UNITED STATES
`
`SECURITIES AND EXCHANGE COMMISSION
`
`WASHINGTON, D.C. 20549
`
`FORM 10-Q
`
`(Mark One}
`
`QUARTERLY REPORT UNDER SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
`QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015
`
`El
`
`TRANSITION REPORT PURSUANT TO SECTION 13 OR I5(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`FOR THE TRANSITION PERIOD FROM
`TO
`
`Commission file number:
`
`I-I136
`
`BRISTOL—MYERS SQUIBB COMPANY
`(Exact name of registrant as specified in its charter)
`
`Delaware
`
`(State or other jurisdiction ol‘
`incorporation or organization)
`
`22-0 790350
`
`(l.R.S. Employer
`Identification No.)
`
`345 Park Avenue, New York, N.Y. 10154
`(Address of principal executive offices) (Zip Code)
`
`(212) 546-4000
`(Registrant's telephone number, including area eode)
`
`(Former name, former address and former fiscal year, it‘ changed since last report)
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or l5{d) ofthe Securities Exchange Act
`of 1934 during the preceding [2 months {or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
`the filing requirements for the past 90 days. Yes
`No El
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site. if any. every Interactive Data
`File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.4[l5 ofthis chapter} during the preceding 12 months (or for
`such shorter period that the registrant was required to submit and post such tiles). Yes
`No [I
`
`Indicate by check mark whether the registrant is a large accelerated filer. an accelerated filer, a non-accelerated filer or a smaller reporting
`company. See definition of“accelerated filer", “large accelerated filer“ and “smaller reporting company" in Rule 12b-2 ofthe Exchange Act. {Check
`one):
`
`Large accelerated filer
`
`Accelerated filer Cl No-n—aceelerated filer El
`
`Smaller reponing company El
`
`Indicate by check mark whether the registrant is a shell company [as defined in Rule l2b-2 ofthe Exchange Act) Yes El No
`
`APPLICABLE ONLY TO CORPORATE ISSUERS:
`
`At September 30, 2015, there were l,668.286.3 I7 shares outstanding ofthe Registrant's $0.10 par value common stock.
`
`BMS 2010
`CFAD V. BMS
`|PR2015-01723
`
`Page 1
`
`BMS 2010
`CFAD v. BMS
`IPR2015-01723
`
`Page 1
`
`

`

`BRISTOL-MYERS SQUI BB COMPANY
`INDEX TO FORM 10-Q
`SEPTEMBER 30, 2015
`
`PART I—FINANCIAL INFORMATION
`
`Item 1.
`
`Financial Statements:
`
`Consolidated Statements of Earnings and Comgrehensive Income
`Consolidated Balance Sheets
`
`Consolidated Statements ofCash Flows
`
`Notes to Consolidated Financial Statements
`
`Item 2.
`
`Management’s Discussion and Analysis ofFinaneia| Condition and Rcsuits ofOQcrations
`
`Item 3.
`
`Quantitative and Qualitative Disclosure About Market Risk
`
`Item 4.
`
`Controls and Procedures
`
`PART ll—OTHER INFORMATION
`
`Item 1.
`
`Legal Proceedings
`
`Item 1A.
`
`Risk Factors
`
`Item 2.
`
`Issuer Purchases of Eguity Securities
`
`Item 6.
`
`Exhibits
`
`Signatures
`
`Page 2
`
`I‘:
`
`I‘:
`
`I‘:
`
`I‘:
`
`Page 2
`
`

