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 neurology. Our priorities are to continue to renew and diversify our portfolio through launching our new product portfolio, advancing our early, mid and late-stage pipeline, and executing disciplined business development. We remain committed to reducing our debt and returning capital to shareholders. 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 2021 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 2022, we received 14 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 oncology through FDA approval of Opdualag, the first PD-1 inhibitor and LAG-3 blocking antibody combination. Additionally, in the U.S., EU and Japan, two Opdivo based regimens as first line treatments for unresectable advanced or metastatic ESCC were approved. We continue to advance and invest in our cell therapy portfolio through the approval of Abecma in Japan for the treatment of multiple myeloma, and approvals of Breyanzi for the second line and third line treatments of relapsed or refractory diffuse large B-cell lymphoma in the U.S. and EU, respectively. We continue the expansion of 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 expand our portfolio in immunology with an important opportunity for deucravacitinib, our TYK2 inhibitor, for the treatment of psoriasis and other diseases. Within cardiovascular, we broadened our New Product Portfolio with the FDA approval of Camzyos (mavacamten) in April 2022 for patients with symptomatic obstructive HCM.

Our revenues increased by 3% for the six months ended June 30, 2022 due to In-Line Products (primarily Eliquis and Opdivo) and New Product Portfolio (primarily Abecma, Opdualag and Reblozyl), partially offset by Recent LOE Products (primarily Revlimid) and foreign exchange. The $0.11 decrease in GAAP EPS primarily resulted from specified items, including equity investment and contingent consideration fair value adjustments, partially offset by lower impairment charges and higher divestiture gains in 2022. After adjusting for specified items, non-GAAP EPS increased $0.51 as a result of higher revenues, royalties and licensing income and lower weighted-average common shares outstanding.

			Three Months Ended June 30,												Six Months Ended June 30,
Dollars in Millions, except per share data			2022						2021						2022						2021
Total Revenues			$	11,887					$	11,703					$	23,535					$	22,776
Diluted Earnings Per Share
GAAP			$	0.66					$	0.47					$	1.25					$	1.36
Non-GAAP			1.93						1.63						3.89						3.38

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, reconciliations and changes to our non-GAAP financial measures refer to “—Non-GAAP Financial Measures.”

Economic and Market Factors

COVID-19

In response to the COVID-19 pandemic, international, federal, state and local public health and governmental authorities have taken, and continue to take, a number of actions to limit the spread of COVID-19 and address related disruptions in the U.S. and global economy. While we continue to experience impacts on revenues from COVID-19 primarily due to lower new patient starts and patient visits, the pandemic has not significantly impacted our results of operations. The situation remains dynamic and it is 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 future developments such as the ultimate duration and the severity of the spread of COVID-19 and any variant strains in the U.S. and globally, the effectiveness and outreach of vaccines, the effectiveness of federal, state, local and international government's mitigation actions, the pandemic's impact on the U.S. and global economies, changes in the behavior of patients and medical professionals and the timing for resumption to our normal operations, as well as developments affecting healthcare and the delivery of medicines to patients. See “Part I—Item 1A. Risk Factors—General Risks—The COVID-19 pandemic is affecting our business and could have a material adverse effect on us” in our 2021 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. Additional information on the procedures adopted are available at www.bms.com/about-us/responsibility/coronavirus-updates.

Governmental Actions

Our products continue to be subject to increasing pressures across the portfolio from pharmaceutical market access and pricing controls and discounting, changes to tax and importation laws 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 can negatively impact 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 or negotiate prices for prescription drugs, (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. The outcome of these Congressional actions is uncertain. Congress is also considering potential changes to U.S. income tax laws which would result in an increase to our income tax expense, including through increased taxation of our international operations. Furthermore, countries are expected to make changes to their tax laws and updates to international tax treaties to implement the agreement by the Organization for Economic Co-operation and Development to establish a global minimum tax. 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 2021 Form 10-K.

In February 2022, the Russian Federation invaded Ukraine. As a result, the U.S. and many other countries have implemented extensive sanctions on the Russian Federation, with which BMS intends to fully comply. In June 2022, we transferred our commercial operations in the Russian Federation to a third-party distributor and incurred $39 million of exit costs. Our remaining net assets in the Russian Federation are not material. The Russian Federation and Ukraine represent less than 1% of our total revenues, net assets, workforce and clinical trials, and while the situation continues to evolve, as of now, we do not anticipate any significant negative impacts on our business. For a more complete discussion on the risks we encounter in our business, please refer to “Part I—Item 1A. Risk Factors” in our 2021 Form 10-K.

Significant Product and Pipeline Approvals

The following is a summary of the significant approvals received in 2022 as of July 27, 2022:

Product			Date			Approval

Breyanzi			June 2022			FDA approval of Breyanzi for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after one line of therapy.

Opdivo+Yervoy			May 2022			Japan's Ministry of Health, Labour and Welfare approval of Opdivo plus Yervoy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status.

Opdivo			May 2022			Japan's Ministry of Health, Labour and Welfare approval of Opdivo in combination with fluoropyrimidine- and platinum-containing chemotherapy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status.

Opdivo+Yervoy			May 2022			FDA approval of Opdivo plus Yervoy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status.

Opdivo			May 2022			FDA approval of Opdivo in combination with fluoropyrimidine- and platinum-containing chemotherapy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status.

Camzyos (mavacamten)			April 2022			FDA approval of Camzyos (mavacamten) for the treatment of adults with symptomatic obstructive HCM.

Breyanzi			April 2022			EC approval of Breyanzi for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma, primary mediastinal large B-cell lymphoma and follicular lymphoma grade 3B after two or more lines of systemic therapy.

