Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS
Basis of Consolidation
Bristol-Myers Squibb Company (“BMS” or “the Company”) prepared these unaudited consolidated financial statements following the requirements of the SEC and U.S. GAAP for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Quarterly Report on Form 10-Q, which include all adjustments necessary for a fair presentation of the financial position at June 30, 2022 and December 31, 2021, the results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. All intercompany balances and transactions have been eliminated. These financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021 included in the 2021 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.
Business Segment Information
BMS operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases. A global research and development organization and supply chain organization are responsible for the discovery, development, manufacturing and supply of products. Regional commercial organizations market, distribute and sell the products. The business is also supported by global corporate staff functions. Consistent with BMS’s operational structure, the Chief Executive Officer (“CEO”), as the chief operating decision maker, manages and allocates resources at the global corporate level. Managing and allocating resources at the global corporate level enables the CEO to assess both the overall level of resources available and how to best deploy these resources across functions, therapeutic areas, regional commercial organizations and research and development projects in line with our overarching long-term corporate-wide strategic goals, rather than on a product or franchise basis. The determination of a single segment is consistent with the financial information regularly reviewed by the CEO for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. For further information on product and regional revenue, see “—Note 2. Revenue”.
Use of Estimates and Judgments
Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results. The preparation of financial statements requires the use of management estimates, judgments and assumptions. The most significant assumptions are estimates used in determining accounting for acquisitions; impairments of intangible assets; charge-backs, cash discounts, sales rebates, returns and other adjustments; legal contingencies; and income taxes. Actual results may differ from estimates.
Reclassifications
Certain reclassifications were made to conform the prior period consolidated financial statements to the current period presentation. Upfront and contingent milestone charges in connection with asset acquisitions or licensing of third-party intellectual property rights previously presented in Research and development are now presented in Acquired IPRD in the consolidated statements of earnings. Additionally, Rebates and discounts previously presented in Other changes in operating assets and liabilities in the consolidated statements of cash flows are now presented separately in Rebates and discounts.
Recently Issued Accounting Standards Not Yet Adopted
Business Combinations
In October 2021, the FASB issued amended guidance on accounting for contract assets and contract liabilities from contracts with customers in a business combination. The guidance is intended to address inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized. At the acquisition date, an entity should account for the related revenue contracts in accordance with existing revenue recognition guidance generally by assessing how the acquiree applied recognition and measurement in their financial statements. The amended guidance is effective January 1, 2023 on a prospective basis. Early adoption is permitted.
Fair Value Measurements
In June 2022, the FASB issued amended guidance on measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendment requires the following disclosures for equity securities subject to contractual sale restrictions: the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; the nature and remaining duration of the restriction(s); and the circumstances that could cause a lapse in the restriction(s). The amended guidance is effective January 1, 2024 on a prospective basis. Early adoption is permitted.
Note 2. REVENUE
The following table summarizes the disaggregation of revenue by nature:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Net product sales | $ | 11,485 | | | $ | 11,405 | | | $ | 22,793 | | | $ | 22,203 | |
| Alliance revenues | 199 | | | 159 | | | 387 | | | 301 | |
| Other revenues | 203 | | | 139 | | | 355 | | | 272 | |
| Total Revenues | $ | 11,887 | | | $ | 11,703 | | | $ | 23,535 | | | $ | 22,776 | |
The following table summarizes GTN adjustments:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Gross product sales | $ | 17,299 | | | $ | 16,782 | | | $ | 33,949 | | | $ | 32,341 | |
GTN adjustments(a) | | | | | | | |
| Charge-backs and cash discounts | (1,750) | | | (1,720) | | | (3,513) | | | (3,306) | |
| Medicaid and Medicare rebates | (2,624) | | | (2,139) | | | (4,708) | | | (3,857) | |
| Other rebates, returns, discounts and adjustments | (1,440) | | | (1,518) | | | (2,935) | | | (2,975) | |
| Total GTN adjustments | (5,814) | | | (5,377) | | | (11,156) | | | (10,138) | |
| Net product sales | $ | 11,485 | | | $ | 11,405 | | | $ | 22,793 | | | $ | 22,203 | |
(a) Includes adjustments for provisions for product sales made in prior periods resulting from changes in estimates of $123 million and $197 million for the three and six months ended June 30, 2022, and $85 million and $302 million for the three and six months ended June 30, 2021, respectively.
The following table summarizes the disaggregation of revenue by product and region:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| In-Line Products | | | | | | | |
| Eliquis | $ | 3,235 | | | $ | 2,792 | | | 6,446 | | | 5,678 | |
| Opdivo | 2,063 | | | 1,910 | | | 3,986 | | | 3,630 | |
| Pomalyst/Imnovid | 908 | | | 854 | | | 1,734 | | | 1,627 | |
| Orencia | 876 | | | 814 | | | 1,668 | | | 1,572 | |
| Sprycel | 544 | | | 541 | | | 1,027 | | | 1,011 | |
| Yervoy | 525 | | | 510 | | | 1,040 | | | 966 | |
| Empliciti | 77 | | | 86 | | | 152 | | | 171 | |
| Mature and other products | 435 | | | 473 | | | 897 | | | 979 | |
| New Product Portfolio | | | | | | | |
| Reblozyl | 172 | | | 128 | | | 328 | | | 240 | |
| Abecma | 89 | | | 24 | | | 156 | | | 24 | |
| Zeposia | 66 | | | 28 | | | 102 | | | 46 | |
| Breyanzi | 39 | | | 17 | | | 83 | | | 17 | |
| Inrebic | 23 | | | 16 | | | 41 | | | 32 | |
| Onureg | 32 | | | 12 | | | 55 | | | 27 | |
| Opdualag | 58 | | | — | | | 64 | | | — | |
| Camzyos | 3 | | | — | | | 3 | | | — | |
Recent LOE Products(a) | | | | | | | |
| Revlimid | 2,501 | | | 3,202 | | | $ | 5,298 | | | $ | 6,146 | |
| Abraxane | 241 | | | 296 | | | 455 | | | 610 | |
| Total Revenues | $ | 11,887 | | | $ | 11,703 | | | $ | 23,535 | | | $ | 22,776 | |
| | | | | | | |
| United States | $ | 8,268 | | | $ | 7,388 | | | $ | 15,962 | | | $ | 14,398 | |
| International | 3,427 | | | 4,124 | | | 7,154 | | | 8,023 | |
| | | | | | | |
Other(b) | 192 | | | 191 | | | 419 | | | 355 | |
| Total Revenues | $ | 11,887 | | | $ | 11,703 | | | $ | 23,535 | | | $ | 22,776 | |
(a) Recent LOE Products includes products with significant decline in revenue from the prior reporting period as a result of a loss of exclusivity.
(b) Other revenues include royalties and alliance-related revenues for products not sold by BMS’s regional commercial organizations.
Revenue recognized from performance obligations satisfied in prior periods was $184 million and $331 million for the three and six months ended June 30, 2022 and $146 million and $430 million for the three and six months ended June 30, 2021, respectively, consisting primarily of revised estimates for GTN adjustments related to prior period sales and royalties for out-licensing arrangements.
Note 3. ALLIANCES
BMS enters into collaboration arrangements with third parties for the development and commercialization of certain products. Although each of these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and exposed to significant risks and rewards depending on the commercial success of the activities. BMS may either in-license intellectual property owned by the other party or out-license its intellectual property to the other party. These arrangements also typically include research, development, manufacturing, and/or commercial activities and can cover a single investigational compound or commercial product or multiple compounds and/or products in various life cycle stages. The rights and obligations of the parties can be global or limited to geographic regions. BMS refers to these collaborations as alliances and its partners as alliance partners.
Selected financial information pertaining to alliances was as follows, including net product sales when BMS is the principal in the third-party customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the products in the alliance, but only the payments between the alliance partners or the related amortization if the payments were deferred or capitalized.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Revenues from alliances: | | | | | | | |
| Net product sales | $ | 3,273 | | | $ | 2,805 | | | $ | 6,512 | | | $ | 5,687 | |
| Alliance revenues | 199 | | | 159 | | | 387 | | | 301 | |
| Total Revenues | $ | 3,472 | | | $ | 2,964 | | | $ | 6,899 | | | $ | 5,988 | |
| | | | | | | |
| Payments to/(from) alliance partners: | | | | | | | |
| Cost of products sold | $ | 1,572 | | | $ | 1,346 | | | $ | 3,128 | | | $ | 2,743 | |
| Marketing, selling and administrative | (53) | | | (48) | | | (107) | | | (97) | |
| Research and development | 12 | | | 6 | | | 34 | | | 7 | |
| Acquired IPRD | 100 | | | 730 | | | 100 | | | 736 | |
| Other (income)/expense, net | (11) | | | (14) | | | (23) | | | (19) | |
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Selected Alliance Balance Sheet information: | | | |
| Receivables – from alliance partners | $ | 325 | | | $ | 320 | |
| Accounts payable – to alliance partners | 1,509 | | | 1,229 | |
Deferred income – from alliances(a) | 321 | | | 330 | |
(a) Includes unamortized upfront and milestone payments.
The nature, purpose, significant rights and obligations of the parties and specific accounting policy elections for each of the Company's significant alliances are discussed in the 2021 Form 10-K. Significant developments and updates related to alliances during the six months ended June 30, 2022, and 2021 are set forth below.
BridgeBio
In May 2022, BMS and BridgeBio commenced a collaboration to develop and commercialize BBP-398, a SHP2 inhibitor, in oncology. The transaction included an upfront payment of $90 million, which was expensed to Acquired IPRD during the three months ended June 30, 2022. BridgeBio is eligible to receive contingent development, regulatory and sales-based milestones up to $815 million, as well as royalties on global net sales, excluding certain markets. BridgeBio is responsible for funding and completing ongoing BBP-398 Phase I monotherapy and combination therapy trials. BMS will lead and fund all other development and commercial activities. BridgeBio has an option to co-develop BBP-398 and receive higher royalties in the U.S.
Nektar
In April 2022, BMS and Nektar announced that the companies have jointly decided to end the global clinical development program for bempegaldesleukin in combination with Opdivo based on results from pre-planned analyses of two late-stage clinical studies in RCC and bladder cancer. These studies and all other ongoing studies in the program will be discontinued.
Eisai
In the second quarter of 2021, BMS and Eisai commenced an exclusive global strategic collaboration for the co-development and co-commercialization of MORAb-202, a selective folate receptor alpha antibody-drug conjugate being investigated in endometrial, ovarian, lung and breast cancers. MORAb-202 is currently in Phase I/II clinical trials for solid tumors.
BMS and Eisai jointly develop and commercialize MORAb-202 in the U.S., Canada, Europe, Japan, China and certain other countries in the Asia-Pacific region (the “collaboration territory”). Eisai is responsible for the global manufacturing and supply. Profits, research and development and commercialization costs are shared in the collaboration territories. BMS is responsible for development and commercialization outside of the collaboration territory and will pay a royalty on those sales.
A $650 million up-front collaboration fee was expensed to Acquired IPRD in the second quarter of 2021 and paid in the third quarter of 2021. BMS is also obligated to pay up to $2.5 billion upon the achievement of contingent development, regulatory and sales-based milestones.
