Note 1. ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING STANDARDS
Basis of Consolidation
The consolidated financial statements are prepared in conformity with U.S. GAAP, including the accounts of Bristol-Myers Squibb Company and all of its controlled majority-owned subsidiaries and certain variable interest entities. All intercompany balances and transactions are eliminated. Material subsequent events are evaluated and disclosed through the report issuance date. Refer to the Summary of Abbreviated Terms at the end of this 2020 Form 10-K for terms used throughout the document.
Alliance and license arrangements are assessed to determine whether the terms provide economic or other control over the entity requiring consolidation of an entity. Entities controlled by means other than a majority voting interest are referred to as variable interest entities and are consolidated when BMS has both the power to direct the activities of the variable interest entity that most significantly impacts its economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the entity.
Business Segment Information
BMS operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases. A global research and development organization and supply chain organization are responsible for the discovery, development, manufacturing and supply of products. Regional commercial organizations market, distribute and sell the products. The business is also supported by global corporate staff functions. Consistent with BMS’s operational structure, the Chief Executive Officer (“CEO”), as the chief operating decision maker, manages and allocates resources at the global corporate level. Managing and allocating resources at the global corporate level enables the CEO to assess both the overall level of resources available and how to best deploy these resources across functions, therapeutic areas, regional commercial organizations and research and development projects in line with our overarching long-term corporate-wide strategic goals, rather than on a product or franchise basis. The determination of a single segment is consistent with the financial information regularly reviewed by the CEO for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. For further information on product and regional revenue, see “—Note 2. Revenue”.
Use of Estimates and Judgments
The preparation of financial statements requires the use of management estimates, judgments and assumptions. The most significant assumptions are estimates used in determining accounting for acquisitions; impairments of goodwill and intangible assets; sales rebate and return accruals; legal contingencies; and income taxes. Actual results may differ from estimates.
Reclassifications
Certain reclassifications were made to conform the prior period consolidated financial statements to the current period presentation. Cash payments resulting for licensing arrangements, including upfront and contingent milestones previously included in operating activities in the consolidated statements of cash flows are now presented in investing activities. The adjustment resulted in an increase to net cash provided by operating activities and net cash used in investing activities of $143 million in 2019 and $1.1 billion in 2018. Deferred income previously presented separately in the consolidated statements of cash flows is now presented in Other operating assets and liabilities. These reclassifications did not have an impact on net assets or net earnings.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include bank deposits, time deposits, commercial paper and money market funds. Cash equivalents consist of highly liquid investments with original maturities of three months or less at the time of purchase and are recognized at cost, which approximates fair value.
Cash is restricted when withdrawal or general use is contractually or legally restricted including escrow for litigation settlements and funds restricted for annual Company contributions to the defined contribution plan in the U.S. Restricted cash was $427 million and $474 million at December 31, 2020 and 2019, respectively.
Marketable Debt Securities
Marketable debt securities are classified as “available-for-sale” on the date of purchase and reported at fair value. Fair value is determined based on observable market quotes or valuation models using assessments of counterparty credit worthiness, credit default risk or underlying security and overall capital market liquidity. Marketable debt securities are reviewed for impairment by assessing if the decline in market value of the investment below the carrying value is other than temporary, which considers the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value, the duration and extent that the market value has been less than cost and the investee's financial condition.
Investments in Equity Securities
Investments in equity securities with readily determinable fair values are recorded at fair value with changes in fair value recorded in Other (income)/expense, net. Investments in equity securities without readily determinable fair values are recorded at cost minus any impairment, plus or minus changes in their estimated fair value resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Changes in the estimated fair value of investments in equity securities without readily determinable fair values are recorded in Other (income)/expense, net. Investments in 50% or less owned companies are accounted for using the equity method of accounting when the ability to exercise significant influence over the operating and financial decisions of the investee is maintained. The proportional share of the investees net income or losses of equity investments accounted for using the equity method are included in Other (income)/expense, net. Investments in equity securities without readily determinable fair values and investments in equity accounted for using the equity method are assessed for potential impairment on a quarterly basis based on qualitative factors.
Inventory Valuation
Inventories are stated at the lower of average cost or net realizable value.
Property, Plant and Equipment and Depreciation
Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed on a straight-line method based on the estimated useful lives of the related assets ranging from 20 to 50 years for buildings and 3 to 20 years for machinery, equipment and fixtures.
Current facts or circumstances are periodically evaluated to determine if the carrying value of depreciable assets to be held and used may not be recoverable. If such circumstances exist, an estimate of undiscounted future cash flows generated by the long-lived asset, or appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists at its lowest level of identifiable cash flows. If an asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value. An estimate of the asset’s fair value is based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques using unobservable fair value inputs, such as a discounted value of estimated future cash flows.
Capitalized Software
Eligible costs to obtain internal use software are capitalized and amortized over the estimated useful life of the software ranging from three to ten years.
Acquisitions
Businesses acquired are consolidated upon obtaining control. The fair value of assets acquired and liabilities assumed are recognized at the date of acquisition. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. Business acquisition costs are expensed when incurred. Contingent consideration from potential development, regulatory, approval and sales-based milestones and sales-based royalties are included in the purchase price for business combinations and excluded for asset acquisitions. Certain transactions are accounted for as asset acquisitions since they were determined not to be a business as that term is defined in ASC 805 primarily because no significant processes were acquired or substantially of the relative fair value was allocated to a single asset. Amounts allocated to investigational compounds for asset acquisitions are expensed at the date of acquisition.
Goodwill, Acquired In-Process Research and Development and Other Intangible Assets
The fair value of acquired intangible assets is determined using an income-based approach referred to as the excess earnings method utilizing Level 3 fair value inputs. Market participant valuations assume a global view considering all potential jurisdictions and indications based on discounted after-tax cash flow projections, risk adjusted for estimated probability of technical and regulatory success.
Finite-lived intangible assets, including licenses, marketed product rights and IPRD projects that reach commercialization are amortized on a straight-line basis over their estimated useful life. Estimated useful lives are determined considering the period assets are expected to contribute to future cash flows. Finite-lived intangible assets are tested for impairment when facts or circumstances suggest that the carrying value of the asset may not be recoverable. If the carrying value exceeds the projected undiscounted pretax cash flows of the intangible asset, an impairment loss equal to the excess of the carrying value over the estimated fair value (discounted after-tax cash flows) is recognized.
Goodwill is tested at least annually for impairment by assessing qualitative factors in determining whether it is more likely than not that the fair value of net assets is below their carrying amounts. Examples of qualitative factors assessed include BMS’s share price, financial performance compared to budgets, long-term financial plans, macroeconomic, industry and market conditions as well as the substantial excess of fair value over the carrying value of net assets from the annual impairment test performed in a prior year. Each relevant factor is assessed both individually and in the aggregate.
IPRD is tested for impairment on an annual basis and more frequently if events occur or circumstances change that would indicate a potential reduction in the fair values of the assets below their carrying value. Impairment charges are recognized to the extent the carrying value of IPRD is determined to exceed its fair value.
Restructuring
Restructuring charges are recognized as a result of actions to streamline operations, realize synergies from acquisitions and reduce the number of facilities. Estimating the impact of restructuring plans, including future termination benefits, integration expenses and other exit costs requires judgment. Actual results could vary from these estimates. Restructuring charges are recognized upon meeting certain criteria, including finalization of committed plans, reliable estimates and discussions with local works councils in certain markets.
Contingencies
Loss contingencies from legal proceedings and claims may occur from government investigations, shareholder lawsuits, product and environmental liability, contractual claims, tax and other matters. Accruals are recognized when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Gain contingencies (including contingent proceeds related to the divestitures) are not recognized until realized. Legal fees are expensed as incurred.
Revenue Recognition
Refer to “—Note 2. Revenue” for a detailed discussion of accounting policies related to revenue recognition, including deferred revenue and royalties. Refer to “—Note 3. Alliances” for further detail regarding alliances.
Research and Development
Research and development costs are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Research and development costs are presented net of reimbursements from alliance partners. Upfront and contingent development milestone payments for asset acquisitions of investigational compounds are also included in research and development expense if there are no alternative future uses.
Advertising and Product Promotion Costs
Advertising and product promotion costs are expensed as incurred. Advertising and product promotion costs are included in Marketing, selling and administrative expenses and were $990 million in 2020, $633 million in 2019 and $672 million in 2018.
Foreign Currency Translation
Foreign subsidiary earnings are translated into U.S. dollars using average exchange rates. The net assets of foreign subsidiaries are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recognized in Other Comprehensive (Loss)/Income.
Income Taxes
The provision for income taxes includes income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment of whether or not a valuation allowance is required often requires significant judgment including the long-range forecast of future taxable income and the evaluation of tax planning initiatives. Adjustments to the deferred tax valuation allowances are made to earnings in the period when such assessments are made.
Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.
Recently Adopted Accounting Standards
Financial Instruments - Measurement of Credit Losses
In June 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. Entities are required to use a forward-looking estimated loss model. Available-for-sale debt security credit losses will be recognized as allowances rather than a reduction in amortized cost. BMS adopted the amended guidance on a modified retrospective approach on January 1, 2020. The amended guidance did not impact BMS’s results of operations.
Note 2. REVENUE
The following table summarizes the disaggregation of revenue by nature:
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|
|
|
|
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|
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|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Net product sales
|
$
|
41,321
|
|
|
$
|
25,174
|
|
|
$
|
21,581
|
|
Alliance revenues
|
615
|
|
|
597
|
|
|
647
|
|
Other revenues
|
582
|
|
|
374
|
|
|
333
|
|
Total Revenues
|
$
|
42,518
|
|
|
$
|
26,145
|
|
|
$
|
22,561
|
|
Net product sales represent more than 95% of total revenues for the years ended December 31, 2020, 2019 and 2018. Products are sold principally to wholesalers, distributors, specialty pharmacies, and to a lesser extent, directly to retailers, hospitals, clinics and government agencies. Customer orders are generally fulfilled within a few days of receipt resulting in minimal order backlog. Contractual performance obligations are usually limited to transfer of control of the product to the customer. The transfer occurs either upon shipment or upon receipt of the product after considering when the customer obtains legal title to the product and when BMS obtains a right of payment. At these points, customers are able to direct the use of and obtain substantially all of the remaining benefits of the product.
Gross revenue to the three largest pharmaceutical wholesalers in the U.S. as a percentage of global gross revenues was as follows:
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|
|
|
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|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
McKesson Corporation
|
31
|
%
|
|
26
|
%
|
|
25
|
%
|
AmerisourceBergen Corporation
|
25
|
%
|
|
20
|
%
|
|
20
|
%
|
Cardinal Health, Inc.
|
19
|
%
|
|
17
|
%
|
|
17
|
%
|
Wholesalers are initially invoiced at contractual list prices. Payment terms are typically 30 to 90 days based on customary practices in each country. Revenue is reduced from wholesaler list price at the time of recognition for expected charge-backs, discounts, rebates, sales allowances and product returns, which are referred to as GTN adjustments. These reductions are attributed to various commercial arrangements, managed healthcare organizations and government programs such as Medicare, Medicaid and the 340B Drug Pricing Program containing various pricing implications such as mandatory discounts, pricing protection below wholesaler list price or other discounts when Medicare Part D beneficiaries are in the coverage gap. In addition, non-U.S. government programs include different pricing schemes such as cost caps, volume discounts, outcome-based pricing and pricing claw-backs determined on sales of individual companies or an aggregation of companies participating in a specific market. Charge-backs and cash discounts are reflected as a reduction to receivables and settled through the issuance of credits to the customer, typically within one month. All other rebates, discounts and adjustments, including Medicaid and Medicare, are reflected as a liability and settled through cash payments to the customer, typically within various time periods ranging from a few months to one year.
Significant judgment is required in estimating GTN adjustments considering legal interpretations of applicable laws and regulations, historical experience, payer channel mix, current contract prices under applicable programs, unbilled claims, processing time lags and inventory levels in the distribution channel.
The following table summarizes GTN adjustments:
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Year Ended December 31,
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Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Gross product sales
|
$
|
60,016
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|
|
$
|
37,206
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|
|
$
|
30,174
|
|
GTN adjustments(a)
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|
|
|
|
|
Charge-backs and cash discounts
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(5,827)
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|
|
(3,675)
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|
|
(2,735)
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|
Medicaid and Medicare rebates
|
(7,595)
|
|
|
(4,941)
|
|
|
(3,225)
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|
Other rebates, returns, discounts and adjustments
|
(5,273)
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|
|
(3,416)
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|
|
(2,633)
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|
Total GTN adjustments
|
(18,695)
|
|
|
(12,032)
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|
|
(8,593)
|
|
Net product sales
|
$
|
41,321
|
|
|
$
|
25,174
|
|
|
$
|
21,581
|
|
(a) Includes adjustments for provisions for product sales made in prior periods resulting from changes in estimates of $106 million in 2020, $132 million in 2019 and $96 million in 2018.
Alliance and other revenues consist primarily of amounts related to collaborations and out-licensing arrangements. Each of these arrangements are evaluated for whether they represent contracts that are within the scope of the revenue recognition guidance in their entirety or contain aspects that are within the scope of the guidance, either directly or by reference based upon the application of the guidance related to the derecognition of nonfinancial assets (ASC 610).
Performance obligations are identified and separated when the other party can benefit directly from the rights, goods or services either on their own or together with other readily available resources and when the rights, goods or services are not highly interdependent or interrelated.
Transaction prices for these arrangements may include fixed upfront amounts as well as variable consideration such as contingent development and regulatory milestones, sales-based milestones and royalties. The most likely amount method is used to estimate contingent development, regulatory and sales-based milestones because the ultimate outcomes are binary in nature. The expected value method is used to estimate royalties because a broad range of potential outcomes exist, except for instances in which such royalties relate to a license. Variable consideration is included in the transaction price only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Significant judgment is required in estimating the amount of variable consideration to recognize when assessing factors outside of BMS’s influence such as likelihood of regulatory success, limited availability of third party information, expected duration of time until resolution, lack of relevant past experience, historical practice of offering fee concessions and a large number and broad range of possible amounts. To the extent arrangements include multiple performance obligations that are separable, the transaction price assigned to each distinct performance obligation is reflective of the relative stand-alone selling price and recognized at a point in time upon the transfer of control.
Three types of out-licensing arrangements are typically utilized: (i) arrangements when BMS out-licenses intellectual property to another party and has no further performance obligations; (ii) arrangements that include a license and an additional performance obligation to supply product upon the request of the third party; and (iii) collaboration arrangements, which include transferring a license to a third party to jointly develop and commercialize a product.
Most out-licensing arrangements consist of a single performance obligation that is satisfied upon execution of the agreement when the development and commercialization rights are transferred to a third party. Upfront fees are recognized immediately and included in Other (income)/expense, net. Although contingent development and regulatory milestone amounts are assessed each period for the likelihood of achievement, they are typically constrained and recognized when the uncertainty is subsequently resolved for the full amount of the milestone and included in Other (income)/expense, net. Sales-based milestones and royalties are recognized when the milestone is achieved or the subsequent sales occur. Sales-based milestones are included in Other (income)/expense, net and royalties are included in Alliance and other revenues.
Certain out-licensing arrangements may also include contingent performance obligations to supply commercial product to the third party upon its request. The license and supply obligations are accounted for as separate performance obligations as they are considered distinct because the third party can benefit from the license either on its own or together with other supply resources readily available to it and the obligations are separately identifiable from other obligations in the contract in accordance with the revenue recognition guidance. After considering the standalone selling prices in these situations, upfront fees, contingent development and regulatory milestone amounts and sales-based milestone and royalties are allocated to the license and recognized in the manner described above. Consideration for the supply obligation is usually based upon stipulated cost-plus margin contractual terms which represent a standalone selling price. The supply consideration is recognized at a point in time upon transfer of control of the product to the third party and included in Alliance and other revenues. The above fee allocation between the license and the supply represents the amount of consideration expected to be entitled to for the satisfaction of the separate performance obligations.
Although collaboration arrangements are unique in nature, both parties are active participants in the operating activities and are exposed to significant risks and rewards depending on the commercial success of the activities. Performance obligations inherent in these arrangements may include the transfer of certain development or commercialization rights, ongoing development and commercialization services and product supply obligations. Except for certain product supply obligations which are considered distinct and accounted for as separate performance obligations similar to the manner discussed above, all other performance obligations are not considered distinct and are combined into a single performance obligation since the transferred rights are highly integrated and interrelated to the obligation to jointly develop and commercialize the product with the third party. As a result, upfront fees are recognized ratably over time throughout the expected period of the collaboration activities and included in Other (income)/expense, net as the license is combined with other development and commercialization obligations. Contingent development and regulatory milestones that are no longer constrained are recognized in a similar manner on a prospective basis. Royalties and profit sharing are recognized when the underlying sales and profits occur and are included in Alliance and other revenues. Refer to “—Note 3. Alliances” for further information.
The following table summarizes the disaggregation of revenue by product and region:
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Year Ended December 31,
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Dollars in Millions
|
2020
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2019
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2018
|
Prioritized Brands
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|
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|
Revlimid
|
$
|
12,106
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|
|
$
|
1,299
|
|
|
$
|
—
|
|
Eliquis
|
9,168
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|
|
7,929
|
|
|
6,438
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|
Opdivo
|
6,992
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|
|
7,204
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|
|
6,735
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|
Orencia
|
3,157
|
|
|
2,977
|
|
|
2,710
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|
Pomalyst/Imnovid
|
3,070
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|
|
322
|
|
|
—
|
|
Sprycel
|
2,140
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|
|
2,110
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|
|
2,000
|
|
Yervoy
|
1,682
|
|
|
1,489
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|
|
1,330
|
|
Abraxane
|
1,247
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|
|
166
|
|
|
—
|
|
Empliciti
|
381
|
|
|
357
|
|
|
247
|
|
Reblozyl
|
274
|
|
|
—
|
|
|
—
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|
Inrebic
|
55
|
|
|
5
|
|
|
—
|
|
Onureg
|
17
|
|
|
—
|
|
|
—
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|
Zeposia
|
12
|
|
|
—
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|
|
—
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|
|
|
|
|
|
|
Established Brands
|
|
|
|
|
|
Vidaza
|
455
|
|
|
58
|
|
|
—
|
|
Baraclude
|
447
|
|
|
555
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|
|
744
|
|
Other Brands(a)
|
1,315
|
|
|
1,674
|
|
|
2,357
|
|
Total Revenues
|
$
|
42,518
|
|
|
$
|
26,145
|
|
|
$
|
22,561
|
|
|
|
|
|
|
|
United States
|
$
|
26,577
|
|
|
$
|
15,342
|
|
|
$
|
12,586
|
|
Europe
|
9,853
|
|
|
6,266
|
|
|
5,658
|
|
Rest of World
|
5,457
|
|
|
4,013
|
|
|
3,733
|
|
Other(b)
|
631
|
|
|
524
|
|
|
584
|
|
Total Revenues
|
$
|
42,518
|
|
|
$
|
26,145
|
|
|
$
|
22,561
|
|
(a) Includes BMS and Celgene products in 2020 and 2019.
(b) Other revenues include royalties and alliance-related revenues for products not sold by BMS’s regional commercial organizations.
Contract assets are primarily estimated future royalties and termination fees not eligible for the licensing exclusion and therefore recognized upon the adoption of ASC 606 and ASC 610. Contract assets are reduced and receivables are increased in the period the underlying sales occur. Cumulative catch-up adjustments to revenue affecting contract assets or contract liabilities were not material during the year ended December 31, 2020 and 2019. Revenue recognized from performance obligations satisfied in prior periods was $338 million in 2020 and $411 million in 2019, consisting primarily of royalties for out-licensing arrangements and revised estimates for GTN adjustments related to prior period sales. Contract assets were not material at December 31, 2020 and 2019.
Sales commissions and other incremental costs of obtaining customer contracts are expensed as incurred as the amortization periods would be less than one year.
Note 3. ALLIANCES
BMS enters into collaboration arrangements with third parties for the development and commercialization of certain products. Although each of these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and exposed to significant risks and rewards depending on the commercial success of the activities. BMS may either in-license intellectual property owned by the other party or out-license its intellectual property to the other party. These arrangements also typically include research, development, manufacturing, and/or commercial activities and can cover a single investigational compound or commercial product or multiple compounds and/or products in various life cycle stages. The rights and obligations of the parties can be global or limited to geographic regions. BMS refer to these collaborations as alliances and its partners as alliance partners.
The most common activities between BMS and its alliance partners are presented in results of operations as follows:
•When BMS is the principal in the end customer sale, 100% of product sales are included in Net product sales. When BMS's alliance partner is the principal in the end customer sale, BMS’s contractual share of the third-party sales and/or royalty income are included in Alliance revenues as the sale of commercial products are considered part of BMS’s ongoing major or central operations. Refer to “—Note 2. Revenue” for information regarding recognition criteria.
•Amounts payable to BMS by alliance partners (who are the principal in the end customer sale) for supply of commercial products are included in Alliance revenues as the sale of commercial products are considered part of BMS’s ongoing major or central operations.
•Profit sharing, royalties and other sales-based fees payable by BMS to alliance partners are included in Cost of products sold as incurred.
•Cost reimbursements between the parties are recognized as incurred and included in Cost of products sold; Marketing, selling and administrative expenses; or Research and development expenses, based on the underlying nature of the related activities subject to reimbursement.
•Upfront and contingent development and regulatory approval milestones payable to BMS by alliance partners for investigational compounds and commercial products are deferred and amortized over the expected period of BMS's development and co-promotion obligation through the market exclusivity period or the periods in which the related compounds or products are expected to contribute to future cash flows. The amortization is presented consistent with the nature of the payment under the arrangement. For example, amounts received for investigational compounds are presented in Other (income)/expense, net as the activities being performed at that time are not related to the sale of commercial products included in BMS’s ongoing major or central operations; amounts received for commercial products are presented in alliance revenue as the sale of commercial products are considered part of BMS’s ongoing major or central operations.
•Upfront and contingent regulatory approval milestones payable by BMS to alliance partners for commercial products are capitalized and amortized over the shorter of the contractual term or the periods in which the related products are expected to contribute to future cash flows.
