CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. Income Taxes

We adopted ASU 2016-09, effective January 1, 2017. See Note 2 for additional information related to the adoption of this accounting standard update.

We regularly evaluate the likelihood of the realization of our deferred tax assets and reduce the carrying amount of those deferred tax assets by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carryforward periods available to us for tax reporting purposes and other relevant factors. Significant judgment is required in making this assessment.

Our tax returns are under routine examination in many taxing jurisdictions. The scope of these examinations includes, but is not limited to, the review of our taxable presence in a jurisdiction, our deduction of certain items, our claims for research and development credits, our compliance with transfer pricing rules and regulations and the inclusion or exclusion of amounts from our tax returns as filed. Our U.S. federal income tax returns have been audited by the Internal Revenue Service (IRS) through the year ended December 31, 2008. Tax returns for the years ended December 31, 2009, 2010 and 2011 are currently under examination by the IRS. We are also subject to audits by various state and foreign taxing authorities, including most U.S. states and countries where we have operations.

We regularly reevaluate our tax positions and the associated interest and penalties, if applicable, resulting from audits of federal, state and foreign income tax filings, as well as changes in tax law (including regulations, administrative pronouncements, judicial precedents, etc.) that would reduce the technical merits of the position to below more likely than not. We believe that our accruals for tax liabilities are adequate for all open years. Many factors are considered in making these evaluations, including past history, recent interpretations of tax law and the specifics of each matter. Because tax regulations are subject to interpretation and tax litigation is inherently uncertain, these evaluations can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. We apply a variety of methodologies in making these estimates and assumptions, which include studies performed by independent economists, advice from industry and subject matter experts, evaluation of public actions taken by the IRS and other taxing authorities, as well as our industry experience. These evaluations are based on estimates and assumptions that have been deemed reasonable by management. However, if management’s estimates are not representative of actual outcomes, our results of operations could be materially impacted.

Unrecognized tax benefits, generally represented by liabilities on the Consolidated Balance Sheets and all subject to tax examinations, arise when the estimated benefit recorded in the financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Virtually all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. We account for interest and potential penalties related to uncertain tax positions as part of our provision for income taxes. For the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2016~~2017 gross unrecognized tax benefits increased by ~~$45.9~~$42 million, primarily from an increase in unrecognized tax benefits related to current year operations of ~~$53.2~~$34 million and accrued interest of ~~$4.1 million, partially offset by a decrease in unrecognized tax benefits related to settlements of tax positions taken in prior years~~

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~of $11.4~~$8 million. The liability for unrecognized tax benefits is expected to increase in the next 12 months relating to operations occurring in that period. Any settlements of examinations with taxing authorities or statute of limitations expirations would likely result in a decrease in our liability for unrecognized tax benefits and a corresponding increase in taxes paid or payable and/or a decrease in income tax expense. It is reasonably possible that the amount of the liability for unrecognized tax benefits could change by a significant amount during the next twelve-month period as a result of settlements or statute of limitations expirations. Finalizing examinations with the relevant taxing authorities can include formal administrative and legal proceedings and, as a result, it is difficult to estimate the timing and range of possible change related to the Company’s unrecognized tax benefits. An estimate of the range of possible change cannot be made until issues are further developed or examinations close. Our estimates of tax benefits and potential tax benefits may not be representative of actual outcomes and variation from such estimates could materially affect our consolidated financial statements in the period of settlement or when the statutes of limitations expire.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. Collaboration ~~Agreements~~Arrangements

We enter into collaborative arrangements for the research and development, license, manufacture and/or commercialization of products and/or product candidates. In addition, we also acquire products, product candidates and research and development technology rights and establish research and development collaborations with third parties to enhance our strategic position within our industry by strengthening and diversifying our research and development capabilities, product pipeline and marketed product base. These arrangements may include non-refundable, upfront payments, payments by us for options to acquire rights to products and product candidates and other rights, as well as contingent obligations by us for potential development, regulatory and commercial performance milestone payments, cost sharing arrangements, royalty payments, profit sharing and equity ~~investments. These arrangements could include obligations for us to make~~investments (including equity investments in the event of an initial public offering of equity by our ~~partners.~~partners). The activities under these collaboration agreements are performed with no guarantee of either technological or commercial success. Although we do not consider any individual alliance to be material, certain of the more notable alliances are described ~~below. See~~in Note 17 of Notes to Consolidated Financial Statements included in our ~~2015~~2016 Annual Report on Form ~~10-K for a description of certain other~~10-K. During 2017, we did not enter into any new collaboration ~~agreements entered into prior~~arrangements or make any payments pursuant to ~~January 1, 2016. The following is a brief description of significant developments~~any existing collaboration arrangements that were material individually or in the ~~relationships between Celgene and our collaboration partners during the nine months ended September 30, 2016:~~aggregate.

~~Agios Pharmaceuticals, Inc. (Agios):~~Potential Future Milestone Payments: ~~During 2010,~~For the six-month period ended June 30, 2017, we entered into ~~a discovery and development collaboration and license agreement with Agios (2010 Collaboration Agreement)~~arrangements that ~~focused on cancer metabolism targets and~~include the ~~discovery, development and commercialization of associated therapeutics. We had an exclusive option to license any~~ potential ~~products that resulted from the Agios cancer metabolism research platform through the end of phase I clinical trials.~~

With respect to each product that we chose to license, Agios could receive up to approximately $120.0 million upon achievement of certain milestones and other payments plus royalties on worldwide sales, and Agios may also participate in the development and commercialization of certain products in the United States.

~~In June 2014, we exercised our option to license enasidenib (AG-221) from Agios on an exclusive worldwide basis, with Agios retaining the right to conduct a portion of commercialization activities~~ for AG-221 in the United States. AG-221 is currently in a phase I/II study in patients that present an isocitrate dehydrogenase-2 (IDH2) mutation with advanced hematologic malignancies, including acute myeloid leukemia (AML).

In January 2015, we exercised our option to an exclusive license from Agios to AG-120, an orally available, selective inhibitor of the mutated isocitrate dehydrogenase-1 (IDH1) protein for the treatment of patients with cancers that harbor an IDH1 mutation, outside the United States, with Agios retaining the right to conduct development and commercialization within the United States. In May 2016, we agreed to return to Agios the AG-120 lead development candidate. As a result, Agios obtained global rights to AG-120 and the IDH1 program. Neither Agios nor Celgene will have any continuing financial obligation, including royalties orfuture milestone payments ~~to the other concerning AG-120 or the IDH1 program.~~

In April 2015, we and Agios entered into a new joint worldwide development and profit share collaboration for AG-881. AG-881 is a small molecule that has shown in preclinical studies to fully penetrate the blood brain barrier and inhibit IDH1 and IDH2 mutant cancer cells. Under the terms of ~~the AG-881 collaboration, Agios received an initial payment of $10.0~~$203 million ~~and is eligible~~related to ~~receive contingent payments of up to $70.0 million based on~~ the attainment of specified development and regulatory ~~goals. The upfront payment~~milestones over a period of several years. Our obligation to Agios was accounted for as $9.0 million of upfront research and development collaboration expense and $1.0 million of prepaid manufacturing rights recorded on the balance sheet. We and Agios will jointly collaborate on the worldwide development program for AG-881, sharing development costs equally. The two companies will share profits equally, with Celgene recording commercial sales worldwide. Agios will lead commercializationfund these efforts is contingent upon our continued involvement in the ~~U.S. with both companies sharing equally in field-based commercial~~programs) and/or the lack of any adverse events which could cause the discontinuance of the programs.

A financial summary of certain period activity and the period-end balances related to our collaboration arrangements is presented below^1,2:



		Three-Month Periods Ended June 30,
		Research and Development Expense
		Upfront Fees	Milestones	Extension/Termination of Arrangements	Amortization of Prepaid Research and Development	Equity Investments Made During Period
Agios	2017	$—	$—	$—	$—	$31
	2016	200	—	—	—	—
Juno³	2017	—	—	—	—	—
	2016	50	—	—	—	—
Other Collaboration Arrangements	2017	75	—	—	3	36
	2016	34	10	—	4	—



		Six-Month Periods Ended June 30,
		Research and Development Expense
		Upfront Fees	Milestones	Extension/Termination of Arrangements	Amortization of Prepaid Research and Development	Equity Investments Made During Period
Agios	2017	$8	$—	$—	$—	$31
	2016	200	25	—	—	—
Juno³	2017	—	—	—	—	2
	2016	50	—	—	—	41
Other Collaboration Arrangements	2017	77	—	7	7	46
	2016	114	50	—	10	37

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~activities, and we will lead commercialization ex-U.S. with Agios providing one third of field-based commercial activities in the major European Union (EU) markets.~~

In May 2016, we and one of our subsidiaries entered into a new global collaboration agreement with Agios (2016 Collaboration Agreement), focused on the research and development of immunotherapies against certain metabolic targets that exert their antitumor efficacy primarily via the immune system. In addition to new programs identified under the 2016 Collaboration Agreement, we and Agios have also agreed that all future development and commercialization of two programs that were conducted under the 2010 Collaboration Agreement will now be governed by the 2016 Collaboration Agreement.

During the term of the 2016 Collaboration Agreement, Agios plans to conduct research programs focused on discovering compounds that are active against metabolic targets in the immuno-oncology (IO) field. The initial four-year term will expire in May 2020. We may extend the term for up to two additional one-year terms or in specified cases, up to four additional years.

Under the 2016 Collaboration Agreement, Agios has granted us exclusive options to obtain development and commercialization rights for each program that we have designated for further development. We may exercise each such option beginning on the designation of a development candidate for such program (or on the designation of such program as a continuation program) and ending on the earlier of the end of a specified period after Agios has furnished us with specified information for such program, or January 1, 2030. Programs that have applications in the inflammation or autoimmune (I&I) field that may result from the 2016 Collaboration Agreement will also be subject to the exclusive options described above.

~~Agios will retain rights to any program that we do not designate for further development or as to which we do not exercise our option.~~

Under the terms of the 2016 Collaboration Agreement, following our exercise of an option with respect to a program, we and Agios (and, if applicable, one of its affiliates) will enter into either a co-development and co-commercialization agreement if such program is in the IO field, typically with a 50/50 profit and cost share, or a license agreement if such program is in the I&I field.

Under the terms of the 2016 Collaboration Agreement, we made an initial upfront payment to Agios in the amount of $200.0 million for the initial four-year term. We have specified rights to extend the term by paying a per-year extension fee. We will pay Agios a designation fee for each program that we designate for further development and for each continuation program. For each program as to which we exercise our option to develop and commercialize, subject to antitrust clearance, we will pay Agios an option exercise fee of at least $30.0 million for any designated development program and for any continuation programs, plus up to $169.0 million (or up to $209.0 million for one program designated by Celgene which will have a profit and cost share of 65 percent for Celgene and 35 percent for Agios) in clinical and regulatory milestone payments (and in the case of licensed programs in the I&I field, up to $386.0 million in clinical, regulatory and commercial milestone payments, as well as double-digit tiered royalties on any net sales). Agios will remain responsible for the initial phase I dose escalation study for each program under the 2016 Collaboration Agreement, including associated costs.

~~bluebird bio, Inc. (bluebird):~~ In June 2015, we amended and restated the March 2013 collaboration agreement with bluebird. The amended and restated collaboration will focus on the discovery, development and commercialization of novel disease-altering gene therapy product candidates targeting BCMA. BCMA is a cell surface protein that is expressed in normal plasma cells and in most multiple myeloma cells, but is absent from other normal tissues. The collaboration applies gene therapy technology to modify a patient’s own T-cells, known as chimeric antigen receptor (CAR) T-cells, to target and destroy cancer cells that express BCMA. We have an option to license any anti-BCMA products resulting from the collaboration after the completion of a phase I clinical study by bluebird.

Under the amended and restated collaboration agreement we made an additional $25.0 million payment for bluebird to develop the lead anti-BCMA product candidate (bb2121) through a phase I clinical study and to develop next-generation anti-BCMA product candidates. The payment was recorded as prepaid research and development on the balance sheet and is being recognized as expense as development work is performed. Upon exercising our option to license a product and achievement of certain milestones, we may be obligated to pay up to $230.0 million per licensed product in aggregate potential option fees and clinical and regulatory milestone payments. bluebird also has the option 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 United States in exchange for a reduction of milestone payments. Royalties would also be paid to bluebird in regions where there is no profit share, including in the United States, if bluebird declines to exercise their co-development and profit sharing rights. In February 2016, we exercised our option to license bb2121 and made a corresponding $10.0 million license payment to bluebird.

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

We have the ability to terminate the collaboration at our discretion upon 90 days written notice to bluebird. If a product is optioned, the parties will enter into a pre-negotiated license agreement and potentially a co-development agreement should bluebird exercise its option to participate in the development and commercialization in the United States. The license agreement, if not terminated sooner, would expire upon the expiration of all applicable royalty terms under the agreement with respect to the particular product, and the co-development agreement, if not terminated sooner, would expire when the product is no longer being developed or commercialized in the United States. Upon the expiration of a particular license agreement, we will have a fully paid-up, royalty-free license to use bluebird intellectual property to manufacture, market, use and sell such licensed product.

~~Juno Therapeutics, Inc. (Juno):~~ In June 2015, we announced a collaboration and investment agreement with Juno for the development and commercialization of immunotherapies for cancer and autoimmune diseases. The collaboration and investment agreement became effective on July 31, 2015. Under the terms of the agreement, we have the option to be the commercialization partner for Juno’s oncology and cell therapy auto-immune product candidates, including Juno’s CD19 and CD22 directed CAR T-cell product candidates. For Juno-originated programs co-developed under the collaboration, (a) Juno will be responsible for research and development in North America and will retain commercialization rights in those territories, (b) we will be responsible for development and commercialization in the rest of the world, and will pay Juno a royalty on sales in those territories, and (c) we have certain co-promotion options for global profit sharing arrangements under which the parties will share worldwide expenses and profits equally, except in China.

Juno will have the option to enter into co-development and co-commercialization arrangements on certain Celgene-originated development candidates that target T-cells. For any such Celgene-originated programs co-developed under the collaboration, (a) the parties will share global costs and profits, with 70 percent allocated to us and 30 percent allocated to Juno, and (b) we will lead global development and commercialization, subject to a Juno co-promote option in the United States and certain EU territories.

Upon closing, we made a $1.000 billion payment to Juno and received 9.1 million shares of Juno common stock, amounting to approximately 9 percent of Juno's outstanding common stock. The value of our investment in Juno common stock of $424.9 million was recorded as an available-for sale marketable security based on the market price of the stock on the date of closing and the remaining portion of the $1.000 billion payment, which consists of both a $150.0 million upfront payment and a $425.1 million premium paid on our equity investment, was recorded to research and development expense.

The collaboration agreement has an initial term of ten years. If the parties enter into any pre-negotiated license or co-commercialization agreement during the initial term, the collaboration agreement will continue until all such license and co-commercialization agreements have expired. The collaboration agreement may be terminated at our discretion upon 120 days’ prior written notice to Juno and by either party upon material breach of the other party, subject to cure periods.

In April 2016, we exercised our option to develop and commercialize Juno’s CD19 program outside North America and China and entered into a pre-negotiated license agreement with Juno with respect to such program by making a $50.0 million payment for such license.

~~Acetylon Pharmaceuticals, Inc. (Acetylon):~~ In May 2016, our collaboration and option agreement with Acetylon expired. As a result, we do not have an exclusive right to acquire Acetylon or any right to receive any research and development services from Acetylon or have any obligation to pay any milestone payment under that agreement. We have retained our equity interest in Acetylon.

~~Jounce Therapeutics, Inc. (Jounce):~~ In July 2016, we entered into a collaboration agreement with Jounce for the development and commercialization of immunotherapies for cancer, including Jounce’s lead product candidate, JTX-2011, targeting ICOS (the Inducible T cell CO-Stimulator), up to four early stage programs to be selected from a defined pool of B cell, T regulatory cell and tumor-associated macrophage targets emerging from Jounce’s research platform, and a Jounce checkpoint immuno-oncology program. Under the terms of the collaboration agreement we made an initial upfront payment to Jounce in the amount of $237.6 million for the initial four year term. Jounce is also eligible to receive regulatory, development, and net sales milestone payments.

We have the right to opt into the collaboration programs at defined stages of development. Following opt-in, the parties will share U.S. profits and losses on the collaboration programs as follows: (a) Jounce will retain a 60 percent U.S. profit share of JTX-2011, with 40 percent allocated to us; (b) Jounce will retain a 25 percent U.S. profit share on the first additional program, with 75 percent allocated to us; and (c) the parties will equally share U.S. profits on up to three additional programs. Also, following opt-in to each of the foregoing programs, we will receive exclusive ex-U.S. commercialization rights with respect to such program, Jounce will be eligible to receive tiered royalties on sales outside the United States, and development costs will be shared by the parties in a

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~manner that is commensurate with their respective product rights under such program. The parties will equally share global profits from the checkpoint program.~~

The collaboration agreement has an initial term of 4 years, which may be extended up to three additional years. If the parties enter into any pre-negotiated license or co-commercialization agreement during the initial term, the collaboration agreement will continue until all such license and co-commercialization agreements have expired. The collaboration agreement may be terminated at our discretion upon 120 days prior written notice to Jounce and by either party upon material breach of the other party, subject to cure periods.

