Additions

  
Level 3 InputsContingent ConsiderationIn connection with our first quarter 2021 acquisition of MYR, we recorded a liability for contingent consideration, which is revalued each reporting period until the related contingency is resolved. The contingent consideration was estimated using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex.The following table summarizes the change in fair value of our contingent consideration: 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  | Nine Months Ended |  |
|  |  | September 30, |  | September 30, |  |
| (in millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  |
| Beginning balance |  | $ | 306  |  |  | $ | 334  |  |  | $ | 317  |  |  | $ | —  |  |  |
| Additions |  | —  |  |  | —  |  |  | —  |  |  | 341  |  |  |
| Changes in valuation assumptions |  | (30) |  |  | —  |  |  | (19) |  |  | —  |  |  |
| Effect of foreign exchange remeasurement |  | (27) |  |  | (7) |  |  | (49) |  |  | (13) |  |  |
| Ending balance |  | $ | 249  |  |  | $ | 328  |  |  | $ | 249  |  |  | $ | 328  |  |  |

Changes in valuation assumptions were primarily related to increasing discount rates and updated probability rate estimates. Such changes were included in Research and development expenses on our Condensed Consolidated Statements of Income. Effect of foreign exchange remeasurement was included in Other income (expense), net on our Condensed Consolidated Statements of Income.Liability Related to the Sale of Future RoyaltiesWe recorded a liability related to the sale of future royalties as part of our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”), which is subsequently amortized using the effective interest method over the remaining estimated life. The fair values of the liability related to the sale of future royalties were $1.1 billion and $1.3 billion as of September 30, 2022 and December 31, 2021, respectively, and the carrying value was $1.1 billion as of September 30, 2022 and December 31, 2021. See Note 9. Debt and Credit Facilities for additional information.Fair Value Level TransfersThere were no transfers between Level 1, Level 2 and Level 3 in the periods presented.Nonrecurring Fair Value MeasurementsDuring the nine months ended September 30, 2022, we recorded a partial impairment charge of $2.7 billion related to certain IPR&D assets. See Note 7. Goodwill and Intangible Assets for additional information.4.    AVAILABLE-FOR-SALE DEBT SECURITIES AND EQUITY SECURITIESAvailable-for-Sale Debt SecuritiesThe following table summarizes our available-for-sale debt securities:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | September 30, 2022 |  | December 31, 2021 |
| (in millions) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value  |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value  |
| U.S. treasury securities |  | $ | 456  |  |  | $ | —  |  |  | $ | (7) |  |  | $ | 448  |  |  | $ | 408  |  |  | $ | —  |  |  | $ | (1) |  |  | $ | 407  |  |
| U.S. government agencies securities |  | 19  |  |  | —  |  |  | —  |  |  | 19  |  |  | 4  |  |  | —  |  |  | —  |  |  | 4  |  |
| Non-U.S. government securities |  | 44  |  |  | —  |  |  | —  |  |  | 44  |  |  | 50  |  |  | —  |  |  | —  |  |  | 50  |  |
| Certificates of deposit |  | 65  |  |  | —  |  |  | —  |  |  | 65  |  |  | 249  |  |  | —  |  |  | —  |  |  | 249  |  |
| Corporate debt securities |  | 1,397  |  |  | —  |  |  | (30) |  |  | 1,367  |  |  | 1,365  |  |  | —  |  |  | (2) |  |  | 1,363  |  |
| Residential mortgage and asset-backed securities |  | 350  |  |  | —  |  |  | (3) |  |  | 347  |  |  | 425  |  |  | —  |  |  | (1) |  |  | 424  |  |
| Total |  | $ | 2,331  |  |  | $ | —  |  |  | $ | (40) |  |  | $ | 2,290  |  |  | $ | 2,501  |  |  | $ | —  |  |  | $ | (4) |  |  | $ | 2,497  |  |

14
