BRISTOL MYERS SQUIBB CO, 10-Q filed on 7/22/2010
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2010
Entity Registrant Name
BRISTOL MYERS SQUIBB CO 
Trading Symbol
BMY 
Entity Central Index Key
0000014272 
Current Fiscal Year End Date
12/31 
Entity Well-known Seasoned Issuer
Yes 
Entity Current Reporting Status
Yes 
Entity Voluntary Filers
No 
Entity Filer Category
Large Accelerated Filer 
Entity Common Stock, Shares Outstanding
1,714,842,193 
Document Type
10-Q 
Amendment Flag
FALSE 
Document Period End Date
06/30/2010 
Document Fiscal Year Focus
2010 
Document Fiscal Period Focus
Q2 
CONSOLIDATED STATEMENTS OF EARNINGS (USD $)
In Millions, except Per Share data
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
EARNINGS
 
 
 
 
Net Sales
$ 4,768 
$ 9,575 
$ 4,665 
$ 8,987 
Cost of products sold
1,277 
2,583 
1,225 
2,390 
Marketing, selling and administrative
894 
1,794 
922 
1,823 
Advertising and product promotion
263 
475 
298 
546 
Research and development
822 
1,732 
811 
1,719 
Provision for restructuring
24 
35 
19 
38 
Litigation expense
 
 
28 
132 
Equity in net income of affiliates
(85)
(182)
(150)
(296)
Other (income)/expense
(19)
94 
(10)
(82)
Total Expenses
3,176 
6,531 
3,143 
6,270 
Earnings from Continuing Operations Before Income Taxes
1,592 
3,044 
1,522 
2,717 
Provision for income taxes
324 
675 
353 
628 
Net Earnings from Continuing Operations
1,268 
2,369 
1,169 
2,089 
Discontinued Operations:
 
 
 
 
Earnings, net of taxes
 
 
129 
130 
Gain on disposal, net of taxes
 
 
 
 
Net Earnings from Discontinued Operations
 
 
129 
130 
Net Earnings
1,268 
2,369 
1,298 
2,219 
Net Earnings Attributable to Noncontrolling Interest
341 
699 
315 
598 
Net Earnings Attributable to Bristol-Myers Squibb Company
927 
1,670 
983 
1,621 
Amounts Attributable to Bristol-Myers Squibb Company:
 
 
 
 
Net Earnings from Continuing Operations
927 
1,670 
880 
1,529 
Net Earnings from Discontinued Operations
 
 
103 
92 
Net Earnings Attributable to Bristol-Myers Squibb Company
927 
1,670 
983 
1,621 
Earnings per Common Share from Continuing Operations Attributable to Bristol-Myers Squibb Company:
 
 
 
 
Basic
0.54 
0.97 
0.44 
0.77 
Diluted
0.53 
0.96 
0.44 
0.77 
Earnings per Common Share Attributable to Bristol-Myers Squibb Company:
 
 
 
 
Basic
0.54 
0.97 
0.49 
0.81 
Diluted
0.53 
0.96 
0.49 
0.81 
Dividends declared per common share
$ 0.32 
$ 0.64 
$ 0.31 
$ 0.62 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND RETAINED EARNINGS (USD $)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
COMPREHENSIVE INCOME
 
 
 
 
Net Earnings
$ 1,268 
$ 2,369 
$ 1,298 
$ 2,219 
Other Comprehensive Income/(Loss):
 
 
 
 
Foreign currency translation
(6)
(40)
95 
20 
Foreign currency translation on hedge of a net investment
64 
143 
(35)
(2)
Derivatives qualifying as cash flow hedges, net of taxes of $(17) and $15 for the three months ended June 30, 2010 and 2009, respectively; and $(30) and $(2) for the six months ended June 30, 2010 and 2009, respectively
40 
69 
(31)
Derivatives qualifying as cash flow hedges reclassified to net earnings, net of taxes of $2 and $7 for the three months ended June 30, 2010 and 2009, respectively; and $(3) and $14 for the six months ended June 30, 2010 and 2009, respectively
(4)
(21)
(41)
Pension and postretirement benefits, net of taxes of $4 and $(160) for the three months ended June 30, 2010 and 2009, respectively; and $4 and $(220) for the six months ended June 30, 2010 and 2009, respectively
(12)
(12)
295 
405 
Pension and postretirement benefits reclassified to net earnings, net of taxes of $(11) and $(20) for the three months ended June 30, 2010 and 2009, respectively; and $(23) and $(37) for the six months ended June 30, 2010 and 2009, respectively
26 
43 
35 
65 
Available for sale securities, net of taxes of $(2) and $(4) for three months ended June 30, 2010 and 2009, respectively; and $(1) and $(5) for the six months, ended June 30, 2010 and 2009 respectively
17 
32 
12 
14 
Total Other Comprehensive Income/(Loss)
125 
241 
350 
464 
Comprehensive Income
1,393 
2,610 
1,648 
2,683 
Comprehensive Income Attributable to Noncontrolling Interest
341 
699 
317 
603 
Comprehensive Income Attributable to Bristol-Myers Squibb Company
1,052 
1,911 
1,331 
2,080 
RETAINED EARNINGS
 
 
 
 
Retained Earnings at January 1
 
30,760 
 
22,549 
Net Earnings Attributable to Bristol-Myers Squibb Company
927 
1,670 
983 
1,621 
Cash dividends declared
(1,108)
(1,108)
(1,234)
(1,234)
Retained Earnings at June 30
$ 31,322 
$ 31,322 
$ 22,936 
$ 22,936 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND RETAINED EARNINGS (Parenthetical) (USD $)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Derivatives qualifying as cash flow hedges, taxes
$ (17)
$ (30)
$ 15 
$ (2)
Derivatives qualifying as cash flow hedges reclassified to net earnings, taxes
(3)
14 
Pension and postretirement benefits, taxes
(160)
(220)
Pension and postretirement benefits reclassified to net earnings, taxes
(11)
(23)
(20)
(37)
Available for sale securities, taxes
$ (2)
$ (1)
$ (4)
$ (5)
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions
Jun. 30, 2010
Dec. 31, 2009
ASSETS
 
 
Current Assets:
 
 
Cash and cash equivalents
$ 5,918 
$ 7,683 
Marketable securities
1,536 
831 
Receivables
3,172 
3,164 
Inventories
1,265 
1,413 
Deferred income taxes
796 
611 
Prepaid expenses
296 
256 
Total Current Assets
12,983 
13,958 
Property, plant and equipment
4,745 
5,055 
Goodwill
5,218 
5,218 
Other intangible assets, net
2,763 
2,865 
Deferred income taxes
1,331 
1,636 
Marketable securities
2,795 
1,369 
Other assets
1,216 
907 
Total Assets
31,051 
31,008 
LIABILITIES
 
 
Current Liabilities:
 
 
Short-term borrowings
290 
231 
Accounts payable
1,681 
1,711 
Accrued expenses
2,386 
2,785 
Deferred income
275 
237 
Accrued rebates and returns
671 
622 
U.S. and foreign income taxes payable
49 
175 
Dividends payable
556 
552 
Total Current Liabilities
5,908 
6,313 
Pension, postretirement and postemployment liabilities
1,248 
1,658 
Deferred income
915 
949 
U.S. and foreign income taxes payable
749 
751 
Other liabilities
409 
422 
Long-term debt
6,248 
6,130 
Total Liabilities
15,477 
16,223 
Commitments and contingencies (Note 17)
 
 
EQUITY
 
 
Bristol-Myers Squibb Company Shareholders' Equity:
 
 
Preferred stock, $2 convertible series, par value $1 per share: Authorized 10 million shares; issued and outstanding 5,366 in 2010 and 5,515 in 2009, liquidation value of $50 per share
 
 
Common stock, par value of $0.10 per share: Authorized 4.5 billion shares; 2.2 billion issued in both 2010 and 2009
220 
220 
Capital in excess of par value of stock
3,697 
3,768 
Accumulated other comprehensive loss
(2,300)
(2,541)
Retained earnings
31,322 
30,760 
Less cost of treasury stock - 491 million common shares in both 2010 and 2009
(17,271)
(17,364)
Total Bristol-Myers Squibb Company Shareholders' Equity
15,668 
14,843 
Noncontrolling interest
(94)
(58)
Total Equity
15,574 
14,785 
Total Liabilities and Equity
$ 31,051 
$ 31,008 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2010
Dec. 31, 2009
Preferred stock, $2 convertible series, par value
$ 1.00 
$ 1.00 
Preferred stock, $2 convertible series, shares authorized
10,000,000 
10,000,000 
Preferred stock, $2 convertible series, shares issued
5,366 
5,515 
Preferred stock, $2 convertible series, shares outstanding
5,366 
5,515 
Preferred stock, $2 convertible series, liquidation value, per share
50.00 
50.00 
Common stock, par value
0.10 
0.10 
Common stock, shares authorized
4,500,000,000 
4,500,000,000 
Common stock, shares issued
2,200,000,000 
2,200,000,000 
Treasury stock, shares
491,000,000 
491,000,000 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions
6 Months Ended
Jun. 30,
2010
2009
Cash Flows From Operating Activities:
 
 
Net Earnings
$ 2,369 
$ 2,219 
Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
Net earnings attributable to noncontrolling interest
(699)
(598)
Depreciation
246 
231 
Amortization
132 
113 
Impairment of manufacturing operations
200 
 
Deferred income taxes
97 
112 
Stock-based compensation
96 
88 
Other gains
(15)
(78)
Changes in operating assets and liabilities:
 
 
Receivables
(54)
64 
Inventories
12 
(10)
Deferred income
75 
Accounts payable
54 
266 
U.S. and foreign income taxes payable
(195)
61 
Changes in other operating assets and liabilities
(739)
(1,295)
Net Cash Provided by Operating Activities
1,513 
1,248 
Cash Flows From Investing Activities:
 
 
Proceeds from sale and maturities of marketable securities
1,481 
810 
Purchases of marketable securities
(3,587)
(1,913)
Additions to property, plant and equipment and capitalized software
(210)
(365)
Proceeds from sale of businesses, property, plant and equipment and other investments
35 
104 
Net Cash Used in Investing Activities
(2,281)
(1,364)
Cash Flows From Financing Activities:
 
 
Short-term debt borrowings/(repayments)
61 
(30)
Long-term debt borrowings
 
Long-term debt repayments
 
(67)
Interest rate swap termination
98 
191 
Dividends paid
(1,103)
(1,231)
Issuances of common stock and excess tax benefits from share-based arrangements
122 
 
Common stock repurchases
(165)
 
Proceeds from Mead Johnson initial public offering
 
782 
Net Cash (Used in)/Provided by Financing Activities
(981)
(355)
Effect of Exchange Rates on Cash and Cash Equivalents
(16)
Decrease in Cash and Cash Equivalents
(1,765)
(469)
Cash and Cash Equivalents at Beginning of Period
7,683 
7,976 
Cash and Cash Equivalents at End of Period
$ 5,918 
$ 7,507 
BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS
BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

Note 1. BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS or the Company) prepared these unaudited consolidated financial statements following the requirements of the Securities and Exchange Commission and United States (U.S.) generally accepted accounting principles (GAAP) for interim reporting. Under those rules, certain footnotes and other financial information that are normally required for annual financial statements can be condensed or omitted. The Company is responsible for the consolidated financial statements included in this Form 10-Q. These consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation of the financial position at June 30, 2010 and December 31, 2009, the results of operations for the three and six months ended June 30, 2010 and June 30, 2009, and cash flows for the six months ended June 30, 2010 and 2009. All intercompany balances and transactions have been eliminated. Material subsequent events are evaluated and disclosed through the report issuance date. These unaudited consolidated financial statements and the related notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2009 included in the Annual Report on Form 10-K.

Certain prior period amounts have been reclassified to conform to the current period presentation. Mead Johnson Nutrition Company (Mead Johnson) financial results, previously reported in the Mead Johnson segment, have been reported as discontinued operations for the three and six months ended June 30, 2009.

Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited consolidated financial statements may not be indicative of full year operating results.

The preparation of financial statements requires the use of management estimates and assumptions, based on complex judgments that are considered reasonable, that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and contingent liabilities at the date of the financial statements. The most significant assumptions are employed in estimates used in determining the fair value of intangible assets, restructuring charges and accruals, sales rebate and return accruals, legal contingencies, tax assets and tax liabilities, stock-based compensation expense, pension and postretirement benefits (including the actuarial assumptions), fair value of financial instruments with no direct or observable market quotes, inventory obsolescence, potential impairment of long-lived assets, allowances for bad debt, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from estimated results.

New accounting standards were adopted on January 1, 2010, none of which had an impact on the consolidated financial statements upon adoption. Among other items, these standards:

 

   

Provide clarifying criteria in determining when a transferor has surrendered control over transferred financial assets and removed the concept of a qualifying special-purpose entity.

 

   

Require an ongoing reassessment of the primary beneficiary in a variable interest entity; eliminate the quantitative approach previously required in determining the primary beneficiary; and provide guidance in determining the primary beneficiary as the entity that has both the power to direct the activities of a variable interest entity that most significantly impacts the entities economic performance and has the obligation to absorb losses or the right to receive benefits for events significant to the variable interest entity.

The Company is currently evaluating the potential impact of an accounting standard that allows for the allocation of consideration received in a bundled revenue arrangement among the separate deliverables by introducing an estimated selling price method for valuing the elements if vendor-specific objective evidence or third-party evidence of a selling price is not available. The standard provides more flexibility in recognizing revenue for bundled arrangements and expands related disclosure requirements. It is effective either on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 or on a retrospective basis and early application is permitted.

 

ALLIANCES AND COLLABORATIONS
ALLIANCES AND COLLABORATIONS

Note 2. ALLIANCES AND COLLABORATIONS

The Company maintains alliances and collaborations with various third parties for the development and commercialization of certain products. The following information summarizes the current operating trends of commercialized products. See the 2009 Annual Report on Form 10-K for a more complete description of the below agreements, including termination provisions, as well as disclosures of other alliances and collaborations.

sanofi

The Company has agreements with sanofi-aventis (sanofi) for the codevelopment and cocommercialization of AVAPRO*/AVALIDE* (irbesartan/irbesartan-hydrochlorothiazide), an angiotensin II receptor antagonist indicated for the treatment of hypertension and diabetic nephropathy, and PLAVIX* (clopidogrel bisulfate), a platelet aggregation inhibitor. The worldwide alliance operates under the framework of two geographic territories; one in the Americas (principally the U.S., Canada, Puerto Rico and Latin American countries) and Australia, and the other in Europe and Asia. The agreements expire on the later of (i) with respect to PLAVIX*, 2013 and, with respect to AVAPRO*/AVALIDE*, 2012 in the Americas and Australia and 2013 in Europe and Asia, and (ii) the expiration of all patents and other exclusivity rights relating to these products in the applicable territory.

The Company acts as the operating partner and owns a 50.1% majority controlling interest in the territory covering the Americas and Australia and consolidates all country partnership results for this territory with sanofi's 49.9% share of the results reflected as a noncontrolling interest. The Company recognizes net sales in this territory and in comarketing countries outside this territory (e.g., Germany, Italy for irbesartan only, Spain and Greece). Discovery royalties owed to sanofi are included in cost of products sold. Sanofi acts as the operating partner and owns a 50.1% majority controlling interest in the territory covering Europe and Asia. The Company's 49.9% ownership interest in this territory is accounted for under the equity method with its share of operating results recognized in equity in net income of affiliates. Distributions of profits relating to the joint ventures among the Company and sanofi are included within operating activities in the consolidated statements of cash flows.

The Company and sanofi have a separate partnership governing the copromotion of irbesartan in the U.S. The Company recognizes other income related to the amortization of deferred income associated with sanofi's $350 million payment to the Company for their acquisition of an interest in the irbesartan license for the U.S. upon formation of the alliance. Income attributed to certain supply activities and development and opt-out royalties with sanofi are reflected on a net basis in other income.

The following summarized financial information is reflected in the consolidated financial statements:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Territory covering the Americas and Australia:

           

Net sales

   $ 1,828    $ 1,725    $ 3,706    $ 3,330

Discovery royalty expense

     327      299      661      576

Noncontrolling interest - pre-tax

     500      424      1,020      815

Profit distributions to sanofi

     567      391      1,053      813

Territory covering Europe and Asia:

           

Equity in net income of affiliates

     88      154      188      301

Profit distributions to the Company

     85      115      154      242

Other:

           

Net sales comarketing countries and other

     106      127      208      259

Other income - irbesartan license fee

     8      8      16      16

Other income - supply activities and development and opt-out royalties

     9      10      31      21
               June 30,
2010
   December  31,
2009

Investment in affiliates - territory covering Europe and Asia

         $ 43    $ 10

Deferred income - irbesartan license fee

           75      91

 

The following is summarized financial information for interests in the partnerships with sanofi for the territory covering Europe and Asia, which are not consolidated but are accounted for using the equity method:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 500    $ 772    $ 1,048    $ 1,527

Gross profit

     244      388      488      767

Net income

     193      295      387      584

Otsuka

The Company has a worldwide commercialization agreement (excluding certain countries) with Otsuka Pharmaceutical Co., Ltd. (Otsuka), to codevelop and copromote with Otsuka, ABILIFY* (aripiprazole), for the treatment of schizophrenia, bipolar mania disorder and major depressive disorder. In the U.S., Germany, France and Spain, where the product is invoiced to third-party customers by the Company on behalf of Otsuka, the Company recognizes alliance revenue for its contractual share of third-party net sales, which was reduced in the U.S. starting January 1, 2010 from 65% to 58% for 2010. Further reductions in the Company's U.S. contractual share of revenue in the U.S. will occur on January 1, 2011 and January 1, 2012 under the terms of the commercialization agreement. Beginning January 1, 2010, Otsuka reimburses the Company 30% of ABILIFY* related operating expenses in the U.S. Reimbursements are netted principally in advertising and product promotion and selling, general and administrative expenses. The Company continues to receive 65% of third-party net sales in France, Germany and Spain with no expense reimbursement. In certain countries where the Company is presently the exclusive distributor for the product or has an exclusive right to sell ABILIFY*, the Company recognizes 100% of the net sales and related cost of products sold and expenses.

The Company paid Otsuka $400 million in April 2009 for extending the term of the commercialization and manufacturing agreement in the U.S. through April 2015. This payment is included in other assets and is being amortized as a reduction of net sales through the extension period. Previously capitalized milestone payments totaling $60 million are included in intangible assets and amortized to cost of products sold.

The Company and Otsuka also have an oncology collaboration for SPRYCEL (dasatinib) and IXEMPRA (ixabepilone) (the "Oncology Products") in the U.S., Japan and the EU (the "Oncology Territory"). Beginning January 1, 2010, the Company pays a collaboration fee to Otsuka equal to 30% of the first $400 million annual net sales of the Oncology Products in the Oncology Territory, 5% of annual net sales between $400 million and $600 million, and 3% of annual net sales between $600 million and $800 million with additional trailing percentages of annual net sales over $800 million. This fee is included in cost of products sold. Otsuka will contribute 20% of the first $175 million of certain commercial operational expenses relating to the Oncology Products in the Oncology Territory and 1% of such costs in excess of $175 million. Reimbursements are netted principally in selling, general and administrative and advertising and product promotion.

The following summarized financial information related to this alliance is reflected in the consolidated financial statements:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010     2009    2010     2009

ABILIFY* net sales, including amortization of extension payment

   $ 633      $ 643    $ 1,250      $ 1,232

Oncology Products collaboration fees

     32        -        62        -  

Otsuka's reimbursement - operating expense

     (23     -        (48     -  

Amortization expense - extension payments

     16        16      32        16

Amortization expense - milestone payments

     2        2      4        4
                June 30,
2010
    December 31,
2009

Intangible assets:

         

Extension payment

        $ 319      $ 351

Milestone payments

          13        17

 

Lilly

The Company has a collaboration with Eli Lilly and Company (Lilly) for the codevelopment and promotion of ERBITUX* (cetuximab) in the U.S., pursuant to a commercialization agreement with Lilly's subsidiary, ImClone Systems Incorporated (ImClone), which expires as to ERBITUX* in September 2018. Lilly receives a distribution fee based on 39% of ERBITUX* net sales in North America, which is included in cost of products sold. In Japan, the Company shares rights to ERBITUX* under an agreement with Lilly and Merck KGaA and receives 50% of the pre-tax profit from Merck's net sales of ERBITUX* in Japan which is further shared equally with Lilly. The Company's 25% share of profits from commercialization in Japan is included in other income.

