An Indiana corporation
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I.R.S. employer identification no. 35-0470950
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Lilly Corporate Center, Indianapolis, Indiana 46285
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(317) 276-2000
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Title of Each Class
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Name of Each Exchange On Which Registered
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Common Stock (no par value)
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New York Stock Exchange
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1.00% Notes Due June 2, 2022
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New York Stock Exchange
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7.13% Notes Due June 1, 2025
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New York Stock Exchange
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1.63% Notes Due June 2, 2026
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New York Stock Exchange
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2.13% Notes Due June 3, 2030
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New York Stock Exchange
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6.77% Notes Due January 1, 2036
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New York Stock Exchange
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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•
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uncertainties in the pharmaceutical research and development process, including with respect to the timing of anticipated regulatory approvals and launches of new products;
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•
|
market uptake of recently launched products;
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•
|
competitive developments affecting current products and our pipeline;
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•
|
the expiration of intellectual property protection for certain of our products;
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•
|
our ability to protect and enforce patents and other intellectual property;
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•
|
the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and access to pharmaceuticals;
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•
|
regulatory compliance problems or government investigations;
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•
|
regulatory actions regarding currently marketed products;
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•
|
unexpected safety or efficacy concerns associated with our products;
|
•
|
issues with product supply stemming from manufacturing difficulties or disruptions;
|
•
|
regulatory changes or other developments;
|
•
|
changes in patent law or regulations related to data-package exclusivity;
|
•
|
litigation involving past, current, or future products as we are largely self-insured;
|
•
|
unauthorized disclosure, misappropriation, or compromise of trade secrets or other confidential data stored in our information systems, networks, and facilities, or those of third parties with whom we share our data;
|
•
|
changes in tax law, including the impact of tax reform legislation enacted in December 2017 and related guidance;
|
•
|
changes in foreign currency exchange rates, interest rates, and inflation;
|
•
|
asset impairments and restructuring charges;
|
•
|
changes in accounting standards promulgated by the Financial Accounting Standards Board and the Securities and Exchange Commission;
|
•
|
acquisitions and business development transactions and related integration costs;
|
•
|
information technology system inadequacies or operating failures;
|
•
|
reliance on third-party relationships and outsourcing arrangements;
|
•
|
the impact of global macroeconomic conditions; and
|
•
|
uncertainties and risks related to timing and potential value to both Elanco and Lilly of the planned separation of the Elanco animal health business, including business, industry, and market risks, as well as risks involving the anticipated tax-free nature of the separation.
|
Item 1.
|
Business
|
•
|
Cialis
®
,
for the treatment of erectile dysfunction and benign prostatic hyperplasia
|
•
|
Effient
®
, for the reduction of thrombotic cardiovascular events (including stent thrombosis) in patients with acute coronary syndrome who are managed with an artery-opening procedure known as percutaneous coronary intervention, including patients undergoing angioplasty, atherectomy, or stent placement
|
•
|
Basaglar
®
(insulin glargine injection), a long-acting human insulin analog for the treatment of diabetes (launched in Japan and Europe under the trade name Abasaglar
™
)
|
•
|
Evista
®
,
for the prevention and treatment of osteoporosis in postmenopausal women and for the reduction of the risk of invasive breast cancer in postmenopausal women with osteoporosis and postmenopausal women at high risk for invasive breast cancer
|
•
|
Forteo
®
,
for the treatment of osteoporosis in postmenopausal women and men at high risk for fracture and for glucocorticoid-induced osteoporosis in men and postmenopausal women
|
•
|
Glyxambi
®
, a combination tablet of linagliptin (Trajenta
®
) and empagliflozin (Jardiance
®
) for the treatment of type 2 diabetes
|
•
|
Humalog
®
,
Humalog Mix 75/25,
Humalog U-100,
Humalog U-200
and
Humalog Mix 50/50
, insulin analogs for the treatment of diabetes
|
•
|
Humatrope
®
,
for the treatment of human growth hormone deficiency and certain pediatric growth conditions
|
•
|
Humulin
®
, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500,
human insulins of recombinant DNA origin for the treatment of diabetes
|
•
|
Jardiance
, for the treatment of type 2 diabetes and to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease
|
•
|
Jentadueto
®
and Jentadueto
XR,
a combination of linagliptin and metformin hydrochloride for use in the treatment of type 2 diabetes
|
•
|
Synjardy
®
and Synjardy XR
, a combination tablet of empagliflozin and metformin hydrochloride for the treatment of type 2 diabetes
|
•
|
Trajenta,
for the treatment of type 2 diabetes
|
•
|
Trulicity
®
, for the treatment of type 2 diabetes
|
•
|
Olumiant
®
,
for the treatment of adults with moderately-to-severely active rheumatoid arthritis (approved in the European Union (EU) and Japan in 2017, and in the U.S. in 2018)
|
•
|
Taltz
®
, for the treatment of moderate-to-severe plaque psoriasis (approved in the U.S. and EU in 2016) and active psoriatic arthritis (approved in Japan in 2016, in the U.S. in 2017, and in the EU in 2018)
|
•
|
Amyvid
®
, a radioactive diagnostic agent for positron emission tomography (PET) imaging of beta-amyloid neuritic plaques in the brains of adult patients with cognitive impairment who are being evaluated for Alzheimer's disease and other causes of cognitive decline
|
•
|
Cymbalta
®
, for the treatment of major depressive disorder, diabetic peripheral neuropathic pain, generalized anxiety disorder, fibromyalgia, and chronic musculoskeletal pain due to chronic low back pain or chronic pain due to osteoarthritis
|
•
|
Emgality
®
, a once-monthly subcutaneously injected calcitonin gene-related peptide (CGRP) antibody for the treatment of migraine prevention (approved in the U.S. and EU in 2018).
|
•
|
Prozac
®
,
for the treatment of major depressive disorder, obsessive-compulsive disorder, bulimia nervosa, and panic disorder
|
•
|
Strattera
®
,
for the treatment of attention-deficit hyperactivity disorder
|
•
|
Zyprexa
®
,
for the treatment of schizophrenia, acute mixed or manic episodes associated with bipolar I disorder, and bipolar maintenance
|
•
|
Alimta
®
,
for the first-line treatment, in combination with another agent, of advanced non-small cell lung cancer (NSCLC) for patients with non-squamous cell histology; for the second-line treatment of advanced non-squamous NSCLC; as monotherapy for the maintenance treatment of advanced non-squamous NSCLC in patients whose disease has not progressed immediately following chemotherapy treatment; and in combination with another agent, for the treatment of malignant pleural mesothelioma
|
•
|
Cyramza
®
,
for the treatment of various cancers, with approvals as follows:
|
◦
|
as a single agent and in combination with another agent as a second-line treatment of advanced or metastatic gastric cancer
|
◦
|
in combination with another agent as a second-line treatment of metastatic NSCLC
|
◦
|
as a second-line treatment of metastatic colorectal cancer
|
•
|
Erbitux
®
,
indicated both as a single agent and in combination with another chemotherapy agent for the treatment of certain types of colorectal cancers; and as a single agent, in combination with chemotherapy, or in combination with radiation therapy for the treatment of certain types of head and neck cancers
|
•
|
Gemzar
®
,
for the treatment of pancreatic cancer; in combination with other agents, for the treatment of metastatic breast cancer, NSCLC, and advanced or recurrent ovarian cancer; and in the EU for the treatment of bladder cancer
|
•
|
Lartruvo
®
, approved in the U.S., and conditionally approved in the EU, in 2016 for use in combination with another agent for the treatment of soft tissue carcinoma. Following a negative result in a recent
|
•
|
Portrazza
®
, approved in the U.S. for use in combination with other agents as a first-line treatment of metastatic squamous NSCLC, and approved in the EU for use in combination with other agents as a first-line treatment for epidermal growth factor receptor expressing squamous NSCLC
|
•
|
Verzenio
®
,
approved in 2017 in the U.S. for use as a single agent and in combination with endocrine therapy for the treatment of a certain type of metastatic breast cancer
|
•
|
Denagard
®
,
an antibiotic for the control and treatment of respiratory and enteric diseases in swine and poultry
|
•
|
Imvixa
™
, to prevent and control infestation caused by sea lice
in salmon
|
•
|
Optaflexx
®
and
Paylean
®
,
leanness and performance enhancers for cattle and swine, respectively
|
•
|
Rumensin
®
,
a cattle feed additive that improves feed efficiency and growth and also controls and prevents coccidiosis
|
•
|
Tylan
®
,
an antibiotic used to control certain diseases in cattle, swine, and poultry
|
•
|
Credelio
®
, a monthly chewable tablet for dogs that kills fleas, treats flea infestations, and treats and controls tick infestations
|
•
|
Feline, canine, and rabies vaccines including:
Duramune
®
and
Ultra
Duramune
®
,
Duramune Lyme
®
,
Bronchi-Shield
®
,
Fel-O-Vax
®
, ULTRA
™
Fel-O-Vax
®
, and
Fel-O-Guard
®
,
and
Rabvac
®
|
•
|
Galliprant
®
, an anti-inflammatory tablet that targets the key receptor associated with canine osteoarthritis pain
|
•
|
Interceptor
®
Plus,
a monthly chewable tablet that prevents heartworm disease and treats and controls adult hookworm, roundworm, whipworm, and tapeworm in dogs
|
•
|
Osurnia
®
,
to treat otitis externa in dogs caused by certain strains of bacteria and yeast
|
•
|
Trifexis
®
,
a monthly chewable tablet for dogs that kills fleas, prevents flea infestations, prevents heartworm disease, and controls intestinal parasite infections
|
•
|
We and Boehringer Ingelheim have a diabetes alliance under which we jointly develop and commercialize Trajenta, Jentadueto, Jardiance, Glyxambi, Synjardy, and Basaglar in major markets.
|
•
|
Outside the U.S. and Canada, Erbitux is commercialized by Merck KGaA.
|
•
|
We and Daiichi Sankyo Co., Ltd. (Daiichi Sankyo) co-promote Effient in the U.S., Brazil, Mexico, and certain other countries. Effective January 2016, Daiichi Sankyo has been exclusively promoting Effient in major European markets; however, the economic results for these countries continue to be shared. We retain sole marketing rights in Canada, Australia, Russia, and certain other countries. Daiichi Sankyo retains sole marketing rights in Japan and certain other countries.
|
•
|
Patent term adjustment is a statutory right available to all U.S. patent applicants to provide relief in the event that a patent grant is delayed during examination by the United States Patent and Trademark Office (USPTO).
|
•
|
Patent term restoration is a statutory right provided to U.S. patent holders that claim inventions subject to review by the U.S. Food and Drug Administration (FDA). To make up for a portion of the time invested in clinical trials and the FDA review process, a single patent for a human pharmaceutical product may be eligible for patent term restoration. Patent term restoration is limited by a formula and cannot be calculated until product approval due to uncertainty about the duration of clinical trials and the time it takes the FDA to review an application. There is a five-year cap on any restoration, and no patent may be extended for more than 14 years beyond FDA approval. Some countries outside the U.S. also offer forms of patent term restoration. For example, Supplementary Protection Certificates are sometimes available to extend the life of a European patent up to an additional five years. Similarly, in Japan, South Korea, and Australia, patent terms can be extended up to five years, depending on the length of regulatory review and other factors.
|
•
|
Regulatory authorities in major markets generally grant data package protection for a period of years following new drug approvals in recognition of the substantial investment required to complete clinical trials. Data package protection prohibits other manufacturers from submitting regulatory applications for marketing approval based on the innovator company’s regulatory submission data for the drug. The base period of data package protection depends on the country. For example, the period is generally five years in the U.S. (12 years for new biologics as described below), effectively 10 years in the EU, and eight years in Japan. The period begins on the date of product approval and runs concurrently with the patent term for any relevant patent.
|
•
|
Under the Biologics Price Competition and Innovation Act of 2009
(the BPCI Act), the FDA has the authority to approve biosimilars. A competitor seeking approval of a biosimilar must file an application to show its molecule is highly similar to an approved innovator biologic and include a certain amount of safety and efficacy data that the FDA will determine on a case-by-case basis. Under the data protection provisions of this law, the FDA cannot approve a biosimilar application until 12 years after initial marketing approval of the innovator biologic, subject to certain conditions.
|
•
|
In the U.S., the FDA has the authority to grant additional data protection for approved drugs where the sponsor conducts specified testing in pediatric or adolescent populations within a specified time period. If granted, this “pediatric exclusivity” provides an additional six months of exclusivity, which is added to the term of data protection as well as to the term of any relevant patents, to the extent these protections have not already expired. While the term of the pediatric exclusivity attaches to the term of any relevant patent, pediatric exclusivity is a regulatory exclusivity, a bar to generic approval, not a patent right.
|
•
|
Under the U.S. orphan drug law, a specific use of a drug or biologic can receive "orphan" designation if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or affecting more than 200,000 people but not reasonably expected to recover its development and marketing costs through U.S. sales. Among other benefits, orphan designation entitles the particular use of the drug to seven years of market exclusivity, meaning that the FDA cannot (with limited exceptions) approve another marketing application for the same drug for the same indication until expiration of the seven-year period. Unlike pediatric exclusivity, the orphan exclusivity period is independent of and runs in parallel with any applicable patents.
|
•
|
Alimta is protected by a vitamin regimen patent (2021) plus pediatric exclusivity (2022).
|
•
|
Cyramza is protected by a compound patent and biologics data package protection (2026).
|
•
|
Emgality is protected by a compound patent (2033).
|
•
|
Forteo is protected by use patents (August 2019).
|
•
|
Jardiance, and the related combination products Glyxambi and Synjardy, are protected by a compound patent (2025, not including possible patent extension).
|
•
|
Lartruvo is protected by a compound patent (2027, not including possible patent extension) and by biologics data package protection (2028). Following a negative result in a recent clinical trial, we are suspending promotion of Lartruvo and are working with global regulators to determine the appropriate next steps.
|
•
|
Olumiant, is protected by a compound patent (2030, not including possible patent extension).
|
•
|
Portrazza is protected by a compound patent (2025, not including possible patent extension), and by biologics data package protection (2027).
|
•
|
Taltz is protected by a compound patent (2026, not including possible patent extension) and by biologic data package protection (2028).
|
•
|
Trajenta and Jentadueto are protected by a compound patent (2023, not including possible patent extension).
|
•
|
Trulicity is protected by a compound patent (2024, not including possible patent extension) and by biologics data package protection (2026).
|
•
|
Verzenio is protected by a compound patent (2029, not including possible patent extension).
|
•
|
Alimta in major European countries (vitamin regimen patent 2021) and Japan (patents covering use to treat cancer concomitantly with vitamins 2021).
|
•
|
Cymbalta in Japan (data package protection January 2020).
|
•
|
Forteo in Japan (patents covering its formulation and its use August 2019).
|
•
|
Lartruvo in major European countries (compound patent and data package protection 2026, not including possible patent extension). Following a negative result in a recent clinical trial, we are suspending promotion of Lartruvo and are working with global regulators to determine the appropriate next steps.
|
•
|
Olumiant in major European countries (compound patent 2029, not including possible patent extension) and Japan (compound patent 2033).
|
•
|
Taltz in major European countries (data package protection 2026; compound patent 2031).
|
•
|
Discovery Phase
|
•
|
Early Development Phase
|
•
|
Product Phase
|
•
|
Submission Phase
|
Name
|
Age
|
Offices and Business Experience
|
David A. Ricks
|
51
|
President, Chief Executive Officer, director (since January 2017) and board chair (since June 2017)
|
Melissa S. Barnes
|
50
|
Senior Vice President, Enterprise Risk Management and Chief Ethics and Compliance Officer (since January 2013)
|
Enrique A. Conterno
|
52
|
Senior Vice President and President, Lilly Diabetes (since November 2009) and President, Lilly USA (since February 2017)
|
Stephen F. Fry
|
53
|
Senior Vice President, Human Resources and Diversity (since February 2011)
|
Michael J. Harrington
|
56
|
Senior Vice President and General Counsel (since January 2013)
|
Johna L. Norton
|
52
|
Senior Vice President, Global Quality (since April 2017)
|
Myles O'Neill
|
60
|
Senior Vice President and President, Manufacturing Operations (since January 2018)
|
Leigh Ann Pusey
|
56
|
Senior Vice President, Corporate Affairs and Communications (since June 2017). Prior to joining Lilly, Ms. Pusey served as president and CEO of the American Insurance Association.
|
Aarti Shah, Ph.D.
|
54
|
Senior Vice President and Chief Information and Digital Officer (since January 2018)
|
Christi Shaw
|
52
|
Senior Vice President and President, Lilly Bio-Medicines (since April 2017). Prior to returning to Lilly, Ms. Shaw served as U.S. country head and president of Novartis Pharmaceutical Corporation from 2014 to 2016, and as North American region head of Novartis Oncology from 2010 to 2014.
|
Daniel Skovronsky, M.D., Ph.D.
|
45
|
Senior Vice President and Chief Scientific Officer (since June 2018)
|
Joshua L. Smiley
|
49
|
Senior Vice President and Chief Financial Officer (since January 2018)
|
Alfonso Zulueta
|
56
|
Senior Vice President and President, Lilly International (since February 2017)
|
Anne E. White
|
50
|
Senior Vice President and President, Lilly Oncology (since September 2018)
|
Item 1A.
|
Risk Factors
|
•
|
Pharmaceutical research and development is very costly and highly uncertain; we may not succeed in developing or acquiring commercially successful products sufficient in number or value to replace revenues of products that have lost or will soon lose intellectual property protection or are displaced by competing products or therapies.
|
•
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We depend on products with intellectual property protection for most of our revenues, cash flows, and earnings; we have lost or will lose effective intellectual property protection for many of those products in the next several years, which has resulted and is likely to continue to result in rapid and severe declines in revenues.
|
Product
|
U.S. Revenues
(2018)
($ in millions)
|
Percent of Worldwide Revenues
(2018)
|
Patent / Data Protection - U.S.
|
|
Alimta
|
1,131.0
|
|
5%
|
Vitamin regimen patent plus pediatric exclusivity will expire in 2022
|
Cialis
|
1,129.2
|
|
5%
|
Compound patent plus pediatric exclusivity expired in May 2018 and unit dose patent expired in September 2018
|
Forteo
|
757.9
|
|
3%
|
Formulation and related process patents expired in December 2018 and use patents will expire in August 2019
|
Product
|
Revenues Outside U.S.
(2018)
($ in millions)
|
Percent of Worldwide Revenues
(2018)
|
Patent / Data Protection - Major Europe / Japan
|
||
Alimta
|
$
|
1,001.9
|
|
4%
|
Major European countries: vitamin regimen patent will expire in 2021
Japan: use patents to treat cancer concomitantly with vitamins will expire in 2021
|
Forteo
|
817.7
|
|
3%
|
Japan: data package protection expired in July 2018; formulation and use patents will expire in August 2019
|
|
Cymbalta
|
653.7
|
|
3%
|
Japan: data package protection will expire in January 2020
|
•
|
Our long-term success depends on intellectual property protection; if our intellectual property rights are invalidated, circumvented, or weakened, our business will be adversely affected.
|
•
|
Our human pharmaceutical 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 reputation or business.
|
•
|
We face intense competition 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.
|
•
|
Changes in foreign currency rates or devaluation of a foreign currency can materially affect our revenue, cost of sales, and operating expenses.
|
•
|
Unanticipated changes in our tax rates or exposure to additional tax liabilities could increase our income taxes and decrease our net income.
|
•
|
Failure, inadequacy, or breach of our information technology systems, infrastructure, and business information or violations of data protection laws could result in material harm to our business and reputation.
|
•
|
Significant economic downturns or international trade disruptions or disputes could adversely affect our business and operating results.
|
•
|
Pharmaceutical products can develop unexpected safety or efficacy concerns, which could have a material adverse effect on revenues and income.
|
•
|
We face many product liability claims and are self-insured; we could face large numbers of claims in the future, which could adversely affect our business.
|
•
|
Regulatory compliance problems could be damaging to the company.
|
•
|
Manufacturing difficulties or disruptions could lead to product supply problems.
|
•
|
Reliance on third-party relationships and outsourcing arrangements could adversely affect our business.
|
•
|
Our animal health segment faces risks related to increased generic competition, food and animal safety concerns, factors affecting global agricultural markets, and other risks.
|
•
|
We may not realize the anticipated value or tax treatment for the divestiture of our interest in Elanco.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
•
|
The patent litigation and administrative proceedings involving Alimta;
|
•
|
The patent arbitration involving Adocia;
|
•
|
The product liability litigation involving Cymbalta;
|
•
|
The employee litigation in Brazil; and
|
•
|
The insulin and glucagon pricing litigation.
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
|
Period
|
Total Number of
Shares Purchased
(in thousands)
|
Average Price Paid
per Share
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
(in thousands)
|
Approximate Dollar Value
of Shares that May Yet Be
Purchased Under the
Plans or Programs
(dollars in millions)
|
||||||
October 2018
|
8,972.2
|
|
$
|
111.46
|
|
8,972.2
|
|
$
|
6,000.0
|
|
November 2018
|
895.5
|
|
111.65
|
|
895.5
|
|
5,900.0
|
|
||
December 2018
|
—
|
|
—
|
|
—
|
|
5,900.0
|
|
||
Total
|
9,867.7
|
|
111.47
|
|
9,867.7
|
|
|
|
|
Lilly
|
|
Peer Group
|
|
S&P 500
|
||||||
Dec-13
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
Dec-14
|
|
$
|
139.75
|
|
|
$
|
114.39
|
|
|
$
|
113.69
|
|
Dec-15
|
|
$
|
175.21
|
|
|
$
|
116.56
|
|
|
$
|
115.26
|
|
Dec-16
|
|
$
|
157.03
|
|
|
$
|
112.80
|
|
|
$
|
129.05
|
|
Dec-17
|
|
$
|
185.04
|
|
|
$
|
128.90
|
|
|
$
|
157.22
|
|
Dec-18
|
|
$
|
259.88
|
|
|
$
|
136.56
|
|
|
$
|
150.33
|
|
(1)
|
We constructed the peer group as the industry index for this graph. It comprises the companies in the pharmaceutical and biotech industries that we used to benchmark the compensation of our executive officers for
2018
: AbbVie Inc.; Amgen Inc.; AstraZeneca PLC; Baxter International Inc.; Biogen Idec Inc.; Bristol-Myers Squibb Company; Celgene Corporation; Gilead Sciences Inc.; GlaxoSmithKline plc; Johnson & Johnson; Medtronic plc; Merck & Co., Inc.; Novartis AG.; Pfizer Inc.; Roche Holdings AG; Sanofi; and Shire plc.
