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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 March 31, 2021
OR
☐ 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 Par ValueBMYNew York Stock Exchange
1.000% Notes due 2025BMY25New York Stock Exchange
1.750% Notes due 2035BMY35New York Stock Exchange
Celgene Contingent Value RightsCELG RTNew 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 March 31, 2021, there were 2,232,843,755 shares outstanding of the Registrant’s $0.10 par value common stock.


BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
March 31, 2021
PART I—FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II—OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 6.
*    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,
EARNINGS20212020
Net product sales$10,798 $10,541 
Alliance and other revenues275 240 
Total Revenues11,073 10,781 
Cost of products sold(a)
2,841 3,662 
Marketing, selling and administrative1,666 1,606 
Research and development2,225 2,372 
Amortization of acquired intangible assets2,513 2,282 
Other (income)/expense, net(702)1,163 
Total Expenses8,543 11,085 
Earnings/(Loss) Before Income Taxes2,530 (304)
Provision for Income Taxes501 462 
Net Earnings/(Loss)2,029 (766)
Noncontrolling Interest8 9 
Net Earnings/(Loss) Attributable to BMS$2,021 $(775)
Earnings/(Loss) per Common Share
Basic$0.90 $(0.34)
Diluted0.89 (0.34)
(a)    Excludes amortization of acquired intangible assets.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
Dollars in Millions
(UNAUDITED)
 Three Months Ended March 31,
COMPREHENSIVE INCOME/(LOSS)20212020
Net Earnings/(Loss)$2,029 $(766)
Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings:
Derivatives qualifying as cash flow hedges280 70 
Pension and postretirement benefits23 16 
Available-for-sale debt securities(2)1 
Foreign currency translation(6)(116)
Total Other Comprehensive Income/(Loss)295 (29)
Comprehensive Income/(Loss)2,324 (795)
Comprehensive Income Attributable to Noncontrolling Interest8 9 
Comprehensive Income/(Loss) Attributable to BMS$2,316 $(804)
The accompanying notes are an integral part of these consolidated financial statements.

3


BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEETS
Dollars in Millions
(UNAUDITED)
 
ASSETSMarch 31,
2021		December 31,
2020
Current Assets:
Cash and cash equivalents$10,982 $14,546 
Marketable debt securities1,948 1,285 
Receivables8,660 8,501 
Inventories1,953 2,074 
Other current assets3,568 3,786 
Total Current Assets27,111 30,192 
Property, plant and equipment5,763 5,886 
Goodwill20,524 20,547 
Other intangible assets50,819 53,243 
Deferred income taxes793 1,161 
Marketable debt securities288 433 
Other non-current assets7,137 7,019 
Total Assets$112,435 $118,481 
LIABILITIES
Current Liabilities:
Short-term debt obligations$1,777 $2,340 
Accounts payable2,972 2,713 
Other current liabilities12,581 14,027 
Total Current Liabilities17,330 19,080 
Deferred income taxes5,235 5,407 
Long-term debt44,505 48,336 
Other non-current liabilities7,692 7,776 
Total Liabilities74,762 80,599 
Commitments and contingencies
EQUITY
Bristol-Myers Squibb Company Shareholders’ Equity:
Preferred stock— — 
Common stock292 292 
Capital in excess of par value of stock43,852 44,325 
Accumulated other comprehensive loss(1,544)(1,839)
Retained earnings22,204 21,281 
Less cost of treasury stock(27,199)(26,237)
Total Bristol-Myers Squibb Company Shareholders’ Equity37,605 37,822 
Noncontrolling interest68 60 
Total Equity37,673 37,882 
Total Liabilities and Equity$112,435 $118,481 
The accompanying notes are an integral part of these consolidated financial statements.
4


BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Millions
(UNAUDITED)
 Three Months Ended March 31,
 20212020
Cash Flows From Operating Activities:
Net earnings/(loss)$2,029 $(766)
Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities:
Depreciation and amortization, net2,668 2,477 
Deferred income taxes68 (53)
Stock-based compensation151 210 
Impairment charges339 53 
Pension settlements and amortization11 11 
Divestiture gains and royalties(135)(173)
Asset acquisition charges5 46 
Equity investment (gains)/losses(601)338 
Contingent consideration fair value adjustments(510)556 
Other adjustments233 (41)
Changes in operating assets and liabilities:
Receivables67 (743)
Inventories106 1,448 
Accounts payable303 703 
Income taxes payable227 229 
Other(1,137)(358)
Net Cash Provided by Operating Activities3,824 3,937 
Cash Flows From Investing Activities:
Sale and maturities of marketable debt securities782 1,394 
Purchase of marketable debt securities(1,302)(735)
Capital expenditures(173)(186)
Divestiture and other proceeds585 205 
Acquisition and other payments, net of cash acquired(35)(68)
Net Cash (Used in)/Provided by Investing Activities(143)610 
Cash Flows From Financing Activities:
Short-term debt obligations, net(62)26 
Repayment of long-term debt(4,522)— 
Repurchase of common stock(1,775)(81)
Dividends(1,108)(1,017)
Other172 18 
Net Cash Used in Financing Activities(7,295)(1,054)
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash(38)(67)
(Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash(3,652)3,426 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period14,973 12,820 
Cash, Cash Equivalents and Restricted Cash at End of Period$11,321 $16,246 
The accompanying notes are an integral part of these consolidated financial statements.

5


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, 2021 and December 31, 2020, the results of operations and cash flows for the three months ended March 31, 2021 and 2020. 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, 2020 included in the 2020 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 consolidated financial statements to the current period presentation. Cash payments resulting for licensing arrangements, including upfront and contingent milestones previously included in operating activities in the consolidated statements of cash flows are now presented in investing activities. The adjustment resulted in an increase to net cash provided by operating activities and net cash used in investing activities of $43 million in the three months ended March 31, 2020. These reclassifications did not have an impact on net assets or net earnings.

Recently Adopted Accounting Standards

In December 2019, the FASB issued amended guidance on the accounting and reporting of income taxes. The guidance is intended to simplify the accounting for income taxes by removing exceptions related to certain intraperiod tax allocations and deferred tax liabilities; clarifying guidance primarily related to evaluating the step-up tax basis for goodwill in a business combination; and reflecting enacted changes in tax laws or rates in the annual effective tax rate. BMS adopted the new guidance effective January 1, 2021. The amended guidance did not have a material impact on BMS’s results of operations.

6


Note 2. REVENUE

The following table summarizes the disaggregation of revenue by nature:
Three Months Ended March 31,
Dollars in Millions20212020
Net product sales$10,798 $10,541 
Alliance revenues142 105 
Other revenues133 135 
Total Revenues$11,073 $10,781 

The following table summarizes GTN adjustments:
Three Months Ended March 31,
Dollars in Millions20212020
Gross product sales$15,559 $14,686 
GTN adjustments(a)
Charge-backs and cash discounts(1,586)(1,340)
Medicaid and Medicare rebates(1,718)(1,498)
Other rebates, returns, discounts and adjustments(1,457)(1,307)
Total GTN adjustments(4,761)(4,145)
Net product sales$10,798 $10,541 
(a)    Includes adjustments for provisions for product sales made in prior periods resulting from changes in estimates of $217 million and $72 million for the three months ended March 31, 2021 and 2020, respectively.

The following table summarizes the disaggregation of revenue by product and region:
Three Months Ended March 31,
Dollars in Millions20212020
Prioritized Brands
Revlimid$2,944 $2,915 
Eliquis2,886 2,641 
Opdivo1,720 1,766 
Orencia758 714 
Pomalyst/Imnovid773 713 
Sprycel470 521 
Yervoy456 396 
Abraxane314 300 
Empliciti85 97 
Reblozyl112 8 
Inrebic16 12 
Onureg15 — 
Zeposia18 — 
Established Brands
Vidaza54 158 
Baraclude113 122 
Other Brands339 418 
Total Revenues$11,073 $10,781 
United States$7,010 $6,766 
Europe2,553 2,567 
Rest of the World1,346 1,335 
Other(a)
164 113 
Total Revenues$11,073 $10,781 
(a)    Other revenues include royalties and alliance-related revenues for products not sold by BMS’s regional commercial organizations.

