UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20212022
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-37702
Amgen Inc.
(Exact name of registrant as specified in its charter)
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Delaware | | 95-3540776 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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One Amgen Center Drive | | 91320-1799 |
Thousand Oaks | |
California | |
(Address of principal executive offices) | | (Zip Code) |
(805) 447-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, $0.0001 par value | AMGN | The Nasdaq Stock Market LLC |
1.250% Senior Notes due 2022 | AMGN22 | The Nasdaq Stock Market LLC |
2.00% Senior Notes due 2026 | AMGN26 | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
Smaller reporting company | ☐ | Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☑
As of July 29, 2021,August 1, 2022, the registrant had 567,852,353534,930,850 shares of common stock, $0.0001 par value, outstanding.
AMGEN INC.
INDEX
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Defined Terms and Products
Defined terms
We use several terms in this Form 10-Q, including but not limited to those that are finance, regulation and disease-state related as well as names of other companies, which are given below.
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Term | Description | | | | |
2017 Tax Act | Tax Cuts and Jobs Act of 2017 | | | | |
ANDA | Abbreviated New Drug Application | | | | |
AOCI | accumulated other comprehensive income (loss) | | | | |
ASR | accelerated share repurchase | | | | |
BeiGene | BeiGene, Ltd. | | | | |
Bergamo | Laboratorio Quimico Farmaceutico Bergamo Ltda | | | | |
ChemoCentryx | ChemoCentryx, Inc. | | | | |
CMS | Centers for Medicare & Medicaid Services | | | | |
COVID-19 | coronavirus disease 2019 | | | | |
Eczacıbaşı | EIS Eczacıbaşı İlaç, Sınai ve Finansal Yatırımlar Sanayi ve Ticaret A.Ş. | | | | |
EMA | European Medicines Agency | | | | |
EPS | earnings per share | | | | |
FASB | Financial Accounting Standards Board | | | | |
FDA | U.S. Food and Drug Administration | | | | |
Fitch | Fitch Ratings, Inc. | | | | |
Five Prime | Five Prime Therapeutics, Inc. | | | | |
FTC | Federal Trade Commission | | | | |
GAAP | U.S. generally accepted accounting principles | | | | |
Gensenta | Gensenta İlaç Sanayi ve Ticaret A.Ş. | | | | |
HHS | U.S. Department of Health & Human Services | | | | |
IPR&D | in-process research and development | | | | |
IRP | international reference pricing | | | | |
IRS | Internal Revenue Service | | | | |
LIBOR | London Interbank Offered Rate | | | | |
Lp(a) | lipoprotein(a) | | | | |
MD&A | management’s discussion and analysis | | | | |
MFN | most-favored nation | | | | |
Moody’s | Moody’s Investors Service, Inc. | | | | |
Neumora | Neumora Therapeutics, Inc. | | | | |
OECD | Organisation for Economic Co-operation and Development | | | | |
PBM | pharmacy benefit manager | | | | |
PTAB | Patent Trial and Appeal Board | | | | |
R&D | research and development | | | | |
RAR | Revenue Agent Report | | | | |
ROW | rest of world | | | | |
S&P | Standard & Poor’s Financial Services LLC | | | | |
SEC | U.S. Securities and Exchange Commission | | | | |
SG&A | selling, general and administrative | | | | |
Teneobio | Teneobio, Inc. | | | | |
U.S. Treasury | U.S. Department of Treasury | | | | |
USPTO | U.S. Patent and Trademark Office | | | | |
UTB | unrecognized tax benefit | | | | |
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Products
The brand names of our products, our delivery devices and certain of our product candidates and their associated generic names are given below.
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Term | | Description |
Aimovig | | Aimovig® (erenumab-aooe) |
AMGEVITA | | AMGEVITA™ (adalimumab) |
Aranesp | | Aranesp® (darbepoetin alfa) |
AVSOLA | | AVSOLA® (infliximab-axxq) |
BLINCYTO | | BLINCYTO® (blinatumomab) |
Corlanor | | Corlanor® (ivabradine) |
ENBREL | | Enbrel® (etanercept) |
EPOGEN | | EPOGEN® (epoetin alfa) |
EVENITY | | EVENITY® (romosozumab-aqqg) |
IMLYGIC | | IMLYGIC® (talimogene laherparepvec) |
KANJINTI | | KANJINTI® (trastuzumab-anns) |
KYPROLIS | | KYPROLIS® (carfilzomib) |
LUMAKRAS/LUMYKRAS | | LUMAKRAS® / LUMYKRAS™ (sotorasib) |
MVASI | | MVASI® (bevacizumab-awwb) |
Neulasta | | Neulasta® (pegfilgrastim) |
NEUPOGEN | | NEUPOGEN® (filgrastim) |
Nplate | | Nplate® (romiplostim) |
Olpasiran | | Olpasiran (formerly AMG 890) |
Onpro | | Onpro® |
Otezla | | Otezla® (apremilast) |
Parsabiv | | Parsabiv® (etelcalcetide) |
Prolia | | Prolia® (denosumab) |
Repatha | | Repatha® (evolocumab) |
RIABNI | | RIABNI™ (rituximab-arrx) |
Sensipar/Mimpara | | Sensipar®/Mimpara™ (cinacalcet) |
TEZSPIRE | | TEZSPIRE® (tezepelumab-ekko) |
Vectibix | | Vectibix® (panitumumab) |
XGEVA | | XGEVA® (denosumab) |
PART I — FINANCIAL INFORMATION
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Item 1. | FINANCIAL STATEMENTS |
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share data)
(Unaudited)
| | | Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Revenues: | Revenues: | | | | | | | | Revenues: | | | | | | | |
Product sales | Product sales | $ | 6,114 | | | $ | 5,908 | | | $ | 11,706 | | | $ | 11,802 | | Product sales | $ | 6,281 | | | $ | 6,114 | | | $ | 12,012 | | | $ | 11,706 | |
Other revenues | Other revenues | 412 | | | 298 | | | 721 | | | 565 | | Other revenues | 313 | | | 412 | | | 820 | | | 721 | |
Total revenues | Total revenues | 6,526 | | | 6,206 | | | 12,427 | | | 12,367 | | Total revenues | 6,594 | | | 6,526 | | | 12,832 | | | 12,427 | |
| Operating expenses: | Operating expenses: | | Operating expenses: | |
Cost of sales | Cost of sales | 1,637 | | | 1,488 | | | 3,127 | | | 3,001 | | Cost of sales | 1,510 | | | 1,637 | | | 3,071 | | | 3,127 | |
Research and development | Research and development | 1,082 | | | 964 | | | 2,049 | | | 1,916 | | Research and development | 1,039 | | | 1,082 | | | 1,998 | | | 2,049 | |
Acquired in-process research and development | Acquired in-process research and development | 1,505 | | | 0 | | | 1,505 | | | 0 | | Acquired in-process research and development | — | | | 1,505 | | | — | | | 1,505 | |
Selling, general and administrative | Selling, general and administrative | 1,384 | | | 1,295 | | | 2,638 | | | 2,611 | | Selling, general and administrative | 1,327 | | | 1,384 | | | 2,555 | | | 2,638 | |
Other | Other | 90 | | | 136 | | | 151 | | | 161 | | Other | 542 | | | 90 | | | 532 | | | 151 | |
Total operating expenses | Total operating expenses | 5,698 | | | 3,883 | | | 9,470 | | | 7,689 | | Total operating expenses | 4,418 | | | 5,698 | | | 8,156 | | | 9,470 | |
| Operating income | Operating income | 828 | | | 2,323 | | | 2,957 | | | 4,678 | | Operating income | 2,176 | | | 828 | | | 4,676 | | | 2,957 | |
| Other income (expense): | Other income (expense): | | Other income (expense): | |
Interest expense, net | Interest expense, net | (281) | | | (296) | | | (566) | | | (642) | | Interest expense, net | (328) | | | (281) | | | (623) | | | (566) | |
Other income, net | 11 | | | 3 | | | 24 | | | 14 | | |
Other (expense) income, net | | Other (expense) income, net | (317) | | | 11 | | | (847) | | | 24 | |
| Income before income taxes | Income before income taxes | 558 | | | 2,030 | | | 2,415 | | | 4,050 | | Income before income taxes | 1,531 | | | 558 | | | 3,206 | | | 2,415 | |
| Provision for income taxes | Provision for income taxes | 94 | | | 227 | | | 305 | | | 422 | | Provision for income taxes | 214 | | | 94 | | | 413 | | | 305 | |
| Net income | Net income | $ | 464 | | | $ | 1,803 | | | $ | 2,110 | | | $ | 3,628 | | Net income | $ | 1,317 | | | $ | 464 | | | $ | 2,793 | | | $ | 2,110 | |
| Earnings per share: | Earnings per share: | | Earnings per share: | |
Basic | Basic | $ | 0.81 | | | $ | 3.07 | | | $ | 3.67 | | | $ | 6.16 | | Basic | $ | 2.46 | | | $ | 0.81 | | | $ | 5.16 | | | $ | 3.67 | |
Diluted | Diluted | $ | 0.81 | | | $ | 3.05 | | | $ | 3.65 | | | $ | 6.12 | | Diluted | $ | 2.45 | | | $ | 0.81 | | | $ | 5.13 | | | $ | 3.65 | |
| Shares used in calculation of earnings per share: | Shares used in calculation of earnings per share: | | Shares used in calculation of earnings per share: | |
Basic | Basic | 573 | | | 588 | | | 575 | | | 589 | | Basic | 535 | | | 573 | | | 541 | | | 575 | |
Diluted | Diluted | 576 | | | 592 | | | 578 | | | 593 | | Diluted | 537 | | | 576 | | | 544 | | | 578 | |
See accompanying notes.
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
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| Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net income | $ | 464 | | | $ | 1,803 | | | $ | 2,110 | | | $ | 3,628 | |
Other comprehensive (loss) income, net of reclassification adjustments and taxes: | | | | | | | |
Gains (losses) on foreign currency translation | 14 | | | (3) | | | (25) | | | (55) | |
(Losses) gains on cash flow hedges | (48) | | | (116) | | | 142 | | | (177) | |
Losses on available-for-sale securities | 0 | | | (2) | | | 0 | | | (21) | |
Other | (1) | | | 0 | | | 0 | | | (2) | |
Other comprehensive (loss) income, net of taxes | (35) | | | (121) | | | 117 | | | (255) | |
Comprehensive income | $ | 429 | | | $ | 1,682 | | | $ | 2,227 | | | $ | 3,373 | |
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| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net income | $ | 1,317 | | | $ | 464 | | | $ | 2,793 | | | $ | 2,110 | |
Other comprehensive income (loss), net of reclassification adjustments and taxes: | | | | | | | |
Foreign currency translation | (65) | | | 14 | | | (116) | | | (25) | |
Cash flow hedges | 156 | | | (48) | | | 240 | | | 142 | |
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Other | — | | | (1) | | | — | | | — | |
Other comprehensive income (loss), net of reclassification adjustments and taxes | 91 | | | (35) | | | 124 | | | 117 | |
Comprehensive income | $ | 1,408 | | | $ | 429 | | | $ | 2,917 | | | $ | 2,227 | |
See accompanying notes.
AMGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per-share data)
| | | June 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
| | (Unaudited) | | | | (Unaudited) | | |
ASSETS | ASSETS | ASSETS |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 6,630 | | | $ | 6,266 | | Cash and cash equivalents | $ | 5,203 | | | $ | 7,989 | |
Marketable securities | Marketable securities | 1,452 | | | 4,381 | | Marketable securities | 1,980 | | | 48 | |
Trade receivables, net | Trade receivables, net | 4,479 | | | 4,525 | | Trade receivables, net | 5,327 | | | 4,895 | |
Inventories | Inventories | 4,115 | | | 3,893 | | Inventories | 4,554 | | | 4,086 | |
Other current assets | Other current assets | 2,423 | | | 2,079 | | Other current assets | 2,258 | | | 2,367 | |
Total current assets | Total current assets | 19,099 | | | 21,144 | | Total current assets | 19,322 | | | 19,385 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 4,906 | | | 4,889 | | Property, plant and equipment, net | 5,158 | | | 5,184 | |
Intangible assets, net | Intangible assets, net | 15,308 | | | 16,587 | | Intangible assets, net | 13,927 | | | 15,182 | |
Goodwill | Goodwill | 14,676 | | | 14,689 | | Goodwill | 14,865 | | | 14,890 | |
Other noncurrent assets | Other noncurrent assets | 5,784 | | | 5,639 | | Other noncurrent assets | 6,022 | | | 6,524 | |
Total assets | Total assets | $ | 59,773 | | | $ | 62,948 | | Total assets | $ | 59,294 | | | $ | 61,165 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | $ | 1,277 | | | $ | 1,421 | | Accounts payable | $ | 1,256 | | | $ | 1,366 | |
Accrued liabilities | Accrued liabilities | 8,984 | | | 10,141 | | Accrued liabilities | 10,545 | | | 10,731 | |
Current portion of long-term debt | Current portion of long-term debt | 4,324 | | | 91 | | Current portion of long-term debt | 817 | | | 87 | |
Total current liabilities | Total current liabilities | 14,585 | | | 11,653 | | Total current liabilities | 12,618 | | | 12,184 | |
| Long-term debt | Long-term debt | 28,458 | | | 32,895 | | Long-term debt | 35,705 | | | 33,222 | |
Long-term tax liabilities | Long-term tax liabilities | 6,428 | | | 6,968 | | Long-term tax liabilities | 5,603 | | | 6,594 | |
Other noncurrent liabilities | Other noncurrent liabilities | 2,055 | | | 2,023 | | Other noncurrent liabilities | 2,949 | | | 2,465 | |
| Contingencies and commitments | Contingencies and commitments | 0 | | 0 | Contingencies and commitments | 0 | | 0 |
| Stockholders’ equity: | Stockholders’ equity: | | Stockholders’ equity: | |
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—569.6 shares in 2021 and 578.3 shares in 2020 | 31,877 | | | 31,802 | | |
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—534.9 shares in 2022 and 558.3 shares in 2021 | | Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—534.9 shares in 2022 and 558.3 shares in 2021 | 31,343 | | | 32,096 | |
Accumulated deficit | Accumulated deficit | (22,762) | | | (21,408) | | Accumulated deficit | (28,252) | | | (24,600) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (868) | | | (985) | | Accumulated other comprehensive loss | (672) | | | (796) | |
Total stockholders’ equity | Total stockholders’ equity | 8,247 | | | 9,409 | | Total stockholders’ equity | 2,419 | | | 6,700 | |
Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 59,773 | | | $ | 62,948 | | Total liabilities and stockholders’ equity | $ | 59,294 | | | $ | 61,165 | |
See accompanying notes.
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per-share data)
(Unaudited)
| | | Number of shares of common stock | | Common stock and additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Total | | Number of shares of common stock | | Common stock and additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Total |
Balance as of December 31, 2020 | 578.3 | | | $ | 31,802 | | | $ | (21,408) | | | $ | (985) | | | $ | 9,409 | | |
Balance as of December 31, 2021 | | Balance as of December 31, 2021 | 558.3 | | | $ | 32,096 | | | $ | (24,600) | | | $ | (796) | | | $ | 6,700 | |
| Net income | Net income | — | | | — | | | 1,646 | | | — | | | 1,646 | | Net income | — | | | — | | | 1,476 | | | — | | | 1,476 | |
Other comprehensive income, net of taxes | Other comprehensive income, net of taxes | — | | | — | | | — | | | 152 | | | 152 | | Other comprehensive income, net of taxes | — | | | — | | | — | | | 33 | | | 33 | |
Dividends declared on common stock ($1.76 per share) | — | | | — | | | (1,012) | | | — | | | (1,012) | | |
Dividends declared on common stock ($1.94 per share) | | Dividends declared on common stock ($1.94 per share) | — | | | — | | | (1,034) | | | — | | | (1,034) | |
Issuance of common stock in connection with the Company’s equity award programs | Issuance of common stock in connection with the Company’s equity award programs | 0.7 | | | 6 | | | — | | | — | | | 6 | | Issuance of common stock in connection with the Company’s equity award programs | 0.5 | | | 18 | | | — | | | — | | | 18 | |
Stock-based compensation expense | Stock-based compensation expense | — | | | 57 | | | — | | | — | | | 57 | | Stock-based compensation expense | — | | | 78 | | | — | | | — | | | 78 | |
Tax impact related to employee stock-based compensation expense | Tax impact related to employee stock-based compensation expense | — | | | (59) | | | — | | | — | | | (59) | | Tax impact related to employee stock-based compensation expense | — | | | (45) | | | — | | | — | | | (45) | |
Repurchases of common stock | (3.7) | | | — | | | (865) | | | — | | | (865) | | |
Balance as of March 31, 2021 | 575.3 | | | 31,806 | | | (21,639) | | | (833) | | | 9,334 | | |
Repurchases of common stock (Note 10) | | Repurchases of common stock (Note 10) | (24.6) | | | (900) | | | (5,410) | | | — | | | (6,310) | |
Balance as of March 31, 2022 | | Balance as of March 31, 2022 | 534.2 | | | 31,247 | | | (29,568) | | | (763) | | | 916 | |
| Net income | Net income | — | | | — | | | 464 | | | — | | | 464 | | Net income | — | | | — | | | 1,317 | | | — | | | 1,317 | |
Other comprehensive loss, net of taxes | — | | | — | | | — | | | (35) | | | (35) | | |
| Other comprehensive income, net of taxes | | Other comprehensive income, net of taxes | — | | | — | | | — | | | 91 | | | 91 | |
Issuance of common stock in connection with the Company’s equity award programs | Issuance of common stock in connection with the Company’s equity award programs | 0.8 | | | 47 | | | — | | | — | | | 47 | | Issuance of common stock in connection with the Company’s equity award programs | 0.7 | | | 45 | | | — | | | — | | | 45 | |
Stock-based compensation expense | Stock-based compensation expense | — | | | 100 | | | — | | | — | | | 100 | | Stock-based compensation expense | — | | | 120 | | | — | | | — | | | 120 | |
Tax impact related to employee stock-based compensation expense | Tax impact related to employee stock-based compensation expense | — | | | (76) | | | — | | | — | | | (76) | | Tax impact related to employee stock-based compensation expense | — | | | (69) | | | — | | | — | | | (69) | |
Repurchases of common stock | (6.5) | | | — | | | (1,592) | | | — | | | (1,592) | | |
| Other | Other | — | | | — | | | 5 | | | — | | | 5 | | Other | — | | | — | | | (1) | | | — | | | (1) | |
Balance as of June 30, 2021 | 569.6 | | | $ | 31,877 | | | $ | (22,762) | | | $ | (868) | | | $ | 8,247 | | |
Balance as of June 30, 2022 | | Balance as of June 30, 2022 | 534.9 | | | $ | 31,343 | | | $ | (28,252) | | | $ | (672) | | | $ | 2,419 | |
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AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(In millions, except per-share data)
(Unaudited)
| | | Number of shares of common stock | | Common stock and additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Total | | Number of shares of common stock | | Common stock and additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Total |
Balance as of December 31, 2019 | 591.4 | | | $ | 31,531 | | | $ | (21,330) | | | $ | (528) | | | $ | 9,673 | | |
Cumulative effect of changes in accounting principles, net of taxes | — | | | — | | | (2) | | | — | | | (2) | | |
Balance as of December 31, 2020 | | Balance as of December 31, 2020 | 578.3 | | | $ | 31,802 | | | $ | (21,408) | | | $ | (985) | | | $ | 9,409 | |
| Net income | Net income | — | | | — | | | 1,825 | | | — | | | 1,825 | | Net income | — | | | — | | | 1,646 | | | — | | | 1,646 | |
Other comprehensive loss, net of taxes | — | | | — | | | — | | | (134) | | | (134) | | |
Dividends declared on common stock ($1.60 per share) | — | | | — | | | (938) | | | — | | | (938) | | |
Other comprehensive income, net of taxes | | Other comprehensive income, net of taxes | — | | | — | | | — | | | 152 | | | 152 | |
Dividends declared on common stock ($1.76 per share) | | Dividends declared on common stock ($1.76 per share) | — | | | — | | | (1,012) | | | — | | | (1,012) | |
Issuance of common stock in connection with the Company’s equity award programs | Issuance of common stock in connection with the Company’s equity award programs | 0.9 | | | 10 | | | — | | | — | | | 10 | | Issuance of common stock in connection with the Company’s equity award programs | 0.7 | | | 6 | | | — | | | — | | | 6 | |
Stock-based compensation expense | Stock-based compensation expense | — | | | 52 | | | — | | | — | | | 52 | | Stock-based compensation expense | — | | | 57 | | | — | | | — | | | 57 | |
Tax impact related to employee stock-based compensation expense | Tax impact related to employee stock-based compensation expense | — | | | (68) | | | — | | | — | | | (68) | | Tax impact related to employee stock-based compensation expense | — | | | (59) | | | — | | | — | | | (59) | |
Repurchases of common stock | Repurchases of common stock | (4.3) | | | — | | | (933) | | | — | | | (933) | | Repurchases of common stock | (3.7) | | | — | | | (865) | | | — | | | (865) | |
Balance as of March 31, 2020 | 588.0 | | | $ | 31,525 | | | $ | (21,378) | | | $ | (662) | | | $ | 9,485 | | |
Balance as of March 31, 2021 | | Balance as of March 31, 2021 | 575.3 | | | 31,806 | | | (21,639) | | | (833) | | | 9,334 | |
| Net income | Net income | — | | | — | | | 1,803 | | | — | | | 1,803 | | Net income | — | | | — | | | 464 | | | — | | | 464 | |
Other comprehensive loss, net of taxes | Other comprehensive loss, net of taxes | — | | | — | | | — | | | (121) | | | (121) | | Other comprehensive loss, net of taxes | — | | | — | | | — | | | (35) | | | (35) | |
| Issuance of common stock in connection with the Company’s equity award programs | Issuance of common stock in connection with the Company’s equity award programs | 1.0 | | | 65 | | | — | | | — | | | 65 | | Issuance of common stock in connection with the Company’s equity award programs | 0.8 | | | 47 | | | — | | | — | | | 47 | |
Stock-based compensation expense | Stock-based compensation expense | — | | | 101 | | | — | | | — | | | 101 | | Stock-based compensation expense | — | | | 100 | | | — | | | — | | | 100 | |
Tax impact related to employee stock-based compensation expense | Tax impact related to employee stock-based compensation expense | — | | | (81) | | | — | | | — | | | (81) | | Tax impact related to employee stock-based compensation expense | — | | | (76) | | | — | | | — | | | (76) | |
Repurchases of common stock | Repurchases of common stock | (2.6) | | | — | | | (591) | | | — | | | (591) | | Repurchases of common stock | (6.5) | | | — | | | (1,592) | | | — | | | (1,592) | |
Other | Other | — | | | — | | | (2) | | | — | | | (2) | | Other | — | | | — | | | 5 | | | — | | | 5 | |
Balance as of June 30, 2020 | 586.4 | | | $ | 31,610 | | | $ | (20,168) | | | $ | (783) | | | $ | 10,659 | | |
Balance as of June 30, 2021 | | Balance as of June 30, 2021 | 569.6 | | | $ | 31,877 | | | $ | (22,762) | | | $ | (868) | | | $ | 8,247 | |
|
See accompanying notes.
