NOPQ
`Together we can prevail.TM
`
`bio pharma
`bio pharma
`the next generation
`
`345 Park Avenue | New York, NY 10154-0037 | 212-546-4000 | www.bms.com
`
`NOPQ
`
`2007 Annual Report
`
`AstraZeneca Exhibit 2109
`Mylan v. AstraZeneca
`IPR2015-01340
`
`Page 1 of 124
`
`

`

`Transforming
`
`On our cover
`
`Close-up of a 96-microtube rack.
`Each tube is labeled with a unique
`bar code that identifies the con-
`tents, which may be chemical
`compounds, cells, proteins, DNA,
`antibodies or other biological
`reagents. This rack design and
`coding greatly enhance auto-
`mated research activities such
`as high-throughput screening.
`
`State-of-the-art technology—
`combined with our scientists’
`innovative thinking and leading-
`edge research—is helping to
`transform Bristol-Myers Squibb
`into a next-generation
`BioPharma company.
`
`On our back cover
`
`In 1999 Jim Creaby of Manasquan,
`New Jersey, noticed a suspicious
`mole on his chest. It was diagnosed
`as malignant melanoma, which had
`spread to his lymph nodes. Despite
`rounds of surgery and chemotherapy,
`the cancer continued to spread
`over the next several years. Then in
`January 2007 Jim entered a clinical
`trial for ipilimumab, an investigational
`compound being developed by
`Bristol-Myers Squibb and Medarex Inc.
`Since entering the trial, Jim appears
`to be doing well. “I’m grateful to
`Bristol-Myers Squibb and all the
`people who have worked on this,”
`he says.
`
`© 2008 Bristol-Myers Squibb Company
`
`All rights reserved.
`Designed, photographed and
`written by the Bristol-Myers Squibb
`Corporate and Business
`Communications Department.
`
`Reach Out and Read is a project
`sponsored by Bristol-Myers Squibb
`employees and the Bristol-Myers
`Squibb Foundation as part of
`SECURE THE FUTURE.
`
`Building bridges
`All too often, patients worldwide
`face barriers to health care. And
`certain populations—particularly
`the urban and rural poor, women, racial and ethnic
`minorities and marginalized people—experience worse
`health outcomes compared with others.
`The Bristol-Myers Squibb Foundation seeks to address
`these health disparities. The Foundation has targeted
`four diseases and regions. They are:
`• HIV/AIDS in Africa, where the AIDS pandemic
`continues to spread.
`• Hepatitis in Asia, where millions are chronically
`infected with hepatitis B.
`• Cancer in Central and Eastern Europe, where greater
`access to cancer education, treatment, prevention
`and care is especially needed.
`• Serious mental illness in the U.S., where underserved
`populations often need enhanced care and support.
`The model for these programs is Bristol-Myers Squibb’s
`initiative, SECURE THE FUTURE. This $150 million program,
`established in 1999 to help confront HIV/AIDS in Africa,
`has clearly demonstrated that communities can reduce
`disparities by integrating clinic-based medical care with
`community-based health education and supportive
`care. As part of SECURE THE FUTURE, Bristol-Myers Squibb
`and Baylor College of Medicine have established five
`pediatric clinical centers and about 20 satellite clinics in
`Africa to treat HIV-positive children and their families.
`
`Page 2 of 124
`
`

`

`for the future
`
`To Our Stockholders
`
`I’m pleased to report
`
`that your company delivered strong financial
`
`results in 2007, with solid growth in both sales
`
`and earnings. In accordance with Generally
`
`Accepted Accounting Principles (GAAP),
`
`Bristol-Myers Squibb reported net fully diluted
`
`earnings per share (EPS) from continuing
`
`operations of 99 cents in 2007 compared
`
`with 73 cents in 2006. Total net sales from
`
`continuing operations in 2007 were $19.3
`
`billion compared with $17.3 billion in 2006.
`
`>>
`
`Page 3 of 124
`
`

