Lilly (Eli)

“China utilizes a value-based procurement program process for products that have generic substitutes. As a general matter, products that we choose to tender through this process are similarly subject to price reductions.”

Annual report 2025A · The company itself

“Among other third-party providers, we, and the pharmaceutical industry generally, depend on China-based suppliers for portions of our supply chain. U.S. officials have enacted and continue to consider legislation or other actions that are intended to limit supply chain reliance on China, including the BIOSECURE Act.”

Annual report 2025A · The company itself

“In addition, historically, geopolitical tensions between the U.S. and China have led to the imposition of tariffs, sanctions, and certain 21 other business restrictions between the U.S. and China. In 2025, the U.S. government imposed new tariffs on Chinese goods, and China responded with tariffs on select U.S. goods. If new legislation or additional trade restrictions are adopted or geopolitical tensions were to increase and disrupt our operations in or related to China, such disruption could significantly impact our business and results of operations.”

Annual report 2025A · The company itself

“Moreover, tensions between the U.S. and China, which have already led to a series of tariffs and sanctions, as well as other business restrictions, could further escalate based on additional trade restrictions, retaliation thereto, or otherwise, which could significantly impact our business, including by increasing scrutiny of, or restrictions on, market access, operations, and business development transactions.”

Annual report 2025A · The company itself

“For example, we, and the pharmaceutical industry generally, depend on China-based suppliers for portions of our supply chain, including integral chemical synthesis, reagents, starting materials, and ingredients.”

Annual report 2025A · The company itself

“In some markets, including the EU, Japan, and China, governments have significant power as large single payors to regulate prices and access criteria or impose other means of cost control.”

Annual report 2025A · The company itself

“State-owned hospitals and the state insurance program account for the vast majority of drug purchases in China, impacting access-price negotiations that have intensified in recent years. China's healthcare policies aim to balance accelerating patient access to innovative medicines with cost containment objectives. To facilitate patient access in China, we seek and have secured inclusion of Mounjaro and other of our branded products on China's National Reimbursement Drug List, a list of drugs fully or partially reimbursed by China’s national basic health insurance. In exchange for broad access, these products are generally subject to negotiation of significant price concessions.”

Annual report 2025A · The company itself

“The outcome of our preliminary agreements with the U.S. government and broader U.S. policy efforts to align domestic pharmaceutical pricing with international benchmarks from countries with competing healthcare cost containment priorities is uncertain and could impact our pricing strategies, product demand or access, or competitive positioning across global markets, and may result in reduced revenue in certain markets.”

Annual report 2025A · The company itself

“In November 2025, we announced preliminary voluntary agreements with the U.S. government in which, among other arrangements, we agreed to implement measures to lower Medicaid and certain other drug prices for U.S. patients and to launch new medicines with a more balanced pricing approach across developed nations. We face risks and uncertainty associated with these arrangements and negotiating the definitive agreements, including potential delays and the possibility of unfavorable terms related to pricing, access, and other key objectives. Among other risks, we may fail to adequately capitalize on the additional U.S. access to our obesity medicines resulting from these agreements, particularly if the revenues generated from such expanded access are insufficient to offset pricing concessions.”

Annual report 2025A · The company itself

“For example, in August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices in Medicare (effective beginning in 2026) at a significant discount compared to the list price. In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028. Given our product portfolio, we expect additional products will be selected in future years, which would have the effect of accelerating revenue erosion.”

Annual report 2025A · The company itself

“Continued expansion of the 340B program and growth of entities claiming entitlement to 340B pricing, including in ways that may be inconsistent with the statutory scheme and through state laws that purport to mandate 340B sales to contract pharmacies, impact our revenue on an increasing percentage of sales. Changes to the calculation of rebates under the Medicaid program could also increase our Medicaid rebate obligations and decrease the prices charged to 340B covered entities, which could have a significant impact on our business.”

Annual report 2025A · The company itself

“Investments to increase our manufacturing capacity include new sites in North Carolina, Wisconsin, Indiana, Virginia, Texas, Alabama, Pennsylvania, Ireland, Germany, and the Netherlands.”

Annual report 2025A · The company itself

“We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and in Europe and Asia.”

Annual report 2025A · The company itself

“Our active ingredient manufacturing and finishing operations, including formulation, filling, assembling, delivery device manufacturing, and packaging, take place at sites in the U.S., including Puerto Rico, Ireland and a number of other sites throughout the world.”