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| | | Six months ended June 30, | | Six months ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net income | Net income | $ | 2,110 | | | $ | 3,628 | | Net income | $ | 2,793 | | | $ | 2,110 | |
Depreciation, amortization and other | Depreciation, amortization and other | 1,696 | | | 1,827 | | Depreciation, amortization and other | 1,669 | | | 1,696 | |
Deferred income taxes | Deferred income taxes | (137) | | | (261) | | Deferred income taxes | (514) | | | (137) | |
Acquired in-process research and development | Acquired in-process research and development | 1,505 | | | 0 | | Acquired in-process research and development | — | | | 1,505 | |
Adjustments for equity method investments | | Adjustments for equity method investments | 497 | | | (36) | |
Loss on divestiture | | Loss on divestiture | 560 | | | — | |
Other items, net | Other items, net | 170 | | | 245 | | Other items, net | 436 | | | 206 | |
Changes in operating assets and liabilities, net of acquisitions: | Changes in operating assets and liabilities, net of acquisitions: | | Changes in operating assets and liabilities, net of acquisitions: | |
Trade receivables, net | Trade receivables, net | 35 | | | (1,177) | | Trade receivables, net | (504) | | | 35 | |
Inventories | Inventories | (167) | | | (226) | | Inventories | (410) | | | (167) | |
Other assets | Other assets | (258) | | | 143 | | Other assets | 198 | | | (258) | |
Accounts payable | Accounts payable | (156) | | | (216) | | Accounts payable | (98) | | | (156) | |
Accrued income taxes, net | Accrued income taxes, net | (930) | | | 452 | | Accrued income taxes, net | (685) | | | (930) | |
Long-term tax liabilities | Long-term tax liabilities | 47 | | | 106 | | Long-term tax liabilities | 108 | | | 47 | |
Other liabilities | Other liabilities | 120 | | | 455 | | Other liabilities | 44 | | | 120 | |
Net cash provided by operating activities | Net cash provided by operating activities | 4,035 | | | 4,976 | | Net cash provided by operating activities | 4,094 | | | 4,035 | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Cash paid for acquisitions, net of cash acquired | (1,626) | | | 0 | | |
Purchases of marketable securities | Purchases of marketable securities | (8,000) | | | (2,229) | | Purchases of marketable securities | (1,976) | | | (8,000) | |
Proceeds from sales of marketable securities | Proceeds from sales of marketable securities | 4,404 | | | 2,598 | | Proceeds from sales of marketable securities | — | | | 4,404 | |
Proceeds from maturities of marketable securities | Proceeds from maturities of marketable securities | 6,528 | | | 238 | | Proceeds from maturities of marketable securities | 47 | | | 6,528 | |
Purchases of property, plant and equipment | | Purchases of property, plant and equipment | (436) | | | (351) | |
| Purchases of property, plant and equipment | (351) | | | (300) | | |
Purchases of equity method investments | (3) | | | (2,648) | | |
Cash paid for acquisitions, net of cash acquired | | Cash paid for acquisitions, net of cash acquired | — | | | (1,626) | |
Other | Other | (62) | | | (48) | | Other | 61 | | | (65) | |
Net cash provided by (used in) investing activities | 890 | | | (2,389) | | |
Net cash (used in) provided by investing activities | | Net cash (used in) provided by investing activities | (2,304) | | | 890 | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Net proceeds from issuance of debt | Net proceeds from issuance of debt | 0 | | | 9,002 | | Net proceeds from issuance of debt | 3,954 | | | — | |
Repayment of debt | 0 | | | (5,000) | | |
| Repurchases of common stock | (2,452) | | | (1,516) | | |
| Repurchases of common stock (Note 10) | | Repurchases of common stock (Note 10) | (6,360) | | | (2,452) | |
Dividends paid | Dividends paid | (2,024) | | | (1,887) | | Dividends paid | (2,118) | | | (2,024) | |
| Other | Other | (85) | | | (78) | | Other | (52) | | | (85) | |
Net cash (used in) provided by financing activities | (4,561) | | | 521 | | |
Increase in cash and cash equivalents | 364 | | | 3,108 | | |
Net cash used in financing activities | | Net cash used in financing activities | (4,576) | | | (4,561) | |
(Decrease) increase in cash and cash equivalents | | (Decrease) increase in cash and cash equivalents | (2,786) | | | 364 | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | 6,266 | | | 6,037 | | Cash and cash equivalents at beginning of period | 7,989 | | | 6,266 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 6,630 | | | $ | 9,145 | | Cash and cash equivalents at end of period | $ | 5,203 | | | $ | 6,630 | |
See accompanying notes.
AMGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 20212022
(Unaudited)
1. Summary of significant accounting policies
Business
Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. We operate in 1 business segment: human therapeutics.
Basis of presentation
The financial information for the three and six months ended June 30, 20212022 and 2020,2021, is unaudited but includes all adjustments (consisting of only normal, recurring adjustments unless otherwise indicated), which Amgen considers necessary for a fair presentation of its condensed consolidated results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.
The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and with our condensed consolidated financial statements and the notes thereto contained in our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022.
Principles of consolidation
The condensed consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. In determining whether we are the primary beneficiary of a variable interest entity, we consider whether we have both the power to direct activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of or the right to receive benefits from the entity that could potentially be significant to that entity. We do not have any significant interests in any variable interest entities.entities of which we are the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP)GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Property, plant and equipment, net
Property, plant and equipment is recorded at historical cost, net of accumulated depreciation and amortization, of $9.1$9.0 billion and $9.0$8.8 billion as of June 30, 20212022 and December 31, 2020,2021, respectively.
Recent accounting pronouncements
In March 2020, the Financial Accounting Standards Board (FASB)FASB issued a new accounting standard to ease the financial reporting burdens caused by the expected market transition from the London Interbank Offered Rate (LIBOR)LIBOR and other interbank offered rates to alternative reference rates, commonly referred to as reference rate reform.reform. The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting. Specifically, a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment of a previous accounting treatment. Moreover, for all types of hedging relationships, an entity is permitted to change the reference rate without having to dedesignate the hedging relationship. The standard is generally effective for all contract modifications made and hedging relationships evaluated through December 31, 2022. In January 2021, the FASB issued a new accounting standard to expand onthat expanded the scope of the original March 2020 standard to include derivative instruments on discounting transactions. We are currently evaluatingdo not expect the impact that bothtwo standards willto have a material impact on our condensed consolidated financial statements.
In November 2021, the FASB issued a new accounting standard around the recognition and measurement of contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The new standard clarifies that contract assets and contract liabilities acquired in a business combination from an acquiree should initially be recognized by applying revenue recognition principles and not at fair value. The standard is effective for interim and annual periods beginning on January 1, 2023, and early adoption is permitted. The impact of this standard will depend on the facts and circumstances of future transactions.
2. Acquisitions and divestitures
Acquisition of Teneobio, Inc.
On October 19, 2021, we acquired all of the outstanding stock of Teneobio, a privately held, clinical-stage biotechnology company developing a new class of biologics called human heavy-chain antibodies, which are single-chain antibodies composed of the human heavy-chain domain. The transaction, which was accounted for as a business combination, includes Teneobio’s proprietary bispecific and multispecific antibody technologies, which complement Amgen’s existing antibody capabilities and bispecific T-cell engager (BiTE®) platform and will enable significant acceleration and efficiency in the discovery and development of new molecules to treat diseases across Amgen’s core therapeutic areas. Upon its acquisition, Teneobio became a wholly owned subsidiary of Amgen, and its operations have been included in our condensed consolidated financial statements commencing on the acquisition date.
Measurement period adjustments for the six months ended June 30, 2022, included changes to the purchase price allocation and total consideration, resulting in a net increase of $22 million to goodwill. The measurement period adjustments resulted primarily from valuation inputs pertaining to certain acquired assets based on facts and circumstances that existed as of the acquisition date and did not result from events subsequent to the acquisition date. These adjustments did not have a significant impact on Amgen’s results of operations during the six months ended June 30, 2022, and would not have had a significant impact on prior-period results if these adjustments had been made as of the acquisition date. The following table summarizes the total consideration and allocated acquisition date fair values of assets acquired and liabilities assumed, inclusive of measurement period adjustments (in millions):
| | | | | | | | |
| | Amounts |
Cash purchase price | | $ | 993 | |
Contingent consideration | | 299 | |
Total consideration | | $ | 1,292 | |
| | |
Cash and cash equivalents | | $ | 100 | |
In-process research and development | | 991 | |
Finite-lived intangible asset – research and development technology rights | | 115 | |
Finite-lived intangible assets – licensing rights | | 41 | |
Goodwill | | 273 | |
Other assets, net | | 16 | |
Deferred tax liability | | (244) | |
Total assets acquired, net | | $ | 1,292 | |
Consideration for this transaction comprised (i) an upfront cash payment of $993 million, which included a working-capital adjustment, and (ii) future contingent milestone payments to Teneobio’s former equity holders of up to $1.6 billion in cash, based on the achievement of various development and regulatory milestones with regard to the leading asset (AMG 340, formerly TNB-585) and to various development milestones for other drug candidates. The estimated fair values of the contingent consideration obligations aggregated $299 million as of the acquisition date and were determined using a probability-weighted expected return methodology. The assumptions in this method include the probability of achieving the milestones and the expected payment dates, with such amounts discounted to present value based on our pretax cost of debt. See Note 11, Fair value measurement, for information regarding the estimated fair value of these obligations as of June 30, 2022.
The estimated fair values of acquired IPR&D assets totaled $991 million, of which $784 million relates to AMG 340, that is in a phase 1 clinical trial for the treatment of metastatic castration-resistant prostate cancer (mCRPC), and the balance relates to four separate preclinical oncology programs. The R&D technology rights of $115 million relate to Teneobio’s proprietary bispecific and multispecific antibody technologies; the amount is being amortized over 10 years by using the straight-line method. Teneobio has also licensed its technology and certain identified targets to various third parties, representing contractual agreements valued at $41 million. The estimated fair values for these intangible assets were determined using a multi-period excess earnings income approach that discounts expected future cash flows to present value by applying a discount rate that represents the estimated rate that market participants would use to value the intangible assets. The projected cash flows were based on certain assumptions attributable to the respective intangible asset, including estimates of future revenues and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from the FDA and other regulatory agencies.
A deferred tax liability of $244 million was recognized on temporary differences related to the book bases and tax bases of the acquired identifiable assets and assumed liabilities, primarily driven by the intangible assets acquired.
The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $273 million was recorded as goodwill, which is not deductible for tax purposes. The goodwill value represents expected synergies from both AMG 340 and the technologies acquired.
Our accounting for this acquisition is preliminary and will be finalized upon completion of our analysis of certain tax-related items as we obtain additional information during the measurement period of up to one year from the acquisition date.
Acquisition of Five Prime Therapeutics, Inc.
On April 16, 2021, Amgen completed its acquisition of Five Prime Therapeutics, Inc. (Five Prime) for a total cash consideration of $1.6 billion, net of cash acquired. The purchase price was funded with cash on hand. This transaction was accounted for as an asset acquisition because substantially all the value of the assets acquired was concentrated in the intellectual property rights of bemarituzumab, a phase 3 trial-ready, first-in-class program for gastric cancer. Five Prime’s operations have been included in our condensed consolidated financial statements commencing after the acquisition date.
We allocated the consideration to acquire Five Prime to: the bemarituzumab in-process research and development (IPR&D)IPR&D program of $1.5 billion, which was expensed immediately in Acquired IPR&D expense in the Condensed Consolidated Statements of Income; deferred tax assets of $177 million; and other net liabilities of $47 million. The acquiredAcquired IPR&D expense was not tax deductible.
Divestiture of Gensenta İlaç Sanayi ve Ticaret A.Ş.
On June 28, 2022, we entered into a share purchase agreement with Eczacıbaşı under which Eczacıbaşı will acquire all of our shares in Gensenta—a subsidiary in Turkey. Net assets related to Gensenta of $80 million met the criteria to be classified as held-for-sale and did not meet the criteria to be classified as discontinued operations. Upon closing of the transaction, we expect to receive $135 million in cash. The transaction is expected to close in the third quarter of 2022 upon approval by the Turkish Competition Authority.
As of June 30, 2022, held-for-sale assets and liabilities of $100 million and $20 million were included in Other current assets and Accrued liabilities, respectively, in the Condensed Consolidated Balance Sheets. During the three months ended June 30, 2022, we recognized a loss of $560 million recorded to Other operating expenses in the Condensed Consolidated Statements of Income, primarily due to the impact of the cumulative foreign currency translation loss, with valuation allowances to Other current assets and Accrued liabilities in the Condensed Consolidated Balance Sheets.
3. Revenues
We operate in 1 business segment: human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Revenues by product and by geographic area, based on customers’ locations, are presented below. The majority of rest-of-world (ROW)ROW revenues relates to products sold in Europe.
Revenues were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, |
| | 2021 | | 2020 |
| | U.S. | | ROW | | Total | | U.S. | | ROW | | Total |
Enbrel® (etanercept) | | $ | 1,113 | | | $ | 31 | | | $ | 1,144 | | | $ | 1,213 | | | $ | 33 | | | $ | 1,246 | |
Prolia® (denosumab) | | 538 | | | 276 | | | 814 | | | 441 | | | 218 | | | 659 | |
Otezla® (apremilast) | | 423 | | | 111 | | | 534 | | | 464 | | | 97 | | | 561 | |
Neulasta® (pegfilgrastim) | | 434 | | | 52 | | | 486 | | | 520 | | | 73 | | | 593 | |
XGEVA® (denosumab) | | 355 | | | 133 | | | 488 | | | 318 | | | 117 | | | 435 | |
Aranesp® (darbepoetin alfa) | | 135 | | | 232 | | | 367 | | | 156 | | | 231 | | | 387 | |
Repatha® (evolocumab) | | 143 | | | 143 | | | 286 | | | 115 | | | 85 | | | 200 | |
KYPROLIS® (carfilzomib) | | 190 | | | 90 | | | 280 | | | 167 | | | 86 | | | 253 | |
Other products | | 1,043 | | | 672 | | | 1,715 | | | 1,034 | | | 540 | | | 1,574 | |
Total product sales(1) | | $ | 4,374 | | | $ | 1,740 | | | 6,114 | | | $ | 4,428 | | | $ | 1,480 | | | 5,908 | |
Other revenues | | | | | | 412 | | | | | | | 298 | |
Total revenues | | | | | | $ | 6,526 | | | | | | | $ | 6,206 | |
| | | | | | | | | | | | |
| | Six months ended June 30, |
| | 2021 | | 2020 |
| | U.S. | | ROW | | Total | | U.S. | | ROW | | Total |
ENBREL | | $ | 2,007 | | | $ | 61 | | | $ | 2,068 | | | $ | 2,330 | | | $ | 69 | | | $ | 2,399 | |
Prolia® | | 1,039 | | | 533 | | | 1,572 | | | 863 | | | 450 | | | 1,313 | |
Otezla® | | 789 | | | 221 | | | 1,010 | | | 841 | | | 199 | | | 1,040 | |
Neulasta® | | 855 | | | 113 | | | 968 | | | 1,054 | | | 148 | | | 1,202 | |
XGEVA® | | 689 | | | 267 | | | 956 | | | 673 | | | 243 | | | 916 | |
Aranesp® | | 260 | | | 462 | | | 722 | | | 331 | | | 478 | | | 809 | |
Repatha® | | 282 | | | 290 | | | 572 | | | 239 | | | 190 | | | 429 | |
KYPROLIS® | | 349 | | | 182 | | | 531 | | | 354 | | | 179 | | | 533 | |
Other products | | 2,007 | | | 1,300 | | | 3,307 | | | 2,022 | | | 1,139 | | | 3,161 | |
Total product sales(1) | | $ | 8,277 | | | $ | 3,429 | | | 11,706 | | | $ | 8,707 | | | $ | 3,095 | | | 11,802 | |
Other revenues | | | | | | 721 | | | | | | | 565 | |
Total revenues | | | | | | $ | 12,427 | | | | | | | $ | 12,367 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, |
| | 2022 | | 2021 |
| | U.S. | | ROW | | Total | | U.S. | | ROW | | Total |
ENBREL | | $ | 1,036 | | | $ | 15 | | | $ | 1,051 | | | $ | 1,113 | | | $ | 31 | | | $ | 1,144 | |
Prolia | | 611 | | | 311 | | | 922 | | | 538 | | | 276 | | | 814 | |
Otezla | | 487 | | | 107 | | | 594 | | | 423 | | | 111 | | | 534 | |
XGEVA | | 391 | | | 142 | | | 533 | | | 355 | | | 133 | | | 488 | |
Aranesp | | 132 | | | 225 | | | 357 | | | 135 | | | 232 | | | 367 | |
Neulasta | | 263 | | | 47 | | | 310 | | | 434 | | | 52 | | | 486 | |
Repatha | | 154 | | | 171 | | | 325 | | | 143 | | | 143 | | | 286 | |
KYPROLIS | | 213 | | | 104 | | | 317 | | | 190 | | | 90 | | | 280 | |
Nplate | | 156 | | | 128 | | | 284 | | | 136 | | | 109 | | | 245 | |
Other products | | 1,003 | | | 585 | | | 1,588 | | | 907 | | | 563 | | | 1,470 | |
Total product sales(1) | | $ | 4,446 | | | $ | 1,835 | | | 6,281 | | | $ | 4,374 | | | $ | 1,740 | | | 6,114 | |
Other revenues | | | | | | 313 | | | | | | | 412 | |
Total revenues | | | | | | $ | 6,594 | | | | | | | $ | 6,526 | |
| | | | | | | | | | | | |
| | Six months ended June 30, |
| | 2022 | | 2021 |
| | U.S. | | ROW | | Total | | U.S. | | ROW | | Total |
ENBREL | | $ | 1,879 | | | $ | 34 | | | $ | 1,913 | | | $ | 2,007 | | | $ | 61 | | | $ | 2,068 | |
Prolia | | 1,193 | | | 581 | | | 1,774 | | | 1,039 | | | 533 | | | 1,572 | |
Otezla | | 837 | | | 208 | | | 1,045 | | | 789 | | | 221 | | | 1,010 | |
XGEVA | | 759 | | | 276 | | | 1,035 | | | 689 | | | 267 | | | 956 | |
Aranesp | | 269 | | | 446 | | | 715 | | | 260 | | | 462 | | | 722 | |
Neulasta | | 567 | | | 91 | | | 658 | | | 855 | | | 113 | | | 968 | |
Repatha | | 319 | | | 335 | | | 654 | | | 282 | | | 290 | | | 572 | |
KYPROLIS | | 409 | | | 195 | | | 604 | | | 349 | | | 182 | | | 531 | |
Nplate | | 312 | | | 238 | | | 550 | | | 248 | | | 224 | | | 472 | |
Other products | | 1,939 | | | 1,125 | | | 3,064 | | | 1,759 | | | 1,076 | | | 2,835 | |
Total product sales(1) | | $ | 8,483 | | | $ | 3,529 | | | 12,012 | | | $ | 8,277 | | | $ | 3,429 | | | 11,706 | |
Other revenues | | | | | | 820 | | | | | | | 721 | |
Total revenues | | | | | | $ | 12,832 | | | | | | | $ | 12,427 | |
| | | | | | | | | | | | |
____________
(1) Hedging gains and losses, which are included in product sales, were not material for the three and six months ended June 30, 20212022 and 2020.2021.
4. Income taxes
The effective tax rates for the three and six months ended June 30, 2021,2022, were 16.8%14.0% and 12.6%12.9%, respectively, compared with 11.2%16.8% and 10.4%12.6%, respectively, for the corresponding periods of the prior year.
The increasedecrease in our effective tax rate for the three and six months ended June 30, 2021,2022, was primarily due to the non-deductibleprior year nondeductible IPR&D expense arising from the acquisition of Five Prime.Prime, partially offset by current year unfavorable items including a loss on a nonstrategic divestiture. The increase in our effective tax rate for the six months ended June 30, 2022, was primarily due to current year unfavorable items compared to last year including a loss on a nonstrategic divestiture, partially offset by the prior year nondeductible IPR&D expense arising from the acquisition of Five Prime and changes in earnings mix. The effective tax rates differ from the federal statutory rate primarily as a result of foreign earnings from the Company’s operations conducted in Puerto Rico, a territory of the United States that is treated as a foreign jurisdiction for U.S. tax purposes, that are currently subject to a tax incentive grant through 2035. In addition, the Company’s operations conducted in Singapore are subject to a tax incentive grant through 2034. These foreign earnings are also subject to U.S. tax at a reduced rate of 10.5%. See Note 2, Acquisitions and divestitures.
The U.S. territory of Puerto Rico imposes ana 4% excise tax on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. The rate of 4% is effective through December 31, 2027. We account for the excise tax as a manufacturing cost that is capitalized in inventoryInventories and expensed in costCost of sales when the related products are sold. For U.S. income tax purposes, in 2022, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes when the excise tax is incurred.
One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely examined by tax authorities in those jurisdictions. Significant disputes may arisecan and have arisen with tax authorities involving issues regarding the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and relevant facts. Tax authorities, including the IRS, are becoming more aggressive and are particularly focused on such matters.
In 2017, we received a Revenue Agent Report (RAR)an RAR and a modified RAR from the Internal Revenue Service (IRS)IRS for the years 2010, 2011 and 2010–2012, proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. We disagreed with the proposed adjustments and calculations and pursued a resolution with the IRS administrative appeals office. As previously reported, we were unable to reach resolution with the IRS appeals office.office but were unable to reach resolution. In July 2021, we filed a petition in the U.S. Tax Court to contest two duplicate Statutory Notices of Deficiency (Notices) for 2010, 2011 and the years 2010–2012 that we received in May and July 2021. The duplicate Notices2021, which seek to increase our U.S. taxable income for the years 2010–2012 by an amount that would result in additional federal tax of approximately $3.6 billion plus interest. Any additional tax that could be imposed for the years 2010–2012 would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings. In any event, we firmly believe that the IRS’s positions in the Notices are without merit and we will vigorously contest the Notices through the judicial process.
In addition, in 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2013–2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2010–2012. We disagreedisagreed with the proposed adjustments and calculations and are pursuingpursued resolution with the IRS administrative appeals office. office but were unable to reach resolution.In July 2022, we filed a petition in the U.S. Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S. taxable income for the years 2013–2015 by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest. In addition, the Notice asserts penalties of approximately $2.0 billion. Any additional tax that could be imposed for the years 2013–2015 would be reduced by up to approximately $2.2 billion of repatriation tax previously accrued on our foreign earnings.
We firmly believe that the IRS positions set forth in the 2010–2012 and 2013–2015 Notices are without merit. We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process, and we will seek consolidation of the two periods into one case in the U.S. Tax Court.
We are currently under examination by the IRS for the years 2016, 2017 and 2018. We are also currently under examination2016–2018 with respect to issues similar to those for the 2010 through 2015 period. In addition, we have examinations by a number of other state and foreign tax jurisdictions.
Final resolution of these complex matters is not likely within the next 12 months. We believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse impact on our condensed consolidated financial statements.
We are no longer subject to U.S. federal income tax examinations for the years ended on or before December 31, 2009.
See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations, Income Taxes, for further discussion and Part II, Item 1A, Risk Factors—The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability.
During the three and six months ended June 30, 2021,2022, the gross amounts of our unrecognized tax benefits (UTBs)UTBs increased by $50 million and $110$95 million, respectively, as a result of tax positions taken during the current year. Substantially all of the UTBs as of June 30, 2021,2022, if recognized, would affect our effective tax rate.
5. Earnings per share
The computation of basic earnings per share (EPS)EPS is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which primarily include shares that may be issued under our stock option, restricted stock and performance unit award programs (collectively, dilutive securities), as determined by using the treasury stock method.
