Risk factor changes · LLY

What changed in Eli Lilly's risk factors

Item 1A (Risk Factors) of Eli Lilly's FY2025 10-K compared with its FY2024 10-K, sentence by sentence.

Newer: 10-K filed 2026-02-12 · Older: 10-K filed 2025-02-19

New in the latest 10-K 68

• We regularly submit new product candidates and indications to regulatory agencies for approval, including highly anticipated candidates such as orforglipron.
• We compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies and face intensifying competition worldwide, including from China and other markets where research and development capabilities have expanded and accelerated significantly.
• Technological innovation has amplified and we expect will continue to amplify competitive aspects of our business, including by enabling additional participation in and breadth of drug discovery and new healthcare delivery models.
• Business practices or commercial capabilities that we deploy in light of these or other market dynamics may not prove sufficient.
• In addition to patient safety concerns, improper commercialization and dispensation practices by these actors may inappropriately condition consumer expectations or otherwise disadvantage compliant market participants.
• To capitalize on the rapid development of next-generation technologies and otherwise effectively compete, we must continue to enhance skill sets and develop our workforce, both in and outside the U.S.
• In November 2025, we announced preliminary voluntary agreements with the U.S. government in which, among other arrangements, we agreed to implement measures 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.
• We face risks and uncertainty associated with these arrangements and negotiating the definitive agreements, including potential delays and the possibility of unfavorable terms related to pricing, access, and other key objectives.
• Among other risks, we may fail to adequately capitalize on the additional U.S. access to our obesity medicines resulting from these agreements, particularly if the revenues generated from such expanded access are insufficient to offset pricing concessions.
• 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.
• In general, securing and growing access for our obesity medicines is an important factor in the success of our business.
• Among other considerations, payers in various international markets do not currently provide coverage for obesity medicines for weight loss indications, requiring patient self-pay.
• In addition, patient self-pay sales through LillyDirect represented a growing portion of our business in 2025, and we have launched, and continue to explore, new partnerships and tools, including through LillyDirect, to further expand access to our medicines.
• Our financial results and prospects are subject to risks related to the level and pace of patient participation in cash-pay markets, which may be influenced by pricing, economic conditions, and competitive offerings, as well as regulatory or other actions that could restrict our ability to benefit from such markets, and uncertainty regarding our ability to secure reimbursement coverage in such markets over time. 27 Additional policies, regulations, legislation, or enforcement, including because of the regulatory priorities of the U.S. executive branch, state attorneys general, and regulatory authorities worldwide, could adversely impact our business and consolidated results of operations.
• In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028.
• Continued expansion of the 340B program and growth of entities claiming entitlement to 340B pricing, including in ways that may be inconsistent with the statutory scheme and through state laws that purport to mandate 340B sales to contract pharmacies, impact our revenue on an increasing percentage of sales.
• Changes to the calculation of rebates under the Medicaid program could also increase our Medicaid rebate obligations and decrease the prices charged to 340B covered entities, which could have a significant impact on our business.
• In addition, government price reporting and payment regulations are complex, and require ongoing assessment of the methods by which we calculate and report pricing.
• Moreover, the negotiating power of health plans, managed care organizations, pharmacy benefit managers, and other supply chain entities has increased, and they, along with governments, employ formularies and other methods to control costs and encourage utilization of certain drugs, including through the use of formulary inclusion or favorable formulary placement.
• These practices in some cases create difficulty in obtaining or maintaining timely or adequate pricing or formulary placement of our products.
• For example, in July 2025, CVS Caremark, the pharmacy benefit management division of CVS Health, stopped covering Zepbound as a preferred obesity management medicine on some insurance plans, which has negatively impacted access for patients covered under these plans.
• For biologics, loss of exclusivity may also result in the near-term entry of competitor versions (i.e., biosimilars).
• See Item 1, "Business Patents, Trademarks, and Other Intellectual Property Rights" and Item 8, "Financial Statements and Supplementary Data Note 16: Contingencies," for more details.
• Patents relating to pharmaceutical products are often obtained early in the development process.
• The USPTO issued procedures regarding the discretionary denial by the Director of institution of IPR proceedings based on the agency's workload and priorities.
• The USPTO's ability to apply these 30 procedures is being challenged, and it is not clear how these procedures will affect the ability of our competitors to institute IPR proceedings.
• Intellectual property threats across international markets include policies which favor domestic competitors or are otherwise disadvantageous to our products, challenges to our patents validity in foreign courts, and government policies that force technology transfer or undermine or nullify patent protections under the guise of health emergencies or other public interests.
• See Item 1, "Business Patents, Trademarks, and Other Intellectual Property Rights," and Item 8, "Financial Statements and Supplementary Data Note 16: Contingencies," for more details.
• Third-party access to our proprietary data may also enable such party's development of competing products or enhancement of services sold to competitors, thereby eroding our competitive advantage.
• Supply chain difficulties, disruptions or shortages may arise from our or contracted supply chain activity as well as from external environmental factors.
• Variability in demand and supply for our products can also challenge supply capacity and resiliency.
• Challenges and disruptions may include (i) actual or perceived quality, oversight, or regulatory compliance problems;
• (ii) equipment, mechanical, data, or IT system vulnerabilities, such as system inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, theft, exfiltration, ransomware or other cyber-attacks from a variety of sources;
• (iii) labor deficiencies;
• (iv) inability to obtain single-source or other raw or intermediate materials; or (v) issues related to contractors and suppliers, including the failure, inability, or refusal of a supplier or contract manufacturer to supply contracted quantities in a timely or compliant manner or at all, increases in demand on a supplier with constrained capacity, contractual disputes with our suppliers and contract manufacturers, and vertical integration by competitors within our supply chain.
• Relevant external environmental factors include (i) tariffs, (ii) cost inflation and global transportation and logistics challenges;
• (iii) labor market dynamics;
• (iv) natural disasters (including increased instances or severity of natural disasters or other events that may be due to climate change);
• (v) public health outbreaks, epidemics, or pandemics;
• (vi) periods of uneven economic growth or downturns; and (vii) the emergence or escalation of, or responses to international tension and conflicts.

