ALLIANCES

BMS enters into collaboration arrangements with third parties for the development and commercialization of certain products. Although each of these arrangements is unique in nature, both parties are active participants in the operating activities of the collaboration and exposed to significant risks and rewards depending on the commercial success of the activities. BMS may either in-license intellectual property owned by the other party or out-license its intellectual property to the other party. These arrangements also typically include research, development, manufacturing, and/or commercial activities and can cover a single investigational compound or commercial product or multiple compounds and/or products in various life cycle stages. The rights and obligations of the parties can be global or limited to geographic regions. We refer to these collaborations as alliances and our partners as alliance partners. Products sold through alliance arrangements in certain markets include Opdivo, Eliquis, Orencia, Sprycel, Yervoy, Empliciti, and Sustiva (Atripla*) and certain other brands.

Payments between alliance partners are accounted for and presented in the results of operations after considering the specific nature of the payment and the underlying activities to which the payments relate. Multiple alliance activities, including the transfer of rights, are only separated into individual units of accounting if they have standalone value from other activities that occur over the life of the arrangements. In these situations, the arrangement consideration is allocated to the activities or rights on a relative selling price basis. If multiple alliance activities or rights do not have standalone value, they are combined into a single unit of accounting.

The most common activities between BMS and its alliance partners are presented in results of operations as follows:

•

When BMS is the principal in the end customer sale, 100% of product sales are included in net product sales. When BMS's alliance partner is the principal in the end customer sale, BMS's contractual share of the third-party sales and/or royalty income are included in alliance revenue as the sale of commercial products are considered part of BMS's ongoing major or central operations. Refer to "Revenue Recognition" included in "—Note 1. Accounting Policies" for information regarding recognition criteria.


•	Amounts payable to BMS by alliance partners (who are the principal in the end customer sale) for supply of commercial products are included in alliance revenue as the sale of commercial products are considered part of BMS's ongoing major or central operations.


•	Profit sharing, royalties and other sales-based fees payable by BMS to alliance partners are included in cost of products sold as incurred.


•	Cost reimbursements between the parties are recognized as incurred and included in cost of products sold; marketing, selling and administrative expenses; or research and development expenses, based on the underlying nature of the related activities subject to reimbursement.

•

Upfront and contingent development and approval milestones payable to BMS by alliance partners for investigational compounds and commercial products are deferred and amortized over the expected period of BMS's co-promotion obligation through the market exclusivity period or the periods in which the related compounds or products are expected to contribute to future cash flows. The amortization is presented consistent with the nature of the payment under the arrangement. For example, amounts received for investigational compounds are presented in other income (net) as the activities being performed at that time are not related to the sale of commercial products that are part of BMS’s ongoing major or central operations; amounts received for commercial products are presented in alliance revenue as the sale of commercial products are considered part of BMS’s ongoing major or central operations (except for the AstraZeneca alliance pertaining to the Amylin products - see further discussion under the specific AstraZeneca alliance disclosure herein).


•	Upfront and contingent approval milestones payable by BMS to alliance partners for commercial products are capitalized and amortized over the shorter of the contractual term or the periods in which the related products are expected to contribute to future cash flows. The amortization is included in cost of products sold.


•	Upfront and contingent milestones payable by BMS to alliance partners prior to regulatory approval are expensed as incurred and included in research and development expenses.


•	Royalties and other contingent consideration payable to BMS by alliance partners related to the divestiture of such businesses are included in other income when earned.


•	Equity in net income of affiliates is included in other income (net).


•	All payments between BMS and its alliance partners are presented in cash flows from operating activities, except as otherwise described below.

Selected financial information pertaining to our alliances was as follows, including net product sales when BMS is the principal in the third-party customer sale for products subject to the alliance. Expenses summarized below do not include all amounts attributed to the activities for the products in the alliance, but only the payments between the alliance partners or the related amortization if the payments were deferred or capitalized.



