Amgen 2010 Annual Report Download

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Amgen 2010 Annual Report
and Financial Summary

Table of contents

  • Page 1
    Amgen 2010 Annual Report and Financial Summary

  • Page 2
    ... the new science's promise by bringing safe, effective medicines from lab to manufacturing plant to patient. Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease, and...

  • Page 3
    ... development of denosumab is an excellent example of Amgen at its best. After 15 years of extraordinary effort from molecule to medicine, nearly $1.5 billion of investment, millions of staff hours, and complex clinical trials with thousands of patients around the world, Amgen delivered two medicines...

  • Page 4
    ...We advanced our pipeline significantly in 2010 with 13 international approvals, 37 marketing applications filed, four new molecules in clinical trials, and eight From left, Amgen CEO Kevin Sharer, Dr. David Lacey, Dr. Scott Simonet, and Roger M. Perlmutter, M.D., Ph.D., executive vice president of...

  • Page 5
    ... Science magazine ranks Amgen number 10 on its list of top employers in the biotechnology and pharmaceutical industry. KEVIN W. SHARER Chairman and Chief Executive Officer • World Finance magazine (Europe) names Amgen as the Best Biotechnology Innovation Company of 2010. • Amgen educational...

  • Page 6
    ... this publication. Amgen's product pipeline will change over time as programs and molecules move through the drug development process, including progressing to market or failing in clinical trials, due to the nature of the development process, and Amgen disclaims any duty to update this information...

  • Page 7
    ... hyperparathyroidism in end-stage renal disease Vectibix® (panitumumab) Metastatic colorectal cancer with disease progression on or following standard chemotherapy XGEVA™ (denosumab) Prevention of skeletal-related events in patients with advanced malignancies involving bone AMGEN 2010 ANNUAL...

  • Page 8
    ... become dominant in diseases like osteoporosis and metastatic bone cancer. OPG functioned as an off-switch for osteoclasts, but how did it work? Scientists at Immunex (now Amgen) identified two proteins that interact with one another, RANK and RANK Ligand. Through a series of studies utilizing OPG...

  • Page 9
    ... information, visit www.xgeva.com. Amgen has also submitted marketing applications for XGEVAâ„¢ in the European Union, Australia, Canada, and Switzerland. In Japan, Amgen is working with its licensing partner, Daiichi-Sankyo Company, Limited, and a marketing application was submitted. AMGEN 2010...

  • Page 10
    ...to restore health or even save lives. Over the decades, Amgen therapeutics have changed the practice of medicine, helping millions of people around the world in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease, and other serious illnesses. In 2010, Amgen reached a major...

  • Page 11
    ... white blood cell count and reduce my risk of infection during my chemo treatments." Now a breast cancer survivor, Julie sang the national anthem to kick off the 2010 LIVESTRONG Challenge in San Jose, California. She's back performing again and says, "Life is good!" AMGEN 2010 ANNUAL REPORT â- 9

  • Page 12
    ... Patients and Strengthening the Communities in Which We Operate Products and Partnerships • Two Amgen therapeutics-Prolia® (denosumab) and XGEVA™ (denosumab) -w ere approved in 2010. Prolia® was approved in the United States, Europe, Canada, Australia, and Switzerland. In the United States...

  • Page 13
    ... States and internationally. In 2010, the Amgen Foundation awarded grants in Greece and Hungary to support resources that address this need. The Foundation also provided funding for numerous organizations in support of programs that advance science education as well as improve the quality of care...

  • Page 14
    ... to a change in manufacturing strategy. To exclude the impairment of a non-ENBREL-related intangible asset previously acquired in the Immunex acquisition. Forward-looking statements: This Annual Report contains forward-looking statements that are based on Amgen management's current expectations and...

  • Page 15
    ...) Identification No.) One Amgen Center Drive, 91320-1799 Thousand Oaks, California (Zip Code) (Address of principal executive offices) (805) 447-1000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each...

  • Page 16
    ... ...Manufacturing, Distribution and Raw Materials ...Business Relationships ...Government Regulation ...Research and Development and Selected Product Candidates ...Human Resources ...Executive Officers of the Registrant ...Geographic Area Financial Information ...Investor Information ...Item...

  • Page 17
    ... 4,600 work in manufacturing, approximately 4,200 work in our commercial operations and the rest are in general and administrative functions. Currently, we market primarily recombinant protein therapeutics in supportive cancer care, nephrology and inflammation. Our principal products are...

  • Page 18
    ...; and failure rates are high. Product development cycles are very long - approximately 10 to 15 years from discovery to market. A new medicine must undergo many years of preclinical and clinical testing to establish its safety and efficacy for use in humans at appropriate dosing levels and with an...

  • Page 19
    ...», NEUPOGEN» and ENBREL in supportive cancer care, nephrology and inflammation. Certain of our marketed products face, and our product candidates, if approved, are also expected to face, substantial competition, including from products marketed by large pharmaceutical corporations, which may have...

  • Page 20
    ...commitment ("PMC") is a trial or study that a sponsor company agrees to in writing, but is not required by law, to conduct. We currently have PMRs or PMCs for a number of our marketed products. In addition, we may be required to implement risk management plans for our products in the various regions...

  • Page 21
    ..., on June 16, 2010, CMS opened an NCA to examine the use of ESAs to manage anemia in patients with CKD and dialysis-related anemia, which is generally CMS's first step toward developing a National Coverage Determination ("NCD"). Generally, an NCD is a national policy statement granting, limiting or...