•Upfront and contingent milestones payable by BMS to alliance partners prior to regulatory approval are expensed as incurred and included in Research and development expense.
•Royalties and other contingent consideration payable to BMS by alliance partners related to the divestiture of such businesses are included in Other (income)/expense, net when earned.
•All payments between BMS and its alliance partners are presented in Cash Flows From Operating Activities.
Selected financial information pertaining to alliances was as follows, including net product sales when BMS is the principal in the third-party customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the products in the alliance, but only the payments between the alliance partners or the related amortization if the payments were deferred or capitalized.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Revenues from alliances:
|
|
|
|
|
|
Net product sales
|
$
|
9,364
|
|
|
$
|
9,944
|
|
|
$
|
8,359
|
|
Alliance revenues
|
615
|
|
|
597
|
|
|
647
|
|
Total Revenues
|
$
|
9,979
|
|
|
$
|
10,541
|
|
|
$
|
9,006
|
|
|
|
|
|
|
|
Payments to/(from) alliance partners:
|
|
|
|
|
|
Cost of products sold
|
$
|
4,485
|
|
|
$
|
4,169
|
|
|
$
|
3,439
|
|
Marketing, selling and administrative
|
(128)
|
|
|
(127)
|
|
|
(104)
|
|
Research and development
|
349
|
|
|
42
|
|
|
1,044
|
|
Other (income)/expense, net
|
(74)
|
|
|
(60)
|
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Alliance Balance Sheet Information:
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Receivables – from alliance partners
|
$
|
343
|
|
|
$
|
347
|
|
Accounts payable – to alliance partners
|
1,093
|
|
|
1,026
|
|
Deferred income from alliances(a)
|
366
|
|
|
431
|
|
(a) Includes unamortized upfront and milestone payments.
Specific information pertaining to significant alliances is discussed below, including their nature and purpose; the significant rights and obligations of the parties; specific accounting policy elections; and the statements of earnings classification of and amounts attributable to payments between the parties.
Pfizer
BMS and Pfizer jointly develop and commercialize Eliquis, an anticoagulant discovered by BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis except in certain countries where Pfizer commercializes Eliquis and pays BMS a sales-based fee.
Co-exclusive license rights were granted to Pfizer in exchange for an upfront payment and potential milestone payments. Both parties assumed certain obligations to actively participate in a joint executive committee and various other operating committees and have joint responsibilities for the research, development, distribution, sales and marketing activities of the alliance using resources in their own infrastructures. BMS and Pfizer manufacture the product in the alliance and BMS is the principal in the end customer product sales in the U.S., significant countries in Europe, as well as Canada, Australia, China, Japan and South Korea. In certain smaller countries, Pfizer has had full commercialization rights and BMS supplies the product to Pfizer at cost plus a percentage of the net sales price to end-customers, which is recorded in full upon transfer of control of the product to Pfizer.
BMS did not allocate consideration to the rights transferred to Pfizer as such rights were not sold separately by BMS or any other party, nor could Pfizer receive any benefit for the delivered rights without the fulfillment of other ongoing obligations by BMS under the alliance agreement. As such, the global alliance was treated as a single unit of accounting and upfront proceeds and any subsequent contingent milestone proceeds are amortized over the expected period of BMS’s co-promotion obligation through the market exclusivity period. BMS received $884 million in non-refundable upfront, milestone and other licensing payments which are amortized and included in Other (income)/expense, net as Eliquis was not a commercial product at the commencement of the alliance.
Summarized financial information related to this alliance was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Revenues from Pfizer alliance:
|
|
|
|
|
|
Net product sales
|
$
|
8,942
|
|
|
$
|
7,711
|
|
|
$
|
6,329
|
|
Alliance revenues
|
226
|
|
|
218
|
|
|
109
|
|
Total Revenues
|
$
|
9,168
|
|
|
$
|
7,929
|
|
|
$
|
6,438
|
|
|
|
|
|
|
|
Payments to/(from) Pfizer:
|
|
|
|
|
|
Cost of products sold – Profit sharing
|
$
|
4,331
|
|
|
$
|
3,745
|
|
|
$
|
3,078
|
|
Other (income)/expense, net – Amortization of deferred income
|
(55)
|
|
|
(55)
|
|
|
(55)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Alliance Balance Sheet Information:
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Receivables
|
$
|
253
|
|
|
$
|
247
|
|
Accounts payable
|
1,024
|
|
|
922
|
|
Deferred income
|
300
|
|
|
355
|
|
Ono
BMS and Ono jointly develop and commercialize Opdivo, Yervoy and several BMS investigational compounds in Japan, South Korea and Taiwan. BMS is responsible for supply of the products. Profits, losses and development costs are shared equally for all combination therapies involving compounds of both parties. Otherwise, sharing is 80% and 20% for activities involving only one of the party’s compounds.
BMS and Ono also jointly develop and commercialize Orencia in Japan. BMS is responsible for the order fulfillment and distribution of the intravenous formulation and Ono is responsible for the subcutaneous formulation. Both formulations are jointly promoted by both parties with assigned customer accounts and BMS is responsible for the product supply. A co-promotion fee of 60% is paid when a sale is made to the other party’s assigned customer.
In 2019, Ono exercised the right to accept NKTR-214 into the alliance with BMS upon completion of a Phase I clinical study of Opdivo and NKTR-214 in the Ono Territory. Ono partially reimbursed BMS for development costs incurred with the study and shares in certain future development costs, contingent milestone payments, profits and losses under the collaboration with Nektar.
In 2017, Ono granted BMS an exclusive license for the development and commercialization of ONO-4578, Ono’s Prostaglandin E2 receptor 4 antagonist. In 2020, the rights were terminated by both parties.
Summarized financial information related to this alliance was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Revenues from Ono alliances:
|
|
|
|
|
|
Net product sales
|
$
|
194
|
|
|
$
|
194
|
|
|
$
|
165
|
|
Alliance revenues
|
382
|
|
|
305
|
|
|
294
|
|
Total Revenues
|
$
|
576
|
|
|
$
|
499
|
|
|
$
|
459
|
|
BMS is the principal in the end customer product sales and has the exclusive right to develop, manufacture and commercialize Opdivo worldwide except in Japan, South Korea and Taiwan. Ono is entitled to receive royalties of 4% in North America and 15% in all territories excluding the three countries listed above, subject to customary adjustments.
Nektar
In 2018, BMS and Nektar commenced a worldwide license and collaboration for the development and commercialization of Bempegaldesleukin (NKTR-214), Nektar’s investigational immuno-stimulatory therapy designed to selectively expand specific cancer-fighting T cells and natural killer cells directly in the tumor micro-environment. In January 2020, the parties amended the collaboration agreement. The Opdivo and NKTR-214 combination therapy is currently in Phase III clinical studies for metastatic melanoma, adjuvant melanoma, muscle-invasive bladder cancer and RCC. A joint development plan agreed by the parties as part of the original agreement, and updated as part of the January 2020 amendment, specifies development in certain indications and tumor types with each party responsible for the supply of their own product. BMS’s share of the development costs associated with therapies comprising a BMS medicine used in combination with NKTR-214 is 67.5%, subject to certain cost caps for Nektar. The January 2020 amendment retains the cost sharing percentages from the original agreement. The parties will also jointly commercialize the therapies, subject to regulatory approval. BMS’s share of global NKTR-214 profits and losses will be 35% subject to certain annual loss caps for Nektar.
BMS paid Nektar $1.85 billion for the rights discussed above and 8.3 million shares of Nektar common stock which represented a 4.8% ownership interest. BMS’s equity ownership is subject to certain lock-up, standstill and voting provisions for a five-year period. The amount of the upfront payment allocated to the equity investment was $800 million after considering Nektar’s stock price on the date of closing and current limitations on trading the securities. The remaining $1.05 billion of the upfront payment was allocated to the rights discussed above and included in Research and development expense in 2018. BMS will also pay up to $1.8 billion upon the achievement of contingent development, regulatory and sales-based milestones over the life of the alliance period. Research and development expense payable under this agreement with Nektar was $132 million in 2020, $108 million in 2019 and $59 million in 2018.
bluebird
BMS and bluebird jointly develop and commercialize novel disease-altering gene therapy product candidates targeting BCMA. The collaboration arrangement began in 2013 and included (i) a right for BMS to license any anti-BCMA products resulting from the collaboration, (ii) a right for bluebird to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and profit share in the U.S. in exchange for a reduction of milestone payments, and (iii) sales-based milestones and royalties payable to bluebird upon the commercialization of any licensed products resulting from the collaboration if bluebird declined to exercise their co-development and profit sharing rights. The options to license idecabtagene vicleucel (ide-cel, bb2121) and bb21217 were exercised in 2016 and 2017, respectively.
BMS and bluebird share equally in all profits and losses relating to developing, commercializing and manufacturing ide-cel within the U.S. BMS is exclusively responsible for the development and commercialization of ide-cel outside the U.S.
BMS is responsible for the worldwide development, including related funding after the substantial completion by bluebird of the ongoing Phase I clinical trial, and commercialization of bb21217. bluebird has an option to co-develop, co-promote and share equally in all profits and losses in the U.S.
In 2020, BMS and bluebird amended their collaboration arrangement where, among other items, BMS is assuming the contract manufacturing agreements relating to ide-cel adherent lentiviral vector. Over time, BMS is assuming responsibility for manufacturing ide-cel suspension lentiviral vector outside of the U.S., with bluebird responsible for manufacturing ide-cel suspension lentiviral vector in the U.S. The parties were also released from future exclusivity related to BCMA-directed T cell therapies. In addition, BMS agreed to buy out its obligation to pay bluebird future ex-U.S. milestones and royalties on ide-cel and bb21217 for a payment of $200 million, which was included in Research and development expense in 2020. Cost sharing payments between the parties were not material.
Otsuka
BMS and Otsuka co-promoted Sprycel in the U.S. and the EU through 2019. BMS was responsible for the development and manufacture of the product and was also the principal in the end customer product sales. A fee was paid to Otsuka through 2020 based on net sales levels in the Oncology Territory (U.S., Japan and the EU) that equated to $294 million on the first $1.0 billion of annual net sales plus 1% of net sales in excess of $1.0 billion.
Revenues earned from the Otsuka alliance were $1.8 billion in 2019 and $1.7 billion in 2018. Payments to Otsuka of $302 million in 2019 and $297 million in 2018, were recorded in Cost of product sold.
Effective January 1, 2020, Otsuka is no longer co-promoting Sprycel in the U.S. and as a result, this arrangement is no longer considered a collaboration under ASC 808. Revenues earned and fees paid to Otsuka in the Oncology Territory in 2020 are not included in the select financial information table above.
Note 4. ACQUISITIONS, DIVESTITURES, LICENSING AND OTHER ARRANGEMENTS
Acquisitions
Business Combination
Celgene
On November 20, 2019, BMS completed the Celgene acquisition. The acquisition is expected to further position BMS as a leading biopharmaceutical company for sustained innovation and long-term growth and to address the needs of patients with cancer, inflammatory, immunologic or cardiovascular diseases through high-value innovative medicines and leading scientific capabilities. Each share of Celgene common stock was converted into a right to receive one share of BMS common stock and $50.00 in cash. Celgene shareholders also received one tradeable contingent value right (“CVR”) for each share of Celgene common stock representing the right to receive $9.00 in cash, subject to the achievement of future regulatory milestones.
The aggregate cash paid in connection with the Celgene acquisition was $35.7 billion (or $24.6 billion net of cash acquired). BMS funded the acquisition through cash on-hand and debt proceeds, as described in “—Note 9. Financial Instruments and Fair Value Measurements.”
The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The assessment of the fair value of assets acquired and liabilities assumed was finalized. The measurement period adjustments reflected in 2020 primarily resulted from completing valuations of real estate and personal property, revised future cash flow estimates for certain intangible assets, changes in the estimated tax basis of certain intangible assets based upon a tax ruling which reduced deferred income tax liabilities and other changes to certain equity investments, legal contingency and income tax liabilities. The related impact to net earnings that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date was not material to the consolidated financial statements.
The total consideration for the acquisition consisted of the following:
|
|
|
|
|
|
Amounts in Millions, Except Per Share Data
|
Total Consideration
|
Celgene shares outstanding at November 19, 2019
|
714.9
|
|
Cash per share
|
$
|
50
|
|
Cash consideration for outstanding shares
|
35,745
|
|
|
|
Celgene shares outstanding at November 19, 2019
|
714.9
|
|
Closing price of BMS common stock on November 19, 2019
|
$
|
56.48
|
|
Estimated fair value of share consideration
|
40,378
|
|
|
|
Celgene shares outstanding at November 19, 2019
|
714.9
|
|
Closing price of CVR(a)
|
$
|
2.30
|
|
Fair value of CVRs
|
1,644
|
|
|
|
Fair value of replacement options
|
1,428
|
|
Fair value of replacement restricted share awards
|
987
|
|
Fair value of CVRs issued to option and share award holders
|
87
|
|
Fair value of share-based compensation awards attributable to pre-combination service(b)
|
2,502
|
|
|
|
Total consideration transferred
|
$
|
80,269
|
|
(a) The closing price of CVR is based on the first trade on November 21, 2019.
(b) Fair value of the awards attributed to post-combination services of $1.0 billion were included in compensation costs. Refer to “—Note 18. Employee Stock Benefit Plans” for more information.
The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the Acquisition Date based upon their respective fair values summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in Millions
|
Amounts Recognized as of Acquisition Date
(as previously reported)
|
|
Measurement Period Adjustments
|
|
Purchase Price Allocation
|
Cash and cash equivalents
|
$
|
11,179
|
|
|
$
|
—
|
|
|
$
|
11,179
|
|
Receivables
|
2,652
|
|
|
—
|
|
|
2,652
|
|
Inventories
|
4,511
|
|
|
—
|
|
|
4,511
|
|
Property, plant and equipment
|
1,342
|
|
|
(277)
|
|
|
1,065
|
|
Intangible assets(a)
|
64,027
|
|
|
(100)
|
|
|
63,927
|
|
Otezla* assets held-for-sale(b)
|
13,400
|
|
|
—
|
|
|
13,400
|
|
Other assets
|
3,408
|
|
|
43
|
|
|
3,451
|
|
Accounts payable
|
(363)
|
|
|
—
|
|
|
(363)
|
|
Income taxes payable
|
(2,718)
|
|
|
(38)
|
|
|
(2,756)
|
|
Deferred income tax liabilities
|
(7,339)
|
|
|
2,336
|
|
|
(5,003)
|
|
Debt
|
(21,782)
|
|
|
—
|
|
|
(21,782)
|
|
Other liabilities
|
(4,017)
|
|
|
15
|
|
|
(4,002)
|
|
Identifiable net assets acquired
|
64,300
|
|
|
1,979
|
|
|
66,279
|
|
Goodwill(c)
|
15,969
|
|
|
(1,979)
|
|
|
13,990
|
|
Total consideration transferred
|
$
|
80,269
|
|
|
$
|
—
|
|
|
$
|
80,269
|
|
(a) Intangible assets consists of currently marketed product rights of approximately $44.4 billion (amortized over 5.1 years calculated using the weighted-average useful life of the assets) and IPRD of approximately $19.5 billion (not amortized), and were valued using the multi-period excess earnings method. This method starts with a forecast of all of the expected future net cash flows associated with the asset and then involves adjusting the forecast to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.
(b) Amount includes $381 million of inventory, $13.0 billion of developed product rights, $19 million of accrued liabilities and $5 million of other non-current liabilities. Refer to “—Divestitures” for more information.
(c) Goodwill represents the going-concern value associated with future product discovery beyond the existing pipeline and expected value of synergies resulting from cost savings and avoidance not attributed to identifiable assets. Goodwill is not deductible for tax purposes.
BMS’s Consolidated Statement of Earnings for the year ended December 31, 2019, include $1.9 billion of Revenues and $1.6 billion of Net Loss associated with the result of operations of Celgene from the acquisition date to December 31, 2019.
Acquisition expenses were $657 million during the year ended December 31, 2019, including financial advisory, legal, proxy filing, regulatory, financing fees and hedge costs.
The following unaudited pro forma information has been prepared as if the Celgene acquisition and the Otezla* divestiture had occurred on January 1, 2018. The unaudited supplemental pro forma consolidated results do not purport to reflect what the combined Company’s results of operations would have been nor do they project the future results of operations of the combined Company. The unaudited supplemental pro forma consolidated results reflect the historical financial information of BMS and Celgene, adjusted to give effect to the Celgene acquisition and the Otezla* divestitures as if it had occurred on January 1, 2018, primarily for the following adjustments:
•Amortization expenses primarily related to fair value adjustments to Celgene’s intangible assets, inventories and debt.
•Non-recurring acquisition-related costs directly attributable to the Celgene acquisition and tax expense directly attributable to the Otezla* divestiture.
•Interest expense, including amortization of deferred financing fees, attributable to the Celgene acquisition financing.
•Elimination of historical revenue and expenses related to Otezla*. Refer to “—Divestitures.”
The above adjustments were adjusted for the applicable tax impact using an estimated weighted-average statutory tax rate applied to the applicable pro forma adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Amounts in Million
|
2019
|
|
2018
|
Total Revenues
|
$
|
39,759
|
|
|
$
|
36,243
|
|
Net Earnings/(Loss)
|
3,369
|
|
|
(4,083)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Acquisitions
MyoKardia
On November 17, 2020, BMS acquired MyoKardia a clinical-stage biopharmaceutical company pioneering a precision medicine approach to discover, develop and commercialize targeted therapies for the treatment of serious cardiovascular diseases. BMS, through a subsidiary, completed a tender offer to acquire all of the issued and outstanding shares of MyoKardia’s common stock and accepted all shares validly tendered and not withdrawn as of the expiration time of the tender offer for $225.00 per share, or $13.1 billion, including cash settlements of equity stock awards. The acquisition provides BMS with rights to MyoKardia’s lead asset, mavacamten, a potential first-in-class cardiovascular medicine for the treatment of obstructive hypertrophic cardiomyopathy that has completed Phase III development with an anticipated NDA submission in the first quarter of 2021.
BMS funded the transaction through a combination of cash on hand from its operations and net proceeds received in connection with the 2020 senior unsecured notes offering. The consideration transferred was allocated based on the relative fair value of gross assets acquired. The transaction was accounted for as an asset acquisition since mavacamten represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes). As a result, an $11.4 billion IPRD charge was recognized in the fourth quarter of 2020.
The following summarizes the total consideration transferred and allocation of consideration transferred to the assets acquired and liabilities assumed:
|
|
|
|
|
|
Amounts in Million
|
Amounts
|
Cash consideration for outstanding shares
|
$
|
12,030
|
|
Cash consideration for stock awards
|
1,059
|
|
Consideration paid
|
13,089
|
|
Less: Charge for unvested stock awards(a)
|
482
|
|
Transaction costs
|
53
|
|
Consideration to be allocated
|
$
|
12,660
|
|
|
|
Other intangible assets(b)
|
$
|
11,553
|
|
Cash and cash equivalents
|
861
|
|
Deferred income taxes
|
295
|
|
Other assets
|
177
|
|
Other liabilities
|
(226)
|
|
Total assets acquired, net
|
$
|
12,660
|
|
(a) Represents the accelerated vesting of MyoKardia stock awards and included in Marketing, selling and administrative expense ($241 million) and Research and development expense ($241 million) as of December 31, 2020.
(b) Includes IPRD of $11.4 billion (of which $11.1 billion related to mavacamten) and licenses of $115 million.
Forbius
In 2020, BMS acquired all of the outstanding shares of Forbius, a privately held, clinical-stage protein engineering company that designs and develops biotherapeutics for the treatment of cancer and fibrotic diseases. The acquisition provides BMS with full rights to Forbius’s TGF-beta program, including the program’s lead investigational asset, AVID200, which is in Phase I development. BMS accounted for the transaction as an asset acquisition since AVID200 represented substantially all of the fair value of the gross assets acquired. The transaction price included an upfront payment of $185 million and contingent development, regulatory and sales-based milestone payments up to $815 million. The up-front payment was included in Research and development expense except for $7 million that was allocated to deferred tax assets.
Other
Research and development expense also includes $100 million in 2020 and $60 million in 2018 resulting from the occurrence of certain development events attributed to the Cormorant asset acquisition completed in 2016.
Divestitures
The following table summarizes the financial impact of divestitures including royalties, which are included in Other (income)/expense, net. Revenue and pretax earnings related to all divestitures were not material in all periods presented (excluding divestiture gains or losses).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds(a)
|
|
Divestiture Gains
|
|
Royalty Income
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
Diabetes Business
|
$
|
558
|
|
|
$
|
661
|
|
|
$
|
579
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(567)
|
|
|
$
|
(650)
|
|
|
$
|
(661)
|
|
Erbitux* Business
|
13
|
|
|
15
|
|
|
216
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23)
|
|
|
(145)
|
|
Manufacturing Operations
|
10
|
|
|
48
|
|
|
160
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Plavix* and Avapro*/Avalide*
|
7
|
|
|
—
|
|
|
80
|
|
|
(12)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Otezla*
|
—
|
|
|
13,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
UPSA Business
|
—
|
|
|
1,508
|
|
|
—
|
|
|
—
|
|
|
(1,157)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mature Brands and Other
|
127
|
|
|
10
|
|
|
212
|
|
|
(42)
|
|
|
(12)
|
|
|
(178)
|
|
|
(77)
|
|
|
(13)
|
|
|
(8)
|
|
Total
|
$
|
715
|
|
|
$
|
15,642
|
|
|
$
|
1,247
|
|
|
$
|
(55)
|
|
|
$
|
(1,168)
|
|
|
$
|
(178)
|
|
|
$
|
(644)
|
|
|
$
|
(686)
|
|
|
$
|
(814)
|
|
(a) Includes royalties received subsequent to the related sale of the asset or business.
Diabetes Business
In February 2014, BMS and AstraZeneca terminated their diabetes business alliance agreements and BMS sold to AstraZeneca substantially all of the diabetes business comprising the alliance. Consideration for the transaction included tiered royalty payments ranging from 10% to 25% based on net sales through 2025. Royalties were $673 million in 2020, $533 million in 2019 and $457 million in 2018.
