There are many difficulties and uncertainties inherent in pharmaceutical research and development, the introduction of new products, and business development activities to expandenhance our product pipeline.

There is a high rate of failure inherent in new drug discovery and development. To bring a drug from the discovery phase to market can take over a decade and often costs in excess of $2 billion. Failure can occur at any point in the process, including in later stages after substantial investment. As a result, most funds invested in research programs will not generate financial returns. New product candidates that appear promising in development 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, the application of pricing controls, limited scope of approved uses, label changes, changes in the relevant treatment standards or the availability of new or better competitive products, difficulty or excessive costs to manufacture, or infringement of the patents or intellectual property rights of others. Regulatory agencies continue to establish high hurdles for the efficacy and safety of new products.products and indications. Delays, uncertainties, unpredictabilities, and uncertaintiesinconsistencies in drug approval processes across markets and agencies can result in delays in product launches, and lost market opportunity.opportunity, potential impairment of inventories, and other negative impacts. In addition, it can be very difficult to predict revenue growth rates of or variability in demand for new products.products and indications.

We cannot state with certainty when or whether our products now under development will be approved or launched; whether, if initially granted, such approval will be maintained; whether we will be able to develop, license, or otherwise acquire additional product candidates or products; or whether our products, once launched, will be commercially successful.

We must maintain a continuous flow of successful new products and successful new indications or brandline extensions for existing products, both through our internal efforts and our business development activities, sufficient both to cover our substantial research and development costs and to replace revenues that are lost as profitable products become subject to pricing controls, lose intellectual property exclusivity, or are displaced by competing products or therapies. Failure to do so in the short-term or long-term would have a material adverse effect on our business, results of operations, cash flows, and financial position. Our

We engage in various forms of business development activities to enhance our product pipeline, may includeincluding licensing arrangements, co-development agreements, co-promotion arrangements, joint ventures, acquisitions, strategic alliances, collaborations, investments, and licensing arrangements.equity investments. There are substantial risks associated with identifying successful business development targets and consummating related transactions. Increased focus on business combinations in our industry, including by the Federal Trade Commission and competition authorities in Europe and other jurisdictions, and heightened competition for attractive targets has and could continue to delay, jeopardize or increase the costs of our business development activities. In addition, failures or difficulties in integrating or retaining new personnel or the operations of the businesses, products, or assets we acquire (including related technology, commercial operations, compliance programs, information security, manufacturing, distribution, and general business operations and procedures) may affect our ability to realize the expected benefits of business development transactions whichand may result in our incurrence of substantial asset impairment or restructuring charges. We also may fail to generate the expected revenue and pipeline enhancement from business development activities due to developments outside our control, including unsuccessful clinical trials, issues related to the quality, integrity, or broad applicability of data, regulatory impediments, and commercialization challenges. Accordingly, business

development transactions may not be completed in a timely manner if(if at all,all), may not result in successful development outcomes or successful commercialization of any product, and may give rise to legal proceedings or regulatory scrutiny.

See Item 1, "Business—Research and Development—Phases of New Drug Development" and Item 7, “Management’s"Management's Discussion and Analysis - Results of Operations - Analysis—Executive Overview - Overview—Late-Stage Pipeline,”" for more details about our current product pipeline.

A numberIn the ordinary course of their lifecycles, our top-selling products including Alimta and Forteo, have recently lost, or will lose in the next few years, significant patent protection and/or data protection in the U.S., as well as in key countriesjurisdictions outside the U.S., after a specified period of time. Some products also lose patent protection as a result of successful third-party challenges. We have faced, and remain exposed to, generic competition following the expiration or loss of such intellectual property protection. In particular,For example, following the expiration of patent exclusivity for Alimta in Europe and Japan in June 2021, we have faced generic competition that has rapidly and severely eroded revenue from prior levels, and we expect thatsuch competition will continue to erode revenue from current levels in these markets. In addition, as a result of the entry of generic competition for Alimtamultiple generics in the U.S. following the lossexpiration of patent and pediatric exclusivity for Alimta in in the first half of 2022, we began facing, and expect to continue to face, generic competition that has rapidly and severely eroded revenue from prior levels, and we expect will cause a rapid and severe decline incontinue to erode revenue for the product and have a material adverse effect on our consolidated results of operations and cash flows.from current levels.