Previously capitalized milestone payments are being amortized through 2018 and are classified in costs of products sold.

The following summarized financial information related to this alliance is reflected in the consolidated financial statements:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 172    $ 173    $ 338    $ 337

Distribution fees

     67      67      132      131

Amortization expense - milestone payments

     9      10      19      19

Other income - Japan commercialization fee

     11      5      19      10
               June 30,
2010
   December  31,
2009

Intangible asset - milestone payments

         $ 304    $ 323

In January 2010, the Company and Lilly restructured the commercialization agreement described above as it relates to necitumumab (IMC-11F8), a novel targeted cancer therapy currently in Phase III development for non-small cell lung cancer. As restructured, both companies will share in the cost of developing and potentially commercializing necitumumab in the U.S., Canada and Japan. Lilly maintains exclusive rights to necitumumab in all other markets. The Company will fund 55% of development costs for studies that will be used only in the U.S. and will fund 27.5% for global studies. The Company and Lilly will share development costs in Japan equally. The Company will pay $250 million to Lilly as a milestone payment upon first approval in the U.S. In the U.S. and Canada, the Company will recognize sales and receive 55% of the profits for necitumumab. Lilly will provide 50% of the selling effort. In Japan, the Company and Lilly will share commercial costs and profits evenly. The agreement as it relates to necitumumab continues beyond patent expiration. It may be terminated at any time by the Company with 12 months advance notice (18 months if prior to launch), by either party for uncured material breach by the other or if both parties agree to terminate.

Gilead

The Company and Gilead Sciences, Inc. (Gilead) have a joint venture to develop and commercialize ATRIPLA* (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg), a once-daily single tablet three-drug regimen combining the Company's SUSTIVA (efavirenz) and Gilead's TRUVADA* (emtricitabine and tenofovir disoproxil fumarate), in the U.S., Canada and Europe. The Company accounts for its participation in the U.S. joint venture under the equity method of accounting and recognizes its share of the joint venture results in equity in net income of affiliates in the consolidated statements of earnings.

In the U.S., Canada and most European countries, the Company records revenue for the bulk efavirenz component of ATRIPLA* upon sales of that product to third-party customers. Revenue for the efavirenz component is determined by applying a percentage to ATRIPLA* revenue to approximate revenue for the SUSTIVA brand. In a limited number of EU countries, the Company recognizes revenue for ATRIPLA* since the product is purchased from Gilead and then distributed to third-party customers.

The following summarized financial information related to this alliance is reflected in the consolidated financial statements:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Net sales

   $ 255      $ 206      $ 505      $ 388   

Equity in net loss of affiliates

     (3     (3     (6     (5

 

AstraZeneca

The Company maintains two worldwide codevelopment and cocommercialization agreements with AstraZeneca PLC (AstraZeneca), The first is for the worldwide codevelopment and cocommercialization (excluding Japan) of ONGLYZA (saxagliptin), a DPP-IV inhibitor (Saxagliptin Agreement) and the second is for the worldwide codevelopment and cocommercialization (including Japan) of dapagliflozin, a sodium-glucose cotransporter-2 (SGLT2) inhibitor (SGLT2 Agreement). Both compounds are being studied for the treatment of diabetes and were discovered by the Company. Under each agreement, the two companies are jointly developing the clinical and marketing sterategy and share development and commercialization costs and profits and losses equally. Net reimbursements for development costs from AstraZeneca are included in research and development. Net reimbursements for commercial costs are included principally in advertising and product promotion and selling, general and administrative expenses. AstraZeneca's share of profits is included in cost of goods sold.

Upfront licensing and milestone payments received for both compounds totaling $350 million, including $50 million received in the first quarter of 2010, are deferred and amortized over the useful life of the products into other income.

The Company and AstraZeneca launched ONGLYZA in the third quarter of 2009.

The following summarized financial information related to this alliance is reflected in the consolidated financial statements:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 28    $ -    $ 38    $ -

Amortization income - milestone payments

     7      3      13      6
               June 30,
2010
   December 31,
2009

Deferred income - milestone payments

         $ 305    $ 268

Exelixis

In June 2010, the Company terminated its global codevelopment and cocommercialization arrangement for XL184 (a MET/VEG/RET inhibitor), an oral anti-cancer compound with all rights returning to Exelixis, Inc. (Exelixis). As a result of the termination, the Company paid $17 million, which has been included in research and development expense. In addition, the Company is no longer obligated for contingent development and regulatory milestone payments of $295 million and sales milestone payments of $150 million. The Company will continue its license arrangement with Exelixis for XL281 and its other collaborations for three small molecule IND's for codevelopment and copromotion.

 

BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION

Note 3. BUSINESS SEGMENT INFORMATION

The BioPharmaceuticals segment is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases. A global research and development organization and a global supply chain organization are utilized and responsible for the development and delivery of products to the market. Products are distributed and sold through five regional organizations that serve the United States; Europe; Latin America, Middle East and Africa; Japan, Asia Pacific and Canada; and Emerging Markets. The business is also supported by global corporate staff functions. The segment information presented below is consistent with the financial information regularly reviewed by the chief operating decision maker for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods.

Net sales of key products were as follows:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

PLAVIX*

   $ 1,627    $ 1,539    $ 3,293    $ 2,974

AVAPRO*/AVALIDE*

     307      313      621      615

REYATAZ

     357      331      730      653

SUSTIVA Franchise (total revenue)

     331      312      666      604

BARACLUDE

     223      179      439      331

ERBITUX*

     172      173      338      337

SPRYCEL

     132      107      263      195

IXEMPRA

     29      29      58      53

ABILIFY*

     633      643      1,250      1,232

ORENCIA

     178      148      347      272

ONGLYZA

     28      -      38      -

Other

     751      891      1,532      1,721
                           

Net sales

   $ 4,768    $ 4,665    $ 9,575    $ 8,987
                           

Segment income excludes the impact of significant items not indicative of current operating performance or ongoing results, and earnings attributed to sanofi and other noncontrolling interest. The reconciliation to earnings from continuing operations before income taxes was as follows:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

BioPharmaceuticals segment income

   $ 1,180      $ 1,217      $ 2,413      $ 2,287   

Reconciling items:

        

Downsizing and streamlining of worldwide operations

     (24     (17     (35     (32

Impairment of manufacturing operations

     (15     -        (215     -   

Accelerated depreciation, asset impairment and other shutdown costs

     (27     (26     (58     (56

Pension settlements/curtailments

     (5     (25     (5     (25

Process standardization implementation costs

     (6     (25     (19     (45

Gain on sale of product lines, businesses and assets

     -        11        -        55   

Litigation charges

     -        (28     -        (132

Upfront licensing and milestone payments

     (17     (29     (72     (174

Debt buyback and swap terminations

     -        11        -        11   

Product liability

     -        -        -        (3

Noncontrolling interest

     506        433        1,035        831   
                                

Earnings from continuing operations before income taxes

   $ 1,592      $ 1,522      $ 3,044      $ 2,717   
                                

 

RESTRUCTURING
RESTRUCTURING

Note 4. RESTRUCTURING

The productivity transformation initiative (PTI) was designed to fundamentally change the way the business is run to meet the challenges of a changing business environment and to take advantage of the diverse opportunities in the marketplace as the transformation into a next-generation biopharmaceutical company continues. In addition to the PTI, a strategic process designed to achieve a culture of continuous improvement to enhance efficiency, effectiveness and competitiveness and to continue to improve the cost base has been implemented.

The following PTI and other restructuring charges were recognized:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Employee termination benefits

   $ 27      $ 19      $ 37      $ 32   

Other exit costs

     (3     -        (2     6   
                                

Provision for restructuring, net

     24        19        35        38   

Impairment of manufacturing operations

     15        -        215        -   

Accelerated depreciation, asset impairment and other shutdown costs

     27        24        58        50   

Pension plan curtailment charge

     5        25        5        25   

Process standardization implementation costs

     6        25        19        45   
                                

Total cost

     77        93        332        158   

Gain on sale of product lines, businesses and assets

     -        (11     -        (55
                                

Net charges

   $ 77      $ 82      $ 332      $ 103   
                                

Most of the accelerated depreciation, asset impairment and other shutdown costs were included in cost of products sold and primarily relate to the rationalization of the manufacturing network in the BioPharmaceuticals segment. These assets continue to be depreciated until the facility closures are completed. The remaining charges were primarily attributed to process standardization activities or attributed to pension plan curtailment charges both of which are recognized as incurred.

Restructuring charges included termination benefits for workforce reduction of manufacturing, selling, administrative, and research and development personnel across all geographic regions of approximately 260 and 140 for the three months ended June 30, 2010 and 2009, respectively, and approximately 480 and 355 for the six months ended June 30, 2010 and 2009, respectively.

The following table presents the detail of expenses incurred in connection with restructuring activities and related restructuring liability activity:

 

     Six Months Ended June 30, 2010     Six Months Ended June 30, 2009  
Dollars in Millions    Employee
Termination
Liability
    Other Exit
Costs
Liability
    Total     Employee
Termination
Liability
    Other Exit
Costs
Liability
    Total  

Liability at January 1

   $ 157      $ 16      $ 173      $ 188      $ 21      $ 209   
                                                

Charges

     31        3        34        32        6        38   

Changes in estimates

     6        (5     1        -        -        -   
                                                

Provision for restructuring, net

     37        (2     35        32        6        38   

Charges in discontinued operations

     -        -        -        9        -        9   

Foreign currency translation

     (6     -        (6     -        -        -   

Spending

     (62     (7     (69     (75     (4     (79
                                                

Liability at June 30

   $ 126      $ 7      $ 133      $ 154      $ 23      $ 177   
                                                

In connection with the continued optimization of the manufacturing network, the operations in Latina, Italy were sold to International Chemical Investors, SE (ICI) on May 31, 2010 resulting in a $215 million loss. The loss consisted of a $200 million impairment charge recorded in the first quarter of 2010 attributed to the write-down of assets to fair value less cost of sale when the assets met the held for sale criteria and $15 million of other working capital adjustments and transaction related fees recorded upon closing in the second quarter. An 18 million ($22 million) 6% subordinated promissory note payable in installments by May 2017 was received as consideration. Additional charges may be required pertaining to the Company's obligation to fund a portion of ICI's future restructuring costs up to 19 million ($23 million).

As part of the transaction, a one year supply agreement was entered into with ICI in which the Company will be the non-exclusive supplier of certain products to ICI. Also, a three year tolling and manufacturing agreement, which can be extended for an additional two years, was entered into with ICI in which the Company will supply certain raw material products to be processed and finished at the Latina facility and then distributed by the Company in various markets.

 

DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS

Note 5. DISCONTINUED OPERATIONS

Mead Johnson Nutrition Company Split-off

In February 2009, Mead Johnson Nutrition Company (Mead Johnson) completed an initial public offering (IPO) in which the Company received $782 million and retained an 83.1% interest in Mead Johnson. On December 23, 2009, the split-off of the remaining interest in Mead Johnson was completed in exchange for 269 million shares of the Company's common stock. The results of the Mead Johnson business are included in discontinued operations for the three and six months ended June 30, 2009.

 

Dollars in Millions    Three Months
Ended June  30,
2009
   Six Months
Ended June 30,
2009

Net sales

   $ 719    $ 1,412
             

Earnings before income taxes

   $ 219    $ 408

Provision for income taxes(1)

     90      278
             

Net earnings from discontinued operations

     129      130

Less net earnings from discontinued operations attributable to noncontrolling interest

     26      38
             

Net earnings from discontinued operations attributable to Bristol-Myers Squibb Company

   $ 103    $ 92
             

 

(1) Provision for income taxes include $130 million for the six months ended June 30, 2009 of taxes incurred from the transfer of various international business units to Mead Johnson prior to the IPO.

Transitional Relationships with Discontinued Operations

Subsequent to the split-off, cash flows and income associated with the Mead Johnson business continued to be generated relating to activities that are transitional in nature and generally result from agreements that are intended to facilitate the orderly transfer of business operations. The agreements include, among others, services for accounting, customer service, distribution and manufacturing and generally expire no later than 18 months from the date of the split-off. The income generated from these transitional activities is included in other (income)/expense and is not expected to be material to the future results of operations or cash flows.

 

EARNINGS PER SHARE
EARNINGS PER SHARE

Note 6. EARNINGS PER SHARE

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Amounts in Millions, Except Per Share Data    2010     2009     2010     2009  

EPS Numerator - Basic:

        

Income from Continuing Operations Attributable to BMS

   $ 927      $ 880      $ 1,670      $ 1,529   

Earnings attributable to unvested restricted shares

     (3     (5     (7     (8
                                

Income from Continuing Operations Attributable to BMS common shareholders'

     924        875        1,663        1,521   

Net Earnings from Discontinued Operations Attributable to BMS(1)

     -        102        -        91   
                                

EPS Numerator - Basic

   $ 924      $ 977      $ 1,663      $ 1,612   
                                

EPS Denominator - Basic:

        

Average Common Shares Outstanding

     1,718        1,980        1,717        1,979   
                                

EPS - Basic:

        

Continuing Operations

   $ 0.54      $ 0.44      $ 0.97      $ 0.77   

Discontinued Operations

     -        0.05        -        0.04   
                                

Net Earnings

   $ 0.54      $ 0.49      $ 0.97      $ 0.81   
                                

EPS Numerator - Diluted:

        

Income from Continuing Operations Attributable to BMS

   $ 927      $ 880      $ 1,670      $ 1,529   

Earnings attributable to unvested restricted shares

     (3     (5     (7     (8
                                

Income from Continuing Operations Attributable to BMS common shareholders'

     924        875        1,663        1,521   

Net Earnings from Discontinued Operations Attributable to BMS(1)

     -        102        -        91   
                                

EPS Numerator - Diluted

   $ 924      $ 977      $ 1,663      $ 1,612   
                                

EPS Denominator - Diluted:

        

Average Common Shares Outstanding

     1,718        1,980        1,717        1,979   

Contingently convertible debt common stock equivalents

     1        1        1        1   

Incremental shares attributable to share-based compensation plans

     9        2        9        2   
                                

Average Common Shares Outstanding and Common Share Equivalents

     1,728        1,983        1,727        1,982   
                                

EPS - Diluted:

        

Continuing Operations

   $ 0.53      $ 0.44      $ 0.96      $ 0.77   

Discontinued Operations

     -        0.05        -        0.04   
                                

Net Earnings

   $ 0.53      $ 0.49      $ 0.96      $ 0.81   
                                

(1) Net Earnings from Discontinued Operations for EPS Calculation:

        

 Net Earnings from Discontinued Operations Attributable to BMS

   $ -      $ 103      $ -      $ 92   

 Earnings attributable to unvested restricted shares

     -        (1     -        (1
                                

 Net Earnings from Discontinued Operations Attributable to BMS for EPS Calculation

   $ -      $ 102      $ -      $ 91   
                                

Anti-dilutive weighted-average equivalent shares:

        

Stock incentive plans

     64        138        66        132   
                                

Total anti-dilutive shares

     64        138        66        132   
                                

 

INCOME TAXES
INCOME TAXES

Note 7. INCOME TAXES

The effective income tax rate on earnings from continuing operations before income taxes was 20.4% and 22.2% for the three and six months ended June 30, 2010 compared to 23.2% and 23.1% for the three and six months ended June 30, 2009. The effective tax rate is lower than the U.S. statutory rate of 35% primarily due to the permanent reinvestment of offshore earnings from certain manufacturing operations.

The decrease in the effective income tax rate in the three months ended June 30, 2010, was due to:

 

   

A $66 million tax benefit in the second quarter of 2010 for the re-measurement of a U.S. contingent tax matter related to 2004.

 

   

An out-of-period tax adjustment of $59 million related to previously unrecognized net deferred tax assets primarily attributed to deferred profits for financial reporting purposes related to certain alliances as of December 31, 2009. This was partially offset by a reversal of a $17 million understatement of tax expense in the first quarter of 2010. These adjustments are not material to any current or prior periods nor are they expected to be material for the year ended December 31, 2010.

Partially offset by:

 

   

A favorable impact on the prior year rate from the research and development tax credit and deferral of income under the controlled foreign corporation "look-through" rules both of which expired on December 31, 2009.

 

   

A $40 million tax benefit in the second quarter of 2009 related to the final settlement of certain state audits.

In addition to the factors described above, the effective income tax rate in the six months ended June 30, 2010, included an unfavorable impact from a $21 million charge resulting from the reduction of deferred tax assets due to the enactment of healthcare reform. The deferred tax charge was required as a result of the elimination of the deductibility of retiree healthcare payments to the extent of tax-free Medicare Part D subsidies that are received. The change in deductibility is effective January 1, 2013.

U.S. income taxes have not been provided on undistributed earnings of foreign subsidiaries as these undistributed earnings have been invested or are expected to be permanently reinvested offshore. If, in the future, these earnings are repatriated to the U.S., or if such earnings are determined to be remitted in the foreseeable future, additional tax provisions would be required. Reforms to the international tax laws have been proposed that if adopted may increase taxes and reduce the results of operations and cash flows. Future income tax rates are also expected to be negatively impacted by healthcare reform including the enactment of an annual non-tax deductible pharmaceutical fee beginning in 2011 payable to the government.

The Company is currently under examination by a number of tax authorities which have proposed adjustments to tax for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. The Company estimates that it is reasonably possible that the total amount of unrecognized tax benefits at June 30, 2010 will decrease in the range of approximately $175 million to $205 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits, primarily settlement related, will involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. The Company also anticipates that it is reasonably possible that new issues will be raised by tax authorities which may require increases to the balance of unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. The Company believes that it has adequately provided for all open tax years by tax jurisdiction.

 

FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT

Note 8. FAIR VALUE MEASUREMENT

The fair value of financial assets and liabilities are classified in one of the following three categories:

 

     June 30, 2010    December 31, 2009
Dollars in Millions    Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
   Total    Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
   Total

Available for Sale:

                       

U.S. Treasury Bills

   $ 653    $ -    $ -    $ 653    $ -    $ -    $ -    $ -

U.S. Government Agency Securities

     602      -      -      602      225      -      -      225

Equity Securities

     5      -      -      5      11      -      -      11

Prime Money Market Funds

     -      4,089      -      4,089      -      5,807      -      5,807

Corporate Debt Securities

     -      1,614      -      1,614      -      837      -      837

Commercial Paper

     -      998      -      998      -      518      -      518

FDIC Insured Debt Securities

     -      359      -      359      -      252      -      252

U.S. Treasury Money Market Funds

     -      9      -      9      -      218      -      218

U.S. Government Agency Money Market Funds

     -      -      -      -      -      24      -      24

Floating Rate Securities (FRS)

     -      -      47      47      -      -      91      91

Auction Rate Securities (ARS)

     -      -      90      90      -      -      88      88
                                                       

Total available for sale assets

     1,260      7,069      137      8,466      236      7,656      179      8,071
                                                       

Derivatives:

                       

Interest Rate Swap Derivatives

     -      392      -      392      -      165      -      165

Foreign Currency Forward Derivatives

     -      110      -      110      -      21      -      21
                                                       

Total derivative assets

     -      502      -      502      -      186      -      186
                                                       

Total assets at fair value

   $ 1,260    $ 7,571    $ 137    $ 8,968    $ 236    $ 7,842    $ 179    $ 8,257
                                                       

Derivatives:

                       

Foreign Currency Forward Derivatives

   $ -    $ 15    $ -    $ 15    $ -    $ 31    $ -    $ 31

Natural Gas Contracts

     -      2      -      2      -      1      -      1

Interest Rate Swap Derivatives

     -      -      -      -      -      5      -      5
                                                       

Total derivative liabilities

     -      17      -      17      -      37      -      37
                                                       

Total liabilities at fair value

   $ -    $ 17    $ -    $ 17    $ -    $ 37    $ -    $ 37
                                                       

For financial assets and liabilities that utilize Level 1 and Level 2 inputs, direct and indirect observable price quotes are utilized, including LIBOR and EURIBOR yield curves, foreign exchange forward prices, NYMEX futures pricing and common stock price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities:

 

   

U.S. Treasury Bills, U.S. Government Agency Securities and U.S. Government Agency Money Market Funds - valued at the quoted market price from observable pricing sources at the reporting date.

