XML 57 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Fair value measurement
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
Fair value measurement Fair value measurement
To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing an asset or liability and are developed based on the
best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
Level 2—Valuations for which all significant inputs are observable either directly or indirectly—other than Level 1 inputs
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.
The fair values of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in millions):
Fair value measurement as of December 31, 2023, using:
Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable
inputs
(Level 2)		Significant
unobservable
inputs
(Level 3)		Total
Assets:
Available-for-sale securities:
U.S. Treasury bills$— $— $— $— 
Money market mutual funds10,266 — — 10,266 
Other short-term interest-bearing securities— 138 — 138 
Other investments— — — — 
Equity securities4,514 — — 4,514 
Derivatives:
Foreign currency forward contracts— 145 — 145 
Cross-currency swap contracts— — — — 
Interest rate swap contracts— — — — 
Total assets$14,780 $283 $— $15,063 
Liabilities:
Derivatives:
Foreign currency forward contracts$— $116 $— $116 
Cross-currency swap contracts— 405 — 405 
Interest rate swap contracts— 571 — 571 
Forward interest rate contracts— — — — 
Contingent consideration obligations
— — 96 96 
Total liabilities$— $1,092 $96 $1,188 
Fair value measurement as of December 31, 2022, using:
Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable
inputs
(Level 2)		Significant
unobservable
inputs
(Level 3)		Total
Assets:
Available-for-sale securities:
U.S. Treasury bills$1,676 $— $— $1,676 
Money market mutual funds2,659 — — 2,659 
Other short-term interest-bearing securities— — — — 
Other investments— 130 — 130 
Equity securities480 — 335 815 
Derivatives:
Foreign currency forward contracts— 287 — 287 
Cross-currency swap contracts— 54 — 54 
Total assets$4,815 $471 $335 $5,621 
Liabilities:
Derivatives:
Foreign currency forward contracts$— $76 $— $76 
Cross-currency swap contracts— 541 — 541 
Interest rate swap contracts— 776 — 776 
Forward interest rate contracts— 5 — 5 
Contingent consideration obligations— — 270 270 
Total liabilities$— $1,398 $270 $1,668 
Interest-bearing and equity securities
The fair values of our U.S. Treasury securities, money market mutual funds and equity investments in publicly traded securities, including our equity investments in BeiGene and Neumora, as of December 31, 2023, are based on quoted market prices in active markets, with no valuation adjustment. Previously, the fair value of our equity investment in Neumora did not have a readily determinable fair value and was initially valued at the acquisition price and subsequently valued based on a combination of observable price transactions when available, market performance and publicly available market information for similar companies that have actively traded equity securities. During the third quarter of 2023, Neumora became a publicly traded company, and its equity securities now have a readily determinable fair value. Accordingly, the fair value inputs of our equity investment in Neumora changed from using Level 3 inputs as of December 31, 2022, to using a Level 1 input as of December 31, 2023. See Note 10, Investments— Neumora Therapeutics, Inc.
As of the first quarter of 2023, we no longer account for our equity investment in BeiGene under the equity method of accounting. As of December 31, 2022, the fair value and carrying value were $4.2 billion and $2.2 billion, respectively, with the fair value estimated by using a Level 1 input. See Note 10, Investments—BeiGene, Ltd.
Derivatives
Our foreign currency forward contracts, cross-currency swap contracts and interest rate swap contracts are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs, as applicable, include foreign currency exchange rates, LIBOR, SOFR, swap rates, obligor credit default swap rates and cross-currency basis swap spreads. Certain inputs, when applicable, are at commonly quoted intervals. Starting in the third quarter of 2023, terms under our existing derivative contracts reference the SOFR benchmark consistent with the ISDA protocol. See Note 19, Derivative instruments.
Contingent consideration obligations
As a result of our business acquisitions, we have incurred contingent consideration obligations as discussed below. The contingent consideration obligations are recorded at their fair values by using probability-adjusted discounted cash flows, and we revalue these obligations each reporting period until the related contingencies have been resolved. The fair value measurements of these obligations are based on significant unobservable inputs related to licensing rights and product candidates acquired in business combinations, and they are reviewed quarterly by management in our R&D and commercial sales organizations. The inputs include, as applicable, estimated probabilities and the timing of achieving specified development, regulatory and commercial milestones as well as estimated annual sales. Significant changes that increase or decrease the probabilities of achieving the related development, regulatory and commercial events or that shorten or lengthen the time required to achieve such events or that increase or decrease estimated annual sales would result in corresponding increases or decreases in the fair values of the obligations, as applicable. Changes in the fair values of contingent consideration obligations are recognized in Other operating expenses in the Consolidated Statements of Income.
Changes in the carrying amounts of contingent consideration obligations were as follows (in millions):
Years ended December 31,
202320222021
Beginning balance$270 $342 $33 
Additions— — 309 
Payments(9)(7)(7)
Net changes in valuations(165)(65)7 
Ending balance$96 $270 $342 
As of December 31, 2023 and 2022, our contingent consideration obligations are primarily the result of our acquisition of Teneobio in October 2021, which obligated us to pay the former shareholders up to $1.6 billion upon achieving separate development and regulatory milestones with regard to various R&D programs. See Note 3, Acquisitions and divestitures. During the third quarter of 2023, the development of AMG 340 was terminated, resulting in a decrease of the related contingent consideration liability. The remeasurement of this liability of $165 million was recognized in Other operating expenses in the Consolidated Statements of Income and included in Other items, net, in the Consolidated Statements of Cash Flows. See Note 13, Goodwill and other intangible assets, for the impact on the related IPR&D asset. The remaining contingent consideration liability as of December 31, 2023, primarily relates to potential development and regulatory milestones for R&D programs acquired via the Teneobio acquisition that we continue to pursue.
Summary of the fair values of other financial instruments
Cash equivalents
The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.
Borrowings
We estimated the fair values of our borrowings by using Level 2 inputs. As of December 31, 2023 and 2022, the aggregate fair values of our borrowings were $59.2 billion and $35.0 billion, respectively, and the carrying values were $64.6 billion and $38.9 billion, respectively.
During the years ended December 31, 2023 and 2022, there were no transfers of assets or liabilities between fair value measurement levels, and except with respect to the impairment of AMG 340 disclosed in Note 13, Goodwill and other
intangible assets, there were no material remeasurements to the fair values of assets and liabilities that are not measured at fair value on a recurring basis.