The computations for basic and diluted EPS were as follows (in millions, except per-share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Income (Numerator): | | | | | | | |
Net income for basic and diluted EPS | $ | 464 | | | $ | 1,803 | | | $ | 2,110 | | | $ | 3,628 | |
| | | | | | | |
Shares (Denominator): | | | | | | | |
Weighted-average shares for basic EPS | 573 | | | 588 | | | 575 | | | 589 | |
Effect of dilutive securities | 3 | | | 4 | | | 3 | | | 4 | |
Weighted-average shares for diluted EPS | 576 | | | 592 | | | 578 | | | 593 | |
| | | | | | | |
Basic EPS | $ | 0.81 | | | $ | 3.07 | | | $ | 3.67 | | | $ | 6.16 | |
Diluted EPS | $ | 0.81 | | | $ | 3.05 | | | $ | 3.65 | | | $ | 6.12 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Income (Numerator): | | | | | | | |
Net income for basic and diluted EPS | $ | 1,317 | | | $ | 464 | | | $ | 2,793 | | | $ | 2,110 | |
| | | | | | | |
Shares (Denominator): | | | | | | | |
Weighted-average shares for basic EPS | 535 | | | 573 | | | 541 | | | 575 | |
Effect of dilutive securities | 2 | | | 3 | | | 3 | | | 3 | |
Weighted-average shares for diluted EPS | 537 | | | 576 | | | 544 | | | 578 | |
| | | | | | | |
Basic EPS | $ | 2.46 | | | $ | 0.81 | | | $ | 5.16 | | | $ | 3.67 | |
Diluted EPS | $ | 2.45 | | | $ | 0.81 | | | $ | 5.13 | | | $ | 3.65 | |
For the three and six months ended June 30, 20212022 and 2020,2021, the number of antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.
6. Investments
Available-for-sale investments
The amortized cost, gross unrealized gains, gross unrealized losses and fair values of interest-bearing securities, which are considered available-for-sale, by type of security were as follows (in millions):
| Types of securities as of June 30, 2021 | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair values | |
Types of securities as of June 30, 2022 | | Types of securities as of June 30, 2022 | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair values |
U.S. Treasury notes | U.S. Treasury notes | | $ | 51 | | | $ | 1 | | | $ | 0 | | | $ | 52 | | U.S. Treasury notes | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
U.S. Treasury bills | U.S. Treasury bills | | 1,400 | | | 0 | | | 0 | | | 1,400 | | U.S. Treasury bills | | 1,980 | | | — | | | — | | | 1,980 | |
| Money market mutual funds | Money market mutual funds | | 5,707 | | | 0 | | | 0 | | | 5,707 | | Money market mutual funds | | 4,433 | | | — | | | — | | | 4,433 | |
Other short-term interest-bearing securities | Other short-term interest-bearing securities | | 0 | | | 0 | | | 0 | | | 0 | | Other short-term interest-bearing securities | | — | | | — | | | — | | | — | |
| Total interest-bearing securities | Total interest-bearing securities | | $ | 7,158 | | | $ | 1 | | | $ | 0 | | | $ | 7,159 | | Total interest-bearing securities | | $ | 6,413 | | | $ | — | | | $ | — | | | $ | 6,413 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Types of securities as of December 31, 2020 | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair values |
U.S. Treasury notes | | $ | 129 | | | $ | 1 | | | $ | 0 | | | $ | 130 | |
U.S. Treasury bills | | 4,948 | | | 0 | | | 0 | | | 4,948 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Money market mutual funds | | 4,765 | | | 0 | | | 0 | | | 4,765 | |
Other short-term interest-bearing securities | | 2 | | | 0 | | | 0 | | | 2 | |
Total interest-bearing securities | | $ | 9,844 | | | $ | 1 | | | $ | 0 | | | $ | 9,845 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Types of securities as of December 31, 2021 | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair values |
U.S. Treasury notes | | $ | 47 | | | $ | — | | | $ | — | | | $ | 47 | |
U.S. Treasury bills | | 1,400 | | | — | | | — | | | 1,400 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Money market mutual funds | | 5,856 | | | — | | | — | | | 5,856 | |
Other short-term interest-bearing securities | | 1 | | | — | | | — | | | 1 | |
Total interest-bearing securities | | $ | 7,304 | | | $ | — | | | $ | — | | | $ | 7,304 | |
The fair values of interest-bearing securities by location in the Condensed Consolidated Balance Sheets were as follows (in millions):
| | | | | | | | | | | | | | |
Condensed Consolidated Balance Sheets locations | | June 30, 2021 | | December 31, 2020 |
Cash and cash equivalents | | $ | 5,707 | | | $ | 5,464 | |
Marketable securities | | 1,452 | | | 4,381 | |
Total interest-bearing securities | | $ | 7,159 | | | $ | 9,845 | |
| | | | | | | | | | | | | | |
Condensed Consolidated Balance Sheets locations | | June 30, 2022 | | December 31, 2021 |
Cash and cash equivalents | | $ | 4,433 | | | $ | 7,256 | |
Marketable securities | | 1,980 | | | 48 | |
Total interest-bearing securities | | $ | 6,413 | | | $ | 7,304 | |
Cash and cash equivalents in the above table excludes bank account cash of $923$770 million and $802$733 million as of June 30, 20212022 and December 31, 2020,2021, respectively.
The fair valuesTotal interest-bearing securities as of available-for-sale investments by contractual maturity were as follows (in millions):
| | | | | | | | | | | | | | |
Contractual maturities | | June 30, 2021 | | December 31, 2020 |
Maturing in one year or less | | $ | 7,159 | | | $ | 9,795 | |
Maturing after one year through three years | | 0 | | | 50 | |
| | | | |
| | | | |
| | | | |
| | | | |
Total available-for-sale investments | | $ | 7,159 | | | $ | 9,845 | |
June 30, 2022 and December 31, 2021, mature in one year or less.
For the three and six months ended June 30, 20212022 and 2020,2021, realized gains and losses on interest-bearing securities were not material. Realized gains and losses on interest-bearing securities are recorded in Other (expense) income, net, in the Condensed Consolidated Statements of Income. The cost of securities sold is based on the specific-identification method.
The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.
Equity securities
We held investments in equity securities with readily determinable fair values (publicly traded securities) of $403$361 million and $477$611 million as of June 30, 20212022 and December 31, 2020,2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. ForDuring the three months ended June 30, 20212022 and 2020, net unrealized gains on publicly traded securities were $25 million and $80 million, respectively. For the six months ended June 30, 2021, and 2020, net unrealized gains and losses on publicly traded securities were a $31$106 million net loss and a $5$25 million net gain, respectively. During the six months ended June 30, 2022 and 2021, net unrealized losses on publicly traded securities were $276 million and $31 million, respectively. Realized gains and losses on sales of publicly traded securities for the three and six months ended June 30, 20212022 and 2020,2021, were not material.
We held investments of $245$280 million and $203$262 million in equity securities without readily determinable fair values as of June 30, 20212022 and December 31, 2020,2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. Gains and losses recognized on these securities, including adjustments to the carrying values of these securities, were not material forDuring the three and six months ended June 30, 2021.2022 and 2021, upward adjustments and downward adjustments on these securities were not material. Adjustments were based on observable price transactions.
Equity method investments
Limited partnerships
We held limited partnership investments of $616 million and $496 million as of June 30, 2021 and December 31, 2020, respectively, which are included in Other assets in the Condensed Consolidated Balance Sheets. These investments, primarily investment funds of early-stage biotechnology companies, are accounted for by using the equity method of accounting and are measured by using our proportionate share of the net asset values of the underlying investments held by the limited partnerships as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of June 30, 2021, unfunded additional commitments to be made for these investments during the next several years were not material. For the three months ended June 30, 2021 and 2020, net unrealized losses from our limited partnership investments were $43 million and $10 million, respectively. For the six months ended June 30, 2021 and 2020, net unrealized gains from our limited partnership investments were $165 million and $10 million, respectively.
BeiGene, Ltd.
As of June 30, 2022 and December 31, 2021, we had an ownership interest in BeiGene of approximately 20.3% in BeiGene, Ltd. (BeiGene)18.2% and 18.4%, respectively, which is included in Other noncurrent assets in the Condensed Consolidated Balance Sheets and accounted for under the equity method of accounting. We amortize the difference between the fair value of equity securities acquired and our proportionate share of the carrying value of the underlying net assets of BeiGene over the useful lives of the assets that gave rise to this basis difference. This amortization and our share of the results of operations of BeiGene are included in Other (expense) income, net, in the Condensed Consolidated Statements of Income one quarter in arrears, which began in the second quarter of 2020.arrears.
During the three and six months ended June 30, 2022 and 2021, the carrying value of our equity investment was adjusted by our share of BeiGene’s net loss of $80 million and net income of $14 million, respectively, and amortization of the basis difference of $48 million and $42 million, respectively. During the six months ended June 30, 2022 and 2021, the carrying value of our equity investment was adjusted by our share of BeiGene’s net losslosses of $188 million and $83 million, respectively, and amortization of the basis difference of $42$95 million and $84 million, respectively. In addition, during the three and six months ended June 30, 2021, the carrying value increased by $21 million and $38 million, respectively, from the impact of BeiGene ownership transactions. As of June 30, 2022 and December 31, 2021, the carrying value and fair valuevalues of our investment in BeiGene totaled $2.5 billion and $2.8 billion, respectively, and $6.4the fair values of our investment totaled $3.1 billion and $5.1 billion, respectively. As of June 30, 2021,2022, we believe the carrying value of our equity investment in BeiGene is fully recoverable.
Neumora Therapeutics, Inc.
On September 30, 2021, we acquired an approximately 25.9% ownership interest in Neumora, a privately held company, for $257 million, which is included in Other noncurrent assets in the Condensed Consolidated Balance Sheets, in exchange for a $100 million cash payment and $157 million in noncash consideration primarily related to future services. Although our equity investment provides us with the ability to exercise significant influence over Neumora, we have elected the fair value option to account for our equity investment. Under the fair value option, changes in the fair value of the investment are recognized through earnings each reporting period. We believe the fair value option best reflects the economics of the underlying transaction. As of June 30, 2022 and December 31, 2021, our ownership interest in Neumora was approximately 25.7% and 25.9%, respectively, and the fair values of our investment were $131 million and $220 million, respectively. Accordingly, for the reduction in fair value of our investment during the three and six months ended June 30, 2022, we recognized a loss of $39 million and $89 million, respectively, for the reduction in fair value of our investment in Other (expense) income, net, in the Condensed Consolidated Statements of Income. For information on determination of fair values, see Note 11, Fair value measurement.
Limited partnerships
We held limited partnership investments of $338 million and $573 million as of June 30, 2022 and December 31, 2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. These investments, primarily investment funds of early-stage biotechnology companies, are accounted for by using the equity method of accounting and are measured by using our proportionate share of the net asset values of the underlying investments held by the limited partnerships as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of June 30, 2022, unfunded additional commitments to be made for these investments during the next several years were $209 million. For the three months ended June 30, 2022 and 2021, net unrealized losses from our limited partnership investments were $60 million and $43 million, respectively. For the six months ended June 30, 2022 and 2021, net unrealized gains and losses from our limited partnership investments were a $220 million net loss and a $165 million net gain, respectively.
7. Inventories
Inventories consisted of the following (in millions):
| | | June 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
Raw materials | Raw materials | $ | 641 | | | $ | 486 | | Raw materials | $ | 779 | | | $ | 647 | |
Work in process | Work in process | 2,443 | | | 2,437 | | Work in process | 2,763 | | | 2,367 | |
Finished goods | Finished goods | 1,031 | | | 970 | | Finished goods | 1,012 | | | 1,072 | |
Total inventories | Total inventories | $ | 4,115 | | | $ | 3,893 | | Total inventories | $ | 4,554 | | | $ | 4,086 | |
8. Goodwill and other intangible assets
Goodwill
The change in the carrying amount of goodwill was as follows (in millions):
| | | | | |
| Six months ended June 30, 20212022 |
Beginning balance | $ | 14,68914,890 | |
Adjustments to goodwill resulting from acquisitions and divestitures, net(1) | 7 | |
Currency translation adjustment | (13)(32) | |
Ending balance | $ | 14,67614,865 | |
____________
(1) Composed of adjustments to goodwill resulting from changes to the acquisition date fair values of net assets acquired in the acquisition of Teneobio and the nonstrategic Gensenta divestiture. See Note 2, Acquisitions and divestitures.
Other intangible assets
Other intangible assets consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Gross carrying amounts | | Accumulated amortization | | Other intangible assets, net | | Gross carrying amounts | | Accumulated amortization | | Other intangible assets, net |
Finite-lived intangible assets: | | | | | | | | | | | |
Developed-product-technology rights | $ | 25,584 | | | $ | (11,673) | | | $ | 13,911 | | | $ | 25,591 | | | $ | (10,564) | | | $ | 15,027 | |
Licensing rights | 3,766 | | | (2,886) | | | 880 | | | 3,743 | | | (2,791) | | | 952 | |
Marketing-related rights | 1,363 | | | (1,079) | | | 284 | | | 1,367 | | | (1,041) | | | 326 | |
Research and development technology rights | 1,308 | | | (1,105) | | | 203 | | | 1,317 | | | (1,065) | | | 252 | |
Total finite-lived intangible assets | 32,021 | | | (16,743) | | | 15,278 | | | 32,018 | | | (15,461) | | | 16,557 | |
Indefinite-lived intangible assets: | | | | | | | | | | | |
In-process research and development | 30 | | | — | | | 30 | | | 30 | | | — | | | 30 | |
Total other intangible assets | $ | 32,051 | | | $ | (16,743) | | | $ | 15,308 | | | $ | 32,048 | | | $ | (15,461) | | | $ | 16,587 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Gross carrying amounts | | Accumulated amortization | | Other intangible assets, net | | Gross carrying amounts | | Accumulated amortization | | Other intangible assets, net |
Finite-lived intangible assets: | | | | | | | | | | | |
Developed-product-technology rights | $ | 25,537 | | | $ | (13,863) | | | $ | 11,674 | | | $ | 25,561 | | | $ | (12,769) | | | $ | 12,792 | |
Licensing rights | 3,864 | | | (3,050) | | | 814 | | | 3,807 | | | (2,973) | | | 834 | |
Marketing-related rights | 1,326 | | | (1,125) | | | 201 | | | 1,354 | | | (1,112) | | | 242 | |
Research and development technology rights | 1,371 | | | (1,153) | | | 218 | | | 1,377 | | | (1,133) | | | 244 | |
Total finite-lived intangible assets | 32,098 | | | (19,191) | | | 12,907 | | | 32,099 | | | (17,987) | | | 14,112 | |
Indefinite-lived intangible assets: | | | | | | | | | | | |
In-process research and development | 1,020 | | | — | | | 1,020 | | | 1,070 | | | — | | | 1,070 | |
Total other intangible assets | $ | 33,118 | | | $ | (19,191) | | | $ | 13,927 | | | $ | 33,169 | | | $ | (17,987) | | | $ | 15,182 | |
Developed-product-technology rights consists of rights related to marketed products. Licensing rights primarily consists of contractual rights to receive future milestone, royalty and profit-sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and upfront payments associated with royalty obligations for marketed products. Marketing-related rights primarily consists of rights related to the sale and distribution of marketed products. Research and development (R&D)R&D technology rights pertains to technologies used in R&D that have alternative future uses.
IPR&D consists of R&D projects acquired in a business combination that are not complete at the time of acquisition due to remaining technological risks and/or lack of receipt of required regulatory approvals. We review IPR&D projects for impairment annually, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and upon the establishment of technological feasibility or regulatory approval.
During the three months ended June 30, 20212022 and 2020,2021, we recognized amortization associated with our finite-lived intangible assets of $652$629 million and $713$652 million, respectively. During the six months ended June 30, 20212022 and 2020,2021, we recognized amortization associated with our finite-lived intangible assets of $1.3 billion and $1.4 billion, respectively.in both periods. Amortization of intangible assets is primarily included in Cost of sales in the Condensed Consolidated Statements of Income. The total estimated amortization for our finite-lived intangible assets for the remaining six months ending December 31, 2021,2022, and the years ending December 31, 2022, 2023, 2024, 2025, 2026 and 2026,2027, are $1.2$1.3 billion, $2.5 billion, $2.5 billion, $2.4 billion, $2.4 billion, $2.2$1.7 billion and $1.8 billion, respectively.
9. Financing arrangements
Our borrowings consisted of the following (in millions):
| | | June 30, 2021 | | December 31, 2020 | | June 30, 2022 | | December 31, 2021 |
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes) | $ | 1,482 | | | $ | 1,527 | | |
2.70% notes due 2022 (2.70% 2022 Notes) | 500 | | | 500 | | |
2.65% notes due 2022 (2.65% 2022 Notes) | 1,500 | | | 1,500 | | |
3.625% notes due 2022 (3.625% 2022 Notes) | 750 | | | 750 | | |
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds) | 0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds) | 757 | | | 791 | | 0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds) | $ | 733 | | | $ | 767 | |
2.25% notes due 2023 (2.25% 2023 Notes) | 2.25% notes due 2023 (2.25% 2023 Notes) | 750 | | | 750 | | 2.25% notes due 2023 (2.25% 2023 Notes) | 750 | | | 750 | |
3.625% notes due 2024 (3.625% 2024 Notes) | 3.625% notes due 2024 (3.625% 2024 Notes) | 1,400 | | | 1,400 | | 3.625% notes due 2024 (3.625% 2024 Notes) | 1,400 | | | 1,400 | |
1.90% notes due 2025 (1.90% 2025 Notes) | 1.90% notes due 2025 (1.90% 2025 Notes) | 500 | | | 500 | | 1.90% notes due 2025 (1.90% 2025 Notes) | 500 | | | 500 | |
3.125% notes due 2025 (3.125% 2025 Notes) | 3.125% notes due 2025 (3.125% 2025 Notes) | 1,000 | | | 1,000 | | 3.125% notes due 2025 (3.125% 2025 Notes) | 1,000 | | | 1,000 | |
2.00% €750 million notes due 2026 (2.00% 2026 euro Notes) | 2.00% €750 million notes due 2026 (2.00% 2026 euro Notes) | 889 | | | 916 | | 2.00% €750 million notes due 2026 (2.00% 2026 euro Notes) | 786 | | | 853 | |
2.60% notes due 2026 (2.60% 2026 Notes) | 2.60% notes due 2026 (2.60% 2026 Notes) | 1,250 | | | 1,250 | | 2.60% notes due 2026 (2.60% 2026 Notes) | 1,250 | | | 1,250 | |
5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes) | 5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes) | 657 | | | 649 | | 5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes) | 579 | | | 643 | |
2.20% notes due 2027 (2.20% 2027 Notes) | 2.20% notes due 2027 (2.20% 2027 Notes) | 1,750 | | | 1,750 | | 2.20% notes due 2027 (2.20% 2027 Notes) | 1,750 | | | 1,750 | |
3.20% notes due 2027 (3.20% 2027 Notes) | 3.20% notes due 2027 (3.20% 2027 Notes) | 1,000 | | | 1,000 | | 3.20% notes due 2027 (3.20% 2027 Notes) | 1,000 | | | 1,000 | |
1.65% notes due 2028 (1.65% 2028 Notes) | | 1.65% notes due 2028 (1.65% 2028 Notes) | 1,250 | | | 1,250 | |
3.00% notes due 2029 (3.00% 2029 Notes) | | 3.00% notes due 2029 (3.00% 2029 Notes) | 750 | | | — | |
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes) | 4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes) | 968 | | | 957 | | 4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes) | 853 | | | 947 | |
2.45% notes due 2030 (2.45% 2030 Notes) | 2.45% notes due 2030 (2.45% 2030 Notes) | 1,250 | | | 1,250 | | 2.45% notes due 2030 (2.45% 2030 Notes) | 1,250 | | | 1,250 | |
2.30% notes due 2031 (2.30% 2031 Notes) | 2.30% notes due 2031 (2.30% 2031 Notes) | 1,250 | | | 1,250 | | 2.30% notes due 2031 (2.30% 2031 Notes) | 1,250 | | | 1,250 | |
2.00% notes due 2032 (2.00% 2032 Notes) | | 2.00% notes due 2032 (2.00% 2032 Notes) | 1,250 | | | 1,250 | |
3.35% notes due 2032 (3.35% 2032 Notes) | | 3.35% notes due 2032 (3.35% 2032 Notes) | 1,000 | | | — | |
6.375% notes due 2037 (6.375% 2037 Notes) | 6.375% notes due 2037 (6.375% 2037 Notes) | 478 | | | 478 | | 6.375% notes due 2037 (6.375% 2037 Notes) | 478 | | | 478 | |
6.90% notes due 2038 (6.90% 2038 Notes) | 6.90% notes due 2038 (6.90% 2038 Notes) | 254 | | | 254 | | 6.90% notes due 2038 (6.90% 2038 Notes) | 254 | | | 254 | |
6.40% notes due 2039 (6.40% 2039 Notes) | 6.40% notes due 2039 (6.40% 2039 Notes) | 333 | | | 333 | | 6.40% notes due 2039 (6.40% 2039 Notes) | 333 | | | 333 | |
3.15% notes due 2040 (3.15% 2040 Notes) | 3.15% notes due 2040 (3.15% 2040 Notes) | 2,000 | | | 2,000 | | 3.15% notes due 2040 (3.15% 2040 Notes) | 2,000 | | | 2,000 | |
5.75% notes due 2040 (5.75% 2040 Notes) | 5.75% notes due 2040 (5.75% 2040 Notes) | 373 | | | 373 | | 5.75% notes due 2040 (5.75% 2040 Notes) | 373 | | | 373 | |
2.80% notes due 2041 (2.80% 2041 Notes) | | 2.80% notes due 2041 (2.80% 2041 Notes) | 1,150 | | | 1,150 | |
4.95% notes due 2041 (4.95% 2041 Notes) | 4.95% notes due 2041 (4.95% 2041 Notes) | 600 | | | 600 | | 4.95% notes due 2041 (4.95% 2041 Notes) | 600 | | | 600 | |
5.15% notes due 2041 (5.15% 2041 Notes) | 5.15% notes due 2041 (5.15% 2041 Notes) | 729 | | | 729 | | 5.15% notes due 2041 (5.15% 2041 Notes) | 729 | | | 729 | |
5.65% notes due 2042 (5.65% 2042 Notes) | 5.65% notes due 2042 (5.65% 2042 Notes) | 415 | | | 415 | | 5.65% notes due 2042 (5.65% 2042 Notes) | 415 | | | 415 | |
5.375% notes due 2043 (5.375% 2043 Notes) | 5.375% notes due 2043 (5.375% 2043 Notes) | 185 | | | 185 | | 5.375% notes due 2043 (5.375% 2043 Notes) | 185 | | | 185 | |
4.40% notes due 2045 (4.40% 2045 Notes) | 4.40% notes due 2045 (4.40% 2045 Notes) | 2,250 | | | 2,250 | | 4.40% notes due 2045 (4.40% 2045 Notes) | 2,250 | | | 2,250 | |
4.563% notes due 2048 (4.563% 2048 Notes) | 4.563% notes due 2048 (4.563% 2048 Notes) | 1,415 | | | 1,415 | | 4.563% notes due 2048 (4.563% 2048 Notes) | 1,415 | | | 1,415 | |
3.375% notes due 2050 (3.375% 2050 Notes) | 3.375% notes due 2050 (3.375% 2050 Notes) | 2,250 | | | 2,250 | | 3.375% notes due 2050 (3.375% 2050 Notes) | 2,250 | | | 2,250 | |
4.663% notes due 2051 (4.663% 2051 Notes) | 4.663% notes due 2051 (4.663% 2051 Notes) | 3,541 | | | 3,541 | | 4.663% notes due 2051 (4.663% 2051 Notes) | 3,541 | | | 3,541 | |
3.00% notes due 2052 (3.00% 2052 Notes) | | 3.00% notes due 2052 (3.00% 2052 Notes) | 1,350 | | | 1,350 | |
4.20% notes due 2052 (4.20% 2052 Notes) | | 4.20% notes due 2052 (4.20% 2052 Notes) | 1,000 | | | — | |
2.77% notes due 2053 (2.77% 2053 Notes) | 2.77% notes due 2053 (2.77% 2053 Notes) | 940 | | | 940 | | 2.77% notes due 2053 (2.77% 2053 Notes) | 940 | | | 940 | |
4.40% notes due 2062 (4.40% 2062 Notes) | | 4.40% notes due 2062 (4.40% 2062 Notes) | 1,250 | | | — | |
Other notes due 2097 | Other notes due 2097 | 100 | | | 100 | | Other notes due 2097 | 100 | | | 100 | |
Unamortized bond discounts, premiums and issuance costs, net | Unamortized bond discounts, premiums and issuance costs, net | (1,174) | | | (1,188) | | Unamortized bond discounts, premiums and issuance costs, net | (1,245) | | | (1,213) | |
Fair value adjustments | Fair value adjustments | 424 | | | 566 | | Fair value adjustments | (210) | | | 284 | |
Other | Other | 16 | | | 5 | | Other | 13 | | | 15 | |
Total carrying value of debt | Total carrying value of debt | 32,782 | | | 32,986 | | Total carrying value of debt | 36,522 | | | 33,309 | |
Less current portion | Less current portion | (4,324) | | | (91) | | Less current portion | (817) | | | (87) | |
Total long-term debt | Total long-term debt | $ | 28,458 | | | $ | 32,895 | | Total long-term debt | $ | 35,705 | | | $ | 33,222 | |
There are no material differences between the effective interest rates and coupon rates of any of our borrowings, except for the 4.563% 2048 Notes, the 4.663% 2051 Notes and the 2.77% 2053 Notes, which have effective interest rates of 6.3%, 5.6% and 5.2%, respectively.
