Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of results of operations and financial condition is provided as a supplement to and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q to enhance the understanding of our results of operations, financial condition and cash flows.

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. 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 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. For further information on our strategy, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Executive Summary-Strategy” in our 2020 Form 10-K. Refer to the Summary of Abbreviated Terms at the end of this Quarterly Report on Form 10-Q for terms used throughout the document.

In 2021, we received 19 approvals for new medicines and additional indications and formulations of currently marketed medicines in major markets (the U.S., EU and Japan), including advancement in hematology malignancies through regulatory approvals of Breyanzi and Abecma, the first approvals of our cell therapy portfolio. In support of our continued investment in our cell therapy portfolio, we are expanding our manufacturing capabilities through the construction of new state-of-the-art cell therapy manufacturing facilities in Devens, Massachusetts and Leiden, Netherlands. We continue to see momentum in our oncology portfolio with the approvals for both Opdivo and Opdivo+Yervoy in various indications. We continue to expand our portfolio in immunology with the FDA approval of Zeposia for the treatment of adults with moderately to severely active UC and have an important opportunity for deucravacitinib, our TYK2 inhibitor, for the treatment of psoriasis and other diseases. We bolstered our leading cardiovascular franchise by adding mavacamten with the acquisition of MyoKardia in 2020. In March 2021, the FDA accepted the NDA for mavacamten for patients with symptomatic obstructive HCM with an assigned PDUFA goal date of January 28, 2022.

Our revenues increased by 9% for the nine months ended September 30, 2021 due to Eliquis, Revlimid, our IO and new product portfolios(1) and foreign exchange, partially offset by lower demand for Established Brands. The $1.61 change in GAAP EPS primarily resulted from specified items including, lower unwinding of inventory fair value adjustments and tax charges and higher equity investment fair value adjustments, partially offset by higher licensing, acquisition and impairment charges. After adjusting for specified items, non-GAAP EPS increased $0.69 as a result of higher revenues, partially offset by higher costs and expenses to support product launches and the broader portfolio.


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions, except per share data	2021		2020		2021		2020
Total Revenues	$	11,624	$	10,540	$	34,400	$	31,450

Diluted Earnings Per Share
GAAP	$	0.69	$	0.82	$	2.05	$	0.44
Non-GAAP	2.00		1.63		5.67		4.98

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.”


(1)			New product portfolio includes Reblozyl, Inrebic, Onureg, Zeposia, Breyanzi and Abecma.

Economic and Market Factors

COVID-19

In December 2019, COVID-19 emerged and subsequently expanded to a pandemic, resulting in international, federal, state and local public health and governmental authorities taking a number of actions to limit the spread of COVID-19 and address material disruptions in the U.S. and global economy. We have and continue to experience impacts on revenues from COVID-19 primarily due to lower new patient starts and patient visits, however, the pandemic has not significantly impacted our results of operations. It remains difficult to reasonably assess or predict the full extent of the negative impact that the COVID-19 pandemic may have on our business, financial condition, results of operations and cash flows. The future financial and operational impact of the COVID-19 pandemic on BMS will depend on developments such as the ultimate duration and recovery from the pandemic, government actions, impact on the U.S. and global economies, customer behavior changes and timing for resumption to our normal operations, among others. See the Company’s risk factor relating to the COVID-19 pandemic included under “Part I—Item 1A. Risk Factors—COVID-19 Pandemic Risks—The COVID-19 pandemic is affecting our business and could have a material adverse effect on us” in our 2020 Form 10-K.

As the COVID-19 pandemic affected global healthcare systems as well as major economic and financial markets, we adopted several procedures focused on ensuring the continued supply of our medicines to our patients and protecting the health, wellbeing and safety of our workforce:

Workplace and Community

We are maintaining our steadfast commitment to protecting our workforce, communities and patients, and ensuring the continued supply of life-saving medicines.
As a science-based company, we have a social responsibility to help reduce the spread of the virus. We are encouraged that approximately 94% of our employees in the U.S. and Puerto Rico are vaccinated against COVID-19, and as of November 1, 2021, vaccinations will be required for the majority of our colleagues in these regions. Although local regulations and conditions in other ex-U.S. jurisdictions may limit or restrict vaccine mandates, we are committed to implementing similar requirements in other markets wherever possible. Medical or religious accommodations are being considered on an individual basis.
As we return workers to the office, we will continue to assess the need to require weekly asymptomatic testing, mask wearing, and physical distancing of all colleagues onsite at our facilities in the U.S. and Puerto Rico. We also keep our workforce safe by conducting regular deep cleaning of our sites.
Our manufacturing sites have remained open throughout the pandemic supported by on site personnel. We have taken a thoughtful and phased approach to bringing the rest of our workforce back to our 250 plus sites around the world, guided by the following principles:

◦Serving the needs of our patients and customers

◦Prioritizing health and safety

◦Following medical advice and government direction

◦Leading with compassion and flexibility

◦Modeling key learnings

No single approach fits for every site or market – our timelines and circumstances have varied across the globe. We are monitoring local conditions and government direction closely and adjusting our plans as appropriate.

Supply of Our Medicines and Support to Patients, Physicians and Advocacy Groups

An important element of keeping our promise to patients, their families and our healthcare providers is to ensure that our supply chain is robust and carefully managed. Our clinical and commercial supply chain teams have proactively used mitigation plans to ensure our products reach our markets, clinical sites and patients over the past months. Thanks to these efforts, we have not seen any disruption in our clinical or commercial supply chain due to the pandemic.
We recognize this remains a challenging time for everyone, and we know patients may be facing additional hardships. We expanded our existing patient support programs to help eligible unemployed patients in the U.S. who have lost their health insurance due to the COVID-19 pandemic. The expanded program offers access to Bristol Myers Squibb medicines for free, including some of the company’s most widely prescribed products, as well as those prescribed via telehealth services.
All of our U.S. and Puerto Rico personnel are required to be vaccinated to interact with customers, vendors and people at our clinical trial sites. We are also continuing to employ remote interactions as appropriate to ensure continued support for healthcare professionals, patient care, and access to our medicines across our global markets.

Our Clinical Trials and Research

We are working with health authorities and investigators to protect our trial participants and personnel at BMS and our clinical trial sites, while ensuring regulatory compliance and the integrity of our science.
We have provided clinical trial investigators with overarching principles and guidance regarding the conduct of BMS clinical trials worldwide in light of COVID-19, and are taking into account guidance from health authorities, where applicable.

Governmental Actions

Additional regulations in the U.S. and internationally may occur in the future, including healthcare reform initiatives, further changes to tax laws and pricing laws and potential importation restrictions, that may reduce our results of operations (including intangible asset impairment charges), operating cash flow, liquidity and financial flexibility. For example, Congress is currently considering a number of different proposals that would potentially: (i) allow the government to set prices for prescription drugs, including benchmarking those prices to prices paid in other countries, (ii) penalize manufacturers for price increases beyond inflationary measures, (iii) redesign the Part D benefit with new out of pocket limits for patients and new mandated discounts for manufacturers, (iv) increase the U.S. corporate tax rate, and (v) increase the U.S. taxation of our international business operations. The outcome of these Congressional actions remains highly uncertain. In addition, the Organization for Economic Co-operation and Development recently reached agreement on a global minimum tax pursuant to which countries are expected to implement changes to their tax laws and updates to international tax treaties. See risk factor on the Company’s risk factors on these items included under “Part I—Item 1A. Risk Factors—Product, Industry and Operational Risks—Increased pricing pressure and other restrictions in the U.S. and abroad continue to negatively affect our revenues and profit margins” and “—Changes to tax regulations could negatively impact our earnings” in our 2020 Form 10-K.

