United States
`Securities and Exchange Commission
`Washington, D.C. 20549
`Form 10-K
`Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
`for the fiscal year ended December 31, 2022
`Commission file number 001-06351
`
`ELI LILLY AND COMPANY
`
`(Exact name of Registrant as specified in its charter)
`
`Indiana
`(State or other jurisdiction of
`incorporation or organization)
`
`
`
`35-0470950
`(I.R.S. Employer
`Identification No.)
`
`Name of Each Exchange On Which Registered
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`
`Lilly Corporate Center, Indianapolis, Indiana 46285
`(Address and zip code of principal executive offices)
`Registrant's telephone number, including area code (317) 276-2000
`Securities registered pursuant to Section 12(b) of the Exchange Act:
`Title of Each Class
`Trading Symbol(s)
`Common Stock (no par value)
`LLY
`7 1/8% Notes due 2025
`LLY25
`1.625% Notes due 2026
`LLY26
`2.125% Notes due 2030
`LLY30
`0.625% Notes due 2031
`LLY31
`0.500% Notes due 2033
`LLY33
`6.77% Notes due 2036
`LLY36
`1.625% Notes due 2043
`LLY43
`1.700% Notes due 2049
`LLY49A
`1.125% Notes due 2051
`LLY51
`1.375% Notes due 2061
`LLY61
`Securities registered pursuant to Section 12(g) of the Exchange Act: None
`Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
`Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
`Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the
`Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
`Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
`the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
`Yes ☒ No ☐
`Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
`of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
`Large accelerated filer ☒
`Non-accelerated filer ☐
`
`Accelerated filer
`Smaller reporting company
`Emerging growth company
`
`If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
`provided pursuant to Section 13(a) of the Exchange Act. ☐
`Indicate by check mark whether the Registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section
`404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
`If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
`previously issued financial statements. ☐
`Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
`during the relevant recovery period pursuant to § 240.10D-1(b). ☐
`Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
`Aggregate market value of the common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the Registrant's most
`recently completed second fiscal quarter: approximately $274,342,000,000.
`Number of shares of common stock outstanding as of February 17, 2023: 950,296,118
`Portions of the Registrant's Proxy Statement for the 2023 Annual Meeting of Shareholders have been incorporated by reference into Part III of this report.
`
`☐
`☐
`☐
`
`Novo Nordisk Exhibit 2523
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00001
`
`Novo Nordisk Exhibit 2523
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00001
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`

`

`Eli Lilly and Company
`Form 10-K
`For the Year Ended December 31, 2022
`Table of Contents
`
`Business
`Risk Factors
`Unresolved Staff Comments
`Properties
`Legal Proceedings
`Mine Safety Disclosures
`
`Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
`Securities
`[Reserved]
`Management's Discussion and Analysis of Results of Operations and Financial Condition
`Quantitative and Qualitative Disclosures About Market Risk
`Financial Statements and Supplementary Data
`Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
`Controls and Procedures
`Other Information
`Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
`
`Directors, Executive Officers, and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director Independence
`Principal Accountant Fees and Services
`Exhibits and Financial Statement Schedules
`Form 10-K Summary
`
`2
`
`Part I
`
`Item 1.
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`Part II
`
`Item 5.
`
`Item 6.
`Item 7.
`Item 7A.
`Item 8.
`Item 9.
`Item 9A.
`Item 9B.
`Item 9C.
`
`Part III
`
`Item 10.
`Item 11.
`Item 12.
`Item 13.
`Item 14.
`Item 15.
`Item 16.
`
`Page
`
`5
`24
`34
`34
`34
`34
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`35
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`37
`37
`55
`56
`113
`113
`113
`113
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`114
`114
`115
`115
`115
`116
`117
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00002
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
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`

