Eli Lilly and Company, a global pharmaceutical leader with a rich history spanning nearly 150 years, has formally expressed its support for the U.S. Securities and Exchange Commission’s (SEC) proposed rule on Semiannual Reporting. In a comprehensive comment letter submitted on July 18, 2026, Donald A. Zakrowski, Senior Vice President, Finance, and Chief Accounting Officer at Eli Lilly, detailed the company’s perspective, emphasizing the potential for significant reductions in administrative burden for reporting companies with minimal impact on investor information access. The proposal, released by the SEC on May 5, 2026, aims to modernize the financial reporting landscape for companies registered under the Exchange Act.
Background of the Proposal
The SEC’s proposed rule on Semiannual Reporting stems from a broader initiative to reassess and potentially streamline the regulatory framework for public companies. For decades, U.S. public companies have been required to file quarterly reports (Form 10-Q) and annual reports (Form 10-K) to provide investors with regular updates on their financial health and operational performance. While these filings are crucial for transparency, the administrative and financial costs associated with preparing them are substantial. The proposed shift to a semiannual reporting model, supplemented by voluntary quarterly earnings releases, seeks to alleviate some of these burdens, particularly for established and financially stable companies. The SEC’s move is partly in response to feedback from the business community regarding the increasing complexity and cost of compliance, while also aiming to maintain robust investor protections.
Lilly’s Position: A Strategic Embrace of Efficiency
Eli Lilly and Company, a company with a long-standing commitment to transparent and timely disclosure since its listing on the New York Stock Exchange over seven decades ago, views the proposed semiannual reporting framework as a positive step. Mr. Zakrowski articulated that if adopted substantially as proposed, Lilly currently anticipates electing to file semiannual reports on the newly proposed Form 10-S. This transition would be complemented by the company’s continued practice of issuing voluntary quarterly earnings releases.
"We commend the Commission for its thoughtful initiative to modernize the financial reporting landscape for Exchange Act reporting companies," the letter states. Lilly believes this approach will lead to a tangible reduction in the administrative burden associated with quarterly filings, with "very minimal impact on the investor community." This stance reflects a strategic alignment with regulatory efficiency, allowing the company to reallocate resources toward its core mission of drug discovery, development, and patient care.
Investor Information Access: Maintaining Transparency Through Existing Channels
A key concern in any proposed change to financial reporting is the potential impact on investors’ access to timely and decision-useful information. Eli Lilly addresses this directly by highlighting its existing practices. The company currently disseminates its quarterly financial results broadly and initially through earnings releases. These releases, according to Lilly, contain "all material information related to the applicable quarter." Subsequently, the more detailed Form 10-Q is filed.
"As a general matter, our earnings release contains all material information related to the applicable quarter," Mr. Zakrowski noted. "Given this practice, we receive few inquiries from investors and other stakeholders about information available exclusively in our Form 10-Q filings." This observation suggests that for many investors, especially those focused on key financial and operational metrics, the earnings release already serves as the primary source of information.
Under the proposed semiannual reporting model, Lilly anticipates continuing to furnish quarterly earnings releases. These releases would continue to include the financial and operational metrics that investors rely upon for informed decision-making. When combined with ongoing disclosure obligations through Form 8-K filings, which are used for reporting significant corporate events in a timely manner, Lilly believes that investors and the public will remain "well-informed with decision-useful information." This perspective suggests that the proposed framework leverages existing market practices and disclosure mechanisms to ensure continued transparency.
Reduced Administrative Burden: A Focus on Core Competencies
The proposed Form 10-S offers a significant opportunity for companies to reduce recurring administrative burdens. While Eli Lilly would maintain its rigorous quarterly accounting close processes and internal controls to ensure the accuracy of information disseminated through its earnings releases, the company anticipates substantial cost savings by eliminating the need for full Form 10-Q preparation. These savings encompass both the time and financial resources dedicated to the preparation, management review, and external auditing of quarterly reports.
