UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-Q
___________________________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 001-01136
___________________________
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
___________________________
Delaware22-0790350
(State or other jurisdiction of

incorporation or organization)
(I.R.S Employer
Identification No.)

430 E. 29th Street, 14FL,, New York,, NY10016
(Address of principal executive offices) (zip code)
(212) (212) 546-4000
(Registrant’s telephone number, including area code)

___________________________
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 Par ValueBMYNew York Stock Exchange
1.000% Notes due 2025BMY25New York Stock Exchange
1.750% Notes due 2035BMY35New York Stock Exchange
Bristol-Myers Squibb Contingent Value RightsBMY RTNew York Stock Exchange
Celgene Contingent Value RightsCELG RTNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large“large accelerated filer,,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☒
Accelerated filer  ☐
Non-accelerated filer  ☐
Smaller reporting company  ☐
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐   No  ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
At September 30, 2019,2020, there were 1,629,284,7982,259,751,518 shares outstanding of the Registrant’s $0.10 par value common stock.





BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
September 30, 2019
2020
PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements:
Consolidated Statements of Earnings and Comprehensive Income
3
Consolidated Balance Sheets
4
Consolidated Statements of Cash Flows
5
Notes to Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2833
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
4554
Item 4.
Controls and Procedures
4554
PART II—OTHER INFORMATION
Item 1.
Legal Proceedings
4555
Item 1A.
Risk Factors
4555
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
4657
Item 6.
Exhibits
47
Summary of Abbreviated Terms
48
Signatures
49
*Item 6.Indicates brand names
Exhibits
58
59
60

*    Indicates brand names of products which are trademarks not owned by BMS. Specific trademark ownership information is included in the Exhibit Index at the end of this Quarterly Report on Form 10-Q.





PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
Dollars in Millions, Except Per Share Data
(UNAUDITED)

 Three Months Ended September 30,Nine Months Ended September 30,
EARNINGS2020201920202019
Net product sales$10,197 $5,768 $30,555 $17,512 
Alliance and other revenues343 239 895 688 
Total Revenues10,540 6,007 31,450 18,200 
Cost of products sold(a)
2,502 1,790 8,863 5,586 
Marketing, selling and administrative1,706 1,055 4,940 3,137 
Research and development2,499 1,378 7,393 4,051 
Amortization of acquired intangible assets2,491 25 7,162 73 
Other (income)/expense, net(915)410 (488)249 
Total Expenses8,283 4,658 27,870 13,096 
Earnings Before Income Taxes2,257 1,349 3,580 5,104 
Provision/(Benefit) for Income Taxes379 (17)2,548 584 
Net Earnings1,878 1,366 1,032 4,520 
Noncontrolling Interest6 13 20 25 
Net Earnings Attributable to BMS$1,872 $1,353 $1,012 $4,495 
Earnings per Common Share
Basic$0.83 $0.83 $0.45 $2.75 
Diluted0.82 0.83 0.44 2.75 
(a)    Excludes amortization of acquired intangible assets.
 Three Months Ended September 30, Nine Months Ended September 30,
EARNINGS2019 2018 2019 2018
Net product sales$5,768
 $5,433
 $17,512
 $15,866
Alliance and other revenues239
 258
 688
 722
Total Revenues6,007
 5,691
 18,200
 16,588
     

 

Cost of products sold1,810
 1,648
 5,646
 4,857
Marketing, selling and administrative1,055
 1,104
 3,137
 3,215
Research and development1,382
 1,280
 4,061
 4,965
Other income (net)411
 (508) 252
 (912)
Total Expenses4,658
 3,524
 13,096
 12,125
        
Earnings Before Income Taxes1,349
 2,167
 5,104
 4,463
Provision for Income Taxes(17) 255
 584
 674
Net Earnings1,366
 1,912
 4,520
 3,789
Noncontrolling Interest13
 11
 25
 29
Net Earnings Attributable to BMS$1,353
 $1,901
 $4,495
 $3,760
        
Earnings per Common Share       
Basic$0.83
 $1.16
 $2.75
 $2.30
Diluted0.83
 1.16
 2.75
 2.30



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in Millions
(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
COMPREHENSIVE INCOME2019 2018 2019 2018COMPREHENSIVE INCOME2020201920202019
Net Earnings$1,366
 $1,912
 $4,520
 $3,789
Net Earnings$1,878 $1,366 $1,032 $4,520 
Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings:       
Other Comprehensive (Loss)/Income, net of taxes and reclassifications to earnings:Other Comprehensive (Loss)/Income, net of taxes and reclassifications to earnings:
Derivatives qualifying as cash flow hedges38
 5
 24
 71
Derivatives qualifying as cash flow hedges(132)38 (121)24 
Pension and postretirement benefits1,116
 22
 1,204
 194
Pension and postretirement benefits(4)1,116 5 1,204 
Available-for-sale securities4
 2
 43
 (31)
Available-for-sale debt securitiesAvailable-for-sale debt securities(2)4 7 43 
Foreign currency translation—
 (21) 28
 (237)Foreign currency translation(5)0 (70)28 
Other Comprehensive Income/(Loss)1,158
 8
 1,299
 (3)
Other Comprehensive (Loss)/IncomeOther Comprehensive (Loss)/Income(143)1,158 (179)1,299 
       
Comprehensive Income2,524
 1,920
 5,819
 3,786
Comprehensive Income1,735 2,524 853 5,819 
Comprehensive Income Attributable to Noncontrolling Interest13
 11
 25
 29
Comprehensive Income Attributable to Noncontrolling Interest6 13 20 25 
Comprehensive Income Attributable to BMS$2,511
 $1,909
 $5,794
 $3,757
Comprehensive Income Attributable to BMS$1,729 $2,511 $833 $5,794 
The accompanying notes are an integral part of these consolidated financial statements.


3




BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEETS
Dollars in Millions
(UNAUDITED)
ASSETSSeptember 30,
2019		 December 31,
2018		ASSETSSeptember 30,
2020		December 31,
2019
Current Assets:   Current Assets:
Cash and cash equivalents$30,489
 $6,911
Cash and cash equivalents$19,435 $12,346 
Marketable securities2,053
 1,973
Marketable debt securitiesMarketable debt securities1,720 3,047 
Receivables5,510
 5,965
Receivables8,062 7,685 
Inventories1,192
 1,195
Inventories1,949 4,293 
Prepaid expenses and other947
 1,116
Other current assetsOther current assets3,111 1,983 
Total Current Assets40,191
 17,160
Total Current Assets34,277 29,354 
Property, plant and equipment4,830
 5,027
Property, plant and equipment5,740 6,252 
Goodwill6,513
 6,538
Goodwill20,517 22,488 
Other intangible assets1,002
 1,091
Other intangible assets56,698 63,969 
Deferred income taxes1,624
 1,371
Deferred income taxes913 510 
Marketable securities925

1,775
Other assets2,348
 2,024
Marketable debt securitiesMarketable debt securities495 767 
Other non-current assetsOther non-current assets6,896 6,604 
Total Assets$57,433
 $34,986
Total Assets$125,536 $129,944 
   
LIABILITIES   LIABILITIES
Current Liabilities:   Current Liabilities:
Short-term debt obligations$569
 $1,703
Short-term debt obligations$3,585 $3,346 
Accounts payable1,888
 1,892
Accounts payable2,441 2,445 
Accrued and other current liabilities8,032
 7,059
Other current liabilitiesOther current liabilities14,438 12,513 
Total Current Liabilities10,489
 10,654
Total Current Liabilities20,464 18,304 
Income taxes payable2,919
 3,043
Deferred income taxesDeferred income taxes5,913 6,454 
Long-term debtLong-term debt41,364 43,387 
Other non-current liabilities1,881
 1,516
Other non-current liabilities7,565 10,101 
Long-term debt24,390
 5,646
Total Liabilities39,679
 20,859
Total Liabilities75,306 78,246 
   
Commitments and contingencies   Commitments and contingencies
   
EQUITY   EQUITY
Bristol-Myers Squibb Company Shareholders’ Equity:   Bristol-Myers Squibb Company Shareholders’ Equity:
Preferred stock—
 —
Preferred stock0 0 
Common stock221
 221
Common stock292 292 
Capital in excess of par value of stock2,206
 2,081
Capital in excess of par value of stock44,435 43,709 
Accumulated other comprehensive loss(1,463) (2,762)Accumulated other comprehensive loss(1,699)(1,520)
Retained earnings36,555
 34,065
Retained earnings32,414 34,474 
Less cost of treasury stock(19,871) (19,574)Less cost of treasury stock(25,284)(25,357)
Total Bristol-Myers Squibb Company Shareholders’ Equity17,648
 14,031
Total Bristol-Myers Squibb Company Shareholders’ Equity50,158 51,598 
Noncontrolling interest106
 96
Noncontrolling interest72 100 
Total Equity17,754
 14,127
Total Equity50,230 51,698 
Total Liabilities and Equity$57,433
 $34,986
Total Liabilities and Equity$125,536 $129,944 
The accompanying notes are an integral part of these consolidated financial statements.

4




BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Millions
(UNAUDITED)

Nine Months Ended September 30, Nine Months Ended September 30,
2019 2018 20202019
Cash Flows From Operating Activities:   Cash Flows From Operating Activities:
Net earnings$4,520
 $3,789
Net earnings$1,032 $4,520 
Adjustments to reconcile net earnings to net cash provided by operating activities:   Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization, net510
 465
Depreciation and amortization, net7,690 510 
Deferred income taxes(587) (161)Deferred income taxes1,419 (536)
Stock-based compensation157
 168
Stock-based compensation608 157 
Impairment charges183
 110
Impairment charges131 183 
Pension settlements and amortization1,683
 145
Pension settlements and amortization34 1,683 
Divestiture gains and royalties(1,676) (822)Divestiture gains and royalties(486)(1,676)
Asset acquisition charges25
 85
Asset acquisition charges278 25 
Equity investment losses15
 244
Equity investment (gains)/lossesEquity investment (gains)/losses(724)15 
Contingent consideration fair value adjustmentsContingent consideration fair value adjustments(597)0 
Other adjustments(21) (43)Other adjustments(140)(21)
Changes in operating assets and liabilities:   Changes in operating assets and liabilities:
Receivables434
 (222)Receivables(356)434 
Inventories(7) (152)Inventories2,571 (7)
Accounts payable48
 (186)Accounts payable56 48 
Deferred income13
 84
Income taxes payable47
 199
Income taxes payable(2,104)(4)
Other685
 (192)Other970 698 
Net Cash Provided by Operating Activities6,029
 3,511
Net Cash Provided by Operating Activities10,382 6,029 
Cash Flows From Investing Activities:   Cash Flows From Investing Activities:
Sale and maturities of marketable securities2,464
 1,453
Purchase of marketable securities(1,642) (1,062)
Sale and maturities of marketable debt securitiesSale and maturities of marketable debt securities4,757 2,325 
Purchase of marketable debt securitiesPurchase of marketable debt securities(3,148)(1,642)
Capital expenditures(585) (661)Capital expenditures(470)(585)
Divestiture and other proceeds2,087
 947
Divestiture and other proceeds550 2,226 
Acquisition and other payments(58) (1,215)
Net Cash Provided by/(Used in) Investing Activities2,266
 (538)
Acquisition and other payments, net of cash acquiredAcquisition and other payments, net of cash acquired(421)(58)
Net Cash Provided by Investing ActivitiesNet Cash Provided by Investing Activities1,268 2,266 
Cash Flows From Financing Activities:   Cash Flows From Financing Activities:
Short-term debt obligations, net115
 (617)Short-term debt obligations, net(264)115 
Issuance of long-term debt18,790
 —
Issuance of long-term debt0 18,790 
Repayment of long-term debt(1,256) (5)Repayment of long-term debt(1,500)(1,256)
Repurchase of common stock(300) (320)Repurchase of common stock(81)(300)
Dividends(2,011) (1,960)Dividends(3,054)(2,011)
Other(40) (55)Other265 (40)
Net Cash Provided by/(Used in) Financing Activities15,298
 (2,957)
Effect of Exchange Rates on Cash and Cash Equivalents(15) (29)
Net Increase/(Decrease) in Cash and Cash Equivalents23,578
 (13)
Cash and Cash Equivalents at Beginning of Period6,911
 5,421
Cash and Cash Equivalents at End of Period$30,489
 $5,408
Net Cash (Used in)/Provided by Financing ActivitiesNet Cash (Used in)/Provided by Financing Activities(4,634)15,298 
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted CashEffect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash24 (15)
Increase in Cash, Cash Equivalents and Restricted CashIncrease in Cash, Cash Equivalents and Restricted Cash7,040 23,578 
Cash, Cash Equivalents and Restricted Cash at Beginning of PeriodCash, Cash Equivalents and Restricted Cash at Beginning of Period12,820 6,911 
Cash, Cash Equivalents and Restricted Cash at End of PeriodCash, Cash Equivalents and Restricted Cash at End of Period$19,860 $30,489 
The accompanying notes are an integral part of these consolidated financial statements.

5



Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS

Basis of Consolidation

Bristol-Myers Squibb Company prepared these unaudited consolidated financial statements following the requirements of the SEC and U.S. GAAP for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Quarterly Report on Form 10-Q, which include all adjustments necessary for a fair presentation of the financial position at September 30, 20192020 and December 31, 2018,2019, the results of operations for the three and nine months ended September 30, 20192020 and 2018,2019, and cash flows for the nine months ended September 30, 20192020 and 2018.2019. All intercompany balances and transactions have been eliminated. BMS’s consolidated financial statements include the assets, liabilities, operating results and cash flows of Celgene from the date of acquisition on November 20, 2019. These financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 20182019 included in the 20182019 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

Business Segment Information

The CompanyBMS 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 chief executive officerCEO 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

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results. 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 business combinations; impairments of intangible assets; sales rebate and return accruals; legal contingencies; and income taxes; and pension and postretirement benefits.taxes. Actual results may differ from estimates.

ReclassificationReclassifications

Certain reclassifications were made to conform the prior period amounts were reclassified to conforminterim consolidated financial statements to the current period presentation. Accrued liabilities, Deferred income and Income taxes payable previously presented separately in Total Current Liabilities in the consolidated balance sheets are now presented as Accrued and other current liabilities. Deferred income and Pension and other liabilities previously presented separately in Total Liabilities in the consolidated balance sheets are now presented as Other non-current liabilities.

Recently Adopted Accounting Standards

Leases

Amended guidance for lease accounting was adopted on January 1, 2019 using the modified retrospective method with the cumulative effect of the change recognized in retained earnings in the period of adoption. The new guidance requires an entity to recognize a right-of-use asset and a lease liability initially measured at the present value of future lease payments. The cumulative effect of the accounting change was not material. The Company elected the package of practical expedients upon adoption and will apply the practical expedient not to separate lease and non-lease components for new and modified leases commencing after adoption. In addition, the Company applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months. The amended guidance does not materially impact the Company’s results of operations other than recognition of the operating lease right-of-use asset and lease liability.

Goodwill Impairment Testing

Amended guidance that simplifies the recognition and measurement of a goodwill impairment loss by eliminating Step 2 of the quantitative goodwill impairment test was adopted prospectively in the first quarter of 2019. Under the amended guidance, a goodwill impairment loss is recognized for the amount by which the reporting unit's carrying amount, including goodwill, exceeds its fair value up to the amount of its allocated goodwill. The adoption of the amended guidance did not have an impact on the Company’s results of operations.


6



Recently Issued Accounting Standards Not Yet Adopted

Financial Instruments - Measurement of Credit Losses

In June 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. Entities will beare 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. TheBMS adopted the amended guidance is effective January 1, 2020 with early adoption permitted in 2019 on a modified retrospective approach.approach on January 1, 2020. The amended guidance willdid not have a material impact to the Company’sBMS’s results of operations.

6


Note 2. REVENUE

The following table summarizes the disaggregation of revenue by nature:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Net product sales$10,197 $5,768 $30,555 $17,512 
Alliance revenues184 143 452 418 
Other revenues159 96 443 270 
Total Revenues$10,540 $6,007 $31,450 $18,200 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Net product sales$5,768
 $5,433
 $17,512
 $15,866
Alliance revenues143
 177
 418
 483
Other revenues96
 81
 270
 239
Total Revenues$6,007
 $5,691
 $18,200
 $16,588


The following table summarizes GTN adjustments:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Gross product sales$15,211 $8,884 $43,685 $25,697 
GTN adjustments(a)
Charge-backs and cash discounts(1,440)(927)(4,072)(2,591)
Medicaid and Medicare rebates(2,146)(1,362)(5,126)(3,252)
Other rebates, returns, discounts and adjustments(1,428)(827)(3,932)(2,342)
Total GTN adjustments(5,014)(3,116)(13,130)(8,185)
Net product sales$10,197 $5,768 $30,555 $17,512 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Gross product sales$8,884
 $7,681
 $25,697
 $21,891
GTN adjustments(a)
       
Charge-backs and cash discounts(927) (711) (2,591) (1,957)
Medicaid and Medicare rebates(1,362) (847) (3,252) (2,169)
Other rebates, returns, discounts and adjustments(827) (690) (2,342) (1,899)
Total GTN adjustments(3,116) (2,248) (8,185) (6,025)
Net product sales$5,768
 $5,433
 $17,512
 $15,866
(a)    Includes adjustments for provisions for product sales made in prior periods resulting from changes in estimates of $(25) million and $91 million for the three and nine months ended September 30, 2020 and $12 million and $139 million for the three and nine months ended September 30, 2019, respectively.

(a)Includes adjustments to provisions for product sales made in prior periods resulting from changes in estimates of $12 million and $139 million for the three and nine months ended September 30, 2019 and $(7) million and $103 million for the three and nine months ended September 30, 2018, respectively.

The following table summarizes the disaggregation of revenue by product and region:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Prioritized Brands
Revlimid$3,027 $0 $8,826 $0 
Eliquis2,095 1,928 6,899 5,895 
Opdivo1,780 1,817 5,199 5,441 
Orencia826 767 2,290 2,185 
Pomalyst/Imnovid777 0 2,235 0 
Sprycel544 558 1,576 1,561 
Yervoy446 353 1,211 1,104 
Abraxane342 0 950 0 
Empliciti96 89 290 263 
Reblozyl96 0 159 0 
Inrebic13 0 40 0 
Zeposia2 0 3 0 
Onureg3 0 3 0 
Established Brands
Baraclude100 145 343 433 
Vidaza106 0 390 0 
Other Brands(a)
287 350 1,036 1,318 
Total Revenues$10,540 $6,007 $31,450 $18,200 
United States$6,542 $3,472 $19,795 $10,588 
Europe2,453 1,445 7,156 4,416 
Rest of the World1,361 976 4,030 2,838 
Other(b)
184 114 469 358 
Total Revenues$10,540 $6,007 $31,450 $18,200 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Prioritized Brands       
Opdivo$1,817
 $1,793
 $5,441
 $4,931
Eliquis1,928
 1,577
 5,895
 4,733
Orencia767
 675
 2,185
 1,979
Sprycel558
 491
 1,561
 1,464
Yervoy353
 382
 1,104
 946
Empliciti89
 59
 263
 178
        
Established Brands
 
    
Baraclude145
 175
 433
 579
Other Brands350
 539
 1,318
 1,778
Total Revenues$6,007
 $5,691
 $18,200
 $16,588
        
United States$3,472
 $3,235
 $10,588
 $9,243
Europe1,445
 1,365
 4,416
 4,179
Rest of the World976
 932
 2,838
 2,728
Other(a)
114
 159
 358
 438
Total Revenues$6,007
 $5,691
 $18,200
 $16,588
(a)    Includes BMS and Celgene products in 2020.
(b)    Other revenues include royalties and alliance-related revenues for products not sold by BMS’s regional commercial organizations.

(a)Other revenues include royalties and alliance-related revenues for products not sold by the Company's regional commercial organizations.

7



Revenue recognized from performance obligations satisfied in prior periods was $32 million and $260 million for the three and nine months ended September 30, 2020 and $78 million and $341 million for the three and nine months ended September 30, 2019, and $97 million and $398 million for the three and nine months ended September 30, 2018, respectively, consisting primarily of royalties for out-licensing arrangements and revised estimates for gross-to-netGTN adjustments related to prior period sales. Contract assets were not material at September 30, 20192020 and December 31, 2018.2019.

Note 3. ALLIANCES

The CompanyBMS enters into collaboration arrangements with third parties for the research, development manufacturing and/orand 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. The CompanyBMS 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. The CompanyBMS refers to these collaborations as alliances and its partners as alliance partners.

Selected financial information pertaining to the Company's alliances was as follows, including net product sales when the CompanyBMS 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.
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Revenues from alliances:
Net product sales$2,116 $2,464 $7,040 $7,412 
Alliance revenues184 143 452 418 
Total Revenues$2,300 $2,607 $7,492 $7,830 
Payments to/(from) alliance partners:
Cost of products sold$1,007 $1,017 $3,363 $3,116 
Marketing, selling and administrative(25)(33)(103)(93)
Research and development48 11 327 32 
Other (income)/expense, net(28)(15)(59)(45)
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Revenues from alliances:       
Net product sales$2,464
 $2,037
 $7,412
 $6,135
Alliance revenues143
 177
 418
 483
Total Revenues$2,607
 $2,214
 $7,830
 $6,618
        
Payments to/(from) alliance partners:       
Cost of products sold$1,017
 $838
 $3,116
 $2,528
Marketing, selling and administrative(33) (26) (93) (76)
Research and development11
 (2) 32
 1,060
Other income (net)(15) (14) (45) (44)
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Selected Alliance Balance Sheet information:
Receivables – from alliance partners$336 $347 
Accounts payable – to alliance partners971 1,026 
Deferred income from alliances(a)
392 431 
(a)    Includes unamortized upfront and milestone payments.
Selected Alliance Balance Sheet information:   
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Receivables - from alliance partners$342
 $395
Accounts payable - to alliance partners994
 904
Deferred income from alliances(a)
452
 491
(a)Includes unamortized upfront and milestone payments.

The nature, and purpose, significant rights and obligations of the parties and specific accounting policy elections for each of the Company'sCompany’s significant alliances are discussed in the Company's 20182019 Form 10-K. There were no significantSignificant developments and updates related to alliances during 2019.the nine months ended September 30, 2020 are set forth below.

Otsuka

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 table above.

8


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 the second quarter of 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 the second quarter of 2020.

Note 4. ACQUISITIONS, DIVESTITURES, LICENSING AND OTHER ARRANGEMENTS

DivestituresAcquisitions

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. 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 purchase price allocation is preliminary and subject to change for income tax matters. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made year-to-date to the amounts initially recorded in 2019. 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 is immaterial to the consolidated financial statements.
9


Dollars in MillionsAmounts Recognized as of Acquisition Date
(as previously reported)		Measurement Period AdjustmentsAmounts Recognized as of Acquisition Date
(as adjusted)
Cash and cash equivalents$11,179 $— $11,179 
Receivables2,652 — 2,652 
Inventories4,511 — 4,511 
Property, plant and equipment1,342 (277)1,065 
Intangible assets64,027 (100)63,927 
Otezla* assets held-for-sale
13,400 — 13,400 
Other assets3,408 45 3,453 
Accounts payable(363)— (363)
Income taxes payable(2,718)(47)(2,765)
Deferred income tax liabilities(7,339)2,350 (4,989)
Debt(21,782)— (21,782)
Other liabilities(4,017)15 (4,002)
Identifiable net assets acquired64,300 1,986 66,286 
Goodwill15,969 (1,986)13,983 
Total consideration transferred$80,269 $— $80,269 

Asset Acquisitions

MyoKardia

In the fourth quarter of 2020, BMS entered into a definitive merger agreement under which BMS will acquire 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. The acquisition will provide 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, through a subsidiary, commenced a tender offer to acquire all of the issued and outstanding shares of MyoKardia’s common stock for $225.00 per share, or $13.1 billion. In November 2020, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), as amended, expired. Expiration of the waiting period under the HSR Act satisfies one of the conditions necessary for the consummation of the transaction, which remains subject to the satisfaction of the tender of a majority of the outstanding shares of MyoKardia’s common stock, a well as other customary closing conditions and regulatory approvals. BMS intends to close the acquisition of MyoKardia at the earliest possible date after the closing of the tender offer, which it currently expects to be in the fourth quarter of 2020.

BMS anticipates funding the transaction through a combination of cash on hand from its operations and subject to market conditions, net proceeds gains or lossesreceived in connection with a future debt issuance. BMS expects to account for the transaction as an asset acquisition since mavacamten will represent substantially all of the fair value of the gross assets acquired.

Forbius

In the third quarter of 2020, BMS acquired all of the outstanding shares of Forbius, a privately held, clinical-stage protein engineering company that designs and royalty incomedevelops 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 resulting from divestitures.the occurrence of a development event attributed to the Cormorant asset acquisition completed in 2016.

10


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 and assets held-for-sale were not material in all periods presented (excluding divestiture gains or losses).
Three Months Ended September 30,
Net Proceeds(a)
Divestiture (Gains)/LossesRoyalty and Milestone Income
Dollars in Millions202020192020201920202019
UPSA Business$0 $1,510 $0 $(1,176)$0 $0 
Diabetes Business129 163 0 0 (148)(171)
Erbitux*3 3 0 0 0 0 
Manufacturing Operations0 0 0 1 0 0 
Mature Brands and Other41 7 1 (4)(44)(6)
Total$173 $1,683 $1 $(1,179)$(192)$(177)
Three Months Ended September 30,Nine Months Ended September 30,
Net Proceeds(a)
 Divestiture Losses/(Gains) Royalty Income
Net Proceeds(a)
Divestiture (Gains)/LossesRoyalty and Milestone Income
Dollars in Millions2019 2018 2019 2018 2019 2018Dollars in Millions202020192020201920202019
UPSA Business$1,510
 $—
 $(1,176) $—
 $—
 $—
UPSA Business$0 $1,510 $0 $(1,160)$0 $0 
Diabetes Business163
 165
 —
 —
 (171) (170)Diabetes Business409 491 0 0 (404)(497)
Erbitux* Business
3
 59
 —
 —
 —
 (48)
Erbitux*Erbitux*10 11 0 0 0 0 
Manufacturing Operations—
 —
 1
 —
 —
 —
Manufacturing Operations10 3 (1)1 0 0 
Plavix* and Avapro*/Avalide*
Plavix* and Avapro*/Avalide*
7 0 (12)0 0 0 
Mature Brands and Other7
 140
 (4) (108) (6) 1
Mature Brands and Other73 9 7 (12)(76)(8)
Total$1,683
 $364
 $(1,179) $(108) $(177) $(217)Total$509 $2,024 $(6)$(1,171)$(480)$(505)
(a)    Includes royalties received subsequent to the related sale of the asset or business.
 Nine Months Ended September 30,
 
Net Proceeds(a)
 Divestiture Losses/(Gains) Royalty Income
Dollars in Millions2019 2018 2019 2018 2019 2018
UPSA Business$1,510
 $—
 $(1,160) $—
 $—
 $—
Diabetes Business491
 408
 —
 —
 (497) (497)
Erbitux* Business
11
 168
 —
 —
 —
 (145)
Manufacturing Operations3
 159
 1
 —
 —
 —
Mature Brands and Other9
 212
 (12) (178) (8) (2)
Total$2,024
 $947
 $(1,171) $(178) $(505) $(644)
(a)Includes royalties received subsequent to the related sale of the asset or business.