Certain other significant products no longer have effective exclusivity through patent protection or data protection. For non-biologic products, loss of exclusivity (whether by expiration of legal rights or by termination thereof as a consequence of litigation) 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. Historically, outside the U.S., the market penetration of generics following loss of exclusivity has not been as rapid or pervasive as in the U.S.; however, generic market penetration is increasing in many markets outside the U.S., including Japan, Europe, and many countries in emerging markets. For biologics (such as Humalog, Humulin, Erbitux, Cyramza, Trulicity, Taltz, and Emgality), loss of exclusivity may or may not result in the near-term entry of competitor versions (i.e., biosimilars) due to many factors, including development timelines, manufacturing challenges, and/or uncertainties regarding the regulatory pathways for approval of the competitor versions. Generic pharmaceutical companies could also introduce a generic product before resolution of any related patent litigation.

There is no assurance that the patents we are seeking will be granted or that the patents we hold will be found valid and enforceable if challenged. Moreover, patents relating to particular products, uses, formulations, or processes do not preclude other manufacturers from employing alternative processes or marketing alternative products or formulations that compete with our patented products. In addition, competitors or other third parties may assert claims that our activities infringe patents or other intellectual property rights held by them, or allege a third-party right of ownership in our existing intellectual property. See Item 7, “Management’s"Management's Discussion and Analysis - Results of Operations - Analysis—Executive Overview - Overview—Other Matters - Matters—Patent Matters,”" and Item 1, "Business - "Business—Patents, Trademarks, and Other Intellectual Property Rights," for more details.

Our long-term success depends on our ability to continually discover or acquire, develop, and commercialize innovative new medicines. Without strong intellectual property protection, we would be unable to generate the returns necessary to support our significant investments in research and development, as well as the other expenditures required to bring new drugs and indications to the market.

and may not be upheld. In addition, a separateIPR process currently allows competitors to request reviewseek invalidation of issued patents byat the USPTO without the protections of the BPCIA or Hatch-Waxman Act. OurThe use of IPR proceedings after the institution of litigation pursuant to the BPCIA or Hatch-Waxman Act is currently a topic of debate among legislators and the future ability of our competitors to use IPR proceedings as an alternative to Hatch-Waxman Act or BPCIA litigation procedures to challenge our patents may be invalidatedremains uncertain. Recently, the USPTO issued an interim procedure regarding the use of discretionary denials of IPR proceedings when there is parallel district court litigation. However, it is not clear how this interim procedure could affect the ability of our competitors to institute IPR proceedings after institution of litigation. If our patents are challenged through this expedited review process. Although such a decision can be appealed toprocess, even if we prevail in demonstrating the courts, in certain circumstances a loss in such a proceeding could result in a competitor entering the market, while avalidity of our patent, our win provides limited precedential value at the PTAB and no precedential value in federal district court, meaning the same patent can be challenged by other competitors. 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. In addition, competitors or other third parties may claim that our activities infringe patents or other intellectual property rights held by them. If successful, such claims could result in our being unable to market a product in a particular territory or being required to pay significant damages for past infringement or royalties on future sales. In addition, intellectual property protection in certain jurisdictions outside the U.S. is weak and we face additional risks to our intellectual property rights, including competition with generic or counterfeit versions of our products relatively shortly after launch. See Item 1, “Business - "Business—Patents, Trademarks, and Other Intellectual Property Rights,”" and Item 8, "Financial Statements and Supplementary Data - Data—Note 16,16: Contingencies," for more details.

We compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical companies.companies and, in many cases, our products compete against the leading products of one or more of our competitors. To compete successfully, we must continue to deliver to the market innovative, cost-effective products that meet important medical needs. Our product revenues can be adversely affected by the introduction by competitors of branded products that are perceived as superior by the marketplace, 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. Our revenues can also be adversely affected by treatment innovations, including new modalities, that eliminate or minimize the need for treatment with our drugs.

Regulation of generic and biosimilar products varies around the world and such regulation is complex and subject to ongoing interpretation and implementation by regulatory agencies and courts. Particularly for biosimilars, recent government proposalshealth authority guidelines and legislative actions could make it easier, less expensive, and less time consumingburdensome for competitor products to enter the market someand further incentivize uptake of whichbiosimilars. In the U.S., the FDA has issued several "interchangeability" designations for biosimilar products, and is expected to continue doing so in the future. These designations could be substituted– subject to state law requirements – enable pharmacies to substitute biosimilars for our products by pharmacies.innovator biological products. Given the importance of biologic products to our clinical-stage pipeline, such regulation could have a material adverse effect on our business. See Item 1, “Business - Competition”"Business—Competition" and "Business - "Business—Research and Development," for more details.