Note 4. ACQUISITIONS, DIVESTITURES, LICENSING AND OTHER ARRANGEMENTS
Acquisitions
Turning Point
In June 2022, BMS entered into a definitive merger agreement to acquire Turning Point, a clinical-stage precision oncology company with a pipeline of investigational medicines designed to target the common mutations and alterations that drive cancer growth. The acquisition will provide BMS rights to Turning Point's lead asset, repotrectinib, and several other clinical and pre-clinical stage assets. Repotrectinib is in a registrational Phase II study in adults and a Phase I/II study in pediatric patients, and is a potential best-in-class tyrosine kinase inhibitor targeting the ROS1 and NTRK oncogenic drivers in NSCLC and other advanced solid tumors.
BMS commenced a tender offer in June 2022, which was extended through August 15, 2022, to acquire all of the issued and outstanding shares of Turning Point's common stock for $76.00 per share in an all-cash transaction for a total consideration of $4.1 billion, including cash settlements of equity stock awards. The transaction is subject to the satisfaction of the tender of a majority of the outstanding shares of Turning Point’s common stock, as well as other customary closing conditions and regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is expected to close during the third quarter of 2022.
Divestitures
The following table summarizes the financial impact of divestitures including royalties, which are included in Other (income)/expense, net. Revenue and pretax earnings related to all divestitures were not material in all periods presented (excluding divestiture gains or losses).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| Net Proceeds(a) | | Divestiture Gains | | Royalty Income |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Diabetes Business | $ | 185 | | | $ | 132 | | | $ | — | | | $ | — | | | $ | (220) | | | $ | (152) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Mature Products and Other | 3 | | | 70 | | | — | | | (11) | | | (1) | | | — | |
| Total | $ | 188 | | | $ | 202 | | | $ | — | | | $ | (11) | | | $ | (221) | | | $ | (152) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
| Net Proceeds(a) | | Divestiture Gains | | Royalty Income |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Diabetes Business | $ | 357 | | | $ | 296 | | | $ | — | | | $ | — | | | $ | (390) | | | $ | (286) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Mature Products and Other | 228 | | | 86 | | | (211) | | | (11) | | | (2) | | | (1) | |
| Total | $ | 585 | | | $ | 382 | | | $ | (211) | | | $ | (11) | | | $ | (392) | | | $ | (287) | |
(a) Includes royalties received subsequent to the related sale of the asset or business.
Mature Products and Other
Manufacturing Operations
In May 2022, BMS agreed to sell its manufacturing facility in Syracuse, New York to LOTTE Corporation for approximately $170 million. The transaction is expected to close by the end of 2022, subject to certain regulatory approvals and other closing conditions and will be accounted for as a sale of a business. The business was accounted for as held-for-sale and its assets were reduced to the estimated relative fair value resulting in $43 million impairment charge recorded to Cost of products sold during the three months ended June 30, 2022. Assets and liabilities of $155 million and $6 million were reclassified to held-for-sale as of June 30, 2022, and included within Other current assets and Other current liabilities, respectively.
Other
During the first quarter of 2022, product rights to several mature products were sold to Cheplapharm, resulting in cash proceeds of $221 million and a divestiture gain of $211 million.
Licensing and Other Arrangements
The following table summarizes the financial impact of Keytruda* royalties, Tecentriq* royalties, upfront licensing fees and milestones for products that have not obtained commercial approval, which are included in Other (income)/expense, net.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
Keytruda* royalties | $ | (243) | | | $ | (204) | | | $ | (464) | | | $ | (396) | |
Tecentriq* royalties | (19) | | | (23) | | | (44) | | | (45) | |
| | | | | | | |
| Contingent milestone income | (5) | | | (2) | | | (46) | | | (2) | |
| Amortization of deferred income | (11) | | | (15) | | | (23) | | | (30) | |
| Other royalties | (9) | | | (9) | | | (16) | | | (12) | |
| Total | $ | (287) | | | $ | (253) | | | $ | (593) | | | $ | (485) | |
In-license Arrangements
Immatics
During the first quarter of 2022, BMS obtained a global exclusive license to Immatics’ TCR bispecific IMA401 program. IMA401 is being studied in oncology and a Clinical Trial Application has been approved by the German federal regulatory authority. The trial commenced in May 2022. BMS and Immatics collaborate on the development and BMS will be responsible for the commercialization of IMA401 and its related products worldwide, including strategic decisions, regulatory responsibilities, funding and manufacturing. Immatics has the option to co-fund U.S. development in exchange for enhanced U.S. royalty payments and/or to co-promote IMA401 in the U.S. The transaction included an upfront payment of $150 million which was expensed to Acquired IPRD in the first quarter of 2022. Immatics is eligible to receive contingent development, regulatory and sales-based milestones of up to $770 million as well as royalties on global net sales.
Dragonfly
During the first quarter of 2022, a Phase I development milestone for interlukin-12 (“IL-12”) was achieved resulting in a $175 million payment to Dragonfly and an Acquired IPRD charge. The parties also amended the terms of three future milestones by requiring the achievement of certain criteria by specified dates unless BMS notifies Dragonfly that it will discontinue development of IL-12. These milestones continue to be considered substantive and contingent because the decision to proceed will be based on an assessment of clinical data prior to the specified dates.
Other
Royalty Extinguishment
In April 2022, BMS amended the terms of a license arrangement and paid a third party $295 million to extinguish a future royalty obligation related to mavacamten, prior to its FDA approval in April 2022, resulting in an Acquired IPRD charge during the three months ended June 30, 2022.
Note 5. OTHER (INCOME)/EXPENSE, NET
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Interest expense | $ | 313 | | | $ | 330 | | | $ | 639 | | | $ | 683 | |
| Royalties and licensing income | (508) | | | (405) | | | (985) | | | (772) | |
| Equity investment losses/(gains) | 308 | | | (148) | | | 952 | | | (749) | |
| Integration expenses | 124 | | | 152 | | | 229 | | | 293 | |
| Contingent consideration | — | | | — | | | 1 | | | (510) | |
| (Gain)/Loss on debt redemption | (9) | | | — | | | 266 | | | 281 | |
| Provision for restructuring | 20 | | | 78 | | | 43 | | | 123 | |
| Litigation and other settlements | 25 | | | 44 | | | (12) | | | 36 | |
| | | | | | | |
| Investment income | (27) | | | (12) | | | (37) | | | (21) | |
| | | | | | | |
| Divestiture gains | — | | | (11) | | | (211) | | | (11) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other | 38 | | | (30) | | | 48 | | | (57) | |
| Other (income)/expense, net | $ | 284 | | | $ | (2) | | | $ | 933 | | | $ | (704) | |
Note 6. RESTRUCTURING
Celgene Acquisition Plan
In 2019, a restructuring and integration plan was implemented as an initiative to realize sustainable run rate synergies resulting from cost savings and avoidance from the Celgene acquisition that are currently expected to be approximately $3.0 billion. The synergies are expected to be realized in Cost of products sold (5%), Marketing, selling and administrative expenses (65%) and Research and development expenses (30%). Charges of approximately $3.3 billion are expected to be incurred. The majority of the charges are expected to be incurred through 2022. Cumulative charges of approximately $2.9 billion have been recognized to date including integration planning and execution expenses, employee termination benefit costs and accelerated stock-based compensation, contract termination costs and other shutdown costs associated with site exits. Cash outlays in connection with these actions are expected to be approximately $3.0 billion. Employee workforce reductions were approximately 140 and 240 for the six months ended June 30, 2022 and 2021, respectively.
MyoKardia Acquisition Plan
In 2020, a restructuring and integration plan was initiated to realize expected cost synergies resulting from cost savings and avoidance from the MyoKardia acquisition. Charges of approximately $150 million are expected to be incurred through 2022, and consist of integration planning and execution expenses, employee termination benefit costs and other costs. Cumulative charges of $122 million have been recognized for these actions to date.
The following provides the charges related to restructuring initiatives by type of cost:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Celgene Acquisition Plan | $ | 146 | | | $ | 200 | | | $ | 273 | | | $ | 373 | |
| MyoKardia Acquisition Plan | 2 | | | 19 | | | 5 | | | 56 | |
| | | | | | | |
| Total charges | $ | 148 | | | $ | 219 | | | $ | 278 | | | $ | 429 | |
| | | | | | | |
| Employee termination costs | $ | 19 | | | $ | 75 | | | $ | 41 | | | $ | 119 | |
| Other termination costs | 1 | | | 3 | | | 2 | | | 4 | |
| Provision for restructuring | 20 | | | 78 | | | 43 | | | 123 | |
| Integration expenses | 124 | | | 152 | | | 229 | | | 293 | |
| Accelerated depreciation | 4 | | | — | | | 6 | | | — | |
| Asset impairments | — | | | — | | | — | | | 24 | |
| Other shutdown costs, net | — | | | (11) | | | — | | | (11) | |
| Total charges | $ | 148 | | | $ | 219 | | | $ | 278 | | | $ | 429 | |
| | | | | | | |
| Cost of products sold | $ | — | | | $ | — | | | $ | — | | | $ | 24 | |
| Marketing, selling and administrative | 4 | | | — | | | 6 | | | — | |
| | | | | | | |
| Other (income)/expense, net | 144 | | | 219 | | | 272 | | | 405 | |
| Total charges | $ | 148 | | | $ | 219 | | | $ | 278 | | | $ | 429 | |
The following summarizes the charges and spending related to restructuring plan activities:
| | | | | | | | | | | |
| Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 |
| Liability at December 31 | $ | 101 | | | $ | 148 | |
Provision for restructuring(a) | 43 | | | 114 | |
| Foreign currency translation and other | (6) | | | (2) | |
| Payments | (67) | | | (134) | |
Liability at June 30 | $ | 71 | | | $ | 126 | |
(a) Includes a reduction of the liability resulting from changes in estimates of $8 million for both the six months ended June 30, 2022 and 2021. Excludes $9 million for the six months ended June 30, 2021 of accelerated stock-based compensation relating to the Celgene Acquisition Plan.
Note 7. INCOME TAXES
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Earnings Before Income Taxes | $ | 1,958 | | | $ | 1,553 | | | $ | 3,645 | | | $ | 4,083 | |
| Provision for Income Taxes | 529 | | | 492 | | | 933 | | | 993 | |
| Effective Tax Rate | 27.0 | % | | 31.7 | % | | 25.6 | % | | 24.3 | % |
Income taxes in interim periods are determined based on the estimated annual effective tax rates and the tax impact of discrete items that are reflected immediately. The effective tax rates in 2022 and 2021 were impacted by low jurisdictional tax rates attributed to the unwinding of inventory fair value adjustments and intangible asset amortization, and contingent value rights fair value adjustments that were not taxable in the six months ended June 30, 2021. Additional changes to the effective tax rate may occur in future periods due to various reasons, including changes to the estimated pretax earnings mix and tax reserves and revised interpretations or changes to the relevant tax code.
It is reasonably possible that the amount of unrecognized tax benefits at June 30, 2022 could decrease in the range of approximately $455 million to $505 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits.
BMS is currently under examination by a number of tax authorities, which have proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. As previously disclosed, BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax positions for the 2008 to 2012 tax years. BMS disagrees with the IRS’s positions and continues to work cooperatively with the IRS to resolve these open tax audits. It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.