During the three months ended June 30, 2021,March 31, 2022, we entered intoissued $4.0 billion of debt consisting of $750 million of the following interest rate swap contracts: (i)3.00% 2029 Notes, $1.0 billion notional amount with respectof the 3.35% 2032 Notes, $1.0 billion of the 4.20% 2052 Notes and $1.25 billion of the 4.40% 2062 Notes. The 3.00% 2029 Notes were issued to finance eligible projects that meet specified criteria to benefit the 2.45% 2030 Notes, resultingenvironment. In the event of a change-in-control triggering event, as defined in an effective interest rate of three-month LIBOR plus 1.0% for that portionthe terms of the notes, we may be required to purchase all or a portion of these notes at a price equal to 101% of the principal amount of the notes plus accrued and (ii) $500 million notionalunpaid interest. In addition, these notes may be redeemed at any time at our option, in whole or in part, at the principal amount with respectof the notes being redeemed plus accrued and unpaid interest and a make-whole amount, which are defined by the terms of the notes. The notes may be redeemed without payment of make-whole amounts if redemption occurs during a specified period of time immediately prior to the 2.30% 2031 Notes, resulting in an effective interest rate of three-month LIBOR plus 0.8% for that portionmaturing of the notes. Such time periods range from two months to six months prior to maturity.
10. Stockholders’ equity
Stock repurchase program
Activity under our stock repurchase program, on a trade date basis, was as follows (in millions):
| | | 2021 | | 2020 | | 2022 | | 2021 |
| | Shares | | Dollars | | Shares | | Dollars | | Shares | | Dollars | | Shares | | Dollars |
First quarter | First quarter | 3.7 | | | $ | 865 | | | 4.3 | | | $ | 933 | | First quarter | 24.6 | | | $ | 5,410 | | | 3.7 | | | $ | 865 | |
Second quarter | Second quarter | 6.5 | | | 1,592 | | | 2.6 | | | 591 | | Second quarter | — | | | — | | | 6.5 | | | 1,592 | |
| Total stock repurchases | Total stock repurchases | 10.2 | | | $ | 2,457 | | | 6.9 | | | $ | 1,524 | | Total stock repurchases | 24.6 | | | $ | 5,410 | | | 10.2 | | | $ | 2,457 | |
On February 24, 2022, the Company entered into ASR agreements with 3 third-party financial institutions (Dealers). Under the ASR agreements, the Company made payments in an aggregate amount of $6.0 billion on February 25, 2022, to the Dealers and received and retired an initial 23.3 million shares of the Company’s common stock from the Dealers. The payments were recorded as reductions to shareholders’ equity, consisting of a $5.1 billion increase to accumulated deficit, which reflects the value of the initial shares received, and a $0.9 billion decrease in additional paid-in capital, which reflects the value of the stock that remains to be delivered by the Dealers pending final settlement. The final number of shares to be repurchased by the Company will be based on the daily volume-weighted average stock price of the Company’s common stock during the terms of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. At settlement, under certain circumstances, one or more of the Dealers may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to a Dealer. The final settlement under the ASR agreements is scheduled to occur in the third quarter of 2022, subject to an earlier termination under certain limited circumstances, as set forth in the ASR agreements. In total, we repurchased 24.6 million shares of common stock in the first quarter of 2022, including shares received under the ASR agreements.
In March 2021, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $3.4 billion. As of June 30, 2021, $3.92022, $4.6 billion of authorization remained available under our stock repurchase program.
Dividends
In March 20212022 and December 2020, the Board of Directors declared a quarterly cash dividend of $1.76 per share, which were paid in June 2021 and March 2021, respectively. In July 2021, the Board of Directors declared a quarterly cash dividend of $1.76$1.94 per share, which were paid in June 2022 and March 2022, respectively. In August 2022, the Board of Directors declared a quarterly cash dividend of $1.94 per share, which will be paid on September 8, 2021.2022.
Accumulated other comprehensive income (loss)
The components of Accumulated other comprehensive income (loss) (AOCI)AOCI were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign currency translation | | Cash flow hedges | | Available-for-sale securities | | Other | | AOCI |
Balance as of December 31, 2020 | $ | (709) | | | $ | (263) | | | $ | 1 | | | $ | (14) | | | $ | (985) | |
| | | | | | | | | |
Foreign currency translation adjustments | (39) | | | — | | | — | | | — | | | (39) | |
Unrealized gains | — | | | 108 | | | 0 | | | 0 | | | 108 | |
Reclassification adjustments to income | — | | | 133 | | | 0 | | | — | | | 133 | |
Other | — | | | — | | | — | | | 1 | | | 1 | |
Income taxes | 0 | | | (51) | | | 0 | | | — | | | (51) | |
Balance as of March 31, 2021 | (748) | | | (73) | | | 1 | | | (13) | | | (833) | |
| | | | | | | | | |
Foreign currency translation adjustments | 14 | | | — | | | — | | | — | | | 14 | |
Unrealized losses | — | | | (31) | | | 0 | | | 0 | | | (31) | |
Reclassification adjustments to income | — | | | (28) | | | 0 | | | — | | | (28) | |
Other | — | | | — | | | — | | | (1) | | | (1) | |
Income taxes | 0 | | | 11 | | | 0 | | | — | | | 11 | |
Balance as of June 30, 2021 | $ | (734) | | | $ | (121) | | | $ | 1 | | | $ | (14) | | | $ | (868) | |
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| Foreign currency translation | | Cash flow hedges | | Available-for-sale securities | | Other | | AOCI |
Balance as of December 31, 2021 | $ | (844) | | | $ | 61 | | | $ | — | | | $ | (13) | | | $ | (796) | |
| | | | | | | | | |
Foreign currency translation adjustments | (51) | | | — | | | — | | | — | | | (51) | |
Unrealized gains | — | | | 56 | | | — | | | — | | | 56 | |
Reclassification adjustments to income | — | | | 51 | | | — | | | — | | | 51 | |
| | | | | | | | | |
Income taxes | — | | | (23) | | | — | | | — | | | (23) | |
Balance as of March 31, 2022 | (895) | | | 145 | | | — | | | (13) | | | (763) | |
| | | | | | | | | |
Foreign currency translation adjustments | (65) | | | — | | | — | | | — | | | (65) | |
Unrealized gains | — | | | 67 | | | — | | | — | | | 67 | |
Reclassification adjustments to income | — | | | 132 | | | — | | | — | | | 132 | |
| | | | | | | | | |
Income taxes | — | | | (43) | | | — | | | — | | | (43) | |
Balance as of June 30, 2022 | $ | (960) | | | $ | 301 | | | $ | — | | | $ | (13) | | | $ | (672) | |
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Reclassifications out of AOCI and into earnings, including related income tax expenses, were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | |
Components of AOCI | | 2021 | | 2020 | | Condensed Consolidated Statements of Income locations |
Cash flow hedges: | | | | | | |
Foreign currency contract (losses) gains | | $ | (18) | | | $ | 68 | | | Product sales |
Cross-currency swap contract gains | | 46 | | | 51 | | | Other income, net |
| | | | | | |
| | 28 | | | 119 | | | Income before income taxes |
| | (6) | | | (26) | | | Provision for income taxes |
| | $ | 22 | | | $ | 93 | | | Net income |
Available-for-sale securities: | | | | | | |
Net realized gains | | $ | 0 | | | $ | 0 | | | Other income, net |
| | 0 | | | 0 | | | Provision for income taxes |
| | $ | 0 | | | $ | 0 | | | Net income |
| | | | | | |
| | Six months ended June 30, | | |
Components of AOCI | | 2021 | | 2020 | | Condensed Consolidated Statements of Income locations |
Cash flow hedges: | | | | | | |
Foreign currency contract (losses) gains | | $ | (19) | | | $ | 117 | | | Product sales |
Cross-currency swap contract losses | | (86) | | | (82) | | | Other income, net |
| | | | | | |
| | (105) | | | 35 | | | Income before income taxes |
| | 22 | | | (8) | | | Provision for income taxes |
| | $ | (83) | | | $ | 27 | | | Net income |
Available-for-sale securities: | | | | | | |
Net realized gains | | $ | 0 | | | $ | 33 | | | Other income, net |
| | 0 | | | (7) | | | Provision for income taxes |
| | $ | 0 | | | $ | 26 | | | Net income |
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | |
Components of AOCI | | 2022 | | 2021 | | Condensed Consolidated Statements of Income locations |
Cash flow hedges: | | | | | | |
Foreign currency contract gains (losses) | | $ | 53 | | | $ | (18) | | | Product sales |
Cross-currency swap contract (losses) gains | | (185) | | | 46 | | | Other (expense) income, net |
| | | | | | |
| | (132) | | | 28 | | | Income before income taxes |
| | 28 | | | (6) | | | Provision for income taxes |
| | $ | (104) | | | $ | 22 | | | Net income |
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| | Six months ended June 30, | | |
Components of AOCI | | 2022 | | 2021 | | Condensed Consolidated Statements of Income locations |
Cash flow hedges: | | | | | | |
Foreign currency contract gains (losses) | | $ | 80 | | | $ | (19) | | | Product sales |
Cross-currency swap contract losses | | (263) | | | (86) | | | Other (expense) income, net |
| | | | | | |
| | (183) | | | (105) | | | Income before income taxes |
| | 39 | | | 22 | | | Provision for income taxes |
| | $ | (144) | | | $ | (83) | | | Net income |
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11. Fair value measurement
To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing an asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:
| | | | | | | | |
Level 1 | — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access |
Level 2 | — | Valuations for which all significant inputs are observable either directly or indirectly—other than Level 1 inputs |
Level 3 | — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement |
The availability of observable inputs can vary among different types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.
The fair values of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in millions):
| | | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | |
| Fair value measurement as of June 30, 2021, using: | | Total | |
Fair value measurement as of June 30, 2022, using: | | Fair value measurement as of June 30, 2022, using: | | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | Total |
Assets: | Assets: | | | | | | | | | Assets: | | |
Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
U.S. Treasury notes | U.S. Treasury notes | | $ | 52 | | | $ | 0 | | | $ | 0 | | | $ | 52 | | U.S. Treasury notes | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
U.S. Treasury bills | U.S. Treasury bills | | 1,400 | | | 0 | | | 0 | | | 1,400 | | U.S. Treasury bills | | 1,980 | | | — | | | — | | | 1,980 | |
| Money market mutual funds | Money market mutual funds | | 5,707 | | | 0 | | | 0 | | | 5,707 | | Money market mutual funds | | 4,433 | | | — | | | — | | | 4,433 | |
Other short-term interest-bearing securities | Other short-term interest-bearing securities | | 0 | | | 0 | | | 0 | | | 0 | | Other short-term interest-bearing securities | | — | | | — | | | — | | | — | |
Equity securities | Equity securities | | 403 | | | 0 | | | 0 | | | 403 | | Equity securities | | 361 | | | — | | | 131 | | | 492 | |
Derivatives: | Derivatives: | | Derivatives: | |
Foreign currency contracts | Foreign currency contracts | | 0 | | | 62 | | | 0 | | | 62 | | Foreign currency contracts | | — | | | 413 | | | — | | | 413 | |
Cross-currency swap contracts | Cross-currency swap contracts | | 0 | | | 182 | | | 0 | | | 182 | | Cross-currency swap contracts | | — | | | 29 | | | — | | | 29 | |
Interest rate swap contracts | Interest rate swap contracts | | 0 | | | 45 | | | 0 | | | 45 | | Interest rate swap contracts | | — | | | — | | | — | | | — | |
| Total assets | Total assets | | $ | 7,562 | | | $ | 289 | | | $ | 0 | | | $ | 7,851 | | Total assets | | $ | 6,774 | | | $ | 442 | | | $ | 131 | | | $ | 7,347 | |
| Liabilities: | Liabilities: | | Liabilities: | |
Derivatives: | Derivatives: | | Derivatives: | |
Foreign currency contracts | Foreign currency contracts | | $ | 0 | | | $ | 119 | | | $ | 0 | | | $ | 119 | | Foreign currency contracts | | $ | — | | | $ | 30 | | | $ | — | | | $ | 30 | |
Cross-currency swap contracts | Cross-currency swap contracts | | 0 | | | 305 | | | 0 | | | 305 | | Cross-currency swap contracts | | — | | | 503 | | | — | | | 503 | |
Interest rate swap contracts | Interest rate swap contracts | | 0 | | | 90 | | | 0 | | | 90 | | Interest rate swap contracts | | — | | | 591 | | | — | | | 591 | |
Contingent consideration obligations | Contingent consideration obligations | | 0 | | | 0 | | | 48 | | | 48 | | Contingent consideration obligations | | — | | | — | | | 310 | | | 310 | |
Total liabilities | Total liabilities | | $ | 0 | | | $ | 514 | | | $ | 48 | | | $ | 562 | | Total liabilities | | $ | — | | | $ | 1,124 | | | $ | 310 | | | $ | 1,434 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | |
| | | | | |
Fair value measurement as of December 31, 2020, using: | | | | | Total |
Assets: | | | | | | | | |
Available-for-sale securities: | | | | | | | | |
U.S. Treasury notes | | $ | 130 | | | $ | 0 | | | $ | 0 | | | $ | 130 | |
U.S. Treasury bills | | 4,948 | | | 0 | | | 0 | | | 4,948 | |
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Money market mutual funds | | 4,765 | | | 0 | | | 0 | | | 4,765 | |
Other short-term interest-bearing securities | | 0 | | | 2 | | | 0 | | | 2 | |
Equity securities | | 477 | | | 0 | | | 0 | | | 477 | |
Derivatives: | | | | | | | | |
Foreign currency contracts | | 0 | | | 28 | | | 0 | | | 28 | |
Cross-currency swap contracts | | 0 | | | 255 | | | 0 | | | 255 | |
Interest rate swap contracts | | 0 | | | 66 | | | 0 | | | 66 | |
Total assets | | $ | 10,320 | | | $ | 351 | | | $ | 0 | | | $ | 10,671 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Derivatives: | | | | | | | | |
Foreign currency contracts | | $ | 0 | | | $ | 237 | | | $ | 0 | | | $ | 237 | |
Cross-currency swap contracts | | 0 | | | 318 | | | 0 | | | 318 | |
Interest rate swap contracts | | 0 | | | 15 | | | 0 | | | 15 | |
Contingent consideration obligations | | 0 | | | 0 | | | 33 | | | 33 | |
Total liabilities | | $ | 0 | | | $ | 570 | | | $ | 33 | | | $ | 603 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quoted prices in active markets for identical assets (Level 1) | | Significant other observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | |
| | | | | |
Fair value measurement as of December 31, 2021, using: | | | | | Total |
Assets: | | | | | | | | |
Available-for-sale securities: | | | | | | | | |
U.S. Treasury notes | | $ | 47 | | | $ | — | | | $ | — | | | $ | 47 | |
U.S. Treasury bills | | 1,400 | | | — | | | — | | | 1,400 | |
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| | | | | | | | |
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Money market mutual funds | | 5,856 | | | — | | | — | | | 5,856 | |
Other short-term interest-bearing securities | | — | | | 1 | | | — | | | 1 | |
Equity securities | | 611 | | | — | | | 220 | | | 831 | |
Derivatives: | | | | | | | | |
Foreign currency contracts | | — | | | 183 | | | — | | | 183 | |
Cross-currency swap contracts | | — | | | 66 | | | — | | | 66 | |
Interest rate swap contracts | | — | | | 16 | | | — | | | 16 | |
Total assets | | $ | 7,914 | | | $ | 266 | | | $ | 220 | | | $ | 8,400 | |
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Liabilities: | | | | | | | | |
Derivatives: | | | | | | | | |
Foreign currency contracts | | $ | — | | | $ | 39 | | | $ | — | | | $ | 39 | |
Cross-currency swap contracts | | — | | | 339 | | | — | | | 339 | |
Interest rate swap contracts | | — | | | 156 | | | — | | | 156 | |
Contingent consideration obligations | | — | | | — | | | 342 | | | 342 | |
Total liabilities | | $ | — | | | $ | 534 | | | $ | 342 | | | $ | 876 | |
Interest-bearing and equity securities
The fair values of our U.S. Treasury securities, money market mutual funds and equity investments in publicly traded securities are based on quoted market prices in active markets, with no valuation adjustment. The fair value of equity securities without readily determinable fair values are initially valued at the transaction price and subsequently valued based on a combination of market performance and publicly available market information for similar companies that have actively traded equity securities.
Derivatives
All of our foreign currency forward derivative contracts have maturities of three years or less, and all are with counterparties that have minimum credit ratings of A– or equivalent by Standard & Poor’s Financial Services LLC (S&P),S&P, Moody’s Investors Service, Inc. (Moody’s) or Fitch Ratings, Inc. (Fitch).Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, LIBOR, swap rates and obligor credit default swap rates. In addition, inputs for our foreign currency option contracts include implied volatility measures. These inputs, when applicable, are at commonly quoted intervals. See Note 12, Derivative instruments.
Our cross-currency swap contracts are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, LIBOR, swap rates, obligor credit default swap rates and cross-currency-basis swap spreads. See Note 12, Derivative instruments.
Our interest rate swap contracts are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by using an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include LIBOR, swap rates and obligor credit default swap rates. See Note 12, Derivative instruments.
During the three and six months ended June 30, 2021 and 2020, there were no material remeasurements to the fair values of assets and liabilities that are not measured at fair value on a recurring basis.
Contingent consideration obligations
As a result of our business acquisitions, we have incurred contingent consideration obligations as discussed below. The contingent consideration obligations are recorded at their fair values by using probability-adjusted discounted cash flows, and we revalue these obligations each reporting period until the related contingencies have been resolved. The fair value measurements of these obligations are based on significant unobservable inputs related to licensing rights and product candidates acquired in business combinations, and they are reviewed quarterly by management in our R&D and commercial sales organizations. The inputs include, as applicable, estimated probabilities and the timing of achieving specified development, regulatory and commercial milestones as well as estimated annual sales. Significant changes that increase or decrease the probabilities of achieving the related development, regulatory and commercial events or that shorten or lengthen the time required to achieve such events or that increase or decrease estimated annual sales would result in corresponding increases or decreases in the fair values of the obligations, as applicable. Changes in the fair values of contingent consideration obligations are recognized in Other operating expenses in the Condensed Consolidated Statements of Income.
Changes in the carrying amounts of contingent consideration obligations were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Beginning balance | | $ | 330 | | | $ | 39 | | | $ | 342 | | | $ | 33 | |
| | | | | | | | |
Payments | | (1) | | | (2) | | | (3) | | | (3) | |
Net changes in valuations | | (19) | | | 11 | | | (29) | | | 18 | |
Ending balance | | $ | 310 | | | $ | 48 | | | $ | 310 | | | $ | 48 | |
As of June 30, 2022 and December 31, 2021, our contingent consideration obligations are primarily the result of our acquisition of Teneobio in October 2021, which obligates us to pay the former shareholders up to $1.6 billion upon achieving separate development and regulatory milestones with regard to various R&D programs. See Note 2, Acquisitions and divestitures.
Summary of the fair values of other financial instruments
Cash equivalents
The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.
Borrowings
We estimated the fair values of our borrowings by using Level 2 inputs. As of June 30, 20212022 and December 31, 2020,2021, the aggregate fair values of our borrowings were $37.9$34.4 billion and $39.4$37.9 billion, respectively, and the carrying values were $32.8$36.5 billion and $33.0$33.3 billion, respectively.
Investment in BeiGene, Ltd.
We estimated the fair value of our investment in BeiGene by using Level 1 inputs. As of June 30, 2022 and December 31, 2021, the fair values were $3.1 billion and $5.1 billion, and the carrying values were $2.5 billion and $2.8 billion, respectively.
During the three and six months ended June 30, 2022 and 2021, there were no transfers of assets or liabilities between fair value measurement levels, and there were no material remeasurements to the fair values of assets and liabilities that are not measured at fair value on a recurring basis, except with respect to the impairment of net assets in connection with the nonstrategic Gensenta divestiture. See Note 2, Acquisitions and divestitures.
12. Derivative instruments
The Company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. To reduce our risks related to such exposures, we use or have used certain derivative instruments, including foreign currency forward, cross-currency swap, forward interest rate and interest rate swap contracts. We do not use derivatives for speculativespeculative- trading purposes.
Cash flow hedges
We are exposed to possible changes in the values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates primarily associated with our euro-denominated international product sales. Increases and decreases in the cash flows associated with our international product sales due to movements in foreign currency exchange rates are partially offset by corresponding increases and decreases in the cash flows from our international operating expenses resulting from these foreign currency exchange rate movements. To further reduce our exposure to foreign currency exchange rate fluctuations with regard to our international product sales, we enter into foreign currency forward contracts to hedge a portion of our projected international product sales up to a maximum of three years into the future,future; and at any given point in time, a higher percentage of nearer-term projected product sales are being hedged than in successive periods.
As of June 30, 20212022 and December 31, 2020,2021, we had outstanding foreign currency forward contracts with aggregate notional amounts of $5.2$5.6 billion and $5.1$5.7 billion, respectively. We have designated these foreign currency forward contracts, which are primarily euro based, as cash flow hedges. Accordingly, we report the unrealized gains and losses on these contracts in AOCI in the Condensed Consolidated Balance Sheets, and we reclassify them to Product sales in the Condensed Consolidated Statements of Income in the same periods during which the hedged transactions affect earnings.
