Edgar Filing: BRISTOL MYERS SQUIBB CO

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

___________________________

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______

Commission File Number 1-1136

___________________________

BRISTOL-MYERS SQUIBB COMPANY

(Exact name of registrant as specified in its charter)

___________________________



Delaware		22-0790350
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

430 E. 29th Street, 14FL, New York, N.Y. 10016

(Address of principal executive offices)

(212) 546-4000

(Registrant’s telephone number, including area code)

___________________________

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

At March 31, 2019, there were 1,635,705,782 shares outstanding of the Registrant’s $0.10 par value common stock.

BRISTOL-MYERS SQUIBB COMPANY

INDEX TO FORM 10-Q

March 31, 2019




PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements:
Consolidated Statements of Earnings and Comprehensive Income	3
Consolidated Balance Sheets	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.
Quantitative and Qualitative Disclosure About Market Risk	39

Item 4.
Controls and Procedures	39

PART II—OTHER INFORMATION

Item 1.
Legal Proceedings	39

Item 1A.
Risk Factors	39

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.
Exhibits	40

Summary of Abbreviated Terms	41
Signatures	42


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

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS

Dollars in Millions, Except Per Share Data

(UNAUDITED)



	Three Months Ended March 31,
EARNINGS	2019			2018
Net product sales	$	5,713		$	4,972
Alliance and other revenues	207			221
Total Revenues	5,920			5,193

Cost of products sold	1,844			1,584
Marketing, selling and administrative	1,006			980
Research and development	1,351			1,250
Other income (net)	(260		)	(400		)
Total Expenses	3,941			3,414

Earnings Before Income Taxes	1,979			1,779
Provision for Income Taxes	264			284
Net Earnings	1,715			1,495
Noncontrolling Interest	5			9
Net Earnings Attributable to BMS	$	1,710		$	1,486

Earnings per Common Share
Basic	$	1.05		$	0.91
Diluted	1.04			0.91

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Dollars in Millions

(UNAUDITED)



	Three Months Ended March 31,
COMPREHENSIVE INCOME	2019		2018
Net Earnings	$	1,715	$	1,495
Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings:
Derivatives qualifying as cash flow hedges	14		(19		)
Pension and postretirement benefits	49		129
Available-for-sale securities	26		(26		)
Foreign currency translation	29		5
Other Comprehensive Income/(Loss)	118		89

Comprehensive Income	1,833		1,584
Comprehensive Income Attributable to Noncontrolling Interest	5		9
Comprehensive Income Attributable to BMS	$	1,828	$	1,575

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

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(UNAUDITED)



ASSETS	March 31, 2019			December 31, 2018
Current Assets:
Cash and cash equivalents	$	7,335		$	6,911
Marketable securities	1,429			1,973
Receivables	5,704			5,965
Inventories	1,283			1,195
Prepaid expenses and other	1,342			1,116
Total Current Assets	17,093			17,160
Property, plant and equipment	4,985			5,027
Goodwill	6,536			6,538
Other intangible assets	1,026			1,091
Deferred income taxes	1,380			1,371
Marketable securities	1,233			1,775
Other assets	2,581			2,024
Total Assets	$	34,834		$	34,986

LIABILITIES
Current Liabilities:
Short-term debt obligations	$	381		$	1,703
Accounts payable	1,976			1,892
Accrued liabilities	5,856			6,489
Deferred income	103			172
Income taxes payable	525			398
Total Current Liabilities	8,841			10,654
Deferred income	448			468
Income taxes payable	3,084			3,043
Pension and other liabilities	1,509			1,048
Long-term debt	5,635			5,646
Total Liabilities	19,517			20,859

Commitments and contingencies

EQUITY
Bristol-Myers Squibb Company Shareholders’ Equity:
Preferred stock	—			—
Common stock	221			221
Capital in excess of par value of stock	2,103			2,081
Accumulated other comprehensive loss	(2,644		)	(2,762		)
Retained earnings	35,109			34,065
Less cost of treasury stock	(19,571		)	(19,574		)
Total Bristol-Myers Squibb Company Shareholders’ Equity	15,218			14,031
Noncontrolling interest	99			96
Total Equity	15,317			14,127
Total Liabilities and Equity	$	34,834		$	34,986

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

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars in Millions

(UNAUDITED)



	Three Months Ended March 31,
	2019			2018
Cash Flows From Operating Activities:
Net earnings	$	1,715		$	1,495
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization, net	170			143
Deferred income taxes	2			160
Stock-based compensation	53			55
Impairment charges	45			80
Pension settlements and amortization	66			50
Divestiture gains and royalties	(166		)	(255		)
Asset acquisition charges	—			60
Equity investment gains	(175		)	(15		)
Other adjustments	(6		)	(14		)
Changes in operating assets and liabilities:
Receivables	236			219
Inventories	35			(4		)
Accounts payable	136			(241		)
Deferred income	15			23
Income taxes payable	196			114
Other	(932		)	(695		)
Net Cash Provided by Operating Activities	1,390			1,175
Cash Flows From Investing Activities:
Sale and maturities of marketable securities	1,350			442
Purchase of marketable securities	(242		)	(285		)
Capital expenditures	(204		)	(239		)
Divestiture and other proceeds	171			375
Acquisition and other payments	(15		)	(336		)
Net Cash Provided by/(Used in) Investing Activities	1,060			(43		)
Cash Flows From Financing Activities:
Short-term debt obligations, net	(73		)	(344		)
Repayment of long-term debt	(1,250		)	—
Repurchase of common stock	—			(167		)
Dividends	(669		)	(653		)
Other	(37		)	(58		)
Net Cash Used in Financing Activities	(2,029		)	(1,222		)
Effect of Exchange Rates on Cash and Cash Equivalents	3			11
Net Increase/(Decrease) in Cash and Cash Equivalents	424			(79		)
Cash and Cash Equivalents at Beginning of Period	6,911			5,421
Cash and Cash Equivalents at End of Period	$	7,335		$	5,342

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

Note 1. BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING STANDARDS

Basis of Consolidation

Bristol-Myers Squibb Company prepared these unaudited consolidated financial statements following the requirements of the SEC and U.S. GAAP for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Quarterly Report on Form 10-Q, which include all adjustments necessary for a fair presentation of the financial position at March 31, 2019 and December 31, 2018 and the results of operations and cash flows for the three months ended March 31, 2019 and 2018. 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, 2018 included in the 2018 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

Business Segment Information

The Company 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. The determination of a single segment is consistent with the financial information regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods. 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 sales rebate and return accruals; legal contingencies; income taxes; and pension and postretirement benefits. Actual results may differ from estimates.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation. Equity investment gains previously presented in Other adjustments in the consolidated statements of cash flows is now presented separately.

Recently Adopted Accounting Standards

Leases

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

Goodwill Impairment Testing

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

Recently Issued Accounting Standards Not Yet Adopted

Financial Instruments - Measurement of Credit Losses

In June 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. Entities will be required to use a forward-looking estimated loss model. Available-for-sale debt security credit losses will be recognized as allowances rather than a reduction in amortized cost. The guidance is effective January 1, 2020 with early adoption permitted in 2019 on a modified retrospective approach. The amended guidance is not expected to materially impact the Company’s results of operations.

Note 2. REVENUE

The following table summarizes the disaggregation of revenue by nature:



	Three Months Ended March 31,
Dollars in Millions	2019		2018
Net product sales	$	5,713	$	4,972
Alliance revenues	129		152
Other revenues	78		69
Total Revenues	$	5,920	$	5,193

The following table summarizes GTN adjustments:



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Gross product sales	$	7,994		$	6,701
GTN adjustments^(a)
Charge-backs and cash discounts	(774		)	(583		)
Medicaid and Medicare rebates	(800		)	(557		)
Other rebates, returns, discounts and adjustments	(707		)	(589		)
Total GTN adjustments	(2,281		)	(1,729		)
Net product sales	$	5,713		$	4,972


(a)	Includes adjustments to provisions for product sales made in prior periods resulting from changes in estimates of $78 million and $50 million in the three months ended March 31, 2019 and 2018, respectively.

The following table summarizes the disaggregation of revenue by product and region:



	Three Months Ended March 31,
Dollars in Millions	2019		2018
Prioritized Brands
Opdivo	$	1,801	$	1,511
Eliquis	1,925		1,506
Orencia	640		593
Sprycel	459		438
Yervoy	384		249
Empliciti	83		55

Established Brands
Baraclude	141		225
Other Brands	487		616
Total Revenues	$	5,920	$	5,193

United States	$	3,449	$	2,778
Europe	1,480		1,406
Rest of the World	874		873
Other^(a)	117		136
Total Revenues	$	5,920	$	5,193


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

The following table summarizes contract assets as of March 31, 2019 and December 31, 2018:



Dollars in Millions	March 31, 2019		December 31, 2018
Prepaid expenses and other	$	51	$	35
Other assets	16		19
Total contract assets	$	67	$	54

Revenue recognized from performance obligations satisfied in prior periods was $147 million and $150 million for the three months ended March 31, 2019 and 2018, respectively, consisting primarily of royalties for out-licensing arrangements and revised estimates for gross-to-net adjustments related to prior period sales.

Note 3. ALLIANCES

BMS enters into collaboration arrangements with third parties for the research, development, manufacturing and/or 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 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 BMS 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 March 31,
Dollars in Millions	2019			2018
Revenues from alliances:
Net product sales	$	2,378		$	1,920
Alliance revenues	129			152
Total Revenues	$	2,507		$	2,072

Payments to/(from) alliance partners:
Cost of products sold	$	1,019		$	799
Marketing, selling and administrative	(28		)	(22		)
Research and development	14			5
Other income (net)	(14		)	(14		)



Selected Alliance Balance Sheet information:
Dollars in Millions	March 31, 2019		December 31, 2018
Receivables - from alliance partners	$	334	$	395
Accounts payable - to alliance partners	1,004		904
Deferred income from alliances^(a)	487		491


(a)	Includes unamortized upfront and milestone payments.

The nature and purpose, significant rights and obligations of the parties and specific accounting policy elections for each of the Company's significant alliances are discussed in the Company's 2018 Form 10-K. There were no significant developments and updates related to alliances during 2019.

Note 4. DIVESTITURES AND OTHER ARRANGEMENTS

Divestitures

The following table summarizes proceeds, gains and royalty income resulting from divestitures. Revenue and pretax earnings related to all divestitures and assets held-for-sale were not material in all periods presented (excluding divestiture gains).



	Three Months Ended March 31,
	Proceeds^(a)				Divestiture Gains					Royalty Income
Dollars in Millions	2019		2018		2019		2018			2019			2018
Diabetes Business	$	164	$	88	$	—	$	—		$	(165	)	$	(162	)
Erbitux* Business	5		59		—		—			—			(47		)
Manufacturing Operations	2		158		—		—			—			—
Mature Brands and Other	—		70		—		(45		)	(1		)	(1		)
Total	$	171	$	375	$	—	$	(45	)	$	(166	)	$	(210	)


(a)	Includes royalties received subsequent to the related sale of the asset or business.

Manufacturing Operations

In 2017, BMS sold its small molecule active pharmaceutical ingredient manufacturing operations in Swords, Ireland to SK Biotek for approximately $165 million, subject to certain adjustments. The transaction was accounted for as a sale of a business and initial proceeds of $158 million were received in the first quarter of 2018. SK Biotek will provide certain manufacturing services for BMS through 2022.

Assets Held-For-Sale

In 2018, BMS agreed to sell its UPSA consumer health business for $1.6 billion. The transaction is expected to close in July 2019 and will be accounted for as a sale of a business. Assets were reclassified to assets held-for-sale and included within Prepaid expenses and other and liabilities were reclassified to liabilities related to assets held-for-sale and included within Accrued liabilities. The following table summarizes the net assets held-for-sale as of March 31, 2019 and December 31, 2018.