UPSA Business

In the third quarter of 2019, the Company sold its UPSA consumer health business, including the shares of UPSA SAS and BMS'sBMS’s assets and liabilities relating to the UPSA product portfolio. The transaction was accounted for as the sale of a business. The UPSA business was treated as a single disposal group held-for-sale as of December 31, 2018.

Assets Held-For-Sale

Manufacturing Operations

In the second quarter of 2019, the CompanyBMS agreed to sell its manufacturing and packaging facility in Anagni, Italy to Catalent for approximately $50 million.Catalent. The transaction is expected to close by the end of 2019 subject to regulatory approvals and the satisfaction of certain other customary closing conditions and will be accounted for as a sale of a business. Catalent will provide certain manufacturing and packaging services for the Company for a period of time subsequent to closing. The business was accounted for as held-for-salethe sale of a business and itsthe sale was completed in the fourth quarter of 2019. The assets were reduced to the estimatedtheir relative fair value after considering the purchase price resulting in aan impairment charge of $113 million impairment charge for the nine months ended September 30, 2019 that was included in Cost of products sold. Assets were reclassified to assets held-for-sale as of September 30, 2019

Licensing and included within Prepaid expenses and other. Liabilities were reclassified to liabilities related to assets held-for-sale and included within Accrued and other current liabilities.Other Arrangements


9



The following table summarizes the net assets held-for-sale asfinancial impact of September 30, 2019Keytruda* royalties, up-front and December 31, 2018.milestone licensing fees for products that have not obtained commercial approval, which are included in Other (income)/expense, net.
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Keytruda* royalties
$(176)$(132)$(492)$(373)
Up-front licensing fees0 (24)(30)(24)
Contingent milestone income(16)(6)(62)(15)
Amortization of deferred income(14)(14)(44)(44)
Other royalties(5)(3)(16)(6)
Total$(211)$(179)$(644)$(462)
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Receivables$—
 $79
Inventories7
 81
Property, plant and equipment36
 187
Goodwill4
 127
Other12
 5
Assets held-for-sale$59
 $479
    
Accounts payable$—
 $35
Accrued and other current liabilities8
 78
Deferred income taxes—
 25
Other liabilities3
 14
Liabilities related to assets held-for-sale$11
 $152
    
Net assets held-for-sale$48
 $327


11


Dragonfly

In the fourth quarter of 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. The transaction included an upfront payment of $400 million and Dragonfly is eligible to receive contingent consideration comprised of development, regulatory and sales-based milestone payments up to $2.8 billion. Dragonfly will also receive royalties on global net sales.

Note 5. OTHER INCOME (NET)(INCOME)/EXPENSE, NET
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Interest expense$346 $209 $1,065 $377 
Pension and postretirement0 1,537 (6)1,607 
Royalties and licensing income(403)(356)(1,124)(967)
Divestiture losses/(gains)1 (1,179)(6)(1,171)
Acquisition expenses0 7 0 475 
Contingent consideration(988)0 (597)0 
Investment income(13)(173)(99)(348)
Integration expenses195 96 535 224 
Provision for restructuring176 10 451 32 
Equity investment (gains)/losses(244)261 (724)15 
Litigation and other settlements10 (1)41 0 
Transition and other service fees(18)(7)(129)(11)
Intangible asset impairment0 0 21 15 
Reversion excise tax0 0 76 0 
Other23 6 8 1 
Other (income)/expense, net$(915)$410 $(488)$249 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Interest expense$209

$44
 $377

$135
Investment income(173)
(44) (348)
(118)
Equity investment losses/(gains)261

(97) 15

244
Provision for restructuring10

45
 32

102
Acquisition expenses7

—
 475

—
Integration expenses96
 —
 224
 —
Litigation and other settlements(1)
11
 —

10
Equity in net income of affiliates—

(22) —

(73)
Divestiture gains(1,179)
(108) (1,171)
(178)
Royalties and licensing income(356)
(338) (967)
(1,058)
Transition and other service fees(7)
—
 (11)
(5)
Pension and postretirement1,537

(10) 1,607

(40)
Intangible asset impairment—

—
 15

64
Other7

11
 4

5
Other income (net)$411

$(508) $252

$(912)


Note 6. RESTRUCTURING

A restructuring and integration plan is being implemented as an initiative to realize $2.5 billion of sustainable run-rate synergies resulting from cost savings and avoidance from the Celgene acquisition. 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%). The majority of charges are expected to be incurred through 2022, and range between $2.5 billion to $3.0 billion. Cumulative charges of approximately $1.7 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 1,400 for the nine months ended September 30, 2020.

12


The following tables summarize the charges and activity related to the Celgene acquisition:
Dollars in MillionsThree Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Employee termination costs$133 $386 
Other termination costs36 42 
Provision for restructuring169 428 
Integration expenses195 535 
Accelerated depreciation6 6 
Asset impairments3 42 
Other0 3 
Total charges$373 $1,014 
Dollars in MillionsThree Months Ended
September 30, 2020		Nine Months Ended
September 30, 2020
Marketing, selling and administrative$6 $7 
Research and development3 42 
Other (income)/expense, net364 965 
Total charges$373 $1,014 
Dollars in MillionsNine Months Ended
September 30, 2020
Liability at January 1$77 
Charges372 
Change in estimates(8)
Provision for restructuring(a)
364 
Foreign currency translation and other2 
Payments(255)
Liability at September 30$188 
(a)    Excludes $64 million of accelerated stock-based compensation.

In October 2016, the Company announced a restructuring plan was announced to evolve and streamline itsBMS’s operating model. The majority of the charges are expected to be incurred through 2020, range between $1.5 billion to $2.0 billion. Cumulative charges of approximately $1.5 billion and consist ofhave been recognized including employee termination benefit costs, contract termination costs, plant and equipment accelerated depreciation and impairment charges and other shutdown costs associated with early manufacturing and R&D site exits. The remaining charges are expected to result from additional site exit costs. Cash outlays in connection with these actions are expected to be approximately 40% to 50% of the total charges. Charges of approximately $1.3 billion have been recognized for these actions since the announcement. Restructuring charges are recognized upon meeting certain criteria, including finalization of committed plans, reliable estimates and discussions with local works councils in certain markets.

Employee workforce reductions were approximately 100 and 600 for the nine months ended September 30, 2019 and 2018, respectively.


10



The following tables summarize the charges and activity related to the restructuring actions:Company transformation:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Employee termination costs$0 $4 $3 $11 
Other termination costs7 6 20 21 
Provision for restructuring7 10 23 32 
Accelerated depreciation1 33 42 96 
Asset impairments2 9 44 119 
Other shutdown costs0 0 6 0 
Total charges$10 $52 $115 $247 
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Cost of products sold$3 $22 $30 $156 
Marketing, selling and administrative0 0 0 1 
Research and development0 20 56 58 
Other (income)/expense, net7 10 29 32 
Total charges$10 $52 $115 $247 
13


 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Employee termination costs$4
 $37
 $11
 $72
Other termination costs6
 8
 21
 30
Provision for restructuring10
 45
 32
 102
Accelerated depreciation33
 30
 96
 82
Impairment charges9
 —
 119
 10
Other shutdown costs—
 1
 —
 6
Total charges$52
 $76
 $247
 $200
Nine Months Ended September 30,
Dollars in Millions20202019
Liability at December 31$23 $99 
Cease-use liability reclassification0 (3)
Liability at January 123 96 
Charges22 36 
Change in estimates1 (4)
Provision for restructuring23 32 
Foreign currency translation and other0 (1)
Payments(40)(98)
Liability at September 30$6 $29 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Cost of products sold$22
 $12
 $156
 $39
Marketing, selling and administrative—
 1
 1
 2
Research and development20
 18
 58
 57
Other income (net)10
 45
 32
 102
Total charges$52
 $76
 $247
 $200

 Nine Months Ended September 30,
Dollars in Millions2019 2018
Liability at December 31$99
 $186
Cease-use lease liability reclassification(3) —
Liability at January 196
 186
    
Charges36
 108
Change in estimates(4) (6)
Provision for restructuring32
 102
Foreign currency translation and other(1) 2
Payments(98) (171)
Liability at September 30$29
 $119


Note 7. INCOME TAXES
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Earnings Before Income Taxes$2,257 $1,349 $3,580 $5,104 
Provision/(Benefit) for Income Taxes379 (17)2,548 584 
Effective Tax Rate16.8 %(1.3)%71.2 %11.4 %
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Earnings Before Income Taxes$1,349
 $2,167
 $5,104
 $4,463
Provision for Income Taxes(17) 255
 584
 674
Effective Tax Rate(1.3)% 11.8% 11.4% 15.1%


JurisdictionalAn $853 million deferred tax charge resulting from an internal transfer of certain intangible assets to the U.S. and an additional $266 million GILTI tax charge upon finalization of the Otezla* divestiture tax consequences with tax authorities increased the effective tax rate by 31.3% for the nine months ended September 30, 2020. The tax impact of low jurisdictional tax rates attributed to inventory and otherintangible asset purchase price adjustments increased the effective tax impactsrate and non-taxable fair value adjustments to contingent value rights decreased the effective tax rate for the nine months ended September 30, 2020. The tax impact of high jurisdictional tax rates attributed to pension settlement charges and gain on sale of the UPSA business divestiture and other specified items decreased the effective tax rate by 13.1% and 3.6% in the three and nine months ended September 30, 2019, respectively. These items decreased the effective tax rate by 1.5% and 0.8% in the three and nine months ended September 30, 2018, respectively.prior periods. The tax impact of these discrete items are reflected immediately and are not considered in estimating the annual effective tax rate. Additional changes to the effective tax rate may occur in future periods due to various reasons including pretax earnings mix, tax reserves, cash repatriations and revised interpretations of the relevant tax code.

The CompanyBMS 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 2008-2012 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. Tax reserve releases due to lapse of statutes werewas $81 million and $49 million in the three months ended September 30, 2019 and 2018, respectively.2019.


11



It is also reasonably possible that the total amount of unrecognized tax benefits at September 30, 20192020 could decrease in the range of approximately $300$350 million to $340$390 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. It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. The CompanyBMS believes that it has adequately provided for all open tax years by tax jurisdiction.

14


Note 8. EARNINGS PER SHARE
Three Months Ended September 30,Nine Months Ended September 30,
Amounts in Millions, Except Per Share Data2020201920202019
Net Earnings Attributable to BMS Used for Basic and Diluted EPS Calculation$1,872 $1,353 $1,012 $4,495 
Weighted-Average Common Shares Outstanding – Basic2,257 1,632 2,260 1,634 
Incremental Shares Attributable to Share-Based Compensation Plans33 2 35 2 
Weighted-Average Common Shares Outstanding – Diluted2,290 1,634 2,295 1,636 
Earnings per Common Share
Basic$0.83 $0.83 $0.45 $2.75 
Diluted0.82 0.83 0.44 2.75 
 Three Months Ended September 30, Nine Months Ended September 30,
Amounts in Millions, Except Per Share Data2019 2018 2019 2018
Net Earnings Attributable to BMS used for Basic and Diluted EPS Calculation$1,353
 $1,901
 $4,495
 $3,760
        
Weighted-average common shares outstanding - basic1,632
 1,632
 1,634
 1,633
Incremental shares attributable to share-based compensation plans2
 4
 2
 4
Weighted-average common shares outstanding - diluted1,634
 1,636
 1,636
 1,637
        
Earnings per share - basic$0.83
 $1.16
 $2.75
 $2.30
Earnings per share - diluted0.83
 1.16
 2.75
 2.30


The total number of potential shares of common stock excluded from the diluted EPS computation because of the antidilutive impact was 27 million and 29 million for the three and nine months ended September 30, 2020, respectively, and was not material for the three and nine months ended September 30, 2019.

Note 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
September 30, 2020December 31, 2019
Dollars in MillionsLevel 1Level 2Level 3Level 1Level 2Level 3
Cash and cash equivalents - money market and other securities$0 $17,075 $0 $0 $10,448 $0 
Marketable debt securities:
Certificates of deposit0 1,391 0 0 1,227 0 
Commercial paper0 0 0 0 1,093 0 
Corporate debt securities0 824 0 0 1,494 0 
Derivative assets0 74 0 0 140 0 
Equity investments2,927 134 0 2,020 175 0 
Derivative liabilities0 (120)0 0 (40)0 
Contingent consideration liability:
Contingent value rights1,697 0 0 2,275 0 0 
Other acquisition related contingent consideration0 0 73 0 0 106 
 September 30, 2019 December 31, 2018
Dollars in MillionsLevel 1 Level 2 Level 1 Level 2
Cash and cash equivalents - money market and other investments$—
 $29,771
 $—
 $6,173
Marketable securities       
Certificates of deposit—
 1,156
 —
 971
Commercial paper—
 129
 —
 273
Corporate debt securities—
 1,693
 —
 2,379
Equity investments—
 —
 —
 125
Derivative assets—
 85
 —
 44
Equity investments113
 147
 88
 266
Derivative liabilities—
 (251) —
 (31)

As further described in “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements” in the Company's 2018Company’s 2019 Form 10-K, the Company'sCompany’s fair value estimates use inputs that are either (1) quoted prices for identical assets or liabilities in active markets (Level 1 inputs); (2) observable prices for similar assets or liabilities in active markets or for identical or similar assets or liabilities in markets that are not active (Level 2 inputs); or (3) unobservable inputs (Level 3 inputs). There were no Level 3 financial assets

15


Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued 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 liabilitiesdecrease 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 contingent consideration as of September 30, 20192020 was calculated using the following significant unobservable inputs:
Ranges (weighted average) utilized as of:
InputsSeptember 30, 2020
Discount rate2.2% to 2.7% (2.4%)
Probability of payment0% to 80% (2.7%)
Projected year of payment for development and regulatory milestones2021 to 2025

There were no transfers between levels 1, 2 and December 31, 2018.3 during the nine months ended September 30, 2020. The following table represents a roll-forward of the fair value of level 3 instruments:
Dollars in MillionsNine Months Ended September 30, 2020
Fair value as of January 1$106 
Changes in estimated fair value(35)
Foreign exchange2 
Fair value as of September 30$73 

Available-for-sale Debt Securities and Equity Investments

Changes in fair value of equity investments are included in Other income (net).(income)/expense, net. The following table summarizes the Company's available-for-sale debt securities and equity investments:
September 30, 2020December 31, 2019
Dollars in MillionsAmortized CostGross UnrealizedAmortized CostGross Unrealized
GainsLossesFair ValueGainsLossesFair Value
Certificates of deposit$1,391 $0 $0 $1,391 $1,227 $0 $0 $1,227 
Commercial paper0 0 0 0 1,093 0 0 1,093 
Corporate debt securities807 17 0 824 1,487 8 (1)1,494 
Total available-for-sale debt securities(a)
$2,198 $17 $0 $2,215 $3,807 $8 $(1)$3,814 
Equity investments3,061 2,195 
Total$5,276 $6,009 
 September 30, 2019 December 31, 2018
Dollars in MillionsAmortized Cost Gross Unrealized   Amortized Cost Gross Unrealized  
 Gains Losses Fair Value  Gains Losses Fair Value
Certificates of deposit$1,156
 $—
 $—
 $1,156
 $971
 $—
 $—
 $971
Commercial paper129
 —
 —
 129
 273
 —
 —
 273
Corporate debt securities1,686
 8
 (1) 1,693
 2,416
 —
 (37) 2,379
 $2,971
 $8
 $(1) 2,978
 $3,660
 $—
 $(37) 3,623
                
Equity investments      260
       479
Total      $3,238
       $4,102
(a)    All marketable debt securities mature within five years as of September 30, 2020 and December 31, 2019.


12



Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Current marketable securities$2,053
 $1,973
Non-current marketable securities(a)
925
 1,775
Other assets260
 354
Total$3,238
 $4,102
(a)All non-current marketable securities mature within five years as of September 30, 2019 and December 31, 2018.

Equity investments not measured at fair value and excluded from the above fair value table were limited partnerships and other equity method investments of $150$496 million at September 30, 20192020 and $114$429 million at December 31, 20182019 and other equity investments without readily determinable fair values of $164$735 million at September 30, 20192020 and $206$781 million at December 31, 2018.2019. These amounts are included in Other non-current assets. Upward adjustments to equity investments without readily determinable fair values for the three and nine months ended September 30, 2020 were $46 million and $318 million, respectively, resulting from observable price changes for similar securities for the same issuer and were recorded in Other (income)/expense, net. Downward adjustments to equity investments without readily determinable fair values for the three and nine months ended September 30, 2020 were $2 million and $203 million, respectively.

The following table summarizes the net gain/(loss) recorded for equity investments with readily determinable fair values held as of September 30, 20192020 and 2018:2019:
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Net gain/(loss) recognized$(235) $97
 $(81) $(262)
Less: Net gain/(loss) recognized for equity investments sold—
 —
 14
 —
Net unrealized gain/(loss) on equity investments held$(235) $97
 $(95) $(262)
16


Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Net gain/(loss) recognized$170 $(235)$577 $(81)
Less: Net gain recognized for equity investments sold0 0 0 14 
Net unrealized gain/(loss) on equity investments held$170 $(235)$577 $(95)

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. Upon adoptionThe majority of the amended guidance for derivatives and hedging in the first quarter of 2018, the entire change in fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the derivatives qualifying as cash flow hedges component of Other Comprehensive (Loss)/Income. 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)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 $921 million$3.0 billion and Japanese yen of $546 million$1.4 billion at September 30, 2019.2020.

The earnings impact related to discontinued cash flow hedges and hedge ineffectiveness was not material 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 BMS benefits 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.

Net Investment Hedges — EuroNon-U.S. Dollar borrowings of €950 million ($1.01.1 billion) at September 30, 20192020 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 $43 million and $10 million in 2019 and 2018, respectively, and were recordedincluded in the foreign currency translation component of Other Comprehensive Income/(Loss)Accumulated other comprehensive loss with the related offset in Long-termlong-term debt.

In January 2018, the Company entered into $300 million of cross-currency interest rate swap contracts maturing in December 2022 designated to hedge Japanese yen currency exposures of the Company's net investment in its Japan subsidiary. Contract fair value changes are recorded in the foreign currency translation component of Other Comprehensive Income/(Loss)/Income with a related offset in Other non-current assets or Other non-current liabilities.

Cross-currency interest rate swap contracts of $400 million at September 30, 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.


13



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 (2.0%(0.15% as of September 30, 2019)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 match those ofalign 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.

Following
17


In the announcementsecond quarter of the Company's pending acquisition of Celgene, the Company entered into forward starting interest rate swap option contracts, 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 pending Celgene acquisition. In April 2019, the Company entered into 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 anticipated issuance of long-term debt to fund the Celgene acquisition and terminated the forward starting interest rate swap option contracts.contracts were terminated. The deal contingent forward starting interest rate swap contracts were unwoundterminated upon the May 2019 issuancecompletion of the new notes, refer to “—Debt Obligations.”Celgene acquisition.

The following table summarizes the fair value of outstanding derivatives:
 September 30, 2020December 31, 2019
Asset(a)
Liability(b)
Asset(a)
Liability(b)
Dollars in MillionsNotionalFair ValueNotionalFair ValueNotionalFair ValueNotionalFair Value
Derivatives designated as hedging instruments:
Interest rate swap contracts$255 $27 $0 $0 $255 $6 $0 $0 
Cross-currency interest rate swap contracts225 2 175 (1)175 2 125 (1)
Foreign currency forward contracts1,904 18 3,422 (116)766 27 980 (20)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts1,108 27 478 (3)2,342 91 1,173 (10)
Foreign currency zero-cost collar contracts123 0 65 0 2,482 14 2,235 (9)
 September 30, 2019 December 31, 2018
 
Asset(a)
 
Liability(b)
 
Asset(a)
 
Liability(b)
Dollars in MillionsNotional Fair Value Notional Fair Value Notional Fair Value Notional Fair Value
Derivatives designated as hedging instruments:              
Interest rate swap contracts$255
 $11
 $—
 $—
 $—
 $—
 $755
 $(10)
Cross-currency interest rate swap contracts125
 1
 175
 (2) 50
 —
 250
 (5)
Foreign currency forward contracts1,667
 68
 246
 (4) 1,503
 44
 496
 (10)
                
Derivatives not designated as hedging instruments:              
Foreign currency forward contracts525
 5
 203
 (5) 54
 —
 600
 (6)
Deal contingent forward starting interest rate swap contracts—
 —
 10,350
 (240) —
 —
 —
 —
(a)    Included in Other current assets and Other non-current assets.
(a)Included in prepaid expenses and other and other assets.
(b)Included in accrued and other current liabilities and other non-current liabilities.
(b)    Included in Other current liabilities and Other non-current liabilities.

The following table summarizes the financial statement classification and amount of gain/(loss)(gain)/loss recognized on hedging instruments:
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Dollars in MillionsCost of products soldOther (income)/expense, netCost of products soldOther (income)/expense, net
Interest rate swap contracts$0 $(7)$0 $(21)
Cross-currency interest rate swap contracts0 (3)0 (8)
Foreign currency forward contracts(5)14 (63)(41)
Foreign currency zero-cost collar contracts0 0 0 1 
Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
Dollars in MillionsCost of products sold Other income (net) Cost of products sold Other income (net)Dollars in MillionsCost of products soldOther (income)/expense, netCost of products soldOther (income)/expense, net
Interest rate swap contracts$—
 $6
 $—
 $18
Interest rate swap contracts$0 $(6)$0 $(18)
Cross-currency interest rate swap contracts—
 2
 —
 6
Cross-currency interest rate swap contracts0 (2)0 (6)
Foreign currency forward contracts20
 9
 76
 11
Foreign currency forward contracts(20)(9)(76)(11)
Forward starting interest rate swap option contracts—
 —
 —
 (35)
Deal contingent forward starting interest rate swap contracts—
 —
 —
 (240)
Forward starting interest rate swap optionsForward starting interest rate swap options0 0 0 35 
Deal contingent forward starting interest rate swapDeal contingent forward starting interest rate swap0 0 0 240 

 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Dollars in MillionsCost of products sold Other income (net) Cost of products sold Other income (net)
Interest rate swap contracts$—
 $5
 $—
 $18
Cross-currency interest rate swap contracts—
 2
 —
 6
Foreign currency forward contracts13
 10
 (20) 17
18



14



The following table summarizes the effect of derivative and non-derivative instruments designated as hedging instruments in Other Comprehensive Income/(Loss):/Income:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Derivatives qualifying as cash flow hedges
Foreign currency forward contracts gain/(loss):
Recognized in Other Comprehensive (Loss)/Income(a)
$(128)$63 $(65)$102 
Reclassified to Cost of products sold(17)(20)(69)(76)
Derivatives qualifying as net investment hedges
Cross-currency interest rate swap contracts gain/(loss):
Recognized in Other Comprehensive (Loss)/Income(11)2 (1)4 
Non-derivatives qualifying as net investment hedges
Non-U.S. dollar borrowings gain/(loss):
Recognized in Other Comprehensive (Loss)/Income(39)41 (51)43 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Derivatives qualifying as cash flow hedges       
Foreign currency forward contracts gain/(loss):       
Recognized in Other Comprehensive Income/(Loss)(a)
$63
 $18
 $102
 $63
Reclassified to Cost of products sold(20) (13) (76) 20
        
Derivatives qualifying as net investment hedges       
Cross-currency interest rate swap contracts gain/(loss):       
Recognized in Other Comprehensive Income/(Loss)2
 5
 4
 1
        
Non-derivatives qualifying as net investment hedges       
Non U.S. dollar borrowings gain/(loss):       
Recognized in Other Comprehensive Income/(Loss)41
 (6) 43
 10
(a)    The amount is expected to be reclassified into earnings in the next 12 months.
(a)The amount is expected to be reclassified into earnings in the next 12 months.

Debt Obligations

Short-term debt obligations include:
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Non-U.S. short-term borrowings$183 $351 
Current portion of long-term debt3,250 2,763 
Other152 232 
Total$3,585 $3,346 
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Non-U.S. short-term borrowings$355
 $320
Current portion of long-term debt—
 1,249
Other214
 134
Total$569
 $1,703


Long-term debt and the current portion of long-term debt include:
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Principal Value$42,896 $44,335 
Adjustments to Principal Value:
Fair value of interest rate swap contracts27 6 
Unamortized basis adjustment from swap terminations155 175 
Unamortized bond discounts and issuance costs(256)(280)
Unamortized purchase price adjustments of Celgene debt1,792 1,914 
Total$44,614 $46,150 
Current portion of long-term debt$3,250 $2,763 
Long-term debt41,364 43,387 
Total$44,614 $46,150 
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Principal Value$24,467
 $6,776
Adjustments to Principal Value   
Fair value of interest rate swap contracts11
 (10)
Unamortized basis adjustment from swap terminations181
 201
Unamortized bond discounts and issuance costs(269) (72)
Total$24,390
 $6,895
    
Current portion of long-term debt$—
 $1,249
Long-term debt24,390
 5,646


The fair value of long-term debt was $26.6$52.7 billion at September 30, 20192020 and $7.1$50.7 billion at December 31, 20182019 valued using Level 2 inputs.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. Interest payments were $166 million$1.3 billion and $174$166 million for the nine months ended September 30, 20192020 and 2018,2019, respectively, net of amounts related to interest rate swap contracts.

DuringIn the firstsecond quarter of 2019, the $750 million 1.600% Notes and the $500 million 1.750% Notes matured and were repaid.


15



In May 2019, the CompanyBMS issued an aggregate principal amount of $19.0 billion of floating rate and fixed rate unsecured senior notes. The notes rank equally in right of payment with all of the Company'sCompany’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. All of the notes are subject to special mandatory redemption at a redemption price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest if the pending acquisition of Celgene is not completed by July 30, 2020 or the Company notifies the trustee in respect of the notes that it will not pursue the consummation of the Celgene acquisition. The following table summarizes the note issuances:
Dollars in Millions2019
Principal Value: 
Floating Rate Notes due 2020$750
Floating Rate Notes due 2022500
2.550% Notes due 20211,000
2.600% Notes due 20221,500
2.900% Notes due 20243,250
3.200% Notes due 20262,250
3.400% Notes due 20294,000
4.125% Notes due 20392,000
4.250% Notes due 20493,750
Total$19,000
  
Proceeds net of discount and deferred loan issuance costs$18,790

19


During the third quarter of 2020, the $1.5 billion 2.875% Notes matured and were repaid. During the first quarter of 2019, the $750 million 1.600% Notes and the $500 million 1.750% Notes matured and were repaid.