`

`Forward-Looking Statements
`This Annual Report on Form 10-K and our other publicly available documents include forward-looking statements within the meaning of
`Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act), and are subject to the
`safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. In particular, information appearing under "Business,"
`"Risk Factors," and "Management's Discussion and Analysis of Results of Operations and Financial Condition" includes forward-looking
`statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and generally can be
`identified by the use of words such as "may," "believe," "will," "expect," "project," "estimate," "intend," "anticipate," "plan," "continue," or
`similar expressions or future or conditional verbs.
`Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those
`expressed in forward-looking statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or
`events, it is based on management's current plans and expectations, expressed in good faith and believed to have a reasonable basis.
`However, we can give no assurance that any such expectation or belief will result or will be achieved or accomplished. Investors therefore
`should not place undue reliance on forward-looking statements. The following include some but not all of the factors that could cause actual
`results or events to differ materially from those anticipated:
`•
`the significant costs and uncertainties in the pharmaceutical research and development process, including with respect to the timing and
`process of obtaining regulatory approvals;
`the impact and outcome of acquisitions and business development transactions and related integration costs;
`•
`the expiration of intellectual property protection for certain of our products and competition from generic and/or biosimilar products;
`•
`our ability to protect and enforce patents and other intellectual property;
`•
`changes in patent law or regulations related to data package exclusivity;
`•
`competitive developments affecting current products and our pipeline;
`•
`• market uptake of recently launched products;
`•
`information technology system inadequacies, breaches, or operating failures;
`•
`unauthorized access, disclosure, misappropriation, or compromise of confidential information or other data stored in our information
`technology systems, networks, and facilities, or those of third parties with whom we share our data;
`the impact of global macroeconomic conditions, trade disruptions, disputes, unrest, war, regional dependencies, or other costs,
`uncertainties and risks related to engaging in business globally;
`unexpected safety or efficacy concerns associated with our products;
`litigation, investigations, or other similar proceedings involving past, current, or future products or commercial activities as we are largely
`self-insured;
`issues with product supply and regulatory approvals stemming from manufacturing difficulties, disruptions, or shortages, including as a
`result of unpredictability and variability in demand, labor shortages, third-party performance, quality, or regulatory actions related to our
`facilities;
`dependence on certain products for a significant percentage of our total revenue and an increasingly consolidated supply chain;
`reliance on third-party relationships and outsourcing arrangements;
`the impact of public health outbreaks, epidemics, or pandemics, such as the COVID-19 pandemic;
`regulatory changes or other developments;
`regulatory actions regarding operations and products;
`continued pricing pressures and the impact of actions of governmental and private payers affecting pricing of, reimbursement for, and
`access to pharmaceuticals;
`devaluations in foreign currency exchange rates or changes in interest rates and inflation;
`changes in tax law, tax rates, or events that differ from our assumptions related to tax positions;
`asset impairments and restructuring charges;
`
`•
`•
`•
`•
`•
`•
`
`•
`•
`•
`
`3
`
`•
`
`•
`•
`
`•
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`Novo Nordisk Exhibit 2523
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00003
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
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`

`

`•
`
`changes in accounting and reporting standards promulgated by the Financial Accounting Standards Board and the Securities and
`Exchange Commission (SEC);
`regulatory compliance problems or government investigations; and
`•
`actual or perceived deviation from environmental-, social-, or governance-related requirements or expectations.
`•
`Investors should also carefully read the factors described under Item 1A, "Risk Factors" in this Annual Report on Form 10-K for a description
`of certain risks that could, among other things, cause our actual results to differ from those expressed in forward-looking statements.
`Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and
`under Item 1A, "Risk Factors" to be a complete statement of all potential risks and uncertainties.
`All forward-looking statements speak only as of the date of this Annual Report and are expressly qualified in their entirety by the risk factors
`and cautionary statements included in this Annual Report. Except as is required by law, we expressly disclaim any obligation to publicly
`release any revisions to forward-looking statements to reflect events after the date of this Annual Report.
`
`4
`
`Novo Nordisk Exhibit 2523
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00004
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
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`

