Other (Income)/Deductions—Net

9 Months Ended

Oct. 01, 2023

Other Income and Expenses [Abstract]


Components of Other (income)/deductions––net include:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Interest income	$	(523)	$	(70)	$	(1,015)	$	(114)
Interest expense	695		311		1,521		925
Net interest expense(a)	173		240		505		811
Royalty-related income	(260)		(239)		(737)		(628)
Net (gains)/losses on asset disposals	—		7		(2)		6
Net (gains)/losses recognized during the period on equity securities(b)	393		112		709		1,353
Income from collaborations, out-licensing arrangements and sales of compound/product rights	(10)		(4)		(84)		(17)
Net periodic benefit costs/(credits) other than service costs	(92)		(306)		(260)		(294)
Certain legal matters, net(c)	71		77		246		175
Certain asset impairments(d)	—		200		264		200
Haleon/Consumer Healthcare JV equity method (income)/loss(e)	(131)		51		(354)		(283)
Other, net(f)	(222)		(198)		(643)		(260)
Other (income)/deductions––net	$	(79)	$	(59)	$	(356)	$	1,063

(a)The decrease in net interest expense in the third quarter and first nine 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 losses in the third quarter of 2023 include, among other things, unrealized losses of $312 million related to our investments in Cerevel Therapeutics Holdings, Inc. (Cerevel) and Allogene Therapeutics, Inc (Allogene). The net losses in the first nine months of 2023 include, among other things, unrealized losses of $606 million related to our investments in BioNTech, Cerevel and Allogene. The net losses in the first nine months of 2022 included, among other things, unrealized losses of $974 million related to our investments in BioNTech, Cerevel and Arvinas.

(c)The third quarter of 2023 includes legal obligations related to pre-acquisition matters and certain product liability expenses related to products discontinued and/or divested by Pfizer. The first nine months of 2023 primarily includes certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer and legal obligations related to pre-acquisition matters. The third quarter and first nine months of 2022 primarily included certain product liability and other legal expenses related to products discontinued and/or divested by Pfizer.

(d)The first nine 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. (Array) acquisition. The third quarter and first nine months of 2022 represented an intangible asset impairment charge associated with our Biopharma segment, representing an IPR&D asset for the unapproved indication of symptomatic dilated cardiomyopathy due to a mutation of the gene encoding the lamin A/C protein, acquired in our Array acquisition, and was a result of the Phase 3 trial reaching futility at a pre-planned interim analysis.

(e)See Note 2C.

(f)The third quarter and first nine months of 2023 includes, among other things, a $222 million gain on the divestiture of our early-stage rare disease gene therapy portfolio to Alexion. The first nine months of 2023 also includes, among other things, dividend income of $213 million from our investment in ViiV and $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.


Additional information about the intangible assets that were impaired during 2023 follows:
									Nine Months Ended
	Fair Value(a)								October 1, 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.