Amgen 2011 Annual Report Download

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Amgen 2011 Annual Report
and Financial Summary

Table of contents

  • Page 1
    Amgen 2011 Annual Report and Financial Summary

  • Page 2
    ... improve people's lives. Amgen Values Be science-based Compete intensely and win Create value for patients, staff, and stockholders Be ethical Trust and respect each other Ensure quality Work in teams Collaborate, communicate, and be accountable Products Aranesp® (darbepoetin alfa) Enbrel...

  • Page 3
    ...ovarian cancer, pancreatic cancer, psoriasis, asthma, cardiovascular disease, in R&D and participate in a wide range of therapeutic areas • Reliably manufacture products with the highest quality and lowest cost • Expand our operating footprint into emerging markets and Japan • Manage our cost...

  • Page 4
    ...commercial, manufacturing, and clinical development operations there. Amgen also took important steps to capitalize on Strategic Plans for Higher Growth Our growth strategy includes more emphasis on adding innovative medicines through business development initiatives. In 2011, Amgen acquired BioVex...

  • Page 5
    ... and Med Ad News. • Fortune once again lists Amgen as one of the most-admired drug companies. • Amgen ranks fifth among large biotech and pharmaceutical companies and 16th overall in The Scientist 's list of Best Places to Work in Industry. Kevin W. Sharer Chairman and Chief Executive Officer...

  • Page 6
    ...-art manufacturing plant in Dun Laoghaire, Ireland. The facility has space for future expansion to meet a growing worldwide demand for our therapeutics. Globalization of Clinical Research Clinical research is important to Amgen. Nearly 70 percent of patients enrolled in our clinical trials are now...

  • Page 7
    ... as part of 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...

  • Page 8
    6 Amgen 2011 Annual Report The Next Wave: A Look Inside Amgen's New Drug Pipeline Amgen's pursuit of pioneering science has always been driven by the goal of providing truly novel therapies for patients with serious illnesses. We believe that a deep understanding of human biology is the key to ...

  • Page 9
    ...'s target. Upcoming Pipeline Milestones In 2012, Amgen expects to deliver important results for several potential new therapies in our pipeline. The anticipated milestones include: • Announcement of data from phase 2 studies of AMG 145 in patients with high levels of LDL cholesterol. • Detailed...

  • Page 10
    ... for chemotherapy-related infections every year. Amgen hopes to help lower that toll through a partnership with the CDC Foundation, a nonprofit organization that connects the Centers for Disease Control and Prevention with the private sector to build public health programs. In 2011, Amgen provided...

  • Page 11
    ... the prevention of skeletal-related events from bone metastases. "I'm so grateful for all the support from my family and my medical team." Bill - Neulasta® (pegfilgrastim) As general sales manager of a Los Angeles radio station, Bill set the ambitious goal of staying on the job while he battled...

  • Page 12
    ... care, advance pioneering science education programs, and assist organizations providing vital community services. • To help meet basic needs and bring vital health Inspiring the Next Generation of Scientists • The Amgen Foundation provided a three-year, $1.5 million grant for the National Board...

  • Page 13
    ... plan to publish our second annual environmental sustainability report in alignment with Global Reporting Initiative (GRI) guidelines, the generally accepted industry-reporting standard.To learn more, visit http://environment.amgen.com. A wastewater plant at Amgen Manufacturing Limited, Puerto Rico...

  • Page 14
    ... associated with the Fremont manufacturing facility transaction Other merger-related expenses (g) Amortization of acquired intangible assets, research and development (R&D) technology rights (h) Tax benefit resulting from prior-period charges Tax settlement (j) California tax law change (k) Write...

  • Page 15
    ... Center Drive, Thousand Oaks, California (Address of principal executive offices) 95-3540776 (I.R.S. Employer Identification No.) 91320-1799 (Zip Code) (805) 447-1000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class...

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

  • Page 17
    ..., fill and finish and distribution activities for all of our principal products as well as most of our product candidates. We operate a number of commercial and/or clinical manufacturing facilities, and our primary facilities are located in the United States, Puerto Rico and the Netherlands. (See...

  • Page 18
    ... rates are high. Product development cycles are very long - approximately 10 to 15 years from discovery to market. A potential 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
    ... settlement charge) in connection with an agreement in principle to settle allegations relating to our sales and marketing practices. Marketed Products We market our principal products, Neulasta®, NEUPOGEN®, ENBREL, Aranesp® and EPOGEN®, in supportive cancer care, inflammation and nephrology...

  • Page 20
    ..., or in a reduction of price that we receive from selling our products. In addition, the development of new treatment options or standards of care may reduce the use of our products or may limit the utility and application of ongoing clinical trials for our product candidates. In addition to the...

  • Page 21
    ...® (Filgrastim) We 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 Kirin-Amgen, Inc. (K-A), a joint venture between Kirin Holdings Company, Limited (Kirin) and Amgen...