Opdivo+Yervoy			April 2022			EC approval of Opdivo plus Yervoy for the first-line treatment of adult patients with unresectable advanced, recurrent or metastatic ESCC with tumor cell PD-L1 expression > 1%.

Opdivo			April 2022			EC approval of Opdivo for the adjuvant treatment of adults with muscle-invasive urothelial carcinoma with tumor cell PD-L1 expression > 1% who are at risk of recurrence after undergoing radical resection.

Opdivo			April 2022			EC approval of Opdivo in combination with fluoropyrimidine- and platinum-based chemotherapy for the first-line treatment of adult patients with unresectable advanced, recurrent, or metastatic ESCC with PD-L1 expression > 1%.

Opdualag			March 2022			FDA approval of Opdualag, a fixed-dose combination of nivolumab and relatlimab, for the treatment of adult and pediatric patients 12 years of age and older with unresectable or metastatic melanoma.

Opdivo			March 2022			FDA approval of Opdivo in combination with platinum-doublet chemotherapy for adult patients with resectable NSCLC in the neoadjuvant setting.

Opdivo			March 2022			Japan's Ministry of Health, Labour and Welfare approval of Opdivo for the adjuvant treatment of urothelial carcinoma.

Abecma			January 2022			Japan’s Ministry of Health, Labour and Welfare approval of Abecma for the treatment of adult patients with relapsed or refractory multiple myeloma who have received at least three prior therapies.

Refer to “—Product and Pipeline Developments” for the developments in our marketed products and late-stage pipeline since the start of the second quarter of 2022.

Acquisitions, Divestitures, Licensing and Other Arrangements

Refer to “Item 1. Financial Statements—Note 3. Alliances” and “—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for information on significant divestitures, licensing and other arrangements in 2022.

RESULTS OF OPERATIONS

Regional Revenues

The composition of the changes in revenues was as follows:

			Three Months Ended June 30,																								Six Months Ended June 30,
Dollars in Millions			2022						2021						% Change						Foreign Exchange**(b)**						2022						2021						% Change						Foreign Exchange**(b)**
United States			$	8,268					$	7,388					12		%				—						$	15,962					$	14,398					11		%				—
International			3,427						4,124						(17)		%				(9)		%				7,154						8,023						(11)		%				(8)		%
Other(a)			192						191						1		%				—						419						355						18		%				—
Total			$	11,887					$	11,703					2		%				(3)		%				$	23,535					$	22,776					3		%				(3)		%

(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 second quarter of 2022 and year-to-date increased due to Eliquis, our New Product Portfolio and Opdivo. Average U.S. net selling prices increased 4% year-to-date compared to the same period a year ago.

International

• International revenues for the second quarter of 2022 and year-to-date decreased due to lower demand of Revlimid as a result of generic erosion and foreign exchange impacts*,* partially offset by Eliquis, Opdivo and our New Product Portfolio. Average net selling prices decreased compared to the same period a year ago.

No single country outside the U.S. contributed more than 10% of total revenues during the six months ended June 30, 2022 and 2021. 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 June 30,																		Six Months Ended June 30,
Dollars in Millions			2022						2021						% Change						2022						2021						% Change
Gross product sales			$	17,299					$	16,782					3		%				$	33,949					$	32,341					5		%
GTN adjustments
Charge-backs and cash discounts			(1,750)						(1,720)						2		%				(3,513)						(3,306)						6		%
Medicaid and Medicare rebates			(2,624)						(2,139)						23		%				(4,708)						(3,857)						22		%
Other rebates, returns, discounts and adjustments			(1,440)						(1,518)						(5)		%				(2,935)						(2,975)						(1)		%
Total GTN adjustments			(5,814)						(5,377)						8		%				(11,156)						(10,138)						10		%
Net product sales			$	11,485					$	11,405					1		%				$	22,793					$	22,203					3		%
GTN adjustments percentage			34		%				32		%				2		%				33		%				31		%				2		%
U.S.			38		%				38		%				—						38		%				37		%				1		%
Non-U.S.			16		%				15		%				1		%				16		%				16		%				—

Reductions to provisions for product sales made in prior periods resulting from changes in estimates were $123 million and $197 million for the three and six months ended June 30, 2022 and $85 million and $302 million for the three and six months ended June 30, 2021, respectively. The reductions to provisions primarily related to Non-U.S. revisions in clawback amounts primarily driven by the VAT recoverable estimates in 2022 and Eliquis coverage gap discounts in 2021. 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 June 30,																		Six Months Ended June 30,
Dollars in Millions			2022						2021						% Change						2022						2021						% Change
In-Line Products
Eliquis			$	3,235					$	2,792					16		%				6,446						$	5,678					14		%
U.S.			2,192						1,722						27		%				4,339						3,645						19		%
Non-U.S.			1,043						1,070						(3)		%				2,107						2,033						4		%
Opdivo			2,063						1,910						8		%				3,986						3,630						10		%
U.S.			1,205						1,076						12		%				2,304						2,020						14		%
Non-U.S.			858						834						3		%				1,682						1,610						4		%
Pomalyst/Imnovid			908						854						6		%				1,734						1,627						7		%
U.S.			616						567						9		%				1,173						1,079						9		%
Non-U.S.			292						287						2		%				561						548						2		%
Orencia			876						814						8		%				1,668						1,572						6		%
U.S.			654						593						10		%				1,246						1,129						10		%
Non-U.S.			222						221						—						422						443						(5)		%
Sprycel			544						541						1		%				1,027						1,011						2		%
U.S.			372						325						14		%				677						600						13		%
Non-U.S.			172						216						(20)		%				350						411						(15)		%
Yervoy			525						510						3		%				1,040						966						8		%
U.S.			326						328						(1)		%				637						622						2		%
Non-U.S.			199						182						9		%				403						344						17		%
Empliciti			77						86						(10)		%				152						171						(11)		%
U.S.			47						51						(8)		%				94						102						(8)		%
Non-U.S.			30						35						(14)		%				58						69						(16)		%