Dollars in Millions	March 31, 2019		December 31, 2018
Receivables	$	73	$	79
Inventories	87		81
Property, plant and equipment	190		187
Goodwill	127		127
Others	6		5
Assets held-for-sale	$	483	$	479

Accounts payable	$	38	$	35
Accrued liabilities	59		78
Deferred income taxes	24		25
Other liabilities	23		14
Liabilities related to assets held-for-sale	$	144	$	152

Net assets held-for-sale	$	339	$	327

Note 5. OTHER INCOME (NET)



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Interest expense	$	45		$	46
Investment income	(56		)	(36		)
Equity investment gains	(175		)	(15		)
Provision for restructuring	12			20
Acquisition and integration expenses	187			—
Litigation and other settlements	1			—
Equity in net income of affiliates	—			(24		)
Divestiture gains	—			(45		)
Royalties and licensing income	(308		)	(367		)
Transition and other service fees	(2		)	(4		)
Pension and postretirement	44			(11		)
Intangible asset impairment	—			64
Other	(8		)	(28		)
Other income (net)	$	(260	)	$	(400	)

Note 6. RESTRUCTURING

In October 2016, the Company announced a restructuring plan to evolve and streamline its operating model. The majority of the charges are expected to be incurred through 2020, range between $1.5 billion to $2.0 billion and consist of employee termination benefit costs, contract termination costs, plant and equipment accelerated depreciation and impairment charges and other shutdown costs associated with early manufacturing and R&D site exits. Cash outlays in connection with these actions are expected to be approximately 40% to 50% of the total charges. Charges of approximately $1.1 billion have been recognized for these actions since the announcement. Restructuring charges are recognized upon meeting certain criteria, including finalization of committed plans, reliable estimates and discussions with local works councils in certain markets.

Employee workforce reductions were approximately 50 and 100 for the three months ended March 31, 2019 and 2018, respectively.

The following tables summarize the charges and activity related to the restructuring actions:



	Three Months Ended March 31,
Dollars in Millions	2019		2018
Employee termination costs	$	4	$	9
Other termination costs	8		11
Provision for restructuring	12		20
Accelerated depreciation	31		21
Asset impairments	1		10
Other shutdown costs	—		3
Total charges	$	44	$	54



	Three Months Ended March 31,
Dollars in Millions	2019		2018
Cost of products sold	$	12	$	13
Marketing, selling and administrative	1		1
Research and development	19		20
Other income (net)	12		20
Total charges	$	44	$	54



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Liability at December 31	$	99		$	186
Cease-use lease liability reclassification	(3		)	—
Liability at January 1	96			186

Charges	15			20
Change in estimates	(3		)	—
Provision for restructuring	12			20
Foreign currency translation	—			5
Payments	(45		)	(75		)
Liability at March 31	$	63		$	136

Note 7. INCOME TAXES



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Earnings Before Income Taxes	$	1,979		$	1,779
Provision for Income Taxes	264			284
Effective Tax Rate	13.3		%	16.0		%

The reduction in the effective tax rate was primarily due to the recognition of prior period tax credits in 2019. Jurisdictional tax rates and other tax impacts attributed to non-deductible R&D charges, equity investment fair value adjustments and other specified items decreased the effective tax rate by 1.2% in the three months ended March 31, 2019 and 2018. The tax impact of these discrete items are reflected immediately and are not considered in estimating the annual effective tax rate. Additional changes to the effective tax rate may occur in future periods due to various reasons including pretax earnings mix, tax reserves, cash repatriations and revised interpretations of the relevant tax code.

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. It is reasonably possible that new issues will be raised by tax authorities, which may require adjustments to the amount of unrecognized tax benefits; however, an estimate of such adjustments cannot reasonably be made at this time.

It is also reasonably possible that the total amount of unrecognized tax benefits at March 31, 2019 could decrease in the range of approximately $355 million to $395 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.

Note 8. EARNINGS PER SHARE



	Three Months Ended March 31,
Amounts in Millions, Except Per Share Data	2019		2018
Net Earnings Attributable to BMS used for Basic and Diluted EPS Calculation	$	1,710	$	1,486

Weighted-average common shares outstanding - basic	1,634		1,633
Incremental shares attributable to share-based compensation plans	3		7
Weighted-average common shares outstanding - diluted	1,637		1,640

Earnings per share - basic	$	1.05	$	0.91
Earnings per share - diluted	1.04		0.91

Note 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:



	March 31, 2019					December 31, 2018
Dollars in Millions	Level 1		Level 2			Level 1		Level 2
Cash and cash equivalents - money market and other investments	$	—	$	6,741		$	—	$	6,173
Marketable securities
Certificates of deposit	—		658			—		971
Commercial paper	—		139			—		273
Corporate debt securities	—		1,865			—		2,379
Equity investments	—		—			—		125
Derivative assets	—		63			—		44
Equity investments	164		272			88		266
Derivative liabilities	—		(10		)	—		(31		)

As further described in “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements” in the Company's 2018 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). There were no Level 3 financial assets or liabilities as of March 31, 2019 and December 31, 2018.

Available-for-sale Debt Securities and Equity Investments

Changes in fair value of equity investments are included in Other income (net). The following table summarizes the Company's debt and equity securities, classified as available-for-sale:



	March 31, 2019									December 31, 2018
Dollars in Millions	Amortized Cost		Gross Unrealized							Amortized Cost		Gross Unrealized
Dollars in Millions	Amortized Cost		Gains		Losses			Fair Value		Amortized Cost		Gains		Losses			Fair Value
Certificates of deposit	$	658	$	—	$	—		$	658	$	971	$	—	$	—		$	971
Commercial paper	139		—		—			139		273		—		—			273
Corporate debt securities	1,876		—		(11		)	1,865		2,416		—		(37		)	2,379
	$	2,673	$	—	$	(11	)	$	2,662	$	3,660	$	—	$	(37	)	$	3,623

Equity investments								436									479
Total								$	3,098								$	4,102



Dollars in Millions	March 31, 2019		December 31, 2018
Current marketable securities	$	1,429	$	1,973
Non-current marketable securities^(a)	1,233		1,775
Other assets	436		354
Total	$	3,098	$	4,102


(a)	All non-current marketable securities mature within five years as of March 31, 2019 and December 31, 2018.

