AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Patents and regulatory data protection support most revenues, cash flows and earnings. Historical rapid erosion after protection losses demonstrates the economic significance of exclusivity. This establishes a current structural advantage without requiring an inference from margins.
durability · 2/4 · Protection is finite, Trulicity faces significant losses in the next few years, and exclusivity duration is uncertain. Current commercial success is strong, but the supplied evidence does not establish repeated replacement of future patent losses.
customer dependency · 2/4 · Strong volume growth demonstrates demand indirectly, while protected products restrict direct copying. However, formulary restrictions and therapeutic substitution limit dependency; patient switching friction and repeat-use rates are not established.
erosion resilience · 2/4 · Revenue, cash generation and first-half gross margin improved despite realized price declines. Resilience is demonstrated over the reported period, but historical patent-loss erosion and scheduled government price setting limit longer-term confidence.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Realized prices fell in both the second quarter and first half of 2026, primarily for Mounjaro and Zepbound. China reimbursement access also reduced realized prices. Strong volume offsets do not establish pricing power.
retention · 2/4 · Volume-led growth supports continuing demand indirectly, including for Mounjaro and Zepbound. It cannot distinguish repeat demand from new patients, channel changes or expanded access at lower prices, so retention is assessed as mixed without fabricating persistence rates.
margin resilience · 2/4 · First-quarter gross margin declined 0.6 percentage points primarily from lower prices. Second-quarter margin rose 1.5 points and first-half margin rose 0.5 points as production improvements and mix offset pricing pressure. This demonstrates mixed but meaningful operating resilience rather than durable pricing-led protection.
contractual freedom · 1/4 · Government agreements include price reductions, private payers negotiate concessions for access, and Trulicity and Verzenio were selected for government-set prices effective in 2028. These are concrete constraints on price setting; complete contract terms are unavailable.
Predictability86
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 16.21
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 6.76
Financial strength72
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 46.61
- netDebtEbitGrade
- 73.21
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 66.33
- Debt / FCF (x)
- 4.74
- Net debt / operating income (x)
- 1.34
- Interest coverage (x)
- 29.39
- Current ratio (x)
- 1.58
Capital allocation84
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 34.91
- 3-year average dilution (%)
- -0.16
- 3-year average SBC / revenue (%)
- 1.41
- cashConversionGrade
- 37.08
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash flow increased from $4.240 billion in 2023 to $16.813 billion in 2025 and reached $16.023 billion in first-half 2026. However, first-half capital spending, acquisitions and acquired IPR&D consumed substantial cash alongside dividends and buybacks, while borrowings increased. Shares declined net of employee issuance, but returns on recent acquisitions and capacity commitments remain unproven.
incentive alignment · 2/4 · Actual arrangements combine revenue, EPS and pipeline bonus measures with relative shareholder-return awards, post-vesting holding requirements and compensation recovery provisions. Exclusion of business-development and acquired IPR&D costs from bonus EPS weakens accountability for capital allocation. Complete ownership evidence is missing, and future award vesting is not assumed.
execution · 3/4 · First-half revenue rose 51% and net income rose 72%, with substantially stronger operating cash flow and improved production costs. These reported operating outcomes strongly support commercial and operating execution indirectly; they do not establish future pipeline success or successful integration of recent acquisitions.
governance · 2/4 · Independent standing committees and an auditor opinion of effective financial-reporting controls provide concrete safeguards. The proxy discloses a combined chair/CEO role and classified board; proposed reforms required 80% approval and their adoption is unestablished. An affirmed pricing-related judgment and subsequent denial of review are realized adverse evidence, while other allegations are not treated as proven misconduct.
Evidence
Risks Related to Our Intellectual Property We depend on products with intellectual property protection for most of our revenues, cash flows, and earnings; the loss of effective intellectual property protection for certain of our products has resulted, and in the future is likely to continue to result, in rapid and severe declines in revenues for those products.
Risk Factors—Risks Related to Our Intellectual Property · Filed 12/02/2026
For example, Trulicity will lose significant patent and remaining data protections in the next few years.
Risk Factors—Trulicity protection losses · Filed 12/02/2026
The length of market exclusivity for our products can be difficult to predict with certainty because of the complex interaction between patent and regulatory forms of exclusivity and the inherent uncertainties regarding patent litigation.
