Amgen 2007 Annual Report Download - page 146

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Related party transactions
We own a 50% interest in KA, a corporation formed in 1984 with Kirin Holdings Company, Limited
(“Kirin”) (formerly named Kirin Brewery Company, Limited) for the development and commercialization of cer-
tain products based on advanced biotechnology. We account for our interest in KA under the equity method and
include our share of KA’s profits or losses in “Selling, general and administrative” in the Consolidated State-
ments of Income. For the years ended December 31, 2007, 2006 and 2005, our share of KA’s profits were $51
million, $61 million and $58 million, respectively. At December 31, 2007 and 2006, the carrying value of our
equity method investment in KA was $292 million and $241 million, respectively, and is included in non-current
“Other assets” in the Consolidated Balance Sheets. KA’s revenues consist of royalty income related to its li-
censed product rights. All of our rights to manufacture and market certain products including darbepoetin alfa,
pegfilgrastim, granulocyte colony-stimulating factor (“G-CSF”) and recombinant human erythropoietin are pur-
suant to exclusive licenses from KA. We currently market certain of these products under the brand names
Aranesp®, Neulasta®, NEUPOGEN®and EPOGEN®, respectively. KA receives royalty income from us, as well
as Kirin, J&J and F. Hoffman-La Roche Ltd. (“Roche”) under separate product license agreements for certain
geographic areas outside of the United States. During the years ended December 31, 2007, 2006 and 2005, KA
earned royalties from us of $336 million, $324 million and $288 million, respectively. These amounts are in-
cluded in “Cost of sales (excludes amortization of acquired intangible assets)” in the Consolidated Statements of
Income. At December 31, 2007 and 2006, we owed KA $91 million and $78 million, respectively, which were
included in “Accrued liabilities” in the Consolidated Balance Sheets.
KA’s expenses primarily consist of costs related to R&D activities conducted on its behalf by Amgen and
Kirin. KA pays Amgen and Kirin for such services at negotiated rates. During the years ended December 31,
2007, 2006 and 2005, we earned revenues from KA of $180 million, $131 million and $113 million, respectively,
for certain R&D activities performed on KA’s behalf. These amounts are included in “Other revenues” in the
Consolidated Statements of Income. In addition, included in “Other revenues” in the Consolidated Statements of
Income for the year ended December 31, 2007 is $45 million received from KA with respect to achieving certain
regulatory filing milestones.
5. Income taxes
The provision for income taxes includes the following (in millions):
Years ended December 31,
2007 2006 2005
Current provision:
Federal ................................................. $467 $1,392 $1,079
State ................................................... 40 73 82
Foreign ................................................ 176 138 128
Total current provision ................................ 683 1,603 1,289
Deferred provision (benefit):
Federal ................................................. 135 (481) (90)
State ................................................... (24) (49) (7)
Foreign ................................................ 1 (3) 2
Total deferred provision (benefit) ........................ 112 (533) (95)
Total provision ...................................... $795 $1,070 $1,194
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