`

`PART I—FINANCIAL INFORMATION
`
`Item 1. FINANCIAL STATEMENTS
`
`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED STATEMENTS OF EARNINGS
`
`Dollars and Shares in Millions, Except Per Share Data
`(UNAUDITED)
`
`EARNINGS
`
`Net product sales
`Alliance and other revenues
`
`Total Revenues
`
`Cost of products so Id
`Marketing, selling and administrative
`
`Advertising and product promotion
`
`Research and development
`
`Other (ineome)1’expense
`
`Total Expenses
`
`Earnings Before Income Taxes
`Provision for Income Taxes
`
`Net Earnings
`
`Net Earnings Attributable to Noncontrolling Interest
`
`Net Earnings Attributable to BMS
`
`Three Months Ended September 30,
`2015
`2:314
`
`Nine Months Ended September 30.
`2015
`2014
`
`‘5
`
`$
`
`$
`
`3.552
`517
`
`4,069
`
`$
`
`3
`
`2,843
`1.078
`
`3,921
`
`3
`
`3
`
`10,183
`2,090
`
`12,273
`
`S
`
`$
`
`1.097
`983
`
`193
`
`1.132
`
`(323)
`
`3,082
`
`98?
`25?
`
`"130
`
`24
`
`706
`
`S
`
`1,007
`1.029
`
`171
`
`983
`
`(27?)
`
`2.913
`
`1,008
`276
`
`732
`
`11
`
`721
`
`2,957
`2,845
`
`495
`
`4,004
`
`(515)
`
`9,786
`
`2,487
`668
`
`1.819
`
`57
`
`3
`
`1.762
`
`$
`
`8,420
`3,201
`
`11.621
`
`2,966
`2,937
`
`521
`
`3.345
`
`(589)
`
`9,180
`
`2,441
`439
`
`2,002
`
`11
`
`1.991
`
`Earnings per Common Share
`Basic
`Diluted
`
`Cash dividends declared per common share
`
`31%
`$
`
`$
`
`0.42
`0.42
`
`0.37
`
`$
`S
`
`S
`
`0.43
`0.43
`
`0.36
`
`$
`S
`
`S
`
`1.06
`1.05
`
`1.11
`
`$
`513
`
`$
`
`1.20
`1.19
`
`1.08
`
`CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
`Dollars in Millions
`
`(UNAUDITED)
`
`COMPREHENSIVE INCOME
`
`Net E€|l'I1il1g3
`
`Other Comprehensive |ncomef(Loss), net oftaxes and reclassifieations to earnings:
`
`Derivatives qualifying as cash flow hedges
`
`Pension and postretirement benefits
`Available-for-sale securities
`
`Foreign currency translation
`
`Other Comprehensive Incomef(Loss)
`
`Comprehensive Income
`
`Comprehensive Income Attributable to Noncontrolling Interest
`
`Comprehensive Income Attributable to BMS
`
`Page 3
`
`$
`
`Three Months Ended
`September 30,
`2015
`2014
`
`Nine Months Ended
`September 30,
`2015
`2014
`
`$
`
`730
`
`$
`
`732
`
`$
`
`1,819
`
`$
`
`2.002
`
`(46)
`
`(131)
`(16)
`
`(29)
`
`(222)
`
`508
`
`24
`
`484
`
`$
`
`57
`
`(407)
`(22)
`
`(8)
`
`(380)
`
`352
`
`11
`
`341
`
`(49)
`
`131
`(22)
`
`(30)
`
`30
`
`49
`
`(508)
`(7)
`
`2
`
`(464)
`
`1,849
`
`57
`
`1,538
`
`11
`
`$
`
`1,792
`
`$
`
`1,527
`
`Page 3
`
`

`

`The accompanying notes are an integral part of these consolidated financial statements.
`
`Page 4
`
`Page 4
`
`

`

`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED BALANCE SHEETS
`
`Dollars in Millions, Except Share and Per Share Data(UNAUDlTED)
`
`ASSETS
`Current Assets:
`
`Cash and cash equivalents
`Marketable securities
`
`Receivables
`Inventories
`
`Deferred income taxes
`
`Prepaid expenses and other
`Assets held-for-sale
`
`Total Current Assets
`
`Property, plant and equipment
`Goodwill
`
`Other intangible assets
`Deferred income taxes
`
`Marketable securities
`Other assets
`
`Total Assets
`
`LIABILITIES
`
`Currettt Liabilities:
`
`Short-term borrowings
`
`Accounts payable
`Accrued expenses
`Deferred income
`Accrued rebates and returns
`
`lncotne taxes payable
`Dividends payable
`
`Total Current Liabilities
`
`Pension, postretirement and postemployment liabilities
`Deferred income
`
`Income taxes payable
`Other liabilities
`
`Long-tenn debt
`
`Total Liabilities
`
`Commitments and contingencies {Note 19}
`
`EQUITY
`
`Bristol-Myers Squibb Company Shareholders‘ Equity:
`
`Preferred stock. 52 convertible series. par value $1 per share: Authorized 10 million shares; issued
`and outstanding 4,1718 in 2015 and 4,212 in 2014, liquidation value of$50 per share
`
`Common stock, par value of S0. 10 per share: Authorized 4.5 billion shares; 2.2 billion issued in both 2015
`and 21114
`
`Capital in excess of par value of stock
`
`Accumulated other comprehensive loss
`
`Retained eztmings
`
`Less cost oftreasury stock — 540 million common shares in 2015 and 547 million in 2014
`
`Total Bristol-Myers Squibb Company Shareholders’ Equity
`
`Page 5
`
`S
`
`S
`
`S
`
`September 31],
`2015
`
`December 31,
`2014
`
`$
`
`3,9?5
`1.43 8
`
`3,908
`l .130
`
`L73 l
`
`529
`215
`
`12,926
`
`4,249
`6.952
`
`1,544
`719
`
`4.627
`762
`
`5.571
`1,864
`
`3.390
`1.560
`
`L644
`
`470
`109
`
`14,608
`
`4,417
`7,027
`
`1,753
`915
`
`4,408
`621
`
`3 1 .7';'9
`
`$
`
`33.749
`
`642
`
`S
`
`1,249
`2,330
`963
`1,159
`
`179
`636
`
`7,158
`
`902
`630
`
`716
`468
`
`6.632
`
`15,506
`
`—
`
`221
`
`[.413
`
`(2,395)
`
`32,446
`
`(16,606)
`
`15.079
`
`590
`
`2,487
`2,459
`1,167
`851
`
`262
`645
`
`8,461
`
`1,1 15
`770
`
`560
`618
`
`7.242
`
`18,766
`
`—
`
`221
`
`1,50?
`
`(2.425)
`
`32,541
`
`(16,992)
`
`14,852
`
`Page 5
`
`