`

`Part I
`Item 1. Business
`Eli Lilly and Company (referred to as the company, Lilly, we, or us) was incorporated in 1901 in Indiana to succeed to the drug manufacturing
`business founded in Indianapolis, Indiana, in 1876 by Colonel Eli Lilly. We discover, develop, manufacture, and market products in a single
`business segment—human pharmaceutical products.
`Our purpose is to unite caring with discovery to create medicines that make life better for people around the world. Most of the products that
`we sell today were discovered or developed by our own scientists, and our long-term success depends on our ability to continually discover
`or acquire, develop, and commercialize innovative medicines.
`We manufacture and distribute our products through facilities in the United States (U.S.), including Puerto Rico, and 7 other countries. Our
`products are sold in approximately 110 countries.
`Products
`Our products include:
`Diabetes products, including:
`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.
`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; and to reduce the risk of cardiovascular death
`and hospitalizations for heart failure in adults.
`• 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.
`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.
`Oncology products, including:
`•
`Alimta , for the first-line treatment, in combination with two other agents, of advanced non-small cell lung cancer (NSCLC) for
`®
`patients with non-squamous cell histology and no epidermal growth factor receptor or anaplastic lymphoma kinase genomic tumor
`aberrations; for the first-line treatment, in combination with another agent, of advanced non-squamous NSCLC; 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 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 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 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.
`
`® ®
`
`•
`
`•
`
`•
`
`5
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
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`

