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F-7
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012
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
pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. Our medicines help millions of patients
in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease, and other serious illnesses. We operate in one
business segment: human therapeutics.
Principles of consolidation
The consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. We do not
have any significant interests in variable interest entities that require consolidation. All material intercompany transactions and
balances have been eliminated in consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results may differ from those estimates.
Product sales
Sales of our products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of
accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively “sales deductions”) 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.
With regard to EPOGEN® (epoetin alfa), we have the exclusive right to sell epoetin alfa for dialysis, certain diagnostics and
all non-human, non-research uses in the United States. We granted to Ortho Pharmaceutical Corporation (which has assigned its
rights under the product license agreement to Janssen Biotech, Inc., formerly known as Centocor Ortho Biotech Products, L.P.),
a subsidiary of Johnson & Johnson (J&J), a license relating to epoetin alfa for sales in the United States for all human uses except
dialysis and diagnostics. This license agreement, which is perpetual, may be terminated for various reasons, including upon mutual
agreement of the parties, or default. The parties are required to compensate each other for epoetin alfa sales that either party makes
into the other party’s exclusive market, sometimes referred to as “spillover.” Accordingly, we do not recognize product sales we
make into the exclusive market of J&J and do recognize product sales made by J&J into our exclusive market. Sales in our exclusive
market are derived from our sales to our customers, as adjusted for spillover. We are employing an arbitrated audit methodology
to measure each party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to
and usage by end users.
Other revenues
Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on
third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably
measurable and collectability is reasonably assured. Royalty estimates are made in advance of amounts collected using historical
and forecasted trends. Corporate partner revenues are comprised of amounts earned from Kirin-Amgen, Inc. (K-A) for certain
research and development (R&D) activities, which are earned as the R&D activities are performed. Corporate partner revenues
also include license fees and milestone payments earned from K-A and from third parties. See Multiple-deliverable revenue
arrangements, discussed below, Note 6, Collaborative arrangements, and Note 7, Related party transactions.
Multiple-deliverable revenue arrangements
From time to time, we enter into arrangements for the R&D, manufacture and/or commercialization of products and product
candidates. These arrangements may require us to deliver various rights, services and/or goods across the entire life cycle of a
product or product candidate, including (i) intellectual property rights/licenses, (ii) R&D services, (iii) manufacturing services
and/or (iv) commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen