UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`Form 10-Q
`Quarterly Report Pursuant to Section 13 or 15(d) of the
`Securities Exchange Act of 1934
`For the quarterly period ended March 31, 2023
`COMMISSION FILE NUMBER 001-6351
`
`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.)
`
`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
`Common Stock (no par value)
`7 1/8% Notes due 2025
`1.625% Notes due 2026
`2.125% Notes due 2030
`0.625% Notes due 2031
`0.500% Notes due 2033
`6.77% Notes due 2036
`1.625% Notes due 2043
`1.700% Notes due 2049
`1.125% Notes due 2051
`1.375% Notes due 2061
`
`Trading Symbols
`LLY
`LLY25
`LLY26
`LLY30
`LLY31
`LLY33
`LLY36
`LLY43
`LLY49A
`LLY51
`LLY61
`
`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
`
`Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
`Yes ☐ No ☒
`The number of shares of common stock outstanding as of April 24, 2023:
`
`Class
`Common
`
`
`
`
`Number of Shares Outstanding
`
`949,272,933
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00001
`
`

`

`PART I. Financial Information
`
`Item 1.
`
`Item 2.
`
`Item 3.
`Item 4.
`
`PART II. Other Information
`
`Item 1.
`Item 1A.
`Item 2.
`Item 6.
`
`Signatures
`
`Eli Lilly and Company
`Form 10-Q
`For the Quarter Ended March 31, 2023
`Table of Contents
`
`Financial Statements
`Consolidated Condensed Statements of Operations
`Consolidated Condensed Statements of Comprehensive Income
`Consolidated Condensed Balance Sheets
`Consolidated Condensed Statements of Equity
`Consolidated Condensed Statements of Cash Flows
`Notes to Consolidated Condensed Financial Statements
`Management's Discussion and Analysis of Results of Operations and Financial Condition
`Executive Overview
`Results of Operations
`Financial Condition and Liquidity
`Critical Accounting Estimates
`Available Information on our Website
`Quantitative and Qualitative Disclosures About Market Risk
`Controls and Procedures
`
`Legal Proceedings
`Risk Factors
`Unregistered Sales of Equity Securities and Use of Proceeds
`Exhibits
`
`2
`
`Page
`5
`
`5
`5
`6
`7
`8
`9
`10
`32
`32
`38
`41
`41
`42
`43
`43
`
`44
`
`44
`44
`44
`45
`
`45
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00002
`
`

`

`Forward-Looking Statements
`This Quarterly Report on Form 10-Q 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 "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 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;
`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.
`
`•
`•
`•
`•
`•
`•
`
`•
`
`•
`•
`
`•
`
`•
`•
`•
`•
`
`•
`•
`
`3
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00003
`
`

`

`More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our
`reports filed with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2022, particularly under the caption "Risk
`Factors." 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 Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties.
`All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the
`cautionary statements included in or incorporated by reference into this Quarterly Report on Form 10-Q. 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 Quarterly Report on
`Form 10-Q.
`
`4
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00004
`
`

`

`PART I. Financial Information
`
`Item 1. Financial Statements
`
`
`
`Consolidated Condensed Statements of Operations
`(Unaudited)
`ELI LILLY AND COMPANY AND SUBSIDIARIES
`(Dollars and shares in millions, except per-share data)
`
`
`
`Revenue (Note 2)
`Costs, expenses, and other:
`Cost of sales
`Research and development
`Marketing, selling, and administrative
`Acquired in-process research and development (Note 3)
`Other–net, (income) expense (Note 10)
`
`Income before income taxes
`Income taxes (Note 6)
`Net income
`
`Earnings per share:
`Basic
`Diluted
`
`Shares used in calculation of earnings per share:
`Basic
`Diluted
`
`$
`
`$
`
`$
`$
`
`Three Months Ended March 31,
`2023
`2022
`
`6,960.0 $
`
`1,626.7
`1,985.1
`1,749.2
`105.0
`(35.7)
`5,430.3
`1,529.7
`184.8
`1,344.9 $
`
`1.49 $
`1.49 $
`
`901.0
`903.3
`
`7,810.0
`
`2,072.1
`1,610.1
`1,557.9
`165.6
`350.7
`5,756.4
`2,053.6
`150.7
`1,902.9
`
`2.11
`2.10
`
`903.7
`906.4
`
`See notes to consolidated condensed financial statements.
`
`5
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00005
`
`