Note 8. EARNINGS PER SHARE
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Amounts in Millions, Except Per Share Data | 2022 | | 2021 | | 2022 | | 2021 |
| Net Earnings Attributable to BMS Used for Basic and Diluted EPS Calculation | $ | 1,421 | | | $ | 1,055 | | | $ | 2,699 | | | $ | 3,076 | |
| | | | | | | |
| Weighted-Average Common Shares Outstanding – Basic | 2,133 | | | 2,227 | | | 2,140 | | | 2,232 | |
| Incremental Shares Attributable to Share-Based Compensation Plans | 16 | | | 25 | | | 17 | | | 26 | |
| Weighted-Average Common Shares Outstanding – Diluted | 2,149 | | | 2,252 | | | 2,157 | | | 2,258 | |
| | | | | | | |
| Earnings per Common Share | | | | | | | |
| Basic | $ | 0.67 | | | $ | 0.47 | | | $ | 1.26 | | | $ | 1.38 | |
| Diluted | 0.66 | | | 0.47 | | | 1.25 | | | 1.36 | |
The total number of potential shares of common stock excluded from the diluted earnings per common share computation because of the antidilutive impact was not material for the three and six months ended June 30, 2022 and 2021.
Note 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Dollars in Millions | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 |
| Cash and cash equivalents - money market and other securities | $ | — | | | $ | 7,708 | | | $ | — | | | $ | — | | | $ | 12,225 | | | $ | — | |
| Marketable debt securities: | | | | | | | | | | | |
| Certificates of deposit | — | | | 2,022 | | | — | | | — | | | 2,264 | | | — | |
| Commercial paper | — | | | 316 | | | — | | | — | | | 320 | | | — | |
| Corporate debt securities | — | | | 140 | | | — | | | — | | | 403 | | | — | |
| Derivative assets | — | | | 609 | | | 8 | | | — | | | 206 | | | 12 | |
| Equity investments | 497 | | | 556 | | | — | | | 1,910 | | | 109 | | | — | |
| Derivative liabilities | — | | | 17 | | | — | | | — | | | 25 | | | — | |
| Contingent consideration liability: | | | | | | | | | | | |
| Contingent value rights | 6 | | | — | | | — | | | 8 | | | — | | | — | |
| Other acquisition related contingent consideration | — | | | — | | | 33 | | | — | | | — | | | 35 | |
As further described in “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements” in the Company’s 2021 Form 10-K, the Company’s fair value estimates use inputs that are either (1) quoted prices for identical assets or liabilities in active markets (Level 1 inputs); (2) observable prices for similar assets or liabilities in active markets or for identical or similar assets or liabilities in markets that are not active (Level 2 inputs); or (3) unobservable inputs (Level 3 inputs).
The fair value of equity investments is adjusted for characteristics specific to the security and is not adjusted for contractual sale restrictions. Equity investments subject to contractual sale restrictions were not material at June 30, 2022 and December 31, 2021. The restrictions will expire by April 2023.
Contingent consideration obligations are recorded at their estimated fair values and these obligations are revalued each reporting period until the related contingencies are resolved. The contingent value rights are adjusted to fair value using the traded price of the securities at the end of each reporting period. The fair value measurements for other contingent consideration liabilities are estimated using probability-weighted discounted cash flow approaches that are based on significant unobservable inputs related to product candidates acquired in business combinations and are reviewed quarterly. These inputs include, as applicable, estimated probabilities and timing of achieving specified development and regulatory milestones and the discount rate used to calculate the present value of estimated future payments. Significant changes which increase or decrease the probabilities of achieving the related development and regulatory events or shorten or lengthen the time required to achieve such events would result in corresponding increases or decreases in the fair values of these obligations.
Marketable Debt Securities and Equity Investments
The following table summarizes marketable debt securities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Dollars in Millions | Amortized Cost | | Gross Unrealized | | | | Amortized Cost | | Gross Unrealized | | |
| Gains | | Losses | | Fair Value | | | Gains | | Losses | | Fair Value |
| Certificates of deposit | $ | 2,022 | | | $ | — | | | $ | — | | | $ | 2,022 | | | $ | 2,264 | | | $ | — | | | $ | — | | | $ | 2,264 | |
| Commercial paper | 316 | | | — | | | — | | | 316 | | | 320 | | | — | | | — | | | 320 | |
| Corporate debt securities | 140 | | | — | | | — | | | 140 | | | 401 | | | 2 | | | — | | | 403 | |
Total marketable debt securities(a) | $ | 2,478 | | | $ | — | | | $ | — | | | $ | 2,478 | | | $ | 2,985 | | | $ | 2 | | | $ | — | | | $ | 2,987 | |
(a) All marketable debt securities mature within one year as of June 30, 2022 and December 31, 2021.
The following summarizes the carrying amount of equity investments:
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Equity investments with readily determinable fair values | $ | 1,053 | | | $ | 2,019 | |
| Equity investments without readily determinable fair values | 389 | | | 283 | |
| Equity method investments | 569 | | | 666 | |
| Total equity investments | $ | 2,011 | | | $ | 2,968 | |
The following summarizes the activity related to equity investments. Changes in fair value of equity investments are included in Other (income)/expense, net.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
Equity investments with readily determined fair values(a) | | | | | | | |
| Net loss/(gain) recognized | $ | 254 | | | $ | 81 | | | $ | 852 | | | $ | (115) | |
| Net (gain)/loss recognized on investments sold | (16) | | | (1) | | | (16) | | | 2 | |
| Net unrealized loss/(gain) recognized on investments still held | 270 | | | 82 | | | 868 | | | (117) | |
| | | | | | | |
| Equity investments without readily determinable fair values | | | | | | | |
| Upward adjustments | — | | | (192) | | | (6) | | | (461) | |
| Impairments and downward adjustments | — | | | — | | | 2 | | | 1 | |
| Cumulative upward adjustments | | | | | (109) | | | |
| Cumulative impairments and downward adjustments | | | | | 52 | | | |
| | | | | | | |
| Equity in net (income)/loss of affiliates | 54 | | | (37) | | | 104 | | | (174) | |
(a) Certain prior year amounts have been reclassified to conform to the current year's presentation.
Qualifying Hedges and Non-Qualifying Derivatives
Cash Flow Hedges — Foreign currency forward contracts are used to hedge certain forecasted intercompany inventory purchases and sales transactions and certain foreign currency transactions. The fair value for contracts designated as cash flow hedges is temporarily reported in Accumulated other comprehensive loss and included in earnings when the hedged item affects earnings. The net gain or loss on foreign currency forward contracts is expected to be reclassified to net earnings (primarily included in Cost of products sold and Other (income)/expense, net) within the next 24 months. The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro of $5.3 billion and Japanese yen of $1.3 billion at June 30, 2022.
The earnings impact related to discontinued cash flow hedges and hedge ineffectiveness was not material during all periods presented. Cash flow hedge accounting is discontinued when the forecasted transaction is no longer probable of occurring within 60 days after the originally forecasted date or when the hedge is no longer effective. Assessments to determine whether derivatives designated as qualifying hedges are highly effective in offsetting changes in the cash flows of hedged items are performed at inception and on a quarterly basis. Foreign currency forward contracts not designated as hedging instruments are used to offset exposures in certain foreign currency denominated assets, liabilities and earnings. Changes in the fair value of these derivatives are recognized in earnings as they occur.
Net Investment Hedges — Non-U.S. dollar borrowings of €950 million ($992 million) at June 30, 2022 are designated as net investment hedges to hedge euro currency exposures of the net investment in certain foreign affiliates and are recognized in long-term debt. The effective portion of foreign exchange gain on the remeasurement of euro debt was included in the foreign currency translation component of Accumulated other comprehensive loss with the related offset in long-term debt.
Cross-currency interest rate swap contracts of $686 million at June 30, 2022 are designated to hedge Japanese yen currency exposure of BMS’s net investment in its Japan subsidiaries. Contract fair value changes are recorded in the foreign currency translation component of Accumulated other comprehensive loss with a related offset in Other non-current assets or Other non-current liabilities.
Fair Value Hedges — Fixed to floating interest rate swap contracts are designated as fair value hedges and used as an interest rate risk management strategy to create an appropriate balance of fixed and floating rate debt. The contracts and underlying debt for the hedged benchmark risk are recorded at fair value. The effective interest rate for the contracts is one-month LIBOR (1.79% as of June 30, 2022) plus an interest rate spread of 4.6%. Gains or losses resulting from changes in fair value of the underlying debt attributable to the hedged benchmark interest rate risk are recorded in interest expense with an associated offset to the carrying value of debt. Since the specific terms and notional amount of the swap are intended to align with the debt being hedged, all changes in fair value of the swap are recorded in interest expense with an associated offset to the derivative asset or liability on the consolidated balance sheet. As a result, there was no net impact in earnings. If the underlying swap is terminated prior to maturity, then the fair value adjustment to the underlying debt is amortized as a reduction to interest expense over the remaining term of the debt.
In the first quarter of 2022, treasury lock contracts were entered into with a total notional value of $3.0 billion and $2.3 billion to hedge interest rate risk and cash payment associated with long-term debt, respectively. The treasury lock contracts were terminated upon issuance and redemption of long-term debt. These contracts were not designated for hedge accounting and the contract settlements were not material.
The following table summarizes the fair value of outstanding derivatives:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| Asset(a) | | Liability(b) | | Asset(a) | | Liability(b) |
| Dollars in Millions | Notional | | Fair Value | | Notional | | Fair Value | | Notional | | Fair Value | | Notional | | Fair Value |
| Derivatives designated as hedging instruments: | | | | | | | | | | | | | | |
| Interest rate swap contracts | $ | — | | | $ | — | | | $ | 255 | | | $ | (9) | | | $ | 255 | | | $ | 10 | | | $ | — | | | $ | — | |
| Cross-currency interest rate swap contracts | 686 | | | 77 | | | — | | | — | | | 600 | | | 26 | | | — | | | — | |
| Foreign currency forward contracts | 7,625 | | | 524 | | | 540 | | | (5) | | | 3,587 | | | 161 | | | 1,814 | | | (20) | |
| | | | | | | | | | | | | | | |
| Derivatives not designated as hedging instruments: | | | | | | | | | | | | | | |
| Foreign currency forward contracts | 623 | | | 8 | | | 522 | | | (3) | | | 883 | | | 9 | | | 568 | | | (5) | |
| | | | | | | | | | | | | | | |
| Other | — | | | 8 | | | — | | | — | | | — | | | 12 | | | — | | | — | |
(a) Included in Other current assets and Other non-current assets.
(b) Included in Other current liabilities and Other non-current liabilities.
The following table summarizes the financial statement classification and amount of (gain)/loss recognized on hedging instruments:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 |
| Dollars in Millions | Cost of products sold | | Other (income)/expense, net | | Cost of products sold | | Other (income)/expense, net |
| Interest rate swap contracts | $ | — | | | $ | (7) | | | $ | — | | | $ | (18) | |
| | | | | | | |
| Cross-currency interest rate swap contracts | — | | | (4) | | | — | | | (8) | |
| Foreign currency forward contracts | (131) | | | (18) | | | (213) | | | (75) | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 |
| Dollars in Millions | Cost of products sold | | Other (income)/expense, net | | Cost of products sold | | Other (income)/expense, net |
| Interest rate swap contracts | $ | — | | | $ | (7) | | | $ | — | | | $ | (15) | |
| Cross-currency interest rate swap contracts | — | | | (3) | | | — | | | (6) | |
| Foreign currency forward contracts | 59 | | | 16 | | | 126 | | | (16) | |
The following table summarizes the effect of derivative and non-derivative instruments designated as hedging instruments in Other Comprehensive Income:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Derivatives qualifying as cash flow hedges | | | | | | | |
| Foreign currency forward contracts gain/(loss): | | | | | | | |
Recognized in Other Comprehensive Income(a) | $ | 481 | | | $ | (38) | | | $ | 601 | | | $ | 221 | |
| Reclassified to Cost of products sold | (131) | | | 53 | | | (213) | | | 89 | |
| Forward starting interest rate swap contract loss: | | | | | | | |
| Reclassified to Other (income)/expense, net | — | | | — | | | (3) | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Derivatives qualifying as net investment hedges | | | | | | | |
| Cross-currency interest rate swap contracts gain: | | | | | | | |
| Recognized in Other Comprehensive Income | 51 | | | — | | | 64 | | | 26 | |
| | | | | | | |
| Non-derivatives qualifying as net investment hedges | | | | | | | |
| Non-U.S. dollar borrowings gain: | | | | | | | |
| Recognized in Other Comprehensive Income | 68 | | | (16) | | | 83 | | | 25 | |
(a) The majority is expected to be reclassified into earnings in the next 24 months.