~~Other Potential Future Milestone Payments:~~ In addition to the collaboration arrangements described above, we entered into a collaborative arrangement during 2016 that includes the potential for a future milestone payment of $85.0 million related to the attainment of a specified regulatory milestone. Our obligation to fund this effort is contingent upon our continued involvement in the program and/or the lack of any adverse events which could cause the discontinuance of the program.

~~A financial summary of certain period activity related to our collaboration agreements is presented below~~^1,2:

Three-Month Periods Ended September 30,
Research and Development Expense
Upfront Fees Milestones Extension/Termination of Agreements Amortization of Prepaid Research and Development Equity Investments Made During Period
Agios 2016 $— $— $— $0.3 $—
bluebird 2016 — — — 2.1 —
2015 — — — 2.1 —
Jounce 2016 237.6 — — — 23.6
Juno³
2016 — — — — —
2015 575.1 — — — 424.9
Nurix 2016 — — — — —
2015 149.8 — — — 17.0
Other Collaboration Arrangements 2016 86.0 — 8.8 10.4 15.0
2015 26.9 — 10.0 6.8 —

Nine-Month Periods Ended September 30,
Research and Development Expense
Upfront Fees Milestones Extension/Termination of Agreements Amortization of Prepaid Research and Development Equity Investments Made During Period
Agios 2016 $200.0 $25.0 $— $0.5 $—
2015 9.0 — — — —
AstraZeneca 2016 — — — — —
2015 450.0 — — — —
bluebird 2016 10.0 — — 6.3 —
2015 — — — 2.8 —
Jounce 2016 237.6 — — — 23.6
Juno³
2016 50.0 — — — 41.0
2015 575.1 — — — 424.9
Lycera 2016 — — — — —
2015 69.5 — — — 10.0
Nurix 2016 — — — — —
2015 149.8 — — — 17.0
Other Collaboration Arrangements 2016 190.0 50.5 8.8 15.8 52.0
2015 86.9 8.0 18.1 18.9 50.0

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~A financial summary of the period-end balances related to our collaboration agreements is presented below:~~

Balances as of: Intangible Asset Balance Equity Investment Balance Percentage of Outstanding Equity
Acceleron September 30, 2016 $— $195.9 14%
December 31, 2015 — 224.9 14%
Agios September 30, 2016 0.5 276.9 13%
December 31, 2015 1.0 340.4 13%
bluebird September 30, 2016 13.9 N/A N/A
December 31, 2015 20.2 N/A N/A
Jounce September 30, 2016 — 23.6 11%
December 31, 2015 — N/A N/A
Juno September 30, 2016 — 308.4 10%
December 31, 2015 — 401.8 9%
Lycera September 30, 2016 3.0 10.0 8%
December 31, 2015 3.0 10.0 8%
Nurix September 30, 2016 0.2 17.0 11%
December 31, 2015 0.2 17.0 11%
Other Collaboration Arrangements September 30, 2016 32.3 210.1 N/A
December 31, 2015 48.2 335.0 N/A



	Balances as of:	Intangible Asset Balance	Equity Investment Balance	Percentage of Outstanding Equity
Agios	June 30, 2017	$—	$302	12%
	December 31, 2016	—	219	12%
Juno	June 30, 2017	—	309	10%
	December 31, 2016	—	194	10%
Other Collaboration Arrangements	June 30, 2017	13	552	N/A
	December 31, 2016	22	439	N/A

Activity and balances are presented specifically for notable new collaborations and for those collaborations which we have described in detail in our ~~2015~~2016 Annual Report on Form 10-K if there has been ~~new~~ significant activity during the periods presented. Amounts related to collaborations that are not specifically presented are included in the aggregate as Other Collaboration Arrangements.


²	In addition to the expenses noted in the tables above, we may also incur expenses for collaboration agreement related activities that are managed or funded by us.

Our equity investment in Juno made in the first quarter of 2016 was transacted at a price per share that exceeded the market value of Juno's publicly traded common stock on the transaction closing date, resulting in an expense for the premium of ~~$6.0~~$6 million that was recorded in the Consolidated ~~Statements~~Statement of ~~Operations~~Income as Other (expense) income, ~~(expense),~~ net in the first quarter of 2016.

15. Commitments and Contingencies

Collaboration Arrangements and ~~Purchased Compounds:~~Acquired Research and Development Assets: We have entered into certain research and development collaboration ~~agreements~~arrangements with third parties that include ~~the~~our funding of certain development, manufacturing and commercialization efforts ~~with~~and the potential for making future milestone and royalty payments upon the achievement of pre-established developmental, regulatory and/or commercial targets. In ~~September 2016,~~addition, we ~~acquired compounds as part of our purchase of EngMab in a transaction~~have also made certain acquisitions that included potential future development, regulatory and commercial milestones. Our obligation to fund these ~~efforts/milestones~~efforts and make milestone payments is contingent upon our continued involvement in the programs and/or the lack of any adverse events which could cause the discontinuance of the programs. Due to the nature of these arrangements, the future potential payments are inherently uncertain, and accordingly no amounts have been recorded for the potential future achievement of these targets in our accompanying Consolidated Balance Sheets ~~at September~~as of June 30, ~~2016~~2017 and December 31, ~~2015.~~2016. See Note 3 for additional details related to our ~~purchase of EngMab~~acquisitions and Note 14 for additional details related to collaboration arrangements.

Contingencies: We believe we maintain insurance coverage adequate for our current needs. Our operations are subject to environmental laws and regulations which, among other things, impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. We review the effects of such laws and regulations on our operations and modify our operations as appropriate. We believe we are in substantial compliance with all applicable environmental laws and regulations.

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

We have ongoing customs, duties and ~~VAT~~value-added-tax examinations in various countries that have yet to be settled. Based on our knowledge of the claims and facts and circumstances to date, none of these matters, individually or in the aggregate, are deemed to be material to our financial condition.

16. Legal Proceedings

Like many companies in our industry, we have from time to time received inquiries and subpoenas and other types of information requests from government authorities and others and we have been subject to claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests and legal proceedings is difficult to predict, adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, product recalls, costs and significant payments, which may have a material adverse effect on our results of operations, cash flows or financial condition.

Pending patent proceedings include challenges to the scope, validity and/or enforceability of our patents relating to certain of our products, uses of products or processes. Further, as certain of our products mature or they near the end of their regulatory exclusivity periods, it is more likely that we will receive challenges to our patents, and in some jurisdictions we have received such challenges.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We are also subject, from time to time, to claims of third parties that we infringe their patents covering products or processes. Although we believe we have substantial defenses to these challenges and claims, there can be no assurance as to the outcome of these matters and an adverse decision in these proceedings could result in one or more of the following: (i) a loss of patent protection, which could lead to a significant reduction of sales that could materially affect our future results of operations, cash flows or financial condition (ii) our inability to continue to engage in certain activities, and (iii) significant liabilities, including payment of damages, royalties and/or license fees to any such third party.

Among the principal matters pending are the following:

~~Patent Related~~Patent-Related Proceedings:

REVLIMID^®: In 2012, our European patent EP 1 667 682 (the ’682 patent) relating to certain polymorphic forms of lenalidomide expiring in 2024 was opposed in a proceeding before the European Patent Office (EPO) by Generics (UK) Ltd. and Teva Pharmaceutical Industries Ltd. On July 21, 2015, the EPO determined ~~based primarily on procedural grounds,~~ that the ’682 patent was not valid. Celgene appealed the EPO ruling to the EPO Board of Appeal, ~~which stays~~thereby staying any revocation of the patent until the appeal is finally adjudicated. No appeal hearing date has been set. We do not anticipate a decision from the EPO Board of Appeal for several years and intend to vigorously defend ~~all of~~ our intellectual property rights.

In 2010, Celgene’s European patent EP 1 505 973 (the ’973 patent) relating to certain uses of lenalidomide expiring in 2023 was opposed in a proceeding before the EPO by Synthon B.V. and an anonymous party. On February 25, 2013, the EPO determined that the ’973 patent was not valid. Celgene appealed the EPO ruling to the EPO Board of Appeal, ~~which stays~~thereby staying any revocation of the patent until the appeal is finally adjudicated. No appeal hearing date has been set. We do not anticipate a decision from the EPO Board of Appeal for several years and intend to vigorously defend ~~all of~~ our intellectual property rights.

We believe that our patent portfolio for lenalidomide in Europe, including the composition of matter patent which expires in 2022, is strong and defensible. Although we believe that we will prevail in the EPO proceedings, in the event these patents are found not to be valid, we still expect that we will ~~still~~ have ~~patent~~ protection in the EU for lenalidomide under other patents through at least 2022.

We received a Notice Letter dated September 9, 2016 from Dr. Reddy’s Laboratories (DRL) notifying us of DRL’s ~~ANDA~~Abbreviated New Drug Application (ANDA) which contains Paragraph IV certifications against U.S. Patent Nos. ~~7,456,800, 7,855,217, 7,968,569, 8,530,498, 8,648,095, 9,101,621,~~7,456,800; 7,855,217; 7,968,569; 8,530,498; 8,648,095; 9,101,621; and 9,101,622 that are listed in the U.S. Food and Drug Administration's (FDA) list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book (Orange Book) for REVLIMID^®. DRL is seeking to manufacture and market a generic version of 2.5mg, 5mg, 10mg, 15mg, 20mg, and 25mg REVLIMID^® (lenalidomide) ~~capsules.~~capsules in the United States.

~~On October 20, 2016,~~In response to the Notice Letter, we timely filed an infringement action against DRL in the United States District Court for the District of New ~~Jersey.~~Jersey on October 20, 2016. As a result of the filing of our action, the FDA cannot grant final approval of DRL's ANDA until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) March 9, 2019. On November 18, 2016, DRL filed an answer and counterclaims asserting that the patents-in-suit are invalid and/or not infringed. On December 27, 2016, we filed a reply to DRL’s counterclaims. Fact discovery is set to close on May 31, 2018. The Court has not yet ~~responded~~entered a schedule for expert discovery or trial. We subsequently received an additional Notice Letter from DRL dated June 8, 2017 notifying us of additional Paragraph IV certifications against U.S. Patent Nos. 7,189,740; 8,404,717; and 9,056,120 that are listed in the Orange Book for REVLIMID^®. In response to the ~~complaint.~~Notice Letter, we timely filed an infringement action against DRL in the United States District Court for the District of New Jersey on July 20, 2017. As a result of the filing of our action, the FDA cannot grant final approval of DRL's ANDA until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) December 8, 2019.

We received a Notice Letter dated February 27, 2017 from Zydus Pharmaceuticals (USA) Inc. (Zydus) notifying us of Zydus’ ANDA which contains Paragraph IV certifications against U.S. Patent Nos. 7,456,800; 7,855,217; 7,968,569; 8,530,498; 8,648,095; 9,101,621; and 9,101,622 that are listed in the Orange Book for REVLIMID^®. Zydus is seeking to manufacture and market a generic version of 2.5 mg, 5 mg, 10 mg, 15 mg, 20 mg, and 25mg REVLIMID^® (lenalidomide) capsules in the United States.

In response to the Notice Letter, we timely filed an infringement action against Zydus in the United States District Court for the District of New Jersey on April 12, 2017. As a result of the filing of our action, the FDA cannot grant final approval of Zydus’ ANDA at least until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) August 27, 2019. Zydus has not yet filed a response and the Court has not yet entered a scheduling order.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We received a Notice Letter dated July 5, 2017 from Cipla LTD, India (Cipla) notifying us of Cipla’s ANDA which contains Paragraph IV certifications against U.S. Patent Nos. 7,456,800; 7,855,217; 7,968,569; 8,530,498; 8,648,095; 9,101,621; and 9,101,622 that are listed in the Orange Book for REVLIMID^®. Cipla is seeking to manufacture and market a generic version of 5 mg, 10 mg, 15 mg, 20 mg, and 25mg REVLIMID^® (lenalidomide) capsules in the United States. We are in the process of assessing this Notice Letter, and we intend to vigorously defend our intellectual property rights.

We received a Notice Letter dated July 24, 2017 from Lotus Pharmaceutical Co., Inc. (Lotus) notifying us of Lotus’s ANDA which contains Paragraph IV certifications against U.S. Patent Nos. 5,635,517; 6,315,720; 6,561,977; 6,755,784; 7,189,740; 7,456,800; 7,855,217; 7,968,569; 8,315,886; 8,404,717; 8,530,498; 8,626,531; 8,648,095; 9,056,120; 9,101,621; and 9,101,622 that are listed in the Orange Book for REVLIMID^®. Lotus is seeking to manufacture and market a generic version of 2.5 mg, 5 mg, 10 mg, 15 mg, 20 mg, and 25mg REVLIMID^® (lenalidomide) capsules in the United States. We are in the process of assessing this Notice Letter, and we intend to vigorously defend our intellectual property rights.

POMALYST^®: In 2015, our European patent EP 2 105 135 (the ’135 patent) relating to certain pharmaceutical compositions for treating cancer expiring in 2023 was opposed in a proceeding before the ~~European Patent Office (EPO)~~EPO by Generics (UK) Ltd., Accord Healthcare Ltd., Hexal AG, IPS Intellectual Property Services, Synthon B.V., and Actavis Group PTC EHF. ~~A hearing at~~On December 19, 2016 the EPO ~~is scheduled for December 19 and 20, 2016. We do~~determined that the ’135 patent was not ~~anticipate a formal decision from the EPO until early 2017.~~valid. Regulatory ~~Exclusivity~~exclusivity for POMALYST^® will expire in Europe in 2023. ~~We have applied for Supplementary Protection Certificates~~

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

We received a Notice Letter dated March 30, 2017 from Teva Pharmaceuticals USA, Inc. (Teva) notifying us of Teva’s ANDA submitted to the FDA that contains Paragraph IV certifications against U.S. Patent Nos. 6,316,471; 8,198,262; 8,673,939; 8,735,428; and 8,828,427 that are listed in the Orange Book. Teva is seeking to manufacture and market a generic version of 1 mg, 2 mg, 3 mg, and 4 mg POMALYST® (pomalidomide) capsules in the United States. We later received similar Notice Letters (the Pomalidomide Notice Letters) from six other generic drug manufacturers - Par Pharmaceutical, Inc. (Par); Apotex, Inc. (Apotex); Hetero USA, Inc. (Hetero); Aurobindo Pharma Ltd. (Aurobindo); Mylan Pharmaceuticals Inc. (Mylan); and Breckenridge Pharmaceutical, Inc. (“Breckenridge”) - relating to these and other POMALYST® patents listed in the Orange Book.

~~(SPC’s)~~In response to the Pomalidomide Notice Letters, we timely filed an infringement actions in the United States District Court for the District of New Jersey against Teva and Par on May 4, 2017 and against Apotex, Hetero, Aurobindo, Mylan, and Breckenridge on May 11, 2017. As a result of the filing of our actions, the FDA cannot grant final approval of these ANDAs at least until the earlier of (i) a final decision that each ~~member state in Europe,~~of the patents is invalid, unenforceable, and/or not infringed; or (ii) August 8, 2020. On July 13, 2017, Apotex and Hetero each filed answers and counterclaims asserting that the patents-in-suit are invalid and/or not infringed. The remaining generic drug manufacturers have not yet filed responses and the Court has not yet entered scheduling orders.

OTEZLA^®(Apremilast): In February 2015, Polypharma S.A., Teva Pharmaceuticals, Ltd., Zentiva k.s. and LEK Pharmaceutical d.d. opposed Celgene’s European patent EP 2 276 483 (the ‘483 patent), which ifis directed to certain crystalline forms of apremilast. An oral hearing was held on March 21, 2017 at the EPO, whereby the Opposition Division determined that the '483 patent was not valid. Celgene plans to appeal the EPO ruling to the EPO Board of Appeal, which will have the effect of staying any revocation of the patent until the appeal is finally adjudicated. Upon the filing of an appeal, we would not anticipate a decision from the EPO Board of Appeal for several years. This patent will expire on March 27, 2028 and has been granted ~~will extend~~an SPC which extends the patent term ~~of the ‘135 patent by five years.~~to January 16, 2030. The ~~patent~~regulatory exclusivity will ~~then~~ expire ~~in 2028 in each member state that grants the SPC assuming the ‘135 patent is deemed to be valid in the EPO proceeding.~~on January 15, 2025.

THALOMID^® (thalidomide): We received a Notice Letter dated December 18, 2014 from Lannett Holdings, Inc. (Lannett) notifying us of Lannett’s ~~Abbreviated New Drug Application (ANDA)~~ANDA which contains Paragraph IV certifications against U.S. Patent Nos. 5,629,327; 6,045,501; 6,315,720; 6,561,976; 6,561,977; 6,755,784; 6,869,399; 6,908,432; 7,141,018; 7,230,012; 7,435,745; 7,874,984; 7,959,566; 8,204,763; 8,315,886; 8,589,188; and 8,626,531 that are listed in the Orange Book for THALOMID^® (thalidomide). Lannett is seeking to market a generic version of 50mg, 100mg, 150mg, and 200mg of THALOMID^® capsules.