A great deal of confidential information owned by us or our business partners or other third parties is stored in our information systems, networks, and facilities or those of third parties. This includes valuable trade secrets and intellectual property, clinical trial information, corporate strategic plans, marketing plans, customer information, and personally identifiable information, such as employee and patient information (collectively, confidential information). We also rely, to a large extent, on the efficient and uninterrupted operation of complex information technology systems, infrastructure, and hardware (together, IT systems), some of which are within our control and some of which are within the control of third parties, to accumulate, process, store, and transmit large amounts of confidential information and other data. We are subject to a variety of continuously evolving and developing laws and regulations around the world related to privacy, data protection, and data security. Maintaining the security, confidentiality, integrity, and availability of our IT systems and confidential information is vital to our business. Our failure, or the failure of our third-party service providers, to protect and maintain the security, confidentiality, integrity, and availability of our (or their) IT systems and our confidential information and other data could significantly harm our reputation as well as result in significant costs, including those related to fines, litigation, and obligations to comply with applicable data breach laws.

IT systems are vulnerable to system inadequacies, operating failures, service interruptions or failures, security breaches, malicious intrusions, or cyber-attacks from a variety of sources. sources, which may remain undetected for significant periods of time. Such vulnerabilities, inadequacies, or failures are in many cases more acute for IT systems associated with recently acquired businesses, and we may be unable to address such vulnerabilities, inadequacies, or failures immediately after acquiring a business. As a result, our newly acquired businesses could be more vulnerable to potential interruptions, breaches, intrusions, or attacks.

Cyber-attacks are growing in their frequency, sophistication, and intensity, and are becoming increasingly difficult to detect, mitigate, or prevent. Cyber-attacks come in many forms, including the deployment of harmful malware, exploitation of vulnerabilities (including those of third-party software or systems), denial-of-service attacks, the use of social engineering, and other means to compromise the confidentiality, integrity, and availability of our IT systems, confidential information, and other data. Breaches resulting in the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information, or the unauthorized access to, disruption of, or interference with our IT systems, products and services, can occur in a variety of ways, including but not limited to, negligent or wrongful conduct by employees or others with permitted access to our systems and information, or wrongful conduct by hackers, competitors, certain governments or nation-states, or other current or former company personnel. Our third-party partners, including third-party providers of data hosting or cloud services, as well as suppliers, distributors, alliances, and other third-party service providers,third parties with whom we may share data, face similar risks, which could affect us directly or indirectly. Unassociated third parties present further risks, including by propagating misinformation related to our products, business, and industry. The healthcare industry has been and continues to be a target for cyber-attacks, and the number of threats has only increased during the COVID-19 pandemic.over time. Numerous federal agencies that monitor and regulate internet and cyber-crime have issued guidance, alerts and directives warning of software vulnerabilities that require immediate patching, malicious actors targeting healthcare relatedhealthcare-related systems and nation-state sponsored hacking designed to steal valuable information, including related to potential COVID-19 treatments.

The failure, inadequacy, or inadequacybreach of our IT systems or business processes, the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized access to, disclosure or use of, confidential information, or the unauthorized access to, disruption of, or interference with our products and services that rely on IT systems or business processes, could impair our ability to secure and maintain intellectual property rights; result in a product manufacturing interruption or failure, or in the interruption or failure of products or services that rely on IT systems or business processes; damage our operations, customer relationships, or reputation; andundermine integration activities or otherwise delay the launch of acquired products; result in unfavorable clinical trial results by virtue of incorrect or unreliable data; and/or cause us to lose trade secrets or other competitive advantages. Unauthorized disclosure of personally identifiable information could expose us to significant sanctions for violations of data privacy laws and

regulations around the world and could damage public trust in our company. In addition, IT system security in jurisdictions outside the U.S. is weaker and may result in additional costs, uncertainties, and risks.

To date, system inadequacies, operating failures, unauthorized access, service interruptions or failures, security breaches, malicious intrusions, cyber-attacks, and the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure or use of confidential information have not had a material impact on our consolidated results of operations. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business, or reputational losses that may result from an interruption or breach of our IT systems. We continue to implement measures in an effort to protect, detect, respond to, and minimize or prevent these risks and to enhance the resiliency of our IT systems; however, these measures may not be successful and we may fail to detect or remediate security breaches, malicious intrusions, cyber-attacks, or other compromises of our systems. Any of these events could result in material financial, legal, commercial, or reputational harm to our business.