Debt Obligations
Short-term debt obligations include:
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Non-U.S. short-term borrowings | $ | 151 | | | $ | 105 | |
| Current portion of long-term debt | 4,646 | | | 4,764 | |
| Other | 156 | | | 79 | |
| Total | $ | 4,953 | | | $ | 4,948 | |
Long-term debt and the current portion of long-term debt include:
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Principal Value | $ | 40,993 | | | $ | 43,095 | |
| | | |
| Adjustments to Principal Value: | | | |
| Fair value of interest rate swap contracts | (9) | | | 10 | |
| Unamortized basis adjustment from swap terminations | 107 | | | 119 | |
| Unamortized bond discounts and issuance costs | (296) | | | (263) | |
| Unamortized purchase price adjustments of Celgene debt | 958 | | | 1,408 | |
| Total | $ | 41,753 | | | $ | 44,369 | |
| | | |
| Current portion of long-term debt | $ | 4,646 | | | $ | 4,764 | |
| Long-term debt | 37,107 | | | 39,605 | |
| Total | $ | 41,753 | | | $ | 44,369 | |
The fair value of long-term debt was $39.7 billion at June 30, 2022 and $49.1 billion at December 31, 2021 valued using Level 2 inputs, which are based upon the quoted market prices for the same or similar debt instruments. The fair value of short-term borrowings approximates the carrying value due to the short maturities of the debt instruments.
During the six months ended June 30, 2022, BMS purchased an aggregate principal amount of $6.0 billion of certain of its debt securities for $6.6 billion of cash in tender offers and “make whole” redemptions. In connection with these transactions, a net of $266 million loss on debt redemption was recognized based on the carrying value of the debt and included in Other (income)/expense, net. In addition, $1.5 billion 2.60% Notes and $500 million Floating Rate Notes matured and were repaid.
During the six months ended June 30, 2022, we issued an aggregate principal amount of $6.0 billion of debt with net proceeds of $5.9 billion. The table below summarizes the issuances:
| | | | | |
| Dollars in Millions | |
| Principal Value: | |
2.950% Notes due 2032 | 1,750 | |
3.550% Notes due 2042 | 1,250 | |
3.700% Notes due 2052 | 2,000 | |
3.900% Notes due 2062 | 1,000 | |
| Total | $ | 6,000 | |
The notes rank equally in right of payment with all of BMS's existing and future senior unsecured indebtedness and are redeemable at any time, in whole, or in part, at varying specified redemption prices plus accrued and unpaid interest.
During the six months ended June 30, 2021, BMS purchased an aggregate principal amount of $3.5 billion of certain of its debt securities for approximately $4.0 billion of cash in a series of tender offers and “make whole” redemptions. In connection with these transactions, a $281 million loss on debt redemption was recognized based on the carrying value of the debt and included in Other (income)/expense, net. In addition, the $500 million 2.875% Notes and $1.0 billion 2.550% Notes matured and were repaid.
Interest payments were $720 million and $807 million for the six months ended June 30, 2022 and 2021, respectively, net of amounts related to interest rate swap contracts.
At December 31, 2021, BMS had four separate revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility which expired in January 2022, a three-year $1.0 billion facility which expired in January 2022 and two five-year $1.5 billion facilities that were extended to September 2025 and July 2026, respectively.
In January 2022, BMS entered into a five-year $5.0 billion facility expiring in January 2027, which is extendable annually by one year with the consent of the lenders. This facility provides for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for our commercial paper borrowings. Concurrently with the entry into this facility, the commitments under our existing five-year $1.5 billion facilities were terminated and the three-year $1.0 billion facility and 364-day $2.0 billion facility expired in accordance with their terms in January 2022. No borrowings were outstanding under any revolving credit facility at June 30, 2022 or December 31, 2021.
Note 10. RECEIVABLES
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Trade receivables | $ | 8,186 | | | $ | 8,723 | |
| Less charge-backs and cash discounts | (575) | | | (723) | |
| Less allowance for expected credit loss | (25) | | | (21) | |
| Net trade receivables | 7,586 | | | 7,979 | |
| Alliance, Royalties, VAT and other | 1,468 | | | 1,390 | |
| Receivables | $ | 9,054 | | | $ | 9,369 | |
Non-U.S. receivables sold on a nonrecourse basis were $674 million and $638 million for the six months ended June 30, 2022 and 2021, respectively. Receivables from the three largest customers in the U.S. represented approximately 64% and 59% of total trade receivables at June 30, 2022 and December 31, 2021, respectively.
Note 11. INVENTORIES
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Finished goods | $ | 469 | | | $ | 543 | |
| Work in process | 1,912 | | | 2,111 | |
| Raw and packaging materials | 422 | | | 350 | |
| Total inventories | $ | 2,803 | | | $ | 3,004 | |
| | | |
| Inventories | $ | 2,142 | | | $ | 2,095 | |
| Other non-current assets | 661 | | | 909 | |
The fair value adjustments related to the Celgene acquisition were $245 million at June 30, 2022 and $508 million at December 31, 2021. Other non-current assets include inventory expected to remain on hand beyond 12 months in both periods.
In the first quarter of 2022, BMS recorded an out of period adjustment to reduce the remaining amount of inventory fair value adjustments resulting from the Celgene acquisition by $114 million with a corresponding increase to Cost of products sold of $32 million and Research and development expense of $82 million. The adjustment was not material to previously reported balance sheets or results of operations.
Note 12. PROPERTY, PLANT AND EQUIPMENT
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Land | $ | 162 | | | $ | 169 | |
| Buildings | 5,740 | | | 5,897 | |
| Machinery, equipment and fixtures | 3,243 | | | 3,252 | |
| Construction in progress | 850 | | | 764 | |
| Gross property, plant and equipment | 9,995 | | | 10,082 | |
| Less accumulated depreciation | (4,025) | | | (4,033) | |
| Property, plant and equipment | $ | 5,970 | | | $ | 6,049 | |
Depreciation expense was $141 million and $286 million for the three and six months ended June 30, 2022 and $143 million and $278 million for the three and six months ended June 30, 2021, respectively.
Note 13. GOODWILL AND OTHER INTANGIBLE ASSETS
| | | | | | | | | | | | | | | | | |
| Dollars in Millions | Estimated Useful Lives | | June 30,
2022 | | December 31,
2021 |
| Goodwill | | | $ | 20,446 | | | $ | 20,502 | |
| | | | | |
| Other intangible assets: | | | | | |
| Licenses | 5 – 15 years | | 307 | | | 307 | |
| Acquired marketed product rights | 3 – 15 years | | 60,477 | | | 60,454 | |
| Capitalized software | 3 – 10 years | | 1,581 | | | 1,499 | |
| IPRD | | | 3,710 | | | 3,750 | |
| Gross other intangible assets | | | 66,075 | | | 66,010 | |
| Less accumulated amortization | | | (28,385) | | | (23,483) | |
| Other intangible assets | | | $ | 37,690 | | | $ | 42,527 | |
Amortization expense of other intangible assets was $2.4 billion and $4.9 billion for the three and six months ended June 30, 2022 and $2.5 billion and $5.1 billion for the three and six months ended June 30, 2021, respectively.
In the first quarter of 2022, a $40 million IPRD impairment charge was recorded in Research and development expense following a decision to discontinue development of an investigational compound in connection with the prioritization of current pipeline opportunities. The compound was obtained in the acquisition of Celgene and was being studied as a potential treatment for autoimmune diseases. The charge represented a full write-down.
In the second quarter of 2021, a $230 million IPRD impairment charge was recorded in Research and development expense following a decision to discontinue development of an investigational compound in connection with the prioritization of current pipeline opportunities. The compound was being studied as a potential treatment for fibrotic diseases and was acquired in the acquisition of Celgene. The charge represented a full write-down based on the estimated fair value determined using discounted cash flow projections.
In the first of quarter of 2021, Inrebic EU regulatory approval milestones of $300 million were achieved resulting in a $385 million increase to the acquired marketed product rights intangible asset, after establishing the applicable deferred tax liability. An impairment charge of $315 million was recognized in Cost of products sold as the carrying value of this asset exceeded the projected undiscounted cash flows of the asset. The charge was equal to the excess of the asset's carrying value over its estimated fair value using discounted cash flow projections.
Note 14. SUPPLEMENTAL FINANCIAL INFORMATION
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31, 2021 |
| Income taxes | $ | 3,067 | | | $ | 2,786 | |
| Research and development | 664 | | | 514 | |
| Contract assets | 419 | | | 361 | |
| Equity investments | 38 | | | 255 | |
Restricted cash(a) | 153 | | | 140 | |
| Other | 1,421 | | | 776 | |
| Other current assets | $ | 5,762 | | | $ | 4,832 | |
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31, 2021 |
| Equity investments | $ | 1,973 | | | $ | 2,713 | |
| Inventories | 661 | | | 909 | |
| Operating leases | 840 | | | 919 | |
| Pension and postretirement | 315 | | | 317 | |
| Research and development | 572 | | | 248 | |
Restricted cash(a) | 57 | | | 197 | |
| Other | 310 | | | 232 | |
| Other non-current assets | $ | 4,728 | | | $ | 5,535 | |
(a) Restricted cash consists of funds restricted for annual Company contributions to the defined contribution plan in the U.S. and escrow for litigation settlements. Cash is restricted when withdrawal or general use is contractually or legally restricted. Restricted cash of $373 million at June 30, 2021, was included in cash, cash equivalents and restricted cash in the consolidated statements of cash flows.