  • Page 22
    ... Amgen (see Business Relationships - Kirin Holdings Company, Limited), to manufacture and market Aranesp» in the United States, all European countries, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East...

  • Page 23
    ...sales. In the United States, Aranesp» competes with EPOGEN», primarily in the U.S. hospital dialysis clinic setting. The following table reflects companies and their currently marketed products that compete with Aranesp» in the United States and Europe in the supportive cancer care and nephrology...

  • Page 24
    ...were granted an exclusive license to manufacture and market Neulasta» and NEUPOGEN» in the United States, Europe, Canada, Australia and New Zealand under a licensing agreement with KA. (See Business Relationships - Kirin Holdings Company, Limited.) Neulasta» and NEUPOGEN» stimulate production of...

  • Page 25
    ...circumstances from companies marketing or developing treatments for neutropenia associated with chemotherapy, for bone marrow and PBPC transplant patients, severe chronic neutropenia and AML. Further, NEUPOGEN» competes with Neulasta» in the United States and Europe, and NEUPOGEN» sales have been...

  • Page 26
    ...following table reflects companies and their currently marketed products that compete with Neulasta» and/or NEUPOGEN» in the United States and Europe in the supportive cancer care setting. The table and the following discussion of competitor marketed products and products in development may not be...

  • Page 27
    ... other products. The following table reflects companies and their currently marketed products that primarily compete with ENBREL in the United States and Canada in the inflammatory disease setting. The table and the following discussion of competitor marketed products and products in development may...

  • Page 28
    In addition, several pharmaceutical companies announced their intent to produce biosimilars that may compete with ENBREL. Other Our other marketed products are Sensipar»/Mimpara» (cinacalcet), Vectibix» (panitumumab), Nplate» (romiplostim), Prolia» (denosumab) and XGEVATM (denosumab). Sensipar...

  • Page 29
    ... table reflects companies and their currently marketed products that compete with Sensipar» in the United States and with Mimpara» in Europe in the nephrology segment for patients with CKD on dialysis. The table and discussion below of competitor marketed products and products in development may...

  • Page 30
    ... an exclusive license by KA to manufacture and market Nplate» in the United States, all European countries, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East. In February 2009, we announced that the...

  • Page 31
    ... under commercial plans. (See Reimbursement.) Future U.S. product sales for Prolia» will depend on the willingness of primary care physicians to prescribe, the availability of reimbursement for and patient acceptance of the product. On May 25, 2010, the EC granted marketing authorization for Prolia...

  • Page 32
    ... companies and their currently marketed products that compete with Prolia». The table and the discussion of competitor marketed products and product in development may not be exhaustive. Territory Competitor Marketed Product Competitor U.S. & U.S. & U.S. & U.S. & U.S. & U.S. & U.S. & Europe Europe...

  • Page 33
    ...programs to increase public awareness of the health risks associated with the diseases these products treat, as well as providing support to various patient education and support programs in the related therapeutic areas. (See Government Regulation - FDA Regulation of Product Marketing and Promotion...

  • Page 34
    ...worldwide focus on patient access controls and cost containment by public and private insurers has resulted, and may continue to result, in reduced reimbursement rates for our products. In addition, recent healthcare reform efforts enacted in the United States have made substantial long-term changes...

  • Page 35
    ...is financed jointly by the states and federal government through taxes. Medicaid offers a broad set of benefits, including prescription drugs. Medicaid includes the Drug Rebate Program which requires manufacturers to provide rebates to the states for products covered and reimbursed by state Medicaid...

  • Page 36
    ...product's ASP is calculated and reported to CMS on a quarterly basis and therefore may change each quarter. The ASP in effect for a given quarter (the "Current Period") is based upon certain historical sales and sales incentive data covering a statutorily defined period of time preceding the Current...

  • Page 37
    ... from the MEDCAC meeting, on June 16, 2010, CMS opened a new NCA to examine the use of ESAs to manage anemia in patients with CKD and dialysis-related anemia, which is generally CMS' first step toward developing an NCD. CMS has stated that the NCA process for ESAs will conclude on or before June 16...

  • Page 38
    ... of $100,000 per item of false information. Related to our participation in the Medicaid drug rebate program is a requirement that we extend comparable discounts under the Public Health Service ("PHS") drug pricing program to a variety of community health clinics and other entities that receive...

  • Page 39
    ... to patients in Medicaid managed care plans was effective on March 23, 2010. As mentioned above, the new healthcare reform law also expanded the list of provider institutions to which we must extend discounts under the PHS 340B drug pricing program. The new healthcare reform law added certain cancer...

  • Page 40
    ... product characterization are required to transform laboratory scale processes into reproducible commercial manufacturing processes. Our manufacturing operations consist of bulk manufacturing, formulation, fill and finish and distribution activities. Bulk manufacturing includes fermentation and cell...

  • Page 41
    ...the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials. Distribution We operate distribution centers in the United States, principally in Kentucky and California, and in the Netherlands for worldwide...

  • Page 42
    ... our product sales.) Raw Materials and Medical Devices Certain raw materials necessary for the commercial and clinical bulk manufacturing of our products are provided by unaffiliated third-party suppliers, certain of which may be our only source for such materials. Also, certain medical devices and...

  • Page 43
    ... transferred to this joint venture. KA has given exclusive licenses to us to manufacture and market: (i) darbepoetin alfa in the United States, Europe, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East...

