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An
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Indiana
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corporation
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I.R.S. employer identification no.
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35-0470950
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange On Which Registered
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Common Stock (no par value)
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LLY
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New York Stock Exchange
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1.000% Notes due 2022
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LLY22
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New York Stock Exchange
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7 1/8% Notes due 2025
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LLY25
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New York Stock Exchange
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1.625% Notes due 2026
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LLY26
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New York Stock Exchange
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2.125% Notes due 2030
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LLY30
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New York Stock Exchange
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0.625% Notes due 2031
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LLY31
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New York Stock Exchange
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6.77% Notes due 2036
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LLY36
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New York Stock Exchange
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1.700% Notes due 2049
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LLY49A
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New York Stock Exchange
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Large accelerated filer
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ý
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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☐
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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;
|
•
|
market uptake of recently launched products;
|
•
|
competitive developments affecting current products and our pipeline;
|
•
|
the expiration of intellectual property protection for certain of our products;
|
•
|
our ability to protect and enforce patents and other intellectual property;
|
•
|
the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and access to pharmaceuticals;
|
•
|
regulatory compliance problems or government investigations;
|
•
|
regulatory actions regarding currently marketed products;
|
•
|
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, investigations, or other similar proceedings involving past, current, or future products or commercial activities 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 United States tax reform legislation enacted in December 2017 and related guidance, or events that differ from our assumptions related to tax positions;
|
•
|
changes in foreign currency exchange rates, interest rates, and inflation;
|
•
|
asset impairments and restructuring charges;
|
•
|
changes in accounting and reporting 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; and
|
•
|
the impact of global macroeconomic conditions.
|
Item 1.
|
Business
|
•
|
Baqsimi® (glucagon), a nasal powder formulation for the treatment of severe hypoglycemia in patients with diabetes (approved in the U.S. and Europe in 2019)
|
•
|
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™)
|
•
|
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
|
•
|
Humalog®, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, and insulin lispro, 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
|
•
|
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 Europe and Japan in 2017, and in the U.S. in 2018)
|
•
|
Taltz®, for the treatment of moderate-to-severe plaque psoriasis, active psoriatic arthritis (approved in the U.S. in 2017, and in Europe in 2018), and ankylosing spondylitis (approved in the U.S. in 2019)
|
•
|
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 migraine prevention (approved in the U.S. and Europe in 2018) and the treatment of episodic cluster headache (approved in the U.S. in 2019)
|
•
|
Reyvow™, an oral medicine for the acute treatment of migraine (launched in the U.S. in 2020)
|
•
|
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 use as a single agent or in combination with another agent as a second-line treatment of advanced or metastatic gastric cancer or gastro-esophageal junction adenocarcinoma; in combination with another agent as a second-line treatment of metastatic NSCLC; in combination with another agent as a second-line treatment of metastatic colorectal cancer; as a single agent as a second-line treatment of hepatocellular carcinoma (approved in the U.S. in 2019); and in combination with another agent as a first-line treatment of adult patients with metastatic NSCLC with activating epidermal growth factor receptor (EGFR) mutations (approved in Europe in 2020)
|
•
|
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
|
•
|
Verzenio®, for use as a single agent and in combination with endocrine therapy for the treatment of a certain type of metastatic breast cancer (approved in the U.S. in 2017 and in Europe and Japan in 2018)
|
•
|
Cialis®, for the treatment of erectile dysfunction and benign prostatic hyperplasia
|
•
|
We and Boehringer Ingelheim have a global agreement to develop and commercialize a portfolio of diabetes products, including Trajenta, Jentadueto®, Jardiance, Glyxambi®, Synjardy®, Trijardy® XR, and Basaglar.
|
•
|
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 FDA. To make up for a portion of the time invested in clinical trials and the FDA review
|
•
|
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 Europe, 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 consider 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. The BPCI Act is part of the Affordable Care Act, the constitutionality of which is currently being litigated.
|
•
|
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 (May 2022).
|
•
|
Baqsimi is protected by data protection (July 2022).
|
•
|
Cyramza is protected by a compound patent and biologics data protection (2026).
|
•
|
Emgality is protected by a compound patent (2033).
|
•
|
Jardiance, and the related combination products Glyxambi and Synjardy, are protected by a compound patent (2025, not including possible patent extension).
|
•
|
Olumiant is protected by a compound patent (2030, not including possible patent extension).
|
•
|
Reyvow is protected by a compound patent (2025, not including possible patent extension).
|
•
|
Taltz is protected by a compound patent (2026, not including possible patent extension) and by biologics data protection (2028).
|
•
|
Trajenta and Jentadueto are protected by a compound patent (2023, not including possible patent extension).
|
•
|
Trulicity is protected by a compound patent (2027).
|
•
|
Verzenio is protected by a compound patent (2029, not including possible patent extension).
|
•
|
Alimta is protected by a vitamin regimen patent in major European countries (June 2021) and by patents covering use to treat cancer concomitantly with vitamins in Japan (June 2021).
|
•
|
Cyramza is protected by a compound patent in major European countries (2028) and Japan (2026).
|
•
|
Emgality in is protected by a compound patent in major European countries (2033) and Japan (2031, not including possible patent extension).
|
•
|
Olumiant is protected by a compound patent in major European countries (2029, not including possible patent extension) and Japan (2033).
|
•
|
Taltz is protected by a compound patent in major European countries (2031) and Japan (2030).
|
•
|
Trulicity is protected by a compound in major European countries and Japan (2029).
|
•
|
Verzenio is protected by a compound in major European countries and Japan (2029).
|
•
|
Discovery Phase
|
•
|
Early Development Phase
|
•
|
Product Phase
|
•
|
Submission Phase
|
Name
|
Age
|
Offices and Business Experience
|
David A. Ricks
|
52
|
President, Chief Executive Officer, director (since January 2017) and board chair (since June 2017)
|
Melissa S. Barnes
|
51
|
Senior Vice President, Enterprise Risk Management and Chief Ethics and Compliance Officer (since January 2013)
|
Stephen F. Fry
|
54
|
Senior Vice President, Human Resources and Diversity (since February 2011)
|
Anat Hakim
|
50
|
Senior Vice President and General Counsel (since February 2020). Prior to joining Lilly Ms. Hakim was Executive Vice President, General Counsel and Secretary of Wellcare Health Plans, a managed care company. Prior to joining Wellcare, she served as Divisional Vice President and Associate General Counsel at Abbott Laboratories, a health care company.
|
Patrik Jonsson
|
53
|
Senior Vice President and President, Lilly Bio-Medicines (since September 2019)
|
Michael B. Mason
|
53
|
Senior Vice President and President, Lilly Diabetes (since January 2020)
|
Johna L. Norton
|
53
|
Senior Vice President, Global Quality (since April 2017)
|
Myles O'Neill
|
61
|
Senior Vice President and President, Manufacturing Operations (since January 2018)
|
Leigh Ann Pusey
|
57
|
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.
|
55
|
Senior Vice President and Chief Information and Digital Officer (since January 2018)
|
Daniel Skovronsky, M.D., Ph.D.
|
46
|
Senior Vice President, Chief Scientific Officer, and President, Lilly Research Laboratories (since June 2018)
|
Joshua L. Smiley
|
50
|
Senior Vice President and Chief Financial Officer (since January 2018)
|
Anne E. White
|
51
|
Senior Vice President and President, Lilly Oncology (since September 2018)
|
Alfonso Zulueta
|
57
|
Senior Vice President and President, Lilly International (since January 2014)
|
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.
|
•
|
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
|
Revenues Outside U.S.
(2019)
($ in millions)
|
Percent of Worldwide Revenues
(2019)
|
Patent / Data Protection - Major Europe / Japan
|
||
Alimta
|
$
|
896.4
|
|
4%
|
Major European countries: vitamin regimen patent will expire in June 2021
Japan: use patents to treat cancer concomitantly with vitamins will expire in June 2021
|
Forteo
|
759.1
|
|
3%
|
Japan: data package protection expired in July 2018; formulation and use patents expired in August 2019
|
|
Cymbalta
|
675.8
|
|
3%
|
Japan: data package protection expired 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 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, income, and reputation.
|
•
|
We face litigation and investigations related to our products and our pricing practices 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.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
•
|
The patent litigation and administrative proceedings involving Alimta, Jardiance, Taltz, and Emgality;
|
•
|
The product liability litigation involving Cymbalta;
|
•
|
The litigation related to the Cosmopolis facility in Brazil; and
|
•
|
Pricing litigation, investigations, and inquiries.
|
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 2019
|
2,079
|
|
$
|
114.10
|
|
2,079
|
|
$
|
1,562.8
|
|
November 2019
|
318
|
|
114.80
|
|
318
|
|
1,526.2
|
|
||
December 2019
|
225
|
|
116.65
|
|
225
|
|
1,500.0
|
|
||
Total
|
2,622
|
|
114.41
|
|
2,622
|
|
|
|
|
Lilly
|
|
Peer Group
|
|
Peer Group (Previous)
|
|
S&P 500
|
||||||||
Dec-14
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
Dec-15
|
|
$
|
125.37
|
|
|
$
|
104.58
|
|
|
$
|
101.48
|
|
|
$
|
101.38
|
|
Dec-16
|
|
$
|
112.36
|
|
|
$
|
98.05
|
|
|
$
|
98.82
|
|
|
$
|
113.51
|
|
Dec-17
|
|
$
|
132.40
|
|
|
$
|
114.47
|
|
|
$
|
115.88
|
|
|
$
|
138.29
|
|
Dec-18
|
|
$
|
185.96
|
|
|
$
|
119.86
|
|
|
$
|
123.99
|
|
|
$
|
132.23
|
|
Dec-19
|
|
$
|
215.99
|
|
|
$
|
142.01
|
|
|
$
|
146.32
|
|
|
$
|
173.86
|
|
(1)
|
We constructed the peer group as the industry index for this graph. It is comprised of the following companies in the pharmaceutical and biotech industries: AbbVie Inc.; Allergan plc; Amgen Inc.; AstraZeneca plc; Biogen Inc.; Bristol-Myers Squibb Company; Gilead Sciences Inc.; GlaxoSmithKline plc; Johnson & Johnson; Merck & Co., Inc.; Novartis AG.; Novo Nordisk A/S; Pfizer Inc.; Roche Holding AG; Sanofi; and Takeda Pharmaceutical Company Limited. The peer group used for performance benchmarking aligns with the peer group used for executive compensation purposes for 2019 other than our peer group for performance benchmarking excludes Celgene Corporation and Shire plc as they were acquired in 2019.
|
(2)
|
Our previous peer group is the same as the peer group, except that Allergan plc, Novo Nordisk A/S and Takeda Pharmaceutical Company Limited were added to and Baxter International Inc. and Medtronic plc were removed from the peer group. Our peer group (previous) excludes Celgene Corporation and Shire plc as they were acquired in 2019. The peer group (previous) total shareholder return is not presented in the graph above as the graph substantially overlapped the peer group total shareholder return.
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, except revenue per employee and per-share data)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Operations(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
|
$
|
18,312.8
|
|
|
$
|
17,050.5
|
|
Cost of sales
|
4,721.2
|
|
|
4,681.7
|
|
|
4,447.7
|
|
|
4,160.5
|
|
|
3,373.1
|
|
|||||
Research and development
|
5,595.0
|
|
|
5,051.2
|
|
|
5,096.2
|
|
|
5,040.0
|
|
|
4,514.2
|
|
|||||
Marketing, selling, and administrative
|
6,213.8
|
|
|
5,975.1
|
|
|
5,982.4
|
|
|
5,841.9
|
|
|
5,732.4
|
|
|||||
Other(2)
|
523.6
|
|
|
2,105.2
|
|
|
2,142.7
|
|
|
(5.9
|
)
|
|
538.9
|
|
|||||
Income before income taxes
|
5,265.9
|
|
|
3,680.1
|
|
|
2,304.8
|
|
|
3,276.3
|
|
|
2,891.9
|
|
|||||
Income taxes(3)
|
628.0
|
|
|
529.5
|
|
|
2,391.2
|
|
|
551.4
|
|
|
379.7
|
|
|||||
Net income (loss) from continuing operations
|
4,637.9
|
|
|
3,150.6
|
|
|
(86.4
|
)
|
|
2,724.9
|
|
|
2,512.2
|
|
|||||
Net income (loss)(4)
|
8,318.4
|
|
|
3,232.0
|
|
|
(204.1
|
)
|
|
2,737.6
|
|
|
2,408.4
|
|
|||||
Earnings (loss) per share from continuing operations—diluted
|
4.96
|
|
|
3.05
|
|
|
(0.08
|
)
|
|
2.57
|
|
|
2.36
|
|
|||||
Earnings (loss) per share—diluted(4)
|
8.89
|
|
|
3.13
|
|
|
(0.19
|
)
|
|
2.58
|
|
|
2.26
|
|
|||||
Dividends declared per share
|
2.68
|
|
|
2.33
|
|
|
2.12
|
|
|
2.05
|
|
|
2.01
|
|
|||||
Weighted-average number of shares outstanding—diluted (thousands)
|
935,684
|
|
|
1,033,667
|
|
|
1,052,023
|
|
|
1,061,825
|
|
|
1,065,720
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Position(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
39,286.1
|
|
|
$
|
43,908.4
|
|
|
$
|
44,981.0
|
|
|
$
|
38,805.9
|
|
|
$
|
35,568.9
|
|
Long-term debt
|
13,817.9
|
|
|
9,196.4
|
|
|
9,940.0
|
|
|
8,367.4
|
|
|
7,971.4
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplementary Data(1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Return on total equity(4)
|
184.9
|
%
|
|
25.7
|
%
|
|
(1.5
|
)%
|
|
18.5
|
%
|
|
16.1
|
%
|
|||||
Return on assets(4)
|
21.0
|
%
|
|
7.3
|
%
|
|
(0.5
|
)%
|
|
7.5
|
%
|
|
6.8
|
%
|
|||||
Revenue per employee
|
$
|
664,000
|
|
|
$
|
650,000
|
|
|
$
|
575,000
|
|
|
$
|
510,000
|
|
|
$
|
490,000
|
|
Number of employees
|
33,625
|
|
|
33,090
|
|
|
34,750
|
|
|
35,910
|
|
|
34,790
|
|
|||||
Number of shareholders of record
|
22,600
|
|
|
24,000
|
|
|
25,300
|
|
|
26,800
|
|
|
28,000
|
|
Item 7.
|
Management’s Discussion and Analysis of Results of Operations and Financial Condition
|
|
Year Ended
December 31, |
|
Percent Change
|
||||||
|
2019
|
|
2018
|
|
|||||
Revenue
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
4
|
Gross margin
|
17,598.3
|
|
|
16,811.6
|
|
|
5
|
||
Gross margin as a percent of revenue
|
78.8
|
%
|
|
78.2
|
%
|
|
|
||
Operating expense
|
$
|
11,808.8
|
|
|
$
|
11,026.3
|
|
|
7
|
Acquired in-process research and development
|
239.6
|
|
|
1,983.9
|
|
|
(88)
|
||
Asset impairment, restructuring, and other special charges
|
575.6
|
|
|
266.9
|
|
|
NM
|
||
Income before income taxes
|
5,265.9
|
|
|
3,680.1
|
|
|
43
|
||
Income taxes
|
628.0
|
|
|
529.5
|
|
|
19
|
||
Net income from continuing operations
|
4,637.9
|
|
|
3,150.6
|
|
|
47
|
||
Net income
|
8,318.4
|
|
|
3,232.0
|
|
|
NM
|
||
EPS from continuing operations
|
4.96
|
|
|
3.05
|
|
|
63
|
||
EPS
|
8.89
|
|
|
3.13
|
|
|
NM
|
•
|
We recognized acquired IPR&D charges of $239.6 million primarily related to collaborations with AC Immune SA (AC Immune), Centrexion Therapeutics Corporation (Centrexion), ImmuNext, Inc. (ImmuNext), and Avidity Biosciences, Inc. (Avidity).
|
•
|
We recognized charges of $575.6 million primarily associated with the accelerated vesting of Loxo Oncology, Inc. (Loxo) employee equity awards as a result of the closing of the acquisition of Loxo, and, to a lesser extent, charges associated with the decision to close and sell a research and development facility located in the United Kingdom (U.K).
|
•
|
We recognized acquired IPR&D charges of $1.98 billion primarily related to the acquisition of ARMO BioSciences, Inc. (ARMO) and the collaboration with Dicerna Pharmaceuticals, Inc. (Dicerna).
|
•
|
We recognized charges of $266.9 million primarily associated with asset impairments related to the sale of the Posilac® (rbST) brand and the related sale of the Augusta, Georgia manufacturing site and with expenses related to our efforts to reduce our cost structure.
|
•
|
We recognized $313.3 million of income tax benefit primarily due to measurement period adjustments to the one-time repatriation transition tax (also known as the 'Toll Tax') and the global intangible low-taxed income (GILTI).
|
*
|
Biologic molecule subject to the United States (U.S.) Biologics Price Competition and Innovation Act
|
**
|
Diagnostic agent
|
Compound
|
Indication
|
U.S.
|
Europe
|
Japan
|
Developments
|
Endocrinology
|
|||||
Baqsimi
|
Severe hypoglycemia
|
Launched
|
Approved
|
Submitted
|
Launched in the U.S. in third quarter of 2019. Approved in Europe in the fourth quarter of 2019. Submitted to the Japan regulatory authorities in 2019.
|
Tirzepatide
|
Type 2 diabetes
|
Phase III
|
Phase III trials are ongoing.
|
||
Obesity
|
Phase III
|
Phase III trials were initiated in the fourth quarter of 2019.
|
|||
Ultra-rapid Lispro
|
Type 1 and 2 diabetes
|
Submitted
|
Submitted to regulatory authorities in Europe and Japan in the first quarter of 2019. Submitted to the U.S. Food and Drug Administration (FDA) in the third quarter of 2019. In January 2020, the European regulatory authorities issued a positive opinion recommending approval.
|
||
Immunology
|
|||||
Mirikizumab
|
Crohn's Disease
|
Phase III
|
Phase III trials were initiated during the third quarter of 2019.
|
||
Psoriasis
|
Phase III
|
Phase III trials are ongoing.
|
|||
Ulcerative colitis
|
Phase III
|
Phase III trials are ongoing.
|
Compound
|
Indication
|
U.S.
|
Europe
|
Japan
|
Developments
|
Neuroscience
|
|||||
Emgality
|
Cluster headache
|
Launched
|
Submitted
|
Phase III
|
Submitted to European regulatory authorities in the first quarter of 2019. Approved and launched in the U.S. in the second quarter of 2019.
|
Migraine prevention
|
Launched
|
Submitted
|
Launched in Europe in the first quarter of 2019. Submitted to Japanese regulatory authorities in January 2020.
|
||
Flortaucipir
|
Alzheimer's disease diagnostic
|
Submitted
|
Phase III
|
Submitted to the FDA in the third quarter of 2019.
|
|
Reyvow
|
Acute treatment of migraine
|
Launched
|
Phase III
|
Approved by the FDA in the fourth quarter of 2019. Received Schedule V classification from the Drug Enforcement Agency and launched in the U.S. in January 2020.
|
|
Solanezumab
|
Preclinical Alzheimer's disease
|
Phase III
|
Announced in February 2020 that a Phase III trial for people with dominantly inherited Alzheimer's disease (DIAD) did not meet the primary endpoint. We do not plan to pursue submission for DIAD. Phase III trial is ongoing for Anti-Amyloid Treatment in Asymptomatic Alzheimer's.
|
||
Tanezumab
|
Osteoarthritis pain
|
Submitted
|
Phase III
|
In the third quarter of 2018 and the first quarter of 2019, announced multiple Phase III trials met several primary endpoints. In the second quarter of 2019, announced the results of the long-term Phase III study in which the 5mg dose met two of the three co-primary endpoints and the 2.5mg dose did not meet any of the three co-primary endpoints. In partnership with Pfizer, we submitted to the FDA in the fourth quarter of 2019 and are pursuing submission in Europe and Japan in 2020.
|
|
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. In the third quarter of 2019, announced results from a Phase III study evaluating long-term safety and efficacy in Japan. In partnership with Pfizer, announced in the third quarter of 2019 that we are not planning regulatory submissions. We plan to maintain an open dialogue with regulatory authorities on potential future regulatory pathways.
|
|||
Cancer pain
|
Phase III
|
Phase III trial is ongoing.
|
Compound
|
Indication
|
U.S.