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31, 2021 |
| Rebates and discounts | $ | 5,842 | | | $ | 6,399 | |
| Income taxes | 1,141 | | | 754 | |
| Employee compensation and benefits | 797 | | | 1,375 | |
| Research and development | 1,386 | | | 1,373 | |
| Dividends | 1,154 | | | 1,186 | |
| Interest | 352 | | | 378 | |
| Royalties | 384 | | | 410 | |
| Operating leases | 167 | | | 169 | |
| | | |
| Other | 1,857 | | | 1,927 | |
| Other current liabilities | $ | 13,080 | | | $ | 13,971 | |
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31, 2021 |
| Income taxes | $ | 4,366 | | | $ | 4,835 | |
| Pension and postretirement | 589 | | | 654 | |
| Operating leases | 815 | | | 874 | |
| Deferred income | 307 | | | 326 | |
| Deferred compensation | 354 | | | 427 | |
| Other | 209 | | | 218 | |
| Other non-current liabilities | $ | 6,640 | | | $ | 7,334 | |
Note 15. EQUITY
The following table summarizes changes in equity for the six months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Capital in Excess of Par Value of Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Treasury Stock | | Noncontrolling Interest |
| Dollars and Shares in Millions | Shares | | Par Value | | Shares | | Cost | |
| Balance at December 31, 2021 | 2,923 | | | $ | 292 | | | $ | 44,361 | | | $ | (1,268) | | | $ | 23,820 | | | 747 | | | $ | (31,259) | | | $ | 60 | |
| Net Earnings | — | | | — | | | — | | | — | | | 1,278 | | | — | | | — | | | 5 | |
| Other Comprehensive Income | — | | | — | | | — | | | 39 | | | — | | | — | | | — | | | — | |
Cash dividends declared(a) | — | | | — | | | — | | | — | | | (1,150) | | | — | | | — | | | — | |
| Share repurchase program | — | | | — | | | (750) | | | — | | | — | | | 65 | | | (4,250) | | | — | |
| Stock compensation | — | | | — | | | 145 | | | — | | | — | | | (18) | | | 322 | | | — | |
| | | | | | | | | | | | | | | |
| Balance at March 31, 2022 | 2,923 | | | $ | 292 | | | $ | 43,756 | | | $ | (1,229) | | | $ | 23,948 | | | 794 | | | $ | (35,187) | | | $ | 65 | |
| Net Earnings | — | | | — | | | — | | | — | | | 1,421 | | | — | | | — | | | 8 | |
| Other Comprehensive Income | — | | | — | | | — | | | 237 | | | — | | | — | | | — | | | — | |
Cash dividends declared(a) | — | | | — | | | — | | | — | | | (1,152) | | | — | | | — | | | — | |
| Share repurchase program | — | | | — | | | 300 | | | — | | | — | | | 2 | | | (300) | | | — | |
| Stock compensation | — | | | — | | | 319 | | | — | | | — | | | (8) | | | 195 | | | — | |
| Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (12) | |
| Balance at June 30, 2022 | 2,923 | | | 292 | | | 44,375 | | | (992) | | | 24,217 | | | 788 | | | (35,292) | | | 61 | |
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(a) Cash dividends declared per common share were $0.54 for the three months ended March 31, 2022 and June 30, 2022, respectively.
The following table summarizes changes in equity for the six months ended June 30, 2021:
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| Common Stock | | Capital in Excess of Par Value of Stock | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Treasury Stock | | Noncontrolling Interest |
| Dollars and Shares in Millions | Shares | | Par Value | | Shares | | Cost | |
| Balance at December 31, 2020 | 2,923 | | | $ | 292 | | | $ | 44,325 | | | $ | (1,839) | | | $ | 21,281 | | | 679 | | | $ | (26,237) | | | $ | 60 | |
| Net Earnings | — | | | — | | | — | | | — | | | 2,021 | | | — | | | — | | | 8 | |
| Other Comprehensive Income | — | | | — | | | — | | | 295 | | | — | | | — | | | — | | | — | |
Cash dividends declared(a) | — | | | — | | | — | | | — | | | (1,098) | | | — | | | — | | | — | |
| Share repurchase program | — | | | — | | | — | | | — | | | — | | | 28 | | | (1,768) | | | — | |
| Stock compensation | — | | | — | | | (473) | | | — | | | — | | | (15) | | | 806 | | | — | |
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| Balance at March 31, 2021 | 2,923 | | | $ | 292 | | | $ | 43,852 | | | $ | (1,544) | | | $ | 22,204 | | | 692 | | | $ | (27,199) | | | $ | 68 | |
| Net Loss | — | | | — | | | — | | | — | | | 1,055 | | | — | | | — | | | 6 | |
| Other Comprehensive Loss | — | | | — | | | — | | | 26 | | | — | | | — | | | — | | | — | |
Cash dividends declared(a) | — | | | — | | | — | | | — | | | (1,091) | | | — | | | — | | | — | |
| Stock repurchase program | — | | | — | | | — | | | — | | | — | | | 19 | | | (1,235) | | | — | |
| Stock compensation | — | | | — | | | 212 | | | — | | | — | | | (10) | | | 236 | | | — | |
| Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8) | |
| Balance at June 30, 2021 | 2,923 | | | 292 | | | 44,064 | | | (1,518) | | | 22,168 | | | 701 | | | (28,198) | | | 66 | |
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(a) Cash dividends declared per common share were $0.49 for the three months ended March 31, 2021 and June 30, 2021, respectively.
BMS has a share repurchase program, authorized by its Board of Directors, allowing for repurchases of its shares. The share repurchase program does not obligate us to repurchase any specific number of shares, does not have a specific expiration date and may be suspended or discontinued at any time. Treasury stock is recognized at the cost to reacquire the shares. Shares issued from treasury are recognized utilizing the first-in first-out method. The outstanding share repurchase authorization under the program was approximately $15.2 billion as of December 31, 2021.
During the first quarter of 2022, BMS entered into accelerated share repurchase ("ASR") agreements to repurchase an aggregate $5.0 billion of common stock to be settled in two tranches during the second and third quarters of 2022. The ASR agreements were funded with cash on-hand. In the first quarter of 2022 approximately 65 million shares of common stock (85% of the $5.0 billion aggregate repurchase price) were received by BMS and included in treasury stock. During the three months ended June 30, 2022, the first tranche of the ASR was settled and approximately 2 million shares of common stock were received by BMS and transferred to treasury stock. The second tranche is expected to settle in the third quarter of 2022. The total number of shares to be repurchased under the ASR agreements will be based on volume-weighted average prices of BMS's common stock during the terms of the ASR transactions less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. The remaining share repurchase capacity under the share repurchase program was approximately $10.2 billion as of June 30, 2022.
BMS repurchased 47 million shares of its common stock for $3.0 billion in the six months ended June 30, 2021.
The components of Other Comprehensive Income were as follows:
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| 2022 | | 2021 |
| Dollars in Millions | Pretax | | Tax | | After Tax | | Pretax | | Tax | | After Tax |
| Three Months Ended June 30, | | | | | | | | | | | |
| Derivatives qualifying as cash flow hedges: | | | | | | | | | | | |
| Unrealized gains/(losses) | $ | 481 | | | $ | (65) | | | $ | 416 | | | $ | (38) | | | $ | (3) | | | $ | (41) | |
Reclassified to net earnings(a) | (131) | | | 16 | | | (115) | | | 53 | | | (6) | | | 47 | |
| Derivatives qualifying as cash flow hedges | 350 | | | (49) | | | 301 | | | 15 | | | (9) | | | 6 | |
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| Pension and postretirement benefits: | | | | | | | | | | | |
| Actuarial gains/(losses) | 20 | | | (3) | | | 17 | | | 1 | | | 2 | | | 3 | |
Amortization(b) | 6 | | | (1) | | | 5 | | | 10 | | | (2) | | | 8 | |
Settlements(b) | 4 | | | (1) | | | 3 | | | 5 | | | (1) | | | 4 | |
| Pension and postretirement benefits | 30 | | | (5) | | | 25 | | | 16 | | | (1) | | | 15 | |
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| Marketable debt securities: | | | | | | | | | | | |
| Unrealized (losses)/gains | — | | | (1) | | | (1) | | | (3) | | | 1 | | | (2) | |
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| Foreign currency translation | (64) | | | (24) | | | (88) | | | 3 | | | 4 | | | 7 | |
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| Other Comprehensive Income | $ | 316 | | | $ | (79) | | | $ | 237 | | | $ | 31 | | | $ | (5) | | | $ | 26 | |
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| Six Months Ended June 30, | | | | | | | | | | | |
| Derivatives qualifying as cash flow hedges: | | | | | | | | | | | |
| Unrealized gains/(losses) | $ | 601 | | | $ | (81) | | | $ | 520 | | | $ | 221 | | | $ | (14) | | | $ | 207 | |
Reclassified to net earnings(a) | (216) | | | 28 | | | (188) | | | 89 | | | (10) | | | 79 | |
| Derivatives qualifying as cash flow hedges | 385 | | | (53) | | | 332 | | | 310 | | | (24) | | | 286 | |
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| Pension and postretirement benefits: | | | | | | | | | | | |
| Actuarial gains/(losses) | 40 | | | (7) | | | 33 | | | 22 | | | (3) | | | 19 | |
Amortization(b) | 12 | | | (3) | | | 9 | | | 19 | | | (5) | | | 14 | |
Settlements(b) | 5 | | | (1) | | | 4 | | | 6 | | | (1) | | | 5 | |
| Pension and postretirement benefits | 57 | | | (11) | | | 46 | | | 47 | | | (9) | | | 38 | |
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| Marketable debt securities: | | | | | | | | | | | |
| Unrealized gains | (2) | | | — | | | (2) | | | (6) | | | 2 | | | (4) | |
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| Foreign currency translation | (70) | | | (30) | | | (100) | | | 12 | | | (11) | | | 1 | |
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| Total Other Comprehensive Income | $ | 370 | | | $ | (94) | | | $ | 276 | | | $ | 363 | | | $ | (42) | | | $ | 321 | |
(a)Included in Cost of products sold.
(b)Included in Other (income)/expense, net.
The accumulated balances related to each component of Other Comprehensive Income, net of taxes, were as follows:
| | | | | | | | | | | |
| Dollars in Millions | June 30,
2022 | | December 31,
2021 |
| Derivatives qualifying as cash flow hedges | $ | 510 | | | $ | 178 | |
| Pension and postretirement benefits | (722) | | | (768) | |
| Marketable debt securities | — | | | 2 | |
| Foreign currency translation | (780) | | | (680) | |
| Accumulated other comprehensive loss | $ | (992) | | | $ | (1,268) | |
Note 16. EMPLOYEE STOCK BENEFIT PLANS
Stock-based compensation expense was as follows:
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| | Three Months Ended June 30, | | Six Months Ended June 30, |
| Dollars in Millions | 2022 | | 2021 | | 2022 | | 2021 |
| Cost of products sold | $ | 11 | | | $ | 15 | | | $ | 19 | | | $ | 30 | |
| Marketing, selling and administrative | 48 | | | 65 | | | 96 | | | 125 | |
| Research and development | 57 | | | 74 | | | 108 | | | 144 | |
| Other (income)/expense, net | — | | | 3 | | | — | | | 9 | |
| Total stock-based compensation expense | $ | 116 | | | $ | 157 | | | $ | 223 | | | $ | 308 | |
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Income tax benefit(a) | $ | 22 | | | $ | 33 | | | $ | 44 | | | $ | 64 | |
(a) Income tax benefit excludes excess tax benefits from share-based compensation awards that were vested or exercised of $19 million and $59 million for the three and six months ended June 30, 2022 and $12 million and $29 million for the three and six months ended June 30, 2021, respectively.