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except revenue per employee and per-share data)
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Operations
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
|
$
|
19,958.7
|
|
|
$
|
19,615.6
|
|
Cost of sales
|
6,430.0
|
|
|
6,150.8
|
|
|
5,710.1
|
|
|
5,054.5
|
|
|
4,959.2
|
|
|||||
Research and development
|
5,307.1
|
|
|
5,357.3
|
|
|
5,310.3
|
|
|
4,816.3
|
|
|
4,760.2
|
|
|||||
Marketing, selling, and administrative
|
6,631.8
|
|
|
6,680.1
|
|
|
6,528.0
|
|
|
6,548.3
|
|
|
6,643.4
|
|
|||||
Other
(1)
|
2,391.1
|
|
|
2,485.7
|
|
|
299.7
|
|
|
749.6
|
|
|
252.5
|
|
|||||
Income before income taxes
|
3,795.7
|
|
|
2,197.4
|
|
|
3,374.0
|
|
|
2,790.0
|
|
|
3,000.3
|
|
|||||
Income taxes
(2)
|
563.7
|
|
|
2,401.5
|
|
|
636.4
|
|
|
381.6
|
|
|
609.8
|
|
|||||
Net income (loss)
|
3,232.0
|
|
|
(204.1
|
)
|
|
2,737.6
|
|
|
2,408.4
|
|
|
2,390.5
|
|
|||||
Net income (loss) as a percent of revenue
|
13.2
|
%
|
|
(0.9
|
)%
|
|
12.9
|
%
|
|
12.1
|
%
|
|
12.2
|
%
|
|||||
Net income (loss) per share—diluted
|
$
|
3.13
|
|
|
$
|
(0.19
|
)
|
|
$
|
2.58
|
|
|
$
|
2.26
|
|
|
$
|
2.23
|
|
Dividends declared per share
|
2.33
|
|
|
2.12
|
|
|
2.05
|
|
|
2.01
|
|
|
1.97
|
|
|||||
Weighted-average number of shares outstanding—diluted (thousands)
|
1,033,667
|
|
|
1,052,023
|
|
|
1,061,825
|
|
|
1,065,720
|
|
|
1,074,286
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Position
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets
|
$
|
20,549.6
|
|
|
$
|
19,202.1
|
|
|
$
|
15,101.4
|
|
|
$
|
12,573.6
|
|
|
$
|
11,928.3
|
|
Current liabilities
|
11,888.1
|
|
|
14,535.9
|
|
|
10,986.6
|
|
|
8,229.6
|
|
|
9,741.0
|
|
|||||
Property and equipment—net
|
8,919.5
|
|
|
8,826.5
|
|
|
8,252.6
|
|
|
8,053.5
|
|
|
7,963.9
|
|
|||||
Total assets
|
43,908.4
|
|
|
44,981.0
|
|
|
38,805.9
|
|
|
35,568.9
|
|
|
36,307.6
|
|
|||||
Long-term debt
|
11,639.7
|
|
|
9,940.5
|
|
|
8,367.8
|
|
|
7,972.4
|
|
|
5,332.8
|
|
|||||
Total equity
|
10,909.1
|
|
|
11,667.9
|
|
|
14,080.5
|
|
|
14,590.3
|
|
|
15,388.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplementary Data
|
|
|
|
|
|
|
|
|
|
||||||||||
Return on total equity
|
25.7
|
%
|
|
(1.5
|
)%
|
|
18.5
|
%
|
|
16.1
|
%
|
|
13.7
|
%
|
|||||
Return on assets
|
7.3
|
%
|
|
(0.5
|
)%
|
|
7.5
|
%
|
|
6.8
|
%
|
|
6.8
|
%
|
|||||
Capital expenditures
|
$
|
1,210.6
|
|
|
$
|
1,076.8
|
|
|
$
|
1,037.0
|
|
|
$
|
1,066.2
|
|
|
$
|
1,162.6
|
|
Depreciation and amortization
|
1,609.0
|
|
|
1,567.3
|
|
|
1,496.6
|
|
|
1,427.7
|
|
|
1,379.0
|
|
|||||
Effective tax rate
(2)
|
14.9
|
%
|
|
109.3
|
%
|
|
18.9
|
%
|
|
13.7
|
%
|
|
20.3
|
%
|
|||||
Revenue per employee
|
$
|
635,000
|
|
|
$
|
563,000
|
|
|
$
|
506,000
|
|
|
$
|
484,000
|
|
|
$
|
501,000
|
|
Number of employees
|
38,680
|
|
|
40,655
|
|
|
41,975
|
|
|
41,275
|
|
|
39,135
|
|
|||||
Number of shareholders of record
|
24,000
|
|
|
25,300
|
|
|
26,800
|
|
|
28,000
|
|
|
29,300
|
|
Item 7.
|
Management’s Discussion and Analysis of Results of Operations and Financial Condition
|
|
Year Ended
December 31, |
|
Percent Change
|
||||||
|
2018
|
|
2017
|
|
|||||
Revenue
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
7
|
Gross margin
|
18,125.7
|
|
|
16,720.5
|
|
|
8
|
||
Gross margin as a percent of revenue
|
73.8
|
%
|
|
73.1
|
%
|
|
|
||
Operating expense
|
$
|
11,938.9
|
|
|
$
|
12,037.4
|
|
|
(1)
|
Acquired in-process research and development
|
1,983.9
|
|
|
1,112.6
|
|
|
78
|
||
Asset impairment, restructuring, and other special charges
|
482.0
|
|
|
1,673.6
|
|
|
(71)
|
||
Income before income taxes
|
3,795.7
|
|
|
2,197.4
|
|
|
73
|
||
Income taxes
|
563.7
|
|
|
2,401.5
|
|
|
(77)
|
||
Net income (loss)
|
3,232.0
|
|
|
(204.1
|
)
|
|
NM
|
||
Earnings (loss) per share
|
3.13
|
|
|
(0.19
|
)
|
|
NM
|
•
|
We recognized acquired IPR&D charges of
$1.98 billion
(pretax), or $1.83 per share, primarily related to the acquisition of ARMO Biosciences Inc. (ARMO) and the collaboration with Dicerna Pharmaceuticals (Dicerna).
|
•
|
We recognized charges of
$482.0 million
(pretax), or $0.41 per share, primarily associated with asset impairments related to the sale of the Posilac
®
(rbST) brand and the related sale of the Augusta, Georgia manufacturing site, as well as the suspension of commercial activities for Imrestor
®
. The charges also include expenses associated with the initial public offering (IPO) and separation of the Elanco animal health business, as well as efforts to reduce our cost structure.
|
•
|
We recognized $313.3 million of income tax benefit, or $0.30 per share, primarily due to measurement period adjustments to the Toll Tax and GILTI.
|
•
|
We recognized acquired IPR&D charges of
$1.11 billion
(pretax), or $0.97 per share, primarily related to the acquisition of CoLucid Pharmaceuticals, Inc. (CoLucid).
|
•
|
We recognized charges of
$1.67 billion
(pretax), or $1.23 per share, primarily associated with efforts to reduce our cost structure, including the United States (U.S.) voluntary early retirement program.
|
•
|
We recognized a provisional tax expense of $1.91 billion, or $1.81 per share, due to the 2017 Tax Act.
|
*
|
Biologic molecule subject to the U.S. Biologics Price Competition and Innovation Act
|
**
|
Diagnostic agent
|
Compound
|
Indication
|
U.S.
|
Europe
|
Japan
|
Developments
|
Immunology
|
|||||
Mirikizumab
|
Psoriasis
|
Phase III
|
Phase III trials were initiated during the second quarter of 2018.
|
||
Ulcerative colitis
|
Phase III
|
Phase III trial was initiated during the second quarter of 2018.
|
|||
Olumiant
|
Rheumatoid arthritis
|
Launched
|
Granted approval of 2mg dose by FDA and launched in U.S. in second quarter of 2018.
|
||
Atopic dermatitis
|
Phase III
|
In the first quarter of 2019, announced Phase III trials met primary endpoint. Additional Phase III trials are ongoing.
|
|||
Systemic lupus erythematosus
|
Phase III
|
Phase III trials were initiated during the third quarter of 2018. Granted Fast Track designation
(1)
from the FDA in fourth quarter of 2018.
|
|||
Neuroscience
|
|||||
Emgality
|
Cluster headache
|
Submitted
|
Phase III
|
In the second quarter of 2018, announced Phase III trial met primary endpoint for episodic cluster headache. Received Breakthrough Therapy Designation
(2)
in the third quarter of 2018. Submitted to FDA in fourth quarter of 2018 and to European regulatory authorities in first quarter of 2019. Granted Priority Review
(3)
from FDA in first quarter of 2019. A separate Phase III trial did not meet primary endpoint for chronic cluster headache.
|
|
Migraine prevention
|
Launched
|
Phase III
|
Approved and launched in the U.S. in the third and fourth quarters of 2018, respectively. Approved and launched in Europe in the fourth quarter of 2018 and first quarter of 2019, respectively.
|
||
Flortaucipir
|
Alzheimer's disease
|
Phase III
|
In the third quarter of 2018, announced Phase III trial met primary endpoints. In discussions with regulatory authorities to determine next steps.
|
||
Lanabecestat
|
Early and mild Alzheimer's disease
|
Discontinued
|
Phase III trials discontinued in second quarter of 2018.
|
||
Lasmiditan
|
Migraine
|
Submitted
|
Phase III
|
Submitted to FDA in fourth quarter of 2018. Phase III trials are ongoing.
|
|
Solanezumab
|
Preclinical Alzheimer's disease
|
Phase III
|
Phase III trial is ongoing.
|
||
Tanezumab
|
Osteoarthritis pain
|
Phase III
|
In the third quarter of 2018 and the first quarter of 2019, announced multiple Phase III trials met primary endpoints. We anticipate additional readouts from the program to be available in 2019.
|
||
Chronic low back pain
|
Phase III
|
In the first quarter of 2019, announced Phase III trial met primary endpoint for the 10mg dose and did not meet primary endpoint on the 5mg dose. We anticipate additional readouts from the program to be available in 2019.
|
|||
Cancer pain
|
Phase III
|
Phase III trial is ongoing.
|
Compound
|
Indication
|
U.S.
|
Europe
|
Japan
|
Developments
|
Oncology
|
|||||
Lartruvo
|
Soft tissue sarcoma
|
Launched
|
Phase III
|
Granted accelerated approval by the FDA based on Phase II data and launched in the U.S. in 2016. Granted conditional approval and launched in Europe in 2016. In the first quarter of 2019, announced confirmatory phase III trial did not meet primary endpoint. As trial did not confirm clinical benefit, we are suspending promotion and are in discussions with global regulators to determine next steps.
|
|
Pegilodecakin
|
Pancreatic cancer
|
Phase III
|
Acquired with ARMO in the second quarter of 2018. Phase III trial is ongoing. See Note 3 to the consolidated financial statements for information on the acquisition.
|
||
Verzenio
|
Adjuvant breast cancer
|
Phase III
|
Phase III trial is ongoing.
|
||
Metastatic breast cancer
|
Launched
|
Approved
|
Approved in Europe and Japan in the fourth quarter of 2018.
|
|
Year Ended
December 31, |
|
|
||||||
|
2018
|
|
2017
|
|
Percent Change
|
||||
U.S.
(1)
|
$
|
13,875.2
|
|
|
$
|
12,785.1
|
|
|
8
|
Outside U.S.
|
10,680.5
|
|
|
10,086.3
|
|
|
6
|
||
Revenue
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
7
|
|
Year Ended
December 31, |
|
|
||||||||||||||
|
2018
|
|
2017
|
|
|
||||||||||||
Product
|
U.S.
(1)
|
|
Outside U.S.
|
|
Total
|
|
Total
|
Percent Change
|
|||||||||
Trulicity
|
$
|
2,515.8
|
|
|
$
|
683.3
|
|
|
$
|
3,199.1
|
|
|
$
|
2,029.8
|
|
|
58
|
Humalog
|
1,787.8
|
|
|
1,208.7
|
|
|
2,996.5
|
|
|
2,865.2
|
|
|
5
|
||||
Alimta
|
1,131.0
|
|
|
1,001.9
|
|
|
2,132.9
|
|
|
2,062.5
|
|
|
3
|
||||
Cialis
|
1,129.2
|
|
|
722.7
|
|
|
1,851.8
|
|
|
2,323.1
|
|
|
(20)
|
||||
Forteo
|
757.9
|
|
|
817.7
|
|
|
1,575.6
|
|
|
1,749.0
|
|
|
(10)
|
||||
Humulin
®
|
910.2
|
|
|
421.2
|
|
|
1,331.4
|
|
|
1,335.4
|
|
|
—
|
||||
Taltz
|
738.7
|
|
|
198.7
|
|
|
937.5
|
|
|
559.2
|
|
|
68
|
||||
Cyramza
®
|
291.5
|
|
|
529.9
|
|
|
821.4
|
|
|
758.3
|
|
|
8
|
||||
Basaglar
|
622.8
|
|
|
178.5
|
|
|
801.2
|
|
|
432.1
|
|
|
85
|
||||
Cymbalta
®
|
54.3
|
|
|
653.7
|
|
|
708.0
|
|
|
757.2
|
|
|
(6)
|
||||
Jardiance
(2)
|
400.2
|
|
|
258.1
|
|
|
658.3
|
|
|
447.5
|
|
|
47
|
||||
Erbitux
®
|
531.6
|
|
|
103.8
|
|
|
635.3
|
|
|
645.9
|
|
|
(2)
|
||||
Trajenta
®(3)
|
224.2
|
|
|
350.5
|
|
|
574.7
|
|
|
537.9
|
|
|
7
|
||||
Zyprexa
|
36.2
|
|
|
435.1
|
|
|
471.3
|
|
|
581.2
|
|
|
(19)
|
||||
Strattera
|
89.7
|
|
|
361.1
|
|
|
450.8
|
|
|
618.2
|
|
|
(27)
|
||||
Other human pharmaceutical products
|
1,131.1
|
|
|
1,136.2
|
|
|
2,267.4
|
|
|
1,694.3
|
|
|
34
|
||||
Animal health products
|
1,523.0
|
|
|
1,619.5
|
|
|
3,142.5
|
|
|
3,085.6
|
|
|
2
|
||||
Revenue
|
$
|
13,875.2
|
|
|
$
|
10,680.5
|
|
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
7
|
(1)
|
U.S. revenue includes revenue in Puerto Rico.
|
(2)
|
Jardiance revenue includes Glyxambi
®
and Synjardy
®
.
|
(3)
|
Trajenta revenue includes Jentadueto
®
.
|
|
Year Ended
December 31, |
|
Percent Change
|
||||||
|
2017
|
|
2016
|
|
|||||
Revenue
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
|
8
|
Gross margin
|
16,720.5
|
|
|
15,512.0
|
|
|
8
|
||
Gross margin as a percent of revenue
|
73.1
|
%
|
|
73.1
|
%
|
|
|
||
Operating expense
|
$
|
12,037.4
|
|
|
$
|
11,838.3
|
|
|
2
|
Acquired in-process research and development
|
1,112.6
|
|
|
30.0
|
|
|
NM
|
||
Asset impairment, restructuring, and other special charges
|
1,673.6
|
|
|
382.5
|
|
|
NM
|
||
Income before income taxes
|
2,197.4
|
|
|
3,374.0
|
|
|
(35)
|
||
Income taxes
|
2,401.5
|
|
|
636.4
|
|
|
NM
|
||
Net income (loss)
|
(204.1
|
)
|
|
2,737.6
|
|
|
NM
|
||
Earnings (loss) per share
|
(0.19
|
)
|
|
2.58
|
|
|
NM
|
•
|
We recognized acquired IPR&D charges of $30.0 million (pretax), or $0.02 per share, related to upfront fees paid in connection with a collaboration agreement with AstraZeneca to co-develop MEDI1814, a potential disease-modifying treatment for Alzheimer's disease.
|
•
|
We recognized charges of $382.5 million (pretax), or $0.29 per share, related to integration and severance costs related to the acquisition of Novartis AH, other global severance costs, and asset impairments primarily related to the closure of an animal health manufacturing facility in Ireland.
|
•
|
We recognized charges of $203.9 million (pretax), or $0.19 per share, related to the impact of the Venezuelan financial crisis, including the significant deterioration of the bolívar.
|
|
Year Ended
December 31, |
|
|
||||||
|
2017
|
|
2016
|
|
Percent Change
|
||||
U.S.
(1)
|
$
|
12,785.1
|
|
|
$
|
11,506.2
|
|
|
11
|
Outside U.S.
|
10,086.3
|
|
|
9,715.9
|
|
|
4
|
||
Revenue
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
|
8
|
|
Year Ended
December 31, |
|
|
|||||||||||||||
|
2017
|
|
2016
|
|
|
|||||||||||||
Product
|
U.S.
(1)
|
|
Outside U.S.
|
|
Total
|
|
Total
|
Percent Change
|
||||||||||
Humalog
|
$
|
1,717.8
|
|
|
$
|
1,147.4
|
|
|
$
|
2,865.2
|
|
|
$
|
2,768.8
|
|
|
3
|
|
Cialis
|
1,358.6
|
|
|
964.5
|
|
|
2,323.1
|
|
|
2,471.6
|
|
|
(6
|
)
|
||||
Alimta
|
1,034.3
|
|
|
1,028.2
|
|
|
2,062.5
|
|
|
2,283.3
|
|
|
(10
|
)
|
||||
Trulicity
|
1,609.8
|
|
|
419.9
|
|
|
2,029.8
|
|
|
925.5
|
|
|
NM
|
|
||||
Forteo
|
965.2
|
|
|
783.8
|
|
|
1,749.0
|
|
|
1,500.0
|
|
|
17
|
|
||||
Humulin
|
884.6
|
|
|
450.7
|
|
|
1,335.4
|
|
|
1,365.9
|
|
|
(2
|
)
|
||||
Cyramza
|
278.8
|
|
|
479.6
|
|
|
758.3
|
|
|
614.1
|
|
|
23
|
|
||||
Cymbalta
|
114.9
|
|
|
642.2
|
|
|
757.2
|
|
|
930.5
|
|
|
(19
|
)
|
||||
Erbitux
|
541.7
|
|
|
104.2
|
|
|
645.9
|
|
|
687.0
|
|
|
(6
|
)
|
||||
Strattera
|
284.9
|
|
|
333.3
|
|
|
618.2
|
|
|
854.7
|
|
|
(28
|
)
|
||||
Zyprexa
|
75.5
|
|
|
505.7
|
|
|
581.2
|
|
|
725.3
|
|
|
(20
|
)
|
||||
Taltz
|
486.0
|
|
|
73.2
|
|
|
559.2
|
|
|
113.1
|
|
|
NM
|
|
||||
Trajenta
(2)
|
213.2
|
|
|
324.7
|
|
|
537.9
|
|
|
436.6
|
|
|
23
|
|
||||
Jardiance
(3)
|
290.4
|
|
|
157.0
|
|
|
447.5
|
|
|
201.9
|
|
|
NM
|
|
||||
Basaglar
|
311.1
|
|
|
121.0
|
|
|
432.1
|
|
|
86.1
|
|
|
NM
|
|
||||
Effient
|
340.1
|
|
|
48.8
|
|
|
388.9
|
|
|
535.2
|
|
|
(27
|
)
|
||||
Other human pharmaceutical products
|
767.0
|
|
|
927.5
|
|
|
1,694.3
|
|
|
1,564.3
|
|
|
8
|
|
||||
Animal health products
|
1,511.1
|
|
|
1,574.5
|
|
|
3,085.6
|
|
|
3,158.2
|
|
|
(2
|
)
|
||||
Revenue
|
$
|
12,785.1
|
|
|
$
|
10,086.3
|
|
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
|
8
|
|
|
Payments Due by Period
|
||||||||||||||||||
(Dollars in millions)
|
Total
|
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
||||||||||
Long-term debt, including interest payments
(1)
|
$
|
16,605.7
|
|
|
$
|
927.7
|
|
|
$
|
1,690.5
|
|
|
$
|
2,800.2
|
|
|
$
|
11,187.3
|
|
Capital lease obligations
|
11.8
|
|
|
4.5
|
|
|
5.9
|
|
|
1.4
|
|
|
—
|
|
|||||
Operating leases
|
805.2
|
|
|
155.8
|
|
|
217.0
|
|
|
132.9
|
|
|
299.5
|
|
|||||
Purchase obligations
(2)
|
17,019.6
|
|
|
16,805.5
|
|
|
204.5
|
|
|
9.6
|
|
|
—
|
|
|||||
2017 Tax Act one-time Toll Tax
(3)
|
2,836.5
|
|
|
159.8
|
|
|
509.8
|
|
|
732.9
|
|
|
1,434.0
|
|
|||||
Other long-term liabilities reflected on our balance sheet
(4)
|
1,571.6
|
|
|
—
|
|
|
412.4
|
|
|
190.9
|
|
|
968.3
|
|
|||||
Total
|
$
|
38,850.4
|
|
|
$
|
18,053.3
|
|
|
$
|
3,040.1
|
|
|
$
|
3,867.9
|
|
|
$
|
13,889.1
|
|
•
|
Purchase obligations consisting primarily of all open purchase orders as of
December 31, 2018
. Some of these purchase orders may be cancelable; however, for purposes of this disclosure, we have not distinguished between cancelable and noncancelable purchase obligations.
|
•
|
Contractual payment obligations with each of our significant vendors, which are noncancelable and are not contingent.