As of September 30, 2019,2020, BMS had four separate revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility expiring in January 2020,2021, a $1.0 billion facility expiring in January 2022 and two five-year $1.5 billion facilities that were extended to September 2023 and July 2024, respectively. The facilities provide for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for the Company'sBMS’s commercial paper borrowings. The Company'sBMS’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. The Company's 364-day $2.0 billion facility can be renewed for one year on each anniversary date, subject to certain terms and conditions. No borrowings were outstanding under any revolving credit facilityfacilities at September 30, 20192020 or December 31, 2018.

In connection with the pending acquisition of Celgene, the Company entered into a bridge commitment letter that provided for up to $33.5 billion in a 364-day senior unsecured bridge facility in January 2019. The Company terminated the bridge facility upon receipt of proceeds from the Company's issuance of $19.0 billion of new notes in May 2019.

The Company also 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 pending Celgene acquisition. The term loan is subject to customary terms and conditions and does not have any financial covenants. No amounts will be borrowed under the term loan prior to the closing of the pending acquisition of Celgene. If drawn upon, the proceeds under the term loan will be used to fund a portion of the cash to be paid in the pending acquisition of Celgene and the payment of related fees and expenses.

Note 10. RECEIVABLES
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Trade receivables$7,168 $6,888 
Less charge-backs and cash discounts(371)(391)
Less allowance for expected credit loss(20)(21)
Net trade receivables6,777 6,476 
Alliance, royalties, VAT and other1,285 1,209 
Receivables$8,062 $7,685 
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Trade receivables$4,595
 $4,914
Less charge-backs and cash discounts(270) (245)
Less bad debt allowances(36) (33)
Net trade receivables4,289
 4,636
Prepaid and refundable income taxes159
 218
Alliance, royalties, VAT and other1,062
 1,111
Receivables$5,510
 $5,965


Non-U.S. receivables sold on a nonrecourse basis were $580$788 million and $594$580 million for the nine months ended September 30, 20192020 and 2018,2019, respectively. Receivables from the Company's 3 largest pharmaceutical wholesalerscustomers in the U.S. represented approximately 70%56% and 50% of total trade receivables at September 30, 20192020 and December 31, 2018.2019, respectively.


16



Note 11. INVENTORIES
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Finished goods$822 $2,227 
Work in process2,069 3,267 
Raw and packaging materials221 172 
Total inventories$3,112 $5,666 
Inventories$1,949 $4,293 
Other non-current assets1,163 1,373 
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Finished goods$306
 $356
Work in process1,124
 1,152
Raw and packaging materials127
 116
Total inventories$1,557
 $1,624
    
Inventories$1,192
 $1,195
Other assets(a)
365
 429

(a)
Total inventories include fair value adjustments resulting from the Celgene acquisition of $883 million at September 30, 2020 and $3.5 billion at December 31, 2019. Other non-current assets include inventory expected to remain on hand beyond one year in both periods.

Prior year amounts of certain inventory balances are presented as work in process to conform to the current year presentation rather than finished goods and raw materials.

Note 12. PROPERTY, PLANT AND EQUIPMENT
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Land$188 $187 
Buildings5,708 6,336 
Machinery, equipment and fixtures3,101 3,157 
Construction in progress409 527 
Gross property, plant and equipment9,406 10,207 
Less accumulated depreciation(3,666)(3,955)
Property, plant and equipment(a)
$5,740 $6,252 
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Land$105
 $104
Buildings5,285
 5,231
Machinery, equipment and fixtures2,932
 2,962
Construction in progress465
 548
Gross property, plant and equipment8,787
 8,845
Less accumulated depreciation(3,957) (3,818)
Property, plant and equipment$4,830
 $5,027
(a)    Includes measurement period adjustments. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information.


Depreciation expense was $136 million and $451 million for the three and nine months ended September 30, 2020 and $135 million and $401 million for the three and nine months ended September 30, 2019, and $127 million and $366 million for the three and nine months ended September 30, 2018, respectively.

Note 13. LEASES

The Company leases facilities for office, research and development, and for storage and distribution purposes, comprising 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. The Company considers factors 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 the Company’s 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. As most leases do not provide an implicit rate, the Company's incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.

The remaining 10% of the Company’s total lease obligation is comprised of vehicles used primarily by the Company’s sales force and an R&D facility operated by a third party under the Company's direction. Vehicle lease terms vary by country with terms generally between one year and 4 years.


17



The following table summarizes the components of lease expense:
Dollars in MillionsThree Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating lease cost$25
 $80
Variable lease cost5
 15
Short-term lease cost6
 16
Sublease income(1) (3)
Total operating lease expense$35
 $108


20
Operating lease right-of-use assets and liabilities were as follows as of September 30, 2019 and January 1, 2019:
Dollars in MillionsSeptember 30,
2019		 January 1,
2019
Other assets$496
 $543
    
Accrued and other current liabilities66
 40
Other non-current liabilities504
 548
Total liabilities$570
 $588


Future lease payments for non-cancellable operating leases as of September 30, 2019 were as follows:
Dollars in MillionsOperating Leases
2019 (excluding the nine months ended September 30, 2019)$28
202086
202176
202269
202361
Thereafter395
Total future lease payments715
  
Less imputed interest145
Total lease liability$570


Right-of-use assets obtained in exchange for new operating lease obligations were not material for the three and nine months ended September 30, 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $41 million for the nine months ended September 30, 2019, net of a $33 million lease incentive received in the second quarter. The weighted-average remaining lease term was 11 years and the discount rate was 4% as of September 30, 2019.

Note 14.13. GOODWILL AND OTHER INTANGIBLE ASSETS
Dollars in MillionsEstimated Useful LivesSeptember 30,
2020		December 31,
2019
Goodwill(a)
$20,517 $22,488 
Other intangible assets:
Licenses5 – 15 years461 482 
Acquired developed product rights(a)
3 – 15 years59,651 46,827 
Capitalized software3 – 10 years1,357 1,297 
IPRD6,600 19,500 
Gross other intangible assets68,069 68,106 
Less accumulated amortization(11,371)(4,137)
Other intangible assets$56,698 $63,969 
Dollars in MillionsEstimated Useful Lives September 30,
2019		 December 31,
2018
Goodwill  $6,513
 $6,538
      
Other intangible assets:     
Licenses5 – 15 years 482
 510
Developed technology rights9 – 15 years 2,357
 2,357
Capitalized software3 – 10 years 1,258
 1,156
IPRD  —
 32
Gross other intangible assets  4,097
 4,055
Less accumulated amortization  (3,095) (2,964)
Other intangible assets  $1,002
 $1,091
(a)    Includes measurement period adjustments. Refer to “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for more information.


In the nine months ended September 30, 2020, $12.9 billion of IPRD was reclassified to acquired developed 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 $2.5 billion and $7.3 billion for the three and nine months ended September 30, 2020 and $52 million and $156 million for the three and nine months ended September 30, 2019, respectively.

Note 14. SUPPLEMENTAL FINANCIAL INFORMATION
Dollars in MillionsSeptember 30,
2020		December 31, 2019
Prepaid and refundable income taxes$1,633 $754 
Research and development462 410 
Equity investments126 0 
Other(a)
890 819 
Other current assets$3,111 $1,983 
(a)    Includes restricted cash of $84 million at September 30, 2020.
Dollars in MillionsSeptember 30,
2020		December 31, 2019
Equity investments$4,166 $3,405 
Inventories1,163 1,373 
Operating leases718 704 
Pension and postretirement222 456 
Restricted cash(a)
341 390 
Other286 276 
Other non-current assets$6,896 $6,604 
(a)    Restricted cash consists of escrow for litigation settlements and $54funds restricted for annual Company contributions to the defined contribution plan in the U.S. Restricted cash of $425 million was included in cash, cash equivalents and $147 millionrestricted cash at September 30, 2020 in the consolidated statements of cash flows.
Dollars in MillionsSeptember 30,
2020		December 31, 2019
Rebates and returns$5,747 $4,275 
Income taxes payable686 1,517 
Employee compensation and benefits1,069 1,457 
Research and development1,315 1,324 
Dividends1,043 1,025 
Interest380 493 
Royalties398 418 
Operating leases136 133 
Contingent value rights1,680 0 
Other1,984 1,871 
Other current liabilities$14,438 $12,513 
21


Dollars in MillionsSeptember 30,
2020		December 31, 2019
Income taxes payable$5,025 $5,368 
Contingent value rights17 2,275 
Pension and postretirement871 725 
Operating leases722 672 
Deferred income361 424 
Deferred compensation301 287 
Other268 350 
Other non-current liabilities$7,565 $10,101 

Note 15. EQUITY

The following table summarizes changes in equity for the three and nine months ended September 30, 2018, respectively.2020:

Common StockCapital in Excess of Par Value of StockAccumulated Other Comprehensive LossRetained EarningsTreasury StockNoncontrolling Interest
Dollars and Shares in MillionsSharesPar ValueSharesCost
Balance at December 31, 20192,923 $292 $43,709 $(1,520)$34,474 672 $(25,357)$100 
Net loss— — — — (775)— — 9 
Other Comprehensive Loss— — — (29)— — — — 
Cash dividends declared(a)
— — — — (1,028)— — — 
Share repurchase program— — — — — 1 (81)— 
Stock compensation— — (455)— — (13)681 — 
Distributions— — — — — — — (43)
Balance at March 31, 20202,923 292 43,254 (1,549)32,671 660 (24,757)66 
Net loss— — — — (85)— — 5 
Other Comprehensive Loss— — — (7)— — — — 
Cash dividends declared(a)
— — — — (1,021)— — — 
Stock repurchase program— — 1,400 — — 16 (1,400)— 
Stock compensation— — (210)— — (7)506 — 
Distributions— — — — — — — (5)
Balance at June 30, 20202,923 292 44,444 (1,556)31,565 669 (25,651)66 
Net earnings— — — — 1,872 — — 6 
Other Comprehensive Loss— — — (143)— — — — 
Cash dividends declared(a)
— — — — (1,023)— — — 
Stock repurchase program— — 0 — — 0 0 — 
Stock compensation— — (9)— — (6)367 — 
Distributions— — — — — — — 0 
Balance at September 30, 20202,923 $292 $44,435 $(1,699)$32,414 663 $(25,284)$72 
(a)    Cash dividends declared per common share were $0.45 for the three months ended March 31, 2020, June 30, 2020 and September 30, 2020.

18
22



In the first quarter of 2019, a $32 million IPRD impairment charge was recorded in Research and development following the decision to discontinue development of an investigational compound obtained in the acquisition of Medarex. In the first quarter of 2018, a $64 million impairment charge was recorded in Other income (net) for an out-licensed asset obtained in the acquisition of ZymoGenetics, Inc., which did not meet its primary endpoint in a Phase II clinical study.

Note 15. ACCRUED AND OTHER CURRENT LIABILITIES
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Rebates and returns$3,209
 $2,417
Employee compensation and benefits639
 848
Research and development891
 805
Dividends668
 669
Royalties378
 391
Interest289
 69
Deal contingent forward starting interest rate swap contracts240
 —
Branded Prescription Drug Fee165
 188
Litigation and other settlements75
 118
Operating leases66
 —
Restructuring24
 85
Pension and postretirement benefits35
 35
Deferred income86
 172
Income taxes payable546
 398
Liabilities related to assets held-for-sale11
 152
Other710
 712
Accrued and other current liabilities$8,032
 $7,059



19



Note 16. EQUITY

The following table summarizes changes in equity for the nine months ended September 30, 2019:
Common StockCapital in Excess of Par Value of StockAccumulated Other Comprehensive LossRetained EarningsTreasury StockNoncontrolling Interest
Dollars and Shares in MillionsSharesPar ValueSharesCost
Balance at December 31, 20182,208 $221 $2,081 $(2,762)$34,065 576 $(19,574)$96 
Accounting change - cumulative effect(a)
— — — — 5 — — — 
Adjusted balance at January 1, 20192,208 221 2,081 (2,762)34,070 576 (19,574)96 
Net earnings— — — — 1,710 — — 5 
Other Comprehensive Income— — — 118 — — — — 
Cash dividends declared(b)
— — — — (671)— — — 
Stock compensation— — 22 — — (4)3 — 
Distributions— — — — — — — (2)
Balance at March 31, 20192,208 221 2,103 (2,644)35,109 572 (19,571)99 
Net earnings— — — — 1,432 — — 7 
Other Comprehensive Income— — — 23 — — — — 
Cash dividends declared(b)
— — — — (671)— — — 
Stock compensation— — 47 — — 0 0 — 
Distributions— — — — — — — (4)
Balance at June 30, 20192,208 221 2,150 (2,621)35,870 572 (19,571)102 
Net earnings— — — — 1,353 — — 13 
Other Comprehensive Income— — — 1,158 — — — — 
Cash dividends declared(b)
— — — — (668)— — — 
Stock repurchase program— — — — — 7 (300)— 
Stock compensation— — 56 — — — — — 
Distributions— — — — — — — (9)
Balance at September 30, 20192,208 $221 $2,206 $(1,463)$36,555 579 $(19,871)$106 
 Common Stock Capital in Excess of Par Value of Stock Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Noncontrolling Interest
Dollars and Shares in MillionsShares Par Value Shares Cost 
Balance at December 31, 20182,208
 $221
 $2,081
 $(2,762) $34,065
 576
 $(19,574) $96
Accounting change - cumulative effect(a)
—
 —
 —
 —
 5
 —
 —
 —
Adjusted balance at January 1, 20192,208
 221
 2,081
 (2,762) 34,070
 576
 (19,574) 96
Net earnings—
 —
 —
 —
 1,710
 —
 —
 5
Other Comprehensive Income/(Loss)—
 —
 —
 118
 —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (671) —
 —
 —
Stock compensation—
 —
 22
 —
 —
 (4) 3
 —
Distributions—
 —
 —
 —
 —
 —
 —
 (2)
Balance at March 31, 20192,208
 221
 2,103
 (2,644) 35,109
 572
 (19,571) 99
Net earnings—
 —
 —
 —
 1,432
 —
 —
 7
Other Comprehensive Income/(Loss)—
 —
 —
 23
 —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (671) —
 —
 —
Stock compensation—
 —
 47
 —
 —
 —
 —
 —
Distributions—
 —
 —
 —
 —
 —
 —
 (4)
Balance at June 30, 20192,208
 221
 2,150
 (2,621) 35,870
 572
 (19,571) 102
Net earnings—
 —
 —
 —
 1,353
 —
 —
 13
Other Comprehensive Income/(Loss)—
 —
 —
 1,158
 —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (668) —
 —
 —
Stock repurchase program—
 —
 —
 —
 —
 7
 (300) —
Stock compensation—
 —
 56
 —
 —
 —
 —
 —
Distributions—
 —
 —
 —
 —
 —
 —
 (9)
Balance at September 30, 20192,208
 $221
 $2,206
 $(1,463) $36,555
 579
 $(19,871) $106
(a)    Refer to “—Note 1. Accounting Policies and Recently Issued Accounting Standards” in the Company’s 2019 Form 10-K for additional information.
(a)Refer to “—Note 1. Basis of Presentation and Recently Issued Accounting Standards” for additional information.
(b)
(b)    Cash dividends declared per common share were $0.41 for the three months ended March 31, 2019, June 30, 2019 and September 30, 2019.


20



The following table summarizes changes in equity for the ninethree months ended March 31, 2019, June 30, 2019 and September 30, 2018:2019.
 Common Stock Capital in Excess of Par Value of Stock Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Noncontrolling Interest
Dollars and Shares in MillionsShares Par Value Shares Cost 
Balance at December 31, 20172,208
 $221
 $1,898
 $(2,289) $31,160
 575
 $(19,249) $106
Accounting change - cumulative effect(a)
—
 —
 —
 (34) 332
 —
 —
 —
Adjusted balance at January 1, 20182,208
 221
 1,898
 (2,323) 31,492
 575
 (19,249) 106
Net earnings—
 —
 —
 —
 1,486
 —
 —
 9
Other Comprehensive Income/(Loss)—
 —
 —
 89
 —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (655) —
 —
 —
Stock repurchase program—
 —
 —
 —
 —
 3
 (166) —
Stock compensation—
 —
 18
 —
 —
 (4) (18) —
Distributions—
 —
 —
 —
 —
 —
 —
 (2)
Balance at March 31, 20182,208
 221
 1,916
 (2,234) 32,323
 574
 (19,433) 113
Net earnings—
 —
 —
 —
 373
 —
 —
 9
Other Comprehensive Income/(Loss)—
 —
 —
 (100) —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (652) —
 —
 —
Stock repurchase program—
 —
 —
 —
 —
 2
 (147) —
Stock compensation—
 —
 50
 —
 —
 —
 —
 —
Distributions—
 —
 —
 —
 —
 —
 —
 (21)
Balance at June 30, 20182,208
 221
 1,966
 (2,334) 32,044
 576
 (19,580) 101
Net earnings—
 —
 —
 —
 1,901
 —
 —
 11
Other Comprehensive Income/(Loss)—
 —
 —
 8
 —
 —
 —
 —
Cash dividends declared(b)
—
 —
 —
 —
 (653) —
 —
 —
Stock compensation—
 —
 63
 —
 —
 —
 4
 —
Distributions—
 —
 —
 —
 —
 —
 —
 (2)
Balance at September 30, 20182,208
 $221
 $2,029
 $(2,326) $33,292
 576
 $(19,576) $110

(a)Refer to “—Note 1. Accounting Policies and Recently Issued Accounting Standards” in the Company's 2018 Form 10-K for additional information.
(b)Cash dividends declared per common share were $0.40 for the three months ended March 31, 2018, June 30, 2018 and September 30, 2018.

The CompanyBMS has a stockshare repurchase program, authorized by its Board of Directors, allowing for repurchases of its shares. The repurchases are effected in the open market or through privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including through Rule 10b5-1 trading plans. The stock 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.

The outstanding share repurchase authority authorization under the program was $1.0 billion as of December 31, 2019. In February 2020, the Board of Directors approved an increase of $5.0 billion to the share repurchase authorization for BMS common stock. BMS repurchased 1.4 million shares of its common stock for $81 million during the nine months ended September 30, 2020. The remaining share repurchase capacity under the share repurchase program was approximately $5.9 billion as of September 30, 2020.

In the fourth quarter of 2019, BMS executed accelerated share repurchase (“ASR”) agreements to repurchase an aggregate $7 billion of common stock. The ASR was funded with cash on-hand. In the fourth quarter of 2019, 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 the second quarter of 2020, the agreement was settled and approximately 16 million shares of common stock were received by BMS and transferred to treasury stock.

The Company repurchased 6.5 million shares of its common stock for $300 million in the third quarter of 2019. The remaining share repurchase capacity under the stock repurchase program was $1.0 billion as of September 30, 2019.

21
23



The components of Other Comprehensive Income/(Loss)/Income were as follows:
20202019
Dollars in MillionsPretaxTaxAfter TaxPretaxTaxAfter Tax
Three Months Ended September 30,
Derivatives qualifying as cash flow hedges:
Unrealized gain/(losses)$(128)$10 $(118)$63 $(8)$55 
Reclassified to net earnings(a)
(17)3 (14)(20)3 (17)
Derivatives qualifying as cash flow hedges(145)13 (132)43 (5)38 
Pension and postretirement benefits:
Actuarial losses(16)3 (13)(126)27 (99)
Amortization(b)
9 (2)7 12 (2)10 
Settlements(b)
3 (1)2 1,550 (345)1,205 
Pension and postretirement benefits(4)0 (4)1,436 (320)1,116 
Available-for-sale debt securities:
Unrealized gains/(losses)(4)2 (2)6 (2)4 
Foreign currency translation(16)11 (5)10 (10)0 
Other Comprehensive (Loss)/Income$(169)$26 $(143)$1,495 $(337)$1,158 
Nine Months Ended September 30,
Derivatives qualifying as cash flow hedges:
Unrealized gains/(losses)$(65)$4 $(61)$102 $(12)$90 
Reclassified to net earnings(a)
(69)9 (60)(76)10 (66)
Derivatives qualifying as cash flow hedges(134)13 (121)26 (2)24 
Pension and postretirement benefits:
Actuarial losses(28)6 (22)(140)30 (110)
Amortization(b)
27 (5)22 45 (8)37 
Settlements(b)
7 (2)5 1,643 (366)1,277 
Pension and postretirement benefits6 (1)5 1,548 (344)1,204 
Available-for-sale securities:
Unrealized gains10 (2)8 42 (2)40 
Realized gains/(losses)(1)0 (1)3 0 3 
Available-for-sale securities9 (2)7 45 (2)43 
Foreign currency translation(81)11 (70)39 (11)28 
Total Other Comprehensive (Loss)/Income$(200)$21 $(179)$1,658 $(359)$1,299 
 2019 2018
Dollars in MillionsPretax Tax After tax Pretax Tax After tax
Three Months Ended September 30,           
Derivatives qualifying as cash flow hedges:           
Unrealized gains/(losses)$63
 $(8) $55
 $18
 $(2) $16
Reclassified to net earnings(a)
(20) 3
 (17) (13) 2
 (11)
Derivatives qualifying as cash flow hedges43
 (5) 38
 5
 —
 5
            
Pension and postretirement benefits:           
Actuarial (losses)/gains(126) 27
 (99) (12) 3
 (9)
Amortization(b)
12
 (2) 10
 14
 (3) 11
Settlements(b)
1,550
 (345) 1,205
 26
 (6) 20
Pension and postretirement benefits1,436
 (320) 1,116
 28
 (6) 22
            
Available-for-sale securities:           
Unrealized gains/(losses)6
 (2) 4
 4
 (2) 2
            
Foreign currency translation10
 (10) —
 (21) —
 (21)
            
Total Other Comprehensive Income/(Loss)$1,495
 $(337) $1,158
 $16
 $(8) $8
            
Nine Months Ended September 30,           
Derivatives qualifying as cash flow hedges:           
Unrealized gains/(losses)$102
 $(12) $90
 $63
 $(6) $57
Reclassified to net earnings(a)
(76) 10
 (66) 20
 (6) 14
Derivatives qualifying as cash flow hedges26
 (2) 24
 83
 (12) 71
            
Pension and postretirement benefits:           
Actuarial (losses)/gains(140) 30
 (110) 100
 (21) 79
Amortization(b)
45
 (8) 37
 50
 (9) 41
Settlements(b)
1,643
 (366) 1,277
 95
 (21) 74
Pension and postretirement benefits1,548
 (344) 1,204
 245
 (51) 194
            
Available-for-sale securities:           
Unrealized gains/(losses)42
 (2) 40
 (36) 5
 (31)
Realized losses3
 —
 3
 —
 —
 —
Available-for-sale securities45
 (2) 43
 (36) 5
 (31)
            
Foreign currency translation39
 (11) 28
 (232) (5) (237)
            
Total Other Comprehensive Income/(Loss)$1,658
 $(359) $1,299
 $60
 $(63) $(3)
(a)Included in Cost of products sold.
(a)Included in Cost of products sold.
(b)Included in Other income (net).
(b)Included in Other (income)/expense, net.

The accumulated balances related to each component of Other Comprehensive Income/(Loss),/Income, net of taxes, were as follows:
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Derivatives qualifying as cash flow hedges$(102)$19 
Pension and postretirement benefits(894)(899)
Available-for-sale debt securities13 6 
Foreign currency translation(716)(646)
Accumulated other comprehensive loss$(1,699)$(1,520)
Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Derivatives qualifying as cash flow hedges$75
 $51
Pension and postretirement benefits(898) (2,102)
Available-for-sale securities13
 (30)
Foreign currency translation(653) (681)
Accumulated other comprehensive loss$(1,463) $(2,762)


24

22



Note 17.16. 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 this plan were eliminated in 2009. The Company contributed at least the minimum amount required by the ERISA. Plan benefits were based primarily on the participant’s years of credited service and final average compensation. As of September 30, 2019, remaining Plan assets consist primarily of fixed-income securities.

The net periodic benefit cost of defined benefit pension plans includes:
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Service cost – benefits earned during the year$12 $6 $36 $18 
Interest cost on projected benefit obligation11 20 30 101 
Expected return on plan assets(26)(39)(73)(173)
Amortization of prior service credits(1)(1)(3)(3)
Amortization of net actuarial loss12 14 33 49 
Curtailments and settlements3 1,550 7 1,643 
Net periodic pension benefit cost$11 $1,550 $30 $1,635 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Service cost – benefits earned during the year$6
 $6
 $18
 $20
Interest cost on projected benefit obligation20
 50
 101
 146
Expected return on plan assets(39) (97) (173) (315)
Amortization of prior service credits(1) (1) (3) (3)
Amortization of net actuarial loss14
 17
 49
 57
Curtailments and settlements1,550
 26
 1,643
 95
Net periodic pension benefit cost$1,550
 $1
 $1,635
 $—

Pension settlement charges were recognized after determining the annual lump sum payments will exceed the annual interest and service costs for certain pension plans. The charges included the acceleration of a portion of unrecognized actuarial losses. Non-current pension liabilities were $588 million at September 30, 2020 and $569 million at December 31, 2019. Defined contribution plan expense in the U.S. was approximately $70 million and $220 million for the three and nine months ended September 30, 2020 and approximately $50 million and $140 million for the three and nine months ended September 30, 2019, respectively. Comprehensive medical and group life benefits are provided for substantially all 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 net periodic benefit credits were not material in both periods.

As a result of the Bristol-Myers Squibb Retirement Income Plan 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, resulting in an excise tax of $76 million in the first quarter of 2020.

In December 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 the third quarter of 2019, $1.3 billion was distributed to participants who elected lump sum payments during the election window and a group annuity contract was purchased from Athene, which irrevocably assumed the obligation, for $2.4 billion for most of the remaining plan participants. These transactions resulted in a $1.5 billion non-cash pre-tax pension settlement charge in the third quarter of 2019. The remaining plan obligation of approximately $200 million is expected to bewas settled through the purchase of an additional group annuity contract from Athene in the fourth quarter of 2019.

