filings.toolsBristol Myers Squibb 10-K 2019-12-31
Filed 2020-02-24. 22 sections, 617K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
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)
(212) 546-4000
(Registrant’s telephone number, including area code)
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 |
Securities registered pursuant to Section 12(g) of the Act:
| Title of each class |
| $2 Convertible Preferred Stock, $1 Par Value |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 such 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions 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 ☒
The aggregate market value of the 1,634,012,788 shares of voting common equity held by non-affiliates of the registrant, computed by reference to the closing price as reported on the New York Stock Exchange, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $74,102,479,936**. Bristol-Myers Squibb has no non-voting common equity. At February 1,** 2020**, there were** 2,257,510,796 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive proxy statement for the registrant’s Annual Meeting of Shareholders to be filed within 120 days after the conclusion of the registrant's fiscal year ended December 31, 2019 with the U.S. Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described therein.
BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-K
December 31, 2019
| * | 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 2019 Form 10-K. |
PART I
Item 1. BUSINESS.
General
Bristol-Myers Squibb Company was incorporated under the laws of the State of Delaware in August 1933 under the name Bristol-Myers Company, as successor to a New York business started in 1887. In 1989, Bristol-Myers Company changed its name to Bristol-Myers Squibb Company as a result of a merger. We are engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of biopharmaceutical products on a global basis. Refer to the Summary of Abbreviated Terms at the end of this 2019 Form 10-K for terms used throughout the document.
On November 20, 2019, we completed our acquisition of Celgene and, as a result, Celgene became a wholly owned subsidiary of Bristol-Myers Squibb Company. Under the terms of the transaction, Celgene shareholders received one share of Bristol-Myers Squibb common stock and $50.00 in cash for each share of Celgene common stock held by them. Celgene shareholders also received one contingent value right (the “CVR”) representing the right to receive $9.00 in cash, which is subject to the achievement of future regulatory milestones, for each share of Celgene common stock. We funded the cash portion of the merger consideration with available cash, which included $18.8 billion of net proceeds raised in the May 2019 issuance of new notes and $8 billion of borrowings under the term loan established in January 2019 in connection with the acquisition. Based on the closing share price of our common stock on November 20, 2019, the aggregate purchase price was approximately $80.3 billion, including approximately $35.7 billion in cash and approximately $40.4 billion in Bristol-Myers Squibb common stock.
To allow the acquisition by Bristol-Myers Squibb to close on a timely basis in light of concerns expressed by the Federal Trade Commission (the “FTC”), Celgene entered into a purchase agreement with Amgen on August 25, 2019 under which Amgen would acquire the global rights to Otezla* (apremilast) for $13.4 billion. In connection with the divestiture and Celgene entering into the purchase agreement, we entered into a guarantee with Amgen under which we agreed to guarantee the full payment and performance of Celgene’s obligations under the purchase agreement. On November 15, 2019, the FTC accepted the consent order for public comment, which allowed the acquisition of Celgene to proceed subject to certain conditions, including the completion of the divestiture of Otezla* to Amgen. On November 21, 2019, the divestiture of Otezla* was completed.
We continue to operate in one segment—Biopharmaceuticals after our acquisition of Celgene. For additional information about our business segment, refer to “Item 8. Financial Statements and Supplementary Data—Note 1. Accounting Policies and Recently Issued Accounting Standards.” We believe that our combination with Celgene will enable us to create a leading biopharmaceutical company that is well-positioned to address the needs of patients with cancer, inflammatory, immunologic, cardiovascular or fibrotic diseases through high-value innovative medicines and leading scientific capabilities. Our principal strategy is to combine the resources, scale and capability of a pharmaceutical company with the speed and focus on innovation of the biotech industry. Our focus as a biopharmaceutical company is on discovering, developing and delivering transformational medicines for patients facing serious diseases in areas where we believe that we have an opportunity to make a meaningful difference: oncology (both solid tumors and hematology), immunology, cardiovascular and fibrosis. Our new four strategic priorities as a combined company are to drive enterprise performance, maximize the value of our commercial portfolio, ensure the long-term sustainability of our pipeline through combined internal and external innovation and establish our new culture and embed our people strategy. While we are committed to reducing the debt that we incurred in connection with the Celgene transaction, we plan to remain focused on broadening our portfolio of marketed medicines and pipeline assets. For a further discussion of our strategy initiatives, refer to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Strategy.”
We compete with other worldwide research-based drug companies, smaller research companies and generic drug manufacturers. Our products are sold worldwide, primarily to wholesalers, specialty distributors, retail pharmacies, hospitals, government entities and the medical profession. We manufacture products in the U.S. and Puerto Rico and have significant manufacturing operations in two foreign countries. Most of our revenues come from products in the following therapeutic classes: hematology, oncology, cardiovascular and immunology.
The percentage of revenues by significant region/country were as follows:
| Year Ended December 31, | |||||||||||
| Dollars in Millions | 2019 | 2018 | 2017 | ||||||||
| United States | 59 | % | 56 | % | 55 | % | |||||
| Europe | 24 | % | 25 | % | 24 | % | |||||
| Rest of the World | 17 | % | 19 | % | 21 | % | |||||
| Total Revenues | $ | 26,145 | $ | 22,561 | $ | 20,776 |
Acquisitions, Divestitures and Licensing Arrangements
Acquisitions, divestitures and licensing arrangements allow us to focus our resources behind growth opportunities that drive the greatest long-term value.
Our significant business development activities include:
| • | In December 2019, we completed the divestiture of our oral solid, biologics and sterile product manufacturing and packaging facility in Anagni, Italy, to Catalent Inc. |
| • | In November 2019, we completed our acquisition of Celgene. |
| • | In July 2019, we completed the divestiture of our consumer health business, UPSA, to Taisho Pharmaceutical Co., Ltd. |
Also, in November 2019 pursuant to the consent order that was accepted by the FTC in connection with the regulatory approval process for the acquisition of Celgene, we completed the divestiture of Otezla* to Amgen.
Additional information relating to our acquisitions, divestitures and licensing arrangements is contained in “Item 8. Financial Statements and Supplementary Data—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements.”
Products, Intellectual Property and Product Exclusivity
Our pharmaceutical products include chemically-synthesized or small molecule drugs and products produced from biological processes, called “biologics.” Small molecule drugs are typically administered orally, e.g., in the form of a pill or tablet, although other drug delivery mechanisms are used as well. Biologics are typically administered to patients through injections or by intravenous infusion.
Below is a summary of our significant products, including approved indications. For information about our alliance arrangements for certain of the products below, refer to “—Alliances” below and “Item 8. Financial Statements and Supplementary Data—Note 3. Alliances.”
| Revlimid | Revlimid (lenalidomide) is an oral immunomodulatory drug that in combination with dexamethasone is indicated for the treatment of patients with multiple myeloma. Revlimid as a single agent is also indicated as a maintenance therapy in patients with multiple myeloma following autologous hematopoietic stem cell transplant. Revlimid has received approvals for several indications in the hematological malignancies including lymphoma and MDS. |
| Eliquis | Eliquis (apixaban) is an oral Factor Xa inhibitor, targeted at stroke prevention in adult patients with NVAF and the |
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Item 1A. RISK FACTORS.
Any of the risks and uncertainties described below could significantly and negatively affect our business operations, financial condition, operating results (including components of our financial results), cash flows, prospects, reputation or credit ratings now and in the future, which could cause the trading price of our common stock to decline significantly. Additional risks and uncertainties that are not presently known to us, or risks that we currently consider immaterial, could also impair our business operations, financial condition, operating results or cash flows. The following discussion of risk factors contains “forward-looking” statements, as discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Special Note Regarding Forward-Looking Statements.”
We may encounter difficulties integrating ours and Celgene's businesses and operations and, therefore, may not fully realize the projected benefits from our acquisition of Celgene, and our significant additional indebtedness that we incurred and our issuance of additional shares in connection with the acquisition could have negative consequences.
The ultimate success of our acquisition of Celgene and our ability to realize the anticipated benefits from the acquisition, including the expected cost savings and avoidance from synergies, innovation opportunities and operational efficiencies, depends on, among other things, how effective we are in integrating the Bristol-Myers Squibb and Celgene operations, products and employees.
We are in the process of integrating a large number of manufacturing, operational and administrative systems to achieve consistency throughout the combined company, including with respect to human capital management, portfolio rationalization, finance and accounting systems, sales operations and product distribution, pricing systems and methodologies, data security systems, compliance programs and internal controls processes. This integration is a complex, costly and time-consuming process. If any difficulties in the integration of our operations were to occur, they could adversely affect our business, including, among other ways, causing a failure to meet demand for our products, or adversely affect our ability to meet our financial reporting obligations. Inconsistencies in standards, controls, procedures and policies may adversely affect our ability to maintain relationships with customers, suppliers, distributors, alliance partners, creditors, clinical trial investigators and managers of our clinical trials.
If we are unable to successfully combine the businesses in an efficient, cost-effective manner within the anticipated timeframe, the projected benefits and cost savings may not be realized fully or may take longer to realize than expected and our business may be unable to grow as planned, which could materially impact our business, cash flow, financial condition or results of operations as well as adversely impact our share price. The integration process may also result in significant expenses and charges, both cash and noncash. The attention of certain members of our management and our resources will be at times focused on the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business.
This acquisition increased the amount of our debt resulting in additional interest expense. Additional cash will be required for any dividends declared due to additional shares issued in connection with the acquisition. Both of these factors could reduce our financial flexibility to continue capital investments, develop new products and declare future dividends.
Events outside our control, including changes in regulation and laws as well as economic trends, also could adversely affect our ability to realize the expected benefits from this acquisition.
The public announcement of data from our clinical studies, or those of our competitors, or news of any developments related to our, or our competitors', products or late-stage compounds may cause significant volatility in our stock price and depending on the data, may result in an adverse impact on our business, financial condition or results of operations. If the development of any of our key late-stage product candidates is delayed or discontinued or a clinical study does not meet one or more of its primary endpoints, our stock price could decline significantly and there may be an adverse impact on our business, financial condition or results of operations.
We are focusing our efforts and resources in disease areas of high unmet need. With our more focused portfolio, investors are placing heightened scrutiny on some of our products or late-stage compounds. We have, however, experienced setbacks and may continue to do so as there are further developments in our clinical studies. Additionally, we inherited many late-stage compounds as well as prioritized brand portfolio in hematology and immunology through our acquisition of Celgene, which may not meet expectations.
