Amgen 2012 Annual Report Download - page 73

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Research and development
R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and
overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems’
costs and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs and
cost recoveries associated with K-A and third-party R&D arrangements, including upfront fees and milestones paid to third parties
in connection with technologies which had not reached technological feasibility and did not have an alternative future use. Net
payment or reimbursement of R&D costs is recognized when the obligations are incurred or as we become entitled to the cost
recovery.
The Company groups all of its R&D activities and related expenditures into three categories: (1) Discovery Research and
Translational Sciences, (2) later stage clinical programs and (3) marketed products. These categories include the Company’s R&D
activities as set forth in the following table:
Category Description
Discovery Research and Translational
Sciences R&D expenses incurred in activities substantially in support of early research
through the completion of phase 1 clinical trials. These activities encompass our
discovery research and translational sciences functions, including drug discovery,
toxicology, pharmacokinetics and drug metabolism, and process development.
Later stage clinical programs R&D expenses incurred in or related to phase 2 and phase 3 clinical programs
intended to result in registration of a new product or a new indication for an
existing product in the United States or the EU.
Marketed products R&D expenses incurred in support of the Company’ s marketed products that are
authorized to be sold in the United States or the EU. Includes clinical trials
designed to gather information on product safety (certain of which may be required
by regulatory authorities) and their product characteristics after regulatory approval
has been obtained, as well as the costs of obtaining regulatory approval of a product
in a new market after approval in either the United States or the EU has been
obtained.
R&D expense by category was as follows (in millions):
2012 2011 2010
Discovery Research and Translational Sciences $ 1,137 $ 1,125 $ 1,154
Later stage clinical programs 1,285 983 832
Marketed products 958 1,059 908
Total R&D expense $ 3,380 $ 3,167 $ 2,894
The increase in R&D expense for 2012 was driven primarily by an increase of $302 million in our later stage clinical
programs, including AMG 145 and romosozumab; and an increase of $12 million in Discovery Research and Translational Sciences
activities, offset partially by reduced expenses associated with marketed product support of $101 million.
The increase in R&D expense for 2011 was driven primarily by an increase of $151 million in our marketed product support
driven largely by our continued support for Prolia® and XGEVA® which, subsequent to their approvals during 2010, were
categorized as marketed products rather than later stage clinical programs; and an increase of $151 million in our later stage clinical
program support, including AMG 386, ganitumab (AMG 479), talimogene laherparepvec and AMG 145, offset partially by
decreased support for Prolia® and XGEVA® as a result of their aforementioned approvals. These increases were offset partially
by a decrease of $29 million in our Discovery Research and Translational Sciences activities, due primarily to reduced amortization
expense related to R&D technology intangible assets acquired in business combinations in prior years.
Selling, general and administrative
Selling, general and administrative (SG&A) expenses are comprised primarily of salaries, benefits and other staff-related
costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside
marketing, advertising and legal expenses; and other general and administrative costs. Advertising costs are expensed as incurred.
SG&A expenses also include costs and cost recoveries associated with marketing and promotion efforts under certain collaboration
arrangements. Net payment or reimbursement of SG&A costs is recognized when the obligations are incurred or when we become
entitled to the cost recovery. Beginning January 1, 2011, SG&A expenses also include the annual U.S. healthcare reform federal
excise fee.