Amgen 2012 Annual Report Download - page 121

F-22
EPS. For the years ended December 31, 2011 and 2010, the conversion values of our convertible notes were less than the related
principal amounts, and accordingly, no shares were assumed to be issued for purposes of computing diluted EPS.
The computation for basic and diluted EPS was as follows (in millions, except per share data):
2012 2011 2010
Income (Numerator):
Net income for basic and diluted EPS $ 4,345 $ 3,683 $ 4,627
Shares (Denominator):
Weighted-average shares for basic EPS 775 905 960
Effect of dilutive securities 12 7 5
Weighted-average shares for diluted EPS 787 912 965
Basic EPS $ 5.61 $ 4.07 $ 4.82
Diluted EPS $ 5.52 $ 4.04 $ 4.79
For the years ended December 31, 2012, 2011 and 2010, there were employee stock-based awards, calculated on a weighted-
average basis, to acquire 6 million, 33 million and 43 million shares of our common stock, respectively, that are not included in
the computation of diluted EPS because their impact would have been anti-dilutive. In addition, shares of our common stock that
may be issued upon exercise of our warrants are not included in the computation of diluted EPS for any of the periods presented
above because their impact would have been anti-dilutive.
6. Collaborative arrangements
A collaborative arrangement is a contractual arrangement that involves a joint operating activity which involves two or more
parties who are both: (i) active participants in the activity; and (ii) exposed to significant risks and rewards dependent on the
commercial success of the activity.
From time to time, we enter into collaborative arrangements for the R&D, manufacture and/or commercialization of products
and product candidates. These collaborations generally provide for non-refundable upfront license fees, development and
commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. Our collaboration agreements
are performed with no guarantee of either technological or commercial success and each is unique in nature. Our significant
arrangements are discussed below.
Pfizer Inc.
We are in a collaboration with Pfizer to co-promote Enbrel® in the United States and Canada. The rights to market ENBREL
outside the United States and Canada are reserved to Pfizer. Under the agreement, a management committee comprised of equal
representation from Amgen and Pfizer is responsible for overseeing 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 Pfizer
a percentage of annual gross profits on our ENBREL sales in the United States and Canada attributable to all approved indications
on a scale that increases as gross profits increase; however, we maintain a majority share of ENBREL profits. After expiration of
the co-promotion term on October 31, 2013, we will be required to pay Pfizer residual royalties based on a declining percentage
of annual net ENBREL sales in the United States and Canada for three years, ranging from 12% to 10%. The amounts of such
payments are anticipated to be significantly less than what would be owed based on the terms of the current ENBREL profit share.
Effective November 1, 2016, there will be no further royalty payments.
We have determined that we are the principal participant in the collaboration with Pfizer to market ENBREL in the United
States and Canada. Accordingly, we record our product sales of ENBREL to third parties net of estimated returns, rebates and
other deductions. For the years ended December 31, 2012, 2011 and 2010, ENBREL sales aggregated $4.2 billion, $3.7 billion
and $3.5 billion, respectively.
During the years ended December 31, 2012, 2011 and 2010, the ENBREL profit share expense was $1,495 million, $1,288
million and $1,184 million, respectively. In addition, cost recoveries from Pfizer for their share of the selling and marketing