bmy-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-Q

___________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ 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 001-01136

___________________________

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, NY 10016

(Address of principal executive offices) (zip code)

(212) 546-4000

(Registrant’s telephone number, including area code)

___________________________

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BMY	New York Stock Exchange
1.000% Notes due 2025	BMY25	New York Stock Exchange
1.750% Notes due 2035	BMY35	New York Stock Exchange
Bristol-Myers Squibb Contingent Value Rights	BMY RT	New York Stock Exchange
Celgene Contingent Value Rights	CELG RT	New York Stock Exchange

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 ☒ 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 ☒ 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 ☒

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 ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

At June 30, 2020, there were 2,253,934,635 shares outstanding of the Registrant’s $0.10 par value common stock.

BRISTOL-MYERS SQUIBB COMPANY

INDEX TO FORM 10-Q

June 30, 2020



PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements:
Consolidated Statements of Earnings and Comprehensive (Loss)/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			31

Item 3.
Quantitative and Qualitative Disclosure About Market Risk			51

Item 4.
Controls and Procedures			51

PART II—OTHER INFORMATION

Item 1.
Legal Proceedings			52

Item 1A.
Risk Factors			52

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds			54

Item 6.
Exhibits			55

Summary of Abbreviated Terms			56
Signatures			57

* 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 June 30,						Six Months Ended June 30,
EARNINGS	2020		2019		2020		2019
Net product sales	$	9,817	$	6,031	$	20,358	$	11,744
Alliance and other revenues	312		242		552		449
Total Revenues	10,129		6,273		20,910		12,193

Cost of products sold^(a)	2,699		1,972		6,361		3,796
Marketing, selling and administrative	1,628		1,076		3,234		2,082
Research and development	2,522		1,325		4,894		2,673
Amortization of acquired intangible assets	2,389		24		4,671		48
Other (income)/expense, net	(736)		100		427		(161)
Total Expenses	8,502		4,497		19,587		8,438

Earnings Before Income Taxes	1,627		1,776		1,323		3,755
Provision for Income Taxes	1,707		337		2,169		601
Net (Loss)/Earnings	(80)		1,439		(846)		3,154
Noncontrolling Interest	5		7		14		12
Net (Loss)/Earnings Attributable to BMS	$	(85)	$	1,432	$	(860)	$	3,142

(Loss)/Earnings per Common Share
Basic	$	(0.04)	$	0.88	$	(0.38)	$	1.92
Diluted	(0.04)		0.87		(0.38)		1.92

(a) Excludes amortization of acquired intangible assets.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

Dollars in Millions

(UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
COMPREHENSIVE (LOSS)/INCOME	2020		2019		2020		2019
Net (Loss)/Earnings	$	(80)	$	1,439	$	(846)	$	3,154
Other Comprehensive (Loss)/Income, net of taxes and reclassifications to earnings:
Derivatives qualifying as cash flow hedges	(59)		(28)		11		(14)
Pension and postretirement benefits	(7)		39		9		88
Available-for-sale debt securities	8		13		9		39
Foreign currency translation	51		(1)		(65)		28
Other Comprehensive (Loss)/Income	(7)		23		(36)		141

Comprehensive (Loss)/Income	(87)		1,462		(882)		3,295
Comprehensive Income Attributable to Noncontrolling Interest	5		7		14		12
Comprehensive (Loss)/Income Attributable to BMS	$	(92)	$	1,455	$	(896)	$	3,283

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

BRISTOL-MYERS SQUIBB COMPANY

CONSOLIDATED BALANCE SHEETS

Dollars in Millions

(UNAUDITED)


ASSETS	June 30, 2020		December 31, 2019
Current Assets:
Cash and cash equivalents	$	19,934	$	12,346
Marketable debt securities	1,724		3,047
Receivables	7,855		7,685
Inventories	2,384		4,293
Other current assets	2,446		1,983
Total Current Assets	34,343		29,354
Property, plant and equipment	5,777		6,252
Goodwill	20,578		22,488
Other intangible assets	59,171		63,969
Deferred income taxes	1,088		510
Marketable debt securities	523		767
Other non-current assets	6,596		6,604
Total Assets	$	128,076	$	129,944

LIABILITIES
Current Liabilities:
Short-term debt obligations	$	4,819	$	3,346
Accounts payable	2,852		2,445
Other current liabilities	15,750		12,513
Total Current Liabilities	23,421		18,304
Deferred income taxes	6,157		6,454
Long-term debt	41,853		43,387
Other non-current liabilities	7,485		10,101
Total Liabilities	78,916		78,246

Commitments and contingencies

EQUITY
Bristol-Myers Squibb Company Shareholders’ Equity:
Preferred stock	—		—
Common stock	292		292
Capital in excess of par value of stock	44,444		43,709
Accumulated other comprehensive loss	(1,556)		(1,520)
Retained earnings	31,565		34,474
Less cost of treasury stock	(25,651)		(25,357)
Total Bristol-Myers Squibb Company Shareholders’ Equity	49,094		51,598
Noncontrolling interest	66		100
Total Equity	49,160		51,698
Total Liabilities and Equity	$	128,076	$	129,944