Significant Product and Pipeline Approvals

The following is a summary of the significant approvals received in 2021:


Product			Date			Approval


Opdivo			October 2021			EC approval of Opdivo in combination with fluoropyrimidine- and platinum-based combination chemotherapy for the first-line treatment of adult patients with HER2-negative advanced or metastatic gastric, gastroesophageal junction, or esophageal adenocarcinoma whose tumors express PD-L1 with a combined positive score ≥ 5.


Opdivo			September 2021			Japan’s Ministry of Health, Labour and Welfare approval of Opdivo for the treatment of pediatric patients with recurrent or refractory classical Hodgkin lymphoma.


Opdivo			August 2021			Japan’s Ministry of Health, Labour and Welfare approval of the combination therapy Opdivo and Cabometyx* for the treatment of unresectable or metastatic RCC.


Opdivo			August 2021			FDA approval of Opdivo for the adjuvant treatment of patients with urothelial carcinoma who are at high risk of recurrence after undergoing radical resection, regardless of prior neoadjuvant chemotherapy, nodal involvement or PD-L1 status.


Abecma			August 2021			EC approval for Abecma for the treatment of adult patients with relapsed and refractory multiple myeloma, who have received at least three prior therapies, including an immunomodulatory agent, a proteasome inhibitor and an anti-CD38 antibody and have demonstrated disease progression on the last therapy.


Opdivo			July 2021			EC approval of Opdivo for the adjuvant treatment of adult patients with esophageal or gastroesophageal junction cancer who have residual pathologic disease following prior neoadjuvant chemoradiotherapy.


Opdivo+Yervoy			June 2021			EC approval of Opdivo plus Yervoy for the treatment of adult patients with mismatch repair deficient or microsatellite instability-high metastatic CRC after prior fluoropyrimidine-based combination chemotherapy.


Onureg			June 2021			EC approval of Onureg as a maintenance therapy in adult patients with AML who achieved complete remission or complete remission with incomplete blood count recovery following induction therapy with or without consolidation treatment and who are not candidates for, including those who choose not to proceed to, hematopoietic stem cell transplantation.


Opdivo+Yervoy			June 2021			EC approval of Opdivo plus Yervoy for the first-line treatment of adults with unresectable malignant pleural mesothelioma.


Zeposia			May 2021			FDA approval of Zeposia for the treatment of adults with moderately to severely active UC.


Opdivo			May 2021			Japan’s Ministry of Health, Labour and Welfare approval of Opdivo and Yervoy in combination therapy for the first-line treatment of unresectable advanced or recurrent malignant pleural mesothelioma.


Opdivo			May 2021			FDA approval of Opdivo for the adjuvant treatment of patients with completely resected esophageal or gastroesophageal junction cancer with residual pathologic disease after neoadjuvant chemoradiotherapy.


Opdivo			April 2021			FDA approval of Opdivo in combination with chemotherapy for patients with advanced or metastatic gastric cancer, gastroesophageal junction cancer, and esophageal adenocarcinoma, regardless of PD-L1 expression status.


Opdivo			April 2021			EC approval of Opdivo in combination with Cabometyx* for the first-line treatment of patients with advanced RCC.


Abecma			March 2021			FDA approval of Abecma for the treatment of adult patients with relapsed or refractory multiple myeloma after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody.


Breyanzi			March 2021			Japan’s Ministry of Health, Labour and Welfare approval of Breyanzi for the treatment of patients with relapsed or refractory large B-cell lymphoma and relapsed or refractory follicular lymphoma.


Inrebic			February 2021			EC approval of Inrebic for the treatment of disease-related splenomegaly or symptoms in adult patients with primary myelofibrosis, post-polycythaemia vera myelofibrosis or post-essential thrombocythaemia myelofibrosis, who are Janus Associated Kinase inhibitor naïve or have been treated with ruxolitinib.


Breyanzi			February 2021			FDA approval of Breyanzi for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy.


Opdivo			January 2021			FDA approval of Opdivo in combination with Cabometyx* for the first-line treatment of patients with advanced RCC.

The FDA has indicated it is undertaking an industry-wide review of indications that received accelerated approval and for which the confirmatory studies did not meet their primary endpoints. This is not specific to BMS, but we have two Opdivo indications that are subject to this review by the FDA in the third-line treatment of SCLC and second-line treatment of HCC. In consultation with the FDA, we have withdrawn the Opdivo indication in the third-line treatment of SCLC. Additionally, we decided to withdraw the Opdivo indication in the second-line treatment of HCC.

Refer to “—Product and Pipeline Developments” for all of the developments in our marketed products and late-stage pipeline in 2021.

Divestitures, Licensing and Other Arrangements

Divestitures, licensing and other arrangements allow us to focus our resources behind our growth opportunities that drive the greatest long-term value. Significant transactions entered into in 2021 are summarized below. Refer to “Item 1. Financial Statements—Note 3. Alliances” and “—Note 4. Divestitures, Licensing and Other Arrangements” for further information.

Agenus - We obtained a global exclusive license to Agenus’ proprietary bispecific antibody program, AGEN1777, that blocks TIGIT and an additional target. AGEN1777 is being studied in oncology and a Phase I clinical trial was initiated in October 2021.

Eisai - We commenced an exclusive global strategic collaboration with Eisai for the co-development and co-commercialization of MORAb-202, a selective folate receptor alpha antibody-drug conjugate being investigated in endometrial, ovarian, lung and breast cancers. MORAb-202 is currently in Phase I/II clinical trials for solid tumors.

Prothena - We exercised our option under the global neuroscience research and development collaboration to enter into an exclusive U.S. license for PRX005, an anti-tau antibody that specifically targets an area within the microtubule binding region for the potential treatment of Alzheimer’s disease. A Phase I clinical trial with PRX005 has been initiated.

Rockefeller University - We obtained a global exclusive license to develop, manufacture and commercialize Rockefeller’s novel monoclonal antibody duo treatment that neutralizes the SARS-CoV-2 virus for treatment and potentially for prevention of COVID-19. Phase I clinical trials to assess dosing for IV and subcutaneous formulations and to assess safety have been completed by Rockefeller. In May 2021, enrollment initiated in the Phase II study within the NIH ACTIV-2 protocol at a network of sites within the U.S. Phase II enrollment was completed in August 2021 and topline data is expected in the fourth quarter 2021.

RESULTS OF OPERATIONS

Regional Revenues

The composition of the changes in revenues was as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
Dollars in Millions	2021		2020		% Change		Foreign Exchange(b)		2021		2020		% Change		Foreign Exchange(b)
United States	$	7,296	$	6,542	12	%	—		$	21,694	$	19,795	10	%	—
Europe	2,661		2,453		8	%	2	%	7,903		7,156		10	%	6	%
Rest of the World	1,391		1,361		2	%	1	%	4,172		4,030		4	%	2	%
Other(a)	276		184		50	%	N/A		631		469		35	%	N/A
Total	$	11,624	$	10,540	10	%	—		$	34,400	$	31,450	9	%	1	%

(a) Other revenues include royalties and alliance-related revenues for products not sold by our regional commercial organizations.

(b) Foreign exchange impacts were derived by applying the prior period average currency rates to the current period sales.

United States

U.S. revenues for the third quarter 2021 and year-to-date increased due to Revlimid, our new product portfolio, Eliquis and our IO portfolio. Average U.S. net selling prices increased 1% year-to-date compared to the same period a year ago.

Europe

Europe revenues for the third quarter 2021 and year-to-date increased due to Eliquis, our IO product portfolio and Revlimid and foreign exchange, partially offset by lower demand for Established Brands. Average net selling prices decreased year-to-date compared to the same period a year ago.

Rest of the World

Rest of the World revenues for the third quarter 2021 and year-to-date increased due to our IO portfolio*, Pomalyst/Imnovid* and foreign exchange, partially offset by lower revenues for Abraxane, due to manufacturing delays, and Established Brands. Average net selling prices decreased year-to-date compared to the same period a year ago.