			Three Months Ended June 30,																		Six Months Ended June 30,
Dollars in Millions			2022						2021						% Change						2022						2021						% Change
Mature and other products			435						473						(8)		%				897						979						(8)		%
U.S.			147						130						13		%				280						282						(1)		%
Non-U.S.			288						343						(16)		%				617						697						(11)		%
New Product Portfolio
Reblozyl			172						128						34		%				328						240						37		%
U.S.			144						110						31		%				278						208						34		%
Non-U.S.			28						18						56		%				50						32						56		%
Abecma			89						24						**						156						24						37		%
U.S.			72						24						**						128						24						**
Non-U.S.			17						—						N/A						28						—						N/A
Zeposia			66						28						**						102						46						**
U.S.			48						20						**						69						33						**
Non-U.S.			18						8						**						33						13						**
Breyanzi			39						17						**						83						17						**
U.S.			33						17						94		%				74						17						**
Non-U.S.			6						—						N/A						9						—						N/A
Inrebic			23						16						44		%				41						32						28		%
U.S.			20						15						33		%				35						30						17		%
Non-U.S.			3						1						**						6						2						**
Onureg			32						12						**						55						27						**
U.S.			25						12						**						44						26						69		%
Non-U.S.			7						—						N/A						11						1						**
Opdualag			58						—						N/A						64						—						N/A
U.S.			58						—						N/A						64						—						N/A
Non-U.S.			—						—						N/A						—						—						N/A
Camzyos			3						—						N/A						3						—						N/A
U.S.			3						—						N/A						3						—						N/A
Non-U.S.			—						—						N/A						—						—						N/A
Recent LOE Products**(a)**
Revlimid			2,501						3,202						(22)		%				5,298						6,146						(14)		%
U.S.			2,130						2,164						(2)		%				4,168						4,122						1		%
Non-U.S.			371						1,038						(64)		%				1,130						2,024						(44)		%
Abraxane			241						296						(19)		%				455						610						(25)		%
U.S.			176						234						(25)		%				349						459						(24)		%
Non-U.S.			65						62						5		%				106						151						(30)		%
Total Revenues			11,887						11,703						2		%				23,535						22,776						3		%
U.S.			8,268						7,388						12		%				15,962						14,398						11		%
Non-U.S.			3,619						4,315						(16)		%				7,573						8,378						(10)		%

** Change in excess of 100%.

(a) Recent LOE Products includes products with significant decline in revenue from a prior reporting period as a result of a loss of exclusivity.

Eliquis (apixaban) — an oral Factor Xa inhibitor, indicated for the reduction in risk of stroke/systemic embolism in NVAF and for the treatment of DVT/PE and reduction in risk of recurrence following initial therapy.

• U.S. revenues increased 27% in the second quarter of 2022 and 19% year-to-date due to higher average net selling prices, including favorable GTN adjustments, and higher demand. A majority of Eliquis patients enter the coverage gap during the third and fourth quarters which is expected to result in lower revenues during the second half of the year.

• International revenues decreased 3% in the second quarter of 2022 due to foreign exchange impacts of 12%, partially offset by higher demand. Excluding foreign exchange impacts, revenues increased by 9%.

International revenues increased 4% year-to-date due to higher demand, partially offset by foreign exchange impacts of 9% and lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 13%.

• Following the May 2021 expiration of regulatory exclusivity for Eliquis in Europe, generic manufacturers have begun marketing generic versions of Eliquis in the UK and Netherlands, and may seek to market generic versions of Eliquis in additional countries 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, CRC, head and neck, RCC, HCC, lung, melanoma, MPM, stomach and esophageal cancer. 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 12% in the second quarter of 2022 and 14% year-to-date due to higher demand across multiple indications including the Opdivo+Yervoy combinations for NSCLC, Opdivo+Cabometyx* combination for kidney cancer, bladder and various gastric and esophageal cancers, partially offset by declining second-line eligibility across tumor indications and increased competition.

• International revenues increased 3% in the second quarter of 2022 and 4% year-to-date due to higher demand as a result of additional indication launches and core indications, partially offset by foreign exchange impacts of 10% and 9%, respectively. Excluding foreign exchange impacts, revenues increased 13% in both periods.

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 9% in both the second quarter of 2022 and year-to-date due to higher average net selling prices and higher demand.

• International revenues increased 2% in both the second quarter of 2022 and year-to-date due to higher demand, partially offset by foreign exchange impacts of 9% and 8%, respectively, and lower average net selling prices. Excluding foreign exchange impacts, revenues increased by 11% and 10%, 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 both the second quarter of 2022 and year-to-date due to higher demand.

• International revenues remained consistent in the second quarter of 2022 due to higher demand, offset by foreign exchange impacts of 12%. Excluding foreign exchange impacts, revenues increased by 12%.

International revenues decreased 5% year-to-date due to foreign exchange impacts of 9%, partially offset by higher demand. Excluding foreign exchange impacts, revenues increased by 4%.

• In the U.S. and EU, estimated LOE dates are based on method of use patents that expired 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.

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 14% in the second quarter of 2022 and 13% year-to-date due to higher average net selling prices and higher demand.

• International revenues decreased 20% in the second quarter of 2022 and 15% year-to-date due to foreign exchange impacts of 10% and 9%, respectively and lower demand as a result of generic erosion. Excluding foreign exchange impacts, revenues decreased by 10% and 6%, respectively.

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, CRC and esophageal cancer.

• U.S. revenues remained consistent in the second quarter of 2022 due to lower demand offset by higher average net selling prices.