	Year Ended December 31,
Dollars in Millions	2017			2016			2015
Revenues from alliances:
Net product sales	$	6,949		$	5,568		$	4,308
Alliance revenues	1,294			1,629			2,408
Total Revenues	$	8,243		$	7,197		$	6,716

Payments to/(from) alliance partners:
Cost of products sold	$	2,723		$	2,129		$	1,655
Marketing, selling and administrative	(58		)	(28		)	15
Research and development	2			56			693
Other income (net)	(731		)	(1,009		)	(733		)

Noncontrolling interest, pretax	12			16			51



Selected Alliance Balance Sheet Information:	December 31,
Dollars in Millions	2017		2016
Receivables – from alliance partners	$	522	$	903
Accounts payable – to alliance partners	878		555
Deferred income from alliances^(a)	467		1,194


(a)	Includes unamortized upfront, milestone and other licensing proceeds, revenue deferrals attributed to Atripla* and undelivered elements of diabetes business divestiture proceeds. Amortization of deferred income (primarily related to alliances) was $83 million in 2017, $244 million in 2016 and $307 million in 2015.

Upfront payments for new licensing and alliance agreements (including options to license or acquire the related assets) charged to research and development expenses were $41 million in 2017, $15 million in 2016 and $619 million in 2015.

Specific information pertaining to each of our significant alliances is discussed below, including their nature and purpose; the significant rights and obligations of the parties; specific accounting policy elections; and the income statement classification of and amounts attributable to payments between the parties.

Pfizer

BMS and Pfizer jointly develop and commercialize Eliquis, an anticoagulant discovered by BMS. Pfizer funds between 50% and 60% of all development costs depending on the study. Profits and losses are shared equally on a global basis except in certain countries where Pfizer commercializes Eliquis and pays BMS a sales based fee.

Co-exclusive license rights were granted to Pfizer in exchange for an upfront payment and potential milestone payments. Both parties assumed certain obligations to actively participate in a joint executive committee and various other operating committees and have joint responsibilities for the research, development, distribution, sales and marketing activities of the alliance using resources in their own infrastructures. BMS manufactures the product in the alliance and is the principal in the end customer product sales in the U.S., significant countries in Europe, as well as Canada, Australia, China, Japan and South Korea. In 2015, BMS transferred full commercialization rights to Pfizer in certain smaller countries in order to simplify operations. In the transferred countries, BMS supplies the product to Pfizer at cost plus a percentage of the net sales price to end-customers.

The Company determined the rights transferred to Pfizer did not have standalone value as such rights were not sold separately by BMS or any other party, nor could Pfizer receive any benefit for the delivered rights without the fulfillment of other ongoing obligations by BMS under the alliance agreement, including the exclusive supply arrangement. As such, the global alliance was treated as a single unit of accounting and upfront proceeds and any subsequent contingent milestone proceeds are amortized over the expected period of BMS's co-promotion obligation through the market exclusivity period. BMS received $884 million in non-refundable upfront, milestone and other licensing payments related to Eliquis through December 31, 2017. Amortization of the Eliquis deferred income is included in other income as Eliquis was not a commercial product at the commencement of the alliance.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017			2016			2015
Revenues from Pfizer alliance:
Net product sales	$	4,808		$	3,306		$	1,849
Alliance revenues	64			37			11
Total Revenues	$	4,872		$	3,343		$	1,860

Payments to/(from) Pfizer:
Cost of products sold – Profit sharing	$	2,314		$	1,595		$	895
Other income (net) – Amortization of deferred income	(55		)	(55		)	(55		)



Selected Alliance Balance Sheet Information:	December 31,
Dollars in Millions	2017		2016
Deferred income	$	466	$	521

Gilead

BMS and Gilead formed a joint venture in the U.S. and Canada and another joint venture in Europe to develop and commercialize a combination product named Atripla*, which combines BMS's Sustiva with Gilead's Truvada*. The two joint ventures are consolidated by Gilead.

In December 2017, Gilead terminated BMS's participation in the U.S. and Canada joint venture following the launch of a generic version of Sustiva by a third-party in the U.S. As a result, deferred income and alliance receivables attributed to Sustiva product held by the joint venture at December 31, 2017 was reduced by $438 million to reflect the post-termination selling price. In addition BMS is entitled to a fee equal to 55% of Atripla* U.S. net sales multiplied by the ratio of the difference in the average net selling prices of Atripla* and Truvada* to the Atripla* average net selling price in 2018. The fee is reduced to 35% in 2019 and 15% in 2020, of Atripla* U.S. net sales multiplied by the ratio described above. BMS will continue to supply Sustiva at cost plus a markup to Gilead during this three-year period unless either party elects to terminate the supply arrangement.