No single country outside the U.S. contributed more than 10% of total revenues during the nine months ended September 30, 2021 or 2020. Our business is typically not seasonal.

GTN Adjustments

The reconciliation of gross product sales to net product sales by each significant category of GTN adjustments was as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
Dollars in Millions	2021			2020			% Change		2021			2020			% Change
Gross product sales	$	17,335		$	15,211		14	%	$	49,676		$	43,685		14	%
GTN adjustments
Charge-backs and cash discounts	(1,908)			(1,440)			33	%	(5,214)			(4,072)			28	%
Medicaid and Medicare rebates	(2,625)			(2,146)			22	%	(6,482)			(5,126)			26	%
Other rebates, returns, discounts and adjustments	(1,559)			(1,428)			9	%	(4,534)			(3,932)			15	%
Total GTN adjustments	(6,092)			(5,014)			21	%	(16,230)			(13,130)			24	%
Net product sales	$	11,243		$	10,197		10	%	$	33,446		$	30,555		9	%

GTN adjustments percentage	35		%	33		%	2	%	32		%	30		%	2	%
U.S.	42		%	39		%	3	%	39		%	36		%	3	%
Non-U.S.	17		%	18		%	(1)	%	17		%	16		%	1	%

Reductions to provisions for product sales made in prior periods resulting from changes in estimates were $282 million and $91 million for the nine months ended September 30, 2021 and 2020, respectively. The reductions to provisions in 2021 was primarily related to Eliquis coverage gap discounts. GTN adjustments are primarily a function of product sales volume, regional and payer channel mix, contractual or legislative discounts and rebates. U.S. GTN adjustments percentage increased primarily due to higher government channel mix, which has higher GTN adjustment percentages.

Product Revenues


	Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in Millions	2021		2020		% Change		2021		2020		% Change
Prioritized Brands
Revlimid	$	3,347	$	3,027	11	%	$	9,493	$	8,826	8	%
U.S.	2,303		2,080		11	%	6,425		6,094		5	%
Non-U.S.	1,044		947		10	%	3,068		2,732		12	%

Eliquis	2,413		2,095		15	%	8,091		6,899		17	%
U.S.	1,315		1,118		18	%	4,960		4,258		16	%
Non-U.S.	1,098		977		12	%	3,131		2,641		19	%

Opdivo	1,905		1,780		7	%	5,535		5,199		6	%
U.S.	1,062		1,018		4	%	3,082		2,982		3	%
Non-U.S.	843		762		11	%	2,453		2,217		11	%

Orencia	870		826		5	%	2,442		2,290		7	%
U.S.	644		588		10	%	1,773		1,642		8	%
Non-U.S.	226		238		(5)	%	669		648		3	%

Pomalyst/Imnovid	851		777		10	%	2,478		2,235		11	%
U.S.	586		548		7	%	1,665		1,559		7	%
Non-U.S.	265		229		16	%	813		676		20	%

Sprycel	551		544		1	%	1,562		1,576		(1)	%
U.S.	346		336		3	%	946		944		—
Non-U.S.	205		208		(1)	%	616		632		(3)	%

Yervoy	515		446		15	%	1,481		1,211		22	%
U.S.	313		309		1	%	935		820		14	%
Non-U.S.	202		137		47	%	546		391		40	%

Abraxane	266		342		(22)	%	876		950		(8)	%
U.S.	211		236		(11)	%	670		659		2	%
Non-U.S.	55		106		(48)	%	206		291		(29)	%

Empliciti	82		96		(15)	%	253		290		(13)	%
U.S.	48		59		(19)	%	150		177		(15)	%
Non-U.S.	34		37		(8)	%	103		113		(9)	%

Reblozyl	160		96		67	%	400		159		**
U.S.	147		92		60	%	355		155		**
Non-U.S.	13		4		**		45		4		**

Inrebic	22		13		69	%	54		40		35	%
U.S.	20		13		54	%	50		40		25	%
Non-U.S.	2		—		N/A		4		—		N/A

Onureg	21		3		**		48		3		**
U.S.	21		3		**		47		3		**
Non-U.S.	—		—		N/A		1		—		N/A

Zeposia	40		2		**		86		3		**
U.S.	32		2		**		65		3		**
Non-U.S.	8		—		N/A		21		—		N/A


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2021	2020	% Change		2021	2020	% Change
Prioritized Brands




Breyanzi	30	—	N/A		47	—	N/A
U.S.	29	—	N/A		46	—	N/A
Non-U.S.	1	—	N/A		1	—	N/A

Abecma	71	—	N/A		95	—	N/A
U.S.	67	—	N/A		91	—	N/A
Non-U.S.	4	—	N/A		4	—	N/A

Established Brands
Vidaza	36	106	(66)	%	135	390	(65)	%
U.S.	1	—	N/A		8	2	**
Non-U.S.	35	106	(67)	%	127	388	(67)	%

Baraclude	105	100	5	%	327	343	(5)	%
U.S.	2	3	(33)	%	8	9	(11)	%
Non-U.S.	103	97	6	%	319	334	(4)	%

Other Brands	339	287	18	%	997	1,036	(4)	%
U.S.	149	137	9	%	418	448	(7)	%
Non-U.S.	190	150	27	%	579	588	(2)	%

Total Revenues	11,624	10,540	10	%	34,400	31,450	9	%
U.S.	7,296	6,542	12	%	21,694	19,795	10	%
Non-U.S.	4,328	3,998	8	%	12,706	11,655	9	%

** Change in excess of 100%.

Revlimid (lenalidomide) — 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.

U.S. revenues increased 11% in the third quarter 2021 and 5% year-to-date due to higher average net selling prices and higher demand.
International revenues increased 10% in the third quarter 2021 due to higher demand and foreign exchange of 2%. Excluding foreign exchange impacts, revenues increased by 8%.

International revenues increased 12% year-to-date due to foreign exchange of 5% and higher demand. Excluding foreign exchange impacts, revenues increased 7%.

In the U.S., certain third parties have been granted volume-limited licenses to sell generic lenalidomide beginning in 2022. In the EU, licenses have been granted to third parties to market generic lenalidomide products prior to expiry of our patent and supplementary protection certificate rights beginning in 2022. Revenues for Revlimid are expected to decline in the U.S. and International starting in 2022. Refer to “Item 1. Financial Statements—Note 17. Legal Proceedings and Contingencies—Intellectual Property” for further information.

Eliquis (apixaban) — an oral Factor Xa inhibitor targeted at stroke prevention in adult patients with NVAF and the prevention and treatment of VTE disorders.

U.S. revenues increased 18% in the third quarter 2021 and 16% year-to-date due to higher demand. A majority of Eliquis patients enter the coverage gap during the third and fourth quarters which result in lower revenues during the second half of the year.
International revenues increased 12% in the third quarter 2021 and 19% year-to-date due to higher demand and foreign exchange of 2% and 6%, respectively. Excluding foreign exchange impacts, revenues increased by 10% and 13%, respectively.
In September 2021, the Bristol Myers Squibb-Pfizer Alliance announced that the Court of Appeals for the Federal Circuit affirmed the U.S. District Court’s August 2020 decision finding the composition of matter patent and formulation patent covering Eliquis valid and infringed. Given the decision, the earliest that generic manufacturers are permitted to launch their apixaban products is April 1, 2028, subject to additional appeals and challenges.

Following the May 2021 expiration of regulatory exclusivity for Eliquis in Europe, generic manufacturers may seek to market generic versions of Eliquis in Europe prior to the expiration of our patents, which may lead to additional, infringement and invalidity actions involving our Eliquis patents being filed in various countries in Europe. We believe in the innovative science behind Eliquis and the strength of our intellectual property, which we will defend against infringement. Refer to “Item 1. Financial Statements—Note 17. Legal Proceedings and Contingencies—Intellectual Property” for further information.