Annual report 2025A · The company itself

“In December 2025 the European Commission, Council, and Parliament reached an agreement-in-principle on EU Pharmaceutical Legislation. The implementation timeline and eventual impact on patients and the overall market is currently uncertain. Budget pressures and associated cost containment measures remain a focus in the EU, among other jurisdictions.”

Annual report 2025A · The company itself

“Most countries in the EU attempt to contain drug costs by engaging in some form of reference pricing in which authorities examine pre-determined internal or external markets for published prices of a product or national class of drugs. Member states also employ mandatory rebates, clawbacks, market caps, and other mechanisms to limit spending.”

Annual report 2025A · The company itself

“Investments to increase our manufacturing capacity include new sites in North Carolina, Wisconsin, Indiana, Virginia, Texas, Alabama, Pennsylvania, Ireland, Germany, and the Netherlands.”

Annual report 2025A · The company itself

“In some markets, including the EU, Japan, and China, governments have significant power as large single payors to regulate prices and access criteria or impose other means of cost control.”

Annual report 2025A · The company itself

“We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and in Europe and Asia.”

Annual report 2025A · The company itself

“In most international markets, we operate in an environment of government-mandated cost-containment programs, which may include price controls, international reference pricing, discounts and rebates, therapeutic reference pricing (to other, often generic, pharmaceutical choices), health technology assessments, regulatory hurdles, restrictions on physician prescription levels, and mandatory generic substitution. In these markets, healthcare services and the determination of pricing and reimbursement for pharmaceutical products are impacted by government control at the point of care or as the primary payer.”

Annual report 2025A · The company itself

“Significant portions of our business are conducted in Europe, Asia, and other international geographies.”

Annual report 2025A · The company itself

“Products Our products include: Therapeutic area Products Certain Indications Cardiometabolic Health products Basaglar In collaboration with Boehringer Ingelheim, a long-acting human insulin analog for the treatment of diabetes. Humalog, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, insulin lispro protamine, and insulin lispro mix 75/25 Human insulin analogs for the treatment of diabetes. Humulin, Humulin 70/30, Humulin N, Humulin R, and Humulin U-500 Human insulins of recombinant DNA origin for the treatment of diabetes.”

Annual report 2025A · The company itself

“Jardiance In collaboration with Boehringer Ingelheim, for the treatment of type 2 diabetes; to reduce the risk of cardiovascular death in adult patients with type 2 diabetes and established cardiovascular disease; to reduce the risk of cardiovascular death and hospitalizations for heart failure in adults; and to reduce the risk of sustained decline in estimated glomerular filtration rate (eGFR), end-stage kidney disease, cardiovascular death and hospitalization in adults with chronic kidney disease (CKD) at risk of progression.”

Annual report 2025A · The company itself

“Mounjaro A glucose-dependent insulinotropic polypeptide and glucagon-like peptide-1 receptor agonist, for the treatment of adults with type 2 diabetes in combination with diet and exercise to improve glycemic control.”

Annual report 2025A · The company itself

“Trulicity For the treatment of type 2 diabetes in adults and pediatric patients 10 years of age and older; and to reduce the risk of major adverse cardiovascular events in adult patients with type 2 diabetes and established cardiovascular disease or multiple cardiovascular risk factors.”

Annual report 2025A · The company itself

“Further, cost and wage inflation, availability of adequate capacity in global transportation, supply chain complexities, including consolidation therein, labor market issues, international tension and conflicts, uneven economic growth or downturns, an increase in overall demand in our industry for certain products and materials, and public health outbreaks, epidemics, or pandemics, have caused, and in the future may cause, delays or disruptions in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements, as well as other general business impacts.”

Annual report 2025A · The company itself

“In addition, in the U.S., most of our products are distributed through a limited number of wholesalers. If one of these significant wholesalers encounters financial or other difficulties or otherwise is unable or unwilling to support distribution of our products, it could cause disruption to our supply chain or we might be unable to timely collect the amounts that the wholesaler owes us, which could negatively impact our results of operations.”

Annual report 2025A · The company itself

“In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other healthcare professionals, and hospitals.”