`

`The company also reported non-GAAP EPS from continuing
`operations of $1.38 for the year. The non-GAAP EPS information
`is an indication of our operational performance and does not
`include specified income and expense items that affect the com-
`parability of our results. If we include 10 cents of earnings from
`discontinued operations—our Medical Imaging business, which was
`sold in January 2008—our fully diluted non-GAAP EPS were $1.48.
`This figure is one cent higher than Wall Street consensus and also
`above the upper end of our final 2007 EPS guidance range, which
`we revised upward four times over the course of the year. It com-
`pares with our 2006 fully diluted non-GAAP EPS from continuing
`operations of $1.01 ($1.09 including discontinued operations).
`Our solid growth is largely the result of the strong performance
`of our key pharmaceutical brands,
`including Plavix, Abilify,
`Reyataz, Avapro/Avalide, Orencia, Sprycel, Erbitux, Baraclude
`and the Sustiva franchise, all of them addressing areas of signifi-
`cant medical need. In 2007 we added another important therapy
`to our growing arsenal of innovative anticancer treatments:
`Ixempra, for advanced breast cancer. Ixempra is off to a good
`start in the U.S., and we’ve filed for its approval in the European
`Union and Japan.
`
`Becoming a next–generation
`BioPharma company
`Over the past year, the entire Management Council has spent a
`great deal of time looking at the business from top to bottom as part
`of a comprehensive review of the company’s strategy, operations
`and prospects. Our mandate was clear: find ways to increase rev-
`enue, expand profit margins and improve cash flows so we can
`boost shareholder value while also delivering a steady stream of
`innovative medicines to patients fighting serious diseases—and do
`all this by being both competitive and compliant.
`The review took place against a backdrop of numerous
`challenges to both our company and the pharmaceutical industry
`as a whole. The overall political and regulatory environment
`remains problematic for the entire industry, with fewer new drugs
`being approved and review times increasing in many instances.
`Pricing pressures are intensifying, as payors—especially govern-
`ments—look for new ways to reduce health care expenditures.
`And lengthy and expensive patent challenges by generics
`companies—such as the one we faced recently with Plavix—are
`becoming the norm.
`In addition, the industry is facing an unprecedented wave of
`patent expirations over the next few years that could impact its
`ability to invest in research and development (R&D) and deliver
`strong returns to investors. Fortunately for Bristol-Myers Squibb, our
`major exclusivity losses are behind us for the time being, although
`in the 2011–12 time frame in the U.S. we face expiration of the
`Plavix patent as well as the loss of Abilify—our two top products.
`This is why it’s so important for us to prepare now for this eventuality.
`
`the
`next
`generation
`BioPharma
`company
`
`Our mandate is clear:
`
`find ways to increase
`
`revenue, expand profit
`
`margins and improve
`
`cash flows so we can
`
`boost shareholder value
`
`while also delivering a
`
`steady stream of innovative
`
`medicines to patients
`
`fighting serious diseases.
`
`2 Bristol-Myers Squibb | 2007 Annual Report
`
`Page 4 of 124
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`

`

`In the course of our review of the business, several things
`became clear:
`• First, we must make fundamental changes in the organization
`and operations of our company if we want to grow our
`business, increase shareholder value and become a dynamic
`biopharmaceutical leader for the future.
`• Second, we need to make continuous productivity improve-
`ment a central tenet of our business and operations going for-
`ward to keep our R&D and new product engine fully stoked.
`• And finally, we must concentrate even harder on delivering
`greater value to patients fighting serious diseases, which
`we can achieve by further refining our focus on innovation in
`our products as well as in the ways we provide our products
`to patients.
`
`Appreciating the little things
`“It’s been quite an ordeal,” says Jean Rymon. That’s an
`understatement.
`Jean, 54, of Emmaus, Pennsylvania, was diagnosed
`with breast cancer in 1991 and treated with surgery and
`chemotherapy. She caught the cancer early, and following
`treatment she appeared cancer free. She and her husband
`continued with their lives and raised their two sons, now
`24 and 21.
`But even as the years passed, cancer was never far from
`Jean’s mind. She knew it could recur. And in June 2000 it
`did, when her doctor detected metastases in her lymph
`nodes and bones.“Since then,” she says,“it seems like I’ve
`been on every drug available.” Although perhaps slowed,
`the cancer continued to spread, and it invaded her lungs.
`“It got pretty bad, and by the end of 2006 I didn’t expect to
`survive.” Jean was so weak she had to have help to get out
`of bed. And worse, she had run out of treatment options.
`Then her doctor suggested she enter a clinical trial with Ixempra (ixabepilone).“When she told me about it,
`I was ready.” Jean entered the trial in May 2007, and since then, she appears to be doing better.“I’m walking and eating
`better and I’ve got increased stamina. Also I’m cooking and helping with cleaning and the laundry. I never thought I’d
`appreciate doing those things, but now I do.”
`Ixempra, discovered and developed by Bristol-Myers Squibb researchers, was approved by the U.S. Food and Drug
`Administration in October 2007. In addition, the Marketing Authorization Application for Ixempra was submitted in
`September 2007 to the European Medicines Evaluation Agency, and the Japanese New Drug Application was submitted
`in December.
`“I am so fortunate to have benefited from cancer research,” Jean says.“I tell everyone I know,‘Put your money into
`cancer research!’” For her part, Jean has helped raise $25,000 for breast cancer research.
`
`Jean Rymon
`
`fighting serious disease
`
`2007 Annual Report | Bristol-Myers Squibb 3
`
`Page 5 of 124
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`

