Amgen 2009 Annual Report Download - page 86

Selected operating expenses
The following table summarizes our operating expenses for the years ended December 31, 2009, 2008 and
2007 (dollar amounts in millions):
2009 Change 2008 Change 2007
Operating expenses:
Cost of sales (excludes amortization of certain acquired
intangible assets) ............................ $2,091 (9)% $2,296 (10)% $2,548
% of product sales ......................... 15% 16% 18%
Research and development ....................... $2,864 (5)% $3,030 (7)% $3,266
% of product sales ......................... 20% 21% 23%
Selling, general and administrative ................ $3,820 1% $3,789 13% $3,361
% of product sales ......................... 27% 26% 23%
Amortization of certain acquired intangible assets .... $ 294 0% $ 294 (1)% $ 298
Write-off of acquired in-process research and
development ................................ $ — 0% $ — (100)% $ 590
Other charges ................................. $ 67 (82)% $ 380 (48)% $ 728
Cost of sales
Cost of sales, which excludes the amortization of certain acquired intangible assets, (“Cost of sales”) de-
creased 9% for the year ended December 31, 2009 compared to 2008. The decrease was primarily driven by
lower excess capacity charges, lower royalty expenses and lower sales volume, partially offset by less favorable
product mix and higher fill and finish costs resulting from lower utilization at our manufacturing facility in Puer-
to Rico. The decrease in Cost of sales was also driven by lower excess inventory write-offs, primarily due to the
$84 million write-off of inventory in 2008 resulting from a strategic decision to change manufacturing processes.
Cost of sales decreased 10% for the year ended December 31, 2008 compared to 2007. The decrease was
primarily driven by lower restructuring charges incurred in 2008, as discussed below. In addition, the decline in
Cost of sales was due to lower inventory write-offs and lower cost ENBREL, partially offset by higher sales vol-
ume and excess capacity charges.
Cost of sales for the years ended December 31, 2009, 2008 and 2007 included $1 million, $6 million and
$150 million, respectively, of restructuring and related charges. The restructuring charges incurred in the year
ended December 31, 2007 primarily related to accelerated depreciation resulting from the decision to accelerate
closure of one of our ENBREL commercial bulk manufacturing operations in connection with the rationalization
of our worldwide network of manufacturing facilities. See Note 9, “Restructuring” to the Consolidated Financial
Statements for further discussion.
Research and development
R&D costs are expensed as incurred and primarily include salaries, benefits and other staff-related costs; fa-
cilities 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 include costs incurred under R&D arrangements with our corporate partners, such as
activities performed on behalf of KA, and costs and cost recoveries associated with collaborative R&D and
in-licensing arrangements, including upfront fees and milestones paid to collaboration partners in connection
with technologies that have no alternative future use. Net payment or reimbursement of R&D costs for R&D col-
laborations is recognized when the obligations are incurred or as we become entitled to the cost recovery.
R&D expenses decreased 5% for the year ended December 31, 2009 compared to 2008. This decline was
primarily attributable to lower clinical trial costs of $128 million, including those associated with our denosumab
and Vectibix®registrational studies, our marketed products and the delay of the phase 3 motesanib NSCLC trial,
and $14 million lower staff-related costs. Additionally, we incurred higher licensing fees, in 2009, related to the
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