Reworded 135

Removed words are struck through; added words are highlighted.

• Failure or results that misalign with expectations can occur at any point in the process, including in later stages after substantial investment and investment, following meaningful cost for manufacturing capabilities and inventory to prepare for launch. launch, and after we and others may have attributed significant value for these potential products.
• New product candidates that appear promising in development or prior to being acquired may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage, failure to obtain placement on guidelines or recommendations published by third-party organizations that are commensurate with clinical data, organizations, the application of pricing controls, limited scope of approved uses, label changes, changes in the relevant treatment standards or the availability of newer, better, or more cost-effective competitive products, difficulty or excessive costs to manufacture, insufficient infrastructure to support detection, diagnostic or other requisites for treatment, ineffectiveness in connecting with healthcare professionals, including digitally through virtual engagements, or infringement of the patents or intellectual property rights of others.
• In addition, it can be very difficult to predict revenue growth rates of, or variability in demand for, new or future products and indications, which in some cases leads to difficulty meeting product demand or, on the other hand, lower volume growth, excess inventory inventory, and related financial charges.
• Through internal innovation and business development we must maintain a flow of successful products and indications or line extensions sufficient both to cover our substantial research and development costs and investments and to replace revenues that are lost as profitable products become subject to pricing controls, lose intellectual property exclusivity, or are displaced by competing products products, or therapies. therapies, or experience a reduction in patient access.
• Failure to timely replenish our product portfolio and pipeline in a timely manner would have a material adverse effect on our business, results of operations, cash flows, and financial position.
• In addition, the growth of our business and revenue base increases the risk that products developed or acquired by us may not provide adequate value to sustain further long-term growth. 25 We engage in various forms of business development activities to enhance or refine our product pipeline and development capabilities, including licensing arrangements, co-development agreements, co-promotion arrangements, distribution and promotion agreements, joint ventures, acquisitions, equity investments, and divestitures.
• There are substantial risks associated with identifying and competing for successful business development targets and consummating related transactions.
• Continued regulatory focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, and heightened competition for attractive targets has and could continue to delay, jeopardize, or increase the costs or risks of our business development activities.
• In addition, failures or difficulties in integrating or retaining new personnel or the operations of the businesses, products, or assets we acquire (including related technology, commercial operations, compliance programs, information security, manufacturing, distribution, and general business operations and procedures) may affect our ability to realize the expected potential benefits of business development transactions and may result in our incurrence of substantial asset impairment or restructuring charges.
• We also may fail to generate the expected revenue and pipeline enhancement from business development activities due to limited diligence opportunities, that fails to identify risks or adequately anticipate their magnitude, unsuccessful clinical trials, issues related to the quality, integrity, or broad applicability of data, regulatory impediments, and manufacturing or commercialization challenges.
• Additionally, business development activity focused on new modalities may entail additional risks and costs. costs given the high levels of scientific uncertainty inherent in novel technologies.
• Business development transactions may not be completed in a timely manner (if at all), may not result in successful development outcomes or successful commercialization of any product, may require additional unanticipated investments to achieve potential benefits, may give rise to legal proceedings or regulatory scrutiny, and may result in charges that negatively impact our financial position or results of operations in any given period.
• We and our products face intense competition, including from multinational pharmaceutical companies, biotechnology companies, and lower-cost generic and biosimilar manufacturers, and such competition could have a material adverse effect on our business.
• We compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies and, in In many cases, our products compete against the leading products of one or more of our competitors.
• To compete successfully, successfully in a highly competitive and increasingly fast-paced global environment, we must continue to deliver innovative, cost-effective products through internal innovation or business development that meet important medical needs, provide improved outcomes and a positive consumer experience for patients, and deliver value to payers.
• Our product revenues and prospects are adversely affected by patient access issues, the introduction by competitors of branded products that are first to market, have better marketplace access, have greater brand recognition recognition, or are perceived as superior by the marketplace, by price competition, by generic or biosimilar versions of our branded products, and by generic or biosimilar versions of other products in the same therapeutic class as our branded products.
• Particularly for biosimilars, health authority guidelines and legislative actions could continue to make it less burdensome for competitor products to enter the market and further incentivize uptake of biosimilars.