`

`Last December we unveiled our plans for transforming Bristol-
`Myers Squibb from a midcap pharmaceutical company to
`a next–generation BioPharma company. This hybrid approach
`combines the strengths of a tra-
`ditional pharmaceutical com-
`pany—such as its global reach
`and its integrated commercial
`and manufacturing infrastruc-
`ture—with the advantages of
`agility, entrepreneurial thinking
`and flexibility that are charac-
`teristic of many successful bio-
`technology companies.
`A key element of our new
`BioPharma approach is a selec-
`tively integrated business model
`that basically says we will not
`do everything ourselves in the
`extensive process of bringing
`new medicines to market. Of
`course we will continue to invest
`in our productive pipeline: our
`pharmaceutical R&D expendi-
`tures exceeded $3 billion in
`2007 and are slated to grow
`modestly in 2008.
`At the same time, we’re constantly consid-
`ering selective acquisitions of companies,
`products and technologies—along with pursu-
`ing partnerships—that support our objectives
`in our disease areas of focus. We call this
`approach our “String of Pearls” strategy, and
`I’m happy to say it’s been greatly enhanced
`with our acquisition of Adnexus Therapeutics in
`October 2007. This dynamic biotech company
`is developing an exciting new therapeutic
`class of biologics targeting cancer and other
`serious diseases.
`Biologics—large molecule protein-based
`therapeutics—remain a cornerstone of our drug
`discovery and development strategy in oncol-
`ogy and immunology, and their importance
`will only grow. In May 2007 we broke ground on
`our $750 million biologics manufacturing facility
`in Devens, Massachusetts, the single largest
`capital investment in the history of Bristol-Myers
`Squibb. We expect the Devens plant to begin
`producing Orencia, our treatment for rheuma-
`toid arthritis, and other biologics by 2011.
`
`Janette Abramowitz (right)
`and Jochem Gokemeijer,
`scientists at Bristol-Myers
`Squibb’s Adnexus labs in
`Waltham,Massachusetts
`
`String of Pearls
`Bristol-Myers Squibb is committed to helping patients
`prevail over serious diseases. To accelerate the discovery
`and development of new therapies, we are complementing and
`enhancing our internal capabilities with innovative alliances, partnerships
`and acquisitions. This is our “String of Pearls” strategy.
`A recent example of one type of “pearl” is the acquisition of Adnexus
`Therapeutics, a biotech company that has developed a proprietary
`and novel class of biologics called Adnectins. The first investigational
`oncology compound developed from this technology, CT-322, is already
`in Phase II clinical development for glioblastoma multiforme. In addition,
`Adnexus has developed a proprietary protein engineering system called
`PROfusion, which can engineer trillions of protein variations at one time.
`Together, Adnectins and the PROfusion technology represent a powerful
`next-generation biologics platform for a wide variety of targets and
`therapeutic areas.
`Pearls such as Adnexus, combined with our existing internal capabilities,
`will further augment Bristol-Myers Squibb’s pharmaceutical pipeline and
`ensure the continued delivery of innovative medicines.
`
`adding new pearls
`
`4 Bristol-Myers Squibb | 2007 Annual Report
`
`Page 6 of 124
`
`