Pension settlement charges
Note 17. EMPLOYEE STOCK BENEFIT PLANS

Stock-based compensation expense was as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Cost of products sold$9 $4 $28 $11 
Marketing, selling and administrative81 32 255 90 
Research and development78 20 261 56 
Other (income)/expense, net17 0 64 0 
Total stock-based compensation expense$185 $56 $608 $157 
Income tax benefit(a)
$38 $10 $124 $29 
(a)    Income tax benefit excludes excess tax benefits from share-based compensation awards that were also recognized after determining that the annual lump sum payments will likely exceed the annual interest and service costs for the primary and certain other U.S. and international pension plans. The charges included the accelerationvested or exercised of a portion of unrecognized actuarial losses. Non-current pension liabilities were $426 million at September 30, 2019 and $427 million at December 31, 2018. Defined contribution plan expense in the U.S. was approximately $50$1 million and $140$29 million for the three and nine months ended September 30, 20192020 and approximately $50 million and $130 millionwas not material for the three and nine months ended September 30, 2018, respectively. Comprehensive medical2019.

The total stock-based compensation expense for the three and group life benefits are providednine months ended September 30, 2020 includes $85 million and $306 million, respectively, related to the Celgene post-combination service period for substantially all U.S. retirees electingthe replacement awards and $17 million and $64 million, respectively, of accelerated vesting of the replacement awards related to participate in comprehensive medicalthe Celgene acquisition. It also includes $5 million related to CVR obligation on unvested stock awards for the nine months ended September 30, 2020.

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The number of units granted and group life plans and to a lesser extent certain benefitsthe weighted-average fair value on the grant date for non-U.S. employees. The net periodic benefit creditsthe nine months ended September 30, 2020 were not material in both periods.as follows:

Units in MillionsUnitsWeighted-Average Fair Value
Restricted stock units13.0 $53.62 
Market share units0.9 53.92 
Performance share units1.4 55.61 
Dollars in MillionsStock OptionsRestricted Stock UnitsMarket Share UnitsPerformance Share Units
Unrecognized compensation cost$54 $991 $53 $93 
Expected weighted-average period in years of compensation cost to be recognized1.52.63.01.8

Note 18. LEGAL PROCEEDINGS AND CONTINGENCIES

The CompanyBMS 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. The Company recognizes accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters 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. Legal proceedings that are materialsignificant or that the CompanyBMS believes could become significant or material are described below.

Although the CompanyWhile 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 thesethe matters, therethe 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 that any other or future lawsuits, claims, government investigations or other legal proceedings will not be material. Unless otherwise noted, the Company is unablematerial to assess the outcomeBMS’s financial position, results of the respective litigation nor is it able to provide an estimated range of potential loss.operations or cash flows for a particular period. Furthermore, failure to enforce the Company'sBMS’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”.
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INTELLECTUAL PROPERTY

Plavix* - Australia
As previously disclosed, 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. (Apotex), has since changed its name to Apotex. In August 2007, Apotex filed an application in the Federal Court of Australia (the Federal Court) 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 granted Sanofi’s injunction. A subsidiary of the Company 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 Apotex case, and a trial occurred in April 2008. 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. The Company 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 which have stayed the Federal Court’s ruling. Apotex filed a notice of appeal appealing the holding of validity of the clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate claims. A hearing on the appeals occurred in February 2009. On September 29, 2009, the Full Court held all of the claims of Patent No. 597784 invalid. In November 2009, the Company and Sanofi applied to the High Court of Australia (High Court) for special leave to appeal the judgment of the Full Court. In March 2010, the High Court denied the Company and Sanofi’s request to hear the appeal of the Full Court decision. The case was remanded to the Federal Court for further proceedings related to damages sought by Apotex. The Company and Apotex have settled the Apotex case, and the case was dismissed. The Australian government has intervened in this matter and is seeking maximum damages up to 449 million AUD ($303 million), plus interest, which would be split between the Company and Sanofi, for alleged losses experienced for paying a higher price for branded Plavix* during the period when the injunction was in place. The Company and Sanofi have disputed that the Australian government is entitled to any damages and the Australian government's claim is still pending and a trial was concluded in September 2017. The Company is expecting a decision in 2019.

Sprycel - Europe
In May 2013, Apotex, Actavis Group PTC ehf, Generics [UK] Limited (Mylan) and an unnamed company filed oppositions in the EPO seeking revocation of European Patent No. 1169038 (the ‘038 patent) covering dasatinib, the active ingredient in Sprycel. On January 20, 2016, the Opposition Division of the EPO revoked the ‘038 patent. In May 2016, the Company appealed the EPO’s decision to the EPO Board of Appeal. In February 2017, the EPO Board of Appeal upheld the Opposition Division’s decision, and revoked the ‘038 patent. Orphan drug exclusivity and data exclusivity for Sprycel in the EU expired in November 2016. The EPO Board of Appeal’s decision does not affect the validity of the Company's other Sprycel patents within and outside Europe, including different patents that cover the monohydrate form of dasatinib and the use of dasatinib to treat CML. Additionally, in February 2017, the EPO Board of Appeal reversed and remanded an invalidity decision on European Patent No. 1610780 and its claim to the use of dasatinib to treat CML, which the EPO’s Opposition Division had revoked in October 2012. In December 2018, the EPO’s Opposition Division upheld the validity of the patent directed to the use of dasatinib to treat CML, which expires in 2024. The Company intends to take appropriate legal actions to protect Sprycel.

Anti-PD-1 Antibody Patent Oppositions and Litigation
In September 2015, Dana-Farber Cancer Institute (Dana-Farber)(“Dana-Farber”) filed a complaint in the U.S. District Court for the District of Massachusetts federal court seeking to correct the inventorship on up to six6 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, the CompanyBMS settled the lawsuit with Pfizer. A bench trial in the lawsuit with Dana-Farber took place in February 2019. In May 2019, the judge in the caseCourt issued an opinion ruling that the two scientists should be added as inventors to the patents. The decision has beenwas appealed to the U.S. Court of Appeals for the Federal Circuit.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 FarberDana-Farber filed a new lawsuit in the District of Massachusetts against the CompanyBMS seeking damages as a result of the court'sCourt’s decision adding the scientists as inventors.

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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 Patent Litigation - U.S.
In 2017, twenty-fiveBMS received Notice Letters from NaN generic companies sent the Company Paragraph-IV certification letters informing the Companynotifying BMS that they had filed aNDAs containing paragraph IV certifications seeking approval of generic versions of Eliquis. As a result, two2 Eliquis patents listed in the FDA Orange Book are being challenged: the composition of matter patent claiming apixaban specifically and a formulation patent. In April 2017, the Company,response, BMS, along with its partner Pfizer, initiated patent lawsuitsinfringement actions under the Hatch-Waxman Act against all generic filers in federal district courtsthe U.S. District Court for the District of Delaware in Delaware and West Virginia.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 the Company’sBMS’s basis for projected LOE, from February 2023 to November 2026. The Company hasLOE. BMS settled lawsuits with a number of aNDA filers through September 2019. Thefilers. These settlements do not affect the Company’sBMS’s projected LOE for Eliquis. A trial with the remaining aNDA filers took place in late 2019. On August 5, 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 ($316 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.

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 October 31, 2019on November 15, 2021.

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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 on January 17, 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 (“Eugia Pharma”) and Aurobindo Pharma Ltd.; 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 Delaware.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. In November 2020, Breckenridge and Eugia Pharma received final approval from the FDA of their respective aNDAs. A trial concerning the consolidated litigations is scheduled to begin on January 11, 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 answer and/or counterclaims alleging that each of these patents is invalid and/or not infringed. In these actions, the Court has ordered that the parties be ready for trial by April 15, 2021.

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.

Revlimid - U.S.
Celgene has received Notice Letters on behalf of DRL; 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”); Aurobindo Pharma Limited, Eugia Pharma Specialities Limited, Aurobindo Pharma USA, Inc., and 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. Mylan has filed a motion to dismiss the District of New Jersey action, and the Court stayed the action pending resolution of a pending Federal Circuit appeal in another case. 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.

On September 16, 2020, Celgene settled all outstanding claims in the litigation with DRL. Pursuant to the settlement, Celgene has agreed to provide DRL 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 DRL with a license to Celgene’s patents required to manufacture and sell an unlimited quantity of generic lenalidomide in the United States beginning no earlier than January 31, 2026.

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28


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 March 2020, BMS received a Notice Letter from Teva 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 an FDA Orange Book-listed monohydrate form patent expiring in 2026. In response, BMS filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey. BMS and Teva settled and the case was dismissed.

In May 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
The CompanyBMS and certain Sanofi entities are defendants in consumer protection and/or false advertising actions brought by the attorneys general of Hawaii and New Mexico relating to the sales and promotion of Plavix*. TheIn the Hawaii matter, trial began on October 26, 2020 and is currently scheduled for trial in April 2020.expected to last until mid-November.

PRODUCT LIABILITY LITIGATION

The CompanyBMS 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, the CompanyBMS 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., approximately 30 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.

Byetta*
Amylin, a former subsidiary of the Company,BMS, and Lilly are co-defendants in product liability litigation related to Byetta*. To date,As of September 2020, there are approximately 570590 separate lawsuits pending on behalf of approximately 2,2002,250 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 aan MDL or in a coordinated proceeding in California Superior Court in Los Angeles (JCCP)(“JCCP”). In November 2015, the defendants'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 October 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 between the Company andwith AstraZeneca.

Abilify*
29
The Company 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 2,000 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 United States District Court for the Northern District of Florida. On February 15, 2019, the Company 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 the various state courts, including California and New Jersey.

Onglyza*
The CompanyBMS 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 September 2019,2020, 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 the Company’sBMS’s global diabetes business divestiture, the CompanyBMS 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, 2 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 the Company, the Company’sBMS, BMS’s Chief Executive Officer, Giovanni Caforio, the Company’sBMS’s Chief Financial Officer at the time, Charles A. Bancroft and certain former and current executives of the Company.BMS. The case in California has been voluntarily dismissed. The remaining complaint alleges violations of securities laws for the Company’sBMS’s disclosures related to the CheckMate-026 clinical trial in lung cancer. In September 2019, the Court granted the Company’sBMS’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 Company continues to believe these allegations are without merit and will continue to defendplaintiffs appealed the matter.Court’s decision in October 2020.


Celgene Securities Class Action
25



OTHER LITIGATION

Acquisition of Celgene Litigation
Following the announcement of the Company's pending acquisition of Celgene, 13 complaintsBeginning in March 2018, two putative class actions were filed byagainst Celgene shareholdersand certain of its officers in the U.S. District Court for the District of Delaware,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. No trial date has been scheduled for the claims that survived the Court’s order. In May 2020, the plaintiff filed a motion for class certification. In June 2020, the defendants filed an opposition to the plaintiff’s motion for class certification.

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 U.S. District Court forsame allegations as the Southern District of New York andCelgene Securities Class Action against the Court of Chancery ofsame remaining defendants in that action. In July 2020, the State of Delaware seeking to enjoin the Company's pending acquisition of Celgene. The complaints in these actions name as defendants Celgene and the members of Celgene's Board of Directors. NaN of these complaints also name the Company and Burgundy Merger Sub, Inc.,filed a wholly-owned subsidiary of the Company that was formed solely for the purpose of completing the pending acquisition of Celgene and will be merged with and into Celgene upon the completion of the acquisition, as defendants. Of the complaints naming the Company as a defendant, four are styled as putative class actions. The plaintiffs allege violations of various federal securities laws and breaches of fiduciary duties in connection with the acquisition of Celgene by the Company. After the Company and Celgene released supplemental disclosures relating to the proposed acquisition in early April 2019, the plaintiffs in these cases agreedmotion to dismiss their actions. As of June 30, 2019, all of these complaints have been dismissed, including all five complaints that named the Company and Burgundy Merger Sub, Inc. as defendants.plaintiffs’ complaint in full.

Separately, a fourteenth complaint styled as a putative class action was filed in the Court of Chancery of the State of Delaware on behalf of the Company's shareholders naming members of the Company's Board of Directors as defendants. This complaint alleges that each of the members of the Company's Board of Directors breached his or her fiduciary duties to the Company and its shareholders by failing to disclose material information about the pending acquisition. The lawsuit was voluntarily dismissed in April 2019.OTHER LITIGATION

Average Manufacturer Price Litigation
The CompanyBMS 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 the CompanyBMS 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. The case is currently scheduled for trialIn January 2020, BMS reached an agreement in January 2020.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
The CompanyBMS and several other manufacturers of HIV medications are defendants in related lawsuits brought by indirect purchaserspending in the U.S. District Court for the Northern District of California allegingCalifornia. 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 Company has movedcurrently pending actions, which are 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 is scheduled for February 2022. In addition, two actions on behalf of direct purchasers were filed in September and October 2020 in the Northern District of California asserting similar claims.

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Humana Litigations
On May 16, 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.

On March 1, 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. 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. Motions to transfer and dismiss this matter are pending.

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 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. On September 29, 2020, Celgene and BMS removed the action to the U.S. District Court for the District of Minnesota.
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GOVERNMENT INVESTIGATIONS

Like other pharmaceutical companies, the CompanyBMS and certain of its subsidiaries are subject to extensive regulation by national, state and local government agenciesauthorities in the U.S. and other countries in which the CompanyBMS operates. As a result, the Company,BMS, from time to time, is subject to various governmental and regulatory inquiries and investigations.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, the CompanyBMS 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 the Company’sBMS’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 the CompanyBMS is responsible under various state, federal and foreign laws, the CompanyBMS 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 the CompanyBMS accrues liabilities when they are probable and reasonably estimable. The CompanyBMS estimated its share of future costs for these sites to be $69.7$76.6 million at September 30, 2019,2020, 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.


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NOTE 19. PENDING CELGENE ACQUISITION

On January 3, 2019, the Company announced that it entered into a definitive merger agreement under which it will acquire Celgene. Under the terms of the agreement, which has been approved by the respective Boards of Directors of the Company and Celgene, if the merger is completed, Celgene shareholders will receive one share of the Company's common stock and $50.00 in cash for each share of Celgene common stock held by them. Celgene shareholders will also receive one tradeable contingent value right (“CVR”) for each share of Celgene representing the right to receive $9.00 in cash, which is subject to the achievement of future regulatory milestones. Based on the closing price of a share of the Company's common stock on January 2, 2019, the most recent trading day prior to the date of the announcement, the merger consideration represented approximately $74 billion. The amount of consideration to be received by Celgene shareholders will fluctuate with changes in the price of shares of BMS common stock.

The Company expects to fund the anticipated cash portion of the merger consideration through a combination of available cash, including $18.8 billion of net proceeds raised in the May 2019 issuance of new notes, borrowings under the term loan established earlier in the year and short-term borrowings. The Company also announced plans to initiate a $7.0 billion accelerated share repurchase program following the closing of the Company's pending acquisition of Celgene, subject to Board of Directors’ approval.

The acquisition was approved by the Company’s and Celgene’s shareholders on April 12, 2019. The European Commission granted unconditional approval of the Celgene acquisition in July 2019 and the acquisition has been approved by all other requisite foreign jurisdictions. Consummation of the pending acquisition remains subject to the satisfaction of customary closing conditions and regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). With respect to the review of the pending acquisition pursuant to the HSR Act, the Company and Celgene on March 25, 2019 each received a request for additional information and documentary materials (also known as a “second request”) from the FTC in connection with its review. The effect of this request, which was issued under the HSR Act, is to extend the waiting period imposed by the HSR Act until 30 days after the Company and Celgene have substantially complied with this request, unless the period is extended voluntarily by the parties or terminated sooner by the FTC. To allow the pending acquisition to close on a timely basis in light of concerns expressed by the FTC, Celgene entered into a purchase agreement with Amgen on August 26, 2019 under which Amgen would acquire the global rights to Otezla* for $13.4 billion. In connection with the divestiture and Celgene entering into the purchase agreement, the Company entered into a guarantee with Amgen under which it agreed to guarantee the full payment and performance of Celgene’s obligations under the purchase agreement. The pending Otezla* divestiture is subject to, among other things, the closing of the Celgene acquisition and the issuance by the FTC of a consent order requiring Celgene to divest Otezla* to Amgen. The Company continues to work constructively with the FTC to bring about the issuance of a consent order, which will permit the Celgene acquisition to proceed. Once the FTC issues the consent order and the other closing conditions are satisfied, the Company intends to close the pending acquisition of Celgene at the earliest possible date, which it currently expects to be before the end of 2019. The Company remains focused on executing a successful closing of the Celgene acquisition.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of results of operations and financial condition is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q to enhance the understanding of our results of operations, financial condition and cash flows.

EXECUTIVE SUMMARY

Bristol-Myers Squibb Company is a global specialty biopharmaceutical company whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. Our principal strategy is to combine the resources, scale and capability of a pharmaceutical company with the speed and focus on innovation of the biotech industry. Our focus as a specialtyvision is to be the world’s leading biopharmaceutical company is on discovering, developingthat transforms patients’ lives through science in areas where we believe that we have an opportunity to make a meaningful difference: oncology (both solid tumors and delivering transformational medicines for patients facing serious diseases. Our four strategic priorities are to drive business performance,hematology), immunology, cardiovascular and fibrosis. We continue to advance the next wave of innovative medicines by investing significantly in our pipeline both internally and through business development activities. For further build a leading franchiseinformation on our strategy, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Executive Summary-Strategy” in IO, maintain a diversified portfolio both within and outside of IO, and continue our disciplined approach to capital allocation, including establishing partnerships, collaborations and in-licensing or acquiring investigational compounds as an essential component of successfully delivering transformational medicines to patients.2019 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

We completed the Celgene transaction on November 20, 2019. Commencing from the acquisition date, our consolidated financial statements include the assets, liabilities, operating results and cash flows of Celgene. On JanuaryOctober 3, 2019, we announced that2020, we entered into a definitive merger agreement to acquire Celgene.MyoKardia for approximately $13.1 billion in cash. We expect that our acquisition of Celgene and the pendingplanned MyoKardia acquisition will enablefurther position us to createas a leading focused specialty biopharmaceutical company, that is well positioned to address the needs of patientsexpanding our oncology, hematology, immunology and cardiovascular portfolios with cancer, inflammatory, immunologic or cardiovascular diseases through high-value innovation medicinesseveral near-term assets and leading scientific capabilities. The acquisition was approved by our and Celgene’s respective shareholders on April 12, 2019. The European Commission granted unconditional approval of the Celgene acquisition in July 2019 and the acquisition has been approved by all other requisite foreign jurisdictions. The acquisition remains subject to the satisfaction of customary closing conditions and regulatory approvals, including review by the FTC. To allow the pending acquisition to close on a timely basis in light of concerns expressed by the FTC, Celgene entered into a purchase agreement with Amgen on August 26, 2019 under which Amgen would acquire the global rights to Otezla* for $13.4 billion. We continue to work constructively with the FTC to realize our goal of completing the Celgene acquisition before the end of 2019 while staying committed to delivering on our strategic priorities and preparing for an efficient integration with Celgene. Refer to “Item 1. Financial Statements—Note 19. Pending Celgene Acquisition” for further discussion on our pending acquisition of Celgene.additional external partnerships. Refer to “—Financial Position, LiquidityAcquisitions, Divestitures, Licensing and Capital Resources”Collaboration Arrangements” for a discussion of our financing arrangements in connection with the pending acquisition.further information.

The COVID-19 pandemic is resulting in significant risks and disruptions to the health and welfare of the global population and economy. Although the pandemic has not had a significant impact on our results of operations, it remains difficult to reasonably assess or predict the full extent of the negative impact that the COVID-19 pandemic may have on our business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and recovery from the pandemic, government actions, impact on the U.S. and global economies, customer behavior changes and timing for resumption to our normal operations, among others. Refer to “—COVID-19 and Market Factors” for further information.

Our revenues increased by 10%73% for the nine months ended September 30, 20192020 as a result of the Celgene acquisition, which contributed $12.9 billion of revenues or 71% of the growth, and higher demand for Eliquis and Opdivo. The $0.45 increase$2.31 decrease in GAAP EPS primarily resulted from higher revenues, the UPSA businessCelgene acquisition including (i) amortization of acquired intangible assets, (ii) the unwinding of inventory fair value adjustments and (iii) tax charges resulting from an internal transfer of certain intangible assets and the Otezla* divestiture, gain in 2019 and Nektar related charges in 2018, partially offset by pension settlement charges and Celgene related expenses in 2019.higher revenues. After adjusting for specified items, non-GAAP EPS increased $0.42 due to higher revenues.$1.52 as a result of the Celgene acquisition.
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions, except per share data2020201920202019
Total Revenues$10,540 $6,007 $31,450 $18,200 
Diluted Earnings Per Share
GAAP$0.82 $0.83 $0.44 $2.75 
Non-GAAP1.63 1.17 4.98 3.46 
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions, except per share data2019 2018 2019 2018
Total Revenues$6,007
 $5,691
 $18,200
 $16,588
        
Diluted Earnings Per Share       
GAAP$0.83
 $1.16
 $2.75
 $2.30
Non-GAAP1.17
 1.09
 3.46
 3.04

Our non-GAAP financial measures, including non-GAAP earnings and related EPS information, are adjusted to exclude specified items whichthat represent certain costs, expenses, gains and losses and other items impacting the comparability of financial results. For a detailed listing of all specified items and further information and reconciliations of non-GAAP financial measures refer to “—Non-GAAP Financial Measures.”


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Economic and Market Factors

COVID-19

The COVID-19 pandemic continues to affect global healthcare systems as well as major economic and financial markets. Virtually all industries are facing challenges associated with the economic conditions resulting from efforts to address this pandemic. For example, many entities in certain industries have seen sharp declines in revenues due to regulatory and organizational mandates (e.g., “shelter in place” mandates, non-essential business and school closures) and voluntary changes in consumer behavior (e.g., “physical distancing”). Many entities continue to experience conditions often associated with a sudden and severe economic downturn. Such conditions may include financial market volatility and erosion of market value, deteriorating credit, liquidity concerns, further increases in government intervention, increasing unemployment, broad declines in consumer discretionary spending, increasing inventory levels, reductions in production because of decreased demand and supply constraints, layoffs and furloughs and other restructuring activities.

We continue to monitor the impact on our business resulting from wider restrictions in select states and non-U.S. countries. This is a dynamically changing environment and we continue to react to outbreaks throughout the world by re-enforcing our directives to keep our workforce safe. If infection rates continue to increase, these events could negatively affect our planned recovery, pressuring demand from less patient visits and channel mix if unemployment data trends unfavorably.

We have not incurred and do not anticipate disruptions to the supply of our medicines for patients due to the COVID-19 pandemic. All of our internal manufacturing facilities and key contract manufacturers are operating with proper measures taken to help ensure employee safety. We have increased the number of our lab workers where it is safe to do so. We have implemented a number of measures to protect the health and safety of our workforce including, where needed, a mandatory work-from-home policy for our global workforce who can perform their jobs from home as well as restrictions on business travel, and workplace and in-person meetings. Field-based personnel in the U.S. and certain other markets have begun in-person customer interactions in healthcare settings where it is safe to do so and approved by the government. The remote engagement model has continued to support healthcare professionals, patient care and access to our medicines. Although certain field-based sales teams have begun in person engagement in selected states and non-U.S. regions, the majority of interactions remain remote.

The situation remains dynamic and challenging to assess the potential impact on our operations such as the ability and willingness of patients to access treatment centers or obtain a prescription and changes in prescribing patterns that may potentially affect our operations in the long-term. Certain changes in buying patterns have occurred including payers implementing policies to encourage larger prescription sizes and earlier refills to help patients avoid trips to the pharmacy. However, fewer patient office visits are resulting in lower than previously expected new patient starts. We estimate these factors have resulted in a negative impact of approximately 1% on year-to-date revenues.

The timing of specific product launches depends on the relevant facts and circumstances for each situation. For example, we delayed the commercialization of Zeposia to June based on the best health interest of our patients, customers and workforce. In contrast, Reblozyl wasavailable for MDS patients following its approval for this additional indication in April 2020 and Onureg was available for patients with AML in September 2020. Our expanded U.S. patient assistance programs provided certain covered BMS medicines free to eligible patients that lost employment and health insurance due to COVID-19. It is uncertain what the aggregate impact of the above factors and potential changes in channel mix will have on our revenues and expenses during 2020.

Global clinical studies continued to recover through September driven in large part by decreased COVID-19 incidence, clinical trial sites beginning to permit on-site visits, as well as greater remote access to electronic medical records at sites in the U.S. However, certain delays have occurred due to slower enrollment. Patient enrollment for certain new clinical studies and ongoing studies at new sites are carefully being started when the safety of study participants, our employees and staff at clinical trial sites, regulatory compliance and scientific integrity of trial data can be assured. We expect many new studies to start through the first quarter of 2021 following the completion of feasibility assessments, rigorous planning and selected protocol simplifications. Previously suspended research and early development activities performed in laboratories recommenced in all major sites in the U.S. although close monitoring of the situation continues.

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The COVID-19 pandemic has increased the volatility of the financial markets, foreign currency exchanges and interest rates. Although we incurred downward adjustments to our equity investment fair values in the first quarter of 2020, the fair values have subsequently recovered. Lower interest rates and the strengthening of the U.S. Dollar with certain currencies have not had a material impact to our operations. We also assigned a value of approximately $64 billion to intangible assets obtained in the Celgene acquisition that closed in November 2019. Significant charges might occur in future periods due to a decline in previously expected cash flows as a direct or indirect result of the pandemic. This may occur due to delays in the enrollment or timely completion of clinical programs, FDA site inspections and other interactions with regulatory bodies in general, regulatory approvals, launches of newly approved products or lower demand in general. See risk factor on the Company’s risk factors resulting from the COVID-19 pandemic included under “Part II—Item 1A. Risk Factors—The COVID-19 pandemic is affecting our business and could have a material adverse effect on us.”

Contingent Value Right Update

We have filed BLAs for liso-cel and ide-cel, the two remaining assets underlying the CVRs that we issued in connection with the Celgene transaction that have not been approved by the FDA. The applications are under review by the FDA. The third CVR asset, Zeposia, was approved earlier this year. Liso-cel has a PDUFA date of November 16, 2020 and ide-cel has a PDUFA date of March 27, 2021. Unless the FDA approves liso-cel for the treatment of relapsed-refractory diffuse large B cell lymphoma in humans by December 31, 2020 and ide-cel for the treatment of relapsed/refractory multiple myeloma in human by March 31, 2021, no payment will be made under the CVRs and the CVRs will expire valueless. The FDA has informed us that inspections of two manufacturing facilities are required before they can issue a decision on the liso-cel application. One of those inspections has occurred; the other has not yet been scheduled. We do not believe that the scheduling of the second site inspection is dependent on the outcome of the first site’s inspection, as they are independent facilities. See risk factor on the Company’s risk factors resulting from the COVID-19 pandemic included under “Part II—Item 1A. Risk Factors— It is possible that the COVID-19 pandemic could delay the timing of the FDA’s approval decisions for liso-cel and ide-cel, which could have a material adverse effect on the CVRs that we issued in connection with the Celgene transaction.”