• Alternatively, actual or perceived failure of robust generic and biosimilar competition could propel governments to adopt additional policies and legislation that threaten our intellectual property, pricing of our products, or other aspects of our business. 26 Our success depends on a market that is observant of intellectual property rights and regulatory requirements.
• For example, we have seen an increase in continue to see the production, marketing, and sale of counterfeit, misbranded, adulterated, and compounded mass-compounded incretins in the U.S. and other markets that could materially impact us.
• Our actions intended to stop or prevent illegal sales of such medicines are costly and may be costly or ineffective.
• See Item 1, "Business Government Regulation of Our Operations and Products," for additional information on market risks related to counterfeit, misbranded, adulterated, and compounded mass-compounded medicines.
• If inadequately regulated, e- 25 commerce e-commerce may increase the prevalence of dangerous counterfeit or diverted mass-compounded products and scams, potentially exposing patients to significant risks.
• Our reputation and business could suffer harm as a result of counterfeit or diverted mass-compounded drugs sold under our brand name, which may also impact our business and financial results.
• In addition, we rely on our ability to attract, engage, attract and retain highly qualified and skilled scientific, technical, management, and other personnel in order to compete effectively.
• We continue to face intense competition for qualified individuals from numerous multinational pharmaceutical companies, biotechnology companies, academic and other research institutions, as well as employers near our manufacturing and other facilities, which has increased and may continue to increase our labor costs.
• Our failure to compete effectively for talent could negatively affect sales of our current and any future approved products and indications, ability to discover, develop, manufacture, and could result sell our medicines, resulting in material financial, legal, commercial, or reputational harm to our business.
• Our business is subject to increasing government price controls and other public and private restrictions on pricing, reimbursement, and access for our drugs, which could have a material adverse effect on our results of operations, reputation reputation, or business.
• Public and private payers actors continue to take aggressive steps to control their expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, our medicines.
• These pressures have negatively affected, affected and we expect will continue to negatively affect, affect our consolidated results of operations.
• Governments and private payers actors worldwide have intensified their scrutiny of, and actions intended to address, pricing, reimbursement, and access to pharmaceutical products and are demanding greater commercial and clinical value from pharmaceutical companies in the form of strong product differentiation and demonstrated value.
• We continue to experience scrutiny on the pricing of current and potential diabetes, obesity, and Alzheimer's disease products due to to, among other factors, payer concern over projected growth in these markets demand and, for certain of these drugs, the anticipated duration of treatment.
• For example, 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 in Medicare effective (effective beginning in 2026. 2026) at a significant discount compared to the list price.
• The effect of reducing prices and reimbursement for certain of our products could significantly impact impacts our business and consolidated results of operations.
• Within the U.S., state level transparency initiatives, importation rules, reporting requirements, and mandated programs, including the establishment of drug affordability boards with the power to set upper payment limits on certain drugs in state-regulated plans, drugs, have also increased administrative costs, in some cases, compromised confidential business practices and otherwise detrimentally impacted our business.
• For more details, see Item 1, "Business Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access." Further, restrictive or unfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers, actors, including in relation to the implementation of the IRA, reference pricing, and or compulsory licensing, may adversely impact our business and financial results.
• We continue to experience additional pricing pressures, rebates, clawbacks, and other changes in reimbursement policies and programs resulting from periods of uneven economic growth or downturns or uncertainty, and the emergence or escalation of, and responses to, international tension and conflicts. 26 In addition, government price reporting and payment regulations are complex, and require ongoing assessment of the methods by which we calculate and report pricing.
• Calculation methodologies are inherently subjective and are subject to review and challenge by government agencies. agencies and, in some cases, by private actors.
• If agencies disagree there is disagreement with our calculations, or the methodologies and assumptions underlying them, we may need to restate previously reported data and could be subject to financial and legal liability, which may be significant.
• For more details, see Item 1, "Business Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access," Item 7, "Management's Discussion and Analysis Executive Overview Other Matters Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access and Certain Other Regulatory Developments" Developments," and Item 8, "Financial Statements and Supplementary Data Note 16: Contingencies." Pharmaceutical products can develop safety or efficacy concerns, which could have a material adverse effect on our revenues, income, and reputation.
• After approval and launch, the products are used for longer periods of time by much larger numbers of patients, which may lead to identifying new or expanded safety or efficacy concerns.

