INCOME TAXES

9 Months Ended

Sep. 30, 2011

INCOME TAXES

INCOME TAXES

4. INCOME TAXES

The effective tax rate for the three months ended September 30, 2011 and 2010 was 22.6% and 30.0%, respectively. The decrease in the effective tax rate was primarily attributable to a change in the geographic earnings mix, favorable return-to-provision adjustments in 2011, including adjustments for manufacturing, research and development incentives, compared with unfavorable return-to-provision adjustments in 2010, and the standard quarterly accruals necessary to record the tax liability using the latest full year projected effective tax rate. The effective tax rate for the nine months ended September 30, 2011 and 2010 was 27.1% and 28.6%, respectively. The decrease in the effective tax rate was primarily attributable to a change in the geographic earnings mix and favorable return-to-provision adjustments in 2011, including adjustments for manufacturing, research and development incentives, compared with unfavorable return-to-provision adjustments in 2010.

The Company’s gross reserve for uncertain tax positions related to foreign and domestic matters, including penalties and interest, as of September 30, 2011 and December 31, 2010, was $25.0 million and $17.1 million, respectively. Pursuant to the Amended and Restated Tax Matters Agreement dated December 18, 2009, Bristol-Myers Squibb Company (BMS) maintains responsibility for all uncertain tax positions which may exist in the pre-initial public offering period or which may exist as a result of the initial public offering transaction. The Company has recorded a receivable from BMS for uncertain tax positions, including penalties and interest, of $16.3 million as of September 30, 2011. The Company believes that it has adequately provided for all uncertain tax positions. It is reasonably possible that new issues may be raised by tax authorities and that these issues may require increases in the balance of unrecognized tax benefits.