lly-20260331

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 March 31, 2026

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
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 April 27, 2026:


Class						Number of Shares Outstanding
Common						941,741,406

Eli Lilly and Company

Form 10-Q

For the Quarter Ended March 31, 2026

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 Cash Flows	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management's Discussion and Analysis of Results of Operations and Financial Condition	23
	Executive Overview	23
	Results of Operations	27
	Financial Condition and Liquidity	28
	Critical Accounting Estimates	29
	Available Information on our Website	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II. Other Information		30

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	30
Item 6.	Exhibits	31

Signatures		31

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. 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," "could," "aim," "seek," "believe," "will," "expect," "project," "estimate," "intend," "target," "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 from those expressed in forward-looking statements. Forward-looking statements are 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 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 from those anticipated:

•the significant costs and uncertainties in the pharmaceutical research and development process, including with respect to the timing and process of obtaining regulatory approvals and the ability of the company's clinical trials to meet expectations;

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

•intense competition affecting our products, pipeline, or industry;

•market uptake of launched products and indications;

•continued pricing pressures and the impact of actions of governmental and private actors affecting pricing of, reimbursement for, and patient access to pharmaceuticals, or reporting obligations related thereto;

•implementation of our voluntary agreement with the U.S. government related to drug pricing and access;

•developments or uncertainties related to our or competitive products, including as may relate to safety or efficacy concerns;

•dependence on relatively few products or product classes for a significant percentage of our total revenue and a consolidated supply chain;

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

•our ability to protect and enforce patents and other intellectual property and changes in patent law or regulations related to data package exclusivity;

•information technology system inadequacies, inadequate controls or procedures, security 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 and violations of data protection laws or regulations;

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

•reliance on third-party relationships and outsourcing arrangements;

•the use of artificial intelligence or other emerging technologies in various facets of our operations, including partnerships related to the use of, or the sharing of, such technologies with third parties, which may exacerbate competitive, regulatory, litigation, cybersecurity, and other risks;

•the impact of global macroeconomic conditions, including uneven economic growth or downturns or uncertainty, trade and other global disputes and interruptions, including related to tariffs, trade protection measures, and similar restrictions, international tension, conflicts, regional dependencies, or other costs, uncertainties, and risks related to engaging in business globally;

•fluctuations in foreign currency exchange rates, changes in interest rates, and inflation or deflation;

•significant and sudden declines or volatility in the trading price of our common stock and market capitalization;

•litigation, investigations, or other similar proceedings involving past, current, or future products, activities, or intellectual property;

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

•regulatory changes, developments, and uncertainty;

•regulatory oversight and actions regarding our operations and products;

•regulatory compliance problems or government investigations;

•risks from the proliferation of counterfeit, misbranded, adulterated, or illegally compounded products;

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

•asset impairments and restructuring charges; and

•changes in accounting and reporting standards.

More information on factors that could cause our actual results to differ from those expressed in forward-looking statements is included from time to time in our reports filed with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the year ended December 31, 2025, particularly under Part I, Item 1A, "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.

Trademarks and Trade Names

All trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of the company, or, to the extent trademarks or trade names belonging to other companies are referenced in this Quarterly Report on Form 10-Q, the property of their respective owners. Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that the company or, to the extent applicable, their respective owners will not assert, to the fullest extent under applicable law, the company’s or their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

PART I. Financial Information

Item 1. Financial Statements

Consolidated Condensed Statements of Operations

(Unaudited)

ELI LILLY AND COMPANY

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


	Three Months Ended March 31,
	2026		2025
Revenue	$	19,799	$	12,729
Costs, expenses, and other:
Cost of sales	3,577		2,225
Research and development	3,510		2,734
Marketing, selling, and administrative	2,934		2,468
Acquired in-process research and development	584		1,572
Asset impairment, restructuring, and other special charges	279		35
Other–net, (income) expense	65		239
	10,949		9,273
Income before income taxes	8,850		3,456
Income taxes	1,454		697
Net income	$	7,396	$	2,759



Earnings per share:
Basic	$	8.27	$	3.07

Diluted	$	8.26	$	3.06


Shares used in calculation of earnings per share:
Basic	894.5		898.7
Diluted	895.9		900.6

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)

ELI LILLY AND COMPANY

(Dollars in millions)


	Three Months Ended March 31,
	2026		2025
Net income	$	7,396	$	2,759
Other comprehensive income, net of tax	47		547
Comprehensive income	$	7,443	$	3,306

See notes to consolidated condensed financial statements.