  • Page 44
    ... ENBREL, including strategic planning, the approval of an annual marketing plan, product pricing and the establishment of a brand team. The brand team, with equal representation from each party, prepares and implements the annual marketing plan, which requires a minimum level of financial and sales...

  • Page 45
    ... Food, Drug and Cosmetic Act ("FDCA") and the regulations promulgated thereunder, as well as other federal and state statutes and regulations govern, among other things, the raw materials and components used in the production, research, development, testing, manufacture, quality control, labeling...

  • Page 46
    ... that were used in previous studies, use in other patient populations or other stages of the disease or use over a longer period of time. Additional trials of this nature are sometimes required by regulatory agencies as a condition of their approval to market our products and they might also request...

  • Page 47
    ...use and, potentially, withdrawal of the product from the market. We currently have approved REMS for our ESAs, ENBREL, Prolia» and Nplate». Because REMS are relatively new, the FDA and sponsor companies continue to learn how best to implement, operate and monitor the effectiveness of REMS, and the...

  • Page 48
    ... equipment, facilities, laboratories and processes used in the manufacturing and testing of products prior to providing approval to market a product. If after receiving approval from the FDA, we make a material change in manufacturing equipment, location or process, additional regulatory review may...

  • Page 49
    ... research centers in Canada and Germany, and smaller development facilities throughout Europe and in Canada, Australia, Mexico, Hong Kong and India. (See Item 2. Properties.) To execute our clinical trial programs, we need to maintain an effective development organization and associated R&D support...

  • Page 50
    ..., product pipeline and marketed product base. These licenses and collaboration agreements generally provide for non-refundable upfront license fees, R&D and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. Various public and privately owned companies...

  • Page 51
    ... syndromes Omecamtiv mecarbil (AMG 423) Heart failure Rilotumumab (AMG 102) Various cancer types Sensipar»/Mimpara» (cinacalcet) Post Renal Transplant Vectibix» (panitumumab) Locally advanced head and neck cancer Inflammatory diseases Hypercholesterolemia Type 2 diabetes Asthma Bone-related...

  • Page 52
    ..., and survival. Denosumab is being studied across a range of conditions including osteoporosis, treatment-induced bone loss, RA and numerous tumor types across the spectrum of cancer-related bone diseases. Prolia» (denosumab) The phase 3 study evaluating Prolia» patients with male osteoporosis is...

  • Page 53
    ..., for a new indication for the prevention of bone metastases in prostate cancer. Also, we are currently conducting a study for the prevention of bone metastases in patients with breast cancer and are planning an additional SRE study in patients with multiple myeloma. Sensipar»/Mimpara» (cinacalcet...

  • Page 54
    ... as a potential treatment for psoriasis and RA. In 2010, we initiated phase 2 studies of AMG 827 as a potential treatment for Crohn's disease and asthma. We received the results from the phase 2 study in psoriasis in 2010 and plan to share these data at an upcoming medical meeting. AMG 853 AMG 853...

  • Page 55
    ... executive capacities at General Electric Company ("GE"). Mr. Sharer is a director of Chevron Corporation and Northrop Grumman Corporation. He is Chairman of the Board of the Los Angeles County Museum of Natural History. Mr. David W. Beier, age 62, became Senior Vice President, Global Government...

  • Page 56
    ..., Mr. McNamee held human resource positions at GE. Mr. Jonathan M. Peacock, age 52, became Executive Vice President and Chief Financial Officer in September 2010. Prior to joining Amgen, Mr. Peacock served as Chief Financial and Administration Officer of Novartis Pharmaceuticals AG beginning in 2005...

  • Page 57
    ...other companies, such as employment relations, general economic conditions, geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial also may impair our business, operations, liquidity and stock price materially...

  • Page 58
    ... of ESAs to manage anemia in patients with CKD and dialysis-related anemia. This NCA initiates the process of reviewing and evaluating potential changes in Medicare coverage policies for the use of ESAs in those patients and may result in the issuance of a new NCD by CMS. The 30-day public comment...

  • Page 59
    ... effect for dialysis facilities which provides a single payment for all dialysis services including drugs, supplies, and non-routine laboratory tests that were previously reimbursed separately. (See Reimbursement - Reimbursement of Our Principal Products - Dialysis Reimbursement.) Dialysis providers...

  • Page 60
    ... cancer patients. The Complete Response Letter related to the PMO indication requested several items, including further information on the design and background adverse event rates to inform the methodology of our previously submitted post-marketing surveillance program. The FDA also requested a new...

  • Page 61
    ...third-party service providers acting on our behalf fail to effectively implement and/or administer the REMS for our products, we may be required to modify such REMS, and we may be subject to FDA enforcement actions or to civil penalties. Further, if new medical data or product quality issues suggest...

  • Page 62
    ... changes, we experienced a substantial reduction in our ESA sales, in particular Aranesp» sales in the U.S. supportive cancer care setting. In October 2009, the results from TREAT, a phase 3 pivotal study of patients with CKD not on dialysis were published in the New England Journal of Medicine...

  • Page 63
    ... business and results of operations. Regulatory authorities outside the United States have also reviewed and scrutinized the use of our ESA products. In June 2008, the EMA recommended updating the product information for ESAs with a new warning for their use in cancer patients, which was approved by...

  • Page 64
    ... obtain approvals in the timeframe needed to execute our product strategies, our business and results of operations would be materially adversely affected. Additional information on our clinical trials can be found on our website at www.amgen.com. (This website address is not intended to function as...