 

   

Equity Securities - valued using quoted stock prices from New York Stock Exchange or National Association of Securities Dealers Automated Quotation System at the reporting date.

 

   

Prime Money Market Funds - net asset value of $1 per share.

 

   

Corporate Debt Securities and Commercial Paper - valued at the quoted market price from observable pricing sources at the reporting date.

 

   

FDIC Insured Debt Securities - valued at the quoted market price from observable pricing sources at the reporting date.

 

   

U.S. Treasury Money Market Funds - valued at the quoted market price from observable pricing sources at the reporting date.

 

   

Interest rate swap derivative assets and liabilities - valued using LIBOR and EURIBOR yield curves, less credit valuation adjustments, at the reporting date. Counterparties to these contracts are highly-rated financial institutions, none of which experienced any significant downgrades since January 1, 2010. Valuations may fluctuate considerably from period-to-period due to volatility in underlying interest rates, driven by market conditions and the duration of the swap. In addition, credit valuation adjustment volatility may have a significant impact on the valuation of interest rate swaps due to changes in counterparty credit ratings and credit default swap spreads.

 

   

Foreign currency forward derivative assets and liabilities - valued using quoted forward foreign exchange prices at the reporting date. Counterparties to these contracts are highly-rated financial institutions, none of which experienced any significant downgrades since January 1, 2010. Valuations may fluctuate considerably from period-to-period due to volatility in the underlying foreign currencies. Short-term maturities of the foreign currency forward derivatives are less than two years; therefore, counterparty credit risk is not significant.

Valuation models are utilized that rely exclusively on Level 3 inputs due to the lack of observable market quotes for the ARS and FRS portfolio. These inputs are based on expected cash flow streams and collateral values including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The fair value of ARS was determined using internally developed valuations that were based in part on indicative bids received on the underlying assets of the securities and other evidence of fair value. Due to the current lack of an active market for FRS and the general lack of transparency into their underlying assets, other qualitative analysis are relied upon to value FRS including discussion with brokers and fund managers, default risk underlying the security and overall capital market liquidity. During the six months ended June 30, 2010, $55 million principal at par was received for FRS.

 

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

Note 9. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash and cash equivalents were $5,918 million at June 30, 2010 and $7,683 million at December 31, 2009 and consisted of prime money market funds, government agency securities and treasury securities. Cash equivalents primarily consist of highly liquid investments with original maturities of three months or less at the time of purchase and are recorded at cost, which approximates fair value.

The following table summarizes current and non-current marketable securities, accounted for as "available for sale" debt securities and equity securities:

 

     June 30, 2010    December 31, 2009
Dollars in Millions    Amortized
Cost Basis
   Unrealized
Gain in
Accumulated
OCI
   Unrealized
Loss in
Accumulated
OCI
    Fair
Value
   Amortized
Cost Basis
   Unrealized
Gain in
Accumulated
OCI
   Unrealized
Loss in
Accumulated
OCI
    Fair
Value

Current marketable securities:

                     

Certificates of deposit

   $ 780    $ -    $ -      $ 780    $ 501    $ -    $ -      $ 501

Commercial Paper

     185      -      -        185      205      -      -        205

U.S. Treasury Bills

     250      -      -        250      -      -      -        -

Corporate debt securities

     266      4      -        270      -      -      -        -

FDIC insured debt securities

     51      -      -        51      -      -      -        -

U.S. government agency securities

     -      -      -        -      125      -      -        125
                                                         

Total current

   $ 1,532    $ 4    $ -      $ 1,536    $ 831    $ -    $ -      $ 831
                                                         

Non-current marketable securities:

                     

Corporate debt securities

   $ 1,335    $ 18    $ (9   $ 1,344    $ 834    $ 5    $ (2   $ 837

U.S. government agency securities

     600      2      -        602      100      -      -        100

U.S. Treasury Bills

     399      4      -        403      -      -      -        -

FDIC insured debt securities

     304      4      -        308      252      -      -        252

Auction rate securities

     80      10      -        90      80      8      -        88

Floating rate securities(1)

     58      -      (11     47      113      -      (22     91

Other

     1      -      -        1      1      -      -        1
                                                         

Total non-current

   $ 2,777    $ 38    $ (20   $ 2,795    $ 1,380    $ 13    $ (24   $ 1,369
                                                         

Other assets:

                     

Equity securities

   $ 5    $ -    $ -      $ 5    $ 11    $ -    $ -      $ 11
                                                         

 

(1) All FRS have been in an unrealized loss position for 12 months or more at June 30, 2010.

The contractual maturities of non-current "available for sale" debt securities at June 30, 2010 were as follows:

 

Dollars in Millions

   1 to 5
Years
   Over 10
Years
   Total

Available for sale:

        

Corporate debt securities

   $ 1,344    $ -    $ 1,344

U.S. government agency securities

     602      -      602

U.S. Treasury Bills

     403      -      403

FDIC insured debt securities

     308      -      308

Floating rate securities

     47      -      47

Auction rate securities

     -      90      90

Other

     1      -      1
                    

Total available for sale

   $ 2,705    $ 90    $ 2,795
                    

 

RECEIVABLES
RECEIVABLES

Note 10. RECEIVABLES

Receivables include:

 

Dollars in Millions    June 30
2010
   December 31,
2009

Trade receivables

   $ 1,896    $ 2,000

Less allowances

     91      103
             

Net trade receivables

     1,805      1,897

Alliance partners receivables

     950      870

Income tax refund claims

     190      103

Miscellaneous receivables

     227      294
             

Receivables

   $ 3,172    $ 3,164
             

Receivables are netted with deferred income related to alliance partners until recognition of income. As a result, alliance partner receivables and deferred income were reduced by $1,029 million and $730 million at June 30, 2010 and December 31, 2009, respectively. For additional information regarding alliance partners, see "-Note 2. Alliances and Collaborations." Non-U.S. receivables sold on a nonrecourse basis were $447 million and $104 million for the six months ended June 30, 2010 and 2009, respectively. In the aggregate, receivables due from three pharmaceutical wholesalers in the U.S. represented 50% and 47% of total trade receivables at June 30, 2010 and December 31, 2009, respectively.

In the second quarter of 2010, the government of Greece announced that they intend to convert certain past due receivables from government run hospitals into non-interest bearing notes to be paid over one to three year periods. As a result, receivables of 41 million ($51 million) were reclassified to other long-term assets. A $9 million charge attributed to the imputed discount on the expected non-interest bearing loans over the expected collection period was recognized in the three months ended June 30, 2010 and has been included in other (income)/expense.

INVENTORIES
INVENTORIES

Note 11. INVENTORIES

Inventories include:

 

Dollars in Millions    June 30,
2010
   December 31,
2009

Finished goods

   $ 545    $ 580

Work in process

     446      630

Raw and packaging materials

     274      203
             

Inventories

   $ 1,265    $ 1,413
             

Inventories expected to remain on-hand beyond one year were $242 million and $249 million at June 30, 2010 and December 31, 2009, respectively, and were included in non-current other assets. In addition, $148 million of these inventories (plus $37 million of additional purchase obligations) currently cannot be sold in the U.S. until the U.S. Food and Drug Administration (FDA) approves a manufacturing process change. Inventories also include capitalized costs related to production of products for programs in Phase III development subject to final FDA approval of $57 million and $49 million at June 30, 2010 and December 31, 2009, respectively. The status of the regulatory approval process and the probability of future sales were considered in assessing the recoverability of these costs.

PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT

Note 12. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment includes:

 

Dollars in Millions    June 30,
2010
   December 31,
2009

Land

   $ 135    $ 142

Buildings

     4,300      4,350

Machinery, equipment and fixtures

     3,103      3,563

Construction in progress

     690      840
             

Gross property, plant and equipment

     8,228      8,895

Less accumulated depreciation

     3,483      3,840
             

Property, plant and equipment

   $ 4,745    $ 5,055
             

 

EQUITY
EQUITY

Note 13. EQUITY

Changes in common shares, treasury stock and capital in excess of par value of stock were as follows:

 

Dollars and Shares in Millions    Common Shares
Issued
   Treasury
Stock
    Cost
of
Treasury
Stock
    Capital in Excess
of Par Value

of Stock
 

Balance at January 1, 2009

   2,205    226      $ (10,566   $ 2,757   

Mead Johnson initial public offering

   -      -          -          942   

Employee stock compensation plans

   -      (2     58        4   
                           

Balance at June 30, 2009

   2,205    224      $ (10,508   $ 3,703   
                           

Balance at January 1, 2010

   2,205    491      $ (17,364   $ 3,768   

Stock repurchase program

   -      7        (173     -     

Employee stock compensation plans

   -      (7     266        (71
                           

Balance at June 30, 2010

   2,205    491      $ (17,271   $ 3,697   
                           

The accumulated balances related to each component of other comprehensive income/(loss) (OCI), net of taxes, were as follows:

 

Dollars in Millions    Foreign
Currency
Translation
    Derivatives
Qualifying
as
Effective
Hedges
    Pension and
Other
Postretirement
Benefits
    Available
for Sale
Securities
    Accumulated
Other
Comprehensive
Income/(Loss)
 

Balance at January 1, 2009

   $ (424   $ 14      $ (2,258   $ (51   $ (2,719

Other comprehensive income/(loss)

     18        (38     470        14        464   
                                        

Balance at June 30, 2009

   $ (406   $ (24   $ (1,788   $ (37   $ (2,255
                                        

Balance at January 1, 2010

   $ (343   $ (30   $ (2,158   $ (10   $ (2,541

Other comprehensive income/(loss)

     103        75        31        32        241   
                                        

Balance at June 30, 2010

   $ (240   $ 45      $ (2,127   $ 22      $ (2,300
                                        

The reconciliation of noncontrolling interest was as follows:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Balance at beginning of period

   $ (16   $ (208   $ (58   $ (33

Mead Johnson initial public offering

     -          -          -          (160

Net earnings attributable to noncontrolling interest

     505        456        1,033        864   

Other comprehensive income attributable to noncontrolling interest

     -          2        -          5   

Distributions

     (583     (410     (1,069     (836
                                

Balance at June 30

   $ (94   $ (160   $ (94   $ (160
                                

Noncontrolling interest is primarily related to the partnerships with sanofi for the territory covering the Americas for net sales of PLAVIX*. Net earnings attributable to noncontrolling interest are presented net of taxes of $165 million and $144 million for the three months ended June 30, 2010 and 2009, respectively, and $336 million and $271 million for the six months ended June 30, 2010 and 2009, respectively, in the consolidated statements of earnings with a corresponding increase to the provision for income taxes. Distribution of the partnership profits to sanofi and sanofi's funding of ongoing partnership operations occur on a routine basis and are included within operating activities in the consolidated statements of cash flows. The above activity includes the pre-tax income and distributions related to these partnerships. Net earnings attributable to noncontrolling interest included in discontinued operations was $26 million and $38 million in the three and six months ended June 30, 2009, respectively.

Treasury stock is recognized at the cost to reacquire the shares. Shares issued from treasury are recognized utilizing the first-in first-out method.

In May 2010, the Board of Directors authorized the repurchase of up to $3.0 billion of common stock. Repurchases may be made either in the open market or through private transactions, including under repurchase plans established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The stock repurchase program does not have an expiration date but is expected to take place over the next few years. It may be suspended or discontinued at any time. During the three months ended June 30, 2010, the Company repurchased 7.3 million shares at the average price of approximately $23.75 per share and an aggregate cost of $173 million.

 

PENSION, POSTRETIREMENT AND POSTEMPLOYMENT LIABILITIES
PENSION, POSTRETIREMENT AND POSTEMPLOYMENT LIABILITIES

Note 14. PENSION, POSTRETIREMENT AND POSTEMPLOYMENT LIABILITIES

The net periodic benefit cost of defined benefit pension and postretirement benefit plans includes:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     Pension Benefits     Other
Benefits
    Pension Benefits     Other
Benefits
 
Dollars in Millions    2010     2009     2010     2009     2010     2009     2010     2009  

Service cost - benefits earned during the period

   $ 11      $ 48      $ 2      $ 2      $ 22      $ 107      $ 4      $ 3   

Interest cost on projected benefit obligation

     86        89        8        10        173        193        15        19   

Expected return on plan assets

     (112     (107     (6     (5     (225     (233     (12     (10

Amortization of prior service cost/(benefit)

     -        1        (1     (1     -        4        (2     (2

Amortization of net actuarial loss

     24        28        3        2        48        70        6        5   
                                                                

Net periodic benefit cost

     9        59        6        8        18        141        11        15   

Settlements

     5        -        -        -        5        -        -        -   

Curtailments and special termination benefits

     6        25        -        -        9        25        -        -   
                                                                

Total net periodic benefit cost

   $ 20      $ 84      $ 6      $ 8      $ 32      $ 166      $ 11      $ 15   
                                                                

Continuing operations

   $ 20      $ 82      $ 6      $ 8      $ 32      $ 161      $ 11      $ 14   

Discontinued operations

     -        2        -        -        -        5        -        1   
                                                                

Total net periodic benefit cost

   $ 20      $ 84      $ 6      $ 8      $ 32      $ 166      $ 11      $ 15   
                                                                

Contributions to the U.S. pension plans are expected to approximate $330 million during 2010, of which $315 million was contributed in the six months ended June 30, 2010. Contributions to the international plans are expected to range from $85 million to $100 million in 2010, of which $48 million was contributed in the six months ended June 30, 2010.

In connection with the amendments of the U.S. Retirement Income Plan and several other plans, the crediting of future benefits relating to service was eliminated effective December 31, 2009. In addition, actuarial gains and losses are amortized over the expected weighted-average remaining lives of the participants (32 years). Net periodic benefit costs are reduced as a result of these changes. Pension settlement charges resulting in an acceleration of previously deferred actuarial losses might be required in future periods if lump sum payments for individual plans exceed the sum of the related plan's service cost and interest cost.

Certain enhancements were made to the defined contribution plans in the U.S. and Puerto Rico allowing for increased matching and additional Company contributions effective January 1, 2010. The expense attributed to these plans was $44 million and $14 million for the three months ended June 30, 2010 and 2009, respectively, and $95 million and $27 million for the six months ended June 30, 2010 and 2009, respectively.

EMPLOYEE STOCK BENEFIT PLANS
EMPLOYEE STOCK BENEFIT PLANS

Note 15. EMPLOYEE STOCK BENEFIT PLANS

Stock-based compensation expense was as follows:

 

     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Stock options

   $ 14    $ 18    $ 27    $ 36

Restricted stock

     23      19      46      35

Long-term performance awards

     12      8      23      17
                           

Total stock-based compensation expense

   $ 49    $ 45    $ 96    $ 88
                           

Continuing operations

   $ 49    $ 42    $ 96    $ 82

Discontinued operations

     -      3      -      6
                           

Total stock-based compensation expense

   $ 49    $ 45    $ 96    $ 88
                           

Deferred tax benefit related to stock-based compensation expense:

           

Continuing operations

   $ 16    $ 14    $ 31    $ 27

Discontinued operations

     -      1      -      2
                           

Total deferred tax benefit related to stock-based compensation expense

   $ 16    $ 15    $ 31    $ 29
                           

In the six months ended June 30, 2010, 3.1 million restricted stock units, 1.4 million market share units and 1.7 million long-term performance share units were granted. The weighted-average grant date fair value for restricted stock units, market share units and long-term performance share units granted during the six months ended June 30, 2010 was $24.73, $24.69 and $23.65, respectively.

 

Restricted stock units vest ratably over a four year period. Market share units vest ratably over a four year period based on share price performance. The fair value of market share units was estimated on the date of grant using a model applying multiple input variables that determine the probability of satisfying market conditions. Long-term performance share units are determined based on the achievement of annual performance goals, but are not vested until the end of the three year period.

Total compensation costs related to nonvested awards not yet recognized and the weighted-average period over which such awards are expected to be recognized at June 30, 2010 were as follows:

 

Dollars in Millions    Stock Options    Restricted Stock    Long-Term
Performance
Awards

Unrecognized compensation cost

   $ 60    $ 209    $ 40

Expected weighted-average period of compensation cost to be recognized

     2.1 years      2.1 years      1.5 years
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS

Note 16. FINANCIAL INSTRUMENTS

Financial instruments include cash and cash equivalents, marketable securities, receivables, accounts payable, debt instruments and derivatives. Due to their short term maturity, the carrying amount of receivables and accounts payable approximate fair value. For further information about cash, cash equivalents and marketable securities, see "-Note 9. Cash, Cash Equivalents and Marketable Securities."

There is exposure to market risk due to changes in currency exchange rates and interest rates. As a result, certain derivative financial instruments are used when available on a cost-effective basis to hedge the underlying economic exposure. These instruments qualify as cash flow, net investment and fair value hedges upon meeting certain criteria, including effectiveness of offsetting hedged exposures. Changes in fair value of derivatives that do not qualify for hedge accounting are recognized in earnings as they occur. All financial instruments, including derivatives, are subject to counterparty credit risk which is considered as part of the overall fair value measurement. Derivative financial instruments are not used for trading purposes.

Foreign currency forward contracts are used to manage cash flow exposures. The primary net foreign currency exposures hedged are the Euro, Japanese yen, Canadian dollar, British pound, Australian dollar and Mexican peso. Fixed-to-floating interest rate swaps are used as part of the interest rate risk management strategy. These swaps generally qualify for fair-value hedge accounting treatment. Certain net asset changes due to foreign exchange volatility are generally hedged through non-U.S. dollar borrowings which qualify as a net investment hedge.

Qualifying Hedges

Cash Flow Hedges

Foreign Currency Forward Contracts - Foreign currency forward contracts are utilized to hedge forecasted intercompany and other transactions for certain foreign currencies. These contracts are designated as foreign currency cash flow hedges when appropriate. The effective portion of changes in fair value for the designated foreign currency hedges is temporarily reported in accumulated OCI and recognized in earnings when the hedged item affects earnings. The net deferred gains on foreign currency forward contracts qualifying for cash flow hedge accounting are expected to be reclassified to earnings within the next two years.

Effectiveness is assessed at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is included in current period earnings. The impact of hedge ineffectiveness on earnings was not significant during the three and six months ended June 30, 2010. Cash flow hedge accounting is discontinued when the forecasted transaction is no longer probable of occurring on the originally forecasted date, or 60 days thereafter, or when the hedge is no longer effective. Discontinued foreign currency forward hedges resulted in a pre-tax gain of $9 million and $11 million during the three and six months ended June 30, 2010, respectively, which was recognized in other (income)/expense.

Interest Rate Contracts - Terminated swaps that qualify as cash flow hedges are recognized in accumulated OCI and amortized to earnings over the remaining life of the debt when the hedged debt remains outstanding.

 

The impact on OCI and earnings from derivative instruments qualifying as cash flow hedges was as follows:

 

     Six Months Ended June 30,  
     Foreign Currency
Forward
Contracts
    Natural Gas
Contracts
    Forward
Starting
Swaps
    Total Impact  
Dollars in Millions    2010     2009     2010     2009     2010     2009     2010     2009  

Net carrying amount at January 1

   $ (11   $ 35      $ (1   $ (2   $ (18   $ (19   $ (30   $ 14   

Cash flow hedges deferred in OCI

     99        3        -        2        -        -        99        5   

Cash flow hedges reclassified to cost of products sold/interest expense (effective portion)

     9        (55     -        -        -        -        9        (55

Change in deferred taxes

     (33     13        -        (1     -        -        (33     12   
                                                                

Net carrying amount at June 30

   $ 64      $ (4   $ (1   $ (1   $ (18   $ (19   $ 45      $ (24
                                                                

Hedge of Net Investment

Non-U.S. dollar borrowings, primarily the 500 Million Notes due 2016 and 500 Million Notes due 2021, ($1.2 billion total), are used to hedge the foreign currency exposures of the net investment in certain foreign affiliates. These borrowings are designated as a hedge of a net investment. At June 30, 2010, 294 million ($363 million) of the Notes due 2016 have been dedesignated.