In September 2015, BMS transferred a percentage of its future royalty rights on Amylin net product sales in the U.S. to CPPIB. The transferred rights represent approximately 70% of potential future royalties BMS is entitled to in 2019 to 2025. In exchange for the transfer, BMS received an additional tiered-based royalty on Amylin net product sales in the U.S. from CPPIB in 2016 through 2018 including $45 million in 2018, and paid $39 million in 2020 and $48 million in 2019.
In November 2017, BMS transferred a percentage of its future royalty rights on a portion of Onglyza* and Farxiga* net product sales to Royalty Pharma. The transferred rights represent approximately 20% to 25% of potential future royalties BMS is entitled to for those products in 2020 to 2025. In exchange for the transfer, BMS received an additional tiered-based royalty on Onglyza* and Farxiga* net product sales from Royalty Pharma including $165 million in 2019 and $159 million in 2018, and paid $67 million in 2020.
Erbitux* Business
BMS had a commercialization agreement with Lilly through Lilly’s subsidiary ImClone for the co-development and promotion of Erbitux* in the U.S., Canada and Japan. BMS was the principal in the end customer product sales in North America and paid Lilly a distribution fee for 39% of Erbitux* net sales in North America plus a share of certain royalties paid by Lilly.
In October 2015, BMS transferred its rights to Erbitux* in North America to Lilly in exchange for tiered sales-based royalties through September 2018, including $145 million in 2018.
BMS transferred its co-commercialization rights in Japan to Merck KGaA in 2015 in exchange for sales-based royalties through 2032. As a result of the adoption of ASC 610 in 2018, estimated future royalties resulting from the transfer of rights to Merck KGaA were recorded as a cumulative effect adjustment in Retained earnings. A $23 million change in estimated future royalties was included in 2019.
Manufacturing Operations
In 2019, BMS sold its manufacturing and packaging facility in Anagni, Italy to Catalent Inc. The transaction was accounted for as the sale of a business. The divestiture included the transfer of the facility, the majority of employees at the site, inventories and certain third-party contract manufacturing obligations. The assets were reduced to their relative fair value after considering the purchase price resulting in an impairment charge of $121 million that was included in Cost of products sold. Catalent Inc. will provide certain manufacturing and packaging services for BMS for a period of time.
In 2017, BMS sold its small molecule active pharmaceutical ingredient manufacturing operations in Swords, Ireland to SK Biotek Co., Ltd. Proceeds of $160 million were received in 2018. The transaction was accounted for as the sale of a business. The divestiture included the transfer of the facility, the majority of employees at the site, inventories and certain third-party contract manufacturing obligations.
Plavix* and Avapro*/Avalide*
Sanofi reacquired BMS's co-development and co-commercialization agreements for Plavix* and Avapro*/Avalide* in 2013. Consideration for the transfer of rights included quarterly royalties through December 31, 2018 and a $200 million terminal payment received in 2018 of which $120 million was allocated to opt-out markets and $80 million was allocated to BMS's 49.9% interest in the Europe and Asia territory partnership. Royalties expected to be received in 2018 and the portion of terminal payment allocated to opt-out markets was reflected as a contract asset and cumulative effect adjustment upon adoption of ASC 610 in 2018 as BMS had fulfilled its performance obligation. The $80 million allocated to BMS's partnership interest was deferred as of December 31, 2018 and recognized as an equity investment gain when transferred to Sanofi in 2019.
Royalties earned from Sanofi in the territory covering the Americas and Australia and opt-out markets were presented in Alliance revenues and aggregated $26 million in 2018. Royalties attributed to the territory covering Europe and Asia earned by the territory partnership and paid to BMS were included in equity in net loss/(income) of affiliates and amounted to $96 million in 2018.
Otezla*
In order to complete the Celgene acquisition, BMS was required by the FTC to divest certain products. On November 21, 2019, BMS completed the divestiture of Otezla* (apremilast) to Amgen for $13.4 billion of cash. The transaction was accounted for as an asset divestiture. Otezla* was acquired as part of the Celgene acquisition and was classified as held-for-sale at the time of the acquisition. The fair value of Otezla* net assets consisted of $13.0 billion of developed product rights and $381 million of inventory.
UPSA Business
In 2019, BMS sold its UPSA consumer health business, including the shares of UPSA SAS and BMS’s assets and liabilities relating to the UPSA product portfolio. The transaction was accounted for as the sale of a business.
Mature Brands and Other
In 2020, a mature brand was sold resulting in proceeds of $50 million and divestiture gains of $49 million. In 2018, several mature brands were sold to Cheplapharm resulting in proceeds of $153 million and divestiture gains of $127 million.
Licensing and Other Arrangements
The following table summarizes the financial impact of Keytruda* royalties, Tecentriq* royalties, up-front and milestone licensing fees for products that have not obtained commercial approval, which are included in Other (income)/expense, net.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Keytruda* royalties
|
$
|
(681)
|
|
|
$
|
(545)
|
|
|
$
|
(343)
|
|
Tecentriq* royalties
|
(19)
|
|
|
—
|
|
|
—
|
|
Up-front licensing fees
|
(30)
|
|
|
(29)
|
|
|
(61)
|
|
Contingent milestone income
|
(72)
|
|
|
(31)
|
|
|
(37)
|
|
Amortization of deferred income
|
(58)
|
|
|
(58)
|
|
|
(57)
|
|
Other royalties
|
(23)
|
|
|
(11)
|
|
|
(41)
|
|
Total
|
$
|
(883)
|
|
|
$
|
(674)
|
|
|
$
|
(539)
|
|
Tecentriq* Patent License
In 2020, BMS and Ono entered a global patent license agreement with Roche Group related to Tecentriq* (atezolizumab), Roche’s anti-PD-L1 antibody. Under the agreement, Roche paid $324 million which included royalties for the nine months ended September 30, 2020, and will pay single-digit royalties on worldwide net sales of Tecentriq* through December 31, 2026. The upfront payment and royalties will be shared between BMS and Ono consistent with existing agreements. BMS recorded $239 million in Other (income)/expense, net for the settlement and $19 million for royalties in the fourth quarter of 2020.
Dragonfly
In 2020, BMS obtained a global exclusive license to Dragonfly’s interleukin-12 (IL-12) investigational immunotherapy program, including its extended half-life cytokine DF6002. BMS will be responsible for the development and any subsequent commercialization of DF6002 and its related products worldwide, including strategic decisions, regulatory responsibilities, funding, and manufacturing. Dragonfly will continue to be involved in the development of DF6002 in current and certain future Phase I/II clinical trials. BMS paid $475 million to Dragonfly for the rights in 2020 including $75 million following the commencement of a Phase I combination clinical study (included in Research and development expense). Dragonfly is eligible to receive additional contingent consideration comprised of development, regulatory and sales-based milestone payments up to $2.7 billion and royalties on global net sales.
Note 5. OTHER (INCOME)/EXPENSE, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Interest expense
|
$
|
1,420
|
|
|
$
|
656
|
|
|
$
|
183
|
|
Contingent consideration
|
(1,757)
|
|
|
523
|
|
|
—
|
|
Royalties and licensing income
|
(1,527)
|
|
|
(1,360)
|
|
|
(1,353)
|
|
Equity investment (gains)/losses
|
(1,228)
|
|
|
(275)
|
|
|
419
|
|
Integration expenses
|
717
|
|
|
415
|
|
|
—
|
|
Provision for restructuring
|
530
|
|
|
301
|
|
|
131
|
|
Litigation and other settlements
|
(194)
|
|
|
77
|
|
|
76
|
|
Transition and other service fees
|
(149)
|
|
|
(37)
|
|
|
(12)
|
|
Investment income
|
(121)
|
|
|
(464)
|
|
|
(173)
|
|
Reversion excise tax
|
76
|
|
|
—
|
|
|
—
|
|
Divestiture gains
|
(55)
|
|
|
(1,168)
|
|
|
(178)
|
|
Intangible asset impairment
|
21
|
|
|
15
|
|
|
64
|
|
Pension and postretirement
|
(13)
|
|
|
1,599
|
|
|
(27)
|
|
Acquisition expenses
|
—
|
|
|
657
|
|
|
—
|
|
Other
|
(34)
|
|
|
(1)
|
|
|
16
|
|
Other (income)/expense, net
|
$
|
(2,314)
|
|
|
$
|
938
|
|
|
$
|
(854)
|
|
Note 6. RESTRUCTURING
Celgene Acquisition Plan
In 2019, a restructuring and integration plan was implemented as an initiative to realize sustainable run rate synergies resulting from cost savings and avoidance from the Celgene acquisition which is currently expected to be approximately $3.0 billion. The synergies are expected to be realized in Cost of products sold (10%), Marketing, selling and administrative expenses (55%) and Research and development expenses (35%). Charges of approximately $3.0 billion are expected to be incurred through 2022. Cumulative charges of approximately $1.9 billion have been recognized including integration planning and execution expenses, employee termination benefit costs and accelerated stock-based compensation, contract termination costs and other shutdown costs associated with site exits. Cash outlays in connection with these actions are expected to be approximately $2.5 billion. Employee workforce reductions were approximately 1,565 in 2020 and 125 in 2019.
MyoKardia Acquisition Plan
In 2020, a restructuring and integration plan was initiated to realize expected cost synergies resulting from cost savings and avoidance from the MyoKardia acquisition. Charges of approximately $150 million are expected to be incurred through 2022, and consist of integration planning and execution expenses, employee termination benefit costs and other costs.
Company Transformation
In 2016, a restructuring plan was announced to evolve and streamline BMS’s operating model. Cumulative charges of approximately $1.5 billion were recognized for these actions since the announcement. Actions under the plan have been completed as of December 31, 2020.
The following provides the charges related to restructuring initiatives by type of cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Celgene Acquisition Plan
|
$
|
1,244
|
|
|
$
|
674
|
|
|
$
|
—
|
|
MyoKardia Acquisition Plan
|
39
|
|
|
—
|
|
|
—
|
|
Company Transformation
|
127
|
|
|
305
|
|
|
268
|
|
Total charges
|
$
|
1,410
|
|
|
$
|
979
|
|
|
$
|
268
|
|
|
|
|
|
|
|
Employee termination costs
|
$
|
457
|
|
|
$
|
273
|
|
|
$
|
87
|
|
Other termination costs
|
73
|
|
|
28
|
|
|
44
|
|
Provision for restructuring
|
530
|
|
|
301
|
|
|
131
|
|
Integration expenses
|
717
|
|
|
415
|
|
|
—
|
|
Accelerated depreciation
|
53
|
|
|
133
|
|
|
113
|
|
Asset impairments
|
103
|
|
|
130
|
|
|
16
|
|
Other shutdown costs
|
7
|
|
|
—
|
|
|
8
|
|
Total charges
|
$
|
1,410
|
|
|
$
|
979
|
|
|
$
|
268
|
|
|
|
|
|
|
|
Cost of products sold
|
$
|
32
|
|
|
$
|
180
|
|
|
$
|
57
|
|
Marketing, selling and administrative
|
10
|
|
|
1
|
|
|
1
|
|
Research and development
|
113
|
|
|
82
|
|
|
79
|
|
Other (income)/expense, net
|
1,255
|
|
|
716
|
|
|
131
|
|
Total charges
|
$
|
1,410
|
|
|
$
|
979
|
|
|
$
|
268
|
|
The following summarizes the charges and spending related to restructuring plan activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Liability at December 31
|
$
|
100
|
|
|
$
|
99
|
|
|
$
|
186
|
|
Cease-use liability reclassification
|
—
|
|
|
(3)
|
|
|
—
|
|
Liability at January 1
|
100
|
|
|
96
|
|
|
186
|
|
Provision for restructuring(a)
|
460
|
|
|
156
|
|
|
131
|
|
Foreign currency translation and other
|
6
|
|
|
(1)
|
|
|
1
|
|
Payments
|
(418)
|
|
|
(151)
|
|
|
(219)
|
|
Liability at December 31
|
$
|
148
|
|
|
$
|
100
|
|
|
$
|
99
|
|
(a) Includes reductions to the liability resulting from changes in estimates of $10 million in 2020, $4 million in 2019 and $17 million in 2018, respectively. Excludes $70 million in 2020 and $145 million in 2019 of accelerated stock-based compensation relating to the Celgene Acquisition Plan.
Note 7. INCOME TAXES
The provision/(benefit) for income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Current:
|
|
|
|
|
|
U.S.
|
$
|
1,245
|
|
|
$
|
1,002
|
|
|
$
|
566
|
|
Non-U.S.
|
(104)
|
|
|
1,437
|
|
|
410
|
|
Total Current
|
1,141
|
|
|
2,439
|
|
|
976
|
|
Deferred:
|
|
|
|
|
|
U.S.
|
229
|
|
|
(113)
|
|
|
(51)
|
|
Non-U.S.
|
754
|
|
|
(811)
|
|
|
96
|
|
Total Deferred
|
983
|
|
|
(924)
|
|
|
45
|
|
Total Provision
|
$
|
2,124
|
|
|
$
|
1,515
|
|
|
$
|
1,021
|
|
Effective Tax Rate
The reconciliation of the effective tax rate to the U.S. statutory Federal income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Earnings Before Income Taxes
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
(Loss)/Earnings before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
$
|
(10,106)
|
|
|
|
|
$
|
542
|
|
|
|
|
$
|
2,338
|
|
|
|
Non-U.S.
|
3,235
|
|
|
|
|
4,433
|
|
|
|
|
3,630
|
|
|
|
Total
|
(6,871)
|
|
|
|
|
4,975
|
|
|
|
|
5,968
|
|
|
|
U.S. statutory rate
|
(1,443)
|
|
|
21.0
|
%
|
|
1,045
|
|
|
21.0
|
%
|
|
1,253
|
|
|
21.0
|
%
|
Deemed repatriation transition tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56)
|
|
|
(0.9)
|
%
|
Global intangible low taxed income (GILTI)
|
729
|
|
|
(10.6)
|
%
|
|
849
|
|
|
17.1
|
%
|
|
94
|
|
|
1.6
|
%
|
Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland
|
(86)
|
|
|
1.3
|
%
|
|
(68)
|
|
|
(1.4)
|
%
|
|
(202)
|
|
|
(3.4)
|
%
|
Internal transfer of intangible assets
|
853
|
|
|
(12.4)
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
U.S. Federal valuation allowance
|
4
|
|
|
(0.1)
|
%
|
|
25
|
|
|
0.5
|
%
|
|
119
|
|
|
2.0
|
%
|
U.S. Federal, state and foreign contingent tax matters
|
136
|
|
|
(2.0)
|
%
|
|
(13)
|
|
|
(0.3)
|
%
|
|
(55)
|
|
|
(0.9)
|
%
|
U.S. Federal research based credits
|
(165)
|
|
|
2.4
|
%
|
|
(138)
|
|
|
(2.8)
|
%
|
|
(138)
|
|
|
(2.3)
|
%
|
Contingent value rights
|
(363)
|
|
|
5.3
|
%
|
|
110
|
|
|
2.2
|
%
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible R&D charges
|
2,461
|
|
|
(35.8)
|
%
|
|
5
|
|
|
0.1
|
%
|
|
17
|
|
|
0.3
|
%
|
Puerto Rico excise tax
|
(147)
|
|
|
2.1
|
%
|
|
(163)
|
|
|
(3.3)
|
%
|
|
(152)
|
|
|
(2.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local taxes (net of valuation allowance)
|
103
|
|
|
(1.5)
|
%
|
|
(16)
|
|
|
(0.3)
|
%
|
|
67
|
|
|
1.1
|
%
|
Foreign and other
|
42
|
|
|
(0.6)
|
%
|
|
(121)
|
|
|
(2.3)
|
%
|
|
74
|
|
|
1.2
|
%
|
Total
|
$
|
2,124
|
|
|
(30.9)
|
%
|
|
$
|
1,515
|
|
|
30.5
|
%
|
|
$
|
1,021
|
|
|
17.1
|
%
|
The tax charge for the deemed repatriation transition tax was complete as of December 31, 2018 and included favorable measurement period adjustments to the provisional amounts recorded in 2017 associated with the Act.
The GILTI tax associated with the Otezla* divestiture was $266 million in 2020 and $808 million in 2019.
BMS is no longer indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign and state income and withholding tax that would apply. BMS remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the deferred tax liability with respect to this basis difference is not practicable. BMS operates under a favorable tax grant in Puerto Rico not scheduled to expire prior to 2023.
An internal transfer of certain intangible assets to the U.S. acquired in the Celgene transaction resulted in a tax charge to establish a deferred tax liability based on the fair value of the assets in 2020.
A U.S. Federal valuation allowance was established in 2019 and 2018 as a result of the Nektar equity investment fair value losses that would be considered limited as a capital loss.
U.S. Federal, state and foreign contingent tax matters includes a $81 million tax benefit in 2019 and $119 million tax benefit in 2018 with respect to lapse of statutes.
Fair value adjustments for contingent value rights are not taxable or tax deductible.
Non-deductible R&D charges primarily resulted from the $11.4 billion MyoKardia IPRD charge in 2020.
Puerto Rico imposes an excise tax on the gross company purchase price of goods sold from BMS’s manufacturer in Puerto Rico. The excise tax is recognized in Cost of products sold when the intra-entity sale occurs. For U.S. income tax purposes, the excise tax is not deductible but results in foreign tax credits that are generally recognized in BMS’s provision for income taxes when the excise tax is incurred.
Deferred Taxes and Valuation Allowance
The components of current and non-current deferred income tax assets/(liabilities) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Deferred tax assets
|
|
|
|
Foreign net operating loss carryforwards
|
$
|
3,271
|
|
|
$
|
2,480
|
|
|
|
|
|
State net operating loss and credit carryforwards
|
325
|
|
|
263
|
|
U.S. Federal net operating loss and credit carryforwards
|
435
|
|
|
88
|
|
|
|
|
|
Milestone payments and license fees
|
643
|
|
|
558
|
|
|
|
|
|
|
|
|
|
Other foreign deferred tax assets
|
307
|
|
|
370
|
|
Share-based compensation
|
389
|
|
|
521
|
|
|
|
|
|
Other
|
981
|
|
|
650
|
|
Total deferred tax assets
|
6,351
|
|
|
4,930
|
|
Valuation allowance
|
(2,809)
|
|
|
(2,844)
|
|
Deferred tax assets net of valuation allowance
|
$
|
3,542
|
|
|
$
|
2,086
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
Acquired intangible assets
|
$
|
(6,612)
|
|
|
$
|
(7,387)
|
|
Goodwill and other
|
(1,176)
|
|
|
(643)
|
|
Total deferred tax liabilities
|
$
|
(7,788)
|
|
|
$
|
(8,030)
|
|
|
|
|
|
Deferred tax liabilities, net
|
$
|
(4,246)
|
|
|
$
|
(5,944)
|
|
|
|
|
|
Recognized as:
|
|
|
|
Deferred income taxes assets – non-current
|
$
|
1,161
|
|
|
$
|
510
|
|
Deferred income taxes liabilities – non-current
|
(5,407)
|
|
|
(6,454)
|
|
|
|
|
|
Total
|
$
|
(4,246)
|
|
|
$
|
(5,944)
|
|
The U.S. Federal net operating loss carryforwards were $1.5 billion at December 31, 2020. These carryforwards were acquired as a result of certain acquisitions and are subject to limitations under Section 382 of the Internal Revenue Code. The net operating loss carryforwards expire in varying amounts beginning in 2022. The foreign and state net operating loss carryforwards expire in varying amounts beginning in 2021 (certain amounts have unlimited lives).
At December 31, 2020, a valuation allowance of $2.8 billion exists for the following items: $2.0 billion primarily for foreign net operating loss and tax credit carryforwards, $207 million for state deferred tax assets including net operating loss and tax credit carryforwards and $557 million for U.S. Federal deferred tax assets including equity fair value adjustments and U.S. Federal net operating loss carryforwards.
Changes in the valuation allowance were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Balance at beginning of year
|
$
|
2,844
|
|
|
$
|
3,193
|
|
|
$
|
2,827
|
|
Provision
|
62
|
|
|
75
|
|
|
458
|
|
Utilization
|
(488)
|
|
|
(423)
|
|
|
(43)
|
|
Foreign currency translation
|
212
|
|
|
(132)
|
|
|
(48)
|
|
Acquisitions
|
179
|
|
|
228
|
|
|
—
|
|
Non U.S. rate change
|
—
|
|
|
(97)
|
|
|
(1)
|
|
Balance at end of year
|
$
|
2,809
|
|
|
$
|
2,844
|
|
|
$
|
3,193
|
|
Income tax payments were $3.4 billion in 2020, $1.5 billion in 2019 and $747 million in 2018, respectively.
Business is conducted in various countries throughout the world and is subject to tax in numerous jurisdictions. A significant number of tax returns that are filed are subject to examination by various Federal, state and local tax authorities. Tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve. Liabilities are established for possible assessments by tax authorities resulting from known tax exposures including, but not limited to, transfer pricing matters, tax credit deductibility of certain expenses, and deemed repatriation transition tax. Such liabilities represent a reasonable provision for taxes ultimately expected to be paid and may need to be adjusted over time as more information becomes known. The effect of changes in estimates related to contingent tax liabilities is included in the effective tax rate reconciliation above.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (excluding interest and penalties):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Balance at beginning of year
|
$
|
1,905
|
|
|
$
|
995
|
|
|
$
|
1,155
|
|
Gross additions to tax positions related to current year
|
76
|
|
|
170
|
|
|
48
|
|
Gross additions to tax positions related to prior years
|
325
|
|
|
19
|
|
|
21
|
|
Gross additions to tax positions assumed in acquisitions
|
51
|
|
|
852
|
|
|
—
|
|
Gross reductions to tax positions related to prior years
|
(352)
|
|
|
(35)
|
|
|
(106)
|
|
Settlements
|
(7)
|
|
|
(23)
|
|
|
2
|
|
Reductions to tax positions related to lapse of statute
|
(5)
|
|
|
(72)
|
|
|
(119)
|
|
Cumulative translation adjustment
|
10
|
|
|
(1)
|
|
|
(6)
|
|
Balance at end of year
|
$
|
2,003
|
|
|
$
|
1,905
|
|
|
$
|
995
|
|
Additional information regarding unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Unrecognized tax benefits that if recognized would impact the effective tax rate
|
$
|
1,900
|
|
|
$
|
1,809
|
|
|
$
|
853
|
|
Accrued interest
|
366
|
|
|
292
|
|
|
167
|
|
Accrued penalties
|
20
|
|
|
10
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest and penalties payable for unrecognized tax benefits are included in either current or non-current income taxes payable. Interest and penalties related to unrecognized tax benefits are included in income tax expense.