The announcement of data from our clinical studies, or those of our competitors, or news of any developments related to our, or our competitors', products or late-stage compounds, such as Opdivo, may cause significant volatility in our stock price and, depending on the news, may result in an adverse impact on our business, financial condition or results of operations. Furthermore, the announcement of any negative or unexpected data or the discontinuation of development of any of our key late-stage product candidates, any delay in our anticipated timelines for filing for regulatory approval or a significant advancement of a competitor, may cause our stock price to decline significantly and may have an adverse impact on our business, financial condition or results of operations. There is no assurance that data from our clinical studies will support filings for regulatory approval, or that our key product candidates may prove to be effective or as effective as other competing products, or even if approved, that any such products will become commercially successful for all approved indications.
Increased pricing pressure and other restrictions in the U.S. and abroad from MCOs, institutional purchasers and government agencies and programs, among others, continue to negatively affect our revenues and profit margins.
Our products continue to be subject to increasing pressures across the portfolio from market access, pharmaceutical pricing controls and discounting and other restrictions in the U.S., the EU and other regions around the world that result in lower prices, lower reimbursement rates and smaller populations for whom payers will reimburse, which negatively impact our revenues and profit margins, including from (i) the impact of the increased pricing pressure from Medicare Part D formularies, Medicare Part B reimbursement rates (including the potential implementation of the pilot program by the Centers for Medicare & Medicaid Services (“CMS”) that would, among other things, set payment amounts to physicians on Part B drugs based on international drug prices and would include fifty percent of Medicare Part B single source drugs), expanded utilization under the 340B Drug Pricing Program (“340B”), as well as commercial formularies in general; (ii) rules and practices of MCOs and institutional and governmental purchasers taking actions to control costs or shift the cost burden to manufacturers, including actions that could result in the exclusion of a product from, or the unfavorable placement of, a product on a MCO formulary; (iii) government administrative and policy changes and changes in laws and regulations for federal healthcare programs such as Medicare and Medicaid, other government actions and inquiries at the federal level (including the proposals contained in the “American Patient First Blueprint”) that seek to amend pharmaceutical pricing and reimbursement practices such as using international pricing indexes, modifying the federal Anti-Kickback statute discount safe harbor, accelerating generic drug approval processes, promoting the use of biosimilar drugs and the option of applying step therapy, listing prices of products in DTC television advertisements and granting additional authority to governmental agencies to manage drug utilization and negotiate drug prices and laws at the state level (including laws that have recently been enacted in California, Vermont, Nevada and New York that are focused on drug pricing transparency and/or limiting state spending on drugs), including the proposed rule by the U.S. federal government to allow states or certain other non-federal government entities to submit proposals to the FDA allowing for the importation of certain prescription drugs from Canada; (iv) the potential impact of changes to U.S. federal pharmaceutical coverage and reimbursement policies and practices, including changes resulting from our implementation of the guidance in the 2016 final rule issued by the CMS on the calculation of average manufacturer price and best price (which also will require inclusion of sales in U.S. Territories in the calculation of average manufacturer price and best price beginning on April 1, 2022), as well as the scrutiny of drug manufacturers, including Celgene, by the House Oversight and Reform Committee in January 2019 seeking documents and detailed information about drug-pricing practices; (v) reimbursement delays; (vi) government price erosion mechanisms across Europe and in other countries resulting in deflation for pharmaceutical product pricing; (vii) the increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid and private sector beneficiaries; (viii) collection delays or failures to pay in government-funded public hospitals outside the U.S.; (ix) the impact on pricing from parallel trade and drug importation across borders; (x) other developments in technology and/or industry practices that could impact the reimbursement policies and practices of third-party payers; and (xi) inhibited market access due to real or perceived differences in value propositions for our products compared to competing products. We expect that these market access constraints, pharmaceutical pricing controls and discounting and other restrictions will become more acute and will continue to negatively affect our future revenues and profit margins.
Additionally, in early 2016, Health Resources and Services Administration (“HRSA”) finalized a regulation regarding the 340B pricing methodology and providing guidelines for when civil monetary penalties may be issued for “knowing and intentional” manufacturer overcharges of 340B covered entities. The effective date of this regulation was January 1, 2019. Following the effective date, manufacturers who are found to have knowingly and intentionally overcharged 340B covered entities could be subject to significant monetary penalties. Such findings could also result in negative publicity that could harm the manufacturer’s reputation or cause business disruption. Over the course of the past few years, Celgene had received inquiries from HRSA regarding the limited distribution networks for Revlimid, Pomalyst, and Thalomid and compliance with the 340B program. We believe that we have complied with applicable legal requirements. If we are ultimately required to change our sales or pricing practices with regard to the distribution of these drugs under the 340B program, or if we were required to pay penalties under the applicable regulations, there would be an adverse effect on our revenues and profitability.
We may experience difficulties or delays in the development and commercialization of new products.
Compounds or products may appear promising in development but fail to reach market within the expected or optimal timeframe, or at all. In addition, product extensions or additional indications may not be approved. Furthermore, products or indications approved under the U.S. FDA's Accelerated Approval Program may be contingent upon verification and description of clinical benefit in confirmatory studies and such studies may not be successful. For example, in July 2019, we announced that Part 2 of the Phase III CheckMate-227 trial did not meet its primary endpoint of overall survival with Opdivo plus chemotherapy versus chemotherapy therapy in patients with first-line non-squamous NSCLC.
Developing and commercializing new compounds and products involve inherent risks and uncertainties, including (i) efficacy and safety concerns, delayed or denied regulatory approvals, delays or challenges with producing products on a commercial scale or excessive costs to manufacture products; (ii) inability to enroll patients and timely completion of the clinical trials; (iii) failure to enter into or implement optimal alliances for the development and/or commercialization of new products; (iv) failure to maintain a consistent scope and variety of promising late-stage products; (v) failure of one or more of our products to achieve or maintain commercial viability; and (vi) changes in regulatory approval processes may cause delays or denials of new product approvals.
We are unable to predict whether and when any further changes to laws or regulatory policies affecting our business could occur. For example, in the U.S., a partial federal government shutdown halted the work of many federal agencies and their employees from late December 2018 through late January 2019. While federal employees have since returned to work, a subsequent extended shutdown could result in reductions or delays of FDA's activities, including with respect to our ongoing clinical programs, our manufacturing of our products and product candidates and our product approvals.
Regulatory approval delays are especially common when a product is expected to have a REMS, as required by the FDA to address significant risk/benefit issues. The inability to bring a product to market or a significant delay in the expected approval and related launch date of a new product could negatively impact our revenues and earnings. In addition, if certain acquired pipeline programs are canceled or we believe their commercial prospects have been reduced, we may recognize material non-cash impairment charges for those programs. Finally, losing key molecules and intermediaries or our compound library through a natural or man-made disaster or act of sabotage could negatively impact the product development cycle.
We could lose market exclusivity of a product earlier than expected.
In the pharmaceutical and biotechnology industries, the majority of an innovative product’s commercial value is realized during its market exclusivity period. In the U.S. and in some other countries, when market exclusivity expires and generic versions are approved and marketed or when biosimilars are introduced (even if only for a competing product), there are usually very substantial and rapid declines in a product’s revenues.
Market exclusivity for our products is based upon patent rights and certain regulatory forms of exclusivity. The scope of our patent rights, if any, varies from country to country and may also be dependent on the availability of meaningful legal remedies in a country. The failure to obtain or maintain patent and other intellectual property rights, or limitations on the use or loss of such rights, could be material to us. In some countries, including certain EU member states, basic patent protections for our products may not exist because certain countries did not historically offer the right to obtain specific types of patents and/or we (or our licensors) did not file in those countries. In addition, the patent environment can be unpredictable and the validity and enforceability of patents cannot be predicted with certainty. In addition, manufacturers of innovative drugs as well as generic drug manufacturers may be able to design their products around our owned or licensed patents and compete with us using the resulting alternative technology. Absent relevant patent protection for a product, once the data exclusivity period expires, generic or alternative versions can be approved and marketed.
Generic and biosimilar product manufacturers as well as other groups seeking financial gain are also increasingly seeking to challenge patents before they expire, and we could face earlier-than-expected competition for any products at any time. Patents covering our key products have been, and are likely to continue to be, subject to validity and enforceability challenges in patent litigations and post-grant review patent office proceedings. For example, in February 2017 one of the EU patents for Sprycel was revoked by the Opposition Division of the EPO. We may experience a decline in European revenues upon the entry of generics into the market. Refer to “Item 8. Financial Statements and Supplementary Data—Note 19*. Legal Proceedings and Contingencies” for further information. In some cases, manufacturers may seek regulatory approval by submitting their own clinical study data to obtain marketing approval or choose to launch a generic product “at risk” before the expiration of the applicable patent(s) and/or before the final resolution of related patent litigation. There is no assurance that a particular product will enjoy market exclusivity for the full time period that appears in the estimates disclosed in this* 2019 Form 10-K or that we assume when we provide our financial guidance. In addition, some countries, such as India, are allowing competitors to manufacture and sell competing generic products, which negatively impacts the protections afforded the Company. Lower-priced generics or biosimilars for BMS biologic products or competing biologics could negatively impact our volumes and prices.
Orphan exclusivity and regulatory data protection for Revlimid’s multiple myeloma indication in Europe expired in June 2017. The regulatory marketing protection for Revlimid in Europe expired in June 2018. Notwithstanding that our intellectual property rights for Revlimid in the major European markets are due to remain in force through at least 2022, we expect that some generic drug companies may attempt to market a generic version of Revlimid in European markets before this time. In particular, we expect generic entry for Revlimid in the United Kingdom beginning on January 18, 2022, and in various other European countries where our Supplemental Protection Certificate is in force beginning on February 18, 2022. Although we are confident in the strength of our intellectual property rights, it may be possible for generic drug companies to successfully challenge our rights and launch their generic versions of Revlimid prior to the expiration of our intellectual property rights for Revlimid.
In addition, both the U.S. Congress and the FDA have taken steps to promote the development and approval of generic drugs and biosimilar biologics. For example, in December 2019, the U.S. Congress enacted legislation intended to facilitate generic companies’ access to drug samples. Section 610 of the Further Consolidated Appropriations Act, 2020, provides generic and biosimilar developers a private right of action to obtain sufficient quantities of drug samples from the reference product's manufacturer in order to conduct testing necessary to obtain approval for generic or biosimilar products. This new law has the potential to have an adverse impact on our business.
Certain novel approaches to the treatment of diseases, such as chimeric antigen receptor (“CAR”) T cell therapy, may present significant challenges and risks for us.