  • Page 65
    ...innovator's data in their application to the FDA. The new law does not change the duration of patents granted on biologic products. As part of the implementation process, the FDA published several questions in the Federal Register for public comment. The FDA held a public meeting in November 2010 to...

  • Page 66
    ...new drugs currently in development, drugs currently approved for other indications that may later be approved for the same indications as those of our products and drugs approved for other indications that are used off-label. Large pharmaceutical companies and generic manufacturers of pharmaceutical...

  • Page 67
    ... ESAs for use in managing the anemia of its hemodialysis patients in the United States and Puerto Rico, based on forecasts provided by Fresenius North America and subject to the terms and conditions of the agreement. We rely on third-party suppliers for certain of our raw materials, medical devices...

  • Page 68
    ... In addition, we currently use third-party contract manufacturers to produce or assist in the production of ENBREL, Prolia», Sensipar»/Mimpara», Nplate» and XGEVATM and plan to use contract manufacturers to produce or assist in the production of a number of our late-stage product candidates. Our...

  • Page 69
    ... at our Thousand Oaks, California manufacturing facility; if significant natural disasters or production failures occur at the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials. We currently perform...

  • Page 70
    ... and EPOGEN» voluntarily recalled in 2009 and 2010 were manufactured at our Puerto Rico facility. In future inspections, our failure to adequately address the FDA's expectations could lead to further inspections of the facility or regulatory actions. (See Manufacturing difficulties, disruptions or...

  • Page 71
    ... settlements of claims for monetary damages or change the way we operate our business, which could have a material adverse effect on our results of operations, financial position or cash flows. In addition, product liability is a major risk in testing and marketing biotechnology and pharmaceutical...

  • Page 72
    ... could have a material adverse effect on our business and results of operations. Changes in credit ratings issued by nationally recognized credit rating agencies could adversely affect our cost of financing and have an adverse effect on the market price of our securities. Current economic conditions...

  • Page 73
    ... guidelines directly applicable to us and to our products. However, professional societies, health technology assessment organizations, practice management groups, insurance carriers, physicians, private health/science foundations and organizations involved in various diseases from time to time may...

  • Page 74
    .... If our partners fail to effectively deliver on their marketing and commercialization commitments to us or if we and our partners fail to coordinate our efforts effectively, sales of our products may be materially adversely affected. Our corporate compliance and risk mitigation programs cannot...

  • Page 75
    ... taxes, tax liabilities or our results of operations. For example, the Commonwealth of Puerto Rico recently enacted tax legislation effective on January 1, 2011 that, in certain circumstances, imposes a temporary excise tax for companies that purchase products from related Puerto Rico manufacturers...

  • Page 76
    ..., 2010. For additional information regarding manufacturing initiatives, see Item 1. Business - Manufacturing, Distribution and Raw Materials. Number of spaces or buildings: Manufacturing Commercial: Research and/or Development Other Functions Sales and Marketing Location United States: Thousand...

  • Page 77
    ... occur at the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials, - We rely on third-party suppliers for certain of our raw materials, medical devices and components and - Manufacturing difficulties...

  • Page 78
    ... periods indicated, the range of high and low quarterly closing sales prices of the common stock as quoted on The NASDAQ Global Select Market: Year ended December 31, 2010 High Low Fourth quarter ...Third quarter ...Second quarter ...First quarter ...Year ended December 31, 2009 ... $ 57.96 $ 52...

  • Page 79
    ... as of December 31 of each year. The historical stock price performance of the Company's common stock shown in the performance graph is not necessarily indicative of future stock price performance. Amgen vs. Amex Biotech, Amex Pharmaceutical and S&P 500 Indices Comparison of Five-Year Cumulative...

  • Page 80
    ... price, blackout periods in which we are restricted from repurchasing shares, and the impact of repurchases on our credit rating and may include private block purchases as well as market transactions. During the three months ended December 31, 2010, we had one outstanding stock repurchase program...

  • Page 81
    ...of approximately $2.2 billion. Included in cost of sales (excludes amortization of certain acquired intangible assets) for 2007 is a charge of $30 million related to the write-off of the cost of a semi-completed manufacturing asset that will not be used due to a change in manufacturing strategy. 65

  • Page 82
    ... no alternative future use. In 2010 we incurred an asset impairment charge of $118 million ($74 million, net of tax) associated with a strategic decision to optimize our network of manufacturing facilities. In 2009, we recorded loss accruals for settlements of certain legal proceedings aggregating...

  • Page 83
    ...interest expense of $266 million ($168 million, net of tax), $250 million ($155 million, net of tax), $235 million ($144 million, net of tax), $168 million ($88 million, net of tax) and $197 million ($141 million, net of tax), respectively, related to the adoption of the new accounting standard. 67

  • Page 84
    ...cancer care, nephrology and inflammation. Our principal products include Aranesp», EPOGEN», Neulasta», NEUPOGEN» and ENBREL, all of which are sold in the United States. ENBREL is marketed under a collaboration agreement with Pfizer in the United States and Canada. Our international product sales...

  • Page 85
    ... for ESAs to manage anemia in patients with CKD and/or dialysis-related anemia. In addition, the FDA-approved REMS for ESAs may continue to impact Aranesp» sales in the supportive cancer care setting. Future product label changes (including those we proposed prior to the 2010 CRDAC meeting...

  • Page 86
    ... diluted EPS resulting from our stock repurchase program, including approximately 67 million shares repurchased in 2010 at a total cost of $3.8 billion. Although changes in foreign currency rates result in increases or decreases in our reported international product sales, the benefit or detriment...