Opdivo (nivolumab) — a fully human monoclonal antibody that binds to the PD-1 on T and NKT cells that has been approved for several anti-cancer indications including bladder, blood, colon, head and neck, kidney, liver, lung, melanoma, MPM and stomach. The Opdivo+Yervoy regimen also is approved in multiple markets for the treatment of NSCLC, melanoma, MPM, RCC, CRC and various gastric and esophageal cancers. There are several ongoing potentially registrational studies for Opdivo across other tumor types and disease areas, in monotherapy and in combination with Yervoy and various anti-cancer agents.

U.S. revenues increased 4% in the third quarter 2021 and 3% year-to-date due to higher demand across multiple therapies including the Opdivo+Yervoy combinations in NSCLC, Opdivo+Cabometyx* combination in kidney cancer and Opdivo in various gastric and esophageal cancers and higher average net selling prices, partially offset by declining second-line eligibility across tumor indications and increased competition.
International revenues increased 11% in both the third quarter 2021 and year-to-date due to higher demand and foreign exchange of 1% and 4%, respectively. Excluding foreign exchange impacts, revenues increased by 10% and 7%, respectively.

Orencia (abatacept) — a fusion protein indicated for adult patients with moderate to severe active RA and PsA and is also indicated for reducing signs and symptoms in certain pediatric patients with moderately to severely active polyarticular JIA.

U.S. revenues increased 10% in the third quarter 2021 and 8% year-to-date due to higher demand.
International revenues decreased 5% in the third quarter 2021 due to the timing of product distribution to our alliance partner.

International revenues increased 3% year-to-date due to foreign exchange of 3%. Excluding foreign exchange impacts, revenues remained consistent.

In the U.S. and EU, estimated LOE dates are based on method of use patents that expire in 2021. Formulation and additional patents expire in 2026 and beyond. There are no Orencia biosimilars on the market in the U.S., EU or Japan.

Pomalyst/Imnovid (pomalidomide) — a proprietary, distinct, small molecule that is administered orally and modulates the immune system and other biologically important targets. Pomalyst/Imnovid is indicated for patients with multiple myeloma who have received at least two prior therapies including lenalidomide and a proteasome inhibitor and have demonstrated disease progression on or within 60 days of completion of the last therapy.

*•*U.S. revenues increased 7% in both the third quarter 2021 and year-to-date due to higher average net selling prices and higher demand.

International revenues increased 16% in the third quarter 2021 and 20% year-to-date, due to higher demand and foreign exchange of 1% and 4%, respectfully, partially offset by lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 15% and 16%, respectfully.

Sprycel (dasatinib) — an oral inhibitor of multiple tyrosine kinase indicated for the first-line treatment of patients with Philadelphia chromosome-positive CML in chronic phase and the treatment of adults with chronic, accelerated, or myeloid or lymphoid blast phase CML with resistance or intolerance to prior therapy, including Gleevec* (imatinib mesylate) and the treatment of children and adolescents aged 1 year to 18 years with chronic phase Philadelphia chromosome-positive CML.

U.S. revenues increased 3% in the third quarter 2021 due to higher demand, partially offset by lower average net selling prices.

U.S. revenues remained consistent year-to-date due to higher demand, offset by lower average net selling prices.

International revenues remained consistent in the third quarter 2021

International revenues decreased 3% year-to-date due to lower demand as a result of increased generic competition in certain indications and lower average net selling prices, partially offset by foreign exchange of 3%. Excluding foreign exchange impacts, revenues decreased by 6%.

Yervoy (ipilimumab) — a monoclonal antibody for the treatment of patients with unresectable or metastatic melanoma. The Opdivo+Yervoy regimen also is approved in multiple markets for the treatment of NSCLC, melanoma, MPM, RCC, and CRC.

U.S. revenues remained consistent in the third quarter 2021.

U.S. revenues increased 14% year-to-date due to higher demand primarily from the Opdivo+Yervoy combination for NSCLC.

International revenues increased 47% in the third quarter 2021 and 40% year-to-date due to higher demand and foreign exchange of 2% and 6%, respectively, partially offset by lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 45% and 34%, respectively.

Abraxane (paclitaxel albumin-bound particles for injectable suspension) — a solvent-free protein-bound chemotherapy product that combines paclitaxel with albumin using our proprietary Nab® technology platform, and is used to treat breast cancer, NSCLC and pancreatic cancer, among others.

U.S. revenues decreased 11% in the third quarter 2021 due to manufacturing delays and lower average net selling prices.

U.S. revenues increased 2% year-to-date due to higher demand, partially offset by lower average net selling prices.

International revenues decreased 48% in the third quarter 2021 and 29% year-to-date due to manufacturing delays and lower average net selling prices, partially offset by foreign exchange of 1% and 3%, respectively. Excluding foreign exchange impacts, revenues decreased by 49% and 32%, respectively.
We expect that the manufacturing delays in the U.S. and International will continue into the fourth quarter 2021.
In the U.S., as part of the settlement with Actavis LLC, Actavis was granted a license to certain patents required to sell a generic paclitaxel protein-bound particles for injectable suspension product beginning in 2022. In the EU, the patent expired in 2019 and generics have entered the market. In Japan, the estimated LOE is based on a method of use patent expiring in 2023. Revenues for Abraxane are expected to decline in the U.S. starting in 2022 and continue to decline in the EU.

Empliciti (elotuzumab) — a humanized monoclonal antibody for the treatment of multiple myeloma.

Reblozyl (luspatercept-aamt) — an erythroid maturation agent indicated for the treatment of anemia in adult patients with beta thalassemia who require regular red blood cell transfusions and for the treatment of anemia failing an erythropoiesis stimulating agent (“ESA”) in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions. Reblozyl was launched for adult patients with beta thalassemia who require regular red blood cell transfusions in November 2019 and for adult patients with MDS previously treated with ESA in April 2020.

Inrebic (fedratinib) — an oral kinase inhibitor indicated for the treatment of adult patients with intermediate-2 or high-risk primary or secondary (post-polycythemia vera or post-essential thrombocythemia) myelofibrosis. Inrebic was launched in August 2019.

Onureg (azacitidine) — an oral hypomethylating agent that incorporates into DNA and RNA, indicated for continued treatment of adult patients with AML who achieved first complete remission or complete remission with incomplete blood count recovery following intensive induction chemotherapy and are not able to complete intensive curative therapy. Onureg was launched in September 2020.

Zeposia (ozanimod) — an oral immunomodulatory drug used to treat relapsing forms of multiple sclerosis, to include clinically isolated syndrome, relapsing-remitting disease, and active secondary progressive disease, in adults and to treat moderately to severely active UC in adults. Zeposia was launched in June 2020.

Breyanzi (lisocabtagene maraleucel) — a CD19-directed genetically modified autologous T cell immunotherapy indicated for the treatment of adult patients with certain types of relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy. Breyanzi was launched in April 2021.

Abecma (idecabtagene vicleucel) — a B-cell maturation antigen-directed genetically modified autologous T cell immunotherapy indicated for the treatment of adult patients with relapsed or refractory multiple myeloma after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody. Abecma was launched in May 2021.

Vidaza (azacitidine for injection) — a hypomethylating agent with several approved indications worldwide for frontline treatment of patients with myelodysplastic syndromes, chronic myelomonocytic leukemia (CMMoL), and acute myeloid leukemia.

International revenues decreased due to lower demand and lower average net selling prices resulting from generic competition.

Baraclude (entecavir) — an oral antiviral agent for the treatment of chronic hepatitis B.

International revenues decreased due to lower demand resulting from generic competition.

Other Brands — includes all other brands, including those which have lost exclusivity in major markets, OTC brands and royalty revenue.

International revenues decreased primarily due to continued generic erosion.

