2003 was a good year for your company. Three important new Bristol-Myers Squibb medicines are helping thousands of people with schizophrenia, HIV/AIDS and cancer, and have the potential to touch thousands more. For the 80th year in a row, we paid dividends to our stockholders, and for the third consecutive year, those dividend payments exceeded $2 billion. Across our pharmaceutical and other health care portfolios, as well as our geographies, we realized broad-based sales and earnings growth. We have made significant progress strengthening financial and internal controls, and are implementing fundamental changes in our company to address the opportunities and challenges ahead.

For the year, Bristol-Myers Squibb earned $3.1 billion from continuing operations on worldwide net revenues of $20.9 billion. Total net sales increased 15 percent, including the effect of foreign exchange. Among our leading products, net sales of Pravachol, our cholesterol-lowering medicine, grew 25 percent to $2.8 billion, while net sales of Plavix, an antiplatelet therapy, and Avapro/Avalide, treatments for hypertension—which we are codeveloping and comarketing with Sanofi-Synthélabo—increased 31 percent to $2.5 billion, and 29 percent to $757 million, respectively.

Looking at our newer products, our total revenue for Abilify—a treatment for schizophrenia that we are codeveloping and copromoting with Otsuka Pharmaceutical Co., Ltd.—reached nearly $300 million in its first full year on the market. Across our pharmaceutical and related health care businesses, eight products or product lines each realized global net sales in excess of $500 million, and an additional 23 products each achieved net sales greater than $100 million. Eighteen of these brands grew at double-digit rates.

In addition to delivering solid financial performance, we met other key objectives for the year. As you may recall, we set the following goals:

• successfully launch our new products
• grow our key in-line products and franchises
• invest in our businesses and pipeline
• continue putting the right leaders in place
• strengthen our compliance processes and structures as well as our financial controls and accounting

As we did all these things, we also initiated a critically important change process to build on the momentum we achieved in 2003 and prepare for the challenges and opportunities ahead. To help guide us in this process, we are implementing a new strategy that narrows our focus more sharply on our mission and on areas of medical need where we can truly make a difference for patients both now and in the future. As such, we have chosen "Focus" as the theme of this annual report to highlight our strategy.

Launching New Products
I would like to begin my discussion of our achievements with ERBITUX, the novel cancer treatment that we are codeveloping and copromoting with ImClone Systems Incorporated. As you may recall, we committed ourselves to bring this important product through development and regulatory review, and I am pleased that following those steps, ERBITUX received marketing approval from the U.S. Food and Drug Administration on February 12, 2004.

ERBITUX represents a significant step forward in the fight against advanced colorectal cancer, a disease for which there are few effective treatment options. All of us at Bristol-Myers Squibb are excited about the potential for this new medicine to help patients. And ERBITUX serves as an important bridge between our well-established cancer therapies and our promising oncology pipeline opportunities.

I would like to thank my colleagues, especially those in our oncology area—as well as the people of ImClone—for their dedication, resiliency and focus, all critical to making ERBITUX a reality for patients in need. Undoubtedly, you will hear and read more about this promising medicine as we move quickly to make it available to more patients and to explore potential additional uses for it in the fight against cancer.

With the approval of ERBITUX, Bristol-Myers Squibb has introduced three important new medicines in a 16-month period. When compared with the recent average for companies in our industry of just slightly over one new drug launch per year, this achievement clearly illustrates the progress we are making in developing our late-stage pipeline.

Turning to our other newer products, Abilify already has captured a significant share—more than 7 percent, to date—of the weekly new prescriptions in the antipsychotic class. Thanks to its strong sales in its first year on the market, Abilify ranks among the 10 most successful new product launches to date in the entire pharmaceutical industry. In 2003, Abilify gained an additional indication for long-term treatment of schizophrenia, and we also submitted for filing an indication for treatment of acute mania in patients with bipolar disorder. Abilify has a growing presence in several countries outside the U.S., and received a recommendation for marketing approval in Europe on February 25, 2004.

Reyataz, our treatment for HIV/AIDS, was introduced in the U.S. in July 2003. To date, it has garnered a strong 15 percent share of weekly new prescriptions in the protease inhibitor category. As the first protease inhibitor with once-a-day dosing, Reyataz can help HIV/AIDS patients reduce their pill burden. It is an important addition to our growing virology business, which also includes Sustiva, Videx EC and Zerit. On March 2, 2004, we received marketing approval for Reyataz in Europe and are looking forward to introducing it in other international markets in 2004.