7


Revenue recognized from performance obligations satisfied in prior periods was $284 million and $130 million for the three months ended March 31, 2021 and 2020, respectively, consisting primarily of revised estimates for GTN adjustments related to prior period sales and royalties for out-licensing arrangements. Contract assets were not material at March 31, 2021 and December 31, 2020.

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 March 31,
Dollars in Millions20212020
Revenues from alliances:
Net product sales$2,882 $2,723 
Alliance revenues142 105 
Total Revenues$3,024 $2,828 
Payments to/(from) alliance partners:
Cost of products sold$1,397 $1,306 
Marketing, selling and administrative(49)(40)
Research and development7 46 
Other (income)/expense, net(5)(15)
Dollars in MillionsMarch 31,
2021		December 31,
2020
Selected Alliance Balance Sheet information:
Receivables – from alliance partners$315 $343 
Accounts payable – to alliance partners1,356 1,093 
Deferred income from alliances(a)
367 366 
(a)    Includes unamortized upfront and milestone payments.

Specific information pertaining to significant alliances including their nature and purpose; the significant rights and obligations of the parties; specific accounting policy elections are discussed in the 2020 Form 10-K.


8


Note 4. DIVESTITURES, LICENSING AND OTHER ARRANGEMENTS

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 March 31,
Net Proceeds(a)
Divestiture GainsRoyalty Income
Dollars in Millions202120202021202020212020
Diabetes Business$164 $153 $— $— $(134)$(127)
Erbitux* Business
— 4 — — — — 
Manufacturing Operations— — — (1)— — 
Plavix* and Avapro*/Avalide*
5 7 — (12)— — 
Mature Brands and Other11 31 — (3)(1)(31)
Total$180 $195 $— $(16)$(135)$(158)
(a)    Includes royalties received subsequent to the related sale of the asset or business.

Licensing and Other Arrangements

The following table summarizes the financial impact of Keytruda* royalties, Tecentriq* royalties, up-front and milestone licensing fees for products that have not obtained commercial approval, which are included in Other (income)/expense, net.
Three Months Ended March 31,
Dollars in Millions20212020
Keytruda* royalties
$(192)$(161)
Tecentriq* royalties
(22)— 
Up-front licensing fees— (30)
Contingent milestone income— (41)
Amortization of deferred income(15)(15)
Other royalties(3)(5)
Total$(232)$(252)

Note 5. OTHER (INCOME)/EXPENSE, NET
Three Months Ended March 31,
Dollars in Millions20212020
Interest expense$353 $362 
Contingent consideration(510)556 
Royalties and licensing income(367)(410)
Equity investment (gains)/losses(601)338 
Integration expenses141 174 
Provision for restructuring45 160 
Litigation and other settlements(8)32 
Transition and other service fees(15)(61)
Investment income(9)(61)
Reversion excise tax— 76 
Divestiture gains— (16)
Loss on debt redemption281 — 
Other(12)13 
Other (income)/expense, net$(702)$1,163 

9


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 which is currently expected to be approximately $3.0 billion. The synergies are expected to be realized in Cost of products sold (10%), Marketing, selling and administrative expenses (55%) and Research and development expenses (35%). Charges of approximately $3.0 billion are expected to be incurred through 2022. Cumulative charges of approximately $2.1 billion have been recognized 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 $2.5 billion. Employee workforce reductions were approximately 65 and 600 for the three months ended March 31, 2021 and 2020, 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 approximately $76 million have been recognized for these actions.

Company Transformation

In 2016, a restructuring plan was announced to evolve and streamline BMS’s operating model. Cumulative charges of approximately $1.5 billion were recognized for these actions since the announcement. Actions under the plan were completed as of December 31, 2020.

