Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

6 Months Ended

Jun. 28, 2026

Restructuring and Related Activities [Abstract]

Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives

A. Realigning Our Cost Base Program

In the fourth quarter of 2023, we announced that we launched a multi-year, enterprise-wide cost realignment program that aims to realign our costs with our longer-term revenue expectations. In the second quarter of 2025, we identified additional productivity opportunities to further reduce costs primarily in SI&A, driven in large part by enhanced digital enablement, including automation and AI, and simplification of business processes.

We expect costs associated with these components of the program to be incurred through 2027 and to total approximately $4.7 billion, representing primarily cash expenditures for severance, implementation, exit, and digital enablement costs, as well as non-cash asset write downs of which $3.4 billion is associated with our Biopharma segment.

In the third quarter of 2026, we identified additional productivity enhancements from technology and simplification efforts across our commercial, R&D and enabling functions designed to further reduce costs in SI&A. We expect one-time costs to achieve the additional savings to be incurred through 2029 and to total approximately $2.0 billion, primarily representing cash

expenditures for digital enablement, implementation and severance of which $800 million is associated with our Biopharma segment.

Additionally, in connection with our efforts to simplify the structure and sharpen the focus of our R&D organization, in the first quarter of 2025, we expanded this program after having identified additional opportunities to drive improvements in productivity and operational efficiencies through enhanced digital enablement, including automation and AI, and simplification of business processes. We expect costs to implement these initiatives to be incurred through 2026 and to total approximately $600 million, primarily representing cash expenditures for severance, digital enablement and implementation, all of which is associated with our Biopharma segment. The majority of these costs were recorded in 2025, with cash outlays expected primarily through 2026.

We expect costs associated with all the components of this program to total approximately $7.3 billion of which $4.8 billion is associated with the Biopharma segment.

From the start of this program through June 28, 2026, we incurred total costs of $4.9 billion, of which $3.8 billion is associated with our Biopharma segment (including $3.3 billion of restructuring charges).

B. Manufacturing Optimization Program

In the second quarter of 2024, we announced that we launched a multi-year, multi-phased program to reduce our costs of goods sold, which includes operational efficiencies, network structure changes, and product portfolio enhancements. The first phase of this program is primarily focused on operational efficiencies, and we expect costs for this first phase to total approximately $1.4 billion, primarily representing cash expenditures for severance and implementation costs, all of which is associated with our Biopharma segment.

In the third quarter of 2026, we announced the next phase of the program, with a focus on network structure changes, product portfolio enhancements and additional operational efficiencies. The one-time costs to achieve the savings associated with this phase of the program are expected to be approximately $4.0 billion, substantially all associated with our Biopharma segment, with approximately 60% of non-cash expenditures for accelerated depreciation and asset write-downs and 40% of cash expenditures for severance, implementation and exit costs. The costs to achieve these savings are expected to be incurred through 2029.

We expect costs associated with both phases of this program to total approximately $5.4 billion, substantially all of which is associated with the Biopharma segment.

From the start of this program through June 28, 2026, we incurred total costs of $1.1 billion, substantially all of which relates to our Biopharma segment (including $824 million of restructuring charges). The costs were recorded primarily through 2025, with cash outlays expected primarily through 2029.

C. Key Activities


The following summarizes costs and credits for acquisitions and cost-reduction/productivity initiatives:
	Three Months Ended				Six Months Ended
(MILLIONS)	June 28, 2026		June 29, 2025		June 28, 2026		June 29, 2025
Restructuring charges/(credits):
Employee terminations	$	354	$	(148)	$	369	$	236
Asset impairments	54		44		82		217
Exit costs	10		30		17		94
Restructuring charges/(credits)(a)	419		(74)		468		547

Integration costs and other(b)	38		56		89		113
Restructuring charges and certain acquisition-related costs	457		(18)		557		660
Net periodic benefit costs/(credits) recorded in Other (income)/deductions––net	(5)		(9)		(2)		(68)
Inventory write-offs––recorded in Cost of sales	46		—		46		—




Additional depreciation––asset restructuring recorded in Cost of sales(c)	10		4		14		7
Implementation costs recorded in our condensed consolidated statements of operations as follows(d):
Cost of sales	25		26		40		46
Selling, informational and administrative expenses	56		14		91		20
Research and development expenses	63		39		102		62

Total implementation costs	144		78		233		128
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	653	$	54	$	848	$	727

(a)Primarily represents cost-reduction initiatives. Amounts associated with our Biopharma segment: (i) charges of $390 million for the three months ended June 28, 2026 (including charges of $417 million for our Realigning our Cost Base Program and credits of $29 million for our Manufacturing Optimization Program), (ii) charges of $421 million for the six months ended June 28, 2026 (including charges of $464 million for our Realigning our Cost Base Program and credits of $52 million for our Manufacturing Optimization Program), (iii) credits of $406 million for the three months ended June 29, 2025 (including credits of $408 million for our Manufacturing Optimization Program and $25 million for our Realigning our Cost Base Program) and (iv) charges of $211 million for the six months ended June 29, 2025 (including charges of $562 million for our Realigning our Cost Base Program and credits of $412 million for our Manufacturing Optimization Program). For 2025, Employee terminations included revisions of estimates of previously recorded accruals for severance benefits, driven in large part by higher-than-expected voluntary attrition.

(b)Represents external, incremental costs directly related to integrating acquired businesses, such as expenditures for consulting and the integration of systems and processes, and certain other qualifying costs.

(c)Represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.

(d)Represents incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.


The following summarizes the components and changes in restructuring accruals:
(MILLIONS)	Employee Termination Costs		Asset Impairment Charges		Exit Costs		Accrual
Balance, December 31, 2025(a)	$	1,783	$	—	$	127	$	1,910
Provision	369		82		17		468
Utilization and other(b)	(577)		(82)		(36)		(695)
Balance, June 28, 2026(c)	$	1,575	$	—	$	107	$	1,682

(a)Included in Other current liabilities ($1.4 billion) and Other noncurrent liabilities ($466 million).

(b)Other activity includes adjustments for foreign currency translation that are not material to our condensed consolidated financial statements.

(c)Included in Other current liabilities ($972 million) and Other noncurrent liabilities ($710 million).