Amgen 2007 Annual Report Download - page 140

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Restructuring
On August 15, 2007, we announced a plan to restructure our worldwide operations in order to improve our
cost structure while continuing to make significant R&D investments and build the framework for our future
growth. This restructuring plan was primarily the result of regulatory and reimbursement developments that be-
gan in 2007 involving erythropoietic stimulating agent (“ESA”) products, including our marketed ESA products
Aranesp®and EPOGEN®, and the resulting impact on our operations. Our ESA products have and will continue
to face current and future regulatory and reimbursement challenges, including the potential for further revisions
to product labels and loss of or restrictions on reimbursement coverage. In addition, the restructuring plan is also,
to a lesser degree, the result of various challenges facing certain of our other products.
We currently estimate that $775 million to $825 million of restructuring charges will be incurred in con-
nection with the implementation of our restructuring plan. Included in such amounts are (i) severance related
costs of $185 million to $200 million with respect to staff reductions, aggregating approximately 2,200 to 2,600
positions or approximately 12% to 14% of our worldwide staff; (ii) asset related charges of $450 million to $470
million primarily consisting of asset impairments and accelerated depreciation resulting from rationalizing our
worldwide network of manufacturing facilities in order to gain cost efficiencies while continuing to meet future
commercial and clinical demand for our products and product candidates and, to a lesser degree, changes to cer-
tain R&D capital projects and (iii) other costs of $140 million to $155 million, principally related to the accrual
of losses for leases for certain R&D facilities that will not be used in our operations. During the year ended De-
cember 31, 2007, we completed the majority of the above-noted actions and incurred $739 million of
restructuring costs. We expect that substantially all remaining restructuring actions, discussed above, will be
completed and the related estimated costs incurred in 2008. Such cost estimates and amounts incurred to date,
noted above, are net of amounts recoverable from our co-promotion partner, Wyeth, as discussed further below.
The following table summarizes the charges (credits) recorded through December 31, 2007 related to the re-
structuring plan by type of activity (in millions):
Year ended December 31, 2007
Separation
costs
Asset
impairments
Accelerated
depreciation Other Total
Cost of sales (excluding amortization of intangible
assets) ....................................... $ (1) $ 4 $147 $ — $ 150
Research and development ......................... (19) 38 — — 19
Selling, general and administrative ................... (11) — 1 (114) (124)
Other items (primarily certain restructuring costs in
2007) ........................................ 209 366 — 119 694
$178 $408 $148 $ 5 $ 739
During the year ended December 31, 2007, we recorded staff separation costs of $209 million, principally
consisting of severance. Partially offsetting these amounts in “Cost of sales (excluding amortization of intangible
assets)” (“COS”), “Research and development” and “Selling, general and administrative” (“SG&A”) expenses
for the year ended December 31, 2007 are the reversal of previously accrued expenses for bonuses and stock-
based compensation awards totaling $31 million, which were forfeited as a result of the employees’ termination.
We also recorded asset impairment charges of $408 million during the year ended December 31, 2007.
These charges were primarily recorded in connection with our decisions to make changes to certain manufactur-
ing and, to a lesser degree, certain R&D capital projects and to close certain production operations. In particular,
these decisions included certain revisions to and the subsequent indefinite postponement of our planned Ireland
manufacturing operations, certain revisions to our planned manufacturing expansion in Puerto Rico and the clo-
sure of a clinical manufacturing facility in Thousand Oaks, California.
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