The development of novel approaches for the treatment of diseases, such as our acquisition in November 2019 of Celgene’s and Juno's CAR T cell therapy programs, including liso-cel and ide-cel, presents many new challenges and risks due to the unique nature of genetic modification of patient cells ex vivo using certain viruses to reengineer these cells to ultimately treat diseases, including obtaining regulatory approval from FDA and other regulatory agencies that have very limited experience with the development of cellular therapies involving genetic modification of patient cells; developing and deploying consistent and reliable processes, while limiting contamination, for engineering a patient’s cells ex vivo and infusing genetically modified cells back into the patient; developing processes for the safe administration of cellular therapies, including long-term follow-up for patients receiving cellular therapies; and sourcing additional clinical and, if approved, commercial supplies for the materials used to manufacture and process our potential CAR T products. The use of reengineered cells as a potential cancer treatment is a recent development and may not be broadly accepted by the regulatory, patient or medical communities. Further, we may not be able to satisfactorily establish the safety and efficacy or the reliability of these therapies or demonstrate the potential advantages and side effects compared to existing and future therapies. Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. Furthermore, certain payment models could impact the interest of appropriate treatment sites in administering CAR T cell therapies, thereby limiting patient access. To date, only a few products that involve the genetic modification of patient cells have been approved for commercial sale. Moreover, the safety profiles of cellular therapies may adversely influence public perception and may adversely influence the willingness of subjects to participate in clinical trials, or if approved, of physicians and payors to subscribe to these novel treatment approaches. If we fail to overcome these and other challenges, or if significant adverse events are reported from similar therapies, our development of these novel treatment approaches may be hampered or delayed, which could adversely affect our future anticipated revenues and/or profitability related to these therapeutic programs.
We face intense competition from other manufacturers.
BMS is dependent on the market access, uptake and expansion for marketed brands, new product introductions, new indications, product extensions and co-promotional activities with alliance partners, to deliver future growth. Competition is keen and includes (i) lower-priced generics and increasingly aggressive generic commercialization tactics, (ii) new competitive products entering the market, particularly in IO, (iii) lower prices for other companies' products, real or perceived superior efficacy (benefit) or safety (risk) profiles or other differentiating factors, (iv) technological advances and patents attained by our competitors, (v) clinical study results from our products or a competitor’s products that affect the value proposition for our products, (vi) business combinations among our competitors and major third-party payers and (vii) competing interests for external partnerships to develop and bring new products to markets. If we are unable to compete successfully against our competitors' products in the marketplace, this could have a material negative impact on our revenues and earnings.
Litigation claiming infringement of intellectual property may adversely affect our future revenues and operating earnings.
We and certain of our subsidiaries are involved in various legal proceedings, including patent litigation, such as claims that our patents are invalid, unenforceable and/or do not cover the product of the generic drug manufacturer or where third parties seeks damages and/or injunctive relief to compensate for alleged infringement of their patents by our commercial or other activities. Resolving an intellectual property infringement claim can be costly and time consuming and may require us to enter into license agreements, which may not be available on commercially reasonable terms. A successful claim of patent or other intellectual property infringement could subject us to significant damages or an injunction preventing the manufacture, sale, or use of the affected product or products. Any of these events could have a material adverse effect on our profitability and financial condition.
Adverse outcomes in other legal matters could negatively affect our business.
Current or future lawsuits, claims, proceedings and government investigations could preclude or delay the commercialization of our products or could adversely affect our operations, profitability, liquidity or financial condition, after any possible insurance recoveries, where available. Such legal matters include (i) intellectual property disputes; (ii) adverse decisions in litigation, including product liability and commercial cases; (iii) anti-bribery regulations, such as the U.S. Foreign Corrupt Practice Act or UK Bribery Act, including compliance with ongoing reporting obligations to the government resulting from any settlements; (iv) recalls or withdrawals of pharmaceutical products or forced closings of manufacturing plants; (v) the failure to fulfill obligations under supply contracts with the government and other customers; (vi) product pricing and promotional matters; (vii) lawsuits and claims asserting, or investigations into, violations of securities, antitrust, Federal and state pricing, consumer protection, data privacy and other laws and regulations; (viii) environmental, health, safety and sustainability matters; and (ix) tax liabilities resulting from assessments from tax authorities.
We are subject to a variety of U.S. and international laws and regulations.
We are currently subject to a number of government laws and regulations and in the future, could become subject to new government laws and regulations. The costs of compliance with such laws and regulations, or the negative results of non-compliance, could adversely affect our business, our operating results and the financial condition of our Company. These include (i) new healthcare reform initiatives in the U.S. or in other countries, including additional mandatory discounts or fees and efforts focused on increasing transparency around drug costs; (ii) judicial or other governmental decisions affecting pricing, drug reimbursement, receivable payments and access or marketing within or across jurisdictions; (iii) changes in intellectual property law; (iv) changes in accounting standards; (v) new and increasing data privacy regulations and enforcement, particularly in the EU and the U.S.; (vi) emerging and new global regulatory requirements for reporting payments and other value transfers to healthcare professionals; and (vii) the potential impact of importation restrictions, legislative and/or other regulatory changes.
In addition, the U.S. healthcare industry is highly regulated and subject to frequent and substantial changes. We anticipate continued U.S. congressional interest in modifying provisions of the Affordable Care Act, particularly given the recent ruling in Texas v. Azar to invalidate the law as unconstitutional. The revenues that we generate by the health insurance exchanges and Medicaid expansion under the Affordable Care Act are not material, so the impact of the change in law and similar recent administration actions is expected to be limited. Any future replacement, modification or repeal of the Affordable Care Act may adversely affect our business and financial results, particularly if the legislation reduces incentives for employer-sponsored insurance coverage, and we cannot predict how other future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
Changes to tax regulations could negatively impact our earnings.
We are subject to income taxes in the U.S. and various other countries globally. In particular, although the passage of the Tax Cuts and Jobs Act of 2017 reduced the U.S. tax rate to 21%, the law is complex and further regulations and interpretations are still being issued. We could face audit challenges on how we apply the new law that could have a negative impact on our provision for income taxes. In addition, our future earnings could be negatively impacted by changes in tax legislation, including a repeal or modification of the Tax Cuts and Jobs Act of 2017, changes in tax rates and tax base such as limiting, phasing-out or eliminating deductions or tax credits, increase taxing of certain excess income from intellectual property, revising tax law interpretations in domestic or foreign jurisdictions, changes in rules for earnings repatriations and changes in other tax laws in the U.S. or other countries.
Third-party royalties represent a significant percentage of our pretax income and operating cash flow.
We have entered into several arrangements which entitle us to potential royalties from third parties for out-licensed intellectual property, commercialization rights and sales-based contingent proceeds related to the divestiture of businesses. In many of these arrangements we have minimal, if any, continuing involvement that contribute to the financial success of those activities. Royalties have continued to represent a significant percentage of our pretax income, including royalties related to the divestiture of our diabetes business (including the transfer of certain future royalty rights pertaining to Amylin, Onglyza and Farxiga* product sales), out-licensed intellectual property and the Merck patent infringement settlement. Pretax income generated from royalties was approximately $1.6 billion in 2019. Our pretax income could be adversely affected if the royalty streams decline in future periods.*
The failure of third parties to meet their contractual, regulatory and other obligations could adversely affect our business.
We rely on suppliers, vendors, outsourcing partners, alliance partners and other third parties to research, develop, manufacture, commercialize, co-promote and sell our products, manage certain marketing, selling, human resource, finance, IT and other business unit and functional services and meet their contractual, regulatory and other obligations. Using these third parties poses a number of risks, such as: (i) they may not perform to our standards or legal requirements, for example, in relation to the outsourcing of significant clinical development activities for innovative medicines to some contract research organizations; (ii) they may not produce reliable results; (iii) they may not perform in a timely manner; (iv) they may not maintain confidentiality of our proprietary information; (v) they may incur a significant cyberattack or business disruption; (vi) disputes may arise with respect to ownership of rights to technology developed with our partners; and (vii) disagreements could cause delays in, or termination of, the research, development or commercialization of the product or result in litigation or arbitration. Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country specific privacy and data security risk given current legal and regulatory environments. The failure of any critical third party to meet its obligations, including for future royalty and milestone payments; adequately deploy business continuity plans in the event of a crisis; and/or satisfactorily resolve significant disagreements with us or address other factors, could have a material adverse impact on our operations and results. In addition, if these third parties violate, or are alleged to have violated, any laws or regulations, including the local pharmaceutical code, U.S. Foreign Corrupt Practice Act, UK Bribery Act, the EU's General Data Protection Regulation, and other similar laws and regulations, during the performance of their obligations for us, it is possible that we could suffer financial and reputational harm or other negative outcomes, including possible legal consequences.
Failure to execute our business strategy could adversely impact our growth and profitability.
Our strategy is focused on delivering innovative, transformational medicines to patients in a focused set of disease areas. If we are unable to successfully execute on this strategy, this could negatively impact our future results of operations and market capitalization. In connection with this strategy, we are in the process of integrating Celgene and our ability to successfully integrate Celgene could impact our results of operations. If we are not able to achieve the cost savings that we expect, this could negatively impact our operating margin and earnings results. In addition, we may be unable to consistently maintain an adequate pipeline, through internal R&D programs or transactions with third parties, to support future revenue growth. Competition among pharmaceutical companies for acquisition and product licensing opportunities is intense, and we may not be able to locate suitable acquisition targets or licensing partners at reasonable prices, or successfully execute such transactions. If we are unable to support and grow our marketed products, successfully execute the launches of newly approved products, advance our late-stage pipeline, manage change from our operating model evolution and manage our costs effectively, our operating results and financial condition could be negatively impacted.
Failure to attract and retain highly qualified workforce could affect our ability to successfully develop and commercialize products.
Our success is largely dependent on our continued ability to attract and retain highly qualified scientific, technical and management workforce, including people with expertise in clinical R&D, governmental regulation and commercialization, and in connection with our Celgene acquisition, integrate two unique corporate cultures and maintain employee morale. Competition for qualified talent in the biopharmaceutical field is intense. We cannot be sure that we will be able to attract and retain quality talent of both Bristol-Myers Squibb and Celgene or that the costs of doing so will not materially increase.
Failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions could adversely impact our future results. In addition, any businesses or assets that we acquire in the future may underperform, we may not be able to successfully integrate them into our existing business and the occurrence of a number of unexpected factors could prevent or substantially delay the consummation of an anticipated acquisition, divestiture or merger.
We have acquired, or in-licensed, a number of other assets and although we are committed to reducing our debt, we expect to continue to support our pipeline with compounds or products obtained through licensing and acquisitions. Future revenues, profits and cash flows of an acquired company’s products, technologies and pipeline candidates may not materialize due to low product uptake, delayed or missed pipeline opportunities, the inability to capture expected synergies resulting from cost savings and avoidance, increased competition, safety concerns, regulatory issues, supply chain problems or other factors beyond our control. Substantial difficulties, costs and delays could result from integrating our acquisitions, including for (i) R&D, manufacturing, distribution, sales, marketing, promotion and information technology activities; (ii) policies, procedures, processes, controls and compliance; and (iii) tax considerations. Where we acquire debt or equity securities as all or part of the consideration for business development activities, such as in connection with a joint venture, the value of those securities will fluctuate and may depreciate in value. We may not control the company in which we acquire securities, such as in connection with a collaborative arrangement, and as a result, we will have limited ability to determine its management, operational decisions, internal controls and compliance and other policies, which can result in additional financial and reputational risks.