Governmental Actions

Additional regulations in the U.S. may occur in the future, including healthcare reform initiatives, further changes to tax laws and pricing laws and potential importation restrictions, that may reduce our results of operations, operating cash flow, liquidity and financial flexibility. For example, in July and September 2020 the U.S. federal government issued executive orders regarding U.S. drug prices and payment for pharmaceutical products, including orders that: (1) direct the U.S. Secretary of Health and Human Services to establish demonstration projects to test whether a payment model that would link payments for certain Medicare Part B drugs administered in doctors’ offices or hospitals and certain Medicare Part D drugs sold at pharmacies to a “most favored nation price” drawn from the lowest price paid by “economically comparable” countries in the Organisation for Economic Co-operation and Development would reduce costs and improve outcomes, which would apply to many cancer medications; (2) would authorize states, drug wholesalers and pharmacies to develop programs to import certain FDA-approved drugs from Canada and other unspecified foreign countries and sell them in the U.S.; (3) would reform the Medicare rebate system; and (4) would mandate discounts provided to certain hospitals for insulin and EpiPens to be passed on to patients. Each of the executive orders will require additional rulemaking or implementation processes. See risk factor on the Company’s risk factors on the executive orders included under “Part II—Item 1A. Risk Factors—U.S. executive orders on biopharmaceutical pricing and other potential initiatives by the U.S. federal government to implement measures to regulate drug pricing in the future could adversely affect our business.”

We continue to monitor the potential impact of the economic conditions in certain European and other countries and the related impact on prescription trends, pricing discounts and creditworthiness of our customers. We believe these economic conditions will not have a material impact on our liquidity, cash flow or financial flexibility.

The UK departed from the EU on January 31, 2020. The departure began a transition period that is set to end on December 31, 2020, during which the UK and the EU will negotiate their future relationship. Similar to other companies in our industry, certain regulatory, trade, labor and other aspects of our business will likely be affected during the transition period and over time. However, we currently do not believe that these matters and other related financial effects will have a material impact on our consolidated results of operations, financial position or liquidity. Our sales in the UK represent less than 3% of our total revenues. See “Item 1A. Risk Factors—Adverse changes in U.S. and global economic and political conditions could adversely affect our profitability” in our 2019 Form 10-K for more information on the impact on the Company of the exit of the UK from the EU.

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Significant Product and Pipeline Approvals

The following is a summary of the significant approvals received in 2020:
ProductDateApproval
Opdivo+YervoyMarch 2019October 2020
Announced conversion of accelerated FDA approval to full FDA approval for Opdivo+Yervoy for first line metastatic melanoma treatment based on longer follow-up data from CheckMate-067.
January 2019
Announced the EC approval of Opdivo plus low-dose +Yervoy for previously untreatedthe first-line treatment of adult patients with intermediate and poor-risk advanced RCC.unresectable MPM.
OrenciaOnuregApril 2019September 2020
Announced the ECFDA approval of an extension application to add 2 new strengths of 50 mg and 87.5 mg for solution for injection in a pre-filled syringe (PFS) - in addition to the existing 125 mg strength - for subcutaneous administration, as well as a new indication for OrenciaOnureg solution for injection in a PFS(azacitidine) for the continued treatment of moderateadult patients with AML who achieved first complete remission or complete remission with incomplete blood count recovery following intensive induction chemotherapy and who are not able to severe active polyarticular JIA in paediatric patients 2 years of age and older.complete intensive curative therapy.
SprycelReblozylFebruary 2019June 2020
Announced the EC approval of SprycelReblozyl, in both tablet and powder for oral suspension formulations, in combination with chemotherapy for the treatment of pediatric patients with newly diagnosed Philadelphia chromosome-positive ALL.
EmplicitiAugust 2019
Announced the EC approval of Empliciti plus pomalidomide and low-dose dexamethasone for the treatment of adult patients with RRMMtransfusion-dependent anemia due to very low-, low- and intermediate-risk MDS with ring sideroblasts, who have received at least two prior therapies, including lenalidomide and a proteasome inhibitor, and have demonstrated disease progression on the last therapy.had an unsatisfactory response or are ineligible for erythropoietin-based therapy, or beta thalassemia.
OpdivoJune 2020
FDA approval of Opdivo for the treatment of patients with unresectable advanced, recurrent or metastic ESCC after prior fluoropyrimidine- and platinum-based chemotherapy.
ZeposiaMay 2020
EC approval of Zeposia for the treatment of adult patients with RRMS with active disease as defined by clinical or imaging features.
Opdivo+YervoyMay 2020
FDA approval of Opdivo+Yervoy given with two cycles of platinum-doublet chemotherapy for the first-line treatment of adult patients with metastatic or recurrent NSCLC with no EGFR or ALK genomic tumor aberrations. The therapy is approved for patients with squamous or non-squamous disease and regardless of PD-L1 expression.
Opdivo+YervoyMay 2020
FDA approval of Opdivo+Yervoy for the first-line treatment of adult patients with metastatic NSCLC whose tumors express PD-L1 (≥1%) with no EGFR or ALK genomic tumor aberrations.
PomalystMay 2020
FDA approval of Pomalyst for patients with AIDS-related Kaposi sarcoma whose disease has become resistant to highly active antiretroviral therapy, or in patients with Kaposi sarcoma who are HIV-negative.
ReblozylApril 2020
FDA approval of Reblozyl for the treatment of anemia failing an erythropoiesis stimulating agent in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions.
ZeposiaMarch 2020
FDA approval of Zeposia (ozanimod) for the treatment of adults with RMS, including clinically isolated syndrome, relapsing-remitting disease, and active secondary progressive disease.
Opdivo+YervoyMarch 2020
FDA approval of Opdivo+Yervoy combination for the treatment of HCC in patients who have been previously treated with sorafenib.

The FDA has indicated it is undertaking an industry-wide review of indications that received accelerated approval and for which the confirmatory studies did not meet their primary endpoints. This is not specific to BMS, but we have two Opdivo indications that are subject to this review by the FDA in the third-line treatment of SCLC and second-line treatment of HCC. It is possible one or both indications could be withdrawn from the label.

Refer to “—Product and Pipeline Developments” for all of the developments in our marketed products and late-stage pipeline in 2019.2020.

Acquisitions, Divestitures, Licensing and Collaboration Arrangements

Acquisitions, divestitures, licensing and collaboration arrangements allow us to focus our resources behind our growth opportunities that drive the greatest long-term value. WeSignificant transactions entered into in 2020 are focused on the following core therapeutic areas: oncology, including IO, immunoscience, cardiovascular diseases and fibrosis. In the second quarter of 2019, we provided notice of termination to PsiOxus Therapeutics, Ltd. pertaining to the License and Collaboration agreement for the development of NG-348, an “armed” oncolytic virus in solid tumors.summarized below. Refer to “Item 1. Financial Statements—Note 3. Alliances” and “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for further information. Refer to “Item 1. Financial Statements—Note 19. Pending Celgene Acquisition” for further discussion on our pending acquisition of Celgene. Refer to “—Financial Position, Liquidity and Capital Resources” for a discussion of our financing arrangements in connection with the pendingplanned MyoKardia acquisition.


29
36


MyoKardia - In the fourth quarter of 2020, we entered into a definitive merger agreement under which we will acquire 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. The acquisition will provide us 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.

Dragonfly - In the fourth quarter of 2020, we obtained a global exclusive license to Dragonfly’s interleukin-12 (IL-12) investigational immunotherapy program, including its extended half-life cytokine DF6002.

In the third quarter of 2020, we entered into a research collaboration and license agreement with Dragonfly. We will leverage Dragonfly’s proprietary technology to develop therapeutics in multiple sclerosis and neuroinflammation. Dragonfly will lead research and discovery activities on three targets. We will have the right to opt-in at the drug candidate stage and obtain an exclusive, global license to develop and commercialize therapeutics discovered or invented by Dragonfly against the targets.

Forbius - In the third quarter of 2020, we 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 us with full rights to Forbius’s TGF-beta program, including the program’s lead investigational asset, AVID200, which is in Phase I development.

Repare - In the second quarter of 2020, we entered into a global collaboration and license agreement with Repare Therapeutics Inc., a precision oncology company pioneering synthetic lethality to develop novel therapeutics that target specific vulnerabilities of tumors in genetically defined patient populations. We will leverage Repare’s proprietary, CRISPR-enabled genome-wide synthetic lethal target discovery platform to jointly identify multiple synthetic lethal precision oncology targets for drug candidates. Repare will lead all target identification and validation activities. We will have the right to opt-in at the drug candidate stage and obtain an exclusive, global license to develop and commercialize therapeutics discovered by Repare against the targets.
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RESULTS OF OPERATIONS

Regional Revenues

 Three Months Ended September 30, Nine Months Ended September 30,
 Total Revenues 2019 vs. 2018 Total Revenues 2019 vs. 2018
Dollars in Millions2019 2018 % Change 
Foreign Exchange(b)
 2019 2018 % Change 
Foreign Exchange(b)
United States$3,472
 $3,235
 7 % —
 $10,588
 $9,243
 15 % —
Europe1,445
 1,365
 6 % (4)% 4,416
 4,179
 6 % (6)%
Rest of the World976
 932
 5 % (2)% 2,838
 2,728
 4 % (6)%
Other(a)
114
 159
 (28)% N/A
 358
 438
 (18)% N/A
Total$6,007
 $5,691
 6 % (1)% $18,200
 $16,588
 10 % (2)%
(a)Other revenues include royalties and alliance-related revenues for products not sold by our regional commercial organizations.
(b)Foreign exchange impacts were derived by applying the prior period average currency rates to the current period sales.

The composition of the changes in revenues was as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions20202019% Change
Foreign Exchange(b)
20202019% Change
Foreign Exchange(b)
United States$6,542 $3,472 88 %— $19,795 $10,588 87 %— 
Europe2,453 1,445 70 %4 %7,156 4,416 62 %(1)%
Rest of the World1,361 976 39 %(3)%4,030 2,838 42 %(4)%
Other(a)
184 114 61 %N/A469 358 31 %N/A
Total$10,540 $6,007 75 %— $31,450 $18,200 73 %(1)%
(a)    Other revenues include royalties and alliance-related revenues for products not sold by our regional commercial organizations.
(b)    Foreign exchange impacts were derived by applying the prior period average currency rates to the current period sales.

United States

•U.S. revenues for the third quarter 2020 and year-to-date were impacted by Revlimid and other Celgene products ($3.0 billion and $8.8 billion, respectively), which contributed 88% and 83%, respectively, of the growth. Average net selling prices decreased 1% in the third quarter 2020 and increased 2% year-to-date.

Europe

•Europe revenues for the third quarter 2020 and year-to-date were impacted by Celgene products ($908 million and $2.7 billion, respectively), which contributed 63% and 61%, respectively, of the growth. Excluding the impact of Celgene and foreign exchange, Europe revenues increased by 3% in the third quarter 2020 and 2% year-to-date primarily due to higher demand for Eliquis and Orencia in both periods and for Opdivo in the nine months ended September 30, 2019, partially offset by declines in established brands. The lower growth rate in the three months period compared to the nine month period was primarily due to Opdivo and Yervoy trends and higher Medicare Part D coverage gap cost share (from 50% in 2018 to 70% in 2019). Average net selling prices after discounts, charge-backs and rebates were 2% lower in the third quarter 2019 and 1% higher year-to-date and are expected to be roughly flat on a full year basis.

Europe revenues increased in both periods due to higher demand for Eliquis and Opdivo, partially offset by foreign exchange, lower demand for established brands and lower average net selling prices.prices for both periods.

Rest of the World

•Rest of the World revenues increased in both periodsfor the third quarter 2020 and year-to-date were impacted by Celgene products ($474 million and $1.4 billion, respectively), which contributed approximately 48% and 50%, respectively, of the growth. Excluding the impact of Celgene and foreign exchange, Rest of World revenues decreased 6% for the third quarter 2020 and 4% year-to-date primarily due to higherlower demand for Opdivo, Eliquis established brands and Yervoy, partially offset by foreign exchange.lower average net selling prices for both periods.

No single country outside the U.S. contributed more than 10% of total revenues during the nine months ended September 30, 20192020 or 2018.2019. Our business is typically not seasonal.


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GTN Adjustments

The reconciliation of gross product sales to net product sales by each significant category of GTN adjustments was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions20202019% Change20202019% Change
Gross product sales$15,211 $8,884 71 %$43,685 $25,697 70 %
GTN adjustments
Charge-backs and cash discounts(1,440)(927)55 %(4,072)(2,591)57 %
Medicaid and Medicare rebates(2,146)(1,362)58 %(5,126)(3,252)58 %
Other rebates, returns, discounts and adjustments(1,428)(827)73 %(3,932)(2,342)68 %
Total GTN adjustments(5,014)(3,116)61 %(13,130)(8,185)60 %
Net product sales$10,197 $5,768 77 %$30,555 $17,512 74 %
GTN adjustments percentage33 %35 %(2)%30 %32 %(2)%
U.S.39 %44 %(5)%36 %40 %(4)%
Non-U.S.18 %16 %2 %16 %15 %1 %

Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 % Change 2019 2018 % Change
Gross product sales$8,884
 $7,681
 16% $25,697
 $21,891
 17%
GTN adjustments           
Charge-backs and cash discounts(927) (711) 30% (2,591) (1,957) 32%
Medicaid and Medicare rebates(1,362) (847) 61% (3,252) (2,169) 50%
Other rebates, returns, discounts and adjustments(827) (690) 20% (2,342) (1,899) 23%
Total GTN adjustments(3,116) (2,248) 39% (8,185) (6,025) 36%
Net product sales$5,768
 $5,433
 6% $17,512
 $15,866
 10%
            
GTN adjustments percentage35% 29% 6% 32% 28% 4%
U.S.44% 36% 8% 40% 35% 5%
Non-U.S.16% 16% —% 15% 14% 1%

Reductions to provisions for product sales made in prior periods resulting from changes in estimates were $139$91 million and $103$139 million for the nine months ended September 30, 20192020 and 2018,2019, respectively. GTN adjustments are primarily a function of product sales volume, regional and payer channel mix, contractual or legislative discounts and rebates. U.S. GTN adjustments are increasing at a higher rate than gross product salespercentage decreased primarily due to the addition of Celgene hematology brands, which have lower GTN adjustment percentages, partially offset by higher U.S. Eliquis gross product sales, which has a relatively highhave higher U.S. GTN adjustment percentagepercentages.

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Product Revenues
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions20202019% Change20202019% Change
Prioritized Brands
Revlimid$3,027 $— N/A$8,826 $— N/A
U.S.2,080 — N/A6,094 — N/A
Non-U.S.947 — N/A2,732 — N/A
Eliquis2,095 1,928 9 %6,899 5,895 17 %
U.S.1,118 1,124 (1)%4,258 3,599 18 %
Non-U.S.977 804 22 %2,641 2,296 15 %
Opdivo1,780 1,817 (2)%5,199 5,441 (4)%
U.S.1,018 1,088 (6)%2,982 3,324 (10)%
Non-U.S.762 729 5 %2,217 2,117 5 %
Orencia826 767 8 %2,290 2,185 5 %
U.S.588 554 6 %1,642 1,569 5 %
Non-U.S.238 213 12 %648 616 5 %
Pomalyst/Imnovid777 — N/A2,235 — N/A
U.S.548 — N/A1,559 — N/A
Non-U.S.229 — N/A676 — N/A
Sprycel544 558 (3)%1,576 1,561 1 %
U.S.336 325 3 %944 872 8 %
Non-U.S.208 233 (11)%632 689 (8)%
Yervoy446 353 26 %1,211 1,104 10 %
U.S.309 222 39 %820 750 9 %
Non-U.S.137 131 5 %391 354 10 %
Abraxane342 — N/A950 — N/A
U.S.236 — N/A659 — N/A
Non-U.S.106 — N/A291 — N/A
Empliciti96 89 8 %290 263 10 %
U.S.59 62 (5)%177 183 (3)%
Non-U.S.37 27 37 %113 80 41 %
Reblozyl96 — N/A159 — N/A
U.S.92 — N/A155 — N/A
Non-U.S.4 — N/A4 — N/A
Inrebic13 — N/A40 — N/A
U.S.13 — N/A40 — N/A
Non-U.S.— — N/A— — N/A
Zeposia2 — N/A3 — N/A
U.S.2 — N/A3 — N/A
Non-U.S.— — N/A— — N/A
Onureg3 — N/A3 — N/A
U.S.3 — N/A3 — N/A
Non-U.S.— — N/A— — N/A
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 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions20202019% Change20202019% Change
Established Brands
Baraclude100 145 (31)%343 433 (21)%
U.S.3 2 50 %9 16 (44)%
Non-U.S.97 143 (32)%334 417 (20)%
Vidaza106 — N/A390 — N/A
U.S.— — N/A2 — N/A
Non-U.S.106 — N/A388 — N/A
Other Brands(a)
287 350 (18)%1,036 1,318 (21)%
U.S.137 95 44 %448 275 63 %
Non-U.S.150 255 (41)%588 1,043 (44)%
Total Revenues10,540 6,007 75 %31,450 18,200 73 %
U.S.6,542 3,472 88 %19,795 10,588 87 %
Non-U.S.3,998 2,535 58 %11,655 7,612 53 %
(a)    Includes BMS and Celgene products in 2020.

Revlimid (lenalidomide)—an oral immunomodulatory drug that in combination with dexamethasone is indicated for the treatment of patients with multiple myeloma. Revlimid as a resultsingle agent is also indicated as a maintenance therapy in patients with multiple myeloma following autologous hematopoietic stem cell transplant.

Eliquis (apixaban)— an oral Factor Xa inhibitor targeted at stroke prevention in adult patients with NVAF and the prevention and treatment of VTE disorders.

•U.S. revenues decreased 1% in the third quarter 2020 with the comparable prior year period due to higher demand offset by lower average net selling prices of approximately 22%. The lower average net selling price is primarily due to the increase in the Medicare Part D coverage gap cost shareper patient in 2020, and, competitive pressures to maintain its position on healthcare payer formularies allowinga lesser extent, unfavorable channel mix and higher contractual rebates. A majority of Eliquis patients continued access through their medical plans.enter the coverage gap during the third and fourth quarters each year. As a result, the expansion of the coverage gap had a significant negative impact in the third quarter and is expected to continue in the fourth quarter.

30U.S. revenues increased 18% year-to-date due to higher demand, partially offset by lower average net selling prices of approximately 8%.


•International revenues increased by 22% in the third quarter 2020 and 15% year-to-date due to higher demand, partially offset by lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 18% in the third quarter 2020 and 15% year-to-date.

Product Revenues
 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 % Change 2019 2018 % Change
Prioritized Brands           
Opdivo$1,817
 $1,793
 1 % $5,441
 $4,931
 10 %
U.S.1,088
 1,141
 (5)% 3,324
 3,103
 7 %
Non-U.S.729
 652
 12 % 2,117
 1,828
 16 %
            
Eliquis1,928
 1,577
 22 % 5,895
 4,733
 25 %
U.S.1,124
 917
 23 % 3,599
 2,781
 29 %
Non-U.S.804
 660
 22 % 2,296
 1,952
 18 %
            
Orencia767
 675
 14 % 2,185
 1,979
 10 %
U.S.554
 474
 17 % 1,569
 1,360
 15 %
Non-U.S.213
 201
 6 % 616
 619
 — %
            
Sprycel558
 491
 14 % 1,561
 1,464
 7 %
U.S.325
 267
 22 % 872
 791
 10 %
Non-U.S.233
 224
 4 % 689
 673
 2 %
            
Yervoy353
 382
 (8)% 1,104
 946
 17 %
U.S.222
 278
 (20)% 750
 668
 12 %
Non-U.S.131
 104
 26 % 354
 278
 27 %
            
Empliciti89
 59
 51 % 263
 178
 48 %
U.S.62
 41
 51 % 183
 119
 54 %
Non-U.S.27
 18
 50 % 80
 59
 36 %
            
Established Brands           
Baraclude145
 175
 (17)% 433
 579
 (25)%
U.S.2
 6
 (67)% 16
 25
 (36)%
Non-U.S.143
 169
 (15)% 417
 554
 (25)%
            
Other Brands350
 539
 (35)% 1,318
 1,778
 (26)%
U.S.95
 111
 (14)% 275
 396
 (31)%
Non-U.S.255
 428
 (40)% 1,043
 1,382
 (25)%
            
Total Revenues6,007
 5,691
 6 % 18,200
 16,588
 10 %
U.S.3,472
 3,235
 7 % 10,588
 9,243
 15 %
Non-U.S.2,535
 2,456
 3 % 7,612
 7,345
 4 %


31


Opdivo (nivolumab)(nivolumab) — a fully human monoclonal antibody that binds to the PD-1 on T and NKT cells that has been approved for several anti-cancer indications including bladder, blood, colon, head and neck, kidney, liver, lung, melanoma and stomach and continues to be investigated across other tumor types and disease areas.

•
U.S. revenues decreased in the third quarter 2019, and sequentially quarter-over-quarter, due to a smaller previously-treated advanced lung cancer market and increased competition for the Opdivo+Yervoy combination in kidney cancer. We expect this trend to continue until the market stabilizes or new indications are approved and launched.

•U.S. revenues increaseddecreased 6% in the third quarter 2020 and 10% year-to-date due to the smaller previously-treated advanced lung cancer market, lower demand from COVID-19 (primarily lower new patient starts and patient visits) and increased competition in the adjuvant melanoma indication, partially offset by higher demand indue to the first and second quarters of 2019 resulting from the second quarter 2018 approvallaunch of the Opdivo+Yervoy combination for kidney cancer and increased usecombinations in adjuvant melanoma.NSCLC.

•International revenues increased 5% in the third quarter 2020 and year-to-date due to higher demand as a result of approvals for additional indications andindication launches in new countries.countries, partially offset by foreign exchange. Excluding foreign exchange impacts, revenues increased by 16%6% in the third quarter 2020 and 24%9% year-to-date.

Eliquis(apixaban) — an oral Factor Xa inhibitor targeted at stroke prevention in adult patients with NVAF and the prevention and treatment of VTE disorders.

41
U.S. revenues increased due to higher demand, partially offset by an increase in Medicare Part D coverage gap cost share in the third quarter 2019.
International revenues increased due to higher demand. Excluding foreign exchange impacts, revenues increased by 26% in the third quarter and 23% year-to-date.


Orencia (abatacept)(abatacept) — a fusion protein indicated for adult patients with moderate to severe active RA and PsA and is also indicated for reducing signs and symptoms in certain pediatric patients with moderately to severely active polyarticular JIA.

•U.S. revenues increased due to higher demand6% and higher average net selling prices.
International revenues excluding foreign exchange impacts increased by 8%5% in the third quarter 2020 and year-to-date, respectively, due to higher demand.

•International revenues increased 12% and 5% in the third quarter 2020 and year-to-date, respectively, due to higher demand. Excluding foreign exchange impacts, international revenue increased by 13% in the third quarter 2020 and 7% year-to-date.

Pomalyst/Imnovid (pomalidomide) — a proprietary, distinct, small molecule that is administered orally and modulates the immune system and other biologically important targets. Pomalyst/Imnovid is indicated for patients with multiple myeloma who have received at least two prior therapies including lenalidomide and a proteasome inhibitor and have demonstrated disease progression on or within 60 days of completion of the last therapy.

Sprycel (dasatinib)(dasatinib) — an oral inhibitor of multiple tyrosine kinase indicated for the first-line treatment of patients with Philadelphia chromosome-positive CML in chronic phase and the treatment of adults with chronic, accelerated, or myeloid or lymphoid blast phase CML with resistance or intolerance to prior therapy, including Gleevec* (imatinib meslylate)mesylate).

•U.S. revenues increased 3% in the third quarter 2020 and 8% year-to-date due to higher average net selling prices and higher demand.

•International revenues excluding foreign exchange impacts increased by 6%decreased 11% in the third quarter 2020 and 7%8% year-to-date due lower demand as a result increased generic competition and foreign exchange. Excluding foreign exchange impact, revenues decreased 11% in the third quarter 2020 and decreased by 6% year-to-date. We may experience a decline in European revenues due to generic competition.

Yervoy (ipilimumab)(ipilimumab) — a monoclonal antibody for the treatment of patients with unresectable or metastatic melanoma.

•
U.S. revenues decreased in the third quarter 2019, and sequentially quarter-over-quarter, due to increased competition for the Opdivo+Yervoy combination for kidney cancer.

U.S•U.S. revenues increased year-to-date due to higher demand39% in the firstthird quarter 2020 and second quarters of 20199% year-to-date primarily due to the approvallaunch of the Opdivo+Yervoy combination for NSCLC, partially offset by increased competition for the Opdivo+Yervoy combination for kidney cancer.

•
International revenues increased due to higher demand and from the approval of
•International revenues increased 5% in the third quarter 2020 and 10% year-to-date due to higher demand as a result of additional indication launches primarily in Europe, partially offset by lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 4% in the third quarter 2020 and 13% year-to-date.

Abraxane (paclitaxel albumin-bound particles for injectable suspension)—a solvent-free protein-bound chemotherapy product that combines paclitaxel with albumin using our proprietary nab® technology platform, and is used to treat breast cancer, NSCLC and pancreatic cancer, among others.

Opdivo+Yervoy combination for melanoma and kidney cancer in Japan and certain European countries. Excluding foreign exchange impacts, revenues increased by 32% in the third quarter and 35% year-to-date.

Empliciti (elotuzumab)(elotuzumab) — a humanized monoclonal antibody for the treatment of multiple myeloma.

•
U.S. revenues increased due to the fourth quarter 2018 approval
Reblozyl (luspatercept-aamt) — an erythroid maturation agent indicated for the treatment of anemia in adult patients with beta thalassemia who require regular red blood cell transfusions and anemia failing an erythropoiesis stimulating agent in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. Reblozyl MDS indication was launched in April 2020.

42


Inrebic (fedratinib) — an oral kinase inhibitor with activity against wild type and mutationally activated JAK2 and FLT3 and is indicated for the treatment of adult patients with intermediate-2 or high-risk primary or secondary (post-polycythemia vera or post-essential thrombocythemia) myelofibrosis. Inrebic was launched in August 2019.

Zeposia (ozanimod) — an oral immunomodulatory drug used to treat relapsing forms of multiple sclerosis, to include clinically isolated syndrome, relapsing-remitting disease, and active secondary progressive disease, in adults. Zeposia was launched in June 2020.

Onureg (azacitidine) — is an oral hypomethylating agent that incorporates into DNA and RNA, indicated for continued treatment of adult patients with AML who achieved first complete remission or complete remission with incomplete blood count recovery following intensive induction chemotherapy and are not able to complete intensive curative therapy. Onureg was launched in September 2020.