`•
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`•
`
`•
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`Jaypirca , for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL) after at least two lines of
`TM
`systemic therapy, including a BTK inhibitor.
`• Retevmo , for the treatment of metastatic NSCLC with a rearranged during transfection (RET) gene fusion in adult patients; for the
`®
`treatment of advanced metastatic medullary thyroid cancer with a RET mutation who require systemic therapy in adult and pediatric
`patients; for the treatment of advanced or metastatic thyroid cancer with a RET gene fusion in adult and pediatric patients who
`require systemic therapy and are radioactive iodine-refractory; and for the treatment of adult patients with locally advanced or
`metastatic solid tumors with a RET gene fusion that have progressed on or following prior systemic treatment or who have no
`satisfactory alternative treatment options.
`Tyvyt , in collaboration with Innovent Biologics, Inc., for the treatment of relapsed or refractory classic Hodgkin's lymphoma; for the
`®
`first-line treatment of non-squamous NSCLC in combination with Alimta and another agent; for the first-line treatment of squamous
`NSCLC in combination with two other agents; for the first-line treatment of hepatocellular carcinoma in combination with another
`agent; for the first-line treatment of esophageal squamous cell carcinoma in combination with certain other agents; and for the first-
`line treatment of gastric cancer in combination with two other agents, each in China.
`Verzenio , for use as monotherapy or in combination with endocrine therapy for the treatment of HR+, HER2- metastatic breast
`®
`cancer and in combination with endocrine therapy for treatment of HR+, HER2-, node positive, early breast cancer at high risk of
`recurrence and a Ki-67 score at least 20 percent, as determined by a U.S. Food and Drug Administration (FDA) approved test.
`Immunology products, including:
`• Olumiant , in collaboration with Incyte Corporation, for the treatment of adults with moderately-to-severely active rheumatoid arthritis,
`®
`moderate to severe atopic dermatitis, and severe alopecia areata, and for the treatment of hospitalized adults with COVID-19 who
`require supplemental oxygen, mechanical ventilation, or extracorporeal membrane oxygenation.
`Taltz , for the treatment of adults and pediatric patients aged 6 years or older with moderate-to-severe plaque psoriasis, adults with
`®
`active psoriatic arthritis, adults with ankylosing spondylitis, and adults with active non-radiographic axial spondyloarthritis.
`Neuroscience products, including:
`• 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 , for migraine prevention and the treatment of episodic cluster headache in adults.
`Zyprexa , for the treatment of schizophrenia, acute mixed or manic episodes associated with bipolar I disorder, and bipolar
`maintenance.
`Other products and therapies, including:
`•
`Bamlanivimab and etesevimab, administered together, for the treatment of mild-to-moderate COVID-19 in adults and pediatric
`patients from birth to 12 years old with positive results of direct SARS-CoV-2 viral testing and who are at high risk for progression to
`severe COVID-19, including hospitalization or death (Emergency Use Authorization (EUA) granted in 2021). In May 2022, the FDA
`announced that bamlanivimab and etesevimab are not currently authorized for emergency use for any U.S. region.
`Bebtelovimab, for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older and
`weighing at least 40 kilograms) with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to
`severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized
`by the FDA are not accessible or clinically appropriate (EUA granted in 2022). In November 2022, the FDA announced that
`bebtelovimab is not currently authorized for emergency use for any U.S. region.
`• Cialis , for the treatment of erectile dysfunction and benign prostatic hyperplasia.
`®
`•
`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.
`
`® ®
`
`•
`
`•
`•
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`•
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`6
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
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`Marketing and Distribution
`We sell most of our products worldwide. We adapt our marketing methods and product emphasis in various countries to meet local customer
`needs and comply with local regulations.
`U.S.
`We promote our major products in the U.S. through sales representatives who engage with physicians and other healthcare professionals.
`We also educate healthcare providers about our products in various other ways, including promoting in online channels, distributing literature
`and samples of certain products to physicians, and exhibiting at medical meetings. In addition, we advertise certain products directly to
`consumers in the U.S., and we maintain websites and other media channels with information about our major products. We supplement our
`employee sales force with contract sales organizations to leverage our resources and reach additional patients in need.
`We maintain special business groups to service wholesalers, pharmacy benefit managers, managed care organizations, group purchasing
`organizations, government and long-term care institutions, hospitals, and certain retail pharmacies. We enter into arrangements with these
`organizations providing for discounts or rebates on our products.
`In the U.S., most of our products are distributed through wholesalers that serve pharmacies, physicians and other healthcare professionals,
`and hospitals. In 2022, 2021, and 2020, three wholesale distributors in the U.S.—McKesson Corporation, AmerisourceBergen Corporation,
`and Cardinal Health, Inc.—each accounted for a significant percentage of our consolidated revenue. No other customer accounted for more
`than 10 percent of our consolidated revenue in any of these years. For additional information, see Item 8, "Financial Statements and
`Supplementary Data—Note 2: Revenue."
`Outside the U.S.
`The products we market and distribution of our products vary from country to country. Outside the U.S., we promote our products to
`healthcare providers through sales representatives and other channels. In most countries in which we operate, we maintain our own sales
`organizations, but in some countries we market our products through third parties, some of which we have engaged through distribution and
`promotion arrangements.
`Marketing Collaborations
`Certain of our products are marketed in arrangements with other pharmaceutical companies. For example, 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.
`®
`®
`®
`For additional information, see Item 8, "Financial Statements and Supplementary Data—Note 4: Collaborations and Other Arrangements."
`Competition
`Our products compete globally with many other pharmaceutical products in highly competitive markets.
`Important competitive factors include effectiveness, safety, and ease of use; formulary placement, price, payer coverage and reimbursement
`rates, and demonstrated cost-effectiveness; regulatory approvals; marketing effectiveness; and research and development of new products,
`processes, modalities, and uses. Most new products or uses that we introduce must compete with other branded, biosimilar, or generic
`products already on the market or that are later developed by competitors. When competitors introduce new products, uses, or delivery