`

`Noncontrolling interest
`
`Total Equity
`Total Liabilities and Equity
`
`194
`
`15,273
`315379
`
`$
`
`131
`
`14,983
`33,749
`
`5
`
`The accompanying nmes are an integral part ofthese consolidated financial statements.
`
`Page 6
`
`Page 6
`
`

`

`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED STATEMENTS OF CASH FLOWS
`Dollars in Millions
`
`(UNAUDITED)
`
`Cash Flows From Operating Activities:
`
`Net earnings
`
`Adjustments to reconcile net earnings to net cash provided by operating activities:
`Net earnings attributable to noncontrolling interest
`
`Depreciation and amortization, net
`Deferred income taxes
`
`Stock-based compensation
`
`irnpairment charges
`Pension settlements and amortization
`
`Other adjustments
`
`Changes in operating assets and liabilities:
`Receivables
`
`Inventories
`Accounts payable
`Deferred income
`
`Income taxes payable
`Other changes
`
`Net Cash Provided by Operating Activities
`
`Cash Flows From Investing Activities:
`Sale and maturities of marketable securities
`
`Purchases of marketable securities
`
`Additions to property, plant and equipment and capitalized software
`
`Divestitures and other proceeds
`Acquisitions and other payments
`
`Net Cash Provided by!(Uscd in) Investing Activities
`
`Cash Flows From Financing Activities:
`
`Short-term borrowings, net
`
`Issuance ofiong-term debt
`
`Repayments of long-term debt
`
`Interest rate swap contract terminations
`lssuances ofcornmon stock
`
`Dividends
`
`Net Cash Used in Financing Activities
`Effect of Exchange Rates on Cash and Cash Equivalents
`
`Increasei’(Decrease) in Cash and Cash Equivalents
`
`Cash and Cash Equivalents at Beginning of Period
`
`Cash and Cash Equivalents at End of Period
`
`Nine Months Ended September 30,
`2015
`2014
`
`S
`
`l.8l9
`
`$
`
`2,002
`
`(57)
`
`300
`51
`
`126
`
`24
`ITS
`
`306
`
`(586)
`
`231
`(1.218)
`153
`
`T?
`(233)
`
`1,221
`
`2,449
`
`(2,283)
`
`(535)
`
`673
`(892)
`
`(588)
`
`54
`
`[.268
`
`(1,952)
`
`(2)
`231
`
`(1,359)
`
`(2,265)
`36
`
`(1,596)
`
`5.571
`
`3,9'i'S
`
`$
`
`(I I)
`
`364
`(5?)
`
`147
`
`386
`206
`
`(562)
`
`26
`
`(162)
`63
`404
`
`82
`(312)
`
`2,5 76
`
`2,77]
`
`(4,811)
`
`(335)
`
`3,453
`(213)
`
`865
`
`45
`
`—
`
`(676)
`
`(4)
`229
`
`(1,800)
`
`(2,206)
`30
`
`1,265
`
`3,586
`
`4,851
`
`$
`
`The accompanying notes are an integral part ofthese consolidated financial statements.
`
`Page 7
`
`Page 7
`
`

