. District Court for Middle District of Louisiana, 2023). These lawsuits are at various stages in the litigation process. A settlement has been reached in the In re Insulin Pricing Litigation consumer class action and a motion for preliminary approval of the settlement is pending. In August 2023, the Arkansas, Illinois, Kansas, Mississippi, and Montana cases were transferred to the District of New Jersey ~~dismissed with prejudice~~for coordinated or consolidated pre-trial proceedings by the Minnesota Attorney General's federal RICO claims and false advertising claims under state law; the consumer fraud and other related state law claims remain ongoing. Additionally, in May 2019, the Kentucky Attorney General's Office filed a complaint against us, Sanofi, and Novo Nordisk, Commonwealth of Kentucky v. Novo Nordisk, Inc. et al., in Kentucky state court, alleging violations of the Kentucky consumer protection law, false advertising, and unjust enrichment.

In June 2021, the Mississippi Attorney General's Office initiated litigation against us, Sanofi, Novo Nordisk, Evernorth/ESI, CVS/Caremark, and United/Optum in the Hinds County, Mississippi Chancery Court, alleging state law consumer protection, unjust enrichment, and civil conspiracy claims. After the case was removed to federal court, we, along with the other defendants, filed a motion to dismiss the lawsuit, which was denied. This matter is ongoing.

In May 2022, the state of Arkansas filed suit against us Sanofi, Novo Nordisk, ESI, CVS/Caremark/Aetna, and Optum, asserting state law consumer protection, civil conspiracy, and unjust enrichment claims. The case has been removed to federal court and is ongoing.

In September 2022, the County of Albany, New York filed a suit against us, Sanofi, Novo Nordisk, Evernorth/ESI, CVS/Caremark and United/Optum asserting violations of federal RICO statute and state law claimsJudicial Panel for ~~deceptive trade practices, unjust enrichment, and civil conspiracy. This matter is ongoing.~~

Multi-District Litigation.

In September 2022, the State of Montana filed a suit against us, Sanofi, Novo Nordisk, Evernorth/ESI, Medco Health Solutions, CVS/Caremark and Optum asserting violations of the Montana Unfair Practices and Consumer Protection Act, unjust enrichment, and civil conspiracy. This matter is ongoing.

Investigations, Subpoenas, and Inquiries

In connection with the pricing and sale of our insulin and other products, we have been subject to various investigations and received subpoenas, civil investigative demand requests, information requests, interrogatories, and other inquiries from various governmental entities. These include subpoenas from the New York and Vermont Attorney General Offices, civil investigative demands from the Washington, New Mexico, Colorado, ~~Illinois,~~Louisiana, Texas and Ohio Attorney General Offices, the U.S. Department of Justice, and the U.S. Federal Trade Commission, as well as information requests from the Mississippi, Washington D.C., California, Florida, Hawaii, and Nevada Attorney General Offices. In May 2023, Lilly entered into a non-monetary settlement agreement with the New York Attorney General's office that resolved all matters related to New York's insulin pricing subpoena.

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

We received a request in January 2019 from the House of Representatives' Committee on Oversight and Reform seeking commercial information and business records related to the pricing of insulin products, among other issues. We also received similar requests from the Senate Finance Committee and the Senate Committee on Health, Education, Labor, and Pensions, and separate requests from the House Committee on Energy and Commerce majority and minority members. In January 2021, the Senate Finance Committee released a report summarizing the findings of its investigation. In December 2021, the House of Representatives' Committee on Oversight and Reform majority and minority staffs released separate reports with findings from their investigations into drug pricing, including of insulin products.

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

Research Corporation Technologies, Inc.

In April 2016, we were named as a defendant in litigation filed by Research Corporation Technologies, Inc. (RCT) in the U.S. District Court for the District of Arizona. RCT is seeking damages for breach of contract, unjust enrichment, and conversion related to processes used to manufacture certain products, including Humalog and Humulin. In October 2021, the court issued a summary judgment decision ~~finding~~ in favor of RCT on certain issues, including with respect to a disputed royalty. Both parties filed motions for reconsideration, which were denied. We filed supplemental summary judgment motions. A temporary stay on the proceedings was lifted in April 2023, but a trial date has not been set. Potential damages payable under the litigation, if finally awarded after an appeal, could be material but are not currently reasonably estimable. This matter is ongoing.

Note ~~10:~~9: Other Comprehensive Income (Loss)

The following tables summarize the activity related to each component of other comprehensive income (loss) during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(Amounts presented net of taxes)	(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Unrealized Net Gains (Losses) on Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Effective Portion of Cash Flow Hedges		Accumulated Other Comprehensive Loss		(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Net Unrealized Gains (Losses) on Available-For-Sale Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Net Unrealized Gains (Losses) on Cash Flow Hedges		Accumulated Other Comprehensive Loss
Balance at July 1, 2022		$	(1,844.2)	$	(27.9)	$	(2,443.2)	$	27.6	$	(4,287.7)
Balance at April 1, 2023												Balance at April 1, 2023	$	(1,826.6)	$	(28.3)	$	(2,066.1)	$	143.7	$	(3,777.3)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(165.1)		(24.9)		47.8		63.0		(79.2)		Other comprehensive income (loss) before reclassifications	(58.7)		(5.9)		(5.6)		43.5		(26.7)
Net amount reclassified from accumulated other comprehensive loss	Net amount reclassified from accumulated other comprehensive loss	—		13.5		57.2		0.4		71.1		Net amount reclassified from accumulated other comprehensive loss	—		0.7		12.9		1.7		15.3
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(165.1)		(11.4)		105.0		63.4		(8.1)		Net other comprehensive income (loss)	(58.7)		(5.2)		7.3		45.2		(11.4)

Balance at September 30, 2022		$	(2,009.3)	$	(39.3)	$	(2,338.2)	$	91.0	$	(4,295.8)
Balance at June 30, 2023												Balance at June 30, 2023	$	(1,885.3)	$	(33.5)	$	(2,058.8)	$	188.9	$	(3,788.7)


(Amounts presented net of taxes)	(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Unrealized Net Gains (Losses) on Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Effective Portion of Cash Flow Hedges		Accumulated Other Comprehensive Loss		(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Net Unrealized Gains (Losses) on Available-For-Sale Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Net Unrealized Gains (Losses) on Cash Flow Hedges		Accumulated Other Comprehensive Loss
Balance at July 1, 2021		$	(1,516.2)	$	9.1	$	(4,569.9)	$	(210.1)	$	(6,287.1)
Balance at April 1, 2022												Balance at April 1, 2022	$	(1,575.2)	$	(18.1)	$	(2,531.6)	$	(100.4)	$	(4,225.3)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(8.0)		(2.4)		18.6		16.8		25.0		Other comprehensive income (loss) before reclassifications	(269.6)		(9.3)		31.7		124.8		(122.4)
Net amount reclassified from accumulated other comprehensive loss	Net amount reclassified from accumulated other comprehensive loss	—		0.1		86.0		3.3		89.4		Net amount reclassified from accumulated other comprehensive loss	0.6		(0.5)		56.7		3.2		60.0
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(8.0)		(2.3)		104.6		20.1		114.4		Net other comprehensive income (loss)	(269.0)		(9.8)		88.4		128.0		(62.4)

Balance at September 30, 2021		$	(1,524.2)	$	6.8	$	(4,465.3)	$	(190.0)	$	(6,172.7)
Balance at June 30, 2022												Balance at June 30, 2022	$	(1,844.2)	$	(27.9)	$	(2,443.2)	$	27.6	$	(4,287.7)

The following tables summarize the activity related to each component of other comprehensive income (loss) during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


(Amounts presented net of taxes)	(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Unrealized Net Gains (Losses) on Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Effective Portion of Cash Flow Hedges		Accumulated Other Comprehensive Loss		(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Net Unrealized Gains (Losses) on Available-For-Sale Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Net Unrealized Gains (Losses) on Cash Flow Hedges		Accumulated Other Comprehensive Loss
Balance at January 1, 2022		$	(1,550.2)	$	3.7	$	(2,583.6)	$	(213.0)	$	(4,343.1)
Balance at January 1, 2023												Balance at January 1, 2023	$	(1,874.2)	$	(37.1)	$	(2,062.3)	$	129.0	$	(3,844.6)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	(459.7)		(55.5)		72.9		297.2		(145.1)		Other comprehensive income (loss) before reclassifications	14.1		2.2		(22.4)		56.2		50.1
Net amount reclassified from accumulated other comprehensive loss	Net amount reclassified from accumulated other comprehensive loss	0.6		12.5		172.5		6.8		192.4		Net amount reclassified from accumulated other comprehensive loss	(25.2)		1.4		25.9		3.7		5.8
Net other comprehensive income (loss)	Net other comprehensive income (loss)	(459.1)		(43.0)		245.4		304.0		47.3		Net other comprehensive income (loss)	(11.1)		3.6		3.5		59.9		55.9

Balance at September 30, 2022		$	(2,009.3)	$	(39.3)	$	(2,338.2)	$	91.0	$	(4,295.8)
Balance at June 30, 2023												Balance at June 30, 2023	$	(1,885.3)	$	(33.5)	$	(2,058.8)	$	188.9	$	(3,788.7)

(Amounts presented net of taxes) Foreign Currency Translation Gains (Losses) Unrealized Net Gains (Losses) on Securities Defined Benefit Pension and Retiree Health Benefit Plans Effective Portion of Cash Flow Hedges Accumulated Other Comprehensive Loss
Balance at January 1, 2021 $ (1,427.5) $ 14.8 $ (4,751.0) $ (332.7) $ (6,496.4)
Other comprehensive income (loss) before reclassifications (96.7) (8.8) 27.2 132.8 54.5
Net amount reclassified from accumulated other comprehensive loss — 0.8 258.5 9.9 269.2
Net other comprehensive income (loss) (96.7) (8.0) 285.7 142.7 323.7
Balance at September 30, 2021 $ (1,524.2) $ 6.8 $ (4,465.3) $ (190.0) $ (6,172.7)