|
Europe
|
Japan
|
Developments
|
Oncology
|
|||||
Lartruvo®
|
Soft tissue sarcoma
|
Withdrawn
|
Withdrawing
|
Not Submitting
|
In the first quarter of 2019, announced confirmatory phase III trial did not meet primary endpoint. As this trial did not confirm clinical benefit, we suspended promotion globally and withdrew the product in the U.S. in the third quarter of 2019. For countries in Europe, we have withdrawn or are in the process of withdrawing the product.
|
Pegilodecakin
|
Pancreatic cancer
|
Not Submitting
|
In the fourth quarter of 2019, announced phase III trial did not meet primary endpoint of overall survival. Phase II trials for other indications also did not meet primary endpoint. We do not plan to initiate any new trials.
|
||
Selpercatinib (LOXO-292)
|
Thyroid Cancer
|
Submitted
|
Phase III
|
In the fourth quarter of 2019, submitted to the FDA and European regulatory authorities based on Phase II data. Granted Breakthrough Therapy Designation(1). Granted Priority Review(2) from the FDA in first quarter of 2020. Phase III trials were initiated in the fourth quarter of 2019 in all major geographies.
|
|
Lung Cancer
|
Submitted
|
Phase III
|
•
|
foreign reference pricing in Medicare and private insurance,
|
•
|
modifications to Medicare Parts B and D,
|
•
|
provisions that would allow the Department of Health and Human Services to negotiate prices for biologics and drugs in Medicare,
|
•
|
a reduction in biologic data exclusivity,
|
•
|
proposals related to Medicaid prescription drug coverage and manufacturer drug rebates,
|
•
|
proposals that would require biopharmaceutical manufacturers to disclose proprietary drug pricing information; and
|
•
|
state-level proposals related to prescription drug prices and reducing the cost of pharmaceuticals purchased by government health care programs.
|
|
Year Ended
December 31, |
|
|
||||||
|
2019
|
|
2018
|
|
Percent Change
|
||||
U.S.(1)
|
$
|
12,722.6
|
|
|
$
|
12,391.9
|
|
|
3
|
Outside U.S.
|
9,596.8
|
|
|
9,101.4
|
|
|
5
|
||
Revenue
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
4
|
|
Year Ended
December 31, |
|
|
||||||||||||||
|
2019
|
|
2018
|
|
|
||||||||||||
Product
|
U.S.(1)
|
|
Outside U.S.
|
|
Total
|
|
Total
|
Percent Change
|
|||||||||
Trulicity
|
$
|
3,155.2
|
|
|
$
|
972.7
|
|
|
$
|
4,127.8
|
|
|
$
|
3,199.1
|
|
|
29
|
Humalog(2)
|
1,669.7
|
|
|
1,151.0
|
|
|
2,820.7
|
|
|
2,996.5
|
|
|
(6)
|
||||
Alimta
|
1,219.5
|
|
|
896.4
|
|
|
2,115.8
|
|
|
2,132.9
|
|
|
(1)
|
||||
Forteo
|
645.5
|
|
|
759.1
|
|
|
1,404.7
|
|
|
1,575.6
|
|
|
(11)
|
||||
Taltz
|
1,016.8
|
|
|
349.6
|
|
|
1,366.4
|
|
|
937.5
|
|
|
46
|
||||
Humulin®
|
879.7
|
|
|
410.4
|
|
|
1,290.1
|
|
|
1,331.4
|
|
|
(3)
|
||||
Basaglar
|
876.2
|
|
|
236.3
|
|
|
1,112.6
|
|
|
801.2
|
|
|
39
|
||||
Jardiance(3)
|
565.9
|
|
|
378.3
|
|
|
944.2
|
|
|
658.3
|
|
|
43
|
||||
Cyramza®
|
335.3
|
|
|
589.9
|
|
|
925.1
|
|
|
821.4
|
|
|
13
|
||||
Cialis
|
231.7
|
|
|
658.8
|
|
|
890.5
|
|
|
1,851.8
|
|
|
(52)
|
||||
Cymbalta®
|
49.6
|
|
|
675.8
|
|
|
725.4
|
|
|
708.0
|
|
|
2
|
||||
Trajenta®(4)
|
224.8
|
|
|
365.8
|
|
|
590.6
|
|
|
574.7
|
|
|
3
|
||||
Verzenio
|
454.8
|
|
|
124.9
|
|
|
579.7
|
|
|
255.0
|
|
|
NM
|
||||
Erbitux®
|
487.9
|
|
|
55.4
|
|
|
543.4
|
|
|
635.3
|
|
|
(14)
|
||||
Olumiant
|
42.2
|
|
|
384.7
|
|
|
426.9
|
|
|
202.5
|
|
|
NM
|
||||
Zyprexa®
|
41.0
|
|
|
377.6
|
|
|
418.7
|
|
|
471.3
|
|
|
(11)
|
||||
Strattera
|
30.8
|
|
|
211.7
|
|
|
242.5
|
|
|
450.8
|
|
|
(46)
|
||||
Emgality
|
154.9
|
|
|
7.7
|
|
|
162.5
|
|
|
4.9
|
|
|
NM
|
||||
Other products
|
641.1
|
|
|
990.7
|
|
|
1,631.9
|
|
|
1,885.1
|
|
|
(13)
|
||||
Revenue
|
$
|
12,722.6
|
|
|
$
|
9,596.8
|
|
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
4
|
(1)
|
U.S. revenue includes revenue in Puerto Rico.
|
(3)
|
Jardiance revenue includes Glyxambi® and Synjardy®.
|
(4)
|
Trajenta revenue includes Jentadueto®.
|
|
Year Ended
December 31, |
|
Percent Change
|
||||||
|
2018
|
|
2017
|
|
|||||
Revenue
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
|
8
|
Gross margin
|
16,811.6
|
|
|
15,526.1
|
|
|
8
|
||
Gross margin as a percent of revenue
|
78.2
|
%
|
|
77.7
|
%
|
|
|
||
Operating expense
|
$
|
11,026.3
|
|
|
$
|
11,078.6
|
|
|
—
|
Acquired in-process research and development
|
1,983.9
|
|
|
1,112.6
|
|
|
78
|
||
Asset impairment, restructuring, and other special charges
|
266.9
|
|
|
1,331.6
|
|
|
(80)
|
||
Income before income taxes
|
3,680.1
|
|
|
2,304.8
|
|
|
60
|
||
Income taxes
|
529.5
|
|
|
2,391.2
|
|
|
(78)
|
||
Net income (loss) from continuing operations
|
3,150.6
|
|
|
(86.4
|
)
|
|
NM
|
||
Net income (loss)
|
3,232.0
|
|
|
(204.1
|
)
|
|
NM
|
||
Earnings (loss) per share from continuing operations
|
3.05
|
|
|
(0.08
|
)
|
|
NM
|
||
Earnings (loss) per share
|
3.13
|
|
|
(0.19
|
)
|
|
NM
|
•
|
We recognized acquired IPR&D charges of $1.11 billion primarily related to the acquisition of CoLucid Pharmaceuticals, Inc. (CoLucid).
|
•
|
We recognized charges of $1.33 billion primarily associated with efforts to reduce our cost structure, including the U.S. voluntary early retirement program.
|
•
|
We recognized a provisional tax expense of $1.91 billion due to the Tax Cuts and Jobs Act (2017 Tax Act).
|
|
Year Ended
December 31, |
|
|
||||||
|
2018
|
|
2017
|
|
Percent Change
|
||||
U.S. (1)
|
$
|
12,391.9
|
|
|
$
|
11,414.4
|
|
|
9
|
Outside U.S.
|
9,101.4
|
|
|
8,559.4
|
|
|
6
|
||
Revenue
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
|
8
|
|
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 products
|
1,170.8
|
|
|
1,176.5
|
|
|
2,347.5
|
|
|
2,271.3
|
|
|
3
|
|
||||
Revenue
|
$
|
12,391.9
|
|
|
$
|
9,101.4
|
|
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
|
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)
|
$
|
20,934.9
|
|
|
$
|
382.2
|
|
|
$
|
2,173.8
|
|
|
$
|
1,381.3
|
|
|
$
|
16,997.6
|
|
Finance lease obligations
|
19.0
|
|
|
7.0
|
|
|
8.8
|
|
|
3.2
|
|
|
—
|
|
|||||
Operating lease liabilities
|
720.4
|
|
|
138.1
|
|
|
193.3
|
|
|
116.3
|
|
|
272.7
|
|
|||||
Purchase obligations(2)
|
15,897.1
|
|
|
15,452.8
|
|
|
239.6
|
|
|
204.7
|
|
|
—
|
|
|||||
2017 Tax Act Toll Tax(3)
|
2,630.0
|
|
|
225.3
|
|
|
507.4
|
|
|
1,109.9
|
|
|
787.4
|
|
|||||
Other long-term liabilities reflected on our balance sheet(4)
|
1,800.1
|
|
|
—
|
|
|
421.2
|
|
|
193.8
|
|
|
1,185.1
|
|
|||||
Total
|
$
|
42,001.5
|
|
|
$
|
16,205.4
|
|
|
$
|
3,544.1
|
|
|
$
|
3,009.2
|
|
|
$
|
19,242.8
|
|
•
|
Purchase obligations consisting primarily of all open purchase orders as of December 31, 2019. 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)
|
2019
|
|
2018
|
||||
Sales return, rebate, and discount liabilities, beginning of year
|
$
|
4,670.9
|
|
|
$
|
4,134.0
|
|
Reduction of net sales(1)
|
15,490.2
|
|
|
13,424.9
|
|
||
Cash payments
|
(15,525.6
|
)
|
|
(12,888.0
|
)
|
||
Sales return, rebate, and discount liabilities, end of year
|
$
|
4,635.5
|
|
|
$
|
4,670.9
|
|
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
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
||
Costs, expenses, and other:
|
|
|
|
|
|
|
||||||||
Cost of sales
|
|
4,721.2
|
|
|
4,681.7
|
|
|
4,447.7
|
|
|||||
Research and development
|
|
5,595.0
|
|
|
5,051.2
|
|
|
5,096.2
|
|
|||||
Marketing, selling, and administrative
|
|
6,213.8
|
|
|
5,975.1
|
|
|
5,982.4
|
|
|||||
Acquired in-process research and development (Note 3)
|
|
239.6
|
|
|
1,983.9
|
|
|
1,112.6
|
|
|||||
Asset impairment, restructuring, and other special charges
(Note 5)
|
|
575.6
|
|
|
266.9
|
|
|
1,331.6
|
|
|||||
Other—net, (income) expense (Note 18)
|
|
(291.6
|
)
|
|
(145.6
|
)
|
|
(301.5
|
)
|
|||||
|
|
17,053.6
|
|
|
17,813.2
|
|
|
17,669.0
|
|
|||||
Income before income taxes
|
|
5,265.9
|
|
|
3,680.1
|
|
|
2,304.8
|
|
|||||
Income taxes (Note 14)
|
|
628.0
|
|
|
529.5
|
|
|
2,391.2
|
|
|||||
Net income (loss) from continuing operations
|
|
4,637.9
|
|
|
3,150.6
|
|
|
(86.4
|
)
|
|||||
Net income (loss) from discontinued operations (Note 19)
|
|
3,680.5
|
|
|
81.4
|
|
|
(117.7
|
)
|
|||||
Net income (loss)
|
|
$
|
8,318.4
|
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
||
|
|
|
|
|
|
|
||||||||
Earnings (loss) per share:
|
|
|
|
|
|
|
||||||||
Earnings (loss) from continuing operations - basic
|
|
4.98
|
|
|
3.07
|
|
|
(0.08
|
)
|
|||||
Earnings (loss) from discontinued operations - basic
|
|
3.95
|
|
|
0.07
|
|
|
(0.11
|
)
|
|||||
Earnings (loss) per share - basic
|
|
$
|
8.93
|
|
|
$
|
3.14
|
|
|
$
|
(0.19
|
)
|
||
|
|
|
|
|
|
|
||||||||
Earnings (loss) from continuing operations - diluted
|
|
4.96
|
|
|
3.05
|
|
|
(0.08
|
)
|
|||||
Earnings (loss) from discontinued operations - diluted
|
|
3.93
|
|
|
0.08
|
|
|
(0.11
|
)
|
|||||
Earnings (loss) per share - diluted
|
|
$
|
8.89
|
|
|
$
|
3.13
|
|
|
$
|
(0.19
|
)
|
||
|
|
|
|
|
|
|
||||||||
Shares used in calculation of earnings (loss) per share:
|
|
|
|
|
|
|
||||||||
Basic
|
|
931,059
|
|
|
1,027,721
|
|
|
1,052,023
|
|
|||||
Diluted
|
|
935,684
|
|
|
1,033,667
|
|
|
1,052,023
|
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
|
|
Year Ended December 31
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
|
$
|
8,318.4
|
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
||
Other comprehensive income (loss) from continuing operations:
|
|
|
|
|
|
|
||||||||
Change in foreign currency translation gains (losses)
|
|
(89.9
|
)
|
|
(429.6
|
)
|
|
362.9
|
|
|||||
Change in net unrealized gains (losses) on securities
|
|
34.4
|
|
|
(8.8
|
)
|
|
(181.3
|
)
|
|||||
Change in defined benefit pension and retiree health benefit plans (Note 15)
|
|
(970.0
|
)
|
|
544.0
|
|
|
(566.8
|
)
|
|||||
Change in effective portion of cash flow hedges
|
|
34.3
|
|
|
(6.0
|
)
|
|
27.8
|
|
|||||
Other comprehensive income (loss) from continuing operations before income taxes
|
|
(991.2
|
)
|
|
99.6
|
|
|
(357.4
|
)
|
|||||
Benefit (provision) for income taxes related to other comprehensive income (loss) from continuing operations
|
|
151.0
|
|
|
(30.3
|
)
|
|
402.7
|
|
|||||
Other comprehensive income (loss) from continuing operations, net of tax (Note 17)
|
|
(840.2
|
)
|
|
69.3
|
|
|
45.3
|
|
|||||
Other comprehensive income (loss) from discontinued operations, net of tax (Note 17)
|
|
56.8
|
|
|
14.3
|
|
|
129.2
|
|
|||||
Other comprehensive income (loss), net of tax (Note 17)
|
|
(783.4
|
)
|
|
83.6
|
|
|
174.5
|
|
|||||
Comprehensive income (loss)
|
|
$
|
7,535.0
|
|
|
$
|
3,315.6
|
|
|
$
|
(29.6
|
)
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions, shares in thousands)
|
|
December 31
|
|
2019
|
|
2018
|
||||
Assets
|
|
|
|
|
||||||
Current Assets
|
|
|
|
|
||||||
Cash and cash equivalents (Note 7)
|
|
$
|
2,337.5
|
|
|
$
|
7,320.7
|
|
||
Short-term investments (Note 7)
|
|
101.0
|
|
|
88.2
|
|
||||
Accounts receivable, net of allowances of $22.4 (2019) and $24.1 (2018)
|
|
4,547.3
|
|
|
4,593.9
|
|
||||
Other receivables
|
|
994.2
|
|
|
1,182.9
|
|
||||
Inventories (Note 6)
|
|
3,190.7
|
|
|
3,098.1
|
|
||||
Prepaid expenses and other
|
|
2,538.9
|
|
|
2,036.7
|
|
||||
Current assets of discontinued operations (Note 19)
|
|
—
|
|
|
2,229.1
|
|
||||
Total current assets
|
|
13,709.6
|
|
|
20,549.6
|
|
||||
Investments (Note 7)
|
|
1,962.4
|
|
|
2,005.4
|
|
||||
Goodwill (Note 8)
|
|
3,679.4
|
|
|
1,366.6
|
|
||||
Other intangibles, net (Note 8)
|
|
6,618.0
|
|
|
1,068.0
|
|
||||
Deferred tax assets (Note 14)
|
|
2,572.6
|
|
|
2,613.7
|
|
||||
Property and equipment, net (Note 9)
|
|
7,872.9
|
|
|
7,996.1
|
|
||||
Operating lease assets (Note 10)
|
|
532.1
|
|
|
—
|
|
||||
Other noncurrent assets
|
|
2,339.1
|
|
|
1,824.9
|
|
||||
Noncurrent assets of discontinued operations (Note 19)
|
|
—
|
|
|
6,484.1
|
|
||||
Total assets
|
|
$
|
39,286.1
|
|
|
$
|
43,908.4
|
|
||
Liabilities and Equity
|
|
|
|
|
||||||
Current Liabilities
|
|
|
|
|
||||||
Short-term borrowings and current maturities of long-term debt (Note 11)
|
|
$
|
1,499.3
|
|
|
$
|
1,102.2
|
|
||
Accounts payable
|
|
1,405.3
|
|
|
1,207.1
|
|
||||
Employee compensation
|
|
915.5
|
|
|
955.6
|
|
||||
Sales rebates and discounts
|
|
4,933.6
|
|
|
4,849.5
|
|
||||
Dividends payable
|
|
671.5
|
|
|
650.8
|
|
||||
Income taxes payable (Note 14)
|
|
160.6
|
|
|
393.4
|
|
||||
Other current liabilities
|
|
2,189.4
|
|
|
2,036.7
|
|
||||
Current liabilities of discontinued operations (Note 19)
|
|
—
|
|
|
692.8
|
|
||||
Total current liabilities
|
|
11,775.2
|
|
|
11,888.1
|
|
||||
Other Liabilities
|
|
|
|
|
||||||
Long-term debt (Note 11)
|
|
13,817.9
|
|
|
9,196.4
|
|
||||
Noncurrent operating lease liabilities (Note 10)
|
|
486.7
|
|
|
—
|
|
||||
Accrued retirement benefits (Note 15)
|
|
3,698.2
|
|
|
2,802.2
|
|
||||
Long-term income taxes payable (Note 14)
|
|
3,607.2
|
|
|
3,700.0
|
|
||||
Other noncurrent liabilities
|
|
1,014.3
|
|
|
1,357.6
|
|
||||
Deferred tax liabilities (Note 14)
|
|
2,187.5
|
|
|
1,312.7
|
|
||||
Noncurrent liabilities of discontinued operations (Note 19)
|
|
—
|
|
|
2,742.3
|
|
||||
Total other liabilities
|
|
24,811.8
|
|
|
21,111.2
|
|
||||
Commitments and Contingencies (Note 16)
|
|
|
|
|
||||||
Eli Lilly and Company Shareholders' Equity (Notes 12 and 13)
|
|
|
|
|
||||||
Common stock—no par value
Authorized shares: 3,200,000 Issued shares: 958,056 (2019) and 1,057,639 (2018) |
|
598.8
|
|
|
661.0
|
|
||||
Additional paid-in capital
|
|
6,685.3
|
|
|
6,583.6
|
|
||||
Retained earnings
|
|
4,920.4
|
|
|
11,395.9
|
|
||||
Employee benefit trust
|
|
(3,013.2
|
)
|
|
(3,013.2
|
)
|
||||
Accumulated other comprehensive loss (Note 17)
|
|
(6,523.6
|
)
|
|
(5,729.2
|
)
|
||||
Cost of common stock in treasury
|
|
(60.8
|
)
|
|
(69.4
|
)
|
||||
Total Eli Lilly and Company shareholders' equity
|
|
2,606.9
|
|
|
9,828.7
|
|
||||
Noncontrolling interests
|
|
92.2
|
|
|
1,080.4
|
|
||||
Total equity
|
|
2,699.1
|
|
|
10,909.1
|
|
||||
Total liabilities and equity
|
|
$
|
39,286.1
|
|
|
$
|
43,908.4
|
|
|
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, 2017
|
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 1)
|
|
|
|
|
|
|
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 1)
|
|
|
|
|
|
|
763.8
|
|
|
|
|
(105.2
|
)
|
|
|
|
|
|
|
||||||||||||||