Prior to the termination of BMS's participation in the U.S. joint venture, both parties actively participated in a joint executive committee and various other operating committees with direct oversight over the activities of the joint venture. The joint venture purchased Sustiva and Truvada* API in bulk form from the parties and completed the finishing of Atripla*. The joint venture distributed Atripla* and was the principal in the end customer product sales. BMS recorded the bulk efavirenz component of Atripla* as alliance revenue which was based on the relative ratio of the average respective net selling prices of Truvada* and Sustiva. Alliance revenue and the related alliance receivable was not recognized until Atripla* was sold to third-party customers.

The joint venture in Europe was accounted for by BMS and continues to operate in a similar manner described above except that Gilead distributes Atripla*, is the principal in the end customer product sales and the parties no longer coordinate joint promotional activities. The European joint venture will continue until either party terminates the arrangement or the last patent expires that allows market exclusivity to Atripla*.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017		2016		2015
Revenues from Gilead alliances:
Alliance revenues	$	623	$	934	$	1,096

Equity in net loss of affiliates	$	13	$	12	$	17



Selected Alliance Balance Sheet Information:	December 31,
Dollars in Millions	2017		2016
Deferred income	$	—	$	634

Otsuka

BMS and Otsuka co-promote Sprycel in the U.S., Japan and the EU (the Oncology Territory). Both parties actively participate in various governance committees, however, BMS has control over the decision making. BMS is responsible for the development and manufacture of the product and is also the principal in the end customer product sales. Ixempra* (ixabepilone) was included in the alliance prior to BMS's divestiture of that business in 2015. A fee is paid to Otsuka based on the following percentages of combined annual net sales of Sprycel and Ixempra* in the Oncology Territory (including post divestiture Ixempra* sales) through 2020:



	% of Net Sales
$0 to $400 million	65%
$400 million to $600 million	12%
$600 million to $800 million	3%
$800 million to $1.0 billion	2%
In excess of $1.0 billion	1%

BMS also had a worldwide commercialization agreement with Otsuka, to co-develop and co-promote Abilify*, excluding certain Asian countries. The U.S. portion of the agreement expired in April 2015 and the EU portion expired in June 2014. In other countries where we had the exclusive right to sell Abilify*, expiration occurred on a country-by-country basis with the last expiration in Canada in January, 2018.

Both parties actively participated in joint executive governance and operating committees. Otsuka was responsible for providing all sales force efforts in 2013, however, BMS was responsible for certain operating expenses up to various annual limits. BMS purchased the API from Otsuka and completed the manufacturing of the product for subsequent sale to third-party customers in the U.S. and certain other countries. BMS provided other services including distribution, customer management and pharmacovigilance. BMS was the principal for the end customer product sales where it was the exclusive distributor for or had an exclusive right to sell Abilify*. Otsuka was the principal for the end customer product sales in the U.S. and in the EU. Alliance revenue was recorded for BMS's share of net sales to third-party customers in the U.S. and EU when Abilify* was shipped and all risks and rewards of ownership transferred to third-party customers.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017		2016		2015
Revenues from Otsuka alliances:
Net product sales	$	1,814	$	1,670	$	1,501
Alliance revenues	7		2		604
Total Revenues	$	1,821	$	1,672	$	2,105

Payments to/(from) Otsuka:
Cost of products sold:
Oncology fee	$	299	$	304	$	299
Royalties	11		10		30
Cost of product supply	31		30		35

Lilly

BMS had a commercialization agreement with Lilly through Lilly’s subsidiary ImClone for the co-development and promotion of Erbitux* in the U.S., Canada and Japan. Both parties actively participated in a joint executive committee and various other operating committees and shared responsibilities for research and development using resources in their own infrastructures. Lilly manufactured bulk requirements for Erbitux* in its own facilities and filling and finishing was performed by a third party for which BMS had oversight responsibility. BMS had exclusive distribution rights in North America and was responsible for promotional efforts in North America although Lilly had the right to co-promote in the U.S. at their own expense. BMS was the principal in the end customer product sales in North America and paid Lilly a distribution fee for 39% of Erbitux* net sales in North America plus a share of certain royalties paid by Lilly. BMS’s rights and obligations with respect to the commercialization of Erbitux* in North America would have expired in September 2018.

In October 2015, BMS transferred its rights to Erbitux* in North America to Lilly in exchange for sales-based royalties as described below. The transferred rights include, but are not limited to, full commercialization and manufacturing responsibilities. The transaction was accounted for as a business divestiture and resulted in a non-cash charge of $171 million for intangible assets directly related to the business and an allocation of goodwill.