Growing our Key Products
While Abilify and Reyataz contributed to our strength in 2003, and, more importantly, have tremendous potential going forward, our principal growth drivers in the year were Pravachol, Plavix and Avapro/Avalide, as well as Sustiva and the cancer treatment Paraplatin. Net sales of Sustiva grew 20 percent to $544 million, and those of Paraplatin increased 24 percent to $905 million. Altogether, our worldwide pharmaceutical net sales increased 16 percent to $15 billion.

In our Health Care businesses, ConvaTec reported solid net sales gains in its two major product lines: ostomy, which grew 13 percent to $512 million, and wound therapeutics, which increased 17 percent to $319 million. In our Medical Imaging business, net sales of the cardiovascular imaging agent Cardiolite grew 8 percent to $324 million. Net sales in our Mead Johnson Nutritionals business increased 11 percent to nearly $2 billion. International nutritionals net sales grew 9 percent. Recently, we divested our adult nutritionals line, allowing Mead Johnson to focus exclusively on products for infants and children, an area where it is a recognized market leader.

Growth was strong across our geographies as well. U.S. pharmaceutical net sales rose 16 percent to $8.4 billion, while international pharmaceutical net sales increased 17 percent to $6.5 billion, inclusive of foreign exchange. In the U.S., total net sales of Plavix rose 27 percent, with Avapro/Avalide, Sustiva, Paraplatin and Pravachol also all growing at double-digit rates.

In the Europe, Middle East and Africa region, our pharmaceutical business continued its trend of robust growth, up 23 percent. This solid performance was due in large part to strong net sales of Pravachol, Plavix, Avapro/Avalide and Sustiva, which all grew in the 30-50 percent range during the year. In the Asia/Pacific region, pharmaceutical net sales increased 12 percent, driven in part by strong net sales in Japan of TAXOL, a cancer treatment, which grew 34 percent. Sales of TAXOL also increased 28 percent in Europe, although the product lost data exclusivity there in the third quarter of 2003. Global TAXOL sales in 2003 were $934 million.

Investing in the Future
Turning to our research and development goals, we advanced our drug pipeline significantly in 2003. We transitioned two potentially breakthrough compounds to Phase III, including muraglitazar, our dual PPAR agonist for diabetes, and ixabepilone, our novel epothilone for cancer. We now have eight promising compounds in later stages of development, seven of which were discovered in our own laboratories.

In the next 12 months, we intend to submit up to three of our late-stage products for regulatory approval, including entecavir, for hepatitis B; abatacept, or CTLA4Ig, for rheumatoid arthritis; and muraglitazar. In 2003, we invested $2.3 billion in companywide research and development, and expect to boost spending on drug development in the 10-12 percent range in 2004 to accelerate our promising late-stage pipeline.

While internal growth is vital to our future success, we are continually evaluating and pursuing external opportunities that can leverage our strengths. In 2003, we licensed three products: a long-acting insulin compound, Basulin, from Flamel Technologies, and an inhaled insulin product from QDose—both early-stage compounds that enhance our diabetes franchise—as well as edifoligide, a Phase III compound from Corgentech, to prevent vein graft failure in bypass surgery, that will build on our leadership in the atherosclerosis/thrombosis area.

Bristol-Myers Squibb has a notable record of pursuing successful licensing arrangements to supplement its own pipeline, and many of these arrangements have led to fruitful codevelopment, copromotion and comarketing agreements. We will continue to complement our pipeline in 2004 with additional licensed products.

We also entered into a new alliance with Lexicon Genetics, which will provide us with potentially valuable drug discovery targets in the neuroscience area. Our comprehensive network of alliances and partnerships includes more than 190 collaborations with approximately 130 companies and research institutions.

Meeting Other Important Objectives
Integrity and transparency are critical to our continued and future success. We made great progress in 2003 toward our goals of strengthening our financial reporting and other compliance efforts and structures.

I have communicated to all our employees that our first priority must be full compliance with the letter and spirit of all the rules and regulations governing our company. And we must do this with the highest standards of business, personal and medical ethics, and in accordance with the values expressed in the Bristol-Myers Squibb Pledge.