`

`
`
`Consolidated Condensed Statements of Comprehensive Income
`(Unaudited)
`ELI LILLY AND COMPANY AND SUBSIDIARIES
`(Dollars in millions)
`
`Net income
`Other comprehensive income, net of tax (Note 9)
`Comprehensive income
`
`Three Months Ended March 31,
`2023
`2022
`
`$
`
`$
`
`1,344.9 $
`67.3
`1,412.2 $
`
`1,902.9
`117.8
`2,020.7
`
`See notes to consolidated condensed financial statements.
`
`6
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00006
`
`

`

`Consolidated Condensed Balance Sheets
`ELI LILLY AND COMPANY AND SUBSIDIARIES
`(Dollars in millions)
`
`Assets
`Current Assets
`Cash and cash equivalents (Note 5)
`Short-term investments (Note 5)
`Accounts receivable, net of allowances of $14.0 (2023) and $16.0 (2022)
`Other receivables
`Inventories
`Prepaid expenses and other current assets
`Total current assets
`Investments (Note 5)
`Goodwill
`Other intangibles, net
`Deferred tax assets
`Property and equipment, net of accumulated depreciation of $10,486.0 (2023) and $10,233.4
`(2022)
`Other noncurrent assets
`Total assets
`Liabilities and Equity
`Current Liabilities
`Short-term borrowings and current maturities of long-term debt
`Accounts payable
`Employee compensation
`Sales rebates and discounts
`Dividends payable
`Income taxes payable
`Other current liabilities
`Total current liabilities
`Other Liabilities
`Long-term debt
`Accrued retirement benefits (Note 7)
`Long-term income taxes payable
`Other noncurrent liabilities
`Total other liabilities
`Commitments and Contingencies (Note 8)
`Eli Lilly and Company Shareholders' Equity
`Common stock
`Additional paid-in capital
`Retained earnings
`Employee benefit trust
`Accumulated other comprehensive loss (Note 9)
`Cost of common stock in treasury
`Total Eli Lilly and Company shareholders' equity
`Noncontrolling interests
`Total equity
`Total liabilities and equity
`
`$
`
`$
`
`$
`
`$
`
`See notes to consolidated condensed financial statements.
`
`7
`
`March 31, 2023
`(Unaudited)
`
`
`
`December 31, 2022
`
`3,545.9 $
`123.4
`7,526.2
`1,495.9
`4,544.8
`3,575.2
`20,811.4
`2,750.4
`4,073.1
`7,087.1
`3,406.7
`
`10,546.2
`4,488.1
`53,163.0 $
`
`3.1 $
`2,015.9
`739.7
`9,529.5
`—
`1,528.3
`2,193.5
`16,010.0
`
`18,880.5
`1,313.0
`3,842.1
`1,822.5
`25,858.1
`
`593.5
`6,793.1
`10,639.3
`(3,013.2)
`(3,777.3)
`(45.0)
`11,190.4
`104.5
`11,294.9
`53,163.0 $
`
`2,067.0
`144.8
`6,896.0
`1,662.9
`4,309.7
`2,954.1
`18,034.5
`2,901.8
`4,073.0
`7,206.6
`2,792.9
`
`10,144.0
`4,337.0
`49,489.8
`
`1,501.1
`1,930.6
`1,059.8
`8,784.1
`1,017.2
`475.1
`2,370.3
`17,138.2
`
`14,737.5
`1,305.1
`3,709.6
`1,824.0
`21,576.2
`
`594.1
`6,921.4
`10,042.6
`(3,013.2)
`(3,844.6)
`(50.5)
`10,649.8
`125.6
`10,775.4
`49,489.8
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00007
`
`