`

`delivering innovation
`
`Managing disease, managing life
`Rod Olson, 42, is director of sales at a shipping company based in
`New York. In August 2006 he was feeling unusually tired.“At first I thought
`I had bronchitis or the flu,” he says. He went to his doctor and had some
`blood tests. Later, he was with members of his sales team when the doctor
`called him with the results: He was HIV positive.“I was shocked at first,”
`he says,“but then I thought,‘OK, what do I need to do?’” He went online,
`did his research and spoke to his doctor. His doctor prescribed Atripla
`(efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate
`300 mg), a once-daily, single-tablet regimen, the result of a first-of-its-kind
`collaboration between Bristol-Myers Squibb and Gilead Sciences.“I take
`one pill a day,” Rod says.“That pill reminds me that I need to be proactive,
`stay healthy and eat right and exercise. Life is fragile, and sometimes bad
`things can happen. But for me, HIV is a manageable disease.”
`
`As part of our BioPharma strategy, we’re
`working with partners to share development
`and commercialization costs and risks for
`several promising compounds. In April 2007
`we announced a worldwide collaboration
`with Pfizer to develop and commercialize
`apixaban, a Bristol-Myers Squibb-discovered
`anticoagulant that is being studied for the
`prevention and treatment of a broad range
`of venous and arterial thrombotic conditions.
`Our transformation into a next–generation
`BioPharma company is linked to another
`important effort designed to make Bristol-
`Myers Squibb much more productive,
`efficient and effective. Our Productivity
`Transformation initiative is intended to free
`up and redirect resources—time, money
`and energy—that can be put to better use
`investing in our pipeline and new products
`and adding to our “String of Pearls.”
`Over the next three years, we
`expect to reduce spending by
`$1.5 billion through both cost
`savings and cost avoidance,
`and this reduction in our annual
`cost base will be sustained from
`2010 forward. There are more
`than 300 initiatives under way
`across the company to achieve
`this goal,and we’re making good
`progress so far.
`These initiatives include reduc-
`ing general and administrative
`operations by simplifying, stan-
`dardizing and outsourcing,
`where appropriate, processes
`and services. We’re cutting the
`number of brands in the com-
`pany’s mature products portfo-
`lio by 60 percent over the next
`four years and reducing by
`more than half the number of
`manufacturing facilities by the
`end of 2010. We’re also reduc-
`ing staff in certain business sup-
`port functions while continuing to invest as appropriate in R&D,
`biologics and drug commercialization talent. Overall we expect a
`net 10 percent reduction in headcount over the next three years.
`It’s important to stress that we’re addressing the productivity
`issue through actions that are selective and strategic, not across-
`
`Rod Olson
`
`2007 Annual Report | Bristol-Myers Squibb 5
`
`Page 7 of 124
`
`

`

`James D. Robinson III
`Over his many years
`of service on our Board
`of Directors, Jim Robinson
`has not just witnessed
`tremendous change at
`Bristol-Myers Squibb—he’s
`been a prime driver of it.
`During that period, our
`company has evolved from
`a diversified provider of health, personal care and consumer products
`to a more focused cutting-edge biopharmaceutical leader. Recently,
`this transformation has accelerated dramatically—with Jim playing a
`central role in shaping a compelling vision of success for our company
`based on the twin tenets of growing shareholder value and helping
`patients prevail over serious diseases.
`Jim came to the chairmanship of Bristol-Myers Squibb at a difficult time
`in our company’s recent past. He moved quickly to restore confidence,
`build trust and inspire belief in the importance of our mission and the
`exciting opportunities ahead for us to make an even bigger difference in
`the lives of people everywhere. Now, as we move forward with our plans
`for becoming a next–generation BioPharma company, we are grateful for
`Jim’s leadership and commitment that have been key to turning those
`plans into blueprints for action.
`Jim stepped down from the Board chairmanship on February 12 as he
`will soon reach the Board’s mandatory retirement age. Still, I know I can
`continue to count on him for insight, advice and friendship at this critical
`time for our company. In recognition of his longstanding commitment to
`the advancement of medical science and patient care, the Bristol-Myers
`Squibb Foundation will endow the Bristol-Myers Squibb / James D.
`Robinson III Chairs to develop young faculty at New York’s Memorial
`Sloan-Kettering Cancer Center. Jim has long been associated with this
`renowned cancer treatment and teaching institution. In this way and
`many others, the legacy of Jim Robinson will continue to touch lives and
`inspire greatness for many years to come.
`
`— Jim Cornelius
`
`the-board. Bristol-Myers Squibb
`remains committed to attracting,
`developing and retaining out-
`standing talent.
`Included in these planned cost
`cuts is a significant downsizing of
`our Park Avenue headquarters to
`much more utilitarian offices on
`a single, lower floor.
`I’m grateful to employees
`across the company for their
`ideas—big and small—for saving
`money. For example,
`several
`colleagues determined recently
`that we could print our drug information sheets
`on lighter weight paper, potentially saving the
`company at least $250,000.
`The role of our non-pharmaceutical businesses
`in our future plans is still being evaluated, though
`it’s clear our relationship to these brands will shift
`as part of our BioPharma approach. These busi-
`nesses are profitable and successful, and they’ve
`delivered steady growth, excellent margins and
`stable cash flows. We’re looking for opportunities
`to increase their value for our shareholders while
`recognizing that they don’t offer synergy oppor-
`tunities with the BioPharma model.
`Our Medical Imaging business—which is fac-
`ing a major exclusivity loss this year on its primary
`product, Cardiolite—was sold in January 2008
`to Avista Capital Partners for $525 million. For
`the remaining two non-pharmaceutical busi-
`nesses—ConvaTec, a maker of ostomy products
`and wound therapeutics, and Mead Johnson
`Nutritionals, a leading provider of infant formula
`and children’s nutritional products—we’re looking
`at a range of strategic alternatives to maximize
`shareholder value.
`With such a promising future for the company,
`I’m pleased the Board voted last December
`to increase the indicated annual dividend for
`2008 by 11 percent to $1.24 per share. And just
`as important, we’re doing this while also increas-
`ing investments in the pipeline and achieving
`significant cost savings in non-priority areas.
`Ultimately, our success as a next–generation
`BioPharma company will be measured by
`the difference we can make in the lives of
`patients fighting serious diseases—in our ability
`to inspire hope for the future. We want as
`many patients as possible to echo the words of
`
`6 Bristol-Myers Squibb | 2007 Annual Report
`
`Page 8 of 124
`
`