The number of units granted and the weighted-average fair value on the grant date for the six months ended June 30, 2022 were as follows:
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| Units in Millions | Units | | Weighted-Average Fair Value |
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| Restricted stock units | 8.0 | | | $ | 63.81 | |
| Market share units | 1.0 | | | 60.74 | |
| Performance share units | 1.4 | | | 66.76 | |
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| Dollars in Millions | Stock Options | | Restricted Stock Units | | Market Share Units | | Performance Share Units |
| Unrecognized compensation cost | $ | 1 | | | $ | 919 | | | $ | 76 | | | $ | 132 | |
| Expected weighted-average period in years of compensation cost to be recognized | 0.3 | | 3.1 | | 3.2 | | 2.0 |
Note 17. LEGAL PROCEEDINGS AND CONTINGENCIES
BMS and certain of its subsidiaries are involved in various lawsuits, claims, government investigations and other legal proceedings that arise in the ordinary course of business. These claims or proceedings can involve various types of parties, including governments, competitors, customers, suppliers, service providers, licensees, employees, or shareholders, among others. These matters may involve patent infringement, antitrust, securities, pricing, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage, among others. The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. Legal proceedings that are significant or that BMS believes could become significant or material are described below.
While BMS does not believe that any of these matters, except as otherwise specifically noted below, will have a material adverse effect on its financial position or liquidity as BMS believes it has substantial defenses in the matters, the outcomes of BMS’s legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. There can be no assurance that there will not be an increase in the scope of one or more of these pending matters or any other or future lawsuits, claims, government investigations or other legal proceedings will not be material to BMS’s financial position, results of operations or cash flows for a particular period. Furthermore, failure to successfully enforce BMS’s patent rights would likely result in substantial decreases in the respective product revenues from generic competition.
Unless otherwise noted, BMS is unable to assess the outcome of the respective matters nor is it able to estimate the possible loss or range of losses that could potentially result for such matters. Contingency accruals are recognized when it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. Developments in legal proceedings and other matters that could cause changes in the amounts previously accrued are evaluated each reporting period. For a discussion of BMS’s tax contingencies, see “—Note 7. Income Taxes”.
INTELLECTUAL PROPERTY
Anti-PD-1 and Anti-PD-L1 Antibody Litigation
In September 2015, Dana-Farber Cancer Institute (“Dana-Farber”) filed a complaint in the U.S. District Court for the District of Massachusetts seeking to correct the inventorship on up to six related U.S. patents directed to methods of treating cancer using PD-1 and PD-L1 antibodies. Specifically, Dana-Farber sought to add two scientists as inventors to these patents. In October 2017, Pfizer was allowed to intervene in the case alleging that one of the scientists identified by Dana-Farber was employed by a company eventually acquired by Pfizer during the relevant period. In May 2019, the District Court issued a decision ruling that the two scientists should be added as inventors to the patents which decision was affirmed on appeal. In June 2019, Dana-Farber filed a new lawsuit in the District of Massachusetts against BMS seeking damages as a result of the decision adding the scientists as inventors. In February 2021, BMS filed a motion to dismiss that complaint. In August 2021, the Court denied the motion to dismiss, but ruled that Dana-Farber’s claims for damages before May 17, 2019—the date of the District Court’s ruling that Dana-Farber was a co-inventor of the patents—are preempted by federal patent law. A trial has been scheduled for May 2023.
On March 17, 2022, BMS filed a lawsuit in U.S. District Court for the District of Delaware against AstraZeneca Pharmaceuticals LP and AstraZeneca UK Ltd ("AZ") alleging that AZ's marketing of the PD-L1 antibody Imfinzi infringes certain claims of U.S. Patent Nos. 9,580,505, 9,580,507, 10,138,299, 10,308,714, 10,266,594, 10,266,595, 10,266,596 and 10,323,092. No trial date has been scheduled.
CAR T
In October 2017, Juno and Sloan Kettering Institute for Cancer Research (“SKI”) filed a complaint for patent infringement against Kite Pharma, Inc. (“Kite”) in the U.S. District Court for the Central District of California. The complaint alleged that Kite’s Yescarta* product infringes certain claims of U.S. Patent No. 7,446,190 (the “’190 Patent”) concerning CAR T cell technologies. Kite filed an answer and counterclaims asserting non-infringement and invalidity of the ’190 Patent. In December 2019, following an eight-day trial, the jury rejected Kite’s defenses, finding that Kite willfully infringed the ’190 Patent and awarding to Juno and SKI a reasonable royalty consisting of a $585 million upfront payment and a 27.6% running royalty on Kite’s sales of Yescarta* through the expiration of the ’190 Patent in August 2024. In January 2020, Kite renewed its previous motion for judgment as a matter of law and also moved for a new trial, and Juno filed a motion seeking enhanced damages, supplemental damages, ongoing royalties, and prejudgment interest. In March 2020, the Court denied both of Kite’s motions in their entirety. In April 2020, the Court granted in part Juno’s motion and entered a final judgment awarding to Juno and SKI approximately $1.2 billion in royalties, interest and enhanced damages and a 27.6% running royalty on Kite’s sales of Yescarta* from December 13, 2019 through the expiration of the ’190 Patent in August 2024. In April 2020, Kite appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit and the Court held an oral hearing on July 6, 2021. In August 2021, a Federal Circuit panel reversed the jury verdict and district court decision and found the ’190 Patent to be invalid. In October 2021, Juno and SKI filed a petition with the Federal Circuit for panel and en banc rehearing which the Federal Circuit denied on January 14, 2022. On June 13, 2022, Juno and SKI filed a petition for a writ of certiorari with the U.S. Supreme Court.
Eliquis - Europe
In November 2020 and January 2021, Sandoz Limited (“Sandoz”) and Teva Pharmaceutical Industries Ltd. (“Teva Limited”), respectively, filed lawsuits in the United Kingdom seeking revocation of the UK apixaban composition of matter patent and related Supplementary Protection Certificate (“SPC”). BMS subsequently filed counterclaims for infringement in both actions. A trial took place in February 2022 and in a judgement issued on April 7, 2022, the judge found the UK apixaban composition of matter patent and related SPC invalid. The Company is seeking permission to appeal from the Court of Appeal.
Similar lawsuits have been filed in various other countries in Europe seeking revocation of our composition of matter patents and SPCs relating to Eliquis, and trials have been scheduled in certain of those cases. In May 2022, a Dutch court issued a decision denying a request by the Company for a preliminary injunction that would have prevented an at-risk generic launch in the Netherlands by Sandoz prior to a full trial on the merits.
Following the above decisions in the UK and the Netherlands, generic manufacturers have begun marketing generic versions of Eliquis in the UK and Netherlands, and may seek to market generic versions of Eliquis in additional countries in Europe, prior to the expiration of our patents, which may lead to additional infringement and invalidity actions involving Eliquis patents being filed in various countries in Europe in the coming months.
Onureg – U.S.
In November 2021, BMS received a Notice Letter from Accord notifying BMS that Accord had filed an aNDA containing a paragraph IV certification seeking approval of a generic version of Onureg in the U.S. and challenging the one FDA Orange Book-listed formulation patent expiring in 2030. In response, BMS filed a patent infringement action against Accord in the U.S. District Court for the District of Delaware. No trial date has been scheduled.
Plavix* - Australia
Sanofi was notified that, in August 2007, GenRx Proprietary Limited (“GenRx”) obtained regulatory approval of an application for clopidogrel bisulfate 75mg tablets in Australia. GenRx, formerly a subsidiary of Apotex Inc., subsequently changed its name to Apotex (“GenRx-Apotex”). In August 2007, GenRx-Apotex filed an application in the Federal Court of Australia seeking revocation of Sanofi’s Australian Patent No. 597784 (Case No. NSD 1639 of 2007). Sanofi filed counterclaims of infringement and sought an injunction. On September 21, 2007, the Federal Court of Australia granted Sanofi’s injunction. A subsidiary of BMS was subsequently added as a party to the proceedings. In February 2008, a second company, Spirit Pharmaceuticals Pty. Ltd., also filed a revocation suit against the same patent. This case was consolidated with the GenRx-Apotex case. On August 12, 2008, the Federal Court of Australia held that claims of Patent No. 597784 covering clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate salts were valid. The Federal Court also held that the process claims, pharmaceutical composition claims, and claim directed to clopidogrel and its pharmaceutically acceptable salts were invalid. BMS and Sanofi filed notices of appeal in the Full Court of the Federal Court of Australia (“Full Court”) appealing the holding of invalidity of the claim covering clopidogrel and its pharmaceutically acceptable salts, process claims, and pharmaceutical composition claims. GenRx-Apotex appealed. On September 29, 2009, the Full Court held all of the claims of Patent No. 597784 invalid. In March 2010, the High Court of Australia denied a request by BMS and Sanofi to hear an appeal of the Full Court decision. The case was remanded to the Federal Court for further proceedings related to damages sought by GenRx-Apotex. BMS and GenRx-Apotex settled, and the GenRx-Apotex case was dismissed. The Australian government intervened in this matter seeking maximum damages up to 449 million AUD ($309 million), plus interest, which would be split between BMS and Sanofi, for alleged losses experienced for paying a higher price for branded Plavix* during the period when the injunction was in place. BMS and Sanofi dispute that the Australian government is entitled to any damages. A trial was concluded in September 2017. In April 2020, the Federal Court issued a decision dismissing the Australian government’s claim for damages. In May 2020, the Australian government appealed the Federal Court’s decision and an appeal hearing concluded in February 2021.
Pomalyst - U.S.
In February 2022, Celgene received a Notice Letter from MSN Laboratories Pvt. Ltd. (“MSN”) notifying Celgene that MSN had filed an aNDA containing paragraph IV certifications seeking approval to market a generic version of Pomalyst in the U.S. In response, Celgene initiated a patent infringement action against MSN in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents. In June 2022, Celgene entered into a confidential settlement agreement with MSN, settling all outstanding claims in the litigation with MSN.
Revlimid - U.S.
Celgene received a Notice Letter from Alembic Pharmaceuticals Limited, Alembic Global Holding SA, and Alembic Pharmaceuticals, Inc. (“Alembic”) notifying Celgene that Alembic had filed an aNDA containing paragraph IV certifications seeking approval to market a generic version of Revlimid in the U.S. In response, Celgene initiated a patent infringement action against Alembic in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents. Alembic filed answers and counterclaims alleging that the asserted patents are invalid and/or not infringed. The parties subsequently settled all disputes pertaining to the Alembic aNDA, and the case was dismissed.
In May 2022, Celgene received a Notice Letter from Oncogen Pharma (Malaysia) Sdn. Bhd. (“Oncogen”) notifying Celgene that Oncogen has filed an aNDA containing paragraph IV certifications seeking approval to market a generic version of Revlimid in the U.S. In response, Celgene initiated a patent infringement action against Oncogen in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents. The parties subsequently settled all disputes pertaining to the Oncogen aNDA, and the case was dismissed.
In May 2022, Celgene received a Notice Letter from Qilu Pharmaceutical Co. Ltd. (“Qilu”) notifying Celgene that Qilu has filed an aNDA containing paragraph IV certifications seeking approval to market a generic version of Revlimid in the U.S. In response, Celgene initiated a patent infringement action against Qilu in the U.S. District Court for the District of New Jersey asserting certain FDA Orange Book-listed patents. Qilu has not yet responded to the complaint. No schedule has been entered by the Court.
Sprycel - U.S.
In January 2022, BMS received a Notice Letter from Xspray Pharma AB ("Xspray") notifying BMS that Xspray had filed a 505(b)(2) NDA application containing paragraph IV certifications seeking approval of a dasatinib product in the U.S. and challenging two FDA Orange Book-listed monohydrate form patents expiring in 2025 and 2026. In February 2022, BMS filed a patent infringement action against Xspray in the U.S. District Court for the District of New Jersey. Subsequently, the Company also received paragraph IV certification letters from Accord, Biocon, and Nanocopoeia challenging the same patents, and the Company filed patent infringement actions against all three companies. No trial dates have been scheduled in any of these actions.