The impact on OCI and earnings from non-derivative debt designated net investment hedges was as follows:

 

     Six Months Ended June 30,  
     Net Investment Hedges  
Dollars in Millions    2010     2009  

Net carrying amount at January 1

   $ (169   $ (131

Change in spot value of non-derivative debt designated as a hedge

     202        (2

Gain recognized in other (income)/expense, net (overhedged portion)

     (59     -   
          

Net carrying amount at June 30

   $ (26   $ (133
                

Fair Value Hedges

Interest Rate Contracts - Derivative instruments are used as part of an interest rate risk management strategy, principally fixed-to-floating interest rate swaps that are designated as fair-value hedges.

The swaps and underlying debt for the benchmark risk being hedged are recorded at fair value. Swaps are intended to create an appropriate balance of fixed and floating rate debt. The basis adjustment to debt with qualifying fair value hedging relationships is amortized to earnings as an adjustment to interest expense over the remaining life of the debt when the underlying swap is terminated prior to maturity.

In May 2010, fixed-to-floating interest rate swap agreements of $237 million notional amount and 500 million notional amount were terminated generating total proceeds of $116 million which included accrued interest of $18 million and a basis adjustment of $98 million which was deferred and will be amortized to interest expense over the remaining life of the underlying debt.

In January 2010, fixed-to-floating interest rate swaps were executed to convert $332 million of the 6.80% Debentures due 2026 and $147 million of the 7.15% Debentures due 2023 from fixed rate debt to variable rate debt. These swaps qualified as a fair value hedge for each debt instrument.

The impact on earnings from interest rate swaps that qualified as fair value hedges was as follows:

 

     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Recognized in interest expense

   $ (33   $ (29   $ (72   $ (53

Amortization of basis adjustment from swap terminations recognized in interest expense

     (8     (7     (15     (12
                                

Total

   $ (41   $ (36   $ (87   $ (65
                                

 

The impact on long-term debt from interest rate swaps that qualify as fair value hedges and other items were as follows:

 

Dollars in Millions    June 30,
2010
    December 31,
2009
 

Principal value

   $ 5,425      $ 5,622   

Adjustments to Principal Value:

    

Fair value of interest rate swaps

     392        160   

Unamortized basis adjustment from swap terminations

     460        377   

Unamortized bond discounts

     (29     (29
                

Total

   $ 6,248      $ 6,130   
                

Total interest expense, including interest on long-term debt and interest rate swaps, amounted to $32 million and $42 million for the three months ended June 30, 2010 and 2009, respectively, and $65 million and $94 million for the six months ended June 30, 2010 and 2009, respectively.

Non-Qualifying Foreign Exchange Contracts

Foreign currency forward contracts are used to offset exposure to foreign currency-denominated monetary assets, liabilities and earnings. The primary objective of these contracts is to protect the U.S. dollar value of foreign currency-denominated monetary assets, liabilities and earnings from the effects of volatility in foreign exchange rates that might occur prior to their receipt or settlement in U.S. dollars. These contracts are not designated as hedges and are adjusted to fair value through other (income)/expense as they occur, and substantially offset the change in fair value of the underlying foreign currency denominated monetary asset, liability or earnings.

In the first quarter of 2010, foreign currency forward contracts were used to hedge anticipated earnings denominated in Australian and Canadian dollars throughout 2010. These contracts are not designated as qualifying hedges, and therefore, gains or losses on these derivatives will be recognized in earnings in other (income)/expense as they occur.

The effect of non-qualifying hedges was a $6 million gain and $3 million gain for the three and six months ended June 30, 2010, respectively, and was not significant for 2009.

The following table summarizes the fair value of outstanding derivatives:

 

        June 30, 2010   December 31, 2009       June 30, 2010     December 31, 2009  
Dollars in Millions   Balance Sheet Location   Notional   Fair
Value
  Notional   Fair
Value
    Notional   Fair
Value
    Notional   Fair
Value
 

Derivatives designated as hedging instruments:

                   

Interest rate contracts

  Other assets   $ 3,152   $ 392   $ 3,134   $ 165   Accrued expenses   $ -   $ -      $ 597   $ (5

Foreign currency forward contracts

  Other assets     807     106     780     21   Accrued expenses     424     (15     731     (31

Hedge of net investments

      -     -     -     -   Long-term debt     874     (874     1,256     (1,256

Natural gas contracts

      -     -     -     -   Accrued expenses     *     (2     *     (1
                                       

Subtotal

        498       186         (891       (1,293
                                       

Derivatives not designated as hedging instruments:

                   

Foreign currency forward contracts

  Other assets     114     4     -     -   Accrued expenses     -     -        -     -   
                                 

Total Derivatives

      $ 502     $ 186       $ (891     $ (1,293
                                       

* The notional value of natural gas contracts was 1 million and 2 million decatherms at June 30, 2010 and December 31, 2009, respectively.

The derivative financial instruments present certain market and counterparty risks; however, concentration of counterparty risk is mitigated by using banks worldwide with Standard & Poor's and Moody's long-term debt ratings of A or higher. In addition, only conventional derivative financial instruments are utilized. The consolidated financial statements would not be materially impacted if any counterparties failed to perform according to the terms of its agreement. Currently, collateral or any other form of securitization is not required to be furnished by the counterparties to derivative financial instruments.

For a discussion on the fair value of financial instruments, see "-Note 8. Fair Value Measurement."

 

LEGAL PROCEEDINGS AND CONTINGENCIES
LEGAL PROCEEDINGS AND CONTINGENCIES

Note 17. LEGAL PROCEEDINGS AND CONTINGENCIES

Various lawsuits, claims, government investigations and other legal proceedings are pending involving the Company and certain of its subsidiaries. The Company recognizes accruals for such contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. These matters involve, among other things, antitrust, securities, patent infringement, pricing, sales and marketing practices, environmental, commercial, health and safety matters, consumer fraud, employment matters, product liability and insurance coverage. The most significant of these matters are described below.

Although the Company believes it has substantial defenses in these matters, there can be no assurance that there will not be an increase in the scope of pending matters or that any future lawsuits, claims, government investigations or other legal proceedings will not be material.

INTELLECTUAL PROPERTY

PLAVIX* Litigation

PLAVIX* is currently the Company's largest product ranked by net sales. The PLAVIX* patents are subject to a number of challenges in the U.S., including the litigation with Apotex Inc. and Apotex Corp. (Apotex) described below, and in other less significant markets for the product. The Company and its product partner, sanofi, (the Companies) intend to vigorously pursue enforcement of their patent rights in PLAVIX*.

PLAVIX* Litigation - U.S.

Patent Infringement Litigation against Apotex and Related Matters

As previously disclosed, the Company's U.S. territory partnership under its alliance with sanofi is a plaintiff in a pending patent infringement lawsuit instituted in the United States District Court for the Southern District of New York (District Court) entitled Sanofi-Synthelabo, Sanofi-Synthelabo, Inc. and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership v. Apotex. The suit is based on U.S. Patent No. 4,847,265 (the '265 Patent), a composition of matter patent, which discloses and claims, among other things, the hydrogen sulfate salt of clopidogrel, a medicine made available in the U.S. by the Companies as PLAVIX*. Also, as previously reported, the District Court upheld the validity and enforceability of the '265 Patent, maintaining the main patent protection for PLAVIX* in the U.S. until November 2011. The District Court also ruled that Apotex's generic clopidogrel bisulfate product infringed the '265 Patent and permanently enjoined Apotex from engaging in any activity that infringes the '265 Patent, including marketing its generic product in the U.S. until after the patent expires.

Apotex appealed the District Court's decision and on December 12, 2008, the United States Court of Appeals for the Federal Circuit (Circuit Court) affirmed the District Court's ruling sustaining the validity of the '265 Patent. Apotex filed a petition with the Circuit Court for a rehearing en banc, and in March 2009, the Circuit Court denied Apotex's petition. The case has been remanded to the District Court for further proceedings relating to damages. In July 2009, Apotex filed a petition for writ of certiorari with the U.S. Supreme Court requesting the Supreme Court to review the Circuit Court's decision. In November 2009, the U.S. Supreme Court denied the petition, declining to review the Circuit Court's decision. In December 2009, the Company filed a motion in the District Court for summary judgment on damages, and in January 2010, Apotex filed a motion seeking a stay of the ongoing damages proceedings pending the outcome of the reexamination of the PLAVIX* patent by the U.S. Patent and Trademark Office (PTO) described below. In April 2010, the District Court denied Apotex's motion to stay the proceedings. The Company's summary judgment motion remains pending.

As previously disclosed, the Company's U.S. territory partnership under its alliance with sanofi is also a plaintiff in five additional patent infringement lawsuits against Dr. Reddy's Laboratories, Inc. and Dr. Reddy's Laboratories, LTD (Dr. Reddy's), Teva Pharmaceuticals USA, Inc. (Teva), Cobalt Pharmaceuticals Inc. (Cobalt), Watson Pharmaceuticals, Inc. and Watson Laboratories, Inc. (Watson) and Sun Pharmaceuticals (Sun). The lawsuits against Dr. Reddy's, Teva and Cobalt relate to the '265 Patent. In May 2009, Dr Reddy's signed a consent judgment in favor of sanofi and BMS conceding the validity and infringement of the '265 Patent. As previously reported, the patent infringement actions against Teva and Cobalt were stayed pending resolution of the Apotex litigation, and the parties to those actions agreed to be bound by the outcome of the litigation against Apotex. Consequently, on July 12, 2007, the District Court entered judgments against Cobalt and Teva and permanently enjoined Cobalt and Teva from engaging in any activity that infringes the '265 Patent until after the Patent expires. Cobalt and Teva each filed an appeal. In July 2009, the Circuit Court issued a mandate in the Teva appeal binding Teva to the decision in the Apotex litigation. In August 2009, Cobalt consented to entry of judgment in its appeal agreeing to be bound by Circuit Court's decision in the Apotex litigation. The lawsuit against Watson, filed in October 2004, was based on U.S. Patent No. 6,429,210 (the '210 Patent), which discloses and claims a particular crystalline or polymorph form of the hydrogen sulfate salt of clopidogrel, which is marketed as PLAVIX*. In December 2005, the Court permitted Watson to pursue its declaratory judgment counterclaim with respect to U.S. Patent No. 6,504,030. In January 2006, the Court approved the parties' stipulation to stay this case pending the outcome of the trial in the Apotex matter. On May 1, 2009, BMS and Watson entered into a stipulation to dismiss the case. In April 2007, Pharmastar filed a request for inter partes reexamination of the '210 Patent at the PTO. The PTO granted this request in July of 2007 and in July 2009, the PTO vacated the reexamination proceeding. The lawsuit against Sun, filed on July 11, 2008, is based on infringement of the '265 Patent and the '210 Patent. With respect to the '265 Patent, Sun has agreed to be bound by the outcome of the Apotex litigation. Each of Dr. Reddy's, Teva, Cobalt, Watson and Sun have filed an aNDA with the FDA, and, with respect to Dr. Reddy's, Teva, Cobalt and Watson all exclusivity periods and statutory stay periods under the Hatch-Waxman Act have expired. Accordingly, final approval by the FDA would provide each company authorization to distribute a generic clopidogrel bisulfate product in the U.S., subject to various legal remedies for which the Companies may apply including injunctive relief and damages.

On June 1, 2009, Apotex filed a request for ex parte reexamination of the '265 Patent at the PTO and in August 2009, the PTO agreed to reexamine the patent. In December 2009, the PTO issued a non-final office action rejecting several claims covering PLAVIX* including the claim that was previously upheld in the litigation against Apotex referred to above. Sanofi responded to the office action in February 2010. The PTO has issued an ex parte Reexamination Certificate withdrawing the rejections in the non-final office action and confirming patentability of all the claims of the '265 Patent. Apotex has filed a second request for ex parte reexamination of the '265 Patent and in June 2010, the PTO denied Apotex's request to reexamine the patent again.

It is not possible at this time reasonably to assess the outcome of the PLAVIX* patent litigations or the timing of any renewed generic competition for PLAVIX* from Apotex or additional generic competition for PLAVIX* from other third-party generic pharmaceutical companies. Loss of market exclusivity for PLAVIX* and/or sustained generic competition would be material to the Company's sales of PLAVIX*, results of operations and cash flows, and could be material to the Company's financial condition and liquidity. Additionally, it is not possible at this time reasonably to assess the amount of damages that could be recovered by the Company and Apotex's ability to pay such damages in the event the Company prevails in the patent litigation.

Additionally, on November 13, 2008, Apotex filed a lawsuit in New Jersey Superior Court entitled, Apotex Inc., et al. v. sanofi-aventis, et al., seeking payment of $60 million, plus interest, related to the break-up of the proposed settlement agreement.

PLAVIX* Litigation - International

PLAVIX* - Australia

As previously disclosed, sanofi was notified that, in August 2007, GenRx Proprietary Limited (GenRx) obtained regulatory approval of an application for clopidogrel bisulfate 75mg tablets in Australia. GenRx, formerly a subsidiary of Apotex, has since changed its name to Apotex. In August 2007, Apotex filed an application in the Federal Court of Australia seeking revocation of sanofi's Australian Patent No. 597784 (Case No. NSD 1639 of 2007). Sanofi filed counterclaims of infringement and sought an injunction. On September 21, 2007, the Australian court granted sanofi's injunction. A subsidiary of the Company was subsequently added as a party to the proceedings. In February 2008, a second company, Spirit Pharmaceuticals Pty. Ltd., also filed a revocation suit against the same patent. This case was consolidated with the Apotex case and a trial occurred in April 2008. On August 12, 2008, the Federal Court of Australia held that claims of Patent No. 597784 covering clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate salts were valid. The Federal Court also held that the process claims, pharmaceutical composition claims, and claim directed to clopidogrel and its pharmaceutically acceptable salts were invalid. The Company and sanofi filed notices of appeal in the Full Court of the Federal Court of Australia (Full Court) appealing the holding of invalidity of the claim covering clopidogrel and its pharmaceutically acceptable salts, process claims, and pharmaceutical composition claims which have stayed the Federal Court's ruling. Apotex filed a notice of appeal appealing the holding of validity of the clopidogrel bisulfate, hydrochloride, hydrobromide, and taurocholate claims. A hearing on the appeals occurred in February 2009. On September 29, 2009, the Full Federal Court of Australia held all of the claims of Patent No. 597784 invalid. In November 2009, the Company and sanofi applied to the High Court of Australia (High Court) for special leave to appeal the judgment of the Full Court. In March 2010, the High Court denied the Company and sanofi's request to hear the appeal of the Full Court decision. The case has been remanded to the Federal Court for further proceedings related to damages. It is expected the amount of damages will not be material to the Company.

PLAVIX* - EU

As previously disclosed, in 2007, YES Pharmaceutical Development Services GmbH (YES Pharmaceutical) filed an application for marketing authorization in Germany for an alternate salt form of clopidogrel. This application relied on data from studies that were originally conducted by sanofi and BMS for PLAVIX* and were still the subject of data protection in the EU. Sanofi and BMS have filed an action against YES Pharmaceutical and its partners in the administrative court in Cologne objecting to the mandatory authorization. This matter is currently pending.

 

PLAVIX* - Canada (Apotex, Inc.)

On April 22, 2009, Apotex filed an impeachment action against sanofi in the Federal Court of Canada alleging that sanofi's Canadian Patent No. 1,336,777 (the '777 Patent) is invalid. The '777 Patent covers clopidogrel bisulfate and was the patent at issue in the prohibition action in Canada previously disclosed in which the Canadian Federal Court of Ottawa rejected Apotex's challenge to the '777 Patent, held that the asserted claims are novel, not obvious and infringed, and granted sanofi's application for an order of prohibition against the Minister of Health and Apotex, precluding approval of Apotex's Abbreviated New Drug Submission until the patent expires in 2012, which decision was affirmed on appeal by both the Federal Court of Appeal and the Supreme Court of Canada. On June 8, 2009, sanofi filed its defense to the impeachment action and filed a suit against Apotex for infringement of the '777 Patent.

OTHER INTELLECTUAL PROPERTY LITIGATION

ABILIFY*

As previously disclosed, Otsuka has filed patent infringement actions against Teva, Barr Pharmaceuticals, Inc. (Barr), Sandoz Inc. (Sandoz), Synthon Laboratories, Inc (Synthon), Sun Pharmaceuticals (Sun), Zydus Pharmaceuticals USA, Inc., and Apotex relating to U.S. Patent No. 5,006,528, which covers aripiprazole and expires in April 2015 (including the additional six-month pediatric exclusivity period). Aripiprazole is comarketed by the Company and Otsuka in the U.S. as ABILIFY*. The lawsuits are currently pending in the U.S. District Court for the District of New Jersey and a trial is scheduled to begin in August 2010. The 30-month stay under the Hatch-Waxman Act is believed to expire in November 2010. Accordingly, final approval by the FDA would provide each generic company authorization to distribute a generic aripiprazole product in the U.S., subject to various legal remedies for which Otsuka may apply including injunctive relief and damages.

It is not possible at this time to reasonably assess the outcome of these lawsuits or their impact on the Company. If, however, a generic company were to launch "at risk" or if Otsuka were not to prevail in these lawsuits, generic competition would likely result in substantial decreases in the sales of ABILIFY* in the U.S., which would have a material adverse effect on the results of operations and cash flows and could be material to financial condition.

ATRIPLA*

In April 2009, Teva filed an aNDA to manufacture and market a generic version of ATRIPLA*. Teva sent Gilead a Paragraph IV certification letter challenging two of the fifteen Orange Book listed patents for ATRIPLA*. ATRIPLA* is the product of a joint venture between the Company and Gilead. In May 2009, Gilead filed a patent infringement action against Teva in the U.S. District Court for the Southern District of New York (SDNY). In January 2010, the Company received a notice that Teva amended its aNDA and is challenging eight additional Orange Book listed patents for ATRIPLA*. In March 2010, the Company and Merck, Sharp & Dohme Corp. filed a patent infringement action against Teva also in the SDNY relating to two U.S. Patents which claim crystalline or polymorph forms of efavirenz. In March 2010, Gilead filed two patent infringement actions against Teva in the SDNY relating to six Orange Book listed patents for ATRIPLA*. At this time, the Company's patent rights covering efavirenz composition of matter and method of use have not been challenged. It is not possible at this time to reasonably assess the outcome of these lawsuits or their impact on the Company.

REYATAZ

Teva has filed aNDAs to manufacture and market generic versions of all four dosage forms REYATAZ (100, 150, 200 and 300 mg). The Company received a Paragraph IV certification letter from Teva challenging the two Orange Book listed patents for REYATAZ. In December 2009, the Company and Novartis Pharmaceutical Corporation (Novartis) filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware (Delaware District Court) against Teva for infringement of the two listed patents covering REYATAZ, which we believe triggered an automatic 30-month stay of approval of Teva's aNDA. Subsequent patent infringement lawsuits were filed. It is not possible at this time to reasonably assess the outcome of these lawsuits or their impact on the Company.

 

GENERAL COMMERCIAL LITIGATION

Clayworth Litigation

As previously disclosed, the Company, together with a number of other pharmaceutical manufacturers, was named as a defendant in an action filed in California State Superior Court in Oakland, James Clayworth et al. v. Bristol-Myers Squibb Company, et al., alleging that the defendants conspired to fix the prices of pharmaceuticals by agreeing to charge more for their drugs in the U.S. than they charge outside the U.S., particularly Canada, and asserting claims under California's Cartwright Act and unfair competition law. The plaintiffs sought trebled monetary damages, injunctive relief and other relief. In December 2006, the Court granted the Company and the other manufacturers' motion for summary judgment based on the pass-on defense, and judgment was then entered in favor of defendants. In July 2008, judgment in favor of defendants was affirmed by the California Court of Appeals. In July 2010, the California Supreme Court reversed the Court of Appeal's judgment and the matter will be remanded to the Superior Court for further proceedings. It is not possible at this time reasonably to assess the outcome of this lawsuit or its impact on the Company in the event plaintiffs are successful on appeal.