Estimated End-User Demand

Pursuant to the SEC Consent Order described in our 2020 Form 10-K, we monitor inventory levels on hand in the U.S. wholesaler distribution channel and outside of the U.S. in the direct customer distribution channel. We are obligated to disclose products with levels of inventory in excess of one month on hand or expected demand, subject to a de minimis exception. Estimated levels of inventory in the distribution channel in excess of one month on hand for the following products were not material to our results of operations as of the dates indicated:

Abraxane had 1.9 months of inventory on hand internationally in the distribution channel at June 30, 2021 compared to 0.5 months of inventory on hand at March 31, 2021 due to on-going business transition from a distributor and to avert a forecasted back order in Latin America.

In the U.S., we generally determine our months on hand estimates using inventory levels of product on hand and the amount of out-movement provided by our three largest wholesalers, which account for approximately 87% of total gross sales of U.S. products for the nine months ended September 30, 2021. Factors that may influence our estimates include generic competition, seasonality of products, wholesaler purchases in light of increases in wholesaler list prices, new product launches, new warehouse openings by wholesalers and new customer stockings by wholesalers. In addition, these estimates are calculated using third-party data, which may be impacted by their recordkeeping processes.

Revlimid and Pomalyst are distributed in the U.S. primarily through contracted pharmacies under the Revlimid REMS and Pomalyst REMS programs, respectively. These are proprietary risk-management distribution programs tailored specifically to provide for the safe and appropriate distribution and use of Revlimid and Pomalyst. Internationally, Revlimid and Imnovid are distributed under mandatory risk-management distribution programs tailored to meet local authorities’ specifications to provide for the products’ safe and appropriate distribution and use. These programs may vary by country and, depending upon the country and the design of the risk-management program, the product may be sold through hospitals or retail pharmacies.

Our non-U.S. businesses have significantly more direct customers. Information on available direct customer product level inventory and corresponding out-movement information and the reliability of third-party demand information varies widely. We limit our direct customer sales channel inventory reporting to where we can influence demand. When this information does not exist or is otherwise not available, we have developed a variety of methodologies to estimate such data, including using historical sales made to direct customers and third-party market research data related to prescription trends and end-user demand. Given the difficulties inherent in estimating third-party demand information, we evaluate our methodologies to estimate direct customer product level inventory and to calculate months on hand on an ongoing basis and make changes as necessary. Factors that may affect our estimates include generic competition, seasonality of products, price increases, new product launches, new warehouse openings by direct customers, new customer stockings by direct customers and expected direct customer purchases for governmental bidding situations. As such, all of the information required to estimate months on hand in the direct customer distribution channel for non-U.S. business for the quarter ended September 30, 2021 is not available prior to the filing of this Quarterly Report on Form 10-Q. We will disclose any product with levels of inventory in excess of one month on hand or expected demand for the current quarter, subject to a de minimis exception, in our next Annual Report on Form 10-K.

Expenses


	Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in Millions	2021		2020		% Change		2021		2020		% Change
Cost of products sold(a)	$	2,291	$	2,502	(8)	%	$	7,584	$	8,863	(14)	%
Marketing, selling and administrative	1,788		1,706		5	%	5,336		4,940		8	%
Research and development	3,251		2,499		30	%	8,747		7,393		18	%
Amortization of acquired intangible assets	2,546		2,491		2	%	7,606		7,162		6	%
Other (income)/expense, net	(409)		(915)		(55)	%	(1,113)		(488)		**
Total Expenses	$	9,467	$	8,283	14	%	$	28,160	$	27,870	1	%

** In excess of +/- 100%.

(a) Excludes amortization of acquired intangible assets.

Cost of Products Sold

Cost of products sold decreased by $211 million in the third quarter 2021 and $1.3 billion year-to-date, primarily due to lower unwinding of inventory fair value adjustments ($359 million in the third quarter 2021 and $2.3 billion year-to-date), partially offset by higher Eliquis profit sharing ($165 million in the third quarter 2021 and $560 million year-to-date). Year-to-date 2021 was impacted by impairment charges related to Inrebic regulatory approval milestones in the EU ($315 million) and foreign exchange.

Marketing, Selling and Administrative

Marketing, selling and administrative expenses increased by $82 million in the third quarter 2021 and $396 million year-to-date, primarily due to higher advertising and promotion expenses and higher costs to support new product launches.

Research and Development

Research and development expense increased $752 million in the third quarter 2021 and $1.4 billion year-to-date, primarily due to IPRD impairment charges, higher license and asset acquisition charges and higher costs associated with the broader portfolio. The third quarter 2021 included a $610 million IPRD impairment charge relating to an investigational compound being studied as a potential treatment for hematologic diseases. Year-to-date 2021 also included a $230 million IPRD impairment charge relating to an investigational compound being studied as a potential treatment for fibrotic diseases. Significant license and asset acquisition charges included in Research and development expense were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2021		2020		2021		2020
Eisai up-front collaboration fee	$	—	$	—	$	650	$	—
Agenus up-front license fee	200		—		200		—
Prothena opt-in license fee	—		—		80		—


bluebird collaboration fee	—		—		—		200
Forbius asset acquisition	—		178		—		178
Cormorant milestone	—		—		—		100
Other milestones	—		25		50		50
License and asset acquisition charges	$	200	$	203	$	980	$	528

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets increased by $55 million in the third quarter 2021 and $444 million year-to-date, due to the timing of additional product approvals.

Other (Income)/Expense, Net

Other (income)/expense, net changed by $506 million in the third quarter 2021 and $625 million year-to-date, primarily due to fair value adjustments to contingent value rights and equity investments and other items discussed below.


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2021		2020		2021		2020
Interest expense	$	328	$	346	$	1,011	$	1,065
Contingent consideration	—		(988)		(510)		(597)
Royalties and licensing income	(425)		(403)		(1,197)		(1,124)
Equity investment gains	(465)		(244)		(1,214)		(724)
Integration expenses	141		195		434		535
Provision for restructuring	27		176		150		451
Litigation and other settlements	13		10		49		41
Transition and other service fees	(6)		(18)		(43)		(129)
Investment income	(12)		(13)		(33)		(99)
Reversion excise tax	—		—		—		76
Divestiture losses/(gains)	2		1		(9)		(6)
Intangible asset impairment	—		—		—		21


Loss on debt redemption	—		—		281		—
Other	(12)		23		(32)		2
Other (income)/expense, net	$	(409)	$	(915)	$	(1,113)	$	(488)

Contingent consideration primarily includes fair value adjustments resulting from the change in the traded price of contingent value rights issued with the Celgene acquisition. The contractual obligation to pay the contingent value rights terminated in January 2021 because the FDA did not approve liso-cel (JCAR017) by December 31, 2020.
Royalties and licensing income includes diabetes business royalties, Keytruda* royalties, Tecentriq* royalties, up-front licensing fees and milestones for products that have not obtained commercial approval. Refer to “Item 1. Financial Statements—Note 4. Divestitures, Licensing and Other Arrangements” for further information.
Equity investment gains includes fair value adjustments for investments that have readily determinable fair value and observable price changes for investments without readily determinable fair values resulting primarily from initial public offerings or third-party acquisitions of entities which we held an ownership interest. Our share of income from equity method investments are primarily due to fair value adjustments attributed to limited partnerships. Refer to “Item 1. Financial Statements—Note 9. Financial Instruments and Fair Value Measurements” for more information.
Integration expenses primarily includes consulting fees to implement Celgene integration initiatives related to processes and systems.
Provision for restructuring includes exit and other costs primarily related to the Celgene acquisition plan. We are on track to achieve the annualized pre-tax cost savings of approximately $3.0 billion through 2022 as detailed in the restructuring activities. Refer to “Item 1. Financial Statements—Note 6. Restructuring” for further information.
Investment income decreased year-to-date 2021 primarily due to lower interest rates.
Reversion excise tax resulted from the transfer of the retiree medical plan assets back to the Company in the first quarter 2020.
A loss on debt redemption resulted from the early redemption of $3.5 billion long-term debt obligations in the first quarter 2021.