(Amounts presented net of taxes)	Foreign Currency Translation Gains (Losses)		Net Unrealized Gains (Losses) on Available-For-Sale Securities		Defined Benefit Pension and Retiree Health Benefit Plans		Net Unrealized Gains (Losses) on Cash Flow Hedges		Accumulated Other Comprehensive Loss
Balance at January 1, 2022	$	(1,550.2)	$	3.7	$	(2,583.6)	$	(213.0)	$	(4,343.1)

Other comprehensive income (loss) before reclassifications	(294.6)		(30.6)		25.1		234.2		(65.9)
Net amount reclassified from accumulated other comprehensive loss	0.6		(1.0)		115.3		6.4		121.3
Net other comprehensive income (loss)	(294.0)		(31.6)		140.4		240.6		55.4

Balance at June 30, 2022	$	(1,844.2)	$	(27.9)	$	(2,443.2)	$	27.6	$	(4,287.7)

The tax effects on the net activity related to each component of other comprehensive income (loss) were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
Tax benefit (expense)	Tax benefit (expense)	2022		2021		2022		2021		Tax benefit (expense)	2023		2022		2023		2022
Foreign currency translation gains/losses	Foreign currency translation gains/losses	$	(133.3)	$	(39.0)	$	(234.2)	$	(92.3)	Foreign currency translation gains/losses	$	(6.4)	$	(87.2)	$	40.1	$	(100.9)
Unrealized net gains/losses on securities		3.4		0.8		13.1		3.8
Net unrealized gains/losses on available-for-sale securities										Net unrealized gains/losses on available-for-sale securities	1.6		3.0		(1.0)		9.7
Defined benefit pension and retiree health benefit plans	Defined benefit pension and retiree health benefit plans	(22.4)		(28.2)		(73.2)		(79.7)		Defined benefit pension and retiree health benefit plans	(3.0)		(22.4)		(7.0)		(50.8)
Effective portion of cash flow hedges		(16.9)		(5.4)		(80.8)		(37.9)
Net unrealized gains/losses on cash flow hedges										Net unrealized gains/losses on cash flow hedges	(12.0)		(34.0)		(15.9)		(63.9)
Benefit (expense) for income taxes allocated to other comprehensive income (loss) items	Benefit (expense) for income taxes allocated to other comprehensive income (loss) items	$	(169.2)	$	(71.8)	$	(375.1)	$	(206.1)	Benefit (expense) for income taxes allocated to other comprehensive income (loss) items	$	(19.8)	$	(140.6)	$	16.2	$	(205.9)

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 6)5), 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 condensed statements of operations.

Reclassifications out of accumulated other comprehensive loss were as follows:


Details about Accumulated Other Comprehensive Loss Components	Details about Accumulated Other Comprehensive Loss Components	Three Months Ended September 30,				Nine Months Ended September 30,				Affected Line Item in the Consolidated Condensed Statements of Operations	Details about Accumulated Other Comprehensive Loss Components	Three Months Ended June 30,				Six Months Ended June 30,				Affected Line Item in the Consolidated Condensed Statements of Operations
																					Details about Accumulated Other Comprehensive Loss Components	Three Months Ended June 30,	Six Months Ended June 30,	Affected Line Item in the Consolidated Condensed Statements of Operations
		2022		2021		2022		2021				2023		2022		2023		2022
Amortization of retirement benefit items:	Amortization of retirement benefit items:										Amortization of retirement benefit items:
Prior service benefits, net	Prior service benefits, net	$	(13.1)	$	(13.9)	$	(39.2)	$	(41.5)	Other–net, (income) expense	Prior service benefits, net	$	(12.6)	$	(13.1)	$	(25.2)	$	(26.1)	Other–net, (income) expense
Actuarial losses, net	Actuarial losses, net	85.5		122.7		257.5		368.7		Other–net, (income) expense	Actuarial losses, net	28.9		84.8		58.0		172.0		Other–net, (income) expense
Total before tax	Total before tax	72.4		108.8		218.3		327.2			Total before tax	16.3		71.7		32.8		145.9
Tax benefit	Tax benefit	(15.2)		(22.8)		(45.8)		(68.7)		Income taxes	Tax benefit	(3.4)		(15.0)		(6.9)		(30.6)		Income taxes
Net of tax	Net of tax	57.2		86.0		172.5		258.5			Net of tax	12.9		56.7		25.9		115.3

Other, net of tax	Other, net of tax	13.9		3.4		19.9		10.7		Other–net, (income) expense	Other, net of tax	2.4		3.3		(20.1)		6.0		Other–net, (income) expense

Total reclassifications, net of tax	Total reclassifications, net of tax	$	71.1	$	89.4	$	192.4	$	269.2		Total reclassifications, net of tax	$	15.3	$	60.0	$	5.8	$	121.3

Note ~~11:~~10: Other–Net, (Income) Expense

Other–net, (income) expense consisted of the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Interest expense	Interest expense	$	81.5	$	83.6	$	247.6	$	258.4	Interest expense	$	120.3	$	81.2	$	223.1	$	166.1
Interest income	Interest income	(20.1)		(7.0)		(37.3)		(18.0)		Interest income	(46.0)		(10.2)		(80.2)		(17.2)
Net investment (gains) losses on equity securities (Note 6)		123.3		246.8		667.6		(270.1)
Net investment losses on equity securities (Note 5)										Net investment losses on equity securities (Note 5)	64.9		118.9		78.6		544.3
Retirement benefit plans	Retirement benefit plans	(92.4)		(72.6)		(280.0)		(217.1)		Retirement benefit plans	(115.6)		(94.3)		(231.4)		(187.6)
Debt extinguishment loss (Note 6)		—		405.2		—		405.2

Other (income) expense	Other (income) expense	18.7		(20.1)		(17.0)		(34.1)		Other (income) expense	13.2		23.6		11.0		(35.7)
Other–net, (income) expense	Other–net, (income) expense	$	111.0	$	635.9	$	580.9	$	124.3	Other–net, (income) expense	$	36.8	$	119.2	$	1.1	$	469.9

3635

Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition

~~Results of Operations~~

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

General

Management's discussion and analysis of results of operations and financial condition is intended to assist the reader in understanding and assessing significant changes and trends related to ~~the~~our company's results of operations and financial ~~position of our consolidated company.~~position. This discussion and analysis should be read in conjunction with the consolidated condensed financial statements and accompanying footnotes in Part I, Item 1 of this Quarterly Report on Form 10-Q. Certain statements in this Part I, Item 2 of this Quarterly Report on Form 10-Q constitute forward-looking statements. Various risks and uncertainties, including those discussed in "Forward-Looking Statements" in this Quarterly Report on Form 10-Q and "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, may cause our actual results, financial position, and cash generated from operations to differ materially from these forward-looking statements.

~~Executive Overview~~

EXECUTIVE OVERVIEW

This section provides an overview of our financial results, ~~recent product and~~ late-stage pipeline developments, and other matters affecting our company and the pharmaceutical industry. ~~Earnings per share (EPS) data are presented on a diluted basis.~~

~~COVID-19 Pandemic~~

In response to the COVID-19 pandemic, we have focused on maintaining a supply of our medicines; reducing the strain on the medical system; developing treatments for COVID-19; protecting the health, safety, and well-being of our employees; supporting our communities; and ensuring affordability of and access to our medicines, particularly insulin.

We have received various regulatory authorizations, including Emergency Use Authorizations (EUA), for our COVID-19 therapies. We supplied the United States (U.S.) government approximately 810,000 doses of bebtelovimab during the nine months ended September 30, 2022. Beginning in the third quarter of 2022 and in collaboration with the U.S. government, we have made bebtelovimab commercially available for purchase by U.S. states/territories, hospitals, and certain other providers. We do not anticipate any further U.S. government orders. The U.S. Food and Drug Administration (FDA) has revised, and may in the future revise, any EUA for our COVID-19 therapies in response to the prevalence of variants against which our therapies have varying degrees of efficacy, including the new BQ variants. Based on early data, we do not believe that bebtelovimab will neutralize against the new BQ variants.

The COVID-19 pandemic has, and may continue to, adversely impact our business and operations. Strain on global transportation, logistics, manufacturing, and labor markets, including as aggravated by the pandemic and global unrest, the focus of resources on COVID-19, protective measures implemented to control the spread of COVID-19, and an increase in overall demand in our industry for certain resources and medicines, resulting in changed buying patterns, increased costs, and constrained supply, have negatively impacted and may continue to negatively impact the development, manufacturing, supply, distribution, and sales of our medicines.

The degree to which the COVID-19 pandemic and related challenges impact the development, manufacturing, supply, distribution, and sale of our medicines will depend on developments that are highly uncertain and beyond our knowledge or control.

~~Product Supply~~

~~Continued strong demand for Trulicity~~® in U.S. and international markets, partially due to the ongoing limited availability of competitor therapies, has challenged, and is expected to continue to challenge, our ability to meet demand in most international markets. In the U.S., as demand for Trulicity has continued to exceed historical levels, we anticipate tight supplies will persist until additional manufacturing capacity is operationalized, and U.S. wholesalers may experience intermittent restocking delays of Trulicity orders. Outside the U.S., we have implemented certain actions to minimize the impact to existing patients, but we expect to experience intermittent disruptions in our supply of Trulicity in international markets.

~~In addition, the uptake of Mounjaro~~® for type 2 diabetes following its launch in the U.S. has been very strong. We continue to carefully monitor demand, incretin competitor availability, and supply with a focus on access for Type 2 diabetes patients.

We anticipate that additional internal and contracted manufacturing capacity will become fully operational around the world in the next several years, with significant expansion in 2023, as part of our ongoing efforts to meet the significant demand for our incretin medicines.