Equity investments not measured at fair value and excluded from the above table were limited partnerships and other equity method investments of $126 million at March 31, 2019 and $114 million at December 31, 2018 and other equity investments without readily determinable fair values of $208 million at March 31, 2019 and $206 million at December 31, 2018. These amounts are included in Other assets.

The following table summarizes the net gain recorded for equity investments with readily determinable fair values held as of March 31, 2019 and 2018:



	Three Months Ended March 31,
Dollars in Millions	2019		2018
Net gain/(loss) recognized	$	95	$	15
Less: Net gain/(loss) recognized for equity investments sold	14		—
Net unrealized gain/(loss) on equity investments held	$	81	$	15

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. Upon adoption of the amended guidance for derivatives and hedging, the entire change in fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the derivatives qualifying as cash flow hedges component of Other Comprehensive (Loss)/Income. The net gain or loss on foreign currency forward contracts is expected to be reclassified to net earnings (primarily included in Cost of products sold) within the next 12 months. The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro of $1.0 billion and Japanese yen of $508 million at March 31, 2019.

The earnings impact related to discontinued cash flow hedges and hedge ineffectiveness was not significant 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 ($1.1 billion) at March 31, 2019 are designated to hedge euro currency exposures of the net investment in certain foreign affiliates. These borrowings are designated as net investment hedges and recognized in long-term debt. The effective portion of foreign exchange gain or loss on the remeasurement of euro debt was $8 million gain in 2019 and $46 million loss in 2018 and were recorded in the foreign currency translation component of Accumulated other comprehensive loss with the related offset in long-term debt.

In January 2018, BMS entered into $300 million of cross-currency interest rate swap contracts maturing in December 2022 designated to hedge Japanese yen currency exposures of the Company's net investment in its Japan subsidiary. Contract fair value changes are recorded in the foreign currency translation component of Other Comprehensive Income/(Loss) with a related offset in Other assets or Pension and other 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 (2.5% as of March 31, 2019) plus an interest rate spread of 4.6%. Gains or losses resulting from changes in fair value of the underlying debt attributable to the hedged benchmark interest rate risk are recorded in interest expense with an associated offset to the carrying value of debt. Since the specific terms and notional amount of the swap are intended to match those of the debt being hedged, all changes in fair value of the swap are recorded in interest expense with an associated offset to the derivative asset or liability on the consolidated balance sheet. As a result, there was no net impact in earnings. When the underlying swap is terminated prior to maturity, the fair value adjustment to the underlying debt is amortized as a reduction to interest expense over the remaining term of the debt.

Following the announcement of our pending acquisition of Celgene, the Company entered into forward starting interest rate swap option contracts, with a total notional value of $7.6 billion, to hedge future interest rate risk associated with the anticipated issuance of long-term debt to fund the acquisition. A fair value loss adjustment of $35 million was recognized in the first quarter of 2019 and was included in Other income (net).

In April 2019, the Company entered into deal contingent forward starting interest rate swap contracts, with an aggregate notional principal amount of $10.4 billion, to hedge future interest rate risk associated with the anticipated issuance of long-term debt to fund the planned Celgene acquisition. The option contracts that the Company entered into following the announcement of the planned acquisition of Celgene were terminated contemporaneously with the Company's entry into the deal contingent contracts.

The following table summarizes the fair value of outstanding derivatives:



	March 31, 2019									December 31, 2018
	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	$	(3	)	$	—	$	—	$	755	$	(10	)
Cross-currency interest rate swap contracts	175		2		125		(1		)	50		—		250		(5		)
Foreign currency forward contracts	1,642		58		302		(4		)	1,503		44		496		(10		)

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	532		3		69		(2		)	54		—		600		(6		)
Forward starting interest rate swap options	7,600		—		—		—			—		—		—		—


(a)	Included in prepaid expenses and other and other assets.


(b)	Included in accrued liabilities and pension and other liabilities.

The following table summarizes the financial statement classification and amount of gain/(loss) recognized on hedging instruments:



	Three Months Ended March 31,
	2019					2018
Dollars in Millions	Cost of products sold		Other income (net)			Cost of products sold			Other income (net)
Interest rate swap contracts	$	—	$	5		$	—		$	7
Cross-currency interest rate swap contracts	—		2			—			2
Foreign currency forward contracts	30		(9		)	(20		)	(9		)
Forward starting interest rate swap options	—		(35		)	—			—

The following table summarizes the effect of derivative and non-derivative instruments designated as hedging instruments in Other Comprehensive Income/(Loss):



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Derivatives qualifying as cash flow hedges
Foreign currency forward contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)^(a)	$	45		$	(38	)
Reclassified to Cost of products sold	(30		)	20

Derivatives qualifying as net investment hedges
Cross-currency interest rate swap contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)	6			(16		)

Non-derivatives qualifying as net investment hedges
Non U.S. dollar borrowings gain/(loss):
Recognized in Other Comprehensive Income/(Loss)	8			(46		)


(a)	The amount is expected to be reclassified into earnings in the next 12 months.

Debt Obligations

Short-term debt obligations include:



Dollars in Millions	March 31, 2019		December 31, 2018
Non-U.S. short-term borrowings	$	321	$	320
Current portion of long-term debt	—		1,249
Other	60		134
Total	$	381	$	1,703

Long-term debt and the current portion of long-term debt include:



Dollars in Millions	March 31, 2019			December 31, 2018
Principal Value	$	5,513		$	6,776
Adjustments to Principal Value
Fair value of interest rate swap contracts	(3		)	(10		)
Unamortized basis adjustment from swap terminations	194			201
Unamortized bond discounts and issuance costs	(69		)	(72		)
Total	$	5,635		$	6,895

Current portion of long-term debt	$	—		$	1,249
Long-term debt	5,635			5,646

The fair value of long-term debt was $5.9 billion at March 31, 2019 and $7.1 billion at December 31, 2018 valued using Level 2 inputs. Interest payments were $57 million and $59 million for the three months ended March 31, 2019 and 2018, respectively, net of amounts related to interest rate swap contracts.