`

`Consolidated Condensed Statements of Equity
`(Unaudited)
`ELI LILLY AND COMPANY AND SUBSIDIARIES
`Equity of Eli Lilly and Company Shareholders
`
`
`(Dollars in millions, except per-share data, and shares
`in thousands)
`Balance at January 1, 2022
`Net income (loss)
`Other comprehensive income, net of tax
`Retirement of treasury shares
`Purchase of treasury shares
`Issuance of stock under employee stock plans, net
`Stock-based compensation
`Other
`Balance at March 31, 2022
`
`Balance at January 1, 2023
`Net income
`Other comprehensive income, net of tax
`Retirement of treasury shares
`Purchase of treasury shares
`Issuance of stock under employee stock plans, net
`Stock-based compensation
`Other
`Balance at March 31, 2023
`
`Common Stock
`Shares
`Amount
`954,116
`596.3
`
`$
`
`Additional
`Paid-in
`Capital
`6,833.4
`
`$
`
`(5,607)
`
`2,096
`
`(3.5)
`
`1.3
`
`950,605
`
`950,632
`
`$
`
`$
`
`594.1
`
`594.1
`
`$
`
`$
`
`(2,299)
`
`1,336
`
`(1.4)
`
`0.8
`
`(278.1)
`101.0
`
`6,656.3
`
`6,921.4
`
`(259.5)
`131.2
`
`$
`
`$
`
`$
`
`949,669
`
`$
`
`593.5
`
`$
`
`6,793.1
`
`$
`
`Retained
`Earnings
`8,958.5
`1,902.9
`
`(1,496.5)
`
`4.5
`9,369.4
`
`10,042.6
`1,344.9
`
`(748.6)
`
`0.4
`10,639.3
`
`Employee
`Benefit Trust
`$
`(3,013.2)
`
`Accumulated Other
`Comprehensive Loss
`$
`(4,343.1)
`
`Common Stock in Treasury
`Shares
`Amount
`463
`(52.7)
`
`$
`
`(1)
`
`Noncontrolling
`Interests
`175.6
`(36.6)
`
`$
`
`$
`
`$
`
`(3,013.2)
`
`(3,013.2)
`
`$
`
`$
`
`117.8
`
`(4,225.3)
`
`(3,844.6)
`
`67.3
`
`(5,607)
`5,607
`(13)
`
`1,500.0
`(1,500.0)
`2.2
`
`450
`
`450
`
`$
`
`$
`
`(50.5)
`
`(50.5)
`
`$
`
`$
`
`(2,299)
`2,299
`(48)
`
`750.0
`(750.0)
`8.8
`
`(7.8)
`131.2
`
`125.6
`10.0
`
`$
`
`(3,013.2)
`
`$
`
`(3,777.3)
`
`402
`
`$
`
`(3.3)
`(45.0)
`
`$
`
`(31.1)
`104.5
`
` As of March 31, 2023, there was $2.50 billion remaining under our $5.00 billion share repurchase program authorized in May 2021.
`(1)
`
`See notes to consolidated condensed financial statements.
`
`8
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00008
`
`

`

`
`
`Consolidated Condensed Statements of Cash Flows
`(Unaudited)
`ELI LILLY AND COMPANY AND SUBSIDIARIES
`(Dollars in millions)
`
`
`Cash Flows from Operating Activities
`Net income
`Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:
`Depreciation and amortization
`Change in deferred income taxes
`Stock-based compensation expense
`Net investment losses
`Acquired in-process research and development
`Other changes in operating assets and liabilities, net of acquisitions and divestitures
`Other operating activities, net
`Net Cash Provided by Operating Activities
`Cash Flows from Investing Activities
`Purchases of property and equipment
`Proceeds from sales and maturities of short-term investments
`Purchases of short-term investments
`Proceeds from sales of and distributions from noncurrent investments
`Purchases of noncurrent investments
`Purchases of in-process research and development
`Other investing activities, net
`Net Cash Used for Investing Activities
`Cash Flows from Financing Activities
`Dividends paid
`Net change in short-term borrowings
`Proceeds from issuance of long-term debt
`Repayments of long-term debt
`Purchases of common stock
`Other financing activities, net
`Net Cash Provided by (Used for) Financing Activities
`Effect of exchange rate changes on cash and cash equivalents
`Net increase (decrease) in cash and cash equivalents
`Cash and cash equivalents at January 1
`Cash and Cash Equivalents at March 31
`
`Three Months Ended March 31,
`2023
`2022
`
`$
`
`1,344.9 $
`
`362.3
`(559.4)
`131.2
`14.2
`105.0
`164.1
`168.3
`1,730.6
`
`(668.5)
`61.5
`(23.0)
`281.9
`(146.0)
`(235.0)
`40.3
`(688.8)
`
`(1,017.2)
`(1,498.0)
`3,958.5
`—
`(750.0)
`(281.0)
`412.3
`24.8
`1,478.9
`2,067.0
`3,545.9 $
`
`$
`
`1,902.9
`
`435.7
`(506.6)
`101.0
`426.1
`165.6
`(34.3)
`32.6
`2,523.0
`
`(365.4)
`26.7
`(14.6)
`81.4
`(116.7)
`(515.6)
`(133.4)
`(1,037.6)
`
`(885.5)
`499.7
`—
`(710.1)
`(1,500.0)
`(282.4)
`(2,878.3)
`33.6
`(1,359.3)
`3,818.5
`2,459.2
`
`See notes to consolidated condensed financial statements.
`
`9
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00009
`
`