  • Page 87
    ...to risk management activities, such as a REMS, undertaken by us or required by the FDA or other regulatory authorities; • product label changes; • patient population growth; • segment growth and penetration; • new product launches and indications; • expansion into new international markets...

  • Page 88
    ... wholesaler and end-user stocking, contract-driven buying and patients purchasing products later in the year after satisfying their annual insurance deductibles). Such factors can result in higher demand for our products and/or higher wholesaler inventory levels and, therefore, higher product sales...

  • Page 89
    ... CMS in June 2010 and the associated MEDCAC meetings; and • development of new protocols, tests and/or treatments for cancer and/or new chemotherapy treatments or alternatives to chemotherapy that may have reduced and may continue to reduce the use of chemotherapy in some patients. Certain of the...

  • Page 90
    ... sales will depend, in part, on the development of new protocols, tests and/or treatments for cancer and/or new chemotherapy treatments or alternatives to chemotherapy that may have reduced and may continue to reduce the use of chemotherapy in some patients. See Item 1. Business - Marketed Products...

  • Page 91
    ... facility in Puerto Rico. Research and development R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information...

  • Page 92
    ... with the ENBREL profit share of $32 million, expense recoveries associated with our Glaxo collaboration agreement for Prolia» in PMO in Europe, Australia, New Zealand and Mexico of $29 million, lower staff-related costs of $28 million, lower global enterprise resource planning ("ERP") system...

  • Page 93
    ... a newly issued accounting standard which addresses the accounting for the annual fee due from the pharmaceutical manufacturing industry beginning January 1, 2011, mandated by the PPACA and the companion Health Care and Education Reconciliation Act, which made certain changes and adjustments to...

  • Page 94
    ...safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits debt security investments to certain types of debt and money market instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and...

  • Page 95
    ...notes. See Note 15, Financing arrangements to the Consolidated Financial Statements for further discussion of our Convertible Notes. To achieve a desired mix of fixed and floating interest rate debt, we enter into interest rate swap agreements that effectively convert a fixed rate interest coupon to...

  • Page 96
    ... expansions in Puerto Rico and other site developments. Capital expenditures in 2008 were associated primarily with manufacturing capacity expansions in Puerto Rico, Fremont and other site developments and with investment in our global ERP system and other information systems' projects. We currently...

  • Page 97
    ... future payment. Additionally, the expected timing of payment of the obligations presented below is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts...

  • Page 98
    ... party manufacturers, which are based on firm commitments for the purchase of production capacity; (ii) R&D commitments (including those related to clinical trials) for new and existing products; (iii) capital expenditures; and (iv) open purchase orders for the acquisition of goods and services in...

  • Page 99
    ... to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product-specific and...

  • Page 100
    ... million by this legislation. Product returns Returns are estimated through comparison of historical return data to their related sales on a production lot basis. Historical rates of return are determined for each product and are adjusted for known or expected changes in the marketplace specific to...

  • Page 101
    ...capital and credit markets, strong demand for fixed income led to historically low interest rates on corporate debt issuances during 2010. Short-term interest rates on U.S. Treasury instruments continued to decline as a result of the Federal Reserve's monetary policy, which included a program to buy...

  • Page 102
    ...Interest rate sensitive financial instruments Our investment portfolio of available-for-sale debt securities at December 31, 2010 and 2009 was comprised of: U.S. Treasury securities and other government obligations; corporate debt securities; mortgage and asset backed securities; money market mutual...

  • Page 103
    ... in Amgen's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to Amgen's management, including its Chief Executive Officer and Chief Financial Officer, as...

  • Page 104
    the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2010. Management determined that, as of December 31, 2010, there were no changes in our internal control over financial reporting that occurred during the ...

  • Page 105
    ... may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Amgen Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO...

  • Page 106
    ... Not applicable. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT Information about our Directors is incorporated by reference from the section entitled "ITEM 1 - ELECTION OF DIRECTORS" in our Proxy Statement for the 2011 Annual Meeting of Stockholders to be...

  • Page 107
    ... OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Securities Authorized for Issuance Under Existing Equity Compensation Plans The following table sets forth certain information as of December 31, 2010 concerning our common stock that may be issued under any form of award granted under all...

  • Page 108
    ... Certain Beneficial Owners Information about security ownership of certain beneficial owners and management is incorporated by reference from the sections entitled "SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS and SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" in our Proxy Statement. 92

  • Page 109
    ... "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "CORPORATE GOVERNANCE - Board Independence" in our Proxy Statement. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information about the fees for professional services rendered by our independent registered public accountants is incorporated by...

  • Page 110
    ... Annual Report: Page number II. Valuation Accounts ... F-52 All other schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or notes thereto. (a)3. Exhibits Exhibit No. Description 3.1 Restated...

  • Page 111
    ... which are dated December 15, 2008, replaces the current trustee under the agreements listed as Exhibits 4.9 and 4.16, respectively, with Bank of New York Mellon. Amgen Inc. hereby agrees to furnish copies of these agreements to the Securities and Exchange Commission upon request. First Supplemental...

  • Page 112
    ... by reference.) Form of Restricted Stock Unit Agreement for the Amgen Inc. 2009 Equity Incentive Plan. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2010 on May 7, 2010 and incorporated herein by reference.) Amgen Inc. 2009 Performance Award Program. (As Amended and Restated on...