Empliciti in combination with pomalidomide and dexamethasone for relapsed or refractory multiple myeloma.

Baraclude (entecavir)(entecavir) — an oral antiviral agent for the treatment of chronic hepatitis B.

•International revenues continued to decreasedecreased due to lower demandaverage net selling prices resulting from increased generic competition.


Vidaza (azacitidine for injection)—is a pyrimidine nucleoside analog that has been shown to reverse the effects of deoxyribonucleic acid hypermethylation and promote subsequent gene re-expression and is indicated for treatment of patients with the following myelodysplastic syndrome subtypes: refractory anemia or refractory anemia with ringed sideroblasts (if accompanied by neutropenia or thrombocytopenia or requiring transfusions), refractory anemia with excess blasts, refractory anemia with excess blasts in transformation, and CML.
32


Other Brands — includes Sustiva, Reyataz, Daklinza and all other products that lost exclusivity in major markets, OTC brands and royalty revenue.

•U.S. revenues include $68 million and $237 million from Celgene products in the third quarter 2020 and year-to-date, respectively.

•International revenues decreased primarily due to divestiture of the UPSA business and certain other brands and continued generic erosion.

Estimated End-User Demand

Pursuant to the SEC Consent Order described in our 20182019 Form 10-K, we monitor inventory levels on hand in the U.S. wholesaler distribution channel and outside of the U.S. in the direct customer distribution channel. We are obligated to disclose products with levels of inventory in excess of one month on hand or expected demand, subject to a de minimis exception. Estimated levels of inventory in the distribution channel in excess of one month on hand for the following products were not material to our results of operations as of the dates indicated. In the third quarter 2019, we sold our UPSA consumer health business, which included Dafalgan, Efferalgan and Fervex products. Below are international products that had estimated levels of inventory in the distribution channel in excess of one month at June 30, 2019.

DafalganOnureg, an analgesic product sold principally in Europe, had 1.2 months of inventory on hand internationally at direct customers compared to also 1.2 months of inventory on hand at March 31, 2019. The level of inventory on hand was primarily due to the ordering patterns of pharmacists in France.

Efferalgan, an analgesic product sold principally in Europe, had 1.8 months of inventory on hand internationally at direct customers compared to 1.7 months of inventory on hand at March 31, 2019. The level of inventory on hand was primarily due to the ordering patterns of pharmacists in France.

Fervex, a cold and flu product, had 2.6 months of inventory on hand at direct customers compared to 3.1 months of inventory on hand at March 31, 2019. The level of inventory on hand was primarily due to the ordering patterns of pharmacists in France.

Perfalgan, an analgesic product, had 2.5 months of inventory on hand internationally at direct customers compared to 2.2 months of inventory on hand at March 31, 2019. The level of inventory on hand was primarilySeptember 30, 2020 in the Gulf Countries dueU.S. to extended delivery lead time.support the product launch. The inventory is expected to be worked down as demand increases post launch.

In the U.S., we generally determine our months on hand estimates using inventory levels of product on hand and the amount of out-movement provided by our three largest wholesalers, which account for approximately 97%75% of total gross sales of U.S. products. Factors that may influence our estimates include generic competition, seasonality of products, wholesaler purchases in light of increases in wholesaler list prices, new product launches, new warehouse openings by wholesalers and new customer stockings by wholesalers. In addition, these estimates are calculated using third-party data, which may be impacted by their recordkeeping processes.

Revlimidand Pomalyst are distributed in the U.S. primarily through contracted pharmacies under the Revlimid REMS and Pomalyst REMS programs, respectively. These are proprietary risk-management distribution programs tailored specifically to provide for the safe and appropriate distribution and use of Revlimidand Pomalyst.Internationally, Revlimidand Imnovid are distributed under mandatory risk-management distribution programs tailored to meet local authorities’ specifications to provide for the products’ safe and appropriate distribution and use. These programs may vary by country and, depending upon the country and the design of the risk-management program, the product may be sold through hospitals or retail pharmacies.

43


Our non-U.S. businesses have significantly more direct customers. Information on available direct customer product level inventory and corresponding out-movement information and the reliability of third-party demand information varies widely. We limit our direct customer sales channel inventory reporting to where we can influence demand. When this information does not exist or is otherwise not available, we have developed a variety of methodologies to estimate such data, including using historical sales made to direct customers and third-party market research data related to prescription trends and end-user demand. Given the difficulties inherent in estimating third-party demand information, we evaluate our methodologies to estimate direct customer product level inventory and to calculate months on hand on an ongoing basis and make changes as necessary. Factors that may affect our estimates include generic competition, seasonality of products, price increases, new product launches, new warehouse openings by direct customers, new customer stockings by direct customers and expected direct customer purchases for governmental bidding situations. As such, all of the information required to estimate months on hand in the direct customer distribution channel for non-U.S. business for the quarter ended September 30, 20192020 is not available prior to the filing of this Quarterly Report on Form 10-Q. We will disclose any product with levels of inventory levels in excess of one month on hand or expected demand for the current quarter, subject to a de minimis exception, in theour next annual reportAnnual Report on Form 10-K.


33
44




Expenses
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2019 2018 % Change 2019 2018 % ChangeDollars in Millions20202019% Change20202019% Change
Cost of products sold$1,810
 $1,648
 10 % $5,646
 $4,857
 16 %
Cost of products sold(a)
Cost of products sold(a)
$2,502 $1,790 40 %$8,863 $5,586 59 %
Marketing, selling and administrative1,055
 1,104
 (4)% 3,137
 3,215
 (2)%Marketing, selling and administrative1,706 1,055 62 %4,940 3,137 57 %
Research and development1,382
 1,280
 8 % 4,061
 4,965
 (18)%Research and development2,499 1,378 81 %7,393 4,051 82 %
Other income (net)411
 (508) **
 252
 (912) **
Amortization of acquired intangible assetsAmortization of acquired intangible assets2,491 25 **7,162 73 **
Other (income)/expense, netOther (income)/expense, net(915)410 **(488)249 **
Total Expenses$4,658
 $3,524
 32 % $13,096
 $12,125
 8 %Total Expenses$8,283 $4,658 78 %$27,870 $13,096 **
**    In excess of +/- 100%.

(a)    Excludes amortization of acquired intangible assets.

Cost of Products Sold

•Cost of products sold increased due to higher royalties and profit sharing ($162by $712 million in the third quarter 2020 and $589$3.3 billion year-to-date, primarily due to unwinding of inventory fair value adjustments ($456 million in the third quarter 2020 and $2.6 billion year-to-date) resulting primarily from, higher royalties and Eliquis sales, aprofit sharing ($79 million in the third quarter 2020 and $496 million year-to-date) and Celgene product costs (approximately $100 million in the third quarter 2020 and $300 million year-to-date). Year-to-date 2019 was impacted by an impairment charge of $113 million impairment charge to reduce the carrying value of assets held-for-sale to their estimated fair value in 2019for a manufacturing and higher product costs, partially offset by foreign exchangepackaging facility.

Marketing, Selling and lower start-up costs.Administrative


•Marketing, selling and administrative expenses decreasedincreased by $651 million in the third quarter 2020 and $1.8 billion year-to-date, primarily due to lower advertising, promotion, commercial and sales force expenses attributed to transformation initiatives and foreign exchange impact of 1% and decreased year-to-date due to foreign exchange impact of 2%.

Research and development increasedcosts associated with the broader portfolio resulting from the Celgene acquisition (approximately $500 million in the third quarter due to continued investment of IO2020 and other immunoscience development programs$1.7 billion year-to-date).

Research and decreased year-to-date due to Nektar related charges in 2018.Development

Significant charges included in •Research and development were as follows:
 Three Months Ended September 30, Nine Months Ended September 30, 
Dollars in Millions2019  2018 2019  2018 
Nektar$—
  $—
 $—
  $1,050
(a) 
IFM—
  —
 25
(b) 
 25
(b) 
Cormorant—
  —
 —
  60
(b) 
License and asset acquisition charges—
  —
 25
  1,135
 
           
IPRD impairments—
  —
 32
  —
 
Site exit costs20
  18
 58
  57
 
Research and development significant charges$20
  $18
 $115
  $1,192
 
(a)Upfront payment
(b)Milestone payment


34



As discussed in further detail below, Other income (net) decreased in both periods primarily due to a $1.5expense increased by $1.1 billion pension settlement charge, partially offset by a $1.2 billion gain on sale of the UPSA business. Equity investments fair value adjustments also contributed to the decreases in Other income (net) in the third quarter 2019.2020 and $3.3 billion year-to-date, primarily due to costs associated with the broader portfolio resulting from the Celgene acquisition (approximately $900 million in the third quarter 2020 and $2.8 billion year-to-date, excluding the bluebird collaboration charge) license and asset acquisition charges of $203 million in the third quarter 2020 and $528 million year-to-date relating to Nektar, Cormorant, Forbius and bluebird.

Items includedAmortization of Acquired Intangible Assets

•Amortization of acquired intangible assets increased by $2.5 billion in the third quarter 2020 and $7.1 billion year-to-date, due to Revlimid, Pomalyst/Imnovid and other marketed product rights obtained in the Celgene acquisition.

Other income (net) were as follows:(Income)/Expense, Net

•Other (income)/expense, net changed by $1.3 billion in the third quarter 2020 and $737 million year-to-date, primarily due to fair value adjustments to equity investments and contingent value rights in 2020 and pension settlement charges in 2019, partially offset by divestiture gains in 2019 and other items discussed below.

45


Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018Dollars in Millions2020201920202019
Interest expense$209
 $44
 $377
 $135
Interest expense$346 $209 $1,065 $377 
Pension and postretirementPension and postretirement— 1,537 (6)1,607 
Royalties and licensing incomeRoyalties and licensing income(403)(356)(1,124)(967)
Divestiture losses/(gains)Divestiture losses/(gains)1 (1,179)(6)(1,171)
Acquisition expensesAcquisition expenses— 7 — 475 
Contingent considerationContingent consideration(988)— (597)— 
Investment income(173) (44) (348) (118)Investment income(13)(173)(99)(348)
Equity investment losses/(gains)261
 (97) 15
 244
Integration expensesIntegration expenses195 96 535 224 
Provision for restructuring10
 45
 32
 102
Provision for restructuring176 10 451 32 
Acquisition expenses7
 —
 475
 —
Integration expenses96
 —
 224
 —
Equity investment (gains)/lossesEquity investment (gains)/losses(244)261 (724)15 
Litigation and other settlements(1) 11
 —
 10
Litigation and other settlements10 (1)41 — 
Equity in net income of affiliates—
 (22) —
 (73)
Divestiture gains(1,179) (108) (1,171) (178)
Royalties and licensing income(356) (338) (967) (1,058)
Transition and other service fees(7) —
 (11) (5)Transition and other service fees(18)(7)(129)(11)
Pension and postretirement1,537
 (10) 1,607
 (40)
Intangible asset impairment—
 —
 15
 64
Intangible asset impairment— — 21 15 
Reversion excise taxReversion excise tax— — 76 — 
Other7
 11
 4
 5
Other23 6 8 1 
Other income (net)$411
 $(508) $252
 $(912)
Other (income)/expense, netOther (income)/expense, net$(915)$410 $(488)$249 

•Interest expense includes $249 million of interest incurred on theincreased due to $19.0 billion of new notes issued in May 2019.
Investment income includes $153 million2019 and $19.9 billion of interest income earned on the net proceeds of the new notes.
Equity investment losses/(gains) includes fair value adjustments related to our equity investments in Nektar and uniQure N.V. and an $80 million gain related to the termination of our Europe and Asia partnership with Sanofi in 2019.
Acquisition expenses include the following items related to the pending Celgene acquisition: (1) upfront bridge facility commitment fee amortization of $103 million, (2) fair value adjustment of $277 million related to the forward starting interest rate swap option contracts and deal contingent forward starting interest rate swap contracts and (3) financial advisory, legal, proxy filing and other regulatory fees of $95 million.
Integration expenses include consulting fees incurred in connection with pre-integration planning activities.
Equity in net income of affiliates was related to our Europe and Asia partnership with Sanofi, which was terminated in 2019.
Divestiture gains includes the $1.2 billion gain on sale of the UPSA businessdebt assumed in the third quarter 2019.acquisition.
•
Royalties and licensing income primarily includes diabetes royalties of $497 million in both periods and Keytruda* royalties of $373 million in 2019 and $241 million in 2018. In addition, Erbitux* royalties of $145 million, a $50 million fee for amending a royalty rate and a $25 million sales-based milestone were included in 2018.
Pension and postretirement includes the pension settlement chargesa special termination benefits charge of $1.5 billion in the third quarter 2019 relating to the termination of the Bristol-Myers Squibb Retirement Income Plan.
Intangible asset impairment•Royalties and licensing income includes $64diabetes business royalties, Keytruda* royalties, up-front and milestone licensing fees for products that have not obtained commercial approval. Refer to “Item 1. Financial Statements—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for further information.
•Divestiture losses/(gains) includes a $1.2 billion gain on sale of the UPSA business in the third quarter 2019.
•Acquisition expenses include the following items related to the Celgene transaction in 2019: (1) upfront bridge facility commitment fee, (2) acquisition financing hedge losses and (3) financial advisory, legal, proxy filing and other regulatory fees.
•Contingent consideration primarily includes fair value adjustments resulting from the reduction in the traded price of contingent value rights issued with the Celgene acquisition.
•Integration expenses include consulting fees incurred in connection with Celgene integration activities.
•Provision for restructuring includes exit and other costs related to the Celgene transaction. Refer to “Item 1. Financial Statements—Note 6. Restructuring” for further information.
•Equity investment (gains)/losses includes fair value adjustments on equity investments that have readily determinable fair value and observable price changes on equity investments without readily determinable fair values. Refer to “Item 1. Financial Statements—Note 9. Financial Instruments and Fair Value Measurements” for more information. Our share of income from equity method investments was $30 million in 2018 for an out-licensed asset obtainedthe third quarter 2020. A termination fee related to our Europe and Asia partnership with Sanofi of $80 million was in the acquisitionfirst quarter 2019.
•Transition and other service fees primarily includes Otezla* divestiture related fees in 2020.
•Reversion excise tax resulted from the transfer of ZymoGenetics, Inc., which did not meet its primary endpoint in a Phase II clinical study.the retiree medical plan assets back to the Company. Refer to “Item 1. Financial Statements—Note 16. Retirement Benefits” for further information.

Income Taxes
 Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Earnings Before Income Taxes$2,257 $1,349 $3,580 $5,104 
Provision/(Benefit) for Income Taxes379 (17)2,548 584 
Effective Tax Rate16.8 %(1.3)%71.2 %11.4 %
Impact of Specified Items(0.3)%(13.1)%55.5 %(3.6)%
Effective Tax Rate Excluding Specified Items17.1 %11.8 %15.7 %15.0 %

46

 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Earnings Before Income Taxes$1,349
 $2,167
 $5,104
 $4,463
Provision for Income Taxes(17) 255
 584
 674
Effective Tax Rate(1.3)% 11.8 % 11.4 % 15.1 %
        
Impact of Specified Items(13.1)% (1.5)% (3.6)% (0.8)%


The reduction in the effective tax rateimpact attributed to specified items was primarily due to low jurisdictional tax rates attributed to inventory and intangible asset purchase price adjustments and non-taxable fair value adjustments to contingent value rights in the current periods. The nine months ended September 30, 2020 also includes an $853 million deferred tax charge resulting from an internal transfer of certain intangible assets to the U.S. and an additional $266 million GILTI tax charge upon finalization of the Otezla* divestiture tax consequences with tax authorities. Jurisdictional tax rates and other tax impacts attributed to pension settlement charges, gain on sale of the UPSA business divestiture and other specified items. Taxitems decreased the effective tax rate in the prior periods. The effective tax rate excluding specified items increased by 5.3% in the third quarter 2020 and 0.7% year-to-date due to tax reserve releases due to lapse of statutes were $81 million and $49 million in the three months ended September 30,third quarter 2019 and 2018, respectively.changes in the estimated annual effective tax rates resulting primarily from jurisdictional earnings mix. The third quarters 2020 and 2019 each included other favorable discrete tax adjustments of approximately $70 million upon finalization of prior year tax returns and the impact of the Swiss tax reform (2019 only). Refer to “Item 1. Financial Statements—Note 7. Income Taxes” for additional information on the tax impact of specified items.information.


35



Non-GAAP Financial Measures

Our non-GAAP financial measures, such as non-GAAP earnings and related EPS information, are adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis. These items are adjusted after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods including (1) amortization of acquired intangible assets beginning in the fourth quarter of 2019, including product rights that generate a significant portion of our ongoing revenue and will recur until the intangible assets are fully amortized, (2) unwind of inventory fair value adjustments, (3) acquisition and integration expenses, (2)(4) restructuring costs, (3)(5) accelerated depreciation and impairment of property, plant and equipment and intangible assets, (4)(6) R&D charges or other income resulting from upfront or contingent milestone payments in connection with the acquisition or licensing of third-party intellectual property rights, (5)(7) costs of acquiring a priority review voucher, (8) divestiture gains or losses, (6)(9) stock compensation resulting from accelerated vesting of Celgene awards and certain retention-related employee compensation charges related to the Celgene transaction, (10) pension, legal and other contractual settlement charges, (7)(11) interest expense on the new notes issued in May 2019 in connection withincurred prior to our pending acquisition of Celgene transaction and interest income earned on the net proceeds of those notes, (12) equity investment and (8)contingent value rights fair value adjustments and (13) amortization of fair value adjustments of debt redemption gains or losses,acquired from Celgene in our 2019 exchange offer, among other items. Deferred and current income taxes attributed to these items are also adjusted for considering their individual impact to the overall tax expense, deductibility and jurisdictional tax rates. Certain other significant tax items are also excluded such as the impact resulting from internal transfer of intangible assets and the Otezla* divestiture. We also provide international revenues for our priority products excluding the impact of foreign exchange. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in Exhibit 99.2 to our Form 8-K filed on October 31, 2019November 5, 2020 and are incorporated herein by reference.

Non-GAAP information is intended to portray the results of our baseline performance, supplement or enhance management, analysts and investorsinvestors’ overall understanding of our underlying financial performance and facilitate comparisons among current, past and future periods. For example, non-GAAP earnings and EPS information is an indication of our baseline performance before items that are considered by us to not be reflective of our ongoing results. In addition, this information is among the primary indicators that we use as a basis for evaluating performance, allocating resources, setting incentive compensation targets and planning and forecasting for future periods. This information is not intended to be considered in isolation or as a substitute for net earnings or diluted EPS prepared in accordance with GAAP.GAAP and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Amortization of acquired intangible assets were previously included in non-GAAP earnings and EPS information. These amounts have become significant to the financial results subsequent to the Celgene acquisition and as a result, have been excluded in the non-GAAP results to better reflect our core operating performance. Comparable prior period non-GAAP results have not been revised to include this adjustment as the related amounts were insignificant ($25 million and $73 million for the three and nine months ended September 30, 2019, respectively).

36
47



Specified items were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions2020201920202019
Inventory purchase price accounting adjustments$456 $— $2,590 $— 
Employee compensation charges— — 3 — 
Site exit and other costs3 22 32 173 
Cost of products sold459 22 2,625 173 
Employee compensation charges7 — 34 — 
Site exit and other costs(1)— 4 1 
Marketing, selling and administrative6 — 38 1 
License and asset acquisition charges203 — 528 25 
IPRD impairments— — — 32 
Inventory purchase price accounting adjustments8 — 25 — 
Employee compensation charges8 — 41 — 
Site exit and other costs4 20 99 58 
Research and development223 20 693 115 
Amortization of acquired intangible assets2,491 — 7,162 — 
Interest expense(a)
(40)166 (122)249 
Pension and postretirement— 1,545 — 1,638 
Royalties and licensing income(53)(9)(154)(9)
Divestiture losses/(gains)1 (1,179)(6)(1,171)
Acquisition expenses— 7 — 475 
Contingent consideration(988)— (597)— 
Investment income— (99)— (153)
Integration expenses195 96 535 224 
Provision for restructuring176 10 451 32 
Equity investment (gains)/losses(214)261 (693)15 
Reversion excise tax— — 76 — 
Other (income)/expense, net(923)798 (510)1,300 
Increase to pretax income2,256 840 10,008 1,589 
Income taxes on items above(405)(275)(699)(423)
Income taxes attributed to Otezla* divestiture
11 — 266 — 
Income taxes attributed to internal transfer of intangible assets— — 853 — 
Income taxes(394)(275)420 (423)
Increase to net earnings$1,862 $565 $10,428 $1,166 
(a)    Includes amortization of purchase price adjustments to Celgene debt.

48

 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions2019 2018 2019 2018
Impairment charges$9
 $—
 $118
 $10
Accelerated depreciation and other shutdown costs13
 13
 55
 30
Cost of products sold22
 13
 173
 40
        
Marketing, selling and administrative—
 —
 1
 1
        
License and asset acquisition charges—
 —
 25
 1,135
IPRD impairments—
 —
 32
 —
Site exit costs and other20
 18
 58
 57
Research and development20
 18
 115
 1,192
        
Interest expense166
 —
 249
 —
Investment income(99) —
 (153) —
Equity investment losses/(gains)261
 (97) 15
 244
Provision for restructuring10
 45
 32
 102
Acquisition expenses7
 —
 475
 —
Integration expenses96
 —
 224
 —
Divestiture gains(1,179) (108) (1,171) (176)
Royalties and licensing income(9) —
 (9) (75)
Pension and postretirement1,545
 27
 1,638
 95
Intangible asset impairment—
 —
 —
 64
Other income (net)798
 (133) 1,300
 254
 

 

 

 

Increase/(decrease) to pretax income840
 (102) 1,589
 1,487
        
Income taxes on items above(275) 1
 (423) (225)
Income taxes attributed to U.S. tax reform—
 (20) —
 (49)
Income taxes(275) (19) (423) (274)
 

 

 

 

Increase/(decrease) to net earnings$565
 $(121) $1,166
 $1,213

The reconciliations from GAAP to Non-GAAP were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
Dollars in Millions, except per share data2020201920202019
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – GAAP$1,872 $1,353 $1,012 $4,495 
Specified Items1,862 565 10,428 1,166 
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – Non-GAAP$3,734 $1,918 $11,440 $5,661 
Weighted-Average Common Shares Outstanding – Diluted2,290 1,634 2,295 1,636 
Diluted Earnings Per Share Attributable to BMS – GAAP$0.82 $0.83 $0.44 $2.75 
Diluted EPS Attributable to Specified Items0.81 0.34 4.54 0.71 
Diluted EPS Attributable to BMS – Non-GAAP$1.63 $1.17 $4.98 $3.46 
49

 Three Months Ended September 30, Nine Months Ended September 30,
Dollars in Millions, except per share data2019 2018 2019 2018
Net Earnings Attributable to BMS used for Diluted EPS Calculation – GAAP$1,353
 $1,901
 $4,495
 $3,760
Specified Items565
 (121) 1,166
 1,213
Net Earnings Attributable to BMS used for Diluted EPS Calculation – Non-GAAP$1,918
 $1,780
 $5,661
 $4,973
        
Average Common Shares Outstanding – Diluted1,634
 1,636
 1,636
 1,637
        
Diluted EPS Attributable to BMS – GAAP$0.83
 $1.16
 $2.75
 $2.30
Diluted EPS Attributable to Specified Items0.34
 (0.07) 0.71
 0.74
Diluted EPS Attributable to BMS – Non-GAAP$1.17
 $1.09
 $3.46
 $3.04


37




FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Our net cashdebt position was as follows:
Dollars in MillionsSeptember 30,
2020		December 31,
2019
Cash and cash equivalents$19,435 $12,346 
Marketable debt securities – current1,720 3,047 
Marketable debt securities – non-current495 767 
Total cash, cash equivalents and marketable debt securities21,650 16,160 
Short-term debt obligations(3,585)(3,346)
Long-term debt(41,364)(43,387)
Net debt position$(23,299)$(30,573)

Dollars in MillionsSeptember 30,
2019		 December 31,
2018
Cash and cash equivalents$30,489
 $6,911
Marketable securities – current2,053
 1,973
Marketable securities – non-current925
 1,775
Total cash, cash equivalents and marketable securities33,467
 10,659
Short-term debt obligations(569) (1,703)
Long-term debt(24,390) (5,646)
Net cash position$8,508
 $3,310

Cash, cash equivalents and marketable securities held in the U.S. increased to approximately $31.9Our net debt position was reduced by $7.3 billion at September 30, 2019primarily due to operating cash flow of $10.4 billion, partially offset by dividend payments of $3.1 billion.

We assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. We also evaluate our capital structure to ensure financial risks are efficiently managed, adequate liquidity access and lower cost of capital, which may lead to the $18.8 billionrepurchase of net proceeds from the notescommon stock, debt securities and CVRs issued in May 2019. The net proceeds were invested in money market funds and will be used to fund a portion of the cash consideration forconnection with the Celgene acquisition.transaction prior to maturity or the issuance of additional debt securities. We believe that our existing cash, cash equivalents and marketable debt securities together with cash generated from operations and, if required, from the issuance of commercial paper in the U.S. as well as borrowing available under our credit facilities, will be sufficient to satisfy our anticipated cash needs for at least the next few years, which includeincluding dividends, capital expenditures, milestone payments, working capital, andrestructuring initiatives, business development, deemed repatriation transition tax. In addition, wetax, approximately $8.0 billion of debt maturing through 2022 and CVRs issued in connection with the Celgene transaction of approximately $6.8 billion in 2021. We expect to have sufficient cash available and borrowing capacity to fund the aggregate cash portion of the merger consideration to Celgene shareholders. We anticipate funding the cash consideration for the Celgene acquisitionplanned MyoKardia transaction through a combination of available cash borrowingson hand from our operations and, subject to market conditions, net proceeds received in connection with a future debt issuance.

We have a share repurchase program authorized by our Board of Directors allowing for repurchases of our shares. The specific timing and number of shares repurchased will be determined by our management at its discretion and will vary based on market conditions, securities law limitations and other factors. The share repurchase program does not obligate us to repurchase any specific number of shares, does not have a specific expiration date and may be suspended or discontinued at any time. The repurchases may be effected through a combination of one or more open market repurchases, privately negotiated transactions, transactions structured through investment banking institutions and other derivative transactions, relying on Rule 10b-18 and Rule 10b5-1 under the term loan established earlier inExchange Act. The remaining share repurchase authority authorization under the year and short-term borrowings.