Zeposia - U.S.
On October 15, 2021, Actelion Pharmaceuticals LTD and Actelion Pharmaceuticals US, INC (“Actelion”), filed a complaint for patent infringement in the United States District Court for the District of New Jersey against BMS and Celgene for alleged infringement of U.S. Patent No. 10,251,867 (the “’867 Patent”). The Complaint alleges that the sale of Zeposia infringes certain claims of the ’867 Patent and Actelion is seeking damages and injunctive relief. No trial date has been scheduled.
PRICING, SALES AND PROMOTIONAL PRACTICES LITIGATION
Plavix* State Attorneys General Lawsuits
BMS and certain Sanofi entities are defendants in consumer protection actions brought by the attorneys general of Hawaii and New Mexico relating to the labeling, sales and/or promotion of Plavix*. A trial in the Hawaii matter occurred in 2020. In February 2021, the Court issued a decision against Sanofi and BMS, imposing penalties in the total amount of $834 million, with $417 million attributed to BMS. Sanofi and BMS disagree with the decision and are appealing it. BMS remains confident in the merits of its case and its likelihood of success on appeal and BMS does not believe establishing a reserve is warranted for this matter. A trial in the New Mexico matter has been scheduled for January 2023.
PRODUCT LIABILITY LITIGATION
BMS is a party to various product liability lawsuits. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. As previously disclosed, in addition to lawsuits, BMS also faces unfiled claims involving its products.
Abilify*
BMS and Otsuka are co-defendants in product liability litigation related to Abilify*. Plaintiffs allege Abilify* caused them to engage in compulsive gambling and other impulse control disorders. There have been over 2,500 cases filed in state and federal courts and additional cases are pending in Canada. The Judicial Panel on Multidistrict Litigation consolidated the federal court cases for pretrial purposes in the U.S. District Court for the Northern District of Florida. In February 2019, BMS and Otsuka entered into a master settlement agreement establishing a proposed settlement program to resolve all Abilify* compulsivity claims filed as of January 28, 2019 in the MDL as well as various state courts, including California and New Jersey. To date, approximately 2,700 cases, comprising approximately 3,900 plaintiffs, have been dismissed based on participation in the settlement program or failure to comply with settlement related court orders and all remaining cases in the U.S. MDL litigation have since been resolved. Three inactive cases remain in New Jersey State court. There are eleven cases pending in Canada (four class actions, seven individual injury claims). Out of the eleven cases, only two are active (the class actions in Quebec and Ontario). Both class actions have now been certified and all appeals of the certification decision have now been exhausted.
Byetta*
Amylin, a former subsidiary of BMS, and Lilly are co-defendants in product liability litigation related to Byetta*. This litigation involved lawsuits on behalf of plaintiffs, which include injury plaintiffs as well as claims by spouses and/or other beneficiaries, in various courts in the U.S. The majority of these cases have been brought by individuals who allege personal injury sustained after using Byetta*, primarily pancreatic cancer, and, in some cases, claiming alleged wrongful death. The majority of cases were pending in Federal Court in San Diego in an MDL or in a coordinated proceeding in California Superior Court in Los Angeles (“JCCP”). In April 2020 the defendants filed a motion for summary judgment based on federal preemption and a motion for summary judgment based on the absence of general causation evidence in the MDL and JCCP. Both motions were granted in March 2021 and April 2021, respectively. The MDL decision is final as to Amylin and Lilly and all MDL claims have been dismissed. As of June 2022, 80% of the plaintiffs in the JCCP (including injury plaintiffs and spouse/beneficiary plaintiffs) alleging claims against Amylin and Lilly have dismissed their claims with prejudice. Additional dismissals are anticipated. Remaining plaintiffs, if any, may seek to appeal the JCCP dismissal orders. BMS sold Byetta* to AstraZeneca in February 2014 as part of BMS’s global diabetes business divestiture and any additional liability to Amylin with respect to Byetta* is expected to be shared with AstraZeneca.
Onglyza*
BMS and AstraZeneca are co-defendants in product liability litigation related to Onglyza*. Plaintiffs assert claims, including claims for wrongful death, as a result of heart failure or other cardiovascular injuries they allege were caused by their use of Onglyza*. As of June 2022, claims are pending in federal and NY state court on behalf of approximately 251 individuals who allege they ingested the product and suffered an injury. In February 2018, the Judicial Panel on Multidistrict Litigation ordered all federal cases to be transferred to an MDL in the U.S. District Court for the Eastern District of Kentucky. A significant majority of the claims are pending in the MDL, with others pending in a coordinated proceeding in California Superior Court in San Francisco (“JCCP”). In August 2021, the MDL and JCCP courts jointly heard evidence regarding the parties’ motions to exclude general causation experts. On September 24, 2021, the JCCP court granted defendants’ motion to exclude plaintiffs’ only general causation expert and largely denied plaintiffs’ motions to exclude defendants’ general causation experts; on January 5, 2022, the MDL court likewise granted defendants’ motion to exclude plaintiffs’ expert and denied entirely plaintiffs’ motions. On March 30, 2022, the JCCP court granted summary judgment to defendants, thus effectively dismissing the 18 claims previously pending in California state court. Plaintiffs have filed an appeal. Defendants have filed a summary judgment motion in the MDL as well, which remains pending. As part of BMS’s global diabetes business divestiture, BMS sold Onglyza* to AstraZeneca in February 2014 and any potential liability with respect to Onglyza* is expected to be shared with AstraZeneca.
SECURITIES LITIGATION
BMS Securities Class Action
Since February 2018, two separate putative class action complaints were filed in the U.S. District for the Northern District of California and in the U.S. District Court for the Southern District of New York against BMS, BMS’s Chief Executive Officer, Giovanni Caforio, BMS’s Chief Financial Officer at the time, Charles A. Bancroft and certain former and current executives of BMS. The case in California was voluntarily dismissed. The remaining complaint alleged violations of securities laws for BMS’s disclosures related to the CheckMate-026 clinical trial in lung cancer. In September 2019, the Court granted BMS’s motion to dismiss, but allowed the plaintiffs leave to file an amended complaint. In October 2019, the plaintiffs filed an amended complaint. In September 2020, the Court granted BMS’s motion to dismiss the amended complaint with prejudice. The plaintiffs appealed the Court’s decision in October 2020. On March 11, 2022, the Second Circuit affirmed the dismissal with prejudice of the amended complaint. The deadline to file further appeals has expired and the decision in favor of the Company and current and former executives is final.
Celgene Securities Litigations
Beginning in March 2018, two putative class actions were filed against Celgene and certain of its officers in the U.S. District Court for the District of New Jersey (the “Celgene Securities Class Action”). The complaints allege that the defendants violated federal securities laws by making misstatements and/or omissions concerning (1) trials of GED-0301, (2) Celgene’s 2020 outlook and projected sales of Otezla*, and (3) the new drug application for Zeposia. The Court consolidated the two actions and appointed a lead plaintiff, lead counsel, and co-liaison counsel for the putative class. In February 2019, the defendants filed a motion to dismiss plaintiff’s amended complaint in full. In December 2019, the Court denied the motion to dismiss in part and granted the motion to dismiss in part (including all claims arising from alleged misstatements regarding GED-0301). Although the Court gave the plaintiff leave to re-plead the dismissed claims, it elected not to do so, and the dismissed claims are now dismissed with prejudice. In November 2020, the Court granted class certification with respect to the remaining claims.
In April 2020, certain Schwab management investment companies on behalf of certain Schwab funds filed an individual action in the U.S. District Court for the District of New Jersey asserting largely the same allegations as the Celgene Securities Class Action against the same remaining defendants in that action (the “Schwab Action”). In July 2020, the defendants filed a motion to dismiss the plaintiffs’ complaint in full. In March 2021, the Court granted in part and denied in part defendants’ motion to dismiss consistent with its decision in the Celgene Securities Class Action.
The California Public Employees’ Retirement System in April 2021 (the “CalPERS Action”); DFA Investment Dimensions Group Inc., on behalf of certain of its funds; and American Century Mutual Funds, Inc., on behalf of certain of its funds, in July 2021 (respectively the “DFA Action” and the “American Century Action”), and GIC Private Limited in September 2021 (the “GIC Action”), filed separate individual actions in the U.S. District Court for the District of New Jersey asserting largely the same allegations as the Celgene Securities Class Action and the Schwab individual action against the same remaining defendants in those actions. In October 2021, these actions were consolidated for pre-trial proceedings with the Schwab Action. The court also consolidated any future direct actions raising common questions of law and fact with the Schwab Action.
No trial dates have been scheduled in any of the above Celgene Securities Litigations.
Contingent Value Rights Litigations
In June 2021, an action was filed against BMS in the U.S. District Court for the Southern District of New York asserting claims of alleged breaches of a Contingent Value Rights Agreement (“CVR Agreement”) entered into in connection with the closing of BMS’s acquisition of Celgene Corporation in November 2019. The successor trustee under the CVR Agreement alleges that BMS breached the CVR Agreement by allegedly failing to use “diligent efforts” to obtain FDA approval of liso-cel (Breyanzi) before a contractual milestone date, thereby avoiding a $6.4 billion potential obligation to holders of the contingent value rights governed by the CVR Agreement and by allegedly failing to permit inspection of records in response to a request by the successor trustee. The successor trustee seeks damages in an amount to be determined at trial and other relief, including interest and attorneys’ fees. BMS disputes the successor trustee’s allegations and filed a motion to dismiss on July 23, 2021. On June 24, 2022, the court denied BMS’s motion to dismiss.
In October 2021, alleged former Celgene stockholders filed a complaint in the U.S. District Court for the Southern District of New York asserting claims on behalf of a putative class of Celgene stockholders who received CVRs in the BMS merger with Celgene for violations of sections 14(a) and 20(a) of the Securities Exchange Act of 1934 relating to the joint proxy statement. That action later was consolidated with another action filed in the same court, and a consolidated complaint thereafter was filed asserting claims on behalf of a class of CVR acquirers, whether in the BMS merger with Celgene or otherwise, for violations of sections 11, 12(a)(2), and 15 of the Securities Act of 1933 and sections 10(b), 14(a) and 20(2) of the Securities Exchange Act of 1934. The complaint alleges that the February 22, 2019 joint proxy statement was materially false or misleading because it failed to disclose that BMS allegedly had no intention to obtain FDA approval for liso-cel (Breyanzi) by the applicable milestone date in the CVR Agreement and that certain statements made by BMS or certain BMS officers in periodic SEC filings, earnings calls, press releases, and investor presentations between December 2019 and November 2020 were materially false or misleading for the same reason. Defendants have moved to dismiss the complaint.
In November 2021, an alleged purchaser of CVRs filed a complaint in the Supreme Court of the State of New York for New York County asserting claims on behalf of a putative class of CVR acquirers for violations of sections 11(a) and 12(a)(2) of the Securities Act of 1933. The complaint alleges that the registration statement filed in connection with the proposed merger transaction between Celgene and BMS was materially false or misleading because it failed to disclose that allegedly BMS had no intention at the time to obtain FDA approval for liso-cel (Breyanzi) by the contractual milestone date. The complaint asserts claims against BMS, the members of its board of directors at the time of the joint proxy statement, and certain BMS officers who signed the registration statement. BMS removed the action to the U.S. District Court for the Southern District of New York. The plaintiff has filed a motion to remand the action to the state court.