Sale of Elanco Stock (Note 19)
|
|
|
|
|
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
|
|
|||||||
Net income
|
|
|
|
|
|
|
8,318.4
|
|
|
|
|
|
|
|
|
|
|
37.7
|
|
||||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
(794.4
|
)
|
|
|
|
|
|
11.0
|
|
||||||||||||||
Cash dividends declared per share: $2.68
|
|
|
|
|
|
|
(2,430.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Retirement of treasury shares
|
(102,640
|
)
|
|
(64.1
|
)
|
|
|
|
(12,363.4
|
)
|
|
|
|
|
|
(102,640
|
)
|
|
12,427.5
|
|
|
|
|
||||||||||
Purchase of treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,639
|
|
|
(4,400.0
|
)
|
|
|
|
||||||||||
Issuance of stock under employee stock plans, net
|
3,057
|
|
|
1.9
|
|
|
(210.7
|
)
|
|
|
|
|
|
|
|
(74
|
)
|
|
8.6
|
|
|
|
|
||||||||||
Stock-based compensation
|
|
|
|
|
312.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Acquisition of common stock in exchange offer
|
|
|
|
|
|
|
|
|
|
|
|
|
65,001
|
|
|
(8,027.5
|
)
|
|
|
||||||||||||||
Deconsolidation of Elanco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,028.9
|
)
|
|||||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.0
|
)
|
||||||||||||||
Balance at December 31, 2019
|
958,056
|
|
|
$
|
598.8
|
|
|
$
|
6,685.3
|
|
|
$
|
4,920.4
|
|
|
$
|
(3,013.2
|
)
|
|
$
|
(6,523.6
|
)
|
|
530
|
|
|
$
|
(60.8
|
)
|
|
$
|
92.2
|
|
ELI LILLY AND COMPANY AND SUBSIDIARIES
(Dollars in millions)
|
|
Year Ended December 31
|
|
2019
|
|
2018
|
|
2017
|
||||||
Cash Flows from Operating Activities
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
8,318.4
|
|
|
$
|
3,232.0
|
|
|
$
|
(204.1
|
)
|
||
Adjustments to Reconcile Net Income (Loss)
to Cash Flows from Operating Activities:
|
|
|
|
|
|
|
||||||||
Gain related to disposition of Elanco (Note 19)
|
|
(3,680.5
|
)
|
|
—
|
|
|
—
|
|
|||||
Gain on sale of antibiotic business in China (Note 3)
|
|
(309.8
|
)
|
|
—
|
|
|
—
|
|
|||||
Depreciation and amortization
|
|
1,232.6
|
|
|
1,609.0
|
|
|
1,567.3
|
|
|||||
Change in deferred income taxes
|
|
62.4
|
|
|
326.8
|
|
|
(787.9
|
)
|
|||||
Stock-based compensation expense
|
|
312.4
|
|
|
279.5
|
|
|
281.3
|
|
|||||
Acquired in-process research and development (Note 3)
|
|
239.6
|
|
|
1,983.9
|
|
|
1,112.6
|
|
|||||
Other non-cash operating activities, net
|
|
348.7
|
|
|
472.0
|
|
|
441.5
|
|
|||||
Other changes in operating assets and liabilities, net of acquisitions and divestitures:
|
|
|
|
|
|
|
||||||||
Receivables—(increase) decrease
|
|
(127.2
|
)
|
|
(996.7
|
)
|
|
(357.0
|
)
|
|||||
Inventories—(increase) decrease
|
|
(258.7
|
)
|
|
7.8
|
|
|
(253.9
|
)
|
|||||
Other assets—(increase) decrease
|
|
(602.3
|
)
|
|
(980.0
|
)
|
|
(590.1
|
)
|
|||||
Income taxes payable—increase (decrease)
|
|
(221.3
|
)
|
|
(125.3
|
)
|
|
3,489.6
|
|
|||||
Accounts payable and other liabilities—increase (decrease)
|
|
(477.7
|
)
|
|
(284.5
|
)
|
|
916.3
|
|
|||||
Net Cash Provided by Operating Activities
|
|
4,836.6
|
|
|
5,524.5
|
|
|
5,615.6
|
|
|||||
Cash Flows from Investing Activities
|
|
|
|
|
|
|
||||||||
Purchases of property and equipment
|
|
(1,033.9
|
)
|
|
(1,210.6
|
)
|
|
(1,076.8
|
)
|
|||||
Proceeds from sales and maturities of short-term investments
|
|
136.6
|
|
|
2,552.5
|
|
|
4,852.5
|
|
|||||
Purchases of short-term investments
|
|
(42.7
|
)
|
|
(112.2
|
)
|
|
(3,389.7
|
)
|
|||||
Proceeds from sales of noncurrent investments
|
|
609.8
|
|
|
3,509.5
|
|
|
2,586.0
|
|
|||||
Purchases of noncurrent investments
|
|
(247.5
|
)
|
|
(837.9
|
)
|
|
(4,611.6
|
)
|
|||||
Purchases of in-process research and development
|
|
(319.6
|
)
|
|
(1,807.6
|
)
|
|
(1,086.8
|
)
|
|||||
Cash paid for acquisitions, net of cash acquired (Note 3 and 19)
|
|
(6,917.7
|
)
|
|
—
|
|
|
(882.1
|
)
|
|||||
Cash distributed to Elanco upon disposition
|
|
(374.0
|
)
|
|
—
|
|
|
—
|
|
|||||
Cash received for sale of antibiotic business in China
|
|
354.8
|
|
|
—
|
|
|
—
|
|
|||||
Other investing activities, net
|
|
(248.7
|
)
|
|
(187.7
|
)
|
|
(175.1
|
)
|
|||||
Net Cash Provided by (Used for) Investing Activities
|
|
(8,082.9
|
)
|
|
1,906.0
|
|
|
(3,783.6
|
)
|
|||||
Cash Flows from Financing Activities
|
|
|
|
|
|
|
||||||||
Dividends paid
|
|
(2,409.8
|
)
|
|
(2,311.8
|
)
|
|
(2,192.1
|
)
|
|||||
Net change in short-term borrowings
|
|
995.4
|
|
|
(2,197.9
|
)
|
|
1,397.5
|
|
|||||
Proceeds from issuance of long-term debt
|
|
6,556.4
|
|
|
2,477.7
|
|
|
2,232.0
|
|
|||||
Repayments of long-term debt
|
|
(2,866.4
|
)
|
|
(1,009.1
|
)
|
|
(630.6
|
)
|
|||||
Purchases of common stock
|
|
(4,400.0
|
)
|
|
(4,150.7
|
)
|
|
(299.8
|
)
|
|||||
Net proceeds from Elanco initial public offering (Note 19)
|
|
—
|
|
|
1,659.7
|
|
|
—
|
|
|||||
Other financing activities, net
|
|
(200.1
|
)
|
|
(372.8
|
)
|
|
(364.4
|
)
|
|||||
Net Cash Provided by (Used for) Financing Activities
|
|
(2,324.5
|
)
|
|
(5,904.9
|
)
|
|
142.6
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
|
(89.9
|
)
|
|
(63.6
|
)
|
|
(20.5
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
|
(5,660.7
|
)
|
|
1,462.0
|
|
|
1,954.1
|
|
|||||
Cash and cash equivalents at beginning of year (includes $677.5 (2019), $324.4 (2018), and $258.8 (2017) of discontinued operations)
|
|
7,998.2
|
|
|
6,536.2
|
|
|
4,582.1
|
|
|||||
Cash and Cash Equivalents at End of Year (includes $677.5 (2018) and $324.4 (2017) of discontinued operations)
|
|
$
|
2,337.5
|
|
|
$
|
7,998.2
|
|
|
$
|
6,536.2
|
|
•
|
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.
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net product revenue
|
$
|
20,377.3
|
|
|
$
|
19,866.4
|
|
|
$
|
18,776.5
|
|
Collaboration and other revenue(1)
|
1,942.2
|
|
|
1,626.9
|
|
|
1,197.3
|
|
|||
Revenue
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
•
|
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
|
•
|
The largest of our sales rebate and discount amounts are rebates associated with sales covered by managed care, Medicare, Medicaid, chargeback, and patient assistance programs in the 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. customers to return product for dating issues within a specified period prior to and subsequent to the product's expiration date. Following the loss of exclusivity for a patent-dependent product, we expect to experience an elevated level of product returns as product inventory remaining in the wholesale and retail channels expires. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions. We record the return amounts as a deduction to arrive at our net product revenue. Once the product is returned, it is destroyed; we do not record a right of return asset. Our returns policies outside the U.S. are generally more restrictive than in the U.S. as returns are not allowed for reasons other than failure to meet product specifications in many countries. Our reserve for future product returns for product sales outside the U.S. is not material.
|
•
|
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 of each performance obligation. For arrangements that involve variable consideration where we have sold intellectual property, we recognize revenue based on estimates of the amount of consideration we believe we will be entitled to receive from the other party, subject to a constraint. These estimates are adjusted to reflect the actual amounts to be collected when those facts and circumstances become known.
|
•
|
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.
|
|
2019
|
|
2018
|
||||
Contract liabilities
|
$
|
264.6
|
|
|
$
|
294.9
|
|
|
|
|
U.S.(1)
|
|
Outside U.S.
|
||||||||||||||||||||
|
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
Revenue—to unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Endocrinology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Trulicity®
|
$
|
3,155.2
|
|
|
$
|
2,515.8
|
|
|
$
|
1,609.8
|
|
|
$
|
972.7
|
|
|
$
|
683.3
|
|
|
$
|
419.9
|
|
||
Humalog® (2)
|
1,669.7
|
|
|
1,787.8
|
|
|
1,717.8
|
|
|
1,151.0
|
|
|
1,208.7
|
|
|
1,147.4
|
|
||||||||
Forteo®
|
645.5
|
|
|
757.9
|
|
|
965.2
|
|
|
759.1
|
|
|
817.7
|
|
|
783.8
|
|
||||||||
Humulin®
|
879.7
|
|
|
910.2
|
|
|
884.6
|
|
|
410.4
|
|
|
421.2
|
|
|
450.7
|
|
||||||||
Basaglar®
|
876.2
|
|
|
622.8
|
|
|
311.1
|
|
|
236.3
|
|
|
178.5
|
|
|
121.0
|
|
||||||||
Jardiance (3)
|
565.9
|
|
|
400.2
|
|
|
290.4
|
|
|
378.3
|
|
|
258.1
|
|
|
157.0
|
|
||||||||
Trajenta (4)
|
224.8
|
|
|
224.2
|
|
|
213.2
|
|
|
365.8
|
|
|
350.5
|
|
|
324.7
|
|
||||||||
Other Endocrinology
|
293.7
|
|
|
292.7
|
|
|
380.9
|
|
|
230.1
|
|
|
272.5
|
|
|
307.7
|
|
||||||||
Total Endocrinology
|
8,310.7
|
|
|
7,511.6
|
|
|
6,373.0
|
|
|
4,503.7
|
|
|
4,190.5
|
|
|
3,712.2
|
|
||||||||
Oncology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Alimta®
|
1,219.5
|
|
|
1,131.0
|
|
|
1,034.3
|
|
|
896.4
|
|
|
1,001.9
|
|
|
1,028.2
|
|
||||||||
Cyramza®
|
335.3
|
|
|
291.5
|
|
|
278.8
|
|
|
589.9
|
|
|
529.9
|
|
|
479.6
|
|
||||||||
Verzenio®
|
454.8
|
|
|
248.5
|
|
|
21.0
|
|
|
124.9
|
|
|
6.6
|
|
|
—
|
|
||||||||
Erbitux®
|
487.9
|
|
|
531.6
|
|
|
541.7
|
|
|
55.4
|
|
|
103.8
|
|
|
104.2
|
|
||||||||
Other Oncology
|
111.0
|
|
|
200.6
|
|
|
174.6
|
|
|
339.3
|
|
|
215.1
|
|
|
149.6
|
|
||||||||
Total Oncology
|
2,608.5
|
|
|
2,403.2
|
|
|
2,050.4
|
|
|
2,005.9
|
|
|
1,857.3
|
|
|
1,761.6
|
|
||||||||
Immunology:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Taltz®
|
1,016.8
|
|
|
738.7
|
|
|
486.0
|
|
|
349.6
|
|
|
198.7
|
|
|
73.2
|
|
||||||||
Olumiant®
|
42.2
|
|
|
6.7
|
|
|
—
|
|
|
384.7
|
|
|
195.9
|
|
|
45.8
|
|
||||||||
Total Immunology
|
1,059.0
|
|
|
745.4
|
|
|
486.0
|
|
|
734.3
|
|
|
394.6
|
|
|
119.0
|
|
||||||||
Neuroscience:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cymbalta®
|
49.6
|
|
|
54.3
|
|
|
114.9
|
|
|
675.8
|
|
|
653.7
|
|
|
642.2
|
|
||||||||
Zyprexa®
|
41.0
|
|
|
36.2
|
|
|
75.5
|
|
|
377.6
|
|
|
435.1
|
|
|
505.7
|
|
||||||||
Strattera®
|
30.8
|
|
|
89.7
|
|
|
284.9
|
|
|
211.7
|
|
|
361.1
|
|
|
333.3
|
|
||||||||
Emgality®
|
154.9
|
|
|
4.9
|
|
|
—
|
|
|
7.7
|
|
|
—
|
|
|
—
|
|
||||||||
Other Neuroscience
|
80.2
|
|
|
92.3
|
|
|
115.7
|
|
|
93.6
|
|
|
93.4
|
|
|
98.9
|
|
||||||||
Total Neuroscience
|
356.5
|
|
|
277.4
|
|
|
591.0
|
|
|
1,366.4
|
|
|
1,543.3
|
|
|
1,580.1
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cialis ®
|
231.7
|
|
|
1,129.2
|
|
|
1,358.6
|
|
|
658.8
|
|
|
722.7
|
|
|
964.5
|
|
||||||||
Other
|
156.2
|
|
|
325.1
|
|
|
555.4
|
|
|
327.7
|
|
|
393.0
|
|
|
422.0
|
|
||||||||
Total Other
|
387.9
|
|
|
1,454.3
|
|
|
1,914.0
|
|
|
986.5
|
|
|
1,115.7
|
|
|
1,386.5
|
|
||||||||
Revenue
|
$
|
12,722.6
|
|
|
$
|
12,391.9
|
|
|
$
|
11,414.4
|
|
|
$
|
9,596.8
|
|
|
$
|
9,101.4
|
|
|
$
|
8,559.4
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue—to unaffiliated customers(1):
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
12,722.6
|
|
|
$
|
12,391.9
|
|
|
$
|
11,414.4
|
|
||
Europe
|
|
3,765.0
|
|
|
3,663.1
|
|
|
3,390.6
|
|
|||||
Japan
|
|
2,547.6
|
|
|
2,407.4
|
|
|
2,339.5
|
|
|||||
Other foreign countries
|
|
3,284.3
|
|
|
3,030.9
|
|
|
2,829.3
|
|
|||||
Revenue
|
|
$
|
22,319.5
|
|
|
$
|
21,493.3
|
|
|
$
|
19,973.8
|
|
Estimated Fair Value at February 15, 2019
|
|||
Acquired IPR&D(1)
|
$
|
4,670.0
|
|
Finite-lived intangibles(2)
|
980.0
|
|
|
Deferred income taxes
|
(1,032.8
|
)
|
|
Other assets and liabilities - net
|
(26.4
|
)
|
|
Total identifiable net assets
|
4,590.8
|
|
|
Goodwill(3)
|
2,326.9
|
|
|
Total consideration transferred - net of cash acquired
|
$
|
6,917.7
|
|
Counterparty
|
Compound(s),Therapy, or Asset
|
Acquisition Month
|
|
Phase of Development(1)
|
|
Acquired IPR&D Expense
|
||
AC Immune SA
|
Tau aggregation inhibitor small molecules for the potential treatment of Alzheimer's disease and other neurodegenerative diseases
|
January 2019 & September 2019(2)
|
|
Pre-clinical
|
|
$
|
127.1
|
|
ImmuNext, Inc.
|
Novel immunometabolism target
|
March 2019
|
|
Pre-clinical
|
|
40.0
|
|
|
Avidity Biosciences, Inc.
|
Potential new medicines in immunology and other select indications
|
April 2019
|
|
Pre-clinical
|
|
25.0
|
|
|
Centrexion Therapeutics Corporation
|
CNTX-0290, a novel, small molecule somatostatin receptor type 4 agonist
|
July 2019
|
|
Phase I
|
|
47.5
|
|
|
|
|
|
|
|
|
|
||
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 BioSciences, Inc. (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(3)
|
|
28.1
|
|
|
Dicerna Pharmaceuticals, Inc.
|
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
|
|
Product Family
|
|
Milestones
(Deferred) Capitalized(1)
|
||
Trajenta(2)
|
|
$
|
446.4
|
|
Jardiance(3)
|
|
289.0
|
|
|
Basaglar
|
|
(250.0
|
)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Basaglar
|
$
|
1,112.6
|
|
|
$
|
801.2
|
|
|
$
|
432.1
|
|
Jardiance
|
944.2
|
|
|
658.3
|
|
|
447.5
|
|
|||
Trajenta
|
590.6
|
|
|
574.7
|
|
|
537.9
|
|
Year
|
Event
|
Classification
|
Amount
|
||
2018
|
Regulatory approval in the U.S.
|
Intangible asset
|
$
|
100.0
|
|
Began Phase III testing for systemic lupus erythematosus (SLE)
|
R&D Expense
|
20.0
|
|
||
2017
|
Regulatory approval in Europe
|
Intangible asset
|
65.0
|
|
|
Regulatory approval in Japan
|
Intangible asset
|
15.0
|
|
||
Began Phase III testing for atopic dermatitis
|
R&D expense
|
30.0
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Olumiant
|
$
|
426.9
|
|
|
$
|
202.5
|
|
|
$
|
45.8
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Severance
|
$
|
77.8
|
|
|
$
|
127.8
|
|
|
$
|
601.0
|
|
Pension and post-retirement medical charges associated with U.S. voluntary early retirement program (see Note 15)
|
—
|
|
|
—
|
|
|
446.7
|
|
|||
Asset impairment and other special charges
|
497.8
|
|
|
139.1
|
|
|
283.9
|
|
|||
Total asset impairment, restructuring, and other special charges
|
$
|
575.6
|
|
|
$
|
266.9
|
|
|
$
|
1,331.6
|
|
|
2019
|
|
2018
|
||||
Finished products
|
$
|
647.3
|
|
|
$
|
577.8
|
|
Work in process
|
2,067.6
|
|
|
2,057.8
|
|
||
Raw materials and supplies
|
424.6
|
|
|
426.1
|
|
||
Total (approximates replacement cost)
|
3,139.5
|
|
|
3,061.7
|
|
||
Increase to LIFO cost
|
51.2
|
|
|
36.4
|
|
||
Inventories
|
$
|
3,190.7
|
|
|
$
|
3,098.1
|
|
•
|
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.