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

As of March 31, 2019, the Company had four revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility expiring in January 2020, two five-year $1.5 billion facilities that were extended to September 2022 and July 2023, respectively, and a $1.0 billion facility expiring in January 2022. All of these facilities provide for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for the Company's commercial paper borrowings. The Company's $1.0 billion facility and the Company's two $1.5 billion revolving facilities are extendable annually by one year on the anniversary date with the consent of the lenders. No borrowings were outstanding under any revolving credit facility at March 31, 2019 or December 31, 2018.

In connection with the Company's pending acquisition of Celgene, in January 2019 the Company entered into a bridge commitment letter that provides for up to $33.5 billion in a 364-day senior unsecured bridge facility. The Company also entered into an $8.0 billion term loan credit agreement consisting of a $1.0 billion 364-day tranche, a $4.0 billion three-year tranche and a $3.0 billion five-year tranche. The term loan reduced the commitments under the bridge facility to $25.5 billion. If the Company obtains additional funding by issuing securities or obtaining other loans, the amount of the bridge facility will be correspondingly reduced. The bridge facility and the term loan are subject to customary terms and conditions and do not have any financial covenants. No amounts will be borrowed under either the bridge facility or the term loan prior to the closing of the pending acquisition of Celgene. If drawn upon, the proceeds under the bridge facility and the term loan will be used solely to fund a portion of the cash to be paid in the pending acquisition of Celgene, the anticipated refinancing of debt of Celgene and the payment of related fees and expenses.

Note 10. RECEIVABLES



Dollars in Millions	March 31, 2019			December 31, 2018
Trade receivables	$	4,873		$	4,914
Less charge-backs and cash discounts	(241		)	(245		)
Less bad debt allowances	(38		)	(33		)
Net trade receivables	4,594			4,636
Prepaid and refundable income taxes	158			218
Alliance, royalties, VAT and other	952			1,111
Receivables	$	5,704		$	5,965

Non-U.S. receivables sold on a nonrecourse basis were $174 million and $203 million for the three months ended March 31, 2019 and 2018, respectively. Receivables from the Company's three largest pharmaceutical wholesalers in the U.S. represented 70% of total trade receivables at March 31, 2019 and December 31, 2018.

Note 11. INVENTORIES



Dollars in Millions	March 31, 2019		December 31, 2018
Finished goods	$	448	$	396
Work in process	934		1,026
Raw and packaging materials	214		202
Total inventories	$	1,596	$	1,624

Inventories	$	1,283	$	1,195
Other assets	313		429

Other assets include inventory expected to remain on hand beyond one year in both periods.

Note 12. PROPERTY, PLANT AND EQUIPMENT



Dollars in Millions	March 31, 2019			December 31, 2018
Land	$	105		$	104
Buildings	5,286			5,231
Machinery, equipment and fixtures	3,043			2,962
Construction in progress	477			548
Gross property, plant and equipment	8,911			8,845
Less accumulated depreciation	(3,926		)	(3,818		)
Property, plant and equipment	$	4,985		$	5,027

Depreciation expense was $133 million and $113 million for the three months ended March 31, 2019 and 2018, respectively.

Note 13. LEASES

The Company leases facilities for office, research and development, and storage and distribution purposes, comprising approximately 90% of the total lease obligation. Lease terms vary based on the nature of operations and the market dynamics in each country; however, all leased facilities are classified as operating leases with remaining lease terms between one and 20 years. Most leases contain specific renewal options for periods ranging between one and 10 years where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Certain leases also contain termination options that provide the flexibility to terminate the lease ahead of its expiration with sufficient advance notice. Periods covered by an option to terminate the lease were included in the non-cancellable lease term when exercise of the option was determined not to be reasonably certain. Judgment is required in assessing whether renewal and termination options are reasonably certain to be exercised. The Company considers factors such as contractual terms compared to current market rates, leasehold improvements expected to have significant value, costs to terminate a lease and the importance of the facility to the Company’s operations. Costs determined to be variable and not based on an index or rate were not included in the measurement of real estate lease liabilities. As most leases do not provide an implicit rate, the Company's incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.

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

The following table summarizes the components of lease expense for the three months ended March 31, 2019:



Dollars in Millions	2019
Operating lease cost	$	27
Variable lease cost	6
Short-term lease cost	5
Sublease income	—
Total operating lease expense	$	38

Operating lease right-of-use assets and liabilities were as follows as of March 31, 2019 and January 1, 2019:



Dollars in Millions	March 31, 2019		January 1, 2019
Other assets	$	527	$	543

Accrued liabilities	40		40
Pension and other liabilities	529		548
Total liabilities	$	569	$	588

As of December 31, 2018, annual minimum rental commitments for non-cancellable operating leases were approximately $100 million in each of the next five years and an aggregate $200 million thereafter.

Future lease payments for non-cancellable operating leases as of March 31, 2019 were as follow:



Dollars in Millions	Operating Leases
2019 (excluding the three months ended March 31, 2019)	$	35
2020	86
2021	76
2022	70
2023	62
Thereafter	395
Total future lease payments	724

Less imputed interest	155
Total lease liability	$	569

Right-of-use assets obtained in exchange for new operating lease obligations were not material for the three months ended March 31, 2019. Other information related to operating leases for the three months ended March 31, 2019 was as follows:



Dollars in Millions, except lease term and discount rate
Cash paid for amounts included in the measurement of operating lease liabilities	$	29
Weighted-average remaining lease term (in years)	11
Weighted-average discount rate	4		%

Note 14. GOODWILL AND OTHER INTANGIBLE ASSETS



Dollars in Millions	Estimated Useful Lives	March 31, 2019			December 31, 2018
Goodwill		$	6,536		$	6,538

Other intangible assets:
Licenses	5 – 15 years	$	497		$	510
Developed technology rights	9 – 15 years	2,357			2,357
Capitalized software	3 – 10 years	1,166			1,156
IPRD		—			32
Gross other intangible assets		4,020			4,055
Less accumulated amortization		(2,994		)	(2,964		)
Other intangible assets		$	1,026		$	1,091

Amortization expense was $53 million and $46 million for the three months ended March 31, 2019 and 2018, respectively.