BMS is currently under examination by a number of tax authorities which have proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax positions for the 2008 to 2012 tax years. It is reasonably possible that new issues will be raised by tax authorities which may require adjustments to the amount of unrecognized tax benefits; however, an estimate of such adjustments cannot reasonably be made at this time.
It is also reasonably possible that the total amount of unrecognized tax benefits at December 31, 2020 could decrease in the range of approximately $375 million to $415 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that will likely be audited:
|
|
|
|
|
|
U.S.
|
2008 to 2020
|
Canada
|
2012 to 2020
|
France
|
2016 to 2020
|
Germany
|
2008 to 2020
|
Italy
|
2016 to 2020
|
Japan
|
2015 to 2020
|
Switzerland
|
2016 to 2020
|
UK
|
2012 to 2020
|
Note 8. (LOSS)/EARNINGS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Amounts in Millions, Except Per Share Data
|
2020
|
|
2019
|
|
2018
|
Net (Loss)/Earnings Attributable to BMS Used for Basic and Diluted EPS Calculation
|
$
|
(9,015)
|
|
|
$
|
3,439
|
|
|
$
|
4,920
|
|
|
|
|
|
|
|
Weighted-Average Common Shares Outstanding - Basic
|
2,258
|
|
|
1,705
|
|
|
1,633
|
|
Incremental Shares Attributable to Share-Based Compensation Plans
|
—
|
|
|
7
|
|
|
4
|
|
Weighted-Average Common Shares Outstanding - Diluted
|
2,258
|
|
|
1,712
|
|
|
1,637
|
|
|
|
|
|
|
|
(Loss)/Earnings per Common Share
|
|
|
|
|
|
Basic
|
$
|
(3.99)
|
|
|
$
|
2.02
|
|
|
$
|
3.01
|
|
Diluted
|
(3.99)
|
|
|
2.01
|
|
|
3.01
|
|
The total number of potential shares of common stock excluded from the diluted EPS computation because of the antidilutive impact was 106 million in 2020 and was not material in 2019 and 2018.
Note 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Financial instruments include cash and cash equivalents, marketable securities, accounts receivable and payable, debt instruments and derivatives.
Changes in exchange rates and interest rates create exposure to market risk. Certain derivative financial instruments are used when available on a cost-effective basis to hedge the underlying economic exposure. These instruments qualify as cash flow, net investment and fair value hedges upon meeting certain criteria, including effectiveness of offsetting hedged exposures. Changes in fair value of derivatives that do not qualify for hedge accounting are recognized in earnings as they occur. Derivative financial instruments are not used for trading purposes.
Financial instruments are subject to counterparty credit risk which is considered as part of the overall fair value measurement. Counterparty credit risk is monitored on an ongoing basis and mitigated by limiting amounts outstanding with any individual counterparty, utilizing conventional derivative financial instruments and only entering into agreements with counterparties that meet high credit quality standards. The consolidated financial statements would not be materially impacted if any counterparty failed to perform according to the terms of its agreement. Collateral is not required by any party whether derivatives are in an asset or liability position under the terms of the agreements.
Fair Value Measurements — The fair value of financial instruments are classified into one of the following categories:
Level 1 inputs utilize unadjusted quoted prices in active markets accessible at the measurement date for identical assets or liabilities. The fair value hierarchy provides the highest priority to Level 1 inputs.
Level 2 inputs utilize observable prices for similar instruments and quoted prices for identical or similar instruments in non-active markets. Additionally, certain corporate debt securities utilize a third-party matrix pricing model using significant inputs corroborated by market data for substantially the full term of the assets. Equity and fixed income funds are primarily invested in publicly traded securities valued at the respective NAV of the underlying investments. Level 2 derivative instruments are valued using LIBOR yield curves, less credit valuation adjustments, and observable forward foreign exchange rates at the reporting date. Valuations of derivative contracts may fluctuate considerably from volatility in underlying foreign currencies and underlying interest rates driven by market conditions and the duration of the contract.
Level 3 unobservable inputs are used when little or no market data is available. Level 3 financial liabilities consist of other acquisition related contingent consideration and success payments related to undeveloped product rights resulting from the Celgene acquisition.
Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Dollars in Millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash and cash equivalents - money market and other securities
|
$
|
—
|
|
|
$
|
12,361
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,448
|
|
|
$
|
—
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
—
|
|
|
1,020
|
|
|
—
|
|
|
—
|
|
|
1,227
|
|
|
—
|
|
Commercial paper
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,093
|
|
|
—
|
|
Corporate debt securities
|
—
|
|
|
698
|
|
|
—
|
|
|
—
|
|
|
1,494
|
|
|
—
|
|
Derivative assets
|
—
|
|
|
42
|
|
|
27
|
|
|
—
|
|
|
140
|
|
|
—
|
|
Equity investments
|
3,314
|
|
|
138
|
|
|
—
|
|
|
2,020
|
|
|
175
|
|
|
—
|
|
Derivative liabilities
|
—
|
|
|
(270)
|
|
|
—
|
|
|
—
|
|
|
(40)
|
|
|
—
|
|
Contingent consideration liability:
|
|
|
|
|
|
|
|
|
|
|
|
Contingent value rights
|
530
|
|
|
—
|
|
|
—
|
|
|
2,275
|
|
|
—
|
|
|
—
|
|
Other acquisition related contingent consideration
|
—
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
—
|
|
|
106
|
|
Contingent consideration obligations are recorded at their estimated fair values and BMS revalues these obligations each reporting period until the related contingencies are resolved. The contingent value rights are adjusted to fair value using the traded price of the securities at the end of each reporting period. The fair value measurements for other contingent consideration liabilities are estimated using probability-weighted discounted cash flow approaches that are based on significant unobservable inputs related to product candidates acquired in business combinations and are reviewed quarterly. These inputs include, as applicable, estimated probabilities and timing of achieving specified development and regulatory milestones, estimated annual sales and the discount rate used to calculate the present value of estimated future payments. Significant changes which increase or decrease the probabilities of achieving the related development and regulatory events, shorten or lengthen the time required to achieve such events, or increase or decrease estimated annual sales would result in corresponding increases or decreases in the fair values of these obligations. The fair value of our other acquisition related contingent consideration as of December 31, 2020 and 2019 was calculated using the following significant unobservable inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ranges (weighted average) utilized as of:
|
Inputs
|
December 31, 2020
|
|
December 31, 2019
|
Discount rate
|
0.2% to 0.8% (0.5%)
|
|
2.2% to 3.2% (2.6%)
|
Probability of payment
|
0% to 80% (2.7%)
|
|
0% to 68% (4.1%)
|
Projected year of payment for development and regulatory milestones
|
2021 to 2025
|
|
2020 to 2029
|
There were no transfers between levels 1, 2 and 3 during the year ended December 31, 2020. The following table represents a roll-forward of the fair value of level 3 instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
Dollars in Millions
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
|
|
|
|
|
|
|
|
Fair value as of January 1
|
$
|
—
|
|
|
$
|
106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Changes in estimated fair value
|
—
|
|
|
(33)
|
|
|
—
|
|
|
—
|
|
Acquisitions
|
27
|
|
|
—
|
|
|
—
|
|
|
106
|
|
Foreign exchange
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
Fair value as of December 31
|
$
|
27
|
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
106
|
|
Available-for-sale Debt Securities and Equity Investments
The following table summarizes available-for-sale debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Dollars in Millions
|
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair Value
|
|
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair Value
|
Gains
|
|
Losses
|
Gains
|
|
Losses
|
Certificates of deposit
|
$
|
1,020
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,020
|
|
|
$
|
1,227
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,227
|
|
Commercial paper
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,093
|
|
|
—
|
|
|
—
|
|
|
1,093
|
|
Corporate debt securities
|
684
|
|
|
14
|
|
|
—
|
|
|
698
|
|
|
1,487
|
|
|
8
|
|
|
(1)
|
|
|
1,494
|
|
Total available-for-sale debt securities(a)
|
$
|
1,704
|
|
|
$
|
14
|
|
|
$
|
—
|
|
|
1,718
|
|
|
$
|
3,807
|
|
|
$
|
8
|
|
|
$
|
(1)
|
|
|
3,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) All marketable debt securities mature within five years as of December 31, 2020 and 2019.
The following summarizes the carrying amount of equity investments at December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in Millions
|
|
|
|
|
2020
|
|
2019
|
Equity investments with readily determinable fair values
|
|
|
|
|
$
|
3,452
|
|
|
$
|
2,195
|
|
Equity investments without readily determinable fair values
|
|
|
|
|
694
|
|
|
781
|
|
Equity method and other investment
|
|
|
|
|
549
|
|
|
429
|
|
Total equity investments
|
|
|
|
|
$
|
4,695
|
|
|
$
|
3,405
|
|
The following summarizes the activity related to equity investments. Changes in fair value of equity investments are included in Other (income)/expense, net.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Net gain/(loss) recognized on equity investments with readily determinable fair values(a)
|
$
|
1,169
|
|
|
$
|
170
|
|
|
$
|
(530)
|
|
Realized (loss)/gain recognized on equity investments with readily determinable fair value sold
|
(12)
|
|
|
14
|
|
|
7
|
|
|
|
|
|
|
|
Upward adjustments on equity investments without readily determinable fair value
|
183
|
|
|
58
|
|
|
19
|
|
Impairments and downward adjustments on equity investments without readily determinable fair value
|
(204)
|
|
|
(27)
|
|
|
—
|
|
|
|
|
|
|
|
Cumulative upward adjustments on equity investments without readily determinable fair value
|
192
|
|
|
|
|
|
Cumulative impairments and downward adjustments on equity investments without readily determinable fair value
|
(193)
|
|
|
|
|
|
(a) Net unrealized net gains on equity investments still held were $1.2 billion in 2020 and $156 million in 2019. Unrealized net losses on equity investments still held were $537 million in 2018.
Qualifying Hedges and Non-Qualifying Derivatives
Cash Flow Hedges — Foreign currency forward contracts are used to hedge certain forecasted intercompany inventory purchases and sales transactions and certain foreign currency transactions. The fair value for contracts designated as cash flow hedges are temporarily reported in Accumulated other comprehensive loss and included in earnings when the hedged item affects earnings. The net gain or loss on foreign currency forward contracts is expected to be reclassified to net earnings (primarily included in Cost of products sold and Other (income)/expense, net) within the next 12 months. The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro of $3.5 billion and Japanese yen of $1.2 billion at December 31, 2020.
The earnings impact related to discontinued cash flow hedges and hedge ineffectiveness was not significant during all periods presented. Cash flow hedge accounting is discontinued when the forecasted transaction is no longer probable of occurring within 60 days after the originally forecasted date or when the hedge is no longer effective. Assessments to determine whether derivatives designated as qualifying hedges are highly effective in offsetting changes in the cash flows of hedged items are performed at inception and on a quarterly basis. Foreign currency forward contracts not designated as hedging instruments are used to offset exposures in certain foreign currency denominated assets, liabilities and earnings. Changes in the fair value of these derivatives are recognized in earnings as they occur.
BMS may hedge a portion of its future foreign currency exposure by utilizing a strategy that involves both a purchased local currency put option and a written local currency call option that are accounted for as hedges of future sales denominated in that local currency. Specifically, BMS sells (or writes) a local currency call option and purchases a local currency put option with the same expiration dates and local currency notional amounts but with different strike prices. The premium collected from the sale of the call option is equal to the premium paid for the purchased put option, resulting in no net premium being paid. This combination of transactions is generally referred to as a “zero-cost collar.” The expiration dates and notional amounts correspond to the amount and timing of forecasted foreign currency sales. If the U.S. Dollar weakens relative to the currency of the hedged anticipated sales, the purchased put option value reduces to zero and we benefit from the increase in the U.S. Dollar equivalent value of our anticipated foreign currency cash flows; however, this benefit would be capped at the strike level of the written call, which forms the upper end of the collar.
In 2020, Treasury lock hedge contracts were entered into with a total notional value of $2.1 billion to hedge future interest rate risk associated with the anticipated issuance of long-term debt to fund the MyoKardia acquisition. The Treasury lock contracts were terminated upon the issuance of the 2020 unsecured senior notes and the $51 million proceeds were included in Other Comprehensive (Loss)/Income.
Net Investment Hedges — Non-U.S. dollar borrowings of €950 million ($1.2 billion) at December 31, 2020 are designated as net investment hedges to hedge euro currency exposures of the net investment in certain foreign affiliates and are recognized in long-term debt. The effective portion of foreign exchange gain on the remeasurement of euro debt was included in the foreign currency translation component of Accumulated other comprehensive loss with the related offset in long-term debt.
Cross-currency interest rate swap contracts of $400 million at December 31, 2020 are designated to hedge Japanese yen currency exposure of BMS’s net investment in its Japan subsidiaries. Contract fair value changes are recorded in the foreign currency translation component of Other Comprehensive (Loss)/Income with a related offset in Other non-current assets or Other non-current liabilities.
Fair Value Hedges — Fixed to floating interest rate swap contracts are designated as fair value hedges and used as an interest rate risk management strategy to create an appropriate balance of fixed and floating rate debt. The contracts and underlying debt for the hedged benchmark risk are recorded at fair value. The effective interest rate for the contracts is one-month LIBOR (0.14% as of December 31, 2020) plus an interest rate spread of 4.6%. Gains or losses resulting from changes in fair value of the underlying debt attributable to the hedged benchmark interest rate risk are recorded in interest expense with an associated offset to the carrying value of debt. Since the specific terms and notional amount of the swap are intended to align with the debt being hedged, all changes in fair value of the swap are recorded in interest expense with an associated offset to the derivative asset or liability on the consolidated balance sheet. As a result, there was no net impact in earnings. When the underlying swap is terminated prior to maturity, the fair value adjustment to the underlying debt is amortized as a reduction to interest expense over the remaining term of the debt.
In 2019, forward starting interest rate swap option contracts were entered into with a total notional value of $7.6 billion to hedge future interest rate risk associated with the anticipated issuance of long-term debt to fund the Celgene acquisition. Additionally, deal contingent forward starting interest rate swap contracts were entered into, with an aggregate notional principal amount of $10.4 billion to hedge interest rate risk associated with the issuance of long-term debt to fund the acquisition and the forward starting interest rate swap option contracts were terminated. The deal contingent forward starting interest rate swap contracts were terminated upon the completion of the Celgene acquisition.
The following summarizes the fair value of outstanding derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Asset(a)
|
|
Liability(b)
|
|
Asset(a)
|
|
Liability(b)
|
Dollars in Millions
|
Notional
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
|
Notional
|
|
Fair Value
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
$
|
255
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
255
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cross-currency interest rate swap contracts
|
—
|
|
|
—
|
|
|
400
|
|
|
(10)
|
|
|
175
|
|
|
2
|
|
|
125
|
|
|
(1)
|
|
Foreign currency forward contracts
|
231
|
|
|
1
|
|
|
5,813
|
|
|
(259)
|
|
|
766
|
|
|
27
|
|
|
980
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
1,104
|
|
|
17
|
|
|
336
|
|
|
(1)
|
|
|
2,342
|
|
|
91
|
|
|
1,173
|
|
|
(10)
|
|
Foreign currency zero-cost collar contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,482
|
|
|
14
|
|
|
2,235
|
|
|
(9)
|
|
Other
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(a) Included in Other current assets and Other non-current assets.
(b) Included in Other current liabilities and Other non-current liabilities.
The following table summarizes the financial statement classification and amount of (gain)/loss recognized on hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Dollars in Millions
|
Cost of products sold
|
|
Other (income)/expense, net
|
|
Cost of products sold
|
|
Other (income)/expense, net
|
|
Cost of products sold
|
|
Other (income)/expense, net
|
Interest rate swap contracts
|
$
|
—
|
|
|
$
|
(29)
|
|
|
$
|
—
|
|
|
$
|
(24)
|
|
|
$
|
—
|
|
|
$
|
(23)
|
|
Cross-currency interest rate swap contracts
|
—
|
|
|
(10)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
(8)
|
|
Foreign currency forward contracts
|
(18)
|
|
|
(23)
|
|
|
(103)
|
|
|
11
|
|
|
(4)
|
|
|
(14)
|
|
Forward starting interest rate swap option contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
—
|
|
Deal contingent forward starting interest rate swap contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
240
|
|
|
—
|
|
|
—
|
|
Foreign currency zero-cost collar contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
The following table summarizes the effect of derivative and non-derivative instruments designated as hedging instruments in Other Comprehensive (Loss)/Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Derivatives qualifying as cash flow hedges
|
|
|
|
|
|
Foreign currency forward contracts gain/(loss):
|
|
|
|
|
|
Recognized in Other Comprehensive (Loss)/Income(a)
|
$
|
(267)
|
|
|
$
|
65
|
|
|
$
|
86
|
|
Reclassified to Cost of products sold
|
(54)
|
|
|
(103)
|
|
|
(4)
|
|
|
|
|
|
|
|
Treasury lock hedge contracts gain:
|
|
|
|
|
|
Recognized in Other Comprehensive (Loss)/Income
|
51
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
Derivatives qualifying as net investment hedges
|
|
|
|
|
|
Cross-currency interest rate swap contracts gain/(loss):
|
|
|
|
|
|
Recognized in Other Comprehensive (Loss)/Income
|
(11)
|
|
|
6
|
|
|
(5)
|
|
|
|
|
|
|
|
Non-derivatives qualifying as net investment hedges
|
|
|
|
|
|
Non U.S. dollar borrowings gain/(loss):
|
|
|
|
|
|
Recognized in Other Comprehensive (Loss)/Income
|
(105)
|
|
|
29
|
|
|
45
|
|
(a) The majority is expected to be reclassified into earnings in the next 12 months.
Debt Obligations
In 2020, BMS issued an aggregate principal amount of $7.0 billion of fixed rate unsecured senior notes with proceeds net of discount and deferred loan issuance costs of $6.9 billion. The notes rank equally in right of payment with all of BMS’s existing and future senior unsecured indebtedness and are redeemable at any time, in whole, or in part, at varying specified redemption prices plus accrued and unpaid interest.
In 2019, BMS issued an aggregate principal amount of approximately $19.0 billion of floating rate and fixed rate unsecured senior notes with proceeds net of discount and deferred loan issuance costs of $18.8 billion. The notes rank equally in right of payment with all of BMS’s existing and future senior unsecured indebtedness and the fixed rate notes are redeemable at any time, in whole, or in part, at varying specified redemption prices plus accrued and unpaid interest.
In connection with the Celgene acquisition, BMS commenced offers to exchange outstanding notes issued by Celgene of approximately $19.9 billion for a like-amount of new notes to be issued by BMS (the “exchange offers”). This exchange transaction was accounted for as a modification of the assumed debt instruments. Following the settlement of the exchange offers, BMS issued approximately $18.5 billion of new notes in exchange for the Celgene notes tendered in the exchange offers. The aggregate principal amount of Celgene notes that remained outstanding following the settlement of the exchange offers was approximately $1.3 billion.
In 2019, BMS entered into an $8.0 billion term loan credit agreement consisting of a $1.0 billion 364-day tranche, a $4.0 billion three-year tranche and a $3.0 billion five-year tranche in connection with the Celgene acquisition. The term loan was subject to customary terms and conditions and did not have any financial covenants. The proceeds under the term loan were used to fund a portion of the cash to be paid in the Celgene acquisition and the payment of related fees and expenses. Subsequent to the completion of the acquisition, BMS repaid the term loan in its entirety using cash proceeds generated from the Otezla* divestiture. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information.
The fair value of long-term debt was $58.5 billion and $50.7 billion at December 31, 2020 and 2019, respectively, valued using Level 2 inputs which are based upon the quoted market prices for the same or similar debt instruments. The fair value of short-term borrowings approximates the carrying value due to the short maturities of the debt instruments.
Repayment of Notes at maturity aggregated $2.8 billion in 2020 and $1.3 billion in 2019. Interest payments were $1.6 billion in 2020, $414 million in 2019 and $218 million in 2018.
At December 31, 2020, BMS had four separate revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility that expired in January 2021, a three-year $1.0 billion facility expiring in January 2022 and two five-year $1.5 billion facilities that were extended in January 2021 to September 2024 and July 2025, respectively. The facilities provide for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for BMS’s commercial paper borrowings. BMS’s $1.0 billion facility and its two $1.5 billion revolving facilities are extendable annually by one year on the anniversary date with the consent of the lenders. No borrowings were outstanding under any revolving credit facility at December 31, 2020 or 2019. In January 2021, BMS entered into a 364-day $2.0 billion facility expiring in January 2022, which is extendable annually by one year on the anniversary date with the consent of the lenders.
Available financial guarantees provided in the form of bank overdraft facilities, stand-by letters of credit and performance bonds were approximately $1.2 billion at December 31, 2020. Stand-by letters of credit and guarantees are issued through financial institutions in support of various obligations, including sale of products to hospitals and foreign ministries of health, bonds for customs, and duties and value added tax.