In November 2021, an alleged Celgene stockholder filed a complaint in the Superior Court of New Jersey, Union County asserting claims on behalf of two separate putative classes, one of acquirers of CVRs and one of acquirers of BMS common stock, for violations of sections 11(a), 12(a)(2), and 15 of the Securities Act of 1933. The complaint alleges that the registration statement filed in connection with the proposed merger transaction between Celgene and BMS was materially false or misleading because it failed to disclose that allegedly BMS had no intention at the time to obtain FDA approval for liso-cel (Breyanzi) by the contractual milestone date. The complaint asserts claims against BMS, the members of its board of directors at the time of the joint proxy statement, certain BMS officers who signed the registration statement and Celgene’s former chairman and chief executive officer. BMS removed the action to the U.S. District Court for the District of New Jersey and filed a motion to transfer the action to the U.S. District Court for the Southern District of New York. The plaintiff has filed a motion to remand the action to the state court.
No trial dates have been scheduled in any of the above CVR Litigations.
OTHER LITIGATION
HIV Medication Antitrust Litigations
BMS and three other manufacturers of HIV medications are defendants in related lawsuits pending in the Northern District of California. The initial lawsuits, filed on behalf of indirect purchasers, alleged that the defendants’ agreements to develop and sell fixed-dose combination products for the treatment of HIV, including Atripla* and Evotaz®, violate antitrust laws. In July 2020, the Court granted in part defendants’ motion to dismiss, including dismissing with prejudice plaintiffs’ claims as to an overarching conspiracy and plaintiffs’ theories based on the alleged payment of royalties after patent expiration. Other claims, however, remain. In October 2021, BMS entered a settlement agreement with the indirect purchasers. On May 6, 2022, the Court granted final approval of that settlement.
In September and October 2020, two purported class actions were also filed asserting similar claims on behalf of direct purchasers. In March 2021, the Court dismissed one of the direct purchaser cases and limited the claims of the remaining direct purchaser case to those arising in 2016 or later. However, the Court gave plaintiffs leave to amend their complaints, and one plaintiff filed an amended complaint on March 16, 2021. In March 2022, BMS entered into a settlement agreement with the direct purchasers (excluding the retailers discussed below). In June 2022, the Court granted preliminary approval of that settlement.
On September 22, 2021, two additional non-class action direct purchaser complaints were filed by a number of retail pharmacy and grocery store chains against BMS and two other manufacturers of HIV medications. These complaints make allegations similar to those raised in the other federal court cases and the New Mexico state court case described below. In January 2022, BMS entered into an agreement to settle the cases filed against it by the retail pharmacy and grocery store chains, and those cases were dismissed.
In February 2021, BMS and two other manufacturers of HIV medications were sued in State Court in New Mexico by the Attorney General of the State of New Mexico in a case alleging that the defendants’ agreements to develop and sell various fixed-dose combination products for the treatment of HIV, including Atripla*, and agreements to settle certain patent litigation violate the antitrust laws of the State of New Mexico. No trial date has been scheduled.
In December 2021, five additional non-class-action indirect purchaser cases were filed in the Northern District of California, and one additional non-class-action indirect purchaser case was filed in California state court naming BMS and two other manufacturers as defendants. These complaints make allegations similar to those in the other federal court cases. In February 2022, BMS reached a settlement agreement with one of the non-class-action indirect purchaser plaintiffs and that case has been dismissed. In April 2022, two additional indirect purchaser plaintiffs filed non-class suits against BMS and other defendants. In July 2022, BMS entered into a settlement agreement resolving these seven remaining indirect purchaser cases.
Thalomid and Revlimid Litigations
Beginning in November 2014, certain putative class action lawsuits were filed against Celgene in the U.S. District Court for the District of New Jersey alleging that Celgene violated various antitrust, consumer protection, and unfair competition laws by (a) allegedly securing an exclusive supply contract for the alleged purpose of preventing a generic manufacturer from securing its own supply of thalidomide active pharmaceutical ingredient, (b) allegedly refusing to sell samples of Thalomid and Revlimid brand drugs to various generic manufacturers for the alleged purpose of bioequivalence testing necessary for aNDAs to be submitted to the FDA for approval to market generic versions of these products, (c) allegedly bringing unjustified patent infringement lawsuits in order to allegedly delay approval for proposed generic versions of Thalomid and Revlimid, and/or (d) allegedly entering into settlements of patent infringement lawsuits with certain generic manufacturers that allegedly have had anticompetitive effects. The plaintiffs, on behalf of themselves and putative classes of third-party payers, sought injunctive relief and damages. The various lawsuits were consolidated into a master action for all purposes. In March 2020, Celgene reached a settlement with the class plaintiffs. In October 2020, the Court entered a final order approving the settlement and dismissed the matter. That settlement did not resolve the claims of certain entities that opted out of the settlement.
In March 2019, Humana filed a lawsuit against Celgene in the U.S. District Court for the District of New Jersey. Humana’s complaint makes largely the same claims and allegations as were made in the Thalomid and Revlimid antitrust class action litigation. The complaint purports to assert claims on behalf of Humana and its subsidiaries in several capacities, including as a direct purchaser and as an indirect purchaser, and seeks, among other things, treble and punitive damages, injunctive relief and attorneys’ fees and costs. In May 2019, Celgene filed a motion to dismiss Humana’s complaint. In April 2022, the Court issued an order denying Celgene’s motion to dismiss. That order addressed only Celgene’s argument that certain of Humana’s claims were barred by the statute of limitations. The Court’s order did not address Celgene’s other grounds for dismissal and instead directed Celgene to present those arguments in a renewed motion to dismiss following the filing of amended complaints. In May 2022, Humana filed an amended complaint against Celgene and BMS asserting the same claims based on additional factual allegations. Celgene and BMS intend to file a renewed motion to dismiss. No trial date has been scheduled.
United HealthCare Services, Inc. (“UHS”), Blue Cross Blue Shield Association (“BCBSA”), BCBSM Inc., Health Care Service Corporation (“HCSC”), Blue Cross and Blue Shield of Florida Inc., Cigna Corporation (“Cigna”), and several MSP related entities (MSP Recovery Claims, Series LLC; MSPA Claims 1, LLC; MAO-MSO Recovery II, LLC, Series PMPI, a segregated series of MAO-MSO Recovery II, LLC; MSP Recovery Claims Series 44, LLC; MSP Recovery Claims PROV, Series LLC; and MSP Recovery Claims CAID, Series LLC (together, “MSP”)) filed lawsuits making largely the same claims and allegations as were made in the class action litigation. Certain of the matters have made additional claims related to copay assistance and off-label marketing of Thalomid and Revlimid. These cases are now pending in the U.S. District Court for the District of New Jersey and will proceed as described above with respect to the Humana opt-out antitrust action filed in March 2019. No trial dates have been scheduled.
In May 2021, Molina sued Celgene and BMS in San Francisco Superior Court. Molina’s complaint makes largely the same claims and allegations as were made in the class action litigation. In July 2021, Celgene and BMS removed the action to the U.S. District Court for the Northern District of California, and in January 2022, that court granted Molina’s motion to remand to San Francisco Superior Court. In June 2022, the San Francisco Superior Court dismissed 63 of Molina’s claims and stayed the remaining 4 claims. No activity is expected in this case until disposition of the New Jersey actions.
In May 2018, Humana, Inc. (“Humana”) filed a lawsuit against Celgene in the Pike County Circuit Court of the Commonwealth of Kentucky. Humana’s complaint alleges Celgene engaged in unlawful off-label marketing in connection with sales of Thalomid and Revlimid and asserts claims against Celgene for fraud, breach of contract, negligent misrepresentation, unjust enrichment and violations of New Jersey’s Racketeer Influenced and Corrupt Organizations Act. Humana subsequently dismissed its claims for breach of contract voluntarily. The complaint seeks, among other things, treble and punitive damages, injunctive relief and attorneys’ fees and costs. A trial has been scheduled for January 2023.
In May 2020, Celgene filed suit against Humana Pharmacy, Inc. (“HPI”), a Humana subsidiary, in Delaware Superior Court. Celgene’s complaint alleges that HPI breached its contractual obligations to Celgene by assigning claims to Humana that Humana is now asserting. The complaint seeks damages for HPI’s breach as well as a declaratory judgment. A trial has been scheduled for March 2023.
BeiGene Arbitration Matter
On July 5, 2017, Celgene Logistics Sàrl (“Celgene Logistics”) and BeiGene, Ltd. (together with its assignees, “BeiGene”), entered into a License and Supply Agreement (the “LSA”) pursuant to which BeiGene was granted, among other things, an exclusive license to distribute and commercialize Revlimid, Vidaza and Abraxane in China.
As has been disclosed publicly, BeiGene initiated an arbitration proceeding against Celgene Logistics and BMS at the International Chamber of Commerce in June 2020, asserting various claims, including breach of contract under the LSA. In October 2021, Celgene Logistics delivered notice to BeiGene terminating the LSA with respect to Abraxane. A final hearing on the merits was held in June 2022, and the parties are currently engaged in post-hearing briefing.
MSK Contract Litigation
On April 1, 2022, Memorial Sloan Kettering Cancer Center and Eureka Therapeutics, Inc. (collectively, “Plaintiffs”) filed a complaint against BMS, Celgene and Juno (collectively, “Defendants”). In June 2022, Plaintiffs filed an amended complaint. Plaintiffs allege that Defendants breached a license agreement by allegedly failing to use commercially reasonable efforts to develop, manufacture, and commercialize a certain chimeric antigen receptor product and by failing to pay Plaintiffs a running royalty of at least 1.5% of worldwide sales of Abecma allegedly owed to Plaintiffs under the license agreement. Defendants disagree with plaintiffs' claims and filed a motion to dismiss the amended complaint in July 2022. No trial date has been scheduled.
GOVERNMENT INVESTIGATIONS
Like other pharmaceutical companies, BMS and certain of its subsidiaries are subject to extensive regulation by national, state and local authorities in the U.S. and other countries in which BMS operates. As a result, BMS, from time to time, is subject to various governmental and regulatory inquiries and investigations as well as threatened legal actions and proceedings. It is possible that criminal charges, substantial fines and/or civil penalties, could result from government or regulatory investigations.
ENVIRONMENTAL PROCEEDINGS
As previously reported, BMS is a party to several environmental proceedings and other matters, and is responsible under various state, federal and foreign laws, including CERCLA, for certain costs of investigating and/or remediating contamination resulting from past industrial activity at BMS’s current or former sites or at waste disposal or reprocessing facilities operated by third parties.
CERCLA Matters
With respect to CERCLA matters for which BMS is responsible under various state, federal and international laws, BMS typically estimates potential costs based on information obtained from the U.S. Environmental Protection Agency, or counterpart state or foreign agency and/or studies prepared by independent consultants, including the total estimated costs for the site and the expected cost-sharing, if any, with other “potentially responsible parties,” and BMS accrues liabilities when they are probable and reasonably estimable. BMS estimated its share of future costs for these sites to be $88 million at June 30, 2022, which represents the sum of best estimates or, where no best estimate can reasonably be made, estimates of the minimal probable amount among a range of such costs (without taking into account any potential recoveries from other parties). The amount includes the estimated costs for any additional probable loss associated with the previously disclosed North Brunswick Township High School Remediation Site.