RxUSA Wholesale Litigation

As previously disclosed, in July 2006, a complaint was filed by drug wholesaler RxUSA Wholesale, Inc. in the U.S. District Court for the Eastern District of New York against the Company, 15 other drug manufacturers, five drug wholesalers, two officers of defendant McKesson and a wholesale distribution industry trade group, RxUSA Wholesale, Inc. v. Alcon Labs., Inc., et al. The complaint alleges violations of Federal and New York antitrust laws, as well as various other laws. Plaintiff claims that defendants allegedly engaged in anti-competitive acts that resulted in the exclusion of plaintiff from the relevant market and seeks $586 million in damages before any trebling, and other relief. In September 2009, the District Court granted the Company's and other defendants' motions to dismiss. Plaintiff has appealed the District Court's decision to the U.S. Court of Appeals for the Second Circuit.

ANTITRUST LITIGATION

As previously disclosed, 18 lawsuits comprised of both individual suits and purported class actions have been filed against the Company in U.S. District Court, Southern District of Ohio, Western Division, by various plaintiffs, including pharmacy chains (individually and as assignees, in whole or in part, of certain wholesalers), various health and welfare benefit plans/funds and individual residents of various states. These lawsuits allege, among other things, that the purported settlement with Apotex of the patent infringement litigation violated the Sherman Act and related laws. Plaintiffs are seeking, among other things, permanent injunctive relief barring the Apotex settlement and/or monetary damages. The putative class actions filed on behalf of direct purchasers have been consolidated under the caption In re: Plavix Direct Purchaser Antitrust Litigation, and the putative class actions filed on behalf of indirect purchasers have been consolidated under the caption In re: Plavix Indirect Purchaser Antitrust Litigation. Amended complaints were filed on October 19, 2007. Defendants filed a consolidated motion to dismiss in December 2007. In March 2010, the District Court granted the defendants' motion to dismiss with respect to all the direct purchaser claims. The motion to dismiss with respect to the indirect purchasers claims remains pending. In April 2010, the direct purchaser plaintiffs filed a motion for reconsideration with the District Court. It is not possible at this time to reasonably assess the outcome of these lawsuits or their impact on the Company.

PRICING, SALES AND PROMOTIONAL PRACTICES LITIGATION AND INVESTIGATIONS

ABILIFY* State Attorneys General Investigation

In March 2009, the Company received a letter from the Delaware Attorney General's Office advising of a multi-state coalition investigating whether certain ABILIFY* marketing practices violated those states' consumer protection statutes. It is not possible at this time to reasonably assess the outcome of this investigation or its potential impact on the Company.

AWP Litigation

As previously disclosed, the Company, together with a number of other pharmaceutical manufacturers, has been a defendant in a number of private class actions as well as suits brought by the attorneys general of various states. In these actions, plaintiffs allege that defendants caused the Average Wholesale Prices (AWPs) of their products to be inflated, thereby injuring government programs, entities and persons who reimbursed prescription drugs based on AWPs. The Company remains a defendant in four state attorneys general suits pending in state courts around the country. The Company is currently scheduled to go to trial in August 2010 in the Commonwealth Court of Pennsylvania.

As previously reported, one set of class actions were consolidated in the U.S. District Court for the District of Massachusetts (AWP MDL). In August 2009, the District Court granted preliminary approval of a proposed settlement of the AWP MDL plaintiffs' claims against the Company for $19 million, plus half the costs of class notice up to a maximum payment of $1 million. A final approval hearing is currently scheduled to occur in July 2010.

 

California 340B Litigation

As previously disclosed, in August 2005, the County of Santa Clara filed a purported class action against the Company and numerous other pharmaceutical manufacturers on behalf of itself and a putative class of other cities and counties in California, as well as the covered entities that purchased drugs pursuant to the 340B drug discount program, alleging that manufacturers did not provide proper discounts to covered entities. Discovery in this matter is ongoing. In May 2009, the U.S. District Court for the Northern District of California denied plaintiff's motion, without prejudice, to certify the class.

It is not possible at this time to reasonably assess the outcome of this lawsuit, or its potential impact on the Company.

PRODUCT LIABILITY LITIGATION

The Company is a party to various product liability lawsuits. As previously disclosed, in addition to lawsuits, the Company also faces unfiled claims involving its products.

PLAVIX*

As previously disclosed, the Company and certain affiliates of sanofi are defendants in a number of individual lawsuits claiming personal injury allegedly sustained after using PLAVIX*, most of which appear before the United States District Court for the District of New Jersey (NJ District Court). As of June 30, 2010, the companies were defendants in 23 actions before the NJ District Court and have executed tolling agreements with respect to unfiled claims by potential additional plaintiffs. It is not possible at this time to reasonably assess the outcomes of these lawsuits or their potential impact on the Company.

Hormone Replacement Therapy

The Company is one of a number of defendants in a mass-tort litigation in which plaintiffs allege, among other things, that various hormone therapy products, including hormone therapy products formerly manufactured by the Company (ESTRACE*, Estradiol, DELESTROGEN* and OVCON*) cause breast cancer, stroke, blood clots, cardiac and other injuries in women, that the defendants were aware of these risks and failed to warn consumers. As of June 30, 2010, the Company was a defendant in over 300 lawsuits filed on behalf of approximately 500 plaintiffs in federal and state courts throughout the U.S. All of the Company's hormone therapy products were sold to other companies between January 2000 and August 2001. It is not possible at this time reasonably to assess the outcome of the lawsuits in which the Company is a party or their impact on the Company.

ENVIRONMENTAL PROCEEDINGS

As previously reported, the Company is a party to several environmental proceedings and other matters, and is responsible under various state, federal and foreign laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), for certain costs of investigating and/or remediating contamination resulting from past industrial activity at the Company's current or former sites or at waste disposal or reprocessing facilities operated by third-parties.

CERCLA Matters

With respect to CERCLA matters for which the Company is responsible under various state, federal and foreign laws, the Company typically estimates potential costs based on information obtained from the U.S. Environmental Protection Agency, or counterpart state or foreign agency and/or studies prepared by independent consultants, including the total estimated costs for the site and the expected cost-sharing, if any, with other "potentially responsible parties," and the Company accrues liabilities when they are probable and reasonably estimable. The Company estimated its share of future costs for these sites to be $65 million at June 30, 2010, which represents the sum of best estimates or, where no best estimate can reasonably be made, estimates of the minimal probable amount among a range of such costs (without taking into account any potential recoveries from other parties).

New Brunswick Facility - Environmental & Personal Injury Lawsuits

As previously disclosed, in May 2008, over 100 lawsuits were filed against the Company in Superior Court, Middlesex County, NJ, by or on behalf of current and former residents of New Brunswick, NJ who live or have lived adjacent to the Company's New Brunswick facility. The complaints allege various personal injuries and property damage resulting from alleged soil and groundwater contamination on their property stemming from historical operations at the New Brunswick facility. In October 2008, the New Jersey Supreme Court granted Mass Tort status to these cases and transferred them to the New Jersey Superior Court in Atlantic County for centralized case management purposes. The Company intends to defend itself vigorously in this litigation. It is not possible at this time to reasonably assess the outcome of these lawsuits, or the potential impact on the Company.

 

North Brunswick Township Board of Education

As previously disclosed, in October 2003, the Company was contacted by counsel representing the North Brunswick, NJ Board of Education (BOE) regarding a site where waste materials from E.R. Squibb and Sons may have been disposed from the 1940's through the 1960's. Fill material containing industrial waste and heavy metals in excess of residential standards was discovered during an expansion project at the North Brunswick Township High School, as well as at a number of neighboring residential properties and adjacent public park areas. In January 2004, the New Jersey Department of Environmental Protection (NJDEP) sent the Company and others an information request letter about possible waste disposal at the site, to which the Company responded in March 2004. The BOE and the Township, as the current owners of the school property and the park, are conducting and jointly financing soil remediation work and ground water investigation work under a work plan approved by NJDEP, and have asked the Company to contribute to the cost. The Company is actively monitoring the clean-up project, including its costs. To date, neither the school board nor the Township has asserted any claim against the Company. Instead, the Company and the local entities have negotiated an agreement to attempt to resolve the matter by informal means, including mediation and binding allocation as necessary. A central component of the agreement is the provision by the Company of interim funding to help defray cleanup costs and assure the work is not interrupted. The Company transmitted interim funding payments in December 2007 and November 2009. The parties commenced mediation in late 2008; however, those efforts were not successful and the parties have moved to a binding allocation process. In addition, in September 2009, the Township and BOE filed suits against several other parties alleged to have contributed waste materials to the site.

OTHER PROCEEDINGS

SEC Germany Investigation

As previously disclosed, in October 2004, the SEC notified the Company that it was conducting an informal inquiry into the activities of certain of the Company's German pharmaceutical subsidiaries and its employees and/or agents. In October 2006, the SEC informed the Company that its inquiry had become formal. The SEC's inquiry encompasses matters formerly under investigation by the German prosecutor in Munich, Germany, which have since been resolved. The Company understands the inquiry concerns potential violations of the Foreign Corrupt Practices Act. The Company is cooperating with the SEC.

Medarex Shareholder Litigation

On July 22, 2009, the Company and Medarex announced the signing of a merger agreement providing for the acquisition of Medarex by the Company, through a tender offer, for $16.00 per share in cash. Following that announcement, certain Medarex shareholders filed similar lawsuits in state and federal court relating to this transaction against Medarex, the members of Medarex's board of directors, and the Company.

Following the consolidation of the state court actions, on August 20, 2009, the parties entered into a memorandum of understanding (MOU), pursuant to which the parties reached an agreement in principle to settle all of the state and federal actions. Pursuant to the agreements in the MOU, among other things, Medarex made certain supplemental disclosures during the tender offer period. The parties also agreed to present to the Superior Court of New Jersey, Mercer County (NJ Superior Court) a Stipulation of Settlement and any other documentation as may be required in order to obtain approval by the court of the settlement and the dismissal of the actions upon the terms set forth in the MOU. In July 2010, the proposed settlement was approved by the NJ Superior Court and a Final Judgment was entered on July 16, 2010. An objector to the settlement has filed a motion asking the Court to reconsider its approval of the settlement.

 

ALLIANCES AND COLLABORATIONS (Tables)
6 Months Ended
Jun. 30, 2010
Summarized financial information related to sanofi agreement
Summarized financial information for interests in the partnerships with sanofi-Europe and Asia
Summarized financial information for commercialization agreement with Otsuka
Summarized financial information for alliance with Lilly
Summarized financial information for alliance with Gilead
Summarized financial information for alliance with AstraZeneca
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Territory covering the Americas and Australia:

           

Net sales

   $ 1,828    $ 1,725    $ 3,706    $ 3,330

Discovery royalty expense

     327      299      661      576

Noncontrolling interest - pre-tax

     500      424      1,020      815

Profit distributions to sanofi

     567      391      1,053      813

Territory covering Europe and Asia:

           

Equity in net income of affiliates

     88      154      188      301

Profit distributions to the Company

     85      115      154      242

Other:

           

Net sales comarketing countries and other

     106      127      208      259

Other income - irbesartan license fee

     8      8      16      16

Other income - supply activities and development and opt-out royalties

     9      10      31      21
               June 30,
2010
   December  31,
2009

Investment in affiliates - territory covering Europe and Asia

         $ 43    $ 10

Deferred income - irbesartan license fee

           75      91
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 500    $ 772    $ 1,048    $ 1,527

Gross profit

     244      388      488      767

Net income

     193      295      387      584
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010     2009    2010     2009

ABILIFY* net sales, including amortization of extension payment

   $ 633      $ 643    $ 1,250      $ 1,232

Oncology Products collaboration fees

     32        -        62        -  

Otsuka's reimbursement - operating expense

     (23     -        (48     -  

Amortization expense - extension payments

     16        16      32        16

Amortization expense - milestone payments

     2        2      4        4
                June 30,
2010
    December 31,
2009

Intangible assets:

         

Extension payment

        $ 319      $ 351

Milestone payments

          13        17
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 172    $ 173    $ 338    $ 337

Distribution fees

     67      67      132      131

Amortization expense - milestone payments

     9      10      19      19

Other income - Japan commercialization fee

     11      5      19      10
               June 30,
2010
   December  31,
2009

Intangible asset - milestone payments

         $ 304    $ 323
     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Net sales

   $ 255      $ 206      $ 505      $ 388   

Equity in net loss of affiliates

     (3     (3     (6     (5
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Net sales

   $ 28    $ -    $ 38    $ -

Amortization income - milestone payments

     7      3      13      6
               June 30,
2010
   December 31,
2009

Deferred income - milestone payments

         $ 305    $ 268
BUSINESS SEGMENT INFORMATION (Tables)
6 Months Ended
Jun. 30, 2010
Net sales of key products
Reconciliation to earnings from continuing operations
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

PLAVIX*

   $ 1,627    $ 1,539    $ 3,293    $ 2,974

AVAPRO*/AVALIDE*

     307      313      621      615

REYATAZ

     357      331      730      653

SUSTIVA Franchise (total revenue)

     331      312      666      604

BARACLUDE

     223      179      439      331

ERBITUX*

     172      173      338      337

SPRYCEL

     132      107      263      195

IXEMPRA

     29      29      58      53

ABILIFY*

     633      643      1,250      1,232

ORENCIA

     178      148      347      272

ONGLYZA

     28      -      38      -

Other

     751      891      1,532      1,721
                           

Net sales

   $ 4,768    $ 4,665    $ 9,575    $ 8,987
                           
     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

BioPharmaceuticals segment income

   $ 1,180      $ 1,217      $ 2,413      $ 2,287   

Reconciling items:

        

Downsizing and streamlining of worldwide operations

     (24     (17     (35     (32

Impairment of manufacturing operations

     (15     -        (215     -   

Accelerated depreciation, asset impairment and other shutdown costs

     (27     (26     (58     (56

Pension settlements/curtailments

     (5     (25     (5     (25

Process standardization implementation costs

     (6     (25     (19     (45

Gain on sale of product lines, businesses and assets

     -        11        -        55   

Litigation charges

     -        (28     -        (132

Upfront licensing and milestone payments

     (17     (29     (72     (174

Debt buyback and swap terminations

     -        11        -        11   

Product liability

     -        -        -        (3

Noncontrolling interest

     506        433        1,035        831   
                                

Earnings from continuing operations before income taxes

   $ 1,592      $ 1,522      $ 3,044      $ 2,717   
                                
RESTRUCTURING (Tables)
6 Months Ended
Jun. 30, 2010
PTI and other restructuring charges recognized
Detail of expenses incurred in connection with restructuring activities and related restructuring liability activity
     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Employee termination benefits

   $ 27      $ 19      $ 37      $ 32   

Other exit costs

     (3     -        (2     6   
                                

Provision for restructuring, net

     24        19        35        38   

Impairment of manufacturing operations

     15        -        215        -   

Accelerated depreciation, asset impairment and other shutdown costs

     27        24        58        50   

Pension plan curtailment charge

     5        25        5        25   

Process standardization implementation costs

     6        25        19        45   
                                

Total cost

     77        93        332        158   

Gain on sale of product lines, businesses and assets

     -        (11     -        (55
                                

Net charges

   $ 77      $ 82      $ 332      $ 103   
                                
     Six Months Ended June 30, 2010     Six Months Ended June 30, 2009  
Dollars in Millions    Employee
Termination
Liability
    Other Exit
Costs
Liability
    Total     Employee
Termination
Liability
    Other Exit
Costs
Liability
    Total  

Liability at January 1

   $ 157      $ 16      $ 173      $ 188      $ 21      $ 209   
                                                

Charges

     31        3        34        32        6        38   

Changes in estimates

     6        (5     1        -        -        -   
                                                

Provision for restructuring, net

     37        (2     35        32        6        38   

Charges in discontinued operations

     -        -        -        9        -        9   

Foreign currency translation

     (6     -        (6     -        -        -   

Spending

     (62     (7     (69     (75     (4     (79
                                                

Liability at June 30

   $ 126      $ 7      $ 133      $ 154      $ 23      $ 177   
                                                
DISCONTINUED OPERATIONS (Tables)
Results of the Mead Johnson business
Dollars in Millions    Three Months
Ended June  30,
2009
   Six Months
Ended June 30,
2009

Net sales

   $ 719    $ 1,412
             

Earnings before income taxes

   $ 219    $ 408

Provision for income taxes(1)

     90      278
             

Net earnings from discontinued operations

     129      130

Less net earnings from discontinued operations attributable to noncontrolling interest

     26      38
             

Net earnings from discontinued operations attributable to Bristol-Myers Squibb Company

   $ 103    $ 92
             
EARNINGS PER SHARE (Tables)
Earnings per share
     Three Months Ended June 30,     Six Months Ended June 30,  
Amounts in Millions, Except Per Share Data    2010     2009     2010     2009  

EPS Numerator - Basic:

        

Income from Continuing Operations Attributable to BMS

   $ 927      $ 880      $ 1,670      $ 1,529   

Earnings attributable to unvested restricted shares

     (3     (5     (7     (8
                                

Income from Continuing Operations Attributable to BMS common shareholders'

     924        875        1,663        1,521   

Net Earnings from Discontinued Operations Attributable to BMS(1)

     -        102        -        91   
                                

EPS Numerator - Basic

   $ 924      $ 977      $ 1,663      $ 1,612   
                                

EPS Denominator - Basic:

        

Average Common Shares Outstanding

     1,718        1,980        1,717        1,979   
                                

EPS - Basic:

        

Continuing Operations

   $ 0.54      $ 0.44      $ 0.97      $ 0.77   

Discontinued Operations

     -        0.05        -        0.04   
                                

Net Earnings

   $ 0.54      $ 0.49      $ 0.97      $ 0.81   
                                

EPS Numerator - Diluted:

        

Income from Continuing Operations Attributable to BMS

   $ 927      $ 880      $ 1,670      $ 1,529   

Earnings attributable to unvested restricted shares

     (3     (5     (7     (8
                                

Income from Continuing Operations Attributable to BMS common shareholders'

     924        875        1,663        1,521   

Net Earnings from Discontinued Operations Attributable to BMS(1)

     -        102        -        91   
                                

EPS Numerator - Diluted

   $ 924      $ 977      $ 1,663      $ 1,612   
                                

EPS Denominator - Diluted:

        

Average Common Shares Outstanding

     1,718        1,980        1,717        1,979   

Contingently convertible debt common stock equivalents

     1        1        1        1   

Incremental shares attributable to share-based compensation plans

     9        2        9        2   
                                

Average Common Shares Outstanding and Common Share Equivalents

     1,728        1,983        1,727        1,982   
                                

EPS - Diluted:

        

Continuing Operations

   $ 0.53      $ 0.44      $ 0.96      $ 0.77   

Discontinued Operations

     -        0.05        -        0.04   
                                

Net Earnings

   $ 0.53      $ 0.49      $ 0.96      $ 0.81   
                                

(1) Net Earnings from Discontinued Operations for EPS Calculation:

        

 Net Earnings from Discontinued Operations Attributable to BMS

   $ -      $ 103      $ -      $ 92   

 Earnings attributable to unvested restricted shares

     -        (1     -        (1
                                

 Net Earnings from Discontinued Operations Attributable to BMS for EPS Calculation

   $ -      $ 102      $ -      $ 91   
                                

Anti-dilutive weighted-average equivalent shares:

        

Stock incentive plans

     64        138        66        132   
                                

Total anti-dilutive shares

     64        138        66        132   
                                
FAIR VALUE MEASUREMENT (Tables)
Fair Value Of Financial Assets And Liabilities
     June 30, 2010    December 31, 2009
Dollars in Millions    Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
   Total    Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Unobservable
Inputs

(Level 3)
   Total

Available for Sale:

                       

U.S. Treasury Bills

   $ 653    $ -    $ -    $ 653    $ -    $ -    $ -    $ -

U.S. Government Agency Securities

     602      -      -      602      225      -      -      225

Equity Securities

     5      -      -      5      11      -      -      11

Prime Money Market Funds

     -      4,089      -      4,089      -      5,807      -      5,807

Corporate Debt Securities

     -      1,614      -      1,614      -      837      -      837

Commercial Paper

     -      998      -      998      -      518      -      518

FDIC Insured Debt Securities

     -      359      -      359      -      252      -      252

U.S. Treasury Money Market Funds

     -      9      -      9      -      218      -      218

U.S. Government Agency Money Market Funds

     -      -      -      -      -      24      -      24

Floating Rate Securities (FRS)