U.S. revenues increased 2% year-to-date due to higher average net selling prices and higher demand primarily from the Opdivo+Yervoy combination for NSCLC.

• International revenues increased 9% in the second quarter of 2022 and 17% year-to-date due to higher demand as a result of additional indication launches and core indications, partially offset by lower average net selling prices and foreign exchange impacts of 12% and 10%, respectively. Excluding foreign exchange impacts, revenues increased by 21% and 27%, respectively.

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

Mature and other products — includes all other products, including those which have lost exclusivity in major markets, OTC products, royalty revenue and mature products.

• International revenues decreased 16% in the second quarter of 2022 and 11% year-to-date primarily due to continued generic erosion and foreign exchange impacts of 6% and 2%, respectively. Excluding foreign exchange impacts, revenues decreased by 10% and 9%, respectively.

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 ESA in adult patients with very low- to intermediate-risk MDS who have ring sideroblasts and require RBC transfusions.

• U.S. revenues increased 31% in the second quarter of 2022 and 34% year-to-date due to higher demand.

Abecma (idecabtagene vicleucel) — is a B-cell maturation antigen-directed genetically modified autologous CAR T cell therapy 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.

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

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.

Opdualag (nivolumab and relatlimab-rmbw) — a combination of nivolumab, a PD-1 blocking antibody, and relatlimab, a lymphocyte activation gene-3 (LAG-3) blocking antibody, indicated for the treatment of adult and pediatric patients 12 years of age or older with unresectable or metastatic melanoma. Opdualag was launched in March 2022.

Camzyos (mavacamten) — a cardiac myosin inhibitor indicated for the treatment of adults with symptomatic obstructive HCM to improve functional capacity and symptoms. Camzyos was launched in April 2022.

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 decreased 2% in the second quarter of 2022 and increased 1% year-to-date. The increase in revenues year-to-date was due to higher demand in the first quarter of 2022 and higher average net selling prices, partially offset by lower demand in the second quarter of 2022 due to generic erosion. As a result of the availability of generic lenalidomide beginning in March 2022, we expect a material decline in revenue during the second half of 2022.

• International revenues decreased 64% in the second quarter of 2022 and 44% year-to-date due to generic erosion across several European countries and Canada, lower average net selling prices and foreign exchange impacts of 3% and 4%, respectively. Excluding foreign exchange impacts, revenues decreased by 61% and 40%, respectively.

• In the U.S., certain third parties have been granted volume-limited licenses to sell generic lenalidomide beginning in March 2022 or thereafter. 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 the UK in January 2022 and in various other major market European countries (e.g. France, Germany, Italy and Spain) where our supplementary protection certificate is in force beginning in February 2022. In Japan, the estimated minimum market exclusivity date is based on a composition of matter patent, which expires in July 2022. Global revenues for Revlimid are expected to decline to approximately $9.0 billion to $9.5 billion in 2022.

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 25% in the second quarter of 2022 and 24% year-to-date due to the entry of authorized generics and lower demand. Year-to-date was also impacted by manufacturing delays in the first quarter of 2022. Revenues in the second quarter of 2022 include product supply sales and profit sharing fees resulting from authorized generic arrangements.

• International revenues increased 5% in the second quarter of 2022 due to higher demand as the manufacturing delays experienced in the prior year were substantially resolved, partially offset by foreign exchange impacts of 8%. Excluding foreign exchange impacts, revenues increased by 13%.

• International revenues decreased 30% year-to-date due to generic erosion, lower demand as a result of manufacturing delays and foreign exchange impacts of 5%. Excluding foreign exchange impacts, revenues decreased by 25%. During the first quarter of 2022, the manufacturing delays experienced in the U.S. and International were substantially resolved.

• In the U.S. and EU, generics have entered the market. In Japan, the estimated minimum market exclusivity date is 2023 based on a method of use patent. Global revenues for Abraxane are expected to decline by approximately 25% to 30% in 2022.

Estimated End-User Demand

Pursuant to the SEC Consent Order described in our 2021 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:

Camzyos had 5.1 months of inventory on hand at June 30, 2022 in the U.S to support the product launch. The inventory is expected to be worked down as demand increases post launch.

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 accounted for approximately 77% of total gross sales of U.S. products for the six months ended June 30, 2022. 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 June 30, 2022 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 quarterly report on Form 10-Q.

Expenses

			Three Months Ended June 30,																		Six Months Ended June 30,
Dollars in Millions			2022						2021						% Change						2022						2021						% Change
Cost of products sold(a)			$	2,720					$	2,452					11		%				$	5,191					$	5,293					(2)		%
Marketing, selling and administrative			1,787						1,882						(5)		%				3,618						3,548						2		%
Research and development			2,321						2,478						(6)		%				4,581						4,697						(2)		%
Acquired IPRD			400						793						(50)		%				733						799						(8)		%
Amortization of acquired intangible assets			2,417						2,547						(5)		%				4,834						5,060						(4)		%
Other (income)/expense, net			284						(2)						**						933						(704)						**
Total Expenses			$	9,929					$	10,150					(2)		%				$	19,890					$	18,693					6		%

** In excess of +/- 100%.

(a) Excludes amortization of acquired intangible assets.

Cost of Products Sold

Cost of products sold increased by $268 million in the second quarter of 2022, primarily due to higher profit sharing due to Eliquis revenue growth ($228 million), and an impairment charge resulting from the divestiture of a manufacturing site ($43 million), partially offset by foreign exchange and related hedging settlements.

Cost of products sold decreased by $102 million year-to-date, primarily due to the impairment of Inrebic EU regulatory approval milestones ($315 million) in 2021, foreign exchange and related hedging settlements, partially offset by higher profit sharing due to Eliquis revenue growth ($378 million).

