Amgen 2013 Annual Report Download - page 100

expenditures. In all countries outside of the United States, except Japan, we receive 50% of net profits on sales of Nexavar® after deducting certain Bayer-
related costs.
The collaboration with Bayer will terminate when patents expire that were issued in connection with product candidates discovered under the agreements,
or at the time when neither we nor Bayer are entitled to profit sharing under the agreement, whichever happens last.
Amgen is acting as an agent under the collaboration and as such, revenue is derived by calculating net sales of Nexavar ® to third-party customers and
deducting the cost of goods sold, distribution costs, marketing costs, phase 4 clinical trial costs, allocable overhead costs and certain other costs. During the
fourth quarter of 2013, Amgen recorded a net Nexavar® collaboration profit of $78 million, which was recognized as Other revenues in the Consolidated
Statements of Income. In addition, during the fourth quarter of 2013, net R&D expenses related to the collaboration of $13 million were recognized in the
Consolidated Statements of Income.
Other
In addition to the collaborations discussed above, we have various others that are not individually significant to our business at this time. Pursuant to
the terms of those agreements, we may be required to pay or we may receive additional amounts upon the achievement of various development and commercial
milestones which in the aggregate could be significant. We may also incur or have reimbursed to us significant R&D costs if the related product candidate were
to advance to late stage clinical trials. In addition, if any products related to these collaborations are approved for sale, we may be required to pay or we may
receive significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a
high degree of uncertainty of occurring.

We own a 50% interest in K-A, a corporation formed in 1984 with Kirin Holdings Company, Limited (Kirin) for the development and
commercialization of certain products based on advanced biotechnology. All of our rights to manufacture and market certain products including pegfilgrastim,
granulocyte colony-stimulating factor, darbepoetin alfa, recombinant human erythropoietin and romiplostim are pursuant to exclusive licenses from K-A,
which we currently market under the brand names Neulasta ®, NEUPOGEN®, Aranesp®, EPOGEN®, and Nplate®, respectively.
We account for our interest in K-A using the equity method and include our share of K-A’s profits or losses in Selling, general and administrative
expense in the Consolidated Statements of Income. Our share of K-A’s profits and losses was losses of $6 million and $24 million, and profit of $47 million,
for the years ended December 31, 2013, 2012 and 2011, respectively. The carrying value of our equity method investment in K-A, net of dividends received,
was approximately $0.3 billion and $0.4 billion, as of December 31, 2013 and 2012, respectively, and is included in noncurrent Other assets in the
Consolidated Balance Sheets.
K-A’s revenues consist of royalty income related to its licensed technology rights. K-A receives royalty income from us, as well as from Kirin and J&J
under separate product license contracts for certain geographic areas outside the United States. During the years ended December 31, 2013, 2012 and 2011, K-
A earned royalties from us of $272 million, $274 million and $298 million, respectively. These amounts are included in Cost of sales in the Consolidated
Statements of Income.
K-A’s expenses consist primarily of costs related to R&D activities conducted on its behalf by Amgen and Kirin. K-A pays Amgen and Kirin for such
services at negotiated rates. During the years ended December 31, 2013, 2012 and 2011, we earned revenues from K-A of $117 million, $115 million and
$130 million, respectively, for certain R&D activities performed on K-A’s behalf. These amounts are recognized as Other revenues in the Consolidated
Statements of Income. We may also receive several individually immaterial milestones aggregating $85 million upon the achievement of various substantive
success-based development and regulatory approval milestones contingent upon the occurrence of various future events, most of which have a high degree of
uncertainty of occurring. During the years ended December 31, 2013, 2012 and 2011, we recorded cost recoveries from K-A of $218 million, $142 million
and $85 million, respectively, related to certain third-party costs. These amounts are included in Research and development expense in the Consolidated
Statements of Income.
As of December 31, 2013 and 2012, K-A owed us $22 million and we owed K-A $31 million, respectively, which are included in Other current assets
and Accrued liabilities in the Consolidated Balance Sheets, respectively.
F-24