Consolidated Condensed Balance Sheets

ELI LILLY AND COMPANY

(Dollars in millions)


	March 31, 2026		December 31, 2025
Assets	(Unaudited)
Current Assets
Cash and cash equivalents	$	5,282	$	7,268
Accounts receivable	18,429		17,760
Other receivables	2,748		2,395
Inventories	14,529		13,744
Prepaid expenses	13,633		14,315
Other current assets	214		147
Total current assets	54,835		55,629
Noncurrent Assets
Investments	3,116		2,802
Goodwill	6,130		5,898
Other intangibles, net	7,374		6,521
Deferred tax assets	11,350		9,959
Property and equipment, net	26,540		24,675
Other noncurrent assets	7,231		6,992
Total assets	$	116,576	$	112,476
Liabilities and Equity
Current Liabilities
Short-term borrowings and current maturities of long-term debt	$	4,000	$	1,635
Accounts payable	5,029		5,379
Employee compensation	1,359		2,375
Sales rebates and discounts	17,547		17,382
Other current liabilities	8,699		8,457
Total current liabilities	36,634		35,228
Noncurrent Liabilities
Long-term debt	39,370		40,868

Long-term income taxes payable	5,289		5,875
Other noncurrent liabilities	4,085		3,970
Total noncurrent liabilities	48,744		50,713
Commitments and Contingencies
Equity
Common stock	590		590
Additional paid-in capital	6,921		7,346
Retained earnings	29,514		24,470
Employee benefit trust	(3,013)		(3,013)
Accumulated other comprehensive loss	(2,833)		(2,880)
Other equity	19		22
Total equity	31,198		26,535
Total liabilities and equity	$	116,576	$	112,476

See notes to consolidated condensed financial statements.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

ELI LILLY AND COMPANY

(Dollars in millions)


	Three Months Ended March 31,
	2026		2025
Cash Flows from Operating Activities
Net income	$	7,396	$	2,759
Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:

Depreciation and amortization	509		463
Change in deferred income taxes	(1,478)		(392)

Stock-based compensation expense	161		154



Acquired in-process research and development	584		1,572
Other changes in operating assets and liabilities, net of acquisitions and divestitures	(1,664)		(3,364)
Other operating activities, net	(175)		474
Net Cash Provided by Operating Activities	5,333		1,666
Cash Flows from Investing Activities
Purchases of property and equipment	(2,326)		(1,510)



Purchases of noncurrent investments	(297)		(197)
Purchases of in-process research and development	(204)		(1,757)
Cash paid for acquisitions, net of cash acquired	(1,058)		—
Other investing activities, net	(31)		111
Net Cash Used for Investing Activities	(3,916)		(3,353)
Cash Flows from Financing Activities
Dividends paid	(1,548)		(1,346)
Net change in short-term borrowings	1,775		(1,849)
Proceeds from issuance of long-term debt	—		6,461
Repayments of long-term debt	(750)		—
Purchases of common stock	(2,356)		(1,200)

Other financing activities, net	(591)		(686)
Net Cash (Used for) Provided by Financing Activities	(3,470)		1,380
Effect of exchange rate changes on cash and cash equivalents	67		132

Net decrease in cash and cash equivalents	(1,986)		(175)
Cash and cash equivalents at January 1	7,268		3,268
Cash and Cash Equivalents at March 31	$	5,282	$	3,093

See notes to consolidated condensed financial statements.

Notes to Consolidated Condensed Financial Statements

(Tables present dollars and shares in millions, except per-share data, and numbers may not add due to rounding)

Note 1: Basis of Presentation and Implementation of New Financial Accounting Standards

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, 2025. We 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.

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, if dilutive.

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. Our commercial organizations market, distribute, and sell the products. The business is also supported by global corporate staff functions. See Note 10 for additional information.