Business—Our Intellectual Property Portfolio—exclusivity uncertainty · Filed 12/02/2026
We own, have applied for, or are licensed under, a large number of patents in the U.S.
Business—Patents, Trademarks, and Other Intellectual Property Rights · Filed 12/02/2026
In addition, for some products we have effective intellectual property protection in the form of data protection under pharmaceutical regulatory laws.
Business—regulatory data protection · Filed 12/02/2026
But in a number of markets we are unable to patent our products or to enforce the patents that we receive for our products.
Business—limitations on patent enforcement · Filed 12/02/2026
When new products, uses, or delivery systems with therapeutic, convenience, or cost advantages are introduced, including by developing new modalities, our existing products become subject to decreased sales volumes, progressive price reductions, or both.
Business—Competition—therapeutic and cost substitution · Filed 12/02/2026
Financial Results The following table summarizes certain financial information: Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2026 2025 2026 2025 Revenue $ 22,974 $ 15,558 48 $ 42,773 $ 28,286 51 Net income 7,095 5,661 25 14,491 8,420 72 Earnings per share - diluted 7.94 6.29 26 16.19 9.35 73 Revenue increased for the three and six months ended June 30, 2026, driven primarily by increased volume, partially offset by lower realized prices.
MD&A—Financial Results—second-quarter and first-half 2026 · Filed 05/08/2026
7 Consolidated Condensed Statements of Cash Flows (Unaudited) ELI LILLY AND COMPANY (Dollars in millions) Six Months Ended June 30, 2026 2025 Cash Flows from Operating Activities Net income $ 14,491 $ 8,420 Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: Depreciation and amortization 1,043 941 Change in deferred income taxes (433) (1,460) Stock-based compensation expense 362 339 Acquired in-process research and development 3,360 1,726 Other changes in operating assets and liabilities, net of acquisitions and divestitures (2,334) (5,627) Other operating activities, net (466) 414 Net Cash Provided by Operating Activities 16,023 4,753 Cash Flows from Investing Activities Purchases of property and equipment (5,259) (3,207) Purchases of noncurrent investments (604) (368) Purchases of in-process research and development (3,486) (1,864) Cash paid for acquisitions, net of cash acquired (9,805) — Other investing activities, net (158) 252 Net Cash Used for Investing Activities (19,312) (5,187) Cash Flows from Financing Activities Dividends paid (3,094) (2,693) Net change in short-term borrowings 5,284 (246) Proceeds from issuance of long-term debt 8,941 6,461 Repayments of long-term debt (1,623) (778) Purchases of common stock (3,957) (1,892) Other financing activities, net (595) (717) Net Cash Provided by Financing Activities 4,956 135 Effect of exchange rate changes on cash and cash equivalents 15 407 Net increase in cash and cash equivalents 1,682 108 Cash and cash equivalents at January 1 7,268 3,268 Cash and Cash Equivalents at June 30 $ 8,950 $ 3,376 See notes to consolidated condensed financial statements.
Consolidated Condensed Statements of Cash Flows—six months ended June 30, 2026 · Filed 05/08/2026
The increased volume and the lower realized prices during the three and six months ended June 30, 2026 were primarily driven by Mounjaro and Zepbound.
MD&A—Financial Results—Mounjaro and Zepbound volume and pricing · Filed 05/08/2026
In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028.
Business—government-set prices effective in 2028 · Filed 12/02/2026
government in which, among other arrangements, we agreed to lower Medicaid and certain other drug prices for U.S.
MD&A—voluntary government pricing agreements · Filed 05/08/2026
continue to significantly impact the market for pharmaceuticals through negotiation of access, manufacturer price or rebate concessions and pharmacy reimbursement rates.
MD&A—private payer and pharmacy benefit manager concessions · Filed 05/08/2026
While the FDA confirmed in late 2024 that the previous shortage of tirzepatide had ended and that compounding pharmacies are required to cease mass production, we cannot guarantee adequate regulation or compliance.
MD&A—tirzepatide shortage resolution and compounding enforcement · Filed 05/08/2026
Gross margin as a percent of revenue decreased 0.6 percentage points for the three months ended March 31, 2026, primarily driven by lower realized prices.