  • Page 113
    ... First Amendment to the Amgen Inc. Executive Nonqualified Retirement Plan. (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2010 on August 9, 2010 and incorporated herein by reference.) Amgen Nonqualified Deferred Compensation Plan. (As Amended and Restated effective January 1, 2009...

  • Page 114
    ... Amended and Restated Promotion Agreement, dated as of December 16, 2001, by and among Immunex Corporation, American Home Products Corporation and Amgen Inc. (with certain confidential information deleted therefrom). (Filed as an exhibit to Amendment No. 1 to Form S-4 Registration Statement on March...

  • Page 115
    ... herein by reference.) Multi-product License Agreement with Respect to Japan between Amgen Inc. and Takeda Pharmaceutical Company Limited dated February 1, 2008 (with certain confidential information deleted therefrom). (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2008...

  • Page 116
    ... Amgen Inc. and International Business Machines Corporation (with certain confidential information deleted therefrom). (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2010 on November 8, 2010 and incorporated herein by reference.) Integrated Facilities Management Services...

  • Page 117
    ... No. Description 101.PRE** 101.DEF** XBRL Taxonomy Extension Presentation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase. (* = filed herewith) (** = furnished herewith and not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended) (+ = management...

  • Page 118
    ... Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. AMGEN INC. (Registrant) Date: 02/25/2011 By: /s/ JONATHAN M. PEACOCK Jonathan M. Peacock Executive Vice President and Chief Financial Officer...

  • Page 119
    ... KEVIN W. SHARER Kevin W. Sharer Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer) Vice President Finance and Chief Accounting Officer (Principal Accounting Officer) Director...

  • Page 120
    Signature Title Date /s/ JUDITH C. PELHAM Judith C. Pelham Director 02/25/2011 /s/ J. PAUL REASON J. Paul Reason Director 02/25/2011 /s/ LEONARD D. SCHAEFFER Leonard D. Schaeffer Director 02/25/2011 /s/ RONALD D. SUGAR Ronald D. Sugar Director 02/25/2011 104

  • Page 121
    ...1993 Stock Option Plan), the Amgen Inc. Amended and Restated 1999 Equity Incentive Plan (formerly known as the Immunex Corporation 1999 Stock Option Plan); • Registration Statements (Form S-3 No. 333-107639 and Amendment 1 thereto) relating to debt securities, common stock and associated preferred...

  • Page 122
    ... the consolidated financial statements and schedule of Amgen Inc. and the effectiveness of internal control over financial reporting of Amgen Inc. included in this Annual Report (Form 10-K) of Amgen Inc. for the year ended December 31, 2010. /s/ Ernst & Young LLP Los Angeles, California February 25...

  • Page 123
    ..., presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Amgen Inc.'s internal control over financial reporting as of December 31, 2010, based on criteria...

  • Page 124
    ..., except per share data) 2010 2009 2008 Revenues: Product sales ...Other revenues ...Total revenues ...Operating expenses: Cost of sales (excludes amortization of certain acquired intangible assets presented below) ...Research and development ...Selling, general and administrative ...Amortization...

  • Page 125
    AMGEN INC. CONSOLIDATED BALANCE SHEETS December 31, 2010 and 2009 (In millions, except per share data) 2010 2009 ASSETS Current assets: Cash and cash equivalents ...Marketable securities ...Trade receivables, net ...Inventories ...Other current assets ...Total current assets ...Property, plant and ...

  • Page 126
    ... income, net of tax...Comprehensive income ...Issuance of common stock in connection with the Company's equity award programs ...Stock-based compensation ...Tax impact related to employee stock options ...Repurchases of common stock...Other ...Balance at December 31, 2010 ... 1,087 - - $25,890...

  • Page 127
    AMGEN INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2010, 2009 and 2008 (In millions) 2010 2009 2008 Cash flows from operating activities: Net income ...Depreciation and amortization ...Stock-based compensation expense ...Deferred income taxes ...Property, plant and equipment ...

  • Page 128
    ... FINANCIAL STATEMENTS December 31, 2010 1. Summary of significant accounting policies Business Amgen Inc. (including its subsidiaries, referred to as "Amgen," "the Company," "we," "our" or "us") is a global biotechnology medicines company that discovers, develops, manufactures and markets medicines...

  • Page 129
    .... Research and development costs R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems' costs...

  • Page 130
    ...-for-sale securities and Note 17, Fair value measurement. Inventories Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner which approximates the first-in, first-out method. The Company capitalizes...

  • Page 131
    ... use, were immediately expensed as required by accounting principles then in effect. Goodwill principally relates to our 2002 acquisition of Immunex Corporation ("Immunex"). We perform an impairment test annually and whenever events or changes in circumstances indicate that the carrying amount of...

  • Page 132
    ... which addresses the accounting for the annual fee due from the pharmaceutical manufacturing industry beginning January 1, 2011, mandated by the Patient Protection and Affordable Care Act (the "PPACA") and the companion Health Care and Education Reconciliation Act, which made certain changes and...

  • Page 133
    ..., net of tax ...$ 233 Employee stock option and restricted stock unit grants Eligible employees generally receive a grant of stock options and/or restricted stock units annually with the size and type of award generally determined by the employee's salary grade and performance level. In addition...

  • Page 134
    ... unrecognized compensation costs related to nonvested stock option and restricted stock unit awards, which is expected to be recognized over a weightedaverage period of 1.7 years. Performance award program Certain management-level employees also receive annual grants of performance units, which give...

