Eli Lilly and Company

04/30/2026 | Press release | Distributed by Public on 04/30/2026 09:26

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Results of Operations and Financial Condition
(Tables present dollars in millions, except per-share data, and numbers may not add due to rounding)
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 our results of operations and financial 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, 2025, may cause our actual results, financial position, and cash generated from operations to differ from these forward-looking statements.
EXECUTIVE OVERVIEW
This section provides an overview of our financial results, updates to our clinical development pipeline, and other matters affecting our company and industry.
Financial Results
The following table summarizes certain financial information:
Three Months Ended March 31, Percent Change
2026 2025
Revenue $ 19,799 $ 12,729 56
Net income 7,396 2,759 168
Earnings per share - diluted 8.26 3.06 170
Revenue increased for the three months ended March 31, 2026, driven primarily by increased volume, partially offset by lower realized prices. The increased volume and lower realized prices during the three months ended March 31, 2026 were primarily driven by Mounjaro and Zepbound.
Net income and earnings per share for the three months ended March 31, 2026 increased primarily due to higher gross margin and lower acquired IPR&D charges, partially offset by higher research and development expenses and marketing, selling, and administrative expenses.
See "Results of Operations" for additional information.
Clinical Development Pipeline Updates
Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative medicines. See "Management's Discussion and Analysis of Results of Operations and Financial Condition-Executive Overview-Clinical Development Pipeline" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025 for select new molecular entities (NMEs) and new indication line extension (NILEX) products in clinical trials or that were submitted for regulatory review or received regulatory approval in the U.S., European Union (EU), or Japan. The following reflects certain developments since our Annual Report on Form 10-K for the year ended December 31, 2025:
Compound Development
Orforglipron (Foundayo)
The FDA approved orforglipron for treatment of obesity.
Announced that a Phase 3 trial for orforglipron for type 2 diabetes met the primary endpoint.
Baricitinib A Phase 3 trial was initiated for baricitinib for type 1 diabetes.
Eloralintide
A Phase 3 trial was initiated for eloralintide incretin add-on for obesity.
A Phase 3 trial was initiated for eloralintide for obstructive sleep apnea (OSA).
A Phase 3 trial was initiated for eloralintide for osteoarthritis (OA) pain.
Retatrutide
Announced that a Phase 3 trial for retatrutide for type 2 diabetes met the primary endpoint.
Brenipatide A Phase 3 trial was initiated for brenipatide for major depressive disorder.
Sofetabart mipitecan(1)
A Phase 3 trial was initiated for sofetabart mipitecan for platinum-sensitive ovarian cancer.
(
(1) The FDA granted Breakthrough Therapy designation for sofetabart mipitecan for the treatment of certain patients with platinum-resistant ovarian cancer. Breakthrough Therapy designation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition when preliminary clinical evidence indicates that the treatment may demonstrate substantial improvement on a clinically significant endpoint(s) over already available therapies.
Other Matters
Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access and Certain Other Regulatory Developments
Global concern over access to, and affordability of, pharmaceutical products continues to drive debate and action, as well as cost containment efforts by governmental authorities and scrutiny of pricing and access disparities. Cost containment 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.
Reforms, initiatives, and other actions, including those that may stem from political initiatives, periods of uneven economic growth or downturns, or as a result of inflation or deflation, trade and other global disputes and interruptions including related to tariffs, trade protection measures, and similar restrictions, the emergence or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on cost, pricing, reimbursement, and access for our products.
In the first quarter of 2026, we finalized voluntary agreements with the U.S. government in which, among other arrangements, we agreed to lower Medicaid and certain other drug prices for U.S. patients and to launch new medicines with a more balanced pricing approach across developed nations. Under the Medicare GLP-1 Bridge program (Bridge Program), Medicare beneficiaries will have access to discounted Lilly obesity medicines by July 1, 2026 through December 31, 2027, and individual state Medicaid programs will have the option to expand access to these medicines. We continue to engage with the Centers for Medicare & Medicaid Services on long-term Medicare access to obesity medicines. The uptake from this expanded access is unknown. Moreover, the outcome of these arrangements and broader U.S. policy efforts to align domestic pharmaceutical pricing with international benchmarks from countries with competing healthcare cost containment priorities is uncertain and could negatively impact our pricing strategies, product demand or access, or competitive positioning across global markets, and may result in reduced revenue in certain markets.
Other policies, regulations, legislation, or enforcement, including those proposed or pursued by lawmakers, regulators, and other authorities in the U.S. and worldwide, have and may continue to adversely impact our business and consolidated results of operations.
The Inflation Reduction Act of 2022 (IRA) requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D. Currently, these government prices generally apply beginning at nine years (for medicines approved under a New Drug Application) or thirteen years (for medicines approved under a Biologics License Application) following FDA approval or licensure for the molecule. In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices effective in 2026. In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028. Given our product portfolio, we expect other significant products will be selected in future years. The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors and could significantly impact our business and consolidated results of operations.