Income Taxes


	Three Months Ended September 30,						Nine Months Ended September 30,
Dollars in Millions	2021			2020			2021			2020
Earnings Before Income Taxes	$	2,157		$	2,257		$	6,240		$	3,580
Provision for Income Taxes	605			379			1,598			2,548
Effective Tax Rate	28.0		%	16.8		%	25.6		%	71.2		%

Impact of Specified Items	13.1		%	(0.3)		%	9.4		%	55.5		%
Effective Tax Rate Excluding Specified Items	14.9		%	17.1		%	16.2		%	15.7		%

The tax impact attributed to specified items was primarily due to low jurisdictional tax rates attributed to the unwinding of inventory fair value adjustments and intangible asset amortization, an IPRD impairment charge and contingent value rights fair value adjustments that are not taxable or deductible. The nine months ended September 30, 2020 includes an $853 million deferred tax charge resulting from an internal transfer of certain intangible assets to the U.S. and an additional $266 million GILTI tax charge upon finalization of the Otezla* divestiture tax consequences with tax authorities. The 2.2% reduction in the effective tax rate excluding specified items during the third quarter 2021 resulted primarily from changes in previously estimated annual effective tax rates in 2020 due to jurisdictional earnings mix. Refer to “Item 1. Financial Statements—Note 7. Income Taxes” for additional information.

Non-GAAP Financial Measures

Our non-GAAP financial measures, such as non-GAAP earnings and related EPS information, are adjusted to exclude certain costs, expenses, gains and losses and other specified items that are evaluated on an individual basis. These items are adjusted after considering their quantitative and qualitative aspects and typically have one or more of the following characteristics, such as being highly variable, difficult to project, unusual in nature, significant to the results of a particular period or not indicative of future operating results. Similar charges or gains were recognized in prior periods and will likely reoccur in future periods including (i) amortization of acquired intangible assets, including product rights that generate a significant portion of our ongoing revenue and will recur until the intangible assets are fully amortized, (ii) unwind of inventory fair value adjustments, (iii) acquisition and integration expenses, (iv) restructuring costs, (v) accelerated depreciation and impairment of property, plant and equipment and intangible assets, (vi) R&D charges or other income resulting from up-front or contingent milestone payments in connection with the acquisition or licensing of third-party intellectual property rights, (vii) divestiture gains or losses, (viii) stock compensation resulting from accelerated vesting of Celgene awards and certain retention-related employee compensation charges related to the Celgene transaction, (ix) pension, legal and other contractual settlement charges, (x) equity investment and contingent value rights fair value adjustments, including fair value adjustments attributed to limited partnership equity method investments and (xi) amortization of fair value adjustments of debt acquired from Celgene in our 2019 exchange offer, among other items. Deferred and current income taxes attributed to these items are also adjusted for considering their individual impact to the overall tax expense, deductibility and jurisdictional tax rates. Certain other significant tax items are also excluded such as the impact resulting from internal transfer of intangible assets and the Otezla* divestiture in the second quarter 2020. We also provide international revenues for our priority products excluding the impact of foreign exchange. We calculate foreign exchange impacts by converting our current-period local currency financial results using the prior period average currency rates and comparing these adjusted amounts to our current-period results. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in Exhibit 99.2 to our Form 8-K filed on October 27, 2021 and are incorporated herein by reference.

Non-GAAP information is intended to portray the results of our baseline performance, supplement or enhance management, analysts and investors’ overall understanding of our underlying financial performance and facilitate comparisons among current, past and future periods. For example, non-GAAP earnings and EPS information is an indication of our baseline performance before items that are considered by us to not be reflective of our ongoing results. In addition, this information is among the primary indicators that we use as a basis for evaluating performance, allocating resources, setting incentive compensation targets and planning and forecasting for future periods. This information is not intended to be considered in isolation or as a substitute for net earnings or diluted EPS prepared in accordance with GAAP and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in method and in the items being adjusted. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Specified items were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions	2021		2020		2021		2020
Inventory purchase price accounting adjustments	$	97	$	456	$	264	$	2,590
Intangible asset impairment	—		—		315		—
Employee compensation charges	—		—		—		3
Site exit and other costs	—		3		24		32
Cost of products sold	97		459		603		2,625

Employee compensation charges	—		7		1		34
Site exit and other costs	1		(1)		—		4
Marketing, selling and administrative	1		6		1		38

License and asset acquisition charges	200		203		980		528
IPRD impairments	610		—		840		—
Inventory purchase price accounting adjustments	1		8		1		25
Employee compensation charges	—		8		1		41
Site exit and other costs	1		4		1		99
Research and development	812		223		1,823		693

Amortization of acquired intangible assets	2,546		2,491		7,606		7,162

Interest expense(a)	(29)		(40)		(91)		(122)
Contingent consideration	—		(988)		(510)		(597)
Royalties and licensing income	—		(53)		(29)		(154)
Equity investment gains	(465)		(214)		(1,227)		(693)
Integration expenses	141		195		434		535
Provision for restructuring	27		176		150		451


Reversion excise tax	—		—		—		76
Divestiture losses/(gains)	2		1		(9)		(6)



Loss on debt redemption	—		—		281		—

Other (income)/expense, net	(324)		(923)		(1,001)		(510)

Increase to pretax income	3,132		2,256		9,032		10,008

Income taxes on items above	(183)		(405)		(871)		(699)
Income taxes attributed to Otezla* divestiture	—		11		—		266
Income taxes attributed to internal transfer of intangible assets	—		—		—		853
Income taxes	(183)		(394)		(871)		420

Increase to net earnings	$	2,949	$	1,862	$	8,161	$	10,428

(a) Includes amortization of purchase price adjustments to Celgene debt.

The reconciliations from GAAP to Non-GAAP were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
Dollars in Millions, except per share data	2021		2020		2021		2020
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – GAAP	$	1,546	$	1,872	$	4,622	$	1,012
Specified Items	2,949		1,862		8,161		10,428
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – Non-GAAP	$	4,495	$	3,734	$	12,783	$	11,440

Weighted-Average Common Shares Outstanding – Diluted	2,243		2,290		2,253		2,295



Diluted Earnings Per Share Attributable to BMS – GAAP	$	0.69	$	0.82	$	2.05	$	0.44
Diluted EPS Attributable to Specified Items	1.31		0.81		3.62		4.54
Diluted EPS Attributable to BMS – Non-GAAP	$	2.00	$	1.63	$	5.67	$	4.98

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Our net debt position was as follows:


Dollars in Millions	September 30, 2021		December 31, 2020
Cash and cash equivalents	$	13,540	$	14,546
Marketable debt securities – current	2,123		1,285
Marketable debt securities – non-current	46		433
Total cash, cash equivalents and marketable debt securities	15,709		16,264
Short-term debt obligations	(5,065)		(2,340)
Long-term debt	(39,677)		(48,336)
Net debt position	$	(29,033)	$	(34,412)

We regularly assess our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements, dividend payouts, potential share repurchases and future investments or acquisitions in order to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. We also regularly evaluate our capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed, which may lead to the issuance of additional debt securities, the repurchase of debt securities prior to maturity or the issuance or repurchase of common stock. We believe that our existing cash, cash equivalents and marketable debt securities together with cash generated from operations and, if required, from the issuance of commercial paper will be sufficient to satisfy our anticipated cash needs for at least the next few years, including dividends, capital expenditures, milestone payments, working capital, restructuring initiatives, business development, repurchase of common stock, debt maturities of approximately $11.5 billion through 2024 as well as any debt repurchases through redemptions or tender offers.