Management continuously evaluatesprogram was $1.0 billion as of December 31, 2019. Our Board of Directors approved an increase of $5.0 billion to the share repurchase authorization for our capital structure to ensure that we are financed efficiently, which may result in the repurchase of common stock and debt securities, termination of interest rate swap contracts priorin February 2020, increasing the total outstanding share repurchase authorization to maturity and issuance of debt securities.approximately $6.0 billion. We repurchased 6.51.4 million shares of our common stock for $300$81 million during the nine months ended September 30, 2019. The2020, reducing the remaining share repurchase capacity under our stockthe share repurchase program was $1.0to approximately $5.9 billion as of September 30, 2019. We are evaluating opportunities2020. In the second quarter of 2020, the ASR agreements that we executed in the fourth quarter of 2019 to enter the market and may make repurchases from timerepurchase an aggregate $7 billion of common stock were settled. Refer to time depending on a variety of factors, including price, general business and market conditions and alternative uses of capital. We announced plans to initiate a $7.0 billion accelerated share repurchase program following the closing of the pending acquisition of Celgene, subject to Board of Director's approval and may under certain circumstances purchase CVRs issued in connection with the Celgene acquisition.“Item 1. Financial Statements—Note 15. Equity” for additional information.

Dividend payments were $2.0$3.1 billion in the nine months ended September 30, 2019.2020. Dividends declared per common share were $1.23$1.35 in the nine months ended September 30, 2019.2020. Dividend decisions are made on a quarterly basis by our Board of Directors. The merger agreement prohibits us from declaring, setting aside or paying any dividend or other distribution other than our regular cash dividend in the ordinary course of business consistent with past practice in an amount not to exceed $0.41 per share per quarter.

Annual capital expenditures were approximately $1.0 billion$800 million in 20182019 and are expected to be approximately $800 million in 20192020 and $600 million$1.3 billion in 2020.2021. We continue to expandmake capital expenditures in connection with the expansion of our biologics manufacturing capabilities, research and development and other facility-related activities. For example, we have constructed a new large-scale biologics manufacturing facility in Ireland that will produce multiple therapies for our growing biologics portfolio when approved for commercial use in early 2020.

Our investment portfolio includes non-current marketable securities, which are subject to changes in fair value as a result of interest rate fluctuations and other market factors. Our investment policy establishes limits on the amount and time to maturity of investments with any institution. The policy also requires that investments are only entered into with corporate and financial institutions that meet high credit quality standards. Refer to “Item 1. Financial Statements—Note 9. Financial Instruments and Fair Value Measurements” for further information.

Under our commercial paper program, we may issue a maximum of $5$5.0 billion unsecured notes that have maturities of not more than 366 days from the date of issuance. There were no commercial paper borrowings outstanding as of September 30, 2019.2020.

As of September 30, 2019,2020, we had four revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility expiring in January 2020,2021, a $1.0 billion facility expiring in January 2022 and two five-year $1.5 billion facilities that were extended to September 2023 and July 2024, respectively. The facilities provide for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for our commercial paper borrowings. Our $1.0 billion facility and our two $1.5 billion revolving facilities are extendable annually by one year on the anniversary date with the consent of the lenders. Our 364-day $2.0 billion facility can be renewed for one year on each anniversary date, subject to certain terms and conditions. No borrowings were outstanding under any revolving credit facilityfacilities at September 30, 20192020 and December 31, 2018.


2019.
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In connection with our pending acquisition of Celgene,November 2020 we entered into a bridge commitment letter that provided for up to $33.5$4.0 billion in a 364-day senior unsecured bridge facility in January 2019, which would have been funded only to the extent certain anticipated credit agreements were not entered into and debt issuances were not completed prior to the completion of the acquisition. We terminated the bridge facility upon receipt of proceeds from our issuance of $19.0 billion of new notes in May 2019.

We also entered into an $8.0 billiondelayed draw term loan credit agreement consisting of a $1.0$2.0 billion 364-day tranche a $4.0 billion three-year tranche and a $3.0$2.0 billion five-year tranche in connection with the pending Celgene acquisition.two-year tranche. The term loan is subject tofacility provides for customary terms and conditions with no financial covenants and does not have any financial covenants.may be used for general corporate purposes. Any unused credit expires on April 9, 2021. No amounts will be borrowedborrowings were outstanding under the term loan prior to the closingas of the pending acquisition of Celgene. If drawn upon, the proceeds under the term loan will be used to fund a portion of the cash to be paid in the pending acquisition of Celgene and the payment of related fees and expenses.November 4, 2020.

In April 2019 we commenced an exchange offer for any and all outstanding notes issued by Celgene for up to $19.85 billion aggregate principal amount of new notes to be issued by us and cash. In conjunction with the offer to exchange the Celgene notes, we concurrently solicited consents to adopt certain proposed amendments to each of the indentures governing the Celgene notes to eliminate substantially all of the restrictive covenants in such indentures. In May 2019, we announced that the requisite number of consents had been received to adopt the proposed amendments with respect to all Celgene notes and that Celgene executed supplemental indentures to the Celgene indentures implementing the amendments,Our investment portfolio includes non-current marketable debt securities, which were effective upon execution but will only become operative upon the settlement of the exchange offer and consent solicitations. As of October 29, 2019, approximately 88% of the total aggregate principal amount of Celgene notes have been validly tendered for notes to be issued by us since the exchange offer was commenced. The exchange offer and consent solicitations are conditioned upon the closing of the pending Celgene acquisition and we expect to extend the expiration of the offer and consent solicitations until the acquisition closes.

In May 2019 we issued an aggregate principal amount of $19.0 billion of floating rate and fixed rate unsecured senior notes at maturities ranging from 18 months to 30 years. The net proceeds will be used to fund a portion of the aggregate cash portion of the merger consideration to be paid to Celgene shareholders and to pay related fees and expenses. Any remaining proceeds may be used by us for general corporate purposes. Interest is payable semi-annually in the case of the fixed rate notes and quarterly in the case of the floating rate notes. The notes rank equally in right of payment with all of our 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. All of the notes are subject to special mandatory redemption atchanges in fair value as a redemption price equalresult of interest rate fluctuations and other market factors. Our investment policy establishes limits on the amount and time to 101%maturity of the aggregate principal amount of the notes plus accrued and unpaid interest if the pending acquisition of Celgene is not completed by July 30, 2020 or we inform the trustee of the notesinvestments with any institution. The policy also requires that we will not pursue the consummation of the Celgene acquisition.

Following the announcement of our pending acquisition of Celgene, weinvestments are only entered into forward starting interest rate swap option contracts, 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 acquisition. In April 2019, we entered into deal contingent forward starting interest rate swap contracts, with an aggregate notional principal amount of $10.4 billion, to hedge interest rate risk associated with the anticipated issuance of long-term debt to fund the Celgene acquisition and terminated the forward starting interest rate swap option contracts. The deal contingent forward starting interest rate swap contracts were unwound upon our May 2019 issuance of the new notes.

Additional regulations in the U.S. could be passed in the future including additional healthcare reform initiatives, further changes to tax laws, additional pricing laws and potential importation restrictions which may reduce our results of operations, operating cash flow, liquiditycorporate and financial flexibility. We continueinstitutions that meet high credit quality standards. Refer to monitor the potential impact of the economic conditions in certain European“Item 1. Financial Statements—Note 9. Financial Instruments and other countries and the related impact on prescription trends, pricing discounts and creditworthiness of our customers. We believe these economic conditions will not have a material impact on our liquidity, cash flow or financial flexibility.Fair Value Measurements” for further information.

The UK voted to depart from the EU during June 2016. Similar to other companies in our industry, certain regulatory, trade, labor and other aspects of our business will likely be affected over time. However, we currently do not believe that these matters and other related financial effects will have a material impact on our consolidated results of operations, financial position or liquidity. Our sales in the UK represent less than 3% of our consolidated revenues.


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Credit Ratings

BMS'sOur current long-term and short-term credit ratings assigned by Moody'sMoody’s Investors Service are A2 and Prime-1, respectively, with a negative long-term credit outlook, and BMS'sour current long-term and short-term credit ratings assigned by Standard & Poor'sPoor’s are A+ and A-1+, respectively.respectively with a negative long-term credit outlook. The long-term ratings reflect the agencies'agencies’ opinion that we have a low default risk but are somewhat susceptible to adverse effects of changes in circumstances and economic conditions. The short-term ratings reflect the agencies'agencies’ opinion that we have good to extremely strong capacity for timely repayment. The current long-term ratingsWe do not reflect any impact fromexpect that the additional debt that we may incur in connection with the pending MyoKardia acquisition or the potential payment of Celgene. In January 2019, Moody's placed BMS under review forcash to holders of the CVRs issued in connection with the Celgene transaction will result in a downgrade and Standard & Poor's placed BMS on CreditWatch with negative implications, each following the announcement to acquire Celgene. We expect our credit ratings to remain atbelow an investment grade level and we do not expect the changesthat any potential change of our credit rating as result of such actions to impact our ability to access short-term or long-term financing. However, we cannot guarantee the future actions of Moody'sMoody’s and/or Standard & Poor's.Poor’s. Any credit rating downgrade may affect the interest rate of any debt we may incur, the fair market value of existing debt and our ability to access the capital markets generally.

Cash Flows

The following is a discussion of cash flow activities:
Nine Months Ended September 30,
Dollars in Millions20202019
Cash flow provided by/(used in):
Operating activities$10,382 $6,029 
Investing activities1,268 2,266 
Financing activities(4,634)15,298 
 Nine Months Ended September 30,
Dollars in Millions2019 2018
Cash flow provided by/(used in):   
Operating activities$6,029
 $3,511
Investing activities2,266
 (538)
Financing activities15,298
 (2,957)

Operating Activities

Cash flow from operating activities represents the cash receipts and disbursements from all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting net earnings for noncontrolling interest, non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and liabilities resulting from timing differences between the receipts and payments of cash and when the transactions are recognized in our results of operations. As a result, changes in cash from operating activities reflect the timing of cash collections from customers and alliance partners; payments to suppliers, alliance partners and employees; customer discounts and rebates; and tax payments in the ordinary course of business. For example, annual employee bonuses are typically paid in the first quarter of the subsequent year. In addition, cash collections continue to be impacted by longer payment terms for certain biologic products in the U.S., primarily our IOnewer oncology products including Opdivo, Yervoy and Empliciti (90 days)(75 days in 2020 and 90 days in 2019). The longer payment terms are used to more closely align with the insurance reimbursement timing for physicians and cancer centers following administration to the patients.

The $2.5$4.4 billion change in cash flow from operating activities compared to 20182019 was primarily attributable to:
Higherto higher cash collections and timing of payments in the ordinary course of business of approximately $2.2$7.1 billion including lower working capital requirements;(primarily relating to Celgene) and
Lower R&D licensing reversion of retirement medical plan assets of approximately $300 million (net of excise taxes), partially offset by higher income tax payments of $2.1 billion and restructuring, integration and collaboration payments of approximately $1.1 billion primarily due to the Nektar transaction$900 million in 2018.2020.
Partially offset by:
Higher income tax payments of approximately $400 million; and
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Approximately $400 million of Celgene acquisition and integration related payments in 2019.

Investing Activities

Cash requirements from investing activities include cash used for acquisitions, manufacturing and facility-related capital expenditures and purchases of marketable debt securities with original maturities greater than 90 days at the time of purchase reduced by proceeds from business divestitures (including royalties) and the sale and maturity of marketable debt securities.

The $2.8$1.0 billion change in cash flow from investing activities compared to 20182019 was primarily attributable to:
Lower net acquisition and other payments of approximately $1.2 billion primarily due to the purchase of Nektar common stock and Flexus contingent consideration payment in 2018;
Higherlower business divestiture proceeds of approximately $1.1$1.7 billion primarily due to the sale of the UPSA business; and
Higher net sales and maturitiesbusiness in 2019, partially offset by changes in the amount of marketable debt securities with maturities greater than 90 daysheld of approximately $400$900 million.


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Financing Activities

Cash requirements from financing activities include cash used to pay dividends, repurchase common stock and repay long-term debt and other borrowings reduced by proceeds from the exercise of stock options and issuance of long-term debt and other borrowings.

The $18.3$19.9 billion change in cash flow from financing activities compared to 20182019 was primarily due to higherlower net borrowing activity of approximately $18.3$18.8 billion primarily resulting from the issuance of new notes in connection with2019 to fund the pending acquisition of Celgene.Celgene and higher dividend payments of approximately $1.0 billion in 2020.

Product and Pipeline Developments

Our R&D programs are managed on a portfolio basis from early discovery through late-stage development and include a balance of early-stage and late-stage programs to support future growth. Our late stage R&D programs in Phase III development include both investigational compounds for initial indications and additional indications or formulations for marketed products. Spending on these programs represent approximately 35-45% of our annual R&D expenses in the last three years. Opdivo was the only investigational compound or marketed product that represented greater than 10% of our R&D expenses in the last three years. Our late-stage development programs could potentially have an impact on our revenue and earnings within the next few years if regulatory approvals are obtained and products are successfully commercialized. The following are the developments in our marketed products and our late-stage pipeline:pipeline since the start of the third quarter:

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ProductIndicationDateDevelopments
OpdivoCRCBladderMarch 2019September 2020
Announced that CheckMate-274, a pivotal Phase III trial evaluating Opdivo after surgery in patients with high-risk, muscle-invasive urothelial carcinoma, met its primary endpoints of improving disease-free survival versus placebo in both all randomized patients and in patients whose tumor cells express PD-L1 ≥1%.
Gastric and Esophageal CancersOctober 2020
Announced that the CHMP of the EMA has recommended approval of Opdivo for the treatment of adults with unresectable advanced, recurrent or metastatic ESCC after prior fluoropyrimidine- and platinum-based combination chemotherapy.
September 2020
Ono, our alliance partner for Opdivo in Japan, announced that the submissionresults from Phase II/III clinical study evaluating Opdivo in combination with chemotherapy versus placebo in combination with chemotherapy in patients with unresectable advanced or recurrent gastric cancer who are negative for human epidermal growth factor receptor 2, and previously untreated with the first-line therapy in Japan, South Korea and Taiwan that the Opdivo combination group demonstrated a statistically significant improvement in one of the two primary endpoints of progression-free survival, but did not show a supplemental applicationstatistically significant improvement in overall survival, the other primary endpoint versus control combination group.
August 2020
Announced that CheckMate-649, a pivotal Phase III trial evaluating Opdivo plus chemotherapy compared to chemotherapy alone as a first-line treatment for metastatic gastric cancer, gastroesophageal junction cancer or esophageal adenocarcinoma, met both primary endpoints of overall survival at a pre-specified interim analysis and progression-free survival at final analysis in patients whose tumors express PD-L1 with a combined positive score ≥ 5. The overall survival benefit was also observed in the all-randomized population.
August 2020
Announced that the Phase III CheckMate-577 trial evaluating Opdivo as an adjuvant therapy for patients with resected esophageal or gastroesophageal junction cancer met its primary endpoint of disease-free survival at a pre-specified interim analysis.
NSCLCOctober 2020Announced that the Phase III CheckMate-816 trial met a primary endpoint of pathologic complete response in resectable NSCLC.
August 2020
Ono, our alliance partner for Opdivo in Japan, announced top-line results from the Phase III clinical study TASUKI-52 evaluating Opdivo in combination with bevacizumab and chemotherapy versus placebo in combination with bevacizumab and chemotherapy in chemotherapy-naive patients with stage IIIB/IV or recurrent non-squamous NSCLC. The Opdivo combination group demonstrated a statistically significant improvement in the primary endpoint of progression-free survival in a pre-specified interim analysis.
RCCOctober 2020
Announced with Exelixis, that the FDA has accepted the sBLA and sNDA for additional indicationOpdivo in combination with Cabometyx* for patients with advanced RCC. The FDA granted Priority Review to both applications and assigned a PDUFA goal date of MSI-HFebruary 20, 2021.

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ProductIndicationDateDevelopments
Opdivo+YervoyCRCSeptember 2020
Ono, our alliance partner for Opdivo in Japan announced that the companies received approval for combination therapy of Opdivo and Yervoy in Japan to expand the combination use for the treatment of microsatellite instability high unresectable advanced or recurrent CRC that has progressed following chemotherapy, for a partial change in the approved items of the manufacturing and marketing approval. This is mainly based on
RCCSeptember 2020
Announced that more than half of advanced RCC patients treated with the result fromOpdivo plus Yervoy combination were alive after four years across the entire study population of the Phase II CheckMate-142 study evaluatingIII CheckMate-214 clinical trial, with the combination continuing to show superior, long-term overall survival and durable responses compared to sunitinib.
NSCLCSeptember 2020
Announced that the CHMP of the EMA recommending approval of Opdivo plus Yervoy combined with two cycles of chemotherapy as first-line treatment of metastatic NSCLC in patients with MSI-Hadults whose tumors have no sensitizing EGFR mutation or dMMR recurrent or metastatic CRC that has progressed on or after, or been intolerant of, at least one previous line of treatment with chemotherapy including fluoropyrimidine anticancer drugs.ALK translocation.
ESCCMPMSeptember 2019October 2020
Announced resultsFDA approval of Opdivo+Yervoy for the first-line treatment of adult patients with unresectable MPM. This approval is based on a pre-specified interim analysis from the Phase III ATTRACTION-3CheckMate-743 trial evaluatingin which Opdivo versus chemotherapy for the treatment of patients with unresectable advanced or recurrent ESCC refractory or intolerant to combination therapy with fluoropyrimidine and platinum-based drugs. For the primary endpoint of+Yervoy demonstrated superior overall survival Opdivo demonstrated a statistically significant improvement over chemotherapy, with a 23% reduction in riskversus the platinum-based standard of death and a 2.5-month improvement in median overall survival compared to patients treated withcare chemotherapy. The safety profile for Opdivo in this trial was consistent with previously reported studies in ESCC and other solid tumors.
May 2019October 2020
Ono, our alliance partner for Opdivo in Japan announced that the submission of acompanies have submitted supplemental application ofapplications in Japan for Opdivo and Yervoy in combination treatment to expand the use for indicationfirst-line treatment of unresectable advanced or recurrent esophageal cancer in JapanMPM, for a partial change in approvedaprpoved items of the manufacturing and marketing approval.
GBMSeptember 20192020
Announced Phase III CheckMate-548 trial evaluating the addition of Opdivo to the current standard of care (temozolomide and radiation therapy) versus the standard of care alone did not meet one of its primary endpoints, progression-free survival, in patients with newly diagnosed GBM that is MGMT-methylated. The data monitoring committee recommended that the trial continue as planned to allowEMA validated the other primary endpoint, overall survival, to mature. The Company remains blinded to all study data.
May 2019
Announced Phase III CheckMate-498 trial evaluatingtype II variation application for Opdivo plus radiation versus temozolomide plus radiation inYervoy for treatment of patients with newly diagnosed MGMT-unmethylated GBM did not meet its primary endpoint of overall survival at final analysis.previously untreated, unresectable MPM.
HCCMelanomaJune 2019October 2020
Announced topline results from CheckMate-459,for the co-primary endpoint for CheckMate-915, a randomized Phase III study evaluating Opdivo plus Yervoyversus sorafenib asOpdivo for patients who have had a first-line treatmentcomplete surgical removal of stage IIIb/c/d or stage IV melanoma. The addition of Yervoy to Opdivo in this trial did not result in a statistically significant improvement in recurrence-free survival in the all-comer (intent-to-treat) population.
ZeposiaRMSSeptember 2020
Announced interim results from the Phase III open-label extension trial DAYBREAK, demonstrating the long-term efficacy and safety profile of Zeposia in patients with unresectable HCC.RMS. The trial did not achieve statistical significance for its primary endpointincluded 2,494 patients who had previously completed a Phase I, II or III Zeposia clinical trial and who had an average treatment time of overall survival per the pre-specified analysis.35.4 months while in DAYBREAK and no new safety concerns emerged with long-term use of Zeposia.
MelanomaOctober 2019
OnuregAMLSeptember 2020
Announced the ECFDA approval of OpdivoOnureg flat dosing schedule of 240 mg infused over 30 minutes every two weeks or 480 mg infused over 60 minutes every four weeks(azacitidine) for the adjuvantcontinued treatment of adult patients with melanomaAML who achieved first complete remission or complete remission with involvement of lymph nodes or metastatic diseaseincomplete blood count recovery following intensive induction chemotherapy and who have undergoneare not able to complete resection.intensive curative therapy.
September 2019Announced results of a three-year analysis of efficacy data from the Phase III CheckMate-238 study evaluating adjuvant use of Opdivo 3 mg/kg versus Yervoy 10 mg/kg in patients with Stage III or Stage IV melanoma who were at high risk of recurrence following complete surgical resection. At three years of follow-up, Opdivo continues to demonstrate superior recurrence-free survival compared to Yervoy, the active control, with recurrence-free survival rates of 58% and 45%, respectively.
August 2019
Announced, with our alliance partner Nektar, that the FDA has granted Breakthrough Therapy Designation for investigational agent bempegaldesleukin (NKTR-214) in combination with Opdivo for the treatment of patients with previously untreated unresectable or metastatic melanoma. The Breakthrough Therapy Designation is based on clinical data which were recently reported in the 2019 American Society of Clinical Oncology Annual Meeting from the cohort of patients with metastatic melanoma that were treated with the doublet therapy in the ongoing PIVOT-02 Phase I/II clinical study.
NSCLCSeptember 2019
Announced long-term pooled efficacy and safety results from the Phase III CheckMate-017 and CheckMate-057 studies in patients with previously treated advanced NSCLC. At five years, patients treated with Opdivo continued to experience long-term overall survival (OS) benefit versus docetaxel. OS rate at five years were 13.4% for Opdivo and 2.6% for docetaxel. The OS benefit for Opdivo-treated patients was observed across all subgroups.
April 2019
Announced results from pooled analyses of survival data from four studies (CheckMate-017, -057, -063 and -003) in patients with previously-treated advanced NSCLC who were treated with Opdivo. In the pooled analysis of the four studies, 14% of all Opdivo-treated patients were alive at four years. Notably, in patients with PD-L1 greater than or equal to 1% and less than 1%, four-year overall survival rate were 19% and 11%, respectively.
SCCHNSeptember 2019
Received approval in China for Opdivo, as a monotherapy in treatment of patients with SCCHN with disease progression on or after platinum-based therapy, and whose tumors have PD-L1 positive expression (defined as ≥1% of tumor cells expressing PD-L1)
January 2019Acceptance in China of sBLA filing for patients who had previously been treated for metastatic or recurrent SCCHN.

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Productliso-celIndicationLymphomaDateJuly 2020DevelopmentsAnnounced that the EMA validated the MAA for liso-cel, an investigational CD19-directed CAR T cell therapy, for the treatment of adults with relapsed or refractory diffuse large B-cell lymphoma, primary mediastinal B-cell lymphoma and follicular lymphoma grade 3B after at least two prior therapies.
Opdivo+Yervoy

ide-cel; bb2121		HCCMultiple MyelomaJune 2019September 2020
Announced first results from Opdivo+Yervoy cohort ofwith bluebird bio that the Phase I/II CheckMate-040 study, evaluatingFDA has accepted for Priority Review the IO combination in patients with advanced HCC previously treated with sorafenib. With a minimum follow-up of 28 months, the blinded independent central review objective response rate was 31% per Response Evaluation Criteria in Solid Tumors version 1.1. At the time of data cutoff the median duration of response was 17.5 months.
mCRPCFebruary 2019
Announced results from an interim analysis of the Phase II CheckMate-650 trial evaluating Opdivo+Yervoy in patients with mCRPC showed that among 32 asymptomatic or minimally symptomatic patients whose disease had progressed after second-generation hormone therapy and who had not received chemotherapy (cohort 1), with a median follow-up of 11.9 months, the objective response rate was 25%. Additionally, among 30 patients whose disease progressed after taxane-based chemotherapy (cohort 2), with a median follow-up of 13.5 months, the objective response rate was 10%.
MelanomaSeptember 2019
Announced five-year results from the Phase III CheckMate-067 clinical trial, which continues to demonstrate improved overall survival with the first-line combination of Opdivo+Yervoy, versus Yervoy alone, in patients with advanced metastatic melanoma. With a minimum follow-up of 60 months (five years), five-year overall survival rates were 52%BLA for the Opdivo+Yervoy combination, 44% for Opdivo alone, and 26% for Yervoy alone.
June 2019
Announced five-year analysis of the Phase I CA209-004 study, the longest follow-up for the Opdivo+Yervoy combination in patients with previously treated or untreated advanced melanoma to date. The analysis showed that with a median follow-up of 43.1 months (range: 0.9-76.7) in all patients, at four years or longer, overall survival rates were stable at 57%.
June 2019
Announced that an analysis exploring long-term quality of life (QoL) and symptom burden in the Phase III CheckMate-067 study found that QoL was maintained during the treatment-free interval, the period where a patient is off study treatment and free of subsequent therapy, in patients with previously untreated unresectable or metastatic melanoma following discontinuation of therapy with Opdivo or Opdivo+Yervoy.
March 2019
Received FDA full approval for Opdivo in combination with Yervoyide-cel for the treatment of patients with unresectable or metastatic melanoma based on additional longer term efficacy data from CheckMate-067 (4-year overall survival) without restrictions in patient population. This approval fulfills two Post Marketing Requirements to verify and describe clinical benefit, thereby converting prior accelerated approval to full approval for nivolumab in combination with ipilimumab for patients with unresectable or metastatic melanoma and nivolumab monotherapy for BRAF Mutant subjects with unresectable or metastatic melanoma. Importantly, based on FDA review of the CheckMate-067 4-year overall survival data, the results of exploratory analyses by PD-L1 tumor expression have been removed entirely from the label.
NSCLCOctober 2019
Announced results from Phase III CheckMate-9LA trial evaluating Opdivo plus low-dose Yervoy given concomitantly with two cycles of chemotherapy as first-line treatment for patients with advanced NSCLC, met its primary endpoint of superior overall survival at a pre-specified interim analysis. The comparator in this study was chemotherapy alone for up to four cycles followed by optional maintenance therapy. The safety profile of Opdivo plus low-dose Yervoy and two cycles of chemotherapy in CheckMate-9LA was reflective of the known safety profiles of the immunotherapy and chemotherapy components in first-line NSCLC.
September 2019
Announced results from Part 1 of the Phase III CheckMate-227 trial evaluating Opdivo plus low-dose Yervoy as first-line treatment for patients with advanced NSCLC. Opdivo plus low-dose Yervoy met the independent co-primary endpoint of overall survival, demonstrating superior benefit compared to chemotherapy in patients whose tumors expressed PD-L1 ≥1%. Additionally, in an exploratory analysis, results showed improved overall survival for patients treated with the combination of Opdivo plus low-dose Yervoy with PD-L1 <1%. The two-year survival rate for patients treated with the combination regimen was 40% for both patients whose tumors expressed PD-L1 ≥1% and patients whose tumors expressed PD-L1 <1%. In the chemotherapy control arm, two-year survival rates were 33% and 23%, respectively.
July 2019
Announced Part 2 of the Phase III CheckMate-227 study evaluating Opdivo plus chemotherapy versus chemotherapy did not meet its primary endpoint of overall survival in first-line non-squamous NSCLC patients regardless of PD-L1 status.
January 2019
Announced voluntary withdrawal of the Company's sBLA for the Opdivo plus low-dose Yervoy for treatment of first-line advanced NSCLC in patients with TMB greater than or equal to 10 mutations per megabase as data from CheckMate-227, Part 1a. After discussions with FDA, the Company believes further evidence on the relationship between TMB and PD-L1 is required to fully evaluate the impact of Opdivo plus Yervoy on overall survival in first-line NSCLC patients. This analysis will require availability of the final data from CheckMate-227, Part 1a, which could not be provided on time within the review cycle of the current application.
RCCFebruary 2019
Announced new results from the Phase III CheckMate-214 study, showing that therapy with Opdivo plus low-dose Yervoy continued to demonstrate long-term survival benefits in patients with previously untreated advanced or metastatic RCC.
January 2019
Announced the EC approval of Opdivo plus low-dose Yervoy for previously untreated patients with intermediate and poor-risk advanced RCC.
SCCHNApril 2019
Announced topline results from the Phase II CheckMate-714 trial evaluating Opdivo versus Opdivo+Yervoy in patients with recurrent or metastatic SCCHN. The study did not meet its primary endpoints.

