Amgen 2012 Annual Report Download - page 124

F-25
Other
In addition to the collaborations discussed above, we have various others that are not individually significant to our business
at this time. Pursuant to the terms of those agreements, we may be required to pay or we may receive additional amounts upon
the achievement of various development and commercial milestones which in the aggregate could be significant. We may also
incur or have reimbursed to us significant R&D costs if the related product candidate were to advance to late stage clinical trials.
In addition, if any products related to these collaborations are approved for sale, we may be required to pay or we may receive
significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future
events, which have a high degree of uncertainty of occurring.
7. Related party transactions
We own a 50% interest in K-A, a corporation formed in 1984 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
erythropoietin and romiplostim are pursuant to exclusive licenses from K-A, which we currently market under the brand names
Neulasta®, NEUPOGEN®, Aranesp®, EPOGEN®, and Nplate®, respectively.
We account for our interest in K-A using the equity method and include our share of K-A’s profits or losses in Selling, general
and administrative expense in the Consolidated Statements of Income. Our share of K-A’s profits and losses was a loss of $24
million, and profits of $47 million and $71 million, for the years ended December 31, 2012, 2011 and 2010, respectively. At both
December 31, 2012 and 2011, the carrying value of our equity method investment in K-A, net of dividends received, was
approximately $0.4 billion and is included in noncurrent Other assets in the Consolidated Balance Sheets.
K-A’ s revenues consist of royalty income related to its licensed technology rights. K-A receives royalty income from us, as
well as from Kirin, J&J and F. Hoffmann-La Roche Ltd. under separate product license contracts for certain geographic areas
outside the United States. During the years ended December 31, 2012, 2011 and 2010, K-A earned royalties from us of $274
million, $298 million and $322 million, respectively. These amounts are included in Cost of sales (excludes amortization of certain
acquired intangible assets) in the Consolidated Statements of Income.
K-A’ s expenses consist primarily of costs related to R&D activities conducted on its behalf by Amgen and Kirin. K-A pays
Amgen and Kirin for such services at negotiated rates. During the years ended December 31, 2012, 2011 and 2010, we earned
revenues from K-A of $115 million, $130 million and $96 million, respectively, for certain R&D activities performed on K-A’ s
behalf. These amounts are recognized as Other revenues in the Consolidated Statements of Income. We may also receive numerous
individually immaterial milestones aggregating $85 million upon the achievement of various substantive success-based
development and regulatory approval milestones contingent upon the occurrence of various future events, most of which have a
high degree of uncertainty of occurring. During the years ended December 31, 2012, 2011 and 2010, we recorded cost recoveries
from K-A of $142 million, $85 million and $88 million, respectively, related to certain third-party costs. These amounts are included
in Research and development expense in the Consolidated Statements of Income.
As of December 31, 2012 and 2011, we owed K-A $31 million and $75 million, respectively, which are included in Accrued
liabilities in the Consolidated Balance Sheets.
8. Cost savings initiatives
Manufacturing operations optimization
In order to optimize our network of manufacturing facilities and improve cost effectiveness, we determined that certain
manufacturing facilities located in Boulder, Colorado, were no longer needed and accordingly, they were abandoned during the
fourth quarter of 2012. This resulted in the write-off of the carrying value of the facility, which aggregated $118 million, during
the year ended December 31, 2012. The amount is included in Cost of sales (excludes amortization of certain acquired intangible
assets) in the Consolidated Statement of Income.
On January 18, 2011, we entered into an agreement whereby Boehringer Ingelheim (BI) agreed to acquire our rights in and
substantially all assets at our manufacturing facility located in Fremont, California. The transaction closed in March 2011. In
connection with the closing of the transaction, BI assumed our obligations under certain of the facility’s operating lease contracts
and entered into an agreement to manufacture certain quantities of our marketed product Vectibix® for us at this facility through
December 31, 2012 (the supply period).