~~See "Risk Factors" in Part I, Item 1A of our Annual Report on~~ ~~Form 10-K~~ ~~for the year ended December 31, 2021 for additional information on risk factors that could impact our business and operations.~~

Financial Results

The following table summarizes ~~our key operating results:~~certain financial information:

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 Percent Change 2022 2021 Percent Change
Revenue $ 6,941.6 $ 6,772.8 2 $ 21,239.6 $ 20,318.5 5
Gross margin 5,362.5 5,342.0 — 16,157.9 15,055.9 7
Gross margin as a percent of revenue 77.3 % 78.9 % 76.1 % 74.1 %
Research and development $ 1,802.9 $ 1,705.3 6 $ 5,194.9 $ 5,032.4 3
Marketing, selling, and administrative 1,614.2 1,577.9 2 4,797.2 4,839.6 (1)
Acquired in-process research and development (IPR&D) and development milestones 62.4 177.6 (65) 668.4 532.4 26
Asset impairment, restructuring, and other special charges 206.5 — NM 206.5 211.6 (2)
Other–net, (income) expense 111.0 635.9 (83) 580.9 124.3 NM
Net income 1,451.7 1,110.1 31 4,307.1 3,855.6 12
EPS - diluted 1.61 1.22 32 4.76 4.23 13


	Three Months Ended June 30,				Percent Change	Six Months Ended June 30,				Percent Change
	2023		2022			2023		2022
Revenue	$	8,312.1	$	6,488.0	28	$	15,272.1	$	14,298.0	7












Net income	1,763.2		952.5		85	3,108.1		2,855.4		9
Earnings per share - diluted	1.95		1.05		86	3.44		3.16		9

~~NM - not meaningful~~

Revenue increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 driven by increased volume, partially offset by lower realized prices and the unfavorable impact of foreign exchange rates. ~~Research and development expenses increased for~~The increase in revenue during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 was primarily driven by ~~higher development expenses~~sales of Mounjaro®, Verzenio®, and Jardiance® as well as from the sale of rights for late-stage assets, partially offset by lower development expenses for COVID-19 antibodies and the favorable impact of foreign exchange rates. Marketing, selling, and administrative expenses increased for the three months ended September 30, 2022, primarily driven by increased costs associated with the launch of Mounjaro,Baqsimi®, partially offset by the ~~favorable impact~~complete reduction of ~~foreign exchange rates. Marketing, selling,~~sales of COVID-19 antibodies and ~~administrative expenses decreased for~~lower sales of Alimta® following the ~~nine months ended September 30, 2022, primarily driven by the favorable impact~~entry of ~~foreign exchange rates as well as reduced marketing costs~~multiple generics in the first half of ~~2022,~~2022.

Net income and earnings per share for the three and six months ended June 30, 2023 increased primarily due to increased revenue and lower acquired in-process research and development (IPR&D) charges, partially offset by increased ~~costs associated with the launch of Mounjaro.~~

research and development and marketing, selling, and administrative expenses. The ~~following highlighted items also affect comparisons of our financial results~~increase in net income and earnings per share for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022 and 2021:~~

~~2022~~

~~Acquired IPR&D and Development Milestones (See Note 3~~2023 was also due to the ~~consolidated condensed financial statements)~~

•We recognized $62.4 million and $668.4 million of acquired IPR&D and development milestones for the three and nine months ended September 30, 2022, respectively. The charges for the nine months ended September 30, 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.

~~Asset Impairment, Restructuring, and Other Special Charges (See Note 5 to the consolidated condensed financial statements)~~

•We recognized charges of $206.5 million for the three and nine months ended September 30, 2022, primarily related to an intangible asset impairment for GBA1 Gene Therapy (PR001) due to changes in estimated launch timing.

~~Other-Net, (Income) Expense (See Note 11 to the consolidated condensed financial statements)~~

•~~We recognized $123.3 million and $667.6 million of~~lower net investment losses on equity ~~securities~~securities.

See "Results of Operations" for ~~the three and nine months ended September 30, 2022, respectively.~~

~~2021~~

~~Cost of Sales (See Note 5 to the consolidated condensed financial statements)~~

•We recognized a net inventory impairment charge related to our COVID-19 antibodies of $435.1 million for the nine months ended September 30, 2021. As part of our response to the COVID-19 pandemic, and at the request of the U.S. and international governments, we invested in large-scale manufacturing of COVID-19 antibodies at risk, in order to ensure rapid access to patients around the world. As the COVID-19 pandemic evolved during 2021, we incurred a net inventory impairment charge primarily due to the combination of changes to demand from U.S. and international governments, including changes to our agreement with the U.S. government, and near-term expiry dates of COVID-19 antibodies.

~~Acquired IPR&D and Development Milestones (See Note 3 to the consolidated condensed financial statements)~~

•We recognized $177.6 million and $532.4 million of acquired IPR&D and development milestones for the three and nine months ended September 30, 2021, respectively. The charges for the nine months ended September 30, 2021 included acquired IPR&D charges resulting from business development transactions with Rigel Pharmaceuticals, Inc. (Rigel) and Precision Biosciences, Inc. (Precision).

~~Asset Impairment, Restructuring, and Other Special Charges (See Note 5 to the consolidated condensed financial statements)~~

•~~We recognized charges of $211.6 million for the nine months ended September 30, 2021, primarily related to an intangible asset impairment resulting from the sale of the rights to Qbrexza~~®~~, as well as acquisition and integration costs associated with the acquisition of Prevail Therapeutics Inc. (Prevail).~~

~~Other-Net, (Income) Expense (See Note 11 to the consolidated condensed financial statements)~~

•~~We recognized a debt extinguishment loss of $405.2 million related to the repurchase of debt for the three and nine months ended September 30, 2021.~~

•We recognized $246.8 million of net investment losses on equity securities for the three months ended September 30, 2021. We recognized $270.1 million of net investment gains on equity securities for the nine months ended September 30, 2021.

additional information.

3936

Late-Stage Pipeline

Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines. We currently have approximately 4540 new medicine candidates in clinical development or under regulatory review, and a larger number of projects in the discovery phase.

The following ~~certain~~select new molecular entities (NMEs) and new indication line extension (NILEX) products are currently in Phase II or Phase III clinical trials or have been submitted for regulatory review or have received regulatory approval in the ~~U.S.~~United States (U.S.), Europe, or Japan. The ~~following~~ table reflects the status of these NMEs and NILEX products, including ~~certain other~~relevant developments since our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Compound

Indication

Status

Developments

Diabetes and Obesity

~~Tirzepatide (Mounjaro)~~Empagliflozin (Jardiance)(1)

~~Type 2 diabetes~~Chronic kidney disease

Approved

Approved in Europe in July 2023. Submitted in Japan in 2022 and in the U.S. in the first quarter of 2023. Granted U.S. Food and Drug Administration (FDA) Fast Track designation(2).

Tirzepatide (Mounjaro)

Obesity

Submitted

Submitted in Europe in the first quarter of 2023 and in the U.S. in the second quarter of ~~2022~~2023. Received Priority Review designation from the FDA. Announced in the second quarter of 2023 and in ~~Europe~~July 2023 that Phase III trials met all primary and ~~Japan in the third quarter of 2022.~~key secondary endpoints. Phase III trials are ongoing.

Heart failure with preserved ejection fraction

Phase III

Phase III trials are ongoing.

~~Obesity~~Obstructive sleep apnea

Phase III

Granted FDA Fast Track designation~~(1)~~(2) ~~in October 2022. Announced in the second quarter of 2022 that the initial~~. Phase III trial ~~met co-primary and all key secondary endpoints. Phase III trials are~~is ongoing.

~~Obstructive sleep apnea~~

~~Phase III~~

~~Phase III trial initiated in the third quarter of 2022.~~

Nonalcoholic steatohepatitis

Phase II

Phase II trial is ongoing.

~~Basal Insulin-Fc~~Insulin Efsitora Alfa

Type 1 and 2 diabetes

Phase III

Phase III trials ~~initiated in the first, second, and third quarters of 2022.~~

~~Orforglipron (GLP-1R NPA)~~

~~Obesity~~

~~Phase II~~

~~Phase II trials~~ are ongoing.

~~Type 2 diabetes~~

~~Retatrutide (GGG Tri-Agonist)~~Orforglipron

Obesity

~~Phase II~~

~~Phase II trials are ongoing.~~

~~Type 2 diabetes~~

~~Immunology~~

~~Lebrikizumab(2)~~

~~Atopic dermatitis~~

~~Submitted~~

~~Granted FDA Fast Track designation(1). Submitted in the U.S. in the third quarter of 2022 and in Europe in October 2022. Phase III trials are ongoing.~~

~~Mirikizumab~~

~~Ulcerative colitis~~

~~Submitted~~

~~Submitted in the U.S. in first quarter of 2022 and in Europe and Japan in the second quarter of 2022.~~

~~Crohn's Disease~~

Phase III

Phase III trials ~~are ongoing.~~initiated in the second quarter of 2023.

~~ANGPTL3 siRNA~~Type 2 diabetes

~~Cardiovascular disease~~Phase III

Phase III trial initiated in the second quarter of 2023.

Retatrutide

Obesity

Phase III

Phase III trials initiated in the second quarter of 2023.

Type 2 diabetes

Phase II

Phase II trial ~~initiated in the third quarter of 2022.~~was completed.

~~BTLA MAB Agonist~~Lepodisiran
(LP(a) siRNA)

~~Systemic lupus erythematosus~~

~~Phase II~~

~~Phase II trial initiated in the second quarter of 2022.~~

~~CXCR1/2 Ligands Monoclonal Antibody~~

~~Hidradenitis suppurativa~~Cardiovascular disease

Phase II

Phase II trial is ongoing.

~~Peresolimab (PD-1 MAB Agonist)~~Muvalaplin

~~Rheumatoid arthritis~~Cardiovascular disease

Phase II

Phase II trial is ongoing.

~~Rezpegaldesleukin (IL-2 Conjugate)~~Relaxin-LA

~~Systemic lupus erythematosus~~Heart failure

Phase II

Phase II trial initiated in the first quarter of 2023.

Solbinsiran

Cardiovascular disease

Phase II

Phase II trial is ongoing.

4037

Compound

Indication

Status

Developments

Immunology

Mirikizumab

(Omvoh®)

Ulcerative colitis

Approved

Approved in Japan in the first quarter of 2023 and in Europe in the second quarter of 2023. Following the receipt of a complete response letter from the FDA, re-submitted in the U.S. in the second quarter of 2023.

Crohn's Disease

Phase III

Phase III trials are ongoing.