While pharmaceuticals have not generally been sensitive to overall economic cycles, prolonged economicEconomic slowdowns including as a result of COVID-19, could lead to decreased utilization of our products, affecting our sales volume.sales. Declining tax revenues and increased government spending on other programs attributable to economic downturns increase the pressure on governments to reduce health carehealthcare spending, leading to increasing government efforts toincreased control of drug prices andor lower utilization. Additionally, some customers, including governments or other entities reliant upon government funding, may be unable to pay for our products fully or in a timely manner. Also, if our customers, suppliers, or collaboration partners experience financial difficulties, we could experience slower customer collections, greater bad debt expense, and performance defaults by suppliers or collaboration partners. Similarly in the event of a significant economic downturn, wedownturns could have difficulty accessing creditlimit our ability to access capital markets.

SignificantIn addition, significant portions of our business are conducted in Europe including(including the United Kingdom,Kingdom), Asia (including China), and other international geographies. Trade and other global disputes and interruptions in international relationships, including pandemic diseases,related to tariffs, trade protection measures, import or export licensing requirements, the imposition of trade sanctions or similar restrictions by the U.S. or other governments, unrest or war, as well as public health outbreaks, epidemics, or pandemics, such as the COVID-19 could result in changes to regulations governing our products and our intellectual property, or otherwisepandemic, affect our ability to do business. While we do not expect either circumstanceFor example, tensions between the U.S. and China have led to materially affect oura series of tariffs and sanctions being imposed by the U.S. on imports from China mainland, as well as other business restrictions. As a further example, the financial impact of higher energy prices, defense spending, and inflation due, in a direct manner, thesepart, to the Russia-Ukraine war and resulting geopolitical and economic disruptions, particularly following the COVID-19 pandemic, has further exacerbated financial pressures on governments with single-payer or government funded healthcare systems, leading to increased impetus for increases in rebates, clawbacks, and other reforms to reimbursement systems, particularly in Europe. These and similar events couldhave adversely affected, and may continue to adversely affect, us, or our business partners, orand our customers. For more details, see Item 1, "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access." 

In addition, in the U.S., most of our products are distributed through wholesalers and if one of these significant wholesalers should encounter financial or other difficulties, it might decrease the amount of business the wholesaler does with us or we might be unable to timely collect the amounts that the wholesaler owes us, which could negatively impact our results of operations. See Item 1, “Business—Marketing and Distribution,” for more details.

We rely on third parties, including suppliers, distributors, alliances, and collaborations with other pharmaceutical and biotechnology companies, and third-party service providers, for selected aspects of product and clinical development, manufacturing, commercialization, hosting of, and support for, information technologyIT systems, product distribution, and certain financial transactional processes. For example,As examples, we outsource the day-to-day management and oversight of some of our clinical trials to contract research organizations.organizations and the distribution of our products through logistics providers. Outsourcing these functions involves many risks, including the risk that the third parties may not perform to our standards or legal requirements;requirements, including applicable requirements for diversity in clinical trials; may not produce reliable results; may not perform in a timely manner; may not maintain the confidentiality, integrity, and availability of confidential and proprietary information relating to us, our clinical trial subjects, or patients; may experience disruption or fail to perform due to information technologyIT system vulnerabilities, breaches, cyber-attacks, or inadequate controls or procedures; may be unable to satisfy their commitments to us in which case we may not be able to achieve acceptable alternative sourcing; or may fail to perform at all. The foregoing risks may be heightened in jurisdictions outside the U.S., where we may have fewer alternative providers as well as face additional costs, uncertainties, and risks. Failure of these third parties to meet their contractual, regulatory, confidentiality, privacy, security, or other obligations to us, our clinical trial subjects, and our patients could have a material adverse effect on our business.

Public and private payers continue to take aggressive steps to control their expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, our medications.medicines. These pressures have negatively affected, and could continue to negatively affect, our future revenues and net income.

Further, restrictive or extent of currentunfavorable pricing, coverage, or reimbursement determinations for our medicines or product candidates by governments, regulatory agencies, courts, or private payers, such as the Alzheimer’s Monoclonal Antibody NCD, may adversely impact our business and future health care reform efforts.financial results. We also may

continue to experience potential additional pricing pressures, rebates, clawbacks, and other changes in reimbursement policies and programs resulting from the financial strain of the COVID-19 pandemic, on government-funded healthcare systems aroundperiods of global economic downturn or uncertainty, and the world.emergence or escalation of, and responses to, war or unrest (including the Russia-Ukraine war).

For more details, see Item 1, “Business - "Business—Regulations and Private Payer Actions Affecting Pharmaceutical Pricing, Reimbursement, and Access,” and" Item 7, “Management’s"Management's Discussion and Analysis - Results of Operations - Analysis—Executive Overview - Overview—Other Matters - Matters—Trends Affecting Pharmaceutical Pricing, Reimbursement, and Access.”Access," and Item 8, "Financial Statements and Supplementary Data—Note 16: Contingencies."