MD&A—first-quarter 2026 gross margin · Filed 30/04/2026
29 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 2026 2025 2026 2025 Gross margin $ 19,706 $ 13,110 50 $ 35,928 $ 23,614 52 Gross margin as a percent of revenue 85.8 % 84.3 % 84.0 % 83.5 % Research and development $ 3,819 $ 3,336 14 $ 7,329 $ 6,070 21 Marketing, selling, and administrative 3,430 2,753 25 6,364 5,221 22 Acquired IPR&D 2,776 154 NM 3,360 1,726 95 Asset impairment, restructuring, and other special charges 703 — NM 982 35 NM Income taxes 2,152 1,116 93 3,606 1,813 99 Effective tax rate 23.3 % 16.5 % 19.9 % 17.7 % NM - not meaningful Gross margin as a percent of revenue for the three months ended June 30, 2026 increased 1.5 percentage points, primarily driven by improved cost of production and favorable product mix, partially offset by lower realized prices.
MD&A—Gross Margin, Costs, and Expenses · Filed 05/08/2026
Gross margin as a percent of revenue for the six months ended June 30, 2026 increased 0.5 percentage points, primarily driven by improved cost of production, partially offset by lower realized prices.
MD&A—first-half 2026 gross margin drivers · Filed 05/08/2026
60 Consolidated Statements of Cash Flows ELI LILLY AND COMPANY AND SUBSIDIARIES (Dollars in millions) Year Ended December 31, 2025 2024 2023 Cash Flows from Operating Activities Net income $ 20,640 $ 10,590 $ 5,240 Adjustments to Reconcile Net Income to Cash Flows from Operating Activities: Depreciation and amortization 1,997 1,767 1,527 Change in deferred income taxes (1,707) (2,683) (2,341) Stock-based compensation expense 626 646 629 Gains on sale of product rights (180) (224) (1,879) Acquired in-process research and development 2,910 3,280 3,800 Other operating activities, net 620 826 319 Other changes in operating assets and liabilities, net of acquisitions and divestitures: Receivables—(increase) decrease (7,000) (2,155) (2,451) Inventories—(increase) decrease (4,671) (2,507) (1,425) Prepaid expenses and other assets—(increase) decrease (6,609) (3,331) (3,453) Accounts payable and other liabilities—increase (decrease) 10,187 2,609 4,274 Net Cash Provided by Operating Activities 16,813 8,818 4,240 Cash Flows from Investing Activities Purchases of property and equipment (7,841) (5,058) (3,448) Proceeds from sales of and distributions from noncurrent investments 964 374 508 Purchases of noncurrent investments (645) (677) (731) Proceeds from sale of product rights 218 601 1,604 Purchases of in-process research and development (3,008) (3,346) (3,944) Cash paid for acquisitions, net of cash acquired (661) (948) (1,044) Other investing activities, net 1 (248) (98) Net Cash Used for Investing Activities (10,972) (9,302) (7,153) Cash Flows from Financing Activities Dividends paid (5,384) (4,680) (4,069) Net change in short-term borrowings (4,338) (1,852) 4,691 Proceeds from issuance of long-term debt 13,167 11,417 3,959 Repayments of long-term debt (778) (664) — Purchases of common stock (4,108) (2,500) (750) Other financing activities, net (772) (491) (335) Net Cash Provided by (Used for) Financing Activities (2,213) 1,230 3,496 Effect of exchange rate changes on cash and cash equivalents 372 (297) 169 Net increase in cash and cash equivalents 4,000 449 752 Cash and cash equivalents at beginning of year 3,268 2,819 2,067 Cash and Cash Equivalents at End of Year $ 7,268 $ 3,268 $ 2,819 See notes to consolidated financial statements.
Consolidated Statements of Cash Flows—2023 through 2025 · Filed 12/02/2026
16 The following table summarizes the carrying amount and fair value using Level 2 inputs for our short-term and long-term debt: June 30, 2026 December 31, 2025 Carrying Amount Fair Value Carrying Amount Fair Value Short-term commercial paper borrowings $ 5,284 $ 5,280 $ — $ — Long-term debt, including current portion 49,624 46,555 42,503 39,799 Contingent Consideration Contingent consideration is additional consideration payable as a result of an acquisition accounted for as a business combination that is contingent on the achievement of certain development, success-based regulatory, or sales-based milestones.