Annual report 2025A · The company itself

“Zepbound For the treatment of adults with obesity or overweight with at least one weight-related comorbid condition in combination with a reduced-calorie diet and increased physical activity; and for the treatment of moderate to severe obstructive sleep apnea in adults with obesity in combination with a reduced-calorie diet and increased physical activity (relevant indications marketed under Mounjaro in various markets outside the U.S.).”

Annual report 2025A · The company itself

“For example, in July 2025, CVS Caremark, the pharmacy benefit management division of CVS Health, stopped covering Zepbound as a preferred obesity management medicine on some insurance plans, which has negatively impacted access for patients covered under these plans.”

Annual report 2025A · The company itself

“Therapeutic area Products Certain Indications Oncology products Cyramza For use as monotherapy 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 non-small cell lung cancer (NSCLC); in combination with another agent as a second-line treatment of metastatic colorectal cancer; as a monotherapy as a second-line treatment of hepatocellular carcinoma; 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. Erbitux Indicated both as monotherapy and in combination with another agent for the treatment of certain types of colorectal cancers; and as monotherapy, in combination with chemotherapy, or in combination with radiation therapy for the treatment of certain types of head and neck cancers.”

Annual report 2025A · The company itself

“In certain jurisdictions, we utilize LillyDirect, our direct-to-patient digital health care platform, to provide delivery of select Lilly medicines dispensed by third-party pharmacies to patients. Tools to help patients access care from independent healthcare providers and programs to assist patients in adhering to treatment plans are also available on the platform where applicable. Sales through LillyDirect represented a growing portion of our business in 2025 and we have launched, and continue to explore, new partnerships and tools, including through LillyDirect, to further expand access to our medicines.”

Annual report 2025A · The company itself

“Our account managers service wholesalers, pharmacy benefit managers, insurers, plan sponsors, employers, managed care organizations, group purchasing organizations, government and long-term care institutions, hospitals, and certain retail pharmacies.”

Annual report 2025A · The company itself

“We discover, develop, manufacture, and market products in a single business segment—human pharmaceutical products.”

Annual report 2025A · The company itself

“When new products, uses, or delivery systems with therapeutic, convenience, or cost advantages are introduced, including by developing new modalities, our existing products become subject to decreased sales volumes, progressive price reductions, or both.”

Annual report 2025A · The company itself

“Generic Pharmaceuticals and Biosimilars Generic pharmaceuticals and biosimilars can pose major competitive challenges to our business. In most major jurisdictions, the regulatory approval process for pharmaceuticals (other than biological products (biologics)) exempts generics from costly and time-consuming clinical trials to demonstrate their safety and efficacy, allowing generic manufacturers to rely on the safety and efficacy of the innovator product. As a result, generic manufacturers generally invest far fewer resources in research and development than we do for our branded products and can price their products significantly lower than branded products. Accordingly, when a branded non-biologic pharmaceutical loses its market exclusivity, it normally faces intense price competition from generic forms of the product, which can result in the loss of a significant portion of the branded product's revenue in a very short period of time.”

Annual report 2025A · The company itself

“In addition, competition for our biologics, which constitute a substantial portion of our products and pipeline, may be affected by the approval of follow-on biologics, also known as biosimilars. A biosimilar is a subsequent version of an approved innovator biologic that, due to its analytical and clinical similarity to the innovator biologic, may be approved based on an abbreviated data package that relies in part on the full testing required of the innovator biologic.”

Annual report 2025A · The company itself

“Patents, Trademarks, and Other Intellectual Property Rights Overview Intellectual property protection is critical to our ability to successfully commercialize our life sciences innovations and invest in the search for new medicines and uses. Loss of effective patent protection for pharmaceuticals can result in the loss of effective market exclusivity for the product, often leading to a severe and rapid decline in revenues for the product.”

Annual report 2025A · The company itself

“•Patent term extension for a single patent for a pharmaceutical product is provided to U.S. patent holders to compensate for a portion of the time invested in clinical trials and the FDA review process. There is a five-year cap on any restoration, and no patent's expiration date may be extended beyond 14 years from initial FDA approval.”

Annual report 2025A · The company itself

“The primary forms of data protection are as follows: •Data package protection generally prohibits regulatory approval of other manufacturers' applications for marketing approval if they rely on the innovator company's regulatory submission data for the drug. The base period is generally five years in the U.S. (12 years for new biologics under the BPCIA, subject to certain conditions), effectively 10 years in Europe, and eight years in Japan, which can be extended to 10 years with qualifying pediatric studies.”