The U.S. and other countries have imposed or reached alignment on tariffs. In some cases, imposed tariffs have been paused but may come into effect quickly and unpredictably. While pharmaceuticals are exempt from certain of these tariffs, such exemptions may be terminated or may not apply to any future tariffs. The precise impact of tariffs, trade protection measures, and other restrictions depend on their ultimate scope, timing, and other factors. If enacted, additional restrictions could result in supply disruptions or delays, further increase costs, or otherwise have a negative impact on our business. Given the nature of pharmaceutical regulation and commercialization, we may not be able to share the burden of increased costs from tariffs and related impacts to any meaningful degree.
Private payers and pharmacy benefit managers in the U.S. continue to significantly impact the market for pharmaceuticals through negotiation of access, manufacturer price or rebate concessions and pharmacy reimbursement rates. Restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private actors have and may continue to adversely impact our business and consolidated results of operations. In addition, we are engaged in litigation and investigations related to the 340B program, access to insulin, pricing, product safety, and other matters that 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.
In addition, regulatory issues concerning compliance with 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 standards (and comparable foreign regulations and standards) for our products in some cases 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, inability to realize the benefit of capital expenditures, or delays or denials in new product approvals, line extensions or supplemental approvals of current products pending resolution of the issues, or other negative impacts, any of which result in reputational harm or adversely affect our business.
Incretin Medicines
Mounjaro and Zepbound accounted for 65 percent of our total revenue for the three months ended March 31, 2026, and we expect cardiometabolic health products will continue to represent a significant and growing portion of our business, revenue, and prospects. In the first quarter of 2026, we finalized drug pricing agreements with the U.S. government, including Medicare access to discounted Lilly obesity medicines under the Bridge Program.
In April 2026, we received U.S. FDA approval for Foundayo (orforglipron) for the treatment of obesity. Internationally, we have submitted orforglipron for the treatment of obesity and launched Mounjaro in all major markets. To support anticipated demand for our current and prospective products, we have undertaken significant manufacturing expansion initiatives. Additional capacity is expected to become operational over the next several years.
We expect our near-term financial performance will be impacted by, among other factors, the timing of additional potential regulatory approvals for orforglipron, as well as the demand and pace of uptake in new incretin channels and markets, including in U.S. Medicare for Zepbound and Foundayo. 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. Longer term, the durability of our cardiometabolic health product offerings and sustainability of our growth and prospects will depend on our ability to maintain or strengthen our competitive position as the therapeutic landscape evolves and to deliver further innovations that provide sufficient value to sustain our growth momentum.
We continue to see the production, marketing, and sale of counterfeit, misbranded, adulterated, and mass-compounded incretins. These practices may impact patient safety and undermine regulatory drug approval processes. 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. Lilly will continue to consider all options, including filing lawsuits where appropriate, to address unlawful practices and the patient safety risks of unapproved, untested, and manipulated drugs.
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. The U.S. and countries around the world are actively proposing and enacting tax law changes. Further, actions taken with respect to tax-related matters by associations such as the OECD 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 expected to increase their scrutiny of cross-border tax issues. Additionally, we are subject to increasing tax disclosure obligations globally that could heighten our audit risk. Changes to existing U.S. and foreign tax laws and increased scrutiny by tax authorities in the U.S. and other jurisdictions could have a material adverse impact on our future consolidated results of operations and cash flows.
Acquisitions
We invest in external research and technologies and manufacturing capabilities 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 or refine our pipeline and strengthen our business.
Continued regulatory focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, could continue to delay, jeopardize, or increase the costs of our business development activities and may negatively impact our consolidated financial position or results of operations.
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. There is uncertainty in the future movements in foreign currency exchange rates, and fluctuations in these rates have and could adversely impact our consolidated results of operations and cash flows.
Other Factors
Other factors have had, and may continue to have, an impact on our consolidated results of operations. See "Business" 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, 2025 and Notes 4 and 9 to the consolidated condensed financial statements for additional information and risks and uncertainties that could impact our business and operations, including the matters described within this Executive Overview.
RESULTS OF OPERATIONS
Revenue
The following table summarizes our revenue activity by region:
Three Months Ended March 31, Percent Change
2026 2025
U.S. $ 12,119 $ 8,489 43
Outside U.S. 7,680 4,239 81
Revenue $ 19,799 $ 12,729 56
The following are components of the change in revenue compared with the prior year:
Three Months Ended March 31,
2026 vs. 2025
U.S. Outside U.S. Consolidated
Volume 49 % 95 % 65 %
Price (7) (25) (13)
Foreign exchange rates - 11 4
Percent change 43 % 81 % 56 %
In the U.S. for the three months ended March 31, 2026, the volume increase was primarily driven by Zepbound and Mounjaro, and the lower realized prices were primarily driven by Zepbound and Taltz.