We have a share repurchase program authorized by our Board of Directors allowing for repurchases of our shares. The specific timing and number of shares repurchased will be determined by our management at its discretion and will vary based on market conditions, securities law limitations and other factors. The share repurchase program does not obligate us to repurchase any specific number of shares, does not have a specific expiration date and may be suspended or discontinued at any time. The repurchases may be effected through a combination of one or more open market repurchases, privately negotiated transactions, transactions structured through investment banking institutions and other derivative transactions, relying on Rule 10b-18 and Rule 10b5-1 under the Exchange Act. The outstanding share repurchase authority authorization under the program was $4.4 billion as of December 31, 2020. In January 2021, our Board of Directors approved an increase of $2.0 billion to the share repurchase authorization for our common stock, increasing the total outstanding share repurchase authorization to approximately $6.4 billion. We repurchased approximately 54 million shares of our common stock for $3.5 billion during the nine months ended September 30, 2021 reducing the remaining share repurchase capacity under the share repurchase program to approximately $2.9 billion as of September 30, 2021. Refer to “Item 1. Financial Statements—Note 15. Equity” for additional information.

Dividend payments were $3.3 billion in the nine months ended September 30, 2021. Dividends declared per common share were $1.47 in the nine months ended September 30, 2021. Dividend decisions are made on a quarterly basis by our Board of Directors.

Annual capital expenditures were approximately $750 million in 2020 and are expected to be approximately $1.0 billion in 2021 and $1.2 billion in 2022. We continue to make capital expenditures in connection with the expansion of our manufacturing capabilities, research and development and other facility-related activities.

Under our commercial paper program, we may issue a maximum of $5.0 billion unsecured notes that have maturities of not more than 366 days from the date of issuance. There were no commercial paper borrowings outstanding as of September 30, 2021.

In 2021, we purchased aggregate principal amount of $3.5 billion of certain of our debt securities for approximately $4.0 billion of cash in a series of tender offers and “make whole” redemptions and $2.0 billion of notes matured and were repaid.

As of September 30, 2021, we had four separate revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility expiring in January 2022, a three-year $1.0 billion facility expiring in January 2022 and two five-year $1.5 billion facilities that were extended to September 2025 and July 2026, respectively. The revolving facilities provide for customary terms and conditions with no financial covenants, may be used to provide backup liquidity for our commercial paper borrowings and are extendable annually by one year on the anniversary date with the consent of the lenders. No borrowings were outstanding under revolving credit facilities at September 30, 2021 or December 31, 2020.

Our investment portfolio includes non-current marketable debt securities, which are subject to changes in fair value as a result of interest rate fluctuations and other market factors. Our investment policy establishes limits on the amount and time to maturity of investments with any institution. The policy also requires that investments are only entered into with corporate and financial institutions that meet high credit quality standards. Refer to “Item 1. Financial Statements—Note 9. Financial Instruments and Fair Value Measurements” for further information.

Credit Ratings

Our current long-term and short-term credit ratings assigned by Moody’s Investors Service are A2 and Prime-1, respectively, with a stable long-term credit outlook, and our current long-term and short-term credit ratings assigned by Standard & Poor’s are A+ and A-1, respectively with a negative long-term credit outlook. The long-term ratings reflect the agencies’ opinion that we have a low default risk but are somewhat susceptible to adverse effects of changes in circumstances and economic conditions. The short-term ratings reflect the agencies’ opinion that we have good to extremely strong capacity for timely repayment. Any credit rating downgrade may affect the interest rate of any debt we may incur, the fair market value of existing debt and our ability to access the capital markets generally.

Cash Flows

The following is a discussion of cash flow activities:


	Nine Months Ended September 30,
Dollars in Millions	2021		2020
Cash flow provided by/(used in):
Operating activities	$	12,150	$	10,697
Investing activities	(939)		953
Financing activities	(12,257)		(4,634)

Operating Activities

Cash flow from operating activities represents the cash receipts and disbursements from all our activities other than investing and financing activities. Operating cash flow is derived by adjusting net earnings for noncontrolling interest, non-cash operating items, gains and losses attributed to investing and financing activities and changes in operating assets and liabilities resulting from timing differences between the receipts and payments of cash and when the transactions are recognized in our results of operations. As a result, changes in cash from operating activities reflect the timing of cash collections from customers and alliance partners; payments to suppliers, alliance partners and employees; customer discounts and rebates; and tax payments in the ordinary course of business. For example, annual employee bonuses are typically paid in the first quarter of the subsequent year.

The $1.5 billion change in cash flow from operating activities compared to 2020 was primarily due to lower tax payments of approximately $700 million and higher cash collections and timing of payments in the ordinary course of business.

Investing Activities

Cash requirements from investing activities include cash used for acquisitions, manufacturing and facility-related capital expenditures and purchases of marketable securities with original maturities greater than 90 days at the time of purchase, proceeds from business divestitures (including royalties), the sale and maturity of marketable securities, sale of equity investments and upfront and contingent milestones from licensing arrangements.

The $1.9 billion change in cash flow from investing activities compared to 2020 was primarily attributable to changes in the amount of marketable debt securities held of $2.1 billion, higher licensing and asset acquisition payments of approximately $700 million in 2021, partially offset by higher proceeds from sales of equity investments of approximately $1.0 billion.

Financing Activities

Cash requirements from financing activities include cash used to pay dividends, repurchase common stock and repay long-term debt and other borrowings reduced by proceeds from the exercise of stock options and issuance of long-term debt and other borrowings.

The $7.6 billion change in cash flow from financing activities compared to 2020 was primarily due to higher debt repayments of $4.5 billion, including a series of tender offer and “make whole” redemptions, and higher share repurchases of $3.5 billion in 2021.

Product and Pipeline Developments

Our R&D programs are managed on a portfolio basis from early discovery through late-stage development and include a balance of early-stage and late-stage programs to support future growth. Our late stage R&D programs in Phase III development include both investigational compounds for initial indications and additional indications or formulations for marketed products. The following are the developments in our marketed products and our late-stage pipeline since the start of the third quarter:


Product			Indication			Date			Developments


Opdivo	Bladder	August 2021	Announced FDA approval for Opdivo for the adjuvant treatment of patients with urothelial carcinoma who are at high risk of recurrence after undergoing radical resection, regardless of prior neoadjuvant chemotherapy, nodal involvement or PD-L1 status. The approval is based on the Phase III CheckMate-274 trial.
Gastric and Esophageal Cancers	October 2021	Announced EC approval of Opdivo in combination with fluoropyrimidine- and platinum-based combination chemotherapy for the first-line treatment of adult patients with HER2-negative advanced or metastatic gastric, gastroesophageal junction, or esophageal adenocarcinoma whose tumors express PD-L1 with a combined positive score ≥ 5. The approval is based on results from the Phase III Checkmate-649 trial.
July 2021	Announced EC approval of Opdivo for the adjuvant treatment of adult patients with esophageal or gastroesophageal junction cancer who have residual pathologic disease following prior neoadjuvant chemoradiotherapy. The approval is based on results from the Phase 3 CheckMate-577 trial.
HCC	July 2021	Announced that in consultation with the FDA, we withdrew the U.S. indication for Opdivo in HCC following treatment with sorafenib. Opdivo was granted accelerated approval for this indication in 2017 based on tumor responses from the Phase I/II CheckMate-040 trial. CheckMate-459, the confirmatory randomized study of Opdivo versus sorafenib in the first-line setting, did not achieve statistical significance for its primary endpoint of overall survival per the pre-specified analysis.
Hodgkin Lymphoma	September 2021	Ono, our alliance partner for Opdivo in Japan, announced that Japan's Ministry of Health, Labour and Welfare approved Opdivo for the treatment of pediatric patients with recurrent or refractory classical Hodgkin lymphoma, for a partial change in approved items of the manufacturing and marketing approval. The approval is based on results from the Phase I PENGUIN trial.
RCC	August 2021	Ono, our alliance partner for Opdivo in Japan, announced that Japan’s Ministry of Health, Labour and Welfare approved the combination therapy of Opdivo and Cabometyx* for the treatment of unresectable or metastatic RCC, for a partial change in approved items of the manufacturing and marketing approval. The approval is based on results from the Phase III Checkmate-9ER trial.