Short-term debt obligations include:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
|
|
|
Non-U.S. short-term borrowings
|
$
|
176
|
|
|
$
|
351
|
|
Current portion of long-term debt
|
2,000
|
|
|
2,763
|
|
Other
|
164
|
|
|
232
|
|
Total
|
$
|
2,340
|
|
|
$
|
3,346
|
|
Long-term debt and the current portion of long-term debt includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Principal Value:
|
|
|
|
Floating Rate Notes due 2020
|
$
|
—
|
|
|
$
|
750
|
|
2.875% Notes due 2020
|
—
|
|
|
1,500
|
|
3.950% Notes due 2020
|
—
|
|
|
500
|
|
2.250% Notes due 2021
|
500
|
|
|
500
|
|
2.550% Notes due 2021
|
1,000
|
|
|
1,000
|
|
2.875% Notes due 2021
|
500
|
|
|
500
|
|
Floating Rate Notes due 2022
|
500
|
|
|
500
|
|
2.000% Notes due 2022
|
750
|
|
|
750
|
|
2.600% Notes due 2022
|
1,500
|
|
|
1,500
|
|
3.250% Notes due 2022
|
1,000
|
|
|
1,000
|
|
3.550% Notes due 2022
|
1,000
|
|
|
1,000
|
|
0.537% Notes due 2023
|
1,500
|
|
|
—
|
|
2.750% Notes due 2023
|
750
|
|
|
750
|
|
3.250% Notes due 2023
|
500
|
|
|
500
|
|
3.250% Notes due 2023
|
1,000
|
|
|
1,000
|
|
4.000% Notes due 2023
|
700
|
|
|
700
|
|
7.150% Notes due 2023
|
302
|
|
|
302
|
|
2.900% Notes due 2024
|
3,250
|
|
|
3,250
|
|
3.625% Notes due 2024
|
1,000
|
|
|
1,000
|
|
0.750% Notes due 2025
|
1,000
|
|
|
—
|
|
1.000% Euro Notes due 2025
|
701
|
|
|
638
|
|
3.875% Notes due 2025
|
2,500
|
|
|
2,500
|
|
3.200% Notes due 2026
|
2,250
|
|
|
2,250
|
|
6.800% Notes due 2026
|
256
|
|
|
256
|
|
1.125% Notes due 2027
|
1,000
|
|
|
—
|
|
3.250% Notes due 2027
|
750
|
|
|
750
|
|
3.450% Notes due 2027
|
1,000
|
|
|
1,000
|
|
3.900% Notes due 2028
|
1,500
|
|
|
1,500
|
|
3.400% Notes due 2029
|
4,000
|
|
|
4,000
|
|
1.450% Notes due 2030
|
1,250
|
|
|
—
|
|
1.750% Euro Notes due 2035
|
701
|
|
|
638
|
|
5.875% Notes due 2036
|
287
|
|
|
287
|
|
6.125% Notes due 2038
|
226
|
|
|
226
|
|
4.125% Notes due 2039
|
2,000
|
|
|
2,000
|
|
2.350% Notes due 2040
|
750
|
|
|
—
|
|
5.700% Notes due 2040
|
250
|
|
|
250
|
|
3.250% Notes due 2042
|
500
|
|
|
500
|
|
5.250% Notes due 2043
|
400
|
|
|
400
|
|
4.500% Notes due 2044
|
500
|
|
|
500
|
|
4.625% Notes due 2044
|
1,000
|
|
|
1,000
|
|
5.000% Notes due 2045
|
2,000
|
|
|
2,000
|
|
4.350% Notes due 2047
|
1,250
|
|
|
1,250
|
|
4.550% Notes due 2048
|
1,500
|
|
|
1,500
|
|
4.250% Notes due 2049
|
3,750
|
|
|
3,750
|
|
2.550% Notes due 2050
|
1,500
|
|
|
—
|
|
6.875% Notes due 2097
|
87
|
|
|
87
|
|
0.13% - 5.75% Other - maturing through 2024
|
51
|
|
|
51
|
|
Total
|
$
|
48,711
|
|
|
$
|
44,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Principal Value
|
$
|
48,711
|
|
|
$
|
44,335
|
|
|
|
|
|
Adjustments to Principal Value:
|
|
|
|
Fair value of interest rate swap contracts
|
24
|
|
|
6
|
|
Unamortized basis adjustment from swap terminations
|
149
|
|
|
175
|
|
Unamortized bond discounts and issuance costs
|
(303)
|
|
|
(280)
|
|
Unamortized purchase price adjustments of Celgene debt
|
1,755
|
|
|
1,914
|
|
Total
|
$
|
50,336
|
|
|
$
|
46,150
|
|
|
|
|
|
Current portion of long-term debt
|
2,000
|
|
|
2,763
|
|
Long-term debt
|
48,336
|
|
|
43,387
|
|
Total
|
$
|
50,336
|
|
|
$
|
46,150
|
|
Note 10. RECEIVABLES
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Trade receivables
|
$
|
7,882
|
|
|
$
|
6,888
|
|
Less charge-backs and cash discounts
|
(645)
|
|
|
(391)
|
|
Less allowance for expected credit loss
|
(18)
|
|
|
(21)
|
|
Net trade receivables
|
7,219
|
|
|
6,476
|
|
|
|
|
|
Alliance, Royalties, VAT and other
|
1,282
|
|
|
1,209
|
|
Receivables
|
$
|
8,501
|
|
|
$
|
7,685
|
|
Non-U.S. receivables sold on a nonrecourse basis were $1.2 billion in 2020, $797 million in 2019 and $756 million in 2018. In the aggregate, receivables from three pharmaceutical wholesalers in the U.S. represented approximately 56% and 50% of total trade receivables at December 31, 2020 and 2019, respectively.
Changes to the allowances for expected credit loss, charge-backs and cash discounts were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Balance at beginning of year
|
$
|
412
|
|
|
$
|
278
|
|
|
$
|
252
|
|
Celgene acquisition
|
—
|
|
|
116
|
|
|
—
|
|
Provision(a)
|
5,839
|
|
|
3,687
|
|
|
2,739
|
|
Utilization
|
(5,601)
|
|
|
(3,667)
|
|
|
(2,707)
|
|
Other
|
13
|
|
|
(2)
|
|
|
(6)
|
|
Balance at end of year
|
$
|
663
|
|
|
$
|
412
|
|
|
$
|
278
|
|
(a) Includes provision for expected credit loss of $12 million in 2020, $12 million in 2019 and $4 million in 2018.
Certain prior year amounts previously included in provision are presented in utilization.
Note 11. INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Finished goods
|
$
|
932
|
|
|
$
|
2,227
|
|
Work in process
|
2,015
|
|
|
3,267
|
|
Raw and packaging materials
|
207
|
|
|
172
|
|
Total Inventories
|
$
|
3,154
|
|
|
$
|
5,666
|
|
|
|
|
|
Inventories
|
$
|
2,074
|
|
|
$
|
4,293
|
|
Other non-current assets
|
1,080
|
|
|
1,373
|
|
Total inventories include fair value adjustments resulting from the Celgene acquisition of approximately $774 million and $3.5 billion at December 31, 2020 and 2019, respectively, which will be recognized in future periods. Other non-current assets include inventory expected to remain on hand beyond one year in both periods.
Note 12. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Land
|
$
|
189
|
|
|
$
|
187
|
|
Buildings
|
5,732
|
|
|
6,336
|
|
Machinery, equipment and fixtures
|
3,063
|
|
|
3,157
|
|
Construction in progress
|
487
|
|
|
527
|
|
Gross property, plant and equipment
|
9,471
|
|
|
10,207
|
|
Less accumulated depreciation
|
(3,585)
|
|
|
(3,955)
|
|
Property, plant and equipment(a)
|
$
|
5,886
|
|
|
$
|
6,252
|
|
|
|
|
|
United States
|
$
|
4,501
|
|
|
$
|
4,835
|
|
Europe
|
1,243
|
|
|
1,291
|
|
Rest of the World
|
142
|
|
|
126
|
|
Total
|
$
|
5,886
|
|
|
$
|
6,252
|
|
(a) Includes measurement period adjustments. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information.
Depreciation expense was $586 million in 2020, $554 million in 2019 and $505 million in 2018.
Note 13. LEASES
Leased facilities for office, research and development, and storage and distribution purposes, comprise approximately 90% of the total lease obligation. Lease terms vary based on the nature of operations and the market dynamics in each country; however, all leased facilities are classified as operating leases with remaining lease terms between one year and 20 years. Most leases contain specific renewal options for periods ranging between one year and 10 years where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Certain leases also contain termination options that provide the flexibility to terminate the lease ahead of its expiration with sufficient advance notice. Periods covered by an option to terminate the lease were included in the non-cancellable lease term when exercise of the option was determined not to be reasonably certain. Judgment is required in assessing whether renewal and termination options are reasonably certain to be exercised. Factors are considered such as contractual terms compared to current market rates, leasehold improvements expected to have significant value, costs to terminate a lease and the importance of the facility to operations. Costs determined to be variable and not based on an index or rate were not included in the measurement of real estate lease liabilities. These variable costs include real estate taxes, insurance, utilities, common area maintenance and other operating costs. As the implicit rate on most leases is not readily determinable, an incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.
The remaining 10% of lease obligations are comprised of vehicles used primarily by salesforce and an R&D facility operated by a third party under management’s direction. Vehicle lease terms vary by country with terms generally between one year and four years.
The following table summarizes the components of lease expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Operating lease cost
|
$
|
194
|
|
|
$
|
115
|
|
Variable lease cost
|
50
|
|
|
25
|
|
Short-term lease cost
|
19
|
|
|
20
|
|
Sublease income
|
(4)
|
|
|
(4)
|
|
Total operating lease expense
|
$
|
259
|
|
|
$
|
156
|
|
Operating lease right-of-use assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Other non-current assets
|
$
|
859
|
|
|
$
|
704
|
|
|
|
|
|
Other current liabilities
|
164
|
|
|
133
|
|
Other non-current liabilities
|
833
|
|
|
672
|
|
Total liabilities
|
$
|
997
|
|
|
$
|
805
|
|
Future lease payments for non-cancellable operating leases as of December 31, 2020 were as follows:
|
|
|
|
|
|
Dollars in Millions
|
|
2021
|
$
|
195
|
|
2022
|
169
|
|
2023
|
142
|
|
2024
|
106
|
|
2025
|
84
|
|
Thereafter
|
468
|
|
Total future lease payments
|
1,164
|
|
|
|
Less imputed interest
|
(167)
|
|
Total lease liability
|
$
|
997
|
|
Right-of-use assets obtained in exchange for new operating lease obligations were $326 million in 2020 which includes $82 million of right-of-use assets acquired in the MyoKardia acquisition. Cash paid for amounts included in the measurement of operating lease liabilities was $164 million in 2020 and $79 million in 2019. Cash paid in 2019 was net of a $33 million lease incentive received.
Undiscounted lease obligations for operating leases not yet commenced were approximately $750 million as of December 31, 2020. The obligation primarily relates to a research and development facility that is being constructed by the lessor and which is expected to be ready for use in 2022.
A right-of-use asset impairment charge of $31 million was incurred during 2020 due to a site vacancy and partial sublease. The fair value of the right-of-use asset was determined using an income approach incorporating potential future cash flows associated with the sublease of the building.
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Weighted average remaining lease term
|
9.0 years
|
|
9.0 years
|
Weighted average discount rate
|
3
|
%
|
|
4
|
%
|
Note 14. GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful Lives
|
|
December 31,
|
Dollars in Millions
|
|
2020
|
|
2019
|
Goodwill(a)
|
|
|
$
|
20,547
|
|
|
$
|
22,488
|
|
|
|
|
|
|
|
Other intangible assets:
|
|
|
|
|
|
Licenses
|
5 – 15 years
|
|
328
|
|
|
482
|
|
Acquired marketed product rights(a)
|
3 – 15 years
|
|
59,076
|
|
|
46,827
|
|
Capitalized software
|
3 – 10 years
|
|
1,325
|
|
|
1,297
|
|
IPRD
|
|
|
6,130
|
|
|
19,500
|
|
Gross other intangible assets
|
|
|
66,859
|
|
|
68,106
|
|
Less accumulated amortization
|
|
|
(13,616)
|
|
|
(4,137)
|
|
Other intangible assets
|
|
|
$
|
53,243
|
|
|
$
|
63,969
|
|
(a) Includes measurement period adjustments. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information.
In 2020, $13.1 billion of IPRD was reclassified to acquired marketed product rights upon approval in the U.S. for Reblozyl for the treatment of anemia in adults with lower-risk MDS, Zeposia and Onureg. Amortization expense of other intangible assets was $9.9 billion in 2020, $1.3 billion in 2019 and $198 million in 2018. Future annual amortization expense of other intangible assets is expected to be approximately $10.2 billion in 2021, $10.1 billion in 2022, $9.5 billion in 2023 $8.5 billion in 2024 and $1.2 billion in 2025.
Other intangible asset impairment charges were $1.1 billion in 2020, $66 million in 2019 and $84 million in 2018, respectively.
In 2020, a $575 million impairment charge was recorded in Cost of products sold resulting from the lower cash flow projections reflecting revised commercial forecasts for Inrebic, resulting in the full impairment of the asset. Additionally, a $470 million impairment charge was recorded in Research and development expense following a decision to discontinue the orva-cel program development. Inrebic and orva-cel were obtained in connection with the acquisition of Celgene. In 2019, a $32 million IPRD impairment charge was recorded in Research and development expense following a decision to discontinue development of an investigational compound obtained in the acquisition of Medarex. In 2018, a $64 million impairment charge was recorded in Other (income)/expense, net for an out-licensed asset obtained in the 2010 acquisition of ZymoGenetics, Inc., which did not meet its primary endpoint in a Phase II clinical study.
Note 15. SUPPLEMENTAL FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Prepaid and refundable income taxes
|
$
|
1,799
|
|
|
$
|
754
|
|
Research and development
|
492
|
|
|
410
|
|
Equity investments
|
619
|
|
|
—
|
|
Other(a)
|
876
|
|
|
819
|
|
Other current assets
|
$
|
3,786
|
|
|
$
|
1,983
|
|
(a) Includes restricted cash of $89 million and $84 million at December 31, 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Equity investments
|
$
|
4,076
|
|
|
$
|
3,405
|
|
Inventories
|
1,080
|
|
|
1,373
|
|
Operating leases
|
859
|
|
|
704
|
|
Pension and postretirement
|
208
|
|
|
456
|
|
Restricted cash
|
338
|
|
|
390
|
|
Other
|
458
|
|
|
276
|
|
Other non-current assets
|
$
|
7,019
|
|
|
$
|
6,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Rebates and returns
|
$
|
5,688
|
|
|
$
|
4,275
|
|
Income taxes payable
|
647
|
|
|
1,517
|
|
Employee compensation and benefits
|
1,412
|
|
|
1,457
|
|
Research and development
|
1,423
|
|
|
1,324
|
|
Dividends
|
1,129
|
|
|
1,025
|
|
Interest
|
434
|
|
|
493
|
|
Royalties
|
461
|
|
|
418
|
|
Operating leases
|
164
|
|
|
133
|
|
Contingent value rights
|
515
|
|
|
—
|
|
Other
|
2,154
|
|
|
1,871
|
|
Other current liabilities
|
$
|
14,027
|
|
|
$
|
12,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Income taxes payable
|
$
|
5,017
|
|
|
$
|
5,368
|
|
Contingent value rights
|
15
|
|
|
2,275
|
|
Pension and postretirement
|
899
|
|
|
725
|
|
Operating leases
|
833
|
|
|
672
|
|
Deferred income
|
357
|
|
|
424
|
|
Deferred compensation
|
344
|
|
|
287
|
|
Other
|
311
|
|
|
350
|
|
Other non-current liabilities
|
$
|
7,776
|
|
|
$
|
10,101
|
|
Note 16. EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Capital in Excess
of Par Value
of Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Retained
Earnings
|
|
Treasury Stock
|
|
Noncontrolling
Interest
|
Dollars and Shares in Millions
|
Shares
|
|
Par Value
|
|
|
Shares
|
|
Cost
|
|
Balance at January 1, 2018
|
2,208
|
|
|
$
|
221
|
|
|
$
|
1,898
|
|
|
$
|
(2,289)
|
|
|
$
|
31,160
|
|
|
575
|
|
|
$
|
(19,249)
|
|
|
$
|
106
|
|
Accounting change - cumulative effect(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(34)
|
|
|
332
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted balance at January 1, 2018
|
2,208
|
|
|
221
|
|
|
1,898
|
|
|
(2,323)
|
|
|
31,492
|
|
|
575
|
|
|
(19,249)
|
|
|
106
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,920
|
|
|
—
|
|
|
—
|
|
|
27
|
|
Other Comprehensive (Loss)Income
|
—
|
|
|
—
|
|
|
—
|
|
|
(156)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash dividends declared(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,630)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Share repurchase program
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(313)
|
|
|
—
|
|
Stock compensation
|
—
|
|
|
—
|
|
|
183
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
(12)
|
|
|
—
|
|
Adoption of ASU 2018-02
|
—
|
|
|
—
|
|
|
—
|
|
|
(283)
|
|
|
283
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37)
|
|
Balance at December 31, 2018
|
2,208
|
|
|
221
|
|
|
2,081
|
|
|
(2,762)
|
|
|
34,065
|
|
|
576
|
|
|
(19,574)
|
|
|
96
|
|
Accounting change - cumulative effect(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Adjusted balance at January 1, 2019
|
2,208
|
|
|
221
|
|
|
2,081
|
|
|
(2,762)
|
|
|
34,070
|
|
|
576
|
|
|
(19,574)
|
|
|
96
|
|
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,439
|
|
|
—
|
|
|
—
|
|
|
21
|
|
Other Comprehensive (Loss)/Income
|
—
|
|
|
—
|
|
|
—
|
|
|
1,242
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Celgene acquisition
|
715
|
|
|
71
|
|
|
42,721
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash dividends declared(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,035)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Share repurchase program
|
—
|
|
|
—
|
|
|
(1,400)
|
|
|
—
|
|
|
—
|
|
|
105
|
|
|
(5,900)
|
|
|
—
|
|
Stock compensation
|
—
|
|
|
—
|
|
|
307
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
|
117
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17)
|
|
Balance at December 31, 2019
|
2,923
|
|
|
292
|
|
|
43,709
|
|
|
(1,520)
|
|
|
34,474
|
|
|
672
|
|
|
(25,357)
|
|
|
100
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,015)
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Other Comprehensive (Loss)/Income
|
—
|
|
|
—
|
|
|
—
|
|
|
(319)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,178)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Share repurchase program
|
—
|
|
|
—
|
|
|
1,400
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
(2,993)
|
|
|
—
|
|
Stock compensation
|
—
|
|
|
—
|
|
|
(784)
|
|
|
—
|
|
|
—
|
|
|
(36)
|
|
|
2,113
|
|
|
—
|
|
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60)
|
|
Balance at December 31, 2020
|
2,923
|
|
|
$
|
292
|
|
|
$
|
44,325
|
|
|
$
|
(1,839)
|
|
|
$
|
21,281
|
|
|
679
|
|
|
$
|
(26,237)
|
|
|
$
|
60
|
|
(a) Cumulative effect resulting from adoption of ASU 2014-09 and ASU 2016-02.
(b) Cash dividends declared per common share were $1.84 in 2020, $1.68 in 2019 and $1.61 in 2018.
BMS has a share repurchase program, authorized by its Board of Directors, allowing for repurchases of its shares effected in the open market or through privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, including through Rule 10b5-1 trading plans. The share repurchase program does not have an expiration date and may be suspended or discontinued at any time. Treasury stock is recognized at the cost to reacquire the shares. Shares issued from treasury are recognized utilizing the first-in first-out method.
BMS repurchased approximately 27 million shares of its common stock for $1.6 billion during the year ended December 31, 2020. The remaining share repurchase capacity under the share repurchase program was approximately $4.4 billion as of December 31, 2020.
In 2019, BMS executed accelerated share repurchase agreements (“ASR”) to repurchase an aggregate $7 billion of common stock. The ASR was funded with cash on-hand. Approximately 99 million shares of common stock (80% of the $7 billion aggregate repurchase price) were received by BMS and included in treasury stock. In 2020, the agreement was settled and approximately 16 million shares of common stock were received by BMS and transferred to treasury stock.
The components of Other Comprehensive (Loss)/Income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Dollars in Millions
|
Pretax
|
|
Tax
|
|
After Tax
|
|
Pretax
|
|
Tax
|
|
After Tax
|
|
Pretax
|
|
Tax
|
|
After Tax
|
Derivatives qualifying as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses)/gains
|
$
|
(216)
|
|
|
$
|
7
|
|
|
$
|
(209)
|
|
|
$
|
65
|
|
|
$
|
(7)
|
|
|
$
|
58
|
|
|
$
|
86
|
|
|
$
|
(9)
|
|
|
$
|
77
|
|
Reclassified to net earnings(a)
|
(54)
|
|
|
7
|
|
|
(47)
|
|
|
(103)
|
|
|
13
|
|
|
(90)
|
|
|
(4)
|
|
|
(3)
|
|
|
(7)
|
|
Derivatives qualifying as cash flow hedges
|
(270)
|
|
|
14
|
|
|
(256)
|
|
|
(38)
|
|
|
6
|
|
|
(32)
|
|
|
82
|
|
|
(12)
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (losses)/gains
|
(134)
|
|
|
25
|
|
|
(109)
|
|
|
(143)
|
|
|
28
|
|
|
(115)
|
|
|
(89)
|
|
|
(3)
|
|
|
(92)
|
|
Amortization(b)
|
33
|
|
|
(6)
|
|
|
27
|
|
|
55
|
|
|
(11)
|
|
|
44
|
|
|
65
|
|
|
(13)
|
|
|
52
|
|
Settlements(b)
|
10
|
|
|
(3)
|
|
|
7
|
|
|
1,640
|
|
|
(366)
|
|
|
1,274
|
|
|
121
|
|
|
(28)
|
|
|
93
|
|
Pension and postretirement benefits
|
(91)
|
|
|
16
|
|
|
(75)
|
|
|
1,552
|
|
|
(349)
|
|
|
1,203
|
|
|
97
|
|
|
(44)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains/(losses)
|
7
|
|
|
(1)
|
|
|
6
|
|
|
42
|
|
|
(9)
|
|
|
33
|
|
|
(30)
|
|
|
5
|
|
|
(25)
|
|
Realized (gains)/losses(b)
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Available-for-sale securities
|
6
|
|
|
(1)
|
|
|
5
|
|
|
45
|
|
|
(9)
|
|
|
36
|
|
|
(30)
|
|
|
5
|
|
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
(19)
|
|
|
26
|
|
|
7
|
|
|
43
|
|
|
(8)
|
|
|
35
|
|
|
(245)
|
|
|
(9)
|
|
|
(254)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive (Loss)/Income
|
$
|
(374)
|
|
|
$
|
55
|
|
|
$
|
(319)
|
|
|
$
|
1,602
|
|
|
$
|
(360)
|
|
|
$
|
1,242
|
|
|
$
|
(96)
|
|
|
$
|
(60)
|
|
|
$
|
(156)
|
|
(a) Included in Cost of products sold.