  • Page 22
    ... • Intas/Apotex Inc. (Neukine) • Reliance Life Sciences Pvt. Ltd. (Religrast) • Biocon Ltd./Celgene Corporation (Celgene) (Nufil) In addition, the following companies have long-acting filgrastim product candidates in phase 3 clinical development: • Teva Pharmaceutical (Neugranin™ and XM-22...

  • Page 23
    ... (Pfizer) in the United States and Canada, which expires in the fourth quarter of 2013. (See Business Relationships - Pfizer Inc.) The rights to market and sell ENBREL outside the United States and Canada are reserved to Pfizer. ENBREL sales for the years ended December 31, 2011, 2010 and 2009, were...

  • Page 24
    ... (J&J) formerly known as Centocor Ortho Biotech Products, L.P. In December 2011, the FDA accepted a new drug application (NDA) from Pfizer for approval of tofacitinib in RA. In addition, several competitors have product candidates in phase 3 clinical development that may compete with ENBREL in the...

  • Page 25
    ... services in the United States and Puerto Rico. Effective January 1, 2012, we also entered into a three-year non-exclusive supply agreement to supply EPOGEN® to Fresenius Medical Care North America, a subsidiary of Fresenius Medical Care AG & Co. KGaA (Fresenius Medical Care), following the 2011...

  • Page 26
    ... organization medical guidelines and/or reimbursement practices related to Aranesp® or EPOGEN®. Aranesp® (darbepoetin alfa) We were granted an exclusive license by K-A to manufacture and market Aranesp® in the United States, all European countries, Canada, Australia, New Zealand, Mexico...

  • Page 27
    ... profile for use in the treatment of dialysis patients with anemia due to CKD. The FDA has targeted a Prescription Drug User Fee Act (PDUFA) action date of March 27, 2012. EPOGEN® (epoetin alfa) We were granted an exclusive license to manufacture and market EPOGEN® in the United States under...

  • Page 28
    ... oral drugs and have a material adverse impact on Sensipar® sales. (See Reimbursement.) The phase 3 EValuation Of Cinacalcet HCl Therapy to Lower CardioVascular Events (E.V.O.L.V.E™) trial, initiated in 2006, is a large (3,800 patient), multi-center, international, randomized, double-blind study...

  • Page 29
    ... received in December 2007 and is reviewed annually by the Committee for Medicinal Products for Human Use (CHMP). Each year thereafter, the EU conditional marketing authorization was renewed with an additional specific obligation to conduct a clinical trial in the approved monotherapy indication. In...

  • Page 30
    ... sustaining platelet counts. We were granted an exclusive license by K-A 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...

  • Page 31
    ... treatment of bone loss associated with hormone ablation in men with prostate cancer at increased risk of fractures. Since the first reimbursement authority was received in Germany in July 2010, reimbursement authority approval has been granted in most EU countries. Worldwide Prolia® sales for the...

  • Page 32
    ... the most common adverse event reported in the XGEVA® arm of the trial. On June 27, 2011, we announced the submission of an sBLA to the FDA to expand the indication to treat men with castration-resistant prostate cancer to reduce the risk of developing bone metastases. On February 8, 2012, the FDA...

  • Page 33
    ... vary by country. Marketing and Distribution We maintain sales and marketing forces primarily in the United States, Europe and Canada to support our currently marketed products. We have also entered into agreements with third parties to assist in the commercialization and marketing of certain of...

  • Page 34
    ... we promote programs to increase public awareness of the health risks associated with the diseases these products treat, as well as provide support to various patient education and support programs in the related therapeutic areas. (See Government Regulation - FDA Regulation of Product Marketing and...

  • Page 35
    ...and policies, as well as issue reimbursement codes for drugs, all of which can determine how medical items and services are covered and reimbursed by Medicare. CMS can also issue Medicare NCDs which are national policy statements granting, limiting or excluding Medicare coverage for specific medical...

  • Page 36
    ... companies are "self-insured" (i.e., they pay for all healthcare costs incurred by employees directly through a plan administered by a third party). Generally, employer-sponsored insurance premiums are paid primarily by employers and secondarily by employees. Individual market. The individual market...

  • Page 37
    .... 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 health services grants from the PHS, as well as...

  • Page 38
    ... managed care plans was effective on March 23, 2010. As mentioned above, the U.S. healthcare reform law also expanded the list of provider institutions to which we must extend discounts under the PHS 340B drug pricing program. The U.S. healthcare reform law added certain cancer centers, children...

  • Page 39
    ... across Europe as well as in several emerging markets throughout the world. In addition to determining whether or not a new product will be reimbursed, these agencies are becoming increasingly involved in setting the maximum price at which the product will be reimbursed - the "value-based" price for...

  • Page 40
    ...supply of our products and limit our product sales and - We rely on third-party suppliers for certain of our raw materials, medical devices and components.) Commercial Bulk Manufacturing We operate commercial bulk manufacturing facilities in Puerto Rico and in several locations throughout the United...

  • Page 41
    ... 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. Distribution We operate...

  • Page 42
    ..., the Public Health Service Act, the Federal 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...

  • Page 43
    ... and sell any of our product candidates or existing products for new indications.) Applications. The results of preclinical and clinical trials are submitted to the FDA in the form of a BLA for biologic products subject to the Public Health Service Act or an NDA for drugs subject to the approval...