`

`Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS
`
`Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS or the Company) prepared these unaudited consolidated
`financial statements following the requirements of the Securities and Exchange Commission (SEC) and United States (US) generally accepted
`accounting principles (GAAP) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required
`for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in
`this Form l0-Q. These consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the
`financial position at September 30, 2015 and December3l, 2014, and the results of operations for the three and nine months ended September 30,
`2015 and 2014, and cash flows for the nine months ended September 30, 2015 and 2014. All intercompany balances and transactions have been
`eliminated. These unaudited consolidated financial statements and the related notes should be read in conjunction with the audited consolidated
`financial statements for the year ended December 3 1, 2014 included in the Annual Report on Form I0-K (2014 Form 10-K).
`
`Revenues, expenses. assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited
`consolidated financial statements may not be indicative of full year operating results. The preparation of financial statements requires the use of
`management estimates and assumptions. The most significant assumptions are employed in estimates used in determining the fair value and
`potential impairment of intangible assets; sales rebate and return accruals; legal contingencies; income taxes; estimated selling prices used in
`multiple clement arrangements; and pension and postretircment benefits. Actual results may differ from estimated results.
`
`Certain prior period amounts were reclassified to conform to the current period presentation. Pension settlements and amortization previously
`presented in Other in the consolidated statements ofcash flows are now presented separately.
`
`In April 2015, the Financial Accounting Standards Board (FASB) issued amended guidance on the presentation of debt issuance costs. The new
`guidance requires debt issuance costs to be presented as a reduction to the carrying value of debt in the balance sheet, consistent with debt
`discounts. The guidance becomes effective on January 1. 2016, with early adoption permitted on a retrospective basis. The adoption of this
`standard will not have a material impact on our consolidated financial statements.
`
`In May 20I4, the FASB issued a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to
`which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing
`revenue recognition standards in U.S. GAAP when it becomes effective. In July 20l 5, the FASB decided to delay the effective date by one year to
`January l, 2018. Early adoption is permitted no earlier than 2017. The new standard can be applied retrospectively to each prior reporting period
`presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. The
`Company is assessing the potential impact ofthe new standard on financial reporting and has not yet selected a transition method.
`
`In April 2014, the FASB issued amended guidance on the use and presentation of discontinued operations in an entity's consolidated financial
`statements. The new guidance restricts the presentation of discontinued operations to business circumstances when the disposal of business
`operations represents a strategic shift that has or will have a major effect on an entity's operations and financial results. The guidance became
`effective on January 1, 2015.
`
`Note 2. BUSINESS SEGMENT INFORMATION
`
`BMS operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative
`medicines that help patients prevail over serious diseases. A global research and development organization and supply chain organization are
`responsible for the discovery. development, manufacturing and supply of products. Regional commercial organizations market, distribute and sell
`the products. The business is also supported by global corporate staff functions. Segment information is consistent with the financial information
`regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation
`targets, and planning and forecasting future periods.
`Product revenues were as foliows:
`
`Dollars in Millions
`
`Virology
`Bnrnciude (emecavir)
`
`Hepatitis C Franchise“?
`
`Reyataz (arazanavir sir.-ffate) Ft'aneht‘se
`
`Susriva (efavirenz) Franchise“?
`Oncology
`
`Erbfrux* (eemxfmab)
`
`Opdivo (nivofumab)
`
`Sprycel (dasatinib)
`
`Ye-rvoy (ipifimniirab)
`
`Three Months Ended September 30,
`2015
`2014
`
`Nine Months Ended September 30.
`2015
`2014
`
`‘TC ‘CT’ ‘CT
`$
`320
`S
`325
`S
`[.003
`
`$
`
`402
`
`270
`
`333
`
`16?
`
`305
`
`411
`
`240
`
`Page 8
`
`49
`
`338
`
`35?
`
`18?
`
`l
`
`385
`
`350
`
`1,145
`
`86?
`
`940
`
`501
`
`46?
`
`1,191
`
`861
`
`1,100
`
`49
`
`1,044
`
`1,037
`
`542
`
`l
`
`1,095
`
`942
`
`Page 8
`
`