On January 30, 2015, we filed an infringement action against Lannett in the United States District Court for the District of New Jersey. As a result of the filing of our action, the ~~U.S. Food and Drug Administration (FDA)~~FDA cannot grant final approval of Lannett’s ANDA until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) June 22, 2017. On March 27, 2015, Lannett filed a motion to dismiss our complaint for lack of personal jurisdiction and we filed a response to the motion on April 20, 2015. A hearing was held on July 27, 2015 and the Court decided to administratively terminate the motion to dismiss in order to allow us to conduct jurisdictional discovery. On November 17, 2015, Lannett withdrew its motion to dismiss.

On December 8, 2015, Lannett filed an answer and counterclaims asserting that the patents-in-suit are invalid, unenforceable, and/or not infringed and on January 19, 2016 we filed a reply to Lannett's counterclaims. On April 18, 2016, Lannett amended its answer to narrow the scope of its unenforceability counterclaims and we filed an amended reply on May 5, 2016. ~~Fact discovery is currently set to close on April 6, 2017. Markman briefing is currently scheduled to be completed on February 21, 2017.~~ The Court has not ~~yet~~ set dates for ~~a Markman hearing,~~ close of ~~expert~~ discovery, or trial.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

ABRAXANE^® (paclitaxel protein-bound particles for injectable suspension) (albumin bound): We received a Notice Letter dated February 23, 2016 from Actavis LLC (Actavis) notifying us of Actavis’s ANDA which contains Paragraph IV certifications against U.S. Patent Nos. 7,820,788; 7,923,536; 8,138,229; and 8,853,260 that are listed in the Orange Book for ABRAXANE^®. We then received a Notice Letter dated October 25, 2016 from Cipla notifying us of Cipla’s ANDA, which contains Paragraph IV certifications against the same four patents for ABRAXANE^®. Actavis isand Cipla are seeking to manufacture and market a generic version of ABRAXANE^® (paclitaxel protein-bound particles for injectable suspension) (albumin bound) 100 mg/vial.

On April 6, 2016, we filed an infringement action against Actavis in the United States District Court for the District of New Jersey. As a result of the filing of our action, the FDA cannot grant final approval of Actavis’s ANDA until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) August 24, 2018. On May 3, 2016, Actavis filed an answer and counterclaims asserting that the patents-in-suit are invalid and/or not ~~infringed. On June 10, 2016~~infringed and we filed a reply to Actavis’s ~~counterclaims.~~counterclaims on June 10, 2016. Fact discovery is currently ~~set to close on May 15, 2017. Markman briefing is currently scheduled to be completed on April 4, 2017. Expert~~ongoing and expert discovery is currently set to close on November 17, 2017. The Court has not yet set ~~dates~~a date for a ~~Markman~~trial.

On December 8, 2016, we filed an infringement action against Cipla in the United States District Court for the District of New Jersey. As a result of the filing of our action, the FDA cannot grant final approval of Cipla’s ANDA until the earlier of (i) a final decision that each of the patents is invalid, unenforceable, and/or not infringed; or (ii) April 25, 2019. On January 20, 2017, Cipla filed an answer and counterclaims asserting that the patents-in-suit are invalid and/or not infringed. Our reply was filed on February 24, 2017. Fact discovery is currently set to close on April 26, 2018 and expert discovery is currently set to close on November 1, 2018. The Court has not yet set a date for trial.

On January 13, 2017, the UK High Court of Justice handed down a ruling after a hearing ~~or trial.~~held on December 20, 2016 in which Celgene argued that the UK Intellectual Property Office improperly rejected our request for an SPC to the ABRAXANE^® patent UK No. 0 961 612 (the ‘612 patent). In that ruling, the High Court referred the matter to the Court of Justice for the EU (“CJEU”). No hearing date has been set at the CJEU. If the CJEU were to find in Celgene’s favor, the SPC would not only be granted in the UK, but in other jurisdictions that have previously rejected our initial request including Germany, Sweden and Ireland. The ‘612 patent will expire in Europe in September, 2017. However, if the SPC is granted, the patent will expire in 2022. Data exclusivity in Europe will expire in January 2019.

Proceedings involving the ~~USPTO:~~United States Patent and Trademark Office (USPTO):

Under the America Invents Act (AIA), any person may seek to challenge an issued patent by petitioning the ~~United States Patent and Trademark Office (USPTO)~~USPTO to institute a post grant review. On April 23, 2015, we were informed that the Coalition for Affordable Drugs VI LLC filed petitions for Inter Partes Review (IPRs) challenging the validity of Celgene’s patents U.S. 6,045,501 (the ‘501 patent) and U.S. 6,315,720 (the ‘720 patent) covering certain aspects of our REMS program. On October 27, 2015, the USPTO Patent Trial and Appeal Board (PTAB) instituted IPR proceedings relating to these patents. An oral hearing was held on July 21, 2016; the decisions, rendered on October 26, 2016, held that the ’501 and ’720 patents are invalid, primarily due to obviousness in view of certain publications.On November 25, 2016, we requested a rehearing with respect to these patents.

An appeal of the final written decisions of the PTAB can be made to the United States Court of Appeals for the Federal ~~Circuit. The notice of appeal must be filed~~Circuit within 63 days of ~~the decision, unless we choose to move for a rehearing at the PTAB, in which case the notice of appeal is due within 63 days of the~~ PTAB’s final action on ~~any~~our November 25, 2016 rehearing request. The ’501 and ’720 patents remain valid and enforceable pending ~~any~~ rehearing ~~and/or~~and appeal. We retain other patents covering certain aspects of our REMS program, as well as other patents that cover our products that use our REMS system. We are evaluating the decisions, and we intend to continue to vigorously defend our intellectual property rights.

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

On April 4, 2017, Actavis LLC filed petitions for IPRs challenging the validity of our patents U.S. 8,138,229 (the '229 patent); 7,923,536 (the '536 patent); 7,820,788 (the '788 patent); and 8,853,260 (the '260 patent) covering certain aspects of our ABRAXANE® product. We filed our preliminary response on July 12, 2017.

Other Proceedings:

In 2009, we received a Civil Investigative Demand (CID) from the U.S. Federal Trade Commission (FTC) seeking documents and other information relating to requests by manufacturers of generic drugs to purchase our patented REVLIMID^® and THALOMID^® brand drugs in order for the FTC to evaluate whether there may be reason to believe that we have engaged in unfair methods of competition. In 2010, the State of Connecticut issued a subpoena referring to the same issues raised by the 2009 CID. Also in 2010, we received a second CID from the FTC relating to this matter. We continue to cooperate with the FTC and State of Connecticut investigations.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

On April 3, 2014, Mylan ~~Pharmaceuticals Inc. (Mylan)~~ filed a lawsuit against us in the United States District Court for the District of New Jersey alleging that we violated various federal and state antitrust and unfair competition laws by allegedly refusing to sell samples of our THALOMID^® and REVLIMID^®brand drugs so that Mylan can conduct the bioequivalence testing necessary for ANDAs to be submitted to the FDA for approval to market generic versions of these products. Mylan is seeking injunctive relief, damages and declaratory judgment. We filed a motion to dismiss Mylan’s complaint on May 25, 2014. Mylan filed its opposition to our motion to dismiss on June 16, 2014. The Federal Trade Commission filed an amicus curiae brief in opposition to our motion to dismiss on June 17, 2014. On December 22, 2014, the court granted Celgene’s motion to dismiss (i) Mylan’s claims based on Section 1 of the Sherman Act (without prejudice), and (ii) Mylan's related claims arising under the New Jersey Antitrust Act. The court denied our motion to dismiss the ~~rest of the~~remaining claims which primarily relate to Section 2 of the Sherman Act. On January 6, 2015, we filed a motion to certify for interlocutory appeal the order denying our motion to dismiss with respect to the claims relating to Section 2 of the Sherman Act, which appeal was denied by the United State Court of Appeals for the Third Circuit on March 5, 2015. On January 20, 2015, we filed an answer to Mylan’s complaint. Fact discovery closed ~~on April 8,~~in June 2016 and expert discovery closed in November 2016. On December 16, 2016, we moved for summary judgment, seeking a ruling that judgment be granted in our favor on ~~October 24, 2016.~~all claims. The motion for summary judgment has been fully briefed by the parties. No trial date has been set. We intend to vigorously defend against Mylan’s claims.

~~A civil qui tam action brought by a former Celgene employee is pending in~~In 2011, the ~~U.S. District Court~~United States Attorney’s Office for the Central District of California (the Brown Action). The complaint was unsealed in February 2014 when the United States Department of Justice (DOJ) declined to intervene in the action, reserving its right to intervene in the action at a later time. The complaint allegesinformed us that they were investigating possible off-label marketing and improper payments to physicians in connection with the sales of THALOMID^® and REVLIMID^®. In 2012, we learned that two other United States Attorneys’ offices (the Northern District of Alabama and isthe Eastern District of Texas) and various state Attorneys General were conducting related investigations. In February 2014, three civil qui tam actions related to those investigations brought by three former Celgene employees on behalf of the federal and various state governments under the federal false claims act and similar state ~~laws.~~laws were unsealed after the United States Department of Justice (DOJ) declined to intervene in any of these actions. However, the DOJ retained the right to intervene in these actions at any time.

Additionally, while several states similarly declined to intervene in some of these actions, they also retained the right to intervene in the future. The plaintiffs in the Northern District of Alabama and Eastern District of Texas actions have voluntarily dismissed their cases. On April 25, 2014, we filed a motion to dismiss the complaint in the remaining (Central District of California) action, United States of America ex. rel. Beverly Brown v. Celgene Corp., unsealed February 5, 2014 (the Brown Action), which was denied except with respect to certain state claims. ~~The complaint in the Brown Action seeks, among other things, treble damages, civil penalties and attorneys’ fees and costs.~~ We filed our answer to the complaint inon August 28, 2014. Fact discovery closed inon September ~~2015 and expert~~25, 2015. Expert discovery closed on June 30, 2016.

The ~~relator~~Relator (the person who brought the lawsuit on behalf of the government) submitted an expert report that, based on certain theories, purported to calculate damages and penalties. On July 25, 2016, we filed a motion to strike the ~~relator’s~~Relator’s expert ~~report, and on August 23, 2016, the~~report. The Magistrate Judge granted our motion, striking substantial portions of the report ~~which will~~on August 23, 2016, significantly ~~reduce~~reducing the expert’s calculation of damages and penalties. ~~This~~Relator appealed this decision ~~is currently being appealed by the relator~~ to the District Court ~~judge.~~Judge.

~~The~~On August 29, 2016, the parties filed a Joint Stipulation ~~regarding~~on Defendant Celgene's Motion for Summary Judgment ~~Or,~~or, In the Alternative, Partial Summary Judgment. On December 28, 2016, the court entered an order granting in part and denying in part Celgene’s motion for summary judgment. Specifically, the court dismissed Relator’s anti-kickback claims and all claims related to prescriptions submitted to TRICARE, the Veterans Administration and the Tennessee, Texas and Wisconsin Medicaid programs. The court denied Celgene’s motion as to all other issues and upheld the District Court’s decision to strike substantial portions of Relator’s expert report. On January 30, 2017, we filed a Motion for Reconsideration of The Order Partially Denying Summary Judgment Or For Certification For Immediate Appeal And Stay. This motion sought to dispose of the remainder of the Relator’s claims. Relator filed her Opposition to our motion on ~~August 29, 2016. That motion is still awaiting~~February 6, 2017.

A confidential mediation under Federal Rule of Civil Procedure Rule 408 was held on February 25, 2017. Relator and Celgene participated in the mediation and discussions continued after that date. On March 6, 2017, the Judge ordered that the trial begin on April 25, 2017. Relator and Celgene jointly sought, and obtained, a ~~decision. No~~90-day continuance of the trial date ~~has been set. While~~until July 25, 2017. On June 26, 2017, the court held a status conference, in which it directed the parties to submit any proposed settlement agreement to which Relator, Celgene, and the DOJ had agreed to the court by July 13, 2017 with a motion to approve the settlement. The court stated that it would rule on any motion to approve the settlement on July 25, 2017. As a result, we ~~believe that the relator's claims and requested damages are unsubstantiated, we are unable at this time~~accrued $315 million related to ~~predict the outcome of~~ this matter oras a probable and reasonably estimable loss contingency during the ~~ultimate legal and financial liability, if any, and cannot reasonably estimate the possible loss or range of loss, if any. We intend to vigorously defend against the claims in this action.~~three-month period ended June 30, 2017.

~~In February 2014, we received~~On July 13, 2017, the parties submitted a ~~letter purportedly on behalf of a stockholder demanding access~~proposed settlement and motion to ~~certain books and records~~approve the settlement to the court. On July 25, 2017, the court ruled that it would accept the settlement. Under the terms of the ~~Company for~~settlement, Celgene will pay a total of $315 million (including fees and expenses) to resolve the ~~purpose of investigating matters pertaining to the Brown Action. The Company complied~~matter with the ~~demand, as modified through negotiation with counsel for~~United States, 28 States, the ~~purported stockholder. In July 2014, we received a letter purportedly on behalf~~District of ~~two stockholders (one~~Columbia, the City of which was referenced in the February 2014 letter) that demands, primarily on the basis of the allegations in the Brown Action, that our board of directors take action on the Company’s behalf to correct alleged deficiencies in the Company’s internal controls and to recover from current and past directors and officers damages those stockholders allege to have resulted from breaches of fiduciary duties related to the matters alleged in the Brown Action (the Demand). Our Board formed a Demand Investigation Committee, and with the assistance of independent counsel retained by it, the Demand Investigation Committee considered the issues raised in the stockholders’ letter. In October 2015, the Demand Investigation Committee reported to the Board of Directors, and the Board of Directors accepted the Committee’s recommendation, that the Company take no action at this time, legal or otherwise, in response to the stockholders’ demands. In November 2015, we received another letter purportedly on behalf of the same two stockholders that demands access to certain books and records of the Company for the purpose ofChicago

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~investigating whether~~and the ~~Demand was wrongfully refused, the independence, good faith~~Relator. The settlement includes no admission of any wrongdoing by Celgene, and ~~due care~~Celgene is not required to enter into a Corporate Integrity Agreement as part of the Demand Investigation Committee, and whether the Demand Investigation Committee conducted a reasonable investigation of the Demand. On February 22, 2016, the Company produced additional documents pursuant to the November 2015 letter.

In November 2014, we received another letter purportedly on behalf of a stockholder demanding access to certain books and records of the Company for the purpose of investigating matters pertaining to the Brown Action. The Company complied with the demand, as modified through negotiation with counsel for the purported stockholder, and in November 2015 the stockholder filed a complaint in Delaware Chancery Court asserting derivative claims on behalf of the Company against eight current, and four former members of the Board of Directors. The complaint alleges, largely on the basis of allegations in the Brown Action, that the defendant directors breached their fiduciary duties by allowing the Company to engage in unlawful activity in its marketing of THALOMID^® ~~and REVLIMID~~^®, and seeks from the defendant directors unspecified damages, including Celgene’s costs of defending against government and civil investigations and lawsuits and alleged reputational harm, and disgorgement of compensation paid to the defendant directors. On January 22, 2016, the Company filed a motion to dismiss the complaint on the basis that prior to filing the complaint asserting derivative claims the plaintiff was required under Delaware law and failed to demand that our board of directors take action on the Company’s behalf. On April 5, 2016, the Company filed a motion to dismiss the amended complaint. Briefing on the motion to dismiss was completed on August 10, 2016. Oral argument on the motion to dismiss is scheduled to be heard on December 9, 2016.settlement.

On June 7, 2013, Children's Medical Center Corporation (CMCC) filed a lawsuit against us in the Superior Court of the Commonwealth of Massachusetts alleging that our obligation to pay a 1% royalty on REVLIMID^® net sales revenue and a 2.5% royalty on POMALYST^®/IMNOVID^® net sales ~~revenue~~ under a license agreement entered into in December 2002 extended beyond February 28, 2013 and that our failure to make royalty payments to CMCC subsequent to February 28, 2013 breached the license agreement. CMCC is seeking unspecified damages and a declaration that the license agreement remains in full force and effect. In July 2013, we removed these proceedings to the United States District Court for the District of Massachusetts. On August 5, 2013, we filed an answer to CMCC’s complaint and a counterclaim for declaratory judgment that our obligations to pay royalties have expired. On August 26, 2013, CMCC filed an answer to our counterclaim.

On July 8, 2014, CR Rev Holdings, LLC (CR Rev) filed a complaint against Celgene in the same action. CR Rev ~~alleges~~alleged that CMCC sold and assigned to CR Rev a substantial portion of the royalty payments owed by Celgene on the sale of REVLIMID^® ~~to CR Rev.~~. CR Rev has alleged causes of action with respect to REVLIMID^® identical to those alleged by CMCC, and ~~seeks~~sought unspecified damages and a declaration that the license agreement is still in effect.

Discovery in this matter has been completed. On August 4, 2015, plaintiffs filed a motion for summary judgment on certain claims, including breach of contract, declaratory judgment and, with respect to Celgene’s counterclaims, patent misuse. Oral argument on the motion was held on October 21, 2015.