BMS will receive royalties through September 2018, which are included in other income when earned. The royalty rates applicable to North America are 38% on Erbitux* net sales up to $165 million in 2015, $650 million in 2016, $650 million in 2017 and $480 million in 2018, plus 20% on net sales in excess of those amounts in each of the respective years. Royalties earned were $207 million in 2017, $227 million in 2016 and $56 million in 2015.

BMS shared rights to Erbitux* in Japan under an agreement with Lilly and Merck KGaA and received 50% of the pretax profit from Merck KGaA’s net sales of Erbitux* in Japan which was further shared equally with Lilly. BMS transferred its co-commercialization rights in Japan to Merck KGaA in 2015 in exchange for sales-based royalties through 2032 which is included in other income when earned. Royalties earned were $17 million in 2017, $19 million in 2016 and $14 million in 2015. As a result of the adoption of ASC 606 in the first quarter of 2018, estimated future royalties resulting from the transfer of rights to Merck KGaA will be recorded as a cumulative effect adjustment in retained earnings. Subsequent changes in estimates will be recorded in other income (net).

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017			2016			2015
Revenues from Lilly alliance:
Net product sales	$	—		$	—		$	492
Alliance revenues	—			—			9
Total revenues	$	—		$	—		$	501

Cost of products sold	$	—		$	—		$	261

Other income (net):
Royalties	(224		)	(246		)	(70		)
Divestiture loss	—			—			171

AstraZeneca

Prior to the diabetes business divestiture discussed below, BMS had an alliance with AstraZeneca consisting of three worldwide co-development and commercialization agreements covering (1) Onglyza* and related combination products sold under various names, (2) Farxiga* and related combination products and, (3) beginning in August 2012 after BMS's acquisition of Amylin, Amylin's portfolio of products including Bydureon*, Byetta*, Symlin* and Myalept*, as well as certain assets owned by Amylin, including a manufacturing facility located in West Chester, Ohio.

In February 2014, BMS and AstraZeneca terminated their alliance agreements and BMS sold to AstraZeneca substantially all of the diabetes business comprising the alliance. The divestiture included the shares of Amylin and the resulting transfer of its Ohio manufacturing facility; the intellectual property related to Onglyza* and Farxiga* (including BMS's interest in the out-licensing agreement for Onglyza* in Japan); and the purchase of BMS’s manufacturing facility located in Mount Vernon, Indiana in 2015. Substantially all employees dedicated to the diabetes business were transferred to AstraZeneca.

BMS and AstraZeneca entered into several agreements in connection with the sale, including a supply agreement, a development agreement and a transitional services agreement. Under those agreements, BMS was obligated to supply certain products; to perform ongoing development activities for certain clinical study programs; and to provide transitional services such as accounting, financial services, customer service, distribution, regulatory, development, information technology and certain other administrative services for various periods in order to facilitate the orderly transfer of the business operations.

Consideration for the transaction includes a $2.7 billion payment at closing; contingent regulatory and sales-based milestone payments of up to $1.4 billion (including $800 million related to approval milestones and $600 million related to sales-based milestones, payable in 2020); royalty payments based on net sales through 2025 and payments up to $225 million if and when certain assets are transferred to AstraZeneca. AstraZeneca will also pay BMS for any required product supply at a price approximating the product cost as well as negotiated transitional service fees.

Royalty rates on net sales are as follows:



	2015		2016		2017		2018		2019		2020		2021 - 2025
Onglyza* and Farxiga* Worldwide Net Sales up to $500 million	35	%	27	%	12	%	20	%	22	%	25	%	14	%	-	20	%
Onglyza* and Farxiga* Worldwide Net Sales over $500 million	7	%	9	%	12	%	20	%	22	%	25	%	14	%	-	20	%
Amylin products U.S. Net Sales	2	%	2	%	5	%	10	%	12	%	12	%	5	%	-	10	%

The stock and asset purchase agreement contained multiple elements to be delivered subsequent to the closing of the transaction, including the China diabetes business (transferred in 2014), the Mount Vernon, Indiana manufacturing facility (transferred in 2015), and the activities under the development and supply agreements. Each of these elements was determined to have a standalone value. As a result, a portion of the consideration received at closing was allocated to the undelivered elements using the relative selling price method after determining the best estimated selling price for each element. The remaining amount of consideration was included in the calculation for the gain on sale of the diabetes business. Contingent milestone and royalty payments are similarly allocated among the underlying elements if and when the amounts are determined to be payable to BMS. Amounts allocated to the sale of the business are immediately recognized in the results of operations. Amounts allocated to the other elements are recognized in the results of operations only to the extent each element has been delivered.

