Amgen 2009 Annual Report Download - page 79

Our operating expenses for the year ended December 31, 2009 declined approximately $650 million, or 7%,
over 2008 of which approximately one-half of this reduction was attributable to lower legal settlements and re-
structuring and related costs. In addition, cost of sales declined in 2009 principally due to improved operating
efficiencies and lower sales volume, partially offset by a less favorable product mix. Our R&D expenses in 2009
also declined primarily due to lower clinical trial costs due to the completion of certain late-stage registrational
studies for denosumab and Vectibix®. These decreases in our operating expenses were partially offset by a slight
increase in our SG&A expenses primarily due to increased promotional expenses, including spending for activ-
ities in advance of our anticipated launch of Prolia™. This reduction in operating expenses also reflects, in part,
our continuing efforts to maintain control over discretionary expenditures.
For the year ended December 31, 2009, our net income was $4.6 billion, or $4.51 per share on a diluted ba-
sis, reflecting increases of 14% and 20%, respectively, compared to 2008. The growth in our net income
principally reflects our reduced operating expenses, discussed above, and a reduction in our provision for income
taxes primarily due to favorable income tax settlements of approximately $220 million and increased
manufacturing and profits in Puerto Rico, which are taxed under an incentive grant. Our 2009 EPS also benefited
from a reduction in our weighted average shares used to compute diluted EPS resulting from our stock re-
purchase program, including 59 million shares repurchased in 2009 at a total cost of $3.2 billion.
Our financial condition remains strong. At December 31, 2009, our cash, cash equivalents and marketable
securities aggregated $13.4 billion, our total debt outstanding was $10.6 billion and our stockholders’ equity ag-
gregated $22.7 billion. In addition, our cash flow from operations for the year ended December 31, 2009
aggregated $6.3 billion, representing a 6% increase over the prior year. Capital expenditures for 2009 were ap-
proximately $530 million, which represents a decrease from $672 million in 2008 due to improved productivity
and efficiency in our capital program. We believe that existing funds, cash generated from operations and exist-
ing sources of and access to financing are adequate to satisfy our working capital, capital expenditure and debt
service requirements for the foreseeable future. Of our total cash, cash equivalents and marketable securities bal-
ance as of December 31, 2009, $12.1 billion was generated from operations in foreign tax jurisdictions and is
intended for use in our foreign operations. If these funds were repatriated for use in our U.S. operations, we
would be required to pay additional U.S. federal and state income taxes at the applicable marginal tax rates.
Looking forward, we believe that our business will continue to face various regulatory, reimbursement and
competitive challenges. In particular, our ESA products, Aranesp®and EPOGEN®, will continue to be impacted
by regulatory developments, such as the REMS, which has been recently approved by the FDA, and recent or po-
tential future product label changes, including any that may result from the advisory committee meeting proposed
by the FDA to be held in 2010 to re-evaluate the use of ESAs in CKD. In the United States, we rely in large part
on the reimbursement of our products through government programs such as Medicare and Medicaid.
Reimbursement challenges may result from the MEDCAC meeting scheduled for March 24, 2010 to examine
currently available evidence on the use of ESAs to manage anemia in patients who have CKD and the provisions
of the CMS’ proposed rule to implement a bundling prospective payment system for ESRD. In addition, the out-
come of the proposed healthcare reform in the United States is very much uncertain at this time. Further, certain
of our products will continue to face increasing competitive pressure, including our marketed products in the
United States, in particular ENBREL as well as from biosimilar and other products in Europe which compete
with Aranesp®, Neulasta®and NEUPOGEN®.
We also have various opportunities to grow our business in the future, primarily due to our late-stage product
candidate, denosumab. We continue to work with the FDA regarding our BLA for Prolia™. On February 19, 2010,
we announced that the FDA has evaluated the content of our Complete Response submission for Prolia™in the
treatment of PMO, which we submitted on January 25, 2010, and classified it as a Class 2 resubmission. With the
Class 2 designation, the FDA set a corresponding PDUFA action date of July 25, 2010. Additionally, in December
2009, the CHMP announced a positive opinion for the marketing authorization for Prolia™for the treatment of os-
teoporosis in postmenopausal women at increased risk of fracture and for the treatment of bone loss associated with
hormone ablation in men with prostate cancer at increased risk of fractures. Furthermore, we announced positive
study results from three phase 3 denosumab trials in the treatment of bone metastases that will form the basis of the
clinical evidence package for denosumab in advanced cancer, which will be submitted to regulatory authorities later
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