  • Page 44
    ... changes to products at any point in a product's lifecycle based on new safety information or as part of an evolving label change to a particular class of products. The FDA also uses various advisory committees of external experts to assist in its mission to protect and promote the public health, to...

  • Page 45
    ... products derived from biotechnology, a company submits a single marketing authorization application to the European Medicines Agency (EMA) who conducts a thorough evaluation, drawing from its scientific resources across Europe. If the drug product is proven to fulfill the requirements for quality...

  • Page 46
    ..., inflammation, bone health, nephrology, cardiovascular and general medicine, which includes neuroscience. We take a modality-independent approach to R&D - that is, we identify targets, and then choose the modality best suited to address a specific target. As such, our discovery research programs...

  • Page 47
    ... centers in several locations throughout the United States and in the United Kingdom, as well as smaller research centers and development facilities globally. (See Item 2. Properties.) We conduct clinical trial activities using both our internal staff and third-party contract clinical trial service...

  • Page 48
    ...Inflammation General Medicine General Medicine Inflammation Hematology/Oncology Inflammation Hematology/Oncology General Medicine Hematology/Oncology Phase 1 clinical trials investigate safety and proper dose ranges of a product candidate in a small number of human subjects. Phase 2 clinical trials...

  • Page 49
    ... is a fully human monoclonal antibody antagonist of IGF-1 receptor. It is being investigated as a cancer treatment. In 2011, we initiated a phase 3 study for the treatment of first-line metastatic pancreatic cancer. A phase 2 study for the treatment of small cell lung cancer is ongoing. Motesanib...

  • Page 50
    ... we plan to file for the treatment of giant cell tumor of the bone. On June 27, 2011, we announced the submission of an sBLA to the FDA to expand the indication for XGEVA® to treat men with castration-resistant prostate cancer to reduce the risk of developing bone metastases. On February 8, 2012...

  • Page 51
    ... of type 2 diabetes. In 2011 we initiated a phase 2 study of AMG 151 for the treatment of type 2 diabetes. AMG 785 AMG 785 is a humanized monoclonal antibody that targets sclerostin, a protein secreted by bone cells that inhibits bone formation. AMG 785 (also known as CDP7851) is being developed in...

  • Page 52
    ... with chemotherapy were reported at a meeting in September 2011. Phase 2 combination studies in the prostate and small cell lung cancer settings continue. As of February 9, 2011, we had nine phase 3 programs. As of February 10, 2012, we had twelve phase 3 programs, as one was added as the result...

  • Page 53
    ... parties certain product rights which have been transferred to this joint venture from Kirin and Amgen. K-A has given us exclusive licenses to manufacture and market: (i) G-CSF and pegfilgrastim in the United States, Europe, Canada, Australia and New Zealand, (ii) darbepoetin alfa, romiplostim and...

  • Page 54
    ... for ESAs used in providing dialysis services in the United States and Puerto Rico. The agreement may be terminated by either party before expiration of its term in the event of certain breaches of the agreement by the other party. Fresenius Medical Care North America In October 2011, the five-year...

  • Page 55
    ... and corporate finance activities in Europe and focused on healthcare. Dr. Sean E. Harper, age 49, became Executive Vice President, Research and Development in February 2012. Dr. Harper joined the Company in 2002, and has held leadership roles in early development, medical sciences and global...

  • Page 56
    Corporate Chief Medical Officer from March 2007 to February 2012. Prior to joining the Company, Dr. Harper worked for five years at Merck Research Laboratories. Mr. Anthony C. Hooper, age 57, became Executive Vice President, Global Commercial Operations in October 2011. From March 2010 to October ...

  • Page 57
    ... extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans. Governments and private payers may regulate prices, reimbursement levels and/or access to our products to control costs or to affect levels of use of our products. We...

  • Page 58
    .... Generally, an NCD is a national policy statement granting, limiting or excluding Medicare coverage or reimbursement for a specific medical item or service. We believe the restrictions in the 2007 NCD changed the way ESAs are used in clinical practice, for example, by decreasing the number of...

  • Page 59
    .../or allow access to new technologies. The proliferation of HTA organizations (e.g., NICE in the UK) has led to determinations of coverage and reimbursement based on both the clinical as well as the economic value of a product; these agencies are also increasingly setting the maximum price at which...

  • Page 60
    ... biological companies pay to the FDA that provide a substantial portion of the FDA's operating budget, in anticipation of re-authorization before September 30, 2012; and reforms to the regulations that govern diagnostics and medical devices which are sometimes used in conjunction with our products...

  • Page 61
    ...regulatory environment has evolved and safety signals and safety concerns resulting from pre-clinical data, clinical trials (including sub-analyses and meta-analyses), market use or other sources are receiving greater scrutiny. For example, a number of regulatory agencies around the world, including...

  • Page 62
    ... to revised labeling for our products, discovery of new safety information or previously unknown safety concerns and/or safety signals with our products or similar products could also lead to: • requirement of risk management activities (including a REMS) or other FDA compliance actions related to...