     -      -      47      47      -      -      91      91

Auction Rate Securities (ARS)

     -      -      90      90      -      -      88      88
                                                       

Total available for sale assets

     1,260      7,069      137      8,466      236      7,656      179      8,071
                                                       

Derivatives:

                       

Interest Rate Swap Derivatives

     -      392      -      392      -      165      -      165

Foreign Currency Forward Derivatives

     -      110      -      110      -      21      -      21
                                                       

Total derivative assets

     -      502      -      502      -      186      -      186
                                                       

Total assets at fair value

   $ 1,260    $ 7,571    $ 137    $ 8,968    $ 236    $ 7,842    $ 179    $ 8,257
                                                       

Derivatives:

                       

Foreign Currency Forward Derivatives

   $ -    $ 15    $ -    $ 15    $ -    $ 31    $ -    $ 31

Natural Gas Contracts

     -      2      -      2      -      1      -      1

Interest Rate Swap Derivatives

     -      -      -      -      -      5      -      5
                                                       

Total derivative liabilities

     -      17      -      17      -      37      -      37
                                                       

Total liabilities at fair value

   $ -    $ 17    $ -    $ 17    $ -    $ 37    $ -    $ 37
                                                       
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Tables)
6 Months Ended
Jun. 30, 2010
Current and non-current marketable securities, accounted for as "available for sale" debt securities and equity securities
Contractual maturities of non-current "available for sale" debt securities
     June 30, 2010    December 31, 2009
Dollars in Millions    Amortized
Cost Basis
   Unrealized
Gain in
Accumulated
OCI
   Unrealized
Loss in
Accumulated
OCI
    Fair
Value
   Amortized
Cost Basis
   Unrealized
Gain in
Accumulated
OCI
   Unrealized
Loss in
Accumulated
OCI
    Fair
Value

Current marketable securities:

                     

Certificates of deposit

   $ 780    $ -    $ -      $ 780    $ 501    $ -    $ -      $ 501

Commercial Paper

     185      -      -        185      205      -      -        205

U.S. Treasury Bills

     250      -      -        250      -      -      -        -

Corporate debt securities

     266      4      -        270      -      -      -        -

FDIC insured debt securities

     51      -      -        51      -      -      -        -

U.S. government agency securities

     -      -      -        -      125      -      -        125
                                                         

Total current

   $ 1,532    $ 4    $ -      $ 1,536    $ 831    $ -    $ -      $ 831
                                                         

Non-current marketable securities:

                     

Corporate debt securities

   $ 1,335    $ 18    $ (9   $ 1,344    $ 834    $ 5    $ (2   $ 837

U.S. government agency securities

     600      2      -        602      100      -      -        100

U.S. Treasury Bills

     399      4      -        403      -      -      -        -

FDIC insured debt securities

     304      4      -        308      252      -      -        252

Auction rate securities

     80      10      -        90      80      8      -        88

Floating rate securities(1)

     58      -      (11     47      113      -      (22     91

Other

     1      -      -        1      1      -      -        1
                                                         

Total non-current

   $ 2,777    $ 38    $ (20   $ 2,795    $ 1,380    $ 13    $ (24   $ 1,369
                                                         

Other assets:

                     

Equity securities

   $ 5    $ -    $ -      $ 5    $ 11    $ -    $ -      $ 11
                                                         

Dollars in Millions

   1 to 5
Years
   Over 10
Years
   Total

Available for sale:

        

Corporate debt securities

   $ 1,344    $ -    $ 1,344

U.S. government agency securities

     602      -      602

U.S. Treasury Bills

     403      -      403

FDIC insured debt securities

     308      -      308

Floating rate securities

     47      -      47

Auction rate securities

     -      90      90

Other

     1      -      1
                    

Total available for sale

   $ 2,705    $ 90    $ 2,795
                    
RECEIVABLES (Tables)
Receivables include:
Dollars in Millions    June 30
2010
   December 31,
2009

Trade receivables

   $ 1,896    $ 2,000

Less allowances

     91      103
             

Net trade receivables

     1,805      1,897

Alliance partners receivables

     950      870

Income tax refund claims

     190      103

Miscellaneous receivables

     227      294
             

Receivables

   $ 3,172    $ 3,164
             
INVENTORIES (Tables)
Inventories include:
Dollars in Millions    June 30,
2010
   December 31,
2009

Finished goods

   $ 545    $ 580

Work in process

     446      630

Raw and packaging materials

     274      203
             

Inventories

   $ 1,265    $ 1,413
             
PROPERTY, PLANT AND EQUIPMENT (Tables)
Property, plant and equipment includes:
Dollars in Millions    June 30,
2010
   December 31,
2009

Land

   $ 135    $ 142

Buildings

     4,300      4,350

Machinery, equipment and fixtures

     3,103      3,563

Construction in progress

     690      840
             

Gross property, plant and equipment

     8,228      8,895

Less accumulated depreciation

     3,483      3,840
             

Property, plant and equipment

   $ 4,745    $ 5,055
             
EQUITY (Tables)
6 Months Ended
Jun. 30, 2010
Changes in common shares, treasury stock and capital in excess of par value of stock
The accumulated balances related to each component of other comprehensive income/(loss) (OCI), net of taxes
The reconciliation of noncontrolling interest
Dollars and Shares in Millions    Common Shares
Issued
   Treasury
Stock
    Cost
of
Treasury
Stock
    Capital in Excess
of Par Value

of Stock
 

Balance at January 1, 2009

   2,205    226      $ (10,566   $ 2,757   

Mead Johnson initial public offering

   -      -          -          942   

Employee stock compensation plans

   -      (2     58        4   
                           

Balance at June 30, 2009

   2,205    224      $ (10,508   $ 3,703   
                           

Balance at January 1, 2010

   2,205    491      $ (17,364   $ 3,768   

Stock repurchase program

   -      7        (173     -     

Employee stock compensation plans

   -      (7     266        (71
                           

Balance at June 30, 2010

   2,205    491      $ (17,271   $ 3,697   
                           
Dollars in Millions    Foreign
Currency
Translation
    Derivatives
Qualifying
as
Effective
Hedges
    Pension and
Other
Postretirement
Benefits
    Available
for Sale
Securities
    Accumulated
Other
Comprehensive
Income/(Loss)
 

Balance at January 1, 2009

   $ (424   $ 14      $ (2,258   $ (51   $ (2,719

Other comprehensive income/(loss)

     18        (38     470        14        464   
                                        

Balance at June 30, 2009

   $ (406   $ (24   $ (1,788   $ (37   $ (2,255
                                        

Balance at January 1, 2010

   $ (343   $ (30   $ (2,158   $ (10   $ (2,541

Other comprehensive income/(loss)

     103        75        31        32        241   
                                        

Balance at June 30, 2010

   $ (240   $ 45      $ (2,127   $ 22      $ (2,300
                                        
     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Balance at beginning of period

   $ (16   $ (208   $ (58   $ (33

Mead Johnson initial public offering

     -          -          -          (160

Net earnings attributable to noncontrolling interest

     505        456        1,033        864   

Other comprehensive income attributable to noncontrolling interest

     -          2        -          5   

Distributions

     (583     (410     (1,069     (836
                                

Balance at June 30

   $ (94   $ (160   $ (94   $ (160
                                
PENSION, POSTRETIREMENT AND POSTEMPLOYMENT LIABILITIES (Tables)
Schedule of Defined Benefit Plans Disclosures
     Three Months Ended June 30,     Six Months Ended June 30,  
     Pension Benefits     Other
Benefits
    Pension Benefits     Other
Benefits
 
Dollars in Millions    2010     2009     2010     2009     2010     2009     2010     2009  

Service cost - benefits earned during the period

   $ 11      $ 48      $ 2      $ 2      $ 22      $ 107      $ 4      $ 3   

Interest cost on projected benefit obligation

     86        89        8        10        173        193        15        19   

Expected return on plan assets

     (112     (107     (6     (5     (225     (233     (12     (10

Amortization of prior service cost/(benefit)

     -        1        (1     (1     -        4        (2     (2

Amortization of net actuarial loss

     24        28        3        2        48        70        6        5   
                                                                

Net periodic benefit cost

     9        59        6        8        18        141        11        15   

Settlements

     5        -        -        -        5        -        -        -   

Curtailments and special termination benefits

     6        25        -        -        9        25        -        -   
                                                                

Total net periodic benefit cost

   $ 20      $ 84      $ 6      $ 8      $ 32      $ 166      $ 11      $ 15   
                                                                

Continuing operations

   $ 20      $ 82      $ 6      $ 8      $ 32      $ 161      $ 11      $ 14   

Discontinued operations

     -        2        -        -        -        5        -        1   
                                                                

Total net periodic benefit cost

   $ 20      $ 84      $ 6      $ 8      $ 32      $ 166      $ 11      $ 15   
                                                                
EMPLOYEE STOCK BENEFIT PLANS (Tables)
6 Months Ended
Jun. 30, 2010
Stock-based compensation
Compensation costs related to nonvested awards
     Three Months Ended June 30,    Six Months Ended June 30,
Dollars in Millions    2010    2009    2010    2009

Stock options

   $ 14    $ 18    $ 27    $ 36

Restricted stock

     23      19      46      35

Long-term performance awards

     12      8      23      17
                           

Total stock-based compensation expense

   $ 49    $ 45    $ 96    $ 88
                           

Continuing operations

   $ 49    $ 42    $ 96    $ 82

Discontinued operations

     -      3      -      6
                           

Total stock-based compensation expense

   $ 49    $ 45    $ 96    $ 88
                           

Deferred tax benefit related to stock-based compensation expense:

           

Continuing operations

   $ 16    $ 14    $ 31    $ 27

Discontinued operations

     -      1      -      2
                           

Total deferred tax benefit related to stock-based compensation expense

   $ 16    $ 15    $ 31    $ 29
                           
Dollars in Millions    Stock Options    Restricted Stock    Long-Term
Performance
Awards

Unrecognized compensation cost

   $ 60    $ 209    $ 40

Expected weighted-average period of compensation cost to be recognized

     2.1 years      2.1 years      1.5 years
FINANCIAL INSTRUMENTS (Tables)
6 Months Ended
Jun. 30, 2010
Derivative instruments qualifying as cash flow hedges impact on OCI and earnings
Impact on OCI and earnings from non-derivative debt designated net investment hedges table
Interest rate swaps qualified as fair value hedges impact on earnings table
Impact on long-term debt from interest rate swaps that qualify as fair value hedges table
Fair value of outstanding derivatives
     Six Months Ended June 30,  
     Foreign Currency
Forward
Contracts
    Natural Gas
Contracts
    Forward
Starting
Swaps
    Total Impact  
Dollars in Millions    2010     2009     2010     2009     2010     2009     2010     2009  

Net carrying amount at January 1

   $ (11   $ 35      $ (1   $ (2   $ (18   $ (19   $ (30   $ 14   

Cash flow hedges deferred in OCI

     99        3        -        2        -        -        99        5   

Cash flow hedges reclassified to cost of products sold/interest expense (effective portion)

     9        (55     -        -        -        -        9        (55

Change in deferred taxes

     (33     13        -        (1     -        -        (33     12   
                                                                

Net carrying amount at June 30

   $ 64      $ (4   $ (1   $ (1   $ (18   $ (19   $ 45      $ (24
                                                                
     Six Months Ended June 30,  
     Net Investment Hedges  
Dollars in Millions    2010     2009  

Net carrying amount at January 1

   $ (169   $ (131

Change in spot value of non-derivative debt designated as a hedge

     202        (2

Gain recognized in other (income)/expense, net (overhedged portion)

     (59     -   
          

Net carrying amount at June 30

   $ (26   $ (133
                
     Three Months Ended June 30,     Six Months Ended June 30,  
Dollars in Millions    2010     2009     2010     2009  

Recognized in interest expense

   $ (33   $ (29   $ (72   $ (53

Amortization of basis adjustment from swap terminations recognized in interest expense

     (8     (7     (15     (12
                                

Total

   $ (41   $ (36   $ (87   $ (65
                                
Dollars in Millions    June 30,
2010
    December 31,
2009
 

Principal value

   $ 5,425      $ 5,622   

Adjustments to Principal Value:

    

Fair value of interest rate swaps

     392        160   

Unamortized basis adjustment from swap terminations

     460        377   

Unamortized bond discounts

     (29     (29
                

Total

   $ 6,248      $ 6,130   
                
        June 30, 2010   December 31, 2009       June 30, 2010     December 31, 2009  
Dollars in Millions   Balance Sheet Location   Notional   Fair
Value
  Notional   Fair
Value
    Notional   Fair
Value
    Notional   Fair
Value
 

Derivatives designated as hedging instruments:

                   

Interest rate contracts

  Other assets   $ 3,152   $ 392   $ 3,134   $ 165   Accrued expenses   $ -   $ -      $ 597   $ (5

Foreign currency forward contracts

  Other assets     807     106     780     21   Accrued expenses     424     (15     731     (31

Hedge of net investments

      -     -     -     -   Long-term debt     874     (874     1,256     (1,256

Natural gas contracts

      -     -     -     -   Accrued expenses     *     (2     *     (1
                                       

Subtotal

        498       186         (891       (1,293
                                       

Derivatives not designated as hedging instruments:

                   

Foreign currency forward contracts

  Other assets     114     4     -     -   Accrued expenses     -     -        -     -   
                                 

Total Derivatives

      $ 502     $ 186       $ (891     $ (1,293
                                       
ALLIANCES AND COLLABORATIONS (Details) (USD $)
In Millions
Year Ended
Dec. 31,
Year Ended
Dec. 31, 2010
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Mar. 31, 2010
Year Ended
Dec. 31, 2009
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
1 Month Ended
Apr. 30, 2009
2004
2002
The Company acts as the operating partner and owns a majority controlling interest in the territory covering the Americas and Australia
 
 
50.1% 
 
 
 
 
 
 
 
Sanofi's 49.9% share of the results reflected as a noncontrolling interest
 
 
49.9% 
 
 
 
 
 
 
 
Sanofi acts as the operating partner and owns a majority controlling interest in the territory covering Europe and Asia
 
 
50.1% 
 
 
 
 
 
 
 
The Company ownership interest in the territory covering Europe and Asia is accounted for under the equity method
 
 
49.9% 
 
 
 
 
 
 
 
Payment to the company by sanofi for acquisition interest in irbesartan license
 
 
 
 
 
 
 
 
 
$ 350 
Sanofi agreement sales territory covering Americas and Australia
 
1,828 
3,706 
 
 
1,725 
3,330 
 
 
 
Discovery royalty expense
 
327 
661 
 
 
299 
576 
 
 
 
Noncontrolling interest-pre-tax
 
500 
1,020 
 
 
424 
815 
 
 
 
Profit distributions to sanofi
 
567 
1,053 
 
 
391 
813 
 
 
 
Equity in net income of affiliates
 
88 
188 
 
 
154 
301 
 
 
 
Profit distributions to the Company
 
85 
154 
 
 
115 
242 
 
 
 
Net sales comarketing countries and other
 
106 
208 
 
 
127 
259 
 
 
 
Other income-irbesartan license fee
 
16 
 
 
16 
 
 
 
Other income-supply activities and development and opt-out royalties
 
31 
 
 
10 
21 
 
 
 
Investment in affiliates-territory covering Europe and Asia
 
43 
43 
 
10 
 
 
 
 
 
Deferred income-irbesartan license fee
 
75 
75 
 
91 
 
 
 
 
 
Net sales
 
500 
1,048 
 
 
772 
1,527 
 
 
 
Gross profit
 
244 
488 
 
 
388 
767 
 
 
 
Net income
 
193 
387 
 
 
295 
584 
 
 
 
Contractual share of third-party net sales in the U.S. related to commercialization agreement with Otsuka Pharmaceutical Co., Ltd.
 
 
58.00% 
 
65.00% 
 
 
 
 
 
Reimbursement by Otsuka for ABILIFY* related operating expenses in the U.S.
30.0% 
 
30.00% 
 
 
 
 
 
 
 
The Company recognizes net sales and related cost of products sold and expenses in countries where it is the exclusive distributor
 
 
100.00% 
 
 
 
 
 
 
 
Payment to Otsuka for extending the commercialization and manufacturing agreement in the U.S.
 
 
 
 
 
 
 
400 
 
 
Previously capitalized milestone payments included in intangible assets
 
 
 
 
 
 
 
 
60 
 
ABILIFY* net sales, including amortization of extension payment
 
633 
1,250 
 
 
643 
1,232 
 
 
 
Oncology Products collaboration fees
 
32 
62 
 
 
 
 
 
 
 
Otsuka's reimbursement - operating expense
 
(23)
(48)
 
 
 
 
 
 
 
Amortization expense - extension payments
 
16 
32 
 
 
16 
16 
 
 
 
Amortization expense - milestone payments
 
 
 
 
 
 
Extension payment
 
319 
319 
 
351 
 
 
 
 
 
Milestone payments
 
13 
13 
 
17 
 
 
 
 
 
Distribution fee to Lilly for ERBITUX
 
 
39.00% 
 
 
 
 
 
 
 
Company share of pre-tax profit from Merck's net sales of ERBITUX in Japan
 
 
50.00% 
 
 
 
 
 
 
 
Company share of profits from commercialization in Japan
 
 
25.00% 
 
 
 
 
 
 
 
Net sales
 
172 
338 
 
 
173 
337 
 
 
 
Distribution fees
 
67 
132 
 
 
67 
131 
 
 
 
Amortization expense - milestone payments
 
19 
 
 
10 
19 
 
 
 
Other income - Japan commercialization fee
 
11 
19 
 
 
10 
 
 
 
Intangible assets - milestone payments
 
304 
304 
 
323 
 
 
 
 
 
The company funding for development costs for U.S. studies
 
 
55.00% 
 
 
 
 
 
 
 
The company funding for development costs for global studies
 
 
27.50% 
 
 
 
 
 
 
 
Milestone payment to Lilly upon first approval in the U.S. of necitumumab
 
 
250 
 
 
 
 
 
 
 
Company percentage of necitumumab profits in the U.S. and Canada
 
 
55.00% 
 
 
 
 
 
 
 
Lilly's percentage of the selling effort
 
 
50.00% 
 
 
 
 
 
 
 
Net sales
 
255 
505 
 
 
206 
388 
 
 
 
Equity in net loss of affiliates
 
(3)
(6)
 
 
(3)
(5)
 
 
 
Upfront licensing and milestone payments received from AstraZeneca, total
 
 
 
 
 
 
 
 
350 
 
Upfront licensing and milestone payments received from AstraZeneca
 
 
 
50 
 
 
 
 
 
 
Net sales
 
28 
38 
 
 
 
 
 
 
 
Amortization income-milestone payments
 
13 
 
 
 
 
 
Deferred income-milestone payments
 
305 
305 
 
268 
 
 
 
 
 
Termination payment to Exelixis
 
17 
17 
 
 
 
 
 
 
 
Terminated Exelixis contingent development and regulatory milestone payments
 
295 
295 
 
 
 
 
 
 
 
Terminated Exelixis contingent sales milestones payments
 
150 
150 
 
 
 
 
 
 
 
Tier One [Member]
 
 
 
 
 
 
 
 
 
 
Collaboration fee percentage
 
 
 
30.00% 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales level
 
 
 
400 
 
 
 
 
 
 
Commercial operational expense level
 
 
 
175 
 
 
 
 
 
 
Otsuka's contribution of certain commercial operational expenses
 
 
 
20.00% 
 
 
 
 
 
 
Tier Two [Member]
 
 
 
 
 
 
 
 
 
 
Collaboration fee percentage
 
 
 
5.00% 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales Minimum
 
 
 
400 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales Maximum
 
 
 
600 
 
 
 
 
 
 
Commercial operational expense level
 
 
 
175 
 
 
 
 
 
 
Otsuka's contribution of certain commercial operational expenses
 
 
 
1.00% 
 
 
 
 
 