`systems with therapeutic or cost advantages, including by developing new modalities, our products become subject to decreased sales
`volumes, progressive price reductions, or both.
`We believe our long-term competitive success depends on discovering and developing (either alone or in collaboration with others) or
`acquiring innovative, cost-effective products that provide improved outcomes for patients and deliver value to payers, and continuously
`improving the productivity of our operations in a highly competitive environment. There can be no assurance that our efforts will result in
`commercially successful products, and it is possible that our products will be, or will become, uncompetitive from time to time as a result of
`products or uses developed by our competitors.
`
`7
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00007
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`IPR2023-00724
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`Generic Pharmaceuticals
`One of the biggest competitive challenges we face is from generic pharmaceuticals. In the U.S., Europe, Japan, and other 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 than we do for our branded products in research
`and development and can price their products significantly lower than our 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 product's revenue in a very short period of time. Moreover, governments in some countries leverage
`generic entrants to drive price concessions through the utilization of volume-based procurement bidding and other measures.
`Further, public and private payers typically encourage the use of generics as alternatives to brand-name drugs in their healthcare programs.
`Laws in the U.S. generally allow, and in many cases require, pharmacists to substitute generic drugs that have been rated under government
`procedures to be essentially equivalent to a brand-name drug. Where substitution is mandatory, it must be made unless the prescribing
`physician expressly forbids it. In certain countries outside the U.S., intellectual property protection is weak, and we must compete with
`generic or counterfeit versions of our products relatively shortly after launch.
`Biosimilars
`A number of our products and potential new medicines in our clinical-stage pipeline are biologics. In the U.S., the FDA regulates biologics
`under the Federal Food, Drug and Cosmetic Act, the Public Health Service Act, and implementing regulations. Competition for Lilly's
`biologics 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. Approval by the FDA ultimately depends on
`many factors, including a showing that the biosimilar is "highly similar" to the original product and has no clinically meaningful differences
`from the original product in terms of safety, purity, and potency.
`Globally, most governments have developed abbreviated regulatory pathways to approve biosimilars as follow-ons to innovator-developed
`biologics, including the Biologics Price Competition and Innovation Act of 2009 (the BPCIA) in the U.S. A number of biosimilars have been
`licensed under the BPCIA, as well as in Europe and Japan. The patent and regulatory exclusivity for the existing innovator biologic generally
`must expire in a given market before biosimilars may enter that market. In addition, the extent to which a biosimilar, once approved, will be
`substituted for the innovator biologic in a way that is similar to traditional generic substitution for non-biologic products is not yet entirely clear,
`and will depend on a number of regulatory and marketplace factors that are still developing. In the U.S., currently only a biosimilar product
`that is determined to be "interchangeable" by the FDA will be considered substitutable for the original biologic product without the intervention
`of the healthcare provider who prescribed the original biologic product. The FDA requirements for interchangeability are evolving but the FDA
`has issued several "interchangeable" designations for biosimilar products, including for competitive insulin products, and is expected to
`continue doing so in the future.
`Regulatory interpretation of important aspects of the laws regulating biosimilars continues to evolve and, therefore, the impact of these laws
`on our business remains subject to substantial uncertainty. Biosimilars may present both competitive challenges and opportunities. While
`competitors have developed biosimilars that compete with our products, we have developed, and may continue to develop, our own
`biosimilars.
`U.S. Private Sector Dynamics
`In the U.S. private sector, consolidation and integration among healthcare organizations significantly affects the competitive marketplace for
`pharmaceuticals. Health plans, managed care organizations, pharmacy benefit managers, wholesalers, and other supply chain stakeholders
`have been consolidating into fewer, larger entities, thus enhancing their market power and importance. Private third-party insurers, as well as
`governments, typically maintain formularies that specify coverage (the conditions under which drugs are included on a plan's formulary) and
`reimbursement (the associated out-of-pocket cost to the consumer) to control costs by negotiating discounts or rebates in exchange for
`formulary inclusion and placement.
`
`8
`
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`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00008
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`IPR2023-00724
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`Formulary placement can lead to reduced usage of a drug for the relevant patient population due to coverage restrictions, such as prior
`authorizations and formulary exclusions, or due to reimbursement limitations that result in higher consumer out-of-pocket cost, such as non-
`preferred co-pay tiers, increased co-insurance levels, and higher deductibles. Consequently, pharmaceutical companies face increased
`pressure in negotiations, and compete fiercely for formulary placement, not only on the basis of product attributes such as efficacy, safety
`profile, or patient ease of use, but also by providing rebates or other concessions. As payers and pharmaceutical companies continue to
`negotiate formulary placement and rebates, value-based agreements, where rebates may be based on achievement (or not) of specified
`outcomes, are another tool that has become increasingly prevalent. Cost is an increasingly important factor in formulary decisions,
`particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable.
`These pressures have negatively affected, and could continue to negatively affect, our consolidated results of operations. In addition to
`formulary placement, changes in insurance designs continue to drive greater consumer cost-sharing through high deductible plans and
`higher co-insurance or co-pays. For additional information on pricing and reimbursement for our pharmaceutical products, see "—
`Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access—U.S."
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`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. We own, have applied for, or are licensed under, a large number of patents in the U.S. and many other countries
`relating to products, product uses, formulations, and manufacturing processes. In addition, as discussed below, for some products we have
`effective intellectual property protection in the form of data protection under pharmaceutical regulatory l