Amgen 2011 Annual Report Download - page 42

certain medical devices and components necessary for the formulation, fill and finish of our products are
provided by unaffiliated third-party suppliers, certain of which may be the sole source. Certain of the raw
materials, medical devices and components are the proprietary products of those unaffiliated third-party suppliers
and are specifically cited in our drug application with regulatory agencies so that they must be obtained from the
specific sole source or sources and could not be obtained from another supplier unless and until the regulatory
agency approved such supplier. We currently attempt to manage the risk associated with such suppliers by
inventory management, relationship management and evaluation of alternative sources when feasible. We also
monitor the financial condition of certain suppliers and their ability to supply our needs.
Certain of the raw materials required in the commercial and clinical manufacturing of our products are
sourced from other countries and/or derived from biological sources, including mammalian tissues. In addition,
one of our marketed products also uses bovine serum and human serum albumin. Some countries in which we
market our products may restrict the use of certain biologically derived substances in the manufacture of drugs.
We continue to investigate alternatives to certain biological sources and alternative manufacturing processes that
do not require the use of certain biologically derived substances because such raw materials may be subject to
contamination and/or recall. A material shortage, contamination, recall and/or restriction of the use of certain
biologically derived substances or other raw materials, which may be sourced from other countries and that are
used in the manufacture of our products could adversely impact or disrupt the commercial manufacturing of our
products or could result in a mandated withdrawal of our products from the market. (See Item 1A. Risk
Factors — We rely on third-party suppliers for certain of our raw materials, medical devices and components.)
We perform various procedures to assist in authenticating the source of raw materials, including
intermediary materials used in the manufacture of our products, which include verification of the country of
origin. These procedures are incorporated into the manufacturing processes we and our third-party contract
manufacturers perform.
Government Regulation
Regulation by government authorities in the United States and other countries is a significant factor in the
production and marketing of our products and our ongoing R&D activities.
In order to clinically test, manufacture and market products for therapeutic use, we must satisfy mandatory
procedures and safety and effectiveness standards established by various regulatory bodies. In the United States,
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, manufacture, quality
control, labeling, storage, record keeping, approval, advertising and promotion, and distribution of our products.
Failure to comply with the applicable regulatory requirements may subject us to a variety of administrative and/
or judicially imposed sanctions. The sanctions could include the FDA’s refusal to approve pending applications,
withdrawals of approvals, delay or suspension of clinical trials, warning letters, product recalls, product seizures,
total or partial suspension of our operations, injunctions, fines, civil penalties and/or criminal prosecution.
Clinical Development. We must conduct extensive clinical trials designed to establish the safety and
efficacy of product candidates in order to file for regulatory approval to market a product. Product development
and approval within that regulatory framework takes a number of years and involves our expenditure of
substantial resources, and any approval we obtain remains costly for us to maintain. After laboratory analysis and
preclinical testing in animals, we file an investigational new drug application (IND) with the FDA to begin
human testing. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises
concerns or questions. In such a case, we and the FDA must resolve any outstanding concerns before the clinical
trial can begin.
Typically, we undertake a three-phase human clinical testing program. In phase 1, we conduct small clinical
trials to investigate the safety and proper dose ranges of our product candidates in a small number of human
subjects. In phase 2, we conduct clinical trials to investigate side effect profiles and the efficacy of our product
candidates in a larger number of patients who have the disease or condition under study. In phase 3, we conduct
26