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ProductIndicationDateDevelopments
EliquisNVAF/ACSSeptember 2019
Announced findings from NAXOS (EvaluatioN of ApiXaban in strOke and Systemic embolism prevention in patients with nonvalvular atrial fibrillation in the real-life setting in France), the largest real-world data analysis on OAC effectiveness and safety in Europe among patients with NVAF. In this analysis, Eliquis use was associated with a lower rate of major bleeding compared to a vitamin K antagonist, rivaroxaban and dabigatran. These data were featured as a late-breaking oral presentation at the European Society of Cardiology Congress 2019 in Paris, France.
March 2019
Announced results from the Phase IV AUGUSTUS trial evaluating Eliquis versus vitamin K antagonists (VKAs) in patients with NVAF and ACS and/or undergoing PCI. Results show that in patients receiving a P2Y12 inhibitor with or without aspirin (antiplatelet therapies), the proportion of patients with major or clinically relevant non-major (CRNM) bleeding at six months was significantly lower for those treated with Eliquis compared to those treated with a VKA.
OrenciaJIAApril 2019
Received the EC notification on the adoption of the approval on our Orencia solution for subcutaneous injection in pre-filled syringe extension application (50 mg & 87.5 mg strength) and extension of indication for the treatment of polyarticular JIA in pediatric patients two years of age and older.
RAJune 2019
Announced data from a Phase IV mechanistic study exploring differences in the cellular and molecular mechanisms by which Orencia and another treatment, adalimumab, interfere with disease progression in moderate-to-severe early RA patients seropositive for certain autoantibodies. Among 80 adult patients with early moderate-to-severe RA who had never been treated with a biologic medication and tested positive for autoantibodies called anti-citrullinated protein antibody and rheumatoid factor, numerically higher efficacy responses were seen with Orencia at week 24. These results, which are from a prospective analysis of the Early AMPLE head-to-head trial, are featured in a late-breaking oral presentation at the Annual European Congress of Rheumatology.
March 2019
Announced the submission of supplemental applications of “Orencia for Intravenous Infusion 250mg,” “Orencia 125mg Syringe for Subcutaneous Injection 1mL” and “Orencia 125mg Autoinjector for Subcutaneous Injection 1mL” to include the description of “inhibition of the structural damage of the joints” in the currently approved indication of RA for a partial change in approved items of the manufacturing and marketing approval in Japan.
SprycelALLFebruary 2019
Announced the EC approval of Sprycel, in both tablet and powder for oral suspension formulations, in combination with chemotherapy for the treatment of pediatric patients with newly diagnosed Philadelphia chromosome-positive ALL.
EmplicitiMultiple MyelomaAugust 2019
Announced that the EC has approved Empliciti plus pomalidomide and low-dose dexamethasone (EPd) for the treatment of adult patients with RRMM who have received at least two prior therapies, including lenalidomide and a proteasome inhibitor, and have demonstrated disease progression on the last therapy.
June 2019
Announced updated data from ELOQUENT-3, the international randomized Phase II study evaluating Empliciti plus pomalidomide and dexamethasone (EPd) versus pomalidomide and dexamethasone (Pd) alone in patients with RRMM. In a non-prespecified analysis conducted to provide a descriptive assessment of overall survival after extended follow-up of at least 18.3 months, patients treated with EPd continued to experience sustained and clinically relevant overall survival and progression-free survival benefits compared with patients treated with Pd. These data were presented at the 24th Congress of the European Hematology Association in a poster display.
February 2019
Completed filing of a supplemental Japanese New Drug Application (sJNDA) for Empliciti in combination with pomalidomide and dexamethasone for the treatment of patients with multiple myeloma who have received at least twothree prior therapies, including Revlimid*an immunomodulatory agent, a proteasome inhibitor and proteasome inhibitor.an anti-CD38 antibody. The sJNDA filing was submitted based on theFDA has set a PDUFA goal date of March 27, 2021.
Deucravacitinib
(BMS-986165)
Plaque PsoriasisNovember 2020
Announced results offrom Phase III POETYK PSO-1 trial evaluating deucravacitinib (BMS-986165), a global phase II study. The orphan designation was already grantednovel, oral, selective tyrosine kinase 2 inhibitor, for the indicationtreatment of RRMMpatients with moderate to severe plaque psoriasis. POETYK PSO-1 evaluated 6 mg of deucravacitinib once daily and met both co-primary endpoints versus placebo, with more patients achieving Psoriasis Area and Severity Index (PASI) 75, defined as at least a 75 percent improvement in PASI, and a static Physician’s Global Assessment (sPGA) score of clear or almost clear (sPGA 0/1) after 16 weeks of treatment with deucravacitinib. The trial also met multiple key secondary endpoints, including showing deucravacitinib was superior to Otezla* in the initial JNDA. This sJNDA will also be reviewed under “priority review.”proportion of patients reaching a PASI 75 response and sPGA 0/1 at Week 16. The overall safety profile of deucravacitinib in the POETYK PSO-1 trial was consistent with previously reported Phase II results.

IdhifaAMLAugust 2020
Announced that the Phase III IDHENTIFY study evaluating Idhifa plus best supportive care (BSC) versus conventional care regimens, which include BSC only, azacitidine plus BSC, low-dose cytarabine plus BSC or intermediate-dose cytarabine plus BSC, did not meet the primary endpoint of overall survival in patients with relapsed or refractory AML with an isocitrate dehydrogenase-2 mutation.
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Critical Accounting Policies

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses. Our critical accounting policies are those that significantly impact our financial condition and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of this uncertainty, actual results may vary from these estimates. For a discussion of our critical accounting policies, refer to “—Item“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20182019 Form 10-K. There have been no material changes to our critical accounting policies during the nine months ended September 30, 2019.2020. For information regarding the impact of recently adopted accounting standards, refer to “Item 1. Financial Statements—Note.1 Basis of Presentation and Recently Issued Accounting Standards.”


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Cautionary StatementSpecial Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (including documents incorporated by reference) and other written and oral statements we make from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. You can identify these forward-looking statements by the fact they use words such as “should,” “could,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. AllOne can also identify forward-looking statements by the fact that arethey do not statements ofrelate strictly to historical facts are, or may be deemed to be, forward-looking statements.current facts. Such forward-looking statements are based on historical performance and current expectations and projections about our future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years, that are difficult to predict, may be beyond our control and could cause our future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements. These statements are likely to relate to, among other things, our goals, plans and objectives regarding our financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products, our pendingbusiness development strategy generally and in relation to our ability to realize the projected benefits of our acquisition of Celgene and to successfully integrate ours and Celgene’s businesses and operations and to complete and realize the successful closinganticipated benefits of our proposed acquisition of MyoKardia, the full extent of the Otezla* divestiturenegative impact of the COVID-19 pandemic on our operations and usethe development and commercialization of proceeds therefromour products, including the increased possibility that the COVID-19 pandemic could delay the timing of the FDA’s approval decisions for liso-cel and ide-cel, the expiration of patents or data protection on certain products, including assumptions about our ability to retain patent exclusivity of certain products, and the outcome of contingencies such as legal proceedings and financial results. No forward-looking statement can be guaranteed. We included in this Quarterly Report on Form 10-Q, in the 20182019 Form 10-K, particularly under the caption “Item 1A. Risk Factors,” and in our other filings with the SEC additional information on the factors that we believe could cause actual results to differ materially from any forward-looking statement.

Although we believe that we have been prudent in our plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this Quarterly Report on Form 10-Q not to occur. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise after the date of this Quarterly Report on Form 10-Q.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of our market risk, refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our 20182019 Form 10-K.

Item 4. CONTROLS AND PROCEDURES

Management carried out an evaluation, under the supervision and with the participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2019,2020, such disclosure controls and procedures are effective.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in “Item 1. Financial Statements—Note 18. Legal Proceedings and Contingencies,” to the interim consolidated financial statements, and is incorporated by reference herein.

Item 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in the Company’s 20182019 Form 10-K.10-K and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, except as described below.

The COVID-19 pandemic is affecting our business and could have a material adverse effect on us.
The COVID-19 pandemic is affecting how we operate our business. We currently assume that the peak impact of the COVID-19 crisis on our business occurred in the second quarter of 2020, with recovery beginning in the third quarter of 2020 and minimal impact in the fourth quarter of 2020 and beyond. If the negative impact from the COVID-19 pandemic extends beyond our assumed timelines, our results may be worse than expected. The full extent of the impact will depend on future developments, such as the ultimate duration and the severity of the spread of COVID-19 in the U.S. and globally, the effectiveness of federal, state, local and foreign governments’ mitigation actions, the pandemic’s impact on the U.S. and global economies, as well as factors affecting healthcare and the delivery of medicines to patients, including but not limited to those discussed above under "Part I—Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 and Market Factors", and how quickly we can return to more normal operations, among other things.

Although we currently do not anticipate any disruption to the supply of our medicines to patients, it is possible that we could experience manufacturing or supply issues due to COVID-19 in the future, which would increase the negative impact on our business and results of operations. In addition, if a natural disaster or other potentially disruptive event occurs on top of the current pandemic, it could deplete our safety stock levels and we could experience a manufacturing, supply or distribution issue.

We have started to re-engage in-person interactions by our customer-facing (field) personnel in health care settings in the U.S. and a number of other markets. If we determine that it is no longer safe to engage in these in-person interactions, we will likely return to a remote model of engagement. This transition could have a negative impact on our business. It is also possible that there could be a longer-lasting shift in interactions between field personnel and health care professionals that we have not anticipated, which could have a negative impact on our business and results of operations.

Although we have restarted clinical development activities, we continue to experience delays in the initiation and enrollment of patients in our clinical trials. We may not be able to fully mitigate these delays, which could negatively impact the timing of our pipeline development programs and expected future revenues and/or cash flows. In addition, we could experience additional delays or difficulties enrolling patients in clinical trials and/or delays or difficulties with our ongoing, fully enrolled clinical trials, which could further negatively impact the timing of our pipeline development programs and expected future revenues and/or cash flows. A prolonged clinical trial delay could potentially have a significant negative effect on our business, particularly if new competitive products enter the market or clinical trial results for our competitors’ products affect the value proposition for our product. Any such delays or difficulties in clinical development could also potentially lead to a material impairment of our intangible assets, including the approximately $64 billion of intangible assets we obtained through the Celgene transaction. In addition, although research and early development activities performed in laboratories have resumed, they were suspended for a period of time, which negatively impacted the advancement of early pipeline assets. We have plans to mitigate this impact, but if we are not be able to fully mitigate it, the breadth of our future pipeline opportunities could be adversely affected.

We cannot predict or reasonably estimate the impact of any potential long-term changes to the healthcare industry from COVID-19. For example, there is potential for a shift in the U.S. payer channel mix due to changes in patient coverage from the current economic crisis, but we are not able to reliably estimate what the impact would be on our results of operations given the highly variable and uncertain situation. It is also possible that changes in the healthcare system could impose additional burdens on clinical trials, which could increase the costs of sponsoring clinical trials or lead to additional delays or difficulties with completing clinical trials. We may also experience additional pricing pressures and/or increased governmental regulation.

We could face additional risk from the impact of COVID-19 on our suppliers, vendors, outsourcing partners, alliance partners and other third parties that we rely on to research, develop, manufacture, commercialize, co-promote and sell our products, manage certain marketing, selling, human resource, finance, IT and other business unit and functional services. For example, if any of our third-party providers suffer from limited solvency because of the pandemic, it could negatively impact our operating model and our business. It is not possible to estimate the potential impact at this time.
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The COVID-19 pandemic has increased the volatility of the financial markets, foreign currency exchanges and interest rates. Although we incurred downward adjustments to our equity investment fair values in the first quarter of 2020, the fair values have subsequently recovered. If the U.S. dollar continues to strengthen, interest rates continue to decline, and/or stock markets continue to decline, we could see a further reduction in revenues or other income or additional charges to our equity investments, which could have a negative impact on our earnings and cash flows.

We are facing and could continue to face potential other negative consequences stemming from the COVID-19 pandemic, including but not limited to increased cyber threats to us and our third-party vendors such as phishing, social engineering and malware attacks, delays in planned integration milestones and ability to collect our receivables. It is possible that COVID-19 could exacerbate any of the other risks described in our 2019 Form 10-K as well.

At this time, we cannot predict the full extent of the negative impact that the COVID-19 pandemic will have on our business, financial condition, results of operations and/or cash flows.

It is possible that the COVID-19 pandemic could delay the timing of the FDA’s approval decisions for liso-cel and ide-cel, which could have a material adverse effect on the CVRs that we issued in connection with the Celgene transaction.
We have submitted BLAs for liso-cel and ide-cel, the two remaining assets underlying the CVRs that we issued in connection with the Celgene transaction (the third CVR asset, Zeposia (ozanimod), was approved earlier this year). These applications are under review by the FDA. Liso-cel has a PDUFA date of November 16, 2020 and ide-cel has a PDUFA date of March 27, 2021. It is possible that COVID-19 could impact FDA operations, including the ability for the FDA to conduct on-site inspections, such that the review of either or both of these CVR assets could be delayed. Any delay in the timing of approval could reduce the resale price of the CVRs. If there is a significant delay that extends the FDA’s review period beyond December 31, 2020 for liso-cel or March 31, 2021 for ide-cel, then no payment will be made under the CVRs and the CVRs will expire without value.

U.S. executive orders on biopharmaceutical pricing and other potential initiatives by the U.S. federal government to implement measures to regulate drug pricing in the future could adversely affect our business.
In July and September, the U.S. federal government issued several executive orders regarding U.S. drug prices and payment for pharmaceutical products, described in greater detail in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Economic and Market Factors,” which have the potential to significantly impact our ability to discover, develop and deliver medicines for patients across the globe.

While we are unable to predict how or when the executive orders might ultimately be enacted and implemented, the orders, if implemented, would adversely affect our business and results of operations. Even if the executive orders are not finalized in their current form, the U.S. federal government could introduce initiatives similar to the executive orders as well as other initiatives to manage drug utilization and contain costs. Such initiatives could have a material adverse effect on our business and results of operations, particularly to extent the initiatives are not offset by greater demand, increased patient access to health care or other items. See “Item 1A. Risk Factors—Increased pricing pressure and other restrictions in the U.S. and abroad from MCOs, institutional purchasers and government agencies and programs, among others, continue to negatively affect our revenues and profit margins” in our 2019 Form 10-K for more information on the impact on the Company of increasing pricing pressures from market access, pharmaceutical pricing controls and discounting and other restrictions in the U.S., the EU and other regions around the world.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the surrenders of our equity securities during the three months ended September 30, 2019:2020: 
Period
Total Number of Shares Purchased(a)
Average Price Paid per Share(a)
Total Number of Shares Purchased as Part of Publicly Announced Programs(b)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs(b)
Dollars in Millions, Except Per Share Data    
July 1 to 31, 2020263,458 $59.03 — $5,919 
August 1 to 31, 202098,881 60.18 — 5,919 
September 1 to 30, 202076,308 61.05 — 5,919 
Three months ended September 30, 2020438,647 — 
(a)Includes shares repurchased as part of publicly announced programs and shares of common stock surrendered to the Company to satisfy tax-withholding obligations in connection with the vesting of awards under our long-term incentive program.
(b)In May 2010, the Board of Directors authorized the repurchase of up to $3.0 billion of our common stock and in June 2012 increased its authorization for the repurchase of our common stock by an additional $3.0 billion. In October 2016, the Board of Directors approved a new share repurchase program authorizing the repurchase of an additional $3.0 billion of our common stock and in November 2019 further increased its authorization for the repurchase of our common stock by approximately $7.0 billion. In February 2020, the Board of Directors approved an increase of $5.0 billion to the total outstanding share repurchase authorization. The remaining share repurchase capacity under the program was approximately $5.9 billion as of September 30, 2020. The share repurchase program does not have an expiration date. Refer to “Item 1. Financial Statements—Note 15. Equity” for information on the share repurchase program.
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Period
Total Number of Shares Purchased(a)
 
Average Price Paid per Share(a)
 
Total Number of Shares Purchased as Part of Publicly Announced Programs(b)
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs(b)
Dollars in Millions, Except Per Share Data       
July 1 to 31, 2019856,422
 $44.68
 850,000
 $1,310
August 1 to 31, 20195,689,379
 46.10
 5,682,970
 1,048
September 1 to 30, 20195,097
 48.09
 —
 1,048
Three months ended September 30, 20196,550,898
   6,532,970
  
(a)Includes shares repurchased as part of publicly announced programs and shares of common stock surrendered to the Company to satisfy tax-withholding obligations in connection with the vesting of awards under our long-term incentive program.
(b)In May 2010, the Board of Directors authorized the repurchase of up to $3.0 billion of our common stock and in June 2012 increased its authorization for the repurchase of our common stock by an additional $3.0 billion. In October 2016, the Board of Directors approved a new stock repurchase program authorizing the repurchase of an additional $3.0 billion of our common stock. As a result of these actions, the total authorized amount of the stock repurchase program is $9.0 billion. The remaining share repurchase capacity under the program was $1.0 billion as of September 30, 2019. The stock repurchase program does not have an expiration date. Refer to “Item 1. Financial Statements—Note 16. Equity” for information on the share repurchase program.


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Item 6. EXHIBITS

Exhibits (listed by number corresponding to the Exhibit Table of Item 601 in Regulation S-K). The Exhibits designated by the symbol ‡‡ are management contracts or compensatory plans or arrangements required to be filed pursuant to Item 15.
Exhibit No.Description
10a.31a.
10b.
Form of Restricted Stock Units Agreement with four year vesting under the 2012 Stock Award and Incentive Plan. ‡‡
10c.
Form of Restricted Stock Units Agreement with one-year cliff vesting with a two-year post-vest holding period under the 2012 Stock Award and Incentive Plan. ‡‡
10d.
Form of Restricted Stock Units Agreement with two-year cliff vesting with a one-year post-vest holding period under the 2012 Stock Award and Incentive Plan. ‡‡
10e.
Bristol-Myers Squibb Company 1987 Deferred Compensation Plan for Non-Employee Directors, as amended and restated June 13, 2019. ‡‡
31a.
Section 302 Certification Letter.
31b.
32a.
32b.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension LableLabel Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Indicates, in this Quarterly Report on Form 10-Q, brand names of products, which are registered trademarks not solely owned by the Company or its subsidiaries. 

Abilify is a trademark of Otsuka Pharmaceutical Co., Ltd.; Atripla is a trademark of Gilead Sciences, Inc.; Byetta is a trademark of Amylin Pharmaceuticals, LLC; Erbitux is a trademark of ImClone LLC; Gleevec is a trademark of Novartis International AG; Keytruda is a trademark of Merck Sharp & Dohme Corp; Onglyza is a trademark of AstraZeneca AB; Otezla and Revlimid are trademarks of Celgene Corporation; and Plavix is a trademark of Sanofi S.A. Brand names of products that are in all italicized letters, without an asterisk, are registered trademarks of BMS and/or one of its subsidiaries.

*    Indicates, in this Quarterly Report on Form 10-Q, brand names of products, which are registered trademarks not solely owned by the Company or its subsidiaries. Abilify is a trademark of Otsuka Pharmaceutical Co., Ltd.; Atripla is a trademark of Gilead Sciences, Inc.; Avapro/Avalide (known in the EU as Aprovel/Karvea) and Plavix are trademarks of Sanofi; Byetta is a trademark of Amylin Pharmaceuticals, LLC; Cabometyx is a trademark of Exelixis, Inc.; Erbitux is a trademark of ImClone LLC; Onglyza is a trademark of AstraZeneca AB; Gleevec is a trademark of Novartis International AG; Keytruda is a trademark of Merck Sharp & Dohme Corp; Otezla is a trademark of Amgen Inc.; and Yescarta is a trademark of Kite Pharma, Inc. Brand names of products that are in all italicized letters, without an asterisk, are registered trademarks of BMS and/or one of its subsidiaries.

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58




SUMMARY OF ABBREVIATED TERMS

Bristol-Myers Squibb Company and its consolidated subsidiaries may be referred to as Bristol-Myers Squibb, BMS, the Company, we, our or us in this Quarterly Report on Form 10-Q, unless the context otherwise indicates. Throughout this Quarterly Report on Form 10-Q we have used terms which are defined below:
20182019 Form 10-KAnnual Report on Form 10-K for the fiscal year ended December 31, 20182019JIALillyjuvenile idiopathic arthritis
ACSacute coronary syndromeLIBORLondon Interbank Offered Rate
ALLacute lymphoblastic leukemiaLillyEli Lilly and Company
AmgenALKAmgen Inc.anaplastic lymphoma kinaseLOEloss of exclusivity
AmylinAmgenAmgen Inc.MAAmarket authorization application
AMLacute myeloid leukemiaMDLmulti-district litigation
AmylinAmylin Pharmaceuticals, Inc.mCRPCMDSmetastatic castration-resistant prostate cancermyelodysplastic syndromes
aNDAabbreviated new drug applicationsMDLMPMmulti-district litigationmalignant pleural mesothelioma
AstraZenecaAstraZeneca PLCMGMTMyoKardiaO6-methylguanine-DNA methyltransferaseMyoKardia, Inc.
CatalentBCMACatalent, Inc.B-cell maturation antigenMSI-HNDAhigh microsatellite instabilityNew drug application
CelgeneBiohavenCelgene CorporationBiohaven Pharmaceutical Holding Company Ltd.NektarNKTNektar Therapeuticsnatural killer T cells
CERCLABLAbiologics license applicationNSCLCnon-small cell lung cancer
bluebirdbluebird bio, Inc.NVAFnon-valvular atrial fibrillation
CAR Tchimeric antigen receptor T-cellOnoOno Pharmaceutical Co., Ltd.
CatalentCatalent, Inc.ORRoverall response rate
CelgeneCelgene CorporationOTCover-the-counter
CERCLAU.S. Comprehensive Environmental Response, Compensation and Liability ActNKTOtsukanatural killer T cells
CHMPCommittee for Medicinal Products for Human UseNSCLCnon-small cell lung cancer
CMLchronic myeloid leukemiaNVAFnon-valvular atrial fibrillation
CormorantCormorant PharmaceuticalsOnoOno Pharmaceutical Co., Ltd.
CRCcolorectal cancerOTCover-the-counter
dMMRDNA mismatch repair deficientOtsukaOtsuka Pharmaceutical Co., Ltd.
ECCMLEuropean Commissionchronic myeloid leukemiaPCIPD-1percutaneous coronary intervention
EMAEuropean Medicines AgencyPD-1programmed cell death protein 1
EPOCVREuropean Patent Officecontingent value rightsPD-L1programmed death-ligand 1
EPSDragonflyearnings per shareDragonfly Therapeutics, Inc.PfizerPDUFAPfizer, Inc.The Prescription Drug User Fee Act
ERISAECEmployee Retirement Income Security Act of 1974European CommissionPsAPfizerpsoriatic arthritisPfizer, Inc.
ESCCEGFResophageal squamous cell carcinomaestimated glomerular filtration ratePsApsoriatic arthritis
EMAEuropean Medicines AgencyQuarterly Report on Form 10-QQuarterly Report on Form 10-Q for the quarterly period ended September 30, 20192020
EUEPSEuropean Unionearnings per shareR&Dresearch and development
FASBESCCesophageal squamous cell carcinomaRArheumatoid arthritis
EUEuropean UnionRCCrenal cell carcinoma
FASBFinancial Accounting Standards BoardRAReparerheumatoid arthritisRepare Therapeutics Inc.
FDAU.S. Food and Drug AdministrationRCCRMSrenal cell carcinomarelapsing forms of multiple sclerosis
FlexusForbiusFlexus Biosciences,Forbius Biologics, Inc.RRMMrelapsed/relapsed and refractory multiple myeloma
FTCGAAPU.S. Federal Trade CommissionSanofiSanofi S.A.
GAAPU.S. generally accepted accounting principlessBLARRMSsupplemental Biologics License Applicationrelapsing remitting multiple sclerosis
GBMGTNglioblastoma multiformegross-to-netSCCHNSanofisquamous cell carcinoma of the head and neckSanofi S.A.
GTNHCCgross-to-nethepatocellular carcinomaSECSecurities and Exchange Commission
HCCHIVhepatocellular carcinomaTMBtumor mutational burden
HIVhuman immunodeficiency virusesU.S.UCUnited Statesulcerative colitis
IFMIOIFM Therapeutics, Inc.immuno-oncologyUKU.S.United KingdomStates
IDO-1IPRDindoleamine-pyrrole 2, 3-dioxygenase 1VATvalue added tax
IOimmuno-oncologyVTEvenous thromboembolic
IPRDin-process research and developmentUKUnited Kingdom
IRSInternal Revenue ServiceVATvalue added tax
JIAjuvenile idiopathic arthritisViiVViiV Healthcare Limited
LIBORLondon Interbank Offered RateVTEvenous thromboembolic

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
BRISTOL-MYERS SQUIBB COMPANY

(REGISTRANT)
Date:October 31, 2019November 5, 2020By:By:/s/ Giovanni Caforio, M.D.
Giovanni Caforio, M.D.
Chairman of the Board and Chief Executive Officer
Date:October 31, 2019November 5, 2020By:By:/s/ Charles BancroftDavid V. Elkins
Charles BancroftDavid V. Elkins
Chief Financial Officer

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