Amgen 2009 Annual Report Download - page 145

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Related party transactions
We own a 50% interest in KA, a corporation formed in 1984 with Kirin Holdings Company, Limited
(“Kirin”) for the development and commercialization of certain products based on advanced biotechnology. We
account for our interest in KA under the equity method and include our share of KA’s profits or losses in
“Selling, general and administrative” expense in the Consolidated Statements of Income. For the years ended
December 31, 2009, 2008 and 2007, our share of KA’s profits were $72 million, $72 million and $51 million, re-
spectively. At December 31, 2009 and 2008, the carrying value of our equity method investment in KA, net of
dividends received, was $318 million and $356 million, respectively, and is included in non-current “Other as-
sets” in the Consolidated Balance Sheets. The amount of dividends received were $110 million and $8 million
for the years ended December 31, 2009 and 2008, respectively. KA’s revenues consist of royalty income related
to its licensed technology rights. All of our rights to manufacture and market certain products including
darbepoetin alfa, pegfilgrastim, granulocyte colony-stimulating factor (“G-CSF”), recombinant human eryth-
ropoietin and romiplostim are pursuant to exclusive licenses from KA, which we currently market under the
brand names Aranesp®, Neulasta®, NEUPOGEN®, EPOGEN®and Nplate®, respectively. KA receives royalty
income from us, as well as from Kirin, J&J and F. Hoffmann-La Roche Ltd. (“Roche”) under separate product li-
cense agreements for certain geographic areas outside of the United States. During the years ended December 31,
2009, 2008 and 2007, KA earned royalties from us of $327 million, $321 million and $336 million, respectively.
These amounts are included in “Cost of sales (excludes amortization of certain acquired intangible assets)” in the
Consolidated Statements of Income. At December 31, 2009 and 2008, we owed KA $104 million and $89 mil-
lion, respectively, which are included in “Accrued liabilities” in the Consolidated Balance Sheets.
KA’s expenses primarily consist of costs related to R&D activities conducted on its behalf by Amgen and
Kirin. KA pays Amgen and Kirin for such services at negotiated rates. During the years ended December 31,
2009, 2008 and 2007, we earned revenues from KA of $102 million, $124 million and $180 million, respectively,
for certain R&D activities performed on KA’s behalf. These amounts are included in “Other revenues” in the
Consolidated Statements of Income. In addition, included in “Other revenues” in the Consolidated Statements of
Income for the year ended December 31, 2007 is $45 million received from KA with respect to achieving certain
regulatory filing milestones. During the years ended December 31, 2009, 2008 and 2007, we recorded cost
recoveries from KA of $96 million, $82 million and $82 million, respectively, related to certain third-party costs.
These amounts are included in “Research and development” expense in the Consolidated Statements of Income.
9. Restructuring
On August 15, 2007, we announced a plan to restructure our worldwide operations in order to improve our
cost structure. This restructuring plan was primarily the result of regulatory and reimbursement developments
that began in 2007 involving erythropoiesis-stimulating agent (“ESA”) products, including our marketed ESA
products Aranesp®and EPOGEN®, and the resulting impact on our operations. Key components of our
restructuring plan initially included: (i) worldwide staff reductions, (ii) rationalization of our worldwide network
of manufacturing facilities and, to a lesser degree, changes to certain R&D capital projects and (iii) abandoning
leases primarily for certain R&D facilities that will not be used in our operations. Subsequently, we identified
certain additional initiatives designed to further assist in improving our cost structure, including outsourcing cer-
tain non-core business functions, most notably certain of our information systems’ infrastructure services, as well
as abandoning leases for certain additional facilities that will no longer be used in our operations. As of De-
cember 31, 2009, we have completed all of the actions and incurred all related costs included in our restructuring
plan and subsequently identified initiatives.
Through December 31, 2009, we incurred $957 million of costs related to the above-noted actions. The
charges included $213 million of separation costs associated with approximately 3,100 staff members, $476 mil-
lion of asset impairments, $148 million of accelerated depreciation and $120 million of other net charges, which
include $165 million of loss accruals for leases, $41 million for implementation costs associated with certain cost
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