Annual report 2025A · The company itself

“•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 populations within a specified time period. If granted, this "pediatric exclusivity" provides an additional six months of exclusivity, which is added to the end of any other unexpired exclusivity and, for products other than biologics, to the end of certain unexpired patents. •A specific use of a drug or biologic can receive "orphan" designation in the U.S. if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or where it is not reasonably expected to recover development and marketing costs through U.S. sales.”

Annual report 2025A · The company itself

“Outside the major markets, the adequacy and effectiveness of intellectual property protection for pharmaceuticals vary widely. International and U.S. free trade agreements like the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) administered by the World Trade Organization provide global protection of certain intellectual property rights. But in a number of markets we are unable to patent our products or to enforce the patents that we receive for our products. Further, many developing countries, and some developed countries, do not provide effective data package protection even though it is specified in the TRIPs Agreement.”

Annual report 2025A · The company itself

“Patent Challenges In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, authorizes the FDA to approve generic versions of innovative pharmaceuticals (other than biologics) when the generic manufacturer files an Abbreviated New Drug Application (ANDA). Absent a patent challenge, the FDA cannot approve an ANDA until after certain of the innovator's patents expire. However, after the innovator has marketed its product for four years, a generic manufacturer may file an ANDA alleging that the patent(s) listed in the innovator's New Drug Application (NDA) are invalid, unenforceable, or not infringed.”

Annual report 2025A · The company itself

“Generic manufacturers use this process extensively to challenge patents on innovative pharmaceuticals. In addition, generic companies have shown willingness to launch "at risk" (i.e., after receiving ANDA approval) but before final resolution of their patent challenge.”

Annual report 2025A · The company itself

“Under the BPCIA, the FDA cannot approve an application for a biosimilar product until data protection expires, 12 years after initial marketing approval of the innovator biologic, and an application may not be submitted until four years following the date the innovator biologic was first approved. However, the BPCIA does provide a mechanism for a prospective biosimilar competitor to challenge the validity of an innovator's patents as early as four years after initial marketing approval of the innovator biologic. The patent litigation scheme under the BPCIA, and the BPCIA itself, is complex and continues to be interpreted and implemented by the FDA, as well as by courts.”

Annual report 2025A · The company itself

“In addition, there is a procedure in U.S. patent law, known as inter partes review (IPR), which allows any member of the public to file a petition with the USPTO seeking the review of any issued U.S. patent for validity. IPRs are conducted before Administrative Patent Judges in the USPTO using a lower standard of proof than used in federal district court and challenged patents are not accorded the presumption of validity. Generic drug companies and even some investment firms have engaged in the IPR process in attempts to invalidate our patents.”

Annual report 2025A · The company itself

“New product candidates that appear promising in development or prior to being acquired may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payer reimbursement or coverage, failure to obtain placement on guidelines or recommendations published by third-party organizations, the application of pricing controls, limited scope of approved uses, label changes, changes in the relevant treatment standards or the availability of newer, better, or more cost-effective competitive products, difficulty or excessive costs to manufacture, insufficient infrastructure to support detection, diagnostic or other requisites for treatment, ineffectiveness in connecting with healthcare professionals, including digitally through virtual engagements, or infringement of the patents or intellectual property rights of others.”

Annual report 2025A · The company itself

“Through internal innovation and business development we must maintain a flow of successful products and indications or line extensions sufficient both to cover our substantial research and development costs and investments and to replace revenues that are lost as profitable products become subject to pricing controls, lose intellectual property exclusivity, are displaced by competing products, or therapies, or experience a reduction in patient access. Failure to replenish our product portfolio and pipeline in a timely manner would have a material adverse effect on our business, results of operations, cash flows, and financial position.”

Annual report 2025A · The company itself

“Our product revenues and prospects are adversely affected by patient access issues, the introduction by competitors of branded products that are first to market, have better marketplace access, have greater brand recognition, or are perceived as superior by the marketplace, by price competition, by generic or biosimilar versions of our branded products, and by generic or biosimilar versions of other products in the same therapeutic class as our branded products.”