`

`Nicole Dalton, a patient featured in our Together we can prevail
`corporate advertising, who is winning her fight with rheumatoid
`arthritis: “Today, I have a life. I am the champion.”
`
`Building a promising future
`I can think of no more exciting time to be part of this
`great company as it literally reinvents itself for the future. While
`businesses are always in a state of flux, it’s not common for a
`company to launch a top-to-bottom transformation of its organi-
`zation and operational philosophy. But these are not common
`times for the pharmaceutical industry. For companies to succeed
`they need to embrace different ways of thinking and acting.
`I believe our next–generation BioPharma model incorporates the
`best of these new approaches—and provides the clearest
`roadmap for achieving our goals.
`Feeling optimistic as I do about the future of Bristol-Myers
`Squibb, I was delighted and honored when fellow Board members
`approached me about serving as chairman of the Board in
`addition to chief executive officer. I had planned to continue as
`CEO only into 2009 but had a true change of heart when it
`became clear to me how many exciting opportunities lie ahead
`for this company.
`I am fortunate to be working with an outstanding senior lead-
`ership team who represent a diversity of backgrounds and
`perspectives. Recently we announced several important
`changes to that team.
`Lamberto Andreotti, executive vice president and chief operat-
`ing officer of our pharmaceuticals business, has assumed addi-
`tional responsibility for Mead Johnson Nutritionals and ConvaTec.
`He is now executive vice president and chief operating officer of
`the company. Lamberto and Elliott Sigal, executive vice president
`and chief scientific officer, continue to help shape and drive the
`transformation of our company to a next-generation BioPharma
`leader.
`In addition, John Celentano, formerly president of the Health
`Care Group,is now responsible for
`Strategy, Corporate and Business
`Development, and Infomation
`Management and Global Shared
`Services. He remains our Produc-
`tivity Transformation chief as well.
`I also want to welcome several
`new members of the Manage-
`ment Council. Jean-Marc Huet is
`our chief financial officer, who
`will assume his duties at the end
`of this month. He joins us from
`Royal Numico N.V., a nutritional
`products company that was
`recently acquired by Danone.
`
`Anthony McBride is our new senior vice president for Human
`Resources. He has held several human resources leadership
`positions at Bristol-Myers Squibb, including most recently head of
`that function in our pharmaceuticals business. Brian Daniels,
`senior vice president of Global Development in our R&D organi-
`zation, has played a key leadership role in our drug development
`strategy for several years and will now bring that expertise
`directly to the Management Council.
`respectively, Andrew
`Jean-Marc and Anthony succeed,
`Bonfield, who is leaving to pursue other interests, and Steve Bear,
`who is retiring. I am grateful to both Andrew and Steve for their
`wise counsel and dedicated service to Bristol-Myers Squibb.
`I have been deeply impressed by the passion and commitment
`of our employees all across the company. Following one of my
`regular companywide communications on our plans for the future,
`an employee e-mailed me: “This is why I joined Bristol-Myers Squibb.
`Our focus remains on the patients and the fight to cure, or help
`with, serious diseases.”
`Before closing, I would like to acknowledge several other Board
`developments. I’m pleased to welcome Alan J. Lacy and Togo D.
`West Jr. to the Board. Alan is senior advisor to Oak Hill Capital
`Partners, L.P., a private equity investment firm, and former CEO
`and vice chairman of Sears, Roebuck and Co. Togo is chairman
`of TLI Leadership Group and of Noblis, Inc., and a former U.S.
`secretary of the army and U.S. secretary of veterans affairs.
`In addition, I congratulate Board member Lewis B. Campbell on
`his appointment as lead independent director. In this role, Lewis will
`facilitate information flow and communication between the other
`directors and myself. And finally, on behalf of the entire Board, I
`thank Jim Robinson for his dedicated and outstanding service as
`non-executive chairman from June 2005 until February 2008.
`To my colleagues on the Board—and to all of the outstanding
`employees of Bristol-Myers Squibb—thank you for your ongoing
`support and commitment. It would be impossible to imagine—let
`alone plan for—such a promising future for our company without
`your singular dedication to our mission and goals.
`
`James M. Cornelius
`Chairman and Chief Executive Officer
`
`March 7, 2008
`
`2007 Annual Report | Bristol-Myers Squibb 7
`
`Page 9 of 124
`
`