We may not be successful in separating underperforming or non-strategic assets, and gains or losses on the divestiture of, or lost operating income from, such assets may affect our earnings. Our divestitures also may result in continued financial exposure to the divested businesses, such as through guarantees or other financial arrangements, continued supply and services arrangements, or potential litigation, following the transaction. Under these arrangements, nonperformance by us could result in obligations being imposed on us that could have a material adverse effect on our competitive position, cash flows, results of operations, financial condition or reputation. In particular, we divested Otezla in connection with obtaining regulatory approval for our acquisition of Celgene. If the FTC determines that we violated the consent order that we agreed to in connection with the divestiture, the FTC may seek a civil penalty and our reputation may be adversely affected.*
We might incur asset impairment charges related to acquisitions or divestitures that reduce our earnings. The value allocated to certain of our assets could be substantially impaired due to a number of factors beyond our control. New or revised accounting standards, rules and interpretations could result in changes to the recognition of income and expense that may materially and adversely affect our financial results*.*
If the execution or implementation of acquisitions, divestitures, alliances, joint ventures and other portfolio actions is not successful, it could adversely impact our financial condition, cash flows and results of operations. Moreover, due to the substantial amount of debt that we incurred to finance the cash portion of the Celgene acquisition consideration, we will consider smaller, more focused and earlier stage deals. As such, there can be no assurance of when we will be able to expand our business development capacity. Pursuing these opportunities may require us to obtain additional equity or debt financing, and could result in increased leverage and/or a downgrade of our credit ratings.
We depend on several key products for most of our revenues, cash flows and earnings.
We derive a majority of our revenue and earnings from several key products. Our 10 prioritized brands comprised approximately 91% of revenues in 2019. Following our acquisition of Celgene, we expect that Revlimid, Eliquis and Opdivo will represent a significant percentage of our revenue, earnings and cash flows. A reduction in revenue from any of these products could adversely impact our earnings and cash flows. Also, if one of our major products were to become subject to issues such as loss of patent protection, significant changes in demand, formulary access changes, material product liability, unexpected side effects, regulatory proceedings, negative publicity, supply disruption from our manufacturing operations or third-party supplier or a significant advancement of competing products, we may incur an adverse impact on our business, financial condition, results of operations or trading price of our stock.
We could experience difficulties, delays and disruptions in the manufacturing, distribution and sale of our products.
Our product supply and related patient access could be negatively impacted by, among other things: (i) product seizures or recalls or forced closings of manufacturing plants; (ii) our failure, or the failure of any of our suppliers, to comply with cGMP and other applicable regulations or quality assurance guidelines that could lead to manufacturing shutdowns, product shortages or delays in product manufacturing; (iii) manufacturing, quality assurance/quality control, supply problems or governmental approval delays; (iv) the failure of a sole source or single source supplier to provide us with the necessary raw materials, supplies or finished goods within a reasonable timeframe and with required quality; (v) the failure of a third-party manufacturer to supply us with bulk active or finished product on time; (vi) construction or regulatory approval delays for new facilities or the expansion of existing facilities, including those intended to support future demand for our biologics products, such as Opdivo; (vii) the failure to meet new and emerging regulations requiring products to be tracked throughout the distribution channels using unique identifiers to verify their authenticity in the supply chain; (viii) other manufacturing or distribution issues, including limits to manufacturing capacity and changes in the types of products produced, such as biologics, physical limitations or other business interruptions; and (ix) disruption in supply chain continuity, including from natural disasters (such as hurricanes), global disease outbreaks such as the Novel Coronavirus, acts of war or terrorism or other external factors over which we have no control impacting one or more of our facilities or at a critical supplier.
In addition, we have limited experience manufacturing CAR T cell therapies, and our processes may be more difficult or more expensive than the approaches taken by our current and future competitors. We cannot be sure that the manufacturing processes employed by us will result in CAR T cell therapies that will be safe and effective. Our ability to source supplies for materials used to manufacture our CAR T cell therapies and to develop consistent and reliable manufacturing processes and distribution networks with an attractive cost of goods could impact future anticipated revenue and gross profit for our CAR T cell therapies. In addition, we may face challenges with sourcing supplies for clinical and, if approved, commercial manufacturing. Logistical and shipment delays and other factors not in our control could prevent or delay the delivery of our product candidates to patients. Additionally, we are required to maintain a complex chain of identity and custody with respect to patient material as such material moves through the manufacturing process. As a result, even slight deviations at any point in the production process for our CAR T cell therapies or in material used in our CAR T cell therapies could result in adverse patient outcomes, loss of product or regulatory remedial action, which could adversely affect our future anticipated revenues and/or profitability related to our CAR T cell therapies.
Product labeling changes for our marketed products could result in a negative impact on revenues and profit margins.
We or regulatory authorities may need to change the labeling for any pharmaceutical product, including after a product has been marketed for several years. These changes are often the result of additional data from post-marketing studies, head-to-head studies, adverse events reports, studies that identify biomarkers (objective characteristics that can indicate a particular response to a product or therapy) or other studies or post-marketing experience that produce important additional information about a product. New information added to a product’s label can affect its risk-benefit profile, leading to potential recalls, withdrawals or declining revenue, as well as product liability claims. Sometimes additional information from these studies identifies a portion of the patient population that may be non-responsive to a medicine or would be at higher risk of adverse reactions and labeling changes based on such studies may limit the patient population. The studies providing such additional information may be sponsored by us, but they could also be sponsored by competitors, insurance companies, government institutions, MCOs, scientists, investigators or other interested parties. While additional safety and efficacy information from such studies assist us and healthcare providers in identifying the best patient population for each product, it can also negatively impact our revenues due to inventory returns and a more limited patient population going forward. Additionally, certain study results, especially from head-to-head studies, could affect a product’s formulary listing, which could also adversely affect revenues.
The illegal distribution and sale by third parties of counterfeit or unregistered versions of our products or stolen products could have a negative impact on our revenues, earnings, reputation and business.
Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet our rigorous manufacturing and testing standards. A patient who receives a counterfeit drug may be at risk for a number of dangerous health consequences. Our reputation and business could suffer harm as a result of counterfeit drugs sold under our brand name. Thefts of inventory at warehouses, plants or while in-transit, which are then not properly stored and are later sold through unauthorized channels, could adversely impact patient safety, our reputation and our business. In addition, diversion of products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.
We are dependent on information technology and our systems and infrastructure face certain risks, including from cybersecurity breaches and data leakage.
We rely extensively on information technology systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted provided and/or used for third-parties or their vendors, to assist in conducting our business. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our, or our third-party providers', systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. Although the aggregate impact on our operations and financial condition has not been material to date, we have been the target of events of this nature and expect them to continue as cybersecurity threats have been rapidly evolving in sophistication and becoming more prevalent in the industry. We have invested in industry appropriate protections and monitoring practices of our data and IT to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. While we maintain cyber insurance, this insurance may not, however, be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. There can be no assurance that our continuing efforts will prevent breakdowns or breaches to our or our third-party providers’ databases or systems that could adversely affect our business.
Adverse changes in U.S. and global economic and political conditions could adversely affect our profitability.
Global economic and political risks pose significant challenges to a company’s growth and profitability and are difficult to mitigate. We generated approximately 41% of our revenues outside of the U.S. in 2019. As such, our revenues, earnings and cash flow are exposed to risk from a strengthening U.S. dollar. We have exposure to customer credit risks in Europe, South America and other markets including from government-guaranteed hospital receivables in markets where payments are not received on time. We have significant operations in Europe, including for manufacturing and distribution. The results of our operations could be negatively impacted by any member country exiting the eurozone monetary union or EU. In particular, the exit of the UK from the EU, which occurred on January 31, 2020, has created uncertainties affecting our business operations in the UK and the EU and may have an impact on our research, commercial and general business operations in the UK and the EU, including the approval and supply of our products.
In addition, there is currently uncertainty around whether LIBOR will continue to exist after 2021. We have issued variable rate debt based on LIBOR and may in the future undertake interest rate swaps that contain a variable element based on LIBOR. Any discontinuation or modification of LIBOR and any future initiatives to regulate, reform or change the manner of administration of variable interest rate benchmarks could result in adverse consequences to the return on, value of and market for our securities and other instruments whose returns are linked to any such benchmark and cause volatility in the capital markets, which could increase our cost of funding. If LIBOR ceases to exist, we may need to amend certain agreements and we cannot predict what alternative benchmark and related terms would be negotiated with our counterparties and what the impact of any said amendments could have on us. Also, disruptions in the credit markets or a downgrade of our current credit rating could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, which could adversely affect our liquidity and capital resources or significantly increase our cost of capital. Finally, our business and operations may be adversely affected by political volatility, conflicts or crises in individual countries or regions, including terrorist activities or war.
There can be no guarantee that we will pay dividends or repurchase stock.
The declaration, amount and timing of any dividends fall within the discretion of our Board of Directors. The Board's decision will depend on many factors, including our financial condition, earnings, capital requirements, debt service obligations, industry practice, legal requirements, regulatory constraints and other factors that our Board may deem relevant. A reduction or elimination of our dividend payments or dividend program could adversely affect our stock price. In addition, we could, at any time, decide not to buy back any more shares in the market, which could also adversely affect our stock price.
Increased use of social media platforms present risks and challenges.
We are increasing our use of social media to communicate Company news and events. The inappropriate and/or unauthorized use of certain media vehicles could cause brand damage or information leakage or could lead to legal implications, including from the improper collection and/or dissemination of personally identifiable information from employees, patients, healthcare professionals or other stakeholders. In addition, negative or inaccurate posts or comments about us on any social networking website could damage our reputation, brand image and goodwill. Further, the disclosure of non-public Company-sensitive information by our workforce or others, whether intentional or unintentional, through external media channels could lead to information loss.
In addition to the risks relating to our common stock, holders of our CVRs and the Celgene CVRs are subject to additional risks.