The following provides the charges related to restructuring initiatives by type of cost:
Three Months Ended March 31,
Dollars in Millions20212020
Celgene Acquisition Plan$173 $324 
MyoKardia Acquisition Plan37 — 
Company Transformation— 82 
Total charges$210 $406 
Employee termination costs$44 $149 
Other termination costs1 11 
Provision for restructuring45 160 
Integration expenses141 174 
Accelerated depreciation— 30 
Asset impairments24 42 
Total charges$210 $406 
Cost of products sold$24 $16 
Research and development— 56 
Other (income)/expense, net186 334 
Total charges$210 $406 

The following summarizes the charges and spending related to restructuring plan activities:
Three Months Ended March 31,
Dollars in Millions20212020
Liability at December 31$148 $100 
Provision for restructuring(a)
39 142 
Foreign currency translation and other(2)6 
Payments(59)(107)
Liability at March 31
$126 $141 
(a)    Includes the liability resulting from changes in estimates of $1 million and $4 million for the three months ended March 31, 2021 and 2020, respectively. Excludes $6 million and $18 million for the three months ended March 31, 2021 and 2020, respectively, of accelerated stock-based compensation relating to the Celgene Acquisition Plan.
10



Note 7. INCOME TAXES
Three Months Ended March 31,
Dollars in Millions20212020
Earnings/(Loss) Before Income Taxes$2,530 $(304)
Provision for Income Taxes501 462 
Effective Tax Rate19.8 %(152.0)%

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 the first quarter of 2021 and 2020 were impacted by low jurisdictional tax rates attributed to the unwinding or amortization of inventory and intangible asset purchase price adjustments, contingent value rights fair value adjustments that are not taxable or deductible and valuation allowances on equity investment fair value adjustments. 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, cash repatriations and revised interpretations of the relevant tax code.

It is reasonably possible that the amount of unrecognized tax benefits at March 31, 2021 could decrease in the range of approximately $460 million to $510 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/(LOSS) PER SHARE
Three Months Ended March 31,
Amounts in Millions, Except Per Share Data20212020
Net Earnings/(Loss) Attributable to BMS Used for Basic and Diluted EPS Calculation$2,021 $(775)
Weighted-Average Common Shares Outstanding – Basic2,236 2,258 
Incremental Shares Attributable to Share-Based Compensation Plans29 — 
Weighted-Average Common Shares Outstanding – Diluted2,265 2,258 
Earnings/(Loss) per Common Share
Basic$0.90 $(0.34)
Diluted0.89 (0.34)

The total number of potential shares of common stock excluded from the diluted earnings/(loss) per common share computation because of the antidilutive impact was 14 million and 138 million for the three months ended March 31, 2021 and 2020, respectively.

11


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, 2021December 31, 2020
Dollars in MillionsLevel 1Level 2Level 3Level 1Level 2Level 3
Cash and cash equivalents - money market and other securities$— $8,381 $— $— $12,361 $— 
Marketable debt securities:
Certificates of deposit— 1,633 — — 1,020 — 
Corporate debt securities— 603 — — 698 — 
Derivative assets— 165 27 — 42 27 
Equity investments3,094 162 — 3,314 138 — 
Derivative liabilities— (72)— — (270)— 
Contingent consideration liability:
Contingent value rights9 — — 530 — — 
Other acquisition related contingent consideration— — 79 — — 78 

As further described in “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements” in the Company’s 2020 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).

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. The fair value of other acquisition related contingent consideration as of March 31, 2021 was calculated using the following significant unobservable inputs:
Ranges (weighted average) utilized as of:
InputsMarch 31, 2021
Discount rate
0.2% to 0.8% (0.4%)
Probability of payment
0% to 100% (2.8%)
Projected year of payment for development and regulatory milestones
2021 to 2025

There were no transfers between levels 1, 2 and 3 during the three months ended March 31, 2021. The following table represents a roll-forward of the fair value of level 3 instruments:
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Dollars in MillionsAssetLiabilityAssetLiability
Fair value as of January 1$27 $78 $— $106 
Changes in estimated fair value— 3 — (36)
Foreign exchange— (2)— (1)
Fair value as of March 31$27 $79 $— $69 

12


Available-for-sale Debt Securities and Equity Investments

The following table summarizes available-for-sale debt securities:
March 31, 2021December 31, 2020
Dollars in MillionsAmortized CostGross UnrealizedAmortized CostGross Unrealized
GainsLossesFair ValueGainsLossesFair Value
Certificates of deposit$1,633 $— $— $1,633 $1,020 $— $— $1,020 
Corporate debt securities592 11 — 603 684 14 — 698 
Total available-for-sale debt securities(a)
$2,225 $11 $— $2,236 $1,704 $14 $— $1,718 
(a)    All marketable debt securities mature within two years as of March 31, 2021 and December 31, 2020.

