v3.25.4
Fair value measurement
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair value measurement Fair value measurement
To estimate the fair values 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, 2025, 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$— $998 $— $998 
Money market mutual funds7,395 — — 7,395 
Other short-term interest-bearing securities— 132 — 132 
Equity securities6,144 — — 6,144 
Derivatives:
Foreign currency forward contracts— 196 — 196 
Cross-currency swap contracts— 48 — 48 
Total assets$13,539 $1,374 $— $14,913 
Liabilities:
Derivatives:
Foreign currency forward contracts$— $214 $— $214 
Cross-currency swap contracts— 320 — 320 
Interest rate swap contracts— 293 — 293 
Contingent consideration obligations — — 161 161 
Total liabilities$— $827 $161 $988 
Fair value measurement as of December 31, 2024, using:
Quoted prices in
active markets for
identical assets
(Level 1)		Significant other
observable
inputs
(Level 2)		Significant
unobservable
inputs
(Level 3)		Total
Assets:
Available-for-sale securities:
U.S. Treasury bills$— $997 $— $997 
Money market mutual funds10,354 — — 10,354 
Other short-term interest-bearing securities— 135 — 135 
Equity securities4,188 — — 4,188 
Derivatives:
Foreign currency forward contracts— 420 — 420 
Total assets$14,542 $1,552 $— $16,094 
Liabilities:
Derivatives:
Foreign currency forward contracts$— $8 $— $8 
Cross-currency swap contracts— 483 — 483 
Interest rate swap contracts— 531 — 531 
Contingent consideration obligations— — 106 106 
Total liabilities$— $1,022 $106 $1,128 
Interest-bearing and equity securities
The fair values of our U.S. Treasury bills are determined by utilizing third-party pricing services, which obtain pricing data from active market makers and brokers. The fair values of our money market mutual funds and equity investments in publicly traded securities, including our equity investments in BeOne and Neumora, as of December 31, 2025 and 2024, are based on quoted market prices in active markets, with no valuation adjustment.
Derivatives
All of 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, SOFR, swap rates, obligor credit default swap rates and cross-currency basis swap spreads. Certain inputs, when applicable, are at commonly quoted intervals. See Note 19, Derivative instruments.
Contingent consideration obligations
As a result of business development activity, 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 through business development activity, 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,
20252024
Beginning balance$106 $96 
Additions68 — 
Payments(7)(8)
Net changes in valuations(6)18 
Ending balance$161 $106 
As of December 31, 2025 and 2024, our contingent consideration obligations were primarily the result of our acquisition of Teneobio in October 2021, which obligates us to make payments to the former shareholders upon achievement of separate development and regulatory milestones with regard to various R&D programs, and other business development activity in 2025.
Summary of the fair values of other financial instruments
Cash equivalents
The fair values of cash equivalents are approximated at their carrying values due to the short-term nature of such financial instruments.
Borrowings
We estimate the fair values of our fixed-rate debt by using Level 2 inputs. As of December 31, 2025 and 2024, the aggregate fair values of our fixed-rate debt were $51.0 billion and $54.9 billion, respectively, and the carrying values of our fixed-rate debt were $52.8 billion and $58.3 billion, respectively. The estimate of the fair value of our term loan is approximated at its carrying value as of December 31, 2025 and 2024, as this debt instrument bears interest at a floating rate.
During the years ended December 31, 2025 and 2024, there were no transfers of assets or liabilities between fair value measurement levels. Except with respect to the partial impairments of the Otezla intangible asset in 2025 and the IPR&D intangible impairment of AMG 340 in 2023 as disclosed in Note 13, Goodwill and other intangible assets, there were no material remeasurements of the fair values of assets and liabilities that are not measured at fair value on a recurring basis.