`

`Our Pipeline
`
`Disease Areas
`Oncology
`
`Cancer
`
`Cardiovascular & Metabolic Diseases
`Atherosclerosis/Thrombosis
`
`Diabetes
`
`Obesity
`
`Neuroscience
`Psychiatric Disorders
`
`Alzheimer’s Disease
`
`Virology
`
`Hepatitis
`
`HIV/AIDS
`
`Immunology
`Rheumatoid Arthritis
`
`Solid Organ
`Transplant Rejection
`
`Each investigational
`compound or research
`program is represented in
`the chart above as a bar.
`
`Discovery
`
`Exploratory Development
`
`Full Development
`
`Life Cycle Management
`
`Our ability to bring new products to patients in need and to
`find new uses for our current products is dependent upon our
`demonstrating safety and efficacy and a favorable benefit-risk
`relationship via systematic testing in patients who volunteer to
`participate in our studies.
`Like any other scientific endeavor, drug research and develop-
`ment is a complex, time-consuming, resource-intensive process
`with no guaranteed results. Bristol-Myers Squibb is committed
`to pursuing such research and development and, in doing so,
`helping patients to prevail.
`
`As a transforming next-generation BioPharma company, Bristol-
`Myers Squibb is dedicated to discovering and developing innova-
`tive medicines that address serious unmet medical needs in key
`disease areas. Those areas, listed in the chart above, were selected
`with an emphasis on patient needs as well as opportunities for
`leadership by the company.
`Compounds and research programs in Discovery are at the
`earliest stages of research. Compounds in Exploratory Development
`are in preclinical or early clinical development. Full Development
`compounds are investigational drugs that are in later-stage clinical
`development or have been submitted to regulatory agencies
`for approval. Life Cycle Management compounds are among
`approved medicines that are driving current and future growth
`while also undergoing continued clinical development to
`determine whether additional indications and formulations will
`benefit patients.
`
`8 Bristol-Myers Squibb | 2007 Annual Report
`
`Page 10 of 124
`
`

`

`Financial Review
`
`Management’s Discussion
`and Analysis of Financial Condition
`and Results of Operations
`
`Consolidated Financial Statements
`
`Notes to the Consolidated Financial Statements
`
`Reports of Management
`
`Controls and Procedures
`
`Reports of Independent
`Registered Public Accounting Firms
`
`Five-Year Financial Summary
`
`2
`
`46
`
`50
`
`105
`
`106
`
`107
`
`110
`
`Page 11 of 124
`
`