|
|
2019
|
|
2018
|
|
2017
|
||||||
Fair value hedges:
|
|
|
|
|
|
||||||
Effect from hedged fixed-rate debt
|
$
|
112.1
|
|
|
$
|
(40.9
|
)
|
|
$
|
(14.1
|
)
|
Effect from interest rate contracts
|
(112.1
|
)
|
|
40.9
|
|
|
14.1
|
|
|||
Cash flow hedges:
|
|
|
|
|
|
||||||
Effective portion of losses on interest rate contracts reclassified from accumulated other comprehensive loss
|
15.9
|
|
|
14.8
|
|
|
14.8
|
|
|||
Cross-currency interest rate swaps
|
(17.1
|
)
|
|
—
|
|
|
—
|
|
|||
Net losses on foreign currency exchange contracts not designated as hedging instruments
|
61.9
|
|
|
100.0
|
|
|
97.9
|
|
|||
Total
|
$
|
60.7
|
|
|
$
|
114.8
|
|
|
$
|
112.7
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net investment hedges:
|
|
|
|
|
|
||||||
Foreign currency-denominated notes
|
$
|
40.1
|
|
|
$
|
110.4
|
|
|
$
|
(361.5
|
)
|
Cross-currency interest rate swaps
|
47.4
|
|
|
96.8
|
|
|
(126.6
|
)
|
|||
Foreign currency exchange contracts
|
—
|
|
|
5.7
|
|
|
—
|
|
|||
Cash flow hedges:
|
|
|
|
|
|
||||||
Forward-starting interest rate swaps
|
31.6
|
|
|
—
|
|
|
13.0
|
|
|||
Cross-currency interest rate swaps
|
(8.3
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
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, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
1,025.4
|
|
|
$
|
1,025.4
|
|
|
$
|
1,025.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,025.4
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
7.2
|
|
|
$
|
7.2
|
|
|
$
|
7.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7.2
|
|
Corporate debt securities
|
81.4
|
|
|
81.1
|
|
|
—
|
|
|
81.4
|
|
|
—
|
|
|
81.4
|
|
||||||
Asset-backed securities
|
2.6
|
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
||||||
Other securities
|
9.8
|
|
|
9.8
|
|
|
—
|
|
|
—
|
|
|
9.8
|
|
|
9.8
|
|
||||||
Short-term investments
|
$
|
101.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Noncurrent investments:
|
|||||||||||||||||||||||
U.S. government and agency securities
|
$
|
77.2
|
|
|
$
|
76.3
|
|
|
$
|
77.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77.2
|
|
Corporate debt securities
|
271.1
|
|
|
267.8
|
|
|
—
|
|
|
271.1
|
|
|
—
|
|
|
271.1
|
|
||||||
Mortgage-backed securities
|
101.1
|
|
|
99.6
|
|
|
—
|
|
|
101.1
|
|
|
—
|
|
|
101.1
|
|
||||||
Asset-backed securities
|
30.0
|
|
|
29.6
|
|
|
—
|
|
|
30.0
|
|
|
—
|
|
|
30.0
|
|
||||||
Other securities
|
60.0
|
|
|
27.4
|
|
|
—
|
|
|
—
|
|
|
60.0
|
|
|
60.0
|
|
||||||
Marketable equity securities
|
718.6
|
|
|
254.4
|
|
|
718.6
|
|
|
—
|
|
|
—
|
|
|
718.6
|
|
||||||
Equity investments without readily determinable fair values(2)
|
405.0
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity method investments(2)
|
299.4
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Noncurrent investments
|
$
|
1,962.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
|
$
|
5,727.1
|
|
|
$
|
5,727.1
|
|
|
$
|
5,727.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,727.1
|
|
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)
|
289.2
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Noncurrent investments
|
$
|
2,005.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2019
|
$
|
(1,494.2
|
)
|
|
$
|
—
|
|
|
$
|
(1,491.6
|
)
|
|
$
|
—
|
|
|
$
|
(1,491.6
|
)
|
December 31, 2018
|
(498.9
|
)
|
|
—
|
|
|
(497.6
|
)
|
|
—
|
|
|
(497.6
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt, including current portion
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2019
|
$
|
(13,823.0
|
)
|
|
$
|
—
|
|
|
$
|
(15,150.0
|
)
|
|
$
|
—
|
|
|
$
|
(15,150.0
|
)
|
December 31, 2018
|
(9,799.7
|
)
|
|
—
|
|
|
(9,989.4
|
)
|
|
—
|
|
|
(9,989.4
|
)
|
|
|
|
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, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Risk-management instruments
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate contracts designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other noncurrent assets
|
$
|
72.0
|
|
|
$
|
—
|
|
|
$
|
72.0
|
|
|
$
|
—
|
|
|
$
|
72.0
|
|
Interest rate contracts designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other noncurrent assets
|
43.3
|
|
|
—
|
|
|
43.3
|
|
|
—
|
|
|
43.3
|
|
|||||
Cross-currency interest rate contracts designated as net investment hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other noncurrent assets
|
45.1
|
|
|
—
|
|
|
45.1
|
|
|
—
|
|
|
45.1
|
|
|||||
Other current liabilities
|
(21.4
|
)
|
|
—
|
|
|
(21.4
|
)
|
|
—
|
|
|
(21.4
|
)
|
|||||
Other noncurrent liabilities
|
(5.7
|
)
|
|
—
|
|
|
(5.7
|
)
|
|
—
|
|
|
(5.7
|
)
|
|||||
Cross-currency interest rate contracts designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other noncurrent assets
|
3.0
|
|
|
|
|
3.0
|
|
|
|
|
3.0
|
|
|||||||
Other noncurrent liabilities
|
(20.1
|
)
|
|
—
|
|
|
(20.1
|
)
|
|
—
|
|
|
(20.1
|
)
|
|||||
Foreign exchange contracts not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other receivables
|
18.4
|
|
|
—
|
|
|
18.4
|
|
|
—
|
|
|
18.4
|
|
|||||
Other current liabilities
|
(11.9
|
)
|
|
—
|
|
|
(11.9
|
)
|
|
—
|
|
|
(11.9
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Risk-management instruments
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate contracts designated as fair value hedges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other noncurrent assets
|
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
|
|
|||||
Other noncurrent assets
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|||||
Other current liabilities
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|||||
Cross-currency interest rate contracts not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
||||||||||
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
|
)
|
|
Maturities by Period
|
||||||||||||||||||
|
Total
|
|
Less Than
1 Year
|
|
1-5 Years
|
|
6-10 Years
|
|
More Than 10 Years
|
||||||||||
Fair value of debt securities
|
$
|
570.6
|
|
|
$
|
91.2
|
|
|
$
|
276.5
|
|
|
$
|
80.4
|
|
|
$
|
122.5
|
|
|
2019
|
|
2018
|
||||
Unrealized gross gains
|
$
|
10.3
|
|
|
$
|
0.8
|
|
Unrealized gross losses
|
4.0
|
|
|
29.0
|
|
||
Fair value of securities in an unrealized gain position
|
429.5
|
|
|
84.3
|
|
||
Fair value of securities in an unrealized loss position
|
141.1
|
|
|
858.6
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Proceeds from sales
|
$
|
655.5
|
|
|
$
|
5,668.0
|
|
|
$
|
5,769.3
|
|
Realized gross gains on sales
|
40.0
|
|
|
11.8
|
|
|
176.0
|
|
|||
Realized gross losses on sales
|
7.9
|
|
|
51.3
|
|
|
5.8
|
|
|
2019
|
|
2018
|
||||||||||||||||||||
Description
|
Carrying
Amount,
Gross
|
|
Accumulated
Amortization
|
|
Carrying
Amount,
Net
|
|
Carrying
Amount,
Gross
|
|
Accumulated
Amortization
|
|
Carrying
Amount,
Net
|
||||||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketed products
|
$
|
3,150.2
|
|
|
$
|
(1,244.6
|
)
|
|
$
|
1,905.6
|
|
|
$
|
2,077.2
|
|
|
$
|
(1,069.0
|
)
|
|
$
|
1,008.2
|
|
Other
|
94.2
|
|
|
(51.8
|
)
|
|
42.4
|
|
|
89.5
|
|
|
(29.7
|
)
|
|
59.8
|
|
||||||
Total finite-lived intangible assets
|
3,244.4
|
|
|
(1,296.4
|
)
|
|
1,948.0
|
|
|
2,166.7
|
|
|
(1,098.7
|
)
|
|
1,068.0
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Acquired IPR&D
|
4,670.0
|
|
|
—
|
|
|
4,670.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other intangibles
|
$
|
7,914.4
|
|
|
$
|
(1,296.4
|
)
|
|
$
|
6,618.0
|
|
|
$
|
2,166.7
|
|
|
$
|
(1,098.7
|
)
|
|
$
|
1,068.0
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Amortization expense
|
$
|
225.8
|
|
|
$
|
361.3
|
|
|
$
|
462.2
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
||||||||||
Estimated amortization expense
|
$
|
234.3
|
|
|
$
|
235.2
|
|
|
$
|
227.3
|
|
|
$
|
215.6
|
|
|
$
|
165.7
|
|
|
2019
|
|
2018
|
||||
Land
|
$
|
169.5
|
|
|
$
|
165.5
|
|
Buildings
|
7,067.3
|
|
|
7,116.6
|
|
||
Equipment
|
7,913.3
|
|
|
7,792.3
|
|
||
Construction in progress
|
1,884.4
|
|
|
1,588.6
|
|
||
|
17,034.5
|
|
|
16,663.0
|
|
||
Less accumulated depreciation
|
(9,161.6
|
)
|
|
(8,666.9
|
)
|
||
Property and equipment, net
|
$
|
7,872.9
|
|
|
$
|
7,996.1
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Depreciation expense
|
$
|
814.7
|
|
|
$
|
797.1
|
|
|
$
|
681.7
|
|
|
|
|
|
2019
|
|
2018
|
||||
Long-lived assets(1):
|
|
|
|
|
||||||
U.S. and Puerto Rico
|
|
$
|
5,595.4
|
|
|
$
|
5,425.0
|
|
||
Ireland
|
|
1,454.8
|
|
|
1,351.3
|
|
||||
Other foreign countries
|
|
1,758.3
|
|
|
1,769.9
|
|
||||
Long-lived assets
|
|
$
|
8,808.5
|
|
|
$
|
8,546.2
|
|
|
|
|
Weighted-average remaining lease term
|
8 years
|
|
Weighted-average discount rate
|
3.6
|
%
|
|
|
||
Operating cash flows from operating leases
|
$
|
153.6
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
81.2
|
|
|
|
||
Year 1
|
$
|
138.1
|
|
Year 2
|
111.0
|
|
|
Year 3
|
82.3
|
|
|
Year 4
|
60.6
|
|
|
Year 5
|
55.7
|
|
|
After Year 5
|
272.7
|
|
|
Total lease payments
|
720.4
|
|
|
Less imputed interest
|
112.0
|
|
|
Total
|
$
|
608.4
|
|
|
2019
|
|
2018
|
||||
Short-term commercial paper borrowings
|
$
|
1,494.2
|
|
|
$
|
498.9
|
|
0.15 to 7.13 percent long-term notes (due 2022-2059)
|
13,638.5
|
|
|
9,640.8
|
|
||
Other long-term debt
|
12.9
|
|
|
10.1
|
|
||
Unamortized debt issuance costs
|
(73.6
|
)
|
|
(28.4
|
)
|
||
Fair value adjustment on hedged long-term notes
|
245.2
|
|
|
177.2
|
|
||
Total debt
|
15,317.2
|
|
|
10,298.6
|
|
||
Less current portion
|
(1,499.3
|
)
|
|
(1,102.2
|
)
|
||
Long-term debt
|
$
|
13,817.9
|
|
|
$
|
9,196.4
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
||||||||||
Maturities on long-term debt
|
$
|
7.0
|
|
|
$
|
5.9
|
|
|
$
|
1,424.7
|
|
|
$
|
1.9
|
|
|
$
|
619.6
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Cash payments for interest on borrowings
|
$
|
305.5
|
|
|
$
|
223.8
|
|
|
$
|
192.7
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Stock-based compensation expense
|
$
|
306.8
|
|
|
$
|
253.5
|
|
|
$
|
256.3
|
|
Tax benefit
|
64.4
|
|
|
53.2
|
|
|
64.1
|
|
(Percents)
|
2019
|
|
2018
|
|
2017
|
|||
Expected dividend yield
|
2.50
|
%
|
|
2.50
|
%
|
|
2.50
|
%
|
Risk-free interest rate
|
2.46
|
|
|
2.31
|
|
|
1.38
|
|
Volatility
|
21.00
|
|
|
22.26
|
|
|
22.91
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal(1)
|
$
|
280.2
|
|
|
$
|
169.6
|
|
|
$
|
3,181.0
|
|
Foreign
|
299.8
|
|
|
106.8
|
|
|
47.5
|
|
|||
State
|
(14.4
|
)
|
|
4.7
|
|
|
(5.4
|
)
|
|||
Total current tax expense
|
565.6
|
|
|
281.1
|
|
|
3,223.1
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal(2)
|
141.3
|
|
|
(3.7
|
)
|
|
(601.2
|
)
|
|||
Foreign
|
(24.1
|
)
|
|
248.7
|
|
|
(230.9
|
)
|
|||
State
|
(54.8
|
)
|
|
3.4
|
|
|
0.2
|
|
|||
Total deferred tax (benefit) expense
|
62.4
|
|
|
248.4
|
|
|
(831.9
|
)
|
|||
Income taxes
|
$
|
628.0
|
|
|
$
|
529.5
|
|
|
$
|
2,391.2
|
|
|
2019
|
|
2018
|
||||
Deferred tax assets:
|
|
|
|
||||
Purchases of intangible assets
|
$
|
2,512.4
|
|
|
$
|
2,627.7
|
|
Compensation and benefits
|
934.3
|
|
|
781.6
|
|
||
Tax credit carryforwards and carrybacks
|
455.8
|
|
|
359.4
|
|
||
Tax loss carryforwards and carrybacks
|
318.8
|
|
|
248.2
|
|
||
Sales rebates and discounts
|
197.3
|
|
|
45.5
|
|
||
Operating lease liabilities
|
140.6
|
|
|
—
|
|
||
Product return reserves
|
98.1
|
|
|
95.3
|
|
||
Other comprehensive loss on hedging transactions
|
59.6
|
|
|
68.9
|
|
||
Debt
|
53.9
|
|
|
40.3
|
|
||
Other
|
835.7
|
|
|
646.3
|
|
||
Total gross deferred tax assets
|
5,606.5
|
|
|
4,913.2
|
|
||
Valuation allowances
|
(616.5
|
)
|
|
(574.8
|
)
|
||
Total deferred tax assets
|
4,990.0
|
|
|
4,338.4
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Earnings of foreign subsidiaries
|
(1,776.4
|
)
|
|
(1,745.3
|
)
|
||
Intangibles
|
(1,298.0
|
)
|
|
(86.9
|
)
|
||
Inventories
|
(686.4
|
)
|
|
(681.3
|
)
|
||
Prepaid employee benefits
|
(305.9
|
)
|
|
(240.1
|
)
|
||
Property and equipment
|
(274.1
|
)
|
|
(260.9
|
)
|
||
Financial instruments
|
(139.4
|
)
|
|
(22.8
|
)
|
||
Operating lease assets
|
(124.7
|
)
|
|
—
|
|
||
Total deferred tax liabilities
|
(4,604.9
|
)
|
|
(3,037.3
|
)
|
||
Deferred tax assets - net
|
$
|
385.1
|
|
|
$
|
1,301.1
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Cash payments of income taxes
|
$
|
1,180.5
|
|
|
$
|
1,076.7
|
|
|
$
|
221.5
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Income tax at the U.S. federal statutory tax rate
|
$
|
1,105.8
|
|
|
$
|
772.8
|
|
|
$
|
806.7
|
|
Add (deduct):
|
|
|
|
|
|
||||||
International operations, including Puerto Rico
|
(242.0
|
)
|
|
(627.1
|
)
|
|
(480.8
|
)
|
|||
General business credits
|
(108.8
|
)
|
|
(87.4
|
)
|
|
(66.8
|
)
|
|||
Non-deductible acquired IPR&D(1)
|
—
|
|
|
309.9
|
|
|
300.1
|
|
|||
2017 Tax Act
|
—
|
|
|
175.3
|
|
|
1,914.0
|
|
|||
Other
|
(127.0
|
)
|
|
(14.0
|
)
|
|
(82.0
|
)
|
|||
Income taxes
|
$
|
628.0
|
|
|
$
|
529.5
|
|
|
$
|
2,391.2
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Beginning balance at January 1
|
$
|
2,034.6
|
|
|
$
|
1,000.8
|
|
|
$
|
843.3
|
|
Additions based on tax positions related to the current year
|
187.2
|
|
|
798.2
|
|
|
133.8
|
|
|||
Additions for tax positions of prior years
|
425.3
|
|
|
410.9
|
|
|
93.8
|
|
|||
Reductions for tax positions of prior years
|
(100.3
|
)
|
|
(115.4
|
)
|
|
(59.3
|
)
|
|||
Settlements
|
(260.5
|
)
|
|
(33.2
|
)
|
|
(2.4
|
)
|
|||
Lapses of statutes of limitation
|
(161.5
|
)
|
|
(20.5
|
)
|
|
(19.3
|
)
|
|||
Changes related to the impact of foreign currency translation
|
(16.2
|
)
|
|
(6.2
|
)
|
|
10.9
|
|
|||
Ending balance at December 31
|
$
|
2,108.6
|
|
|
$
|
2,034.6
|
|
|
$
|
1,000.8
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Income tax (benefit) expense
|
$
|
(26.4
|
)
|
|
$
|
25.1
|
|
|
$
|
22.8
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
13,427.1
|
|
|
$
|
14,839.7
|
|
|
$
|
1,540.0
|
|
|
$
|
1,718.7
|
|
Service cost
|
250.4
|
|
|
292.7
|
|
|
36.3
|
|
|
41.5
|
|
||||
Interest cost
|
486.0
|
|
|
458.5
|
|
|
58.0
|
|
|
57.3
|
|
||||
Actuarial (gain) loss
|
2,631.7
|
|
|
(1,386.5
|
)
|
|
54.3
|
|
|
(176.9
|
)
|
||||
Benefits paid
|
(584.2
|
)
|
|
(579.4
|
)
|
|
(87.3
|
)
|
|
(82.8
|
)
|
||||
Plan amendments
|
—
|
|
|
17.6
|
|
|
—
|
|
|
(14.1
|
)
|
||||
Curtailment (gain) loss
|
(16.8
|
)
|
|
(43.9
|
)
|
|
(0.5
|
)
|
|
2.5
|
|
||||
Foreign currency exchange rate changes and other adjustments
|
56.8
|
|
|
(171.6
|
)
|
|
0.6
|
|
|
(6.2
|
)
|
||||
Benefit obligation at end of year
|
16,251.0
|
|
|
13,427.1
|
|
|
1,601.4
|
|
|
1,540.0
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
||||
Fair value of plan assets at beginning of year
|
10,932.6
|
|
|
11,713.0
|
|
|
2,398.1
|
|
|
2,372.4
|
|
Actual return on plan assets
|
2,012.0
|
|
|
(360.1
|
)
|
|
444.1
|
|
|
32.6
|
|
Employer contribution
|
429.9
|
|
|
319.0
|
|
|
13.2
|
|
|
75.9
|
|
Benefits paid
|
(584.2
|
)
|
|
(579.4
|
)
|
|
(87.3
|
)
|
|
(82.8
|
)
|
Foreign currency exchange rate changes and other adjustments
|
67.7
|
|
|
(159.9
|
)
|
|
0.1
|
|
|
—
|
|
Fair value of plan assets at end of year
|
12,858.0
|
|
|
10,932.6
|
|
|
2,768.2
|
|
|
2,398.1
|
|
Funded status
|
(3,393.0
|
)
|
|
(2,494.5
|
)
|
|
1,166.8
|
|
|
858.1
|
|
||||
Unrecognized net actuarial (gain) loss
|
6,177.6
|
|
|
5,011.3
|
|
|
(111.6
|
)
|
|
140.6
|
|
||||
Unrecognized prior service (benefit) cost
|
17.4
|
|
|
25.0
|
|
|
(236.4
|
)
|
|
(299.9
|
)
|
||||
Net amount recognized
|
$
|
2,802.0
|
|
|
$
|
2,541.8
|
|
|
$
|
818.8
|
|
|
$
|
698.8
|
|
Amounts recognized in the consolidated balance sheet consisted of:
|
|
|
|
|
|
|
|
||||||||
Other noncurrent assets
|
$
|
163.3
|
|
|
$
|
193.7
|
|
|
$
|
1,381.3
|
|
|
$
|
1,043.6
|
|
Other current liabilities
|
(65.3
|
)
|
|
(64.2
|
)
|
|
(7.3
|
)
|
|
(7.3
|
)
|
||||
Accrued retirement benefits
|
(3,491.0
|
)
|
|
(2,624.0
|
)
|
|
(207.2
|
)
|
|
(178.2
|
)
|
||||
Accumulated other comprehensive (income) loss before income taxes
|
6,195.0
|
|
|
5,036.3
|
|
|
(348.0
|
)
|
|
(159.3
|
)
|
||||
Net amount recognized
|
$
|
2,802.0
|
|
|
$
|
2,541.8
|
|
|
$
|
818.8
|
|
|
$
|
698.8
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||||
(Percents)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||
Discount rate for benefit obligation
|
3.0
|
%
|
|
4.0
|
%
|
|
3.4
|
%
|
|
3.3
|
%
|
|
4.4
|
%
|
|
3.7
|
%
|
Discount rate for net benefit costs
|
4.0
|
|
|
3.4
|
|
|
3.9
|
|
|
4.4
|
|
|
3.7
|
|
|
4.3
|
|
Rate of compensation increase for benefit obligation
|
3.3
|
|
|
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
|
7.4
|
|
|
7.4
|
|
|
7.4
|
|
|
6.0
|
|
|
8.0
|
|
|
8.0
|
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025-2029
|
||||||||||||
Defined benefit pension plans
|
$
|
614.5
|
|
|
$
|
621.8
|
|
|
$
|
641.0
|
|
|
$
|
652.3
|
|
|
$
|
682.4
|
|
|
$
|
3,712.1
|
|
Retiree health benefit plans
|
93.7
|
|
|
93.8
|
|
|
92.9
|
|
|
91.7
|
|
|
94.3
|
|
|
469.8
|
|
|
2019
|
|
2018
|
||||
Projected benefit obligation
|
$
|
14,039.7
|
|
|
$
|
11,584.2
|
|
Fair value of plan assets
|
10,483.4
|
|
|
8,895.6
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Accumulated benefit obligation
|
$
|
13,063.7
|
|
|
$
|
10,837.8
|
|
|
$
|
214.4
|
|
|
$
|
189.4
|
|
Fair value of plan assets
|
10,483.4
|
|
|
8,895.6
|
|
|
—
|
|
|
—
|
|
|
Defined Benefit
Pension Plans
|
|
Retiree Health
Benefit Plans
|
||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
Components of net periodic (benefit) cost:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
250.4
|
|
|
$
|
292.7
|
|
|
$
|
320.8
|
|
|
$
|
36.3
|
|
|
$
|
41.5
|
|
|
$
|
46.4
|
|
Interest cost
|
486.0
|
|
|
458.5
|
|
|
411.6
|
|
|
58.0
|
|
|
57.3
|
|
|
52.9
|
|
||||||
Expected return on plan assets
|
(839.6
|
)
|
|
(842.1
|
)
|
|
(773.6
|
)
|
|
(144.3
|
)
|
|
(177.9
|
)
|
|
(160.7
|
)
|
||||||
Amortization of prior service (benefit) cost
|
6.1
|
|
|
4.6
|
|
|
5.6
|
|
|
(62.9
|
)
|
|
(79.5
|
)
|
|
(90.0
|
)
|
||||||
Recognized actuarial loss
|
284.9
|
|
|
332.5
|
|
|
286.8
|
|
|
1.9
|
|
|
6.1
|
|
|
18.4
|
|
||||||
Curtailment (gain) loss
|
2.2
|
|
|
1.3
|
|
|
93.5
|
|
|
—
|
|
|
(29.3
|
)
|
|
65.5
|
|
||||||
Special termination benefit
|
—
|
|
|
—
|
|
|
317.2
|
|
|
—
|
|
|
—
|
|
|
37.5
|
|
||||||
Net periodic (benefit) cost
|
$
|
190.0
|
|
|
$
|
247.5
|
|
|
$
|
661.9
|
|
|
$
|
(111.0
|
)
|
|
$
|
(181.8
|
)
|
|
$
|
(30.0
|
)
|
|
Defined Benefit
Pension Plans |
|
Retiree Health
Benefit Plans |
||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
Actuarial gain (loss) arising during period
|
$
|
(1,461.0
|
)
|
|
$
|
182.8
|
|
|
$
|
(898.1
|
)
|
|
$
|
246.1
|
|
|
$
|
37.5
|
|
|
$
|
261.3
|
|
Plan amendments during period
|
—
|
|
|
(17.6
|
)
|
|
—
|
|
|
—
|
|
|
14.1
|
|
|
—
|
|
||||||
Curtailment gain (loss)
|
19.0
|
|
|
45.2
|
|
|
3.2
|
|
|
—
|
|
|
(31.8
|
)
|
|
(39.7
|
)
|
||||||
Amortization of prior service (benefit) cost included in net income
|
6.1
|
|
|
4.6
|
|
|
5.6
|
|
|
(62.9
|
)
|
|
(79.5
|
)
|
|
(90.0
|
)
|
||||||
Amortization of net actuarial loss included in net income
|
284.9
|
|
|
332.5
|
|
|
286.8
|
|
|
1.9
|
|
|
6.1
|
|
|
18.4
|
|
||||||
Foreign currency exchange rate changes and other
|
(7.7
|
)
|
|
47.1
|
|
|
(108.8
|
)
|
|
3.6
|
|
|
(0.1
|
)
|
|
(3.3
|
)
|
||||||
Total other comprehensive income (loss) during period
|
$
|
(1,158.7
|
)
|
|
$
|
594.6
|
|
|
$
|
(711.3
|
)
|
|
$
|
188.7
|
|
|
$
|
(53.7
|
)
|
|
$
|
146.7
|
|
|
|
|
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.