|
(Dollars in millions)
|
2018
|
|
2017
|
||||
Sales return, rebate, and discount liabilities, beginning of year
|
$
|
4,172.0
|
|
|
$
|
3,601.8
|
|
Reduction of net sales due to sales returns, discounts, and rebates
(1)
|
12,529.6
|
|
|
10,603.4
|
|
||
Cash payments of discounts and rebates
|
(12,023.4
|
)
|
|
(10,033.2
|
)
|
||
Sales return, rebate, and discount liabilities, end of year
|
$
|
4,678.2
|
|
|
$
|
4,172.0
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions and shares in thousands, except per-share data)
|
|
Year Ended December 31
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
||
Costs, expenses, and other:
|
|
|
|
|
|
|
||||||||
Cost of sales
|
|
6,430.0
|
|
|
6,150.8
|
|
|
5,710.1
|
|
|||||
Research and development
|
|
5,307.1
|
|
|
5,357.3
|
|
|
5,310.3
|
|
|||||
Marketing, selling, and administrative
|
|
6,631.8
|
|
|
6,680.1
|
|
|
6,528.0
|
|
|||||
Acquired in-process research and development (Notes 3)
|
|
1,983.9
|
|
|
1,112.6
|
|
|
30.0
|
|
|||||
Asset impairment, restructuring, and other special charges
(Note 5)
|
|
482.0
|
|
|
1,673.6
|
|
|
382.5
|
|
|||||
Other—net, (income) expense (Note 17)
|
|
(74.8
|
)
|
|
(300.5
|
)
|
|
(112.8
|
)
|
|||||
|
|
20,760.0
|
|
|
20,673.9
|
|
|
17,848.1
|
|
|||||
Income before income taxes
|
|
3,795.7
|
|
|
2,197.4
|
|
|
3,374.0
|
|
|||||
Income taxes (Note 13)
|
|
563.7
|
|
|
2,401.5
|
|
|
636.4
|
|
|||||
Net income (loss)
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
|
$
|
2,737.6
|
|
||
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share:
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
3.14
|
|
|
$
|
(0.19
|
)
|
|
$
|
2.59
|
|
||
Diluted
|
|
$
|
3.13
|
|
|
$
|
(0.19
|
)
|
|
$
|
2.58
|
|
||
Shares used in calculation of earnings (loss) per share:
|
|
|
|
|
|
|
||||||||
Basic
|
|
1,027,721
|
|
|
1,052,023
|
|
|
1,058,324
|
|
|||||
Diluted
|
|
1,033,667
|
|
|
1,052,023
|
|
|
1,061,825
|
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
|
|
Year Ended December 31
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss)
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
|
$
|
2,737.6
|
|
||
Other comprehensive income (loss):
|
|
|
|
|
|
|
||||||||
Change in foreign currency translation gains (losses)
|
|
(440.7
|
)
|
|
501.9
|
|
|
(436.4
|
)
|
|||||
Change in net unrealized gains (losses) on securities
|
|
(8.8
|
)
|
|
(181.3
|
)
|
|
303.0
|
|
|||||
Change in defined benefit pension and retiree health benefit plans (Note 14)
|
|
569.4
|
|
|
(576.6
|
)
|
|
(512.8
|
)
|
|||||
Change in effective portion of cash flow hedges
|
|
(6.0
|
)
|
|
27.8
|
|
|
11.7
|
|
|||||
Other comprehensive income (loss) before income taxes
|
|
113.9
|
|
|
(228.2
|
)
|
|
(634.5
|
)
|
|||||
Benefit (provision) for income taxes related to other comprehensive income (loss) items
|
|
(30.3
|
)
|
|
402.7
|
|
|
(10.6
|
)
|
|||||
Other comprehensive income (loss) (Note 16)
(1)
|
|
83.6
|
|
|
174.5
|
|
|
(645.1
|
)
|
|||||
Comprehensive income (loss)
|
|
$
|
3,315.6
|
|
|
$
|
(29.6
|
)
|
|
$
|
2,092.5
|
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, shares in thousands)
|
|
December 31
|
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
|
||||||
Current Assets
|
|
|
|
|
||||||
Cash and cash equivalents (Note 7)
|
|
$
|
7,998.2
|
|
|
$
|
6,536.2
|
|
||
Short-term investments (Note 7)
|
|
88.2
|
|
|
1,497.9
|
|
||||
Accounts receivable, net of allowances of
$32.5 (2018)
and $38.7 (2017)
|
|
5,246.5
|
|
|
4,546.3
|
|
||||
Other receivables
|
|
958.4
|
|
|
715.9
|
|
||||
Inventories (Note 6)
|
|
4,111.8
|
|
|
4,458.3
|
|
||||
Prepaid expenses and other
|
|
2,146.5
|
|
|
1,447.5
|
|
||||
Total current assets
|
|
20,549.6
|
|
|
19,202.1
|
|
||||
Other Assets
|
|
|
|
|
||||||
Investments (Note 7)
|
|
2,020.7
|
|
|
5,678.8
|
|
||||
Goodwill (Note 8)
|
|
4,347.5
|
|
|
4,370.1
|
|
||||
Other intangibles, net (Note 8)
|
|
3,521.0
|
|
|
4,029.2
|
|
||||
Deferred tax assets (Note 13)
|
|
2,657.7
|
|
|
1,166.4
|
|
||||
Sundry
|
|
1,892.4
|
|
|
1,707.9
|
|
||||
Total other assets
|
|
14,439.3
|
|
|
16,952.4
|
|
||||
Property and equipment, net (Note 9)
|
|
8,919.5
|
|
|
8,826.5
|
|
||||
Total assets
|
|
$
|
43,908.4
|
|
|
$
|
44,981.0
|
|
||
Liabilities and Equity
|
|
|
|
|
||||||
Current Liabilities
|
|
|
|
|
||||||
Short-term borrowings and current maturities of long-term debt (Note 10)
|
|
$
|
1,131.2
|
|
|
$
|
3,706.6
|
|
||
Accounts payable
|
|
1,412.3
|
|
|
1,410.7
|
|
||||
Employee compensation
|
|
1,054.5
|
|
|
997.9
|
|
||||
Sales rebates and discounts
|
|
5,021.9
|
|
|
4,465.1
|
|
||||
Dividends payable
|
|
650.8
|
|
|
590.6
|
|
||||
Income taxes payable (Note 13)
|
|
404.0
|
|
|
532.9
|
|
||||
Other current liabilities
|
|
2,213.4
|
|
|
2,832.1
|
|
||||
Total current liabilities
|
|
11,888.1
|
|
|
14,535.9
|
|
||||
Other Liabilities
|
|
|
|
|
||||||
Long-term debt (Note 10)
|
|
11,639.7
|
|
|
9,940.5
|
|
||||
Accrued retirement benefits (Note 14)
|
|
2,911.3
|
|
|
3,513.9
|
|
||||
Long-term income taxes payable (Note 13)
|
|
3,724.6
|
|
|
3,776.5
|
|
||||
Other noncurrent liabilities
|
|
2,835.6
|
|
|
1,546.3
|
|
||||
Total other liabilities
|
|
21,111.2
|
|
|
18,777.2
|
|
||||
Commitments and Contingencies (Note 15)
|
|
|
|
|
||||||
Eli Lilly and Company Shareholders' Equity (Notes 11 and 12)
|
|
|
|
|
||||||
Common stock—no par value
Authorized shares: 3,200,000 Issued shares: 1,057,639 (2018) and 1,100,672 (2017) |
|
661.0
|
|
|
687.9
|
|
||||
Additional paid-in capital
|
|
6,583.6
|
|
|
5,817.8
|
|
||||
Retained earnings
|
|
11,395.9
|
|
|
13,894.1
|
|
||||
Employee benefit trust
|
|
(3,013.2
|
)
|
|
(3,013.2
|
)
|
||||
Accumulated other comprehensive loss (Note 16)
|
|
(5,729.2
|
)
|
|
(5,718.6
|
)
|
||||
Cost of common stock in treasury
|
|
(69.4
|
)
|
|
(75.8
|
)
|
||||
Total Eli Lilly and Company shareholders' equity
|
|
9,828.7
|
|
|
11,592.2
|
|
||||
Noncontrolling interests
|
|
1,080.4
|
|
|
75.7
|
|
||||
Total equity
|
|
10,909.1
|
|
|
11,667.9
|
|
||||
Total liabilities and equity
|
|
$
|
43,908.4
|
|
|
$
|
44,981.0
|
|
|
Equity of Eli Lilly and Company Shareholders
|
|
|
||||||||||||||||||||||||||||||
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, shares in thousands)
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Employee Benefit Trust
|
|
Accumulated Other Comprehensive Loss
|
|
Common Stock in Treasury
|
|
Noncontrolling Interest
|
||||||||||||||||||||
Shares
|
|
Amount
|
Shares
|
|
Amount
|
||||||||||||||||||||||||||||
Balance at January 1, 2016
|
1,106,063
|
|
|
$
|
691.3
|
|
|
$
|
5,552.1
|
|
|
$
|
16,011.8
|
|
|
$
|
(3,013.2
|
)
|
|
$
|
(4,580.7
|
)
|
|
796
|
|
|
$
|
(90.0
|
)
|
|
$
|
19.0
|
|
Net income
|
|
|
|
|
|
|
2,737.6
|
|
|
|
|
|
|
|
|
|
|
|
16.3
|
|
|||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(693.3
|
)
|
|
|
|
|
|
48.2
|
|
|||||||||||||
Cash dividends declared per share: $2.05
|
|
|
|
|
|
|
(2,167.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Retirement of treasury shares
|
(7,306
|
)
|
|
(4.6
|
)
|
|
|
|
|
(535.5
|
)
|
|
|
|
|
|
|
(7,306
|
)
|
|
540.1
|
|
|
|
|
||||||||
Purchase of treasury shares
|
|
|
|
|
|
|
(60.0
|
)
|
|
|
|
|
|
|
|
|
7,306
|
|
|
(540.1
|
)
|
|
|
|
|||||||||
Issuance of stock under employee stock plans, net
|
2,829
|
|
|
1.8
|
|
|
(106.8
|
)
|
|
|
|
|
|
|
|
|
(85
|
)
|
|
9.5
|
|
|
|
|
|||||||||
Stock-based compensation
|
|
|
|
|
255.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.7
|
)
|
|||||||||||||||
Balance at December 31, 2016
|
1,101,586
|
|
|
688.5
|
|
|
5,640.6
|
|
|
16,046.3
|
|
|
(3,013.2
|
)
|
|
(5,274.0
|
)
|
|
711
|
|
|
(80.5
|
)
|
|
72.8
|
|
|||||||
Net income (loss)
|
|
|
|
|
|
|
(204.1
|
)
|
|
|
|
|
|
|
|
|
|
|
30.5
|
|
|||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
199.0
|
|
|
|
|
|
|
(24.5
|
)
|
|||||||||||||
Cash dividends declared per share: $2.12
|
|
|
|
|
|
|
(2,234.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Retirement of treasury shares
|
(4,390
|
)
|
|
(2.7
|
)
|
|
|
|
(357.1
|
)
|
|
|
|
|
|
|
(4,390
|
)
|
|
359.8
|
|
|
|
|
|||||||||
Purchase of treasury shares
|
|
|
|
|
|
|
60.0
|
|
|
|
|
|
|
|
|
|
4,390
|
|
|
(359.8
|
)
|
|
|
|
|||||||||
Issuance of stock under employee stock plans, net
|
3,476
|
|
|
2.1
|
|
|
(164.1
|
)
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
4.7
|
|
|
|
|
|||||||||
Stock-based compensation
|
|
|
|
|
|
|
281.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reclassification of stranded tax effects (Note 2)
|
|
|
|
|
|
|
643.6
|
|
|
|
|
(643.6
|
)
|
|
|
|
|
|
|
|
|||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.1
|
)
|
|||||||||||||||
Balance at December 31, 2017
|
1,100,672
|
|
|
687.9
|
|
|
5,817.8
|
|
|
13,894.1
|
|
|
(3,013.2
|
)
|
|
(5,718.6
|
)
|
|
664
|
|
|
(75.8
|
)
|
|
75.7
|
|
|||||||
Net income
|
|
|
|
|
|
|
3,232.0
|
|
|
|
|
|
|
|
|
|
|
3.7
|
|
||||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
85.6
|
|
|
|
|
|
|
(2.0
|
)
|
||||||||||||||
Cash dividends declared per share: $2.33
|
|
|
|
|
|
|
(2,372.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Retirement of treasury shares
|
(45,882
|
)
|
|
(28.7
|
)
|
|
|
|
(4,122.0
|
)
|
|
|
|
|
|
(45,882
|
)
|
|
4,150.7
|
|
|
|
|
||||||||||
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,882
|
|
|
(4,150.7
|
)
|
|
|
|
||||||||||
Issuance of stock under employee stock plans, net
|
2,849
|
|
|
1.8
|
|
|
(139.0
|
)
|
|
|
|
|
|
|
|
(60
|
)
|
|
6.4
|
|
|
|
|
||||||||||
Stock-based compensation
|
|
|
|
|
279.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Adoption of new accounting standards (Note 2)
|
|
|
|
|
|
|
763.8
|
|
|
|
|
(105.2
|
)
|
|
|
|
|
|
|
||||||||||||||
Sale of Elanco Stock (Note 3)
|
|
|
|
|
629.2
|
|
|
|
|
|
|
9.0
|
|
|
|
|
|
|
1,017.2
|
|
|||||||||||||
Other
|
|
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(14.2
|
)
|
||||||||||||||
Balance at December 31, 2018
|
1,057,639
|
|
|
$
|
661.0
|
|
|
$
|
6,583.6
|
|
|
$
|
11,395.9
|
|
|
$
|
(3,013.2
|
)
|
|
$
|
(5,729.2
|
)
|
|
604
|
|
|
$
|
(69.4
|
)
|
|
$
|
1,080.4
|
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
|
|
Year Ended December 31
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash Flows from Operating Activities
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
|
$
|
2,737.6
|
|
||
Adjustments to Reconcile Net Income (Loss)
to Cash Flows from Operating Activities:
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
|
1,609.0
|
|
|
1,567.3
|
|
|
1,496.6
|
|
|||||
Change in deferred income taxes
|
|
326.8
|
|
|
(787.9
|
)
|
|
439.5
|
|
|||||
Stock-based compensation expense
|
|
279.5
|
|
|
281.3
|
|
|
255.3
|
|
|||||
Acquired in-process research and development
|
|
1,983.9
|
|
|
1,112.6
|
|
|
30.0
|
|
|||||
Other non-cash operating activities, net
|
|
472.0
|
|
|
441.5
|
|
|
376.1
|
|
|||||
Other changes in operating assets and liabilities, net of acquisitions and divestitures:
|
|
|
|
|
|
|
||||||||
Receivables—(increase) decrease
|
|
(996.7
|
)
|
|
(357.0
|
)
|
|
(709.4
|
)
|
|||||
Inventories—(increase) decrease
|
|
7.8
|
|
|
(253.9
|
)
|
|
(328.2
|
)
|
|||||
Other assets—(increase) decrease
|
|
(980.0
|
)
|
|
(590.1
|
)
|
|
(265.5
|
)
|
|||||
Income taxes payable—increase (decrease)
|
|
(125.3
|
)
|
|
3,489.6
|
|
|
(304.8
|
)
|
|||||
Accounts payable and other liabilities—increase (decrease)
|
|
(284.5
|
)
|
|
916.3
|
|
|
1,123.8
|
|
|||||
Net Cash Provided by Operating Activities
|
|
5,524.5
|
|
|
5,615.6
|
|
|
4,851.0
|
|
|||||
Cash Flows from Investing Activities
|
|
|
|
|
|
|
||||||||
Purchases of property and equipment
|
|
(1,210.6
|
)
|
|
(1,076.8
|
)
|
|
(1,037.0
|
)
|
|||||
Proceeds from disposals of property and equipment
|
|
3.6
|
|
|
40.7
|
|
|
73.4
|
|
|||||
Proceeds from sales and maturities of short-term investments
|
|
2,552.5
|
|
|
4,852.5
|
|
|
1,642.0
|
|
|||||
Purchases of short-term investments
|
|
(112.2
|
)
|
|
(3,389.7
|
)
|
|
(1,327.4
|
)
|
|||||
Proceeds from sales of noncurrent investments
|
|
3,509.5
|
|
|
2,586.0
|
|
|
2,086.0
|
|
|||||
Purchases of noncurrent investments
|
|
(837.9
|
)
|
|
(4,611.6
|
)
|
|
(4,346.0
|
)
|
|||||
Purchases of in-process research and development
|
|
(1,807.6
|
)
|
|
(1,086.8
|
)
|
|
(55.0
|
)
|
|||||
Cash paid for acquisitions, net of cash acquired (Note 3)
|
|
—
|
|
|
(882.1
|
)
|
|
(45.0
|
)
|
|||||
Other investing activities, net
|
|
(191.3
|
)
|
|
(215.8
|
)
|
|
(130.1
|
)
|
|||||
Net Cash Provided by (Used for) Investing Activities
|
|
1,906.0
|
|
|
(3,783.6
|
)
|
|
(3,139.1
|
)
|
|||||
Cash Flows from Financing Activities
|
|
|
|
|
|
|
||||||||
Dividends paid
|
|
(2,311.8
|
)
|
|
(2,192.1
|
)
|
|
(2,158.5
|
)
|
|||||
Net change in short-term borrowings
|
|
(2,197.9
|
)
|
|
1,397.5
|
|
|
1,293.2
|
|
|||||
Proceeds from issuance of long-term debt
|
|
2,477.7
|
|
|
2,232.0
|
|
|
1,206.6
|
|
|||||
Repayments of long-term debt
|
|
(1,009.1
|
)
|
|
(630.6
|
)
|
|
(0.2
|
)
|
|||||
Purchases of common stock
|
|
(4,150.7
|
)
|
|
(299.8
|
)
|
|
(600.1
|
)
|
|||||
Net proceeds from Elanco initial public offering (Note 3)
|
|
1,659.7
|
|
|
—
|
|
|
—
|
|
|||||
Other financing activities, net
|
|
(372.8
|
)
|
|
(364.4
|
)
|
|
(300.8
|
)
|
|||||
Net Cash Provided by (Used for) Financing Activities
|
|
(5,904.9
|
)
|
|
142.6
|
|
|
(559.8
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
|
(63.6
|
)
|
|
(20.5
|
)
|
|
(236.4
|
)
|
|||||
Net increase in cash and cash equivalents
|
|
1,462.0
|
|
|
1,954.1
|
|
|
915.7
|
|
|||||
Cash and cash equivalents at beginning of year
|
|
6,536.2
|
|
|
4,582.1
|
|
|
3,666.4
|
|
|||||
Cash and Cash Equivalents at End of Year
|
|
$
|
7,998.2
|
|
|
$
|
6,536.2
|
|
|
$
|
4,582.1
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net product revenue
|
$
|
22,928.8
|
|
|
$
|
21,671.4
|
|
|
$
|
20,388.4
|
|
Collaboration and other revenue
(1)
|
1,626.9
|
|
|
1,199.9
|
|
|
833.7
|
|
|||
Revenue
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
•
|
Most of our pharmaceutical products are sold to wholesalers that serve pharmacies, physicians and other health care professionals, and hospitals. Most of our animal health products are sold to wholesale distributors. We initially invoice our customers at contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates.
|
•
|
The rebate and discount amounts are recorded as a deduction to arrive at our net product revenue. Sales rebates and discounts that require the use of judgment in the establishment of the accrual include managed care, Medicare, Medicaid, chargebacks, long-term care, hospital, patient assistance programs, and various other programs. We estimate these accruals using an expected value approach.
|
•
|
The largest of our sales rebate and discount amounts are rebates associated with sales covered by managed care, Medicare, Medicaid, and chargeback contracts in the United States (U.S.) In determining the appropriate accrual amount, we consider our historical rebate payments for these programs by product as a percentage of our historical sales as well as any significant changes in sales trends (e.g., patent expiries and product launches), an evaluation of the current contracts for these programs, the percentage of our products that are sold via these programs, and our product pricing. Although we accrue a liability for rebates related to these programs at the time we record the sale, the rebate related to that sale is typically paid up to six months later. Because of this time lag, in any particular period our rebate adjustments may incorporate revisions of accruals for several periods.
|
•
|
Most of our rebates outside the U.S. are contractual or legislatively mandated and are estimated and recognized in the same period as the related sales. In some large European countries, government rebates are based on the anticipated budget for pharmaceutical payments in the country. An estimate of these rebates, updated as governmental authorities revise budgeted deficits, is recognized in the same period as the related sale.
|
•
|
When product sales occur, to determine the appropriate transaction price for our sales, we estimate a reserve for future product returns related to those sales using an expected value approach. This estimate is based on several factors, including: historical return rates, expiration date by product (on average, approximately 24 months after the initial sale of a product to our customer), and estimated levels of inventory in the wholesale and retail channels, as well as any other specifically-identified anticipated returns due to known factors such as the loss of patent exclusivity, product recalls and discontinuances, or a changing competitive environment. We maintain a returns policy that allows U.S. pharmaceutical customers to return product for dating issues within a specified period prior to
|
•
|
As a part of our process to estimate a reserve for product returns, we regularly review the supply levels of our significant products sold to major wholesalers in the U.S. and in major markets outside the U.S., primarily by reviewing periodic inventory reports supplied by our major wholesalers and available prescription volume information for our products, or alternative approaches. We attempt to maintain U.S. wholesaler inventory levels at an average of approximately one month or less on a consistent basis across our product portfolio. Causes of unusual wholesaler buying patterns include actual or anticipated product-supply issues, weather patterns, anticipated changes in the transportation network, redundant holiday stocking, and changes in wholesaler business operations. In the U.S., the current structure of our arrangements provides us with data on inventory levels at our wholesalers; however, our data on inventory levels in the retail channel is more limited. Wholesaler stocking and destocking activity historically has not caused any material changes in the rate of actual product returns.
|
•
|
Actual product returns have been less than 2 percent of our net revenue over each of the past three years and have not fluctuated significantly as a percentage of revenue, although fluctuations are more likely in periods following loss of patent exclusivity for major products in the U.S. market.
|
•
|
Revenue related to products we sell pursuant to these arrangements is included in net product revenue, while other sources of revenue (e.g., royalties and profit sharing from our partner) are included in collaboration and other revenue.
|
•
|
Initial fees and developmental milestones we receive in collaborative and other similar arrangements from the partnering of our compounds under development are generally deferred and amortized into income through the expected product approval date.
|
•
|
Profit-sharing due from our collaboration partners, which is based upon gross margins reported to us by our partners, is recognized as collaboration and other revenue as earned.
|
•
|
Royalty revenue from licensees, which is based on sales to third-parties of licensed products and technology, is recorded when the third-party sale occurs and the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). This royalty revenue is included in collaboration and other revenue.
|
•
|
For arrangements involving multiple goods or services (e.g., research and development, marketing and selling, manufacturing, and distribution), each required good or service is evaluated to determine whether it is distinct. If a good or service does not qualify as distinct, it is combined with the other non-distinct goods or services within the arrangement and these combined goods or services are treated as a single performance obligation for accounting purposes. The arrangement's transaction price is then allocated to each performance obligation based on the relative standalone selling price
|
•
|
Significant judgments must be made in determining the transaction price for our sales of intellectual property. Because of the risk that products in development will not receive regulatory approval, we generally do not recognize any contingent payments that would be due to us upon or after regulatory approval.
|
•
|
We have entered into arrangements whereby we transferred rights to products and committed to supply for a period of time. For those arrangements for which we concluded that the obligations were not distinct, any amounts received upfront are being amortized to revenue as net product revenue over the period of the supply arrangement as the performance obligation is satisfied.
|
|
2018
|
|
2017
|
||||
Contract liabilities
|
$
|
299.3
|
|
|
$
|
335.2
|
|
•
|
The remaining license period of symbolic intellectual property, and
|
•
|
Obligations to supply product for a defined period of time.
|
•
|
Research and development costs, which are expensed as incurred.
|
•
|
Milestone payment obligations incurred prior to regulatory approval of the product, which are accrued when the event requiring payment of the milestone occurs.
|
Standard
|
|
Description
|
|
Effect on the financial statements or other significant matters
|
Accounting Standards Update 2014-09 and various other related updates,
Revenue from Contracts with Customers
|
|
This standard replaced existing revenue recognition standards and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We applied the latter approach.
|
|
Application of the new standard to applicable contracts resulted in an increase of approximately $5 million to retained earnings as of January 1, 2018. Disclosures required by the new standard are included in Note 1, Note 4, and Note 18.
|
Accounting Standards Update 2016-01,
Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities
|
|
This standard requires entities to recognize changes in the fair value of equity investments with readily determinable fair values in net income (except for investments accounted for under the equity method of accounting or those that result in consolidation of the investee). An entity should apply the new standard through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.
|
|
Upon adoption, we reclassified from accumulated other comprehensive loss the after-tax amount of net unrealized gains resulting in an increase to retained earnings of approximately $105 million. Adoption of this standard did not result in a material change in net income in 2018.
|
Accounting Standards Update 2016-16,
Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory
|
|
This standard requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. This standard requires a modified
retrospective approach to adoption. |
|
Upon adoption, the cumulative effect of applying the standard resulted in an increase of approximately $700 million to retained earnings, $2.5 billion to deferred tax assets, and $1.8 billion to deferred tax liabilities. Adoption of this standard did not result in a material change in net income in 2018.
|
Accounting Standards Update 2017-07,
Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
|
|
This standard was issued to improve the transparency and comparability among organizations by requiring entities to separate their net periodic pension cost and net periodic postretirement benefit cost into a service cost component and other components. Previously, the costs of the other components along with the service cost component were classified based upon the function of the employee. This standard requires entities to classify the service cost component in the same financial statement line item or items as other compensation costs arising from services rendered by pertinent employees. The other components of net benefit cost are now presented separately from the line items that include the service cost component. When applicable, the service cost component is now the only component eligible for capitalization. An entity should apply the new standard retrospectively for the classification of the service cost and other components and prospectively for the capitalization of the service cost component.
|
|
Upon adoption of this standard, pension and postretirement benefit cost components other than service costs are presented in other–net, (income) expense. The application of the new standard resulted in reclassification to other income of $248.1 million for the year ended December 31, 2017, while increasing cost of sales by $80.6 million, research and development expenses by $75.5 million, and marketing, selling, and administrative expenses by $92.0 million for the same period. The application of the new standard resulted in reclassification to other income of $197.6 million for the year ended December 31, 2016, while increasing cost of sales by $55.2 million, research and development expenses by $66.4 million, and marketing, selling, and administrative expenses by $76.0 million for the same period. We do not expect application of the new standard to have a material impact on an ongoing basis.