  • Page 63
    ... regulatory agencies side effects or other safety concerns that occur from their use of our products in clinical trials or studies or from marketed use, resulting regulatory action could materially and adversely affect the sales of our products, our business and results of operations. Current global...

  • Page 64
    ... parties for certain parts of our business, including licensees and partners, wholesale distributors of our products, contract clinical trial providers, contract manufacturers and single third-party suppliers. Because of the recent volatility in the financial markets, there may be a disruption or...

  • Page 65
    .... Additional labeling or reimbursement changes by these regulatory authorities could materially and adversely affect the reimbursement, use and sales of our ESAs, our business and results of operations. We continue to receive results from meta-analyses or previously initiated clinical trials using...

  • Page 66
    ... approvals in the timeframe needed to execute our product strategies, our business and results of operations could be materially and 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 67
    ...reimbursement for our products, all of which could have a material adverse effect on our business and results of operations. Clinical trials must be designed based on the current standard of medical care. However in certain diseases, such as cancer, the standard of care is evolving rapidly. In these...

  • Page 68
    ... of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources.) This additional competition could have a material adverse effect on our business and results of operations. We may not be able to develop commercial products. Successful product development in...

  • Page 69
    ... product sales are made to three pharmaceutical product wholesaler distributors, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. These distributors, in turn, sell our products to their customers, which include physicians or their clinics, dialysis centers, hospitals...

  • Page 70
    ... product liability exposure in human clinical trials and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and divert management's attention and adversely affect our reputation and the demand for our products. Amgen and Immunex...

  • Page 71
    ... affect our product use and sales and our business and operating results. For example, in prior years we have experienced shortages in certain components necessary for the formulation, fill and finish of certain of our products in our Puerto Rico facility. Further quality issues which result...

  • Page 72
    ... carrying value of certain related assets, which could have a material and adverse effect on our business and results of operations. Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales. Manufacturing biologic human therapeutic products is...

  • Page 73
    ... packaging for product candidates to be used in clinical trials at our manufacturing facility in Thousand Oaks, California. The global supply of our products and product candidates is significantly dependent on the uninterrupted and efficient operation of these facilities. A number of factors could...

  • Page 74
    ... our product sales, business and operating results. Our Puerto Rico facility is also subject to the same difficulties, disruptions or delays in manufacturing experienced in our other manufacturing facilities. For example, the limited number of lots of ENBREL and EPOGEN® voluntarily recalled in...

  • Page 75
    ...operations in satisfying our needs for working capital; capital expenditure and debt service requirements; our plans to pay dividends and repurchase stock; and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities. In the event of adverse capital...

  • Page 76
    ... potentially applicable foreign regulations and/or that we effectively manage all operational risks. The development, manufacturing, distribution, pricing, sales, marketing and reimbursement of our products, together with our general operations, are subject to extensive federal and state regulation...

  • Page 77
    ... adverse effect on our product sales, business and results of operations. Cost savings initiatives may result in the carrying value of certain existing manufacturing facilities or other assets becoming impaired or other related charges being incurred. Our business continues to face many challenges...

  • Page 78
    ... 1. Business - Manufacturing, Distribution and Raw Materials. Number of spaces or buildings Manufacturing Commercial Other functions Research and/or development Sales and marketing Other products NEUPOGEN® epoetin alfa Neulasta® Aranesp® Enbrel® Location United States: Thousand Oaks...

  • Page 79
    ... 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 rely on third-party suppliers...

  • Page 80
    ... 10, 2012, there were approximately 9,153 holders of record of our common stock. The following table sets forth, for the 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, 2011 High Low...

  • Page 81
    ... general incorporation language in such filing. Stock repurchase program The Company intends to continue to return capital to stockholders through share repurchases, reflecting our confidence in the long-term value of the Company. The amount we spend, the number of shares repurchased and the timing...

  • Page 82
    ..., 2011, the Board of Directors declared a quarterly cash dividend of $0.36 per share of common stock, which will be paid on March 7, 2012, to all stockholders of record as of the close of business on February 15, 2012. We expect to continue to pay quarterly dividends, although the amount and timing...

  • Page 83
    ..., except per share data) 2007 Revenues: Product sales ...Other revenues ...Total revenues ...Operating expenses(1): Cost of sales (excludes amortization of certain acquired intangible assets presented separately) ...Research and development ...Selling, general and administrative ...Amortization...

  • Page 84
    ... of the then outstanding convertible notes, at their then-accreted value of $1.7 billion. Throughout the five years ended December 31, 2011, we had a share repurchase program authorized by the Board of Directors through which we repurchased $8.3 billion, $3.8 billion, $3.2 billion, $2.3 billion and...

  • Page 85
    .... We operate in one business segment - human therapeutics. Therefore, our results of operations are discussed on a consolidated basis. We earn revenues and income and generate cash primarily from sales of human therapeutic products in the areas of supportive cancer care, inflammation and nephrology...