Over the past year, senior management, under the direction of the Audit Committee, continued to identify and implement actions to improve the effectiveness of our disclosure controls and procedures, as well as internal controls over financial reporting. In the finance area, we created the roles of financial controller and operations controller, and named two highly experienced individuals to those positions. Working closely with our chief financial officer, I have acted to implement more stringent financial controls and processes. We are providing enhanced education and training for our Finance colleagues, and are constantly reviewing our accounting policies and procedures with the aim of ensuring full compliance with applicable regulations and laws.

Largely as a result of these actions, throughout 2003 we identified and recorded various charges and adjustments to correct accounting related to prior periods. We reviewed these items and decided to restate previously issued financial statements based on their cumulative impact. We will continue our efforts to strengthen our financial and internal controls.

In 2003, we appointed a new senior-level chief compliance officer, reporting directly to our general counsel and indirectly to me, who is working closely with compliance professionals across the company. And we also have put in place structures and processes to help make clear to our employees their obligations and rights in the compliance area, and to enable them to report—easily and without fear of retribution—any concerns they may have.

Other senior leadership changes include the appointment of Anthony C. Hooper as president of U.S. Pharmaceuticals and a member of the Executive Committee. Tony is a seasoned leader with a proven record of success growing our key businesses and franchises. Most recently, he served as president of our medicines business in Europe, the Middle East and Africa. He will help ensure that our critically important U.S. Pharmaceuticals unit remains a central driver of our growth and leadership going forward.

We also promoted Béatrice Cazala to the position of president, Europe, the Middle East and Africa. Béatrice has extensive experience building our leading brands across Europe, and will be instrumental in taking our business in the region to the next level of achievement and success.

Building and Sustaining a Better World
At Bristol-Myers Squibb, our Pledge defines our success in terms of the values we uphold and live by in our daily work. In addition to financial and business performance, we measure our success by how well we realize our mission to extend and enhance human life, and how broadly we can interpret that mission beyond providing quality medicines and other health care products.

The Bristol-Myers Squibb Foundation supports a wide range of innovative health, research and education initiatives that exemplify our mission and extend it well beyond our business, to our obligations as engaged citizens of the world. Among those initiatives is SECURE THE FUTURE, the largest corporate commitment of its kind to address the staggering HIV/AIDS crisis in sub-Saharan Africa. We have provided grants totaling nearly $100 million to more than 160 programs in nine countries in southern and western Africa that support research, treatment, education and community outreach targeted to women and children who are directly affected by HIV/AIDS.

Now in its fifth year, SECURE THE FUTURE continues to focus on developing sustainable models for addressing the health and social consequences of the pandemic, and replicating those models in other resource-limited settings. Key to the program’s effectiveness are the close partnerships developed among the private sector, governmental and nongovernmental organizations, universities and medical institutions, among others.

A major milestone in 2003 was the opening of a pediatric HIV/AIDS center in Botswana, a southern African country with the highest HIV/AIDS infection rate in the world and where more than 60 percent of infant deaths are related to HIV. It is the first such center in sub-Saharan Africa, and based on its early success, we recently committed to build a second center on the continent in the near future.

Another project that illustrates the broad reach of our company’s mission was a remarkable event in October 2003 that helped people all across the U.S. confront their fears and questions about cancer. Called the Bristol-Myers Squibb TOUR OF HOPE, the event was a nonstop, 3,200-mile, coast-to-coast bicycle ride by 26 extraordinary and dedicated men and women. Their goal was to spread a message of hope and knowledge about fighting and ultimately defeating cancer, especially by encouraging those who are diagnosed with the disease to participate in clinical trials for new anticancer therapies.

Altogether, our charitable cash contributions to health, research and education projects in 2003 exceeded $50 million; we also donated nearly $500 million in medicines and other products to people and communities in need.

We made good progress in our environmental, health and safety efforts in 2003, including our Sustainability 2010 goals, which are among the broadest in the industry. These goals commit us to pursue a range of policies and practices that create a cleaner environment and a safer workplace, and to take a leadership role in our industry to advance these activities.