Annual report 2025A · The company itself

“In the ordinary course of their lifecycles, our products lose significant patent protection and/or data protection after a specified period of time. For example, Trulicity will lose significant patent and remaining data protections in the next few years.”

Annual report 2025A · The company itself

“We have faced, and remain exposed to, generic or biosimilar competition following the expiration or loss of such intellectual property protection. Patent expirations of competitive products may also shift market conditions for our products by contracting the market for branded products, impacting product access, or otherwise intensifying pricing pressures across similar treatments.”

Annual report 2025A · The company itself

“For non-biologic products, loss of exclusivity typically results in the entry of one or more generic competitors, leading to a rapid and severe decline in revenues, especially in the U.S.”

Annual report 2025A · The company itself

“Changes proposed by the USPTO and by certain bills in Congress to limit the number of, and differences between, patents obtained could also affect the scope of patent protection for our products in the U.S.”

Annual report 2025A · The company itself

“We face many generic manufacturer challenges to our patents outside the U.S. as well. The entry of generic competitors typically results in rapid and severe declines in revenues.”

Annual report 2025A · The company itself

“In 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (IRA). Among other measures, the IRA requires HHS to effectively set prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D. Currently, these government prices generally apply beginning at nine years (for medicines approved under a New Drug Application) or thirteen years (for medicines approved under a Biologics License Application) following FDA approval or licensure for the molecule and are set at a price that generally represents a significant discount from existing list prices to wholesalers and direct purchasers.”

Annual report 2025A · The company itself

“In August 2023, HHS selected Jardiance, which is part of our collaboration with Boehringer Ingelheim, as one of the first ten medicines subject to government-set prices effective in 2026. In August 2024, HHS announced the government-set prices for these medicines with Jardiance subject to a 66 percent discount compared to the 2023 U.S. calendar year list price for a 30-day supply.”

Annual report 2025A · The company itself

“In January 2026, HHS selected Trulicity and Verzenio as additional medicines subject to government-set prices to be effective in 2028.”

Annual report 2025A · The company itself

“Given our product portfolio, we expect additional of our significant products will be selected in future years, which would have the effect of accelerating revenue erosion prior to expiry of exclusivities.”

Annual report 2025A · The company itself

“Other IRA provisions require drug manufacturers to provide rebates for Medicare Part B and Part D medicines under certain circumstances and implemented Part D benefit redesign. The IRA has, and will continue to, meaningfully influence our business strategies and those of our competitors.”

Annual report 2025A · The company itself

“Furthermore, states continue to adopt laws that, among other things, expand the 340B program by purporting to compel manufacturers to sell their medicines at 340B prices to an unlimited number of contract pharmacies. Other manufacturers and trade associations continue to litigate the constitutionality of these laws in various federal courts.”

Annual report 2025A · The company itself

“Moreover, we cannot predict the extent to which our business may be affected by current or potential future legislative, regulatory, or private actor developments. However, in general we expect to see continued focus on regulating pricing, resulting in additional state, federal, and international legislative and regulatory developments that could have negative effects on pricing, access, and reimbursement for our products as well as overall operations.”

Annual report 2025A · The company itself

“Our business is subject to government price controls and other public and private restrictions on pricing, reimbursement, and access for our drugs, which could have a material adverse effect on our results of operations, reputation, or business. Public and private actors continue to take aggressive steps to control expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, our medicines. These pressures have negatively affected and we expect will continue to negatively affect our consolidated results of operations.”

Annual report 2025A · The company itself

“Given the limited duration of patent and data protections, the speed with which we develop products, complete clinical testing, receive regulatory approvals, supply commercial products to the market, and obtain public and private payer access are important factors in recouping our development costs and generating financial returns, particularly given regulatory and market dynamics that have and may continue to put pressure on pricing, exclusivity periods, and competition.”

Annual report 2025A · The company itself

“Reforms, initiatives, and other actions in our product markets, including those that may stem from political initiatives, periods of uneven economic growth or downturns or uncertainty, or as a result of inflation or deflation, trade and other global disputes and interruptions including related to tariffs, trade protection measures, and similar restrictions, the emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on pricing, access, and reimbursement for our products.”