As a global company, with substantial operations outside the U.S., we face foreign currency risk exposure from fluctuating currency exchange rates. While we seekrates, interest rate risk from our exposure to manage a portionfloating and variable interest rates, and inflation risk from existing and expected rates of these exposures through hedginginflation in the U.S. and other risk management techniques,jurisdictions, each of which impacts our results of operations. In recent periods, significant fluctuations in currency rates canand inflation have had a materialsignificant negative impact either positive or negative, on our revenue, costresults of sales,operations. We are a net receiver of foreign currencies and operating expenses. Inour results of operations may continue to be adversely impacted if the U.S. dollar remains strong compared to foreign currencies. Further, in the event of an extreme devaluation of local currency in a particular market in which we operate, the price of our products could become unsustainable in the relevant market. Inflationary pressures in recent periods have also negatively impacted us and may continue to negatively impact us in various ways, including cost inflation, higher labor costs, and other higher expenses, with some of these higher expenses due in part to policy actions intended to curb inflation. See Item 7, “Management’s"Management's Discussion and Analysis - Analysis—Financial Condition and Liquidity”Liquidity" and Item 8, "Financial Statements and Supplementary Data—Note 1: Summary of Significant Accounting Policies and Implementation of New Financial Accounting Standards," for more details.

We are subject to income taxes in the U.S. and numerous foreignother jurisdictions, and in the course of our business, we make judgments about the expected tax treatment of various transactions and events. Changes in relevant tax laws, regulations, administrative practices, principles, and interpretations, as well as events that differ from our expectations, couldhave affected and may adversely affect our future effective tax rates.rates, cash flows, and/or results of operations. Significant uncertainty currently exists regarding tax proposals introduced by the current U.S. administration and Congress, including modifications to certain aspects of the Tax Cuts and Jobs Act of 2017, such as the potential repeal or deferral of the provision requiring capitalization of research and development expenses. In addition, global tax authorities in the U.S. and other jurisdictions in which we do business routinely examine our tax returns and are expected to become more aggressive inintensifying their scrutiny and examinations of profit allocations among jurisdictions, which could affectunfavorably impact our anticipated tax liabilities. In December 2017,results of operations. Further, actions taken with respect to tax-related matters by associations such as the U.S. enacted tax reform legislation significantly revising U.S.Organisation for Economic Co-operation and Development and the European Commission could influence tax laws and a number of otherin countries are also actively considering or enacting tax changes. Significant uncertainty currently exists regarding proposed tax policies of the current U.S. presidential administration including repeal of certain aspects of the 2017 tax law.in which we operate. Modifications to key elements of the current U.S. or international tax framework could have a material adverse effectsignificant impact on our consolidated operatingeffective tax rate, results of operations, and cash flows. See Item 7, “Management’s"Management's Discussion and Analysis - Results of Operations - Analysis—Executive Overview - Overview—Other Matters - Matters—Tax Matters”Matters" and Item 8, "Financial Statements and Supplementary Data - Data—Note 14,14: Income Taxes," for more details.

The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to extensive scrutiny and regulation. Many companies, including us, are and have been subject to investigations and claims related to these practices asserted by federal, state, and foreign governmental authorities, private payers, and consumers. These investigations and claims have resulted in substantial expense and other significant consequences to us. We are, and could in the future become, subject to such investigations and claims, the outcomes of which could include criminal charges and fines, penalties, or other monetary or non-monetary remedies, including exclusion from U.S. federal and other health carehealthcare programs. Such investigations and claims have intensified and may continue to intensify as a result of the regulatory priorities of the currenteach particular U.S. presidential administration.administration and other regulatory authorities worldwide. In addition, regulatory issues concerning compliance with cGMP, quality assurance, evolving standards, and increased scrutiny around excipients and potential impurities such as nitrosamines, and

similar regulations and standards (and comparable foreign regulations)regulations and standards) for our products can lead to regulatory and legal actions, product recalls and seizures, fines and penalties, interruption of production leading to product shortages, import bans or denials of import certifications, delays or denials in thenew product approvals or line extensions or supplemental approvals of newcurrent products pending resolution of the issues, and reputational harm, any of which would adversely affect our business. Regulatory compliance and processes in jurisdictions outside the U.S. may also be less predictable and result in additional costs, uncertainties, and risks. See Item 1, “Business - "Business—Government Regulation of Our Operations,”" for more details.

Acquired in-process researchIPR&D and development (IPR&D)Development Milestones (Note 3 to the consolidated financial statements)

Asset Impairment, Restructuring, and Other Special Charges (Note 5 to the consolidated financial statements)