Amgen 2012 Annual Report Download - page 68

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Current global economic conditions also pose challenges to our business, including continued pressure to reduce healthcare
expenditures. Efforts to reduce health care costs are being made by third-party payers including governments and private payers.
In the United States, various actions have been taken aimed at reducing healthcare spending. The continuing prominence of U.S.
budget deficits increases the risk that taxes, fees, rebates, or other federal measures that would further reduce our revenues or
increase our expenses may be enacted. As a result of the economic condition, the industry continues to experience significant
pricing pressures and other cost containment measures in certain European countries also.
Our long-term success depends to a great extent on our ability to continue to discover, develop and commercialize innovative
products and acquire or collaborate on therapies currently in development by other companies. The discovery and development
of safe and effective new products, as well as the development of additional indications for existing products, are necessary for
the continued strength of our businesses. Our product lines must be replenished over time in order to offset revenue losses when
products lose their exclusivity or competing products are launched, as well as to provide for revenue and earnings growth. We
devote considerable resources to R&D activities. However, successful product development in the biotechnology industry is highly
uncertain. We are also confronted by increasing regulatory scrutiny of safety and efficacy before and after products have been
launched.
Finally, our product sales are subject to certain influences throughout the year, including wholesaler and end-user buying
patterns (e.g., wholesaler and end-user stocking, contract-driven buying and patients delaying certain purchasing or physician
visits). Such factors can result in higher demand for our products and/or higher wholesaler inventory levels and, therefore, higher
product sales for a given three-month period, generally followed by a decline in product sales in the subsequent three-month
period. For example, sales of certain of our products in the United States for the three months ended March 31 can be slightly
lower relative to the immediately preceding three-month period. While this can result in variability in quarterly product sales on
a sequential basis, these effects have generally not been significant when comparing product sales in the three months ended
March 31 with product sales in the corresponding period of the prior year.
See Item 1. Business — Marketed Products and Item 1A. Risk Factors for further discussion of certain of the factors that
could impact our future product sales.
Selected financial information
The following is an overview of our results of operations as well as our financial condition (in millions, except percentages
and per share data):
2012 Change 2011
Product sales:
U.S. $ 12,815 9 % $ 11,725
ROW 3,824 7 % 3,570
Total product sales 16,639 9 % 15,295
Other revenues 626 * 287
Total revenues $ 17,265 11 % $ 15,582
Operating expenses $ 11,688 4 % $ 11,270
Operating income $ 5,577 29 % $ 4,312
Net income $ 4,345 18 % $ 3,683
Diluted EPS $ 5.52 37 % $ 4.04
Diluted shares 787 (14)% 912
* Change in excess of 100%
When discussing changes in product sales below, any reference to unit growth or decline refers to changes in the purchases
of our products by healthcare providers, such as physicians or their clinics, dialysis centers, hospitals and pharmacies.
The increase in U.S. product sales for 2012 reflects growth across the portfolio except ESAs, which declined 10%. Excluding
ESAs, U.S. product sales increased 16% driven primarily by unit growth and, to a lesser extent, increases in average net sales
prices. The increase in ROW product sales for 2012 reflects growth for all of our marketed products except Aranesp®, which
declined 4%, and combined Neulasta®/NEUPOGEN®, which declined 9%.
The increase in other revenues for 2012 was driven by a modification to our Takeda collaboration, which replaced a global
co-development and profit share agreement for motesanib, originally signed in 2008, with an exclusive license for Takeda to