In connection with our acquisition of Celgene, we issued CVRs under the Contingent Value Rights Agreement, dated as of November 20, 2019 (the “CVR Agreement”), by and between us and Equiniti Trust Company, as trustee. Pursuant to the CVR Agreement, each holder of a CVR is entitled to the right to receive $9.00 in cash if a specified set of milestones is achieved, as set forth in the CVR Agreement. In addition to the risks relating to our common stock, holders of our CVRs are subject to additional risks, including:
| • | the CVRs may trade at low volumes which could have an adverse effect on the resale price, if any, of the CVRs; |
| • | the market price and trading volume of the CVRs may be volatile; |
| • | if the milestones specified in the CVR agreement are not achieved for any reason within the time periods specified therein, no payment will be made under the CVRs and the CVRs will expire without value; |
| • | since the U.S. federal income tax treatment of the CVRs is unclear, any part of any CVR payment could be treated as ordinary income and required to be included in income prior to the receipt of the CVR payment; |
| • | any payments in respect of the CVRs are subordinated to the right of payment of certain of our indebtedness; |
| • | we are not prohibited from acquiring the CVRs, whether in open market transactions, private transactions or otherwise; |
| • | we may under certain circumstances purchase and cancel all outstanding CVRs; and |
| • | while we have agreed to use diligent efforts to achieve each milestone set forth in the CVR Agreement until it is terminated, we are not required to take all possible actions to achieve these goals, and the failure to achieve such goals would have an adverse effect on the value of the CVRs. |
Item 1B. UNRESOLVED STAFF COMMENTS.
None.
Item 2. PROPERTIES.
Our principal executive offices are located at 430 East 29th Street, 14th Floor, New York, NY. We own or lease manufacturing, R&D, administration, storage and distribution facilities at approximately 260 sites worldwide. We believe our manufacturing properties, in combination with our third-party manufacturers, are in good operating condition and provide adequate production capacity for our current and projected operations. We also believe that none of our properties is subject to any material encumbrance, easement or other restriction that would detract materially from its value or impair its use in the operation of the business. For further information about our manufacturing properties, refer to “Item 1. Business—Manufacturing and Quality Assurance.”
Our significant manufacturing and R&D locations by geographic area were as follows at December 31, 2019:
| Manufacturing | R&D | ||||
| United States | 4 | 11 | |||
| Europe | 3 | 1 | |||
| Total | 7 | 12 |
Item 3. LEGAL PROCEEDINGS.
Information pertaining to legal proceedings can be found in “Item 8. Financial Statements and Supplementary Data—Note 19. Legal Proceedings and Contingencies” and is incorporated by reference herein.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART IA
Information about our Executive Officers
Listed below is information on our executive officers as of February 24, 2020. Executive officers are elected by the Board of Directors for an initial term, which continues until the first Board meeting following the next Annual Meeting of Shareholders, and thereafter, are elected for a one-year term or until their successors have been elected. Executive officers serve at the discretion of the Board of Directors.
| Name and Current Position | Age | Employment History for the Past 5 Years |
| Giovanni Caforio, M.D. Chairman of the Board and Chief Executive Officer Member of the Leadership Team | 55 | 2014 to 2015 – Chief Operating Officer and Director of the Company 2015 to 2017 – Chief Executive Officer and Director of the Company 2017 to present – Chairman of the Board and Chief Executive Officer |
| Nadim Ahmed Executive Vice President and President, Hematology Member of the Leadership Team | 52 | 2014 to 2016 – Corporate Vice President, U.S. Commercial, Celgene 2016 to 2017 – Senior Vice President Worldwide Markets, Celgene 2017 to 2019 – Executive Vice President/President Hematology/Oncology, Celgene 2019 to present – Executive Vice President and President, Hematology |
| Charles A. Bancroft Executive Vice President and Head of Integration Member of the Leadership Team | 60 | 2011 to 2016 – Chief Financial Officer and Executive Vice President, Global Services 2016 to 2019 – Chief Financial Officer and Executive Vice President, Global Business Operations 2019 to present – Executive Vice President and Head of Integration |
| Christopher Boerner, Ph.D. Executive Vice President, Chief Commercial Officer Member of the Leadership Team | 49 | 2014 to 2015 – Executive Vice President, Seattle Genetics 2015 to 2017 – President and Head of U.S. Commercial 2017 to 2018 – President and Head, International Markets 2018 to present – Executive Vice President, Chief Commercial Officer |
| Adam Dubow Senior Vice President, Chief Compliance and Ethics Officer Member of the Leadership Team | 53 | 2013 to 2015 – Vice President and Assistant General Counsel, China, Japan and Intercon Region and EMAC Region 2015 to 2018 – Vice President and Associate General Counsel, Research and Development 2018 to present – Senior Vice President, Chief Compliance and Ethics Officer |
| Joseph E. Eid, M.D. Senior Vice President and Head of Global Medical Affairs Member of the Leadership Team | 52 | 2014 to 2017 – Vice President, Head of Oncology Global Medical Affairs, Merck 2017 to 2019 – Head of Global Medical 2017 to present – Senior Vice President and Head of Global Medical Affairs |
| John E. Elicker Executive Vice President, Investor Relations Member of the Leadership Team | 60 | 2012 to 2017 – Senior Vice President, Public Affairs and Investor Relations 2017 to 2019 – Senior Vice President, Corporate Affairs and Investor Relations 2019 to present – Executive Vice President, Investor Relations |
| David V. Elkins Executive Vice President and Chief Financial Officer Member of the Leadership Team | 51 | 2014 to 2017 – Group Vice President and Chief Financial Officer, Consumer and Consumer Medicines, Johnson & Johnson 2017 to 2018 – Worldwide Vice President and Chief Financial Officer, Consumer Products, Medical Development and Corporate Functions, Johnson & Johnson 2018 to 2019 – Chief Financial Officer, Celgene 2019 to present – Executive Vice President and Chief Financial Officer |
| Samit Hirawat, M.D. Executive Vice President, Chief Medical Officer, Global Drug Development Member of the Leadership Team | 51 | 2012 to 2016 – Senior Vice President & Global Program Head, Novartis 2017 to 2019 – Executive Vice President, Head of Oncology Development, Novartis 2019 to present – Executive Vice President, Chief Medical Officer, Global Drug Development |
| Sandra Leung Executive Vice President, General Counsel Member of the Leadership Team | 59 | 2007 to 2014 – General Counsel and Corporate Secretary 2014 to 2015 – Executive Vice President, General Counsel and Corporate Secretary 2015 to present – Executive Vice President, General Counsel |
| Kathryn Metcalfe Executive Vice President, Corporate Affairs Member of the Leadership Team | 51 | 2011 to 2016 – Chief Communications Officer, Deloitte, LLP 2016 to 2018 – Chief Communications Officer, Aetna, Inc. 2018 to 2019 – Chief Communications Officer, CVS Health Corporation 2020 to present – Executive Vice President, Corporate Affairs |
| Ann Powell Judge Executive Vice President, Chief Human Resources Officer Member of the Leadership Team | 54 | 2009 to 2013 – Chief Human Resources Officer, Shire Pharmaceuticals 2013 to 2016 – Senior Vice President, Global Human Resources 2016 to 2019 – Senior Vice President, Chief Human Resources Officer 2019 to present – Executive Vice President, Chief Human Resources Officer |
| Karen Santiago Senior Vice President and Corporate Controller | 49 | 2012 to 2015 – Vice President Finance, Global Manufacturing and Supply 2015 to 2016 – Vice President Finance, U.S. Commercial and Global Capability Hub 2016 to 2018 – Lead, Enabling Functions and Finance Transformation 2018 to present – Senior Vice President and Corporate Controller |
| Louis S. Schmukler Executive Vice President and President, Global Product Development and Supply Member of the Leadership Team | 64 | 2011 to 2017 – President, Global Product Development and Supply 2017 to 2019 – Senior Vice President and President, Global Product Development and Supply 2019 to present – Executive Vice President and President, Global Product Development and Supply |
| Rupert Vessey, M.A., B.M., B.Ch., F.R.C.P., D.Phil. Executive Vice President, Research and Early Development Member of the Leadership Team | 55 | 2015 to 2019 – President of Research and Early Development, Celgene 2019 to present – Executive Vice President, Research and Early Development |
| Paul von Autenried Executive Vice President, Chief Information Officer Member of the Leadership Team | 58 | 2012 to 2016 – Senior Vice President, Enterprise Services and Chief Information Officer 2016 to 2019 – Senior Vice President, Chief Information Officer 2019 to present – Executive Vice President, Chief Information Officer |
PART II
Item 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND OTHER STOCKHOLDER MATTERS.
Bristol-Myers Squibb common stock is traded on the New York Stock Exchange (Symbol: BMY).
Holders of Common Stock
The number of record holders of our common stock at January 31, 2020 was 37,643.
The number of record holders is based upon the actual number of holders registered on our books at such date based on information provided by EQ Shareowner Services (formerly Wells Fargo Shareowner Services), our transfer agent, and does not include holders of shares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.
Equity Compensation Plan Information
Information required by this item will be contained in our 2020 Proxy Statement under the heading “Items to be Voted Upon—Item 2—Advisory Vote to Approve the Compensation of our Named Executive Officers-Equity Compensation Plan Information,” which information is incorporated herein by reference.
Performance Graph
The following graph compares the cumulative total stockholders' returns of our common shares with the cumulative total stockholders' returns of the companies listed in the Standard & Poor's 500 Index and a composite peer group of major pharmaceutical companies comprised of AbbVie, Amgen, AstraZeneca, Biogen, Gilead, GlaxoSmithKline, Johnson & Johnson, Lilly, Merck, Novartis, Pfizer, Roche and Sanofi. The graph assumes $100 investment on December 31, 2014 in each of our common shares, the S&P 500 Index and the stock of our peer group companies, including reinvestment of dividends, for the years ended December 31, 2015, 2016, 2017, 2018 and 2019. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
| 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||
| Bristol-Myers Squibb | $ | 100.00 | $ | 119.26 | $ | 103.17 | $ | 111.12 | $ | 96.79 | $ | 123.64 | |||||||||||
| S&P 500 | 100.00 | 101.38 | 113.51 | 138.29 | 132.23 | 173.86 | |||||||||||||||||
| Peer Group | 100.00 | 102.92 | 102.35 | 117.95 | 129.78 | 152.19 |
Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the surrenders of our equity securities during the three months ended December 31, 2019:
| Period | Total Number of Shares Purchased**(a)** | Average Price Paid per Share**(a)** | Total Number of Shares Purchased as Part of Publicly Announced Programs**(b)** | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs**(b)** | |||||||||
| Dollars in Millions, Except Per Share Data | |||||||||||||
| October 1 to 31, 2019 | 7,340 | $ | 49.78 | — | $ | 1,048 | |||||||
| November 1 to 30, 2019(c) | 98,729,392 | — | 98,713,203 | 1,048 | |||||||||
| December 1 to 31, 2019 | 2,038,527 | 57.39 | — | 1,048 | |||||||||
| Three months ended December 31, 2019 | 100,775,259 | 98,713,203 |
| (a) | Includes shares repurchased as part of publicly announced programs and shares of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of awards under our long-term incentive program. |
| (b) | In May 2010, the Board of Directors authorized the repurchase of up to $3.0 billion of our common stock and in June 2012 increased its authorization for the repurchase of our common stock by an additional $3.0 billion. In October 2016, the Board of Directors approved a new stock repurchase program authorizing the repurchase of an additional $3.0 billion of our common stock and in November 2019 further increased its authorization for the repurchase of our common stock by an additional $7.0 billion. The stock repurchase program does not have an expiration date. Refer to “Item 1. Financial Statements-Note 16. Equity” for information on the share repurchase program. |
| (c) | In connection with the stock repurchase program, we executed accelerated share repurchase agreements (“ASR”) with Morgan Stanley & Co. LLC and Barclays Bank PLC to repurchase an aggregate $7 billion of common stock. The ASR was funded with cash on-hand. In November 2019, approximately 99 million shares of common stock, representing approximately 80% of the $7 billion aggregate repurchase price at the then current stock price, were delivered to the Company and included in treasury stock. The agreements are expected to settle during the second quarter of 2020, upon which additional shares of common stock may be delivered to the Company or, under certain circumstances, the Company may be required to make a cash payment or may elect to deliver shares of common stock to the counterparties. The total number of shares ultimately repurchased under the program will be determined upon final settlement and will be based on a discount to the volume-weighted average price of our common stock during the ASR period. |
Item 6. SELECTED FINANCIAL DATA.