|
$
|
794.2
|
|
|
$
|
532.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
261.7
|
|
International
|
2,439.2
|
|
|
1,046.8
|
|
|
—
|
|
|
—
|
|
|
1,392.4
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
3,661.4
|
|
|
4.8
|
|
|
2,658.9
|
|
|
—
|
|
|
997.7
|
|
|||||
Developed markets - repurchase agreements
|
(1,659.1
|
)
|
|
—
|
|
|
(1,659.1
|
)
|
|
—
|
|
|
—
|
|
|||||
Emerging markets
|
648.0
|
|
|
18.5
|
|
|
277.4
|
|
|
4.1
|
|
|
348.0
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
2,897.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,897.9
|
|
|||||
Equity-like funds
|
2,279.3
|
|
|
—
|
|
|
—
|
|
|
16.8
|
|
|
2,262.5
|
|
|||||
Real estate
|
570.3
|
|
|
166.2
|
|
|
—
|
|
|
—
|
|
|
404.1
|
|
|||||
Other
|
1,226.8
|
|
|
62.9
|
|
|
222.6
|
|
|
6.6
|
|
|
934.7
|
|
|||||
Total
|
$
|
12,858.0
|
|
|
$
|
1,831.7
|
|
|
$
|
1,499.8
|
|
|
$
|
27.5
|
|
|
$
|
9,499.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Retiree Health Benefit Plans
|
|
|
|
|
|
|
|
|
|
||||||||||
Public equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.
|
$
|
76.5
|
|
|
$
|
52.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24.4
|
|
International
|
152.6
|
|
|
60.8
|
|
|
—
|
|
|
—
|
|
|
91.8
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
82.7
|
|
|
—
|
|
|
56.3
|
|
|
—
|
|
|
26.4
|
|
|||||
Emerging markets
|
58.5
|
|
|
—
|
|
|
27.0
|
|
|
0.4
|
|
|
31.1
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
250.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
250.8
|
|
|||||
Equity-like funds
|
187.4
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
|
185.8
|
|
|||||
Cash value of trust owned insurance contract
|
1,832.2
|
|
|
—
|
|
|
1,832.2
|
|
|
—
|
|
|
—
|
|
|||||
Real estate
|
31.3
|
|
|
16.2
|
|
|
—
|
|
|
—
|
|
|
15.1
|
|
|||||
Other
|
96.2
|
|
|
11.4
|
|
|
7.9
|
|
|
0.7
|
|
|
76.2
|
|
|||||
Total
|
$
|
2,768.2
|
|
|
$
|
140.5
|
|
|
$
|
1,923.4
|
|
|
$
|
2.7
|
|
|
$
|
701.6
|
|
|
|
|
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.
|
$
|
617.7
|
|
|
$
|
409.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
208.6
|
|
International
|
2,117.8
|
|
|
828.8
|
|
|
—
|
|
|
1.8
|
|
|
1,287.2
|
|
|||||
Fixed income:
|
|
|
|
|
|
|
|
|
|
||||||||||
Developed markets
|
2,933.4
|
|
|
17.2
|
|
|
2,173.3
|
|
|
—
|
|
|
742.9
|
|
|||||
Developed markets - repurchase agreements
|
(1,225.5
|
)
|
|
—
|
|
|
(1,225.5
|
)
|
|
—
|
|
|
—
|
|
|||||
Emerging markets
|
565.2
|
|
|
3.4
|
|
|
255.8
|
|
|
6.1
|
|
|
299.9
|
|
|||||
Private alternative investments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Hedge funds
|
2,795.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,795.3
|
|
|||||
Equity-like funds
|
1,893.5
|
|
|
—
|
|
|
—
|
|
|
16.8
|
|
|
1,876.7
|
|
|||||
Real estate
|
505.7
|
|
|
147.1
|
|
|
—
|
|
|
—
|
|
|
358.6
|
|
|||||
Other
|
729.5
|
|
|
213.0
|
|
|
83.7
|
|
|
—
|
|
|
432.8
|
|
|||||
Total
|
$
|
10,932.6
|
|
|
$
|
1,618.6
|
|
|
$
|
1,287.3
|
|
|
$
|
24.7
|
|
|
$
|
8,002.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
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
|
|
|
Continuing Operations
|
|
|
|
|
||||||||||||||||||
(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
|
|
Discontinued Operations
|
|
Accumulated Other Comprehensive Loss
|
||||||||||||
Beginning balance at January 1, 2017 (1)
|
$
|
(1,686.6
|
)
|
|
$
|
224.0
|
|
|
$
|
(3,352.0
|
)
|
|
$
|
(210.9
|
)
|
|
$
|
(200.3
|
)
|
|
$
|
(5,225.8
|
)
|
Other comprehensive income (loss) before reclassifications
|
525.6
|
|
|
(15.7
|
)
|
|
(532.1
|
)
|
|
8.5
|
|
|
127.7
|
|
|
114.0
|
|
||||||
Net amount reclassified from accumulated other comprehensive loss
|
8.1
|
|
|
(110.6
|
)
|
|
151.9
|
|
|
9.6
|
|
|
1.5
|
|
|
60.5
|
|
||||||
Net other comprehensive income (loss)
|
533.7
|
|
|
(126.3
|
)
|
|
(380.2
|
)
|
|
18.1
|
|
|
129.2
|
|
|
174.5
|
|
||||||
Reclassifications of stranded tax effects (Note 1)
|
(38.8
|
)
|
|
15.8
|
|
|
(579.1
|
)
|
|
(41.5
|
)
|
|
—
|
|
|
(643.6
|
)
|
||||||
Balance at December 31, 2017(2)
|
(1,191.7
|
)
|
|
113.5
|
|
|
(4,311.3
|
)
|
|
(234.3
|
)
|
|
(71.1
|
)
|
|
(5,694.9
|
)
|
||||||
Reclassification due to adoption of new accounting standard(3)
|
—
|
|
|
(128.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(128.9
|
)
|
||||||
Other comprehensive income (loss) before reclassifications
|
(378.0
|
)
|
|
24.5
|
|
|
250.7
|
|
|
(16.3
|
)
|
|
12.2
|
|
|
(106.9
|
)
|
||||||
Net amount reclassified from accumulated other comprehensive loss
|
—
|
|
|
(31.2
|
)
|
|
207.9
|
|
|
11.7
|
|
|
2.1
|
|
|
190.5
|
|
||||||
Net other comprehensive income (loss)
|
(378.0
|
)
|
|
(6.7
|
)
|
|
458.6
|
|
|
(4.6
|
)
|
|
14.3
|
|
|
83.6
|
|
||||||
Balance at December 31, 2018(4)
|
(1,569.7
|
)
|
|
(22.1
|
)
|
|
(3,852.7
|
)
|
|
(238.9
|
)
|
|
(56.8
|
)
|
|
(5,740.2
|
)
|
||||||
Other comprehensive income (loss) before reclassifications
|
(46.2
|
)
|
|
28.9
|
|
|
(967.6
|
)
|
|
14.5
|
|
|
(27.2
|
)
|
|
(997.6
|
)
|
||||||
Net amount reclassified from accumulated other comprehensive loss
|
(62.1
|
)
|
|
(1.9
|
)
|
|
181.7
|
|
|
12.5
|
|
|
84.0
|
|
|
214.2
|
|
||||||
Net other comprehensive income (loss)
|
(108.3
|
)
|
|
27.0
|
|
|
(785.9
|
)
|
|
27.0
|
|
|
56.8
|
|
|
(783.4
|
)
|
||||||
Ending balance at December 31, 2019
|
$
|
(1,678.0
|
)
|
|
$
|
4.9
|
|
|
$
|
(4,638.6
|
)
|
|
$
|
(211.9
|
)
|
|
$
|
—
|
|
|
$
|
(6,523.6
|
)
|
Tax benefit (expense)
|
2019
|
|
2018
|
|
2017
|
||||||
Foreign currency translation gains/losses
|
$
|
(18.4
|
)
|
|
$
|
51.6
|
|
|
$
|
170.8
|
|
Unrealized net gains/losses on securities
|
(7.4
|
)
|
|
2.1
|
|
|
55.0
|
|
|||
Defined benefit pension and retiree health benefit plans
|
184.1
|
|
|
(85.3
|
)
|
|
186.6
|
|
|||
Effective portion of cash flow hedges
|
(7.3
|
)
|
|
1.3
|
|
|
(9.7
|
)
|
|||
Benefit/(provision) for income taxes allocated to other comprehensive income (loss) items
|
$
|
151.0
|
|
|
$
|
(30.3
|
)
|
|
$
|
402.7
|
|
Details about Accumulated Other
Comprehensive Loss Components
|
Year Ended December 31,
|
Affected Line Item in the Consolidated Statements of Operations
|
||||||||||
2019
|
|
2018
|
|
2017
|
||||||||
Amortization of retirement benefit items:
|
|
|
|
|
|
|
||||||
Prior service benefits, net
|
$
|
(56.8
|
)
|
|
$
|
(74.9
|
)
|
|
$
|
(84.4
|
)
|
Other—net, (income) expense
|
Actuarial losses
|
286.8
|
|
|
338.6
|
|
|
305.2
|
|
Other—net, (income) expense
|
|||
Total before tax
|
230.0
|
|
|
263.7
|
|
|
220.8
|
|
|
|||
Tax benefit
|
(48.3
|
)
|
|
(55.8
|
)
|
|
(68.9
|
)
|
Income taxes
|
|||
Net of tax
|
181.7
|
|
|
207.9
|
|
|
151.9
|
|
|
|||
|
|
|
|
|
|
|
||||||
Unrealized gains/losses on available-for-sale securities:
|
|
|
|
|
|
|
||||||
Realized gains, net
|
(2.4
|
)
|
|
(39.5
|
)
|
|
(170.2
|
)
|
Other—net, (income) expense
|
|||
Tax expense
|
0.5
|
|
|
8.3
|
|
|
59.6
|
|
Income taxes
|
|||
Net of tax
|
(1.9
|
)
|
|
(31.2
|
)
|
|
(110.6
|
)
|
|
|||
|
|
|
|
|
|
|
||||||
Other, net of tax
|
(49.6
|
)
|
|
11.7
|
|
|
17.7
|
|
Other—net, (income) expense
|
|||
Reclassifications from continuing operations (net of tax)
|
130.2
|
|
|
188.4
|
|
|
59.0
|
|
|
|||
Reclassifications from discontinued operations (net of tax)
|
84.0
|
|
|
2.1
|
|
|
1.5
|
|
Net income (loss) from discontinued operations
|
|||
Total reclassifications for the period, net of tax
|
$
|
214.2
|
|
|
$
|
190.5
|
|
|
$
|
60.5
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Interest expense
|
$
|
400.6
|
|
|
$
|
242.5
|
|
|
$
|
225.0
|
|
Interest income
|
(80.4
|
)
|
|
(159.3
|
)
|
|
(166.4
|
)
|
|||
Debt extinguishment loss (Note 11)
|
252.5
|
|
|
—
|
|
|
—
|
|
|||
Gain on sale of antibiotic business in China (Note 3)
|
(309.8
|
)
|
|
—
|
|
|
—
|
|
|||
Retirement benefit
|
(209.9
|
)
|
|
(240.5
|
)
|
|
(249.0
|
)
|
|||
Other (income) expense
|
(344.6
|
)
|
|
11.7
|
|
|
(111.1
|
)
|
|||
Other–net, (income) expense
|
$
|
(291.6
|
)
|
|
$
|
(145.6
|
)
|
|
$
|
(301.5
|
)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue from discontinued operations
|
$
|
580.0
|
|
|
$
|
3,062.4
|
|
|
$
|
2,897.5
|
|
Net income (loss) from discontinued operations
|
3,680.5
|
|
|
81.4
|
|
|
(117.7
|
)
|
|
|
December 31, 2018
|
||
Inventories
|
|
$
|
1,013.7
|
|
Other current assets
|
|
1,215.4
|
|
|
Current assets of discontinued operations
|
|
$
|
2,229.1
|
|
|
|
|
||
Goodwill
|
|
$
|
2,980.9
|
|
Other intangibles, net
|
|
2,453.0
|
|
|
Property and equipment, net
|
|
923.4
|
|
|
Other assets
|
|
126.8
|
|
|
Noncurrent assets of discontinued operations
|
|
$
|
6,484.1
|
|
|
|
|
||
Current liabilities of discontinued operations
|
|
$
|
692.8
|
|
|
|
|
||
Long-term debt
|
|
$
|
2,443.3
|
|
Other liabilities
|
|
299.0
|
|
|
Noncurrent liabilities of discontinued operations
|
|
$
|
2,742.3
|
|
2019
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
||||||||
Revenue
|
|
$
|
6,114.0
|
|
|
$
|
5,476.6
|
|
|
$
|
5,636.7
|
|
|
$
|
5,092.2
|
|
Cost of sales
|
|
1,282.6
|
|
|
1,175.0
|
|
|
1,124.9
|
|
|
1,138.7
|
|
||||
Operating expenses(1)
|
|
3,279.5
|
|
|
2,793.2
|
|
|
2,988.5
|
|
|
2,747.6
|
|
||||
Acquired IPR&D
|
|
—
|
|
|
77.7
|
|
|
25.0
|
|
|
136.9
|
|
||||
Asset impairment, restructuring, and other special charges(2)
|
|
151.7
|
|
|
—
|
|
|
—
|
|
|
423.9
|
|
||||
Income before income taxes
|
|
1,663.1
|
|
|
1,405.8
|
|
|
1,465.9
|
|
|
731.1
|
|
||||
Income taxes
|
|
167.4
|
|
|
151.9
|
|
|
138.7
|
|
|
170.0
|
|
||||
Net income from continuing operations
|
|
1,495.7
|
|
|
1,253.9
|
|
|
1,327.2
|
|
|
561.1
|
|
||||
Net Income from discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,680.5
|
|
||||
Net income
|
|
1,495.7
|
|
|
1,253.9
|
|
|
1,327.2
|
|
|
4,241.6
|
|
||||
EPS from continuing operations - basic
|
|
1.64
|
|
|
1.37
|
|
|
1.44
|
|
|
0.57
|
|
||||
EPS from discontinued operations - basic
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.76
|
|
||||
EPS—basic
|
|
1.64
|
|
|
1.37
|
|
|
1.44
|
|
|
4.33
|
|
||||
EPS from continuing operations - diluted
|
|
1.64
|
|
|
1.37
|
|
|
1.44
|
|
|
0.57
|
|
||||
EPS from discontinued operations - diluted
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.74
|
|
||||
EPS—diluted
|
|
1.64
|
|
|
1.37
|
|
|
1.44
|
|
|
4.31
|
|
||||
Dividends paid per share
|
|
0.6450
|
|
|
0.6450
|
|
|
0.6450
|
|
|
0.6450
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
2018
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
||||||||
Revenue
|
|
$
|
5,637.6
|
|
|
$
|
5,306.9
|
|
|
$
|
5,585.0
|
|
|
$
|
4,963.8
|
|
Cost of sales
|
|
1,129.9
|
|
|
1,152.9
|
|
|
1,234.3
|
|
|
1,164.6
|
|
||||
Operating expenses(1)
|
|
3,085.5
|
|
|
2,738.1
|
|
|
2,756.6
|
|
|
2,446.2
|
|
||||
Acquired IPR&D(3)
|
|
329.4
|
|
|
30.0
|
|
|
1,624.5
|
|
|
—
|
|
||||
Asset impairment, restructuring, and other special charges
|
|
192.7
|
|
|
42.9
|
|
|
(25.5
|
)
|
|
56.8
|
|
||||
Income before income taxes
|
|
931.6
|
|
|
1,341.1
|
|
|
41.7
|
|
|
1,365.7
|
|
||||
Income taxes(4)
|
|
(189.8
|
)
|
|
247.5
|
|
|
273.3
|
|
|
198.5
|
|
||||
Net income (loss) from continuing operations
|
|
1,121.4
|
|
|
1,093.6
|
|
|
(231.6
|
)
|
|
1,167.2
|
|
||||
Net Income (loss) from discontinued operations
|
|
3.7
|
|
|
55.9
|
|
|
(28.3
|
)
|
|
50.2
|
|
||||
Net income (loss)
|
|
1,125.1
|
|
|
1,149.5
|
|
|
(259.9
|
)
|
|
1,217.4
|
|
||||
Earnings (loss) per share from continuing operations - basic
|
|
1.11
|
|
|
1.07
|
|
|
(0.22
|
)
|
|
1.11
|
|
||||
Earnings (loss) per share from discontinued operations - basic
|
|
—
|
|
|
0.06
|
|
|
(0.03
|
)
|
|
0.05
|
|
||||
Earnings (loss) per share—basic
|
|
1.11
|
|
|
1.13
|
|
|
(0.25
|
)
|
|
1.16
|
|
||||
Earnings (loss) per share from continuing operations - diluted
|
|
1.10
|
|
|
1.07
|
|
|
(0.22
|
)
|
|
1.11
|
|
||||
Earnings (loss) per share from discontinued operations - diluted
|
|
—
|
|
|
0.05
|
|
|
(0.03
|
)
|
|
0.05
|
|
||||
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
|
|
David A. Ricks
|
|
Joshua L. Smiley
|
Chairman, President and Chief Executive Officer
|
|
Senior Vice President and Chief Financial Officer
|
|
|
Medicaid, Managed Care, and Medicare sales rebate accruals
|
Description of the Matter
|
|
As described in Note 1 to the consolidated financial statements under the caption “Revenue Recognition,” the Company establishes provisions for sales rebate and discounts in the same period as the related sales occur. At December 31, 2019 the Company had $4,933.6 million in sales rebate and discount accruals. A large portion of these accruals are rebates associated with sales in the United States for which payment for purchase of the product is covered by Medicaid, Managed Care, and Medicare.