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the financial statements or other significant matters
|
Accounting Standards Update 2016-02,
Leases
|
|
This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under current GAAP, on the balance sheet and requiring additional disclosures about leasing arrangements. An entity can apply the new leases standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We plan to use the latter approach.
|
|
This standard was effective January 1, 2019, and we adopted on that date.
|
|
We expect to record a right-of-use asset and lease liability for operating leases of approximately $650 million on our consolidated balance sheet as of January 1, 2019. Our accounting for capital leases will remain substantially unchanged. This standard will not have a material impact on our consolidated statement of operations.
|
Estimated Fair Value at January 3, 2017
|
|||
Inventories
|
$
|
108.6
|
|
Marketed products
(1)
|
297.0
|
|
|
Property and equipment
|
148.2
|
|
|
Other assets and liabilities - net
|
8.2
|
|
|
Total identifiable net assets
|
562.0
|
|
|
Goodwill
(2)
|
320.1
|
|
|
Total consideration transferred - net of cash acquired
|
$
|
882.1
|
|
Counterparty
|
Compound(s),Therapy, or Asset
|
Acquisition Month
|
|
Phase of Development
(1)
|
|
Acquired IPR&D Expense
|
||
Sigilon Therapeutics
|
Encapsulated cell therapies for the potential treatment of type 1 diabetes
|
April 2018
|
|
Pre-clinical
|
|
$
|
66.9
|
|
AurKa Pharma, Inc.
|
AK-01, an Aurora kinase A inhibitor
|
June 2018
|
|
Phase I
|
|
81.8
|
|
|
ARMO
|
Cancer therapy - pegilodecakin
|
June 2018
|
|
Phase III
|
|
1,475.8
|
|
|
Anima Biotech
|
Translation inhibitors for selected neuroscience targets
|
July 2018
|
|
Pre-clinical
|
|
30.0
|
|
|
SIGA Technologies, Inc.
|
Priority Review Voucher
|
October 2018
|
|
Not applicable
|
|
80.0
|
|
|
Chugai Pharmaceutical Company
|
OWL833, an oral non-peptidic GLP-1 receptor agonist
|
October 2018
|
|
Pre-clinical
|
|
50.0
|
|
|
NextCure, Inc.
|
Immuno-oncology cancer therapies
|
November 2018
|
|
Pre-clinical
|
|
28.1
|
|
|
Dicerna Pharmaceuticals
|
Cardio-metabolic disease, neurodegeneration, and pain
|
December 2018
|
|
Pre-clinical
|
|
148.7
|
|
|
Hydra Biosciences
|
TRPA1 antagonists program for the potential treatment of chronic pain syndromes
|
December 2018
|
|
Pre-clinical
|
|
22.6
|
|
|
|
|
|
|
|
|
|
||
CoLucid Pharmaceuticals, Inc. (CoLucid)
|
Oral therapy for the acute treatment of migraine - lasmiditan
|
March 2017
|
|
Phase III
|
|
857.6
|
|
|
KeyBioscience AG
|
Multiple molecules for treatment of metabolic disorders
|
July 2017
|
|
Phase II
|
|
55.0
|
|
|
Nektar Therapeutics
|
Immunological therapy - NKTR-358
|
August 2017
|
|
Phase I
|
|
150.0
|
|
|
CureVac AG
|
Cancer vaccines
|
November 2017
|
|
Pre-clinical
|
|
50.0
|
|
|
|
|
|
|
|
|
|
||
AstraZeneca
|
Antibody selective for amyloid-beta 42 (Aβ42) - MEDI1814
|
December 2016
|
|
Phase I
|
|
30.0
|
|
Product Family
|
|
Milestones
(Deferred) Capitalized
(1)
|
|||
|
Year
|
Amount
|
|||
Trajenta
(2)
|
|
Cumulative
(4)
|
$
|
446.4
|
|
Jardiance
(3)
|
|
Cumulative
(4)
|
289.0
|
|
|
Basaglar
|
|
2018
|
—
|
|
|
|
2017
|
—
|
|
||
|
2016
|
(187.5
|
)
|
||
|
Cumulative
(4)
|
(250.0
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
Basaglar
|
$
|
801.2
|
|
|
$
|
432.1
|
|
|
$
|
86.1
|
|
Jardiance
|
658.3
|
|
|
447.5
|
|
|
201.9
|
|
|||
Trajenta
|
574.7
|
|
|
537.9
|
|
|
436.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net product revenue
|
$
|
536.1
|
|
|
$
|
548.2
|
|
|
$
|
587.0
|
|
Collaboration and other revenue
|
99.2
|
|
|
97.7
|
|
|
100.0
|
|
|||
Revenue
|
$
|
635.3
|
|
|
$
|
645.9
|
|
|
$
|
687.0
|
|
Territory
|
|
Marketing Rights
|
|
Selling Party
|
U.S.
|
|
Co-promotion
|
|
Lilly
|
Major European markets
|
|
Co-promotion
|
|
Daiichi Sankyo
|
Japan
|
|
Exclusive
|
|
Daiichi Sankyo
|
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
122.2
|
|
|
$
|
388.9
|
|
|
$
|
535.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Severance:
|
|
|
|
|
|
||||||
Human pharmaceutical products
|
$
|
127.8
|
|
|
$
|
601.0
|
|
|
$
|
85.9
|
|
Animal health products
|
14.8
|
|
|
96.4
|
|
|
40.8
|
|
|||
Total severance
|
142.6
|
|
|
697.4
|
|
|
126.7
|
|
|||
Pension and post-retirement medical charges associated with U.S. voluntary early retirement program (see Note 14):
|
|
|
|
|
|
||||||
Human pharmaceutical products
|
—
|
|
|
446.7
|
|
|
—
|
|
|||
Animal health products
|
—
|
|
|
67.0
|
|
|
—
|
|
|||
Total pension and post-retirement medical charges associated with U.S. voluntary early retirement program
|
—
|
|
|
513.7
|
|
|
—
|
|
|||
Asset impairment (gains from facility sales) and other special charges:
|
|
|
|
|
|
||||||
Human pharmaceutical products
|
46.0
|
|
|
81.7
|
|
|
(13.0
|
)
|
|||
Animal health products
|
293.4
|
|
|
380.8
|
|
|
268.8
|
|
|||
Total asset impairment and other special charges
|
339.4
|
|
|
462.5
|
|
|
255.8
|
|
|||
Total asset impairment, restructuring, and other special charges
|
$
|
482.0
|
|
|
$
|
1,673.6
|
|
|
$
|
382.5
|
|
|
2018
|
|
2017
|
||||
Finished products
|
$
|
988.1
|
|
|
$
|
1,211.4
|
|
Work in process
|
2,628.2
|
|
|
2,697.7
|
|
||
Raw materials and supplies
|
506.5
|
|
|
488.8
|
|
||
Total (approximates replacement cost)
|
4,122.8
|
|
|
4,397.9
|
|
||
Increase (reduction) to LIFO cost
|
(11.0
|
)
|
|
60.4
|
|
||
Inventories
|
$
|
4,111.8
|
|
|
$
|
4,458.3
|
|
•
|
Investments in companies over which we have significant influence but not a controlling interest are accounted for using the equity method, with our share of earnings or losses reported in other-net, (income) expense.
|
•
|
For equity investments that do not have readily determinable fair values, we measure these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any change in recorded value is recorded in other-net, (income) expense.
|
•
|
Our public equity investments are measured and carried at fair value. Any change in fair value is recognized in other-net, (income) expense.
|
|
2018
|
|
2017
|
|
2016
|
||||||
Fair value hedges:
|
|
|
|
|
|
||||||
Effect from hedged fixed-rate debt
|
$
|
(40.9
|
)
|
|
$
|
(14.1
|
)
|
|
$
|
(30.8
|
)
|
Effect from interest rate contracts
|
40.9
|
|
|
14.1
|
|
|
30.8
|
|
|||
Cash flow hedges:
|
|
|
|
|
|
||||||
Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss
|
14.8
|
|
|
14.8
|
|
|
15.0
|
|
|||
Net losses on foreign currency exchange contracts not designated as hedging instruments
|
100.0
|
|
|
97.9
|
|
|
78.8
|
|
|||
Total
|
$
|
114.8
|
|
|
$
|
112.7
|
|
|
$
|
93.8
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Net investment hedges:
|
|
|
|
|
|
||||||
Foreign currency-denominated notes
|
$
|
110.4
|
|
|
$
|
(361.5
|
)
|
|
$
|
137.5
|
|
Cross-currency interest rate swaps
|
96.8
|
|
|
(126.6
|
)
|
|
32.5
|
|
|||
Foreign currency exchange contracts
|
5.7
|
|
|
—
|
|
|
31.9
|
|
|||
Cash flow hedges:
|
|
|
|
|
|
||||||
Forward-starting interest rate swaps
|
—
|
|
|
13.0
|
|
|
(3.4
|
)
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||||
Description
|
Carrying
Amount
|
|
Cost
(1)
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
5,752.2
|
|
|
$
|
5,752.2
|
|
|
$
|
5,752.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,752.2
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
16.9
|
|
|
$
|
17.1
|
|
|
$
|
16.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.9
|
|
Corporate debt securities
|
62.2
|
|
|
62.6
|
|
|
—
|
|
|
62.2
|
|
|
—
|
|
|
62.2
|
|
||||||
Asset-backed securities
|
7.6
|
|
|
7.7
|
|
|
—
|
|
|
7.6
|
|
|
—
|
|
|
7.6
|
|
||||||
Other securities
|
1.5
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
||||||
Short-term investments
|
$
|
88.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Noncurrent investments:
|
|||||||||||||||||||||||
U.S. government and agency securities
|
$
|
149.1
|
|
|
$
|
153.6
|
|
|
$
|
149.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
149.1
|
|
Corporate debt securities
|
568.0
|
|
|
587.8
|
|
|
—
|
|
|
568.0
|
|
|
—
|
|
|
568.0
|
|
||||||
Mortgage-backed securities
|
111.4
|
|
|
114.5
|
|
|
—
|
|
|
111.4
|
|
|
—
|
|
|
111.4
|
|
||||||
Asset-backed securities
|
27.7
|
|
|
27.9
|
|
|
—
|
|
|
27.7
|
|
|
—
|
|
|
27.7
|
|
||||||
Other securities
|
87.8
|
|
|
29.7
|
|
|
—
|
|
|
—
|
|
|
87.8
|
|
|
87.8
|
|
||||||
Marketable equity securities
|
357.5
|
|
|
238.3
|
|
|
357.5
|
|
|
—
|
|
|
—
|
|
|
357.5
|
|
||||||
Equity investments without readily determinable fair values
(2)
|
414.7
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity method investments
(2)
|
304.5
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Noncurrent investments
|
$
|
2,020.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
4,763.9
|
|
|
$
|
4,763.9
|
|
|
$
|
4,712.4
|
|
|
$
|
51.5
|
|
|
$
|
—
|
|
|
$
|
4,763.9
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
217.8
|
|
|
$
|
218.2
|
|
|
$
|
217.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
217.8
|
|
Corporate debt securities
|
1,182.3
|
|
|
1,183.2
|
|
|
—
|
|
|
1,182.3
|
|
|
—
|
|
|
1,182.3
|
|
||||||
Asset-backed securities
|
94.2
|
|
|
94.3
|
|
|
—
|
|
|
94.2
|
|
|
—
|
|
|
94.2
|
|
||||||
Other securities
|
3.6
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
||||||
Short-term investments
|
$
|
1,497.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Noncurrent investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
360.0
|
|
|
$
|
365.0
|
|
|
$
|
360.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
360.0
|
|
Corporate debt securities
|
3,464.3
|
|
|
3,473.5
|
|
|
—
|
|
|
3,464.3
|
|
|
—
|
|
|
3,464.3
|
|
||||||
Mortgage-backed securities
|
202.4
|
|
|
204.2
|
|
|
—
|
|
|
202.4
|
|
|
—
|
|
|
202.4
|
|
||||||
Asset-backed securities
|
653.9
|
|
|
656.0
|
|
|
—
|
|
|
653.9
|
|
|
—
|
|
|
653.9
|
|
||||||
Other securities
|
132.1
|
|
|
66.4
|
|
|
—
|
|
|
—
|
|
|
132.1
|
|
|
132.1
|
|
||||||
Marketable equity securities
|
281.3
|
|
|
131.0
|
|
|
281.3
|
|
|
—
|
|
|
—
|
|
|
281.3
|
|
||||||
Cost and equity method investments
(2)
|
584.8
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Noncurrent investments
|
$
|
5,678.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
Description
|
Carrying
Amount
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||||
Short-term commercial paper borrowings
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2018
|
$
|
(498.9
|
)
|
|
$
|
—
|
|
|
$
|
(497.6
|
)
|
|
$
|
—
|
|
|
$
|
(497.6
|
)
|
December 31, 2017
|
(2,696.8
|
)
|
|
—
|
|
|
(2,690.6
|
)
|
|
—
|
|
|
(2,690.6
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt, including current portion
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2018
|
$
|
(12,272.0
|
)
|
|
$
|
—
|
|
|
$
|
(12,461.7
|
)
|
|
$
|
—
|
|
|
$
|
(12,461.7
|
)
|
December 31, 2017
|
(10,950.3
|
)
|
|
—
|
|
|
(11,529.9
|
)
|
|
—
|
|
|
(11,529.9
|
)
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
Description
|
Carrying
Amount
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Risk-management instruments
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate contracts designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sundry
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
4.5
|
|
Other current liabilities
|
(22.3
|
)
|
|
—
|
|
|
(22.3
|
)
|
|
—
|
|
|
(22.3
|
)
|
|||||
Other noncurrent liabilities
|
(19.0
|
)
|
|
—
|
|
|
(19.0
|
)
|
|
—
|
|
|
(19.0
|
)
|
|||||
Cross-currency interest rate contracts designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other receivables
|
69.2
|
|
|
—
|
|
|
69.2
|
|
|
—
|
|
|
69.2
|
|
|||||
Sundry
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|||||
Other current liabilities
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|||||
Other noncurrent liabilities
|
(25.8
|
)
|
|
—
|
|
|
(25.8
|
)
|
|
—
|
|
|
(25.8
|
)
|
|||||
Foreign exchange contracts not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other receivables
|
11.3
|
|
|
—
|
|
|
11.3
|
|
|
—
|
|
|
11.3
|
|
|||||
Other current liabilities
|
(16.3
|
)
|
|
—
|
|
|
(16.3
|
)
|
|
—
|
|
|
(16.3
|
)
|
|||||
Contingent consideration liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other current liabilities
|
(5.1
|
)
|
|
—
|
|
|
—
|
|
|
(5.1
|
)
|
|
(5.1
|
)
|
|||||
Other noncurrent liabilities
|
(69.0
|
)
|
|
—
|
|
|
—
|
|
|
(69.0
|
)
|
|
(69.0
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Risk-management instruments
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate contracts designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other receivables
|
$
|
0.8
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
Sundry
|
35.1
|
|
|
—
|
|
|
35.1
|
|
|
—
|
|
|
35.1
|
|
|||||
Other current liabilities
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|||||
Other noncurrent liabilities
|
(10.5
|
)
|
|
—
|
|
|
(10.5
|
)
|
|
—
|
|
|
(10.5
|
)
|
|||||
Cross-currency interest rate contracts designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other current liabilities
|
(33.4
|
)
|
|
—
|
|
|
(33.4
|
)
|
|
—
|
|
|
(33.4
|
)
|
|||||
Other noncurrent liabilities
|
(26.0
|
)
|
|
—
|
|
|
(26.0
|
)
|
|
—
|
|
|
(26.0
|
)
|
|||||
Foreign exchange contracts not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other receivables
|
26.8
|
|
|
—
|
|
|
26.8
|
|
|
—
|
|
|
26.8
|
|
|||||
Other current liabilities
|
(36.0
|
)
|
|
—
|
|
|
(36.0
|
)
|
|
—
|
|
|
(36.0
|
)
|
|||||
Contingent consideration liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other current liabilities
|
(208.0
|
)
|
|
—
|
|
|
—
|
|
|
(208.0
|
)
|
|
(208.0
|
)
|
|||||
Other noncurrent liabilities
|
(45.2
|
)
|
|
—
|
|
|
—
|
|
|
(45.2
|
)
|
|
(45.2
|
)
|
|
Maturities by Period
|
||||||||||||||||||
|
Total
|
|
Less Than
1 Year
|
|
1-5 Years
|
|
6-10 Years
|
|
More Than 10 Years
|
||||||||||
Fair value of debt securities
|
$
|
943.0
|
|
|
$
|
86.8
|
|
|
$
|
604.8
|
|
|
$
|
97.0
|
|
|
$
|
154.4
|
|
|
2018
|
|
2017
|
||||
Unrealized gross gains
|
$
|
0.8
|
|
|
$
|
184.7
|
|
Unrealized gross losses
|
29.0
|
|
|
47.5
|
|
||
Fair value of securities in an unrealized gain position
|
84.3
|
|
|
1,434.2
|
|
||
Fair value of securities in an unrealized loss position
|
858.6
|
|
|
4,692.8
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Proceeds from sales
|
$
|
5,668.0
|
|
|
$
|
5,769.3
|
|
|
$
|
3,240.5
|
|
Realized gross gains on sales
|
11.8
|
|
|
176.0
|
|
|
30.7
|
|
|||
Realized gross losses on sales
|
51.3
|
|
|
5.8
|
|
|
14.6
|
|
|
2018
|
|
2017
|
||||
Human pharmaceutical products
|
$
|
1,366.6
|
|
|
$
|
1,366.8
|
|
Animal health
|
2,980.9
|
|
|
3,003.3
|
|
||
Total goodwill
|
$
|
4,347.5
|
|
|
$
|
4,370.1
|
|
|
2018
|
|
2017
|
||||||||||||||||||||
Description
|
Carrying
Amount,
Gross
|
|
Accumulated
Amortization
|
|
Carrying
Amount,
Net
|
|
Carrying
Amount,
Gross
|
|
Accumulated
Amortization
|
|
Carrying
Amount,
Net
|
||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketed products
|
$
|
5,270.7
|
|
|
$
|
(1,848.2
|
)
|
|
$
|
3,422.5
|
|
|
$
|
7,682.0
|
|
|
$
|
(3,851.1
|
)
|
|
$
|
3,830.9
|
|
Other
|
142.6
|
|
|
(63.7
|
)
|
|
78.9
|
|
|
171.2
|
|
|
(70.1
|
)
|
|
101.1
|
|
||||||
Total finite-lived intangible assets
|
5,413.3
|
|
|
(1,911.9
|
)
|
|
3,501.4
|
|
|
7,853.2
|
|
|
(3,921.2
|
)
|
|
3,932.0
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Acquired in-process research and development
|
19.6
|
|
|
—
|
|
|
19.6
|
|
|
97.2
|
|
|
—
|
|
|
97.2
|
|
||||||
Other intangibles
|
$
|
5,432.9
|
|
|
$
|
(1,911.9
|
)
|
|
$
|
3,521.0
|
|
|
$
|
7,950.4
|
|
|
$
|
(3,921.2
|
)
|
|
$
|
4,029.2
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Amortization expense
|
$
|
558.7
|
|
|
$
|
683.4
|
|
|
$
|
687.9
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||
Estimated amortization expense
|
$
|
343.3
|
|
|
$
|
342.3
|
|
|
$
|
339.6
|
|
|
$
|
329.8
|
|
|
$
|
318.4
|
|
|
2018
|
|
2017
|
||||
Land
|
$
|
193.1
|
|
|
$
|
192.7
|
|
Buildings
|
7,683.8
|
|
|
7,425.6
|
|
||
Equipment
|
8,817.4
|
|
|
8,689.0
|
|
||
Construction in progress
|
1,769.7
|
|
|
1,783.8
|
|
||
|
18,464.0
|
|
|
18,091.1
|
|
||
Less accumulated depreciation
|
(9,544.5
|
)
|
|
(9,264.6
|
)
|
||
Property and equipment, net
|
$
|
8,919.5
|
|
|
$
|
8,826.5
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Depreciation expense
|
$
|
879.6
|
|
|
$
|
763.1
|
|
|
$
|
716.2
|
|
Rental expense
|
223.2
|
|
|
224.5
|
|
|
221.0
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
After 2023
|
||||||||||||
Lease commitments
|
$
|
155.8
|
|
|
$
|
128.0
|
|
|
$
|
89.0
|
|
|
$
|
74.7
|
|
|
$
|
58.2
|
|
|
$
|
299.5
|
|
|
2018
|
|
2017
|
||||
Short-term commercial paper borrowings
|
$
|
498.9
|
|
|
$
|
2,696.8
|
|
0.15 to 7.13 percent long-term notes (due 2019-2047)
|
11,640.8
|
|
|
10,756.7
|
|
||
Other long-term debt
|
503.1
|
|
|
13.6
|
|
||
Unamortized debt issuance costs
|
(49.1
|
)
|
|
(49.0
|
)
|
||
Fair value adjustment on hedged long-term notes
|
177.2
|
|
|
229.0
|
|
||
Total debt
|
12,770.9
|
|
|
13,647.1
|
|
||
Less current portion
|
(1,131.2
|
)
|
|
(3,706.6
|
)
|
||
Long-term debt
|
$
|
11,639.7
|
|
|
$
|
9,940.5
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
||||||||||
Maturities on long-term debt
|
$
|
634.5
|
|
|
$
|
33.5
|
|
|
$
|
942.3
|
|
|
$
|
1,439.0
|
|
|
$
|
750.3
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash payments for interest on borrowings
|
$
|
223.8
|
|
|
$
|
192.7
|
|
|
$
|
146.4
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Stock-based compensation expense
|
$
|
279.5
|
|
|
$
|
281.3
|
|
|
$
|
255.3
|
|
Tax benefit
|
58.7
|
|
|
70.5
|
|
|
89.4
|
|
(Percents)
|
2018
|
|
2017
|
|
2016
|
|||
Expected dividend yield
|
2.50
|
%
|
|
2.50
|
%
|
|
2.00
|
%
|
Risk-free interest rate
|
2.31
|
|
|
1.38
|
|
|
0.92
|
|
Volatility
|
22.26
|
|
|
22.91
|
|
|
21.68
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
(54.3
|
)
|
|
$
|
(100.6
|
)
|
|
$
|
(57.0
|
)
|
Foreign
|
80.0
|
|
|
38.5
|
|
|
378.9
|
|
|||
State
|
9.7
|
|
|
4.0
|
|
|
(125.0
|
)
|
|||
2017 Tax Act
|
201.5
|
|
|
3,247.5
|
|
|
—
|
|
|||
Total current tax expense
|
236.9
|
|
|
3,189.4
|
|
|
196.9
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
64.0
|
|
|
801.5
|
|
|
517.0
|
|
|||
Foreign
|
285.6