Lebrikizumab(3)

Atopic dermatitis

Submitted

Submitted in the U.S. and Europe in 2022 and in Japan in the first quarter of 2023. Phase III trials are ongoing.

BTLA MAB Agonist

Systemic lupus erythematosus

Phase II

Phase II trial is ongoing.

Eltrekibart

Hidradenitis suppurativa

Phase II

Phase II trial is ongoing.

Peresolimab

Rheumatoid arthritis

Phase II

Phase II trial is ongoing.

Neuroscience

Donanemab

Early Alzheimer's disease

Submitted

~~Granted FDA Breakthrough Therapy designation(3)~~. Submitted for traditional approval in the U.S. in the second quarter of ~~2022. Received Priority Review~~2023 and in Europe in July 2023. Granted FDA Breakthrough Therapy designation ~~under~~(4). Announced in the ~~accelerated approval pathway.~~second quarter of 2023 that a Phase III trial met primary and all secondary endpoints. Phase III trials are ongoing.

Preclinical Alzheimer's disease

Phase III

Phase III trial is ongoing.

Remternetug

Early Alzheimer's disease

Phase III

Phase III trial ~~initiated in the third quarter of 2022.~~

~~Solanezumab~~

~~Preclinical Alzheimer's disease~~

~~Phase III~~

~~Phase III trial~~ is ongoing.

GBA1 Gene Therapy (PR001)

Gaucher disease Type 1

Phase II

Phase II trial initiated in the second quarter of 2023.

Parkinson's disease

Phase II

Granted FDA Fast Track designation~~(1)~~(2). Phase II trial is ongoing.

GRN Gene Therapy (PR006)

Frontotemporal dementia

Phase II

Granted FDA Fast Track designation~~(1)~~(2). Phase II trial is ongoing.

O-GlcNAcase Inh

Alzheimer's disease

Phase II

Phase II trial is ongoing.

P2X7 Inhibitor

Pain

Phase II

Phase II trials are ongoing.

SSTR4 Agonist

Pain

Phase II

Phase II trials are ongoing.

~~TRPA1 Antagonist~~

~~Pain~~

~~Phase II~~

~~Phase II trials are ongoing.~~

~~PACAP38 Antibody~~Compound

~~Migraine~~Indication

~~Discontinued~~Status

~~In the third quarter of 2022 based on the results of the Phase II trial, we discontinued development.~~Developments

Oncology

Pirtobrutinib

~~Selpercatinib (Retevmo~~(Jaypirca®)

~~Lung cancer~~Mantle cell lymphoma

Approved~~(4)~~(5)

~~Phase III trials are ongoing. In the third quarter of 2022, the~~

FDA granted accelerated approval(5) in ~~tumor-agnostic RET fusion-positive advanced or metastatic solid tumors~~the U.S. in the first quarter of 2023. Submitted in Europe in 2022 and ~~traditional approval~~ in ~~locally advanced or metastatic RET fusion-positive non-small cell lung cancer.~~

~~Thyroid cancer~~

~~Approved(4)~~

Japan in the second quarter of 2023. Received a positive opinion from the Committee for Medicinal Products for Human Use in Europe in the second quarter of 2023. Phase III trial is ongoing.

~~Pirtobrutinib (LOXO-305)~~

~~Mantle cell lymphoma~~

~~Submitted~~

~~Submitted in the U.S. in second quarter of 2022. Received Priority Review designation under the accelerated approval pathway. Phase III trial is ongoing.~~

Chronic lymphocytic leukemia

~~Phase III~~Submitted

Submitted in the U.S. in August 2023 under the accelerated approval pathway. Phase III trials are ongoing.

B-cell malignancies

Phase II

Phase II trial is ongoing.

Selpercatinib (Retevmo®)

Lung cancer

Approved(5)

Phase III trials are ongoing.

Thyroid cancer

Approved(5)

Phase III trial is ongoing.

Abemaciclib (Verzenio)

Prostate cancer

Phase III

Phase III trials are ongoing.

Imlunestrant

Adjuvant breast cancer

Phase III

Phase III trial is ongoing.

ER+HER2- metastatic breast cancer

Phase III

Phase III trial is ongoing.

(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.

~~(2)~~(3) In collaboration with Almirall, S.A. in Europe.

~~(3)~~(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.

~~(4)~~(5) Continued approval may be contingent on verification and description of clinical benefit in confirmatory Phase III trials.

Our pipeline also contains several new indication line extension (NILEX) products. The following certain NILEX products for use in the indication described are currently in Phase II or Phase III clinical trials or have been submitted for regulatory review or have received regulatory approval in the U.S., Europe, or Japan. The following table reflects the status of these NILEX products, including certain other developments since our Annual Report on ~~Form 10-K~~ ~~for the year ended December 31, 2021.~~


~~Compound~~	~~Indication~~	~~Status~~	~~Developments~~
~~Diabetes~~
~~Empagliflozin (Jardiance~~®)~~(1)~~	~~Heart failure with preserved ejection fraction~~	~~Approved~~	~~Approved in the U.S. and Europe in the first quarter of 2022 and in Japan in the second quarter of 2022.~~
	~~Chronic kidney disease~~	~~Phase III~~	~~Granted FDA Fast Track designation(2). In the first quarter of 2022 the Independent Data Monitoring Committee recommended stopping the Phase III trial early due to clear positive efficacy.~~
~~Immunology~~
~~Baricitinib (Olumiant~~®)	~~Alopecia areata~~	~~Approved~~	~~Approved in the U.S., Europe, and Japan in the second quarter of 2022.~~
	~~COVID-19~~	~~Approved~~	~~Approved in the U.S. in the second quarter of 2022.~~
~~Oncology~~
~~Abemaciclib (Verzenio~~®)	~~Prostate cancer~~	~~Phase III~~	~~Phase III trials are ongoing.~~

~~(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.~~

Other Matters

Patent Matters

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

~~Following the June 2021 loss of patent exclusivity for Alimta~~® in Europe and Japan, we faced, and expect to continue to face, generic competition that has rapidly and severely eroded revenue, and we expect will continue to erode revenue from current levels. In addition, as a result of the entry of multiple generics in the U.S. following the loss of patent and pediatric exclusivity in May 2022, we began facing, and expect to continue to face, additional generic competition that has eroded revenue, and we expect will continue to rapidly and severely erode revenue from current levels. This decline in revenue has had and will have a material adverse effect on our consolidated results of operations and cash flows. See Note 98 to the consolidated condensed financial statements for a description of legal proceedings currently pending regarding certain of our patents.

Our compound patents for Humalog® (insulin lispro) have expired in the U.S. and major international markets, and we have also introduced lower-priced versions of Humalog as part of our insulin access and affordability solutions. On March 1, 2023, we announced price reductions for Humalog and an expansion of our Insulin Value Program that caps patient out-of-pocket costs at $35 or less per month. A competitor has a similar version of insulin lispro in the U.S. and in certain European markets. Due to the expansion of our insulin access and affordability solutions in the U.S. and the impact of competition and pricing pressure in the U.S. and ~~some~~certain international markets, we expect that lower revenue for Humalog due to realized price decline will continue over time.

~~Our formulation and use patents for Forteo~~® ~~have expired in major markets. We expect further decline in revenue as a result of the entry of generic and biosimilar competition due to the loss of patent exclusivity in major markets.~~

~~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. During the three and nine months ended September 30, 2022, revenue was unfavorably impacted by 4 percent and 3 percent, respectively, due to foreign exchange rates. While there is uncertainty in the future movements in foreign exchange rates, fluctuations in these rates have, and we currently expect in the near-term future will, adversely impact our consolidated results of operations and cash flows.

Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access

Reforms, including those that may stem from periods of economic downturn or uncertainty, or as a result of high inflation, emergence or escalation of, and responses to, war or unrest (including the Russia-Ukraine war), or government budgeting priorities, may 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 will ~~allow~~require the U.S. Department of Health and Human Services 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 (medicines approved under a New Drug Application) or thirteen (medicines approved under a Biologics License Application) years following initial FDA approval and will be capped at a statutory ceiling price that is likely to represent a significant discount from average prices to wholesalers and direct purchasers. ~~It is too soon to tell how the U.S. government will set these prices as~~While the law specifies a ceiling price, ~~but~~it does not set a minimum or floor price. ~~One or more~~Given our product portfolio, we expect some of our significant ~~Lilly~~ products, ~~may~~including those commercialized under collaboration agreements, will be selected, which would have the effect of accelerating revenue erosion prior to patent expiry. The effect of reducing prices and reimbursement for certain of our products ~~could~~would significantly impact our business and consolidated results of operations. The establishment of payment limits or other restrictions by drug affordability review boards and other state level actors would similarly impact us.

Other ~~of the IRA’s~~IRA provisions provide for ~~penalties~~rebate obligations on drug manufacturers that increase prices of ~~certain~~ Medicare Part B and Part D medicines at a rate greater than the rate of inflation and ~~replace~~Part D benefit redesign that includes replacing the Part D coverage gap discount program with a new manufacturer discounting program. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary ~~penalties.~~ penalties, which could be significant.

The IRA takes effect progressively ~~starting in 2023,~~ with the first ~~government set~~government-set prices effective in 2026. The IRA ~~may~~has and will meaningfully influence our business strategies and ~~pharmaceutical industry business strategies.~~those of our competitors. In particular, ~~it may reduce~~the nine-year timeline to set prices for medicines approved under a new drug application reduces the attractiveness of investment in small molecule innovation. ~~Provisions of the IRA may be subject to legal challenges or other reformation, and the~~The full ~~effect~~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 and/or pursued by the U.S. Congress, ~~and executive branch of~~ the current U.S. presidential administration, and ~~other~~ 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 ~~such as the Centers for Medicare & Medicaid Services' National Coverage Determination for monoclonal antibodies for the treatment of Alzheimer's Disease,~~ may adversely impact our business and consolidated results of operations. We expect that these actions may intensify and could particularly affect certain products ~~such as insulin, as governments manage and emerge from the COVID-19 pandemic,~~ which could adversely affect our business. In addition, we are engaged in litigation and investigations related to our 340B limited distribution program, ~~and~~ access to insulin, 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.