Auditing the Medicaid, Managed Care, and Medicare sales rebate and discount liabilities is challenging because of the subjectivity of certain assumptions required to estimate the rebate liabilities. In calculating the appropriate accrual amount, the Company considers historical Medicaid, Managed Care, and Medicare rebate payments by product as a percentage of their historical sales as well as any significant changes in sales trends, the lag in payment timing, an evaluation of the current Medicaid and Medicare laws and interpretations, the percentage of products that are sold via Medicaid, Managed Care, and Medicare, and product pricing. For Medicaid, there is significant complexity associated with calculating the legislated Medicaid rebates. Management utilizes employees with legislative experience and knowledge in developing assumptions used to calculate Medicaid rebates. Similarly, for Managed Care and Medicare, given variability in prescription drug costs, continued historical year over year increases in enrollees and variability in prescription data, historical rebate information may not be predictive for management to estimate the rebate accrual and thus, management supplements its historical data analysis with qualitative adjustments based upon current utilization.
|
How We Addressed the Matter in Our Audit
|
|
We tested the Company’s controls addressing the identified risks of material misstatement related to the valuation of the sales rebate and discount liabilities. This included testing controls over management’s review of the significant assumptions used to calculate the Medicaid, Managed Care, and Medicare rebate liabilities, including the significant assumptions discussed above. This testing also included management’s control to compare actual activity to forecasted activity and controls to ensure the data used to evaluate the significant assumptions was complete and accurate.
Our audit procedures included, among others, evaluating for reasonableness the significant assumptions in light of economic trends, product profiles, and other regulatory factors. Our testing involved assessing the historical accuracy of management’s estimates by comparing actual activity to previous estimates and performing analytical procedures, based on internal and external data sources, to evaluate the completeness of the reserves. Additionally, our procedures included reviewing a sample of contracts, testing a sample of rebate payments and testing the underlying data used in management’s evaluation. For Medicaid, we involved our professional with an understanding of the statutory reimbursement requirements to assess the consistency of the Company’s calculation methodologies with the applicable government regulations and policy. For Medicare we evaluated the reasonableness of assumptions made by management in estimating the Medicare coverage gap liability.
|
|
|
Retirement Benefits - Valuation of Alternative Investments
|
Description of the Matter
|
|
As described in Note 15 to the consolidated financial statements under the caption “Benefit Plan Investments,” the Company’s benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. At December 31, 2019 the Company had $15,626.2 million in plan assets related to the defined benefit pension plans and retiree health benefit plans. Approximately 40% of the total pension and retiree assets are in hedge funds and private equity-like investment funds (“alternative investments”). These alternative investments are valued using significant unobservable inputs or are valued at net asset value (NAV) reported by the counterparty, adjusted as necessary.
Auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, including the underlying net asset values (“NAVs”), discounted cash flow valuations, comparable market valuations, and adjustments for currency, credit, liquidity and other risks. Additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation.
|
How We Addressed the Matter in Our Audit
|
|
We tested the Company’s controls addressing the risks of material misstatement relating to valuation of alternative investments. This included testing management’s review controls over alternative investment valuation, which included a comparison of returns to benchmarks and in-person or telephonic meetings with investment firms to discuss valuation policies and procedures.
Our audit procedures included, among others, comparing fund returns to selected relevant benchmarks and understanding variations, obtaining the latest audited financial statements and comparing to the Company’s estimated fair values and reconciling any differences. We also inquired of management about changes to the investment portfolio and/or related investment strategies and considerations. We assessed the historical accuracy of management’s estimates by comparing actual activity to previous estimates. We evaluated for contrary evidence by confirming the fair value of the investments and ownership interest directly with the trustees and a sample of managers at year end.
|
|
|
Valuation of intangible assets related to the Loxo Oncology (Loxo) Acquisition
|
Description of the Matter
|
|
As described in Note 3 to the consolidated financial statements, in February 2019, the Company completed its acquisition of Loxo Oncology, Inc. (Loxo) for a purchase price of $6.92 billion, net of cash acquired. As a result of the acquisition, the Company acquired a pipeline of investigational medicines, including LOXO-292, an oral RET inhibitor that has been granted Breakthrough Therapy designation by the U.S. Food and Drug Administration. LOXO-292 was accounted for as an indefinite-lived in-process research and development (IPR&D) asset and valued at $4.60 billion.
Auditing the valuation of the LOXO-292 IPR&D asset was complex because of the significant estimation uncertainty in determining the fair value of the asset. The fair value determination is based on a discounted cash flow model using certain assumptions for which there is high subjectivity, such as revenue growth, probability of technical success and discount rate. These significant assumptions are forward-looking and could be affected by future economic and market conditions. Further, the estimated fair value of the IPR&D asset was sensitive to changes in these assumptions.
|
How We Addressed the Matter in Our Audit
|
|
We tested the Company’s controls addressing the identified risks of material misstatement related to the valuation of the IPR&D asset. For example, we tested controls over management’s review of the significant assumptions used to calculate the valuation of the intangible assets acquired including forecasts of future cash flows and review of the valuation model.
Our audit procedures included, among others, obtaining an understanding of management’s approach to developing the probability of technical success and evaluating the reasonableness by comparing to analyst expectations, historical results of similar products in development and industry trends, to the extent applicable. We also evaluated the reasonableness of the projected revenue growth used within the valuation against analyst expectations, industry trends, market trends, other market information and identified contrary evidence. We involved our valuation specialist to evaluate the discounted cash flow model used by the Company and to test the discount rate utilized in the Company’s valuation. Lastly, we evaluated the appropriateness of the Company’s related disclosures.
|
|
|
|
|
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
|
—
|
|
$
|
—
|
|
54,639,336
|
|
Equity compensation plan not approved by security holders
|
—
|
|
—
|
|
—
|
|
|
Total
|
—
|
|
—
|
|
54,639,336
|
|
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, 2019, 2018, and 2017
|
•
|
Consolidated Statements of Comprehensive Income (Loss)—Years Ended December 31, 2019, 2018, and 2017
|
•
|
Consolidated Balance Sheets—December 31, 2019 and 2018
|
•
|
Consolidated Statements of Shareholders' Equity—Years Ended December 31, 2019, 2018, and 2017
|
•
|
Consolidated Statements of Cash Flows—Years Ended December 31, 2019, 2018, and 2017
|
•
|
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.
|
|
|
|
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
|
|
|
|
4.3
|
|
Description of Common Stock
|
|
|
|
4.4
|
|
Description of the Company's 1.000% EUR Notes due 2022, 1.625% EUR Notes due 2026, and 2.125% EUR Notes due 2030
|
|
|
|
4.5
|
|
Description of the Company's 6.77% Notes due 2036
|
|
|
|
4.6
|
|
Description of the Company's 7 1/8% Notes due 2025
|
|
|
|
4.7
|
|
Description of the Company's 0.625% EUR Notes due 2031 and 1.700% EUR Notes due 2049
|
|
|
|
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
|
|
Form of Relative Value Award under the 2002 Lilly Stock Plan(1)
|
|
|
|
10.5
|
|
Restricted Stock Unit Award to Michael Harrington under the 2002 Lilly Stock Plan(1)
|
|
|
|
10.6
|
|
The Lilly Deferred Compensation Plan, as amended(1)
|
|
|
|
10.7
|
|
The Lilly Directors’ Deferral Plan, as amended(1)
|
|
|
|
10.8
|
|
The Eli Lilly and Company Bonus Plan, as amended(1)
|
|
|
|
10.9
|
|
The Eli Lilly and Company Executive Officer Incentive Plan(1)
|
|
|
|
10.10
|
|
2007 Change in Control Severance Pay Plan for Select Employees, as amended(1)
|
|
|
|
21
|
|
List of Subsidiaries
|
|
|
|
23
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
31.1
|
|
Rule 13a-14(a) Certification of David A. Ricks, Chairman, 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
|
|
|
|
104
|
|
Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibit 101)
|
Item 16.
|
Form 10-K Summary
|
Exhibit
|
|
|
|
Location
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
101
|
|
Interactive Data File
|
|
Attached
|
|
|
|
|
|
104
|
|
Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibit 101)
|
|
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
|
|
Director
|
MICHAEL L. ESKEW
|
|
|
|
|
|
/s/ J. Erik Fyrwald
|
|
Director
|
J. ERIK FYRWALD
|
|
|
|
|
|
/s/ Jamere Jackson
|
|
Director
|
JAMERE JACKSON
|
|
|
|
|
|
/s/ William G. Kaelin, Jr., M.D.
|
|
Director
|
WILLIAM G. KAELIN, JR., M.D.
|
|
|
|
|
|
/s/ Juan R. Luciano
|
|
Director
|
JUAN R. LUCIANO
|
|
|
|
|
|
/s/ Marschall S. Runge, M.D., Ph.D.
|
|
Director
|
MARSCHALL S. RUNGE, M.D., Ph.D.
|
|
|
|
|
|
/s/ Kathi P. Seifert
|
|
Director
|
KATHI P. SEIFERT
|
|
|
|
|
|
/s/ Jackson P. Tai
|
|
Director
|
JACKSON P. TAI
|
|
|
|
|
|
/s/ Karen Walker
|
|
Director
|
KAREN WALKER
|
|
|
•
|
one-fifth or more but less than one-third;
|
•
|
one-third or more but less than a majority; or
|
•
|
a majority or more.
|
•
|
mature on June 2, 2022;
|
•
|
bear interest at a rate of 1.000% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption” and in connection with certain events involving United States taxation;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
were issued in an aggregate initial principal amount of €750,000,000, which remains outstanding as of December 31, 2019 and are, subject to our ability to issue additional 1.625% notes which may be of the same series as the 1.625% notes as described under “-Further Issues;”
|
•
|
mature on June 2, 2026;
|
•
|
bear interest at a rate of 1.625% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption” and in connection with certain events involving United States taxation;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
were issued in an aggregate initial principal amount of €750,000,000, which remains outstanding as of December 31, 2019 and are subject to our ability to issue additional 2.125% notes which may be of the same series as the 2.125% notes as described under “-Further Issues;”
|
•
|
mature on June 3, 2030;
|
•
|
bear interest at a rate of 2.125% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption” and in connection with certain events involving United States taxation;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
100% of the principal amount of the notes being redeemed on the redemption date; and
|
•
|
as calculated by the Quotation Agent (as defined below), the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed on that redemption date (not including the amount, if any, of unpaid interest accrued to, but excluding, the redemption date) discounted to the redemption date, on an annual basis (ACTUAL/ACTUAL (ICMA)) using a discount rate equal to the
|
(i)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner, or a fiduciary, settlor, beneficiary or member of the beneficial owner if the
|
(1)
|
is or was present or engaged in a trade or business in the United States or has or had a permanent establishment in the United States;
|
(2)
|
is or was a citizen or resident or is or was treated as a resident of the United States;
|
(3)
|
is or was a foreign or domestic personal holding company, a passive foreign investment company or a controlled foreign corporation for the United States federal income tax purposes, is or was a corporation that has accumulated earnings to avoid United States federal income tax or is or was a private foundation or other tax-exempt organization;
|
(4)
|
is or was an actual or constructive “10-percent shareholder” of ours, as defined in Section 871(h)(3) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”); or
|
(5)
|
is or was a bank receiving interest described in Section 881(c)(3)(A) of the Code;
|
(ii)
|
to any holder that is not the sole beneficial owner of notes, or that is a fiduciary or partnership, but only to the extent that the beneficial owner, a beneficiary or settlor with respect to the fiduciary, or a member of the partnership would not have been entitled to the payment of an additional amount had such beneficial owner, beneficiary, settlor or member received directly its beneficial or distributive share of the payment;
|
(iii)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner or any other person failed to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of notes, if compliance is required by statute, by regulation of the United States Treasury Department or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
|
(iv)
|
to any tax, assessment or governmental charge that is imposed other than by deduction or withholding by us or a paying agent from the payment;
|
(v)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because of a change in law, regulation, or administrative or judicial interpretation that becomes effective after the day on which the payment becomes due or is duly provided for, whichever occurs later;
|
(vi)
|
to any estate, inheritance, gift, sales, excise, transfer, wealth or personal property tax or any similar tax, assessment or governmental charge;
|
(vii)
|
to any tax, assessment or other governmental charge any paying agent (which term may include us) must withhold from any payment of principal of or interest on any note, if such payment can be made without such withholding by any other paying agent;
|
(viii)
|
to any tax, assessment or governmental charge that would not have been so imposed or withheld but for the presentation by the holder of a note for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
|
(ix)
|
any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations or agreements thereunder or official interpretations thereof) or any intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any law implementing such an intergovernmental agreement); or
|
(x)
|
in the case of any combination of the above items.
|
•
|
where withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, that directive, or
|
•
|
presented for payment by or on behalf of a beneficial owner who would have been able to avoid the withholding or deduction by presenting the relevant note to another paying agent in a member state of the European Union.
|
(i)
|
liens existing on property owned or leased by a corporation existing when such corporation becomes a subsidiary;
|
(ii)
|
liens existing on the date of issuance of the first debt security of the particular series;
|
(iii)
|
liens existing on property when the property was acquired by us or any of our subsidiaries;
|
(iv)
|
liens to secure debt incurred prior to, at the time of or within 12 months after the acquisition of restricted property or the completion of the construction, alteration, repair or improvement of restricted property, as the case may be, for the purpose of financing all or a part of the purchase price or cost thereof and liens to the extent they secure debt in excess of such purchase price or cost and for the payment of which recourse may be had only against such restricted property;
|
(v)
|
certain liens in favor of governmental entities that are required by the provisions of any contract or statute, or any liens securing industrial development, pollution control or similar revenue bonds;
|
(vi)
|
any lien securing debt of a subsidiary owing to us or to another subsidiary;
|
(vii)
|
any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any lien referred to in clauses (i) through (vi) above, inclusive, so long as (1) the principal amount of the debt secured thereby does not exceed the principal amount of debt so secured at the time of the extension, renewal or replacement (except that, where an additional principal amount of debt is incurred to provide funds for the completion of a specific project, the additional principal amount, and any related financing costs, may be secured by the lien as well)
|
(viii)
|
any lien that would not otherwise be permitted by clauses (i) through (vii) above, inclusive, securing debt which, together with:
|
▪
|
the aggregate outstanding principal amount of all other debt of ours and our subsidiaries owning restricted property which would otherwise be subject to the foregoing restrictions, and
|
▪
|
the aggregate value of existing sale and leaseback transactions which would be subject to the foregoing restrictions absent this clause (viii),
|
•
|
“consolidated net tangible assets” means the total assets (less applicable reserves and other properly deductible items) less current liabilities (excluding the amount of those which are by their terms extendable or renewable at the option of the obligor to a date more than 12 months after the date as of which the amount is being determined) and all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on our most recent consolidated balance sheet determined in accordance with generally accepted accounting principles.
|
•
|
“funded debt” means our indebtedness or the indebtedness of a subsidiary owning restricted property maturing by its terms more than one year after its creation and indebtedness classified as long-term debt under generally accepted accounting principles and in each case ranking at least pari passu with the debt securities.
|
•
|
“original issue discount security” means any debt security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of maturity thereof pursuant to the indenture.
|
•
|
“restricted property” means
|
◦
|
any manufacturing facility (or portion thereof) owned or leased by us or any of our subsidiaries and located within the continental United States which, in the opinion of our board of directors (or a committee thereof), is of material importance to our business and the business of our subsidiaries taken as a whole, but no such manufacturing facility (or portion thereof) shall be deemed of material importance if its gross book value, before deducting accumulated depreciation, is less than 2% of our consolidated net tangible assets; or
|
◦
|
any shares of capital stock or indebtedness of any subsidiary owning any such manufacturing facility.
|
•
|
“sale and leaseback transaction” means any arrangement with any person providing for the leasing by us or any subsidiary of any restricted property which has been or is to be sold or transferred by us or such subsidiary to such person, excluding (1) temporary leases for a term, including renewals at the option of the lessee, of not more than three years, (2) leases between us and a subsidiary or between subsidiaries, (3) leases of a restricted property executed by the time of, or within 12 months after the latest of, the acquisition, the completion of construction or improvement, or the commencement of commercial operation of the restricted property, and (4) arrangements pursuant to any provision of law with an effect similar to the former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended.
|
•
|
“subsidiary” means any corporation more than 50% of the voting stock of which shall at the time be owned by us or by one or more subsidiaries or by us and one or more subsidiaries, but shall not include any corporation of which we and/or one or more subsidiaries owns directly or indirectly, less than 50% of the outstanding stock of all classes having ordinary voting power for the election of directors but more than 50% of the outstanding shares of stock of a class having by its terms ordinary voting power as a class to elect a majority of the board of directors of such corporation.
|
•
|
“value” means, with respect to a sale and leaseback transaction, an amount equal to the net present value of the lease payments with respect to the term of the lease remaining on the date as of which the amount is being determined, without regard to any renewal or extension options contained in the lease, discounted at the weighted average interest rate on the debt securities of all series (including the yield to maturity on any original issue discount securities) which are outstanding on the effective date of such sale and leaseback transaction.
|
•
|
failure to pay interest when due on any debt securities of such series, continued for 30 days;
|
•
|
failure to pay principal or premium, if any, when due (whether at maturity, upon redemption, by declaration or otherwise) on any debt securities of such series;
|
•
|
failure to observe or perform the covenant in the indenture described below under “Merger or Consolidation” after written notice from the trustee or holders of 25% or more in aggregate principal amount of debt securities of such series outstanding thereunder;
|
•
|
failure to observe or perform any of our covenants in the indenture or the debt securities of such series (other than a covenant included in the indenture or the debt securities solely for the benefit of a series of debt securities other than such series), continued for 60 days (except in the case of a violation of the covenant described below under “Merger or Consolidation”) after written notice from the trustee or the holders of 25% or more in aggregate principal amount, of debt securities of such series outstanding thereunder;
|
•
|
certain events of our bankruptcy, insolvency or reorganization; and
|
•
|
any other event of default as may be specified for such series.
|
1.
|
we have paid or deposited with the trustee a sum sufficient to pay:
|
a.
|
all matured installments of interest upon all the debt securities of such series;
|
b.
|
the principal of and premium, if any, on any and all debt securities of such series which have become due other than by declaration;
|
c.
|
interest on overdue installments of interest, to the extent legally enforceable under applicable law, and on such principal of and premium, if any, on each debt security of such series at the rate borne by such debt security to the date of such payment or deposit or yield to maturity (in the case of an original issue discount security); and
|
d.
|
the expenses of the trustee, and reasonable compensation to the trustee, agents, attorneys and counsel; and
|
2.
|
any and all defaults under the indenture, other than the nonpayment of principal on the debt securities of such series which may have become due by declaration, have been remedied.
|
•
|
the successor corporation assumes all of our payment obligations under the debt securities and the performance of all of our other covenants under the indenture; and
|
•
|
certain other conditions described in the indenture are met.
|
i.
|
there could be a disagreement between us and the holders of debt securities over whether, as a condition to a transfer or lease of our assets, the successor entity is required to assume our obligations under the indenture and, consequently, whether a failure to assume such obligations would result in an event of default under the indenture;
|
ii.
|
in the event that the holders of debt securities attempt to declare an event of default and exercise their acceleration rights under the indenture in such circumstances and we contest such action, there can be no assurance as to how a court interpreting applicable law would interpret the phrase “substantially all”; and
|
iii.
|
it may be difficult for holders to debt securities to declare an event of default and exercise their acceleration rights.