|
|
|
(256.3
|
)
|
|
(83.3
|
)
|
|||
State
|
3.4
|
|
|
0.4
|
|
|
5.8
|
|
|||
2017 Tax Act
|
(26.2
|
)
|
|
(1,333.5
|
)
|
|
—
|
|
|||
Total deferred tax (benefit) expense
|
326.8
|
|
|
(787.9
|
)
|
|
439.5
|
|
|||
Income taxes
|
$
|
563.7
|
|
|
$
|
2,401.5
|
|
|
$
|
636.4
|
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Purchases of intangible assets
|
$
|
2,655.9
|
|
|
$
|
443.1
|
|
Compensation and benefits
|
814.2
|
|
|
1,021.7
|
|
||
Tax credit carryforwards and carrybacks
|
365.2
|
|
|
473.0
|
|
||
Tax loss carryforwards and carrybacks
|
271.7
|
|
|
501.4
|
|
||
Product return reserves
|
100.5
|
|
|
88.4
|
|
||
Other comprehensive loss on hedging transactions
|
68.9
|
|
|
68.9
|
|
||
Debt
|
40.3
|
|
|
53.5
|
|
||
Contingent consideration
|
17.7
|
|
|
41.8
|
|
||
Other
|
714.7
|
|
|
555.8
|
|
||
Total gross deferred tax assets
|
5,049.1
|
|
|
3,247.6
|
|
||
Valuation allowances
|
(596.3
|
)
|
|
(709.1
|
)
|
||
Total deferred tax assets
|
4,452.8
|
|
|
2,538.5
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Earnings of foreign subsidiaries
|
(1,692.3
|
)
|
|
(16.6
|
)
|
||
Inventories
|
(658.4
|
)
|
|
(654.8
|
)
|
||
Property and equipment
|
(311.7
|
)
|
|
(282.1
|
)
|
||
Prepaid employee benefits
|
(240.1
|
)
|
|
(231.5
|
)
|
||
Intangibles
|
(250.5
|
)
|
|
(314.6
|
)
|
||
Financial instruments
|
(22.7
|
)
|
|
(41.5
|
)
|
||
Total deferred tax liabilities
|
(3,175.7
|
)
|
|
(1,541.1
|
)
|
||
Deferred tax assets - net
|
$
|
1,277.1
|
|
|
$
|
997.4
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Cash payments of income taxes
|
$
|
1,101.5
|
|
|
$
|
246.5
|
|
|
$
|
700.6
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Income tax at the U.S. federal statutory tax rate
|
$
|
797.1
|
|
|
$
|
769.1
|
|
|
$
|
1,180.9
|
|
Add (deduct):
|
|
|
|
|
|
||||||
International operations, including Puerto Rico
|
(629.7
|
)
|
|
(428.9
|
)
|
|
(313.7
|
)
|
|||
General business credits
|
(87.4
|
)
|
|
(66.8
|
)
|
|
(58.3
|
)
|
|||
Non-deductible acquired IPR&D
(1)
|
309.9
|
|
|
300.1
|
|
|
—
|
|
|||
2017 Tax Act
|
175.3
|
|
|
1,914.0
|
|
|
—
|
|
|||
Other
|
(1.5
|
)
|
|
(86.0
|
)
|
|
(172.5
|
)
|
|||
Income taxes
|
$
|
563.7
|
|
|
$
|
2,401.5
|
|
|
$
|
636.4
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Beginning balance at January 1
|
$
|
1,014.5
|
|
|
$
|
853.4
|
|
|
$
|
1,066.6
|
|
Additions based on tax positions related to the current year
|
798.2
|
|
|
133.8
|
|
|
73.4
|
|
|||
Additions for tax positions of prior years
|
414.9
|
|
|
97.5
|
|
|
14.8
|
|
|||
Reductions for tax positions of prior years
|
(117.1
|
)
|
|
(59.3
|
)
|
|
(15.2
|
)
|
|||
Settlements
|
(33.2
|
)
|
|
(2.4
|
)
|
|
(171.9
|
)
|
|||
Lapses of statutes of limitation
|
(23.5
|
)
|
|
(19.3
|
)
|
|
(110.0
|
)
|
|||
Changes related to the impact of foreign currency translation
|
(6.8
|
)
|
|
10.8
|
|
|
(4.3
|
)
|
|||
Ending balance at December 31
|
$
|
2,047.0
|
|
|
$
|
1,014.5
|
|
|
$
|
853.4
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Income tax (benefit) expense
|
$
|
24.4
|
|
|
$
|
27.4
|
|
|
$
|
(52.5
|
)
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
15,098.4
|
|
|
$
|
12,455.9
|
|
|
$
|
1,728.5
|
|
|
$
|
1,494.6
|
|
Service cost
|
304.0
|
|
|
331.3
|
|
|
41.5
|
|
|
46.4
|
|
||||
Interest cost
|
461.0
|
|
|
413.4
|
|
|
57.3
|
|
|
52.9
|
|
||||
Actuarial (gain) loss
|
(1,431.2
|
)
|
|
1,580.5
|
|
|
(182.8
|
)
|
|
40.0
|
|
||||
Benefits paid
|
(582.1
|
)
|
|
(486.3
|
)
|
|
(82.8
|
)
|
|
(60.1
|
)
|
||||
Plan amendments
|
17.6
|
|
|
—
|
|
|
(14.1
|
)
|
|
—
|
|
||||
Curtailment (gain) loss
|
(43.9
|
)
|
|
90.4
|
|
|
2.5
|
|
|
105.2
|
|
||||
Special termination benefit
|
—
|
|
|
317.2
|
|
|
—
|
|
|
37.5
|
|
||||
Foreign currency exchange rate changes and other adjustments
|
(161.9
|
)
|
|
396.0
|
|
|
(6.2
|
)
|
|
12.0
|
|
||||
Benefit obligation at end of year
|
13,661.9
|
|
|
15,098.4
|
|
|
1,543.9
|
|
|
1,728.5
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
||||
Fair value of plan assets at beginning of year
|
11,844.5
|
|
|
10,179.7
|
|
|
2,372.4
|
|
|
1,961.2
|
|
Actual return on plan assets
|
(370.3
|
)
|
|
1,447.6
|
|
|
32.6
|
|
|
462.0
|
|
Employer contribution
|
324.7
|
|
|
414.3
|
|
|
75.9
|
|
|
9.1
|
|
Benefits paid
|
(582.1
|
)
|
|
(486.3
|
)
|
|
(82.8
|
)
|
|
(60.1
|
)
|
Foreign currency exchange rate changes and other adjustments
|
(152.6
|
)
|
|
289.2
|
|
|
—
|
|
|
0.2
|
|
Fair value of plan assets at end of year
|
11,064.2
|
|
|
11,844.5
|
|
|
2,398.1
|
|
|
2,372.4
|
|
Funded status
|
(2,597.7
|
)
|
|
(3,253.9
|
)
|
|
854.2
|
|
|
643.9
|
|
||||
Unrecognized net actuarial loss
|
5,011.8
|
|
|
5,645.5
|
|
|
140.6
|
|
|
182.0
|
|
||||
Unrecognized prior service (benefit) cost
|
25.8
|
|
|
15.2
|
|
|
(299.9
|
)
|
|
(395.0
|
)
|
||||
Net amount recognized
|
$
|
2,439.9
|
|
|
$
|
2,406.8
|
|
|
$
|
694.9
|
|
|
$
|
430.9
|
|
Amounts recognized in the consolidated balance sheet consisted of:
|
|
|
|
|
|
|
|
||||||||
Sundry
|
$
|
196.0
|
|
|
$
|
106.8
|
|
|
$
|
1,043.6
|
|
|
$
|
869.0
|
|
Other current liabilities
|
(64.5
|
)
|
|
(64.8
|
)
|
|
(7.3
|
)
|
|
(7.1
|
)
|
||||
Accrued retirement benefits
|
(2,729.2
|
)
|
|
(3,295.9
|
)
|
|
(182.1
|
)
|
|
(218.0
|
)
|
||||
Accumulated other comprehensive (income) loss before income taxes
|
5,037.6
|
|
|
5,660.7
|
|
|
(159.3
|
)
|
|
(213.0
|
)
|
||||
Net amount recognized
|
$
|
2,439.9
|
|
|
$
|
2,406.8
|
|
|
$
|
694.9
|
|
|
$
|
430.9
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||||
(Percents)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||
Discount rate for benefit obligation
|
3.9
|
%
|
|
3.4
|
%
|
|
3.9
|
%
|
|
4.4
|
%
|
|
3.7
|
%
|
|
4.3
|
%
|
Discount rate for net benefit costs
|
3.4
|
|
|
3.9
|
|
|
4.3
|
|
|
3.7
|
|
|
4.3
|
|
|
4.5
|
|
Rate of compensation increase for benefit obligation
|
3.4
|
|
|
3.4
|
|
|
3.4
|
|
|
|
|
|
|
|
|||
Rate of compensation increase for net benefit costs
|
3.4
|
|
|
3.4
|
|
|
3.4
|
|
|
|
|
|
|
|
|||
Expected return on plan assets for net benefit costs
|
7.3
|
|
|
7.4
|
|
|
7.4
|
|
|
8.0
|
|
|
8.0
|
|
|
8.0
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024-2028
|
||||||||||||
Defined benefit pension plans
|
$
|
609.9
|
|
|
$
|
613.6
|
|
|
$
|
623.6
|
|
|
$
|
638.2
|
|
|
$
|
647.9
|
|
|
$
|
3,560.6
|
|
Retiree health benefit plans
|
98.0
|
|
|
99.1
|
|
|
100.7
|
|
|
99.9
|
|
|
98.5
|
|
|
505.3
|
|
|
2018
|
|
2017
|
||||
Projected benefit obligation
|
$
|
11,813.4
|
|
|
$
|
13,025.0
|
|
Fair value of plan assets
|
9,019.7
|
|
|
9,664.3
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Accumulated benefit obligation
|
$
|
11,032.1
|
|
|
$
|
11,956.7
|
|
|
$
|
189.4
|
|
|
$
|
225.1
|
|
Fair value of plan assets
|
9,019.7
|
|
|
9,639.4
|
|
|
—
|
|
|
—
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Components of net periodic (benefit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
304.0
|
|
|
$
|
331.3
|
|
|
$
|
277.7
|
|
|
$
|
41.5
|
|
|
$
|
46.4
|
|
|
$
|
39.1
|
|
Interest cost
|
461.0
|
|
|
413.4
|
|
|
420.8
|
|
|
57.3
|
|
|
52.9
|
|
|
53.2
|
|
||||||
Expected return on plan assets
|
(848.3
|
)
|
|
(776.0
|
)
|
|
(752.1
|
)
|
|
(177.9
|
)
|
|
(160.7
|
)
|
|
(150.2
|
)
|
||||||
Amortization of prior service (benefit) cost
|
4.8
|
|
|
5.7
|
|
|
11.8
|
|
|
(79.5
|
)
|
|
(90.0
|
)
|
|
(85.8
|
)
|
||||||
Recognized actuarial loss
|
334.4
|
|
|
288.2
|
|
|
285.6
|
|
|
6.1
|
|
|
18.4
|
|
|
19.1
|
|
||||||
Curtailment (gain) loss
|
1.3
|
|
|
93.5
|
|
|
—
|
|
|
(29.3
|
)
|
|
65.5
|
|
|
—
|
|
||||||
Special termination benefit
|
—
|
|
|
317.2
|
|
|
—
|
|
|
—
|
|
|
37.5
|
|
|
—
|
|
||||||
Net periodic (benefit) cost
|
$
|
257.2
|
|
|
$
|
673.3
|
|
|
$
|
243.8
|
|
|
$
|
(181.8
|
)
|
|
$
|
(30.0
|
)
|
|
$
|
(124.6
|
)
|
|
Defined Benefit
Pension Plans |
|
Retiree Health
Benefit Plans |
||||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Actuarial gain (loss) arising during period
|
$
|
211.1
|
|
|
$
|
(915.1
|
)
|
|
$
|
(725.2
|
)
|
|
$
|
37.5
|
|
|
$
|
261.3
|
|
|
$
|
(132.2
|
)
|
Plan amendments during period
|
(17.6
|
)
|
|
—
|
|
|
—
|
|
|
14.1
|
|
|
—
|
|
|
35.8
|
|
||||||
Curtailment gain (loss)
|
45.2
|
|
|
3.2
|
|
|
—
|
|
|
(31.8
|
)
|
|
(39.7
|
)
|
|
—
|
|
||||||
Amortization of prior service (benefit) cost included in net income
|
4.8
|
|
|
5.7
|
|
|
11.8
|
|
|
(79.5
|
)
|
|
(90.0
|
)
|
|
(85.8
|
)
|
||||||
Amortization of net actuarial loss included in net income
|
334.4
|
|
|
288.2
|
|
|
285.6
|
|
|
6.1
|
|
|
18.4
|
|
|
19.1
|
|
||||||
Foreign currency exchange rate changes and other
|
45.2
|
|
|
(105.3
|
)
|
|
75.6
|
|
|
(0.1
|
)
|
|
(3.3
|
)
|
|
2.5
|
|
||||||
Total other comprehensive income (loss) during period
|
$
|
623.1
|
|
|
$
|
(723.3
|
)
|
|
$
|
(352.2
|
)
|
|
$
|
(53.7
|
)
|
|
$
|
146.7
|
|
|
$
|
(160.6
|
)
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
Asset Class
|
Total
|
|
Quoted Prices in Active Markets for
Identical Assets (Level 1) |
|
Significant
Observable
Inputs
(Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
|
Investments Valued at Net Asset Value
(1)
|
||||||||||
Defined Benefit Pension Plans
|
|
|
|
|
|
|
|
|
|
||||||||||
Public equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.
|
$
|
619.9
|
|
|
$
|
410.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
209.8
|
|
International
|
2,117.8
|
|
|
828.8
|
|
|
—
|
|
|
1.8
|
|
|
1,287.2
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
2,963.2
|
|
|
25.0
|
|
|
2,173.3
|
|
|
—
|
|
|
764.9
|
|
|||||
Developed markets - repurchase agreements
|
(1,225.5
|
)
|
|
—
|
|
|
(1,225.5
|
)
|
|
—
|
|
|
—
|
|
|||||
Emerging markets
|
571.6
|
|
|
4.1
|
|
|
256.2
|
|
|
6.1
|
|
|
305.2
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
2,801.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,801.9
|
|
|||||
Equity-like funds
|
1,942.5
|
|
|
—
|
|
|
—
|
|
|
16.8
|
|
|
1,925.7
|
|
|||||
Real estate
|
525.8
|
|
|
147.2
|
|
|
—
|
|
|
—
|
|
|
378.6
|
|
|||||
Other
|
747.0
|
|
|
213.3
|
|
|
86.1
|
|
|
—
|
|
|
447.6
|
|
|||||
Total
|
$
|
11,064.2
|
|
|
$
|
1,628.5
|
|
|
$
|
1,290.1
|
|
|
$
|
24.7
|
|
|
$
|
8,120.9
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Retiree Health Benefit Plans
|
|
|
|
|
|
|
|
|
|
||||||||||
Public equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.
|
$
|
59.9
|
|
|
$
|
41.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18.9
|
|
International
|
127.0
|
|
|
50.5
|
|
|
—
|
|
|
0.2
|
|
|
76.3
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
69.1
|
|
|
—
|
|
|
61.5
|
|
|
—
|
|
|
7.6
|
|
|||||
Emerging markets
|
53.5
|
|
|
—
|
|
|
25.5
|
|
|
0.6
|
|
|
27.4
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
245.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
245.8
|
|
|||||
Equity-like funds
|
169.2
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|
167.5
|
|
|||||
Cash value of trust owned insurance contract
|
1,574.7
|
|
|
—
|
|
|
1,574.7
|
|
|
—
|
|
|
—
|
|
|||||
Real estate
|
27.7
|
|
|
14.7
|
|
|
—
|
|
|
—
|
|
|
13.0
|
|
|||||
Other
|
71.2
|
|
|
38.1
|
|
|
(3.8
|
)
|
|
—
|
|
|
36.9
|
|
|||||
Total
|
$
|
2,398.1
|
|
|
$
|
144.3
|
|
|
$
|
1,657.9
|
|
|
$
|
2.5
|
|
|
$
|
593.4
|
|
|
|
|
Fair Value Measurements Using
|
|
|
||||||||||||||
Asset Class
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
Significant Observable Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
|
Investments Valued at Net Asset Value
(1)
|
||||||||||
Defined Benefit Pension Plans
|
|
|
|
|
|
|
|
|
|
||||||||||
Public equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.
|
$
|
466.2
|
|
|
$
|
199.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
266.6
|
|
International
|
2,934.2
|
|
|
955.1
|
|
|
—
|
|
|
—
|
|
|
1,979.1
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
3,182.9
|
|
|
28.7
|
|
|
2,468.2
|
|
|
—
|
|
|
686.0
|
|
|||||
Developed markets - repurchase agreements
|
(1,372.9
|
)
|
|
—
|
|
|
(1,372.9
|
)
|
|
—
|
|
|
—
|
|
|||||
Emerging markets
|
584.7
|
|
|
4.2
|
|
|
252.0
|
|
|
3.1
|
|
|
325.4
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
2,984.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,984.6
|
|
|||||
Equity-like funds
|
1,639.6
|
|
|
—
|
|
|
—
|
|
|
16.8
|
|
|
1,622.8
|
|
|||||
Real estate
|
563.9
|
|
|
338.6
|
|
|
—
|
|
|
—
|
|
|
225.3
|
|
|||||
Other
|
861.3
|
|
|
119.2
|
|
|
602.8
|
|
|
2.2
|
|
|
137.1
|
|
|||||
Total
|
$
|
11,844.5
|
|
|
$
|
1,645.4
|
|
|
$
|
1,950.1
|
|
|
$
|
22.1
|
|
|
$
|
8,226.9
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Retiree Health Benefit Plans
|
|
|
|
|
|
|
|
|
|
||||||||||
Public equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.
|
$
|
43.0
|
|
|
$
|
19.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23.6
|
|
International
|
182.5
|
|
|
61.3
|
|
|
—
|
|
|
—
|
|
|
121.2
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
71.2
|
|
|
—
|
|
|
63.5
|
|
|
—
|
|
|
7.7
|
|
|||||
Emerging markets
|
53.1
|
|
|
—
|
|
|
24.4
|
|
|
0.3
|
|
|
28.4
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
256.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256.0
|
|
|||||
Equity-like funds
|
137.0
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
|
135.4
|
|
|||||
Cash value of trust owned insurance contract
|
1,524.6
|
|
|
—
|
|
|
1,524.6
|
|
|
—
|
|
|
—
|
|
|||||
Real estate
|
33.0
|
|
|
33.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other
|
72.0
|
|
|
15.0
|
|
|
50.5
|
|
|
0.2
|
|
|
6.3
|
|
|||||
Total
|
$
|
2,372.4
|
|
|
$
|
128.7
|
|
|
$
|
1,663.0
|
|
|
$
|
2.1
|
|
|
$
|
578.6
|
|
(Amounts presented net of taxes)
|
Foreign Currency Translation Gains (Losses)
|
|
Unrealized Net Gains (Losses) on Securities
|
|
Defined Benefit Pension and Retiree Health Benefit Plans
|
|
Effective Portion of Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||||
Beginning balance at January 1, 2016
|
$
|
(1,360.2
|
)
|
|
$
|
10.1
|
|
|
$
|
(3,012.1
|
)
|
|
$
|
(218.5
|
)
|
|
$
|
(4,580.7
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) before reclassifications
|
(581.6
|
)
|
|
206.7
|
|
|
(518.7
|
)
|
|
(2.2
|
)
|
|
(895.8
|
)
|
|||||
Net amount reclassified from accumulated other comprehensive loss
|
74.5
|
|
|
7.2
|
|
|
159.2
|
|
|
9.8
|
|
|
250.7
|
|
|||||
Net other comprehensive income (loss)
|
(507.1
|
)
|
|
213.9
|
|
|
(359.5
|
)
|
|
7.6
|
|
|
(645.1
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2016
(1)
|
(1,867.3
|
)
|
|
224.0
|
|
|
(3,371.6
|
)
|
|
(210.9
|
)
|
|
(5,225.8
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other comprehensive income (loss) before reclassifications
|
664.6
|
|
|
(15.7
|
)
|
|
(543.4
|
)
|
|
8.5
|
|
|
114.0
|
|
|||||
Net amount reclassified from accumulated other comprehensive loss
|
8.1
|
|
|
(110.6
|
)
|
|
153.4
|
|
|
9.6
|
|
|
60.5
|
|
|||||
Net other comprehensive income (loss)
|
672.7
|
|
|
(126.3
|
)
|
|
(390.0
|
)
|
|
18.1
|
|
|
174.5
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Reclassifications of stranded tax effects (Note 2)
|
(38.8
|
)
|
|
15.8
|
|
|
(579.1
|
)
|
|
(41.5
|
)
|
|
(643.6
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2017
(2)
|
(1,233.4
|
)
|
|
113.5
|
|
|
(4,340.7
|
)
|
|
(234.3
|
)
|
|
(5,694.9
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Reclassification due to adoption of new accounting standard
(3)
|
—
|
|
|
(128.9
|
)
|
|
—
|
|
|
—
|
|
|
(128.9
|
)
|
|||||
Other comprehensive income (loss) before reclassifications
|
(389.1
|
)
|
|
24.5
|
|
|
274.0
|
|
|
(16.3
|
)
|
|
(106.9
|
)
|
|||||
Net amount reclassified from accumulated other comprehensive loss
|
—
|
|
|
(31.2
|
)
|
|
210.0
|
|
|
11.7
|
|
|
190.5
|
|
|||||
Net other comprehensive income (loss)
|
(389.1
|
)
|
|
(6.7
|
)
|
|
484.0
|
|
|
(4.6
|
)
|
|
83.6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Ending balance at December 31, 2018
(4)
|
$
|
(1,622.5
|
)
|
|
$
|
(22.1
|
)
|
|
$
|
(3,856.7
|
)
|
|
$
|
(238.9
|
)
|
|
$
|
(5,740.2
|
)
|
Tax benefit (expense)
|
2018
|
|
2017
|
|
2016
|
||||||
Foreign currency translation gains/losses
|
$
|
51.6
|
|
|
$
|
170.8
|
|
|
$
|
(70.6
|
)
|
Unrealized net gains/losses on securities
|
2.1
|
|
|
55.0
|
|
|
(89.2
|
)
|
|||
Defined benefit pension and retiree health benefit plans
|
(85.3
|
)
|
|
186.6
|
|
|
153.3
|
|
|||
Effective portion of cash flow hedges
|
1.3
|
|
|
(9.7
|
)
|
|
(4.1
|
)
|
|||
Benefit/(provision) for income taxes allocated to other comprehensive income (loss) items
|
$
|
(30.3
|
)
|
|
$
|
402.7
|
|
|
$
|
(10.6
|
)
|
Details about Accumulated Other
Comprehensive Loss Components
|
Year Ended December 31,
|
Affected Line Item in the Consolidated Statements of Operations
|
||||||||||
2018
|
|
2017
|
|
2016
|
||||||||
Amortization of retirement benefit items:
|
|
|
|
|
|
|
||||||
Prior service benefits, net
|
$
|
(74.7
|
)
|
|
$
|
(84.3
|
)
|
|
$
|
(74.0
|
)
|
Other—net, (income) expense
|
Actuarial losses
|
340.5
|
|
|
306.6
|
|
|
304.7
|
|
Other—net, (income) expense
|
|||
Total before tax
|
265.8
|
|
|
222.3
|
|
|
230.7
|
|
|
|||
Tax benefit
|
(55.8
|
)
|
|
(68.9
|
)
|
|
(71.5
|
)
|
Income taxes
|
|||
Net of tax
|
210.0
|
|
|
153.4
|
|
|
159.2
|
|
|
|||
|
|
|
|
|
|
|
||||||
Unrealized gains/losses on available-for-sale securities:
|
|
|
|
|
|
|
||||||
Realized gains, net
|
(39.5
|
)
|
|
(170.2
|
)
|
|
(16.1
|
)
|
Other—net, (income) expense
|
|||
Impairment losses
|
—
|
|
|
—
|
|
|
27.3
|
|
Other—net, (income) expense
|
|||
Total before tax
|
(39.5
|
)
|
|
(170.2
|
)
|
|
11.2
|
|
|
|||
Tax (benefit) expense
|
8.3
|
|
|
59.6
|
|
|
(4.0
|
)
|
Income taxes
|
|||
Net of tax
|
(31.2
|
)
|
|
(110.6
|
)
|
|
7.2
|
|
|
|||
|
|
|
|
|
|
|
||||||
Other, net of tax
(1)
|
11.7
|
|
|
17.7
|
|
|
84.3
|
|
Other—net, (income) expense
|
|||
Total reclassifications for the period, net of tax
|
$
|
190.5
|
|
|
$
|
60.5
|
|
|
$
|
250.7
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Interest expense
|
$
|
272.1
|
|
|
$
|
225.0
|
|
|
$
|
185.2
|
|
Interest income
|
(161.3
|
)
|
|
(167.3
|
)
|
|
(108.7
|
)
|
|||
Venezuela charge
|
—
|
|
|
—
|
|
|
203.9
|
|
|||
Retirement benefit
|
(242.1
|
)
|
|
(248.1
|
)
|
|
(197.6
|
)
|
|||
Other (income) expense
|
56.5
|
|
|
(110.1
|
)
|
|
(195.6
|
)
|
|||
Other–net, (income) expense
|
$
|
(74.8
|
)
|
|
$
|
(300.5
|
)
|
|
$
|
(112.8
|
)
|
|
|
|
U.S.