On February ~~23, 2016, the Magistrate Judge recommended to the Court to allow royalties on sales of REVLIMID~~^® ~~during the period from March 1, 2013 through May 11, 2016, and to deny the remainder of plaintiffs’ motion, including seeking royalties on sales of POMALYST~~^®~~/IMNOVID~~^®~~. On March 8, 2016,~~2, 2017, we filed objections to the Report and Recommendation. On September 30, 2016, the District Court judge issued an order adopting in part and modifying in part the Magistrate Judge’s Report and Recommendation. In particular, the District Court judge’s order permits Celgene to proceed at trialentered into a Settlement Agreement with ~~its patent misuse defense to the plaintiffs’ claims. No trial date has been set by the court. We intend to vigorously defend against CMCC's~~CMCC and CR ~~Rev's claims.~~

~~During~~Rev resolving the ~~nine-month period ended September 30,~~litigation, providing CMCC with a payment of approximately $199 million (see Notes 9 and 18 to Notes to Consolidated Financial Statements included in our 2016 Annual Report on Form 10-K) and providing us with an exclusive, worldwide, royalty free license to certain patent rights. The Settlement Agreement also provides for potential contingent royalty and other payments, which have not been accrued for as we accrued $130.0 million related to this matter, including $30.0 million accrued during the three-month period ended September 30, 2016, as a probable and reasonably estimable loss contingency. There is a reasonable possibility that the ultimate loss incurred may be in excess of the accrued amount. We will monitor this matter for developments that would affect the likelihood of a loss and the accrued amount thereof and will adjust the accrued amount as appropriate. Any loss in excess of the accrued amount cannot be reasonably estimated at this time and may be affected by, among other things: (i) resolution of disputed facts and claims at trial, and (ii) future court rulings from the District Court or on appeal.do not believe such payments are probable.

On November 7, 2014, the International Union of Bricklayers and Allied Craft Workers Local 1 Health Fund (IUB) filed a putative class action lawsuit against us in the United States District Court for the District of New Jersey alleging that we violated various ~~state~~ antitrust, consumer protection, and unfair competition laws by (a) allegedly securing an exclusive supply contract with Seratec S.A.R.L. so that Barr Laboratories (Barr) allegedly could not secure its own supply of thalidomide active pharmaceutical ingredient; (b) allegedly refusing to sell samples of our THALOMID^® and REVLIMID^®brand drugs to ~~Mylan Pharmaceuticals, Lannett Company, and Dr. Reddy’s Laboratories so that those companies can conduct~~various generic manufacturers for the alleged purpose of bioequivalence testing necessary for ANDAs to

~~CELGENE CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

be submitted to the FDA for approval to market generic versions of these products; and (c) allegedly bringing unjustified patent infringement lawsuits against Barr and Natco Pharma Limited in order to allegedly delay those companies from obtaining approval for proposed generic versions of THALOMID^® and REVLIMID^®. IUB, on behalf of itself and a putative class of third party payers, is seeking injunctive relief and damages. On February 3,6, 2015, we filed a motion to dismiss IUB’s complaint. On March 3, 2015, the City of Providence (“Providence”) filed a similar putative class action making similar allegations. Both IUB and Providence, on behalf of themselves and a putative class of third party payers, are seeking injunctive relief and damages. Providence agreed that the decision in the motion to dismiss IUB’s complaint would apply to the identical claims in Providence’s complaint. A supplemental motion to dismiss Providence's state law claims was filed on April 20, 2015. On October 30, 2015, the court denied our motion to dismiss on all grounds.

Celgene filed its Answer to the IUB and Providence complaints on January 11, 2016. On June 14, 2017, a new complaint was filed by the same counsel representing the plaintiffs in the IUB case, making similar allegations and adding three new plaintiffs - International Union of Operating Engineers Stationary Engineers Local 39 Health and Welfare Trust Fund, The Detectives’ Endowment Association, Inc. and David Mitchell. Counsel identified the new complaint as related to the IUB and Providence cases and intends to move to consolidate the complaints. The completion of fact discovery and expert discovery is scheduled for ~~August~~February 1, ~~2017~~2018 and ~~December~~July 15, ~~2017,~~2018, respectively. No trial date has been set. We intend to vigorously defend against ~~IUB’s~~these claims.

In December 2015, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts, ~~requesting documents~~and in November 2016, we received a second subpoena related to the same inquiry. The materials requested primarily relate to patient assistance programs, including our support of 501(c)(3) organizations that provide financial assistance to eligible patients. We are cooperating with these requests.

CELGENE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

17. Subsequent Events

BeiGene, Ltd. (BeiGene): On July 5, 2017, we entered into a strategic collaboration to develop and commercialize BeiGene’s investigational anti-programmed cell death protein-1 (PD-1) inhibitor, BGB-A317, for patients with solid tumor cancers in the United States, Europe, Japan and the rest of the world outside of Asia. BeiGene will retain exclusive rights for the development and commercialization of BGB-A317 for hematological malignancies globally and for solid tumors in Asia (with the exception of Japan). BeiGene will acquire Celgene’s commercial operations in China and gain an exclusive license to commercialize Celgene’s approved therapies in China - ABRAXANE^®, REVLIMID^® and VIDAZA^®. In addition, BeiGene is granted licensing rights in China to CC-122, under the same terms and conditions as Celgene's approved commercial products. CC-122 is a next generation CelMOD currently in development by Celgene for lymphoma and hepatocellular carcinoma.

Upon closing, BeiGene will receive upfront licensing fees totaling $263 million. In addition, Celgene will acquire an equity stake in BeiGene by purchasing 32.7 million, or 5.9 percent, of BeiGene’s ordinary shares at $4.58 per share, or $59.55 per BeiGene’s American Depositary Shares (ADS), representing a 35% premium to an 11 day volume-weighted average price of BeiGene’s ADS (beginning on June 16 and ending June 30, 2017). BeiGene is eligible to receive up to $980 million in development, regulatory and sales milestone payments as well as royalties on future sales of BGB-A317.

The transactions have been approved by the boards of directors of Celgene and BeiGene. Both companies expect to complete the transaction during the third quarter of 2017, subject to the expiration or termination of applicable waiting periods under all applicable antitrust laws and satisfaction of other usual and customary closing conditions.

FORMA Therapeutics Holdings LLC (FORMA): On March 21, 2014, we entered into a second collaboration arrangement with FORMA (March 2014 Collaboration), pursuant to which FORMA granted us an option to license the rights to select current and future FORMA drug candidates during a term of three and one half years. In addition, with respect to each licensed drug candidate, we have the obligation to pay designated amounts when certain development, regulatory and sales milestone events occur, with such amounts being variable and contingent on various factors. With respect to each licensed drug candidate, we will assume responsibility for all global development activities and costs after completion of Phase 1 clinical trials. FORMA will retain U.S. rights to all such licensed assets, including responsibility for manufacturing and commercialization. Under this ~~request.~~ collaboration arrangement, we also have an option to enter into up to two additional collaborations.

During July 2017, we agreed to pay an upfront payment of $195 million for the first of the two additional collaborations. FORMA granted us an option to license the worldwide rights (except the U.S.) to select current and future drug candidates for the next two years and three months (or through October 1, 2019). In addition, with respect to each licensed drug candidate, we have the same rights and obligations as under the March 2014 Collaboration.

If we exercise our option to enter into an additional collaboration pursuant to the March 2014 Collaboration, we will receive an exclusive option to acquire FORMA, including the U.S. rights to all licensed drug candidates, and worldwide rights to other wholly-owned assets within FORMA at that time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This report contains forward-looking statements that reflect the current views of our management with respect to future events, results of operations, economic performance and/or financial condition. Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “may,” “could,” “will,” “will continue,” “seeks,” “should,” “predicts,” “potential,” “outlook,” “guidance,” “target,” “forecast,” “probable,” “possible” or the negative of such terms and similar expressions. Forward-looking statements are based on current plans, estimates, assumptions and projections, which are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update any forward-looking statement in light of new information or future events, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws. We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements and therefore you should not place too much reliance on them. These factors include, among others, those described in the sections “Forward-Looking Statements” and “Risk Factors” contained in our ~~2015~~2016 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) and in this report and our other public reports filed with the SEC. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.

Executive Summary

Celgene Corporation, together with its subsidiaries (collectively “we,” “our,” “us,” “Celgene” or the “Company”), is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of innovative therapies for the treatment of cancer and inflammatory diseases through next-generation solutions in protein homeostasis, immuno-oncology, epigenetics, immunology and neuro-inflammation. Celgene Corporation was incorporated in the State of Delaware in 1986.

Our primary commercial stage products include REVLIMID^®, POMALYST^®/IMNOVID^®, OTEZLA^®, ABRAXANE^®, VIDAZA^®, azacitidine for injection (generic version of VIDAZA^®), andTHALOMID^® (sold as THALOMID^® or Thalidomide Celgene^TM®outside of the U.S.)~~, and ISTODAX~~^®.In addition, we earn revenue ~~through~~from other product sales and licensing arrangements.

We continue to invest substantially in research and development in support of multiple ongoing proprietary clinical development programs which support our existing products and pipeline of new drug candidates. Our clinical trial activity includes trials across the disease areas of hematology, ~~oncology,~~solid tumors, and inflammation and immunology. REVLIMID^® is in several phase III trials covering a range of hematological malignancies that include multiple myeloma, lymphomas ~~chronic lymphocytic leukemia (CLL)~~ and myelodysplastic syndromes (MDS). ~~POMALYST~~^®~~/IMNOVID~~^® was approved in the United States and the European Union (EU) for indications in multiple myeloma based on phase II and phase III trial results, respectively, and an additional phase III trial is underway with POMALYST^®~~/IMNOVID~~^® ~~in relapsed and refractory multiple myeloma.~~ In solid tumors, ABRAXANE^® is currently in various stages of investigation for ~~breast,~~ pancreatic and non-small cell lung cancers. In inflammation and immunology, OTEZLA^® is being evaluated in a phase III ~~trials~~trial for Behçet's disease, and ~~expanded indications~~is continuing to be studied in ankylosing spondylitis, psoriatic arthritis and plaque psoriasis. We also have a growing number of potential products in phase III trials across multiple diseases. In the inflammation and immunology therapeutic area, we have phase III trials underway for ozanimod in ~~ulcerative colitis (UC) and~~ relapsing multiple sclerosis (RMS) and ulcerative colitis (UC) and for GED-0301 (mongersen) in Crohn’s disease. In hematology, phase III trials are underway for CC-486 and luspatercept in MDS, for CC-486 and IDHIFA^® (enasidenib) in acute myeloid leukemia (AML)~~, for AG-221 in AML~~ and for luspatercept in ~~MDS and~~ beta-thalassemia. In the fourth quarter of 2016, we submitted a new drug application (NDA) for IDHIFA^® (enasidenib) for the treatment of patients with relapsed or refractory AML with isocitrate dehydrogenase-2 (IDH2) mutation.

Beyond our phase III programs, we have access to a growing early-to-mid-stage pipeline of novel potential therapies to address significant unmet medical needs that consists of new drug candidates and cell therapies developed in-house, licensed from other companies or able to be optioned from collaboration partners. We believe that continued use of our primary commercial stage products, participation in research and development collaboration arrangements, depth of our product pipeline, potential regulatory approvals of new products and ~~expanded use of~~new indications for existing products will provide the catalysts for future growth.

~~In September~~

Recent Developments

A comprehensive list of the diseases that our primary commercial stage products are approved to treat for the major markets of the United States, the European Union and Japan is provided in Part I, Item 1. Business in our 2016 Annual Report on Form 10-K filed with the SEC. The following table presents significant developments in our phase III clinical trials and regulatory approval requests that occurred during the three-month period ended June 30, 2017, as well as developments that are expected to occur if the future occurrence is material and reasonably certain:

New phase III Trials:



Product		Disease Indication
OTEZLA^®		Scalp Psoriasis

Recent Transactions

Delinia, Inc. (Delinia): On February 3, 2017, we acquired all of the outstanding shares of ~~EngMab AG (EngMab),~~Delinia, a privately held biotechnology company focused on ~~T-cell bi-specific antibodies. EngMab’s~~developing novel therapeutics for the treatment of autoimmune diseases. The transaction will expand our Inflammation and Immunology pipeline primarily through the acquisition of Delinia’s lead ~~molecule, EM901~~program, DEL-106, as well as related second generation programs. DEL-106 is a ~~preclinical T-cell bi-specific antibody targeting B-cell maturation antigen (BCMA). The acquisition also included another early stage program.~~

novel IL-2 mutein Fc fusion protein designed to preferentially upregulate regulatory T cells (Tregs), immune cells that are critical to maintaining natural self-tolerance and immune system homeostasis.

The consideration included an initial payment of ~~606.9~~$302 million. In addition, the sellers of Delinia are eligible to receive up to $475 million ~~Swiss Francs (CHF) (approximately $625.3 million),~~in contingent development, regulatory and ~~regulatory milestones of up to CHF 150.0 million (approximately $154.7 million) and contingent~~ commercial ~~milestones of up to CHF 2.250 billion (approximately $2.320 billion) based on cumulative sales levels of between $1.000 billion and $40.000 billion.~~milestones. The acquisition ~~of EngMab~~ did not include any significant processes and thus, for accounting purposes, we have concluded that the acquired assets did not meet the definition of a business. The initial payment was allocated primarily to the ~~EM901 molecule and another early stage~~DEL-106 program, resulting in a ~~$623.3~~$300 million research and development asset acquisition expense and ~~$2.0~~approximately $2 million of net ~~working capital~~assets acquired. See Note 3 of Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report.

~~The diseases that our primary commercial stage products are approved~~BeiGene, Ltd. (BeiGene): On July 5, 2017, we entered into a strategic collaboration to ~~treat are described below~~develop and commercialize BeiGene’s investigational anti-programmed cell death protein-1 (PD-1) inhibitor, BGB-A317, for ~~the major markets of~~patients with solid tumor cancers in the United States, ~~the European Union~~Europe, Japan and ~~Japan. Approvals in other international markets are indicated in the aggregate~~rest of world outside Asia. BeiGene will retain exclusive rights for the ~~disease indication that most closely represents~~development and commercialization of BGB-A317 for hematological malignancies globally and for solid tumors in Asia (with the ~~majority~~exception of ~~the other international approvals.~~

Japan). BeiGene will acquire Celgene’s commercial operations in China and gain an exclusive license to commercialize Celgene’s approved therapies in China - ABRAXANE^®, REVLIMID^® ~~(lenalidomide):~~ ~~REVLIMID~~^® ~~is an oral immunomodulatory drug marketed in the United States~~ and ~~many international markets for the following uses:~~



~~Disease~~	~~Geographic Approvals~~
~~Multiple myeloma (MM)~~
~~Multiple myeloma in combination with dexamethasone, in patients who have received at least one prior therapy~~	~~- United States~~ ~~- European Union~~ ~~- Japan~~ ~~- Other international markets~~
~~Multiple myeloma in combination with dexamethasone for newly diagnosed patients~~	~~- United States~~ ~~- Japan~~ ~~- Other international markets~~
~~Adult patients with previously untreated multiple myeloma who are not eligible for transplant~~	~~- European Union~~
~~Myelodysplastic syndromes (MDS)~~
~~Transfusion-dependent anemia due to low- or intermediate-1-risk MDS associated with a deletion 5q abnormality with or without additional cytogenetic abnormalities~~	~~- United States~~ ~~- Other international markets~~
~~Transfusion-dependent anemia due to low- or intermediate-1-risk MDS in patients with isolated deletion 5q cytogenetic abnormality when other options are insufficient or inadequate~~	~~- European Union~~
~~MDS with a deletion 5q cytogenetic abnormality. The efficacy or safety of REVLIMID~~^® ~~for International Prognostic Scoring System (IPSS) intermediate-2 or high risk MDS has not been established.~~	~~- Japan~~
~~Mantle cell lymphoma (MCL) in patients whose disease has relapsed or progressed after two prior therapies, one of which included bortezomib~~	~~- United States~~ ~~- European Union (July 2016)~~

~~ABRAXANE~~^® ~~(paclitaxel albumin-bound particles for injectable suspension):~~ ~~ABRAXANE~~^® ~~is a solvent-free chemotherapy product which was developed using our proprietary nab~~^® ~~technology platform. This protein-bound chemotherapy agent combines paclitaxel with albumin. ABRAXANE~~^® ~~is approved for the following uses:~~



~~Disease~~	~~Geographic Approvals~~
~~Breast Cancer~~
Metastatic breast cancer, after failure of combination chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. Prior therapy should have included an anthracycline unless clinically contraindicated.	~~- United States~~ ~~- Other international markets~~
~~Metastatic breast cancer in adult patients who have failed first-line treatment for metastatic disease for whom standard, anthracycline containing therapy is not indicated~~	~~- European Union~~
~~Breast cancer~~	~~- Japan~~
~~Non-Small Cell Lung Cancer (NSCLC)~~
~~Locally advanced or metastatic NSCLC, as first-line treatment in combination with carboplatin, in patients who are not candidates for curative surgery or radiation therapy~~	~~- United States~~ ~~- European Union~~ ~~- Other international markets~~
~~NSCLC~~	~~- Japan~~
~~Pancreatic Cancer~~
~~Metastatic adenocarcinoma of the pancreas, a form of pancreatic cancer, as first line treatment in combination with gemcitabine~~	~~- United States~~ ~~- European Union~~ ~~- Other international markets~~
~~Unresectable pancreatic cancer~~	~~- Japan~~
~~Gastric Cancer~~	~~- Japan~~

~~POMALYST~~^®~~/IMNOVID~~^® ~~(pomalidomide)~~¹: ~~POMALYST~~^®~~/IMNOVID~~^® ~~is a proprietary, distinct, small molecule that is administered orally and modulates the immune system and other biologically important targets. POMALYST~~^®~~/IMNOVID~~^® ~~is approved for the following uses:~~



