Amgen 2013 Annual Report Download - page 46

Our business will, however, continue to face various challenges. Certain of our products will face increasing competitive pressure as a result of
competitive product launches. Additionally, certain of the existing patents on our principal products — including NEUPOGEN ®, EPOGEN®, Neulasta®and
Aranesp® — recently expired or will expire over the next few years, and we expect to face increasing competition from competitive products including
biosimilars. For additional information, including information on the expiration of patents for various products, see Item 1. Business — Marketing,
Distribution and Selected Marketed Products — Patents.
Current global economic conditions also pose challenges to our business, including continued pressure to reduce healthcare expenditures. Efforts to
reduce healthcare costs are being made by third-party payers including governments and private payers. In the United States, various actions have been taken
aimed at reducing healthcare spending. The continuing prominence of U.S. budget deficits increases the risk that taxes, fees, rebates, or other federal measures
that would further reduce our revenues or increase our expenses may be enacted. As a result of economic conditions, the industry continues to experience
significant pricing pressures and other cost containment measures in certain European countries also.
Our long-term success depends to a great extent on our ability to continue to discover, develop and commercialize innovative products and acquire or
collaborate on therapies currently in development by other companies. The discovery and development of safe and effective new products, as well as the
development of additional indications for existing products, are necessary for the continued strength of our business. We must develop new products over time
in order to offset revenue losses when products lose their exclusivity or competing products are launched, as well as in order to provide for revenue and
earnings growth. We devote considerable resources to R&D activities. However, successful product development in the biotechnology industry is highly
uncertain. We are also confronted by increasing regulatory scrutiny of safety and efficacy both before and after products launch.
Finally, our product sales are subject to certain influences throughout the year, including wholesaler and end-user buying patterns (e.g., wholesaler and
end-user stocking, contract-driven buying and patients delaying certain purchasing or physician visits). Such factors can result in higher demand for our
products and/or higher wholesaler inventory levels and, therefore, higher product sales for a given three-month period, generally followed by a decline in
product sales in the subsequent three-month period. For example, sales of certain of our products in the United States for the three months ended March 31 can
be slightly lower relative to the immediately preceding three-month period. While this can result in variability in quarterly product sales on a sequential basis,
these effects have generally not been significant when comparing product sales in the three months ended March 31 with product sales in the corresponding
period of the prior year.
See Item 1. Business — Marketing, Distribution and Selected Marketed Products and Item 1A. Risk Factors for further discussion of certain of the
factors that could impact our future product sales.
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The following is an overview of our results of operations (in millions, except percentages and per share data):
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Product sales:
U.S. $14,045
10 %
$12,815
ROW 4,147
8 %
3,824
Total product sales 18,192
9 %
16,639
Other revenues 484
(23)%
626
Total revenues $18,676
8 %
$17,265
Operating expenses $12,809
10 %
$11,688
Operating income $5,867
5 %
$5,577
Net income $5,081
17 %
$4,345
Diluted EPS $6.64
20 %
$5.52
Diluted shares 765
(3)%
787
In the following discussion of changes in product sales, any reference to unit growth or decline refers to changes in the purchases of our products by
healthcare providers, such as physicians or their clinics, dialysis centers, hospitals and pharmacies.
The increase in U.S. product sales for 2013 reflects growth across the portfolio except for Aranesp ®, which declined 4%. The growth was driven
primarily by increases in average net sales prices and, to a lesser extent, unit growth. The increase in ROW product sales for 2013 reflects growth for all of our
marketed products except Aranesp®, which declined 7%, and NEUPOGEN ®, which declined 9%. The ROW increase was driven by unit growth.
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