  • Page 86
    ... business, as discussed above. Selected financial information The following provides an overview of our results of operations as well as our financial condition (amounts in millions, except percentages and per-share data): 2011 Change 2010 Product sales: U.S...International ...Total product sales...

  • Page 87
    ... acquisition of goods and services from a related manufacturer in Puerto Rico. This tax is currently scheduled to expire in 2016. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold. For U.S. income...

  • 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
    ..., 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 and Item 1A. Risk...

  • Page 90
    ... June 2011 ESA label changes and any other product label changes; • reimbursement developments, including LCDs; • changes in dose utilization as healthcare providers continue to refine their treatment practices in accordance with approved labeling; and • development of new protocols, tests and...

  • Page 91
    ... related to the QIP; • regulatory developments, including the June 2011 ESA label changes and any other product label changes; • changes in dose utilization as healthcare providers continue to refine their treatment practices in accordance with approved labeling; • new contracts with dialysis...

  • Page 92
    ... entitled to the cost recovery. The Company groups all of its R&D activities and related expenditures into three categories: (1) Discovery Research and Translational Sciences, (2) later stage clinical programs and (3) marketed products. These categories include the Company's R&D activities as set...

  • Page 93
    ... as well as licensing fees paid in 2009, and lower expenses associated with our Discovery Research and Translational Sciences activities of $3 million. Certain amounts for 2010 have been reclassified to better conform to the above descriptions of R&D activities. Selling, general and administrative...

  • Page 94
    ... in Puerto Rico. The excise tax is imposed over a six year period beginning in 2011 with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015, and 1% in 2016). We account for the excise tax as a manufacturing cost that is capitalized in...

  • Page 95
    ... January 1, 2012, except for certain provisions for which adoption was delayed. Financial Condition, Liquidity and Capital Resources Selected financial data was as follows as of December 31, 2011 and 2010 (in millions): 2011 2010 Cash, cash equivalents and marketable securities ...Total assets...

  • Page 96
    ... from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital; capital expenditure and debt service requirements; our plans to pay dividends and repurchase stock; and other business initiatives we plan to strategically pursue, including...

  • Page 97
    ... were outstanding under this facility. In connection with the new revolving credit agreement we terminated our prior $2.3 billion revolving credit agreement that was scheduled to expire in November 2012. In March 2011, we filed a shelf registration statement with the SEC to replace an existing shelf...

  • Page 98
    ... primarily with manufacturing capacity expansions in Puerto Rico and other site developments. We currently estimate 2012 spending on capital projects and equipment to be approximately $700 million. Cash used in investing activities during the year ended December 31, 2011, also included the cost of...

  • Page 99
    ... 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 the ordinary course of business. Our obligation to pay certain of these amounts may be...

  • Page 100
    ... for estimated rebates, wholesaler chargebacks, cash discounts and other deductions (collectively, "sales deductions") and returns, which are established at the time of sale. We analyze the adequacy of our accruals for sales deductions quarterly. Amounts accrued for sales deductions are adjusted...

  • Page 101
    ... 1% of our 2011 product sales and a corresponding impact on our financial condition and liquidity. Wholesaler chargebacks relate to our contractual agreements to sell products to healthcare providers in the United States at fixed prices that are lower than the prices we charge wholesalers. When the...

  • Page 102
    ... in each location and the tax laws and principles of the respective taxing jurisdictions. For example, the Company conducts significant operations outside the United States in Puerto Rico pertaining to manufacturing, distribution and other related functions to meet its worldwide product demand...

  • Page 103
    ... obtaining marketing approval from the FDA and other regulatory agencies for product candidates; estimating the timing of and future net cash flows from product sales resulting from completed products and in-process projects; and developing appropriate discount rates to calculate the present values...

  • Page 104
    ... year. Foreign currency sensitive financial instruments Our international operations are affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately the euro. Increases and decreases in our international product sales from movements in foreign currency...

  • Page 105
    ... of December 31, 2011 and 2010, we were also exposed to price risk on equity securities included in our portfolio of investments, which were acquired primarily for the promotion of business and strategic objectives. These investments are generally in small capitalization stocks in the biotechnology...

  • Page 106
    ... 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 107
    ... of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Amgen Inc. We have audited Amgen Inc.'s (the "Company") internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued...

  • Page 108
    ... 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 2012 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2011...

  • Page 109
    ... 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, 2011, concerning our common stock that may be issued under any form of award granted under all...

  • Page 110
    ... 28, 2011. The Profit Sharing Plan permits eligible employees of the Company's subsidiaries located in Ireland, which participate in the Profit Sharing Plan, to apply a portion of their qualifying bonus and salary to the purchase the Company's Common Stock on the open market at the market price by...

  • Page 111
    ... 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 112
    ... STATEMENT SCHEDULES (a)1. Index to Financial Statements Page number The following Consolidated Financial Statements are included herein: Report of Independent Registered Public Accounting Firm ...Consolidated Statements of Income for each of the three years in the period ended December 31, 2011...