Marketing, Selling and Administrative

Marketing, selling and administrative expenses decreased $95 million in the second quarter of 2022 primarily due to foreign exchange.

Marketing, selling and administrative expenses increased $70 million year-to-date, primarily due to expenses to support new product launches, partially offset by foreign exchange.

Research and Development

Research and development expense decreased by $157 million in the second quarter of 2022 and $116 million year-to-date, primarily due to a $230 million IPRD impairment charge resulting from the decision to discontinue further development of an investigational compound in the second quarter 2021, partially offset by higher costs associated with the overall portfolio, and the unwinding of inventory purchase price adjustments for clinical use during the first six months of 2022 ($108 million).

Acquired IPRD

Acquired IPRD charges resulting from upfront or contingent milestone payments in connection with asset acquisitions or licensing of third-party intellectual property rights were as follows:

			Three Months Ended June 30,												Six Months Ended June 30,
Dollars in Millions			2022						2021						2022						2021
Mavacamten royalty extinguishment			$	295					$	—					$	295					$	—
Dragonfly milestone			—						—						175						—
Immatics upfront license fee			—						—						150						—
BridgeBio upfront license fee			90						—						90						—
Eisai upfront collaboration fee			—						650						—						650
Prothena opt-in license fee			—						80						—						80
Other			15						63						23						69
Acquired IPRD charges			$	400					$	793					$	733					$	799

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets decreased by $130 million in the second quarter of 2022 and $226 million year-to-date, due to a longer than previously expected market exclusivity period for Pomalyst.

Other (Income)/Expense, Net

Other (income)/expense, net changed by $286 million in the second quarter of 2022 and $1.6 billion year-to-date, primarily due to equity investments, contingent value rights and other items discussed below.

			Three Months Ended June 30,												Six Months Ended June 30,
Dollars in Millions			2022						2021						2022						2021
Interest expense			$	313					$	330					$	639					$	683
Royalties and licensing income			(508)						(405)						(985)						(772)
Equity investment losses/(gains)			308						(148)						952						(749)
Integration expenses			124						152						229						293
Contingent consideration			—						—						1						(510)
(Gain)/Loss on debt redemption			(9)						—						266						281
Provision for restructuring			20						78						43						123
Litigation and other settlements			25						44						(12)						36
Investment income			(27)						(12)						(37)						(21)
Divestiture gains			—						(11)						(211)						(11)
Other			38						(30)						48						(57)
Other (income)/expense, net			$	284					$	(2)					$	933					$	(704)

• Royalties and licensing income includes diabetes business royalties, Keytruda* royalties, Tecentriq* royalties, upfront licensing fees and milestones for products that have not obtained commercial approval. Refer to “Item 1. Financial Statements—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” for further information.

• Equity investment losses/(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 or loss from equity method investments is 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.

• 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.

• (Gain)/Loss on debt redemption resulted from the early redemption of long-term debt of $849 million in the second quarter of 2022, $5.2 billion in the first quarter of 2022 and $3.5 billion in the first quarter of 2021.

• 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.

• Litigation and other settlements includes income of $40 million resulting from a settlement resolving all legal claims and business interests pertaining to Nimbus’ TYK2 inhibitor in the first quarter of 2022. The settlement also provides for contingent development, regulatory and sales-based milestones payable to BMS upon the occurrence of certain events.

• Divestiture gains resulted from the divestiture of product rights for several mature products in the first quarter of 2022.

• Other includes exit costs of $39 million resulting from the transition of our commercial operations in the Russian Federation to a third-party distributor during the second quarter of 2022 and transition and other service fees in 2021.

Income Taxes

			Three Months Ended June 30,												Six Months Ended June 30,
Dollars in Millions			2022						2021						2022						2021
Earnings Before Income Taxes			$	1,958					$	1,553					$	3,645					$	4,083
Provision for Income Taxes			529						492						933						993
Effective Tax Rate			27.0		%				31.7		%				25.6		%				24.3		%
Impact of Specified Items			10.0		%				14.1		%				9.2		%				7.1		%
Effective Tax Rate Excluding Specified Items			17.0		%				17.6		%				16.4		%				17.2		%

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 and contingent value rights fair value adjustments that were not taxable in 2021. The 0.8% decrease in the year-to-date effective tax rate excluding specified items during 2022 was due to jurisdictional earnings mix including income taxes attributed to Acquired IPRD charges. 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 past or future operating results. These items are excluded from non-GAAP earnings and related EPS information because the Company believes they neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance. 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 purchase price adjustments, (iii) acquisition and integration expenses, (iv) restructuring costs, (v) accelerated depreciation and impairment of property, plant and equipment and intangible assets, (vi) divestiture gains or losses, (vii) stock compensation resulting from accelerated vesting of Celgene awards and certain retention-related employee compensation charges related to the Celgene transaction, (viii) pension, legal and other contractual settlement charges, (ix) equity investment and contingent value rights fair value adjustments (including fair value adjustments attributed to limited partnership equity method investments) and (x) 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. 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 July 27, 2022 and are incorporated herein by reference.

Beginning with the first quarter of 2022, significant R&D charges or other income resulting from upfront or contingent milestone payments in connection with asset acquisitions or licensing of third-party intellectual property rights are no longer excluded from our non-GAAP financial measures. We are making these changes to our presentation of non-GAAP financial measures following comments from and discussions with the SEC. For purposes of comparability, the non-GAAP financial measures for the three and six months ended June 30, 2021 have been updated to reflect this change.