~~Disease~~	~~Geographic Approvals~~
Multiple myeloma, in combination with dexamethasone, for patients 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	~~- United States~~
Relapsed and refractory multiple myeloma, in combination with dexamethasone, for adult patients who have received at least two prior therapies including both lenalidomide and bortezomib and have demonstrated disease progression on the last therapy	~~- European Union~~
~~Relapsed and refractory multiple myeloma for patients who have received REVLIMID or bortezomib~~	~~- Japan~~

¹~~We received regulatory approval for pomalidomide under the trade name POMALYST~~^® ~~in the United States and Japan and under the trade name IMNOVID~~^® ~~in the European Union.~~

~~OTEZLA~~^® ~~(apremilast):~~ ~~OTEZLA~~^® ~~is an oral small-molecule inhibitor of phosphodiesterase 4 (PDE4) specific for cyclic adenosine monophosphate (cAMP). PDE4 inhibition results in increased intracellular cAMP levels. OTEZLA~~^®~~is approved for the following uses:~~



~~Disease~~	~~Geographic Approvals~~
~~Psoriatic arthritis~~
~~Adult patients with active psoriatic arthritis~~	~~- United States~~
~~Adult patients with active psoriatic arthritis who have had an inadequate response or who have been intolerant to a prior DMARD therapy~~	~~- European Union~~
~~Psoriasis~~
~~Patients with moderate to severe plaque psoriasis who are candidates for phototherapy or systemic therapy~~	~~- United States~~ ~~- Other international markets~~
Adult patients with moderate to severe chronic plaque psoriasis who failed to respond to or who have a contraindication to, or are intolerant to other systemic therapy including cyclosporine, methotrexate or psoralen and ultraviolet-A light	~~- European Union~~

~~VIDAZA~~^® ~~(azacitidine for injection):~~ ~~VIDAZA~~^® ~~is a pyrimidine nucleoside analog that has been shown to reverse the effects of DNA hypermethylation and promote subsequent gene re-expression. VIDAZA~~^® ~~is a Category 1 recommended treatment for patients with intermediate-2 and high-risk MDS, according to the National Comprehensive Cancer Network. The U.S. regulatory exclusivity for VIDAZA~~^® ~~expired in May 2011. After the launch of a generic version of VIDAZA~~^® ~~in the United States by a competitor in September 2013, we experienced a significant reduction in our U.S. sales of~~ VIDAZA^®. In ~~2013,~~addition, BeiGene is granted licensing rights in China to CC-122, under the same terms and conditions as the approved commercial products. CC-122 is a next generation CelMOD currently in development by Celgene for lymphoma and hepatocellular carcinoma.

Upon closing, BeiGene will receive upfront licensing fees totaling $263 million. In addition, Celgene will acquire an equity stake of 5.9 percent in BeiGene. BeiGene is eligible to receive up to $980 million in development, regulatory and sales milestone payments as well as royalties on future sales of BGB-A317.

Both companies expect to complete the transaction during the third quarter of 2017, subject to the expiration or termination of applicable waiting periods under all applicable antitrust laws and satisfaction of other usual and customary closing conditions. See Note 17 of Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report.

FORMA Therapeutics Holdings LLC (FORMA): During July 2017, we ~~contracted with Sandoz AG (Sandoz)~~agreed to ~~sell a generic version~~pay an upfront payment of ~~VIDAZA~~^® ~~in the United States, which we supply, and we recognize net product sales from our sales to Sandoz. Regulatory exclusivity for VIDAZA~~^® ~~is expected to continue in Europe through 2019. VIDAZA~~^® ~~is marketed in the United States and many international markets~~$195 million for the ~~following uses:~~first of two additional optional collaborations pursuant to our March 2014 collaboration arrangement with FORMA. Under this additional collaboration, FORMA granted us an option to license the worldwide rights (except the U.S.) to select current and future drug candidates for the next two years and three months (or through October 1, 2019). In addition, with respect to each licensed drug candidate, we have the obligation to pay designated amounts when certain development, regulatory and sales milestone events occur, with such amounts being variable and contingent on specified factors. FORMA will retain U.S. rights to all such licensed assets, including responsibility for manufacturing and commercialization. See Note 17 of Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report.



~~Disease~~	~~Geographic Approvals~~
~~Myelodysplastic syndromes (MDS)~~
~~All French-American-British (FAB) subtypes~~	~~- United States~~
~~Intermediate-2 and high-risk MDS~~	~~- European Union~~ ~~- Other international markets~~
~~MDS~~	~~- Japan~~
~~Chronic myelomonocytic leukemia with 10% to 29% marrow blasts without myeloproliferative disorder~~	~~- European Union~~ ~~- Other international markets~~
~~Acute myeloid leukemia (AML) with 20% to 30% blasts and multi-lineage dysplasia~~	~~- European Union~~ ~~- Other international markets~~
~~Acute myeloid leukemia with >30% bone marrow blasts according to the WHO classification in patients aged 65 years or older who are not eligible for haematopoietic stem cell transplantation~~	~~- European Union~~

~~THALOMID~~^® ~~(thalidomide):~~ ~~THALOMID~~^®~~, sold as THALOMID~~^® ~~or Thalidomide Celgene~~^TM ~~outside of the United States, is administered orally for the following uses:~~



~~Disease~~	~~Geographic Approvals~~
~~Multiple myeloma~~
~~Newly diagnosed multiple myeloma, in combination with dexamethasone~~	~~- United States~~
Thalomid in combination with dexamethasone is indicated for induction therapy prior to high dose chemotherapy with autologous stem cell rescue, for the treatment of patients with untreated multiple myeloma	~~- Other international markets~~
~~Multiple myeloma after failure of standard therapies (relapsed or refractory)~~	~~- Other international markets~~
~~Thalidomide Celgene~~^TM in combination with melphalan and prednisone as a first line treatment for patients with untreated multiple myeloma who are aged sixty-five years of age or older or ineligible for high dose chemotherapy	~~- European Union~~ ~~- Other international markets~~
~~Erythema nodosum leprosum~~
~~Cutaneous manifestations of moderate to severe erythema nodosum leprosum (ENL), an inflammatory complication of leprosy~~	~~- United States~~ ~~- Other international markets~~
~~Maintenance therapy for prevention and suppression of the cutaneous manifestation of ENL recurrence~~	~~- United States~~ ~~- Other international markets~~

~~ISTODAX~~^® ~~(romidepsin):~~ ~~ISTODAX~~^® is administered by intravenous infusion for the treatment of patients with the diseases as indicated below and has received orphan drug designation for the treatment of non-Hodgkin’s T-cell lymphomas, including CTCL and PTCL.



~~Disease~~	~~Geographic Approvals~~
~~Cutaneous T-cell lymphoma (CTCL) in patients who have received at least one prior systemic therapy~~	~~- United States~~ ~~- Other international markets~~
~~Peripheral T-cell lymphoma (PTCL) in patients who have received at least one prior therapy~~	~~- United States~~ ~~- Other international markets~~

Financial Update

The following table summarizes net product sales, total revenue and earnings for the three-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015 (dollar amounts in millions, except per share data):~~

Three-Month Periods Ended September 30, Increase Percent Change
2016 2015
Total revenue $ 2,982.8
$ 2,334.1
$ 648.7
27.8 %
Net income (loss) $ 171.4
$ (34.1 ) $ 205.5
N/A
Diluted earnings (loss) per share $ 0.21
$ (0.04 ) $ 0.25
N/A

~~Total revenue increased by $648.7 million in the three-month period ended September 30,~~ 2016 ~~compared to the three-month period ended September 30, 2015, primarily due to the continued growth in sales of REVLIMID~~^®~~, POMALYST~~^®~~/IMNOVID~~^® ~~and OTEZLA~~^®. The $205.5 million increase in net income and $0.25 increase in diluted earnings per share in the current three-month period were primarily due to a higher level of net product sales, a $425.5 million decrease in research and development collaboration related expenses and a $201.2 million decrease in acquisition-related charges and restructuring, net, partly offset by a $623.3 million research and development asset acquisition expense in the 2016 three-month period associated with the purchase of EngMab, and an increase in selling, general and administrative expenses of $147.7 million due to a $72.0 million increase in expenses for donations to independent non-profit patient assistance organizations in the United States as well as a $30.0 million increase in litigation-related loss contingency accrual expense.

~~The following table summarizes total revenue and earnings for the nine-month periods ended September 30, 2016 and 2015 (dollar amounts in millions, except per share data):~~

Nine-Month Periods Ended September 30, Increase Percent Change
2016 2015
Total revenue $ 8,248.7
$ 6,692.7
$ 1,556.0
23.2 %
Net income $ 1,570.3
$ 1,041.0
$ 529.3
50.8 %
Diluted earnings per share $ 1.95
$ 1.26
$ 0.69
54.8 %

Total revenue increased by $1.556 billion in the nine-month period ended September 30, 2016 compared to the nine-month period ended September 30, 2015, primarily due to the continued growth in sales of REVLIMID^®~~, POMALYST~~^®~~/IMNOVID~~^® ~~and OTEZLA~~^®. The $529.3 million increase in net income and $0.69 increase in diluted earnings per share in the current nine-month period were primarily due to a higher level of net product sales and a $190.6 million decrease in acquisition related charges and restructuring, net, partly offset by a $414.9 million increase in research and development expenses primarily due to a $623.3 million research and development asset acquisition expense associated with the purchase of EngMab, an increase in selling, general and administrative expenses of $276.8 million primarily due to a $130.0 million litigation-related loss contingency accrual expense, and a $187.0 million increase in interest expense due to the issuance of $8.000 billion of senior notes in August 2015.

~~Results of Operations~~

~~Three-Month Periods Ended September 30, 2016 and 2015~~

~~Total Revenue:~~ ~~Total revenue and related percentages for the three-month periods ended September 30, 2016 and 2015 were as follows~~ (dollar amounts in millions):

Three-Month Periods Ended September 30, Increase (Decrease) Percent Change
2016 2015
Net product sales:

REVLIMID^®
$ 1,891.1
$ 1,453.5
$ 437.6
30.1 %
POMALYST^®/IMNOVID^®
341.1
256.5
84.6
33.0 %
OTEZLA^®
274.6
138.7
135.9
98.0 %
ABRAXANE^®
233.3
229.9
3.4
1.5 %
VIDAZA^®
154.7
147.6
7.1
4.8 %
azacitidine for injection 15.3
21.3
(6.0 ) (28.2 )%
THALOMID^®
38.3
45.1
(6.8 ) (15.1 )%
ISTODAX^®
19.4
17.3
2.1
12.1 %
Other 0.8
2.7
(1.9 ) (70.4 )%
Total net product sales $ 2,968.6
$ 2,312.6
$ 656.0
28.4 %
Other revenue 14.2
21.5
(7.3 ) (34.0 )%
Total revenue $ 2,982.8
$ 2,334.1
$ 648.7
27.8 %



	Three-Month Periods Ended June 30,				Increase		Percent Change
	2017		2016		Increase		Percent Change
Net product sales	$	3,256	$	2,744	$	512	18.7	%
Total revenue	3,268		2,754		514		18.7	%
Net income	1,061		598		463		77.4	%
Diluted earnings per share	$	1.31	$	0.75	$	0.56	74.7	%

Total revenue increased by $648.7 million, or 27.8%, to $2.983 billion for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, reflecting increases of $402.5 million, or 28.5%, in the United States and $246.2 million, or 26.7%, in international markets.

~~Net Product Sales:~~ Total net product sales for the three-month period ended ~~September~~June 30, ~~2016~~2017 increased by ~~$656.0~~$512 million, or ~~28.4%~~18.7%, to ~~$2.969~~approximately $3.3 billion compared to the three-month period ended ~~September~~June 30, ~~2015.~~2016. The increase was comprised of net volume increases of ~~$568.7~~$434 million, or 15.9%, and net price increases of ~~$104.1~~$96 million, or 3.5%. The increase in volume was primarily driven by increased unit sales of REVLIMID^®, OTEZLA^® and POMALYST^®/IMNOVID^®. The price impact was primarily attributable to price increases in the U.S., which were partially offset by price decreases in ~~part by a $16.8 million unfavorable~~Europe. Changes in foreign currency exchange ~~impact,~~rates including the impact of foreign exchange hedging ~~activity.~~activity, unfavorably impacted net product sales by $18 million, or 0.7%.

Total revenue increased by $514 million, or 18.7%, to approximately $3.3 billion for the three-month period ended June 30, 2017 compared to the three-month period ended June 30, 2016, reflecting increases of $393 million, or 22.7%, in the United States and $121 million, or 11.8%, in international markets.

In addition to the increase in total revenue discussed above, notable items impacting net income and diluted earnings per share for the three-month periods ended June 30, 2017 and 2016 are as follows (dollar amounts in millions):



	Income Statement Classification	Three-Month Periods Ended June 30,					Increase (Decrease)
	Income Statement Classification	2017			2016		Increase (Decrease)
Collaboration arrangements (see Note 14*)	Research and development	$	78		$	298	$	(220	)
Litigation-related loss contingency accrual expense (see Note 16*)	Selling, general and administrative	315			100		215
Amortization of acquired intangible assets (see Note 10*)	Amortization of acquired intangible assets	88			175		(87		)
Fair value adjustments of forward point amounts (see Note 7*)	Other (expense) income, net	(43		)	8		(51		)

* References to Notes in this table are to the Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report.

The following table summarizes net product sales, total revenue and earnings for the six-month periods ended June 30, 2017 and 2016 (dollar amounts in millions):



	Six-Month Periods Ended June 30,				Increase		Percent Change
	2017		2016		Increase		Percent Change
Net product sales	$	6,206	$	5,239	$	967	18.5	%
Total revenue	6,228		5,266		962		18.3	%
Net income	2,002		1,399		603		43.1	%
Diluted earnings per share	$	2.47	$	1.74	$	0.73	42.0	%

Total net product sales for the six-month period ended June 30, 2017 increased by $967 million, or 18.5%, to approximately $6.2 billion compared to the six-month period ended June 30, 2016. The increase was comprised of net volume increases of $799 million, or 15.3%, and net price increases of $201 million, or 3.8%. The increase in volume was primarily driven by increased unit sales of REVLIMID^®, OTEZLA^® and POMALYST^®/IMNOVID^®. The price impact was primarily attributable to price increases in the U.S., which were partially offset by price decreases in Europe. Changes in foreign currency exchange rates including the impact of foreign exchange hedging activity unfavorably impacted net product sales by $33 million, or 0.6%.

Total revenue increased by $962 million, or 18.3%, to approximately $6.2 billion for the six-month period ended June 30, 2017 compared to the six-month period ended June 30, 2016, reflecting increases of $674 million, or 20.5%, in the United States and $288 million, or 14.6%, in international markets.

In addition to the increase in total revenue discussed above, notable items impacting net income and diluted earnings per share for the six-month periods ended June 30, 2017 and 2016 are as follows (dollar amounts in millions):



	Income Statement Classification	Six-Month Periods Ended June 30,					Increase (Decrease)
	Income Statement Classification	2017			2016		Increase (Decrease)
Collaboration arrangements (see Note 14*)	Research and development	$	99		$	449	$	(350	)
Research and development asset acquisition expenses (see Note 3*)	Research and development	325			—		325
Litigation-related loss contingency accrual expense (see Note 16*)	Selling, general and administrative	315			100		215
Amortization of acquired intangible assets (see Note 10*)	Amortization of acquired intangible assets	170			267		(97		)
Gain on sale of LifebankUSA business (See Note 3*)	Other (expense) income, net	—			38		(38		)
Fair value adjustments of forward point amounts (see Note 7*)	Other (expense) income, net	(24		)	21		(45		)

* References to Notes in this table are to the Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report.

Three-Month Periods Ended June 30, 2017 and 2016

Net Product Sales and Other Revenues

Net product sales and other revenue for the three-month periods ended June 30, 2017 and 2016 were as follows (dollar amounts in millions):

REVLIMID^®



	Three-Month Periods Ended June 30,				Increase		Percent Change
	2017		2016		Increase		Percent Change
U.S.	$	1,358	$	1,079	$	279	25.9	%
International	676		621		55		8.9	%
Worldwide	$	2,034	$	1,700	$	334	19.6	%

REVLIMID^® net sales increased by ~~$437.6~~$334 million, or ~~30.1%~~19.6%, to ~~$1.891~~$2.0 billion for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015,~~2016, primarily due to increased unit sales ~~in both U.S. and international markets and~~as well as price increases in the U.S. market. Increases in market penetration and treatment duration of patients using REVLIMID^® in multiple myeloma contributed to the increase in U.S. unit sales. ~~The growth~~In addition, unit sales increased across all international regions, primarily in ~~international markets resulted~~

~~from volume increases, primarily~~Europe and Japan, driven by increased duration of use and market share gains. ~~Launch activities in the U.S. and EU for the Newly Diagnosed Multiple Myeloma indication, which~~International volume growth was ~~approved in both the U.S. and the EU in February 2015, commenced in 2015.~~partially offset by net price decreases.