`

`Bristol-Myers Squibb
`
`MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
`
`EXECUTIVE SUMMARY
`
`About the Company
`
`Bristol-Myers Squibb Company (BMS, the Company or Bristol-Myers Squibb) is a global biopharmaceutical and related health
`care products company whose mission is to extend and enhance human life by providing the highest quality pharmaceutical and
`related health care products. The Company is engaged in the discovery, development, licensing, manufacturing, marketing,
`distribution and sale of pharmaceuticals and related health care products.
`
`The Company has three reportable segments—Pharmaceuticals, Nutritionals and ConvaTec. The Pharmaceuticals segment
`consists of the global pharmaceutical/biotechnology and international consumer medicines business, which accounted for
`approximately 81% of the Company’s 2007 net sales. The Nutritionals segment consists of Mead Johnson Nutritionals (Mead
`Johnson), primarily an infant formula and children’s nutritionals business, which accounted for approximately 13% of the Company’s
`2007 net sales. The ConvaTec segment consists of an ostomy, wound and skin care business, which accounted for approximately 6%
`of the Company’s 2007 net sales and was previously included in the Other Health Care operating segment. In January 2008, the
`Company completed the sale of its Medical Imaging business to Avista Capital Partners L.P. (Avista). The results of the Medical
`Imaging business, previously included in the former Other Health Care operating segment, are presented as part of the Company’s
`results from discontinued operations.
`
`2007 Financial Highlights
`
`Worldwide net sales from continuing operations for 2007 increased 12% to $19.3 billion compared to 2006. Plavix (clopidogrel
`bisulfate) sales grew 46%, primarily reflecting the adverse impact of generic competition from August 2006 to mid-2007, as well as
`strong underlying sales growth. The other key products within the Company’s Pharmaceuticals segment, including Avapro/Avalide
`(irbesartan/irbesartan-hydrochlorothiazide), Reyataz (atazanavir sulfate), the Sustiva (efavirenz) Franchise and Abilify (aripiprazole),
`experienced double digit sales growth for the year. Sales of the Company’s newer specialty and biologics medicines Baraclude
`(entecavir), Orencia (abatacept) and Sprycel (dasatinib) continued to be strong. In addition, the Company launched Ixempra
`(ixabepilone) for the treatment of metastatic or locally advanced breast cancer. Overall worldwide sales growth, however, was
`moderated by a significant decline in Pravachol (pravastatin sodium) sales due to generic competition.
`
`Net earnings from continuing operations were $2.0 billion in 2007 compared with $1.4 billion in 2006. The 2007 results include
`a $230 million charge for acquired in-process research and development related to the purchase of Adnexus Therapeutics, Inc.
`(Adnexus), a $292 million charge in connection with the Company’s three-year Productivity Transformation Initiative (PTI) and a
`$275 million impairment charge of the Company’s investment in certain auction rate securities (ARS). The 2006 results include a
`$353 million increase in reserves for a pricing and sales litigation settlement and $220 million in early debt retirement costs.
`Additionally, the Company also recorded gains on sale of product assets and properties of $273 million and $200 million in 2007 and
`2006, respectively.
`
`In December 2007, the Company announced that the Board of Directors (the Board) declared an 11% dividend increase, the first
`increase since 2002. The dividend increase will result in a quarterly dividend of thirty-one cents ($.31) per share on the Company’s
`Common Stock for an indicative dividend for the full year of 2008 of $1.24 per share, subject to the normal quarterly review by the
`Board.
`
`Business Environment
`
`The Company conducts its business primarily within the pharmaceutical/biotechnology industry, which is highly competitive
`and subject to numerous government regulations. Many competitive factors may significantly affect the Company’s sales of its
`products, including product efficacy, safety, price and cost-effectiveness, marketing effectiveness, product labeling, quality control
`and quality assurance of its manufacturing operations, and research and development of new products. To successfully compete for
`business in the health care industry, the Company must demonstrate that its products offer medical benefits, as well as cost
`advantages. Currently, most of the Company’s new product introductions compete with other products already on the market in the
`same therapeutic category, in addition to potential competition of new products that competitors may introduce in the future. The
`Company manufactures branded products, which are priced higher than generic products. Generic competition is one of the
`Company’s leading challenges globally.
`
`In the pharmaceutical/biotechnology industry, the majority of an innovative product’s commercial value is usually realized
`during the period that the product has market exclusivity. When a product loses exclusivity, it is no longer protected by a patent and is
`subject to new competing products in the form of generic brands. Upon exclusivity loss, the Company can lose a major portion of that
`product’s sales in a short period of time. Currently, generic versions of biological products cannot be approved under U.S. law.
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`However, the law could change in the future. Even in the absence of new legislation, the U.S. Food and Drug Administration (FDA)
`is taking steps toward allowing generic versions of certain biologics. C