`

`Neuroscience
`
`A biltjfv * (arip .=‘praz01'e)i°l
`Inuuunoscienee
`
`Orencia (abatacep!)
`Cardiovascular
`
`Efiquis (apfxabart)
`Mature Products and All Other“”
`
`Total Revenues
`
`46
`
`484
`
`466
`625
`
`449
`
`444
`
`216
`820
`
`707
`
`1,345
`
`1,258
`1,988
`
`$
`
`4,069
`
`S
`
`3.921
`
`3
`
`12,223
`
`$
`
`1,5 44
`
`1,209
`
`493
`2,565
`
`1 1,621
`
`*
`
`(:1)
`
`(b}
`
`(c)
`
`(cl)
`
`Indicates brand names of products which are trademarks not owned or wholly owned by EMS. Specific trademark ownership infomiation is included at the end of
`this quarterly report on Form 10-0.
`
`Includes Dakliiiza ldaclatasvir) revenues of $330 million and $38 million for the three months ended September 30. 2015 and 2014, respectively. and S892
`million and $38 million for the nine months ended September 30. 2015 and 2014, respectively. Additionally. includes Sanvepra (asunaprevir) revenues of $72
`million and $1 1 million for the three months ended Septelnber 30, 2015 and 2014, respectively. and $253 million and $11 million for the nine months ended
`September 30, 2015 and 2014. respectively.
`
`Includes alliance and other revenue of $296 million and $309 million for the three months ended September 30, 2015 and 2014, respectively. and $823 million
`and $894 million for the nine months ended September 30, 2015 and 2014. respectively.
`
`Includes alliance and other revenue of$I9 million and $410 million for the three months ended September 30. 2015 and 2014, respectively. and $59? million and
`31.350 million for the nine months ended September 30, 2015 and 2014. respectively. BMS's U.S. commercialization rights to /l.-‘>."i'g'f_'v“ expired on April 20, 2015.
`Includes Diabetes Alliance revenues of $53 million and $42 million for the three months ended September 30, 2015 and 2014. respectively, and $l?| million and
`$248 million for the nine months ended September 30. 2015 and 2014. respectively. See '‘—Note 3. Alliances" for further information on the diabetes business
`divestiture.
`
`Note 3. ALLIANCES
`
`BMS enters into collaboration arrangements with third parties for the development and commercialization of certain products. Although each of
`these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and are exposed to
`significant risks and rewards depending on the commercial success ofthe activities. BMS may either in-license intellectual property owned by the
`other party or out-liccnsc its intellectual property to the other party. These arrangements also typically include research, development,
`manufacturing, andfor commercial activities and can covera single investigational compound or commercial product or multiple compounds andfor
`products in various life cycle stages. The rights and obligations ofthe parties can be global or limited to geographic regions. We refer to these
`collaborations as alliances and our partners as alliance partners. Several key products such as Abili,6,=*, Orencia. Sp:-ycel, Sttstiva (Arr.-'p.~'a*).
`EZiquis. Erbr'mx* and Opdivo. as well as products comprising the diabetes alliance discussed in the 2014 Form 10-K and certain mature and other
`brands are included in alliance arrangements.
`
`Page 9
`
`Page 9
`
`

