Amgen 2013 Annual Report Download - page 98

Pfizer Inc.
The co-promotion term of our Enbrel® collaboration agreement with Pfizer in the United States and Canada expired on October 31, 2013. Under the
collaboration agreement, Amgen and Pfizer shared in the agreed-upon selling and marketing expenses approved by a joint committee. We paid Pfizer a
percentage of annual gross profits on our ENBREL sales in the United States and Canada on a scale that increased with gross profits; however, we
maintained a majority share of ENBREL profits. Upon expiration of the co-promotion term, we are required to pay Pfizer residual royalties based on a
declining percentage of annual net ENBREL sales in the United States and Canada for three years, ranging from 12% to 10%. The amounts of such payments
are anticipated to be significantly less than what would be owed based on the terms of the previous ENBREL profit share. Effective November 1, 2016, there
will be no further royalty payments.
We determined that we were and continue to be the principal participant in the collaboration with Pfizer to market ENBREL in the United States and
Canada. Accordingly, we recorded our product sales of ENBREL to third parties net of estimated returns, rebates and other deductions. For the years ended
December 31, 2013, 2012 and 2011, ENBREL sales aggregated $4.6 billion, $4.2 billion and $3.7 billion, respectively.
During the years ended December 31, 2013, 2012 and 2011, the aggregate net amounts due to Pfizer under this arrangement for the ENBREL profit
share expense and royalties on ENBREL sales during the three months ended December 31, 2013, after the expiration of the co-promotion term, net of their
share of selling and marketing expense was $1.3 billion, $1.3 billion and $1.1 billion, respectively. The amounts we pay to Pfizer are included in Selling,
general and administrative expense in the Consolidated Statements of Income.
Glaxo Group Limited
We are in a collaboration with Glaxo Group Limited (Glaxo), a wholly owned subsidiary of GlaxoSmithKline plc, for the commercialization of
denosumab for osteoporosis indications in Europe, Australia, New Zealand and Mexico (the Primary Territories). We have retained the rights to commercialize
denosumab for all indications in the United States and Canada and for oncology indications in the Primary Territories. Under a related agreement, Glaxo will
commercialize denosumab for all indications in countries, excluding Japan, where we did not have a commercial presence at the commencement of the
agreement, including China, Brazil, India, Taiwan and South Korea (the Expansion Territories). In the Expansion Territories, Glaxo is responsible for all
development and commercialization costs and will purchase denosumab from us to meet demand. We have the option of expanding our role in the
commercialization of denosumab in the Primary Territories and certain of the Expansion Territories. In the Primary Territories, we share equally in the
commercialization profits and losses related to the collaboration after accounting for expenses, including an amount payable to us in recognition of our
discovery and development of denosumab. Glaxo is also responsible for bearing a portion of the cost of certain specified development activities in the Primary
Territories.
The collaboration agreement with Glaxo for the Primary Territories will expire in 2022 and the related agreement for the Expansion Territories will expire
in 2024, unless either agreement is terminated earlier in accordance with its terms.
As the principal participant in the Primary Territories, Amgen records related product sales to third parties net of estimated returns, rebates and other
deductions. During the years ended December 31, 2013, 2012 and 2011, product sales in the Primary Territories for osteoporosis indications were $219
million, $139 million and $62 million, respectively. In the Expansion Territories, we record product sales to Glaxo. During the years ended December 31,
2013, 2012 and 2011, product sales of denosumab to Glaxo for the Expansion Territories were not material.
During the year ended December 31, 2013, the net cost recoveries due to Glaxo were $16 million. During the years ended December 31, 2012 and 2011
the cost recoveries due from Glaxo were $10 million and $30 million, respectively. Cost recoveries are included in Selling, general and administrative expense
in the Consolidated Statements of Income.
AstraZeneca Plc.
We are in a collaboration with AstraZeneca Plc. (AstraZeneca) to jointly develop and commercialize certain monoclonal antibodies from Amgen's clinical
inflammation portfolio, including brodalumab, AMG 139, AMG 157, AMG 181 and AMG 557. The agreement covers the worldwide development and
commercialization of these antibodies, except for certain Asian countries for brodalumab and Japan for AMG 557, which are licensed to other third parties.
Under the terms of the agreement, approximately 65% of related development costs for the 2012-2014 periods will be funded by AstraZeneca, thereafter,
the companies will share costs equally. If approved for sale, Amgen would receive a low-single-digit royalty rate for brodalumab and a mid-single-digit royalty
rate for the rest of the portfolio, after which the worldwide commercialization profits and losses related to the collaboration products would be shared equally.
In 2012, we received a payment
F-22