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)


	Six Months Ended June 30,
	2020		2019
Cash Flows From Operating Activities:
Net (loss)/earnings	$	(846)	$	3,154
Adjustments to reconcile net (loss)/earnings to net cash provided by operating activities:
Depreciation and amortization, net	5,035		339
Deferred income taxes	1,365		(113)
Stock-based compensation	423		101
Impairment charges	116		174
Pension settlements and amortization	22		126
Divestiture gains and royalties	(295)		(320)
Asset acquisition charges	100		25
Equity investment gains	(479)		(246)
Contingent consideration fair value adjustments	391		—
Other adjustments	(92)		(14)
Changes in operating assets and liabilities:
Receivables	(197)		307
Inventories	2,090		28
Accounts payable	480		156
Income taxes payable	185		(39)
Other	(135)		(205)
Net Cash Provided by Operating Activities	8,163		3,473
Cash Flows From Investing Activities:
Sale and maturities of marketable debt securities	3,537		2,149
Purchase of marketable debt securities	(1,957)		(437)
Capital expenditures	(317)		(395)
Divestiture and other proceeds	348		507
Acquisition and other payments, net of cash acquired	(178)		(49)
Net Cash Provided by Investing Activities	1,433		1,775
Cash Flows From Financing Activities:
Short-term debt obligations, net	(22)		84
Issuance of long-term debt	—		18,790
Repayment of long-term debt	—		(1,256)
Repurchase of common stock	(81)		—
Dividends	(2,038)		(1,340)
Other	94		(39)
Net Cash (Used in)/Provided by Financing Activities	(2,047)		16,239
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash	(7)		6
Increase in Cash, Cash Equivalents and Restricted Cash	7,542		21,493
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	12,820		6,911
Cash, Cash Equivalents and Restricted Cash at End of Period	$	20,362	$	28,404

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 June 30, 2020 and December 31, 2019, the results of operations for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. All intercompany balances and transactions have been eliminated. BMS's consolidated financial statements include the assets, liabilities, operating results and cash flows of Celgene from the date of acquisition on November 20, 2019. These financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the 2019 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 business combinations; impairments of intangible assets; sales rebate and return accruals; legal contingencies; and income taxes. Actual results may differ from estimates.

Reclassifications

Certain reclassifications were made to conform the prior period interim consolidated financial statements to the current period presentation.

Recently Adopted Accounting Standards

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. BMS adopted the amended guidance on a modified retrospective approach on January 1, 2020. The amended guidance did not impact BMS’s results of operations.

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	2020		2019		2020		2019
Net product sales	$	9,817	$	6,031	$	20,358	$	11,744
Alliance revenues	163		146		268		275
Other revenues	149		96		284		174
Total Revenues	$	10,129	$	6,273	$	20,910	$	12,193

The following table summarizes GTN adjustments:


	Three Months Ended June 30,						Six Months Ended June 30,
Dollars in Millions	2020		2019		2020		2019
Gross product sales	$	13,788	$	8,819	$	28,474	$	16,813
GTN adjustments^(a)
Charge-backs and cash discounts	(1,292)		(890)		(2,632)		(1,664)
Medicaid and Medicare rebates	(1,482)		(1,090)		(2,980)		(1,890)
Other rebates, returns, discounts and adjustments	(1,197)		(808)		(2,504)		(1,515)
Total GTN adjustments	(3,971)		(2,788)		(8,116)		(5,069)
Net product sales	$	9,817	$	6,031	$	20,358	$	11,744

(a) Includes adjustments for provisions for product sales made in prior periods resulting from changes in estimates of $44 million and $116 million for the three and six months ended June 30, 2020 and $49 million and $127 million for the three and six months ended June 30, 2019, 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	2020		2019		2020		2019
Prioritized Brands
Revlimid	$	2,884	$	—	$	5,799	$	—
Eliquis	2,163		2,042		4,804		3,967
Opdivo	1,653		1,823		3,419		3,624
Orencia	750		778		1,464		1,418
Pomalyst/Imnovid	745		—		1,458		—
Sprycel	511		544		1,032		1,003
Yervoy	369		367		765		751
Abraxane	308		—		608		—
Empliciti	97		91		194		174
Reblozyl	55		—		63		—
Inrebic	15		—		27		—
Zeposia	1		—		1		—

Established Brands
Baraclude	121		147		243		288
Vidaza	126		—		284		—
Other Brands^(a)	331		481		749		968
Total Revenues	$	10,129	$	6,273	$	20,910	$	12,193

United States	$	6,487	$	3,667	$	13,253	$	7,116
Europe	2,136		1,491		4,703		2,971
Rest of the World	1,334		988		2,669		1,862
Other^(b)	172		127		285		244
Total Revenues	$	10,129	$	6,273	$	20,910	$	12,193

(a) Includes BMS and Celgene products in 2020.