(b) Included in Other (income)/expense, net.
The accumulated balances related to each component of Other Comprehensive (Loss)/Income, net of taxes, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Derivatives qualifying as cash flow hedges
|
$
|
(237)
|
|
|
$
|
19
|
|
Pension and postretirement benefits
|
(974)
|
|
|
(899)
|
|
Available-for-sale securities
|
11
|
|
|
6
|
|
Foreign currency translation
|
(639)
|
|
|
(646)
|
|
Accumulated other comprehensive loss
|
$
|
(1,839)
|
|
|
$
|
(1,520)
|
|
Note 17. RETIREMENT BENEFITS
BMS sponsors defined benefit pension plans, defined contribution plans and termination indemnity plans for regular full-time employees. The principal defined benefit pension plan was the Bristol-Myers Squibb Retirement Income Plan (the “Plan”), which covered most U.S. employees. Future benefits related to service for the Plan were eliminated in 2009. BMS contributed at least the minimum amount required by ERISA. Plan benefits were based primarily on the participant’s years of credited service and final average compensation.
In 2018, BMS announced plans to fully terminate the Plan. Pension obligations related to the Plan were to be distributed through a combination of lump sum payments to eligible Plan participants who elected such payments and through the purchase of group annuity contracts from wholly owned insurance subsidiaries of Athene Holding Ltd. (“Athene”). In 2019, $1.3 billion was distributed to Plan participants who elected lump sum payments during the election window, and group annuity contracts were purchased from Athene for $2.6 billion for the remaining Plan participants for whom Athene irrevocably assumed the pension obligations. These transactions fully terminated the Plan and resulted in a $1.5 billion non-cash pre-tax pension settlement charge in 2019.
The principal U.S. defined benefit pension plan was over-funded at termination. As a result, excess Plan assets of $424 million are reflected as BMS assets as of December 31, 2019. These assets are primarily reported in long term restricted cash due to the election to contribute these assets to the Bristol-Myers Squibb Savings and Investment Program, a qualified replacement plan. This election requires that these assets be used to fund future annual Company contribution to the Bristol-Myers Squibb Savings and Investment Program.
BMS acquired Celgene on November 20, 2019. Certain of Celgene’s international subsidiaries have both funded and unfunded defined benefit pension plans. We have recorded the fair value of the Celgene plans using assumptions and accounting policies consistent with those disclosed by BMS. Upon acquisition, the excess of projected benefit obligation over the plan assets was recognized as a liability and previously existing deferred actuarial gains and losses and unrecognized service costs or benefits were eliminated.
The net periodic benefit cost/(credit) of defined benefit pension plans includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
Service cost — benefits earned during the year
|
$
|
48
|
|
|
$
|
26
|
|
|
$
|
26
|
|
Interest cost on projected benefit obligation
|
42
|
|
|
115
|
|
|
193
|
|
Expected return on plan assets
|
(98)
|
|
|
(200)
|
|
|
(386)
|
|
Amortization of prior service credits
|
(4)
|
|
|
(4)
|
|
|
(4)
|
|
Amortization of net actuarial loss
|
44
|
|
|
59
|
|
|
74
|
|
Settlements and Curtailments
|
10
|
|
|
1,640
|
|
|
121
|
|
|
|
|
|
|
|
Net periodic pension benefit cost/(credit)
|
$
|
42
|
|
|
$
|
1,636
|
|
|
$
|
24
|
|
Pension settlement charges were recognized after determining the annual lump sum payments will exceed the annual interest and service costs for certain pension plans, including the primary U.S. pension plan in 2019 and 2018.
Changes in defined benefit pension plan obligations, assets, funded status and amounts recognized in the consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Benefit obligations at beginning of year
|
$
|
2,940
|
|
|
$
|
5,966
|
|
Service cost—benefits earned during the year
|
48
|
|
|
26
|
|
Interest cost
|
42
|
|
|
115
|
|
Settlements and Curtailments
|
(145)
|
|
|
(4,105)
|
|
Actuarial losses
|
233
|
|
|
777
|
|
Benefits paid
|
(58)
|
|
|
(109)
|
|
Acquisition/Divestiture
|
—
|
|
|
262
|
|
Foreign currency and other
|
182
|
|
|
8
|
|
Benefit obligations at end of year
|
$
|
3,242
|
|
|
$
|
2,940
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
2,536
|
|
|
$
|
6,129
|
|
Actual return on plan assets
|
196
|
|
|
804
|
|
Employer contributions
|
96
|
|
|
63
|
|
Settlements
|
(126)
|
|
|
(4,104)
|
|
Benefits paid
|
(58)
|
|
|
(109)
|
|
Asset transfer
|
—
|
|
|
(424)
|
|
Acquisition/Divestiture
|
—
|
|
|
164
|
|
Foreign currency and other
|
163
|
|
|
13
|
|
Fair value of plan assets at end of year
|
$
|
2,807
|
|
|
$
|
2,536
|
|
|
|
|
|
Unfunded status
|
$
|
(435)
|
|
|
$
|
(404)
|
|
|
|
|
|
Assets/(Liabilities) recognized:
|
|
|
|
Other non-current assets
|
$
|
208
|
|
|
$
|
192
|
|
Other current liabilities
|
(26)
|
|
|
(27)
|
|
Other non-current liabilities
|
(617)
|
|
|
(569)
|
|
Funded status
|
$
|
(435)
|
|
|
$
|
(404)
|
|
|
|
|
|
Recognized in Accumulated other comprehensive loss:
|
|
|
|
Net actuarial losses
|
$
|
1,255
|
|
|
$
|
1,192
|
|
Prior service credit
|
(22)
|
|
|
(26)
|
|
Total
|
$
|
1,233
|
|
|
$
|
1,166
|
|
The accumulated benefit obligation for defined benefit pension plans was $3.2 billion and $2.9 billion at December 31, 2020 and 2019, respectively.
Additional information related to pension plans was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
Pension plans with projected benefit obligations in excess of plan assets:
|
|
|
|
Projected benefit obligation
|
$
|
1,805
|
|
|
$
|
1,652
|
|
Fair value of plan assets
|
1,162
|
|
|
1,056
|
|
Pension plans with accumulated benefit obligations in excess of plan assets:
|
|
|
|
Accumulated benefit obligation
|
1,579
|
|
|
1,417
|
|
Fair value of plan assets
|
952
|
|
|
875
|
|
Actuarial Assumptions
Weighted-average assumptions used to determine defined benefit pension plan obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Discount rate
|
1.2
|
%
|
|
1.6
|
%
|
Rate of compensation increase
|
1.3
|
%
|
|
1.3
|
%
|
Interest crediting rate
|
2.2
|
%
|
|
2.2
|
%
|
Weighted-average actuarial assumptions used to determine defined benefit pension plan net periodic benefit cost/(credit) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Discount rate
|
1.6
|
%
|
|
3.2
|
%
|
|
3.1
|
%
|
Expected long-term return on plan assets
|
4.1
|
%
|
|
4.5
|
%
|
|
6.2
|
%
|
Rate of compensation increase
|
1.3
|
%
|
|
0.5
|
%
|
|
0.5
|
%
|
Interest crediting rate
|
2.2
|
%
|
|
2.7
|
%
|
|
2.6
|
%
|
The yield on high quality corporate bonds matching the duration of the benefit obligations is used in determining the discount rate. The Citi Pension Discount curve is used in developing the discount rate for the U.S. plans.
The expected return on plan assets assumption for each plan is based on management’s expectations of long-term average rates of return to be achieved by the underlying investment portfolio. Several factors are considered in developing the expected return on plan assets, including long-term historical returns and input from external advisors. Individual asset class return forecasts were developed based upon market conditions, for example, price-earnings levels and yields and long-term growth expectations. The expected long-term rate of return is the weighted-average of the target asset allocation of each individual asset class.
Actuarial gains and losses resulted from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates) and from differences between assumed and actual experience (such as differences between actual and expected return on plan assets). Actuarial losses in 2020 and 2019 related to plan benefit obligations were primarily the result of decreases in discount rates. Actuarial gains in 2018 related to plan benefit obligations were primarily the result of increases in discount `rates. Gains and losses are amortized over the life expectancy of the plan participants for U.S. plans (25 years in 2021) and expected remaining service periods for most other plans to the extent they exceed 10% of the higher of the market-related value or the projected benefit obligation for each respective plan.
Postretirement Benefit Plans
Comprehensive medical and group life benefits are provided for substantially all legacy BMS U.S. retirees electing to participate in comprehensive medical and group life plans and to a lesser extent certain benefits for non-U.S. employees. The medical plan is contributory. Contributions are adjusted periodically and vary by date of retirement. The life insurance plan is noncontributory. Postretirement benefit plan assets consist principally of fixed-income securities. Postretirement benefit plan obligations were $267 million and $255 million at December 31, 2020 and 2019, respectively, and the fair value of plan assets was $398 million at December 31, 2019. The weighted-average discount rate used to determine benefit obligations was 2.0% and 2.9% at December 31, 2020 and 2019, respectively. The net periodic benefit credits were not material.
As a result of the Bristol-Myers Squibb Retirement Income Plan's termination in 2019, $381 million of assets held in a separate account within the Pension Trust used to fund retiree medical plan payments was reverted back to the Company in 2020, resulting in an excise tax of $76 million.
Plan Assets
The fair value of pension and postretirement plan assets by asset category at December 31, 2020 and 2019 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
Dollars in Millions
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
$
|
101
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
87
|
|
Equity funds
|
—
|
|
|
601
|
|
|
—
|
|
|
601
|
|
|
4
|
|
|
544
|
|
|
—
|
|
|
548
|
|
Fixed income funds
|
—
|
|
|
783
|
|
|
—
|
|
|
783
|
|
|
—
|
|
|
769
|
|
|
—
|
|
|
769
|
|
Corporate debt securities
|
—
|
|
|
533
|
|
|
—
|
|
|
533
|
|
|
—
|
|
|
764
|
|
|
—
|
|
|
764
|
|
U.S. Treasury and agency securities
|
—
|
|
|
70
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
Insurance contracts
|
—
|
|
|
—
|
|
|
149
|
|
|
149
|
|
|
—
|
|
|
—
|
|
|
128
|
|
|
128
|
|
Cash and cash equivalents
|
96
|
|
|
—
|
|
|
—
|
|
|
96
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
24
|
|
Other
|
—
|
|
|
112
|
|
|
40
|
|
|
152
|
|
|
—
|
|
|
111
|
|
|
33
|
|
|
144
|
|
Plan assets subject to leveling
|
$
|
197
|
|
|
$
|
2,099
|
|
|
$
|
189
|
|
|
$
|
2,485
|
|
|
$
|
115
|
|
|
$
|
2,356
|
|
|
$
|
161
|
|
|
$
|
2,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets measured at NAV as a practical expedient
|
|
|
|
|
|
322
|
|
|
|
|
|
|
|
|
302
|
|
Net plan assets
|
|
|
|
|
|
|
$
|
2,807
|
|
|
|
|
|
|
|
|
$
|
2,934
|
|
The investment valuation policies per investment class are as follows:
Level 1 inputs utilize unadjusted quoted prices in active markets accessible at the measurement date for identical assets or liabilities. The fair value hierarchy provides the highest priority to Level 1 inputs. These instruments include equity securities, equity funds and fixed income funds publicly traded on a national securities exchange, and cash and cash equivalents. Cash and cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase and are recognized at cost, which approximates fair value. Pending trade sales and purchases are included in cash and cash equivalents until final settlement.
Level 2 inputs utilize observable prices for similar instruments, quoted prices for identical or similar instruments in non-active markets, and other observable inputs that can be corroborated by market data for substantially the full term of the assets or liabilities. Equity funds and fixed income funds classified as Level 2 within the fair value hierarchy are valued at the NAV of their shares held at year end, which represents fair value. Corporate debt securities and U.S. Treasury and agency securities classified as Level 2 within the fair value hierarchy are valued utilizing observable prices for similar instruments and quoted prices for identical or similar instruments in markets that are not active.
Level 3 unobservable inputs are used when little or no market data is available. Insurance contracts are held by certain foreign pension plans and are carried at contract value, which approximates the estimated fair value and is based on the fair value of the underlying investment of the insurance company.
Investments using the practical expedient consist primarily of multi-asset funds which are redeemable on either a daily, weekly, or monthly basis.
The investment strategy is to maximize return while maintaining an appropriate level of risk to provide sufficient liquidity for benefit obligations and plan expenses. Individual plan investment allocations are determined by local fiduciary committees and the composition of total assets for all pension plans at December 31, 2020 was broadly characterized as an allocation between equity securities (28%), debt securities (60%) and other investments (12%).
Contributions and Estimated Future Benefit Payments
Contributions to pension plans were $96 million in 2020, $63 million in 2019, and $71 million in 2018, and are not expected to be material in 2021. Estimated annual future benefit payments for non-terminating plans (including lump sum payments) will be approximately $140 million in 2021 and approximately $125 million in each of the next four years and in the subsequent five year period.
Savings Plans
The principal defined contribution plan is the Bristol-Myers Squibb Savings and Investment Program. The contributions are based on employee contributions and the level of Company match. The expense attributed to defined contribution plans in the U.S. was approximately $290 million in 2020 and $200 million in 2019 and 2018, respectively.
Note 18. EMPLOYEE STOCK BENEFIT PLANS
On May 1, 2012, the shareholders approved the 2012 Plan, which replaced the 2007 Stock Incentive Plan. The 2012 Plan provides for 109 million shares to be authorized for grants, plus any shares from outstanding awards under the 2007 Plan as of February 29, 2012 that expire, are forfeited, canceled, or withheld to satisfy tax withholding obligations. As of December 31, 2020, 95 million shares were available for award. Shares are issued from treasury stock to satisfy BMS’s obligations under this Plan.
As part of the Celgene acquisition, BMS assumed the 2017 Stock Incentive Plan and the 2014 Equity Incentive Plan (referred together with the BMS plans as the “Plans”). These plans provided for the granting of Options, Restricted Stock Units (“RSUs”), Performance Share Units (“PSUs”) and other share-based and performance-based awards to former Celgene employees, officers and non-employee directors. Additionally, the terms of these plans provided for accelerated vesting of awards upon a change in control followed by an involuntary termination without cause. As of December 31, 2020, 23 million shares were available for award under the Celgene Plans. Outstanding Celgene equity awards were assumed by BMS and converted into BMS equity awards at acquisition. The replacement BMS awards generally have the same terms and conditions (including vesting) as the former Celgene awards for which they were exchanged. Shares are issued from treasury stock to satisfy BMS’s obligations under the Plans.
CVRs were also issued to the holders of vested and unexercised “in the money” Options that were outstanding at the acquisition date. Celgene RSU holders and unvested “in the money” Options that were outstanding at the acquisition date, with awards vesting prior to March 31, 2021 are also eligible to receive CVRs. Celgene RSU holders and unvested “in the money” Options that were outstanding at the acquisition date with awards vesting after March 31, 2021 are eligible to receive a cash value of $9.00 per pre-converted Celgene RSU and “in the money” Options if all CVR milestones are achieved. The contractual obligation to pay the contingent value rights terminated in January 2021 because the FDA did not approve liso-cel (JCAR017) by December 31, 2020.
Executive officers and key employees may be granted options to purchase common stock at no less than the market price on the date the option is granted. Options generally become exercisable ratably over four years and have a maximum term of 10 years. The Plans provide for the granting of stock appreciation rights whereby the grantee may surrender exercisable rights and receive common stock and/or cash measured by the excess of the market price of the common stock over the option exercise price. We primarily utilize treasury shares to satisfy the exercise of stock options.
RSUs may be granted to key employees, subject to restrictions as to continuous employment. Generally, vesting occurs ratably over a three to four year period from grant date. A stock unit is a right to receive stock at the end of the specified vesting period but has no voting rights.
Market share units (“MSUs”) are granted to executives. Vesting is conditioned upon continuous employment until the vesting date and a payout factor of at least 60% of the share price on the award date. The payout factor is the share price on vesting date divided by share price on award date, with a maximum of 200%. The share price used in the payout factor is calculated using an average of the closing prices on the grant or vest date, and the nine trading days immediately preceding the grant or vest date. Vesting occurs ratably over four years.
PSUs are granted to executives, have a three year cycle and are granted as a target number of units subject to adjustment. The number of shares issued when PSUs vest is determined based on the achievement of performance goals and based on BMS’s three-year total shareholder return relative to a peer group of companies. Vesting is conditioned upon continuous employment and occurs on the third anniversary of the grant date.
Stock-based compensation expense for awards ultimately expected to vest is recognized over the vesting period. Forfeitures are estimated based on historical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
Dollars in Millions
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
$
|
37
|
|
|
$
|
19
|
|
|
$
|
15
|
|
Marketing, selling and administrative
|
332
|
|
|
162
|
|
|
122
|
|
Research and development
|
339
|
|
|
115
|
|
|
84
|
|
Other (income)/expense, net
|
71
|
|
|
145
|
|
|
—
|
|
Total stock-based compensation expense
|
$
|
779
|
|
|
$
|
441
|
|
|
$
|
221
|
|
|
|
|
|
|
|
Income tax benefit(a)
|
$
|
158
|
|
|
$
|
87
|
|
|
$
|
41
|
|
(a) Income tax benefit excludes excess tax benefits from share-based compensation awards that were vested or exercised of $35 million in 2020, $4 million in 2019 and $25 million in 2018.
The total stock-based compensation expense for the years ended December 31, 2020 and 2019 includes $382 million and $66 million, respectively, related to Celgene post-combination service period and $71 million and $145 million, respectively, of accelerated vesting of awards related to the Celgene acquisition. It also includes $3 million in 2020 and $10 million in 2019 related to CVR obligation on unvested stock awards for the post combination service period. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information related to the Celgene acquisition.
The replacement stock options granted to Celgene option holders on acquisition were issued consistent with the vesting conditions of the replaced award. Replacement stock options have contractual terms of 10 years from the initial grant date. The majority of stock options outstanding vest in one-fourth increments over a four year period, although certain awards cliff vest or have longer or shorter service periods. Celgene option holders may elect to exercise options at any time during the option term. However, any shares so purchased which have not vested as of the date of exercise shall be subject to forfeiture, which will lapse in accordance with the established vesting time period. The fair value on the acquisition date attributable to post-combination service, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the remaining vesting period. BMS estimated the fair value of replacement options, using a Black-Scholes Option pricing model, with the following assumptions:
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Weighted average risk-free interest rate
|
1.59%
|
Expected volatility
|
25.7%
|
Weighted average expected term (years)
|
2.65
|
Expected dividend yield
|
2.89%
|
The risk-free interest rate is based on rates available for U.S. Federal Reserve treasury constant maturities with a remaining term equal to the options' expected life at the time of the replacement award. Expected volatility of replacement stock option awards was estimated based on a 50/50 blend of implied volatility and five year historical volatility of BMS’ publicly traded stocks. The expected term of an employee share option is the period of time for which the option is expected to be outstanding and is based on historical and forecasted exercise behavior. Dividend yield is estimated based on BMS’ annual dividend rate at the time of award replacement.
The following table summarizes the stock compensation activity for the year ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options(a)
|
|
Restricted Stock Units
|
|
Market Share Units
|
|
Performance Share Units
|
Shares in Millions
|
Number of Options
|
|
Weighted-Average Exercise Price of Shares
|
|
Number of Nonvested Awards
|
|
Weighted-Average Grant-Date Fair Value
|
|
Number of Nonvested Awards
|
|
Weighted-Average Grant-Date Fair Value
|
|
Number of Nonvested Awards
|
|
Weighted-Average Grant-Date Fair Value
|
Balance at January 1, 2020
|
101.2
|
|
|
$
|
48.08
|
|
|
34.7
|
|
|
$
|
55.58
|
|
|
1.6
|
|
|
$
|
59.25
|
|
|
3.0
|
|
|
$
|
57.46
|
|
Granted
|
—
|
|
|
—
|
|
|
13.1
|
|
|
53.65
|
|
|
0.9
|
|
|
53.92
|
|
|
1.4
|
|
|
55.61
|
|
Released/Exercised
|
(23.8)
|
|
|
39.21
|
|
|
(16.1)
|
|
|
56.00
|
|
|
(0.6)
|
|
|
60.20
|
|
|
(1.0)
|
|
|
57.87
|
|
Adjustments for actual payout
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Forfeited/Canceled
|
(4.0)
|
|
|
61.57
|
|
|
(4.0)
|
|
|
54.37
|
|
|
(0.2)
|
|
|
56.88
|
|
|
(0.3)
|
|
|
55.28
|
|
Balance at December 31, 2020
|
73.4
|
|
|
50.25
|
|
|
27.7
|
|
|
54.58
|
|
|
1.7
|
|
|
56.01
|
|
|
3.1
|
|
|
56.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest
|
|
|
|
|
23.7
|
|
|
54.58
|
|
|
1.5
|
|
|
56.19
|
|
|
3.2
|
|
|
57.92
|
|
(a) At December 31, 2020 substantially all of the 8.1 million unvested stock options with a weighted-average exercise price of $53.36, are expected to vest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in Millions
|
Stock Options
|
|
Restricted Stock Units
|
|
Market Share Units
|
|
Performance Share Units
|
Unrecognized compensation cost
|
$
|
41
|
|
|
$
|
828
|
|
|
$
|
42
|
|
|
$
|
75
|
|
Expected weighted-average period in years of compensation cost to be recognized
|
1.3
|
|
2.4
|
|
2.8
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in Millions, except per share data
|
2020
|
|
2019
|
|
2018
|
Weighted-average grant date fair value (per share):
|
|
|
|
|
|
Stock options - replacement awards
|
$
|
—
|
|
|
$
|
15.00
|
|
|
$
|
—
|
|
Restricted stock units - replacement awards
|
—
|
|
|
56.37
|
|
|
—
|
|
Restricted stock units
|
53.65
|
|
|
47.16
|
|
|
61.40
|
|
Market share units
|
53.92
|
|
|
51.52
|
|
|
72.33
|
|
Performance share units
|
55.61
|
|
|
49.99
|
|
|
67.60
|
|
|
|
|
|
|
|
Fair value of awards that vested:
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units - replacement awards
|
$
|
777
|
|
|
$
|
233
|
|
|
$
|
—
|
|
Restricted stock units
|
122
|
|
|
105
|
|
|
98
|
|
Market share units
|
37
|
|
|
30
|
|
|
40
|
|
Performance share units
|
59
|
|
|
53
|
|
|
103
|
|
|
|
|
|
|
|
Total intrinsic value of stock options exercised
|
556
|
|
|
148
|
|
|
89
|
|
The fair value of RSUs, MSUs and PSUs approximates the closing trading price of BMS’s common stock on the grant date after adjusting for the units not eligible for accrued dividends. In addition, the fair value of MSUs and PSUs considers the probability of satisfying the payout factor and total shareholder return, respectively.