(1)
|
|
Outside U.S.
|
||||||||||||||||||||
|
|
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Segment revenue—to unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Human pharmaceutical products:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Endocrinology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Trulicity
®
|
$
|
2,515.8
|
|
|
$
|
1,609.8
|
|
|
$
|
737.6
|
|
|
$
|
683.3
|
|
|
$
|
419.9
|
|
|
$
|
187.9
|
|
||
Humalog
®
|
1,787.8
|
|
|
1,717.8
|
|
|
1,685.2
|
|
|
1,208.7
|
|
|
1,147.4
|
|
|
1,083.6
|
|
||||||||
Humulin
®
|
910.2
|
|
|
884.6
|
|
|
861.8
|
|
|
421.2
|
|
|
450.7
|
|
|
504.1
|
|
||||||||
Forteo
|
757.9
|
|
|
965.2
|
|
|
770.5
|
|
|
817.7
|
|
|
783.8
|
|
|
729.4
|
|
||||||||
Basaglar
|
622.8
|
|
|
311.1
|
|
|
15.8
|
|
|
178.5
|
|
|
121.0
|
|
|
70.3
|
|
||||||||
Jardiance
|
400.2
|
|
|
290.4
|
|
|
144.5
|
|
|
258.1
|
|
|
157.0
|
|
|
57.4
|
|
||||||||
Trajenta
|
224.2
|
|
|
213.2
|
|
|
165.9
|
|
|
350.5
|
|
|
324.7
|
|
|
270.7
|
|
||||||||
Other Endocrinology
|
292.7
|
|
|
380.9
|
|
|
450.6
|
|
|
272.5
|
|
|
307.7
|
|
|
347.5
|
|
||||||||
Total Endocrinology
|
7,511.6
|
|
|
6,373.0
|
|
|
4,831.9
|
|
|
4,190.5
|
|
|
3,712.2
|
|
|
3,250.9
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Oncology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Alimta
|
1,131.0
|
|
|
1,034.3
|
|
|
1,101.0
|
|
|
1,001.9
|
|
|
1,028.2
|
|
|
1,182.3
|
|
||||||||
Erbitux
|
531.6
|
|
|
541.7
|
|
|
581.1
|
|
|
103.8
|
|
|
104.2
|
|
|
105.9
|
|
||||||||
Cyramza
®
|
291.5
|
|
|
278.8
|
|
|
270.1
|
|
|
529.9
|
|
|
479.6
|
|
|
344.0
|
|
||||||||
Other Oncology
|
449.1
|
|
|
195.6
|
|
|
22.9
|
|
|
221.7
|
|
|
149.6
|
|
|
114.6
|
|
||||||||
Total Oncology
|
2,403.2
|
|
|
2,050.4
|
|
|
1,975.1
|
|
|
1,857.3
|
|
|
1,761.6
|
|
|
1,746.8
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cardiovascular:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cialis
|
1,129.2
|
|
|
1,358.6
|
|
|
1,469.5
|
|
|
722.7
|
|
|
964.5
|
|
|
1,002.1
|
|
||||||||
Effient
|
68.1
|
|
|
340.1
|
|
|
465.6
|
|
|
54.1
|
|
|
48.8
|
|
|
69.6
|
|
||||||||
Other Cardiovascular
|
158.4
|
|
|
24.0
|
|
|
56.3
|
|
|
121.8
|
|
|
135.2
|
|
|
162.3
|
|
||||||||
Total Cardiovascular
|
1,355.7
|
|
|
1,722.7
|
|
|
1,991.4
|
|
|
898.6
|
|
|
1,148.5
|
|
|
1,234.0
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Neuroscience:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Strattera
®
|
89.7
|
|
|
284.9
|
|
|
534.9
|
|
|
361.1
|
|
|
333.3
|
|
|
319.8
|
|
||||||||
Cymbalta
(2)
|
54.3
|
|
|
114.9
|
|
|
269.3
|
|
|
653.7
|
|
|
642.2
|
|
|
661.2
|
|
||||||||
Zyprexa
®
|
36.2
|
|
|
75.5
|
|
|
69.8
|
|
|
435.1
|
|
|
505.7
|
|
|
655.5
|
|
||||||||
Other Neuroscience
|
97.2
|
|
|
115.7
|
|
|
115.9
|
|
|
93.4
|
|
|
98.9
|
|
|
93.9
|
|
||||||||
Total Neuroscience
|
277.4
|
|
|
591.0
|
|
|
989.9
|
|
|
1,543.3
|
|
|
1,580.1
|
|
|
1,730.4
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Immunology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Taltz
®
|
738.7
|
|
|
486.0
|
|
|
110.8
|
|
|
198.7
|
|
|
73.2
|
|
|
2.3
|
|
||||||||
Other Immunology
|
6.7
|
|
|
—
|
|
|
—
|
|
|
195.9
|
|
|
45.8
|
|
|
—
|
|
||||||||
Total Immunology
|
745.4
|
|
|
486.0
|
|
|
110.8
|
|
|
394.6
|
|
|
119.0
|
|
|
2.3
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Other human pharmaceutical products
|
58.7
|
|
|
50.9
|
|
|
42.6
|
|
|
176.6
|
|
|
190.3
|
|
|
157.8
|
|
||||||||
Total human pharmaceutical products
|
12,352.2
|
|
|
11,274.0
|
|
|
9,941.7
|
|
|
9,061.0
|
|
|
8,511.7
|
|
|
8,122.2
|
|
||||||||
Animal health products
|
1,523.0
|
|
|
1,511.1
|
|
|
1,564.5
|
|
|
1,619.5
|
|
|
1,574.5
|
|
|
1,593.7
|
|
||||||||
Revenue
|
$
|
13,875.2
|
|
|
$
|
12,785.1
|
|
|
$
|
11,506.2
|
|
|
$
|
10,680.5
|
|
|
$
|
10,086.3
|
|
|
$
|
9,715.9
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Segment profits:
|
|
|
|
|
|
|
||||||||
Human pharmaceutical products
|
|
$
|
6,217.8
|
|
|
$
|
5,139.7
|
|
|
$
|
4,010.0
|
|
||
Animal health products
|
|
607.3
|
|
|
561.3
|
|
|
663.7
|
|
|||||
Total segment profits
|
|
$
|
6,825.1
|
|
|
$
|
5,701.0
|
|
|
$
|
4,673.7
|
|
||
|
|
|
|
|
|
|
||||||||
Reconciliation of total segment profits to consolidated income before taxes:
|
|
|
|
|
|
|
||||||||
Segment profits
|
|
$
|
6,825.1
|
|
|
$
|
5,701.0
|
|
|
$
|
4,673.7
|
|
||
Other profits (losses):
|
|
|
|
|
|
|
||||||||
Amortization of intangible assets (Note 8)
|
|
(546.0
|
)
|
|
(674.8
|
)
|
|
(683.3
|
)
|
|||||
Asset impairment, restructuring, and other special charges (Note 5)
|
|
(482.0
|
)
|
|
(1,673.6
|
)
|
|
(382.5
|
)
|
|||||
Venezuela charge (Note 17)
|
|
—
|
|
|
—
|
|
|
(203.9
|
)
|
|||||
Acquired in-process research and development (Note 3)
|
|
(1,983.9
|
)
|
|
(1,112.6
|
)
|
|
(30.0
|
)
|
|||||
Inventory fair value adjustment related to acquisition of BIVIVP (Note 3)
|
|
—
|
|
|
(42.7
|
)
|
|
—
|
|
|||||
Other, net
|
|
(17.5
|
)
|
|
—
|
|
|
—
|
|
|||||
Consolidated income before taxes
|
|
$
|
3,795.7
|
|
|
$
|
2,197.4
|
|
|
$
|
3,374.0
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Human pharmaceutical products
|
$
|
934.0
|
|
|
$
|
789.8
|
|
|
$
|
723.4
|
|
Animal health products
|
111.3
|
|
|
102.7
|
|
|
89.9
|
|
|||
Total depreciation expense and software amortization included in segment profits
|
$
|
1,045.3
|
|
|
$
|
892.5
|
|
|
$
|
813.3
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Geographic Information
|
|
|
|
|
|
|
||||||||
Revenue—to unaffiliated customers
(1)
:
|
|
|
|
|
|
|
||||||||
United States
|
|
$
|
13,875.2
|
|
|
$
|
12,785.1
|
|
|
$
|
11,506.2
|
|
||
Europe
|
|
4,231.1
|
|
|
3,943.2
|
|
|
3,768.1
|
|
|||||
Japan
|
|
2,493.7
|
|
|
2,419.7
|
|
|
2,330.9
|
|
|||||
Other foreign countries
|
|
3,955.7
|
|
|
3,723.3
|
|
|
3,616.9
|
|
|||||
Revenue
|
|
$
|
24,555.7
|
|
|
$
|
22,871.3
|
|
|
$
|
21,222.1
|
|
||
|
|
|
|
|
|
|
||||||||
Long-lived assets
(2)
:
|
|
|
|
|
|
|
||||||||
United States
|
|
$
|
4,946.6
|
|
|
$
|
5,013.4
|
|
|
$
|
4,984.6
|
|
||
Europe
|
|
2,708.1
|
|
|
2,550.1
|
|
|
2,140.7
|
|
|||||
Japan
|
|
181.9
|
|
|
155.1
|
|
|
92.4
|
|
|||||
Other foreign countries
|
|
1,695.5
|
|
|
1,761.7
|
|
|
1,776.8
|
|
|||||
Long-lived assets
|
|
$
|
9,532.1
|
|
|
$
|
9,480.3
|
|
|
$
|
8,994.5
|
|
2018
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
||||||||
Revenue
|
|
$
|
6,438.6
|
|
|
$
|
6,061.9
|
|
|
$
|
6,355.2
|
|
|
$
|
5,700.0
|
|
Cost of sales
|
|
1,593.7
|
|
|
1,562.3
|
|
|
1,702.7
|
|
|
1,571.3
|
|
||||
Operating expenses
(1)
|
|
3,315.3
|
|
|
2,959.9
|
|
|
2,986.8
|
|
|
2,676.9
|
|
||||
Acquired in-process research and development
(2)
|
|
329.4
|
|
|
30.0
|
|
|
1,624.5
|
|
|
—
|
|
||||
Asset impairment, restructuring, and other special charges
|
|
246.0
|
|
|
83.3
|
|
|
74.4
|
|
|
78.3
|
|
||||
Income before income taxes
|
|
938.9
|
|
|
1,411.0
|
|
|
4.8
|
|
|
1,441.0
|
|
||||
Income taxes
(3)
|
|
(186.2
|
)
|
|
261.5
|
|
|
264.7
|
|
|
223.6
|
|
||||
Net income (loss)
|
|
1,125.1
|
|
|
1,149.5
|
|
|
(259.9
|
)
|
|
1,217.4
|
|
||||
Earnings (loss) per share—basic
|
|
1.11
|
|
|
1.13
|
|
|
(0.25
|
)
|
|
1.16
|
|
||||
Earnings (loss) per share—diluted
|
|
1.10
|
|
|
1.12
|
|
|
(0.25
|
)
|
|
1.16
|
|
||||
Dividends paid per share
|
|
0.5625
|
|
|
0.5625
|
|
|
0.5625
|
|
|
0.5625
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
2017
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
||||||||
Revenue
|
|
$
|
6,160.7
|
|
|
$
|
5,658.0
|
|
|
$
|
5,824.3
|
|
|
$
|
5,228.3
|
|
Cost of sales
(4)
|
|
1,644.9
|
|
|
1,586.3
|
|
|
1,571.7
|
|
|
1,347.9
|
|
||||
Operating expenses
(1)(4)
|
|
3,290.4
|
|
|
2,918.5
|
|
|
3,002.5
|
|
|
2,826.0
|
|
||||
Acquired in-process research and development
(2)
|
|
50.0
|
|
|
205.0
|
|
|
—
|
|
|
857.6
|
|
||||
Asset impairment, restructuring, and other special charges
(5)
|
|
1,003.2
|
|
|
406.5
|
|
|
50.0
|
|
|
213.9
|
|
||||
Income before income taxes
|
|
284.1
|
|
|
591.6
|
|
|
1,260.5
|
|
|
61.2
|
|
||||
Income taxes
(3)
|
|
1,941.0
|
|
|
36.0
|
|
|
252.5
|
|
|
172.0
|
|
||||
Net income (loss)
|
|
(1,656.9
|
)
|
|
555.6
|
|
|
1,008.0
|
|
|
(110.8
|
)
|
||||
Earnings (loss) per share—basic
|
|
(1.58
|
)
|
|
0.53
|
|
|
0.96
|
|
|
(0.10
|
)
|
||||
Earnings (loss) per share—diluted
|
|
(1.58
|
)
|
|
0.53
|
|
|
0.95
|
|
|
(0.10
|
)
|
||||
Dividends paid per share
|
|
0.52
|
|
|
0.52
|
|
|
0.52
|
|
|
0.52
|
|
David A. Ricks
|
|
Joshua L. Smiley
|
Chairman, President and Chief Executive Officer
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers, and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Plan category
|
(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights
(1)
|
(b) Weighted-average exercise price of outstanding options, warrants, and rights
|
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
||||
Equity compensation plans approved by security holders
|
—
|
|
$
|
—
|
|
53,253,739
|
|
Equity compensation plan not approved by security holders
|
—
|
|
—
|
|
—
|
|
|
Total
|
—
|
|
—
|
|
53,253,739
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
•
|
Consolidated Statements of Operations—Years Ended December 31,
2018
,
2017
, and
2016
|
•
|
Consolidated Statements of Comprehensive Income—Years Ended December 31,
2018
,
2017
, and
2016
|
•
|
Consolidated Balance Sheets—December 31,
2018
and
2017
|
•
|
Consolidated Statements of Shareholders' Equity—Years Ended December 31,
2018
,
2017
, and
2016
|
•
|
Consolidated Statements of Cash Flows—Years Ended December 31,
2018
,
2017
, and
2016
|
•
|
Notes to Consolidated Financial Statements
|
2.1
|
|
Agreement and Plan of Merger, dated January 5, 2019, among Eli Lilly and Company, Bowfin Acquisition Corporation and Loxo Oncology, Inc.
|
|
|
|
2.2
|
|
Master Separation Agreement, dated September 24, 2018, between Eli Lilly and Company and Elanco Animal Health Incorporated
|
|
|
|
3.1
|
|
Amended Articles of Incorporation
|
|
|
|
3.2
|
|
Bylaws, as amended
|
|
|
|
4.1
|
|
Indenture with respect to Debt Securities dated as of February 1, 1991, between Eli Lilly and Company and Deutsche Bank Trust Company Americas, as successor trustee to Citibank, N.A., Trustee
|
|
|
|
4.2
|
|
Agreement dated September 13, 2007 appointing Deutsche Bank Trust Company Americas as Successor Trustee under the Indenture listed above
|
|
|
|
10.1
|
|
Amended and Restated 2002 Lilly Stock Plan
(1)
|
|
|
|
10.2
|
|
Form of Performance Award under the 2002 Lilly Stock Plan
(1)
|
|
|
|
10.3
|
|
Form of Shareholder Value Award under the 2002 Lilly Stock Plan
(1)
|
|
|
|
10.4
|
|
The Lilly Deferred Compensation Plan, as amended
(1)
|
|
|
|
10.5
|
|
The Lilly Directors’ Deferral Plan, as amended
(1)
|
|
|
|
10.6
|
|
The Eli Lilly and Company Bonus Plan, as amended
(1)
|
|
|
|
10.7
|
|
The Eli Lilly and Company Executive Officer Incentive Plan
(1)
|
|
|
|
10.8
|
|
2007 Change in Control Severance Pay Plan for Select Employees, as amended
(1)
|
|
|
|
10.9
|
|
Elanco Corporate Bonus
(1)
|
|
|
|
10.10
|
|
Form of Elanco Stock Plan
(1)
|
|
|
|
10.11
|
|
Form of 2018 Change in Control Severance Pay Plan for Select Employees
(1)
|
|
|
|
10.12
|
|
Elanco RSU Awards Agreement
(1)
|
|
|
|
10.13
|
|
Elanco Nonqualified Stock Option Agreement
(1)
|
|
|
|
21
|
|
List of Subsidiaries
|
|
|
|
23
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
31.1
|
|
Rule 13a-14(a) Certification of David A. Ricks, President and Chief Executive Officer
|
|
|
|
31.2
|
|
Rule 13a-14(a) Certification of Joshua L. Smiley, Senior Vice President and Chief Financial Officer
|
|
|
|
32
|
|
Section 1350 Certification
|
|
|
|
101
|
|
Interactive Data File
|
Item 16.
|
Form 10-K Summary
|
Exhibit
|
|
|
|
Location
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
Exhibit
|
|
|
|
Location
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
101
|
|
Interactive Data File
|
|
Attached
|
By
|
|
/s/ David A. Ricks
|
David A. Ricks
|
||
Chairman, President and Chief Executive Officer
|
Signature
|
|
Title
|
|
|
|
/s/ David A. Ricks
|
|
Chairman, President and Chief Executive Officer (principal executive officer)
|
DAVID A. RICKS
|
|
|
|
|
|
/s/ Joshua L. Smiley
|
|
Senior Vice President and Chief Financial Officer (principal financial officer)
|
JOSHUA L. SMILEY
|
|
|
|
|
|
/s/ Donald A. Zakrowski
|
|
Vice President, Finance and Chief Accounting Officer (principal accounting officer)
|
DONALD A. ZAKROWSKI
|
|
|
|
|
|
/s/ Ralph Alvarez
|
|
Director
|
RALPH ALVAREZ
|
|
|
|
|
|
/s/ Katherine Baicker, Ph.D.
|
|
Director
|
KATHERINE BAICKER, Ph.D.
|
|
|
|
|
|
/s/ Carolyn R. Bertozzi, Ph.D.
|
|
Director
|
CAROLYN R. BERTOZZI, Ph.D.
|
|
|
|
|
|
/s/ Michael L. Eskew
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Director
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MICHAEL L. ESKEW
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/s/ J. Erik Fyrwald
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Director
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J. ERIK FYRWALD
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/s/ Jamere Jackson
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Director
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JAMERE JACKSON
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/s/ William G. Kaelin, Jr., M.D.
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Director
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WILLIAM G. KAELIN, JR., M.D.
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/s/ Juan R. Luciano
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Director
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JUAN R. LUCIANO
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/s/ Ellen R. Marram
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Director
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ELLEN R. MARRAM
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/s/ Marschall S. Runge, M.D., Ph.D.
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Director
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MARSCHALL S. RUNGE, M.D., Ph.D.
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/s/ Kathi P. Seifert
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Director
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KATHI P. SEIFERT
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/s/ Jackson P. Tai
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Director
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JACKSON P. TAI
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/s/ Karen Walker
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Director
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KAREN WALKER
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Section 1.
|
Grant of Performance Award
|
Section 2.
|
Vesting
|
a.
|
The actual cumulative EPS for the Performance Period shall be computed using the following procedures:
|
i.
|
A determination of adjusted consolidated net income ascertained from the Company's audited consolidated financial statements shall be made for each fiscal year in the Performance Period in accordance with accounting principles currently applicable in the United States ("US GAAP"), adjusted to the extent deemed appropriate by the Committee for any unusual items deemed significant by the Committee.
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ii.
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The number of shares of outstanding Lilly Common Stock used to compute consolidated EPS shall be determined as of the end of each fiscal year in the Performance Period on a diluted basis or its equivalent in accordance with US GAAP.
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iii.
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To calculate consolidated EPS for each fiscal year in the Performance Period, the adjusted consolidated net income shall be divided by the number of shares of outstanding Lilly Common Stock as computed in accordance with subsection (ii) above and the quotient rounded to the nearest cent.
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iv.
|
To determine the cumulative EPS for the Performance Period, the EPS amounts for each fiscal year as determined above shall be added.
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b.
|
The payout multiple corresponding to the EPS Growth (as shown on page 1 of this document) shall then be applied to the Target Number of Shares.
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c.
|
The number of Performance Units under this Performance Award will be the number resulting from the calculation described in subsection (b) above.
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d.
|
In the event the Grantee’s Service with the Company or an Affiliate is terminated prior to the Service Vesting Date for any reason or in any circumstance other than a Qualifying Termination (as described below), or a retirement after the last day of the Performance Period, as provided in Section 3(c) or (d), the Award, including any accrued Dividend Equivalent Rights, shall be forfeited.
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Section 3.
|
Adjustments, Vesting Acceleration and Forfeitures Upon Certain Employment Status Changes
|
a.
|
Leaves of Absence
. The number of Performance Units shall be reduced proportionally for any portion of the total days in the Performance Period during which the Grantee is on an approved unpaid leave of absence longer than ninety (90) days.
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b.
|
Demotions, Disciplinary Actions and Misconduct
. The Company may, in its sole discretion, cancel this Performance Award or reduce the number of Performance Units, prorated according to time or other measure as determined appropriate by the Company, if during any period prior to the Service Vesting Date the Grantee has been (i) subject to disciplinary action by the Company or (ii) determined to have committed a material violation of law or Company policy or to have failed to properly manage or monitor the conduct of an employee who has committed a material violation of law or Company policy whereby, in either case, such conduct causes significant harm to the Company, as determined in the sole discretion of the Company.
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c.
|
Qualifying Termination
. In the event the Grantee’s employment is subject to a Qualifying Termination (as defined below), the Performance Units shall vest, provided that if the Qualifying Termination occurs prior to the last day of the Performance Period, the number of Performance Units shall be reduced proportionally for the portion of the total days during the Performance Period in which the Grantee was not in active Service.
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i.
|
retirement as a “retiree,” which is a person who is (A) a retired employee under the Lilly Retirement Plan; (B) a retired employee under the retirement plan or program of an Affiliate; or (C) a retired employee under a retirement program specifically approved by the Committee;
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ii.
|
the Grantee’s Service is terminated due to the Grantee’s death;
|
iii.
|
the Grantee’s Service is terminated by reason of Disability;
|
iv.
|
the Grantee’s Service is terminated due to a plant closing or reduction in workforce (as defined below);
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v.
|
the Grantee’s Service is terminated as a result of the Grantee’s failure to locate a position within the Company or an Affiliate following the placement of the Grantee on reallocation or medical reassignment in the United States (or equivalent as determined by the Committee).
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d.
|
Retirement.
Notwithstanding Section 3(c)(i), in the event the Grantee's Service is terminated due to retirement as a “retiree” (as defined in Section 3(c)) subsequent to the last day of the Performance Period but prior to the Service Vesting Date, the Performance Units, if any, shall continue to accrue Dividend Equivalent Rights and the Performance Units and Dividend Equivalent Rights shall vest on the Service Vesting Date.