(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 $98 million and $228 million for the three and six months ended June 30, 2020 and $117 million and $264 million for the three and six months ended June 30, 2019, respectively, consisting primarily of royalties for out-licensing arrangements and revised estimates for GTN adjustments related to prior period sales. Contract assets were not material at June 30, 2020 and December 31, 2019.

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	2020		2019		2020		2019
Revenues from alliances:
Net product sales	$	2,201	$	2,570	$	4,924	$	4,948
Alliance revenues	163		146		268		275
Total Revenues	$	2,364	$	2,716	$	5,192	$	5,223

Payments to/(from) alliance partners:
Cost of products sold	$	1,050	$	1,080	$	2,356	$	2,099
Marketing, selling and administrative	(38)		(32)		(78)		(60)
Research and development	233		7		279		21
Other (income)/expense, net	(16)		(16)		(31)		(30)


Dollars in Millions	June 30, 2020		December 31, 2019
Selected Alliance Balance Sheet information:
Receivables – from alliance partners	$	354	$	347
Accounts payable – to alliance partners	1,039		1,026
Deferred income from alliances^(a)	411		431

(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 2019 Form 10-K. Significant developments and updates related to alliances during the three and six months ended June 30, 2020 are set forth below.

Otsuka

Effective January 1, 2020, Otsuka is no longer co-promoting Sprycel in the U.S. and as a result, this arrangement is no longer considered a collaboration under ASC 808. Revenues earned and fees paid to Otsuka in the Oncology Territory in 2020 are not included in the table above.

bluebird

BMS and bluebird jointly develop and commercialize novel disease-altering gene therapy product candidates targeting BCMA. The collaboration arrangement began in 2013 and included (i) a right for BMS to license any anti-BCMA products resulting from the collaboration, (ii) a right for bluebird to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and profit share in the U.S. in exchange for a reduction of milestone payments, and (iii) sales based milestones and royalties payable to bluebird upon the commercialization of any licensed products resulting from the collaboration if bluebird declined to exercise their co-development and profit sharing rights. The options to license ide-cel (bb2121) and bb21217 were exercised in 2016 and 2017, respectively.

BMS and bluebird share equally in all profits and losses relating to developing, commercializing and manufacturing ide-cel within the U.S. BMS is exclusively responsible for the development and commercialization of ide-cel outside the U.S.

BMS is responsible for the worldwide development, including related funding after the substantial completion by bluebird of the ongoing Phase I clinical trial, and commercialization of bb21217. bluebird has an option to co-develop, co-promote and share equally in all profits and losses in the U.S.

In the second quarter of 2020, BMS and bluebird amended their collaboration arrangement where, among other items, BMS is assuming the contract manufacturing agreements relating to ide-cel adherent lentiviral vector. Over time, BMS is assuming responsibility for manufacturing ide-cel suspension lentiviral vector outside of the U.S., with bluebird responsible for manufacturing ide-cel suspension lentiviral vector in the U.S. The parties were also released from future exclusivity related to BCMA-directed T cell therapies. In addition, BMS agreed to buy out its obligation to pay bluebird future ex-U.S. milestones and royalties on ide-cel and bb21217 for a payment of $200 million, which was included in Research and development expense.

Note 4. ACQUISITIONS, DIVESTITURES, LICENSING AND OTHER ARRANGEMENTS

Acquisitions

Business Combination

Celgene

On November 20, 2019, BMS completed the Celgene acquisition. The acquisition is expected to further position BMS as a leading biopharmaceutical company for sustained innovation and long-term growth and to address the needs of patients with cancer, inflammatory, immunologic or cardiovascular diseases through high-value innovative medicines and leading scientific capabilities. The transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their fair value as of the acquisition date. The purchase price allocation is preliminary and subject to change for income tax matters. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of the acquisition date, as well as measurement period adjustments made year-to-date to the amounts initially recorded in 2019. The measurement period adjustments reflected in 2020 primarily resulted from completing valuations of real estate and personal property, revised future cash flow estimates for certain intangible assets, changes in the estimated tax basis of certain intangible assets based upon a tax ruling which reduced deferred income tax liabilities and other changes to certain equity investments, legal contingency and income tax liabilities. The related impact to net earnings that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date is immaterial to the consolidated financial statements.


Dollars in Millions	Amounts Recognized as of Acquisition Date (as previously reported)		Measurement Period Adjustments		Amounts Recognized as of Acquisition Date (as adjusted)
Cash and cash equivalents	$	11,179	$	—	$	11,179
Receivables	2,652		—		2,652
Inventories	4,511		—		4,511


Property, plant and equipment	1,342		(277)		1,065
Intangible assets	64,027		(100)		63,927

Otezla* assets held-for-sale	13,400		—		13,400
Other assets	3,408		57		3,465

Accounts payable	(363)		—		(363)

Income taxes payable	(2,718)		(27)		(2,745)
Deferred income tax liabilities	(7,339)		2,242		(5,097)

Debt	(21,782)		—		(21,782)
Other liabilities	(4,017)		15		(4,002)
Identifiable net assets acquired	64,300		1,910		66,210
Goodwill	15,969		(1,910)		<