Removed since the previous 10-K 25

• We engage in various forms of business development activities to enhance or refine our product pipeline, including licensing arrangements, co-development agreements, co-promotion arrangements, distribution 24 and promotion agreements, joint ventures, acquisitions, equity investments, and divestitures.
• Our success depends on a market that is observant of intellectual property rights and regulatory requirements.
• To continue to commercialize our products, and advance the research, development, and commercialization of additional modalities, indications, and product candidates, we have expanded, and will likely need to further expand, our workforce, both in and outside the U.S.
• Additional policies, regulations, legislation, or enforcement, including because of the regulatory priorities of the U.S. executive branch and regulatory authorities worldwide, could adversely impact our business and consolidated results of operations.
• In August 2024, HHS announced the government-set prices for these first ten medicines with Jardiance subject to a 66% discount compared to the 2023 U.S. calendar year list price for a 30-day supply and discounts for the other nine medicines ranging from approximately 38% to 79% below list price.
• Certain states have also undertaken efforts to codify 340B contract pharmacies into statute or impose other state law mandates, which increase the cost of 340B programs.
• To date, several states have passed contract pharmacy legislation, which have been subject to various legal challenges.
• Any of these outcomes could result in material financial, legal, commercial, or reputational harm to our business.
• As these practices expand, including due to potential further consolidation of U.S. private third-party payers, we may face difficulty in obtaining or maintaining timely or adequate pricing or formulary placement of our products.
• For biologics, loss of exclusivity may or may not result in the near-term entry of competitor versions (i.e., biosimilars) due to many factors, including development timelines, manufacturing challenges, and/or uncertainties regarding the regulatory approval pathways.
• See Item 7, "Management's Discussion and Analysis Executive Overview Other Matters Patent Matters" and Item 1, "Business Patents, Trademarks, and Other Intellectual Property Rights," for more details. 28 Patents relating to pharmaceutical products are often obtained early in the development process.
• The USPTO issued an interim procedure regarding the use of discretionary denials of IPR proceedings when there is parallel district court litigation.
• However, it is not clear how this interim procedure could affect the ability of our competitors to institute IPR proceedings after institution of litigation.
• These disruptions and challenges could result from actual or perceived quality, oversight, or regulatory compliance problems; natural disasters (including increased instances or severity of natural disasters or other events that may be due to climate change), public health outbreaks, epidemics, or pandemics; periods of uneven economic growth or downturns; emergence or escalation of, and responses to international tension and conflicts; equipment, mechanical, data, or IT system vulnerabilities, such as system inadequacies, inadequate controls or procedures, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, theft, exfiltration, ransomware or other cyber-attacks from a variety of sources; labor shortages; challenges and complexities in manufacturing new drug modalities; contractual disputes with our suppliers and contract manufacturers; vertical integration by competitors within our supply chain; or inability to obtain single-source or other raw or intermediate materials.
• For example, at various times during 2024 demand for our incretin medicines exceeded production.
• While tirzepatide supply currently exceeds demand in the U.S., demand remains dynamic and could be impacted by a variety of factors.
• Supply considerations will continue to influence the timing and approach (including available presentations) of tirzepatide launches in new markets.
• In particular, tensions between the U.S. and China, which have already led to a series of tariffs and sanctions, as well as other business restrictions, could further escalate based on additional trade restrictions or retaliation thereto.
• In February 2025, the U.S. presidential administration imposed new tariffs on Chinese goods and China responded with tariffs on select U.S. goods.
• Additionally, tariffs were proposed or threatened with respect to other jurisdictions, including Mexico, Canada and Europe.
• If geopolitical tensions were to increase and disrupt our operations in, or related to, China or other major international geographies, such disruption would significantly impact our business.
• In recent periods, significant fluctuations in currency rates and inflation have impacted our results of operations.
• Due to a very restrictive market for liability insurance, we are predominately self-insured for litigation liability losses for all of our products, as well as for litigation or investigations related to our pricing practices or other similar matters.
• In addition, changing political leadership, including the new presidential administration and regulatory leadership in the U.S., may propose, enact, or pursue policy, regulatory, and enforcement changes that create additional uncertainty for our business.
• U.S. and foreign governmental authorities are actively promulgating additional regulations and guidance that impact many aspects of our operations.

Source: SEC EDGAR filings, compared sentence by sentence by EdgarStack. Sentence matching is automated and may pair or split passages imperfectly; check the linked filings before relying on any passage. A software tool, not financial advice. Not affiliated with the U.S. Securities and Exchange Commission.