Consideration of $179 million was received in 2015 for the transfer of the Mount Vernon, Indiana manufacturing facility and related inventories resulting in a gain of $79 million for the amounts allocated to the delivered elements. Contingent consideration of $100 million was received in 2017 from AstraZeneca upon achievement of a regulatory approval milestone resulting in an additional gain.

Consideration allocated to the development and supply agreements was amortized over the applicable service periods. Amortization of deferred income attributed to the development agreement ended in December 2016 and was included in other income as the sale of these services was not considered part of BMS’s ongoing major or central operations. Amortization of deferred income attributed to the supply agreement ended in December 2017 and was recorded in alliance revenues. Revenues attributed to the supply agreement were included in alliance revenues.

Consideration for the transaction is presented for cash flow purposes based on the allocation process described above, either as an investing activity if attributed to the sale of the business or related assets or as an operating activity if attributed to the transitional services, supply arrangement or development agreement.

In September 2015, BMS transferred a percentage of its future royalty rights on Amylin net product sales in the U.S. to CPPIB. The transferred rights represent approximately 70% of potential future royalties BMS is entitled to in 2019 to 2025. In exchange for the transfer, BMS will receive an additional tiered-based royalty on Amylin net product sales in the U.S. from CPPIB in 2016 through 2018. These royalties are presented in other income and were $97 million in 2017 and $134 million in 2016.

In November 2017, BMS transferred a percentage of its future royalty rights on a portion of Onglyza* and Farxiga* net product sales to Royalty Pharma. The transferred rights represent approximately 20% to 25% of potential future royalties BMS is entitled to for those products in 2020 to 2025. In exchange for the transfer, BMS will receive an additional tiered-based royalty on Onglyza* and Farxiga* net product sales from Royalty Pharma in 2018 and 2019, which will be presented in other income when earned.

Summarized financial information related to the AstraZeneca alliances was as follows:



	Year Ended December 31,
Dollars in Millions	2017			2016			2015
Revenues from AstraZeneca alliances:
Net product sales	$	6		$	—		$	14
Alliance revenues	125			129			182
Total Revenues	$	131		$	129		$	196

Other income (net):
Amortization of deferred income	—			(113		)	(105		)
Royalties	(228		)	(227		)	(215		)
Transitional services	(12		)	(7		)	(12		)
Divestiture gain	(126		)	—			(82		)

Selected Alliance Cash Flow Information:
Deferred income	—			19			34
Divestiture and other proceeds	302			216			374



Selected Alliance Balance Sheet Information:	December 31,
Dollars in Millions	2017		2016
Deferred income – Services not yet performed for AstraZeneca	$	—	$	38

Sanofi

BMS and Sanofi have co-development and co-commercialization agreements for Plavix* and Avapro*/Avalide*. Effective January 1, 2013, Sanofi assumed essentially all of the worldwide operations of the alliance with the exception of Plavix* in the U.S. and Puerto Rico where BMS is the operating partner with a 50.1% controlling interest. In exchange for the rights transferred to Sanofi, BMS receives quarterly royalties from January 1, 2013 until December 31, 2018 and a terminal payment from Sanofi of $200 million at the end of 2018. As a result of the adoption of ASC 606 in 2018, future royalties will no longer be recorded in alliance revenues and will be recorded as a cumulative effect adjustment in the first quarter of 2018 with a corresponding contract asset. In addition, a portion of the terminal payment will be recorded as a cumulative effect adjustment in the first quarter of 2018 with a corresponding contract asset.