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. This information is not intended to be considered in isolation or as a substitute for the related financial measures 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 June 30,												Six Months Ended June 30,
Dollars in Millions			2022						2021						2022						2021
Inventory purchase price accounting adjustments			$	102					$	88					$	154					$	167
Intangible asset impairment			—						—						—						315
Site exit and other costs			43						1						43						24
Cost of products sold			145						89						197						506
Employee compensation charges			—						1						—						1
Site exit and other costs			4						—						6						(1)
Marketing, selling and administrative			4						1						6						—
IPRD impairments			—						230						40						230
Inventory purchase price accounting adjustments			21						—						108						—
Employee compensation charges			—						—						—						1
Research and development			21						230						148						231
Amortization of acquired intangible assets			2,417						2,547						4,834						5,060
Interest expense(a)			(21)						(28)						(48)						(62)
Equity investment losses/(gains)			307						(154)						950						(762)
Integration expenses			124						152						229						293
Contingent consideration			—						—						—						(510)
(Gain)/Loss on debt redemption			(9)						—						266						281
Provision for restructuring			20						78						43						123
Litigation and other settlements			—						—						(40)						—
Divestiture gains			—						(11)						(211)						(11)
Other			42						—						42						—
Other (income)/expense, net			463						37						1,231						(648)
Increase to pretax income			3,050						2,904						6,416						5,149
Income taxes on items above			(321)						(292)						(719)						(595)
Increase to net earnings			$	2,729					$	2,612					$	5,697					$	4,554

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

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

			Three Months Ended June 30,												Six Months Ended June 30,
Dollars in Millions, except per share data			2022						2021						2022						2021
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – GAAP			$	1,421					$	1,055					$	2,699					$	3,076
Specified Items			2,729						2,612						5,697						4,554
Net Earnings Attributable to BMS Used for Diluted EPS Calculation – Non-GAAP			$	4,150					$	3,667					$	8,396					$	7,630
Weighted-Average Common Shares Outstanding – Diluted			2,149						2,252						2,157						2,258
Diluted Earnings Per Share Attributable to BMS – GAAP			$	0.66					$	0.47					$	1.25					$	1.36
Diluted EPS Attributable to Specified Items			1.27						1.16						2.64						2.02
Diluted EPS Attributable to BMS – Non-GAAP			$	1.93					$	1.63					$	3.89					$	3.38

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Our net debt position was as follows:

Dollars in Millions			June 30, 2022						December 31, 2021
Cash and cash equivalents			$	10,750					$	13,979
Marketable debt securities – current			2,478						2,987
Total cash, cash equivalents and marketable debt securities			13,228						16,966
Short-term debt obligations			(4,953)						(4,948)
Long-term debt			(37,107)						(39,605)
Net debt position			$	(28,832)					$	(27,587)

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. Under the Tax Cuts and Jobs Act of 2017, research and development costs are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. Absent a change in law, we estimate our U.S. income tax payments will increase by nearly $2.0 billion as compared to 2021.

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, income taxes, restructuring initiatives, business development, business combinations, asset acquisitions, repurchase of common stock, debt maturities of approximately $13.4 billion through 2026, as well as any debt repurchases through redemptions or tender offers. During the six months ended June 30, 2022, our net debt position increased by $1.2 billion due to common stock repurchases and dividends of $7.3 billion, partially offset by cash from operating activities of $6.1 billion.

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 authorization under the program was $15.2 billion as of December 31, 2021. During the first quarter of 2022, we executed ASR agreements to repurchase an aggregate $5.0 billion of common stock. The remaining share repurchase capacity under the share repurchase program was approximately $10.2 billion as of June 30, 2022. Refer to “Item 1. Financial Statements—Note 15. Equity” for additional information.

Dividend payments were $2.3 billion during the six months ended June 30, 2022. Dividend per common share of $0.54 was declared during each of the first and second quarters of 2022. Dividend decisions are made on a quarterly basis by our Board of Directors.

Annual capital expenditures were approximately $970 million in 2021 and are expected to be approximately $1.2 billion in 2022 and 2023 in each year. We continue to make capital expenditures in connection with the expansion of our manufacturing capabilities, research and development and other facility-related activities.

During the six months ended June 30, 2022, we purchased an aggregate principal amount of $6.0 billion of certain of our debt securities for $6.6 billion of cash in tender offers and “make whole” redemptions. In connection with these transactions, a net $266 million loss on debt redemption was recognized based on the carrying value of the debt and included in Other (income)/expense, net.

During the six months ended June 30, 2022, we issued an aggregate principal amount of $6.0 billion of debt with net proceeds of $5.9 billion. Refer to “Item 1. Financial Statements—Note 9. Financial Instruments and Fair Value Measurements” for further information.

At December 31, 2021, we had four separate revolving credit facilities totaling $6.0 billion, which consisted of a 364-day $2.0 billion facility which expired in January 2022, a three-year $1.0 billion facility which expired in January 2022 and two five-year $1.5 billion facilities that were extended to September 2025 and July 2026, respectively.

In January 2022, we entered into a five-year $5.0 billion facility expiring in January 2027, which is extendable annually by one year with the consent of the lenders. This facility provides for customary terms and conditions with no financial covenants and may be used to provide backup liquidity for our commercial paper borrowings. Concurrently with the entry into this facility, the commitments under our existing five-year $1.5 billion facilities were terminated and the three-year $1.0 billion facility and 364-day $2.0 billion facility expired in accordance with their terms in January 2022. No borrowings were outstanding under revolving credit facilities at June 30, 2022 or December 31, 2021.

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 June 30, 2022.

Our investment portfolio includes 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.