`

`Notes to Consolidated Condensed Financial Statements
`(Tables present dollars in millions, except per-share data)
`
`Note 1: Basis of Presentation
`We have prepared the accompanying unaudited consolidated condensed financial statements in accordance with the requirements of Form 10-Q
`and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and
`cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the consolidated condensed
`financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of
`operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect
`the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the
`reporting period. Actual results could differ from those estimates.
`The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and
`accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022. We issued our financial statements by
`filing them with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing of this Quarterly Report
`on Form 10-Q.
`All per-share amounts, unless otherwise noted in the footnotes, are presented on a diluted basis; that is, based on the weighted-average number of
`common shares outstanding plus the effect of incremental shares from our stock-based compensation programs.
`We operate as a single operating segment engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical
`products worldwide. A global research and development organization and a supply chain organization are responsible for the discovery,
`development, manufacturing, and supply of our products. Regional commercial organizations market, distribute, and sell the products. The
`business is also supported by global corporate staff functions. Our determination that we operate as a single segment is consistent with the
`financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting
`incentive compensation targets, and planning and forecasting for future periods.
`Research and Development Expenses and Acquired In-Process Research and Development (IPR&D)
`Research and development costs are expensed as incurred. Research and development costs consist of expenses incurred in performing research
`and development activities, including but not limited to, compensation and benefits, facilities and overhead expense, clinical trial expense, and fees
`paid to contract research organizations.
`Acquired IPR&D includes the initial costs and development milestones incurred related to externally developed IPR&D projects, acquired directly in
`a transaction other than a business combination, that do not have an alternative future use. Development milestones are milestone payment
`obligations that are incurred prior to regulatory approval of the compound and are expensed when the event triggering an obligation to pay the
`milestone occurs.
`Reclassifications
`Certain reclassifications have been made to prior periods in the consolidated condensed financial statements and accompanying notes to conform
`with the current presentation. Development milestone payments related to externally developed IPR&D projects, acquired directly in a transaction
`other than a business combination, were previously included in cash flows from operating activities in the consolidated condensed statements of
`cash flows and are now included in purchases of IPR&D in cash flows from investing activities. The reclassification resulted in an increase to net
`cash provided by operating activities and net cash used in investing activities of $23.8 million for the three months ended March 31, 2022.
`
`10
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00010
`
`

`

`Note 2: Revenue
`The following table summarizes our revenue recognized in our consolidated condensed statements of operations:
`
`
`Net product revenue
`(1)
`Collaboration and other revenue
`Revenue
`
`Three Months Ended March 31,
`2023
`2022
`
`$
`
`$
`
`6,238.2 $
`721.8
`6,960.0 $
`
`7,132.9
`677.1
`7,810.0
`
`(1)
`Collaboration and other revenue associated with prior period transfers of intellectual property was $25.1 million and $53.2 million during the three months ended March 31, 2023 and
`2022, respectively.
`We recognize revenue primarily from two different types of contracts, product sales to customers (net product revenue) and collaborations and
`other arrangements. Revenue recognized from collaborations and other arrangements includes our share of profits from the collaborations, as well
`as royalties, upfront and milestone payments we receive under these types of contracts. See Note 4 for additional information related to our
`collaborations and other arrangements. Collaboration and other revenue disclosed above includes the revenue from the Jardiance and Trajenta
`®
`
`®
`families of products resulting from our collaboration with Boehringer Ingelheim discussed in Note 4. Substantially all of the remainder of
`collaboration and other revenue is related to contracts accounted for as contracts with customers.
`Adjustments to Revenue
`Adjustments to increase revenue recognized as a result of changes in estimates for our most significant United States (U.S.) sales returns, rebates,
`and discounts liability balances for products shipped in previous periods were less than 1 percent of U.S. revenue during each of the three months
`ended March 31, 2023 and 2022.
`Contract Liabilities
`Our contract liabilities result from arrangements where we have received payment in advance of performance under the contract and do not include
`sales returns, rebates, and discounts. Changes in contract liabilities are generally due to either receipt of additional advance payments or our
`performance under the contract.
`The following table summarizes contract liability balances:
`
`
`Contract liabilities
`
`March 31, 2023
`220.3 $
`
`December 31, 2022
`219.2
`
`$
`
`During the three months ended March 31, 2023 and 2022, revenue recognized from contract liabilities as of the beginning of the respective year
`was not material. Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not
`expected to be material in any one year.
`
`11
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00011
`
`