Implementation of New Financial Accounting Standards

Accounting Standards Update 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requires disaggregation of specific expense categories in the notes to the financial statements and a qualitative description of the remaining expense amounts not separately disaggregated. This standard is effective for annual reporting periods beginning after December 15, 2026, and requires prospective application with the option to apply it retrospectively. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2027. We are currently evaluating the potential impact of adopting this standard on our disclosures.

Note 2: Revenue

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


	Three Months Ended March 31,
	2026		2025
Net product revenue	$	18,453	$	11,601
Collaboration and other revenue	1,346		1,127
Revenue	$	19,799	$	12,729

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 3 for additional information related to our collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue resulting from our collaboration with Boehringer Ingelheim, as well as the sale of product rights. 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 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 less than 3 percent and 1 percent of U.S. revenue during the three months ended March 31, 2026 and 2025, respectively.

Disaggregation of Revenue

The following table summarizes revenue, including net product revenue and collaboration and other revenue, by product for the three months ended March 31, 2026 and 2025:


	Three Months Ended March 31,
	2026						2025
	U.S.		Outside U.S.		Total		U.S.		Outside U.S.		Total

Cardiometabolic Health:
Mounjaro	$	4,232	$	4,430	$	8,662	$	2,656	$	1,186	$	3,842
Zepbound(1)	4,134		26		4,160		2,305		7		2,312
Jardiance(2)	512		602		1,114		310		705		1,014
Trulicity	600		318		919		771		325		1,095
Other cardiometabolic health	446		460		905		535		410		945
Total cardiometabolic health	9,924		5,836		15,760		6,577		2,631		9,208

Oncology:
Verzenio	706		596		1,302		658		501		1,159
Other oncology	522		444		966		388		400		789
Total oncology	1,228		1,040		2,268		1,046		902		1,948

Immunology:
Taltz	417		315		733		477		285		762
Other immunology	202		269		470		102		225		326
Total immunology	619		584		1,203		578		510		1,088

Neuroscience	293		89		382		189		83		272

Other	56		130		187		100		113		213

Revenue	$	12,119	$	7,680	$	19,799	$	8,489	$	4,239	$	12,729

(1) Tirzepatide is marketed for obesity under the brand name Zepbound in Canada, Japan, and the U.S.

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

The following table summarizes revenue by geographical area:


	Three Months Ended March 31,
	2026		2025
Revenue(1):
U.S.	$	12,119	$	8,489
Europe	3,646		2,389
China	693		451
Japan	571		402
Rest of world	2,771		997
Revenue	$	19,799	$	12,729

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

Note 3: Collaborations and Other Arrangements

We often enter into collaborative and other arrangements to develop and commercialize drug candidates or to sell the rights of a product. See Note 2 for a discussion of our recognition of revenue from our collaborations and other arrangements.

Collaborative activities may include research and development, marketing and selling, manufacturing, and distribution for which we may receive from or pay to the collaboration partner expense reimbursements. 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 arrangement is unique in nature, and our more significant arrangements are discussed below.

Boehringer Ingelheim Collaboration

We and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of compounds. Boehringer Ingelheim's Jardiance product family, which includes Glyxambi, Synjardy, and Trijardy XR, is the significant product family included in the collaboration.

For the Jardiance product family in the most significant markets, which remains in the collaboration through December 31, 2028, we receive a share of net sales depending on performance of the product, which we recognize as collaboration and other revenue. The following table summarizes our revenue recognized:


	Three Months Ended March 31,
	2026		2025
Jardiance	$	1,114	$	1,014

During the three months ended March 31, 2026 and 2025, we recognized $250 million and $370 million of one-time benefits for Jardiance, respectively. As of March 31, 2026, we have the right to receive up to $660 million in potential sales-based milestones related to the Jardiance product family in certain markets in 2026.

Ebglyss

We have a license agreement with F. Hoffmann-La Roche Ltd and Genentech, Inc. (collectively, Roche), which provides us the worldwide development and commercialization rights to lebrikizumab, which is branded and trademarked as Ebglyss. Roche receives tiered royalty payments on worldwide net sales ranging in percentages from high single digits to high teens, which we recognize as cost of sales. As of March 31, 2026, Roche is eligible to receive additional payments from us, including up to $975 million in potential sales-based milestones.