Outside the U.S. for the three months ended March 31, 2026, the volume increase was driven by Mounjaro, and the lower realized prices were primarily driven by the addition of Mounjaro to the National Reimbursed Drug List (NRDL) in China.
The following table summarizes our 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, Percent Change
2026 2025
U.S. Outside U.S. Total Total
Mounjaro $ 4,232 $ 4,430 $ 8,662 $ 3,842 125
Zepbound(1)
4,134 26 4,160 2,312 80
Verzenio
706 596 1,302 1,159 12
Jardiance(2)
512 602 1,114 1,014 10
Trulicity 600 318 919 1,095 (16)
Taltz 417 315 733 762 (4)
Other
1,517 1,393 2,910 2,544 14
Revenue $ 12,119 $ 7,680 $ 19,799 $ 12,729 56
(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.
Revenue of Mounjaro increased 59 percent in the U.S. during the three months ended March 31, 2026, reflecting strong demand, partially offset by lower realized prices. Lower realized prices in the U.S. were partially offset by a favorable one-time adjustment to estimates for rebates and discounts during the three months ended March 31, 2026. Revenue outside the U.S. during the three months ended March 31, 2026 was $4.4 billion compared to $1.2 billion during the three months ended March 31, 2025, primarily driven by volume growth, partially offset by lower realized prices driven by the addition of Mounjaro to the NRDL in China.
Revenue of Zepbound increased 79 percent in the U.S. during the three months ended March 31, 2026, primarily driven by strong demand, partially offset by lower realized prices, including previously announced reductions in cash pay prices. Lower realized prices were partially offset by a favorable one-time adjustment to estimates for rebates and discounts during the three months ended March 31, 2026.
Gross Margin, Costs, and Expenses
The following table summarizes our gross margin, costs, and expenses:
Three Months Ended March 31, Percent Change
2026 2025
Gross margin $ 16,222 $ 10,504 54
Gross margin as a percent of revenue 81.9 % 82.5 %
Research and development $ 3,510 $ 2,734 28
Marketing, selling, and administrative 2,934 2,468 19
Acquired IPR&D 584 1,572 (63)
Income taxes 1,454 697 109
Effective tax rate 16.4 % 20.2 %
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.
Research and development expenses increased 28 percent for the three months ended March 31, 2026, driven by continued investments in our early and late-stage portfolio.
Marketing, selling, and administrative expenses increased 19 percent for the three months ended March 31, 2026, primarily driven by promotional efforts supporting ongoing and planned launches.
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. See Note 4 to the consolidated condensed financial statements for additional information.
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.
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, 2025.
We are making investments in global facilities to manufacture existing and future products. These investments, and other capital investments that support our operations, have increased our capital expenditures and will result in meaningfully higher capital expenditures in the near term.
Cash and cash equivalents decreased to $5.3 billion as of March 31, 2026, compared with $7.3 billion as of December 31, 2025. Refer to the consolidated condensed statements of cash flows for additional information on the significant sources and uses of cash for the three months ended March 31, 2026 and 2025.
In addition to our cash and cash equivalents, we held total investments of $3.3 billion and $2.9 billion as of March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, we had approximately $850 million of unfunded commitments to invest in venture capital funds, which we anticipate will be paid over a period of up to 10 years. See Note 7 to the consolidated condensed financial statements for additional information.
As part of our business development activities in 2026, we have entered into acquisition agreements, subject to closing conditions. Potential amounts payable at closing for these pending acquisitions would be up to approximately $12 billion.
As of March 31, 2026, total debt was $43.4 billion, an increase of $0.9 billion compared with $42.5 billion as of December 31, 2025. See Note 7 to the consolidated condensed financial statements for additional information.
As of March 31, 2026, we had a total of $10.1 billion of unused committed bank credit facilities, $10.0 billion of which is available to support our commercial paper program. See Note 7 to the consolidated condensed financial statements for additional information. We believe that amounts accessible through existing commercial paper markets or other sources should be adequate to fund short-term borrowing needs.
During the three months ended March 31, 2026, we repurchased $2.3 billion of shares under our $15.0 billion share repurchase program authorized in December 2024. As of March 31, 2026, we had $8.6 billion remaining under this program.
During the three months ended March 31, 2026, we paid dividends of $1.5 billion, or $1.73 per share, to our shareholders.
Both domestically and abroad, we monitor the potential impacts of the economic environment and international tension and conflicts; the creditworthiness of our wholesalers and other customers, including foreign government-backed agencies and suppliers; the uncertain impact of healthcare legislation; various international government funding levels; and fluctuations in interest rates, foreign currency exchange rates (see "Executive Overview-Other Matters-Foreign Currency Exchange Rates"), and fair values of equity securities.
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, 2025. 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, 2025.
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 and our executive officers 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 our or our executive officers' social media channels, is not incorporated by reference into, and is not a part of, this Quarterly Report on Form 10-Q.
Eli Lilly and Company published this content on April 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 30, 2026 at 15:26 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]