|
•
|
were issued in an aggregate initial principal amount of $300,000,000, of which $174,445,000 remains outstanding as of December 31, 2019;
|
•
|
mature on January 1, 2036;
|
•
|
bear interest at a rate of 6.77% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption;”
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
were issued in an aggregate initial principal amount of $500,000,000, of which $229,692,000 remains outstanding as of December 31, 2019;
|
•
|
mature on June 1, 2025;
|
•
|
bear interest at a rate of 7 1/8% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
were issued in an aggregate initial principal amount of €600,000,000, which remains outstanding as of December 31, 2019 and are subject to our ability to issue additional 0.625% notes which may be of the same series as the EUR 0.625% notes as described under “-Further Issues;”
|
•
|
mature on November 1, 2031;
|
•
|
bear interest at a rate of 0.625% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption” and in connection with certain events involving United States taxation;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
were issued in an aggregate initial principal amount of €1,000,000,000, which remains outstanding as of December 31, 2019 and are subject to our ability to issue additional 1.700% notes which may be of the same series as the 1.700% Notes as described under “-Further Issues;”
|
•
|
mature on November 1, 2049;
|
•
|
bear interest at a rate of 1.700% per annum;
|
•
|
are unsecured;
|
•
|
rank equally with all of our other present and future unsecured and unsubordinated indebtedness;
|
•
|
are issued as a separate series under the indenture, in registered, book-entry form only;
|
•
|
are repayable at par at maturity;
|
•
|
are redeemable by us at any time prior to maturity as described below under “-Optional Redemption” and in connection with certain events involving United States taxation;
|
•
|
are subject to defeasance and covenant defeasance; and
|
•
|
are not subject to any sinking fund.
|
•
|
100% of the principal amount of the notes being redeemed on the redemption date; and
|
•
|
as calculated by the Quotation Agent (as defined below) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, with respect to the 0.625% notes or the 1.700% notes, that would be due if such series of notes matured on the applicable Par Call Date (in each case, not including the amount, if any, of unpaid interest accrued to, but excluding, the redemption date) discounted to the redemption date, on an annual basis (ACTUAL/ACTUAL (ICMA)) using a discount rate equal to the sum of the Reference Dealer Rate (as defined below), plus 0.2000% (or 20 basis points) with respect to the 0.625% notes or 0.2500% (or 25 basis points) with respect to the 1.700% notes;
|
(i)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner, or a fiduciary, settlor, beneficiary or member of the beneficial owner if the beneficial owner is an estate, trust or partnership, or a person holding a power over an estate or trust administered by a fiduciary holder:
|
(1)
|
is or was present or engaged in a trade or business in the United States or has or had a permanent establishment in the United States;
|
(2)
|
is or was a citizen or resident or is or was treated as a resident of the United States;
|
(3)
|
is or was a foreign or domestic personal holding company, a passive foreign investment company or a controlled foreign corporation for the United States federal income tax purposes, is or was a corporation that has accumulated earnings to avoid United States federal income tax or is or was a private foundation or other tax-exempt organization;
|
(4)
|
is or was an actual or constructive “10-percent shareholder” of ours, as defined in Section 871(h)(3) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”); or
|
(5)
|
is or was a bank receiving interest described in Section 881(c)(3)(A) of the Code;
|
(ii)
|
to any holder that is not the sole beneficial owner of notes, or that is a fiduciary or partnership, but only to the extent that the beneficial owner, a beneficiary or settlor with respect to the fiduciary, or a member of the partnership would not have been entitled to the payment of an additional amount had such beneficial owner, beneficiary, settlor or member received directly its beneficial or distributive share of the payment;
|
(iii)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because the beneficial owner or any other person failed to comply with certification, identification or information reporting requirements concerning the nationality, residence, identity or connection with the United States of the holder or beneficial owner of notes, if compliance is required by statute, by regulation of the United States Treasury Department or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge;
|
(iv)
|
to any tax, assessment or governmental charge that is imposed other than by deduction or withholding by us or a paying agent from the payment;
|
(v)
|
to any tax, assessment or governmental charge that is imposed or withheld solely because of a change in law, regulation, or administrative or judicial interpretation that becomes effective after the day on which the payment becomes due or is duly provided for, whichever occurs later;
|
(vi)
|
to any estate, inheritance, gift, sales, excise, transfer, wealth or personal property tax or any similar tax, assessment or governmental charge;
|
(vii)
|
to any tax, assessment or other governmental charge any paying agent (which term may include us) must withhold from any payment of principal of or interest on any note, if such payment can be made without such withholding by any other paying agent;
|
(viii)
|
to any tax, assessment or governmental charge that would not have been so imposed or withheld but for the presentation by the holder of a note for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
|
(ix)
|
to any withholding or deduction pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations or agreements thereunder or official interpretations thereof) or any intergovernmental agreement between the United States and another jurisdiction for cooperation to facilitate the implementation thereof (or any law implementing such an intergovernmental agreement); or
|
(i)
|
liens existing on property owned or leased by a corporation existing when such corporation becomes a subsidiary;
|
(ii)
|
liens existing on the date of issuance of the first debt security of the particular series;
|
(iii)
|
liens existing on property when the property was acquired by us or any of our subsidiaries;
|
(iv)
|
liens to secure debt incurred prior to, at the time of or within 12 months after the acquisition of restricted property or the completion of the construction, alteration, repair or improvement of restricted property, as the case may be, for the purpose of financing all or a part of the purchase price or cost thereof and liens to the extent they secure debt in excess of such purchase price or cost and for the payment of which recourse may be had only against such restricted property;
|
(v)
|
certain liens in favor of governmental entities that are required by the provisions of any contract or statute, or any liens securing industrial development, pollution control or similar revenue bonds;
|
(vi)
|
any lien securing debt of a subsidiary owing to us or to another subsidiary;
|
(vii)
|
any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any lien referred to in clauses (i) through (vi) above, inclusive, so long as (1) the principal amount of the debt secured thereby does not exceed the principal amount of debt so secured at the time of the extension, renewal or replacement (except that, where an additional principal amount of debt is incurred to provide funds for the completion of a specific project, the additional principal amount, and any related financing costs, may be secured by the lien as well) and (2) the lien is limited to the same property subject to the lien so extended, renewed or replaced (and improvements on the property); and
|
(viii)
|
any lien that would not otherwise be permitted by clauses (i) through (vii) above, inclusive, securing debt which, together with:
|
▪
|
the aggregate outstanding principal amount of all other debt of ours and our subsidiaries owning restricted property which would otherwise be subject to the foregoing restrictions, and
|
▪
|
the aggregate value of existing sale and leaseback transactions which would be subject to the foregoing restrictions absent this clause (viii), does not exceed 15% of our consolidated net tangible assets.
|
(1)
|
our company or such subsidiary could incur debt, in a principal amount at least equal to the value of such sale and leaseback transaction, secured by a lien on the property to be leased (without equally and ratably securing the outstanding debt securities) because such lien would be of a character that no violation of the covenant described under “ Limitations on Liens” above would result; or
|
(2)
|
we apply, during the six months following the effective date of the sale and leaseback transaction, an amount equal to the value of the sale and leaseback transaction to the voluntary retirement of funded debt (whether by redemption, defeasance, repurchase, or otherwise) or to the acquisition of restricted property.
|
•
|
“consolidated net tangible assets” means the total assets (less applicable reserves and other properly deductible items) less current liabilities (excluding the amount of those which are by their terms extendable or renewable at the option of the obligor to a date more than 12 months after the date as of which the amount is being determined) and all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on our most recent consolidated balance sheet determined in accordance with generally accepted accounting principles.
|
•
|
“funded debt” means our indebtedness or the indebtedness of a subsidiary owning restricted property maturing by its terms more than one year after its creation and indebtedness classified as long-term debt under generally accepted accounting principles and in each case ranking at least pari passu with the debt securities.
|
•
|
“original issue discount security” means any debt security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of maturity thereof pursuant to the indenture.
|
•
|
“restricted property” means
|
◦
|
any manufacturing facility (or portion thereof) owned or leased by us or any of our subsidiaries and located within the continental United States which, in the opinion of our board of directors (or a committee thereof), is of material importance to our business and the business of our subsidiaries taken as a whole, but no such manufacturing facility (or portion thereof) shall be deemed of material importance if its gross book value, before deducting accumulated depreciation, is less than 2% of our consolidated net tangible assets; or
|
◦
|
any shares of capital stock or indebtedness of any subsidiary owning any such manufacturing facility.
|
•
|
“sale and leaseback transaction” means any arrangement with any person providing for the leasing by us or any subsidiary of any restricted property which has been or is to be sold or transferred by us or such subsidiary to such person, excluding (1) temporary leases for a term, including renewals at the option of the lessee, of not more than three years, (2) leases between us and a subsidiary or between subsidiaries, (3) leases of a restricted property executed by the time of, or within 12 months after the latest of, the acquisition, the completion of construction or improvement, or the commencement of commercial operation of the restricted property, and (4) arrangements pursuant to any provision of law with an effect similar to the former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended.
|
•
|
“subsidiary” means any corporation more than 50% of the voting stock of which shall at the time be owned by us or by one or more subsidiaries or by us and one or more subsidiaries, but shall not include any corporation of which we and/or one or more subsidiaries owns directly or indirectly, less than 50% of the outstanding stock of all classes having ordinary voting power for the election of directors but more than 50% of the outstanding shares of stock of a class having by its terms ordinary voting power as a class to elect a majority of the board of directors of such corporation.
|
•
|
“value” means, with respect to a sale and leaseback transaction, an amount equal to the net present value of the lease payments with respect to the term of the lease remaining on the date as of which the amount is being determined, without regard to any renewal or extension options contained in the lease, discounted at the weighted average interest rate on the debt securities of all series (including the yield to maturity on any original issue discount securities) which are outstanding on the effective date of such sale and leaseback transaction.
|
•
|
failure to pay interest when due on any debt securities of such series that continues for 30 days;
|
•
|
failure to pay principal or premium, if any, when due (whether at maturity, upon redemption, by declaration or otherwise) on any debt securities of such series;
|
•
|
failure to observe or perform the covenant in the indenture described below under “Merger or Consolidation” after written notice from the trustee or holders of 25% or more in aggregate principal amount of debt securities of such series outstanding thereunder;
|
•
|
failure to observe or perform any of our covenants in the indenture or the debt securities of such series (other than a covenant included in the indenture or the debt securities solely for the benefit of a series of debt securities other than such series), continued for 60 days (except in the case of a violation of the covenant described below under “Merger or Consolidation”) after written notice from the trustee or the holders of 25% or more in aggregate principal amount, of debt securities of such series outstanding thereunder;
|
•
|
certain events of our bankruptcy, insolvency or reorganization; and
|
•
|
any other event of default as may be specified for such series.
|
1)
|
we have paid or deposited with the trustee a sum sufficient to pay:
|
a.
|
all matured installments of interest upon all the debt securities of such series;
|
b.
|
the principal of and premium, if any, on any and all debt securities of such series which have become due other than by declaration;
|
c.
|
interest on overdue installments of interest, to the extent legally enforceable under applicable law, and on such principal of and premium, if any, on each debt security of such series at the rate borne by such debt security to the date of such payment or deposit or yield to maturity (in the case of an original issue discount security); and
|
d.
|
the expenses of the trustee, and reasonable compensation to the trustee, agents, attorneys and counsel; and
|
2)
|
any and all defaults under the indenture, other than the nonpayment of principal on the debt securities of such series which may have become due by declaration, have been remedied.
|
•
|
the successor corporation assumes all of our payment obligations under the debt securities and the performance of all of our other covenants under the indenture; and
|
•
|
certain other conditions described in the indenture are met.
|
i.
|
there could be a disagreement between us and the holders of debt securities over whether, as a condition to a transfer or lease of our assets, the successor entity is required to assume our obligations under the indenture and, consequently, whether a failure to assume such obligations would result in an event of default under the indenture;
|
ii.
|
in the event that the holders of debt securities attempt to declare an event of default and exercise their acceleration rights under the indenture in such circumstances and we contest such action, there can be no assurance as to how a court interpreting applicable law would interpret the phrase “substantially all”; and
|
iii.
|
it may be difficult for holders to debt securities to declare an event of default and exercise their acceleration rights.
|
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
|
ii.
|
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.
|
iii.
|
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.
|
iv.
|
To determine the cumulative EPS for the Performance Period, the EPS amounts for each fiscal year as determined above shall be added.
|
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.
|
c.
|
The number of Performance Units under this Performance Award will be the number resulting from the calculation described in subsection (b) above.
|
d.
|
In the event the Grantee’s Service is terminated prior to the Service Vesting Date for any reason or in any circumstance other than as described in Section 3 below, the Award, including any accrued Dividend Equivalent Rights, shall be forfeited.
|
Section 3.
|
Impact of Certain Employment Status Changes
|
a.
|
Leaves of Absence. In the event the Grantee is on an approved leave of absence during the Performance Period, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
b.
|
Death; Disability. In the event the Grantee’s Service is terminated (i) due to the Grantee’s death, or (ii) by reason of Grantee’s Disability, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
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.
|
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 a plant closing or reduction in workforce (as defined below);
|
iii.
|
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).
|
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.
|
e.
|
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.
|
f.
|
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).
|
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 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:
|
i.
|
In the event that (A) the Grantee is subject to a termination of Service as described in Sections 3(b) and (c) 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.
|
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.
|
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:
|
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
|
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 with the Transaction and the Grantee is subject to a Covered Termination prior to the Service Vesting Date, then immediately as of the date of the Covered Termination, the Performance Units shall vest automatically in full.
|
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 pursuant to Sections 3(b), 3(c) or 3(d).
|
b.
|
If the Award vests pursuant to Section 3(b) 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 Grantee’s termination of Service under Section 3(b), 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 (i) the date the Grantee experiences a Disability or (ii) the date of the Grantee’s death, as applicable.
|
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.
|
d.
|
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 “separation from service” within the meaning of Section 409A of the Code (a “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 and (2) the date of the Grantee’s death.
|
e.
|
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.
|
f.
|
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 payment in the case of a payment pursuant to Section 5(d).
|
g.
|
Dividend Equivalent Rights, if any, that accrue hereunder shall be settled in cash.
|
h.
|
In the event of the death of the Grantee, the payments described above shall be made to the successor of the Grantee.
|
i.
|
|
Section 6.
|
Rights of the Grantee
|
a.
|
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.
|
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.
|
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
|
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 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.
|
i.
|
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.
|
ii.
|
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, (iii) withhold in Shares otherwise issuable to the Grantee pursuant to this Award, and/or (iv) apply any other method of withholding determined by the Company and, to the extent required by Applicable Laws or the Plan, approved by the Committee.
|
iii.
|
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)(i) and 8(b)(ii) above.
|
c.
|
Depending on the withholding method, Lilly and/or the Employer may withhold or account for Tax Related Items by considering applicable statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Grantee. In the event of over-withholding, the Grantee may receive a refund of any over-withheld amount in cash (without interest and without entitlement 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 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 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;
|
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 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
|
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.
|
Data Subject Rights. The Grantee understands that data subject rights regarding the processing of Data vary depending on Applicable Laws and that, depending on where the Grantee is based and subject to the conditions set out in such Applicable Laws, the Grantee may have, without limitation, the right to (i) inquire whether and what kind of Data the Company holds about the Grantee and how it is processed, and to access or request copies of such Data, (ii) request the correction or supplementation of Data about the Grantee that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, (iv) request the Company to restrict the processing of the Grantee’s Data in certain situations where the Grantee feels its processing is inappropriate, (v) object, in certain circumstances, to the processing of Data for legitimate interests, and to (vi) request portability of the Grantee’s Data that the Grantee has actively or passively provided to the Company or the Employer (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Grantee’s employment and is carried out by automated means. In case of concerns, the Grantee understands that he or she may also have the right to lodge a complaint with the competent local data protection authority. Further, to receive clarification of, or to exercise any of, the Grantee’s rights, the Grantee understands that he or she should contact his or her local human resources representative.
|
g.
|
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 Corporate Secretary 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. The Grantee acknowledges that he or she is proficient in the English language or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Grantee to understand the terms and conditions of this Award Agreement. 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
|
Level 6
|
Final Lilly Stock Price
|
< $109.78
|
$109.78
--
$125.25
|
$125.26
--
$140.73
|
$140.74
–
$156.21
|
$156.22
–
$171.69
|
$171.70
– $187.17 |
> $187.17
|
Percent of Target
|
0%
|
50%
|
75%
|
100%
|
125%
|
150%
|
175%
|
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.
|
Section 3.
|
Impact of Certain Employment Status Changes
|
a.
|
Leaves of Absence. In the event the Grantee is on an approved leave of absence during the Performance Period, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
b.
|
Death; Disability. In the event the Grantee’s Service is terminated (i) due to the Grantee’s death, or (ii) by reason of Grantee’s Disability, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
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 a plant closing or reduction in workforce (as defined below);
|
iii.
|
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).
|
d.
|
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.
|
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 termination of Service as described in Sections 3(b) and (c) 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 and (2) 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
|
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 other cash compensation paid to the Grantee by the Company and/or the Employer, (B) 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, (C) withhold in Shares otherwise issuable to the Grantee pursuant to this Award, and/or (D) apply any other method of withholding determined by the Company and, to the extent required by Applicable Laws or the Plan, approved by the Committee.
|
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 statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Grantee. In the event of over-withholding, the Grantee may receive a refund of any over-withheld amount in cash (without interest and without entitlement 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 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 and be paid any portion of the Award 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 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 Laws, 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.
|
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.
|
Data Subject Rights. The Grantee understands that data subject rights regarding the processing of Data vary depending on Applicable Laws and that, depending on where the Grantee is based and subject to the conditions set out in such Applicable Laws, the Grantee may have, without limitation, the right to (i) inquire whether and what kind of Data the Company holds about the Grantee and how it is processed, and to access or request copies of such Data, (ii) request the correction or supplementation of Data about the Grantee that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, (iv) request the Company to restrict the processing of the Grantee’s Data in certain situations where the Grantee feels its processing is inappropriate, (v) object, in certain circumstances, to the processing of Data for legitimate interests, and to (vi) request portability of the Grantee’s Data that the Grantee has actively or passively provided to the Company or the Employer (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Grantee’s employment and is carried out by automated means. In case of concerns, the Grantee understands that he or she may also have the right to lodge a complaint with the competent local data protection authority. Further, to receive clarification of, or to exercise any of, the Grantee’s rights, the Grantee understands that he or she should contact his or her local human resources representative.
|
g.
|
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 Corporate Secretary 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. The Grantee acknowledges that he or she is proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Grantee to understand the terms and conditions of this Award Agreement. 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
|
Section 1.
|
Grant of Relative Value Award
|
Section 2.
|
Vesting
|
a.
|
“Payout Multiple” shall mean the payout multiple set forth in the Lilly Relative Total Shareholder Return Performance Levels table set forth on the first page of this document, representing the attainment level of Lilly’s rTSR, 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.
|
“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.
|
d.
|
“Relative Total Shareholder Return” or “rTSR” shall mean the comparison between Lilly’s TSR and the TSR of the Peer Group over the Performance Period, measured as the absolute percentage point difference in the performance of the Company’s TSR compared to the Peer Group’s median TSR.
|
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.
|
Impact of Certain Employment Status Changes
|
a.
|
Leaves of Absence. In the event the Grantee is on an approved leave of absence during the Performance Period, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
b.
|
Death; Disability. In the event the Grantee’s Service is terminated (i) due to the Grantee’s death, or (ii) by reason of Grantee’s Disability, the number of Shares eligible to vest shall be the number determined in accordance with Section 2 above.
|
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 a plant closing or reduction in workforce (as defined below);
|
iii.
|
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).
|
d.
|
Demotions, Disciplinary Actions and Misconduct. The Committee may, in its sole discretion, cancel this Relative 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.
|
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 and the Final Peer Stock Price shall be equal to 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, on the date the Transaction closes (or if such day is not a trading date, the first trading date immediately preceding such date) (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 termination of Service as described in Sections 3(b) and (c) 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
|
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 and (2) 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 Relative Value Award does not entitle the Grantee to any rights of a shareholder of Lilly until such time as the Relative 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 Relative Value Award, the vesting of the Relative 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 Relative 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 Relative 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 other cash compensation paid to the Grantee by the Company and/or the Employer, (B) 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, (C) withhold in Shares otherwise issuable to the Grantee pursuant to this Award, and/or (iv) apply any other method of withholding determined by the Company and, to the extent required by Applicable Laws or the Plan, approved by the Committee.
|
iii.
|
If the Relative 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 statutory or other withholding rates, including minimum or maximum rates in the jurisdiction(s) applicable to the Grantee. In the event of over-withholding, the Grantee may receive a refund of any over-withheld amount in cash (without interest and without entitlement 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 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.
|
unless otherwise agreed with Lilly, the Award and any Shares subject to the Award, and the income and value of same, are not granted as consideration for, or in connection with, the service the Grantee may provide as a director of an Affiliate;
|
h.