We have a license agreement with Almirall, S.A. (Almirall), under which Almirall licensed the rights to develop and commercialize Ebglyss, for the treatment or prevention of dermatology indications, including, but not limited to, atopic dermatitis, in Europe. We receive tiered royalty payments on net sales in Europe ranging in percentages from low double digits to low twenties, which we recognize as collaboration and other revenue. As of March 31, 2026, we are eligible to receive additional payments up to $1.2 billion in a series of sales-based milestones.

Foundayo

We have a license agreement with Chugai Pharmaceutical Co., Ltd (Chugai), which provides us the worldwide development and commercialization rights to orforglipron, which is branded and trademarked as Foundayo. In addition to milestone payment rights which are not material, Chugai receives tiered royalty payments on worldwide net sales ranging in percentages from mid single digits to low teens, which we recognize as cost of sales.

Note 4: Acquisitions

We engage in various forms of business development activities to enhance or refine 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 if the products are approved for commercialization and/or milestones based on the successful progress of compounds through the development process. We account for each arrangement as either a business combination or an asset acquisition in accordance with GAAP.

Business Combinations

When an acquisition met the definition of a business under GAAP, 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 was recorded as goodwill. The results of operations of the acquisition are included in our consolidated condensed financial statements from the date of acquisition.

Ventyx Acquisition

Overview of Transaction

In March 2026, we acquired all shares of Ventyx Biosciences, Inc. (Ventyx) for a purchase price of $14.00 per share in cash (or an aggregate of $1.1 billion, net of cash acquired). Ventyx is developing oral therapies for patients with inflammatory-mediated diseases.

Assets Acquired and Liabilities Assumed

Our access to information was limited prior to this acquisition. As a consequence, we are in the process of determining fair values and tax bases 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 March 4, 2026
Cash	$	120
Acquired in-process research and development (IPR&D)(1)	977
Other assets and liabilities, net	81
Acquisition date fair value of consideration transferred	1,178
Less:
Cash acquired	(120)
Cash paid, net of cash acquired	$	1,058

(1) Acquired IPR&D intangibles primarily relate to VTX3232.

Verve Acquisition

Overview of Transaction

In July 2025, we acquired all shares of Verve Therapeutics, Inc. (Verve) for a purchase price of $10.50 per share in cash (or an aggregate of $549 million, net of cash acquired), plus one non-tradeable contingent value right (CVR) per share that entitles the holder to receive up to an additional $3.00 per share (or an aggregate of up to approximately $300 million) payable, subject to certain terms and conditions, upon the achievement of a certain specified milestone. Verve is developing genetic medicines for cardiovascular disease.

Assets Acquired and Liabilities Assumed

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


Estimated Fair Value at July 25, 2025
Cash	$	389
Acquired IPR&D(1)	608
Other assets and liabilities, net	166
Acquisition date fair value of consideration transferred	1,163
Less:
Cash acquired	(389)
Fair value of CVR liability	(177)
Fair value of equity interest in Verve held before the business combination	(48)
Cash paid, net of cash acquired	$	549

(1) Acquired IPR&D intangibles primarily relate to VERVE-102 (PCSK9 Editor).

Asset Acquisitions

Upon each asset acquisition, the cost allocated to acquired IPR&D was immediately expensed as acquired IPR&D if the compound had no alternative future use. Milestone payment obligations incurred prior to regulatory approval of the compound were expensed as acquired IPR&D when the event triggering an obligation to pay the milestone occurred. We recognized acquired IPR&D charges of $584 million and $1.6 billion for the three months ended March 31, 2026 and 2025, respectively. Acquired IPR&D charges for the three months ended March 31, 2025 were primarily related to the acquisition of Scorpion Therapeutics, Inc.'s PI3Kα inhibitor program STX-478.

Note 5: Income Taxes

The effective tax rate was 16.4 percent for the three months ended March 31, 2026, compared to 20.2 percent for the three months ended March 31, 2025, primarily driven by the unfavorable tax impact of a non-deductible acquired IPR&D charge in 2025. The 2026 and 2025 effective tax rates were impacted by net discrete tax benefits in each period.

At March 31, 2026 and December 31, 2025, prepaid expenses included prepaid taxes of $11.8 billion and $12.9 billion, respectively.