~~Evolving~~In addition, regulatory ~~priorities have also intensified governmental scrutiny of our operations and our industry, including~~issues concerning compliance with ~~respect to~~ 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 ~~increased focus on business combinations in~~standards (and comparable foreign regulations and standards) for our ~~industry. Any regulatory issues concerning these matters could~~products can 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, contractual and manufacturing costs or penalties, inability to realize the benefit of capital expenditures, or delays or denials in ~~the~~new product approvals, ~~of new products~~line extensions or supplemental approvals of current products pending resolution of the issues, any of which could 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, and reputational harm, any of which would adversely affect our business.~~combinations.

See ~~"Business -~~ "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access" in Part I, Item 1 and "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. See also Note 98 to the consolidated condensed financial statements.

4340

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 very strong uptake of Mounjaro following its launch in the U.S. for type 2 diabetes in the second quarter of 2022, and as demand for Trulicity® has remained strong, we have experienced intermittent delays in fulfilling certain U.S. orders for these products. Outside the U.S., we have implemented actions to manage strong demand amid tight supply, including measures to minimize existing patient impact. We expect to continue to experience disruptions in our supply of Trulicity in international markets.

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, we recently 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. In 2017, the U.S. enacted the Tax Cuts and Jobs Act (the 2017 Tax Act), which contains a provision that requires capitalization and amortization of research and development expenses for tax purposes starting in 2022. Previously, these expenses could be deducted in the year incurred. The implementation of this provision has increased, and is expected to continue to increase, our 2022 cash payments of income taxes and subsequently decrease our cash payments of income taxes moderately over the five-year amortization period. We expect the implementation of this provision to impact our 2022 cash payments of income taxes by up to $1.50 billion. For the three and nine months ended September 30, 2022, the implementation of this provision favorably impacted other tax items that decreased our effective tax rate by approximately 4 percentage points. If this provision of the 2017 Tax Act is deferred or repealed by the U.S. Congress effective for 2022, we expect our effective tax rate to be approximately 13 percent to 14 percent for 2022.

The U.S. and countries around the world are actively ~~considering~~proposing and enacting tax law changes. Tax proposals have been introduced by the U.S. Congress and the U.S. administration containing significant changes, including increases to the tax rates at which both domestic and foreign income of U.S. companies would be taxed. In addition, tax authorities in the U.S. and other jurisdictions in which we do business routinely examine our tax returns and are intensifying their scrutiny and examinations of profit allocations among jurisdictions. Further, actions taken with respect to tax-related matters by associations such as the Organisation for Economic Co-operation and Development and the European Commission could influence tax laws in countries in which we operate. Tax authorities in the U.S. and other jurisdictions in which we do business routinely examine our tax returns and are intensifying their scrutiny and examinations of profit allocations among jurisdictions. Changes to existing U.S. and foreign tax ~~law~~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.

The European Commission published its Pillar Two Directive (Directive), a legislative proposal that would provide a global minimum level of taxation for multinational companies with operations in the European Union (EU), in 2021. In 2022, the EU Member States adopted the Directive which requires them to enact initial legislation effective for years beginning on or after December 31, 2023. Currently, both EU and non-EU countries are drafting or have enacted legislation in order to implement the Pillar Two rules by the effective date. We are continuing to follow Pillar Two legislative developments in order to evaluate the potential future impact it could have on our consolidated results of operations, financial position, and cash flows.

Foreign Currency Exchange Rates and Other Impacts

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. During the three and six months ended June 30, 2023, revenue was unfavorably impacted by 1 percent and 2 percent, respectively, due to foreign exchange rates compared to the prior year periods. There is uncertainty in the future movements in foreign exchange rates, and fluctuations in these rates could adversely impact our consolidated results of operations and cash flows.

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 (including the Russia-Ukraine war), global economic downturns or uncertainty, and an increase in overall demand in our industry for certain products and materials.

Acquisitions

We ~~opportunistically~~ 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 our pipeline and strengthen our business.

In June 2023, we announced an agreement to acquire DICE Therapeutics, Inc. (DICE) for a purchase price of $48 per share in cash (an aggregate of approximately $2.4 billion) payable at closing. The proposed acquisition is expected to close in the third quarter of 2023, subject to customary closing conditions, including the receipt of required antitrust clearance and the tender of at least a majority of the outstanding shares of DICE's common stock as of the expiration of the tender offer.

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

44See "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on risk factors that could impact our business and operations.

RESULTS OF OPERATIONS

Revenue

The following table summarizes our revenue activity by region:


		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,				Percent Change	Six Months Ended June 30,				Percent Change
		2022		2021		Percent Change	2022		2021		Percent Change		2023		2022			2023		2022
U.S.	U.S.	$	4,422.1	$	3,989.6	11	$	13,531.5	$	11,635.1	16	U.S.	$	5,531.4	$	3,934.8	41	$	9,967.6	$	9,109.4	9
Outside U.S.	Outside U.S.	2,519.4		2,783.3		(9)	7,708.1		8,683.4		(11)	Outside U.S.	2,780.7		2,553.3		9	5,304.6		5,188.7		2
Revenue	Revenue	$	6,941.6	$	6,772.8	2	$	21,239.6	$	20,318.5	5	Revenue	$	8,312.1	$	6,488.0	28	$	15,272.1	$	14,298.0	7

Numbers may not add due to rounding.

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2022 vs. 2021						2022 vs. 2021							2023 vs. 2022						2023 vs. 2022
		U.S.		Outside U.S.		Consolidated		U.S.		Outside U.S.		Consolidated			U.S.		Outside U.S.		Consolidated		U.S.		Outside U.S.		Consolidated
Volume	Volume	15	%	13	%	14	%	20	%	7	%	15	%	Volume	39	%	14	%	29	%	11	%	10	%	11	%
Price	Price	(4)		(12)		(7)		(4)		(11)		(7)		Price	2		(3)		—		(2)		(4)		(3)
Foreign exchange rates	Foreign exchange rates	—		(11)		(4)		—		(7)		(3)		Foreign exchange rates	—		(3)		(1)		—		(4)		(2)
Percent change	Percent change	11	%	(9)	%	2	%	16	%	(11)	%	5	%	Percent change	41	%	9	%	28	%	9	%	2	%	7	%

Numbers may not add due to rounding.

In the U.S. for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the increase in volume was primarily driven by ~~COVID-19 antibodies,~~Mounjaro, Trulicity, Verzenio, Jardiance, and Taltz®, ~~and Mounjaro,~~as well as the sale of rights for Baqsimi, partially offset by the complete reduction of COVID-19 antibodies revenue and decreased volume ~~for~~from Alimta ~~resulting from~~following the entry of multiple generics in the ~~second quarter~~first half of ~~2022, and for Olumiant, due to the decline in utilization for COVID-19 treatment.~~2022. In the U.S. for the three ~~and nine~~ months ended ~~September~~June 30, ~~2022,~~2023, the ~~decrease in~~higher realized prices ~~was~~were primarily driven by Mounjaro, partially offset by Trulicity. In the U.S. for the six months ended June 30, 2023, the lower realized prices were primarily driven by Trulicity and Humalog, partially offset by Mounjaro. For the three and six months ended June 30, 2023, the higher realized prices for Mounjaro were due to ~~a list price reduction~~decreased utilization of ~~insulin lispro injection~~savings card programs as access continues to expand, and ~~unfavorable segment mix, and by~~the lower realized prices for Trulicity were due to unfavorable segment mix and higher contracted rebates. InFor the ~~U.S. for the three~~six months ended ~~September~~June 30, ~~2022,~~2023, the ~~decrease in~~lower realized prices for ~~Trulicity was partially offset by changes~~Humalog were due to ~~estimates for rebates and discounts.~~unfavorable segment mix.

Outside the U.S. for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the increase in volume was primarily driven by Verzenio, ~~Trulicity, Tyvyt~~®, Jardiance, Taltz, and ~~Taltz,~~Mounjaro. The increase in volume for the six months ended June 30, 2023 was partially offset by ~~Alimta and Cymbalta~~® ~~resulting from generic competition. Additionally outside~~ the U.S. for the three and nine months ended September 30, 2022, we recognized revenue related to a sales collaboration agreement for the right to sell and distribute Mounjaro in Japan. Outside the U.S. for the nine months ended September 30, 2022, the increasedecrease in volume ~~was also partially offset by decreased~~due to the sales ~~of COVID-19 antibodies and the sale~~ of the rights tofor Cialis® in ~~China~~Taiwan and Saudi Arabia in ~~the second quarter of 2021.~~2022. Outside the U.S. for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the ~~decrease in~~lower realized prices ~~was~~were primarily driven by Verzenio, Trulicity, and Olumiant®. Outside the U.S. for the six months ended June 30, 2023, the lower realized prices were also driven by the impact of government pricing in China from ~~the National Reimbursement Drug List (NRDL) formulary for certain products, particularly Tyvyt and Verzenio, and volume-based~~volume-base procurement ~~(VBP)~~ for Humalog.