 
Tier Three [Member]
 
 
 
 
 
 
 
 
 
 
Collaboration fee percentage
 
 
 
3.00% 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales Minimum
 
 
 
600 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales Maximum
 
 
 
800 
 
 
 
 
 
 
Tier Four [Member]
 
 
 
 
 
 
 
 
 
 
Collaboration fee to Otsuka, annual sales level
 
 
 
$ 800 
 
 
 
 
 
 
BUSINESS SEGMENT INFORMATION (Details) (USD $)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Net Sales
$ 4,768 
$ 9,575 
$ 4,665 
$ 8,987 
Reconciliation to earnings from continuing operations before income taxes
1,592 
3,044 
1,522 
2,717 
Sales Revenue Segment Plavix [Member]
 
 
 
 
Net Sales
1,627 
3,293 
1,539 
2,974 
Sales Revenue Segment Avapro/Avalide [Member]
 
 
 
 
Net Sales
307 
621 
313 
615 
Segment Continuing Operations Segment Income [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
1,180 
2,413 
1,217 
2,287 
Segment Continuing Operations Downsizing [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(24)
(35)
(17)
(32)
Production Related Impairments Or Charges [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(15)
(215)
 
 
Accelerated Depreciation [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(27)
(58)
(26)
(56)
Pension Settlements/Curtailments [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(5)
(5)
(25)
(25)
Process Standardization Implementation Costs [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(6)
(19)
(25)
(45)
Gain On Sale Of Product Lines Businesses And Assets [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
 
 
11 
55 
Segment Continuing Operations Litigation [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
 
 
(28)
(132)
Upfront Licensing And Milestone Payments [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
(17)
(72)
(29)
(174)
Debt Buyback And Swap Terminations [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
 
 
11 
11 
Product Liability [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
 
 
 
(3)
Noncontrolling Interest [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
506 
1,035 
433 
831 
Total Earnings From Continuing Operations Before Income Taxes [Member]
 
 
 
 
Reconciliation to earnings from continuing operations before income taxes
1,592 
3,044 
1,522 
2,717 
Sales Revenue Segment Reyataz [Member]
 
 
 
 
Net Sales
357 
730 
331 
653 
Sales Revenue Segment Sustiva Franchise [Member]
 
 
 
 
Net Sales
331 
666 
312 
604 
Sales Revenue Segment Baraclude [Member]
 
 
 
 
Net Sales
223 
439 
179 
331 
Sales Revenue Segment Erbitux [Member]
 
 
 
 
Net Sales
172 
338 
173 
337 
Sales Revenue Segment Sprycel [Member]
 
 
 
 
Net Sales
132 
263 
107 
195 
Sales Revenue Segment Ixempra [Member]
 
 
 
 
Net Sales
29 
58 
29 
53 
Sales Revenue Segment Abilify [Member]
 
 
 
 
Net Sales
633 
1,250 
643 
1,232 
Sales Revenue Segment Orencia [Member]
 
 
 
 
Net Sales
178 
347 
148 
272 
Sales Revenue Segment Onglyza [Member]
 
 
 
 
Net Sales
28 
38 
 
 
Sales Revenue Segment Member Other Products [Member]
 
 
 
 
Net Sales
751 
1,532 
891 
1,721 
Net Sales, Total [Member]
 
 
 
 
Net Sales
$ 4,768 
$ 9,575 
$ 4,665 
$ 8,987 
RESTRUCTURING (Details)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
May 31, 2010
3 Months Ended
Mar. 31, 2010
Dec. 31, 2009
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Dec. 31, 2008
3 Months Ended
Mar. 31, 2010
Net charges
$ 24 
$ 35 
 
 
 
$ 19 
$ 38 
 
 
Workforce reduction of manufacturing, selling, administrative, and research and development personnel
260 
480 
 
 
 
140 
355 
 
 
Liability
133 
133 
 
 
173 
177 
177 
209 
 
Charges
 
34 
 
 
 
 
38 
 
 
Changes in estimates
 
 
 
 
 
 
 
 
Provision for restructuring, net
 
35 
 
 
 
 
38 
 
 
Charges in discontinued operations
 
 
 
 
 
 
 
 
Foreign currency translation
 
(6)
 
 
 
 
 
 
 
Spending
 
(69)
 
 
 
 
(79)
 
 
Loss on sale of manufacturing operation in Latina, Italy
 
 
215 
 
 
 
 
 
 
Impairment charge related to the sale of manufacturing operation in Latina, Italy
 
200 
 
 
 
 
 
 
 
Portion of working capital adjustments and transaction related fees as a part of impairment charges recorded
 
 
 
15 
 
 
 
 
 
Euro Denominated Promissory Note Payable Euro
 
 
 
 
 
 
 
 
18 
Euro denominated promissory note payable, US Dollar
22 
 
 
 
 
 
 
 
 
Euro denominated promissory note payable, interest rate
 
 
 
6.00% 
 
 
 
 
6.00% 
Obligation to fund a portion of ICIs restructuring, Euro
 
 
 
 
 
 
 
 
19 
Obligation to fund a portion of ICIs restructuring, USD
 
 
 
23 
 
 
 
 
 
Restructuring Charges [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
24 
35 
 
 
 
19 
38 
 
 
Accelerated Depreciation Asset Impairment Shut Down Costs [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
27 
58 
 
 
 
24 
50 
 
 
Pension Plan Curtailment Charge [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
 
 
 
25 
25 
 
 
Restructuring Costs [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
77 
332 
 
 
 
93 
158 
 
 
Net Charges, Total [Member]
 
 
 
 
 
 
 
 
 
Net charges
77 
332 
 
 
 
82 
103 
 
 
Employee Termination Benefits [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
27 
37 
 
 
 
19 
32 
 
 
Liability
126 
126 
 
 
157 
154 
154 
188 
 
Charges
 
31 
 
 
 
 
32 
 
 
Changes in estimates
 
 
 
 
 
 
 
 
Provision for restructuring, net
 
37 
 
 
 
 
32 
 
 
Charges in discontinued operations
 
 
 
 
 
 
 
 
Foreign currency translation
 
(6)
 
 
 
 
 
 
 
Spending
 
(62)
 
 
 
 
(75)
 
 
Other Exit Costs [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
(3)
(2)
 
 
 
 
 
 
Liability
 
 
16 
23 
23 
21 
 
Charges
 
 
 
 
 
 
 
Changes in estimates
 
(5)
 
 
 
 
 
 
 
Provision for restructuring, net
 
(2)
 
 
 
 
 
 
Spending
 
(7)
 
 
 
 
(4)
 
 
Production Related Impairments Or Charges [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
15 
215 
 
 
 
 
 
 
 
Process Standardization Implementation Costs [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
19 
 
 
 
25 
45 
 
 
Gain On Sale Of Product Lines Businesses And Assets [Member]
 
 
 
 
 
 
 
 
 
PTI and other restructuring charges recognized
 
 
 
 
 
$ (11)
$ (55)
 
 
DISCONTINUED OPERATIONS (Details) (USD $)
In Millions
Dec. 23, 2009
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
1 Month Ended
Feb. 28, 2009
Company received from initial public offering of Mead Johnson Nutrition Company
 
 
 
$ 782 
Interest retained in Mead Johnson
 
 
 
83.10% 
Split off of remaining interest in Mead Johnson
269 
 
 
 
Net Sales
 
719 
1,412 
 
Earnings before income taxes
 
219 
408 
 
Provision for income taxes (1)
 
90 
278 
 
Net earnings from discontinued operations
 
129 
130 
 
Less net earnings from discontinued operations attributable to noncontrolling interest
 
26 
38 
 
Net Earnings from Discontinued Operations
 
$ 103 
$ 92 
 
DISCONTINUED OPERATIONS (Parenthetical) (Details) (USD $)
In Millions
6 Months Ended
Jun. 30, 2009
Provision for income taxes incurred from the transfer of various international business units to Mead Johnson prior to the IPO
$ 130 
Maximum number of months to expire from split off date
18 
EARNINGS PER SHARE (Details) (USD $)
In Millions, except Per Share data
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Income from Continuing Operations Attributable to BMS
$ 927 
$ 1,670 
$ 880 
$ 1,529 
Net Earnings from Discontinued Operations Attributable to BMS (1)
 
 
103 
92 
Continuing Operations
0.54 
0.97 
0.49 
0.81 
Earnings Per Share Numerator Basic [Member]
 
 
 
 
Income from Continuing Operations Attributable to BMS
927 
1,670 
880 
1,529 
Earnings attributable to unvested restricted shares
(3)
(7)
(5)
(8)
Income from Continuing Operations Attributable to BMS common shareholders'
924 
1,663 
875 
1,521 
Net Earnings from Discontinued Operations Attributable to BMS (1)
 
 
102 
91 
EPS Numerator - Basic
924 
1,663 
977 
1,612 
Earnings Per Share Denominator Basic [Member]
 
 
 
 
Average Common Shares Outstanding
1,718 
1,717 
1,980 
1,979 
Earnings Per Share, Basic [Member]
 
 
 
 
Continuing Operations
0.54 
0.97 
0.44 
0.77 
Discontinued Operations
 
 
0.05 
0.04 
Net Earnings
0.54 
0.97 
0.49 
0.81 
Earnings Per Share Numerator Diluted [Member]
 
 
 
 
Income from Continuing Operations Attributable to BMS
927 
1,670 
880 
1,529 
Earnings attributable to unvested restricted shares
(3)
(7)
(5)
(8)
Income from Continuing Operations Attributable to BMS common shareholders'
924 
1,663 
875 
1,521 
Net Earnings from Discontinued Operations Attributable to BMS (1)
 
 
102 
91 
EPS Numerator - Diluted
924 
1,663 
977 
1,612 
Earnings Per Share Denominator Diluted [Member]
 
 
 
 
Average Common Shares Outstanding
1,718 
1,717 
1,980 
1,979 
Contingently convertible debt common stock equivalents
Incremental shares attributable to share-based compensation plans
Average Common Shares Outstanding and Common Share Equivalents
1,728 
1,727 
1,983 
1,982 
Earnings Per Share, Diluted [Member]
 
 
 
 
Continuing Operations
0.53 
0.96 
0.44 
0.77 
Discontinued Operations
 
 
0.05 
0.04 
Net Earnings
0.53 
0.96 
0.49 
0.81 
Net Earnings From Discontinued Operations For Earnings Per Share Calculation [Member]
 
 
 
 
Earnings attributable to unvested restricted shares
 
 
(1)
(1)
Net Earnings from Discontinued Operations Attributable to BMS (1)
 
 
103 
92 
Net Earnings from Discontinued Operations Attributable to BMS for EPS Calculation
 
 
102 
91 
Anti-dilutive Weighted Average Equivalent Shares [Member]
 
 
 
 
Stock incentive plans
64 
66 
138 
132 
Total anti-dilutive shares
64 
66 
138 
132 
INCOME TAXES (Details) (USD $)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Effective income tax rate on earnings from continuing operations before income taxes
20.40% 
22.20% 
23.20% 
23.10% 
U.S. statutory rate
 
35.00% 
 
 
Tax benefit re-measurement of US contingent tax
$ 66 
 
 
 
Out-of-period adjustment
59 
 
 
 
Tax understatement reversal
17 
 
 
 
Tax benefit related to certain state audits
 
 
40 
 
Unfavorable impact on the current year rate resulting from the reduction of deferred tax assets due to the enactment of healthcare reform
21 
21 
 
 
Decrease in the total amount of unrecognized tax benefits, minimum
175 
175 
 
 
Decrease in the total amount of unrecognized tax benefits, maximum
$ 205 
$ 205 
 
 
FAIR VALUE MEASUREMENT (Details) (USD $)
In Millions
6 Months Ended
Jun. 30, 2010
Dec. 31, 2009
Fair Value, Inputs, Level 1 [Member]
 
 
Total assets at fair value
$ 1,260 
$ 236 
Fair Value, Inputs, Level 1 [Member] | US Treasury Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
653 
 
Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
602 
225 
Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
11 
Fair Value, Inputs, Level 1 [Member] | Total Available For Sale Assets [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
1,260 
236 
Fair Value, Inputs, Level 2 [Member]
 
 
Total assets at fair value
7,571 
7,842 
Total Liabilities At Fair Value
17 
37 
Fair Value, Inputs, Level 2 [Member] | Prime Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
4,089 
5,807 
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
1,614 
837 
Fair Value, Inputs, Level 2 [Member] | Commercial Paper [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
998 
518 
Fair Value, Inputs, Level 2 [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
359 
252 
Fair Value, Inputs, Level 2 [Member] | Treasury Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
218 
Fair Value, Inputs, Level 2 [Member] | Government Agency Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
 
24 
Fair Value, Inputs, Level 2 [Member] | Total Available For Sale Assets [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
7,069 
7,656 
Fair Value, Inputs, Level 2 [Member] | Derivative Financial Instruments, Assets [Member]
 
 
Derivative Assets
502 
186 
Fair Value, Inputs, Level 2 [Member] | Derivative Financial Instruments, Liabilities [Member]
 
 
Derivative Assets
17 
37 
Fair Value, Inputs, Level 2 [Member] | Foreign Exchange Future [Member]
 
 
Derivative Assets
15 
31 
Derivative Liabilities
110 
21 
Fair Value, Inputs, Level 2 [Member] | Natural Gas Contracts [Member]
 
 
Derivative Assets
Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member]
 
 
Derivative Assets
 
Derivative Liabilities
392 
165 
Fair Value, Inputs, Level 3 [Member]
 
 
Total assets at fair value
137 
179 
Fair Value, Inputs, Level 3 [Member] | Floating Rate Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
47 
91 
Fair Value, Inputs, Level 3 [Member] | Auction Rate Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
90 
88 
Fair Value, Inputs, Level 3 [Member] | Total Available For Sale Assets [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
137 
179 
Total Fair Value [Member]
 
 
Total assets at fair value
8,968 
8,257 
Total Liabilities At Fair Value
17 
37 
Total Fair Value [Member] | US Treasury Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
653 
 
Total Fair Value [Member] | US Government Agencies Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
602 
225 
Total Fair Value [Member] | Equity Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
11 
Total Fair Value [Member] | Prime Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
4,089 
5,807 
Total Fair Value [Member] | Corporate Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
1,614 
837 
Total Fair Value [Member] | Commercial Paper [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
998 
518 
Total Fair Value [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
359 
252 
Total Fair Value [Member] | Treasury Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
218 
Total Fair Value [Member] | Government Agency Money Market Funds [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
 
24 
Total Fair Value [Member] | Floating Rate Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
47 
91 
Total Fair Value [Member] | Auction Rate Securities [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
90 
88 
Total Fair Value [Member] | Total Available For Sale Assets [Member]
 
 
Available-for-sale Securities, Fair Value Disclosure
8,466 
8,071 
Total Fair Value [Member] | Derivative Financial Instruments, Assets [Member]
 
 
Derivative Assets
502 
186 
Total Fair Value [Member] | Derivative Financial Instruments, Liabilities [Member]
 
 
Derivative Assets
17 
37 
Total Fair Value [Member] | Foreign Exchange Future [Member]
 
 
Derivative Assets
15 
31 
Derivative Liabilities
110 
21 
Total Fair Value [Member] | Natural Gas Contracts [Member]
 
 
Derivative Assets
Total Fair Value [Member] | Interest Rate Swap [Member]
 
 
Derivative Assets
 
Derivative Liabilities
392 
165 
Principal payment received for FRS securities
$ 55 
 
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Details) (USD $)
In Millions
Jun. 30, 2010
Dec. 31, 2009
Jun. 30, 2009
Dec. 31, 2008
Cash and cash equivalents
$ 5,918 
$ 7,683 
$ 7,507 
$ 7,976 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
 
 
 
 
Current marketable securities
185 
205 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | Certificates of deposit [Member]
 
 
 
 
Current marketable securities
780 
501 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | US Treasury Securities [Member]
 
 
 
 
Current marketable securities
250 
 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Current marketable securities
 
125 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Current marketable securities
266 
 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Current marketable securities
51 
 
 
 
Amortized Cost Basis[Member] | Current Marketable Securities [Member]
 
 
 
 
Total current
1,532 
831 
 
 
Amortized Cost Basis[Member] | Equity Securities [Member]
 
 
 
 
Equity securities
11 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member]
 
 
 
 
Total non-current
2,777 
1,380 
 
 
Total available for sale
2,777 
1,380 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | Other Noncurrent Marketable Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | US Treasury Securities [Member]
 
 
 
 
Non-current marketable securities
399 
 
 
 
Available for sale Securities, Debt Securities, Non-current
399 
 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Non-current marketable securities
600 
100 
 
 
Available for sale Securities, Debt Securities, Non-current
600 
100 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
1,335 
834 
 
 
Available for sale Securities, Debt Securities, Non-current
1,335 
834 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Non-current marketable securities
304 
252 
 
 
Available for sale Securities, Debt Securities, Non-current
304 
252 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | Floating Rate Securities [Member]
 
 
 
 
Non-current marketable securities
58 
113 
 
 
Available for sale Securities, Debt Securities, Non-current
58 
113 
 
 
Amortized Cost Basis[Member] | Non-current Marketable Securities [Member] | Auction Rate Securities [Member]
 
 
 
 
Non-current marketable securities
80 
80 
 
 
Available for sale Securities, Debt Securities, Non-current
80 
80 
 
 
Unrealized Gain In Accumulated OCI [Member] | Current Marketable Securities [Member]
 
 
 
 
Total current
 
 
 
Unrealized Gain In Accumulated OCI [Member] | Current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Current marketable securities
 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member]
 
 
 
 
Total non-current
38 
13 
 
 
Total available for sale
38 
13 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | US Treasury Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
18 
 
 
Available for sale Securities, Debt Securities, Non-current
18 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
 
Unrealized Gain In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | Auction Rate Securities [Member]
 
 
 
 
Non-current marketable securities
10 
 
 
Available for sale Securities, Debt Securities, Non-current
10 
 
 
Unrealized Loss In Accumulated OCI [Member] | Non-current Marketable Securities [Member]
 
 
 
 
Total non-current
(20)
(24)
 
 
Total available for sale
(20)
(24)
 
 
Unrealized Loss In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
(9)
(2)
 
 
Available for sale Securities, Debt Securities, Non-current
(9)
(2)
 
 
Unrealized Loss In Accumulated OCI [Member] | Non-current Marketable Securities [Member] | Floating Rate Securities [Member]
 
 
 
 
Non-current marketable securities
(11)
(22)
 
 
Available for sale Securities, Debt Securities, Non-current
(11)
(22)
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member]
 
 
 
 
Total non-current
2,705 
 
 
 
Total available for sale
2,705 
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | Other Noncurrent Marketable Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | US Treasury Securities [Member]
 
 
 
 
Non-current marketable securities
403 
 
 
 
Available for sale Securities, Debt Securities, Non-current
403 
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Non-current marketable securities
602 
 
 
 
Available for sale Securities, Debt Securities, Non-current
602 
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
1,344 
 
 
 
Available for sale Securities, Debt Securities, Non-current
1,344 
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Non-current marketable securities
308 
 
 
 
Available for sale Securities, Debt Securities, Non-current
308 
 
 
 
Available For Sale Securities Debt Maturities After One Through Five Years [Member] | Floating Rate Securities [Member]
 
 
 
 
Non-current marketable securities
47 
 
 
 
Available for sale Securities, Debt Securities, Non-current
47 
 
 
 
Available For Sale Securities Debt Maturities Over Ten Years [Member]
 
 
 
 
Total non-current
90 
 
 
 
Total available for sale
90 
 
 
 
Available For Sale Securities Debt Maturities Over Ten Years [Member] | Auction Rate Securities [Member]
 
 
 
 
Non-current marketable securities
90 
 
 
 
Available for sale Securities, Debt Securities, Non-current
90 
 
 
 
Available For Sale Securities Debt Maturities Total [Member]
 
 
 
 
Total non-current
2,795 
 
 
 
Total available for sale
2,795 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | US Treasury Securities [Member]
 
 
 
 
Non-current marketable securities
403 
 
 
 
Available for sale Securities, Debt Securities, Non-current
403 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Non-current marketable securities
602 
 
 
 
Available for sale Securities, Debt Securities, Non-current
602 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
1,344 
 