Note—Debt and Contingent Consideration · Filed 05/08/2026
(Ventyx) and are summarized in the following table: Kelonia Centessa Ventyx Acquisition date June 25, 2026 June 24, 2026 March 4, 2026 Business description In vivo chimeric antigen receptor T-cell (CAR-T) therapies Orexin receptor 2 agonists for sleep-wake disorders Oral therapies for inflammatory-mediated diseases Estimated fair value as of acquisition date: Cash $ 46 $ 233 $ 120 Acquired in-process research and development (IPR&D) 4,695 6,058 977 Goodwill(1) 1,052 1,655 232 Deferred tax liabilities, net (822) (1,279) (150) Other assets and liabilities, net (74) (74) (1) Acquisition date fair value of consideration 4,897 6,593 1,178 Less: Cash acquired (46) (233) (120) Fair value of contingent consideration (1,765) (402) N/A Cash consideration paid or to be paid, net of cash acquired(2) $ 3,086 $ 5,958 $ 1,058 Contingent consideration(3) $ 3,750 $ 1,542 N/A Primary acquired IPR&D intangible KLN-1010 ORX750 VTX3232 (1) The goodwill recognized from these acquisitions is primarily attributable to future unidentified projects and products, the assembled workforce for the companies, and the recognition of deferred tax liabilities, which is not deductible for tax purposes.
Business Combinations—2026 acquisition consideration and acquired IPR&D · Filed 05/08/2026
Note 10: Equity The following table summarizes components of equity with significant changes during the three months ended June 30, 2026 and 2025: Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Shares Amount Balance at March 31, 2026 943.5 $ 590 $ 6,921 $ 29,514 $ (2,833) Net income 7,095 Other comprehensive income, net of tax 72 Cash dividends declared per share: $3.46 (3,088) Purchases of common stock (2.0) (2) (1,628) Issuance of stock under employee stock plans, net — — (5) Stock-based compensation 201 Balance at June 30, 2026 941.5 $ 588 $ 7,117 $ 31,893 $ (2,761) Balance at March 31, 2025 948.1 $ 593 $ 6,910 $ 15,100 $ (3,775) Net income 5,661 Other comprehensive income, net of tax 59 Cash dividends declared per share: $3.00 (2,692) Purchases of common stock (0.9) (1) (692) Issuance of stock under employee stock plans, net — — (6) Stock-based compensation 185 Balance at June 30, 2025 947.2 $ 592 $ 7,089 $ 17,376 $ (3,716) 21 The following table summarizes components of equity with significant changes during the six months ended June 30, 2026 and 2025: Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Shares Amount Balance at December 31, 2025 944.8 $ 590 $ 7,346 $ 24,470 $ (2,880) Net income 14,491 Other comprehensive income, net of tax 119 Cash dividends declared per share: $3.46 (3,088) Purchases of common stock (4.4) (3) (3,984) Issuance of stock under employee stock plans, net 1.1 1 (591) Stock-based compensation 362 Other 4 Balance at June 30, 2026 941.5 $ 588 $ 7,117 $ 31,893 $ (2,761) Balance at December 31, 2024 947.9 $ 592 $ 7,439 $ 13,545 $ (4,322) Net income 8,420 Other comprehensive income, net of tax 606 Cash dividends declared per share: $3.00 (2,692) Purchases of common stock (2.3) (1) (1,891) Issuance of stock under employee stock plans, net 1.6 1 (689) Stock-based compensation 339 Other (6) Balance at June 30, 2025 947.2 $ 592 $ 7,089 $ 17,376 $ (3,716) As of June 30, 2026, we had $7.0 billion remaining under our $15.0 billion share repurchase program authorized in December 2024.
Note 10—Equity—share issuance and repurchases · Filed 05/08/2026
49 2. Annual Cash Bonus (Bonus Plan) The Committee maintained the Bonus Plan’s three equally weighted measures for 2025: product revenue, EPS, and pipeline progress.
Compensation—2025 Annual Cash Bonus measures · Filed 20/03/2026
For bonus purposes, the Talent and Compensation Committee adjusted non-GAAP EPS to exclude the impact of business development transactions and acquired in-process research and development (IPR&D) charges, both of which were not included in original 2025 bonus targets.