In June 2022, we entered into a definitive merger agreement to acquire Turning Point, a clinical-stage precision oncology company with a pipeline of investigational medicines designed to target the most common mutations associated with oncogenesis. We commenced a tender offer in June 2022, which was extended through August 15, 2022, to acquire all of the issued and outstanding shares of Turning Point's common stock for $76.00 per share in an all-cash transaction for a total consideration of $4.1 billion, including cash settlements of equity stock awards. We expect to finance the acquisition with cash on hand. Refer to “Item 1. Financial Statements—Note 4. Acquisitions, Divestitures, Licensing and Other Arrangements” 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 stable 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:

			Six Months Ended June 30,
Dollars in Millions			2022						2021
Cash flow provided by/(used in):
Operating activities			$	6,073					$	6,884
Investing activities			(194)						37
Financing activities			(9,173)						(10,477)

Operating Activities

Cash flow from operating activities represents the cash receipts and disbursements from all of 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.

The $811 million change in cash provided by operating activities compared to 2021 was driven by higher tax payments primarily related to research and development expenses that are capitalized and amortized for tax purposes ($900 million), partially offset by 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, as well as upfront and contingent milestones from licensing arrangements.

The $231 million change in cash used in investing activities compared to 2021 was primarily due to lower proceeds from the sale of equity investments ($660 million) and higher Acquired IPRD payments ($410 million) in 2022, partially offset by changes in the amount of marketable debt securities held ($870 million).

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 $1.3 billion change in cash used in financing activities compared to 2021 was primarily due to changes in the amount of debt securities ($3.1 billion), partially offset by higher repurchases of common stock ($2.0 billion).

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 second quarter of 2022:

Product			Indication			Date			Developments

Opdivo			Bladder			April 2022			Announced EC approval of Opdivo for the adjuvant treatment of adults with muscle-invasive urothelial carcinoma with tumor cell PD-LI expression > 1% who are at risk of recurrence after undergoing radical resection. The approval is based on results from the Phase III CheckMate -274 trial.
Esophageal			May 2022			Ono, our alliance partner for Opdivo in Japan, announced that Japan's Ministry of Health, Labour and Welfare approved Opdivo in combination with fluoropyrimidine- and platinum- containing chemotherapy for the first-line treatment for adult patients with previously untreated unresectable advanced or metastatic ESCC with PD-L1 expression > 1%, as well as in the all-randomized population percentage. The approval is based on the Phase III CheckMate -648 trial. (ONO-4538-50/CA209648).
May 2022			Announced FDA approval of Opdivo in combination with fluoropyrimidine- and platinum- containing chemotherapy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status. The approval is based on the Phase III CheckMate -648 trial.
April 2022			Announced EC approval of Opdivo in combination with fluoropyrimidine- and platinum-based chemotherapy for the first-line treatment of adult patients with unresectable advanced, recurrent, or metastatic ESCC with PD-L1 expression > 1%. The approval is based on results from the Phase III CheckMate -648 trial.
NSCLC			April 2022			Ono, our alliance partner for Opdivo in Japan, announced that the companies have submitted the supplemental Japanese New Drug Application to Pharmaceuticals and Medical Devices Agency for Opdivo to expand its use as a neoadjuvant treatment of resectable NSCLC in combination with chemotherapy for a partial change in approved items of the manufacturing and marketing approval in Japan. The application is based on the Phase III CheckMate -816 study.
April 2022			Announced results from the Phase III CheckMate-816 trial which showed that neoadjuvant treatment with Opdivo in combination with chemotherapy significantly improved event-free survival, a primary endpoint, compared to chemotherapy alone in patients with resectable NSCLC. Opdivo in combination with chemotherapy reduced the risk of disease recurrence, progression or death by 37%, and demonstrated favorable early overall survival trend.
RCC			April 2022			Announced, with our alliance partner Nektar, that based on results from pre-planned analysis of two late-stage clinical studies of bempegaldesleukin in combination with Opdivo in RCC and bladder cancer, to jointly end the global clinical development program for bempegaldesleukin in combination with Opdivo. These studies and all other ongoing studies in the program will be discontinued.

Product			Indication			Date			Developments

Opdivo + Yervoy			NSCLC			June 2022			Announced five-year follow up results from Part I of the Phase III CheckMate -227 trial demonstrating long-term, durable survival outcomes with Opdivo plus Yervoy in first-line treatment of patients with metastatic NSCLC regardless of PD-L1 expression levels. In the primary endpoint population, the combination nearly doubled overall survival rate compared to chemotherapy.
June 2022			Announced three-year follow up results from the Phase III CheckMate -9LA trial demonstrating long-term, durable survival benefits with Opdivo plus Yervoy with two cycles of chemotherapy compared to four cycles of chemotherapy in patients with previously untreated metastatic NSCLC regardless of PD-L1 expression and histology.
Bladder			May 2022			Announced that results from Phase III CheckMate -901 trial, comparing Opdivo plus Yervoy to standard-of-care chemotherapy as a first-line treatment for patients with untreated unresectable or metastatic urothelial carcinoma, who are ineligible for cisplatin baseed chemotherapy, did not meet the primary endpoint of overall survival in patients whose tumor cells express PD-L1 > 1% at final analysis.
Esophageal			May 2022			Ono, our alliance partner for Opdivo in Japan, announced that Japan's Ministry of Health, Labour and Welfare approved Opdivo in combination with fluoropyrimidine- and platinum- containing chemotherapy for the first-line treatment for adult patients with previously untreated unresectable advanced or metastatic ESCC with PD-L1 expression ≥1%, as well as in the all-randomized population. The approval is based on the Phase III CheckMate -648 trial.
May 2022			Announced FDA approval of Opdivo plus Yervoy as a first-line treatment for adult patients with unresectable advanced or metastatic ESCC regardless of PD-L1 status. The approval is based on the Phase III CheckMate -648 trial.
April 2022			Announced EC approval of Opdivo plus Yervoy for the first-line treatment of adult patients with unresectable advanced, recurrent or metastatic ESCC with tumor cell PD-L1 expression > 1%. The approval is based on results from the Phase III CheckMate -648 trial.
Opdualag			Melanoma			July 2022			Announced that CHMP recommended approval for LAG-3-blocking antibody combination Opdualag (nivolumab and relatlimab) for first-line treatment of advanced melanoma patients with tumor cell PD-L1 expression < 1%. The approval recommendation is based on data from the Phase II/III RELATIVITY-047 trial.