The following table sets forth our selected historical consolidated financial information for each of the five periods indicated. This information should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and related notes included elsewhere in this 2019 Form 10-K including disclosures related to the November 20, 2019 acquisition of Celgene.
The selected historical financial information as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 are derived from our audited consolidated financial statements and related notes.
Five Year Financial Summary
| Amounts in Millions, except per share data | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||
| Income Statement Data: | |||||||||||||||||||
| Total Revenues | $ | 26,145 | $ | 22,561 | $ | 20,776 | $ | 19,427 | $ | 16,560 | |||||||||
| Net Earnings | 3,460 | 4,947 | 975 | 4,507 | 1,631 | ||||||||||||||
| Net Earnings/(Loss) Attributable to: | |||||||||||||||||||
| Noncontrolling Interest | 21 | 27 | (32 | ) | 50 | 66 | |||||||||||||
| BMS | 3,439 | 4,920 | 1,007 | 4,457 | 1,565 | ||||||||||||||
| Net Earnings per Common Share Attributable to BMS: | |||||||||||||||||||
| Basic | $ | 2.02 | $ | 3.01 | $ | 0.61 | $ | 2.67 | $ | 0.94 | |||||||||
| Diluted | 2.01 | 3.01 | 0.61 | 2.65 | 0.93 | ||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||
| Basic | 1,705 | 1,633 | 1,645 | 1,671 | 1,667 | ||||||||||||||
| Diluted | 1,712 | 1,637 | 1,652 | 1,680 | 1,679 | ||||||||||||||
| Cash dividends paid on BMS common and preferred stock | $ | 2,679 | $ | 2,613 | $ | 2,577 | $ | 2,547 | $ | 2,477 | |||||||||
| Cash dividends declared per common share | $ | 1.68 | $ | 1.61 | $ | 1.57 | $ | 1.53 | $ | 1.49 | |||||||||
| Financial Position Data at December 31: | |||||||||||||||||||
| Cash and cash equivalents | $ | 12,346 | $ | 6,911 | $ | 5,421 | $ | 4,237 | $ | 2,385 | |||||||||
| Marketable debt securities(a)(b) | 3,814 | 3,623 | 3,739 | 4,724 | 6,442 | ||||||||||||||
| Total Assets | 129,944 | 34,986 | 33,551 | 33,707 | 31,748 | ||||||||||||||
| Long-term debt(a) | 46,150 | 6,895 | 6,975 | 6,465 | 6,550 | ||||||||||||||
| Equity | 51,698 | 14,127 | 11,847 | 16,347 | 14,424 |
| (a) | Includes current and non-current portion. |
| (b) | Prior period amounts were conformed to current period presentation. |
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this 2019 Form 10-K to enhance the understanding of our results of operations, financial condition and cash flows.
The comparison of fiscal 2018 to 2017 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended December 31, 2018—“Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” filed on February 25, 2019.
EXECUTIVE SUMMARY
Bristol-Myers Squibb Company is a global biopharmaceutical company whose mission is to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. Refer to the Summary of Abbreviated Terms at the end of this 2019 Form 10-K for terms used throughout the document.
We completed the Celgene transaction on November 20, 2019. We expect that the acquisition will enable us to create a leading focused biopharmaceutical company that is well positioned to address the needs of patients with cancer, inflammatory, immunologic, cardiovascular or fibrotic diseases through high-value innovative medicines and leading scientific capabilities. Commencing from the acquisition date, BMS's financial statements include the assets, liabilities, operating results and cash flows of Celgene. Refer to “Item 8. Financial Statements—Note 4. Acquisition, Divestitures, Licensing and Other Arrangements” for further discussion on the Celgene transaction.
In 2019, we received several approvals for new medicines and additional indications and formulations of currently marketed medicines in major markets (the U.S., EU and Japan), including multiple regulatory milestone achievements for Opdivo and Opdivo+Yervoy combinations. We are investigating Opdivo alone and in combination with Yervoy and other anti-cancer agents for a wide array of tumor types, and have 24 other IO compounds in clinical development. We continue to expand in the field of hematology, where we have the leading presence, through in-line assets Revlimid and Pomalyst. In 2019, we received regulatory approvals for Reblozyl and Inrebic and submitted a regulatory application for liso-cel targeting Diffuse Large B-Cell Lymphoma. Additionally, our pipeline shows significant added promise in hematology malignancies through our CELMoD agents, multiple modalities targeting B-Cell Maturation Antigen (“BCMA”) and the next generation of cell therapy agents. We are expanding our portfolio in immunology with two near term launch opportunities in TYK-2 inhibitor and ozanimod. Additionally in the cardiovascular space, Eliquis is now the global leading oral anti-coagulant drug, and we continue to experience growth in both the Eliquis brand and market while also advancing our Factor XIa inhibitor program.
In 2019, our revenues increased 16% as a result of higher demand for our prioritized brands including Eliquis and Opdivo and the Celgene acquisition, which contributed $1.9 billion of revenues, representing approximately one half of the growth. The $1.00 decrease in GAAP EPS was primarily due to taxes resulting from the Otezla* divestiture, amortization of acquired intangible assets, the unwinding of inventory fair value adjustments and other costs and expenses resulting from the Celgene acquisition, partially offset by higher revenues. After adjusting for specified items, non-GAAP EPS increased $0.71, primarily as a result of higher revenues.
Highlights
The following table summarizes our financial information:
| Year Ended December 31, | |||||||
| Dollars in Millions, except per share data | 2019 | 2018 | |||||
| Total Revenues | $ | 26,145 | $ | 22,561 | |||
| Diluted Earnings Per Share | |||||||
| GAAP | $ | 2.01 | $ | 3.01 | |||
| Non-GAAP | 4.69 | 3.98 |
Our non-GAAP financial measures, including non-GAAP earnings and related EPS information, are adjusted to exclude specified items that represent certain costs, expenses, gains and losses and other items impacting the comparability of financial results. For a detailed listing of all specified items and further information and reconciliations of non-GAAP financial measures refer to “—Non-GAAP Financial Measures.”
Significant Product and Pipeline Approvals
The following is a summary of the significant approvals received in 2019:
| Product | Date | Approval |
| Revlimid | December 2019 | EC approval in combination with rituximab for the treatment of adult patients with previously treated FL (Grade 1-3a). Revlimid and rituximab (R2) is the first chemotherapy-free combination regimen approved for the patients with FL by the EC. |
| Opdivo+Yervoy | March 2019 | Conversion of accelerated FDA approval to full FDA approval for Opdivo+Yervoy for first line metastatic melanoma treatment based on longer follow-up data from CheckMate-067. |
| January 2019 | EC approval of Opdivo plus low-dose Yervoy for previously untreated patients with intermediate and poor-risk advanced RCC. |
| Orencia | April 2019 | EC approval of two new strengths (50 mg and 87.5 mg) for subcutaneous administration, and a new indication for Orencia injection for the treatment of moderate to severe active polyarticular juvenile idiopathic arthritis in pediatric patients 2 years of age and older. |
| Sprycel | February 2019 | EC approval in both tablet and powder for oral suspension formulations, in combination with chemotherapy for the treatment of pediatric patients with newly diagnosed Philadelphia chromosome-positive ALL. |
| Empliciti | November 2019 | Approved in Japan in combination with pomalidomide and dexamethasone for multiple myeloma following at least two prior therapies, including lenalidomide and proteasome inhibitor. |
| August 2019 | EC approval in combination with pomalidomide and dexamethasone for adult patients with RRMM who have received at least two prior therapies, including lenalidomide and a proteasome inhibitor, and have demonstrated disease progression on the last therapy. |
| Inrebic**(a)** | August 2019 | FDA approval for the treatment of adult patients with intermediate-2 or high-risk primary or secondary (post-polycythemia vera or post-essential thrombocythemia) myelofibrosis. |
| Reblozyl**(a)** | November 2019 | FDA approval for the treatment of anemia in adult patients with beta thalassemia who require regular red blood cell transfusions. |
| (a) | The regulatory approval was obtained by Celgene prior to the completion of the Celgene transaction. |
Refer to “—Product and Pipeline Developments” for all of the developments in our marketed products and late-stage pipeline in 2019 and in early 2020.
Strategy
Our principal strategy is to combine the resources, scale and capability of a pharmaceutical company with the speed and focus on innovation of the biotech industry. Our focus as a biopharmaceutical company is on discovering, developing and delivering transformational medicines for patients facing serious diseases in areas where we believe that we have an opportunity to make a meaningful difference: oncology (both solid tumors and hematology), immunology, cardiovascular and fibrosis. Our four strategic priorities as a combined company are to driv
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk resulting from changes in currency exchange rates and interest rates. Certain derivative financial instruments are used when available on a cost-effective basis to hedge our underlying economic exposure. All of our financial instruments, including derivatives, are subject to counterparty credit risk considered as part of the overall fair value measurement. Derivative financial instruments are not used for trading purposes.
Foreign Exchange Risk
Significant amounts of our revenues, earnings and cash flow are exposed to changes in foreign currency rates. Our primary net foreign currency translation exposures are the euro and Japanese yen. Foreign currency forward contracts are used to manage risk primarily arising from certain intercompany sales and purchases transactions; we are also exposed to foreign exchange transaction risk arising from non-functional currency denominated assets and liabilities and earnings denominated in non-U.S. dollar currencies. Foreign currency forward contracts are used to offset these exposures but are not designated as hedges.
We estimate that a 10% appreciation in the underlying currencies being hedged from their levels against the U.S. dollar (with all other variables held constant) would decrease the fair value of foreign exchange forward contracts by $358 million and $231 million at December 31, 2019 and December 31, 2018, respectively, reducing earnings over the remaining life of the contracts.