To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term debt denominated in foreign currencies, we enter into cross-currency swap contracts. Under the terms of such contracts, we paid euros, pounds sterling and Swiss francs and received U.S. dollars for the notional amounts at the inception of the contracts; and based on these notional amounts, we exchange interest payments at fixed rates over the lives of the contracts by paying U.S. dollars and receiving euros, pounds sterling and Swiss francs. In addition, we will pay U.S. dollars to and receive euros, pounds sterling and Swiss francs from the counterparties at the maturities of the contracts for these same notional amounts. The terms of these contracts correspond to the related hedged debt, thereby effectively converting the interest payments and principal repayment on the debt from euros, pounds sterling and Swiss francs to U.S. dollars. We have designated these cross-currency swap contracts as cash flow hedges. Accordingly, the unrealized gains and losses on these contracts are reported in AOCI in the Condensed Consolidated Balance Sheets and reclassified to Other (expense) income, net, in the Condensed Consolidated Statements of Income in the same periods during which the hedged debt affects earnings.
The notional amounts and interest rates of our cross-currency swaps as of June 30, 2021,2022, were as follows (notional amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Foreign currency | | U.S. dollars |
Hedged notes | | Notional amounts | | Interest rates | | Notional amounts | | Interest rates |
| | | | | | | | |
1.25% 2022 euro Notes | | € | 1,250 | | | 1.3 | % | | $ | 1,388 | | | 3.2 | % |
0.41% 2023 Swiss franc Bonds | | CHF | 700 | | | 0.4 | % | | $ | 704 | | | 3.4 | % |
2.00% 2026 euro Notes | | € | 750 | | | 2.0 | % | | $ | 833 | | | 3.9 | % |
5.50% 2026 pound sterling Notes | | £ | 475 | | | 5.5 | % | | $ | 747 | | | 6.0 | % |
4.00% 2029 pound sterling Notes | | £ | 700 | | | 4.0 | % | | $ | 1,111 | | | 4.5 | % |
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| | Foreign currency | | U.S. dollars |
Hedged notes | | Notional amounts | | Interest rates | | Notional amounts | | Interest rates |
| | | | | | | | |
0.41% 2023 Swiss franc Bonds | | CHF | 700 | | | 0.4 | % | | $ | 704 | | | 3.4 | % |
2.00% 2026 euro Notes | | € | 750 | | | 2.0 | % | | $ | 833 | | | 3.9 | % |
5.50% 2026 pound sterling Notes | | £ | 475 | | | 5.5 | % | | $ | 747 | | | 6.0 | % |
4.00% 2029 pound sterling Notes | | £ | 700 | | | 4.0 | % | | $ | 1,111 | | | 4.5 | % |
In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable U.S. Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on forward interest rate contracts, which are designated as cash flow hedges, are recognized in AOCI in the Condensed Consolidated Balance Sheets and are amortized into Interest expense, net, in the Condensed Consolidated Statements of Income over the lives of the associated debt issuances. Amounts recognized in connection with forward interest rate swaps during the six months ended June 30, 2021,2022, and amounts expected to be recognized during the subsequent 12 months are not material.
The unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):
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| | Three months ended June 30, | | Six months ended June 30, |
Derivatives in cash flow hedging relationships | | 2021 | | 2020 | | 2021 | | 2020 |
Foreign currency contracts | | $ | (46) | | | $ | (101) | | | $ | 137 | | | $ | 138 | |
Cross-currency swap contracts | | 15 | | | 71 | | | (60) | | | (330) | |
| | | | | | | | |
Total unrealized (losses) gains | | $ | (31) | | | $ | (30) | | | $ | 77 | | | $ | (192) | |
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| | Three months ended June 30, | | Six months ended June 30, |
Derivatives in cash flow hedging relationships | | 2022 | | 2021 | | 2022 | | 2021 |
Foreign currency contracts | | $ | 252 | | | $ | (46) | | | $ | 330 | | | $ | 137 | |
Cross-currency swap contracts | | (185) | | | 15 | | | (207) | | | (60) | |
| | | | | | | | |
Total unrealized gains (losses) | | $ | 67 | | | $ | (31) | | | $ | 123 | | | $ | 77 | |
Fair value hedges
To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that qualified for and were designated as fair value hedges. These interest rate swap contracts effectively convert fixed-rate coupons to floating-rate LIBOR-based coupons over the terms of the related hedge contracts. As of both June 30, 20212022 and December 31, 2020,2021, we had interest rate swap contracts with aggregate notional amounts of $7.4$6.7 billion and $5.9 billion, respectively, that hedge certain portions of our long-term debt issuances. During the three months ended June 30, 2021, we entered into $1.5 billion of interest rate swap contracts to hedge portions of our 2.45% 2030 Notes and 2.30% 2031 Notes (see Note 9, Financing arrangements).
For interest rate swap contracts that qualify for and are designated as fair value hedges, we recognize in Interest expense, net, in the Condensed Consolidated Statements of Income the unrealized gain or loss on the derivative resulting from the change in fair value during the period, as well as the offsetting unrealized loss or gain of the hedged item resulting from the change in fair value during the period attributable to the hedged risk. If a hedging relationship involving an interest rate swap contract is terminated, the gain or loss realized on contract termination is recorded as an adjustment to the carrying value of the debt and amortized into Interest expense, net, over the remaining life of the previously hedged debt.
The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):
| | | Carrying amounts of hedged liabilities(1) | | Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities(2) | | Carrying amounts of hedged liabilities(1) | | Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities(2) |
Condensed Consolidated Balance Sheets locations | Condensed Consolidated Balance Sheets locations | | June 30, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 | Condensed Consolidated Balance Sheets locations | | June 30, 2022 | | December 31, 2021 | | June 30, 2022 | | December 31, 2021 |
Current portion of long-term debt | Current portion of long-term debt | | $ | 844 | | | $ | 89 | | | $ | 94 | | | $ | 89 | | Current portion of long-term debt | | $ | 82 | | | $ | 85 | | | $ | 82 | | | $ | 85 | |
Long-term debt | Long-term debt | | $ | 6,857 | | | $ | 6,258 | | | $ | 330 | | | $ | 477 | | Long-term debt | | $ | 6,241 | | | $ | 6,729 | | | $ | (292) | | | $ | 199 | |
____________
(1) Current portion of long-term debt includes $89 million of carrying value with discontinued hedging relationships as of both June 30, 2021 and December 31, 2020. Long-term debt includes $481$82 million and $525$85 million of carrying value with discontinued hedging relationships as of June 30, 20212022 and December 31, 2020,2021, respectively. Long-term debt includes $399 million and $440 million of carrying value with discontinued hedging relationships as of June 30, 2022 and December 31, 2021, respectively.
(2) Current portion of long-term debt includes $89 million of hedging adjustments on discontinued hedging relationships as of both June 30, 2021 and December 31, 2020. Long-term debt includes $381$82 million and $425$85 million of hedging adjustments on discontinued hedging relationships as of June 30, 20212022 and December 31, 2020,2021, respectively. Long-term debt includes $299 million and $340 million of hedging adjustments on discontinued hedging relationships as of June 30, 2022 and December 31, 2021, respectively.
Impact of hedging transactions
The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):
| | | | Three months ended June 30, 2021 | | Six months ended June 30, 2021 | | Three months ended June 30, 2022 | | Six months ended June 30, 2022 |
| | Product sales | | Other income, net | | Interest expense, net | | Product sales | | Other income, net | | Interest expense, net | | Product sales | | Other (expense) income, net | | Interest expense, net | | Product sales | | Other (expense) income, net | | Interest expense, net |
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | | $ | 6,114 | | | $ | 11 | | | $ | (281) | | | $ | 11,706 | | | $ | 24 | | | $ | (566) | | Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | | $ | 6,281 | | | $ | (317) | | | $ | (328) | | | $ | 12,012 | | | $ | (847) | | | $ | (623) | |
The effects of cash flow and fair value hedging: | The effects of cash flow and fair value hedging: | | The effects of cash flow and fair value hedging: | |
(Losses) gains on cash flow hedging relationships reclassified out of AOCI: | | |
Gains (losses) on cash flow hedging relationships reclassified out of AOCI: | | Gains (losses) on cash flow hedging relationships reclassified out of AOCI: | |
Foreign currency contracts | Foreign currency contracts | | $ | (18) | | | $ | — | | | $ | — | | | $ | (19) | | | $ | — | | | $ | — | | Foreign currency contracts | | $ | 53 | | | $ | — | | | $ | — | | | $ | 80 | | | $ | — | | | $ | — | |
Cross-currency swap contracts | Cross-currency swap contracts | | $ | — | | | $ | 46 | | | $ | — | | | $ | — | | | $ | (86) | | | $ | — | | Cross-currency swap contracts | | $ | — | | | $ | (185) | | | $ | — | | | $ | — | | | $ | (263) | | | $ | — | |
| (Losses) gains on fair value hedging relationships—interest rate swap agreements: | | |
Gains (losses) on fair value hedging relationships—interest rate swap agreements: | | Gains (losses) on fair value hedging relationships—interest rate swap agreements: | |
Hedged items(1) | Hedged items(1) | | $ | — | | | $ | — | | | $ | (34) | | | $ | — | | | $ | — | | | $ | 141 | | Hedged items(1) | | $ | — | | | $ | — | | | $ | 157 | | | $ | — | | | $ | — | | | $ | 494 | |
Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | $ | — | | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | (97) | | Derivatives designated as hedging instruments | | $ | — | | | $ | — | | | $ | (135) | | | $ | — | | | $ | — | | | $ | (450) | |
| | | | Three months ended June 30, 2020 | | Six months ended June 30, 2020 | | Three months ended June 30, 2021 | | Six months ended June 30, 2021 |
| | Product sales | | Other income, net | | Interest expense, net | | Product sales | | Other income, net | | Interest expense, net | | Product sales | | Other (expense) income, net | | Interest expense, net | | Product sales | | Other (expense) income, net | | Interest expense, net |
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | | $ | 5,908 | | | $ | 3 | | | $ | (296) | | | $ | 11,802 | | | $ | 14 | | | $ | (642) | | Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income | | $ | 6,114 | | | $ | 11 | | | $ | (281) | | | $ | 11,706 | | | $ | 24 | | | $ | (566) | |
The effects of cash flow and fair value hedging: | The effects of cash flow and fair value hedging: | | The effects of cash flow and fair value hedging: | |
Gains (losses) on cash flow hedging relationships reclassified out of AOCI: | | |
(Losses) gains on cash flow hedging relationships reclassified out of AOCI: | | (Losses) gains on cash flow hedging relationships reclassified out of AOCI: | |
Foreign currency contracts | Foreign currency contracts | | $ | 68 | | | $ | — | | | $ | — | | | $ | 117 | | | $ | — | | | $ | — | | Foreign currency contracts | | $ | (18) | | | $ | — | | | $ | — | | | $ | (19) | | | $ | — | | | $ | — | |
Cross-currency swap contracts | Cross-currency swap contracts | | $ | — | | | $ | 51 | | | $ | — | | | $ | — | | | $ | (82) | | | $ | — | | Cross-currency swap contracts | | $ | — | | | $ | 46 | | | $ | — | | | $ | — | | | $ | (86) | | | $ | — | |
| (Losses) gains on fair value hedging relationships—interest rate swap agreements: | (Losses) gains on fair value hedging relationships—interest rate swap agreements: | | (Losses) gains on fair value hedging relationships—interest rate swap agreements: | |
Hedged items(1) | Hedged items(1) | | $ | — | | | $ | — | | | $ | (30) | | | $ | — | | | $ | — | | | $ | 180 | | Hedged items(1) | | $ | — | | | $ | — | | | $ | (34) | | | $ | — | | | $ | — | | | $ | 141 | |
Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | $ | — | | | $ | — | | | $ | 53 | | | $ | — | | | $ | — | | | $ | (137) | | Derivatives designated as hedging instruments | | $ | — | | | $ | — | | | $ | 55 | | | $ | — | | | $ | — | | | $ | (97) | |
__________
(1) Gains on hedged items do not exactly offset losses on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships and the recognition of gains on terminated hedges when the corresponding hedged item was paid down in the period.
No portions of our cash flow hedge contracts were excluded from the assessment of hedge effectiveness. As of June 30, 2021, the2022, we expected to reclassify $179 million of net gains expected to be reclassified on our foreign currency and cross-currency swap contracts out of AOCI and into earnings during the next 12 months are not material.months.
Derivatives not designated as hedges
To reduce our exposure to foreign currency fluctuations in certain assets and liabilities denominated in foreign currencies, we enter into foreign currency forward contracts that are not designated as hedging transactions. Most of these exposures are hedged on a month-to-month basis. As of June 30, 20212022 and December 31, 2020,2021, the total notional amounts of these foreign currency forward contracts were $0.8 billion$550 million and $1.0 billion,$680 million, respectively. Gains and losses recognized in earnings for our derivative instruments not designated as hedging instruments were not material for the three and six months ended June 30, 20212022 and 2020.2021.
The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):
| | | | Derivative assets | | Derivative liabilities | | | Derivative assets | | Derivative liabilities |
June 30, 2021 | | Condensed Consolidated Balance Sheets locations | | Fair values | | Condensed Consolidated Balance Sheets locations | | Fair values | |
June 30, 2022 | | June 30, 2022 | | Condensed Consolidated Balance Sheets locations | | Fair values | | Condensed Consolidated Balance Sheets locations | | Fair values |
Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | | | | | | | Derivatives designated as hedging instruments: | | | | | | | | |
Foreign currency contracts | Foreign currency contracts | | Other current assets/ Other assets | | $ | 62 | | | Accrued liabilities/ Other noncurrent liabilities | | $ | 119 | | Foreign currency contracts | | Other current assets/ Other noncurrent assets | | $ | 413 | | | Accrued liabilities/ Other noncurrent liabilities | | $ | 30 | |
Cross-currency swap contracts | Cross-currency swap contracts | | Other current assets/ Other assets | | 182 | | | Accrued liabilities/ Other noncurrent liabilities | | 305 | | Cross-currency swap contracts | | Other current assets/ Other noncurrent assets | | 29 | | | Accrued liabilities/ Other noncurrent liabilities | | 503 | |
Interest rate swap contracts | Interest rate swap contracts | | Other current assets/ Other assets | | 45 | | | Accrued liabilities/ Other noncurrent liabilities | | 90 | | Interest rate swap contracts | | Other current assets/ Other noncurrent assets | | — | | | Accrued liabilities/ Other noncurrent liabilities | | 591 | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | | $ | 289 | | | $ | 514 | | Total derivatives designated as hedging instruments | | $ | 442 | | | $ | 1,124 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Derivative assets | | Derivative liabilities |
December 31, 2020 | | Condensed Consolidated Balance Sheets locations | | Fair values | | Condensed Consolidated Balance Sheets locations | | Fair values |
Derivatives designated as hedging instruments: | | | | | | | | |
Foreign currency contracts | | Other current assets/ Other assets | | $ | 28 | | | Accrued liabilities/ Other noncurrent liabilities | | $ | 237 | |
Cross-currency swap contracts | | Other current assets/ Other assets | | 255 | | | Accrued liabilities/ Other noncurrent liabilities | | 318 | |
| | | | | | | | |
Interest rate swap contracts | | Other current assets/ Other assets | | 66 | | | Accrued liabilities/ Other noncurrent liabilities | | 15 | |
Total derivatives designated as hedging instruments | | | | $ | 349 | | | | | $ | 570 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Derivative assets | | Derivative liabilities |
December 31, 2021 | | Condensed Consolidated Balance Sheets locations | | Fair values | | Condensed Consolidated Balance Sheets locations | | Fair values |
Derivatives designated as hedging instruments: | | | | | | | | |
Foreign currency contracts | | Other current assets/ Other noncurrent assets | | $ | 183 | | | Accrued liabilities/ Other noncurrent liabilities | | $ | 39 | |
Cross-currency swap contracts | | Other current assets/ Other noncurrent assets | | 66 | | | Accrued liabilities/ Other noncurrent liabilities | | 339 | |
| | | | | | | | |
Interest rate swap contracts | | Other current assets/ Other noncurrent assets | | 16 | | | Accrued liabilities/ Other noncurrent liabilities | | 156 | |
Total derivatives designated as hedging instruments | | | | $ | 265 | | | | | $ | 534 | |
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Our derivative contracts that were in liability positions as of June 30, 2021,2022, contain certain credit-risk-related contingent provisions that would be triggered if (i) we were to undergo a change in control and (ii) our or the surviving entity’s creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment grade or a materially weaker creditworthiness after the change in control. If these events were to occur, the counterparties would have the right, but not the obligation, to close the contracts under early-termination provisions. In such circumstances, the counterparties could request immediate settlement of these contracts for amounts that approximate the then-currentthen current fair values of the contracts. In addition, our derivative contracts are not subject to any type of master netting arrangement, and amounts due either to or from a counterparty under the contracts may be offset against other amounts due either to or from the same counterparty only if an event of default or termination, as defined, were to occur.
The cash flow effects of our derivative contracts in the Condensed Consolidated Statements of Cash Flows are included in Net cash provided by operating activities, except for the settlement of notional amounts of cross-currency swaps, which are included in Net cash used in financing activities.
13. Contingencies and commitments
Contingencies
In the ordinary course of business, we are involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that are difficult to predict. See our Annual Report on Form 10-K for the year ended December 31, 2020,2021, Part I, Item 1A. Risk Factors—Our business may be affected by litigation and government investigations. investigations. We describe our legal proceedings and other matters that are significant or that we believe could become significant in this footnote; in Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020;2021; and in Note 12,13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022.
We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously.
Our legal proceedings involve various aspects of our business and a variety of claims, some of which present novel factual allegations and/or unique legal theories. In each of the matters described in this filing; in Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020; or2021; and in Note 12,13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2021,2022, in which we could incur a liability, our opponents seek an award of a not-yet-quantified amount of damages or an amount that is not material. In addition, a number of the matters pending against us are at very early stages of the legal process, which in complex proceedings of the sort we face often extend for several years. As a result, none of the matters described in this filing; in Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020; or2021; and in Note 12,13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2021,2022, in which we could incur a liability, have progressed sufficiently through discovery and/or the development of important factual information and legal issues to enable us to estimate a range of possible loss, if any, or such amounts are not material. WhileAlthough it is not possible to accurately predict or determine the eventual outcomes of these matters, an adverse determination in one or more of these matters currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Certain recent developments concerning our legal proceedings and other matters are discussed below:
Abbreviated New Drug Application (ANDA)ANDA Patent Litigation
Otezla® ANDA Patent Litigation
Amgen Inc. v. SandozApotex Inc., et al.
On May 5, 2021, based onJune 14, 2022, Amgen filed a joint request by Amgen and Cipla Limited (Cipla Ltd),lawsuit in the U.S. District Court for the District of New Jersey (the New Jersey District Court) entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Cipla Ltd’s apremilast product during the termagainst Apotex Inc. (Apotex) for infringement of U.S. Patent Nos. 6,962,940 (the ’940 Patent); 7,427,638, (the ’638 Patent), 7,659,302 (the ’302 Patent), 8,455,536 (the ’536 Patent), 9,724,330 (the ’330 Patent)9,872,854 and 10,092,541, (the ’541 Patent), unless authorized pursuant to a confidential settlement agreement. On May 14, 2021,which are listed in the Orange Book for Otezla. This lawsuit was based on Apotex’s submission of an ANDA seeking FDA approval to market a joint request by Amgengeneric version of Otezla and Torrent Pharmaceuticals Ltd. (Torrent),seeks an order of the New Jersey District Court entered a consent judgment and injunction prohibitingmaking any FDA approval of Apotex’s ANDA effective no earlier than the making, using, selling, offering to sell, or importing of Torrent’s apremilast product during the termexpiration of the U.S.applicable patents.
Repatha Patent Nos. 7,893,101Litigation
Patent Disputes in the International Region
On July 21, 2022, Sanofi Biotechnology SAS filed an action against Amgen GmbH and Amgen (Europe) B.V. before the Regional Court of Dusseldorf alleging that the marketing and sale of Repatha infringes European Patent No. 2,756,004 (the ’101EP’004 Patent), 9,872,854 (the ’854 Patent)seeking infringement damages and the ’638 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 19, 2021, based on a joint requestinjunctive relief. The EP’004 Patent is currently in opposition proceedings, initiated by Amgen and Alkem Laboratories Ltd. (Alkem),an anonymous third party, before the New Jersey District Court entered a consent judgment and injunction prohibitingEuropean Patent Office (EPO). A hearing before the making, using, selling, offering to sell, or importing of Alkem’s apremilast product during the termOpposition Division of the ’940, ’638, ’302, ’536, ’330EPO was held on June 8 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 25, 2021, based on a joint request by Amgen9, 2022, and MSN Laboratories Private Limited (MSN), the New Jersey District Court entered a consent judgment and injunction prohibitingOpposition Division upheld the making, using, selling, offering to sell, or importing of MSN’s apremilast product during the termvalidity of the ’940, ’638, ’302, ’536, ’330 and ’541 Patents, unless authorized pursuant toclaims at issue with narrowing amendments. The parties are awaiting the Opposition Division’s written opinion. Amgen filed a confidential settlement agreement. On June 11, 2021, basedNotice of Appeal on a joint request by Amgen and Pharmascience Inc. (Pharmascience), the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Pharmascience’s apremilast product during the term of U.S. Patent No. 9,018,243 (the ’243 Patent) and the ’940, ’638, ’302, ’101, ’536, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On June 17, 2021, based on a joint request by Amgen and Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, DRL) , the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of DRL’sJuly 6, 2022.
apremilast product during the term of the ’638, ’101, ’536 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement.
Trial on the consolidated patent infringement action was held at the New Jersey District Court from June 14 to 25, 2021 with closing arguments on July 28, 2021. The remaining defendants are Sandoz Inc. and Zydus Pharmaceuticals (USA) Inc.
ENBREL Patent LitigationAntitrust Actions
Immunex Corporation, et al. v. Sandoz Inc., et al.Sensipar Antitrust Class Actions
On May 17, 2021,11, 2022, the U.S. Supreme Court denied the petitionparties filed motions asking permission to seek interlocutory appeal of Sandoz Inc., Sandoz International GmbH and Sandoz GmbH for certiorari seeking review of the Federal Circuit Court’s affirmance of the validity of U.S. Patent Nos. 8,063,182 and 8,163,522.
Repatha® Patent Litigation
Amgen Inc., et al. v. Sanofi, et al.
On June 21, 2021, the Federal Circuit Court denied our petition for rehearing en banc of the Federal Circuit Court’s ruling that claims 19 and 29 of our U.S. Patent No. 8,829,165 and claim 7 of our U.S. Patent No. 8,859,741 are invalid for failing to meet the enablement requirement.
NEUPOGEN® (filgrastim)/Neulasta® Patent Litigation
Amgen Inc., et al. v. Hospira Inc. et al.
On June 11, 2021, after having held a claim construction hearing, the U.S. District Court for the District of Delaware (Delaware District Court) determined that the term at issue required no construction, and on July 14, theDelaware’s (the Delaware District Court set a briefing schedule for summary judgment motions.
Patent Trial and Appeal Board (PTAB) Challenge
Lupin PTAB Challenge
On July 12, 2021, the PTAB of the U.S. Patent and Trademark Office issued a decisionCourt’s) March 11, 2022 order denying institution of Lupin Limited’s petition for inter partes review of U.S. Patent No. 9,856,287.
Apotex PTAB Challenge
On June 21, 2021, the U.S. Supreme Court decided United States v. Arthrex, Inc. On June 28, 2021, the Supreme Court granted the government’s pending certiorari petition and vacated and remanded the Federal Circuit Court’s judgment for further consideration under Arthrex.
Breach of Contract Action
Novartis Pharma AG v. Amgen Inc.