Orencia			COVID-19			June 2022			Announced that initial results from the Phase III Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV-1) immune modulators clinical trial sponsored by the National Institutes of Health showed a strong, but not statistically significant improvement in the primary endpoint of time to recovery as measured by day of hospital discharge. Analyses of the secondary endpoints, including mortality and clinical status, demonstrated Orencia reduced participants' risk of death and improved their clinical status at 28 days after entering the study when compared with placebo.

Reblozyl			Beta Thalassemia			June 2022			Announced the withdrawal of the sBLA for Reblozyl for the treatment of anemia in adults with non-transfusion dependent beta thalassemia. We could not appropriately address the FDA's questions about the benefit-risk profile of Reblozyl in this patient population based on the current dataset from the Phase II BEYOND trial.

Zeposia			MS			June 2022			Announced post-hoc analyses from the Zeposia Phase III DAYBREAK open-label extension and Phase III SUNBEAM trials, showing that the majority of patients receiving Zeposia for multiple sclerosis reported improved or preserved cognitive function, with the greatest improvement seen when used early in the disease when thalamic volume remains high.
COVID-19			June 2022			Announced new data on COVID-19 vaccine responses in participants treated with Zeposia from the Phase III DAYBREAK open-label extension study in relapsing MS. For participants who showed no evidence of recent COVID-19 infection, results showed seroconversion occurred in 100% (80/80) and 62% (18/29) of fully vaccinated mRNA and non-mRNA vaccine recipients, respectively.

Product			Indication			Date			Developments

Breyanzi			Lymphoma			June 2022			Announced FDA approval of Breyanzi for the second-line treatment of adult patients with large B-cell lymphoma, including diffuse large B-cell lymphoma not otherwise specified high-grade B-cell lymphoma, primary mediastinal large B-cell lymphoma and follicular lymphoma grade 3B who have: refractory disease to first line chemoimmunotherapy or relapsed within 12 months of first-line chemoimmunotherapy; or refractory disease to first-line chemoimmunotherapy or relapse after first-line chemoimmunotherapy and are not eligible for hematopoietic stem cell transplant due to comorbidities or age. The approval is based on results from the Phase II PILOT and Phase III TRANSFORM trials.
June 2022			Announced that the EMA validated its Type II Variation application for extension of the indication for Breyanzi in second-line treatment of adult patients with diffuse large B-cell lymphoma, high grade B-cell lymphoma, primary mediastinal large B-cell lymphoma and follicular lymphoma grade 3B, who are refractory or have relapsed within 12 months of initial therapy and are candidates for haematopoietic stem cell transplant. The application is based on the Phase III TRANSFORM study.
May 2022			Announced results from the primary analysis of PILOT, a multicenter, Phase II study evaluating Breyanzi in adults with refractory or relapsed large B-cell lymphoma after first-line therapy who were not deemed candidates for high-dose chemotherapy and hematopoietic stem cell transplant. With a median follow-up of 12.3 months, the majority of patients treated with Breyanzi saw a reduction in disease, with 80% of patients responding to treatment and 54% of patients achieving a complete response.
April 2022			Announced EC approval of Breyanzi for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma, primary mediastinal large B-cell lymphoma, and follicular lymphoma grade 3B after two or more lines of systemic therapy. The approval is based on results from the TRANSCEND WORLD and TRANSCEND NHL 001 trials.

Camzyos (mavacamten)			Obstructive HCM			April 2022			Announced FDA approval of Camzyos (mavacamten) for the treatment of adults with symptomatic obstructive HCM to improve functional capacity and symptoms. The approval is based on results from the Phase III EXPLORER-HCM trial.
April 2022			Announced that Phase III VALOR-HCM trial met its primary and secondary endpoints, significantly reducing the need for septal reduction therapy (SRT) in patients with severely symptomatic obstructive HCM who had been appropriate for SRT per the 2011 American College of Cardiology/American Heart Association Guidelines at baseline, after 16 weeks of treatment with mavacamten.
April 2022			Announced that interim results from the EXPLORER-LTE cohort of the MAVA-LTE trial in patients with symptomatic obstructive HCM showed sustained improvements in cardiovascular function and patient symptoms at 48 and 84-weeks, no new safety signals were observed.

deucravacitinib			SLE			June 2022			Announced results from the Phase II PAISLEY trial that showed statistically significant efficacy at the primary endpoint of SLE Responder Index-4 responses at week 32 among patients with moderate to severe SLE who were treated with deucravacitinib versus placebo. Secondary endpoints demonstrated clinically meaningful improvements at Week 48. The safety profile of deucravacitinib was consistent with previously reported studies in patients with psoriasis and psoriatic arthritis with no new safety signals observed. Data demonstrated favorable risk-benefit profile supportive of progressing into Phase III.
Plaque Psoriasis			May 2022			Announced two-year results from the POETYK PSO long-term extension trial demonstrating durable efficacy and a consistent safety profile with deucravacitinib treatment in adult patients with moderate to severe plaque psoriasis. Clinical efficacy was maintained through up to two years of deucravacitinib treatment.

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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 2021 Form 10-K. There have been no material changes to our critical accounting policies during the six months ended June 30, 2022. 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 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, our ability to realize the projected benefits of our acquisitions of Celgene and MyoKardia, 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 marketing 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 2021 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.