`

`Selected financial information pertaining to our alliances was as follows, including net product sales when BMS is the principal in the third-party
`customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the
`products in the alliance, but only the payments between the alliance partners. or the related amortization if the payments were deferned or
`capitalized.
`
`Dollars in Millions
`
`Revenues from alliances:
`
`Net product sales
`Alliance and other revenues
`
`Total Revenues
`
`Payments toflfrom) alliance partners:
`
`Cost of products sold
`Marketing, selling and administrative
`
`Advertising and product promotion
`
`Research and development
`
`Other {inc orne)lexpen se
`
`Noncontrolling interest, pre-tax
`
`Selected Alliance Balance Sheet information:
`
`Dollars in Millions
`
`Receivables - from alliance partners
`
`Accounts payable — to alliance partners
`Deferred income from alliances
`
`Three Months Ended September 30,
`2015
`2014
`
`Nine Months Ended September 30.
`2015
`2014
`
`$
`
`$
`
`$
`
`S
`
`8
`
`$
`
`981
`496
`
`1,477
`
`445
`(I4)
`
`18
`
`89
`
`(173)
`
`17
`
`S
`
`3
`
`$
`
`816
`958
`
`[.774
`
`338
`31
`
`6
`
`33
`
`(411)
`
`7
`
`$
`
`$
`
`S
`
`3,203
`2,003
`
`5.206
`
`1,257
`{l5)
`
`41
`
`277
`
`(622)
`
`45
`
`2.493
`2,909
`
`5,402
`
`1.016
`34
`
`73
`
`13
`
`(964)
`
`18
`
`September 30, December 31,
`2015
`2014
`
`$
`
`838
`
`$
`
`446
`1,495
`
`888
`
`1,479
`1.493
`
`BMS entered into certain licensing and alliance agreements in 2015 (including options to license or acquire the related assets) which individually
`did not materially impact the consolidated financial statements. Upfront payments for these new agreements charged to research and development
`expenses were $266 million during the nine months ended September 30, 2015 (including $86 million in the third quarter of 20] 5). The prior period
`amounts disclosed in research and development expenses for upfront payments to alliance partners were revised to include similar type of
`payments.
`
`Specific infonnation pertaining to each of our significant alliances is discussed in our 20l4 Form l0-K. including their nature and purpose, the
`significant rights and obligations of the parties, and specific accounting policy elections. Significant developments and updates related to
`alliances during the nine months ended September 30, 2015 are set forth below.
`
`Astrazeneca
`
`In February 2014, BMS and Astrazeneca terminated their alliance agreements and BMS sold to Astrazeneca substantially all of the diabetes
`business comprising the alliance. The divestiture included the shares of Amylin and the resulting transfer of its Ohio manufacturing facility; the
`intellectual property related to Ongiyza *fKombigt'_vze* and Farxiga *fXigdnro* (including BMS's interest in the out—licensing agreement for
`Ong:'y2a* in Japan}; and the purchase of BMS’s manufacturing facility located in Mount Vernon. Indiana in the third quarter of 2015. Amylin's
`portfolio of products included Bydm'eon*, Byem1r*, Sym!in* and M11/al'ept*. Substantially all employees dedicated to the diabetes business were
`transferred to AstraZeneea. The sale of the business has been completed in alljurisdictions.
`
`The stock and asset purchase agreement contains multiple elements to be delivered subsequent to the closing of the transaction, including the
`China diabetes business that was part of the alliance (transferred during the third quarter of 2014), the Mount Vernon, Indiana manufacturing
`facility (transferred during the third quarter of20l5) and the activities under the development and supply agreements. Each ofthcse elements was
`determined to have a standalone value. As a result, a portion ofthe consideration received at closing was allocated to the undelivered elements
`using the relative selling price method after determining the best estimated selling price for each element. The remaining amount of consideration
`was included in the calculation for the gain on sale of the diabetes business. Contingent milestone and royalty payments are similarly allocated
`among the underlying elements if and when the amounts are determined to be payable to BMS. Amounts allocated to the sale ofthe business are
`immediately recognized in the results ofoperations. Amounts allocated to the other elements are recognized in the results ofoperations only to the
`extent each element has been delivered.
`
`Page 10
`
`Page 10
`
`

`

`BMS received proceeds ofSl?9 million in the third quarter of 2015 for the transfer ofthe Mount Vernon, Indiana manufacturing facility and related
`inventories resulting in a gain of$79 million for the amounts allocated to the delivered elements. In September 2015. BMS transferred a percentage
`ofits future royalty rights on Amylin net product sales (B_vdm'e'on*, Byetta *, Sym.-':'rr* and Myalepr*) in the US. to CPPIB Credit Europe S.A.R.L.,
`:1 Luxembourg private limited liability company (CPPIB). The transferred rights represent approximately 70% of potential future royalties BMS is
`entitled to in 2019 to 2025. In exchange for the transfer, BMS will receive an additional tiered-based royalty on Amylin net product sales in the U.S.
`from CPPIB in 2016 through 2018, which will be included in other income when earned.
`
`Summarized financial information related to the Astrazeneca alliances was as follows:
`
`Dollars in Millions
`Revenues from Astrazeneca alliances:
`
`Net product sales
`Alliance and other revenues
`
`Total Revenues
`
`Payments to!(from) Astrazeneca:
`
`Cost of products sold:
`
`Profit sharing
`
`Cost reimbursements tof( from) Astrazeneea recognized in:
`
`Cost of products sold
`
`Marketing, selling and administrative
`Advertising and product promotion
`
`Research and development
`
`Other (income)r’expense:
`
`Amortization of deferred income
`
`Provision for restructuring
`Royalties
`Transitional services
`
`Gain on sale of business
`
`Selected Alliance Cash Flow information:
`
`Deferred income
`
`Divestitures and other proceeds
`
`Selected Alliance Balance Sheet information:
`
`Dollars in Millions
`
`Deferred income attributed to:
`
`Assets not yet transferred to AstraZeneca
`
`Services not yet performed for Astrazeneca
`
`fltguka
`
`Three Months Ended September 30,
`2015
`2014
`
`Nine Months Ended September 30.
`2015
`2014
`
`— S
`S3
`
`53
`
`S
`
`2
`40
`
`42
`
`$
`
`$
`
`10
`161
`
`I7]
`
`$
`
`$
`
`163
`85
`
`248
`
`— S
`
`I
`
`S
`
`— S
`
`78
`
`35
`
`$
`
`5
`
`—
`
`Z
`—
`
`_
`
`(31)
`
`_
`(28)
`(3)
`
`(79)
`
`23
`
`251
`
`—
`
`*
`—
`
`(I)
`
`(23)
`
`_
`(46)
`{I 8)
`
`(292)
`
`19
`
`208
`
`—
`
`‘
`-—
`
`—
`
`(80)
`
`_
`( 190)
`(8)
`
`(83)
`
`32
`
`349
`
`(9)
`
`(7)
`(4)
`
`(I0)
`
`(5?)
`
`(2)
`(184)
`(83)
`
`(539)
`
`308
`
`3,415
`
`September 30.
`2015
`
`Decelnlu-r 3|,
`2014
`
`S
`
`— $
`
`170
`
`I76
`
`226
`
`As described in the 20l4 Fonn l0—K, BMS receives a share of U.S. net sales ofAl5n"i'fy* based on a tiered structure and recognizes revenues based
`on the expected annual contractual share using a forecast of net sales for the year (50% in 20l5 and 33% in 2014). BMS'5 U.S. commercialization
`rights to Abtlifj=* expired on April 20, 2015. In February 2015, BMS terminated the co-promotion agreement with Otsuka Pharmaceutical Co., Ltd.
`(0tsuka} in Japan only with respect to Spr_vc'e!. The termination is not expected to have a material impact on future results.
`
`Page 1 1
`
`Page 11
`
`