Royalties received from Sanofi in the territory covering the Americas and Australia, opt-out markets, and former development royalties are presented in alliance revenues and were $200 million in 2017, $195 million in 2016 and $211 million in 2015. Royalties attributed to the territory covering Europe and Asia continue to be earned by the territory partnership and are included in equity in net income of affiliates. Alliance revenues attributed to the supply of irbesartan API to Sanofi were $80 million in 2015.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017			2016			2015
Revenues from Sanofi alliances:
Net product sales	$	27		$	38		$	110
Alliance revenues	207			200			296
Total Revenues	$	234		$	238		$	406

Payments to/(from) Sanofi:
Equity in net income of affiliates	(95		)	(95		)	(104		)
Noncontrolling interest – pretax	12			16			51

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:



	Year Ended December 31,
Dollars in Millions	2017		2016		2015
Net sales	$	231	$	235	$	257
Gross profit	192		195		213
Net income	189		192		209

Ono

BMS is the principal in the end customer product sales and has the exclusive right to develop, manufacture and commercialize Opdivo worldwide except in Japan, South Korea and Taiwan. Ono is entitled to receive royalties of 4% in North America and 15% in all territories excluding the three countries listed above, subject to customary adjustments.

BMS and Ono jointly develop and commercialize Opdivo, Yervoy and several BMS investigational compounds in Japan, South Korea and Taiwan. BMS is responsible for supply of the products. Profits, losses and development costs are shared equally for all combination therapies involving compounds of both parties. Otherwise, sharing is 80% and 20% for activities involving only one of the party’s compounds.

BMS and Ono also jointly develop and commercialize Orencia in Japan. BMS is responsible for the order fulfillment and distribution of the intravenous formulation and Ono is responsible for the subcutaneous formulation. Both formulations are jointly promoted by both parties with assigned customer accounts and BMS is responsible for the product supply. A co-promotion fee of 60% is paid when a sale is made to the other party’s assigned customer.

In 2017, Ono granted BMS an exclusive license for the development and commercialization of ONO-4578, Ono’s Prostaglandin E2 receptor 4 antagonist. BMS acquired worldwide rights except in Japan, South Korea, and Taiwan where it was added to the existing collaboration and in China and ASEAN countries where Ono retained exclusive rights. BMS paid $40 million to Ono, which was included in R&D expense in 2017. Ono is eligible to receive subsequent clinical, regulatory and sales-based milestone payments of up to $480 million and royalties in countries where BMS has exclusive licensing rights.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017		2016		2015
Revenues from Ono alliances:
Net product sales	$	145	$	147	$	113
Alliance revenues	268		280		61
Total Revenues	$	413	$	427	$	174

AbbVie

BMS was granted exclusive global rights to co-develop and commercialize Empliciti, a humanized monoclonal antibody for the treatment of multiple myeloma from PDL BioPharma, Inc. (now part of AbbVie). AbbVie currently participates in joint development and U.S. commercialization committees in which BMS has final decision making authority. Both parties jointly develop the product and AbbVie funds 20% of global development costs. BMS is solely responsible for supply, distribution and sales and marketing activities and is the principal in the end customer product sales. AbbVie shares 30% of all profits and losses in the U.S. and is paid tiered royalties outside of the U.S. BMS paid AbbVie $140 million for certain regulatory milestone events including $52 million for approval milestones through December 31, 2017. AbbVie is also entitled to receive an additional $120 million if certain regulatory events occur and $200 million if certain sales thresholds are achieved. The agreement may be terminated immediately by BMS or by either party for material breaches (subsequent to a notice period).

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2017		2016		2015
Revenues from AbbVie alliance:
Net product sales	$	150	$	132	$	3

Payments to/(from) AbbVie:
Cost of products sold – Profit sharing	$	41	$	34	$	1

F-Star Alpha

In October 2014, BMS acquired an exclusive option to purchase F-Star Alpha and its lead asset FS102, an anti-HER2 antibody fragment, in development for the treatment of breast and gastric cancer among a well-defined population of HER2-positive patients. In 2017, BMS discontinued development of FS102 and did not exercise its option, resulting in an IPRD charge of $75 million included in R&D expense and attributed to noncontrolling interest.

Promedior

In September 2015, BMS purchased a warrant that gives BMS the exclusive right to acquire Promedior, a biotechnology company whose lead asset, PRM-151, is being developed for the treatment of IPF and MF. The warrant is exercisable upon delivery of Phase II data following either of the IPF or MF Phase II clinical studies being directed by Promedior. The upfront payment allocated to the warrant was $84 million and included in R&D expenses in 2015. The remaining $66 million of the $150 million upfront payment was allocated to Promedior’s obligation to complete the Phase II studies which was amortized over the expected period of the Phase II studies. The allocation was determined using Level 3 inputs. BMS is obligated to pay an additional $250 million, plus additional aggregate consideration of up to $850 million for contingent development and regulatory approval milestone payments in the U.S. and Europe if it exercises the warrant.