In the first quarter of 2019, a $32 million IPRD impairment charge was recorded in Research and development following our decision to discontinue development of an investigational compound obtained in the acquisition of Medarex. In the first quarter of 2018, a $64 million impairment charge was recorded in Other income (net) for an out-licensed asset obtained in the 2010 acquisition of ZymoGenetics, Inc., which did not meet its primary endpoint in a Phase II clinical study.

Note 15. ACCRUED LIABILITIES



Dollars in Millions	March 31, 2019		December 31, 2018
Rebates and returns	$	2,404	$	2,417
Employee compensation and benefits	352		848
Research and development	861		805
Dividends	671		669
Royalties	300		391
Branded Prescription Drug Fee	214		188
Liabilities related to assets held-for-sale	144		152
Litigation and other settlements	79		118
Operating lease liabilities	40		—
Restructuring	53		85
Pension and postretirement benefit	35		35
Other	703		781
Accrued liabilities	$	5,856	$	6,489

Note 16. EQUITY

The following table summarizes changes in equity for the three months ended March 31, 2019:



	Common Stock			Capital in Excess of Par Value of Stock		Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Stock					Noncontrolling Interest
Dollars and Shares in Millions	Shares	Par Value		Capital in Excess of Par Value of Stock		Accumulated Other Comprehensive Loss			Retained Earnings			Shares		Cost			Noncontrolling Interest
Balance at December 31, 2018	2,208	$	221	$	2,081	$	(2,762	)	$	34,065		576		$	(19,574	)	$	96
Accounting change - cumulative effect^(a)	—	—		—		—			5			—		—			—
Adjusted balance at January 1, 2019	2,208	221		2,081		(2,762		)	34,070			576		(19,574		)	96
Net earnings	—	—		—		—			1,710			—		—			5
Other Comprehensive Income/(Loss)	—	—		—		118			—			—		—			—
Cash dividends declared^(b)	—	—		—		—			(671		)	—		—			—
Stock compensation	—	—		22		—			—			(4	)	3			—
Distributions	—	—		—		—			—			—		—			(2		)
Balance at March 31, 2019	2,208	$	221	$	2,103	$	(2,644	)	$	35,109		572		$	(19,571	)	$	99


(a)	Refer to “—Note 1. Basis of Presentation and Recently Issued Accounting Standards” for additional information.


(b)	Cash dividends declared per common share were $0.41 for the three months ended March 31, 2019.

The following table summarizes changes in equity for the three months ended March 31, 2018:



	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		Capital in Excess of Par Value of Stock		Accumulated Other Comprehensive Loss			Retained Earnings			Shares		Cost			Noncontrolling Interest
Balance at December 31, 2017	2,208	$	221	$	1,898	$	(2,289	)	$	31,160		575		$	(19,249	)	$	106
Accounting change - cumulative effect^(a)	—	—		—		(34		)	332			—		—			—
Adjusted balance at January 1, 2018	2,208	$	221	$	1,898	$	(2,323	)	$	31,492		575		$	(19,249	)	$	106
Net earnings	—	—		—		—			1,486			—		—			9
Other Comprehensive Income/(Loss)	—	—		—		89			—			—		—			—
Cash dividends declared^(b)	—	—		—		—			(655		)	—		—			—
Stock repurchase program	—	—		—		—			—			3		(166		)	—
Stock compensation	—	—		18		—			—			(4	)	(18		)	—
Distributions	—	—		—		—			—			—		—			(2		)
Balance at March 31, 2018	2,208	$	221	$	1,916	$	(2,234	)	$	32,323		574		$	(19,433	)	$	113


(a)	Refer to “—Note 1. Accounting Policies and Recently Issued Accounting Standards” in the Company's 2018 Form 10-K for additional information.


(b)	Cash dividends declared per common share were $0.40 for the three months ended March 31, 2018.

BMS has a stock repurchase program authorized by its Board of Directors allowing for repurchases in the open market or through private transactions, including plans established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the Exchange Act). The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time. Treasury stock is recognized at the cost to reacquire the shares. Shares issued from treasury are recognized utilizing the first-in first-out method.

The components of Other Comprehensive Income/(Loss) were as follows in the three months ended March 31:



	2019									2018
Dollars in Millions	Pretax			Tax			After tax			Pretax			Tax			After tax
Derivatives qualifying as cash flow hedges:
Unrealized gains/(losses)	$	45		$	(5	)	$	40		$	(38	)	$	6		$	(32	)
Reclassified to net earnings^(a)	(30		)	4			(26		)	20			(7		)	13
Derivatives qualifying as cash flow hedges	15			(1		)	14			(18		)	(1		)	(19		)

Pension and postretirement benefits:
Actuarial (losses)/gains	(2		)	—			(2		)	112			(24		)	88
Amortization^(b)	17			(4		)	13			20			(3		)	17
Settlements^(b)	49			(11		)	38			31			(7		)	24
Pension and postretirement benefits	64			(15		)	49			163			(34		)	129

Available-for-sale securities:
Unrealized gains/(losses)	23			—			23			(32		)	6			(26		)
Realized (gains)/losses	3			—			3			—			—			—
Available-for-sale securities	26			—			26			(32		)	6			(26		)

Foreign currency translation	32			(3		)	29			(7		)	12			5

Total Other Comprehensive Income/(Loss)	$	137		$	(19	)	$	118		$	106		$	(17	)	$	89


(a)	Included in Cost of products sold.


(b)	Included in Other income (net).