  • Page 135
    ... defined in the plan, including upon death, disability, a change in control, or retirement of employees who meet certain service and/or age requirements. The performance units granted in 2010, 2009 and 2008 include stockholder return performance goals, which are considered market conditions and are...

  • Page 136
    ... and 2009 are as follows (in millions): 2010 2009 Deferred tax assets: Intercompany inventory related items ...Expense accruals...Acquired net operating loss and credit carryforwards ...Expenses capitalized for tax ...Stock-based compensation ...Deferred revenue...Other ... ...$ ... 306 626 147 188...

  • Page 137
    ... all of the UTBs as of December 31, 2010, if recognized, would affect our effective tax rate. During the year ended December 31, 2010, we settled our examination with the Internal Revenue Service ("IRS") related to certain transfer pricing tax positions for the years ended December 31, 2007...

  • Page 138
    ... tax rates in effect. For the years ended December 31, 2010, 2009 and 2008, our total foreign income before income taxes was approximately $3.1 billion, $3.1 billion and $2.6 billion, respectively. These earnings include income from manufacturing operations in Puerto Rico under tax incentive grants...

  • Page 139
    ... for overseeing the marketing and sales of ENBREL, including strategic planning, the approval of an annual marketing plan and product pricing. Amgen and Pfizer share in the agreed upon selling and marketing expenses approved by the joint management committee. We currently pay Pfizer a percentage of...

  • Page 140
    ... to develop and commercialize for the Japanese market up to 12 clinical stage molecules from our pipeline across a range of therapeutic areas, including oncology and inflammation, (collectively the "products"). The products include Vectibix» which received regulatory approval in Japan in 2010 for...

  • Page 141
    ...these products in Japan and will pay us royalties on future sales of these products in Japan. Amgen has the right to participate in the promotion of the products in Japan. In February 2008, we also entered into a collaboration agreement with Takeda for the worldwide development and commercialization...

  • Page 142
    ... in December 2009, which granted us exclusive worldwide rights to Array's small-molecule glucokinase activator program, including ARRY-403 (AMG 151), which at the time of the agreement was and currently is being tested in a phase 1 clinical trial in patients with Type 2 diabetes. In connection with...

  • Page 143
    ... our marketed ESA products Aranesp» and EPOGEN», and the resulting impact on our operations. Key components of our restructuring plan initially included: (i) worldwide staff reductions, (ii) rationalization of our worldwide network of manufacturing facilities and, to a lesser degree, changes to...

  • Page 144
    ... value U.S. Treasury securities ...Other government related debt securities: Obligations of U.S. government agencies and FDIC guaranteed bank debt ...Foreign and other...Corporate debt securities: Financial ...Industrial ...Other ...Mortgage and asset backed securities ...Money market mutual funds...

  • Page 145
    ... and acceptable levels of risk. Our investment policy limits debt security investments to certain types of debt and money market instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. We review our...

  • Page 146
    ... the product in certain geographic markets. During 2008, we wrote-off $84 million of inventory resulting from a strategic decision to change manufacturing processes. This charge is included in "Cost of sales (excludes amortization of certain acquired intangible assets)" in our Consolidated Statement...

  • Page 147
    ... in 2011, 2012, 2013, 2014 and 2015, respectively. 14. Accrued liabilities Accrued liabilities consisted of the following as of December 31, 2010 and 2009 (in millions): 2010 2009 Sales deductions ...Employee compensation and benefits ...Clinical development costs ...Sales returns reserve ...Other...

  • Page 148
    ... and $6 million for debt issued in 2010, 2009 and 2008, respectively, and are being amortized over the respective lives of the notes and the related charge is included in "Interest expense, net" in the Consolidated Statements of Income. All of these debt securities as well as the 2017 Notes and...

  • Page 149
    ... or enter into certain other transactions with respect to our common stock. The 2013 Convertible Notes may only be converted: (i) during any calendar quarter if the closing price of our common stock exceeds 130% of the conversion price per share during a defined period at the end of the previous...

  • Page 150
    ... life of the respective note. These interest rate swap agreements qualify and are designated as fair value hedges. The effective interest rates on these notes as of December 31, 2010 and 2009 after giving effect to the related interest rate swap agreements and the notional amounts of these interest...

  • Page 151
    ... for general corporate purposes or as a liquidity backstop to our commercial paper program. Annual commitment fees for this facility are 0.05% based on our current credit rating. As of December 31, 2010, no amounts were outstanding under this facility. We have filed a shelf registration statement...

  • Page 152
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Interest costs Interest costs are expensed as incurred, except to the extent such interest is related to construction in progress, in which case interest is capitalized. Interest expense, net for the years ended December 31, 2010, ...

  • Page 153
    ... 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 the asset or liability and are developed based on the best information available in the...

  • Page 154
    ... prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Fair value measurement at December 31, 2010 using: Total Assets: Available-for-sale investments: U.S. Treasury securities ...Other government related...

  • Page 155
    ... less. Our other government related debt securities portfolio is comprised of securities with a weighted average credit rating of "AAA" or equivalent by Standard and Poor's ("S&P"), Moody's Investors Services, Inc. ("Moody's") or Fitch, Inc. ("Fitch"), and our corporate debt securities portfolio has...

