Amgen 2012 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2012 Amgen annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150

62
develop, manufacture and commercialize motesanib. That modification resulted in revenue recognition of $232 million. The
increase also reflects milestone payments received from AstraZeneca and Astellas Pharma Inc.
Operating expenses in 2011 included a previously disclosed charge for a legal settlement reserve of $780 million.
The increase in net income for 2012 was due primarily to higher operating income, offset partially by higher interest expense,
net, and higher effective income tax rates.
The increase in diluted EPS for 2012 was driven primarily by increases in net income and by the favorable impacts of our
stock repurchase program, which reduced the number of shares used to compute diluted EPS.
Although changes in foreign currency exchange rates result in increases or decreases in our reported international product
sales, the benefit or detriment that such movements have on our international product sales is offset partially by corresponding
increases or decreases in our international operating expenses and our related foreign currency hedging activities. Our hedging
activities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net
income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.
Commencing January 1, 2011, Puerto Rico imposes a temporary excise tax on the purchase of goods and services from a
related manufacturer in Puerto Rico. The excise tax is imposed on the gross intercompany purchase price of the goods and services
and is effective for a six-year period beginning in 2011, with the excise tax rate declining in each year (4% in 2011, 3.75% in
2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015 and 1% in 2016). In February 2013, the Puerto Rico government proposed an
amendment to the excise tax legislation which, if approved, would increase the excise tax rate to 4% effective July 1, 2013 through
2017. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when
the related products are sold. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized
in our provision for income taxes in the year in which the excise tax is incurred. This excise tax has had and will continue to have
a significant adverse impact on our cost of sales and a significant favorable impact on our provision for income taxes. In addition,
the overall impact of the excise tax will vary from period to period as a result of the timing difference between recognizing the
expense and the applicable foreign tax credit. As a result of the excise tax in 2012, cost of sales increased by $343 million, the
provision for income taxes was reduced by $337 million and EPS was unfavorably impacted by $0.01. In 2011, cost of sales
increased by $211 million, the provision for income taxes was reduced by $321 million and EPS was favorably impacted by $0.12.
As of December 31, 2012, our cash, cash equivalents and marketable securities totaled $24.1 billion, and total debt outstanding
was $26.5 billion. Of our total cash, cash equivalents and marketable securities balance as of December 31, 2012, approximately
$18.9 billion was generated from operations in foreign tax jurisdictions and is intended to be invested indefinitely outside the
United States. Under current tax laws, if these funds were repatriated for use in our U.S. operations, we would be required to pay
additional income taxes at the tax rates then in effect.
Results of Operations
Product sales
Worldwide product sales were as follows (dollar amounts in millions):
2012 Change 2011 Change 2010
Neulasta®/NEUPOGEN ®$ 5,352 3 % $ 5,212 8 % $ 4,844
ENBREL 4,236 14 % 3,701 5 % 3,534
Aranesp®2,040 (11)% 2,303 (7)% 2,486
EPOGEN®1,941 (5)% 2,040 (19)% 2,524
XGEVA®748 * 351 * 8
Prolia®472 * 203 * 33
Other products 1,850 25 % 1,485 21 % 1,231
Total product sales $ 16,639 9 % $ 15,295 4 % $ 14,660
Total U.S. $ 12,815 9 % $ 11,725 4 % $ 11,254
Total ROW 3,824 7 % 3,570 5 % 3,406
Total product sales $ 16,639 9 % $ 15,295 4 % $ 14,660
* Change in excess of 100%
Future sales of our products will depend, in part, on the factors discussed in the Overview, Item 1. Business - Marketed
Products, Item 1A. Risk Factors and any additional factors discussed in the individual product sections below.