On June 2, 2021, the parties executed agreementsAmgen’s Motion to settle 2 claims in the litigation, relatingDismiss solely with respect to the 2018 budget overrun disputereverse payment claim and certain counterclaims alleging breaches by Novartis Pharma AG (Novartis) of the 2015various state law claims. The plaintiffs did not oppose Amgen’s motion and 2017 collaboration agreements relatedinstead argued all issues should be appealed at this time. Amgen filed its opposition to the developmentplaintiffs’ motion on June 10, 2022, and commercialization of Aimovig® (erenumab-aooe), and to amend and restate the 2017 collaboration agreement. As part of the agreement, Amgen paid $48 million to Novartis to resolve the 2018 budget dispute, and Novartis is in the process of transitioning U.S. commercial operations to Amgen.
Antitrust Class Actionreply briefs were filed on June 24, 2022.
SensiparHUMIRA® (cinacalcet)Biosimilar Antitrust Class Actions
On AprilAugust 1, 2022, the U.S. Court of Appeals for the Seventh Circuit issued an opinion affirming the June 30, 2020 dismissal with prejudice by the U.S. District Court for the Northern District of Illinois of a consolidated complaint against Amgen along with AbbVie Inc., AbbVie Biotechnology Ltd., Samsung Bioepis Co. andSandoz Inc.
Regeneron Pharmaceuticals, Inc. Antitrust Action
On May 27, 2021, plaintiffs2022, Regeneron Pharmaceuticals, Inc. (Regeneron) filed their oppositions to defendants’ (including Amgen’s) motion to dismiss, and defendants’ reply was filed on May 25, 2021. A hearing on defendants’ motion to dismiss was heldsuit against Amgen in the Delaware District Court for federal and state antitrust and unfair competition violations and tortious interference with prospective business relations. Regeneron alleges that Amgen’s sales contracting practices for Repatha, ENBREL and Otezla with key insurers, third-party payors and PBMs have harmed the sales of its product PRALUENT® and focuses on July 13, 2021.2 primary arguments: that Amgen improperly bundled sales of Repatha with ENBREL, Otezla and potentially other products and sought exclusive or de facto exclusive formulary positioning for Repatha. Amgen’s initial responsive pleading was filed on August 1, 2022.
U.S. Tax Litigation
Amgen Inc. & Subsidiaries v. Commissioner of Internal Revenue
See Note 4, Income taxes, for discussion of the IRS tax dispute and the Company’s petition in the U.S. Tax Court.
14. Subsequent events
On June 1, 2021, Amgen and Kyowa Kirin Co., Ltd. (KKC) announced a collaboration and licensing agreement to jointly develop and commercialize KHK4083, an anti-OX40 fully human monoclonal antibody, worldwide, except in Japan. The transaction closed on July 30, 2021, upon expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Amgen will make an upfront payment of $400 million to KKC, to be recognized as R&D expense in the third quarter of 2021.
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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)MD&A is intended to assist the reader in understanding Amgen’s business. MD&A is provided as a supplement to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022. Our results of operations discussed in MD&A are presented in conformity with GAAP. Amgen operates in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.
Forward-looking statements
This report and other documents we file with the Securities and Exchange Commission (SEC)SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases, written statements or our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We describe our respective risks, uncertainties and assumptions that could affect the outcome or results of operations in Item 1A. Risk Factors in Part II herein and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and in Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. Reference is made in particular to forward-looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, EPS, liquidity and capital resources, trends, planned dividends, stock repurchases, collaborations and effects of pandemics. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.
Overview
Amgen is a biotechnology company committed to unlocking the potential of biology for patients suffering from serious illnesses. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
Our principal products—those with the most significant annual commercial sales—products are ENBREL, Prolia,®, Otezla,®, XGEVA, Aranesp, Neulasta,®, XGEVA®, Aranesp®, Repatha,® KYPROLIS and KYPROLIS®.Nplate. We also market a number of other products, including MVASI,® (bevacizumab-awwb), Nplate® (romiplostim), Vectibix,® (panitumumab), EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, Parsabiv, KANJINTI,® (trastuzumab-anns), EPOGEN® (epoetin alfa), EVENITY® (romosozumab-aqqg), BLINCYTO® (blinatumomab), AMGEVITA™ (adalimumab), Parsabiv® (etelcalcetide), Aimovig®, LUMAKRAS/LUMYKRAS, NEUPOGEN,® Sensipar/Mimpara and Sensipar®/Mimpara™.TEZSPIRE.
COVID-19 pandemic
A novel strain of coronavirus (SARS-CoV-2, or severe acute respiratory syndrome coronavirus 2, causing coronavirus disease 19, or COVID-19) was declared a global pandemic by the World Health Organization on March 11, 2020. Since the onset of the pandemic in 2020, we have been closely monitoring the pandemic’s effects on our global operations. We continue to take appropriate steps to minimize risks to our employees, a significant number of whom have continued to work virtually. Employee access to company facilities has been in accordance with applicable government health and safety protocols and guidance issued in response to the COVID-19 pandemic. To date, our remote working arrangements have not significantly affected our ability to maintain critical business operations, and we have not experienced disruptions to or shortages of our supply of medicines.
SinceOver the beginningcourse of the COVID-19 pandemic we have seenexperienced changes in demand for some of our products driven by changesas fluctuations in the frequency of patient visits to doctors’ offices that hashave impacted providingthe provision of treatments to existing patients and reduced diagnoses in new patients. Through the second quarter,During 2021, there has beenwas a gradual recovery in both patients resuming treatmentspatient visits and in new patient starts, although overall these remain below pre-COVID-19diagnosis rates that approached pre-pandemic levels. The cumulative decrease in diagnoses over the course ofIn 2022, the pandemic has suppressedcontinued to impact the volumehealthcare sector, and our business, to varying degrees across our markets. To date in 2022, in most of new patients starting treatment, whichour major markets, with the exception of the Asia Pacific region that has been affected by sustained lockdowns, we expect tohave seen greater stability in patient visits and demand patterns even in areas facing surges in the virus. Given the evolution of COVID-19 since its onset, including the proliferation of variants, we cannot predict the impact of future virus surges on our business and will continue to closely monitor the impact of COVID-19 on our business during the second half of the year. We are closely monitoring the effects of the emerging COVID-19 variants on patient behavior and access.
Since early 2021, global vaccination efforts have been underway to control the pandemic. However, uncertainty remains as to the length of time required for vaccinating a meaningful portion of the population as well as the efficacy of such vaccinations on the trajectory of the pandemic. Challengeshealthcare sector more generally.
With respect to vaccination efforts, new variants and other causes of virus spread may require governmentsour drug development activities, we continue to issue additional restrictions and/or shutdowns in various geographies. As a result, we expectwork to see continued volatility for at least the duration of the pandemic as governments respond to current local conditions.
At this time, the clinical trials that paused at the onset of the pandemic to ensure subject safety or data integrity have resumed. Study enrollment was most affected negatively in the second quarter of 2020 but by the end of the year resumed to around pre-pandemic levels. We are continuously monitoringmitigate COVID-19 infection rates and working to mitigate effects on future study enrollment.enrollment in our clinical trials around the world. We remain focused on effectively supporting the delivery of care and investigational drug supply to patients enrolled in our active clinical sites in their providing care for patients and in our providing investigational drug supply. In addition, our organization is supporting efforts to combat the COVID-19 pandemic, including by manufacturing therapeutic antibodies in a supply arrangement with Eli Lilly and Company (Lilly) and joining a public–private partnership between leading companies in our industry and U.S. government health agencies to develop a strategy for a coordinated research response.sites.
Despite the ongoing pandemic and business impacts noted above, we believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures and debt service requirements as well as to engage in the capital-return and other business initiatives that we plan to pursue. For a discussion of risks the COVID-19 pandemic presents to our results, see Risk Factors in Item 1A. Risk Factors in Part II herein and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and in Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022.
Significant developments
Following is a summary of selected significant developments affecting our business that occurred since the filing of our Quarterly Report on Form 10-Q for the periodquarter ended March 31, 2021.2022. For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and our Quarterly Report on Form 10-Q for the period ended March 31, 2021.2022.
Business DevelopmentProducts/Pipeline
Kyowa Kirin Co., Ltd. collaborationGeneral Medicine
Olpasiran
•In June 2021,May 2022, we announced positive topline data from the Phase 2 OCEAN(a)-DOSE clinical study, evaluating olpasiran (formerly AMG 890) in adult patients with lipoprotein(a), or Lp(a), levels over 150 nmol/L and KKC, announcedevidence of atherosclerotic cardiovascular disease (ASCVD). Olpasiran is a small interfering RNA (siRNA) designed to lower the body’s production of apolipoprotein(a), a key component of Lp(a) that has been associated with an agreementincreased risk of cardiovascular events. In the double-blind placebo-controlled treatment period, olpasiran was administered up to jointly develop225 mg subcutaneously every 12 weeks to patients with a median baseline Lp(a) of approximately 260 nmol/L. These data demonstrated a significant reduction from baseline in Lp(a) of up to or greater than 90 percent at week 36 (primary endpoint) and commercialize KKC’s potential first-in-class, phase 3-ready anti-OX40 fully human monoclonal antibody in developmentweek 48 (end of treatment period) for the majority of doses. No new safety concerns were identified during this treatment of atopic dermatitis, with potential in other autoimmune diseases. The transaction closed on July 30, 2021, upon expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.period.
Teneobio, Inc. acquisitionInflammation
TEZSPIRE
•In July 2021, we and Teneobio, Inc. (Teneobio),2022, our partner AstraZeneca plc announced an agreement under which Amgen will acquire Teneobio, a privately held, clinical stage biotechnology company developing a new class of biologics calledthat the Committee for Medicinal Products for Human Heavy-Chain Antibodies. Under the termsUse of the agreement,EMA has recommended TEZSPIRE for marketing authorization in the European Union as an add-on therapy in patients 12 years and older with severe asthma who are inadequately controlled with high dose inhaled corticosteroids plus another medicinal product for maintenance treatment.
Business development
Proposed acquisition of ChemoCentryx, Inc.
•On August 4, 2022, Amgen will acquire all outstanding sharesannounced its proposed acquisition of Teneobio at closingChemoCentryx for $52.00per share in exchangecash, for a $900 million upfront cash payment,total transaction price of approximately $4.0 billion. ChemoCentryx is a biopharmaceutical company focused on orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer. In the United States, ChemoCentryxmarkets TAVNEOS®, the first approved orally administered inhibitor of the complement 5a receptor as well as future contingent milestone payments to Teneobio equity holders potentially worth up to an additional $1.6 billion in cash. The acquisition is subject to customary closing conditions, including applicable regulatory approvals. adjunctive treatment for adult patients with severe active anti-neutrophil cytoplasmic autoantibody-associated vasculitis (ANCA vasculitis).The transaction is expected to close in the second halffourth quarter of 2021.2022.
Products/Pipeline
Inflammation
Otezla®
•In May 2021, we announced that the U.S. Food and Drug Administration (FDA) accepted for review the supplemental New Drug Application for Otezla® for the treatment of adults with mild-to-moderate plaque psoriasis who are candidates for phototherapy or systemic therapy. The FDA has set a Prescription Drug User Fee Act (PDUFA) date of December 19, 2021.
Tezepelumab
•In May 2021, Amgen announced that its partner AstraZeneca had submitted a Biologics License Application to the FDA for tezepelumab, a potential first-in-class medicine in severe asthma. The submission is supported by positive clinical trial results including a phase 3 trial, which demonstrated a statistically significant and clinically meaningful reduction in the annualized asthma exacerbation rate (AAER) in patients with severe, uncontrolled asthma compared to placebo.
•In July 2021, we announced that the FDA had granted Priority Review for tezepelumab in the treatment of asthma. The PDUFA date for a decision by the FDA is during the first quarter of 2022.
Oncology/Hematology
LUMAKRAS™ (sotorasib)
•In May 2021, we announced that the FDA had approved LUMAKRAS™ for the treatment of adult patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer (NSCLC), as determined by an FDA-approved test, who have received at least one prior systemic therapy. LUMAKRAS™ received accelerated approval based on overall response rate (ORR) and duration of response (DoR). Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial or trials.
Operations
New manufacturing facilities
We announced plans to expand our United States-based manufacturing footprint:
•In June 2021, we announced plans to build an advanced assembly and packaging plant in Ohio. The new facility will assemble and package vials and syringes to support the growing demand for our medicines.
•In August 2021, we announced plans to build a drug substance plant in North Carolina that will increase our manufacturing network capacity to reliably supply more medicines for patients.
We expect that both of these facilities will be built faster and at a lower cost than traditional plants. Once completed, both will also utilize cutting-edge technologies to be more efficient and environmentally friendly than traditional plants.
Selected financial information
The following is an overview of our results of operations (in millions, except percentages and per-share data):
| | | Three months ended June 30, | | Six months ended June 30, | | | Three months ended June 30, | | Six months ended June 30, | |
| | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Product sales | Product sales | | | | | | | | | | | | Product sales | | | | | | | | | | | |
U.S. | U.S. | $ | 4,374 | | | $ | 4,428 | | | (1) | % | | $ | 8,277 | | | $ | 8,707 | | | (5) | % | U.S. | $ | 4,446 | | | $ | 4,374 | | | 2 | % | | $ | 8,483 | | | $ | 8,277 | | | 2 | % |
ROW | ROW | 1,740 | | | 1,480 | | | 18 | % | | 3,429 | | | 3,095 | | | 11 | % | ROW | 1,835 | | | 1,740 | | | 5 | % | | 3,529 | | | 3,429 | | | 3 | % |
Total product sales | Total product sales | 6,114 | | | 5,908 | | | 3 | % | | 11,706 | | | 11,802 | | | (1) | % | Total product sales | 6,281 | | | 6,114 | | | 3 | % | | 12,012 | | | 11,706 | | | 3 | % |
Other revenues | Other revenues | 412 | | | 298 | | | 38 | % | | 721 | | | 565 | | | 28 | % | Other revenues | 313 | | | 412 | | | (24) | % | | 820 | | | 721 | | | 14 | % |
Total revenues | Total revenues | $ | 6,526 | | | $ | 6,206 | | | 5 | % | | $ | 12,427 | | | $ | 12,367 | | | — | % | Total revenues | $ | 6,594 | | | $ | 6,526 | | | 1 | % | | $ | 12,832 | | | $ | 12,427 | | | 3 | % |
Operating expenses | Operating expenses | $ | 5,698 | | | $ | 3,883 | | | 47 | % | | $ | 9,470 | | | $ | 7,689 | | | 23 | % | Operating expenses | $ | 4,418 | | | $ | 5,698 | | | (22) | % | | $ | 8,156 | | | $ | 9,470 | | | (14) | % |
Operating income | Operating income | $ | 828 | | | $ | 2,323 | | | (64) | % | | $ | 2,957 | | | $ | 4,678 | | | (37) | % | Operating income | $ | 2,176 | | | $ | 828 | | | * | | $ | 4,676 | | | $ | 2,957 | | | 58 | % |
Net income | Net income | $ | 464 | | | $ | 1,803 | | | (74) | % | | $ | 2,110 | | | $ | 3,628 | | | (42) | % | Net income | $ | 1,317 | | | $ | 464 | | | * | | $ | 2,793 | | | $ | 2,110 | | | 32 | % |
Diluted EPS | Diluted EPS | $ | 0.81 | | | $ | 3.05 | | | (73) | % | | $ | 3.65 | | | $ | 6.12 | | | (40) | % | Diluted EPS | $ | 2.45 | | | $ | 0.81 | | | * | | $ | 5.13 | | | $ | 3.65 | | | 41 | % |
Diluted shares | Diluted shares | 576 | | | 592 | | | (3) | % | | 578 | | | 593 | | | (3) | % | Diluted shares | 537 | | | 576 | | | (7) | % | | 544 | | | 578 | | | (6) | % |
* Change in excess of 100%
In the following discussion of changes in product sales, any reference to unit demand 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. In addition, any reference to increases or decreases in inventory refers to changes in inventory held by wholesaler customers and end users (such as pharmacies).
Total product sales increased for the three months ended June 30, 2021,2022, primarily driven by higher unit demand for certain brands including Repatha, Prolia,®, Repatha®, XGEVA® EVENITY, LUMAKRAS/LUMYKRAS and MVASI®,KYPROLIS, partially offset by declines in the net selling prices of certain products.products and unfavorable changes in foreign currency exchange rates. Total product sales decreasedincreased for the six months ended June 30, 2021,2022, primarily driven by declines in the net selling price of certain products, partially offset by higher unit demand for certain brands, including Repatha, Prolia,®, Repatha® EVENITY, LUMAKRAS/LUMYKRAS and MVASI®. There has been gradual recovery throughKYPROLIS, and by favorable changes to estimated sales deductions, partially offset by declines in the second quarternet selling prices of 2021certain products and unfavorable changes in patients resuming their treatments and in new patient starts, although overall both remain below pre-COVID-19 levels.foreign currency exchange rates. For the remainder of 2022, we expect that net selling prices will continue to decline at a portfolio level, driven by increased competition.
DuringOver the initial stagescourse of the COVID-19 pandemic in early 2020, we experienced changes in demand for some of our products. The pandemic interrupted many physician–products as fluctuations in the frequency of patient interactions, which ledvisits to delaysdoctors’ offices have impacted the provision of treatments to existing patients and reduced diagnoses in diagnoses and treatments, with varying degrees of impact across our portfolio.new patients. In general, declines in the sales of negatively affectedour products fellthat were impacted by the dynamics of the pandemic were most significant in the early partmonths of the second quarter of 2020,pandemic, with product demand beginning to show some recovery in late 2020. During 2021, there was a gradual recovery in both patient visits and diagnosis rates that approached pre-pandemic levels; however, variants (including Omicron) began to impact the healthcare sector and our business in late 2021 and early 2022. This led to diminished capacity in the healthcare sector and reduced working days for our own sales force. For the second halfquarter 2022, we have seen the impact of 2020. Inthese variants recede in most markets, with the first halfexception of some markets in the current year,Asia Pacific region, which has allowed us to engage in increased field-facing activities. Provider and patient activity has also increased, leading to improvements in demand has been recovering compared withfor our products to pre-pandemic levels as patients return to doctors’ offices. Thelevels. However, the cumulative decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which we expect to continuecontinues to impact our business during the second half of the year.business. Given the unpredictable nature of the pandemic, we expect there could be ongoing intermittent disruptions in physician–patient interactions, and as a result, we continue to expectmay experience quarter-to-quarter variability. See Risk Factors in Part II, Item 1A. of this Form 10-Q and Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020, and in Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2021.
In addition, other changes in the healthcare ecosystem have the potential to introduce variability into product sales trends. For example, we expect changes in U.S. employment to leadhave led to changes to the insured population. Growth in numbers of Medicaid enrollees and uninsured individuals may have a negative impact on product demand and sales. Overall, uncertainty remains around the timing and magnitude of our sales during the COVID-19 pandemic. See Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.
Other revenues decreased for the three months ended June 30, 2022, driven by lower revenue from COVID-19 antibody material and increased for the six months ended June 30, 2022, primarily driven by higher revenue from COVID-19 antibody material.
Operating expenses decreased for the three and six months ended June 30, 2021,2022, primarily driven bydue to the sale of COVID-19 antibody material.
Operating expenses increased for the three and six months ended June 30, 2021, primarily driven byAcquired IPR&D expense related to the bemarituzumab program acquired as part of the Five Prime acquisition.
acquisition in 2021, partially offset by a loss on a nonstrategic divestiture in 2022. See Note 2, Acquisitions and divestitures.
Although changes in foreign currency exchange rates result in increases or decreases in our reported international product sales, the benefit or detriment that such movements have on our international product sales is partially offset by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities. OurFurther, while not designed to completely address foreign currency changes, our hedging activities seek to offset, in part, the impacts, both positive and negative, thateffects of foreign currency exchange rate changes, may haveboth favorable and unfavorable, on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros. The net impact from changes in foreign currency exchange rates was not material for the three and six months ended June 30, 20212022 and 2020.2021.
Results of operations
Product sales
Worldwide product sales were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
ENBREL | $ | 1,144 | | | $ | 1,246 | | | (8) | % | | $ | 2,068 | | | $ | 2,399 | | | (14) | % |
Prolia® | 814 | | | 659 | | | 24 | % | | 1,572 | | | 1,313 | | | 20 | % |
Otezla® | 534 | | | 561 | | | (5) | % | | 1,010 | | | 1,040 | | | (3) | % |
Neulasta® | 486 | | | 593 | | | (18) | % | | 968 | | | 1,202 | | | (19) | % |
XGEVA® | 488 | | | 435 | | | 12 | % | | 956 | | | 916 | | | 4 | % |
Aranesp® | 367 | | | 387 | | | (5) | % | | 722 | | | 809 | | | (11) | % |
Repatha® | 286 | | | 200 | | | 43 | % | | 572 | | | 429 | | | 33 | % |
KYPROLIS® | 280 | | | 253 | | | 11 | % | | 531 | | | 533 | | | — | % |
Other products | 1,715 | | | 1,574 | | | 9 | % | | 3,307 | | | 3,161 | | | 5 | % |
Total product sales | $ | 6,114 | | | $ | 5,908 | | | 3 | % | | $ | 11,706 | | | $ | 11,802 | | | (1) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
ENBREL | $ | 1,051 | | | $ | 1,144 | | | (8) | % | | $ | 1,913 | | | $ | 2,068 | | | (7) | % |
Prolia | 922 | | | 814 | | | 13 | % | | 1,774 | | | 1,572 | | | 13 | % |
Otezla | 594 | | | 534 | | | 11 | % | | 1,045 | | | 1,010 | | | 3 | % |
XGEVA | 533 | | | 488 | | | 9 | % | | 1,035 | | | 956 | | | 8 | % |
Aranesp | 357 | | | 367 | | | (3) | % | | 715 | | | 722 | | | (1) | % |
Neulasta | 310 | | | 486 | | | (36) | % | | 658 | | | 968 | | | (32) | % |
Repatha | 325 | | | 286 | | | 14 | % | | 654 | | | 572 | | | 14 | % |
KYPROLIS | 317 | | | 280 | | | 13 | % | | 604 | | | 531 | | | 14 | % |
Nplate | 284 | | | 245 | | | 16 | % | | 550 | | | 472 | | | 17 | % |
Other products | 1,588 | | | 1,470 | | | 8 | % | | 3,064 | | | 2,835 | | | 8 | % |
Total product sales | $ | 6,281 | | | $ | 6,114 | | | 3 | % | | $ | 12,012 | | | $ | 11,706 | | | 3 | % |
Future sales of our products will depend in part on the factors discussed below and in the following sections of this report: (i) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Selected Financial Information; and (ii) Part II, Item 1A. Risk Factors;Factors, and in the following sections of our Annual Report on Form 10-K for the year ended December 31, 2020:2021: (i) Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products,Products; (ii) Part I, Item 1A. Risk FactorsFactors; and (iii) Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of Operations—Product Sales, as well as in our Quarterly Report on Form 10-Q for the period ended March 31, 2021, in2022: (i) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Product Sales; and (ii) Part II, Item 1A. Risk Factors.
ENBREL
Total ENBREL sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
ENBREL — U.S. | $ | 1,113 | | | $ | 1,213 | | | (8) | % | | $ | 2,007 | | | $ | 2,330 | | | (14) | % |
ENBREL — Canada | 31 | | | 33 | | | (6) | % | | 61 | | | 69 | | | (12) | % |
Total ENBREL | $ | 1,144 | | | $ | 1,246 | | | (8) | % | | $ | 2,068 | | | $ | 2,399 | | | (14) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
ENBREL — U.S. | $ | 1,036 | | | $ | 1,113 | | | (7) | % | | $ | 1,879 | | | $ | 2,007 | | | (6) | % |
ENBREL — Canada | 15 | | | 31 | | | (52) | % | | 34 | | | 61 | | | (44) | % |
Total ENBREL | $ | 1,051 | | | $ | 1,144 | | | (8) | % | | $ | 1,913 | | | $ | 2,068 | | | (7) | % |
The decrease in ENBREL sales for the three and six months ended June 30, 2021,2022, was primarily driven by lower net selling price and unfavorablelower unit demand.