Annual report 2025A · The company itself

“In addition, historically, geopolitical tensions between the U.S. and China have led to the imposition of tariffs, sanctions, and certain 21 other business restrictions between the U.S. and China. In 2025, the U.S. government imposed new tariffs on Chinese goods, and China responded with tariffs on select U.S. goods. If new legislation or additional trade restrictions are adopted or geopolitical tensions were to increase and disrupt our operations in or related to China, such disruption could significantly impact our business and results of operations.”

Annual report 2025A · The company itself

“We continue to experience additional pricing pressures, rebates, clawbacks, and other changes in reimbursement policies and programs resulting from periods of uneven economic growth or downturns or uncertainty, and the emergence or escalation of, and responses to, international tension and conflicts.”

Annual report 2025A · The company itself

“Intellectual property threats across international markets include policies which favor domestic competitors or are otherwise disadvantageous to our products, challenges to our patents’ validity in foreign courts, and government policies that force technology transfer or undermine or nullify patent protections under the guise of health emergencies or other public interests.”

Annual report 2025A · The company itself

“Trade and other global disputes, interruptions, and developments, including those related to tariffs, trade protection measures, import or export licensing requirements or disagreements with authorities regarding tariff classifications, transfer pricing, or valuations, the imposition of trade sanctions or similar restrictions by the U.S. or other governments, international tension and conflicts, as well as economic stagnation, cost inflation, strains on global transportation, manufacturing, and labor markets, and public health outbreaks, epidemics, or pandemics affect our ability to do business and, in some cases, result in financial, operational, legal, business, or reputational harm.”

Annual report 2025A · The company itself

“Reforms, initiatives, and other actions in our product markets, including those that may stem from political initiatives, periods of uneven economic growth or downturns or uncertainty, or as a result of inflation or deflation, trade and other global disputes and interruptions including related to tariffs, trade protection measures, and similar restrictions, the emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on pricing, access, and reimbursement for our products.”

Annual report 2025A · The company itself

“In addition, historically, geopolitical tensions between the U.S. and China have led to the imposition of tariffs, sanctions, and certain 21 other business restrictions between the U.S. and China. In 2025, the U.S. government imposed new tariffs on Chinese goods, and China responded with tariffs on select U.S. goods. If new legislation or additional trade restrictions are adopted or geopolitical tensions were to increase and disrupt our operations in or related to China, such disruption could significantly impact our business and results of operations.”

Annual report 2025A · The company itself

“External environmental factors have also caused, and in the future may cause, delays in, and/or increase costs related to, distribution of our medicines, the construction or other acquisition of additional manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements. Relevant external environmental factors include (i) tariffs, (ii) cost inflation and global transportation and logistics challenges; (iii) labor market dynamics; (iv) natural disasters (including increased instances or severity of natural disasters or other events that may be due to climate change); (v) public health outbreaks, epidemics, or pandemics; (vi) periods of uneven economic growth or downturns; and (vii) the emergence or escalation of, or responses to international tension and conflicts.”

Annual report 2025A · The company itself

“Trade and other global disputes, interruptions, and developments, including those related to tariffs, trade protection measures, import or export licensing requirements or disagreements with authorities regarding tariff classifications, transfer pricing, or valuations, the imposition of trade sanctions or similar restrictions by the U.S. or other governments, international tension and conflicts, as well as economic stagnation, cost inflation, strains on global transportation, manufacturing, and labor markets, and public health outbreaks, epidemics, or pandemics affect our ability to do business and, in some cases, result in financial, operational, legal, business, or reputational harm.”

Annual report 2025A · The company itself

“Risks Related to Our Operations Failure, inadequacy, breach of, or unauthorized access to, our IT systems or those of our third-party service providers, unauthorized access to our confidential information, or violations of data protection laws, could result in material harm to our business and reputation.”

Annual report 2025A · The company itself

“Some third-party IT systems that are necessary for the operation of our business processes are maintained outside of our control but would impact business operations if compromised as a result of a cyber-attack.”

Annual report 2025A · The company itself

“We and others in the healthcare industry have been and continue to be targets for cyber-attacks, and the number of threats has increased over time.”

Annual report 2025A · The company itself

“Government Regulation of Our Operations and Products Our operations are regulated extensively by numerous government agencies. The lengthy process of laboratory and clinical testing, data analysis, manufacturing development, and regulatory review necessary for governmental approvals of our products is extremely costly and can significantly delay product introductions and revenue generation. In addition, our operations are subject to complex federal, state, local, and foreign laws and regulations concerning relationships with healthcare providers and suppliers, pricing and reimbursement for our products, the environment, occupational health and safety, data privacy and security, and other matters.”