`

`fl
`
`BMS had an Epidermal Growth Factor Receptor (EGFR} commercialization agreement with Eli Lilly and Company (Lilly) through Lilly's subsidiary
`lmClone for the co-development and promotion of Erbin.-x* in the U.S., Canada and Japan. Under the EGFR agreement, both parties actively
`participated in a joint executive committee and various other operating committees and shared responsibilities for research and development using
`resources in their own infrastructures. With respect to Erbr‘rzr.r*, Lilly manufactured bulk requirements for cetuximab in its own facilities and filling
`and finishing was performed by a third party for which BMS had oversight responsibility. BMS had exclusive distribution rights in North America
`and was responsible for promotional efforts in North America although Lilly had the right to co-promote in the U.S. at their own expense. BMS was
`the principal in third-party customer sales in North America and paid Lilly a distribution fee for 39% of Erbimx* net sales in North America plus a
`share of certain royalties paid by Lilly. BMS‘s rights and obligations with respect to the commercialization of Erbirzt.r* in North America would
`have expired in September 2018.
`
`In October 20l 5. BMS transferred its rights to Erbr‘rrrx* in North America to Lilly in exchange for future royalties as described below. The
`transferred rights include. but are not limited to, full commercialization and manufacturing responsibilities. The transaction will be accounted for as
`a business divestiture in the fourth quarter and result in a non-cash charge ofapproximately $170 million for intangible assets directly related to the
`business and an allocation ofgoodwill.
`
`BMS will receive royalties through September 2018. which will be included in other income when earned. The royalty rates applicable to North
`America are 38% on Erbr'.'rr.r* net sales up to $165 million in 2015, $650 million in 2016, $650 million in 2017 and $480 million in 2018. plus 20% on net
`sales in excess ofthose amounts in each ofthe respective years.
`
`BMS shared rights to Erbim.r* in Japan under an agreement with Lilly and Merck KGaA and received 50% ofthe pre-tax profit from Merck KGaA’s
`net sales of Er'br'mx* in Japan which was further shared equally with Lilly. BMS transferred its co-commercialization rights in Japan to Merck
`l(GaA in the second quarter of20l 5 in exchange for future royalties through 2032 which is included in other income when earned.
`
`Pfizer
`
`As described in the 2014 Form 10-K, BMS has an alliance with Pfizer, inc. ( Pfizer) to co—develop and co-promote Eliquis in most countries on a
`worldwide basis. BMS transferred full commercialization rights to Pfizer in certain smaller markets effective in the third quarter of 20] 5 in order to
`simplify operations. BMS will supply the product to Pfizer at cost plus a percentage of the net sales to end-customers in these markets. This
`change in the alliance arrangement is not expected to impact our pre—rax income. BMS retained co—pro1notional rights in the U.S., significant
`markets in Europe, as well as Canada, Australia, China. Japan and South Korea.
`
`The Medicines Company
`
`As described in the 2014 Forln l0-K, BMS had an alliance with The Medicines Company for Reeothrom on a global basis. The Medicines Company
`exercised its option to acquire the business for $132 million, resulting in a gain of $59 million (including 535 million fair value of the option} in
`February 2015.
`
`Valeant
`
`As described in the 2014 Form l0-K. BMS had an alliance with Valeant Pharmaceuticals International. Inc. (Valeant} for certain mature brands in
`Europe. Valeant exercised its option to acquire the business for $61 million, resulting in a gain of $88 million (including 334 million fair value of the
`option} in January 2015.
`
`Rcckitt
`
`As described in the 2014 Form I0-K. BMS has an alliance with Rcckitt Benekiser Group plc (Rcckitt) covering certain BMS over-the-counter
`products sold primarily in Mexico and Brazil. In July 2015, Rcckitt notified BMS that it was exercising its option to acquire all remaining rights in
`such products for these markets, the related inventory and BMS's manufacturing facility located in Mexico at a price determined primarily based
`upon a multiple of sales from May 2014 through May 2016. The closing is expected to occur in May 2016 subject to obtaining customary
`regulatory approvals. During 2015, a $123 million credit was included in other income (including $87 million in the third quarter of 201 5} to decrease
`the fair value of the option due to the strengthening of the U.S dollar against
`local currencies. The anticipated proceeds are expected to
`approximate the fair value ofthe assets to be transferred.
`
`Page 12
`
`Page 12
`
`