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e.
|
Employment Probation
. If the Grantee is placed on employment probation (or its equivalent as determined by the Committee) at any time subsequent to the last day of the Performance Period but prior to the Service Vesting Date, the Grantee shall forfeit the Performance Units and Dividend Equivalent Rights scheduled to vest on the Service Vesting Date to the extent the Award is the next subsequent Award (when compared to other Awards held by the Grantee) that is scheduled to vest following the date that the Grantee is placed on employment probation (it being understood that all other Awards, if any, that are scheduled to vest on the Service Vesting Date shall also be forfeited).
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Section 4.
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Change in Control
|
a.
|
The only Change in Control event that shall result in a benefit under this Section 4 shall be the consummation of a merger, share exchange, or consolidation of the Company, as defined in Section 2.6(c) of the Plan (a “Transaction”).
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b.
|
In the event of a Transaction that occurs prior to the last day of the Performance Period, the Grantee will be credited with an award of Restricted Stock Units equal to the number of Performance Units, to be calculated in a manner consistent with Section 2, but the cumulative EPS shall equal the Company’s cumulative EPS expected results (as determined by the Company’s last approved forecast prior to the consummation of the Transaction, not considering the impact of the Transaction) (the “Credited RSU Award”). The Credited RSU Award shall be eligible to vest on the last day of the Performance Period, subject to the Grantee’s continued Service through the last day of the Performance Period, except as provided below:
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i.
|
In the event that (A) the Grantee is subject to a Qualifying Termination prior to the last day of the Performance Period or (B) the Credited RSU Award is not converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with a Transaction, then immediately prior to the Transaction, the Credited RSU Award shall vest automatically in full.
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ii.
|
In the event that the Credited RSU Award is converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with the Transaction and the Grantee is subject to a Covered Termination (as defined below) prior to the last day of the Performance Period, then immediately as of the date of the Covered Termination, the Credited RSU Award shall vest automatically in full.
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c.
|
The following shall apply in the event of a Transaction that occurs subsequent to the last day of the Performance Period but prior to the Service Vesting Date:
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i.
|
In the event that the Performance Units are not converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with a Transaction, then immediately prior to the Transaction, the Performance Units shall vest automatically in full.
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ii.
|
In the event that the Performance Units are converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection
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Section 5.
|
Settlement
|
a.
|
Except as provided below, a vested Award shall be paid to the Grantee as soon as practicable, but in no event later than sixty (60) days following the Service Vesting Date, including if the Award vests (i) pursuant to Section 3(c) or (ii) pursuant to Section 3(d) prior to the last day of the Performance Period.
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b.
|
If the Award vests pursuant to Section 3(c) subsequent to the last day of the Performance Period, the Award shall be paid to the Grantee no later than sixty (60) days following the date of the Qualifying Termination, provided that if the Award is considered an item of nonqualified deferred compensation subject to Section 409A of the Code (“NQ Deferred Compensation”), the Award shall be paid within sixty (60) days following the date the Grantee experiences a “separation from service” within the meaning of Section 409A of the Code (a “409A Separation”).
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c.
|
If the Award vests pursuant to Section 4(b)(i) or Section 4(c)(i), the Award shall be paid to the Grantee immediately prior to the Transaction, provided that if the Award is considered NQ Deferred Compensation and the Transaction does not constitute a “change in control event” under Section 409A of the Code (a “409A CIC”), then the Award shall be paid in cash (calculated based on the value of the Shares established for the consideration to be paid to holders of Shares in the Transaction) on the Service Vesting Date.
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d.
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If the Award vests pursuant to Section 4(b)(ii) or Section 4(c)(ii), the Award shall be paid to the Grantee as soon as practicable, but in no event later than sixty (60) days following the date the Grantee is subject to a Covered Termination, provided that if the Award is NQ Deferred Compensation, (i) the Award shall be paid within sixty (60) days following the date the Grantee experiences a Section 409A Separation and (ii) if the Grantee is a “specified employee” within the meaning of Section 409A of the Code as of the payment date, the Award shall instead be paid on the earliest of (1) the first day following the six (6) month anniversary of the Grantee’s Section 409A Separation, (2) the date of a 409A CIC, and (3) the date of the Grantee’s death.
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e.
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At the time of settlement provided in this Section 5, Lilly shall issue or transfer Shares or the cash equivalent, as contemplated under Section 5(f) below, to the Grantee. In the event the Grantee is entitled to a fractional Share, the fraction may be paid in cash or rounded, in the Committee’s discretion.
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f.
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At any time prior to the Service Vesting Date or until the Performance Units are paid in accordance with this Section 5, the Committee may, if it so elects, determine to pay part or all of the Performance Units in cash in lieu of issuing or transferring Shares. The amount of cash shall be calculated based on the Fair Market Value of the Shares on the last day of the Restriction Period in the case of payment pursuant to Section 5(a) and on the date of date of payment in the case of a payment pursuant to Section 5(d).
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g.
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Dividend Equivalent Rights, if any, that accrue hereunder shall be settled in cash.
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h.
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In the event of the death of the Grantee, the payments described above shall be made to the successor of the Grantee.
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Section 6.
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Rights of the Grantee
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a.
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No Shareholder Rights
. The Performance Award does not entitle the Grantee to any rights of a shareholder of Lilly until such time as the Performance Award is settled and Shares are issued or transferred to the Grantee.
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b.
|
Dividend Equivalent Rights
. On each date that the Company pays a cash dividend to holders of Shares during the period commencing on the date the number of Performance Units are determined continuing through the date the Performance Units are settled, the Grantee shall be credited with Dividend Equivalent Rights in an amount equal to the total number of Performance Units, multiplied by the dollar amount of the cash dividend paid per Share by the Company on such date. Dividend Equivalent Rights shall accrue in an account denominated in U.S. dollars and shall not accrue interest or other credits prior to being paid. The Dividend Equivalent Rights shall be subject to the same vesting conditions and restrictions as the Performance Units to which the Dividend Equivalent Rights relate, and the Dividend Equivalent Rights shall be forfeited in the event that the Performance Units with respect to which such Dividend Equivalent Rights were credited are forfeited.
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c.
|
No Trust; Grantee’s Rights Unsecured.
Neither this Award Agreement nor any action in accordance with this Award Agreement shall be construed to create a trust of any kind. The right of the Grantee to receive payments of cash or Shares pursuant to this Award Agreement shall be an unsecured claim against the general assets of the Company.
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Section 7.
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Prohibition Against Transfer
|
Section 8.
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Responsibility for Taxes
|
a.
|
Regardless of any action Lilly and/or the Grantee’s employer (the “Employer”) takes with respect to any or all income tax (including federal, state, local and non-U.S. tax), social insurance, payroll tax, fringe benefits tax, payment on account or other tax related items related to the Grantee’s participation in the Plan and legally applicable to the Grantee (“Tax Related Items”), the Grantee acknowledges that the ultimate liability for all Tax Related Items is and remains the Grantee’s responsibility and may exceed the amount actually withheld by Lilly or the Employer. The Grantee further acknowledges that Lilly and the Employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the Award, including the grant of the Performance Award, the vesting of the Performance Award, the transfer and issuance of any Shares, the receipt of any cash payment pursuant to the Award, the accrual and payment of Dividend Equivalent Rights, the receipt of any dividends and the sale of any Shares acquired pursuant to this Award; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Grantee’s liability for Tax Related Items or achieve any particular tax result. Furthermore, if the Grantee becomes subject to Tax Related Items in more than one jurisdiction, the Grantee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Related Items in more than one jurisdiction.
|
b.
|
Prior to the applicable taxable or tax withholding event, as applicable, the Grantee shall pay or make adequate arrangements satisfactory to Lilly and/or the Employer to satisfy all Tax Related Items.
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1.
|
If the Performance Award is paid to the Grantee in cash in lieu of Shares, the Grantee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any obligation for Tax Related Items by withholding from the cash amount paid to the Grantee pursuant to the Award or from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer.
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2.
|
If the Performance Award is paid to the Grantee in Shares and the Grantee is not subject to the short-swing profit rules of Section 16(b) of the Exchange Act, the Grantee authorizes Lilly and/or the Employer, or their respective agents, at their discretion, to (i) withhold from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer, (ii) arrange for the sale of Shares to be issued upon settlement of the Award (on the Grantee’s behalf and at the Grantee’s direction pursuant to this authorization or such other authorization as the Grantee may be required to provide to Lilly or its designated broker in order for such sale to be effectuated) and withhold from the proceeds of such sale, and/or (iii) withhold in Shares otherwise issuable to the Grantee pursuant to this Award.
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3.
|
If the Performance Award is paid to the Grantee in Shares and the Grantee is subject to the short-swing profit rules of Section 16(b) of the Exchange Act, Lilly will withhold in Shares otherwise issuable to the Grantee pursuant to this Award, unless the use of such withholding method is prevented by Applicable Laws or has materially adverse accounting or tax consequences, in which case the withholding obligation for Tax Related Items may be satisfied by one or a combination of the methods set forth in Section 8(b)(2)(i) and (ii) above.
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c.
|
Depending on the withholding method, Lilly and/or the Employer may withhold or account for Tax Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Grantee may receive a refund of any over-withheld amount in cash as soon as practicable and without interest and will not be entitled to the equivalent amount in Shares. If the obligation for Tax Related Items is satisfied by withholding Shares, for tax purposes, the Grantee will be deemed to have been issued the full number of Shares to which he or she is entitled pursuant to this Award, notwithstanding that a number of Shares are withheld to satisfy the obligation for Tax Related Items.
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d.
|
Lilly may require the Grantee to pay Lilly and/or the Employer any amount of Tax Related Items that Lilly and/or the Employer may be required to withhold or account for as a result of any aspect of this Award that cannot be satisfied by the means previously described. Lilly may refuse to deliver Shares or any cash payment to the Grantee if the Grantee fails to comply with the Grantee’s obligation in connection with the Tax Related Items as described in this Section 8.
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Section 9.
|
Section 409A Compliance
|
Section 10.
|
Grantee’s Acknowledgments
|
a.
|
the Plan is established voluntarily by Lilly, it is discretionary in nature and it may be modified, amended, suspended or terminated by Lilly at any time, as provided in the Plan;
|
b.
|
the Award is voluntary and occasional and does not create any contractual or other right to receive future Performance-Based Awards, or benefits in lieu thereof, even if Performance-Based Awards have been granted in the past;
|
c.
|
all decisions with respect to future Performance-Based Awards or other awards, if any, will be at the sole discretion of the Committee;
|
d.
|
the Grantee’s participation in the Plan is voluntary;
|
e.
|
the Award and any Shares subject to the Award are not intended to replace any pension rights or compensation;
|
f.
|
the Award and any Shares subject to the Award, and the income and value of same, are not part of normal or expected compensation for any purpose, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, leave pay, pension or welfare or retirement benefits or similar mandatory payments;
|
g.
|
neither the Award nor any provision of this Award Agreement, the Plan or the policies adopted pursuant to the Plan, confer upon the Grantee any right with respect to employment or continuation of current employment, and in the event that the Grantee is not an employee of Lilly or any subsidiary of Lilly, the Award shall not be interpreted to form an employment contract or relationship with Lilly or any Affiliate;
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h.
|
the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
|
i.
|
no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Grantee ceasing to provide employment or other services to Lilly or the Employer (for any reason whatsoever, whether or not later found to be invalid or in breach of local labor laws in the jurisdiction where the Grantee is employed or the terms of Grantee’s employment agreement, if any);
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j.
|
for purposes of the Award, the Grantee’s employment will be considered terminated as of the date he or she is no longer actively providing services to the Company or an Affiliate and the Grantee’s right, if any, to earn and be paid any portion of the Award and any Dividend Equivalent Rights after such termination of employment or services (regardless of the reason for such termination and whether or not such termination is later found to be invalid or in breach of employment laws in the jurisdiction where the Grantee is employed or the terms of the Grantee’s employment agreement, if any) will be measured by the date the Grantee ceases to actively provide services and will not be extended by any notice period (e.g., active service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Grantee is employed or the terms of the Grantee’s employment agreement, if any); the Committee shall have the exclusive discretion to determine when the Grantee is no longer actively providing services for purposes of the Award (including whether the Grantee may still be considered to be actively providing services while on a leave of absence) in accordance with Section 409A;
|
k.
|
unless otherwise provided in the Plan or by the Committee in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares;
|
l.
|
the Grantee is solely responsible for investigating and complying with any laws applicable to him or her in connection with the Award; and
|
m.
|
the Company has communicated share ownership guidelines that apply to the Grantee, and the Grantee understands and agrees that those guidelines may impact any shares of Lilly Stock that may be issued pursuant to this Award.
|
Section 11.
|
Data Privacy
|
a.
|
Data Collection and Usage
. The Company and the Employer may collect, process and use certain personal information about the Grantee, and persons closely associated with the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job
|
b.
|
Stock Plan Administration Service Providers
. The Company transfers Data to Bank of America Merrill Lynch and/or its affiliated companies (“Merrill Lynch”), an independent service provider, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Grantee may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan. The Company may also transfer Data to KPMG, an independent service provider, which is also assisting the Company with certain aspects of the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner.
|
c.
|
International Data Transfers
. The Company and its service providers are based in the United States. The Grantee’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program, which is open to companies subject to Federal Trade Commission jurisdiction and in which the Company participates with respect to employee data. The Company also participates in the Swiss-U.S. Privacy Shield program under which the Company certifies compliance with certain Swiss data protection requirements with respect to employee data. The Company’s legal basis, where required, for the transfer of Data is Grantee’s consent.
|
d.
|
Data Retention
. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.
|
e.
|
Voluntariness and Consequences of Consent Denial or Withdrawal
. Participation in the Plan is voluntary and the Grantee is providing the consents herein on a purely voluntary basis. If the Grantee does not consent, or if the Grantee later seeks to revoke the Grantee’s consent, the Grantee’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Grantee’s consent is that the Company would not be able to grant this Award or other awards to the Grantee or administer or maintain such awards.
|
f.
|
Declaration of Consent
. By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Grantee is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.
|
Section 12.
|
Additional Terms and Conditions
|
Section 13.
|
Governing Law and Choice of Venue
|
Section 14.
|
Miscellaneous Provisions
|
a.
|
Notices and Electronic Delivery and Participation
. Any notice to be given by the Grantee or successor Grantee shall be in writing, and any notice shall be deemed to have been given or made only upon receipt thereof by the Treasurer of Lilly at Lilly Corporate Center, Indianapolis, Indiana 46285, U.S.A. Any notice or communication by Lilly in writing shall be deemed to have been given in the case of the Grantee if mailed or delivered to the Grantee at any address specified in writing to Lilly by the Grantee and, in the case of any successor Grantee, at the address specified in writing to Lilly by the successor Grantee. In addition, Lilly may, in its sole discretion, decide to deliver any documents related to the Award and participation in the Plan by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. By accepting this Award, the Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Lilly or a third party designated by Lilly.
|
b.
|
Language
. If the Grantee has received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.
|
c.
|
Waiver.
The waiver by Lilly of any provision of this Award Agreement at any time or for any purpose shall not operate as or be construed to be a waiver of the same or any other provision of this Award Agreement at any subsequent time or for any other purpose.
|
d.
|
Severability and Section Headings
. If one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award Agreement to be construed so as to foster the intent of this Award Agreement and the Plan.
|
e.
|
No Advice Regarding Grant
. Lilly is not providing any tax, legal or financial advice, nor is Lilly making any recommendations regarding the Grantee’s participation in the Plan or the Grantee’s acquisition or sale of the underlying Shares. The Grantee should consult with his or her own personal tax, legal and financial advisors regarding the Grantee’s participation in the Plan before taking any action related to the Plan.
|
Section 15.
|
Compensation Recovery
|
a.
|
(i) the number of Shares or the amount of the cash payment was calculated based, directly or indirectly, upon the achievement of financial results that were subsequently the subject of a restatement of all or a portion of the Company’s financial statements; and
|
b.
|
the Grantee has been determined to have committed a material violation of law or Company policy or to have failed to properly manage or monitor the conduct of an employee who has committed a material violation of law or Company policy whereby, in either case, such misconduct causes significant harm to the company.
|
Section 16.
|
Award Subject to Acknowledgement of Acceptance
|
|
No Payout
|
Level 1
|
Level 2
|
Level 3
|
Level 4
|
Level 5
|
Final Lilly Stock Price
|
< $103.43
|
$103.43
--
$118.07
|
$118.08
--
$132.72
|
$132.73
–
$147.37
|
$147.38
–
$162.02
|
> $162.02
|
Percent of Target
|
0%
|
50%
|
75%
|
100%
|
125%
|
150%
|
Section 1.
|
Grant of Shareholder Value Award
|
Section 2.
|
Vesting
|
a.
|
“
Percent of Target
” shall mean the percentage set forth in the Lilly Stock Price Performance Levels table set forth on the first page of this document representing the attainment level of the Final Lilly Stock Price measured against the performance goal attainment levels set forth in the table.
|
b.
|
“
Final Lilly Stock Price
” shall mean the average of the closing price of a share of Lilly Common Stock on the New York Stock Exchange for each trading day in the last two months of the Performance Period, rounded to the nearest cent.
|
c.
|
“
TSR Modifier
” shall mean a whole percentage (as set forth in the TSR Modifier graphic on page 1 of this document) representing the absolute percentage point difference in the performance of the Company’s TSR compared to the Peer Group’s median TSR, subject to a maximum TSR Modifier of plus or minus 20% (
i.e.,
each whole percentage point represents the percentage that the Company’s TSR is above or below the Peer Group’s median TSR).
|
d.
|
“
Total Shareholder Return
” or “
TSR
” shall mean the quotient of (i) the Final Lilly Stock Price or Final Peer Stock Price, as applicable, minus the corresponding Beginning Stock Price, including the impact of Dividend reinvestment on each ex-dividend date, if any, paid by the applicable issuer during the Performance Period, divided by (ii) the corresponding Beginning Stock Price.
|
e.
|
“
Beginning Stock Price
” shall mean the average closing price of a share of Lilly Common Stock on the New York Stock Exchange or a share of each Peer Group company’s stock, as applicable, for each trading day in the two month period immediately preceding the Performance Period, rounded to the nearest cent.
|
f.
|
“
Final Peer Stock Price
” shall mean the average of the closing price of a share of each Peer Group company’s stock, on Nasdaq, the New York Stock Exchange, or other market where an independent share price can be determined, for each trading day in the last two months of the Performance Period, rounded to the nearest cent.
|
g.
|
“
Dividend
” shall mean ordinary or extraordinary cash dividends paid by Lilly or a Peer Group company to its shareholders of record at any time during the Performance Period.
|
h.
|
“
Peer Group
” shall mean all companies identified and most recently approved by the Committee as a member of the Company’s Peer Group in effect as of the Grant Date. Companies that are members of the Peer Group at the beginning of the Performance Period that subsequently cease to be traded on a market where an independent share price can be determined shall be excluded from the Peer Group.
|
Section 3.
|
Adjustments for Certain Employment Status Changes
|
a.
|
Leaves of Absence
. The number of Shares eligible to vest shall be reduced proportionally for any portion of the total days in the Performance Period during which the Grantee is on an approved unpaid leave of absence longer than ninety (90) days.
|
b.
|
Demotions, Disciplinary Actions and Misconduct
. The Committee may, in its sole discretion, cancel this Shareholder Value Award or reduce the number of Shares eligible to vest, prorated according to time or other measure as determined appropriate by the Committee, if during any portion of the Performance Period the Grantee has been (i) subject to disciplinary action by the Company or (ii) determined to have committed a material violation of law or Company policy or to have failed to properly manage or monitor the conduct of an employee who has committed a material violation of law or Company policy whereby, in either case, such conduct causes significant harm to the Company, as determined in the sole discretion of the Company.
|
c.
|
Qualifying Termination
. In the event the Grantee’s employment is subject to a Qualifying Termination (as defined below), the number of Shares eligible to vest shall be reduced proportionally for the portion of the total days during the Performance Period in which the Grantee was not in active Service.
|
i.
|
retirement as a “retiree,” which is a person who is (A) a retired employee under the Lilly Retirement Plan; (B) a retired employee under the retirement plan or program of an Affiliate; or (C) a retired employee under a retirement program specifically approved by the Committee;
|
ii.
|
the Grantee’s Service is terminated due to the Grantee’s death;
|
iii.
|
the Grantee’s Service is terminated by reason of Disability;
|
iv.
|
the Grantee’s Service is terminated due to a plant closing or reduction in workforce (as defined below);
|
v.
|
the Grantee’s Service is terminated as a result of the Grantee’s failure to locate a position within the Company or an Affiliate following the placement of the Grantee on reallocation or medical reassignment in the United States (or equivalent as determined by the Committee).
|
Section 4.
|
Change in Control
|
a.
|
The only Change in Control event that shall result in a benefit under this Section 4 shall be the consummation of a merger, share exchange, or consolidation of the Company, as defined in Section 2.6(c) of the Plan (a “Transaction”).
|
b.
|
In the event of a Transaction that occurs prior to the end of the Performance Period, the Grantee will be credited with an award of Restricted Stock Units equal to the number of Shares eligible to vest, calculated in a manner consistent with Section 2, but the Final Lilly Stock Price shall be equal to the value of Shares established for the consideration to be paid to holders of Shares in the Transaction (the “Credited RSU Award”). The Credited RSU Award shall be eligible to vest on the last day of the Performance Period, subject to the Grantee’s continued Service through the last day of the Performance Period, except as provided below:
|
i.
|
In the event that (A) the Grantee is subject to a Qualifying Termination prior to the end of the Performance Period or (B) the Credited RSU Award is not converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with a Transaction, then immediately prior to the Transaction, the Credited RSU Award shall vest automatically in full.
|
ii.
|
In the event that the Credited RSU Award is converted, assumed, substituted, continued or replaced by a successor or surviving corporation, or a parent or subsidiary thereof, in connection with the Transaction and the Grantee is subject to a Covered Termination (as defined below) prior to the end of the Performance Period, then immediately as of the date of the Covered Termination, the Credited RSU Award shall vest automatically in full.
|
c.
|
If the Grantee is entitled to receive stock of the acquiring entity or successor to the Company as a result of the application of this Section 4, then references to Shares in this Award Agreement shall be read to mean stock of the successor or surviving corporation, or a parent or subsidiary thereof, as and when applicable.
|
Section 5.
|
Settlement
|
a.
|
Except as provided below, the Award shall be paid to the Grantee as soon as practicable, but in no event later than sixty (60) days, following the last day of the Performance Period.
|
b.
|
If the Award vests pursuant to Section 4(b)(i), the Award shall be paid to the Grantee immediately prior to the Transaction, provided that if the Award is considered an item of non-qualified deferred compensation subject to Section 409A of the Code (“NQ Deferred Compensation”) and the Transaction does not constitute a “change in control event,” within the meaning of the U.S. Treasury Regulations (a “409A CIC”), then the Award shall be paid in cash (calculated based on the value of the Shares established for the consideration to be paid to holders of Shares in the Transaction) on the earliest of the date that the Grantee experiences a “separation from service” within the meaning of Section 409A of the Code (a “Section 409A Separation”), the date of the Grantee’s death and the date set forth in Section 5(a) above.
|
c.
|
If the Award vests pursuant to Section 4(b)(ii), the Award shall be paid to the Grantee as soon as practicable, but in no event later than sixty (60) days, following the date the Grantee is subject to a Covered Termination, provided that if the Award is NQ Deferred Compensation, (i) the Award shall be paid within sixty (60) days following the date the Grantee experiences a Section 409A Separation and (ii) if the Grantee is a “specified employee” within the meaning of Section 409A of the Code as of the payment date, the Award shall instead be paid on the earliest of (1) the first day following the six (6) month anniversary of the Grantee’s Section 409A Separation, (2) the date of a 409A CIC, and (3) the date of the Grantee’s death.
|
d.
|
At the time of settlement provided in this Section 5,
Lilly shall issue or transfer Shares or the cash equivalent, as contemplated under Section 5(e) below, to the Grantee. In the event the Grantee is entitled to a fractional Share, the fraction may be paid in cash or rounded, in the Committee’s discretion.
|
e.
|
At any time prior to the end of the Performance Period or until the Award is paid in accordance with this Section 5, the Committee may, if it so elects, determine to pay part or all of the Award in cash in lieu of issuing or transferring Shares. The amount of cash shall be calculated based on the Fair Market Value of the Shares on the last day of the Performance Period in the case of payment pursuant to Section 5(a) and on the date of payment in the case of a payment pursuant to Section 5(c).
|
f.
|
In the event of the death of the Grantee, the payments described above shall be made to the successor of the Grantee.
|
Section 6.
|
Rights of the Grantee
|
a.
|
No Shareholder Rights
. The Shareholder Value Award does not entitle the Grantee to any rights of a shareholder of Lilly until such time as the Shareholder Value Award is settled and Shares are issued or transferred to the Grantee.
|
b.
|
No Trust; Grantee’s Rights Unsecured.