Executive Compensation Summary—bonus EPS adjustments · Filed 20/03/2026
Outstanding RVA peer groups are as follows: Company Name 2025 Award 2024 Award 2023 Award AbbVie Amgen AstraZeneca Biogen n/a Bristol-Myers Squibb Gilead GlaxoSmithKline Johnson & Johnson Medtronic n/a n/a Merck Novartis Novo Nordisk Pfizer Roche Sanofi Stryker n/a n/a Takeda n/a Payouts range from 0 to 200 percent of target, with median peer TSR performance required to achieve target payout.
Compensation—Relative Value Award peer comparison and payout terms · Filed 20/03/2026
Any shares earned are subject to a one-year post-vesting holding requirement.
Compensation—Relative Value Award post-vesting holding requirement · Filed 20/03/2026
Additionally, the policy allows for the recoupment of incentive compensation (cash or stock) and/or non-qualified benefits previously granted or paid to executives (including certain non-executive officers) in the event of: (a) payments based on materially inaccurate assessments of performance, (b) financial restatements due to misconduct, or (c) other misconduct resulting in material violations of law or company policy that causes significant harm to the company.
Compensation—Executive Compensation Recovery Policy · Filed 20/03/2026
•Independent Committees: All standing board committees are composed solely of independent directors and led by independent committee chairs.
Governance—independent standing board committees · Filed 20/03/2026
9 Item 1. Election of Directors Under our articles of incorporation, the board is divided into three classes with approximately one-third of the directors standing for election each year.
Item 1—Election of Directors—classified board · Filed 20/03/2026
Why Our Current Structure Works Best The combined chair/CEO role provides deep strategic insights and consistent communication vital to our innovative research and development business with prolonged development cycles.
Governance—combined chair and CEO role · Filed 20/03/2026
The changes shown to Article 9(b) will be effective if Item 4, “Proposal to Amend the Company’s Articles of Incorporation to Eliminate the Classified Board Structure,” receives the vote of at least 80 percent of the outstanding shares.
Appendix B—conditional classified-board amendment · Filed 20/03/2026
The changes to Articles 9(c), 9(d), and 13 will be effective if Item 5, “Proposal to Amend the Company’s Articles of Incorporation to Eliminate Supermajority Voting Provisions,” receives the vote of at least 80 percent of the outstanding shares.
Appendix B—conditional supermajority amendment · Filed 20/03/2026
In our opinion, Eli Lilly and Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
Independent auditor opinion—internal control over financial reporting · Filed 12/02/2026
In September 2025, the U.S. Court of Appeals for the Seventh Circuit affirmed, and we recognized a charge related to the matter.
Note 9—Average Manufacturer Price Litigation—affirmed judgment and charge · Filed 05/08/2026
In May 2026, the U.S. Supreme Court denied further review.
Note 9—Average Manufacturer Price Litigation—May 2026 review denial · Filed 05/08/2026
Unfavorable formulary placement can lead to reduced usage of a product for the relevant patient population due to coverage restrictions, such as prior authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels, and higher deductibles.
Business—Private Sector Dynamics—formulary restrictions · Filed 12/02/2026
More generally, incretin volume fluctuations due to channel dynamics or demand can have a disproportionate impact on our results of operations in any given period.
MD&A—volume fluctuations and channel dynamics · Filed 05/08/2026
Outside the U.S. for the three and six months ended June 30, 2026, the volume increase was driven by Mounjaro, and the lower realized prices were primarily driven by the addition of Mounjaro to the National Reimbursement Drug List (NRDL) in China.
MD&A—outside-U.S. pricing and China reimbursement access · Filed 05/08/2026
Under the Medicare GLP-1 Bridge program (Bridge Program), Medicare beneficiaries obtained access to discounted Lilly obesity medicines effective July 1, 2026 through December 31, 2027, and individual state Medicaid programs separately have the option to expand access to these medicines.
MD&A—Medicare GLP-1 Bridge access effective July 1, 2026 · Filed 05/08/2026
The uptake from this expanded access is unknown.
MD&A—unknown uptake from expanded government access · Filed 05/08/2026
