| Other Deductions-Net |
The components of Other
deductions—net follow:
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YEAR ENDED DECEMBER 31,
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|
(MILLIONS OF
DOLLARS) |
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
Interest income
|
|
$ |
(458 |
) |
|
$ |
(402 |
) |
|
$ |
(747 |
) |
|
Interest expense
|
|
|
1,681 |
|
|
|
1,797 |
|
|
|
1,232 |
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Net interest expense(a)
|
|
|
1,223 |
|
|
|
1,395 |
|
|
|
485 |
|
|
Royalty-related income
|
|
|
(570 |
) |
|
|
(579 |
) |
|
|
(243 |
) |
|
Net gains on asset
disposals(b)
|
|
|
(1 |
) |
|
|
(262 |
) |
|
|
(188 |
) |
|
Certain legal matters, net(c)
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|
|
790 |
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|
1,737 |
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|
234 |
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Certain asset impairment
charges(d)
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|
|
863 |
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|
2,175 |
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|
417 |
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Gain related to ViiV(e)
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|
— |
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— |
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|
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(482 |
) |
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Other, net
|
|
|
174 |
|
|
|
(130 |
) |
|
|
62 |
|
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Other deductions—net
|
|
$ |
2,479 |
|
|
$ |
4,336 |
|
|
$ |
285 |
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| (a) |
2011 vs.
2010 - Interest income increased due to higher cash balances and
higher interest rates earned on investments. Interest expense
decreased due to lower long- and short-term debt balances and the
conversion of some fixed-rate liabilities to floating rate
liabilities. 2010 vs. 2009 – Interest expense increased due
to our issuance of $13.5 billion of senior unsecured notes on
March 24, 2009 and approximately $10.5 billion of senior
unsecured notes on June 3, 2009, primarily related to the
acquisition of Wyeth, as well as the addition of legacy Wyeth debt.
Interest income decreased due to lower interest rates, coupled with
lower average cash balances. Capitalized interest expense totaled
$50 million in 2011, $36 million in 2010 and $34 million in
2009.
|
| (b) |
In 2010
and 2009, represents gains on sales of certain investments and
businesses. Net gains primarily include realized gains and losses
on sales of available-for-sale securities: in 2011, 2010 and 2009,
gross realized gains were $79 million, $153 million and $186
million, respectively. Gross realized losses were $73 million in
2011, $12 million in 2010 and $43 million in 2009. Proceeds,
primarily from the sale of available-for-sale securities, were
$10.2 billion in 2011, $5.3 billion in 2010 and $27.0 billion in
2009.
|
| (c) |
In 2011,
primarily relates to charges for hormone-replacement therapy
litigation. In 2010, includes a $1.3 billion charge for asbestos
litigation related to our wholly owned subsidiary, Quigley Company,
Inc.
|
| (d) |
The
majority of the asset impairment charges for 2011 and 2010 are
related to intangible assets, including in-process research and
development (IPR&D) assets, which were acquired as part of our
acquisition of Wyeth.
|
In 2011, the impairment
charges of $863 million include (i) approximately $475 million
of IPR&D assets, primarily related to two compounds for the
treatment of certain autoimmune and inflammatory diseases;
(ii) approximately $195 million related to our
biopharmaceutical indefinite-lived brand, Xanax; and
(iii) approximately $185 million of Developed Technology
Rights comprising the impairments of five assets. These impairment
charges reflect, among other things, the impact of new scientific
findings and the increased competitive environment. The impairment
charges are associated with the following: Worldwide Research and
Development ($394 million); Established Products ($193 million);
Specialty Care ($135 million); Primary Care ($56 million); Oncology
($56 million); Animal Health ($17 million); and other ($12
million).
In 2010, the impairment
charges of $2.2 billion include (i) approximately $950 million
of IPR&D assets, primarily Prevnar 13/Prevenar 13 Adult, a
compound for the prevention of pneumococcal disease in adults age
50 and older, and Neratinib, a compound for the treatment of breast
cancer; (ii) approximately $700 million of indefinite-lived
Brands, related to Third Age, infant formulas for the first 12-36
months of age, and Robitussin, a cough suppressant; and
(iii) approximately $550 million of Developed Technology
Rights, primarily Thelin, a product that treated pulmonary
hypertension, and Protonix, a product that treats erosive
gastroesophageal reflux disease. These impairment charges, most of
which occurred in the third quarter of 2010, reflect, among other
things, the following: for IPR&D assets, the impact of changes
to the development programs, the projected development and
regulatory timeframes and the risk associated with these assets;
for Brand assets, the current competitive environment and planned
investment support; and, for Developed Technology Rights, in the
case of Thelin, we voluntarily withdrew the product in regions
where it was approved and discontinued all clinical studies
worldwide, and for the others, an increased competitive
environment. The impairment charges are generally associated with
the following: Specialty Care ($708 million); Oncology ($396
million); Nutrition ($385 million); Consumer Healthcare ($292
million); Established Products ($182 million); Primary Care ($145
million); Worldwide Research and Development ($54 million); and
other ($13 million).
In 2009, the impairment
charge of $417 million primarily relates to certain materials used
in our research and development activities that were no longer
considered recoverable.
| (e) |
Represents a gain related to ViiV, an equity method investment,
which is focused solely on research, development and
commercialization of HIV medicines (see Note 2F. Acquisitions,
Divestitures, Collaborative Arrangements and Equity-Method
Investments: Equity-Method Investments).
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