`

`Disaggregation of Revenue
`The following table summarizes revenue by product for the three months ended March 31, 2023 and 2022:
`
`
`
`U.S.
`
`2023
`Outside U.S.
`
`Three Months Ended March 31,
`
`Total
`
`U.S.
`
`2022
`Outside U.S.
`
`Total
`
`$
`
`1,547.4 $
`329.4
`536.4
`271.6
`198.8
`135.4
`56.0
`3,075.0
`
`429.7 $
`248.1
`32.0
`189.3
`53.2
`73.9
`89.2
`1,115.4
`
`1,977.1 $
`577.5
`568.5
`460.9
`252.0
`209.3
`145.1
`4,190.4
`
`1,313.9 $
`229.8
`—
`368.9
`190.4
`119.3
`54.3
`2,276.6
`
`427.4 $
`189.7
`—
`249.3
`82.8
`72.2
`90.2
`1,111.6
`
`461.1
`100.6
`118.8
`20.1
`52.8
`753.4
`
`312.2
`42.3
`—
`354.5
`
`108.7
`35.8
`144.5
`
`289.8
`136.1
`11.1
`38.1
`127.5
`602.6
`
`214.8
`186.5
`22.0
`423.3
`
`45.6
`170.4
`216.0
`
`750.9
`236.8
`129.9
`58.2
`180.2
`1,356.0
`
`527.0
`228.9
`22.0
`777.8
`
`154.3
`206.2
`360.5
`
`301.5
`79.2
`109.7
`254.3
`39.0
`783.7
`
`307.2
`71.3
`—
`378.5
`
`108.3
`45.1
`153.4
`
`167.9
`151.1
`13.0
`89.7
`147.5
`569.2
`
`180.8
`184.3
`4.5
`369.6
`
`41.0
`203.4
`244.4
`
`1,741.3
`419.4
`—
`618.2
`273.2
`191.5
`144.6
`3,388.2
`
`469.4
`230.3
`122.7
`343.9
`186.7
`1,353.0
`
`488.1
`255.6
`4.5
`748.1
`
`149.3
`248.4
`397.7
`
`Revenue—to unaffiliated customers:
`Diabetes:
`Trulicity
`®
`Jardiance
`(1)
`Mounjaro
`Humalog
`Humulin
`®
`Basaglar
`®
`Other diabetes
`Total diabetes
`
`® ®
`
` (2)
`
`Oncology:
`Verzenio
`Cyramza
`Erbitux
`®
`Alimta
`®
`Other oncology
`Total oncology
`
`® ®
`
`Immunology:
`Taltz
`®
`Olumiant
`® (3)
`Other immunology
`Total immunology
`
`Neuroscience:
`Emgality
`®
`Other neuroscience
`Total neuroscience
`
`Other:
`Forteo
`®
`Cialis
`®
`COVID-19 antibodies
`(4)
`Other
`Total other
`Revenue
`Numbers may not add due to rounding.
`Jardiance revenue includes Glyxambi , Synjardy , and Trijardy XR.
`(1)
`®
`®
`®
`Humalog revenue includes insulin lispro.
`(2)
`(3)
`Olumiant revenue includes sales for baricitinib that were made pursuant to Emergency Use Authorization (EUA) or similar regulatory authorizations.
`(4)
`COVID-19 antibodies include sales for bamlanivimab administered alone, for bamlanivimab and etesevimab administered together, and for bebtelovimab and were made pursuant to
`EUAs or similar regulatory authorizations.
`
`70.2
`6.9
`1,455.2
`50.1
`1,582.4
`5,174.6 $
`
`67.3
`210.8
`14.7
`47.8
`340.6
`2,635.4 $
`
`137.4
`217.7
`1,469.8
`98.1
`1,923.0
`7,810.0
`
`70.7
`7.6
`—
`30.5
`108.7
`4,436.2 $
`
`51.7
`92.7
`—
`22.2
`166.6
`2,523.9 $
`
`122.3
`100.3
`—
`52.8
`275.3
`6,960.0 $
`
`$
`
`12
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00012
`
`