POMALYST^®/IMNOVID^®



	Three-Month Periods Ended June 30,				Increase		Percent Change
	2017		2016		Increase		Percent Change
U.S.	$	241	$	185	$	56	30.3	%
International	150		133		17		12.8	%
Worldwide	$	391	$	318	$	73	23.0	%

POMALYST^®/IMNOVID^® net sales increased by ~~$84.6~~$73 million, or ~~33.0%~~23.0%, to ~~$341.1~~$391 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015, reflecting net~~2016, primarily due to increased unit sales ~~of $203.3 million~~and price increases in the ~~United States and $137.8 million~~U.S. In addition, unit sales increased across all international regions, primarily in ~~international markets.~~Europe. Increases in market share and treatment

duration contributed to the increase in U.S. and international net ~~sales of POMALYST~~sales. International volume growth was partially offset by net price decreases.

OTEZLA^®



	Three-Month Periods Ended June 30,				Increase		Percent Change
	2017		2016		Increase		Percent Change
U.S.	$	306	$	217	$	89	41.0	%
International	52		24		28		116.7	%
Worldwide	$	358	$	241	$	117	48.5	%

OTEZLA^®~~/IMNOVID~~ net sales increased by $117 million, or 48.5%, to $358 million for the three-month period ended June 30, 2017 compared to the three-month period ended June 30, 2016. Net sales in the United States were volume driven reflecting increased market share and expanding patient access as fiscal year 2016 was the second full year on the market in the U.S. During the second half of 2017, we anticipate continued growth in sales from continued market share expansion attributable to new managed care contracts, early launch countries in Europe, launch in Japan and from additional international approvals.

ABRAXANE^®



	Three-Month Periods Ended June 30,				Increase (Decrease)			Percent Change
	2017		2016		Increase (Decrease)			Percent Change
U.S.	$	161	$	174	$	(13	)	(7.5	)%
International	93		75		18			24.0	%
Worldwide	$	254	$	249	$	5		2.0	%

ABRAXANE^®~~. Achieving reimbursement in additional countries, notably in Japan, also continues~~ net sales increased by $5 million, or 2.0%, to ~~contribute~~$254 million for the three-month period ended June 30, 2017 compared to the ~~growth of POMALYST~~three-month period ended June 30, 2016, primarily due to increases in unit sales in international markets, which were partially offset by a decrease in unit sales in the U.S.

OTHER PRODUCT SALES



	Three-Month Periods Ended June 30,				Increase (Decrease)			Percent Change
	2017		2016		Increase (Decrease)			Percent Change
U.S.	$	49	$	68	$	(19	)	(27.9	)%
International	170		168		2			1.2	%
Worldwide	$	219	$	236	$	(17	)	(7.2	)%

All other product sales, which include VIDAZA^®~~/IMNOVID~~, azacitidine for injection, which is an authorized generic version of VIDAZA^® (azacitidine for injection), THALOMID^® and ISTODAX^® decreased by $17 million primarily due to decreases in azacitidine for injection net sales in the U.S., which were partially offset by increases in VIDAZA^® net sales in international markets.

~~OTEZLA~~^®Other Revenue: ~~net sales~~Other revenue increased by ~~$135.9~~$2 million to ~~$274.6~~$12 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015 reflecting net sales of $244.5 million in the United States and $30.1 million in international markets. OTEZLA~~^® was approved by the U.S. Food and Drug Administration (FDA) in March 2014 for the treatment of adult patients with active psoriatic arthritis and in September 2014 for the treatment of patients with moderate to severe plaque psoriasis who are candidates for phototherapy or systemic therapy. OTEZLA^® ~~was approved for plaque psoriasis and psoriatic arthritis in the European Union in January 2015.~~

~~ABRAXANE~~^® net sales increased by $3.4 million, or 1.5%, to $233.3 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015. U.S. sales decreased 0.8 percent to $144.0 million and international sales increased 5.4 percent to $89.3 million. The decrease in sales in the U.S. was due to volume decreases that were offset by an increase in price, while in international markets, volume increases were slightly offset by price decreases. The quarterly activity reflects customer buying patterns and increased competition in breast cancer and lung cancer from new market entrants.

~~VIDAZA~~^® net sales increased by $7.1 million, or 4.8%, to $154.7 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, primarily due to a $9.3 million increase in international markets resulting from increased unit sales which was partly offset by price decreases.

Azacitidine for injection net sales decreased by $6.0 million, or 28.2%, to $15.3 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, primarily due to price decreases which were partially offset by an increase in unit volumes.

~~THALOMID~~^® net sales decreased by $6.8 million, or 15.1%, to $38.3 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, primarily resulting from lower unit volumes in the U.S.

~~ISTODAX~~^® net sales increased by $2.1 million, or 12.1%, to $19.4 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, due to increases in both price and unit volume.

~~Other Revenue:~~ Other revenue decreased by $7.3 million to $14.2 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015 primarily due to a $5.7 million decrease in royalty revenue from Novartis Pharma AG (Novartis) based upon its sales of both RITALIN^® ~~and FOCALIN XR~~^®~~, both of which have been negatively impacted by generic competition in certain markets, a trend we expect to accelerate throughout the remainder of~~ 2016.

Gross to Net Sales Accruals:We record gross to net sales accruals for ~~sales returns and allowances, sales discounts,~~ government rebates, chargebacks and distributor service ~~fees.~~

~~REVLIMID~~^®~~, POMALYST~~^®fees, sales discounts, and ~~THALOMID~~^® ~~are distributed in the United States primarily through contracted pharmacies under the REVLIMID~~^® ~~Risk Evaluation and Mitigation Strategy (REMS), POMALYST REMS~~^TM ~~and THALOMID REMS~~^TM ~~programs, respectively. These are proprietary risk-management distribution programs tailored specifically to provide for the safe and appropriate distribution and use of REVLIMID~~^®~~, POMALYST~~^® ~~and THALOMID~~^®~~. Internationally, REVLIMID~~^®~~, THALOMID~~^®~~/Thalidomide Celgene~~^TM ~~and IMNOVID~~^® are distributed under mandatory risk-management distribution programs tailored to meet local authorities’ specifications to provide for the product’s 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. VIDAZA^®~~, ABRAXANE~~^®~~, ISTODAX~~^® ~~and OTEZLA~~^® ~~are distributed through the more traditional pharmaceutical industry supply chain and are not subject to the same risk-management distribution programs as REVLIMID~~^®~~, POMALYST~~^®~~/IMNOVID~~^® ~~and THALOMID~~^®~~/Thalidomide Celgene~~^TM.

~~We base our~~ sales returns ~~allowance on estimated on-hand retail/hospital inventories, measured end-customer demand as reported by third-party sources, actual returns history~~ and other factors, such as the trend experience for lots where product is still being returned or inventory centralization and rationalization initiatives conducted by major pharmacy chains, as applicable. If the historical data we useallowances. For a discussion of our gross to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. Under this methodology, we track actual returns by individual production lots. Returns on closed lots, that is, lots no longer eligible for return credits, are analyzed to determine historical returns experience. Returns on open lots, that is, lots still eligible for return credits, are monitored and compared with historical return trend rates. Any changes from the historical trend rates are considered in determining the currentnet sales ~~return allowance. As noted above, REVLIMID~~^®~~, POMALYST~~^®~~/IMNOVID~~^® ~~and THALOMID~~^®~~/Thalidomide Celgene~~^TM are distributed primarily through hospitals and contracted pharmacies, which are typically subject to tighter controls of inventory quantities within the supply channel and, thus, resulting in lower returns activity.

~~Sales discount~~ accruals, ~~are based on payment terms extended to customers.~~

Government rebate accruals are based on estimated payments due to governmental agencies for purchases made by third parties under various governmental programs. U.S. Medicaid rebate accruals are generally based on historical payment data and estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Center for Medicaid and Medicare Services. The Medicaid rebate percentage was increased and extended to Medicaid Managed Care Organizations in March 2010. The accrual of the rebates associated with Medicaid Managed Care Organizations is calculated based on estimated historical patient data related to Medicaid Managed Care Organizations. We also analyze actual billings received from the states to further support the accrual rates. Subsequent to implementation of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the 2010 U.S. Health Care Reform Law), certain states have not completed their Medicaid Managed Care Organization billing for the years of 2010 through 2015. Our accruals for these Medicaid Managed Care Organization rebates had been at elevated levels given the delays in the receipt of complete invoices from certain states. Due to the receipt of more complete claims data during 2013, 2014 and 2015, the accruals for certain states were reduced from these elevated levels as a result of both payments being applied to the accrual during 2013, 2014 and 2015 and changes in estimate of the ultimate obligation during the fourth quarters of 2013, 2014 and 2015. We will continue to adjust the rebate accruals as more information becomes available and to reflect actual claims experience. Manufacturers of pharmaceutical products are responsible for 50% of the patient’s cost of branded prescription drugs related to the Medicare Part D Coverage Gap. In order to estimate the cost to us of this coverage gap responsibility, we analyze data for eligible Medicare Part D patients against data for eligible Medicare Part D patients treated with our products as well as the historical invoices. This expense is recognized throughout the year as costs are incurred. In certain international markets government-sponsored programs require rebates to be paid based on program specific rules and, accordingly, the rebate accruals are determined primarily on estimated eligible sales.

Rebates or administrative fees are offered to certain wholesale customers, group purchasing organizations and end-user customers, consistent with pharmaceutical industry practices. Settlement of rebates and fees may generally occur from one to 15 months from the date of sale. We record a provision for rebates at the time of sale based on contracted rates and historical redemption rates. Assumptions used to establish the provision include level of wholesaler inventories, contract sales volumes and average contract pricing. We regularly review the information related to these estimates and adjust the provision accordingly.

Chargeback accruals are based on the differentials between product acquisition prices paid by wholesalers and lower government contract pricing paid by eligible customers covered under federally qualified programs. Distributor service fee accruals are based on contractual fees to be paid to the wholesale distributor for services provided. TRICARE is a health care program of the U.S. Department of Defense Military Health System that provides civilian health benefits for military personnel, military retirees and their dependents. TRICARE rebate accruals are included in chargeback accruals and are based on estimated Department of Defense eligible sales multiplied by the TRICARE rebate formula.

~~See~~see Critical Accounting Estimates and Significant Accounting Policies in our ~~2015~~2016 Annual Report on Form ~~10-K for further discussion of gross to net sales accruals.~~10-K.

Gross to net sales accruals and the balance in the related allowance accounts for the three-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 were as follows (in millions):

Sales Returns Discounts
Government
Rebates

Chargebacks
and Distributor
Service Fees
Total
Balance at June 30, 2016 $ 14.4
$ 14.6
$ 326.8
$ 165.8
$ 521.6
Allowances for sales during prior periods (0.7 ) —
3.1
(7.0 ) (4.6 )
Allowances for sales during 2016 2.8
40.3
164.1
191.1
398.3
Credits/deductions issued for prior year sales (1.7 ) —
(67.6 ) —
(69.3 )
Credits/deductions issued for sales during 2016 (1.2 ) (39.8 ) (83.9 ) (184.1 ) (309.0 )
Balance at September 30, 2016 $ 13.6
$ 15.1
$ 342.5
$ 165.8
$ 537.0

Balance at June 30, 2015 $ 12.3
$ 12.4
$ 169.6
$ 119.7
$ 314.0
Allowances for sales during prior periods —
—
9.2
—
9.2
Allowances for sales during 2015 2.7
30.5
89.5
125.3
248.0
Credits/deductions issued for prior year sales (1.2 ) —
(3.5 ) (0.1 ) (4.8 )
Credits/deductions issued for sales during 2015 (1.8 ) (31.4 ) (57.9 ) (127.6 ) (218.7 )
Balance at September 30, 2015 $ 12.0
$ 11.5
$ 206.9
$ 117.3
$ 347.7



	Government Rebates			Chargebacks and Distributor Service Fees			Sales Discounts			Sales Returns and Allowances			Total
Balance as of March 31, 2017	$	447		$	199		$	17		$	13		$	676
Allowances for sales during prior periods	2			(3		)	—			—			(1		)
Allowances for sales during 2017	214			285			48			3			550
Credits/deductions issued for sales during prior periods	(29		)	(20		)	—			(2		)	(51		)
Credits/deductions issued for sales during 2017	(141		)	(248		)	(47		)	(1		)	(437		)
Balance as of June 30, 2017	$	493		$	213		$	18		$	13		$	737

Balance as of March 31, 2016	$	318		$	149		$	15		$	13		$	495
Allowances for sales during prior periods	4			—			—			—			4
Allowances for sales during 2016	158			197			36			4			395
Credits/deductions issued for sales during prior periods	(11		)	(12		)	—			(2		)	(25		)
Credits/deductions issued for sales during 2016	(142		)	(168		)	(36		)	(1		)	(347		)
Balance as of June 30, 2016	$	327		$	166		$	15		$	14		$	522

A comparison of provisions for allowances for sales within each of the four categories noted above for the three-month periods ended ~~September~~June 30, 2017 and 2016 ~~and 2015~~are as follows:

~~Provisions for sales returns decreased~~Government rebate provisions increased by ~~$0.6~~$54 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September 30, 2015.~~

~~Discount provisions increased by $9.8 million for the three-month period ended September~~June 30, 2016, ~~compared to the three-month period ended September 30, 2015,~~which was primarily due to ~~increased sales volumes. The $9.8~~a $42 million increase ~~primarily related to increases in the United States, with increases of $5.8 million of cash discounts related to REVLIMID~~^®~~and $2.9 million related to OTEZLA~~^®.

Government rebates provisions increased by $68.5 million for the three-month period ended September 30, 2016 compared to the three-month period ended September 30, 2015, primarily due to increases of $47.1 million in government rebates in the U.S. market and ~~$21.4~~a $12 million increase in international government rebates. The ~~$47.1 million~~ increase in the U.S. market was primarily due to higher sales volumes and increased rebate rates, with ~~$29.5~~$27 million due to an increase in Medicaid rebates (primarily in the managed care channel) and ~~$17.3~~$15 million due to an increase in expense related to the Medicare Part D Coverage Gap. The ~~$21.4 million~~ increase in international government rebates was primarily driven by higher sales volumes ~~for our primary products in Europe as well as~~and increased rebate rates.

Chargebacks and distributor service fees provisions increased by ~~$58.8~~$85 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015.~~2016. Chargebacks increased by approximately ~~$47.5~~$40 million and distributor service fees increased by approximately ~~$11.3~~$45 million. The ~~chargeback increases were~~increase in chargebacks was primarily due to higher sales volumes and a greater portion of sales qualifying for chargeback rebates, including a ~~$7.5~~$9 million increase related to the TRICARE program driven by higher sales ~~volume and increased rebate rates.~~volumes. The distributor service fee increase was primarily ~~due~~attributable to ~~higher~~increased sales volumes ofand new managed care contracts effective January 1, 2017 for OTEZLA^®, which accounted for ~~$9.3~~$34 million of the increase and a $10 million increase in ~~distributor service fees.~~commercial copayment program expense which also was attributable to higher sales volumes.

Discount provisions increased by $12 million for the three-month period ended June 30, 2017 compared to the three-month period ended June 30, 2016, primarily due to higher sales volumes. The increase primarily related to an increase of $7 million related to REVLIMID^® and increases related to OTEZLA^® and POMALYST^®.

Provisions for sales returns and allowances decreased by $1 million for the three-month period ended June 30, 2017 compared to the three-month period ended June 30, 2016.

Operating Costs and ~~Expenses:~~Expenses

Operating costs, expenses and related percentages for the three-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 were as follows (dollar amounts in millions):

Three-Month Periods Ended September 30, Increase (Decrease) Percent Change
2016 2015
Cost of goods sold (excluding amortization of acquired intangible assets) $ 107.7
$ 109.9
$ (2.2 ) (2.0 )%
Percent of net product sales 3.6 % 4.8 %

Research and development $ 1,653.5
$ 1,304.5
$ 349.0
26.8 %
Percent of total revenue 55.4 % 55.9 %

Selling, general and administrative $ 698.0
$ 550.3
$ 147.7
26.8 %
Percent of total revenue 23.4 % 23.6 %

Amortization of acquired intangible assets $ 87.1
$ 63.6
$ 23.5
36.9 %
Acquisition related charges and restructuring, net $ 25.0
$ 226.2
$ (201.2 ) (88.9 )%

Cost of Goods Sold (excluding amortization of acquired intangible assets):



	Three-Month Periods Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
Cost of goods sold (excluding amortization of acquired intangible assets)	$	111		$	111		$	—	—	%
Percent of net product sales	3.4		%	4.0		%

Cost of goods sold (excluding amortization of acquired intangible assets) ~~decreased by $2.2 million to $107.7 million~~were flat for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015.~~2016. As a percent of net product sales, cost of goods sold (excluding amortization of acquired intangible assets) decreased to ~~3.6%~~3.4% for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to ~~4.8%~~4.0% for the three-month period ended ~~September~~June 30, ~~2015. The decrease in both the amount of cost of goods sold and as a percent of net product sales was~~2016, primarily due to OTEZLA^®, REVLIMID^® and POMALYST^®, which have a lower cost, ~~making up~~comprising a higher percentage of net product sales, while sales of ABRAXANE^®, VIDAZA^® and azacitidine for injection, which have a ~~lower gross margin,~~higher cost, made up a lower percentage of net product sales.