4542

The following table summarizes our revenue, ~~activity~~including net product revenue and collaboration and other revenue, by product for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,										Three Months Ended June 30,								Percent Change
		2022						2021				2023						2022
Product	Product	U.S.		Outside U.S.		Total		Total		Percent Change	Product	U.S.		Outside U.S.		Total		Total
Trulicity	Trulicity	$	1,418.3	$	432.0	$	1,850.4	$	1,600.1	16	Trulicity	$	1,371.3	$	441.2	$	1,812.5	$	1,911.9	(5)
Mounjaro											Mounjaro	915.7		64.0		979.7		16.0		NM
Verzenio											Verzenio	588.6		338.2		926.8		588.5		57
Taltz	Taltz	493.8		186.1		679.9		593.1		15	Taltz	472.3		231.6		703.9		606.2		16
Verzenio		414.8		202.9		617.7		335.5		84
Jardiance(1)	Jardiance(1)	350.9		222.4		573.3		390.4		47	Jardiance(1)	386.1		282.2		668.3		461.0		45
Baqsimi											Baqsimi	606.2		7.7		613.9		29.0		NM
Humalog(2)	Humalog(2)	248.1		198.8		447.0		626.7		(29)	Humalog(2)	229.8		210.6		440.4		447.1		(1)
COVID-19 antibodies(3)		386.6		—		386.6		217.1		78
Cyramza®											Cyramza®	115.0		145.3		260.3		231.3		13
Olumiant(3)											Olumiant(3)	50.8		168.1		218.9		186.2		18
Humulin®	Humulin®	169.5		68.7		238.2		286.7		(17)	Humulin®	144.3		61.0		205.3		274.0		(25)
Cyramza®		87.5		144.6		232.1		253.4		(8)
Basaglar®		124.8		68.1		193.0		192.8		—
Mounjaro		97.3		90.0		187.3		—		NM
Olumiant(4)		22.9		160.0		182.9		406.9		(55)
Forteo		112.7		64.4		177.1		200.9		(12)
Emgality®	Emgality®	114.0		54.6		168.5		140.0		20	Emgality®	118.8		50.5		169.3		157.5		8
Erbitux®	Erbitux®	126.3		18.7		144.9		134.3		8	Erbitux®	145.5		17.0		162.5		140.8		15
Basaglar® (4)											Basaglar® (4)	83.0		71.2		154.2		174.2		(11)
Forteo®											Forteo®	97.4		50.6		148.0		138.5		7
Cialis											Cialis	9.2		106.4		115.6		147.0		(21)
Alimta	Alimta	64.6		54.8		119.4		457.0		(74)	Alimta	17.9		43.1		60.9		227.7		(73)
Cialis		8.1		107.7		115.7		130.9		(12)
Zyprexa®		8.0		73.4		81.4		101.7		(20)
Tyvyt		—		76.8		76.8		125.6		(39)
Cymbalta		7.8		54.9		62.7		132.0		(53)
COVID-19 antibodies(5)											COVID-19 antibodies(5)	—		—		—		129.1		(100)
Other products	Other products	166.1		240.5		406.7		447.7		(9)	Other products	179.5		492.0		671.6		622.0		8
Revenue	Revenue	$	4,422.1	$	2,519.4	$	6,941.6	$	6,772.8	2	Revenue	$	5,531.4	$	2,780.7	$	8,312.1	$	6,488.0	28

Numbers may not add due to rounding.

NM - not meaningful

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

(2) Humalog revenue includes insulin lispro.

(3) 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.

~~(4)~~ Olumiant revenue includes sales for baricitinib that were made pursuant to ~~EUA~~Emergency Use Authorization (EUA) or similar regulatory authorizations.

(4) Basaglar revenue includes Rezvoglar®.

~~The following table summarizes our revenue activity by product for the nine months ended September 30, 2022 and 2021:~~
Nine Months Ended September 30,
2022 2021
Product U.S. Outside U.S. Total Total Percent Change
Trulicity $ 4,162.4 $ 1,341.1 $ 5,503.5 $ 4,588.2 20
COVID-19 antibodies(1)
1,970.9 14.7 1,985.5 1,176.2 69
Taltz 1,212.6 561.6 1,774.2 1,565.4 13
Verzenio 1,100.5 575.1 1,675.6 945.8 77
Humalog(2)
855.8 656.4 1,512.3 1,851.3 (18)
Jardiance(3)
831.4 622.4 1,453.7 1,058.9 37
Humulin 562.3 223.1 785.4 923.8 (15)
Cyramza 259.3 434.3 693.6 762.5 (9)
Alimta 490.5 200.5 691.1 1,626.6 (58)
Olumiant(4)
104.6 520.1 624.7 809.1 (23)
Basaglar 339.9 218.8 558.7 650.1 (14)
Cialis 25.8 454.7 480.4 538.7 (11)
Emgality 330.8 144.4 475.2 415.7 14
Forteo 261.4 191.7 453.0 617.8 (27)
Erbitux 361.0 47.4 408.3 403.7 1
Zyprexa 26.2 235.5 261.7 292.8 (11)
Tyvyt — 235.8 235.8 340.2 (31)
Cymbalta 25.0 194.3 219.3 484.3 (55)
Mounjaro 109.9 93.3 203.2 — NM
Other products 501.1 743.0 1,244.2 1,267.3 (2)
Revenue $ 13,531.5 $ 7,708.1 $ 21,239.6 $ 20,318.5 5

~~Numbers may not add due to rounding.~~

~~NM - not meaningful~~

~~(1)~~(5) 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.

~~(2)~~ ~~Humalog revenue includes insulin lispro.~~

~~(3)~~

The following table summarizes our revenue, including net product revenue and collaboration and other revenue, by product for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
	2023						2022
Product	U.S.		Outside U.S.		Total		Total		Percent Change
Trulicity	$	2,918.7	$	871.0	$	3,789.6	$	3,653.2	4
Verzenio	1,049.6		628.0		1,677.7		1,057.9		59
Mounjaro	1,452.2		96.0		1,548.2		16.0		NM
Jardiance(1)	715.6		530.2		1,245.8		880.4		42
Taltz	784.5		446.3		1,230.8		1,094.3		12
Humalog(2)	501.4		400.0		901.4		1,065.3		(15)
Baqsimi	629.3		16.1		645.4		58.2		NM
Cyramza	215.6		281.4		497.0		461.5		8
Humulin	343.1		114.2		457.3		547.2		(16)
Olumiant(3)	93.1		354.6		447.8		441.8		1
Basaglar(4)	218.4		145.2		363.5		365.7		(1)
Emgality	227.5		96.1		323.6		306.7		6
Erbitux	264.2		28.1		292.4		263.4		11
Forteo	168.0		102.3		270.3		275.9		(2)
Cialis	16.8		199.1		215.9		364.7		(41)
Alimta	38.0		81.2		119.1		571.7		(79)
COVID-19 antibodies(5)	—		—		—		1,598.9		(100)
Other products	331.6		914.8		1,246.3		1,275.2		71
Revenue	$	9,967.6	$	5,304.6	$	15,272.1	$	14,298.0	7

Numbers may not add due to rounding.

NM - not meaningful

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

~~(4)~~(2) Humalog revenue includes insulin lispro.

(3) Olumiant revenue includes sales for baricitinib that were made pursuant to EUA or similar regulatory authorizations.

(4) Basaglar revenue includes Rezvoglar.

(5) 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 a treatment for type 2 diabetes and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors, increased 18decreased 4 percent in the U.S. during the three months ended ~~September~~June 30, ~~2022,~~2023, driven by lower realized prices, partially offset by increased demand. Revenue of Trulicity increased 6 percent in the U.S. during the six months ended June 30, 2023, driven by increased demand, partially offset by lower realized prices. ~~The~~During the three and six months ended June 30, 2023, the lower realized prices ~~in the U.S.~~ for ~~the three months ended September 30, 2022~~Trulicity were due to unfavorable segment mix and higher contracted rebates, partially offset by changes to estimates for rebates and discounts. Revenue in the U.S. increased 20 percent during the nine months ended September 30, 2022, driven by increased demand, partially offset by lower realized prices due to unfavorable segment mix and higher contracted rebates. Revenue outside the U.S. ~~increased~~decreased 8 ~~percent and 19~~ percent during the three ~~and nine~~ months ended ~~September~~June 30, ~~2022, respectively,~~2023, driven by ~~increased~~decreased volume, lower realized prices, and the unfavorable impact of foreign exchange rates. Volumes in international markets were affected by actions we have taken to manage strong demand ~~partially offset~~amid tight supply, including measures to minimize existing patient impact. Revenue outside the U.S. decreased 4 percent during the six months ended June 30, 2023, driven by the unfavorable impact of foreign exchange rates and ~~to a lesser extent,~~ lower realized ~~prices.~~

prices, partially offset by increased volume.

Revenue of COVID-19 antibodies, treatments for mild to moderate COVID-19 for higher-risk patients and for post-exposure prophylaxis in certain individuals for the prevention of SARS-CoV-2 infection, was $386.6 million and $1.97 billion in the U.S. during the three and nine months ended September 30, 2022, respectively. Revenue outside the U.S. was not material during the three and nine months ended September 30, 2022. The availability of superior or competitive therapies, including therapies that can be administered more easily, or preventative measures, such as vaccines, coupled with the unpredictable nature of pandemics, have and could further negatively impact or eliminate demand for these COVID-19 antibodies. The FDA has revised, and may in the future revise, any EUA for our COVID-19 antibodies in response to the prevalence of variants against which our antibodies have varying degrees of efficacy, including the new BQ variants. Based on early data, we do not believe that bebtelovimab will neutralize against the new BQ variants. We supplied the U.S. government approximately 810,000 doses of bebtelovimab during the nine months ended September 30, 2022. Beginning in the third quarter of 2022 and in collaboration with the U.S. government, we have made bebtelovimab commercially available for purchase by U.S. states/territories, hospitals, and certain other providers. We do not anticipate any further U.S. government orders.

~~Revenue of Taltz, a treatment for moderate-to-severe plaque psoriasis, active psoriatic arthritis, ankylosing spondylitis, and active non-radiographic axial spondyloarthritis,~~Verzenio increased ~~17 percent and 13~~53 percent in the U.S. during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, driven by increased demand and, to a lesser extent, higher realized prices. Revenue outside the U.S. increased 66 percent and 69 percent during the three and six months ended June 30, 2023, respectively, driven by increased demand, partially offset by lower realized ~~prices. Revenue outside~~prices and the ~~U.S. increased 9 percent and 14 percent during the three and nine months ended September 30, 2022, respectively, driven by increased volume, partially offset by~~ unfavorable impact of foreign exchange ~~rates and lower realized prices.~~rates.

Revenue of ~~Verzenio, a treatment for HR+, HER2- metastatic breast cancer and high risk early breast cancer, increased $215.1 million and $518.4 million~~Mounjaro in the U.S. during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023 was $915.7 million and $1.45 billion, respectively, reflecting increased volume and, to a lesser extent, higher realized prices due to decreased utilization of savings card programs as access continues to expand. We have experienced and continue to expect intermittent delays fulfilling orders of certain Mounjaro doses given significant demand. These delays have impacted, and may continue to impact, our volume. Mounjaro launched in the U.S. for the treatment of type 2 diabetes in June of 2022.