We are also exposed to translation risk on non-U.S. dollar-denominated net assets. Non-U.S. dollar borrowings are used to hedge the foreign currency exposures of our net investment in certain foreign affiliates and are designated as hedges of net investments. The effective portion of foreign exchange gains or losses on these hedges is included in the foreign currency translation component of Accumulated other comprehensive loss. If our net investment decreases below the equivalent value of the non-U.S. debt borrowings, the change in the remeasurement basis of the debt would be subject to recognition in income as changes occur. For additional information, refer to “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements.”
Interest Rate Risk
We use fixed-to-floating interest rate swap contracts designated as fair value hedges to provide an appropriate balance of fixed and floating rate debt. We use cross-currency interest rate swap contracts designated to hedge the Company's net investment in its Japan subsidiary. The fair values of these contracts as well as our marketable debt securities are analyzed at year-end to determine their sensitivity to interest rate changes. In this sensitivity analysis, if there were a 100 basis point increase in short-term or long-term interest rates as of December 31, 2019 and December 31, 2018, the expected adverse impact on our earnings would not be material.
We estimate that an increase of 100 basis points in long-term interest rates at December 31, 2019 and December 31, 2018 would decrease the fair value of long-term debt by $3.8 billion and $482 million, respectively.
Credit Risk
We monitor our investments with counterparties with the objective of minimizing concentrations of credit risk. Our investment policy is to invest only in institutions that meet high credit quality standards and establishes limits on the amount and time to maturity of investments with any individual counterparty. The policy also requires that investments are only entered into with corporate and financial institutions that meet high credit quality standards.
The use of derivative instruments exposes us to credit risk if the counterparty fails to perform when the fair value of a derivative instrument contract is positive. If the counterparty fails to perform, collateral is not required by any party whether derivatives are in an asset or liability position. We have a policy of diversifying derivatives with counterparties to mitigate the overall risk of counterparty defaults. For additional information, refer to “Item 8. Financial Statements and Supplementary Data—Note 9. Financial Instruments and Fair Value Measurements.”
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
Dollars in Millions, Except Per Share Data
| Year Ended December 31, | |||||||||||
| EARNINGS | 2019 | 2018 | 2017 | ||||||||
| Net product sales | $ | 25,174 | $ | 21,581 | $ | 19,258 | |||||
| Alliance and other revenues | 971 | 980 | 1,518 | ||||||||
| Total Revenues | 26,145 | 22,561 | 20,776 | ||||||||
| Cost of products sold(a) | 8,078 | 6,467 | 6,014 | ||||||||
| Marketing, selling and administrative | 4,871 | 4,551 | 4,751 | ||||||||
| Research and development | 6,148 | 6,332 | 6,468 | ||||||||
| Amortization of acquired intangible assets | 1,135 | 97 | 97 | ||||||||
| Other (income)/expense, net | 938 | (854 | ) | (1,685 | ) | ||||||
| Total Expenses | 21,170 | 16,593 | 15,645 | ||||||||
| Earnings Before Income Taxes | 4,975 | 5,968 | 5,131 | ||||||||
| Provision for Income Taxes | 1,515 | 1,021 | 4,156 | ||||||||
| Net Earnings | 3,460 | 4,947 | 975 | ||||||||
| Noncontrolling Interest | 21 | 27 | (32 | ) | |||||||
| Net Earnings Attributable to BMS | $ | 3,439 | $ | 4,920 | $ | 1,007 | |||||
| Earnings per Common Share | |||||||||||
| Basic | $ | 2.02 | $ | 3.01 | $ | 0.61 | |||||
| Diluted | 2.01 | 3.01 | 0.61 |
| (a) | Excludes amortization of acquired intangible assets. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Dollars in Millions
| Year Ended December 31, | |||||||||||
| COMPREHENSIVE INCOME | 2019 | 2018 | 2017 | ||||||||
| Net Earnings | $ | 3,460 | $ | 4,947 | $ | 975 | |||||
| Other Comprehensive Income/(Loss), net of taxes and reclassifications to earnings: | |||||||||||
| Derivatives qualifying as cash flow hedges | (32 | ) | 70 | (57 | ) | ||||||
| Pension and postretirement benefits | 1,203 | 53 | 214 | ||||||||
| Available-for-sale securities | 36 | (25 | ) | 39 | |||||||
| Foreign currency translation | 35 | (254 | ) | 18 | |||||||
| Total Other Comprehensive Income/(Loss) | 1,242 | (156 | ) | 214 | |||||||
| Comprehensive Income | 4,702 | 4,791 | 1,189 | ||||||||
| Comprehensive Income/(Loss) Attributable to Noncontrolling Interest | 21 | 27 | (32 | ) | |||||||
| Comprehensive Income Attributable to BMS | $ | 4,681 | $ | 4,764 | $ | 1,221 |
The accompanying notes are an integral part of these consolidated financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEETS
Dollars in Millions, Except Share and Per Share Data
| December 31, | |||||||
| ASSETS | 2019 | 2018 | |||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 12,346 | $ | 6,911 | |||
| Marketable debt securities | 3,047 | 1,848 | |||||
| Receivables | 7,685 | 5,747 | |||||
| Inventories | 4,293 | 1,195 | |||||
| Other current assets | 1,983 | 2,015 | |||||
| Total Current Assets | 29,354 | 17,716 | |||||
| Property, plant and equipment | 6,252 | 5,027 | |||||
| Goodwill | 22,488 | 6,538 | |||||
| Other intangible assets | 63,969 | 1,091 | |||||
| Deferred income taxes | 510 | 815 | |||||
| Marketable debt securities | 767 | 1,775 | |||||
| Other non-current assets | 6,604 | 2,024 | |||||
| Total Assets | $ | 129,944 | $ | 34,986 | |||
| LIABILITIES | |||||||
| Current Liabilities: | |||||||
| Short-term debt obligations | $ | 3,346 | $ | 1,703 | |||
| Accounts payable | 2,445 | 1,892 | |||||
| Other current liabilities | 12,513 | 7,059 | |||||
| Total Current Liabilities | 18,304 | 10,654 | |||||
| Deferred income taxes | 6,454 | 19 | |||||
| Long-term debt | 43,387 | 5,646 | |||||
| Other non-current liabilities | 10,101 | 4,540 | |||||
| Total Liabilities | 78,246 | 20,859 | |||||
| Commitments and contingencies | |||||||
| EQUITY | |||||||
| Bristol-Myers Squibb Company Shareholders’ Equity: | |||||||
| Preferred stock, $2 convertible series, par value $1 per share: Authorized 10 million shares; issued and outstanding 3,568 in 2019 and 3,590 in 2018, liquidation value of $50 per share | — | — | |||||
| Common stock, par value of $0.10 per share: Authorized 4.5 billion shares; 2.9 billion issued in 2019 and 2.2 billion issued in 2018 | 292 | 221 | |||||
| Capital in excess of par value of stock | 43,709 | 2,081 | |||||
| Accumulated other comprehensive loss | (1,520 | ) | (2,762 | ) | |||
| Retained earnings | 34,474 | 34,065 | |||||
| Less cost of treasury stock — 672 million common shares in 2019 and 576 million common shares in 2018 | (25,357 | ) | (19,574 | ) | |||
| Total Bristol-Myers Squibb Company Shareholders' Equity | 51,598 | 14,031 | |||||
| Noncontrolling interest | 100 | 96 | |||||
| Total Equity | 51,698 | 14,127 | |||||
| Total Liabilities and Equity | $ | 129,944 | $ | 34,986 |
The accompanying notes are an integral part of these consolidated financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Dollars in Millions
| Year Ended December 31, | |||||||||||
| 2019 | 2018 | 2017 | |||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net earnings | $ | 3,460 | $ | 4,947 | $ | 975 | |||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization, net | 1,746 | 637 | 789 | ||||||||
| Deferred income taxes | (924 | ) | 45 | 453 | |||||||
| Stock-based compensation | 441 | 221 | 199 | ||||||||
| Impairment charges | 199 | 126 | 327 | ||||||||
| Pension settlements and amortization | 1,688 | 186 | 236 | ||||||||
| Divestiture gains and royalties | (1,855 | ) | (992 | ) | (706 | ) | |||||
| Asset acquisition charges | 25 | 85 | 760 | ||||||||
| Equity investment (gains)/losses | (279 | ) | 512 | (23 | ) | ||||||
| Contingent consideration fair value adjustments | 523 | — | — | ||||||||
| Other adjustments | (22 | ) | (44 | ) | 120 | ||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables | 752 | (429 | ) | (431 | ) | ||||||
| Inventories | 463 | (216 | ) | (29 | ) | ||||||
| Accounts payable | 229 | (59 | ) | 320 | |||||||
| Deferred income | 12 | 84 | (642 | ) | |||||||
| Income taxes paya |
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2019, management carried out an evaluation, under the supervision and with the participation of its chief executive officer and chief financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this 2019 Form 10-K. Based on this evaluation, management has concluded that as of December 31, 2019, such disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the chief executive officer and chief financial officer, management assessed the effectiveness of internal control over financial reporting as of December 31, 2019 based on the framework in “Internal Control—Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management has concluded that the Company’s internal control over financial reporting was effective at December 31, 2019 to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements for external purposes in accordance with United States generally accepted accounting principles. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have excluded from the scope of our assessment of internal control over financial reporting the operations and related assets of Celgene Corporation which we acquired on November 20, 2019. At December 31, 2019 and for the period from acquisition through December 31, 2019, total assets and total revenues subject to Celgene's internal control over financial reporting represented 8% and 7% of BMS's consolidated total assets and total revenues as of and for the year ended December 31, 2019. Based on its assessment, BMS management believes that, as of December 31, 2019, the Company's internal control over financial reporting is effective based on those criteria.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited the Company’s financial statements included in this report on this 2019 Form 10-K and issued its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, which is included herein.
Changes in Internal Control Over Financial Reporting
As of December 31, 2019, management is in the process of evaluating and integrating the internal controls of the acquired Celgene business into the Company's existing operations. Other than the controls enhanced or implemented to integrate the Celgene business, there has been no change in the Company's internal control over financial reporting during the year ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. OTHER INFORMATION.
None.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Bristol-Myers Squibb Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Bristol-Myers Squibb Company and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019, of the Company and our report dated February 24, 2020, expressed an unqualified opinion on those consolidated financial statements.
As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting of Celgene Corporation, which was acquired on November 20, 2019 and whose financial statements constitute 8% and 7% of total assets and total revenues, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2019. Accordingly, our audit did not include the internal control over financial reporting of Celgene Corporation.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 24, 2020
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
| (a) | Reference is made to our 2020 Proxy Statement with respect to our Directors, which is incorporated herein by reference and made a part hereof in response to the information required by Item 10. |
| (b) | The information required by Item 10 with respect to our Executive Officers has been included in Part IA of this 2019 Form 10-K in reliance on General Instruction G of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, which is incorporated herein by reference and made a part hereof in response to the information required by Item 10. |
Item 11. EXECUTIVE COMPENSATION.