The accumulated balances related to each component of Other Comprehensive Income/(Loss), net of taxes, were as follows:



Dollars in Millions	March 31, 2019			December 31, 2018
Derivatives qualifying as cash flow hedges	$	65		$	51
Pension and postretirement benefits	(2,053		)	(2,102		)
Available-for-sale securities	(4		)	(30		)
Foreign currency translation	(652		)	(681		)
Accumulated other comprehensive loss	$	(2,644	)	$	(2,762	)

Note 17. RETIREMENT BENEFITS

BMS sponsors defined benefit pension plans, defined contribution plans and termination indemnity plans for regular full-time employees. The principal defined benefit pension plan is the Bristol-Myers Squibb Retirement Income Plan (the Plan), covering most U.S. employees and representing approximately 66% of the consolidated pension plan assets and 60% of the obligations. Future benefits related to service for this plan were eliminated in 2009. BMS contributes at least the minimum amount required by the ERISA. Plan benefits are based primarily on the participant’s years of credited service and final average compensation. As of March 31, 2019, Plan assets consist primarily of fixed-income securities.

In December 2018, BMS announced plans to fully terminate the Plan. Pension obligations related to the Plan of $3.7 billion will be distributed through a combination of lump sum payments to eligible Plan participants who elect such payments and through the purchase of a group annuity contract from Athene Annuity and Life Company (Athene), a wholly-owned insurance subsidiary of Athene Holding Ltd. The benefit obligation for the Plan as of March 31, 2019 was therefore determined on a plan termination basis for which it is assumed that a portion of eligible active and deferred vested participants will elect lump sum payments. The remaining obligation expected to be transferred to Athene includes an annuity purchase price premium. The Plan has sufficient assets to satisfy all transaction obligations. The transaction is expected to close in the third quarter of 2019 at which time the Company expects to record a total non-cash pre-tax pension settlement charge of approximately $1.5 billion to $2.0 billion.

The net periodic benefit cost/(credit) of defined benefit pension plans includes:



	Three Months Ended March 31,
Dollars in Millions	2019			2018
Service cost – benefits earned during the year	$	7		$	7
Interest cost on projected benefit obligation	44			46
Expected return on plan assets	(64		)	(109		)
Amortization of prior service credits	(1		)	(1		)
Amortization of net actuarial loss	18			21
Curtailments and settlements	49			31
Net periodic pension benefit cost/(credit)	$	53		$	(5	)

Pension settlement charges were recognized after determining that the annual lump sum payments will likely exceed the annual interest and service costs for the primary and certain other U.S. and international pension plans. The charges included the acceleration of a portion of unrecognized actuarial losses. Non-current pension liabilities were $423 million at March 31, 2019 and $427 million at December 31, 2018. Defined contribution plan expense in the U.S. was approximately $40 million for the three months ended March 31, 2019 and 2018. Comprehensive medical and group life benefits are provided for substantially all U.S. retirees electing to participate in comprehensive medical and group life plans and to a lesser extent certain benefits for non-U.S. employees. The net periodic benefit credits were not material in both periods.

Note 18. LEGAL PROCEEDINGS AND CONTINGENCIES

The Company 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. The resolution of these matters often develops over a long period of time and expectations can change as a result of new findings, rulings, appeals or settlement arrangements. The Company recognizes accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve patent infringement, antitrust, securities, pricing, sales and marketing practices, environmental, commercial, contractual rights, licensing obligations, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage. Legal proceedings that are material or that the Company believes could become material are described below.

Although the Company believes it has substantial defenses in these matters, there can be no assurance that there will not be an increase in the scope of pending matters or that any future lawsuits, claims, government investigations or other legal proceedings will not be material. Unless otherwise noted, the Company is unable to assess the outcome of the respective litigation nor is it able to provide an estimated range of potential loss. Furthermore, failure to enforce the Company's patent rights would likely result in substantial decreases in the respective product revenues from generic competition.

INTELLECTUAL PROPERTY

Plavix* - Australia

As previously disclosed, Sanofi was notified that, in August 2007, GenRx Proprietary Limited (GenRx) obtained regulatory approval of an application for clopidogrel bisulfate 75mg tablets in Australia. GenRx, formerly a subsidiary of Apotex Inc. (Apotex), has since changed its name to Apotex. In August 2007, Apotex filed an application in the Federal Court of Australia (the Federal Court) seeking revocation of Sanofi’s Australian Patent No. 597784 (Case No. NSD 1639 of 2007). Sanofi filed counterclaims of infringement and sought an injunction. On September 21, 2007, the Federal Court granted Sanofi’s injunction. A subsidiary of the Company was subsequently added as a party to the proceedings. In February 2008, a second company, Spirit Pharmaceuticals Pty. Ltd., also filed a revocation suit against the same patent. This case was consolidated with the Apotex case, and a trial occurred in April 2008. On August 12, 2008, the Federal Court of Australia held that claims of Patent No. 597784 covering clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate salts were valid. The Federal Court also held that the process claims, pharmaceutical composition claims, and claim directed to clopidogrel and its pharmaceutically acceptable salts were invalid. The Company and Sanofi filed notices of appeal in the Full Court of the Federal Court of Australia (Full Court) appealing the holding of invalidity of the claim covering clopidogrel and its pharmaceutically acceptable salts, process claims, and pharmaceutical composition claims which have stayed the Federal Court’s ruling. Apotex filed a notice of appeal appealing the holding of validity of the clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate claims. A hearing on the appeals occurred in February 2009. On September 29, 2009, the Full Court held all of the claims of Patent No. 597784 invalid. In November 2009, the Company and Sanofi applied to the High Court of Australia (High Court) for special leave to appeal the judgment of the Full Court. In March 2010, the High Court denied the Company and Sanofi’s request to hear the appeal of the Full Court decision. The case was remanded to the Federal Court for further proceedings related to damages sought by Apotex. The Company and Apotex have settled the Apotex case, and the case was dismissed. The Australian government has intervened in this matter and is seeking maximum damages up to 449 million AUD ($319 million), plus interest, which would be split between the Company and Sanofi, for alleged losses experienced for paying a higher price for branded Plavix* during the period when the injunction was in place. The Company and Sanofi have disputed that the Australian government is entitled to any damages and the Australian government's claim is still pending and a trial was concluded in September 2017. The Company is expecting a decision in 2019.