Research and ~~Development:~~Development



	Three-Month Periods Ended June 30,						(Decrease)			Percent Change
	2017			2016			(Decrease)			Percent Change
Research and development	$	835		$	949		$	(114	)	(12.0	)%
Percent of total revenue	25.6		%	34.5		%

Research and development expenses ~~increased~~decreased by ~~$349.0~~$114 million to ~~$1.654 billion~~$835 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015.~~2016. The ~~increase~~decrease was ~~primarily~~ due to a $623.3 million research and development asset acquisition expense associated with the purchase of EngMab as well as increases in activity in support of our early- to mid-stage product pipeline, partially offset by decreases inlower expenses related to collaboration ~~arrangements. See Note 3~~arrangements, partially offset by increases in clinical trial and drug discovery activity. Our research and development expenses may fluctuate from period-to-period based on the volume and timing of ~~Notes~~closing asset acquisitions and collaboration arrangements and associated obligations pursuant to ~~Unaudited Consolidated Financial Statements contained elsewhere in this report for additional details related to our purchase of EngMab.~~such arrangements.

The following table provides a breakdown of research and development expenses (in millions):


	Three-Month Periods Ended September 30,				Increase (Decrease)			Three-Month Periods Ended June 30,				Increase (Decrease)			Percent Change
	2016		2015		Increase (Decrease)			2017		2016		Increase (Decrease)			Percent Change
Human pharmaceutical clinical programs	$	282.4	$	263.7	$	18.7		$	349	$	302	$	47		15.6	%
Other pharmaceutical programs	201.2		170.9		30.3			197		188		9			4.8	%
Drug discovery and development	195.0		94.4		100.6			194		155		39			25.2	%
Collaboration arrangements	345.2		770.7		(425.5		)	78		298		(220		)	(73.8	)%
Research and development asset acquisition expenses	623.3		—		623.3
Cellular therapy	6.4		4.8		1.6			17		6		11			183.3	%
Total	$	1,653.5	$	1,304.5	$	349.0		$	835	$	949	$	(114	)	(12.0	)%

Selling, General and Administrative



	Three-Month Periods Ended June 30,						Increase		Percent Change
	2017			2016			Increase		Percent Change
Selling, general and administrative	$	939		$	732		$	207	28.3	%
Percent of total revenue	28.7		%	26.6		%

The following table presents significant developments in our phase III clinical trials and regulatory approval requests that occurred during the three-month period ended September 30, 2016, as well as developments that are expected to occur if the future occurrence is material and reasonably certain:

~~Regulatory approval requests in major markets:~~



~~Product~~	~~Disease Indication~~	~~Major~~ ~~Market~~	~~Regulatory~~ ~~Agency~~	~~Date of Submission or Filing~~
~~REVLIMID~~^®	~~Newly diagnosed multiple myeloma maintenance after receiving an autologous stem-cell transplant~~	~~U.S.~~	~~FDA~~	~~Q3 2016 (filed)~~
~~ISTODAX~~^®	~~Peripheral T-cell lymphoma~~	~~Japan~~	~~PMDA~~¹	~~Q3 2016 (submitted)~~
~~enasidenib (AG-221)~~	~~Relapsed or refractory acute myeloid leukemia with isocitrate dehydrogenase-2 (IDH2) mutation~~	~~U.S.~~	~~FDA~~	~~Q4 2016 (expected submission)~~

¹ ~~Pharmaceuticals and Medical Devices Agency~~

~~Regulatory agency actions:~~



~~Product~~	~~Disease Indication~~	~~Major~~ ~~Market~~	~~Regulatory~~ ~~Agency~~	~~Action~~
~~REVLIMID~~^®	~~Relapsed or refractory mantle cell lymphoma~~	EU	EC	~~Approval~~

~~Selling, General and Administrative:~~Selling, general and administrative expenses increased by ~~$147.7~~$207 million to ~~$698.0~~$939 million for the three-month period ended ~~September~~June 30, ~~2016~~2017 compared to the three-month period ended ~~September~~June 30, ~~2015.~~2016. The increase was primarily due to ~~a $72.0 million increase in expenses for donations to independent non-profit patient assistance organizations in the United States as well as a $30.0 million increase in~~higher litigation-related loss contingency accrual ~~expense.~~expenses incurred during the three-month period ended June 30, 2017 compared to the similar period ended June 30, 2016. During the second quarter of 2017, we recorded a litigation-related loss contingency accrual expense of $315 million related to the Brown Action, which represented our probable and reasonably estimable risk of loss. During the second quarter of 2016, we recorded a $100 million litigation-related loss contingency accrual expense with respect to the lawsuit filed against us by the Children’s Medical Center Corporation (CMCC), which represented our probable and reasonably estimable risk of loss at that time. Subsequently, we reached a settlement agreement with CMCC during the first quarter of 2017. See Note 16 of Notes to the Unaudited Consolidated Financial Statements contained elsewhere in this report for additional information related to these legal matters.

Amortization of Acquired Intangible ~~Assets:~~Assets



	Three-Month Periods Ended June 30,				(Decrease)			Percent Change
	2017		2016		(Decrease)			Percent Change
Amortization of acquired intangible assets	$	88	$	175	$	(87	)	(49.7	)%

Amortization of intangible assets acquired as a result of business combinations is summarized below for the three-month periods ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 (in millions):


	Three-Month Periods Ended September 30,				Three-Month Periods Ended June 30,				(Decrease)
Acquisitions	2016		2015		2017		2016		(Decrease)
Abraxis	$	37.9	$	38.0	$	38	$	38	$	—
Avila	7.2		11.8		8		95		(87		)
Gloucester	22.9		12.8		23		23		—
Pharmion	1.0		1.0		1		1		—
Quanticel	18.1		—		18		18		—
Total amortization	$	87.1	$	63.6	$	88	$	175	$	(87	)



Delaware		22-2711928
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

86 Morris Avenue, Summit, NJ		07901
(Address of principal executive offices)		(Zip Code)



Large accelerated filer	X	Accelerated filer

Non-accelerated filer (Do not check if a smaller reporting company)		Smaller reporting company

Emerging growth company
If an emerging growth company, indicated 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 7(a)(2)(B) of the Securities Act.



		Page No.
PART I	FINANCIAL INFORMATION

Item 1	Financial Statements (Unaudited)

	Consolidated Statements of ~~Operations~~Income - Three-Month and ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	3

	Consolidated Statements of Comprehensive Income ~~(Loss)~~ - Three-Month and ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	4

	Consolidated Balance Sheets - As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016	5

	Consolidated Statements of Cash Flows - ~~Nine-Month~~Six-Month Periods Ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	6

	Notes to Unaudited Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4036

Item 3	Quantitative and Qualitative Disclosures About Market Risk	6153

Item 4	Controls and Procedures	6557


PART II	OTHER INFORMATION

Item 1	Legal Proceedings	6658

Item 1A	Risk Factors	6658

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7970

Item 6	Exhibits	8071

Signature		8172



	Three-Month Periods Ended September 30,						Nine-Month Periods Ended September 30,
	2016			2015			2016			2015
Net income (loss)	$	171.4		$	(34.1	)	$	1,570.3		$	1,041.0
Other comprehensive income (loss):
Foreign currency translation adjustments	3.9			(4.2		)	6.6			(11.9		)
Pension liability adjustment	—			—			—			(7.6		)

Net unrealized gains (losses) related to cash flow hedges:
Unrealized holding gains (losses)	(53.4		)	(67.1		)	(243.7		)	277.0
Tax benefit (expense)	(0.6		)	29.9			17.8			8.3
Unrealized holding gains (losses), net of tax	(54.0		)	(37.2		)	(225.9		)	285.3

Reclassification adjustment for (gains) included in net income (loss)	(69.4		)	(91.4		)	(216.0		)	(249.6		)
Tax (benefit)	(0.6		)	(0.5		)	(1.9		)	(1.5		)
Reclassification adjustment for (gains) included in net income (loss), net of tax	(70.0		)	(91.9		)	(217.9		)	(251.1		)

Net unrealized gains (losses) on marketable securities available for sale:
Unrealized holding (losses)	(7.7		)	(426.3		)	(361.0		)	(434.6		)
Tax benefit	2.1			133.7			129.4			136.8
Unrealized holding (losses), net of tax	(5.6		)	(292.6		)	(231.6		)	(297.8		)

Reclassification adjustment for losses included in net income (loss)	30.7			10.9			71.2			11.6
Tax (benefit)	(10.9		)	(3.9		)	(25.0		)	(4.1		)
Reclassification adjustment for losses included in net income (loss), net of tax	19.8			7.0			46.2			7.5
Total other comprehensive (loss)	(105.9		)	(418.9		)	(622.6		)	(275.6		)
Comprehensive income (loss)	$	65.5		$	(453.0	)	$	947.7		$	765.4



	Three-Month Periods Ended June 30,						Six-Month Periods Ended June 30,
	2017			2016			2017			2016
Net income	$	1,061		$	598		$	2,002		$	1,399
Other comprehensive income (loss):
Foreign currency translation adjustments	31			(15		)	41			3

Net unrealized gains (losses) related to cash flow hedges:
Unrealized holding (losses) gains	(153		)	31			(234		)	(190		)
Tax benefit (expense)	7			8			7			18
Unrealized holding (losses) gains, net of tax	(146		)	39			(227		)	(172		)

Reclassification adjustment for (gains) included in net income	(79		)	(60		)	(163		)	(147		)
Tax (benefit)	(1		)	(1		)	(2		)	(1		)
Reclassification adjustment for (gains) included in net income, net of tax	(80		)	(61		)	(165		)	(148		)

Net unrealized gains (losses) on marketable securities available-for-sale:
Unrealized holding gains (losses)	2			29			229			(353		)
Tax (expense) benefit	(1		)	(12		)	(81		)	127
Unrealized holding gains (losses), net of tax	1			17			148			(226		)

Reclassification adjustment for losses included in net income	34			30			34			40
Tax (benefit)	(13		)	(11		)	(13		)	(14		)
Reclassification adjustment for losses included in net income, net of tax	21			19			21			26
Total other comprehensive (loss)	(173		)	(1		)	(182		)	(517		)
Comprehensive income	$	888		$	597		$	1,820		$	882



		(908) 673-9000
		(Registrant’s telephone number, including area code)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	5,522.6		$	4,880.3		$	6,660		$	6,170
Marketable securities available for sale	1,346.0			1,671.6
Accounts receivable, net of allowances of $32.1 and $30.3 at September 30, 2016 and December 31, 2015, respectively	1,586.3			1,420.9
Marketable securities available-for-sale							3,480			1,800
Accounts receivable, net of allowances of $35 and $31 at June 30, 2017 and December 31, 2016, respectively							1,729			1,621
Inventory	507.9			443.4			533			498
Other current assets	612.8			984.7			734			779
Total current assets	9,575.6			9,400.9			13,136			10,868
Property, plant and equipment, net	891.3			814.1			989			930
Intangible assets, net	10,498.9			10,858.1			10,218			10,392
Goodwill	4,865.8			4,879.0			4,866			4,866
Other assets	922.1			1,012.3
Other non-current assets							1,097			1,030
Total assets	$	26,753.7		$	26,964.4		$	30,306		$	28,086
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current portion of long-term debt	501.0			—			500			501
Accounts payable	235.4			240.8			272			247
Accrued expenses and other current liabilities	1,847.1			1,647.7			2,379			2,115
Income taxes payable	3.8			19.8			32			41
Current portion of deferred revenue	62.1			60.6			57			55
Total current liabilities	2,649.4			1,968.9			3,240			2,959
Deferred revenue, net of current portion	28.4			30.0			31			28
Income taxes payable	370.1			324.2			463			420
Other non-current tax liabilities	2,519.2			2,519.2			2,519			2,519
Other non-current liabilities	1,733.8			2,041.7			1,825			1,771
Long-term debt, net of discount	13,802.5			14,161.4			13,783			13,789
Total liabilities	21,103.4			21,045.4			21,861			21,486
Commitments and Contingencies (Note 15)
Stockholders’ Equity:
Preferred stock, $.01 par value per share, 5.0 million shares authorized; none outstanding at September 30, 2016 and December 31, 2015, respectively	—			—
Common stock, $.01 par value per share, 1,150.0 million shares authorized; issued 949.4 million and 940.1 million shares at September 30, 2016 and December 31, 2015, respectively	9.5			9.4
Common stock in treasury, at cost; 174.0 million and 153.5 million shares at September 30, 2016 and December 31, 2015, respectively	(16,130.2		)	(14,051.8		)
Preferred stock, $.01 par value per share, 5.0 million shares authorized; none outstanding at June 30, 2017 and December 31, 2016, respectively							—			—
Common stock, $.01 par value per share, 1,150.0 million shares authorized; issued 964.1 million and 954.1 million shares at June 30, 2017 and December 31, 2016, respectively							10			10
Common stock in treasury, at cost; 182.0 million and 175.5 million shares at June 30, 2017 and December 31, 2016, respectively							(17,069		)	(16,281		)
Additional paid-in capital	11,981.2			11,119.3			13,174			12,378
Retained earnings	9,644.7			8,074.4			12,093			10,074
Accumulated other comprehensive income	145.1			767.7			237			419
Total stockholders’ equity	5,650.3			5,919.0			8,445			6,600
Total liabilities and stockholders’ equity	$	26,753.7		$	26,964.4		$	30,306		$	28,086



	Total Consideration
Cash paid for outstanding common stock	$	7,311.3
Cash for equity compensation attributable to pre-combination service	314.9
Total consideration	$	7,626.2



	Amounts Recognized as of the Acquisition Date
Working capital¹	$	479.2
Property, plant and equipment	5.0
In-process research and development product rights	6,842.0
Current deferred tax assets²	241.3
Other non-current assets	7.9
Non-current deferred tax liabilities³	(2,519.2		)
Total identifiable net assets	5,056.2
Goodwill	2,570.0
Total net assets acquired	$	7,626.2



	Three-Month Period Ended September 30, 2015		Nine-Month Period Ended September 30, 2015
Total revenue	$	2,334.1	$	6,692.7
Net income	$	107.3	$	1,029.8
Net income per common share: basic	$	0.14	$	1.30
Net income per common share: diluted	$	0.13	$	1.24



	Fair Value at October 19, 2015 (as adjusted)
Cash	$	95.9
Fair value of pre-existing equity ownership	11.4
Contingent consideration	155.3
Total fair value of consideration	$	262.6



	Pension Liability			Net Unrealized Gains (Losses) From Marketable Securities			Net Unrealized Gains (Losses) From Hedges			Foreign Currency Translation Adjustment			Total Accumulated Other Comprehensive Income (Loss)
Balance December 31, 2015	$	(13.9	)	$	271.5		$	586.4		$	(76.3	)	$	767.7
Other comprehensive income (loss) before reclassifications	—			(231.6		)	(225.9		)	6.6			(450.9		)
Amounts reclassified from accumulated other comprehensive income	—			46.2			(217.9		)	—			(171.7		)
Net current-period other comprehensive income (loss)	—			(185.4		)	(443.8		)	6.6			(622.6		)
Balance September 30, 2016	$	(13.9	)	$	86.1		$	142.6		$	(69.7	)	$	145.1

Balance December 31, 2014	$	(15.5	)	$	460.9		$	519.6		$	(50.2	)	$	914.8
Other comprehensive income (loss) before reclassifications	(7.6		)	(297.8		)	285.3			(11.9		)	(32.0		)
Amounts reclassified from accumulated other comprehensive income	—			7.5			(251.1		)	—			(243.6		)
Net current-period other comprehensive income (loss)	(7.6		)	(290.3		)	34.2			(11.9		)	(275.6		)
Balance September 30, 2015	$	(23.1	)	$	170.6		$	553.8		$	(62.1	)	$	639.2



	Pension Liability Adjustment			Net Unrealized Gains (Losses) On Available-for-Sale Marketable Securities			Net Unrealized Gains (Losses) Related to Cash Flow Hedges			Foreign Currency Translation Adjustments			Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2016	$	(38	)	$	144		$	415		$	(102	)	$	419
Other comprehensive income (loss) before reclassifications, net of tax	—			148			(227		)	41			(38		)
Reclassified losses (gains) from accumulated other comprehensive income, net of tax	—			21			(165		)	—			(144		)
Net current-period other comprehensive income (loss), net of tax	—			169			(392		)	41			(182		)
Balance as of June 30, 2017	$	(38	)	$	313		$	23		$	(61	)	$	237

Balance as of December 31, 2015	$	(14	)	$	272		$	586		$	(76	)	$	768
Other comprehensive (loss) income before reclassifications, net of tax	—			(226		)	(172		)	3			(395		)
Reclassified losses (gains) from accumulated other comprehensive income, net of tax	—			26			(148		)	—			(122		)
Net current-period other comprehensive (loss) income, net of tax	—			(200		)	(320		)	3			(517		)
Balance as of June 30, 2016	$	(14	)	$	72		$	266		$	(73	)	$	251