`

`Promedior
`
`In September 2015, BMS purchased a warrant that gives BMS the exclusive right to acquire Promedior, Inc. (Prornedior). a biotechnology company
`whose lead asset, PRM-151. is being Qleveloped for the treatment of idiopathic pulmonary fibrosis (IPF) and ntyelofibrosis (MF). The warrant is
`exercisable upon completion of the IPF or MF Phase II clinical studies being conducted by Promedior, which is expected to occur in 2017. The
`upfront payment allocated to the warrant was $84 million and included in research and development expenses in the third quarter of 2015. The
`remaining $66 million of the $l5{l million upfront payment was allocated to Promedior's obligation to complete the Phase II studies which will be
`amortized over the expected period of the Phase II studies. The allocation was determined using level 3 inputs. Following BMS's review of the
`Phase 1] clinical study results, ifBMS elects to exercise the warrant it will be obligated to pay an additional $300 million (if based on the [PF study
`results) or $250 million (if based on the MF study results), plus additional aggregate consideration of up to $800 million for contingent
`development and regulatory approval milestone payments in the US. and Europe.
`
`Note 4. ACQUISITIONS AND OTHER DIVESTITURES
`
`In April 2015, BMS acquired all ofthe outstanding shares of Flexus Bioseiences, lne. (Flexus), a privately held biotechnology company focused on
`the discovery and development of novel anti-cancer therapeutics. The acquisition provides BMS with fiill rights to F00l28'r', a preclinical small
`molecule IDOI-inhibitor targeted imrnunotherapy.
`In addition, BMS acquired Plexus‘ IDOfTDO discovery program which includes its IDO-
`selective, IDOITDO dual and TDO-selective compounds. The consideration includes an upfront payment of $800 million (plus acquisition costs)
`and contingent development and regulatory milestone payments up to $450 million. No significant Flexus processes were acquired. therefore the
`transaction was accounted for as an asset acquisition because Flexus was determined not to be a business as that term is defined in ASC 805 -
`Business Combinations. The consideration was allocated to F00l287 and the IDOFTDO discovery program resulting in $800 million ofresearch and
`development expenses and to net operating losses and tax credit carryforwards resulting in $14 million ofdeferred tax assets.
`
`In addition to transactions discussed in "—Note 3. Alliances", BMS divested the l'xempra* business and several other businesses or product
`lines in 2015. These transactions generated net proceeds of$l2I million resulting in pre-tax gains of $136 million (including a $40 million deferred
`gain from 2014]. Additional contingent proceeds will be recognized in earnings when received. Revenues and pre—tax earnings related to these
`businesses were not material.
`
`Note 5. ASSETS HELD-FOR-SALE
`
`Assets held-for-sale were related to the Erbimx* business in North America