  • Page 113
    ... which are dated December 15, 2008, replaces the current trustee under the agreements listed as Exhibits 4.9 and 4.15, 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 114
    ... 9, 2006 and incorporated herein by reference.) Corporate Commercial Paper - Master Note between and among Amgen Inc., as Issuer, Cede & Co., as Nominee of The Depository Trust Company, and Citibank, N.A., as Paying Agent. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 1998 on May...

  • Page 115
    ... for the quarter ended March 31, 2011 on May 10, 2011 and incorporated herein by reference.) Amgen Inc. 2009 Director Equity Incentive Program. (Filed as an exhibit to Form 8-K on May 8, 2009 and incorporated herein by reference.) Form of Grant of Non-Qualified Stock Option Agreement and Restricted...

  • Page 116
    ...an exhibit to Form 10-Q for the quarter ended June 30, 2011 on August 8, 2011 and incorporated herein by reference.) Second Amendment to the Amgen Nonqualified Deferred Compensation Plan, effective October 12, 2011. 2002 Special Severance Pay Plan for Amgen Employees. (Filed as an exhibit to Form 10...

  • Page 117
    ... Form S-4 Registration Statement on March 22, 2002 and incorporated herein by reference.) Description of Amendment No. 1 to Amended and Restated Promotion Agreement, effective as of July 8, 2003, among Wyeth, Amgen Inc. and Immunex Corporation (with certain confidential information deleted therefrom...

  • Page 118
    ... Global Markets Inc. and J.P. Morgan Securities LLC as joint lead arrangers and joint book runners, and the other banks party thereto. (Filed as an exhibit to Form 8-K filed on December 2, 2011 and incorporated herein by reference.) Multi-product License Agreement with Respect to Japan between Amgen...

  • Page 119
    ...10.52 * Sourcing and Supply Agreement, dated November 15, 2011, by and between Amgen USA Inc., a wholly owned subsidiary of Amgen Inc., and DaVita Inc. (with certain confidential information deleted therefrom). Subsidiaries of the Company Consent of the Independent Registered Public Accounting Firm...

  • Page 120
    ... 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: 02/29/2012 By: /S/ JONATHAN M. PEACOCK Jonathan M. Peacock Executive Vice President and Chief Financial Officer...

  • 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
    ...to the Amgen Profit Sharing Plan for Employees in Ireland; of our reports dated February 29, 2012, with respect to 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...

  • Page 123
    ... of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /S/ KEVIN W. SHARER Kevin W. Sharer Chairman of the Board, Chief Executive Officer and Director...

  • Page 124
    Signature Title Date /S/ JUDITH C. PELHAM Judith C. Pelham Director 02/29/2012 /S/ J. PAUL REASON J. Paul Reason Director 02/29/2012 /S/ LEONARD D. SCHAEFFER Leonard D. Schaeffer Director 02/29/2012 /S/ RONALD D. SUGAR Ronald D. Sugar Director 02/29/2012 108

  • Page 125
    ...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, 2011, based on criteria established in...

  • Page 126
    ... per share data) 2011 2010 2009 Revenues: Product sales ...Other revenues ...Total revenues ...Operating expenses: Cost of sales (excludes amortization of certain acquired intangible assets presented separately) ...Research and development ...Selling, general and administrative ...Amortization...

  • Page 127
    ...debt ...Other noncurrent liabilities ...Contingencies and commitments Stockholders' equity: Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding - 795.6 shares in 2011 and 932.1 shares in 2010 ...Accumulated deficit ...Accumulated other comprehensive...

  • Page 128
    ... loss, 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 ...Balance at December 31, 2009 ...Comprehensive income: Net income...

  • Page 129
    ... STATEMENTS OF CASH FLOWS Years ended December 31, 2011, 2010 and 2009 (In millions) 2011 2010 2009 Cash flows from operating activities: Net income ...$ 3,683 $ 4,627 $ 4,605 Depreciation and amortization ...1,060 1,017 1,049 Stock-based compensation expense ...341 353 284 Deferred income...

  • Page 130
    ... and returns. Taxes collected from customers and remitted to government authorities related to the sales of the Company's products, primarily in Europe, are excluded from revenues. We have the exclusive right to sell epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses...

  • Page 131
    ... results of operations or financial position. 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...

  • Page 132
    ..., benefits and other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses; and other general and administrative costs. Advertising costs are expensed as incurred...

  • Page 133
    ... Cost also includes the Puerto Rico excise tax enacted in 2011 related to our manufacturing operations in Puerto Rico. See Note 10, Inventories. Derivatives We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The accounting...

  • Page 134
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The estimated fair values of IPR&D projects acquired in a business combination which have not reached technological feasibility are capitalized and accounted for as indefinite-lived intangible assets subject to impairment testing ...

  • Page 135
    ...a discount rate of 11%, which is based on the estimated weighted-average cost of capital for companies with characteristics similar to those of BioVex. This is comparable to the estimated internal rate of return on BioVex operations and represents the rate that market participants would use to value...

  • Page 136
    ... the facility for an interim period. On June 15, 2011, we reacquired rights to distribute certain of our products in the Brazilian pharmaceutical market from our local distributor in Brazil and its parent company, Hypermarcas, and in connection therewith acquired all business operations relating to...