Five Prime

In November 2015, BMS and Five Prime entered into an exclusive worldwide licensing and collaboration agreement for the development and commercialization of Five Prime’s CSF1R antibody program, including cabiralizumab, currently in Phase I and II development for IO indications and Phase II development for PVNS. Five Prime is responsible for the completion of a Phase I study combining cabiralizumab with Opdivo as a potential treatment for a variety of cancers. BMS is responsible for development, manufacturing and commercialization activities. Five Prime may conduct certain studies at its cost to develop cabiralizumab in PVNS and in combination with its own internal oncology pipeline assets. Five Prime also retained an option to co-promote in the U.S. The agreement replaces a previous clinical collaboration agreement between the two parties.

In consideration for licensing rights, BMS made an upfront payment of $350 million in 2015 which was included in R&D expense. BMS will also be committed to pay up to $1.4 billion upon the achievement of contingent development and regulatory milestones as well as future royalties if the product is approved and commercialized.

Reckitt

In May 2013, BMS transferred to Reckitt the right to sell, distribute and market several OTC brands sold primarily in Mexico and Brazil through May 2016. BMS received royalties on net sales of the products and exclusively supplied certain of the products to Reckitt pursuant to a supply agreement at cost plus a markup. Certain limited assets, including marketing authorizations and certain employees directly attributed to the business, were transferred to Reckitt at the start of the alliance period. BMS retained ownership of all other assets related to the business including the trademarks covering the products.

BMS also granted Reckitt an option to acquire the trademarks, inventory and certain other assets exclusively related to the products at the end of the alliance period at a price determined primarily based upon a multiple of sales from May 2014 through May 2016. In April 2014, the alliance was modified to provide an option to Reckitt to purchase a BMS manufacturing facility located in Mexico primarily dedicated to the products included in the alliance as well as the related employees. In July 2015, Reckitt notified BMS that it was exercising its option. In May 2016, BMS sold the business for $317 million.

Non-refundable upfront proceeds of $485 million received by BMS in 2013 were allocated to two units of accounting, including the rights transferred to Reckitt and the fair value of the option to purchase the remaining assets using the best estimate of the selling price for these elements after considering various market factors. These market factors included an analysis of any estimated excess of the fair value of the business over the potential purchase price if the option is exercised. The fair value of the option was determined using Level 3 inputs and included in other liabilities. During 2015, BMS recognized other income of $123 million to decrease the fair value of the option to zero due to the strengthening of the U.S. dollar against local currencies. The amount allocated to the rights transferred to Reckitt is amortized as alliance revenue over the contractual term.

Summarized financial information related to this alliance was as follows:



	Year Ended December 31,
Dollars in Millions	2016			2015
Revenues from Reckitt alliance:
Alliance revenues	$	48		$	140

Other income (net) – Divestiture gain	(277		)	—

Selected Alliance Cash Flow Information:
Other changes in operating assets and liabilities	$	—		$	(129	)
Divestiture and other proceeds	317			—

The Medicines Company

In February 2013, BMS transferred to The Medicines Company the right to sell, distribute and market Recothrom* on a global basis for two years. Certain employees directly attributed to the business and certain assets were transferred to The Medicines Company at the start of the alliance period, including the Biologics License Application and related regulatory assets. BMS retained all other assets related to Recothrom* including the patents, trademarks and inventory.

BMS also granted The Medicines Company an option to acquire the patents, trademarks, inventory and certain other assets exclusively related to Recothrom* at a price determined based on a multiple of sales (plus the cost of any remaining inventory held by BMS at that time). The Medicines Company exercised the option in February 2015 and acquired the business for $132 million resulting in a $59 million divestiture gain.

Valeant

In October 2012, BMS transferred to PharmaSwiss SA, a wholly-owned subsidiary of Valeant the right to sell, distribute, and market the certain mature brand products in Europe through December 31, 2014.

BMS also granted Valeant an option to acquire the trademarks and intellectual property exclusively related to the products at a price determined based on a multiple of sales. Valeant exercised the option in January 2015 and acquired the business for $61 million resulting in an $88 million divestiture gain.