`

`The following table summarizes revenue by geographical area:
`
`(1)
`Revenue—to unaffiliated customers :
`U.S.
`Europe
`Japan
`China
`Other foreign countries
`Revenue
`
`Numbers may not add due to rounding.
`Revenue is attributed to the countries based on the location of the customer.
`(1)
`
`Three Months Ended March 31,
`2023
`2022
`
`$
`
`$
`
`4,436.2 $
`1,090.9
`387.2
`372.7
`673.1
`6,960.0 $
`
`5,174.6
`1,067.3
`410.2
`406.5
`751.5
`7,810.0
`
`Note 3: Acquisitions and Divestitures
`We engage in various forms of business development activities to enhance our product pipeline, including acquisitions, collaborations, investments,
`and licensing arrangements. In connection with these arrangements, our partners may be entitled to future royalties and/or commercial milestones
`based on sales should products be approved for commercialization and/or milestones based on the successful progress of compounds through the
`development process.
`In December 2022, we completed the acquisition of Akouos, Inc. (Akouos). This transaction, as further discussed below in Acquisition of a
`Business, was accounted for as a business combination under the acquisition method of accounting. Under this method, the assets acquired and
`liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated condensed financial statements. The
`determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over
`the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of this acquisition is included in
`our consolidated condensed financial statements from the date of acquisition.
`We also acquired assets in development which are further discussed below in Asset Acquisitions. Upon each acquisition, the cost allocated to
`acquired IPR&D was immediately expensed if the compound has no alternative future use. Milestone payment obligations incurred prior to
`regulatory approval of the compound are expensed as acquired IPR&D when the event triggering an obligation to pay the milestone occurs. We
`recognized acquired IPR&D charges of $105.0 million and $165.6 million for the three months ended March 31, 2023 and 2022, respectively.
`Acquisition of a Business
`Akouos Acquisition
`Overview of Transaction
`In December 2022, we acquired all shares of Akouos for a purchase price that included $12.50 per share in cash (or an aggregate of
`$327.2 million, net of cash acquired) plus one non-tradable contingent value right (CVR) per share. The CVR entitles the Akouos shareholders up
`to an additional $3.00 per share in cash (or an aggregate of approximately $122 million) payable, subject to certain terms and conditions, upon the
`achievement of certain specified milestones.
`Under the terms of the agreement, we acquired potential gene therapy treatments for hearing loss and other inner ear conditions. The lead gene
`therapies in clinical development that we acquired included GJB2 (which encodes connexin 26) for a common form of monogenic deafness and
`hearing loss; AK-OTOF for hearing loss due to mutations in the otoferlin gene; AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder
`characterized by progressive loss of both hearing and vision; and AK-antiVEGF for vestibular schwannoma.
`
`13
`
`Novo Nordisk Exhibit 2528
`Mylan Pharms. Inc. v. Novo Nordisk A/S
`IPR2023-00724
`Page 00013
`
`

`

`Assets Acquired and Liabilities Assumed
`Our access to Akouos information was limited prior to the acquisition. As a consequence, we are in the process of determining fair values and tax
`bases of a significant portion of the assets acquired and liabilities assumed, including the identification and valuation of intangible assets and tax
`exposures. The final determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date.
`The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to
`the preliminary amounts recognized.
`
`The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:
`
`Estimated Fair Value at December 1, 2022
`Cash
`(1)
`Acquired IPR&D
`(2)
`Goodwill
`Other assets and liabilities, net
`Acquisition date fair value of consideration transferred
`Less:
`Cash acquired
`(3)
`Fair value of CVR liability
`Cash paid, net of cash acquired
`
`$
`
`$
`
`153.2
`184.0
`181.2
`28.9
`547.3
`
`(153.2)
`(66.9)
`327.2
`
`(1)
`Acquired IPR&D intangibles primarily relate to GJB2.
`The goodwill recognized from this acquisition is attributable primarily to future unidentified projects and products and the assembled workforce for Akouos and is not deductible for tax
`(2)
`purposes.
`(3)
`See Note 5 for a discussion on the estimation of the CVR liability.
`The results of operations attributable to Akouos for the three months ended March 31, 2023 were immaterial.
`Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements of
`operations for the three months ended March 31, 2022.
`Asset Acquisitions
`In February 2022, we acquired a Priority Review Voucher from BioMarin Pharmaceutical Inc. for $110.0 million. We recognized no other significant
`acquired IPR&D charges during the three months ended March 31, 2023 and 2022.
`Subsequent Events - Divestitures
`®
`In April 2023, we entered into an agreement to sell the rights of the olanzapine portfolio, including Zyprexa , to Cheplapharm Arzneimittel GmbH.
`Under the terms of the agreement, we will receive $1.05 billion in cash upon successful closing of the transaction and an additional $305 millio