Annual report 2025A · The company itself

“Of particular importance to our business is regulation by the FDA in the U.S. Pursuant to laws and regulations that include the Federal Food, Drug, and Cosmetic Act (FDCA) and the Public Health Service Act (PHSA), the FDA exercises jurisdiction over all of our products and devices in the U.S. and administers requirements covering the testing, safety, effectiveness, manufacturing, quality control, distribution, labeling, marketing, promotion, advertising, dissemination of information, and post-marketing surveillance of those products and devices. The FDA holds broad discretion under the FDCA to interpret the conditions and evidence necessary for timely approval of and ability to market our products and devices as well as those of our competitors.”

Annual report 2025A · The company itself

“The FDA may withdraw approval of a product if compliance with regulatory requirements and standards is not maintained or if problems occur after a product reaches the market, including as may be identified through market surveillance or third-party studies involving our products. The FDA may also mandate labeling changes, post-marketing studies, or risk management programs at any point in a product's life cycle based on new safety information or as part of a labeling change to a particular class of products.”

Annual report 2025A · The company itself

“In Japan, our products can be subject to government-mandated annual price reductions. The government may also apply re-pricings for specific products or classes of products if certain criteria are met, including exceeding product use thresholds.”

Annual report 2025A · The company itself

“Governments in many emerging markets are also focused on limiting health care costs and have enacted price controls and measures impacting intellectual property.”

Annual report 2025A · The company itself

“We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and in Europe and Asia.”

Annual report 2025A · The company itself

“Significant portions of our business are conducted in Europe, Asia, and other international geographies.”

Annual report 2025A · The company itself

“We continue to experience additional pricing pressures, rebates, clawbacks, and other changes in reimbursement policies and programs resulting from periods of uneven economic growth or downturns or uncertainty, and the emergence or escalation of, and responses to, international tension and conflicts.”

Annual report 2025A · The company itself

“External environmental factors have also caused, and in the future may cause, delays in, and/or increase costs related to, distribution of our medicines, the construction or other acquisition of additional manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements. Relevant external environmental factors include (i) tariffs, (ii) cost inflation and global transportation and logistics challenges; (iii) labor market dynamics; (iv) natural disasters (including increased instances or severity of natural disasters or other events that may be due to climate change); (v) public health outbreaks, epidemics, or pandemics; (vi) periods of uneven economic growth or downturns; and (vii) the emergence or escalation of, or responses to international tension and conflicts.”

Annual report 2025A · The company itself

“Economic slowdowns could lead to decreased utilization of our products globally or in specific markets, affecting our sales. Declining tax revenues and increased government spending on other programs attributable to uneven economic growth or downturns may increase the pressure on governments to reduce healthcare spending, leading to increased control of drug prices or lower utilization.”

Annual report 2025A · The company itself

“In December 2025 the European Commission, Council, and Parliament reached an agreement-in-principle on EU Pharmaceutical Legislation. The implementation timeline and eventual impact on patients and the overall market is currently uncertain. Budget pressures and associated cost containment measures remain a focus in the EU, among other jurisdictions.”

Annual report 2025A · The company itself

“Changes to such laws, regulations, and enforcement practices could reduce protections for our innovative products and indications. For example, an agreement-in-principle announced in December 2025 between the European Commission, Council and Parliament to revise the EU's general pharmaceutical legislation would make conditional the length of certain pharmaceutical intellectual property incentives, including by reductions in maximum data protection periods.”

Annual report 2025A · The company itself

“Geopolitical and economic factors have in various cases exacerbated financial pressures on governments with single-payer or government funded healthcare systems, leading to increases in rebates, clawbacks, and other reforms to reimbursement systems, policies and programs.”

Annual report 2025A · The company itself

“Further, cost and wage inflation, availability of adequate capacity in global transportation, supply chain complexities, including consolidation therein, labor market issues, international tension and conflicts, uneven economic growth or downturns, an increase in overall demand in our industry for certain products and materials, and public health outbreaks, epidemics, or pandemics, have caused, and in the future may cause, delays or disruptions in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements, as well as other general business impacts.”