Opdivo + Yervoy	Esophageal	September 2021	Announced that the FDA has accepted the sBLA for Opdivo in combination with Yervoy and Opdivo in combination with fluoropyrimidine- and platinum-containing chemotherapy as first-line treatments for adult patients with unresectable advanced, recurrent or metastatic esophageal squamous cell carcinoma. The FDA assigned a PDUFA goal date of May 28, 2022. The sBLA submissions were based on the Phase III Checkmate-648 trial.
September 2021	Ono, our alliance partner for Opdivo in Japan, announced that the companies have submitted supplemental applications in Japan for Opdivo in combination with Yervoy and Opdivo in combination with chemotherapy for the first-line treatment of unresectable, advanced or recurrent esophageal cancer, for a partial change in approved items of the manufacturing and marketing approvals in Japan. The applications are based on results from the Phase III CheckMate-648 trial.
August 2021	Announced that the EMA validated its MAA for both Opdivo in combination with Yervoy and Opdivo in combination with fluoropyrimidine- and platinum-containing chemotherapy as first-line treatments for adult patients with unresectable advanced, recurrent or metastatic esophageal squamous cell carcinoma. Validation of these applications confirm that the submissions are complete and begins the EMA’s centralized review process. The applications are based on results from the pivotal Phase III CheckMate-648 trial.
Malignant Pleural Mesothelioma	September 2021	Announced three-year data from the CheckMate-743 trial that demonstrated a durable survival benefit with first-line treatment with Opdivo plus Yervoy compared to platinum-based standard-of-care chemotherapy in patients with unresectable malignant pleural mesothelioma, regardless of histology.
RCC	September 2021	Announced that Opdivo plus Yervoy continued to demonstrate durable, long-term survival in the Phase III CheckMate-214 trial, with a five-year survival rate of 48% in patients with previously untreated advanced or metastatic RCC. After a median follow-up of 67.7 months, Opdivo plus Yervoy maintained superior overall survival and response benefits versus sunitinib in both patients with intermediate- and poor-risk prognostic factors, the primary endpoint population, and across all randomized patients.
SCCHN	July 2021	Announced an update on the Phase III CheckMate-651 trial comparing Opdivo plus Yervoy to the EXTREME regimen (cetuximab, cisplatin/carboplatin and fluorouracil) as a first-line treatment in platinum-eligible patients with recurrent or metastatic SCCHN. Although Opdivo plus Yervoy showed a clear, positive trend towards overall survival in patients whose tumors express PD-L1 with a combined positive score ≥ 20, the study did not meet its primary endpoints.


Orencia			aGvHD			August 2021			Announced that the FDA has accepted the sBLA for Orencia for the prevention of moderate to severe aGvHD in patients 6 years of age and older receiving unrelated donor hematopoietic stem cell transplantation. The FDA granted the application Priority Review and assigned a PDUFA goal date of December 23, 2021. The sBLA is based on results from the Phase II ABA2 trial and a registry trial based on real world evidence.


Zeposia			UC			October 2021			Received a positive CHMP opinion of Zeposia for the treatment of adults with moderately to severely active UC who have had an inadequate response, lost response, or were intolerant to either conventional therapy or a biologic agent. The opinion is based on data from the Phase III True North trial.
MS			October 2021			Announced interim results from the Phase III open-label extension trial DAYBREAK, demonstrating the long-term efficacy and safety profile of Zeposia in patients with relapsing forms of MS. In the DAYBREAK extension study, safety was consistent with prior findings and no new safety signals emerged during the reporting period with long-term use of Zeposia. Treatment with Zeposia demonstrated a low annualized relapse rate of 0.103. At months 36 and 48, 75% and 71% of participants were relapse-free and 3- and 6-month confirmed disability progression was observed in 13.9% and 11.4% of participants in the trial, respectively.


Abecma			Multiple Myeloma			August 2021			Announced EC approval for Abecma for the treatment of adult patients with relapsed and refractory multiple myeloma, who have received at least three prior therapies, including an immunomodulatory agent, a proteasome inhibitor and an anti-CD38 antibody and have demonstrated disease progression on the last therapy. The approval is based on results from the pivotal KarMMa study.


deucravacitinib			UC			October 2021			Announced the Phase II LATTICE-UC study evaluating deucravacitinib compared to placebo in moderate to severe UC did not meet the primary efficacy endpoint of clinical remission at Week 12, nor secondary efficacy endpoints. The safety profile of deucravacitinib was consistent with previously reported studies in psoriasis and psoriatic arthritis, and no new safety signals were observed. The potential of deucravacitinib in UC continues to be evaluated in IM011-127, a second Phase II trial that also includes a higher dose.


mavacamten			Obstructive HCM			October 2021			Announced that the EMA validated its MAA for mavacamten for the treatment of patients with obstructive HCM. Validation of the application confirm that the submission is complete and begins the EMA’s centralized review process. The application is based on results from the pivotal Phase III EXPLORER-HCM trial.


relatlimab			Melanoma			October 2021			Announced that the EMA validated its MAA for relatlimab and nivolumab fixed-dose combination for first-line treatment of adult and pediatric patients with advanced (unresectable or metastatic) melanoma. Validation of the application confirm that the submission is complete and begins the EMA’s centralized review process. The application is based on results from the pivotal Phase II/III RELATIVITY-047 trial.
September 2021			Announced that the FDA has accepted for priority review the BLA for the fixed dose combination of relatlimab and nivolumab for the treatment of adult and pediatric patients with unresectable or metastatic melanoma. The FDA assigned a PDUFA goal date of March 19, 2022. The BLA submission was based on the Phase II/III RELATIVITY-047 trial.

Critical Accounting Policies

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses. Our critical accounting policies are those that significantly impact our financial condition and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Because of this uncertainty, actual results may vary from these estimates. For a discussion of our critical accounting policies, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K. There have been no material changes to our critical accounting policies during the nine months ended September 30, 2021. For information regarding the impact of recently adopted accounting standards, refer to “Item 1. Financial Statements—Note.1 Basis of Presentation and Recently Issued Accounting Standards.”

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (including documents incorporated by reference) and other written and oral statements we make from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. You can identify these forward-looking statements by the fact they use words such as “should,” “could,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on historical performance and current expectations and projections about our future financial results, goals, plans and objectives and involve inherent risks, assumptions and uncertainties, including internal or external factors that could delay, divert or change any of them in the next several years, and could cause our future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements. These statements are likely to relate to, among other things, our goals, plans and objectives regarding our financial position, results of operations, cash flows, market position, product development, product approvals, sales efforts, expenses, performance or results of current and anticipated products, our business development strategy generally and in relation to our ability to realize the projected benefits of our acquisitions of Celgene and MyoKardia, the full extent of the impact of the COVID-19 pandemic on our operations and the development and commercialization of our products, potential laws and regulations to lower drug costs, market actions taken by private and government payers to manage drug utilization and contain costs, the expiration of patents or data protection on certain products, including assumptions about our ability to retain patent exclusivity of certain products, and the outcome of contingencies such as legal proceedings and financial results. No forward-looking statement can be guaranteed. This Quarterly Report on Form 10-Q, our 2020 Form 10-K, particularly under the section “Item 1A. Risk Factors,” and our other filings with the SEC, include additional information on the factors that we believe could cause actual results to differ materially from any forward-looking statement.

Although we believe that we have been prudent in our plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this Quarterly Report on Form 10-Q not to occur. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise after the date of this Quarterly Report on Form 10-Q.

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