  • Page 137
    ...in the plans and related grant agreements, including upon death, disability, a change in control, termination in connection with a change in control and retirement of employees who meet certain service and/or age requirements. Stock options and RSUs granted prior to April 25, 2011, generally vest in...

  • Page 138
    ... in publicly traded instruments associated with Amgen's common stock during the period the options were granted. We believe implied volatility in these instruments is more indicative of expected future volatility than the historical volatility in the price of our common stock. We use historical data...

  • Page 139
    .... The performance goals for the units granted in 2011, 2010 and 2009, which are accounted for as equity awards, are based upon Amgen's annual stockholder return compared with a comparator group of companies, which are considered market conditions and are reflected in the grant date fair value of the...

  • Page 140
    ... FINANCIAL STATEMENTS (Continued) The payout simulation models also assumed correlations of returns of the stock prices of our common stock and the common stocks of the comparator groups of companies and stock price volatilities of the comparator groups of companies. As of December 31, 2011...

  • Page 141
    ...and 2010 (in millions): 2011 2010 Deferred income 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 ...Total deferred income tax assets...

  • Page 142
    ...CONSOLIDATED FINANCIAL STATEMENTS (Continued) Substantially all of the UTBs as of December 31, 2011, if recognized, would affect our effective tax rate. During the year ended December 31, 2011, we settled our examination with the Internal Revenue Service (IRS) related to certain transfer pricing tax...

  • Page 143
    ... in Puerto Rico. The excise tax is imposed over a six year period beginning in 2011 with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015, and 1% in 2016). We account for the excise tax as a manufacturing cost that is capitalized in...

  • Page 144
    ... the marketing and sales of ENBREL, including strategic planning, the approval of an annual marketing plan, product pricing and the establishment of a brand team. Amgen and Pfizer share in the agreed-upon selling and marketing expenses approved by the joint management committee. We currently pay...

  • Page 145
    ... either agreement is terminated earlier in accordance with its terms. As the principal participant in the Primary Territories, Amgen records related product sales to third parties net of estimated returns, rebates and other deductions. During the years ended December 31, 2011 and 2010, product sales...

  • Page 146
    ... million of future worldwide development costs for these products in 2012 and a reduced amount of such costs, thereafter. Takeda will be solely responsible for all development and commercialization costs of these products in Japan and will pay Amgen royalties on future sales in Japan. Amgen has the...

  • Page 147
    ...with Kirin Holdings Company, Limited (Kirin) for the development and commercialization of certain products based on advanced biotechnology. All of our rights to manufacture and market certain products including pegfilgrastim, granulocyte colony-stimulating factor, darbepoetin alfa, recombinant human...

  • Page 148
    ...'s Board of Directors in December 2010 and closed in March 2011. In connection with the closing of this transaction, BI has assumed our obligations under certain of the facility's operating lease contracts and has entered into an agreement to manufacture certain quantities of our marketed product...

  • Page 149
    ... losses Estimated fair value Type of security as of December 31, 2011 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...

  • Page 150
    ...of December 31, 2010 Amortized cost Estimated fair 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...

  • Page 151
    ... is based on a number of factors including, the length of time and the extent to which the fair value has been below our cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security. As of December 31, 2011 and 2010, we believe...

  • Page 152
    ... included in Research and development expense in the Consolidated Statements of Income. The amortization expense related to other acquired intangible assets is included principally in Cost of sales (excludes amortization of certain acquired intangible assets) and Selling, general and administrative...

  • Page 153
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Accrued liabilities Accrued liabilities consisted of the following as of December 31, 2011 and 2010 (in millions): 2011 2010 Sales deductions ...Employee compensation and benefits ...Sales returns reserve ...Legal reserve ......

  • Page 154
    ... was 12.7473 shares per $1,000 principal amount of notes at December 31, 2011, which represents a conversion price of approximately $78.45 per share. This conversion rate is adjusted as we make specified types of distributions, including paying cash dividends on our common stock, or enter into F-30

  • Page 155
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) certain other transactions with respect to our common stock. The 0.375% 2013 Convertible Notes may only be converted: (i) during any calendar quarter if the closing price of our common stock exceeds 130% of the then conversion price per share during...

  • Page 156
    ...pounds sterling to U.S. dollars. Shelf registration statements and other facilities As of December 31, 2011, we have a commercial paper program that allows us to issue up to $2.5 billion of unsecured commercial paper to fund our working capital needs. At December 31, 2011 and 2010, we had no amounts...

  • Page 157
    ... this facility. In connection with the new revolving credit agreement we terminated our prior $2.3 billion revolving credit agreement that was scheduled to expire in November 2012. In March 2011, we filed a shelf registration statement with the U.S. Securities and Exchange Commission to replace an...

  • Page 158
    ... in September and December 2011, respectively. Additionally, on December 15, 2011, the Board of Directors declared a quarterly cash dividend of $0.36 per share of common stock, which will be paid on March 7, 2012, to all stockholders of record as of the close of business on February 15, 2012. F-34

  • Page 159
    ... addition to common stock, our authorized capital includes 5 million shares of preferred stock, $0.0001 par value. As of December 31, 2011 and 2010, no shares of preferred stock were issued or outstanding. 16. Fair value measurement To determine the fair value of our financial assets and liabilities...