Annual report 2025A · The company itself

“At the end of 2025, we employed approximately 50,000 people, including approximately 27,000 employees outside the U.S.”

Annual report 2025A · The company itself

“To capitalize on the rapid development of next-generation technologies and otherwise effectively compete, we must continue to enhance skill sets and develop our workforce, both in and outside the U.S. We face intense competition for qualified individuals from numerous multinational companies, academic and other research institutions, as well as employers near our manufacturing and other facilities, which has increased and may continue to increase our labor costs.”

Annual report 2025A · The company itself

“We pay rebates to private payers that provide prescription drug benefits to seniors covered by Medicare and to private payers that provide prescription drug benefits to their customers. These rebates are affected by the introduction of competitive products and generics in the same class and ongoing competitive dynamics.”

Annual report 2025A · The company itself

“Our financial results and prospects are subject to risks related to the level and pace of patient participation in cash-pay markets, which may be influenced by pricing, economic conditions, and competitive offerings, as well as regulatory or other actions that could restrict our ability to benefit from such markets, and uncertainty regarding our ability to secure reimbursement coverage in such markets over time.”

Annual report 2025A · The company itself

“Reforms, initiatives, and other actions in our product markets, including those that may stem from political initiatives, periods of uneven economic growth or downturns or uncertainty, or as a result of inflation or deflation, trade and other global disputes and interruptions including related to tariffs, trade protection measures, and similar restrictions, the emergence, or escalation of, and responses to, international tension and conflicts, or government budgeting priorities, are expected to continue to result in added pressure on pricing, access, and reimbursement for our products.”

Annual report 2025A · The company itself

“Further, cost and wage inflation, availability of adequate capacity in global transportation, supply chain complexities, including consolidation therein, labor market issues, international tension and conflicts, uneven economic growth or downturns, an increase in overall demand in our industry for certain products and materials, and public health outbreaks, epidemics, or pandemics, have caused, and in the future may cause, delays or disruptions in and/or increased costs related to distribution of our medicines, the construction or acquisition of manufacturing capacity, procurement activity, and supplier or contract manufacturer arrangements, as well as other general business impacts.”

Annual report 2025A · The company itself

“In addition, developing laws and regulations related to AI or other emerging technologies create uncertainty, may require significant resources to adjust business practices for compliance, and in some cases, may limit our ability to use AI-based software. Several governmental authorities have already proposed or enacted laws and other guidance governing AI, such as the EU Artificial Intelligence Act.”

Annual report 2025A · The company itself

“Effective development, management, and use of AI technologies is novel and complex, and there are technical challenges associated with achieving desired levels of accuracy, efficiency, and reliability. The algorithms and models utilized in AI systems may have limitations, including biases, errors, insufficient or erroneous training data, or inability to handle certain data types or scenarios or to render explainable or effective outputs.”

Annual report 2025A · The company itself

“Certain of our products, devices and components are manufactured by third parties, and their failure to comply with these regulations has affected and could in the future adversely affect us, including through failure to supply product to us or delays in approvals of new products or indications.”

Annual report 2025A · The company itself

“Additionally, there is attention from the media, stockholders, activists, political leadership, regulatory authorities, and other stakeholders on climate, social, and other sustainability matters. The perception that we or others in our industry or supply chain have failed to act in an appropriate manner, whether or not valid, results in publicity that can negatively affect our business, brand, and reputation, as well as result in increased scrutiny from political leadership, legislators and regulatory authorities.”

Annual report 2025A · The company itself

“Among other third-party providers, we, and the pharmaceutical industry generally, depend on China-based suppliers for portions of our supply chain. U.S. officials have enacted and continue to consider legislation or other actions that are intended to limit supply chain reliance on China, including the BIOSECURE Act.”

Annual report 2025A · The company itself

“If granted, this "pediatric exclusivity" provides an additional six months of exclusivity, which is added to the end of any other unexpired exclusivity and, for products other than biologics, to the end of certain unexpired patents. •A specific use of a drug or biologic can receive "orphan" designation in the U.S. if it is intended to treat a disease or condition affecting fewer than 200,000 people in the U.S., or where it is not reasonably expected to recover development and marketing costs through U.S. sales. Orphan designation entitles a particular use of the drug to seven years of market exclusivity, which runs in parallel with any applicable patents.”

Annual report 2025A · The company itself