"These savings would be redirected toward activities in line with our strategic priorities, all while maintaining availability of critical information for our investors and the general public," the letter emphasizes. This reallocation of resources is a central argument for the proposed rule, suggesting that companies can become more agile and focused on innovation and growth when freed from certain periodic reporting requirements. For a company like Eli Lilly, which invests heavily in research and development, such efficiency gains could translate into accelerated development of new therapies and improved patient outcomes.
Specific Comments and Recommendations
Eli Lilly’s engagement with the SEC extends beyond general support, offering specific feedback on various aspects of the proposal:
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Availability of Semiannual Reporting: Lilly strongly supports making the semiannual reporting option available to all Exchange Act reporting companies. The company believes that broad eligibility is essential to "appropriately reflect the diversity of issuer facts and circumstances." This inclusivity acknowledges that not all companies are the same and that a one-size-fits-all approach to reporting may not be optimal.
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Timing of Adoption: The pharmaceutical giant advocates for the "earliest practicable adoption timeline." From a systems and process perspective, Lilly does not foresee significant hurdles that would necessitate a prolonged transition period. The company expressed readiness to transition to semiannual reporting as early as the first quarter of 2027. The opt-in nature of the proposal, Lilly argues, inherently eliminates the need for an extended transition period, as companies preferring to maintain their current practices can do so.
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Voluntary Earnings Releases: Lilly supports the SEC’s proposal for earnings releases to continue to be "furnished" rather than "filed." This distinction is crucial, as it reinforces the voluntary nature of these releases and maintains a clear separation from mandatory periodic reporting obligations. Filing earnings releases would subject them to greater liability and potentially stifle the flexibility that makes them valuable for timely communication.
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Rule 10b5-1 Plan Cooling-Off Period: A significant and specific recommendation from Eli Lilly concerns the Rule 10b5-1 trading plan cooling-off period for officers and directors. The company urges the SEC to update this period to end the earlier of the existing benchmark or two business days after a company furnishes an earnings release. Without this adjustment, insiders at companies adopting semiannual reporting would face an "unnecessarily long cooling-off period" in the first and third quarters, solely because no Form 10-Q is filed. Lilly argues that this outcome was not the original intent of the rule.
The company further contends that this adjustment is appropriate regardless of the adoption of the semiannual reporting rule. Earnings releases are already the primary vehicle for companies to communicate financial results. Therefore, it is more logical to align the cooling-off period with this date rather than a later, mandatory filing. This is particularly relevant for the fourth quarter, where the gap between an earnings release and the Form 10-K filing can be substantial.
Broader Implications and Future Outlook
The proposed shift to semiannual reporting, if adopted widely, could have far-reaching implications for the U.S. capital markets. For companies, it offers a potential pathway to reduced compliance costs, improved operational efficiency, and a greater ability to focus on strategic initiatives. This could, in turn, foster greater investment in innovation and long-term growth.
For investors, the primary concern is ensuring that transparency is not compromised. Eli Lilly’s submission, along with the SEC’s proposed framework, suggests a balanced approach. By leveraging voluntary earnings releases and existing Form 8-K obligations, the aim is to maintain a high level of disclosure without the administrative overhead of full quarterly reports.
The SEC’s decision on this proposed rule will be closely watched by the business and investment communities. The agency’s commitment to modernization, as evidenced by this proposal, signals a willingness to adapt the regulatory environment to the evolving needs of the market. Eli Lilly’s endorsement underscores the potential benefits of such a reform, particularly for well-established companies with robust internal controls and established communication practices. The company’s detailed feedback, especially concerning the Rule 10b5-1 plans, highlights the interconnectedness of various regulatory frameworks and the importance of comprehensive review during rulemaking processes.
Conclusion
Eli Lilly and Company’s enthusiastic support for the proposed Semiannual Reporting rule reflects a strategic vision for more efficient corporate disclosure. By embracing this potential shift, the company aims to streamline its reporting obligations, reduce compliance costs, and redirect valuable resources towards its core mission of advancing human health. The company’s submission to the SEC emphasizes that this transition can be achieved without compromising the quality or timeliness of material information available to investors, a critical balance that the SEC seeks to strike in its modernization efforts. The pharmaceutical giant’s clear articulation of its position and specific recommendations provides valuable insight for the SEC as it deliberates on the future of financial reporting for public companies.