Revenue of Jardiance increased 54 percent and 49 percent in the U.S. during the three and six months ended June 30, 2023, respectively, primarily driven by increased demand. Revenue outside the U.S. increased 4934 percent and 5833 percent during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, respectively, driven by increased demand, partially offset by lower realized prices due to the impact of the NRDL formulary in China and the unfavorable impact of foreign exchange rates.~~

Revenue of Humalog, an injectable human insulin analog for the treatment of diabetes, decreased 29 percent and 15 percent in the U.S. during the three and nine months ended September 30, 2022, respectively, driven by lower realized prices due to a list price reduction of insulin lispro injection and unfavorable segment mix. Revenue outside the U.S. decreased 29 percent and 22 percent during the three and nine months ended September 30, 2022, respectively, driven by lower realized prices due to the impact of VBP in China and the unfavorable impact of foreign exchange rates. Due to the impact of competition and pricing pressure in the U.S. and some international markets, we expect that lower revenue due to realized price decline will continue over time.

Revenue of Jardiance, a treatment for type 2 diabetes, to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease, and to reduce the risk of cardiovascular death and hospitalization for heart failure in adults with heart failure, regardless of left ventricular ejection fraction, increased 59 percent and 47 percent in the U.S. during the three and nine months ended September 30, 2022,2023, respectively, primarily driven by increased demand. The increase in revenue in the U.S. during the three months ended September 30, 2022 was also driven by changes to estimates for rebates and discounts. Revenue outside the U.S. increased 31 percent and 26 percent during the three and nine months ended September 30, 2022, respectively, primarily driven by increased demand,volume, partially offset by the unfavorable impact of foreign exchange rates. See Note 4 to the consolidated condensed financial statements for information regarding our collaboration with Boehringer Ingelheim involving Jardiance.

Revenue of ~~Alimta, a treatment for various cancers, decreased 78~~Taltz increased 15 percent and 469 percent in the U.S. during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, primarily driven by ~~decreased demand due to the entry of multiple generics in the second quarter of 2022.~~increased demand. Revenue outside the U.S. ~~decreased 66 percent and 72~~increased 19 percent during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, respectively, largely~~2023, primarily driven by ~~decreased demand due to generic competition. Following~~increased volume, partially offset by the unfavorable impact of foreign exchange rates.

There was no worldwide revenue for COVID-19 antibodies during the three and six months ended June ~~2021 loss of patent exclusivity for Alimta in Europe and Japan, we faced, and expect to continue to face, generic competition that has rapidly and severely eroded revenue,~~30, 2023, and we ~~expect will continue to erode~~do not anticipate any revenue from ~~current levels. In addition, as a result of the entry of multiple generics~~COVID-19 antibodies in the U.S. following the loss of patent and pediatric exclusivity in May 2022, we began facing, and expect to continue to face, additional generic competition that has eroded revenue, and we expect will continue to rapidly and severely erode revenue from current levels. See "Executive Overview - Other Matters- Patent Matters" for additional information.2023.

Gross Margin, Costs, and Expenses

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


	Three Months Ended June 30,						Percent Change	Six Months Ended June 30,						Percent Change
	2023			2022				2023			2022

Gross margin	$	6,504.7		$	5,057.5		29	$	11,838.0		$	10,795.4		10
Gross margin as a percent of revenue	78.3		%	78.0		%		77.5		%	75.5		%

Research and development	$	2,356.5		$	1,781.9		32	$	4,341.6		$	3,392.0		28
Marketing, selling, and administrative	1,925.4			1,625.1			18	3,674.6			3,183.0			15
Acquired IPR&D	97.1			440.4			(78)	202.1			606.0			(67)

Other–net, (income) expense	36.8			119.2			(69)	1.1			469.9			(100)
Income taxes	325.7			138.4			NM	510.5			289.1			77
Effective tax rate	15.6		%	12.7		%		14.1		%	9.2		%

NM - not meaningful

Gross margin as a percent of revenue ~~decreased 1.6~~for the three months ended June 30, 2023 increased 0.3 percentage points compared with the three months ended June 30, 2022, primarily driven by product mix, including the sale of rights for Baqsimi, largely offset by increased manufacturing expenses related to ~~77.3~~labor costs and investments in capacity expansion. Gross margin as a percent ~~and~~of revenue for the six months ended June 30, 2023 increased 2.0 percentage points ~~to 76.1~~compared with the six months ended June 30, 2022, primarily driven by sales of COVID-19 antibodies in 2022.

Research and development expenses increased 32 percent and 28 percent for the three and ~~nine~~six months ended ~~September~~June 30, 2022, respectively. The decrease in the gross margin percent for the three months ended September 30, 2022 was primarily driven by a benefit in the gross margin for the three months ended September 30, 2021 due to the partial reversal of inventory impairment charges related to our COVID-19 antibodies that were recognized in the first and second quarters of 2021. The partial reversal of inventory impairment charges related to our COVID-19 antibodies was driven by an unexpected increase in our COVID-19 antibodies sales as the COVID-19 pandemic evolved during the third quarter of 2021. The increase in gross margin percent for the nine months ended September 30, 2022 was primarily driven by a net inventory impairment charge related to our COVID-19 antibodies recognized in 2021. Additionally, for the three and nine months ended September 30, 2022, lower realized prices and increased expenses due to inflation and logistics costs were offset by favorable product mix, including the impact of lower sales of Olumiant for the treatment of COVID-19, and the favorable impact of foreign exchange rates.

~~Research and development expenses increased 6 percent to $1.80 billion and 3 percent to $5.19 billion for the three and ninemonths ended September 30, 2022,~~2023, respectively, primarily driven by higher development expenses for late-stage assets ~~partially offset by lower development expenses for COVID-19 antibodies~~ and ~~the favorable impact of foreign exchange rates.~~additional investments in early-stage research.

Marketing, selling, and administrative expenses increased 218 percent ~~to $1.61 billion~~and 15 percent for the three and six months ended ~~September~~June 30, ~~2022,~~2023, respectively, primarily driven by ~~increased~~ costs associated with ~~the launch~~launches of ~~Mounjaro, partially offset by the favorable impact of foreign exchange rates.~~ ~~Marketing, selling,~~new products and ~~administrative expenses~~ decreased 1 percent to $4.80 billion for the nine months ended September 30, 2022, primarily driven by the favorable impact of foreign exchange rates as well as reduced marketing costs in the first half of 2022, partially offset by increased costs associated with the launch of Mounjaro.indications.

We ~~plan to take compensatory actions to improve retention~~recognized $97.1 million and ~~address wage inflation which will impact our costs and consolidated results of operations.~~

~~We recognized $62.4 millionand$668.4~~$202.1 million of acquired IPR&D ~~and development milestones~~charges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively. ~~The~~We recognized $440.4 million and $606.0 million of acquired IPR&D charges for the ~~nine~~three and six months ended ~~September~~June 30, 2022, ~~included~~respectively, primarily related to 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~~inhibitor. The charges for the six months ended June 30, 2022 also included the purchase of a Priority Review Voucher. ~~We recognized $177.6 millionand~~$532.4 million of acquired IPR&D and development milestones for the three and nine months ended September 30, 2021, respectively. The charges for the nine months ended September 30, 2021 included acquired IPR&D charges from business development transactions with Rigel and Precision. See Note 3 ~~to the consolidated condensed financial statements for additional information.~~

We recognized asset impairment, restructuring, and other special charges of $206.5 million for the three and nine months ended September 30, 2022, primarily related to an intangible asset impairment for GBA1 Gene Therapy (PR001) due to changes in estimated launch timing. There were no asset impairment, restructuring, and other special charges recognized for the three months ended September 30, 2021. We recognized asset impairment, restructuring, and other special charges of $211.6 million for the nine months ended September 30, 2021, primarily related to an intangible asset impairment resulting from the sale of the rights to Qbrexza, as well as acquisition and integration costs associated with the acquisition of Prevail. See Note 5 to the consolidated condensed financial statements for additional information.

Other–net, (income) expense was expense of $111.0 million and $580.9 million for the three and nine months ended September 30, 2022, respectively, compared with expense of $635.9 million and $124.3 million for the three and nine months ended September 30, 2021, respectively. The decrease in other expense for the three months ended September 30, 2022 was primarily driven by a debt extinguishment loss of $405.2 million related to the repurchase of debt in 2021, as well as lowerincluded net investment losses on equity securities ~~in 2022 compared to 2021. The increase in other expense~~of $64.9 million and $78.6 million for ~~the nine~~three and six months ended ~~September~~June 30, ~~2022 was primarily driven by~~2023, respectively. Other–net, (income) expense included net investment losses on equity securities inof $118.9 million and $544.3 million for three and six months ended June 30, 2022, ~~compared with net investment gains on equity securities in 2021, partially offset by a debt extinguishment loss of $405.2 million related~~respectively. See Note 10 to the ~~repurchase of debt in 2021.~~consolidated condensed financial statements for additional information.

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The effective tax rates were ~~7.3~~15.6 percent and ~~8.6~~14.1 percent for the three and ~~nine~~six months ended ~~September~~June 30, 2023, respectively, reflecting the tax impacts of the new Puerto Rico tax regime and the sale of rights for Baqsimi. The effective tax rates were 12.7 percent and 9.2 percent for the three and six months ended June 30, 2022, respectively, reflecting the favorable tax impact of the implementation of a provision in the 2017 Tax Act that requires capitalization and amortization of research and development expenses for tax purposes starting in 2022, net investment losses on equity securities, and an intangible asset impairment charge. We expect our effective tax rate to be approximately 13 percent to 14 percent for 2022 if the capitalization and amortization of research and development expenses provision of the 2017 Tax Act is deferred or repealed by the U.S. Congress effective for 2022.