Neither this Award Agreement nor any action in accordance with this Award Agreement shall be construed to create a trust of any kind. The right of the Grantee to receive payments of cash or Shares pursuant to this Award Agreement shall be an unsecured claim against the general assets of the Company.
|
Section 7.
|
Prohibition Against Transfer
|
Section 8.
|
Responsibility for Taxes
|
a.
|
Regardless of any action Lilly and/or the Grantee’s employer (the “Employer”) takes with respect to any or all income tax (including federal, state, local and non-U.S. tax), social insurance, payroll tax, fringe benefits tax, payment on account or other tax related items related to the Grantee’s participation in the Plan and legally applicable to the Grantee (“Tax Related Items”), the Grantee acknowledges that the ultimate liability for all Tax Related Items is and remains the Grantee’s responsibility and may exceed the amount actually withheld by Lilly or the Employer. The Grantee further acknowledges that Lilly and the Employer (i) make no representations or undertakings regarding the treatment of any Tax Related Items in connection with any aspect of the Award, including the grant of the Shareholder Value Award, the vesting of the Shareholder Value Award, the transfer and issuance of any Shares, the receipt of any cash payment pursuant to the Award, the receipt of any dividends and the sale of any Shares acquired pursuant to this Award; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Grantee’s liability for Tax Related Items or achieve any particular tax result. Furthermore, if the Grantee becomes subject to Tax Related Items in more than one jurisdiction, the Grantee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax Related Items in more than one jurisdiction.
|
b.
|
Prior to the applicable taxable or tax withholding event, as applicable, the Grantee shall pay or make adequate arrangements satisfactory to Lilly and/or the Employer to satisfy all Tax Related Items.
|
i.
|
If the Shareholder Value Award is paid to the Grantee in cash in lieu of Shares, the Grantee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any obligation for Tax Related Items by withholding from the cash amount paid to the Grantee pursuant to the Award or from the Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer.
|
ii.
|
If the Shareholder Value Award is paid to the Grantee in Shares and the Grantee is not subject to the short-swing profit rules of Section 16(b) of the Exchange Act, the Grantee authorizes Lilly and/or the Employer, or their respective agents, at their discretion, to (A) withhold from the Grantee’s wages or
|
iii.
|
If the Shareholder Value Award is paid to the Grantee in Shares and the Grantee is subject to the short-swing profit rules of Section 16(b) of the Exchange Act, Lilly will withhold in Shares otherwise issuable to the Grantee pursuant to this Award, unless the use of such withholding method is prevented by Applicable Laws or has materially adverse accounting or tax consequences, in which case the withholding obligation for Tax Related Items may be satisfied by one or a combination of the methods set forth in Section 8(b)(ii)(A) and (B) above.
|
c.
|
Depending on the withholding method, Lilly and/or the Employer may withhold or account for Tax Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Grantee may receive a refund of any over-withheld amount in cash as soon as practicable and without interest and will not be entitled to the equivalent amount in Shares. If the obligation for Tax Related Items is satisfied by withholding Shares, for tax purposes, the Grantee will be deemed to have been issued the full number of Shares to which he or she is entitled pursuant to this Award, notwithstanding that a number of Shares are withheld to satisfy the obligation for Tax Related Items.
|
d.
|
Lilly may require the Grantee to pay Lilly and/or the Employer any amount of Tax Related Items that Lilly and/or the Employer may be required to withhold or account for as a result of any aspect of this Award that cannot be satisfied by the means previously described. Lilly may refuse to deliver Shares or any cash payment to the Grantee if the Grantee fails to comply with the Grantee’s obligation in connection with the Tax Related Items as described in this Section 8.
|
Section 9.
|
Section 409A Compliance
|
Section 10.
|
Grantee’s Acknowledgment
|
a.
|
the Plan is established voluntarily by Lilly, it is discretionary in nature and it may be modified, amended, suspended or terminated by Lilly at any time, as provided in the Plan;
|
b.
|
the Award is voluntary and occasional and does not create any contractual or other right to receive future Performance-Based Awards, or benefits in lieu thereof, even if Performance-Based Awards have been granted in the past;
|
c.
|
all decisions with respect to future Performance-Based Awards or other awards, if any, will be at the sole discretion of the Committee;
|
d.
|
the Grantee’s participation in the Plan is voluntary;
|
e.
|
the Award and any Shares subject to the Award are not intended to replace any pension rights or compensation;
|
f.
|
the Award and any Shares subject to the Award, and the income and value of same, are not part of normal or expected compensation for any purpose, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, holiday pay, leave pay, pension or welfare or retirement benefits or similar mandatory payments;
|
g.
|
neither the Award nor any provision of this Award Agreement, the Plan or the policies adopted pursuant to the Plan, confer upon the Grantee any right with respect to employment or continuation of current employment, and in the event that the Grantee is not an employee of Lilly or any subsidiary of Lilly, the Award shall not be interpreted to form an employment contract or relationship with Lilly or any Affiliate;
|
h.
|
the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
|
i.
|
no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Grantee ceasing to provide employment or other services to Lilly or the Employer (for any reason whatsoever, whether or not later found to be invalid or in breach of local labor laws in the jurisdiction where the Grantee is employed or the terms of Grantee’s employment agreement, if any);
|
j.
|
for purposes of the Award, the Grantee’s employment will be considered terminated as of the date he or she is no longer actively providing services to the Company or an Affiliate and the Grantee’s right, if any, to earn
|
k.
|
unless otherwise provided in the Plan or by the Committee in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares;
|
l.
|
the Grantee is solely responsible for investigating and complying with any laws applicable to him or her in connection with the Award; and
|
m.
|
the Company has communicated share ownership guidelines that apply to the Grantee, and the Grantee understands and agrees that those guidelines may impact any Shares subject to, or issued pursuant to the Award.
|
Section 11.
|
Data Privacy
|
a.
|
Data Collection and Usage
. The Company and the Employer may collect, process and use certain personal information about the Grantee, and persons closely associated with the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, email address, date of birth, social insurance number, passport or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Shareholder Value Awards or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor (“Data”), for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the Grantee’s consent. Where required under applicable law, Data may also be disclosed to certain securities or other regulatory authorities where the Company’s securities are listed or traded or regulatory filings are made and the legal basis, where required, for such disclosure are the applicable laws.
|
b.
|
Stock Plan Administration Service Providers
. The Company transfers Data to Bank of America Merrill Lynch and/or its affiliated companies (“Merrill Lynch”), an independent service provider, which is assisting the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner. The Grantee may be asked to agree on separate terms and data processing practices with the service provider, with such agreement being a condition to the ability to participate in the Plan. The Company may also transfer Data to KPMG, an independent service provider, which is also assisting the Company with certain aspects of the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Data with such other provider serving in a similar manner.
|
c.
|
International Data Transfers
. The Company and its service providers are based in the United States. The Grantee’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued a limited adequacy finding with respect to the United States that applies only to the extent companies register for the EU-U.S. Privacy Shield program, which is open to companies subject to Federal Trade Commission jurisdiction and in which the Company participates with respect to employee data. The Company’s legal basis, where required, for the transfer of Data is Grantee’s consent.
|
d.
|
Data Retention
. The Company will hold and use the Data only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan, or as required to comply with legal or regulatory obligations, including under tax and security laws.
|
e.
|
Voluntariness and Consequences of Consent Denial or Withdrawal
. Participation in the Plan is voluntary and the Grantee is providing the consents herein on a purely voluntary basis. If the Grantee does not consent, or if the Grantee later seeks to revoke the Grantee’s consent, the Grantee’s salary from or employment and career with the Employer will not be affected; the only consequence of refusing or withdrawing the Grantee’s consent is that the Company would not be able to grant this Award or other awards to the Grantee or administer or maintain such awards.
|
f.
|
Declaration of Consent
. By accepting the Award and indicating consent via the Company’s online acceptance procedure, the Grantee is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data by the Company and the transfer of Data to the recipients mentioned above, including recipients located in countries which do not adduce an adequate level of protection from a European (or other non-U.S.) data protection law perspective, for the purposes described above.
|
Section 12.
|
Additional Terms and Conditions
|
Section 13.
|
Governing Law and Choice of Venue
|
Section 14.
|
Miscellaneous Provisions
|
a.
|
Notices and Electronic Delivery and Participation
. Any notice to be given by the Grantee or successor Grantee shall be in writing, and any notice shall be deemed to have been given or made only upon receipt thereof by the Treasurer of Lilly at Lilly Corporate Center, Indianapolis, Indiana 46285, U.S.A. Any notice or communication by Lilly in writing shall be deemed to have been given in the case of the Grantee if mailed or delivered to the Grantee at any address specified in writing to Lilly by the Grantee and, in the case of any successor Grantee, at the address specified in writing to Lilly by the successor Grantee. In addition, Lilly may, in its sole discretion, decide to deliver any documents related to the Award and participation in the Plan by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. By accepting this Award, the Grantee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Lilly or a third party designated by Lilly.
|
b.
|
Language
. If the Grantee has received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
|
c.
|
Waiver.
The waiver by Lilly of any provision of this Award Agreement at any time or for any purpose shall not operate as or be construed to be a waiver of the same or any other provision of this Award Agreement at any subsequent time or for any other purpose.
|
d.
|
Severability and Section Headings
. If one or more of the provisions of this Award Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Award Agreement to be construed so as to foster the intent of this Award Agreement and the Plan.
|
e.
|
No Advice Regarding Grant
. Lilly is not providing any tax, legal or financial advice, nor is Lilly making any recommendations regarding the Grantee’s participation in the Plan or the Grantee’s acquisition or sale of the underlying Shares. The Grantee should consult with his or her own personal tax, legal and financial advisors regarding the Grantee’s participation in the Plan before taking any action related to the Plan.
|
Section 15.
|
Compensation Recovery
|
a.
|
(i) the number of Shares or the amount of the cash payment was calculated based, directly or indirectly, upon the achievement of financial results that were subsequently the subject of a restatement of all or a portion of the Company’s financial statements, (ii) the Grantee engaged in intentional misconduct that caused or partially caused the need for such a restatement; and (iii) the number of Shares or the amount of cash payment that would have been issued or paid to the Grantee had the financial results been properly reported would have been lower than the number of Shares actually issued or the amount of cash actually paid; or
|
b.
|
the Grantee has been determined to have committed a material violation of law or Company policy or to have failed to properly manage or monitor the conduct of an employee who has committed a material violation of law or Company policy whereby, in either case, such misconduct causes significant harm to the company.
|
Section 16.
|
Award Subject to Acknowledgement of Acceptance
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
1096401 B.C. Unlimited Liability Company
|
|
Canada
|
Alnara Pharmaceuticals, Inc.
|
|
Massachusetts
|
Andean Technical Operations Center
|
|
Peru
|
ARMO Bioscience
|
|
Delaware
|
AurKa Pharma
|
|
Canada
|
Avian Holding Group, Inc.
|
|
New York
|
Avid Radiopharmaceuticals, Inc.
|
|
Pennsylvania
|
ChemGen Corporation
|
|
Massachusetts
|
CoLucid Pharmaceuticals, Inc.
|
|
Delaware
|
Del Sol Financial Services, Inc.
|
|
British Virgin Islands
|
Dista Ilac Ticaret Ltd. Sti.
|
|
Turkey
|
Dista, S.A.
|
|
Spain
|
Dista-Produtos Quimicos & Farmaceuticos, LDA
|
|
Portugal
|
Elanco (Shanghai) Animal Health Co., Ltd.
|
|
China
|
Elanco (Taiwan) Animal Health Co. Ltd.
|
|
Taiwan
|
Elanco (Thailand) Ltd.
|
|
Thailand
|
Elanco Animal Health Incorporated
|
|
Indiana
|
Elanco Animal Health Indonesia
|
|
Indonesia
|
Elanco Animal Health Ireland Limited
|
|
Ireland
|
Elanco Animal Health, Korea, Ltd.
|
|
Korea
|
Elanco Animal Health UK Limited
|
|
United Kingdom
|
Elanco Animal Vaccines Limited
|
|
United Kingdom
|
Elanco Australasia Pty. Ltd.
|
|
Australia
|
Elanco Australia Holding Pty Ltd
|
|
Australia
|
Elanco Bangladesh Limited
|
|
Bangladesh
|
Elanco Brazil Holdings Ltda
|
|
Brazil
|
Elanco Canada Limited
|
|
Canada
|
Elanco Centre de Recherche Sante Animale SA
|
|
Switzerland
|
Elanco Deutschland GmbH
|
|
Germany
|
Elanco Europe GmbH
|
|
Switzerland
|
Elanco Europe Ltd.
|
|
United Kingdom
|
Elanco Financing S.A.
|
|
Switzerland
|
Elanco France S.A.S.
|
|
France
|
Elanco GmbH
|
|
Germany
|
Elanco India Private Limited
|
|
India
|
Elanco International, Inc.
|
|
Indiana
|
Elanco Italia S.p.A.
|
|
Italy
|
Elanco Japan KK
|
|
Japan
|
Elanco Nederland B.V.
|
|
Netherlands
|
Elanco Netherlands Holding B.V.
|
|
Netherlands
|
Elanco Rus Limited Liability Company
|
|
Russia
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
Elanco Salud Animal SA de CV
|
|
Mexico
|
Elanco Saude Animal Ltda.
|
|
Brazil
|
Elanco Spain, S.L.
|
|
Spain
|
Elanco Switzerland Holding Sarl
|
|
Switzerland
|
Elanco Tiergesundheit AG
|
|
Switzerland
|
Elanco UK AH Limited
|
|
United Kingdom
|
Elanco US, Inc.
|
|
Delaware
|
Elanco-Valquimica, S.A.
|
|
Spain
|
Elanco Veterina SVN d.o.o
|
|
Slovenia
|
ELCO for Trade and Marketing, S.A.E.
|
|
Egypt
|
ELCO Holdings B.V.
|
|
Netherlands
|
ELCO Insurance Company Limited
|
|
Bermuda
|
ELCO Management, Inc.
|
|
Delaware
|
ELGO Insurance Company Limited
|
|
Bermuda
|
Eli Lilly (Malaysia) Sdn. Bhd.
|
|
Malaysia
|
Eli Lilly (Philippines), Incorporated
|
|
Philippines
|
Eli Lilly (S.A.) (Proprietary) Limited
|
|
South Africa
|
Eli Lilly (Singapore) Pte. Ltd.
|
|
Singapore
|
Eli Lilly (Suisse) S.A.
|
|
Switzerland
|
Eli Lilly and Company
|
|
Indiana
|
Eli Lilly and Company (India) Pvt. Ltd.
|
|
India
|
Eli Lilly and Company (Ireland) Limited
|
|
Ireland
|
Eli Lilly and Company (N.Z.) Limited
|
|
New Zealand
|
Eli Lilly and Company (Taiwan), Inc.
|
|
Taiwan
|
Eli Lilly and Company Limited
|
|
United Kingdom
|
Eli Lilly Asia Pacific SSC Sdn Bhd
|
|
Malaysia
|
Eli Lilly Asia, Inc.
|
|
Delaware
|
Eli Lilly Australia Pty. Limited
|
|
Australia
|
Eli Lilly Benelux S.A.
|
|
Belgium
|
Eli Lilly B-H d.o.o.
|
|
Bosnia
|
Eli Lilly Bienes y Servicios S de RL de CV
|
|
Mexico
|
Eli Lilly Canada Inc.
|
|
Canada
|
Eli Lilly Cork Limited
|
|
Ireland
|
Eli Lilly CR s.r.o.
|
|
Czech Republic
|
Eli Lilly Danmark A/S
|
|
Denmark
|
Eli Lilly de Centro America, S.A.
|
|
Guatemala
|
Eli Lilly do Brasil Limitada
|
|
Brazil
|
Eli Lilly Egypt for Trading
|
|
Egypt
|
Eli Lilly European Clinical Trial Services SA
|
|
Belgium
|
Eli Lilly Export S.A.
|
|
Switzerland
|
Eli Lilly farmacevtska druzba, d.o.o.
|
|
Slovenia
|
Eli Lilly Finance, S.A.
|
|
Switzerland
|
Eli Lilly Ges.m.b.H.
|
|
Austria
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
Eli Lilly Group Limited
|
|
United Kingdom
|
Eli Lilly Hrvatska d.o.o.
|
|
Croatia
|
Eli Lilly Industries, Inc.
|
|
Delaware
|
Eli Lilly Interamerica Inc., y Compania Limitada
|
|
Chile
|
Eli Lilly Interamerica, Inc.
|
|
Indiana
|
Eli Lilly International Corporation
|
|
Indiana
|
Eli Lilly Ireland Holdings Limited
|
|
Ireland
|
Eli Lilly Israel Ltd.
|
|
Israel
|
Eli Lilly Italia S.p.A.
|
|
Italy
|
Eli Lilly Japan K.K.
|
|
Japan
|
Eli Lilly Kinsale Limited
|
|
Ireland
|
Eli Lilly Nederland B.V.
|
|
Netherlands
|
Eli Lilly Nigeria Ltd.
|
|
Nigeria
|
Eli Lilly Norge A.S.
|
|
Norway
|
Eli Lilly Pakistan (Pvt.) Ltd.
|
|
Pakistan
|
Eli Lilly Polska Sp.z.o.o. (Ltd.)
|
|
Poland
|
Eli Lilly Regional Operations GmbH
|
|
Austria
|
Eli Lilly Romania SRL
|
|
Romania
|
Eli Lilly Saudi Arabia Limited
|
|
India
|
Eli Lilly S.A.
|
|
Switzerland
|
Eli Lilly Services India Private Limited
|
|
India
|
Eli Lilly Slovakia s.r.o.
|
|
Slovakia
|
Eli Lilly Sweden AB
|
|
Sweden
|
Eli Lilly Vostok S.A., Geneva
|
|
Switzerland
|
Eli Lilly y Compania de Mexico, S.A. de C.V.
|
|
Mexico
|
Eli Lilly y Compania de Venezuela, S.A.
|
|
Venezuela
|
Greenfield-Produtos Farmaceuticos, Lda.
|
|
Portugal
|
ICOS Corporation
|
|
Washington
|
ImClone GmbH
|
|
Switzerland
|
ImClone LLC
|
|
Delaware
|
ImClone Systems Holdings, Inc.
|
|
Delaware
|
ImClone Systems LLC
|
|
Delaware
|
Immuno-Vet Services (Pty) Ltd. South Africa
|
|
South Africa
|
IMMUNOVET Services Zambia Ltd.
|
|
South Africa
|
Irisfarma S.A.
|
|
Spain
|
Ivy Animal Health, Inc.
|
|
Delaware
|
Kinsale Financial Services Unlimited Company
|
|
Ireland
|
Lilly (Shanghai) Management Co., Ltd
|
|
China
|
Lilly Asia Ventures Fund I, L.P.
|
|
Cayman Islands
|
Lilly Asia Ventures Fund II, L.P.
|
|
Cayman Islands
|
Lilly Asian Ventures Fund III, L.P.
|
|
Cayman Islands
|
|
|
State or Jurisdiction
of Incorporation or Organization |
|
|
|
Lilly Cayman Holdings
|
|
Cayman Islands
|
Lylly Centre for Clinical Pharmacology PTE. LTD.
|
|
Singapore
|
Lilly China Research and Development Co., Ltd.
|
|
China
|
Lilly del Caribe, Inc.
|
|
Cayman Islands
|
Lilly Deutschland GmbH
|
|
Germany
|
Lilly France S.A.S.
|
|
France
|
Lilly Global Nederland Holdings B.V.
|
|
Netherlands
|
Lilly Global Services, Inc.
|
|
Indiana
|
Lilly Holding GmbH
|
|
Germany
|
Lilly Holdings B.V.
|
|
Netherlands
|
Lilly Hungaria KFT
|
|
Hungary
|
Lilly ilaç ticaret limited şirketi
|
|
Turkey
|
Lilly Industries Holdings B.V.
|
|
Netherlands
|
Lilly Korea Ltd.
|
|
Korea
|
Lilly Nederland Finance B.V.
|
|
Netherlands
|
Lilly Nederland Finance B.V. - GCC
|
|
Netherlands
|
Lilly Nederland Holding B.V.
|
|
Netherlands
|
Lilly Pharma Ltd.
|
|
Russia
|
Lilly Portugal - Produtos Farmaceuticos, Lda.
|
|
Portugal
|
Lilly S.A.
|
|
Spain
|
Lilly Suzhou Pharmaceutical Co. Ltd.
|
|
China
|
Lilly Trading Co. LTD
|
|
China
|
Lilly USA, LLC
|
|
Indiana
|
Lilly Ventures Fund I LLC
|
|
Delaware
|
Lohmann Animal Health (Malaysia) Sdn. Bhd
|
|
Malaysia
|
Lohmann Animal Health Beteiligungs GmbH
|
|
Germany
|
Lohmann Animal Health GmbH
|
|
Germany
|
Lohmann Animal Health International Inc.
|
|
Maine
|
Lohmann Animal Health Phils. Corp.
|
|
Philippines
|
Lohmann Animal Health South Africa (Pty) Ltd.
|
|
South Africa
|
Lohmann Asia Holding Co. Ltd.
|
|
Thailand
|
OY Eli Lilly Finland AB
|
|
Finland
|
Pharmaserve-Lilly S.A.C.I.
|
|
Greece
|
PT. Eli Lilly Indonesia
|
|
Indonesia
|
Spaly Bioquimica, S.A.
|
|
Spain
|
UAB Eli Lilly Lietuva
|
|
Lithuania
|
Vericore Limited
|
|
United Kingdom
|
Vital Pharma Productos Farmaceuticos
|
|
Portugal
|
1.
|
I have reviewed this report on Form 10-K of Eli Lilly and Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
|
/s/ David A. Ricks
|
|
|
David A. Ricks
|
|
|
Chairman, President and Chief Executive Officer
|
1.
|
I have reviewed this report on Form 10-K of Eli Lilly and Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
By:
|
|
/s/ Joshua L. Smiley
|
|
|
Joshua L. Smiley
|
|
|
Senior Vice President and Chief Financial Officer
|
Date:
|
February 19, 2019
|
|
/s/ David A. Ricks
|
|
|
|
David A. Ricks
|
|
|
|
Chairman, President and Chief Executive Officer
|
Date:
|
February 19, 2019
|
|
/s/ Joshua L. Smiley
|
|
|
|
Joshua L. Smiley
|
|
|
|
Senior Vice President and
Chief Financial Officer
|