The fair value of the replacement RSUs approximates the closing trading price of BMS’ common stock on the date of acquisition after adjusting for the units not eligible for accrued dividends. The fair value on the acquisition date attributable to post-combination service, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the remaining vesting period.
The following table summarizes significant outstanding and exercisable options at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
Number of Options (in millions)
|
|
Weighted-Average Remaining Contractual Life (in years)
|
|
Weighted-Average Exercise Price Per Share
|
|
Aggregate Intrinsic Value (in millions)
|
$10 - $40
|
16.5
|
|
|
1.8
|
|
$
|
26.62
|
|
|
$
|
583
|
|
$40 - $55
|
22.9
|
|
|
4.6
|
|
48.72
|
|
|
305
|
|
$55 - $65
|
23.6
|
|
|
3.9
|
|
59.53
|
|
|
64
|
|
$65+
|
10.4
|
|
|
4.3
|
|
69.90
|
|
|
—
|
|
Outstanding
|
73.4
|
|
|
3.7
|
|
50.25
|
|
|
$
|
952
|
|
Exercisable
|
65.3
|
|
|
3.4
|
|
49.87
|
|
|
$
|
872
|
|
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing stock price of $62.03 on December 31, 2020.
Note 19. LEGAL PROCEEDINGS AND CONTINGENCIES
BMS and certain of its subsidiaries are involved in various lawsuits, claims, government investigations and other legal proceedings that arise in the ordinary course of business. These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. These matters may involve patent infringement, antitrust, securities, pricing, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage, among others. The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. Legal proceedings that are significant or that BMS believes could become significant or material are described below.
While BMS does not believe that any of these matters, except as otherwise specifically noted below, will have a material adverse effect on its financial position or liquidity as BMS believes it has substantial defenses in the matters, the outcomes of BMS’s legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. There can be no assurance that there will not be an increase in the scope of one or more of these pending matters or any other or future lawsuits, claims, government investigations or other legal proceedings will not be material to BMS’s financial position, results of operations or cash flows for a particular period. Furthermore, failure to enforce BMS’s patent rights would likely result in substantial decreases in the respective product revenues from generic competition.
Unless otherwise noted, BMS is unable to assess the outcome of the respective matters nor is it able to estimate the possible loss or range of losses that could potentially result for such matters. Contingency accruals are recognized when it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. Developments in legal proceedings and other matters that could cause changes in the amounts previously accrued are evaluated each reporting period. For a discussion of BMS’s tax contingencies, see “—Note 7. Income Taxes”.
INTELLECTUAL PROPERTY
Anti-PD-1 Antibody Litigation
In September 2015, Dana-Farber Cancer Institute (“Dana-Farber”) filed a complaint in the U.S. District Court for the District of Massachusetts seeking to correct the inventorship on up to six related U.S. patents directed to methods of treating cancer using PD-1 and PD-L1 antibodies. Specifically, Dana-Farber is seeking to add two scientists as inventors to these patents. In October 2017, Pfizer was allowed to intervene in this case alleging that one of the scientists identified by Dana-Farber was employed by a company eventually acquired by Pfizer during the relevant period. In February 2019, BMS settled the lawsuit with Pfizer. A bench trial in the lawsuit with Dana-Farber took place in February 2019. In May 2019, the Court issued an opinion ruling that the two scientists should be added as inventors to the patents. The decision was appealed to the U.S. Court of Appeals for the Federal Circuit and the Federal Circuit affirmed the District Court opinion. BMS filed a petition to reconsider the decision with the Federal Circuit en banc, which was denied in October 2020. In June 2019, Dana-Farber filed a new lawsuit in the District of Massachusetts against BMS seeking damages as a result of the Court’s decision adding the scientists as inventors.
CAR T
On October 18, 2017, the day on which the FDA approved Kite Pharma, Inc.’s (“Kite”) Yescarta* product, Juno, along with Sloan Kettering Institute for Cancer Research (“SKI”), filed a complaint against Kite in the U.S. District Court for the Central District of California. The complaint alleged that Yescarta* infringes certain claims of U.S. Patent No. 7,446,190 (“the ’190 Patent”) concerning CAR T cell technologies. Kite filed an answer and counterclaims asserting non-infringement and invalidity of the ’190 Patent. In December 2019, following an eight-day trial, the jury rejected Kite’s defenses, finding that Kite willfully infringed the ’190 Patent and awarding to Juno and SKI a reasonable royalty consisting of a $585 million upfront payment and a 27.6% running royalty on Kite’s sales of Yescarta* through the expiration of the ’190 Patent in August 2024. In January 2020, Kite renewed its previous motion for judgment as a matter of law and also moved for a new trial, and Juno filed a motion seeking enhanced damages, supplemental damages, ongoing royalties, and prejudgment interest. In March 2020, the Court denied both of Kite’s motions in their entirety. In April 2020, the Court granted in part Juno’s motion and entered a final judgment awarding to Juno and SKI approximately $1.2 billion in royalties, interest and enhanced damages and a 27.6% running royalty on Kite’s sales of Yescarta* from December 13, 2019 through the expiration of the ’190 Patent in August 2024. In April 2020, Kite appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit. No date has been scheduled for an oral hearing on the appeal.
Eliquis - U.S.
In 2017, BMS received Notice Letters from twenty-five generic companies notifying BMS that they had filed aNDAs containing paragraph IV certifications seeking approval of generic versions of Eliquis. As a result, two Eliquis patents listed in the FDA Orange Book are being challenged: the composition of matter patent claiming apixaban specifically and a formulation patent. In response, BMS, along with its partner Pfizer, initiated patent infringement actions under the Hatch-Waxman Act against all generic filers in the U.S. District Court for the District of Delaware in April 2017. In August 2017, the U.S. Patent and Trademark Office granted patent term restoration to the composition of matter patent to November 2026, thereby restoring the term of the Eliquis composition of matter patent, which is BMS’s basis for projected LOE. BMS settled with a number of aNDA filers. These settlements do not affect BMS’s projected LOE for Eliquis. A trial with the remaining aNDA filers took place in late 2019. In August 2020, the U.S. District Court issued a decision finding that the remaining aNDA filers’ products infringed the Eliquis composition of matter and formulation patents and that both Eliquis patents are not invalid. The remaining aNDA filers have appealed to the Court of Appeals for the Federal Circuit.
Plavix* - Australia
Sanofi was notified that, in August 2007, GenRx Proprietary Limited (“GenRx”) obtained regulatory approval of an application for clopidogrel bisulfate 75mg tablets in Australia. GenRx, formerly a subsidiary of Apotex Inc., subsequently changed its name to Apotex (“GenRx-Apotex”). In August 2007, GenRx-Apotex filed an application in the Federal Court of Australia seeking revocation of Sanofi’s Australian Patent No. 597784 (Case No. NSD 1639 of 2007). Sanofi filed counterclaims of infringement and sought an injunction. On September 21, 2007, the Federal Court of Australia granted Sanofi’s injunction. A subsidiary of BMS was subsequently added as a party to the proceedings. In February 2008, a second company, Spirit Pharmaceuticals Pty. Ltd., also filed a revocation suit against the same patent. This case was consolidated with the GenRx-Apotex case. On August 12, 2008, the Federal Court of Australia held that claims of Patent No. 597784 covering clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate salts were valid. The Federal Court also held that the process claims, pharmaceutical composition claims, and claim directed to clopidogrel and its pharmaceutically acceptable salts were invalid. BMS and Sanofi filed notices of appeal in the Full Court of the Federal Court of Australia (“Full Court”) appealing the holding of invalidity of the claim covering clopidogrel and its pharmaceutically acceptable salts, process claims, and pharmaceutical composition claims. GenRx-Apotex appealed the holding of validity of the clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate claims. On September 29, 2009, the Full Court held all of the claims of Patent No. 597784 invalid. In March 2010, the High Court of Australia denied a request by BMS and Sanofi to hear an appeal of the Full Court decision. The case was remanded to the Federal Court for further proceedings related to damages sought by GenRx-Apotex. BMS and GenRx-Apotex settled, and the GenRx-Apotex case was dismissed. The Australian government intervened in this matter seeking maximum damages up to 449 million AUD ($341 million), plus interest, which would be split between BMS and Sanofi, for alleged losses experienced for paying a higher price for branded Plavix* during the period when the injunction was in place. BMS and Sanofi dispute that the Australian government is entitled to any damages. A trial was concluded in September 2017. In April 2020, the Federal Court issued a decision dismissing the Australian government’s claim for damages. In May 2020, the Australian government appealed the Federal Court's decision and an appeal hearing has been scheduled for February 2021.
Pomalyst - Canada
Celgene received a Notice of Allegation in January 2020 from Natco Pharma (Canada) Inc. (“Natco Canada”) notifying Celgene that it had filed an Abbreviated New Drug Submission (“aNDS”) with Canada’s Minister of Health with respect to certain of Celgene’s Canadian patents. Natco Canada is seeking to market a generic version of Pomalyst in Canada. In response, Celgene initiated a patent infringement action in the Federal Court of Canada. Natco Canada alleges that the asserted patents are invalid and/or not infringed. A trial is scheduled to begin on November 15, 2021.
Celgene received a second Notice of Allegation in November 2020 from Natco Canada notifying Celgene that it had filed a second aNDS with Canada’s Minister of Health with respect to certain of Celgene’s Canadian patents. Natco Canada is seeking to market a generic version of Pomalyst in Canada. In response, Celgene initiated a patent infringement action in the Federal Court of Canada. Natco Canada alleges that the asserted patents are invalid and/or not infringed. No trial date has been scheduled for this matter.
Celgene received two Notices of Allegation in March 2020 from Dr. Reddy’s Laboratories Ltd. (“DRL Canada”) notifying Celgene that it had filed an aNDS with Canada’s Minister of Health with respect to certain of Celgene’s Canadian patents. DRL Canada is seeking to market a generic version of Pomalyst in Canada. In response, Celgene initiated two patent infringement actions in the Federal Court of Canada. DRL Canada alleges that the asserted patents are invalid and/or not infringed. A trial is scheduled to begin in January 2022.
Pomalyst - U.S.
Beginning in 2017, Celgene received Notice letters on behalf of Teva Pharmaceuticals USA, Inc. (“Teva”); Apotex Inc. (“Apotex”) and Apotex Corp.; Hetero Labs Limited, Hetero Labs Limited Unit-V, Hetero Drugs Limited, Hetero USA, Inc. (collectively, “Hetero”); Eugia Pharma Specialities Limited and Aurobindo Pharma Ltd. (collectively, “Aurobindo”); Mylan Pharmaceuticals Inc.; and Breckenridge Pharmaceutical, Inc. (“Breckenridge”) notifying Celgene that they had filed aNDAs containing paragraph IV certifications seeking approval to market generic versions of Pomalyst in the U.S. In response, Celgene filed patent infringement actions against the companies in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents and the companies filed answers, counterclaims and declaratory judgment actions alleging that the asserted patents are invalid, unenforceable, and not infringed. These litigations were subsequently consolidated. In March 2020, Celgene subsequently filed additional patent infringement actions in the U.S. District Court for the District of New Jersey against each of the companies asserting a newly-issued patent that is listed in the FDA Orange Book and that covers formulations comprising pomalidomide. The companies each filed responsive pleadings between April and June 2020, alleging that the patent is invalid and not infringed. The Court has consolidated these additional litigations with the previously-consolidated litigations. In September 2020, the Court granted Mylan Pharmaceuticals Inc.’s motion to dismiss, which decision Celgene has appealed. In October 2020, Breckenridge and Aurobindo received final approval from the FDA of their respective aNDAs. In November 2020, Celgene and Breckenridge entered into a confidential settlement agreement. Pursuant to terms of the confidential settlement agreement, on January 7, 2021, the Court enjoined Breckenridge from infringing the asserted patents, unless and to the extent otherwise specifically authorized by Celgene and dismissed Breckenridge from the proceedings. A final pretrial conference concerning the consolidated litigations is scheduled for February 16, 2021 but is expected to be delayed.
In February and March 2019, Celgene filed additional patent infringement actions in the U.S. District Court for the District of New Jersey against the companies asserting certain patents that are not listed in the FDA Orange Book and that cover polymorphic forms of pomalidomide, and the companies filed answers and/or counterclaims alleging that each of these patents is invalid and/or not infringed. These actions have been consolidated with the earlier-filed actions against the companies. No trial date has been set for this matter.
In June 2019, Celgene received a Notice Letter from Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (together, “DRL”) notifying Celgene that they had filed an aNDA containing paragraph IV certifications seeking approval to market a generic version of Pomalyst in the U.S. In response, Celgene initiated a patent infringement action against DRL in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents, and DRL filed an answer and counterclaims alleging that each of the patents is invalid and/or not infringed. In March 2020, Celgene filed an additional patent infringement action in the U.S. District Court for the District of New Jersey against DRL asserting a newly-issued patent that is listed in the FDA Orange Book and that covers formulations comprising pomalidomide, which has been consolidated with the above DRL case. The Court has not set a trial date in this consolidated action.
In February 2021, Celgene filed an additional patent infringement action in the U.S. District Court for the District of New Jersey against DRL asserting certain patents that are not listed in the FDA Orange Book and that cover polymorphic forms of pomalidomide. DRL has not responded to the complaint. No trial date has been set for this matter.
Revlimid - U.S.
Celgene has received Notice Letters on behalf of Zydus Pharmaceuticals (USA) Inc.; Cipla Ltd., (“Cipla”); Apotex; Sun Pharma Global FZE, Sun Pharma Global Inc., Sun Pharmaceutical Industries, Inc., and Sun Pharmaceutical Industries Limited; Hetero; Mylan Pharmaceuticals Inc., Mylan Inc., and Mylan N.V. (collectively, “Mylan”); and Aurobindo Pharma Limited, Eugia Pharma Specialities Limited, Aurobindo Pharma USA, Inc., Aurolife Pharma LLC, and Lupin Limited notifying Celgene that they had filed aNDAs containing paragraph IV certifications seeking approval to market generic versions of Revlimid in the U.S. In response, Celgene filed patent infringement actions against the companies in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents as well as other litigations asserting other non-FDA Orange Book-listed patents against certain defendants, who have filed answers and/or counterclaims alleging that the asserted patents are invalid and/or not infringed. No trial date has been scheduled in any of these New Jersey actions.
Celgene also filed a patent infringement action against Mylan in the U.S. District Court for the Northern District of West Virginia (the “West Virginia action”) asserting certain FDA Orange Book-listed patents. Mylan filed its answer and counterclaims alleging that the patents are invalid and/or not infringed. A trial is scheduled to begin in the West Virginia action on October 4, 2021.
In December 2020, Celgene settled all outstanding claims in the litigation with Cipla. Pursuant to the settlement, Celgene has agreed to provide Cipla with a license to Celgene’s patents required to manufacture and sell certain volume-limited amounts of generic lenalidomide in the United States beginning on a certain date after the March 2022 volume-limited license date previously provided to Natco. In addition, Celgene has agreed to provide Cipla with a license to Celgene’s patents required to manufacture and sell an unlimited quantity of generic lenalidomide in the United States beginning January 31, 2026.
Sprycel - U.S.
In August 2019, BMS received a Notice Letter from Dr. Reddy’s Laboratories, Inc. notifying BMS that it had filed an aNDA containing paragraph IV certifications seeking approval of a generic version of Sprycel in the U.S. and challenging two FDA Orange Book-listed monohydrate form patents expiring in 2025 and 2026. In response, BMS filed a patent infringement action in the U.S. District Court for the District of New Jersey. No trial date has been scheduled.
In 2020, BMS received a Notice Letter from Lupin notifying BMS that it had filed an aNDA containing paragraph IV certifications seeking approval of a generic version of Sprycel in the U.S. and challenging two FDA Orange Book-listed monohydrate form patents expiring in 2025 and 2026. In response, BMS filed patent infringement actions in the U.S. District Courts for the District of New Jersey and Delaware. No trial date has been scheduled.
PRICING, SALES AND PROMOTIONAL PRACTICES LITIGATION
Plavix* State Attorneys General Lawsuits
BMS and certain Sanofi entities are defendants in consumer protection actions brought by the attorneys general of Hawaii and New Mexico relating to the labeling, sales and/or promotion of Plavix*. A trial in the Hawaii matter concluded in November 2020 and a decision is expected in the first quarter of 2021.
PRODUCT LIABILITY LITIGATION
BMS is a party to various product liability lawsuits. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. As previously disclosed, in addition to lawsuits, BMS also faces unfiled claims involving its products.
Abilify*
BMS and Otsuka are co-defendants in product liability litigation related to Abilify*. Plaintiffs allege Abilify* caused them to engage in compulsive gambling and other impulse control disorders. There have been over 2,500 cases filed in state and federal courts and additional cases are pending in Canada. The Judicial Panel on Multidistrict Litigation consolidated the federal court cases for pretrial purposes in the U.S. District Court for the Northern District of Florida. In February 2019, BMS and Otsuka entered into a master settlement agreement establishing a proposed settlement program to resolve all Abilify* compulsivity claims filed as of January 28, 2019 in the MDL as well as various state courts, including California and New Jersey. To date, approximately 2,700 cases, comprising approximately 3,900 plaintiffs, have been dismissed based on participation in the settlement program or failure to comply with settlement related court orders. In the U.S., less than 20 cases remain pending on behalf of plaintiffs, who either chose not to participate in the settlement program or filed their claims after the settlement cut-off date. There are ten cases pending in Canada (four class actions, six individual injury claims). Out of the ten cases, only three are active (the class actions in Quebec and Ontario and one individual injury claim). Both class actions have now been certified and will proceed separately, subject to a pending appeal of the Ontario class certification decision.
Byetta*
Amylin, a former subsidiary of BMS, and Lilly are co-defendants in product liability litigation related to Byetta*. As of December 2020, there are approximately 590 separate lawsuits pending on behalf of approximately 2,250 active plaintiffs (including pending settlements), which include injury plaintiffs as well as claims by spouses and/or other beneficiaries, in various courts in the U.S. The majority of these cases have been brought by individuals who allege personal injury sustained after using Byetta*, primarily pancreatic cancer, and, in some cases, claiming alleged wrongful death. The majority of cases are pending in federal court in San Diego in an MDL or in a coordinated proceeding in California Superior Court in Los Angeles (“JCCP”). In November 2015, the defendants’ motion for summary judgment based on federal preemption was granted in both the MDL and the JCCP. In November 2017, the Ninth Circuit reversed the MDL summary judgment order and remanded the case to the MDL. In November 2018, the California Court of Appeal reversed the state court summary judgment order and remanded those cases to the JCCP for further proceedings. Amylin has filed a motion for summary judgment based on federal preemption and a motion for summary judgment based on the absence of general causation evidence, both were heard in 2020. Amylin had product liability insurance covering a substantial number of claims involving Byetta* (which has been exhausted). As part of BMS’s global diabetes business divestiture, BMS sold Byetta* to AstraZeneca in February 2014 and any additional liability to Amylin with respect to Byetta* is expected to be shared with AstraZeneca.
Onglyza*
BMS and AstraZeneca are co-defendants in product liability litigation related to Onglyza*. Plaintiffs assert claims, including claims for wrongful death, as a result of heart failure or other cardiovascular injuries they allege were caused by their use of Onglyza*. As of December 2020, claims are pending in state and federal court on behalf of approximately 280 individuals who allege they ingested the product and suffered an injury. In February 2018, the Judicial Panel on Multidistrict Litigation ordered all federal cases to be transferred to an MDL in the U.S. District Court for the Eastern District of Kentucky. A significant majority of the claims are pending in the MDL. As part of BMS’s global diabetes business divestiture, BMS sold Onglyza* to AstraZeneca in February 2014 and any potential liability with respect to Onglyza* is expected to be shared with AstraZeneca.
SECURITIES LITIGATION
BMS Securities Class Action
Since February 2018, two separate putative class action complaints were filed in the U.S. District for the Northern District of California and in the U.S. District Court for the Southern District of New York against BMS, BMS’s Chief Executive Officer, Giovanni Caforio, BMS’s Chief Financial Officer at the time, Charles A. Bancroft and certain former and current executives of BMS. The case in California has been voluntarily dismissed. The remaining complaint alleges violations of securities laws for BMS’s disclosures related to the CheckMate-026 clinical trial in lung cancer. In September 2019, the Court granted BMS’s motion to dismiss, but allowed the plaintiffs leave to file an amended complaint. In October 2019, the plaintiffs filed an amended complaint. BMS moved to dismiss the amended complaint. In September 2020, the Court granted BMS’s motion to dismiss with prejudice. The plaintiffs appealed the Court's decision in October 2020.