  • Page 160
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows: Level 1 Level ...

  • Page 161
    ... $ $ 103 103 The fair values of our U.S. Treasury securities, money market mutual funds and equity securities are based on quoted market prices in active markets with no valuation adjustment. Substantially all of our other government related and corporate debt securities are investment grade with...

  • Page 162
    ... FINANCIAL STATEMENTS (Continued) broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment/ default projections based on historical data; and other observable inputs. We value our other short-term interest bearing securities at amortized cost...

  • Page 163
    .... Increases or decreases in the cash flows associated with our international product sales due to movements in foreign currency exchange rates are offset partially by the corresponding increases and decreases in our international operating expenses resulting from these foreign currency exchange rate...

  • Page 164
    ... we enter into these contracts and the time the related debt is issued. Gains and losses on such contracts, which are designated as cash flow hedges, are reported in AOCI and amortized into earnings over the lives of the associated debt issuances. The effective portion of the unrealized gain/(loss...

  • Page 165
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) respectively. The interest rate swap contracts as of December 31, 2011 and 2010, were for our 4....as fair value hedges, the unrealized gain or loss on the derivative resulting from the change in fair value during the period as well as ...

  • Page 166
    AMGEN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The fair values of both derivatives designated as hedging instruments and derivatives not designated as hedging instruments included in the Consolidated Balance Sheets were as follows (in millions): December 31, 2011 Derivatives ...

  • Page 167
    ...plaintiff to a class action with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims (including but not limited to patent infringement, marketing, pricing and trade practices and securities law), some...

  • Page 168
    ... Medicare and/or Medicaid programs and commercial insurance plans, including co-payments paid to providers who prescribe and administer the products. The complaints generally assert varying claims under the Medicare and Medicaid statutes, as well as state law claims for deceptive trade practices...

  • Page 169
    ... relating to motions to dismiss the complaints, discovery, class certification, summary judgment and other pre-trial issues. For the private class action cases, the Massachusetts District Court has divided the defendant companies into a Track I group and a Track II group. Both Amgen and Immunex...

  • Page 170
    ... STATEMENTS (Continued) et al.), 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...

  • Page 171
    ... adequate internal controls and to oversee the Company's operations, which plaintiff claims resulted in numerous lawsuits and investigations over a number of years. Plaintiff seeks damages on behalf of Amgen, including costs and expenses, allegedly incurred, among other things, in connection with...

  • Page 172
    ... results of Aranesp® clinical studies, marketed both Aranesp® and EPOGEN® for off-label uses and that these actions or inactions as well as the Amgen market strategy caused damage to the Company resulting in several inquiries, investigations and lawsuits that are costly to defend. The...

  • Page 173
    ... 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 fully cooperated in...

  • Page 174
    ...a manner that will not result in exclusion from U.S. federally-funded health care programs. In connection with the settlement discussions, the Massachusetts District Court vacated the previously scheduled trial date and administratively closed that case. The relators in the Qui Tam Actions have F-50

  • Page 175
    ... these other actions (including the May action) are allegations that Amgen's promotional, contracting, sales and marketing activities relating to Enbrel® and Aranesp® caused the submission of various false claims under the Federal Civil False Claims Act and various State False Claims Acts. Certain...

  • Page 176
    ... information We operate in one business segment - human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Enterprise-wide disclosures about product sales, revenues and long-lived...

  • Page 177
    ...,660 393 $15,053 14,351 291 $14,642 Geographic information Outside the United States, we sell products principally in Europe and Canada. The geographic classification of product sales was based upon the location of the customer. The geographic classification of all other revenues was based upon the...

  • Page 178
    ... FINANCIAL STATEMENTS (Continued) December 31, 2011 2010 Long-lived assets: United States ...Puerto Rico ...International countries ...Total long-lived assets ... $3,144 1,993 283 $5,420 $3,248 2,079 195 $5,522 Major customers In the United States, we sell primarily to pharmaceutical wholesale...

  • Page 179
    ... conditions, is expected to close during the three months ended March 31, 2012. 21. Quarterly financial data (unaudited) (In millions, except per share data) December 31 2011 Quarters ended September 30(1) June 30 March 31 Product sales ...Gross profit from product sales ...Net income ...Earnings...

  • Page 180
    SCHEDULE II AMGEN INC. VALUATION ACCOUNTS Years ended December 31, 2011, 2010 and 2009 (In millions) Balance at beginning of period Additions charged to costs and expenses Balance at end of period Allowance for doubtful accounts Other additions Deductions Year ended December 31, 2011 ...Year ...

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  • Page 183
    ... Development and Corporate Chief Medical Officer Kevin W. Sharer Chairman of the Board and CEO 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 2011 Annual Report...

  • Page 184
    Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 www.amgen.com ©2012 Amgen Inc. All rights reserved. 65679-R1-V1