			Gains (Losses) Reclassified Out of Accumulated Other Comprehensive Income														Gains (Losses) Reclassified Out of Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income Components		Affected Line Item in the Consolidated Statements of Operations	Three-Month Periods Ended September 30,						Nine-Month Periods Ended September 30,							Classification in the Consolidated Statements of Income	Three-Month Periods Ended June 30,						Six-Month Periods Ended June 30,
Accumulated Other Comprehensive Income Components			2016			2015			2016			2015				Classification in the Consolidated Statements of Income	2017			2016			2017			2016
Gains (losses) from cash-flow hedges:															Gains (losses) from cash-flow hedges:
Foreign exchange contracts		Net product sales	$	71.0		$	92.9		$	221.0		$	253.6			Net product sales	$	81		$	62		$	167		$	150
Treasury rate lock agreements		Interest (expense)	(1.3		)	(1.1		)	(3.9		)	(2.9		)		Interest (expense)	(2		)	(1		)	(3		)	(2		)
Interest rate swap agreements		Interest (expense)	(0.3		)	(0.4		)	(1.1		)	(1.1		)		Interest (expense)	—			(1		)	(1		)	(1		)
		Income tax provision	0.6			0.5			1.9			1.5				Income tax provision	1			1			2			1

Gains (losses) from available-for-sale marketable securities:	Gains (losses) from available-for-sale marketable securities:														Gains (losses) from available-for-sale marketable securities:
Realized income (loss) on sales of marketable securities		Interest and investment income, net	(30.7		)	(10.9		)	(71.2		)	(11.6		)
Realized (loss) on sales of marketable securities																Interest and investment income, net	(34		)	(30		)	(34		)	(40		)
		Income tax provision	10.9			3.9			25.0			4.1				Income tax provision	13			11			13			14
Total reclassification, net of tax			$	50.2		$	84.9		$	171.7		$	243.6				$	59		$	42		$	144		$	122



Inputs	Ranges (weighted average) utilized as of:
Inputs	~~September~~June 30, ~~2016~~2017	December 31, ~~2015~~2016
Discount rate	~~0.8%~~1.5% to 12.0% ~~(8.6%~~(8.8%)	~~0.8%~~1.5% to 12.0% ~~(8.8%~~(8.6%)
Probability of payment	0% to 95% ~~(42%~~(42.7%)	0% to 95% ~~(53%~~(42.0%)
Projected year of payment for development and regulatory milestones	~~2016~~2017 to 2029 ~~(2019)~~(2020)	~~2016~~2017 to 2029 (2019)
Projected year of payment for sales-based milestones and other amounts calculated as a percentage of annual sales	~~2019~~2020 to ~~2033 (2024)~~2032 (2025)	2019 to 2033 (2024)



Yes	X	No



Yes	X	No



Yes	No	X


	Notional Amount				Notional Amount
Foreign Currency	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Australian Dollar	$	53.3	$	45.1	$	69	$	49
British Pound	188.2		289.3		161		199
Canadian Dollar	164.8		135.9		270		193
Euro	1,936.9		2,934.3		1,367		1,812
Japanese Yen	719.8		510.4		601		597
Swedish Krona	3.0		—
Total	$	3,066.0	$	3,915.0	$	2,468	$	2,850


	Balance at September 30, 2016			Quoted Price in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Balance as of June 30, 2017			Quoted Price in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	1,346.0		$	1,002.3		$	343.7		$	—		$	3,480		$	1,214		$	2,266		$	—
Forward currency contracts	217.9			—			217.9			—			51			—			51			—
Purchased currency options	45.3			—			45.3			—			88			—			88			—
Interest rate swaps													18			—			18			—
Total assets	$	1,609.2		$	1,002.3		$	606.9		$	—		$	3,637		$	1,214		$	2,423		$	—
Liabilities:
Contingent value rights	$	(45.0	)	$	(45.0	)	$	—		$	—		$	(54	)	$	(54	)	$	—		$	—
Interest rate swaps	(43.1		)	—			(43.1		)	—
Written currency options	(44.0		)	—			(44.0		)	—			(114		)	—			(114		)	—
Other acquisition related contingent consideration	(1,480.1		)	—			—			(1,480.1		)	(1,488		)	—			—			(1,488		)
Total liabilities	$	(1,612.2	)	$	(45.0	)	$	(87.1	)	$	(1,480.1	)	$	(1,656	)	$	(54	)	$	(114	)	$	(1,488	)

	Balance at December 31, 2015			Quoted Price in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Balance as of December 31, 2016			Quoted Price in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	1,671.6		$	1,235.9		$	435.7		$	—		$	1,800		$	891		$	909		$	—
Forward currency contracts	606.0			—			606.0			—			379			—			379			—
Purchased currency options	46.7			—			46.7			—			140			—			140			—
Interest rate swaps	52.5			—			52.5			—			31			—			31			—
Total assets	$	2,376.8		$	1,235.9		$	1,140.9		$	—		$	2,350		$	891		$	1,459		$	—
Liabilities:
Contingent value rights	$	(51.9	)	$	(51.9	)	$	—		$	—		$	(44	)	$	(44	)	$	—		$	—
Written currency options	(19.1		)	—			(19.1		)	—			(54		)	—			(54		)	—
Other acquisition related contingent consideration	(1,521.5		)	—			—			(1,521.5		)	(1,490		)	—			—			(1,490		)
Total liabilities	$	(1,592.5	)	$	(51.9	)	$	(19.1	)	$	(1,521.5	)	$	(1,588	)	$	(44	)	$	(54	)	$	(1,490	)



	Three-Month Period Ended June 30, 2017
Liabilities:	Gloucester			Nogra			Avila			Quanticel			Total
Balance as of March 31, 2017	$	(22	)	$	(1,377	)	$	(8	)	$	(120	)	$	(1,527	)
Amounts acquired or issued, including measurement period adjustments	—			—			—			—			—
Net change in fair value	—			5			5			10			20
Settlements, including transfers to Accrued expenses and other current liabilities	—			—			—			19			19
Balance as of June 30, 2017	$	(22	)	$	(1,372	)	$	(3	)	$	(91	)	$	(1,488	)



	Three-Month Period Ended June 30, 2016
Liabilities:	Gloucester			Nogra			Avila			Quanticel			Total
Balance as of March 31, 2016	$	(19	)	$	(1,267	)	$	(96	)	$	(168	)	$	(1,550	)
Amounts acquired or issued, including measurement period adjustments	—			—			—			—			—
Net change in fair value	(1		)	(28		)	81			(2		)	50
Settlements, including transfers to Accrued expenses and other current liabilities	—			—			—			30			30
Balance as of June 30, 2016	$	(20	)	$	(1,295	)	$	(15	)	$	(140	)	$	(1,470	)



	Six-Month Period Ended June 30, 2017
Liabilities:	Gloucester			Nogra			Avila			Quanticel			Total
Balance as of December 31, 2016	$	(21	)	$	(1,346	)	$	(8	)	$	(115	)	$	(1,490	)
Amounts acquired or issued, including measurement period adjustments	—			—			—			—			—
Net change in fair value	(1		)	(26		)	5			5			(17		)
Settlements, including transfers to Accrued expenses and other current liabilities	—			—			—			19			19
Balance as of June 30, 2017	$	(22	)	$	(1,372	)	$	(3	)	$	(91	)	$	(1,488	)



	Six-Month Period Ended June 30, 2016
Liabilities:	Gloucester			Nogra			Avila			Quanticel			Total
Balance as of December 31, 2015	$	(19	)	$	(1,239	)	$	(97	)	$	(167	)	$	(1,522	)
Amounts acquired or issued, including measurement period adjustments	—			—			—			—			—
Net change in fair value	(1		)	(56		)	82			(3		)	22
Settlements, including transfers to Accrued expenses and other current liabilities	—			—			—			30			30
Balance as of June 30, 2016	$	(20	)	$	(1,295	)	$	(15	)	$	(140	)	$	(1,470	)


	Notional Amount¹				Notional Amount¹
	September 30, 2016		December 31, 2015		June 30, 2017		December 31, 2016
Foreign currency option contracts designated as hedging activity:
Purchased Put	$	1,016.6	$	641.5	$	3,181	$	1,790
Written Call	$	1,126.9	$	690.0	3,580		2,009


			September 30, 2016							June 30, 2017
			Fair Value					Consolidated Balance Sheet Classification		Fair Value
Instrument		Balance Sheet Location	Asset Derivatives		Liability Derivatives				Asset Derivatives				Liability Derivatives
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:						Derivatives designated as hedging instruments:
Foreign exchange contracts¹		Other current assets	$	244.6	$	40.3		Consolidated Balance Sheet Classification	Other current assets		$	81			$	23
		Other non-current assets	53.1		30.4			Accrued expenses and other current liabilities		8				13
		Accrued expenses and other current liabilities	1.4		5.7			Other non-current assets		33				26
		Other non-current liabilities	40.1		64.8			Other non-current liabilities		53				100
Interest rate swap agreements		Other non-current liabilities	0.1		44.1			Other current assets		3				—
								Other non-current assets		27				9
								Other non-current liabilities		—				4
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Foreign exchange contracts¹		Other current assets	30.8		6.5			Other current assets		24				7
		Accrued expenses and other current liabilities	0.9		4.0			Accrued expenses and other current liabilities		—				5
Interest rate swap agreements		Other current assets	0.6		0.6			Other current assets		2				2
		Other non-current assets	5.2		4.3			Other non-current assets		2				1
Total			$	376.8	$	200.7				$	233			$	190


	Three-Month Period Ended September 30, 2016											Three-Month Period Ended June 30, 2017
	(Effective Portion)							(Ineffective Portion and Amount Excluded From Effectiveness Testing)				(Effective Portion)							(Ineffective Portion and Amount Excluded From Effectiveness Testing)
Instrument	Amount of Gain/(Loss) Recognized in OCI on Derivative¹			Location of Gain/(Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income			Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative			Amount of Gain/(Loss) Recognized in OCI on Derivative¹			Classification of Gain/(Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income			Classification of Gain/(Loss) Recognized in Income on Derivative	Amount of Gain/(Loss) Recognized in Income on Derivative
Foreign exchange contracts	$	(55.2	)	Net product sales	$	71.0		Other income (expense), net	$	0.2	2	$	(136	)	Net product sales	$	81		Other (expense) income, net	$	(43	)	2
Treasury rate lock agreements	$	—		Interest (expense)	$	(1.3	)	Other income (expense), net	$	—		—			Interest (expense)	(2		)	Other (expense) income, net	—
Interest rate swap agreements	$	1.8		Interest (expense)	$	(0.3	)	Other income (expense), net	$	—		(17		)	Interest (expense)	—			Other (expense) income, net	—


			Amount of Gain Recognized in Income on Derivative															Amount of Gain Recognized in Income on Derivative
	Location of Gain Recognized in Income on Derivative		Three-Month Periods Ended September 30,							Nine-Month Periods Ended September 30,						Classification of Gain Recognized in Income on Derivative		Three-Month Periods Ended June 30,							Six-Month Periods Ended June 30,
Instrument		2016				2015			2016				2015			Classification of Gain Recognized in Income on Derivative	2017				2016			2017				2016
Interest rate swap agreements	Location of Gain Recognized in Income on Derivative	Interest (expense)		$	9.4		$	16.2			$	35.7		$	45.5		Interest (expense)		$	10		$	13			$	19		$	26


			Amount of Gain (Loss) Recognized in Income on Derivative																	Amount of (Loss) Gain Recognized in Income on Derivative
	Location of Gain (Loss) Recognized in Income on Derivative		Three-Month Periods Ended September 30,								Nine-Month Periods Ended September 30,							Classification of (Loss) Gain Recognized in Income on Derivative		Three-Month Periods Ended June 30,								Six-Month Periods Ended June 30,
Instrument		2016				2015				2016				2015					2017				2016				2017				2016
Foreign exchange contracts	Location of Gain (Loss) Recognized in Income on Derivative	Other income (expense), net		$	(11.9	)		$	14.4			$	(39.1	)		$	69.3		Other (expense) income, net		$	(20	)		$	—			$	(42	)		$	(28	)
Put options on our common stock	Other income (expense), net		$	—			$	(18.8	)		$	7.6			$	(9.9	)	Other (expense) income, net		—				3				—				8


September 30, 2016	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
June 30, 2017										Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
U.S. Treasury securities	$	112.7	$	0.1	$	(0.1	)	$	112.7	$	100	$	—	$	(1	)	$	99
U.S. government-sponsored agency securities	3.5		—		—			3.5		23		—		—			23
U.S. government-sponsored agency MBS	28.4		0.1		(0.1		)	28.4		21		—		(1		)	20
Corporate debt - global	171.5		0.8		—			172.3		939		—		—			939
Asset backed securities	26.7		0.1		—			26.8		9		—		—			9
Ultra short income fund										350		—		—			350
Time deposits¹and Repurchase agreements¹										826		—		—			826
Marketable equity securities	870.9		293.7		(162.3		)	1,002.3		732		486		(4		)	1,214
Total available-for-sale marketable securities	$	1,213.7	$	294.8	$	(162.5	)	$	1,346.0	$	3,000	$	486	$	(6	)	$	3,480


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Duration of one year or less	$	60.8	$	61.0	$	997	$	997
Duration of one through three years	270.4		271.0		438		437
Duration of three through five years	11.6		11.7		7		6
Total	$	342.8	$	343.7	$	1,442	$	1,440



	June 30, 2017		December 31, 2016
Raw materials	$	267	$	274
Work in process	109		87
Finished goods	157		137
Total	$	533	$	498



September 30, 2016	Gross Carrying Value		Accumulated Amortization			Intangible Assets, Net
Amortizable intangible assets:
Acquired developed product rights	$	3,405.9	$	(1,632.3	)	$	1,773.6
Technology	482.6		(282.5		)	200.1
Licenses	66.9		(25.5		)	41.4
Other	43.4		(30.2		)	13.2
	3,998.8		(1,970.5		)	2,028.3
Non-amortized intangible assets:
Acquired IPR&D product rights	8,470.6		—			8,470.6
Total intangible assets	$	12,469.4	$	(1,970.5	)	$	10,498.9

December 31, 2015	Gross Carrying Value		Accumulated Amortization			Intangible Assets, Net
Amortizable intangible assets:
Acquired developed product rights	$	3,405.9	$	(1,448.3	)	$	1,957.6
Technology	565.7		(197.1		)	368.6
Licenses	66.7		(22.3		)	44.4
Other	44.0		(27.1		)	16.9
	4,082.3		(1,694.8		)	2,387.5
Non-amortized intangible assets:
Acquired IPR&D product rights	8,470.6		—			8,470.6
Total intangible assets	$	12,552.9	$	(1,694.8	)	$	10,858.1



	September 30, 2016		December 31, 2015
1.900% senior notes due 2017	$	501.0	$	—


	Stock Options		Restricted Stock Units		Performance- Based Restricted Stock Units (in thousands)		Stock Options		RSUs		PSUs (in thousands)
Outstanding at December 31, 2015	75.7		7.7		334
Outstanding as of December 31, 2016							73.8		7.1		463
Changes during the Year:
Granted	8.3		1.4		203		5.9		1.5		169
Exercised / Released	(6.6	)	(2.7	)	(72	)	(9.7	)	(0.3	)	(1	)
Forfeited	(1.9	)	(0.3	)	(29	)	(0.9	)	(0.3	)	(27	)
Outstanding at September 30, 2016	75.5		6.1		436
Outstanding as of June 30, 2017							69.1		8.0		604



	Sales Returns			Discounts			Government Rebates			Chargebacks and Distributor Service Fees			Total
Balance at June 30, 2016	$	14.4		$	14.6		$	326.8		$	165.8		$	521.6
Allowances for sales during prior periods	(0.7		)	—			3.1			(7.0		)	(4.6		)
Allowances for sales during 2016	2.8			40.3			164.1			191.1			398.3
Credits/deductions issued for prior year sales	(1.7		)	—			(67.6		)	—			(69.3		)
Credits/deductions issued for sales during 2016	(1.2		)	(39.8		)	(83.9		)	(184.1		)	(309.0		)
Balance at September 30, 2016	$	13.6		$	15.1		$	342.5		$	165.8		$	537.0

Balance at June 30, 2015	$	12.3		$	12.4		$	169.6		$	119.7		$	314.0
Allowances for sales during prior periods	—			—			9.2			—			9.2
Allowances for sales during 2015	2.7			30.5			89.5			125.3			248.0
Credits/deductions issued for prior year sales	(1.2		)	—			(3.5		)	(0.1		)	(4.8		)
Credits/deductions issued for sales during 2015	(1.8		)	(31.4		)	(57.9		)	(127.6		)	(218.7		)
Balance at September 30, 2015	$	12.0		$	11.5		$	206.9		$	117.3		$	347.7



	Three-Month Periods Ended June 30,						Decrease		Percent Change
	2017			2016			Decrease		Percent Change
Acquisition related (income) charges and restructuring, net	$	(13	)	$	(36	)	$	23	(63.9	)%


¹	Includes Cash and cash equivalents, Marketable securities ~~available for sale,~~available-for-sale, Accounts receivable, net of allowances, Inventory and Other current assets, less Short-term borrowings and current portion of long-term debt, Accounts payable, Accrued expenses and other current liabilities, and the current portion of Income taxes payable.


	Duration												Duration
	Less Than 1 Year			1 to 3 Years			3 to 5 Years			Total			Less Than 1 Year			1 to 3 Years			3 to 5 Years			Total
Principal amount	$	60.5		$	268.8		$	11.3		$	340.6		$	995		$	436		$	6		$	1,437
Fair value	$	61.0		$	271.0		$	11.7		$	343.7		997			437			6			1,440
Weighted average interest rate	1.1		%	1.2		%	1.9		%	1.2		%	1.4		%	1.7		%	2.5		%	1.5		%