 
 
Available for sale Securities, Debt Securities, Non-current
1,344 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Non-current marketable securities
308 
 
 
 
Available for sale Securities, Debt Securities, Non-current
308 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | Floating Rate Securities [Member]
 
 
 
 
Non-current marketable securities
47 
 
 
 
Available for sale Securities, Debt Securities, Non-current
47 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | Auction Rate Securities [Member]
 
 
 
 
Non-current marketable securities
90 
 
 
 
Available for sale Securities, Debt Securities, Non-current
90 
 
 
 
Available For Sale Securities Debt Maturities Total [Member] | Other Noncurrent Marketable Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
 
Available for sale Securities, Debt Securities, Non-current
 
 
 
Fair Value [Member] | Current Marketable Securities [Member]
 
 
 
 
Total current
1,536 
831 
 
 
Fair Value [Member] | Equity Securities [Member]
 
 
 
 
Equity securities
11 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | Certificates of deposit [Member]
 
 
 
 
Current marketable securities
780 
501 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
 
 
 
 
Current marketable securities
185 
205 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | US Treasury Securities [Member]
 
 
 
 
Current marketable securities
250 
 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Current marketable securities
 
125 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Current marketable securities
270 
 
 
 
Fair Value [Member] | Current Marketable Securities [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Current marketable securities
51 
 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member]
 
 
 
 
Total non-current
2,795 
1,369 
 
 
Total available for sale
2,795 
1,369 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | US Treasury Securities [Member]
 
 
 
 
Non-current marketable securities
403 
 
 
 
Available for sale Securities, Debt Securities, Non-current
403 
 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | US Government Agencies Debt Securities [Member]
 
 
 
 
Non-current marketable securities
602 
100 
 
 
Available for sale Securities, Debt Securities, Non-current
602 
100 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | Corporate Debt Securities [Member]
 
 
 
 
Non-current marketable securities
1,344 
837 
 
 
Available for sale Securities, Debt Securities, Non-current
1,344 
837 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | Federal Deposit Insurance Corporation Insured Debt Securities [Member]
 
 
 
 
Non-current marketable securities
308 
252 
 
 
Available for sale Securities, Debt Securities, Non-current
308 
252 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | Floating Rate Securities [Member]
 
 
 
 
Non-current marketable securities
47 
91 
 
 
Available for sale Securities, Debt Securities, Non-current
47 
91 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | Auction Rate Securities [Member]
 
 
 
 
Non-current marketable securities
90 
88 
 
 
Available for sale Securities, Debt Securities, Non-current
90 
88 
 
 
Fair Value [Member] | Non-current Marketable Securities [Member] | Other Noncurrent Marketable Securities [Member]
 
 
 
 
Non-current marketable securities
 
 
Available for sale Securities, Debt Securities, Non-current
$ 1 
$ 1 
 
 
RECEIVABLES (Details)
In Millions
6 Months Ended
Jun. 30,
6 Months Ended
Jun. 30, 2010
Dec. 31, 2009
2009
2010
Trade receivables
$ 1,896 
$ 2,000 
 
 
Less allowances
91 
103 
 
 
Net trade receivables
1,805 
1,897 
 
 
Alliance partners receivables
950 
870 
 
 
Income tax refund claims
190 
103 
 
 
Miscellaneous receivables
227 
294 
 
 
Receivables
3,172 
3,164 
 
 
Reduction in alliance partner receivables and deferred income
1,029 
730 
 
 
Non-U.S. receivables sold on a nonrecourse basis
447 
 
104 
 
Share of total trade receivables represented by three pharmaceutical wholesalers in the U.S.
50.00% 
47.00% 
 
 
Receivables reclassified to other long-term assets, Euro
 
 
 
41 
Receivables reclassified to other long-term assets, US Dollar
51 
 
 
 
Charge attributed to the imputed discount on non-interest bearing loans
$ 9 
 
 
 
INVENTORIES (Details) (USD $)
In Millions
Jun. 30, 2010
Dec. 31, 2009
Finished goods
$ 545 
$ 580 
Work in process
446 
630 
Raw and packaging materials
274 
203 
Inventories
1,265 
1,413 
Inventories expected to remain on-hand beyond one year and included in non-current other assets
242 
249 
Amount of non-current inventories unable to be sold in the U.S. pending approval of a manufacturing process change from the FDA
148 
 
Additional purchase obligations
37 
 
Capitalized costs related to production of products for programs in Phase III development subject to final U.S. Food and Drug Administration approval
$ 57 
$ 49 
PROPERTY, PLANT AND EQUIPMENT (Details) (USD $)
In Millions
Jun. 30, 2010
Dec. 31, 2009
Gross property, plant and equipment
$ 8,228 
$ 8,895 
Less accumulated depreciation
3,483 
3,840 
Property, plant and equipment
4,745 
5,055 
Land [Member]
 
 
Gross property, plant and equipment
135 
142 
Building [Member]
 
 
Gross property, plant and equipment
4,300 
4,350 
Machinery and Equipment [Member]
 
 
Gross property, plant and equipment
3,103 
3,563 
Construction in Progress [Member]
 
 
Gross property, plant and equipment
$ 690 
$ 840 
EQUITY (Details) (USD $)
Share data in Millions, except Per Share data
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Mar. 31, 2010
Dec. 31, 2009
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
3 Months Ended
Mar. 31, 2009
Dec. 31, 2008
Balance
$ (2,300,000,000)
$ (2,300,000,000)
 
$ (2,541,000,000)
$ (2,255,000,000)
$ (2,255,000,000)
 
$ (2,719,000,000)
Other comprehensive income/(loss)
125,000,000 
241,000,000 
 
 
350,000,000 
464,000,000 
 
 
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax
(240,000,000)
(240,000,000)
 
(343,000,000)
(406,000,000)
(406,000,000)
 
(424,000,000)
Other Comprehensive Income, Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent
 
103,000,000 
 
 
 
18,000,000 
 
 
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax, Ending Balance
45,000,000 
45,000,000 
 
(30,000,000)
(24,000,000)
(24,000,000)
 
14,000,000 
Other Comprehensive Income, Derivatives Qualifying as Hedges, Net of Tax, Portion Attributable to Parent
 
75,000,000 
 
 
 
(38,000,000)
 
 
Accumulated Other Comprehensive Income (Loss), Defined Benefit Pension and Other Postretirement Plans, Net of Tax
(2,127,000,000)
(2,127,000,000)
 
(2,158,000,000)
(1,788,000,000)
(1,788,000,000)
 
(2,258,000,000)
Other Comprehensive Income, Finalization of Pension and Non-Pension Postretirement Plan Valuation, Net of Tax
 
31,000,000 
 
 
 
470,000,000 
 
 
Accumulated Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
22,000,000 
22,000,000 
 
(10,000,000)
(37,000,000)
(37,000,000)
 
(51,000,000)
Other Comprehensive Income, Available-for-sale Securities Adjustment, Net of Tax, Portion Attributable to Parent
 
32,000,000 
 
 
 
14,000,000 
 
 
Net earnings attributable to noncontrolling interest are presented net of taxes of
165,000,000 
336,000,000 
 
 
144,000,000 
271,000,000 
 
 
Net earnings attributable to noncontrolling interest included in discontinued operations was
 
 
 
 
26,000,000 
38,000,000 
 
 
Authorization to repurchase common stock amount
 
3,000,000,000 
 
 
 
 
 
 
Shares repurchased
 
7.3 
 
 
 
 
 
 
Shares repurchased, price per share
 
23.75 
 
 
 
 
 
 
Shares repurchased, cost
 
173,000,000 
 
 
 
 
 
 
Common Stock [Member]
 
 
 
 
 
 
 
 
Balance
2,205 
2,205 
 
2,205 
2,205 
2,205 
 
2,205 
Mead Johnson Initial Public Offering Noncontrolling Interest [Member]
 
 
 
 
 
 
 
 
The reconciliation of noncontrolling interest
 
 
 
 
 
(160,000,000)
 
 
Cost Of Treasury Stock [Member]
 
 
 
 
 
 
 
 
Balance
(17,271)
(17,271)
 
(17,364)
(10,508)
(10,508)
 
(10,566)
Stock repurchase program
 
(173)
 
 
 
 
 
 
Employee stock compensation plans
 
266 
 
 
 
58 
 
 
Additional Paid-in Capital [Member]
 
 
 
 
 
 
 
 
Balance
3,697 
3,697 
 
3,768 
3,703 
3,703 
 
2,757 
Mead Johnson initial public offering
 
 
 
 
 
942 
 
 
Employee stock compensation plans
 
(71)
 
 
 
 
 
Treasury Stock [Member]
 
 
 
 
 
 
 
 
Balance
491 
491 
 
491 
224 
224 
 
226 
Stock repurchase program
 
 
 
 
 
 
 
Employee stock compensation plans
 
(7)
 
 
 
(2)
 
 
Noncontrolling Interest [Member]
 
 
 
 
 
 
 
 
The reconciliation of noncontrolling interest
(94,000,000)
(94,000,000)
(16,000,000)
(58,000,000)
(160,000,000)
(160,000,000)
(208,000,000)
(33,000,000)
Net Earnings Attributable To Noncontrolling Interest [Member]
 
 
 
 
 
 
 
 
The reconciliation of noncontrolling interest
505,000,000 
1,033,000,000 
 
 
456,000,000 
864,000,000 
 
 
Other Comprehensive Income Loss Net Of Tax Portion Attributable To Noncontrolling Interest [Member]
 
 
 
 
 
 
 
 
The reconciliation of noncontrolling interest
 
 
 
 
2,000,000 
5,000,000 
 
 
Minority Interest Decrease From Distributions To Noncontrolling Interest Holders [Member]
 
 
 
 
 
 
 
 
The reconciliation of noncontrolling interest
$ (583,000,000)
$ (1,069,000,000)
 
 
$ (410,000,000)
$ (836,000,000)
 
 
PENSION, POSTRETIREMENT AND POSTEMPLOYMENT LIABILITIES (Details) (USD $)
In Millions
Year Ended
Dec. 31, 2010
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Contributions to the U.S. pension plans, expected
$ 330 
 
 
 
 
Contributions to the U.S. pension plans
 
 
315 
 
 
Contributions to the international plans, expected minimum
85 
 
 
 
 
Contributions to the international plans, expected maximum
100 
 
 
 
 
Contributions to the international plans
 
 
48 
 
 
Expense attributable to U.S. and Puerto Rico defined contribution plans
 
44 
95 
14 
27 
Pension Plans, Defined Benefit [Member]
 
 
 
 
 
Service cost - benefits earned during the period
 
11 
22 
48 
107 
Interest cost on projected benefit obligation
 
86 
173 
89 
193 
Expected return on plan assets
 
(112)
(225)
(107)
(233)
Amortization of prior service cost/(benefit)
 
 
 
Amortization of net actuarial loss
 
24 
48 
28 
70 
Net periodic benefit cost
 
18 
59 
141 
Settlements
 
 
 
Curtailments and special termination benefits
 
25 
25 
Total net periodic benefit cost
 
20 
32 
84 
166 
Continuing operations
 
20 
32 
82 
161 
Discontinued operations
 
 
 
Other Postretirement Benefit Plans, Defined Benefit [Member]
 
 
 
 
 
Service cost - benefits earned during the period
 
Interest cost on projected benefit obligation
 
15 
10 
19 
Expected return on plan assets
 
(6)
(12)
(5)
(10)
Amortization of prior service cost/(benefit)
 
(1)
(2)
(1)
(2)
Amortization of net actuarial loss
 
Net periodic benefit cost
 
11 
15 
Total net periodic benefit cost
 
11 
15 
Continuing operations
 
11 
14 
Discontinued operations
 
 
 
 
$ 1 
EMPLOYEE STOCK BENEFIT PLANS (Details) (USD $)
In Millions, except Per Share data
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Stock options
$ 14 
$ 27 
$ 18 
$ 36 
Restricted stock
23 
46 
19 
35 
Long-term performance awards
12 
23 
17 
Total stock-based compensation expense
49 
96 
45 
88 
Continuing operations
49 
96 
42 
82 
Discontinued operations
 
 
Deferred tax benefit related to stock-based compensation expense
16 
31 
15 
29 
Continuing operations
16 
31 
14 
27 
Discontinued operations
 
 
Restricted stock units, granted
 
3.1 
 
 
Market share units, granted
 
1.4 
 
 
Long-term performance share units, granted
 
1.7 
 
 
Restricted stock units, weighted-average grant date fair value
 
24.73 
 
 
Market share units, weighted-average grant date fair value
 
24.69 
 
 
Long-term performance share units, weighted-average grant date fair value
 
23.65 
 
 
Stock Options [Member]
 
 
 
 
Unrecognized compensation cost
 
60 
 
 
Expected weighted-average period of compensation cost to be recognized, years
 
2.1 
 
 
Restricted Stock [Member]
 
 
 
 
Unrecognized compensation cost
 
209 
 
 
Expected weighted-average period of compensation cost to be recognized, years
 
2.1 
 
 
Long Term Performance Awards [Member]
 
 
 
 
Unrecognized compensation cost
 
$ 40 
 
 
Expected weighted-average period of compensation cost to be recognized, years
 
1.5 
 
 
FINANCIAL INSTRUMENTS (Details)
In Millions
3 Months Ended
Jun. 30, 2010
6 Months Ended
Jun. 30, 2010
Dec. 31, 2009
3 Months Ended
Jun. 30, 2009
6 Months Ended
Jun. 30, 2009
Dec. 31, 2008
6 Months Ended
Jun. 30, 2010
Pre-tax gain on discontinued foreign currency forward hedges
$ 9 
$ 11 
 
 
 
 
 
Net carrying amount
45 
45 
(30)
(24)
(24)
14 
 
Foreign currency used to hedge the foreign currency exposures total
1,200 
1,200 
 
 
 
 
 
Non-U.S. borrowings used to hedge foreign currency exposure dedesignated, Euro
 
 
 
 
 
 
294 
Non-U.S. borrowings used to hedge foreign currency exposure dedesignated, US dollar
363 
363 
 
 
 
 
 
Carrying amount of non-derivative debt designated net investment hedges
(26)
(26)
(169)
(133)
(133)
(131)
 
Change in spot value of non-derivative debt designated as a hedge
 
202 
 
 
(2)
 
 
Gain recognized in other (income)/expense, net (overhedged portion)
 
(59)
 
 
 
 
 
Fixed-to-floating interest rate swaps, notional amount
 
237 
 
 
 
 
 
Fixed-to-floating interest rate swaps, notional amount, Euro
 
 
 
 
 
 
500 
Fixed-to-floating interest rate swaps, proceeds
 
116 
 
 
 
 
 
Accrued interest included in proceeds
 
18 
 
 
 
 
 
Transaction gains deferred, amortized to interest expense
 
98 
 
 
 
 
 
Total
(41)
(87)
 
(36)
(65)
 
 
Principal value
5,425 
5,425 
5,622 
 
 
 
 
Fair value of interest rate swaps
392 
392 
160 
 
 
 
 
Unamortized basis adjustment from swap terminations
460 
460 
377 
 
 
 
 
Unamortized bond discounts
(29)
(29)
(29)
 
 
 
 
Total
6,248 
6,248 
6,130 
 
 
 
 
Interest expense
32 
65 
 
42 
94 
 
 
Effect of nonqualifying hedges
 
 
 
 
 
Interest Expense [Member]
 
 
 
 
 
 
 
Recognized in interest expense
(33)
(72)
 
(29)
(53)
 
 
Foreign Exchange Forward [Member]
 
 
 
 
 
 
 
Net carrying amount
 
64 
(11)
 
(4)
35 
 
Cash flow hedges deferred in OCI
 
99 
 
 
 
 
Cash flow hedges reclassified to cost of products sold/interest expense (effective portion)
 
 
 
(55)
 
 
Change in deferred taxes
 
(33)
 
 
13 
 
 
Foreign Exchange Forward [Member] | Derivatives Designated As Hedging Instruments [Member]
 
 
 
 
 
 
 
Notional
 
424 
731 
 
 
 
 
Foreign Exchange Forward [Member] | Derivatives Designated As Hedging Instruments [Member] | Other Assets [Member]
 
 
 
 
 
 
 
Notional
 
807 
780 
 
 
 
 
Fair Value
 
106 
21 
 
 
 
 
Foreign Exchange Forward [Member] | Derivatives Designated As Hedging Instruments [Member] | Accrued Expenses [Member]
 
 
 
 
 
 
 
Fair Value
 
(15)
(31)
 
 
 
 
Foreign Exchange Forward [Member] | Derivatives Not Designated As Hedging Instruments [Member] | Other Assets [Member]
 
 
 
 
 
 
 
Notional
 
114 
 
 
 
 
 
Fair Value
 
 
 
 
 
 
Natural Gas Contracts [Member]
 
 
 
 
 
 
 
Net carrying amount
 
(1)
(1)
 
(1)
(2)
 
Cash flow hedges deferred in OCI
 
 
 
 
 
 
Change in deferred taxes
 
 
 
 
(1)
 
 
Natural Gas Contracts [Member] | Derivatives Designated As Hedging Instruments [Member] | Accrued Expenses [Member]
 
 
 
 
 
 
 
Fair Value
 
(2)
(1)
 
 
 
 
Interest Rate Swap [Member]
 
 
 
 
 
 
 
Change in unrealized gain loss on hedged item in fair value hedge
(8)
(15)
 
(7)
(12)
 
 
Derivatives Designated As Hedging Instruments [Member] | Liabilities [Member]
 
 
 
 
 
 
 
Fair Value
(891)
 
(1,293)
 
 
 
 
Derivatives Not Designated As Hedging Instruments [Member] | Liabilities [Member]
 
 
 
 
 
 
 
Fair Value
(891)
 
 
 
 
 
 
Derivatives Not Designated As Hedging Instruments [Member] | Assets [Member]
 
 
 
 
 
 
 
Fair Value
502 
 
 
 
 
 
 
Derivatives Designated As Hedging Instruments [Member] | Assets [Member]
 
 
 
 
 
 
 
Fair Value
498 
 
186 
 
 
 
 
Forward Starting Swaps [Member]
 
 
 
 
 
 
 
Net carrying amount
 
(18)
(18)
 
(19)
(19)
 
Total Impact [Member]
 
 
 
 
 
 
 
Net carrying amount
 
45 
(30)
 
(24)
14 
 
Cash flow hedges deferred in OCI
 
99 
 
 
 
 
Cash flow hedges reclassified to cost of products sold/interest expense (effective portion)
 
 
 
(55)
 
 
Change in deferred taxes
 
(33)
 
 
12 
 
 
Hedge Of Net Investments [Member] | Derivatives Designated As Hedging Instruments [Member] | Long-term Debt [Member]
 
 
 
 
 
 
 
Notional
 
874 
1,256 
 
 
 
 
Fair Value
 
(874)
(1,256)
 
 
 
 
Interest Rate Contract [Member] | Derivatives Designated As Hedging Instruments [Member] | Other Assets [Member]
 
 
 
 
 
 
 
Notional
 
3,152 
3,134 
 
 
 
 
Fair Value
 
392 
165 
 
 
 
 
Interest Rate Contract [Member] | Derivatives Designated As Hedging Instruments [Member] | Accrued Expenses [Member]
 
 
 
 
 
 
 
Notional
 
 
597 
 
 
 
 
Fair Value
 
 
$ (5)
 
 
 
 
FINANCIAL INSTRUMENTS (Parenthetical) (Details)
Jun. 30, 2010
Dec. 31, 2009
Derivatives Designated As Hedging Instruments [Member] | Accrued Expenses [Member]
 
 
Notional
LEGAL PROCEEDINGS CONTINGENCIES (Details) (USD $)
In Millions
Jun. 30, 2010
Aug. 31, 2009
Nov. 13, 2008
Jul. 31, 2006
Lawsuit filed by third party related to the break up of the proposed settlement agreement
 
 
$ 60 
 
Complaint filed by third party for loss due to violation of antitrust laws
 
 
 
586 
District Court granted preliminary approval of a proposed settlement
 
19 
 
 
District Court granted preliminary approval of half the costs of class notice
 
 
 
Companies estimated share of future costs on CERCLA act
$ 65