Sprycel - Europe

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

Anti-PD-1 Antibody Patent Oppositions and Litigation

In September 2015, Dana-Farber Cancer Institute (Dana-Farber) filed a complaint in Massachusetts federal court seeking to correct the inventorship on up to five related U.S. patents directed to methods of treating cancer using PD-1 and PD-L1 antibodies. Specifically, Dana-Farber is seeking to add two scientists as inventors to these patents. In October 2017, Pfizer was allowed to intervene in this case alleging that one of the scientists identified by Dana-Farber was employed by a company eventually acquired by Pfizer during the relevant period. In February 2019, the Company settled the lawsuit with Pfizer. A bench trial in the lawsuit with Dana-Farber began on February 4, 2019. A decision is expected in 2019.

Eliquis Patent Litigation - U.S.

In 2017, twenty-five generic companies sent the Company Paragraph-IV certification letters informing the Company that they had filed aNDAs seeking approval of generic versions of Eliquis. As a result, two Eliquis patents listed in the FDA Orange Book are being challenged: the composition of matter patent claiming apixaban specifically and a formulation patent. In April 2017, the Company, along with its partner Pfizer, initiated patent lawsuits under the Hatch-Waxman Act against all generic filers in federal district courts in Delaware and West Virginia. In August 2017, the U.S. Patent and Trademark Office granted patent term restoration to the composition of matter patent, thereby restoring the term of the Eliquis composition of matter patent, which is the Company’s basis for projected LOE, from February 2023 to November 2026. The Company has settled lawsuits with a number of aNDA filers through March 2019. The settlements do not affect the Company’s projected LOE for Eliquis. A trial with the remaining aNDA filers is scheduled for October 2019 in the U.S. District Court for the District of Delaware.

PRICING, SALES AND PROMOTIONAL PRACTICES LITIGATION

Plavix* State Attorneys General Lawsuits

The Company and certain affiliates of Sanofi are defendants in consumer protection and/or false advertising actions brought by the attorneys general of Hawaii and New Mexico relating to the sales and promotion of Plavix*.

PRODUCT LIABILITY LITIGATION

The Company is a party to various product liability lawsuits. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. As previously disclosed, in addition to lawsuits, the Company also faces unfiled claims involving its products.

Byetta*

Amylin, a former subsidiary of the Company, and Lilly are co-defendants in product liability litigation related to Byetta*. To date, there are over 500 separate lawsuits pending on behalf of approximately 2,000 active plaintiffs (including pending settlements), which include injury plaintiffs as well as claims by spouses and/or other beneficiaries, in various courts in the U.S. The majority of these cases have been brought by individuals who allege personal injury sustained after using Byetta*, primarily pancreatic cancer, and, in some cases, claiming alleged wrongful death. The majority of cases are pending in Federal Court in San Diego in an MDL or in a coordinated proceeding in California Superior Court in Los Angeles (JCCP). In November 2015, the defendants' motion for summary judgment based on federal preemption was granted in both the MDL and the JCCP. In November 2017, the Ninth Circuit reversed the MDL summary judgment order and remanded the case to the MDL. In November 2018, the California Court of Appeal reversed the state court dismissal and the state court cases were remanded to the JCCP for further proceedings. Amylin has product liability insurance covering a substantial number of claims involving Byetta* and any additional liability to Amylin with respect to Byetta* is expected to be shared between the Company and AstraZeneca.

Abilify*

The Company and Otsuka are co-defendants in product liability litigation related to Abilify*. Plaintiffs allege Abilify* caused them to engage in compulsive gambling and other impulse control disorders. There have been over 2,000 cases filed in state and federal courts and additional cases are pending in Canada. The Judicial Panel on Multidistrict Litigation consolidated the federal court cases for pretrial purposes in the United States District Court for the Northern District of Florida. On February 15, 2019, the Company and Otsuka entered into a master settlement agreement establishing a proposed settlement program to resolve all Abilify* compulsivity claims filed as of January 28, 2019 in the MDL as well as the various state courts, including California and New Jersey.

Eliquis

The Company and Pfizer are co-defendants in product liability litigation related to Eliquis. Plaintiffs assert claims, including claims for wrongful death, as a result of bleeding they allege was caused by their use of Eliquis. As of April 2019, no claims remain pending in the MDL in the U.S District Court for the Southern District of New York or in state court. One case remains pending in Canada. Over 200 cases have been dismissed with prejudice in the MDL. The claims of 23 plaintiffs were appealed to the Second Circuit Court of Appeals which, in March 2019, affirmed the MDL's dismissals. There were several additional appeals that were stayed pending the outcome of the Second Circuit's decision. These stays have been lifted.

Onglyza*

The Company 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 March 2019, claims are pending in state and federal court on behalf of approximately 275 individuals who allege they ingested the product and suffered an injury. In February 2018, the Judicial Panel on Multidistrict Litigation ordered all federal cases to be transferred to an MDL in the U.S. District Court for the Eastern District of Kentucky. A significant majority of the claims are pending in the MDL. As part of the Company’s global diabetes business divestiture, the Company sold Onglyza* to AstraZeneca in February 2014 and any potential liability with respect to Onglyza* is expected to be shared with AstraZeneca.

SHAREHOLDER DERIVATIVE LITIGATION

Since December 2015, three shareholder derivative lawsuits were filed in New York state court against certain officers and directors of the Company. The plaintiffs allege, among other things, breaches of fiduciary duty surrounding the Company’s previously disclosed October 2015 civil settlement with the SEC of alleged FCPA violations in China in which the Company agreed to a payment of approximately $14.7 million in disgorgement, penalties and interest. All three of the lawsuits were dismissed. The Company received a notice of appeal as to one of the dismissed lawsuits and in March 2019, the Appellate Division of the Supreme Court of New York affirmed the trial court's dismissal. This litigation is now concluded.

SECURITIES LITIGATION