A Focused Strategy for the Future
These are hopeful times for people who are looking to better medicines to help them live healthier, longer and more rewarding lives. Therapies like ERBITUX, Abilify and Reyataz represent significant steps forward in treating terrible diseases that kill or disable millions of people every year. Our leading product Pravachol—the most extensively studied statin drug, with strong efficacy and a safety profile that has not been exceeded by any other statin—continues to be an important treatment option for patients with high cholesterol and coronary artery disease. Drug pipelines hold the promise of more effective treatments in the near and long term. And policy makers are taking positive steps to ensure that people have greater access to the best medicines, an objective we strongly support and promote.

Just as medical science and public policies must change to reflect transformations in society, businesses must continually adapt and change to meet the expectations and needs of their customers, stockholders, employees and other stakeholders. We at Bristol-Myers Squibb see opportunities and challenges ahead that require us to become a different kind of company—a more focused organization that is better able to seize the initiative in turning scientific advances into innovative pharmaceuticals and other health care products in areas of significant unmet medical need. And if we want to be a health care leader for tomorrow, we must begin that transformation process today.

To drive this change, we are implementing a new strategy for building a fundamentally different kind of company. First, as you will read in this report, we are concentrating on 10 disease areas where the need is great for better treatments and where we either already have strong positions—in cancer, HIV/AIDS, psychiatric disorders, atherosclerosis/thrombosis and diabetes—or can build future strengths based on our promising pipeline opportunities. These emerging areas include Alzheimer’s disease, hepatitis, obesity, rheumatoid arthritis and solid organ transplantation.

A second major aspect of our new strategy relates to how we do business, specifically our marketing and sales approaches. Specialists are playing an even greater role in decisions related to patient treatment and care, particularly in the disease areas where we are focusing our efforts. For this reason, we are recasting our business model to help us build even closer relationships with specialists as well as with those primary care physicians who also are involved in treating patients in our disease areas.

Other aspects of our strategy support these two priority areas. For example, biologics—large molecule compounds—will assume a more prominent place among our new therapy options. This promising and growing area requires investments in highly specialized technology and facilities. We will also continue to invest in other parts of the business—including our new product launches, in-line portfolio and pipeline—while keeping the dividend a priority. This means that spending in other areas must be held in check or even cut back.

While we are excited about our pipeline and growth opportunities, we are facing challenges that will affect our overall performance over the next few years. In the 2004-2006 period, several of our larger products will lose exclusivity in the U.S. and elsewhere. As a result, we estimate that aggregate net sales of those products will decline by as much as $1.3 billion in 2004 and by approximately an additional $1.0 billion to $1.3 billion in each of the years 2005, 2006 and 2007.

Much of this revenue loss should be more or less offset by growth of revenues of our major in-line products, such as Plavix and Avapro/Avalide, and by our newer medicines, such as ERBITUX, Abilify and Reyataz, as well as by our pipeline products. However, because many of our newer products are licensed or have high costs associated with their launch, manufacture and initial promotion, our gross margins will be pressured during this period.

Over the next few years, as our portfolio evolves, our new strategy will enable us to maximize product and pipeline opportunities while also addressing exclusivity issues. And, if our pipeline delivers as we hope, we will emerge from this process in a position of greater strength, and we will be poised to deliver sustained sales and earnings growth over an extended period—2007-2011—when our exposure to additional patent expirations will be greatly reduced.

Of course, planning for an uncertain future is never easy, and in our work there are many risks and unknowns that can profoundly affect outcomes. For example, two generic drug companies are currently challenging a key patent for Plavix that expires in 2011. However, standing still or looking back have never been options at Bristol-Myers Squibb. On the contrary, we see our job as not just building toward a better future, but creating that future with optimism and resolve.

And indeed, we have many reasons to be confident about our prospects. We have a bold and vital mission that continues to drive us to succeed, and an enduring code of ethics and values that guide our choices. We have 44,000 dedicated employees who have shown again and again that they believe our company has a vital role to play in advancing the health and well-being of people all over the world. And we have excellent products that extend and enhance human life.

We also have many thousands of stockholders who share our vision of a better world and who are essential to our success. In closing, I would like to thank our stockholders for their continuing support of our goals in this pivotal time for Bristol-Myers Squibb. Our employees also deserve our thanks and gratitude for their hard work and enduring commitment to our mission and success. And I would like to express my sincere appreciation to our Board of Directors for their ongoing support and counsel. I will continue to keep you all closely informed of our progress as we work diligently toward building a great future for our company.



Peter R. Dolan
Chairman and Chief Executive Officer
March 15, 2004