  • Page 156
    ... both income and market based approaches, for which all significant inputs are observable, either directly or indirectly. These inputs include reported trades and broker/dealer quotes of the same or similar securities, credit spreads, benchmark yields and other observable inputs (Level 2). The F-34

  • Page 157
    ... fair value through current earnings. Cash flow hedges We are exposed to possible changes in values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates, associated primarily with our international product sales denominated in Euros. Increases...

  • Page 158
    ... and 2009 (in millions): Derivatives in cash flow hedging relationships Statements of Income location 2010 2009 Foreign currency contracts ...Forward interest rate contracts...Total ... Product sales Interest expense, net $47 (1) $46 $(7) (1) $(8) No portions of our cash flow hedge contracts are...

  • Page 159
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) $116 million in the same line item, "Interest expense, net" in the Consolidated Statement of Income, as the offsetting unrealized loss of $116 million on the related interest rate swap agreements. Derivatives not designated as hedges We enter...

  • Page 160
    ... of December 31, 2010 contain certain credit risk related contingent provisions that are triggered if (i) we were to undergo a change in control and (ii) our or the surviving entity's creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment...

  • Page 161
    ... which seek approval to market generic versions of Sensipar» (cinacalcet hydrochloride). Amgen's filing of the lawsuit stays any U.S. Food and Drug Administration ("FDA") approval of the Teva or Barr ANDA until September 2011. Trial in this action commenced on November 30, 2010 on Teva's and Barr...

  • Page 162
    .... Average Wholesale Price ("AWP") Litigation Amgen and its wholly-owned subsidiary Immunex Inc. are named as defendants, either separately or together, in numerous civil actions broadly alleging that they, together with many other pharmaceutical manufacturers, reported prices for certain products in...

  • Page 163
    ... that the manufacturers misrepresented product pricing information reported to the state by falsely inflating those prices. Federal Securities Litigation - In re Amgen Inc. Securities Litigation The six federal class action stockholder complaints filed against Amgen Inc., Kevin W. Sharer, Richard...

  • Page 164
    ... May 21, 2007 (Rosenfield v. Amgen Inc., et al.) and June 18, 2007 (Public Employees' Retirement Association of Colorado v. Amgen Inc., et al.) were consolidated by the California Central District Court into one action captioned In re Amgen Inc. Securities Litigation. The consolidated complaint was...

  • Page 165
    ... any securities fraud occurred. Birch v. Sharer, et al. On January 23, 2009, a stockholder derivative lawsuit titled Birch v. Sharer, et al. was filed in the Superior Court of the State of California, Los Angeles County (the "Los Angeles Superior Court") naming Amgen Inc., Kevin W. Sharer, David...

  • Page 166
    ...Plaintiffs claim that Amgen and the individual defendants breached their fiduciary duties by failing to inform current and former employees who participated in the Amgen Retirement and Savings Plan and the Retirement and Savings Plan for Amgen Manufacturing Limited of the alleged off-label promotion...

  • Page 167
    ... that Amgen promoted EPOGEN» and Aranesp» for: treating cancer patients who are not on chemotherapy; treating quality of life symptoms associated with anemia, such as fatigue; and reaching hemoglobin targets above the FDAapproved level. Each plaintiff asserts claims under California's consumer...

  • Page 168
    ... public on or about May 7, 2009. The filing states that the relator in the Massachusetts Qui Tam Action is a former Amgen employee. Further, the filing represents that, in addition to the Massachusetts Qui Tam Action, there are currently nine other actions under the False Claim Act ("Qui Tam Actions...

  • Page 169
    ... from the Attorney General of the State of New York seeking documents related to Amgen's promotional activities, sales and marketing activities, medical education, clinical studies, pricing and contracting, license and distribution agreements and corporate communications. Amgen continues to fully...

  • Page 170
    ...a subpoena from the New Jersey Attorney General's Office for production of documents relating to one of its products. Amgen has completed its response per the terms of the subpoena. Commitments We lease certain administrative, R&D, sales and marketing and manufacturing facilities and equipment under...

  • Page 171
    ...) attributable to the United States and to all international countries collectively is stated below. Information regarding long-lived assets for Puerto Rico is also stated below. The geographic classification of product sales was based upon the location of the customer. The geographic classification...

  • Page 172
    ... December 31, 2010 2009 Long-lived assets: United States ...Puerto Rico ...International countries ...Total long-lived assets ...Major customers ... $ 3,248 $ 3,525 2,079 1,920 195 293 $ 5,522 $ 5,738 In the United States, we sell primarily to wholesale distributors of pharmaceutical products. We...

  • Page 173
    ... acquisition, which is subject to customary closing conditions, is expected to close during the three months ended March 31, 2011. 22. Quarterly financial data (unaudited) (In millions, except per share data) December 31(1) 2010 Quarters ended September 30(2) June 30 March 31 Product sales...Gross...

  • Page 174
    SCHEDULE II AMGEN INC. VALUATION ACCOUNTS Years ended December 31, 2010, 2009 and 2008 (In millions) Balance at beginning of period Additions charged to costs and expenses Other additions Balance at end of period Allowance for doubtful accounts Deductions Year ended December 31, 2010 ...Year ...

  • Page 175
    ... General Counsel and Secretary Kevin W. Sharer Chairman of the Board and Chief Executive Officer Martin VanTrieste Senior Vice President, Quality Stockholder Information Amgen Inc. Corporate Office One Amgen Center Drive Thousand Oaks, California 91320-1799 (805) 447-1000 Amgen 2010 Annual Report...

  • Page 176
    Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 www.amgen.com ©2011 Amgen Inc. All rights reserved. MC45347-B