Reference is made to our 2020 Proxy Statement with respect to Executive Compensation, which is incorporated herein by reference and made a part hereof in response to the information required by Item 11.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Reference is made to our 2020 Proxy Statement with respect to the security ownership of certain beneficial owners and management, which is incorporated herein by reference and made a part hereof in response to the information required by Item 12.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to our 2020 Proxy Statement with respect to certain relationships and related transactions, which is incorporated herein by reference and made a part hereof in response to the information required by Item 13.
Item 14. AUDITOR FEES.
Reference is made to our 2020 Proxy Statement with respect to auditor fees, which is incorporated herein by reference and made a part hereof in response to the information required by Item 14.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
| (a) | ||
| Page Number | ||
| 1. | Consolidated Financial Statements | |
| Consolidated Statements of Earnings and Comprehensive Income | 58 | |
| Consolidated Balance Sheets | 59 | |
| Consolidated Statements of Cash Flows | 60 | |
| Notes to Consolidated Financial Statements | 61 | |
| Report of Independent Registered Public Accounting Firm | 110 | |
| 2. | Financial Statement Schedules | |
| All other schedules not included with this additional financial data are omitted because they are not applicable or the required information is included in the financial statements or notes thereto. | ||
| 3. | Exhibits |
The information called for by this Item is incorporated herein by reference to the Exhibit Index in this 2019 Form 10-K.
| (b) | Exhibits Required to be filed by Item 601 of Regulation S-K | 120 |
The information called for by this Item is incorporated herein by reference to the Exhibit Index in this 2019 Form 10-K.
Item 16. FORM 10-K SUMMARY.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BRISTOL-MYERS SQUIBB COMPANY (Registrant) | ||
| By | /s/ GIOVANNI CAFORIO, M.D. | |
| Giovanni Caforio, M.D. | ||
| Chairman of the Board and Chief Executive Officer | ||
| Date: February 24, 2020 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ GIOVANNI CAFORIO, M.D. | Chairman of the Board and Chief Executive Officer | February 24, 2020 | ||
| (Giovanni Caforio, M.D.) | (Principal Executive Officer) | |||
| /s/ DAVID V. ELKINS | Chief Financial Officer | February 24, 2020 | ||
| (David V. Elkins) | (Principal Financial Officer) | |||
| /s/ KAREN SANTIAGO | Senior Vice President and Corporate Controller | February 24, 2020 | ||
| (Karen Santiago) | (Principal Accounting Officer) | |||
| /s/ PETER J. ARDUINI | Director | February 24, 2020 | ||
| (Peter J. Arduini) | ||||
| /s/ ROBERT BERTOLINI | Director | February 24, 2020 | ||
| (Robert Bertolini) | ||||
| /s/ MICHAEL W. BONNEY | Director | February 24, 2020 | ||
| (Michael W. Bonney) | ||||
| /s/ MATTHEW W. EMMENS | Director | February 24, 2020 | ||
| (Matthew W. Emmens) | ||||
| /s/ MICHAEL GROBSTEIN | Director | February 24, 2020 | ||
| (Michael Grobstein) | ||||
| /s/ JULIA A. HALLER, M.D. | Director | February 24, 2020 | ||
| (Julia A. Haller, M.D.) | ||||
| /s/ ALAN J. LACY | Director | February 24, 2020 | ||
| (Alan J. Lacy) | ||||
| /s/ DINESH C. PALIWAL | Director | February 24, 2020 | ||
| (Dinesh C. Paliwal) | ||||
| /s/ THEODORE R. SAMUELS | Director | February 24, 2020 | ||
| (Theodore R. Samuels) | ||||
| /s/ VICKI L. SATO, PH.D. | Director | February 24, 2020 | ||
| (Vicki L. Sato, Ph.D.) | ||||
| /s/ GERALD L. STORCH | Director | February 24, 2020 | ||
| (Gerald L. Storch) | ||||
| /s/ KAREN H. VOUSDEN, PH.D. | Director | February 24, 2020 | ||
| (Karen H. Vousden, Ph.D.) | ||||
| /s/ PHYLLIS R. YALE | Director | February 24, 2020 | ||
| (Phyllis R. Yale) |
SUMMARY OF ABBREVIATED TERMS
Bristol-Myers Squibb Company and its consolidated subsidiaries may be referred to as Bristol-Myers Squibb, BMS, the Company, we, our or us in this 2019 Form 10-K, unless the context otherwise indicates. Throughout this 2019 Form 10-K, we have used terms which are defined below:
| 2019 Form 10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2019 | MAA | Marketing Authorization Application |
| AbbVie | AbbVie Inc. | LIBOR | London Interbank Offered Rate |
| ACS | acute coronary syndrome | Lilly | Eli Lilly and Company |
| ALL | acute lymphoblastic leukemia | MCOs | Managed Care Organizations |
| Amgen | Amgen Inc. | mCRPC | metastatic castration-resistant prostate cancer |
| Amylin | Amylin Pharmaceuticals, Inc. | MDL | multi-district litigation |
| aNDA | abbreviated New Drug Application | MDS | myelodysplastic syndromes |
| ASEAN | Association of Southeast Asian Nations | Mead Johnson | Mead Johnson Nutrition Company |
| AstraZeneca | AstraZeneca PLC | Merck | Merck & Co., Inc. |
| BCMA | B-cell maturation antigen | MF | myelofibrosis |
| Biogen | Biogen, Inc. | MSI-H | high microsatellite instability |
| BLA | Biologics License Application | NASH | Non alcoholic steatohepatitis |
| CERCLA | U.S. Comprehensive Environmental Response, Compensation and Liability Act | NAV | net asset value |
| Celgene | Celgene Corporation | Nektar | Nektar Therapeutics |
| cGMP | current Good Manufacturing Practices | NDA | New Drug Application |
| CML | chronic myeloid leukemia | NKT | natural killer T |
| CPPIB | CPPIB Credit Europe S.A.R.L., a Luxembourg private limited liability company | NLRP3 | NACHT, LRR and PYD domains-containing protein 3 |
| CRC | colorectal cancer | Novartis | Novartis Pharmaceutical Corporation |
| CytomX | CytomX Therapeutics, Inc. | NSCLC | non-small cell lung cancer |
| dMMR | DNA mismatch repair deficient | NVAF | non-valvular atrial fibrillation |
| DSA | Distribution Services Agreement | OIG | Office of Inspector General of the U.S. Department of Health and Human Services |
| EC | European Commission | Ono | Ono Pharmaceutical Co., Ltd. |
| EGFR | estimated glomerular filtration rate | OTC | Over-the-counter |
| EMA | European Medicines Agency | Otsuka | Otsuka Pharmaceutical Co., Ltd. |
| EPO | European Patent Office | PBMs | Pharmacy Benefit Managers |
| EPS | earnings per share | PD-1 | programmed death receptor-1 |
| ERISA | Employee Retirement Income Security Act of 1974 | PDMA | Prescription Drug Marketing Act |
| ESA | erythoropoiesis-stimulating agent | Pfizer | Pfizer, Inc. |
| ESCC | esophageal squamous cell carcinoma | PhRMA Code | Pharmaceutical Research and Manufacturers of America’s Professional Practices Code |
| EU | European Union | PRP | potentially responsible party |
| FASB | Financial Accounting Standards Board | PsA | psoriatic arthritis |
| FCPA | Foreign Corrupt Practices Act | R&D | research and development |
| FDA | U.S. Food and Drug Administration | RA | rheumatoid arthritis |
| FL | follicular lymphoma | RCC | renal cell carcinoma |
| F-Star | F-Star Alpha Ltd. | RDP | regulatory data protection |
| GAAP | U.S. generally accepted accounting principles | REMS | Risk Evaluation and Mitigation Strategy |
| GBM | glioblastoma multiforme | Roche | Roche Holding AG |
| Gilead | Gilead Sciences, Inc. | RRMM | relapsed/refractory multiple myeloma |
| GILTI | global intangible low taxed income | RS | ring sideroblast |
| GlaxoSmithKline | GlaxoSmithKline PLC | Sanofi | Sanofi S.A. |
| GTN | gross-to-net | sBLA | supplemental Biologics License Application |
| GvHD | graft-versus-host disease | SCCHN | squamous cell carcinoma of the head and neck |
| Halozyme | Halozyme Therapeutics, Inc. | SCLC | small cell lung cancer |
| HCC | Hepatocellular carcinoma | SEC | U.S. Securities and Exchange Commission |
| HIV | human immunodeficiency virus | STING | stimulator of interferon genes |
| HR 3590 | The Patient Protection and Affordable Care Act | the 2012 Plan | The 2012 Stock Award and Incentive Plan |
| ImClone | ImClone Systems Incorporated | the Act | the Tax Cuts and Jobs Act of 2017 |
| IO | Immuno-Oncology | U.S. | United States |
| IPF | idiopathic pulmonary fibrosis | UK | United Kingdom |
| IPRD | in-process research and development | VAT | value added tax |
| JIA | Juvenile Idiopathic Arthritis | VTE | venous thromboembolic |
| LOE | loss of exclusivity | WTO | World Trade Organization |
EXHIBIT INDEX
The Exhibits listed below are identified by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-K. The Exhibits designated by the symbol ‡‡ are management contracts or compensatory plans or arrangements required to be filed pursuant to Item 15. The symbol ‡ in the Page column indicates that the Exhibit has been previously filed with the Commission and is incorporated herein by reference. Unless otherwise indicated, all Exhibits are part of Commission File Number 1-1136.
| † | Confidential treatment has been granted for certain portions which are omitted in the copy of the exhibit electronically filed with the Commission. |
| * | Indicates, in this 2019 Form 10-K, brand names of products, which are registered trademarks not solely owned by the Company or its subsidiaries. Abilify is a trademark of Otsuka Pharmaceutical Co., Ltd.; Atripla is a trademark of Gilead Sciences, Inc.; Avapro/Avalide (known in the EU as Aprovel/Karvea) and Plavix are trademarks of Sanofi; Byetta is a trademark of Amylin Pharmaceuticals, LLC; ENHANZE is a trademark of Halozyme, Inc.; Erbitux is a trademark of ImClone LLC; Farxiga and Onglyza are trademarks of AstraZeneca AB; Gleevec is a trademark of Novartis AG; Keytruda is a trademark of Merck Sharp & Dohme Corp.; Otezla is a trademark of Amgen Inc.; and Yescarta is a trademark of Kite Pharma, Inc. Brand names of products that are in all italicized letters, without an asterisk, are registered trademarks of BMS and/or one of its subsidiaries. |