Celgene Securities Class Action
Beginning in March 2018, two putative class actions were filed against Celgene and certain of its officers in the U.S. District Court for the District of New Jersey (the “Celgene Securities Class Action”). The complaints allege that the defendants violated federal securities laws by making misstatements and/or omissions concerning (1) trials of GED-0301, (2) Celgene’s 2020 outlook and projected sales of Otezla, and (3) the new drug application for Zeposia. The Court consolidated the two actions and appointed a lead plaintiff, lead counsel, and co-liaison counsel for the putative class. In February 2019, the defendants filed a motion to dismiss plaintiff’s amended complaint in full. In December 2019, the Court denied the motion to dismiss in part and granted the motion to dismiss in part (including all claims arising from alleged misstatements regarding GED-0301). Although the Court gave the plaintiff leave to re-plead the dismissed claims, it elected not to do so, and the dismissed claims are now dismissed with prejudice. In November 2020, the Court granted class certification with respect to the remaining claims. In December 2020, the defendants sought leave to appeal the Court’s class certification decision. No trial date has been scheduled.
In April 2020, certain Schwab management investment companies on behalf of certain Schwab funds filed an individual action in the U.S. District Court for the District of New Jersey asserting largely the same allegations as the Celgene Securities Class Action against the same remaining defendants in that action. In July 2020, the defendants filed a motion to dismiss the plaintiffs' complaint in full.
OTHER LITIGATION
Average Manufacturer Price Litigation
BMS is a defendant in a qui tam (whistleblower) lawsuit in the U.S. District Court for the Eastern District of Pennsylvania, in which the U.S. Government declined to intervene. The complaint alleges that BMS inaccurately reported its average manufacturer prices to the Centers for Medicare and Medicaid Services to lower what it owed. Similar claims have been filed against other companies. In January 2020, BMS reached an agreement in principle to resolve this matter subject to the negotiation of a definitive settlement agreement and other contingencies. BMS cannot provide assurances that its efforts to reach a final settlement will be successful.
HIV Medication Antitrust Lawsuits
BMS and two other manufacturers of HIV medications are defendants in related lawsuits pending in the Northern District of California. The lawsuits allege that the defendants’ agreements to develop and sell fixed-dose combination products for the treatment of HIV, including Atripla* and Evotaz, violate antitrust laws. The currently pending actions, asserted on behalf of indirect purchasers, were initiated in 2019 in the Northern District of California and in 2020 in the Southern District of Florida. The Florida matter was transferred to the Northern District of California. In July 2020, the Court granted in part defendants’ motion to dismiss, including dismissing with prejudice plaintiffs’ claims as to an overarching conspiracy and plaintiffs’ theories based on the alleged payment of royalties after patent expiration. Other claims, however, remain. A trial on the indirect purchasers’ claims is scheduled for August 2022. In September and October 2020, two purported class actions have also been filed asserting similar claims on behalf of direct purchasers. Defendants’ motions to dismiss and compel arbitration in those matters are scheduled to be heard in February 2021. A trial on the direct purchasers’ claims has not been scheduled.
Humana Litigations
In May 2018, Humana, Inc. (“Humana”) filed a lawsuit against Celgene in the Pike County Circuit Court of the Commonwealth of Kentucky. Humana’s complaint alleges Celgene engaged in unlawful off-label marketing in connection with sales of Thalomid and Revlimid and asserts claims against Celgene for fraud, breach of contract, negligent misrepresentation, unjust enrichment and violations of New Jersey’s Racketeer Influenced and Corrupt Organizations Act. The complaint seeks, among other things, treble and punitive damages, injunctive relief and attorneys’ fees and costs. In April 2019, Celgene filed a motion to dismiss Humana’s complaint, which the Court denied in January 2020. No trial date has been scheduled. In May 2020, Celgene filed suit against Humana Pharmacy, Inc. (“HPI”), a Humana subsidiary, in Delaware Superior Court. Celgene’s complaint alleges that HPI breached its contractual obligations to Celgene by assigning claims to Humana that Humana is now asserting. The complaint seeks damages for HPI’s breach as well as a declaratory judgment. In September 2020, HPI filed a motion to dismiss Celgene’s complaint.
In March 2019, Humana filed a separate lawsuit against Celgene in the U.S. District Court for the District of New Jersey. Humana’s complaint alleges that Celgene violated various antitrust, consumer protection, and unfair competition laws to delay or prevent generic competition for Thalomid and Revlimid brand drugs, including (a) allegedly refusing to sell samples of products to generic manufacturers for purposes of bioequivalence testing intended to be included in aNDAs for approval to market generic versions of these products; (b) allegedly bringing unjustified patent infringement lawsuits, procuring invalid patents, and/or entering into anticompetitive patent settlements; (c) allegedly securing an exclusive supply contract for supply of thalidomide active pharmaceutical ingredient. The complaint purports to assert claims on behalf of Humana and its subsidiaries in several capacities, including as a direct purchaser and as an indirect purchaser, and seeks, among other things, treble and punitive damages, injunctive relief and attorneys’ fees and costs. Celgene filed a motion to dismiss Humana’s complaint, and the Court has stayed discovery pending adjudication of that motion. No trial date has been scheduled.
Thalomid and Revlimid Antitrust Class Action Litigation and Related Proceedings
Beginning in November 2014, certain putative class action lawsuits were filed against Celgene in the U.S. District Court for the District of New Jersey alleging that Celgene violated various antitrust, consumer protection, and unfair competition laws by (a) allegedly securing an exclusive supply contract for the alleged purpose of preventing a generic manufacturer from securing its own supply of thalidomide active pharmaceutical ingredient, (b) allegedly refusing to sell samples of Thalomid and Revlimid brand drugs to various generic manufacturers for the alleged purpose of bioequivalence testing necessary for aNDAs to be submitted to the FDA for approval to market generic versions of these products, (c) allegedly bringing unjustified patent infringement lawsuits in order to allegedly delay approval for proposed generic versions of Thalomid and Revlimid, and/or (d) allegedly entering into settlements of patent infringement lawsuits with certain generic manufacturers that allegedly have had anticompetitive effects. The plaintiffs, on behalf of themselves and putative classes of third-party payers, are seeking injunctive relief and damages. The various lawsuits were consolidated into a master action for all purposes. In October 2017, the plaintiffs filed a motion for certification of two damages classes under the laws of thirteen states and the District of Columbia and a nationwide injunction class. Celgene filed an opposition to the plaintiffs’ motion and a motion for judgment on the pleadings dismissing all state law claims where the plaintiffs no longer seek to represent a class. In October 2018, the Court denied the plaintiffs’ motion for class certification and Celgene’s motion for judgment on the pleadings. In December 2018, the plaintiffs filed a new motion for class certification, which Celgene opposed. In July 2019, the parties reached a settlement under which all the putative class plaintiff claims would be dismissed with prejudice. In December 2019, after certain third-party payors who were members of the settlement class refused to release their potential claims and participate in the settlement, Celgene exercised its right to terminate the settlement agreement. In March 2020, Celgene reached a revised settlement with the class plaintiffs. In May 2020, the Court preliminarily approved the settlement. In October 2020, the Court entered a final order approving the settlement and dismissed the matter. That settlement does not resolve the claims of certain entities that opted out of the first settlement.
In March 2020, United HealthCare Services, Inc. (“UHS”), affiliates of which opted out of the first settlement in the Thalomid and Revlimid Antitrust Class Action Litigation, filed a lawsuit against Celgene in the U.S. District Court for the District of Minnesota. UHS’s complaint makes largely the same claims and allegations as the class action litigation in addition to certain claims regarding donations directed to copay assistance. The complaint purports to assert claims on behalf of UHS and its subsidiaries in several capacities, including as a direct purchaser and as an indirect purchaser, and seeks, among other things, treble and punitive damages, injunctive relief and attorneys’ fees and costs. In December 2020, Celgene’s motion to transfer the action to the District of New Jersey was granted and the case is now pending in that Court.
In July 2020, Blue Cross Blue Shield Association (“BCBSA”) sued Celgene and BMS on behalf of the Federal Employee Program in the U.S. District Court for the District of Columbia. BCBSA’s complaint makes largely the same claims and allegations as the class action litigation. A motion to transfer this matter to the District of New Jersey is pending.
In August 2020, Health Care Service Corporation (“HCSC”), BCBSM Inc., d/b/a Blue Cross and Blue Shield of Minnesota, and Blue Cross and Blue Shield of Florida Inc., d/b/a Florida Blue, sued Celgene and BMS in the state courts of Minnesota. The complaint makes largely the same claims and allegations as the class action litigation but adds allegations on behalf of HCSC only as to alleged off-label marketing of Thalomid and Revlimid. In September 2020, Celgene and BMS removed the action to the U.S. District Court for the District of Minnesota. Motions to remand and dismiss the action and transfer venue to the District of New Jersey are pending.
In January 2021, Cigna Corporation (“Cigna”) sued Celgene and BMS in the U.S. District Court for the Eastern District of Pennsylvania. Cigna’s complaint makes largely the same claims and allegations as the class action litigation. Cigna’s complaint purports to assert claims on behalf of Cigna and its subsidiaries in several capacities, including as a direct purchaser and as an indirect purchaser. Celgene’s and BMS’s response to the complaint is due in March 2021.
GOVERNMENT INVESTIGATIONS
Like other pharmaceutical companies, BMS and certain of its subsidiaries are subject to extensive regulation by national, state and local authorities in the U.S. and other countries in which BMS operates. As a result, BMS, from time to time, is subject to various governmental and regulatory inquiries and investigations as well as threatened legal actions and proceedings. It is possible that criminal charges, substantial fines and/or civil penalties, could result from government or regulatory investigations.
ENVIRONMENTAL PROCEEDINGS
As previously reported, BMS is a party to several environmental proceedings and other matters, and is responsible under various state, federal and foreign laws, including CERCLA, for certain costs of investigating and/or remediating contamination resulting from past industrial activity at BMS’s current or former sites or at waste disposal or reprocessing facilities operated by third parties.
CERCLA Matters
With respect to CERCLA matters for which BMS is responsible under various state, federal and foreign laws, BMS typically estimates potential costs based on information obtained from the U.S. Environmental Protection Agency, or counterpart state or foreign agency and/or studies prepared by independent consultants, including the total estimated costs for the site and the expected cost-sharing, if any, with other “potentially responsible parties,” and BMS accrues liabilities when they are probable and reasonably estimable. BMS estimated its share of future costs for these sites to be $78.8 million at December 31, 2020, which represents the sum of best estimates or, where no best estimate can reasonably be made, estimates of the minimal probable amount among a range of such costs (without taking into account any potential recoveries from other parties). The amount includes the estimated costs for any additional probable loss associated with the previously disclosed North Brunswick Township High School Remediation Site.
Note 20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Dollars in Millions, except per share data
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Year
|
Total Revenues
|
$
|
10,781
|
|
|
$
|
10,129
|
|
|
$
|
10,540
|
|
|
$
|
11,068
|
|
|
$
|
42,518
|
|
Gross Margin
|
7,119
|
|
|
7,430
|
|
|
8,038
|
|
|
8,158
|
|
|
30,745
|
|
Net (Loss)/Earnings
|
(766)
|
|
|
(80)
|
|
|
1,878
|
|
|
(10,027)
|
|
|
(8,995)
|
|
Net (Loss)/Earnings Attributable to:
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
|
9
|
|
|
5
|
|
|
6
|
|
|
—
|
|
|
20
|
|
BMS
|
(775)
|
|
|
(85)
|
|
|
1,872
|
|
|
(10,027)
|
|
|
(9,015)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Earnings per Common Share - Basic(a)
|
$
|
(0.34)
|
|
|
$
|
(0.04)
|
|
|
$
|
0.83
|
|
|
$
|
(4.45)
|
|
|
$
|
(3.99)
|
|
(Loss)/Earnings per Common Share - Diluted(a)
|
(0.34)
|
|
|
(0.04)
|
|
|
0.82
|
|
|
(4.45)
|
|
|
(3.99)
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
$
|
0.45
|
|
|
$
|
0.45
|
|
|
$
|
0.45
|
|
|
$
|
0.49
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
15,817
|
|
|
$
|
19,934
|
|
|
$
|
19,435
|
|
|
$
|
14,546
|
|
|
$
|
14,546
|
|
Marketable debt securities(b)
|
3,156
|
|
|
2,247
|
|
|
2,215
|
|
|
1,718
|
|
|
1,718
|
|
Total Assets
|
129,285
|
|
|
128,076
|
|
|
125,536
|
|
|
118,481
|
|
|
118,481
|
|
Long-term debt(c)
|
46,105
|
|
|
46,106
|
|
|
44,614
|
|
|
50,336
|
|
|
50,336
|
|
Equity
|
49,977
|
|
|
49,160
|
|
|
50,230
|
|
|
37,882
|
|
|
37,882
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Dollars in Millions, except per share data
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter(d)
|
|
Year(d)
|
Total Revenues
|
$
|
5,920
|
|
|
$
|
6,273
|
|
|
$
|
6,007
|
|
|
$
|
7,945
|
|
|
$
|
26,145
|
|
Gross Margin
|
4,096
|
|
|
4,301
|
|
|
4,217
|
|
|
5,453
|
|
|
18,067
|
|
Net Earnings/(Loss)
|
1,715
|
|
|
1,439
|
|
|
1,366
|
|
|
(1,060)
|
|
|
3,460
|
|
Net Earnings/(Loss) Attributable to:
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
|
5
|
|
|
7
|
|
|
13
|
|
|
(4)
|
|
|
21
|
|
BMS
|
1,710
|
|
|
1,432
|
|
|
1,353
|
|
|
(1,056)
|
|
|
3,439
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) per Common Share - Basic(a)
|
$
|
1.05
|
|
|
$
|
0.88
|
|
|
$
|
0.83
|
|
|
$
|
(0.55)
|
|
|
$
|
2.02
|
|
Earnings/(Loss) per Common Share - Diluted(a)
|
1.04
|
|
|
0.87
|
|
|
0.83
|
|
|
(0.55)
|
|
|
2.01
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
$
|
0.41
|
|
|
$
|
0.41
|
|
|
$
|
0.41
|
|
|
$
|
0.45
|
|
|
$
|
1.68
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
7,335
|
|
|
$
|
28,404
|
|
|
$
|
30,489
|
|
|
$
|
12,346
|
|
|
$
|
12,346
|
|
Marketable debt securities(b)
|
2,662
|
|
|
1,947
|
|
|
2,978
|
|
|
3,814
|
|
|
3,814
|
|
Total Assets
|
34,834
|
|
|
55,163
|
|
|
57,433
|
|
|
129,944
|
|
|
129,944
|
|
Long-term debt(c)
|
5,635
|
|
|
24,433
|
|
|
24,390
|
|
|
46,150
|
|
|
46,150
|
|
Equity
|
15,317
|
|
|
16,151
|
|
|
17,754
|
|
|
51,698
|
|
|
51,698
|
|
(a) Earnings per share for the quarters may not add to the amounts for the year, as each period is computed on a discrete basis.
(b) Marketable debt securities includes current and non-current assets.
(c) Long-term debt includes the current portion.
(d) Commencing on November 20, 2019, Celgene’s operations are included in our consolidated financial statements. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for additional information.
The following specified items affected the comparability of results in 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
Dollars in Millions
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Year
|
Inventory purchase price accounting adjustments
|
$
|
1,420
|
|
|
$
|
714
|
|
|
$
|
456
|
|
|
$
|
98
|
|
|
$
|
2,688
|
|
Intangible asset impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
575
|
|
|
575
|
|
Employee compensation charges
|
2
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
4
|
|
Site exit and other costs
|
16
|
|
|
13
|
|
|
3
|
|
|
1
|
|
|
33
|
|
Cost of products sold
|
1,438
|
|
|
728
|
|
|
459
|
|
|
675
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation charges
|
15
|
|
|
12
|
|
|
7
|
|
|
241
|
|
|
275
|
|
Site exit and other costs
|
6
|
|
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
4
|
|
Marketing, selling and administrative
|
21
|
|
|
11
|
|
|
6
|
|
|
241
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
License and asset acquisition charges
|
25
|
|
|
300
|
|
|
203
|
|
|
475
|
|
|
1,003
|
|
IPRD impairments
|
—
|
|
|
—
|
|
|
—
|
|
|
470
|
|
|
470
|
|
Inventory purchase price accounting adjustments
|
17
|
|
|
—
|
|
|
8
|
|
|
11
|
|
|
36
|
|
Employee compensation charges
|
18
|
|
|
15
|
|
|
8
|
|
|
241
|
|
|
282
|
|
Site exit and other costs
|
56
|
|
|
39
|
|
|
4
|
|
|
16
|
|
|
115
|
|
Research and development
|
116
|
|
|
354
|
|
|
223
|
|
|
1,213
|
|
|
1,906
|
|
|
|
|
|
|
|
|
|
|
|
IPRD charge - MyoKardia acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
11,438
|
|
|
11,438
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
2,282
|
|
|
2,389
|
|
|
2,491
|
|
|
2,526
|
|
|
9,688
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(a)
|
(41)
|
|
|
(41)
|
|
|
(40)
|
|
|
(37)
|
|
|
(159)
|
|
Contingent consideration
|
556
|
|
|
(165)
|
|
|
(988)
|
|
|
(1,160)
|
|
|
(1,757)
|
|
Royalties and licensing income
|
(83)
|
|
|
(18)
|
|
|
(53)
|
|
|
(14)
|
|
|
(168)
|
|
Equity investment losses/(gains)
|
339
|
|
|
(818)
|
|
|
(214)
|
|
|
(463)
|
|
|
(1,156)
|
|
Integration expenses
|
174
|
|
|
166
|
|
|
195
|
|
|
182
|
|
|
717
|
|
Provision for restructuring
|
160
|
|
|
115
|
|
|
176
|
|
|
79
|
|
|
530
|
|
Litigation and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(239)
|
|
|
(239)
|
|
|
|
|
|
|
|
|
|
|
|
Reversion excise tax
|
76
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76
|
|
Divestiture (gains)/losses
|
(16)
|
|
|
9
|
|
|
1
|
|
|
(49)
|
|
|
(55)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income)/expense, net
|
1,165
|
|
|
(752)
|
|
|
(923)
|
|
|
(1,701)
|
|
|
(2,211)
|
|
|
|
|
|
|
|
|
|
|
|
Increase to pretax income
|
5,022
|
|
|
2,730
|
|
|
2,256
|
|
|
14,392
|
|
|
24,400
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes on items above
|
(291)
|
|
|
(3)
|
|
|
(405)
|
|
|
(1,034)
|
|
|
(1,733)
|
|
Income taxes attributed to Otezla* divestiture
|
—
|
|
|
255
|
|
|
11
|
|
|
—
|
|
|
266
|
|
Income taxes attributed to internal transfer of intangible assets
|
—
|
|
|
853
|
|
|
—
|
|
|
—
|
|
|
853
|
|
Income taxes
|
(291)
|
|
|
1,105
|
|
|
(394)
|
|
|
(1,034)
|
|
|
(614)
|
|
|
|
|
|
|
|
|
|
|
|
Increase to net earnings
|
$
|
4,731
|
|
|
$
|
3,835
|
|
|
$
|
1,862
|
|
|
$
|
13,358
|
|
|
$
|
23,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
Dollars in Millions
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Year
|
Inventory purchase price accounting adjustments
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
660
|
|
|
$
|
660
|
|
Employee compensation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Site exit and other costs
|
12
|
|
|
139
|
|
|
22
|
|
|
24
|
|
|
197
|
|
Cost of products sold
|
12
|
|
|
139
|
|
|
22
|
|
|
685
|
|
|
858
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
27
|
|
Site exit and other costs
|
1
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
9
|
|
Marketing, selling and administrative
|
1
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
License and asset acquisition charges
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
IPRD impairments
|
32
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
Employee compensation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
33
|
|
Site exit and other costs
|
19
|
|
|
19
|
|
|
20
|
|
|
109
|
|
|
167
|
|
Research and development
|
51
|
|
|
44
|
|
|
20
|
|
|
142
|
|
|
257
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of acquired intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
1,062
|
|
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(a)
|
—
|
|
|
83
|
|
|
166
|
|
|
73
|
|
|
322
|
|
Contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
523
|
|
|
523
|
|
Royalties and licensing income
|
—
|
|
|
—
|
|
|
(9)
|
|
|
(15)
|
|
|
(24)
|
|
Equity investment (gains)/losses
|
(175)
|
|
|
(71)
|
|
|
261
|
|
|
(294)
|
|
|
(279)
|
|
Integration expenses
|
22
|
|
|
106
|
|
|
96
|
|
|
191
|
|
|
415
|
|
Provision for restructuring
|
12
|
|
|
10
|
|
|
10
|
|
|
269
|
|
|
301
|
|
Litigation and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
75
|
|
|
75
|
|
Investment income
|
—
|
|
|
(54)
|
|
|
(99)
|
|
|
(44)
|
|
|
(197)
|
|
Divestiture losses/(gains)
|
—
|
|
|
8
|
|
|
(1,179)
|
|
|
3
|
|
|
(1,168)
|
|
Pension and postretirement
|
49
|
|
|
44
|
|
|
1,545
|
|
|
(3)
|
|
|
1,635
|
|
Acquisition expenses
|
165
|
|
|
303
|
|
|
7
|
|
|
182
|
|
|
657
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Other (income)/expense, net
|
73
|
|
|
429
|
|
|
798
|
|
|
962
|
|
|
2,262
|
|
|
|
|
|
|
|
|
|
|
|
Increase to pretax income
|
137
|
|
|
612
|
|
|
840
|
|
|
2,886
|
|
|
4,475
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes on items above
|
(43)
|
|
|
(105)
|
|
|
(275)
|
|
|
(264)
|
|
|
(687)
|
|
Income taxes attributed to Otezla* divestiture
|
—
|
|
|
—
|
|
|
—
|
|
|
808
|
|
|
808
|
|
Income taxes
|
(43)
|
|
|
(105)
|
|
|
(275)
|
|
|
544
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
Increase to net earnings
|
$
|
94
|
|
|
$
|
507
|
|
|
$
|
565
|
|
|
$
|
3,430
|
|
|
$
|
4,596
|
|
(a) Includes amortization of purchase price adjustments to Celgene debt.