~~Financial Condition and Liquidity~~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. For a discussion of our capital requirements, see "Management's Discussion and Analysis of Results of Operations and Financial Condition" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

We ~~plan to invest more than $2 billion over several years~~have announced additional investment commitments in ~~two~~ new facilities in ~~Lebanon,~~ Indiana, North Carolina, and Limerick, Ireland to manufacture existing and future ~~products and more than $1 billion over several years in a new facility in Concord, North Carolina to manufacture parenteral (injectable) products and devices.~~products. We ~~plan to invest more than 400 million euro over several years in a new facility in Limerick, Ireland to expand our manufacturing network for biologic active ingredients. These~~expect that these investments ~~and other capital investments that support our operations,~~ will result in higher capital expenditures ~~being higher than recent historical levels for~~in excess of $8 billion over the next several years.

In June 2023, we announced an agreement to acquire DICE for a purchase price of $48 per share in cash (an aggregate of approximately $2.4 billion) payable at closing. As of June 30, 2023, potential amounts payable for other pending business development acquisitions were approximately $1 billion in aggregate, subject to closing conditions and/or regulatory approvals. We anticipate funding these acquisitions, including DICE, through cash on hand and the issuance of commercial paper.

Cash and cash equivalents ~~decreased~~increased to ~~$2.62~~$2.69 billion as of ~~September~~June 30, ~~2022,~~2023, compared with ~~$3.82~~$2.07 billion as of December 31, ~~2021.~~2022. Refer to the consolidated condensed statements of cash flows for additional information on the significant sources and uses of cash for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

In addition to our cash and cash equivalents, we held total investments of ~~$2.70~~$2.88 billion and ~~$3.30~~$3.05 billion as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. See Note 65 to the consolidated condensed financial statements for additional information.

As of ~~September~~June 30, ~~2022,~~2023, total debt was ~~$15.89~~$18.82 billion, ~~a decrease~~an increase of ~~$996.3 million~~$2.58 billion compared with ~~$16.88~~$16.24 billion as of December 31, ~~2021.~~2022. In February 2023, we issued $750.0 million of 5.000 percent fixed-rate notes due in 2026, which are callable at par after one year, $1.00 billion of 4.700 percent fixed-rate notes due in 2033, $1.25 billion of 4.875 percent fixed-rate notes due in 2053, and $1.00 billion of 4.950 percent fixed-rate notes due in 2063, all with interest to be paid semi-annually. We used the net cash proceeds from the offering of $3.96 billion for general business purposes, including the repayment of outstanding commercial paper. See Note 65 to the consolidated condensed financial statements for additional information.

As of ~~September~~June 30, ~~2022,~~2023, we had a total of ~~$7.26~~$7.33 billion of unused committed bank credit facilities, $7.00 billion of which is available to support our commercial paper program. We believe that amounts accessible through existing commercial paper markets should be adequate to fund short-term borrowing needs.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we repurchased ~~$1.50 billion~~$750.0 million of shares under our $5.00 billion share repurchase program authorized in May 2021. As of ~~September~~June 30, ~~2022,~~2023, we had ~~$3.25~~$2.50 billion remaining under this program.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we paid dividends of ~~$2.65~~$2.04 billion, or ~~$2.94~~$2.26 per share, to our shareholders. In October 2022, we declared a dividend for the fourth quarter of 2022 of $0.98 per share on outstanding common stock. The dividend of approximately $882 million is payable on December 9, 2022 to shareholders of record at the close of business on November 15, 2022.

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

Both domestically and abroad, we continue to monitor the potential impacts of the economic environment; the creditworthiness of our wholesalers and other customers, including foreign government-backed agencies and suppliers; the uncertain impact of ~~health care~~healthcare legislation; various international government funding levels; and fluctuations in interest rates, foreign currency exchange rates (see "Executive ~~Overview -~~ Overview—Other ~~Matters -~~ Matters—Foreign Currency Exchange ~~Rates"~~Rates and Other Impacts"), and fair values of equity securities.

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 $6.5 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.

5046

~~Critical Accounting Estimates~~CRITICAL ACCOUNTING ESTIMATES

For a discussion of our critical accounting estimates, refer to "Management's Discussion and Analysis of Results of Operations and Financial Condition" in Part II, Item 7 and the notes to our consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. See also Note 1 to the consolidated condensed financial statements. There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~Available Information on our Website~~AVAILABLE INFORMATION ON OUR WEBSITE

We make available through our company website, free of charge, our company filings with the Securities and Exchange Commission (SEC) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. The reports we make available include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, registration statements, and any amendments to those documents.

The website link to our SEC filings is investor.lilly.com/financial-information/sec-filings.

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

5147

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For a discussion of our market risk, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 4. Controls and Procedures

(a)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 of a reporting company designed to ensure that information required to be disclosed by the reporting company in its periodic reports filed with the SEC (such as this Quarterly Report on Form 10-Q) is recorded, processed, summarized, and reported on a timely basis.

Our management, with the participation of David A. Ricks, president and chief executive officer, and Anat Ashkenazi, executive vice president and chief financial officer, evaluated our disclosure controls and procedures (as such terms are defined in our Annual Report on Form 10-K for the year ended December 31, ~~2021)~~2022) as of ~~September~~June 30, ~~2022,~~2023, and concluded that they were effective.

(b)Changes in Internal Controls. During the ~~third~~second quarter of ~~2022,~~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. We are currently preparing to implement a new global enterprise resource planning (ERP) system, which will replace existing operating and financial systems. 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. We currently expect to commence and complete the global implementation in the first quarter of 2024, with post-implementation activities following thereafter. As the implementation and post-implementation activities take place, we will have changes to certain of our processes and procedures, and we will evaluate quarterly whether the changes materially affect our internal control over financial reporting.

5248

PART II. Other Information

Item 1. Legal Proceedings

We are a party to various currently pending legal actions, government investigations, and environmental proceedings. See Note 98 to the consolidated condensed financial statements for information on various legal proceedings.

This Item should be read in conjunction with "Legal Proceedings" in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 1A. Risk Factors

Our material risk factors are disclosed in "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Information relating to the principal market for our common stock and related shareholder matters is described in "Management's Discussion and Analysis of Results of Operations and Financial Condition" in Part II, Item 7 and in "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in Part III, Item 12 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The following table summarizes the activity related to repurchases of our equity securities during the three months ended ~~September~~June 30, ~~2022:~~2023:

Period

Total Number of
Shares Purchased
(in thousands)

Average Price Paid
per Share

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

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

~~July 2022~~April 2023

—

~~3,250.0~~2,500.0

~~August 2022~~May 2023

—

~~3,250.0~~2,500.0

~~September 2022~~June 2023

—

~~3,250.0~~2,500.0

Total

—

During the three months ended ~~September~~June 30, ~~2022,~~2023, we did not repurchase any shares under our $5.00 billion share repurchase program authorized in May 2021.

Item 5. Other Information

On June 14, 2023, Alonzo Weems, executive vice president, enterprise risk management, and chief ethics and compliance officer, adopted a sales and donation plan (Plan). The Plan was entered into during an open trading window and is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act of 1934 and our policies regarding trading in our securities. The Plan calls for the sale of up to 1,148 shares of company common stock and gifts aggregating up to 760 shares of company common stock to unaffiliated third parties, in each case between September 12, 2023 and December 29, 2023 and subject to the terms and conditions of the Plan.

Item 6. Exhibits

The following documents are filed as a part of this Quarterly Report:


Exhibit						Description
~~EXHIBIT~~ 3.1						Amended Articles of Incorporation, ~~are~~ incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on May 4, 2022

~~EXHIBIT~~ 3.2						Bylaws, as amended, ~~are~~ incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 4, 2022

~~EXHIBIT 10.1~~						~~Form of Performance Award under the 2002 Lilly Stock Plan (with non-compete)(1)~~

~~EXHIBIT 10.2~~						~~Form of Shareholder Value Award under the 2002 Lilly Stock Plan (with non-compete)(1)~~

~~EXHIBIT 10.3~~						~~Form of Relative Value Award under the 2002 Lilly Stock Plan (with non-compete)(1)~~

~~EXHIBIT~~ 31.1						Rule 13a-14(a) Certification of David A. Ricks, Chair, President, and Chief Executive ~~Officer~~Officer*

~~EXHIBIT~~ 31.2						Rule 13a-14(a) Certification of Anat Ashkenazi, Executive Vice President and Chief Financial ~~Officer~~Officer*

~~EXHIBIT 32.~~32						Section 1350 ~~Certification~~Certification*

~~EXHIBIT 101.~~101						Interactive Data Files (embedded within the Inline XBRL document)*

~~EXHIBIT 104.~~104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

* Filed herewith.

~~(1)~~ ~~Indicates management contract or compensatory plan.~~

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 Quarterly Report. We will furnish a copy of these agreements to the Securities and Exchange Commission upon request.

Signatures

Pursuant to the requirements 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
		(Registrant)

Date:	~~November 1, 2022~~August 8, 2023	/s/ Anat Ashkenazi
		Anat Ashkenazi
		Executive Vice President and Chief Financial Officer
Date:	~~November 1, 2022~~August 8, 2023	/s/ Donald A. Zakrowski
		Donald A. Zakrowski
		Senior Vice President, Finance, and Chief Accounting Officer

5450


	Three Months Ended September 30,							Nine Months Ended September 30,
	2022			2021			Percent Change	2022			2021			Percent Change
Revenue	$	6,941.6		$	6,772.8		2	$	21,239.6		$	20,318.5		5
Gross margin	5,362.5			5,342.0			—	16,157.9			15,055.9			7
Gross margin as a percent of revenue	77.3		%	78.9		%		76.1		%	74.1		%

Research and development	$	1,802.9		$	1,705.3		6	$	5,194.9		$	5,032.4		3
Marketing, selling, and administrative	1,614.2			1,577.9			2	4,797.2			4,839.6			(1)
Acquired in-process research and development (IPR&D) and development milestones	62.4			177.6			(65)	668.4			532.4			26
Asset impairment, restructuring, and other special charges	206.5			—			NM	206.5			211.6			(2)
Other–net, (income) expense	111.0			635.9			(83)	580.9			124.3			NM




Net income	1,451.7			1,110.1			31	4,307.1			3,855.6			12


EPS - diluted	1.61			1.22			32	4.76			4.23			13