For the remainder of 2022, we expect that net selling price will continue to decline driven by increased competition.
Prolia
Total Prolia sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Prolia — U.S. | $ | 611 | | | $ | 538 | | | 14 | % | | $ | 1,193 | | | $ | 1,039 | | | 15 | % |
Prolia — ROW | 311 | | | 276 | | | 13 | % | | 581 | | | 533 | | | 9 | % |
Total Prolia | $ | 922 | | | $ | 814 | | | 13 | % | | $ | 1,774 | | | $ | 1,572 | | | 13 | % |
The increase in global Proliasales for the three and six months ended June 30, 2022, was primarily driven by higher unit demand.
Otezla
Total Otezla sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Otezla — U.S. | $ | 487 | | | $ | 423 | | | 15 | % | | $ | 837 | | | $ | 789 | | | 6 | % |
Otezla — ROW | 107 | | | 111 | | | (4) | % | | 208 | | | 221 | | | (6) | % |
Total Otezla | $ | 594 | | | $ | 534 | | | 11 | % | | $ | 1,045 | | | $ | 1,010 | | | 3 | % |
The increase in global Otezla sales for the three months ended June 30, 2022, was driven by higher unit demand and favorable changes to estimated sales deductions. Fordeductions, partially offset by lower net selling price.
The increase in global Otezla sales for the remainder of 2021, we expect the trend ofsix months ended June 30, 2022, was primarily driven by higher unit demand and favorable changes to estimated sales deductions, partially offset by lower net selling price declinesand unfavorable changes to continue compared with the prior year.inventory.
We are involved in patentFor a discussion of litigation with a company seekingrelated to market its FDA-approved biosimilar version of ENBREL. See Otezla, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report. Companies with approved
XGEVA
Total XGEVA sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
XGEVA — U.S. | $ | 391 | | | $ | 355 | | | 10 | % | | $ | 759 | | | $ | 689 | | | 10 | % |
XGEVA — ROW | 142 | | | 133 | | | 7 | % | | 276 | | | 267 | | | 3 | % |
Total XGEVA | $ | 533 | | | $ | 488 | | | 9 | % | | $ | 1,035 | | | $ | 956 | | | 8 | % |
The increase in global XGEVAsales for the three and six months ended June 30, 2022, was primarily driven by higher net selling price and favorable changes to estimated sales deductions.
Aranesp
Total Aranesp sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Aranesp — U.S. | $ | 132 | | | $ | 135 | | | (2) | % | | $ | 269 | | | $ | 260 | | | 3 | % |
Aranesp — ROW | 225 | | | 232 | | | (3) | % | | 446 | | | 462 | | | (3) | % |
Total Aranesp | $ | 357 | | | $ | 367 | | | (3) | % | | $ | 715 | | | $ | 722 | | | (1) | % |
The decrease in global Aranesp sales for the three months ended June 30, 2022, was primarily driven by lower net selling price.
The decrease in global Aranesp sales for the six months ended June 30, 2022, was driven by lower net selling price and unfavorable changes in foreign currency exchange rates, partially offset by favorable changes to estimated sales deductions and higher unit demand.
Aranesp continues to face competition from a long-acting erythropoiesis-stimulating agent (ESA) andalso faces competition from biosimilar versions of ENBREL may seekEPOGEN, which will continue to enterimpact sales in the U.S. market if we are not ultimately successful in our litigations, or even earlier. Other companies are also developing proposed biosimilar versions of ENBREL.future.
Prolia®Neulasta
Total Prolia®Neulasta sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
Prolia® — U.S. | $ | 538 | | | $ | 441 | | | 22 | % | | $ | 1,039 | | | $ | 863 | | | 20 | % |
Prolia® — ROW | 276 | | | 218 | | | 27 | % | | 533 | | | 450 | | | 18 | % |
Total Prolia® | $ | 814 | | | $ | 659 | | | 24 | % | | $ | 1,572 | | | $ | 1,313 | | | 20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Neulasta — U.S. | $ | 263 | | | $ | 434 | | | (39) | % | | $ | 567 | | | $ | 855 | | | (34) | % |
Neulasta — ROW | 47 | | | 52 | | | (10) | % | | 91 | | | 113 | | | (19) | % |
Total Neulasta | $ | 310 | | | $ | 486 | | | (36) | % | | $ | 658 | | | $ | 968 | | | (32) | % |
The increasedecrease in global ProliaNeulasta® sales for the three and six months ended June 30, 2021, was primarily driven by higher unit demand. Although disruptions from the effects of the COVID-19 pandemic on new and repeat patient visits have decreased, we anticipate that such disruptions will continue to affect demand in 2021—but to a lesser degree than that experienced in 2020.
Otezla®
Total Otezla® sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
Otezla® — U.S. | $ | 423 | | | $ | 464 | | | (9) | % | | $ | 789 | | | $ | 841 | | | (6) | % |
Otezla® — ROW | 111 | | | 97 | | | 14 | % | | 221 | | | 199 | | | 11 | % |
Total Otezla® | $ | 534 | | | $ | 561 | | | (5) | % | | $ | 1,010 | | | $ | 1,040 | | | (3) | % |
The decrease in global Otezla® sales for the three and six months ended June 30, 2021,2022, was primarily driven by lower net selling price and unfavorable changes to estimated sales deductions, partially offset by higher unit demand.
Increased competition as a result of biosimilar versions of Neulasta has had and will continue to have a significant adverse impact on brand sales, including accelerating net price erosion and lower unit demand. We also expect other biosimilar versions, including biosimilars that will use an on-body injector that would compete with our Onpro injector, to be approved in the future.
For a discussion of ongoing litigationpatent litigations related to Otezla®,these and other biosimilars, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and Part I—Note 12,13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2021, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.2022.
Neulasta®
Repatha
Total Neulasta® Repatha sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
Neulasta® — U.S. | $ | 434 | | | $ | 520 | | | (17) | % | | $ | 855 | | | $ | 1,054 | | | (19) | % |
Neulasta® — ROW | 52 | | | 73 | | | (29) | % | | 113 | | | 148 | | | (24) | % |
Total Neulasta® | $ | 486 | | | $ | 593 | | | (18) | % | | $ | 968 | | | $ | 1,202 | | | (19) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Repatha — U.S. | $ | 154 | | | $ | 143 | | | 8 | % | | $ | 319 | | | $ | 282 | | | 13 | % |
Repatha — ROW | 171 | | | 143 | | | 20 | % | | 335 | | | 290 | | | 16 | % |
Total Repatha | $ | 325 | | | $ | 286 | | | 14 | % | | $ | 654 | | | $ | 572 | | | 14 | % |
The decreaseincrease in global Neulasta® Repatha sales for the three and six months ended June 30, 2021,2022, was driven by the impact of biosimilar competition on net selling price andhigher unit demand, partially offset by favorablelower net selling price. Contracting changes to estimated sales deductions.
Increased competitionsupport and expand Medicare Part D and commercial patient access and the inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, resulted in the United States and Europe as a result of biosimilar versions of Neulasta® has had and will continuedecrease to have a significant adverse impact on brand sales, including additional net selling price erosion. We also expect other biosimilar versions to be approved in the future. 2022.
For a discussion of ongoing patent litigationslitigation related to these and other biosimilars,Repatha, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020, 2021; Part I—Note 12,13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2021,2022; and Part I—Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.
XGEVA®KYPROLIS
Total XGEVA®KYPROLIS sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
XGEVA® — U.S. | $ | 355 | | | $ | 318 | | | 12 | % | | $ | 689 | | | $ | 673 | | | 2 | % |
XGEVA® — ROW | 133 | | | 117 | | | 14 | % | | 267 | | | 243 | | | 10 | % |
Total XGEVA® | $ | 488 | | | $ | 435 | | | 12 | % | | $ | 956 | | | $ | 916 | | | 4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
KYPROLIS — U.S. | $ | 213 | | | $ | 190 | | | 12 | % | | $ | 409 | | | $ | 349 | | | 17 | % |
KYPROLIS — ROW | 104 | | | 90 | | | 16 | % | | 195 | | | 182 | | | 7 | % |
Total KYPROLIS | $ | 317 | | | $ | 280 | | | 13 | % | | $ | 604 | | | $ | 531 | | | 14 | % |
The increase in global XGEVAKYPROLIS® sales for the three months ended June 30, 2021, was driven by higher unit demand. The increase in global XGEVA® sales for theand six months ended June 30, 2021,2022, was primarily driven by higher unit demand, partially offset by lower net selling price.
Aranesp®
Total Aranesp® sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
Aranesp® — U.S. | $ | 135 | | | $ | 156 | | | (13) | % | | $ | 260 | | | $ | 331 | | | (21) | % |
Aranesp® — ROW | 232 | | | 231 | | | — | % | | 462 | | | 478 | | | (3) | % |
Total Aranesp® | $ | 367 | | | $ | 387 | | | (5) | % | | $ | 722 | | | $ | 809 | | | (11) | % |
The decrease in global Aranesp® sales for the three months ended June 30, 2021, was driven by lower net selling price due to competition. The decrease in global Aranesp® sales for the six months ended June 30, 2021, was primarily driven by lower net selling price and unit demand due to competition.
Aranesp® continues to face competition from a long-acting erythropoiesis-stimulating agent (ESA) andalso faces competition from a biosimilar version of EPOGEN®, which will continue to impact sales in the future.
Repatha®
Total Repatha® sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
Repatha® — U.S. | $ | 143 | | | $ | 115 | | | 24 | % | | $ | 282 | | | $ | 239 | | | 18 | % |
Repatha® — ROW | 143 | | | 85 | | | 68 | % | | 290 | | | 190 | | | 53 | % |
Total Repatha® | $ | 286 | | | $ | 200 | | | 43 | % | | $ | 572 | | | $ | 429 | | | 33 | % |
The increase in global Repatha® sales for the three and six months ended June 30, 2021, was driven by higher unit demand, partially offset by lower net selling price. We expect further reduction in the net selling price on a sequential basis as the number of Medicare Part D patients receiving Repatha® increases.
For a discussion of ongoing litigation related to Repatha®, see Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020; Note 12, Contingencies and commitments, to the condensed consolidated financial statements for the period ended March 31, 2021; and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.
KYPROLIS®
Total KYPROLIS® sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
KYPROLIS® — U.S. | $ | 190 | | | $ | 167 | | | 14 | % | | $ | 349 | | | $ | 354 | | | (1) | % |
KYPROLIS® — ROW | 90 | | | 86 | | | 5 | % | | 182 | | | 179 | | | 2 | % |
Total KYPROLIS® | $ | 280 | | | $ | 253 | | | 11 | % | | $ | 531 | | | $ | 533 | | | — | % |
The increase in global KYPROLIS® sales for the three months ended June 30, 2021, was primarily driven by higher unit demand and an increase in net selling price. Global KYPROLIS® sales for the six months ended June 30, 2021 remained relatively flat compared with the prior period.
We are engaged in litigation with two companies that are challenging certain of our patents related to KYPROLIS® and that are seeking to market generic carfilzomib products. Separately, we have entered into confidential settlement agreements with other companies developing generic carfilzomib products, and the court has entered consent judgments enjoining those companies from infringing certain of our patents, subject to terms of the confidential settlement agreements. See Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020; Note 12, Contingencies and commitments, to the condensed consolidated financial statements for the period ended March 31, 2021, and Note 13; Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report. The FDA has reported that it has granted tentative or final approval of ANDAs for generic carfilzomib products filed by a number of companies. The date of approval of those ANDAs for generic carfilzomib products is governed by the Hatch-WaxmanHatch–Waxman Act and any applicable settlement agreements between us and certain companies that seek to develop generic carfilzomib products.
Nplate
Total Nplate sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Nplate — U.S. | $ | 156 | | | $ | 136 | | | 15 | % | | $ | 312 | | | $ | 248 | | | 26 | % |
Nplate — ROW | 128 | | | 109 | | | 17 | % | | 238 | | | 224 | | | 6 | % |
Total Nplate | $ | 284 | | | $ | 245 | | | 16 | % | | $ | 550 | | | $ | 472 | | | 17 | % |
The increase in global Nplate sales for the parties.three and six months ended June 30, 2022, was primarily driven by higher unit demand and net selling price.
Other products
Other product sales by geographic region were as follows (dollar amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change |
MVASI® — U.S. | $ | 206 | | | $ | 149 | | | 38 | % | | $ | 430 | | | $ | 257 | | | 67 | % |
MVASI® — ROW | 88 | | | 23 | | | * | | 158 | | | 30 | | | * |
Nplate® — U.S. | 136 | | | 107 | | | 27 | % | | 248 | | | 234 | | | 6 | % |
Nplate® — ROW | 109 | | | 86 | | | 27 | % | | 224 | | | 177 | | | 27 | % |
Vectibix® — U.S. | 92 | | | 79 | | | 16 | % | | 171 | | | 159 | | | 8 | % |
Vectibix®— ROW | 147 | | | 116 | | | 27 | % | | 259 | | | 238 | | | 9 | % |
KANJINTI® — U.S. | 132 | | | 101 | | | 31 | % | | 262 | | | 197 | | | 33 | % |
KANJINTI® — ROW | 24 | | | 22 | | | 9 | % | | 55 | | | 45 | | | 22 | % |
EPOGEN® — U.S. | 130 | | | 161 | | | (19) | % | | 255 | | | 316 | | | (19) | % |
EVENITY® — U.S. | 79 | | | 40 | | | 98 | % | | 136 | | | 77 | | | 77 | % |
EVENITY®— ROW | 52 | | | 61 | | | (15) | % | | 102 | | | 124 | | | (18) | % |
BLINCYTO® — U.S. | 62 | | | 56 | | | 11 | % | | 127 | | | 113 | | | 12 | % |
BLINCYTO® — ROW | 46 | | | 37 | | | 24 | % | | 88 | | | 74 | | | 19 | % |
AMGEVITA™ — ROW | 107 | | | 62 | | | 73 | % | | 213 | | | 148 | | | 44 | % |
Parsabiv® — U.S. | 37 | | | 160 | | | (77) | % | | 83 | | | 306 | | | (73) | % |
Parsabiv® — ROW | 34 | | | 26 | | | 31 | % | | 67 | | | 55 | | | 22 | % |
Aimovig® — U.S. | 82 | | | 98 | | | (16) | % | | 148 | | | 169 | | | (12) | % |
NEUPOGEN® — U.S. | 36 | | | 28 | | | 29 | % | | 54 | | | 73 | | | (26) | % |
NEUPOGEN® — ROW | 15 | | | 21 | | | (29) | % | | 31 | | | 41 | | | (24) | % |
Sensipar® — U.S. | 4 | | | 32 | | | (88) | % | | 4 | | | 74 | | | (95) | % |
Sensipar®/Mimpara™ — ROW | 20 | | | 49 | | | (59) | % | | 43 | | | 130 | | | (67) | % |
Other — U.S. | 47 | | | 23 | | | * | | 89 | | | 47 | | | 89 | % |
Other — ROW | 30 | | | 37 | | | (19) | % | | 60 | | | 77 | | | (22) | % |
Total other products | $ | 1,715 | | | $ | 1,574 | | | 9 | % | | $ | 3,307 | | | $ | 3,161 | | | 5 | % |
Total U.S. — other products | $ | 1,043 | | | $ | 1,034 | | | 1 | % | | $ | 2,007 | | | $ | 2,022 | | | (1) | % |
Total ROW — other products | 672 | | | 540 | | | 24 | % | | 1,300 | | | 1,139 | | | 14 | % |
Total other products | $ | 1,715 | | | $ | 1,574 | | | 9 | % | | $ | 3,307 | | | $ | 3,161 | | | 5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
MVASI — U.S. | $ | 161 | | | $ | 206 | | | (22) | % | | $ | 329 | | | $ | 430 | | | (23) | % |
MVASI — ROW | 82 | | | 88 | | | (7) | % | | 158 | | | 158 | | | — | % |
Vectibix — U.S. | 96 | | | 92 | | | 4 | % | | 181 | | | 171 | | | 6 | % |
Vectibix— ROW | 111 | | | 147 | | | (24) | % | | 227 | | | 259 | | | (12) | % |
EVENITY — U.S. | 130 | | | 79 | | | 65 | % | | 240 | | | 136 | | | 76 | % |
EVENITY— ROW | 61 | | | 52 | | | 17 | % | | 121 | | | 102 | | | 19 | % |
BLINCYTO — U.S. | 77 | | | 62 | | | 24 | % | | 156 | | | 127 | | | 23 | % |
BLINCYTO — ROW | 62 | | | 46 | | | 35 | % | | 121 | | | 88 | | | 38 | % |
EPOGEN — U.S. | 136 | | | 130 | | | 5 | % | | 256 | | | 255 | | | — | % |
AMGEVITA — ROW | 116 | | | 107 | | | 8 | % | | 224 | | | 213 | | | 5 | % |
Aimovig — U.S. | 88 | | | 82 | | | 7 | % | | 186 | | | 148 | | | 26 | % |
Aimovig — ROW | 4 | | | — | | | NM | | 7 | | | — | | | NM |
Parsabiv — U.S. | 71 | | | 37 | | | 92 | % | | 128 | | | 83 | | | 54 | % |
Parsabiv — ROW | 32 | | | 34 | | | (6) | % | | 61 | | | 67 | | | (9) | % |
KANJINTI — U.S. | 69 | | | 132 | | | (48) | % | | 149 | | | 262 | | | (43) | % |
KANJINTI — ROW | 16 | | | 24 | | | (33) | % | | 32 | | | 55 | | | (42) | % |
LUMAKRAS — U.S. | 51 | | | 9 | | | * | | 99 | | | 9 | | | * |
LUMYKRAS — ROW | 26 | | | — | | | NM | | 40 | | | — | | | NM |
NEUPOGEN — U.S. | 21 | | | 36 | | | (42) | % | | 44 | | | 54 | | | (19) | % |
NEUPOGEN — ROW | 16 | | | 15 | | | 7 | % | | 31 | | | 31 | | | — | % |
Sensipar — U.S. | 5 | | | 4 | | | 25 | % | | 9 | | | 4 | | | * |
Sensipar/Mimpara — ROW | 15 | | | 20 | | | (25) | % | | 31 | | | 43 | | | (28) | % |
Other — U.S.(1) | 98 | | | 38 | | | * | | 162 | | | 80 | | | * |
Other — ROW(1) | 44 | | | 30 | | | 47 | % | | 72 | | | 60 | | | 20 | % |
Total other products | $ | 1,588 | | | $ | 1,470 | | | 8 | % | | $ | 3,064 | | | $ | 2,835 | | | 8 | % |
Total U.S. — other products | $ | 1,003 | | | $ | 907 | | | 11 | % | | $ | 1,939 | | | $ | 1,759 | | | 10 | % |
Total ROW — other products | 585 | | | 563 | | | 4 | % | | 1,125 | | | 1,076 | | | 5 | % |
Total other products | $ | 1,588 | | | $ | 1,470 | | | 8 | % | | $ | 3,064 | | | $ | 2,835 | | | 8 | % |
NM = not meaningful
* Change in excess of 100%.
____________
(1) Other products include Corlanor, AVSOLA, TEZSPIRE, IMLYGIC and RIABNI as well as sales by Gensenta and Bergamo subsidiaries.
Operating expenses
Operating expenses were as follows (dollar amounts in millions):
| | | Three months ended June 30, | | Six months ended June 30, | | | Three months ended June 30, | | Six months ended June 30, | |
| | 2021 | | 2020 | | Change | | 2021 | | 2020 | | Change | | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Operating expenses: | Operating expenses: | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | |
Cost of sales | Cost of sales | $ | 1,637 | | | $ | 1,488 | | | 10 | % | | $ | 3,127 | | | $ | 3,001 | | | 4 | % | Cost of sales | $ | 1,510 | | | $ | 1,637 | | | (8) | % | | $ | 3,071 | | | $ | 3,127 | | | (2) | % |
% of product sales | % of product sales | 26.8 | % | | 25.2 | % | | 26.7 | % | | 25.4 | % | | % of product sales | 24.0 | % | | 26.8 | % | | 25.6 | % | | 26.7 | % | |
% of total revenues | % of total revenues | 25.1 | % | | 24.0 | % | | 25.2 | % | | 24.3 | % | | % of total revenues | 22.9 | % | | 25.1 | % | | 23.9 | % | | 25.2 | % | |
Research and development | Research and development | $ | 1,082 | | | $ | 964 | | | 12 | % | | $ | 2,049 | | | $ | 1,916 | | | 7 | % | Research and development | $ | 1,039 | | | $ | 1,082 | | | (4) | % | | $ | 1,998 | | | $ | 2,049 | | | (2) | % |
% of product sales | % of product sales | 17.7 | % | | 16.3 | % | | 17.5 | % | | 16.2 | % | | % of product sales | 16.5 | % | | 17.7 | % | | 16.6 | % | | 17.5 | % | |
% of total revenues | % of total revenues | 16.6 | % | | 15.5 | % | | 16.5 | % | | 15.5 | % | | % of total revenues | 15.8 | % | | 16.6 | % | | 15.6 | % | | 16.5 | % | |
Acquired in-process research and development | Acquired in-process research and development | $ | 1,505 | | | $ | — | | | NM | | $ | 1,505 | | | $ | — | | | NM | Acquired in-process research and development | $ | — | | | $ | 1,505 | | | NM | | $ | — | | | $ | 1,505 | | | NM |
% of product sales | % of product sales | 24.6 | % | | — | % | | 12.9 | % | | — | % | | % of product sales | — | % | | 24.6 | % | | — | % | | 12.9 | % | |
% of total revenues | % of total revenues | 23.1 | % | | — | % | | 12.1 | % | | — | % | | % of total revenues | — | % | | 23.1 | % | | — | % | | 12.1 | % | |
Selling, general and administrative | Selling, general and administrative | $ | 1,384 | | | $ | 1,295 | | | 7 | % | | $ | 2,638 | | | $ | 2,611 | | | 1 | % | Selling, general and administrative | $ | 1,327 | | | $ | 1,384 | | | (4) | % | | $ | 2,555 | | | $ | 2,638 | | | (3) | % |
% of product sales | % of product sales | 22.6 | % | | 21.9 | % | | 22.5 | % | | 22.1 | % | | % of product sales | 21.1 | % | | 22.6 | % | | 21.3 | % | | 22.5 | % | |
% of total revenues | % of total revenues | 21.2 | % | | 20.9 | % | | 21.2 | % | | 21.1 | % | | % of total revenues | 20.1 | % | | 21.2 | % | | 19.9 | % | | 21.2 | % | |
Other | Other | $ | 90 | | | $ | 136 | | | (34) | % | | $ | 151 | | | $ | 161 | | | (6) | % | Other | $ | 542 | | | $ | 90 | | | * | | $ | 532 | | | $ | 151 | | | * |
Total operating expenses | | Total operating expenses | $ | 4,418 | | | $ | 5,698 | | | (22) | % | | $ | 8,156 | | | $ | 9,470 | | | (14) | % |
NM - Not= not meaningful
* Change in excess of 100%
Cost of sales
Cost of sales increaseddecreased to 25.1%22.9% and 25.2%23.9% of total revenues for the three and six months ended June 30, 2021,2022, respectively, primarily driven by unfavorable product mixlower COVID-19 antibody shipments, lower manufacturing costs and by higher profit share and royalty expenses, partially offset by lower amortization expense from acquisition-related assets.assets, partially offset by unfavorable product mix.