|
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;
|
i.
|
the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
|
j.
|
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);
|
k.
|
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 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;
|
l.
|
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;
|
m.
|
the Grantee is solely responsible for investigating and complying with any laws applicable to him or her in connection with the Award; and
|
n.
|
neither the Company, the Employer nor any Affiliate shall be liable for any foreign exchange rate fluctuation between the Grantee’s local currency and the United States Dollar that may affect the value of the Award or any amounts due to the Grantee pursuant to the settlement of the Award or the subsequent sale of any Shares acquired upon settlement.
|
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 Relative 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 Laws, 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
|
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.
|
Data Subject Rights. The Grantee understands that data subject rights regarding the processing of Data vary depending on Applicable Laws and that, depending on where the Grantee is based and subject to the conditions set out in such Applicable Laws, the Grantee may have, without limitation, the right to (i) inquire whether and what kind of Data the Company holds about the Grantee and how it is processed, and to access or request copies of such Data, (ii) request the correction or supplementation of Data about the Grantee that is inaccurate, incomplete or out-of-date in light of the purposes underlying the processing, (iii) obtain the erasure of Data no longer necessary for the purposes underlying the processing, (iv) request the Company to restrict the processing of the Grantee’s Data in certain situations where the Grantee feels its processing is inappropriate, (v) object, in certain circumstances, to the processing of Data for legitimate interests, and to (vi) request portability of the Grantee’s Data that the Grantee has actively or passively provided to the Company or the Employer (which does not include data derived or inferred from the collected data), where the processing of such Data is based on consent or the Grantee’s employment and is carried out by automated means. In case of concerns, the Grantee understands that he or she may also have the right to lodge a complaint with the competent local data protection authority. Further, to receive clarification of, or to exercise any of, the Grantee’s rights, the Grantee understands that he or she should contact his or her local human resources representative.
|
g.
|
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
|
a.
|
Country-Specific Conditions. The Award shall be subject to any special terms and conditions set forth in any Appendix to this Award Agreement for the Grantee’s country. Moreover, if the Grantee relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Grantee, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Award Agreement.
|
b.
|
Insider Trading / Market Abuse Laws. The Grantee may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States and the Grantee’s country of residence, which may affect the Grantee’s ability to directly or indirectly, for the Grantee or for a third party, acquire or sell, or attempt to sell, or otherwise dispose of Shares, rights to acquire Shares (e.g., the Relative Value Award) under the Plan during such times as the Grantee is considered to have “inside information” regarding the Company (as determined under the laws or
|
c.
|
Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Award and any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Grantee to execute any additional agreements or undertakings that may be necessary to accomplish the foregoing. Without limitation to the foregoing, the Grantee agrees that the Relative Value Award and any benefits or proceeds the Grantee may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required to comply with any requirements imposed under Applicable Laws or any compensation recovery policy of the Company that reflects the provisions of Applicable Laws.
|
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 Corporate Secretary 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. The Grantee acknowledges that he or she is proficient in the English language, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Grantee to understand the terms and conditions of this Award Agreement. 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
|
(1)
|
The Grantee’s participation in the Plan does not constitute an acquired right;
|
(2)
|
The Plan and the Grantee’s participation in it are offered by the Company on a wholly discretionary basis;
|
(3)
|
The Grantee’s participation in the Plan is voluntary; and
|
(4)
|
The Company and its Affiliates are not responsible for any decrease in the value of any Shares acquired pursuant to the Relative Value Awards.
|
(1)
|
La participación del Beneficiario en el Plan no constituye un derecho adquirido;
|
(2)
|
El Plan y la participación del Beneficiario en el es ofrecido por la Compañía de manera completamente discrecional;
|
(3)
|
La participación del Beneficiario en el Plan es voluntaria; y
|
(4)
|
La Compañía y sus Afiliadas no son responsables por ninguna disminución en el valor de las Acciones adquiridas de conformidad con el Premio de Valor Relativo.
|
•
|
the Grantee agrees that any liability for Employer NICs that may arise in connection with or pursuant to the vesting of the Award and the acquisition of shares of common stock of Eli Lilly and Company (the “Company”) or other taxable events in connection with the Award will be transferred to the Grantee; and
|
•
|
the Grantee authorizes the Company and/or the Grantee’s employer to recover an amount sufficient to cover this liability by any method set forth in the Award Agreement and/or the Joint Election.
|
A.
|
The individual who has obtained authorised access to this Election (the “Employee”), who is employed by one of the employing companies listed in the attached schedule (the “Employer”) and who is eligible to receive performance based awards (the “Relative Value Award”) pursuant to the Amended and Restated 2002 Lilly Stock Plan (the “Plan”), and
|
B.
|
Eli Lilly and Company, an Indiana corporation, with registered offices at Lilly Corporate Center, Indianapolis, Indiana, 46285, U.S.A. (the “Company”), which may grant Relative Value Awards under the Plan and is entering into this Election on behalf of the Employer.
|
1.
|
Introduction
|
1.1
|
This Election relates to all Relative Value Awards granted to the Employee under the Plan on or after November 15, 2018 up to the termination date of the Plan.
|
1.2
|
In this Election the following words and phrases have the following meanings:
|
(a)
|
“Chargeable Event” means any event giving rise to Relevant Employment Income.
|
(b)
|
“ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.
|
(c)
|
“Relevant Employment Income” from Relative Value Awards on which Employer's National Insurance Contributions becomes due is defined as:
|
(i)
|
an amount that counts as employment income of the earner under section 426 ITEPA (restricted securities: charge on certain post-acquisition events);
|
(ii)
|
an amount that counts as employment income of the earner under section 438 of ITEPA (convertible securities: charge on certain post-acquisition events); or
|
(iii)
|
any gain that is treated as remuneration derived from the earner's employment by virtue of section 4(4)(a) SSCBA, including without limitation:
|
(A)
|
the acquisition of securities pursuant to the Relative Value Awards (within the meaning of section 477(3)(a) of ITEPA);
|
(B)
|
the assignment (if applicable) or release of the Relative Value Awards in return for consideration (within the meaning of section 477(3)(b) of ITEPA);
|
(C)
|
the receipt of a benefit in connection with the Relative Value Awards, other than a benefit within (i) or (ii) above (within the meaning of section 477(3)(c) of ITEPA).
|
(d)
|
“SSCBA” means the Social Security Contributions and Benefits Act 1992.
|
1.3
|
This Election relates to the Employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise in respect of Relevant Employment Income in respect of the Relative Value Awards pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.
|
1.4
|
This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
|
1.5
|
This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).
|
2.
|
The Election
|
3.
|
Payment of the Employer’s Liability
|
3.1
|
The Employee hereby authorises the Company and/or the Employer to collect the Employer’s Liability in respect of any Relevant Employment Income from the Employee at any time after the Chargeable Event:
|
(a)
|
by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Chargeable Event; and/or
|
(b)
|
directly from the Employee by payment in cash or cleared funds; and/or
|
(c)
|
by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the Relative Value Awards, the proceeds from which must be delivered to the Employer in sufficient time for payment to be made to Her Majesty’s Revenue & Customs (“HMRC”) by the due date; and/or
|
(d)
|
where the proceeds of the gain are to be paid through a third party, the Employee will authorize that party to withhold an amount from the payment or to sell some of the securities which the Employee is entitled to receive in respect of the Relative Value Awards, such amount to be paid in sufficient time to enable the Company and/or the Employer to make payment to HMRC by the due date; and/or
|
(e)
|
by any other means specified in the applicable Relative Value Award agreement entered into between the Employee and the Company.
|
3.2
|
The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities to the Employee in respect of the Relative Value Awards until full payment of the Employer’s Liability is received.
|
3.3
|
The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HMRC on behalf of the Employee within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days after the end of the UK tax month during which the Chargeable Event occurs if payments are made electronically).
|
4.
|
Duration of Election
|
4.1
|
The Employee and the Company agree to be bound by the terms of this Election regardless of whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.
|
4.2
|
Any reference to the Company and/or the Employer shall include that entity’s successors in title and assigns as permitted in accordance with the terms of the Plan and relevant award agreement. This
|
4.3
|
This Election will continue in effect until the earliest of the following:
|
(a)
|
the date on which the Employee and the Company agree in writing that it should cease to have effect;
|
(b)
|
the date on which the Company serves written notice on the Employee terminating its effect;
|
(c)
|
the date on which HMRC withdraws approval of this Election; or
|
(d)
|
the date on which, after due payment of the Employer’s Liability in respect of the entirety of the Relative Value Awards to which this Election relates or could relate, the Election ceases to have effect in accordance with its own terms.
|
4.4
|
This Election will continue in force regardless of whether the Employee ceases to be an employee of the Employer.
|
Name
|
Eli Lilly and Company Limited
|
Registered Office:
|
Lilly House, Priestley Road, Basingstoke, Hants RG24 9NL
|
Company Registration Number:
|
00284385
|
Corporation Tax Reference:
|
7953096404
|
PAYE Reference:
|
581/ML114
|
a.
|
No Shareholder Rights. The Restricted Stock Units granted pursuant to this Award do not and shall not entitle Grantee to any rights of a shareholder of Lilly Stock until the Restricted Stock Units vest and shares of Lilly Stock are issued or transferred. No shares of Lilly Stock shall be issued or transferred to Grantee prior to the date on which the Restricted Stock Units vest and the restrictions with respect to the Restricted Stock Units lapse. The rights of Grantee with respect to the Restricted Stock Units shall remain forfeitable at all times prior to the date on which the Restricted Stock Units become vested and the restrictions with respect to the Restricted Stock Units lapse.
|
b.
|
Dividend Equivalent Units. As long as the Grantee holds Restricted Stock Units granted pursuant to this Award, the Company shall accrue for the Grantee, on each date that the Company pays a cash dividend to holders of Lilly Stock, Dividend Equivalent Units equal to the total number of Restricted Stock Units credited to the Grantee under this Award multiplied by the dollar amount of the cash dividend paid per share of Lilly Stock by the Company on such date. Dividend Equivalent Units shall accrue in an account denominated in U.S. dollars and shall not accrue interest or other credits prior to being paid. The accrued Dividend Equivalent Units shall be subject to the same restrictions as the Restricted Stock Units to which the Dividend Equivalent Units relate, and the Dividend Equivalent Units shall be forfeited in the event that the Restricted Stock Units with respect to which such Dividend Equivalent Units were credited are forfeited.
|
c.
|
No Trust; Grantee’s Rights Unsecured. Neither this Award nor any action pursuant to or in accordance with this Award shall be construed to create a trust of any kind. The right of Grantee
|
a.
|
January 2, 2021, or
|
b.
|
the date the Grantee’s employment is subject to a Qualifying Termination.
|
(i)
|
the date of death of the Grantee while in the active service of the Company or any subsidiary;
|
(ii)
|
the date the Grantee’s employment is terminated by reason of “disability,” within the meaning of Section 409A of the U.S. Internal Revenue Code (the “Code”);
|
(iii)
|
the date the Grantee suffers a “separation from service” from Lilly or the Employer, within the meaning of Section 409A of the Code (a “Section 409A Separation”), and such separation from service is due to a plant closing or reduction in workforce as defined below, or, in the event that the Award constitutes an item of non-qualified deferred compensation subject to Section 409A of the Code, the date that the Grantee suffers a Section 409A Separation;
|
(iv)
|
the date the Grantee’s employment is terminated as a result of the Grantee’s failure to locate a position within the Company or any of its subsidiaries or affiliates following the placement of the Grantee on reallocation or medical reassignment in the United States (or its equivalent outside the United States as determined by the Committee).
|
a.
|
During the entire Restriction Period, the employment of the Grantee with the Company (or a subsidiary of the Company) must not terminate except for reasons specified in Sections 3(b) or 4. “Termination of employment” shall mean the cessation for any reason of the relationship of employer and employee between the Grantee and the Company (or a subsidiary of the Company).
|
b.
|
The Committee may, at its discretion, cancel this Restricted Stock Unit Award or reduce the number of Restricted Stock Units and any accrued Dividend Equivalent Units, prorated according to time or other measure as deemed appropriate by the Committee, if during any portion of the Award Period, including the Restriction 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.
|
a.
|
Lilly shall issue or transfer to the Grantee shares of Lilly Stock or the cash equivalent, as described in Section 8 above, equal to one share per Restricted Stock Unit subject to the withholding tax provisions in Section 14 below. In the event Grantee is entitled to a fractional share, the fraction may be paid in cash or rounded, in the Committee’s discretion.
|
b.
|
Lilly shall pay to the Grantee in cash all accrued Dividend Equivalent Units following deduction for Tax-Related Items in accordance with Section 13 below.
|
a.
|
In the case of Dividend Equivalent Units paid to the Grantee in cash and in the case of any Restricted Stock Units paid to the Grantee in cash in lieu of shares of Lilly Stock, 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.
|
b.
|
If the Restricted Stock Units are paid in shares of Lilly Stock and the Grantee is not subject to the short-swing profit rules of Section 16(b) of the 1934 Act, the Grantee authorizes Lilly and/or the
|
c.
|
If the Restricted Stock Units are paid in shares of Lilly Stock and the Grantee is subject to the short-swing profit rules of Section 16(b) of the 1934 Act, Lilly will withhold in shares of Lilly Stock otherwise issuable to the Grantee pursuant to this Award, unless the use of such withholding method is prevented by applicable law 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 14(b)(i) and (ii) above.
|
a.
|
The only Change in Control event that shall result in a benefit under this Section 18 shall be the consummation of a change in ownership of the Company as defined in Section 12(b)(i) of the 2002 Plan (a “Transaction”).
|
b.
|
In the event that the acquiring entity or successor to the Company does not assume, continue or substitute the Award in connection with the Transaction, then the Company shall issue or transfer to the Grantee shares of Lilly Stock, as noted in Section 9, immediately prior to the consummation of the Transaction in order to allow the shares of Lilly Stock to be outstanding and for the Grantee to be eligible to receive the consideration being paid to Lilly shareholders in connection with the Transaction; provided, however, that if (i) the Grantee is subject to U.S. taxation and (ii) the Award constitutes NQ Deferred Compensation and the Transaction is not a Section 409A CIC, then the Grantee shall receive an equivalent amount in cash (based on the fair market value of the Lilly Stock at the time of the consummation of the Transaction) at the time provided under Section 9.
|
c.
|
In the event that the acquiring entity or successor to the Company assumes, continues or substitutes the Award in connection with the Transaction and the Grantee is subject to a Covered Termination (as defined below) prior to the end of the Restriction Period, the Award shall vest automatically in full and shall be settled in stock of the acquiring or successor corporation within sixty (60) days of the date of the Covered Termination; provided however, that in the event that the Award constitutes NQ Deferred Compensation, the Award shall instead be settled within sixty (60) days of a Covered Termination that also constitutes a Section 409A Separation, but in no event later than December 31 of the year in which the Section 409A Separation occurs.
|
a.
|
the 2002 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 2002 Plan;
|
b.
|
the Award is voluntary and occasional and does not create any contractual or other right to receive future awards of Restricted Stock Units and/or Dividend Equivalent Units, or benefits in lieu thereof, even if Restricted Stock Units and/or Dividend Equivalent Units have been granted in the past;
|
c.
|
all decisions with respect to future awards of Restricted Stock Units, Dividend Equivalent Units or other grants, if any, will be at the sole discretion of the Committee;
|
d.
|
the Grantee’s participation in the 2002 Plan is voluntary;
|
e.
|
the Award and any shares of Lilly Stock subject to the Award are not intended to replace any pension rights or compensation;
|
f.
|
the Award and any shares of Lilly Stock subject to the Award, and the income and value of same, are not part of normal or expected compensation for purposes of 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 payments;
|
g.
|
unless otherwise agreed with Lilly, the Award and any shares of Lilly Stock subject to the Award, and the income and value of same, are not granted as consideration for, or in connection with, the service the Grantee may provide as a director of a subsidiary of Lilly;
|
h.
|
neither the Award nor any provision of this instrument, the 2002 Plan or the policies adopted pursuant to the 2002 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 subsidiary of Lilly;
|
i.
|
the future value of the underlying shares of Lilly Stock is unknown, indeterminable and cannot be predicted with certainty;
|
j.
|
the value of shares of Lilly Stock acquired upon lapse of the Restriction Period may increase or decrease, even below the tax valuation price;
|
k.
|
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);
|
l.
|
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 a subsidiary of the Company and the Grantee’s right, if any, to earn and be paid any portion of the Award 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); and
|
m.
|
unless otherwise provided in the 2002 Plan or by the Committee in its discretion, the Award and the benefits evidenced by this Award 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 of Lilly Stock.
|
a. (i)
|
the number of shares of Lilly Stock subject to the Award was calculated based, directly or indirectly, upon the achievement of financial results (e.g., earnings per share) that were subsequently the subject of 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 of Lilly Stock that would have been subject to the Award had the financial results been properly reported would have been lower than the number of shares of Lilly Stock actually subject to the Award.
|
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 conduct causes significant harm to the company.
|
a.
|
seek restitution of the shares of Lilly Stock subject to or issued (or cash paid) pursuant to this Award to the extent that the number of shares of Lilly Stock subject to the Award exceeded the number of shares of Lilly Stock that would have been subject to the Award had the inaccuracy or error not occurred, or
|
b.
|
issue additional shares of Lilly Stock or make additional cash payment to the extent that the number of shares of Lilly Stock subject to the Award was less than the correct amount.
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
1096401 B.C. Unlimited Liability Company
|
|
Canada
|
Alnara Pharmaceuticals, Inc.
|
|
Delaware
|
Andean Technical Operations Center
|
|
Peru
|
ARMO Bioscience
|
|
Delaware
|
AurKa Pharma
|
|
Canada
|
Avid Radiopharmaceuticals, Inc.
|
|
Delaware
|
CoLucid Pharmaceuticals, Inc.
|
|
Delaware
|
Dista Ilac Ticaret Ltd. Sti.
|
|
Turkey
|
Dista, S.A.
|
|
Spain
|
Dista-Produtos Quimicos & Farmaceuticos, LDA
|
|
Portugal
|
Elanco Animal Health Ireland Limited
|
|
Ireland
|
Elanco Switzerland Holding Sarl
|
|
Switzerland
|
ELCO Dominicana SRL
|
|
Dominican Republic
|
ELCO for Trade and Marketing, S.A.E.
|
|
Egypt
|
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
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
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
|
Eli Lilly Group Limited
|
|
United Kingdom
|
Eli Lilly Holdings Ltd.
|
|
United Kingdom
|
Eli Lilly Hrvatska d.o.o.
|
|
Croatia
|
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 S.A.
|
|
Switzerland
|
Eli Lilly Saudi Arabia Limited
|
|
Saudi Arabia
|
Eli Lilly Services India Private Limited
|
|
India
|
Eli Lilly Services, Inc
|
|
British Virgin Islands
|
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
|
Glycostasis, Inc
|
|
Delaware
|
Greenfield-Produtos Farmaceuticos, Lda.
|
|
Portugal
|
ICOS Corporation
|
|
Washington
|
ImClone GmbH
|
|
Switzerland
|
ImClone LLC
|
|
Delaware
|
ImClone Systems Holdings, Inc.
|
|
Delaware
|
ImClone Systems LLC
|
|
Delaware
|
Irisfarma S.A.
|
|
Spain
|
Kinsale Financial Services Unlimited Company
|
|
Ireland
|
Lilly (Shanghai) Management Co., Ltd
|
|
China
|
|
|
State or Jurisdiction
of Incorporation
or Organization
|
|
|
|
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
|
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 Japan Financing G.K.
|
|
Japan
|
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
|
Loxo Oncology, Inc
|
|
Delaware
|
OY Eli Lilly Finland AB
|
|
Finland
|
Pharmaserve-Lilly S.A.C.I.
|
|
Greece
|
PT. Eli Lilly Indonesia
|
|
Indonesia
|
SGX Pharmaceuticals, Inc
|
|
Delaware
|
Spaly Bioquimica, S.A.
|
|
Spain
|
UAB Eli Lilly Lietuva
|
|
Lithuania
|
Valquifarma S.A.
|
|
Spain
|
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, 2020
|
|
/s/ David A. Ricks
|
|
|
|
David A. Ricks
|
|
|
|
Chairman, President, and Chief Executive Officer
|
Date:
|
February 19, 2020
|
|
/s/ Joshua L. Smiley
|
|
|
|
Joshua L. Smiley
|
|
|
|
Senior Vice President and
Chief Financial Officer
|