The following summarizes the carrying amount of equity investments:
Dollars in MillionsMarch 31,
2021		December 31,
2020
Equity investments with readily determinable fair values$3,256 $3,452 
Equity investments without readily determinable fair values616 694 
Equity method investments683 549 
Total equity investments$4,555 $4,695 

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 March 31,
Dollars in Millions20212020
Net gain/(loss) recognized on equity investments with readily determinable fair values(a)
$437 $(228)
Realized loss recognized on equity investments with readily determinable fair value sold(3)— 
Upward adjustments on equity investments without readily determinable fair value31 75 
Impairments and downward adjustments on equity investments without readily determinable fair value(1)(188)
Cumulative upward adjustments on equity investments without readily determinable fair value218 
Cumulative impairments and downward adjustments on equity investments without readily determinable fair value(167)
(a)    Net unrealized net gains/(losses) on equity investments still held were $381 million and $(228) million for the three months ended March 31, 2021 and 2020, respectively.

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 are 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 12 months. The notional amount of outstanding foreign currency forward contracts was primarily attributed to the euro of $3.3 billion and Japanese yen of $1.1 billion at March 31, 2021.

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.

13


BMS may hedge a portion of its future foreign currency exposure by utilizing a strategy that involves both a purchased local currency put option and a written local currency call option that are accounted for as hedges of future sales denominated in that local currency. Specifically, BMS sells (or writes) a local currency call option and purchases a local currency put option with the same expiration dates and local currency notional amounts but with different strike prices. The premium collected from the sale of the call option is equal to the premium paid for the purchased put option, resulting in no net premium being paid. This combination of transactions is generally referred to as a “zero-cost collar.” The expiration dates and notional amounts correspond to the amount and timing of forecasted foreign currency sales. If the U.S. Dollar weakens relative to the currency of the hedged anticipated sales, the purchased put option value reduces to zero and BMS benefits from the increase in the U.S. Dollar equivalent value of our anticipated foreign currency cash flows; however, this benefit would be capped at the strike level of the written call, which forms the upper end of the collar.

Net Investment Hedges — Non-U.S. Dollar borrowings of €950 million ($1.1 billion) at March 31, 2021 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 $400 million at March 31, 2021 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 Other Comprehensive Income/(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 (0.11% as of March 31, 2021) 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. 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.

The following table summarizes the fair value of outstanding derivatives:
 March 31, 2021December 31, 2020
Asset(a)
Liability(b)
Asset(a)
Liability(b)
Dollars in MillionsNotionalFair ValueNotionalFair ValueNotionalFair ValueNotionalFair Value
Derivatives designated as hedging instruments:
Interest rate swap contracts$255 $14 $— $— $255 $24 $— $— 
Cross-currency interest rate swap contracts400 16 — — — — 400 (10)
Foreign currency forward contracts3,873 118 1,688 (64)231 1 5,813 (259)
Derivatives not designated as hedging instruments:
Foreign currency forward contracts809 17 539 (8)1,104 17 336 (1)
Other— 27 — — — 27 — — 
(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 March 31, 2021Three Months Ended March 31, 2020
Dollars in MillionsCost of products soldOther (income)/expense, netCost of products soldOther (income)/expense, net
Interest rate swap contracts$— $(8)$— $(7)
Cross-currency interest rate swap contracts— (3)— (2)
Foreign currency forward contracts67 (32)(23)(76)
Foreign currency zero-cost collar contracts— — — (9)

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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 Millions20212020
Derivatives qualifying as cash flow hedges
Foreign currency forward contracts gain/(loss):
Recognized in Other Comprehensive Income/(Loss)(a)
$259 $97 
Reclassified to Cost of products sold36 (20)
Derivatives qualifying as net investment hedges
Cross-currency interest rate swap contracts gain:
Recognized in Other Comprehensive Income/(Loss)26