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 are 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 prioritized products and certain other brands.

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. Certain prior period amounts included below were revised to exclude amounts for arrangements that no longer meet the criteria for collaboration arrangements.



Dollars in Millions	Three Months Ended September 30,						Nine Months Ended September 30,
Revenues from alliances:	2018			2017			2018			2017
Net product sales	$	2,037		$	1,754		$	6,135		$	5,017
Alliance revenues	177			232			483			694
Total Revenues	$	2,214		$	1,986		$	6,618		$	5,711

Payments to/(from) alliance partners:
Cost of products sold	$	838		$	678		$	2,528		$	1,965
Marketing, selling and administrative	(26		)	(18		)	(76		)	(41		)
Research and development	(2		)	(13		)	1,060			(14		)
Other income (net)	(14		)	(9		)	(44		)	(29		)



Selected Alliance Balance Sheet information:
Dollars in Millions	September 30, 2018		December 31, 2017
Receivables - from alliance partners	$	354	$	322
Accounts payable - to alliance partners	835		875
Deferred income from alliances^(a)	510		467


(a)	Includes unamortized up-front, milestone and other licensing proceeds. Amortization of deferred income (primarily related to alliances) was $16 million and $20 million in the three months ended September 30, 2018 and 2017 and $48 million and $59 million in the nine months ended September 30, 2018 and 2017, respectively.

The nature and purpose, significant rights and obligations of the parties and specific accounting policy elections for each of our significant alliances are discussed in our 2017 Form 10-K. Significant developments and updates related to alliances during 2018 are set forth below.

Nektar

In the second quarter of 2018, BMS and Nektar commenced a worldwide license and collaboration for the development and commercialization of NKTR-214, Nektar’s investigational immuno-stimulatory therapy designed to selectively expand specific cancer-fighting T cells and natural killer cells directly in the tumor micro-environment. The Opdivo and NKTR-214 combination therapy is currently in Phase II clinical studies for multiple cancer indications and in a Phase III clinical study for melanoma. A joint development plan agreed by the parties contemplates development in various indications and tumor types with each party responsible for the supply of their own product. BMS’s share of the development costs associated with therapies comprising a BMS medicine used in combination with NKTR-214 is 67.5%, subject to certain cost caps for Nektar. The parties will also jointly commercialize the therapies, subject to regulatory approval. BMS's share of global NKTR-214 profits and losses will be 35% subject to certain annual loss caps for Nektar.

BMS paid Nektar $1.85 billion for the rights discussed above and 8.3 million shares of Nektar common stock representing a 4.8% ownership interest. BMS’s equity ownership is subject to certain lock-up, standstill and voting provisions for a five-year period. The amount of the up-front payment allocated to the equity investment was $800 million after considering Nektar’s stock price on the date of closing and current limitations on trading the securities. The remaining $1.05 billion of the up-front payment was allocated to the rights discussed above and included in research and development expense in the second quarter of 2018. BMS will also pay up to $1.8 billion upon the achievement of contingent development, regulatory and sales-based milestones over the life of the alliance period.

Ono

In the third quarter of 2018, BMS provided Ono with a right to accept NKTR-214 into their alliance upon completion of a Phase I clinical study of Opdivo and NKTR-214 in the Ono Territory. If the right is exercised, Ono will partially reimburse BMS for development costs incurred with the study and share in certain future development costs, contingent milestone payments, profits and losses under the collaboration with Nektar.

Promedior

In the third quarter of 2018, BMS notified Promedior that it would not exercise its warrant to purchase all outstanding shares of Promedior.