The U.S. examination of tax years 2019-2021 remains ongoing. For tax years 2016-2018, we are pursuing competent authority assistance through the Mutual Agreement Procedure (MAP) process for the pricing of certain intercompany transactions. The resolution of both audit periods will likely extend beyond the next 12 months.

Note 6: Inventories

The following table summarizes components of inventories:


	March 31, 2026		December 31, 2025
Finished products	$	2,273	$	1,931
Work in process	8,456		8,183
Raw materials and supplies	3,763		3,587
Total (approximates replacement cost)	14,492		13,701
Increase to last-in, first-out cost	37		43
Inventories	$	14,529	$	13,744

Note 7: Financial Instruments

Investments in Equity and Debt Securities

The following table summarizes certain fair value information at March 31, 2026 and December 31, 2025 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		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
March 31, 2026
Cash equivalents(1)	$	2,383	$	2,383	$	2,383	$	—	$	—	$	2,383
Short-term investments:
Available-for-sale debt securities(2)	$	13	$	13	$	2	$	11	$	—	$	13
Other securities	133		133		—		30		103		133
Short-term investments	$	146
Noncurrent investments:
Available-for-sale debt securities(2)	$	360	$	371	$	72	$	288	$	—	$	360
Other securities	60		29		—		2		58		60
Marketable equity securities	448		445		448		—		—		448
Equity investments without readily determinable fair values(3)	912
Equity method investments(3)	1,336
Noncurrent investments	$	3,116

December 31, 2025
Cash equivalents(1)	$	4,392	$	4,392	$	4,392	$	—	$	—	$	4,392
Short-term investments:
Available-for-sale debt securities(2)	$	16	$	16	$	9	$	7	$	—	$	16
Other securities	89		89		—		12		78		89
Short-term investments	$	105
Noncurrent investments:
Available-for-sale debt securities(2)	$	360	$	368	$	69	$	291	$	—	$	360
Other securities	85		54		—		2		83		85
Marketable equity securities	223		292		223		—		—		223
Equity investments without readily determinable fair values(3)	846
Equity method investments(3)	1,288
Noncurrent investments	$	2,802

(1) 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.

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

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

Debt

The following table summarizes the carrying amount and fair value using Level 2 inputs for our short-term and long-term debt:


	March 31, 2026				December 31, 2025
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Short-term commercial paper borrowings	$	1,775	$	1,771	$	—	$	—
Long-term debt, including current portion	41,595		38,233		42,503		39,799

Risk Management and Related Financial Instruments

To manage foreign currency and interest rate risk, we may enter into derivative instruments intended to offset losses and gains on the assets, liabilities, and transactions being hedged. Such instruments are entered into in accordance with documented corporate risk-management policies.

Foreign Currency Risk

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. We manage foreign currency risk primarily through the use of foreign currency debt and foreign currency forward contracts. Our foreign currency-denominated notes designated as accounting hedges had carrying amounts of $3.6 billion and $6.0 billion as of March 31, 2026 and December 31, 2025, respectively. The following table summarizes the aggregate outstanding notional amounts of our foreign currency forward contracts in U.S. dollar equivalent:


	March 31, 2026				December 31, 2025
	Purchase		Sell		Purchase		Sell
Designated as accounting hedges	$	297	$	—	$	67	$	—
Not designated as accounting hedges	13,297		5,520		14,281		9,264

Forward contracts generally have maturities not exceeding 12 months.

Interest Rate Risk

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. 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 may enter into derivative contracts to achieve an acceptable balance between fixed- and floating-rate debt or to reduce cash flow variability from changes in interest rates as part of anticipated debt issuances. The impact of our interest rate contracts on our consolidated condensed financial statements was not material for all periods presented.

Impact of Significant Risk Management Programs on the Financial Statements

The following table summarizes the effects of significant risk-management programs:


	Three Months Ended March 31,
	2026		2025
Recognized in other–net, (income) expense:
Foreign currency forward contracts not designated as accounting hedges	$	(97)	$	13
Recognized in other comprehensive income (loss):
Foreign currency-denominated notes:
Designated as accounting hedges	115

SEC Form 10-Q filed by Eli Lilly and Company