Other (Income)/Deductions - Net (Tables)

6 Months Ended

Jul. 02, 2023

Other Income and Expenses [Abstract]

Schedule of Other (Income)/Deductions - Net

Components of Other (income)/deductions––net include:
	Three Months Ended				Six Months Ended
(MILLIONS)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Interest income	$	(316)	$	(30)	$	(493)	$	(44)
Interest expense	508		293		826		614
Net interest expense(a)	192		263		333		571
Royalty-related income	(273)		(217)		(477)		(389)
Net (gains)/losses on asset disposals	5		—		(2)		(1)
Net (gains)/losses recognized during the period on equity securities(b)	(135)		541		316		1,241
Income from collaborations, out-licensing arrangements and sales of compound/product rights	(7)		(5)		(74)		(14)
Net periodic benefit costs/(credits) other than service costs	(88)		295		(168)		12
Certain legal matters, net(c)	139		19		175		98
Certain asset impairments(d)	—		—		264		—
Haleon/Consumer Healthcare JV equity method (income)/loss(e)	(156)		(149)		(224)		(334)
Other, net(f)	(24)		26		(421)		(62)
Other (income)/deductions––net	$	(347)	$	772	$	(277)	$	1,122

(a)The decrease in net interest expense in the second quarter and first six months of 2023 reflects higher interest expense driven by our $31 billion aggregate principal amount of senior unsecured notes issued in May 2023 as part of the financing for our proposed acquisition of Seagen, which was more than offset by higher interest income on the investment of the net proceeds from the debt issuance.

(b)The net gains in the second quarter of 2023 include, among other things, unrealized gains of $202 million related to our investment in Cerevel Therapeutics Holdings, Inc. (Cerevel). The net losses in the first six months of 2023 include, among other things, unrealized losses of $276 million related to our investment in BioNTech. The net losses in 2022 included, among other things, unrealized losses of $432 million in the second quarter and $776 million in the first six months related to our investments in BioNTech and Cerevel.

(c)The second quarter and first six months of 2023 primarily include certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer. The second quarter and first six months of 2022 primarily included certain product liability expenses related to products discontinued and/or divested by Pfizer. The first six months of 2022 also included legal obligations related to pre-acquisition commitments.

(d)The first six months of 2023 primarily represents intangible asset impairment charges, including $128 million associated with Other business activities, related to IPR&D and developed technology rights for acquired software assets and reflects unfavorable pivotal trial results and updated commercial forecasts, and $120 million associated with our Biopharma segment resulting from the discontinuation of a study related to an out-licensed IPR&D asset for the treatment of prostate cancer, acquired in our Array BioPharma Inc. acquisition.

(e)See Note 2C.

(f)The first six months of 2023 primarily includes, among other things, dividend income of $211 million from our investment in Nimbus resulting from Takeda Pharmaceutical Company Limited’s acquisition of Nimbus’s oral, selective allosteric tyrosine kinase 2 (TYK2) inhibitor program subsidiary, and $183 million from our investment in ViiV.

Schedule of Impaired Intangible Assets

Additional information about the intangible assets that were impaired during 2023 follows:
									Six Months Ended
	Fair Value(a)								July 2, 2023
(MILLIONS)	Amount		Level 1		Level 2		Level 3		Impairment
Intangible assets––Licensing agreements and other(b)	$	—	$	—	$	—	$	—	$	120
Intangible assets––IPR&D(b)	—		—		—		—		94
Intangible assets––Developed technology rights(b)	—		—		—		—		34
Total	$	—	$	—	$	—	$	—	$	248

(a)The fair value amount is presented as of the date of impairment, as this asset is not measured at fair value on a recurring basis. See also Note 1E in our 2022 Form 10-K.

(b)Reflects intangible assets written down to fair value in 2023. Fair value was determined using the income approach, specifically the multi-period excess earnings method, also known as the discounted cash flow method. We started with a forecast of all the expected net cash flows for the asset and then applied an asset-specific discount rate to arrive at a net present value amount. Some of the more significant estimates and assumptions inherent in this approach include: the amount and timing of the projected net cash flows, which includes the expected impact of competitive, legal and/or regulatory forces on the product; the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and the tax rate, which seeks to incorporate the geographic diversity of the projected cash flows.