Research and development
The increasesdecrease in R&D expense for the three months ended June 30, 2022, was driven by lower marketed product support and lower expense resulting from acquisition-related activity, partially offset by higher spend in research and early pipeline.
The decrease in R&D expense for the six months ended June 30, 2021, were primarily2022, was driven by lower marketed product support and lower expense resulting from acquisition-related activity, partially offset by higher late-stage development program spend and research and early pipeline spend and late-stage program support, including recent business development activities.spend.
Acquired in-process research and development
The decrease in Acquired IPR&D expense for the three and six months ended June 30, 2021, is related2022, was due to the bemarituzumab program, which was acquired as part of the Five Prime acquisition.acquisition in 2021. See Note 2, Acquisitions and divestitures.
Selling, general and administrative
The increase in Selling, general and administrative (SG&A) expense for the three months ended June 30, 2021, was driven by higher marketed-product support.
The increasedecrease in SG&A expense for the three and six months ended June 30, 2021,2022, was primarily driven by higher marketed-product support, partially offset by favorable adjustments to estimated U.S. healthcare reform federal excise fees.lower spend for marketed products and lower expense resulting from acquisition-related activity.
Other
Other operating expenses for the three and six months ended June 30, 2022, consisted primarily of a loss on a nonstrategic divestiture. See Note 2, Acquisitions and divestitures. Other operating expenses for the three and six months ended June 30, 2021, consisted primarily of expenses related to cost savingssaving initiatives. Other operating expenses for the three and six months ended June 30, 2020, consisted of legal settlement expenses.
Nonoperating expense/income and income taxes
Nonoperating expense/income and income taxes were as follows (dollar amounts in millions):
| | | Three months ended June 30, | | Six months ended June 30, | | Three months ended June 30, | | Six months ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Interest expense, net | Interest expense, net | $ | (281) | | | $ | (296) | | | $ | (566) | | | $ | (642) | | Interest expense, net | $ | (328) | | | $ | (281) | | | $ | (623) | | | $ | (566) | |
Other income, net | $ | 11 | | | $ | 3 | | | $ | 24 | | | $ | 14 | | |
Other (expense) income, net | | Other (expense) income, net | $ | (317) | | | $ | 11 | | | $ | (847) | | | $ | 24 | |
Provision for income taxes | Provision for income taxes | $ | 94 | | | $ | 227 | | | $ | 305 | | | $ | 422 | | Provision for income taxes | $ | 214 | | | $ | 94 | | | $ | 413 | | | $ | 305 | |
Effective tax rate | Effective tax rate | 16.8 | % | | 11.2 | % | | 12.6 | % | | 10.4 | % | Effective tax rate | 14.0 | % | | 16.8 | % | | 12.9 | % | | 12.6 | % |
Interest expense, net
The decreaseincrease in Interest expense, net, for the three and six months ended June 30, 2021,2022, was primarily due to lowerhigher overall debt outstanding and higher LIBOR rates in the current year period on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps, partially offset by higher overall debt outstanding in the current year period.swaps.
Other (expense) income, net
The decreasechange in Interest expense,Other (expense) income, net, for the three and six months ended June 30, 2021,2022, was primarily due to net costs associated with the early retirement of debtlosses recognized on our strategic equity investments in the first quarter ofcurrent year compared with net gains recognized in the prior year and lower LIBOR rates in thehigher current year period on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps, partially offset by higher overall debt outstandinglosses in the current year period.connection with our BeiGene investment.
Other income, net
Income taxes
The increasedecrease in Other income, net,our effective tax rate for the three months ended June 30, 2021,2022, was primarily due to lower losses in connection with our BeiGene investment,the prior year nondeductible IPR&D expense arising from the acquisition of Five Prime, partially offset by gains recognized on our investments in limited partnerships in the prior year period.
The increase in Other income, net, for the six months ended June 30, 2021, was primarily due to higher gains recognized on our investments in limited partnerships in the current year partially offset by gains recognized in the prior year periodunfavorable items, including a loss on our interest-bearing securities.
Income taxes
a nonstrategic divestiture. The increase in our effective tax rate for the three and six months ended June 30, 2021,2022, was primarily due to current year unfavorable items compared to last year including a loss on a nonstrategic divestiture, partially offset by the non-deductibleprior year nondeductible IPR&D expense arising from the acquisition of Five Prime.Prime and changes in earnings mix. See Note 2, Acquisitions and divestitures.
The Administration proposed and Congress areis considering a variety of potentially significant changes to existing tax law, including an increase in the corporate tax rate and the tax rate on foreign earnings.law. These changes, or others, could substantially increase U.S. taxation of our operations both in and outside the United States, includingtaxes we pay to the U.S. territory of Puerto Rico. In addition,government. Further, the Organization for Economic Co-operation and Development (OECD)OECD recently reached an agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries. If enacted, either by all OECD participants or unilaterally by individual countries, this agreement could result in tax increases in both the United States and foreign jurisdictions. The U.S. Treasury recently released final foreign tax credit regulations that eliminate U.S. creditability of the Puerto Rico Excise Tax beginning in 2023, which would increase our U.S. tax liability. However, the U.S. territory of Puerto Rico recently enacted Act 52-2022, which provides for an alternate fixed tax rate on industrial development income that is expected to be creditable under U.S. law. As part of this new law, eligible businesses would be subject to incremental income and withholding taxes in lieu of payment of the Puerto Rico Excise Tax. In order to qualify for the alternative fixed tax rate, we must amend our current tax grant with the Puerto Rico government by December 31, 2022. Once we qualify for this alternative fixed tax rate, which we expect to occur as of January 1, 2023, our tax expense will increase. While we expect these taxes to be partially offset by U.S. foreign tax credits, the U.S. Treasury has not yet issued guidance on whether the alternative fixed tax rate will be creditable under U.S. law.
In 2017, we received an RAR and a modified RAR from the IRS for the years 2010, 2011 and 2010–2012, proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. We disagreed with the proposed adjustments and calculations and pursued a resolution with the IRS administrative appeals office. As previously reported, we were unable to reach resolution with the IRS appeals office.office but were unable to reach resolution. In July 2021, we filed a petition in the U.S. Tax Court to contest two duplicate Statutory Notices of Deficiency (Notices) for 2010, 2011 and the years 2010–2012 that we received in May and July 2021. The duplicate Notices2021, which seek to increase our U.S. taxable income for the years 2010–2012 by an amount that would result in additional federal tax of approximately $3.6 billion plus interest. Any additional tax that could be imposed for the years 2010–2012 would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings. In any event, we firmly believe that the IRS’s positions in the Notices are without merit and we will vigorously contest the Notices through the judicial process.
In addition, in 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2013–2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2010–2012. We disagreedisagreed with the proposed adjustments and calculations and are pursuingpursued resolution with the IRS administrative appeals office. office but were unable to reach resolution.In July 2022, we filed a petition in the U.S. Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S. taxable income for the years 2013–2015 by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest. In addition, the Notice asserts penalties of approximately $2.0 billion. Any additional tax that could be imposed for the years 2013–2015 would be reduced by up to approximately $2.2 billion of repatriation tax previously accrued on our foreign earnings.
We firmly believe that the IRS positions set forth in the 2010–2012 and 2013–2015 Notices are without merit. We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process, and we will seek consolidation of the two periods into one case in the U.S. Tax Court.
We are currently under examination by the IRS for the years 2016, 2017 and 2018. We are also currently under examination2016–2018 with respect to issues similar to those for the 2010 through 2015 period. In addition, we have examinations by a number of other state and foreign tax jurisdictions.
Final resolution of these complex matters is not likely within the next 12 months. We believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued as noted above and could have a material adverse impact on our condensed consolidated financial statements.
We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009.
See Part II, Item 1A, Risk Factors—The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability, and Note 4, Income taxes, to the condensed consolidated financial statements for further discussion.
Financial condition, liquidity and capital resources
Selected financial data were as follows (in millions):
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Cash, cash equivalents and marketable securities | $ | 8,082 | | | $ | 10,647 | |
Total assets | $ | 59,773 | | | $ | 62,948 | |
Current portion of long-term debt | $ | 4,324 | | | $ | 91 | |
Long-term debt | $ | 28,458 | | | $ | 32,895 | |
Stockholders’ equity | $ | 8,247 | | | $ | 9,409 | |
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Cash, cash equivalents and marketable securities | $ | 7,183 | | | $ | 8,037 | |
Total assets | $ | 59,294 | | | $ | 61,165 | |
Current portion of long-term debt | $ | 817 | | | $ | 87 | |
Long-term debt | $ | 35,705 | | | $ | 33,222 | |
Stockholders’ equity | $ | 2,419 | | | $ | 6,700 | |
Cash, cash equivalents and marketable securities
Our balance of cash, cash equivalents and marketable securities was $8.1$7.2 billion atas of June 30, 2021.2022. The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.
Capital allocation
Consistent with the objective to optimize our capital structure, we deploy our accumulated cash balances in a strategic manner and consider a number of alternatives, including investments in innovation, both internally and externally, strategic transactions (including those that expand our portfolio of products in areas of therapeutic interest), payment of dividends, stock repurchases and repayment of debt.
We intend to continue to invest in our business while returning capital to stockholders through the payment of cash dividends and stock repurchases, thereby reflecting our confidence in the future cash flows of our business and our desire to optimize our cost of capital. The timing and amount of future dividends and stock repurchases will vary based on a number of factors, including future capital requirements for strategic transactions, availability of financing on acceptable terms, debt service requirements, our credit rating, changes to applicable tax laws or corporate laws, changes to our business model and
periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and the Company’s agreements. In addition, the timing and amount of stock repurchases may also be affected by our overall level of cash, stock price and blackout periods, during which we are restricted from repurchasing stock. The manner of stock repurchases may include block purchases, tender offers, ASRs and market transactions.
In March 20212022 and December 2020,2021, the Board of Directors declared a quarterly cash dividend of $1.76$1.94 per share of common stock, which were paid on June 8, 20212022 and March 8, 2021,2022, respectively, an increase of 10% over the quarterly cash dividend paid in each quarter in 2020.2021. In July 2021,August 2022, the Board of Directors declared a quarterly cash dividend of $1.76$1.94 per share of common stock, which will be paid on September 8, 2021.2022 to all stockholders of record as of the close of business on August 18, 2022.
We also returned capital to stockholders through our stock repurchase program. During the six months ended June 30, 2021,2022, we executed trades to repurchase $2.5$5.4 billion of common stock.stock, including $5.1 billion of an initial purchase under the ASR agreements described below. As of June 30, 2021, $3.92022, $4.6 billion of authorization remained available under our stock repurchase program.
In February 2022, we entered into ASR agreements under which we paid an aggregate amount of $6.0 billion to the Dealers and retired an initial 23.3 million shares of common stock. Approximately $0.9 billion of stock remains to be delivered by the Dealers pending final settlement, which will be based on the daily volume-weighted average stock price of our common stock during the terms of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. At settlement, which is scheduled to occur in the third quarter of 2022, the Dealers may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or to make a cash payment, at our election, to the Dealers.
As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of June 30, 20212022 and December 31, 2020.2021. Our accumulated deficit is not anticipated to affect our future ability to operate, repurchase stock, pay dividends or repay our debt given our continuing profitability and strong financial position.
We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, to meet capital expenditure and debt service requirements, to fund our plans to pay dividends and repurchase stock and to fulfill other business initiatives we expectplan to strategically pursue, including acquisitions and licensing activities. We anticipate that our liquidity needs can be met through a variety of sources, including cash provided by operating activities, sales of marketable securities, equity markets and borrowings (includingthrough commercial paper and/or syndicated credit facilities and access to other domestic and foreign debt markets).markets and equity markets. See our Annual Report on Form 10-K for the year ended December 31, 2020,2021, Part I, Item 1A. Risk Factors—Global economic conditions may negatively affect us and may magnify certain risks that affect our business.
Certain of our financing arrangements contain nonfinancial covenants. In addition, our revolving credit agreement includes a financial covenant that requires us to maintain a specified minimum interest coverage ratio of (i) the sum of consolidated net income, interest expense, provision for income taxes, depreciation expense, amortization expense, unusual or nonrecurring charges and other noncash items (Consolidated EBITDA)(consolidated earnings before interest, taxes, depreciation and amortization) to (ii) Consolidated Interest Expense,consolidated interest expense, each as defined and described in the credit agreement. We were in compliance with all applicable covenants under these arrangements as of June 30, 2021.2022.
Cash flows
Our summarized cash flow activity was as follows (in millions):
| | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 |
Net cash provided by operating activities | $ | 4,035 | | | $ | 4,976 | |
Net cash provided by (used in) investing activities | $ | 890 | | | $ | (2,389) | |
Net cash (used in) provided by financing activities | $ | (4,561) | | | $ | 521 | |
| | | | | | | | | | | |
| Six months ended June 30, |
| 2022 | | 2021 |
Net cash provided by operating activities | $ | 4,094 | | | $ | 4,035 | |
Net cash (used in) provided by investing activities | $ | (2,304) | | | $ | 890 | |
Net cash used in financing activities | $ | (4,576) | | | $ | (4,561) | |
Operating
Cash provided by operating activities has been and is expected to continue to be our primary recurring source of funds. Cash provided by operating activities during the six months ended June 30, 2021, decreased2022, increased primarily due to a difference in the timing of payments to tax authorities and the monetization of interest rate swaps in the prior year,higher net income, after adjustments for noncash items, partially offset by the timing of collections from customers, in part, as a result of the impact of the Otezla® acquisition in the prior year.working capital items.
Investing
Cash used in investing activities during the six months ended June 30, 2022, was primarily due to net cash outflows related to marketable securities activity of $1.9 billion and capital expenditures of $436 million. Cash provided by investing activities during the six months ended June 30, 2021, was primarily due to net cash inflows related to marketable securities activity of $2.9 billion, partially offset by the acquisition of Five Prime for $1.6 billion and capital expenditures of $351 million. We currently estimate 2022 spending on capital projects to be approximately $950 million.
Financing
Cash used in investingfinancing activities during the six months ended June 30, 2020,2022, was primarily due to payments to repurchase our $2.6common stock of $6.4 billion, equity investment in BeiGeneincluding amounts paid under the ASR agreements discussed above, and capital expendituresthe payment of $300 million,dividends of $2.1 billion, partially offset by net cash inflows related to marketable securitiesproceeds from the issuance of $607 million. We currently estimate 2021 spending on capital projects to be approximately $900 million.
Financing
debt of $4.0 billion. Cash used in financing activities during the six months ended June 30, 2021, was primarily due to payments to repurchase our common stock of $2.5 billion and the payment of dividends of $2.0 billion. Cash provided by financing activities during the six months ended June 30, 2020, was primarily due to net proceeds from the issuance of debt of $9.0 billion, partially offset by the repayment of debt of $5.0 billion, the payment of dividends of $1.9 billion and payments to repurchase our common stock of $1.5 billion. See Note 9, Financing arrangements, and Note 10, Stockholders’ equity, to the condensed consolidated financial statements for further discussion.
Critical accounting policiesAccounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. A summary of our critical accounting policies and estimates is presented in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
| | | | | |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Information about our market risk is disclosed in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, and is incorporated herein by reference. Except as discussed below, thereThere were no material changes during the six months ended June 30, 2021,2022, to the information provided in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2020.
Interest rate sensitive financial instruments
To achieve a desired mix of fixed and floating interest rate debt, we entered into additional interest rate swap contracts with an aggregate notional amount of $1.5 billion during the three months ended June 30, 2021. As of June 30, 2021, an aggregate notional amount of $7.4 billion of interest rate swap contracts was outstanding. These interest rate swap contracts effectively converted a fixed interest rate coupon to a floating-rate LIBOR-based coupon over the life of the respective notes. A hypothetical 100 basis point increase in interest rates relative to interest rates at June 30, 2021, would have resulted in a reduction in fair value of approximately $390 million on our interest rate swap contracts on that date. The analysis for the interest rate swap contracts does not consider the impact that hypothetical changes in interest rates would have on the related fair value of debt that these interest-rate-sensitive instruments were designed to offset.
| | | | | |
Item 4. | CONTROLS AND PROCEDURES |
We maintain “disclosure controls and procedures,” as such term is defined under the Securities Exchange Act Rule 13a-15(e) that are designed to ensure that information required to be disclosed in Amgen’s Exchange Act reports gets recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information gets accumulated and communicated to Amgen’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to facilitate timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Amgen’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, Amgen’s management necessarily was required to apply its judgment in evaluating the cost–benefit relationship of possible controls and procedures. We carried out an evaluation under the supervision and with the participation of our management, including Amgen’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Amgen’s disclosure controls and procedures. Based on their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.2022.
Management determined that as of June 30, 2021,2022, no changes in our internal control over financial reporting had occurred during the fiscal quarter then ended that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II — OTHER INFORMATION
See Notes 12 andNote 13, Contingencies and commitments, to the condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the periods ended March 31, 20212022 and June 30, 2021, respectively,2022, for discussions that are limited to certain recent developments concerning our legal proceedings. Those discussions should be read in conjunction with Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in Part IV of our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. These statements are not guarantees of future performance, and they involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties our business faces. The risks described below are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employment relations, general economic conditions, geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price.
Below we provide in supplemental form the material changes to our risk factors that occurred during the past quarter. Our risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, provide additional disclosure for these supplemental risks and are incorporated herein by reference.
RISKS RELATED TO ECONOMIC CONDITIONS AND OPERATING A GLOBAL BUSINESS, INCLUDING DURING THE COVID-19 PANDEMIC
The COVID-19 pandemic, and the effort to mitigate the spread of the disease, have had, and are expected to continue to have, an adverse effect, and may have a material adverse effect, on our clinical trials, operations, manufacturing, supply chains, distribution systems, product development, product sales, business and results of operations.
The novel coronavirus identified in late 2019, SARS-CoV-2, which causes the disease known as COVID-19, is an ongoing global pandemic that has resulted in public and governmental efforts to contain or slow the spread of the disease, including widespread shelter-in-place orders, social distancing interventions, quarantines, travel restrictions and various forms of operational shutdowns. The COVID-19 pandemic and the resulting measures implemented in response to the pandemic are adversely affecting, and are expected to continue to adversely affect, our business (including our R&D, clinical trials, operations, manufacturing, supply chains, distribution systems, product development and sales activities), the business activities of our suppliers, customers, third-party payers and our patients. See our Annual Report on Form 10-K for the year ended December 31, 2020, Part I, Item 1A. Risk Factors—The COVID-19 pandemic, and the public and governmental effort to mitigate against the spread of the disease, have had, and are expected to continue to have, an adverse effect, and may have a material adverse effect, on our clinical trials, operations, supply chains, distribution systems, product development, product sales, business and results of operations;see also Our current products and products in development cannot be sold without regulatory approval;and see also We must conduct clinical trials in humans before we commercialize and sell any of our product candidates or existing products for new indications. Due to the pandemic and these measures and their effects, we have experienced, and expect to continue to experience, unpredictable reductions in demand for certain of our products, exacerbated by COVID-19 surges resulting in repeated shut-downs and/or disruptions in certain geographies.
Federal, state and local, and international governmental policies and initiatives designed to reduce the transmission of COVID-19 also have resulted in the cancellation or delay of diagnostic, elective, specialty and other procedures and appointments to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19. These measures and challenges will likely continue to varying degrees for the duration of the pandemic and have significantly reduced patient access to, and administration of, certain of our drugs. For example, Prolia® requires administration by a healthcare provider in doctors’ offices or other healthcare settings that are affected by COVID-19. The U.S. label for Prolia® instructs healthcare professionals who discontinue Prolia® to transition the patient to an alternative antiresorptive, including oral treatments that do not require administration by a healthcare provider. Further, as a result of COVID-19, oncology patients, in consultation with their doctors, may be selecting therapies that are less immunosuppressive or therapies that do not require administration in a hospital setting, potentially adversely affecting certain of our products. Also, new patients have been, and are expected to continue to be, less likely to be diagnosed and/or to start therapeutics during the pandemic, and these effects, together with the lower treatment rates
during the pandemic, have had, and are expected to continue to have, a cumulative negative effect on the commercial performance of our business. The decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which we expect to continue to impact our business during the second half of the year. Once the pandemic subsides, we anticipate there could be a backlog of patients seeking appointments with physicians relating to a variety of medical conditions, and as a result, patients seeking treatment with certain of our products may have to navigate lower provider capacity, and this lower provider capacity could have a continued adverse effect on our sales following the opening up of various geographies and/or the end of the pandemic. Further, the effects of the COVID-19 pandemic may result in long-term shifts in preferences among healthcare professionals and patients toward treatments that do not require administration by healthcare professionals or visits to medical facilities.
As the pandemic continues, and if conditions worsen or if the duration of the pandemic extends significantly, we expect to experience additional adverse effects on our development, operational and commercial activities, customer purchases and our collections of accounts receivable. It remains uncertain the degree to which these adverse effects would impact our future operational and commercial activities, customer purchases and our collections as conditions begin to improve. There has been a resurgence in COVID-19 infections in numerous jurisdictions in the first half of 2021, resulting in the reinstatement of stricter restrictions and shutdowns in a number of jurisdictions, including in the U.S., Europe and Asia Pacific regions. It is expected that the pandemic will continue to ebb and flow, with different jurisdictions having higher levels of infections than others over the course of the pandemic. New variants of the SARS-CoV-2 virus have emerged, and have been shown to be present in many geographies, and appear to spread more easily and quickly than other variants. Further, although some studies suggest that antibodies generated with currently authorized vaccines may be effective against these variants, it remains uncertain whether currently available vaccines will retain their efficacy against current and/or future variants of the virus. Jurisdictions may implement, continue or reinstate border closures, impose or reimpose prolonged quarantines and further restrict travel and business activity, which could significantly affect our ability to support our operations and customers and the ability of our employees to get to their workplaces to discover, study, develop and produce our product candidates and products, disrupt the movement of our products through the supply chain, and further prevent or discourage patients from participating in our clinical trials, seeking healthcare services and the administration of certain of our products. Further, in connection with the global outbreak and spread of COVID-19 and in an effort to increase the wider availability of needed medical products, we or our suppliers may elect to, or governments may require us or our suppliers to, allocate manufacturing capacity (for example pursuant to the U.S. Defense Production Act) in a way that adversely affects our regular operations, customer relationships and financial results. In the U.S., on January 21, 2021, President Biden issued an Executive Order instructing federal agencies to use all available legal authorities, including the Defense Production Act, to improve current and future pandemic response and biological threat preparedness. The rapid reallocation of resources for the treatment and prevention of COVID-19 (including the production of COVID-19 vaccinations or related therapies, such as our agreement to contribute to the production of Lilly’s COVID-19 antibody therapies) and/or disruptions and shortages in the global supply chain caused by the pandemic, could also result in increased competition for, or reduced availability of, materials used in the development, manufacturing, distribution, or administration of our products. For example, during the second quarter of 2021, an industry-wide shortage of certain lab kit supplies necessary for some activities that support our clinical trials has developed that we are actively monitoring and managing. In addition, unpredictable increases in demand for certain of our products could exceed our capacity to meet such demand, which could adversely affect our financial results and customer relationships.
The COVID-19 pandemic and the volatile global economic conditions stemming from it may precipitate or amplify the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially adversely affect our business, operations and financial conditions and results. For example, if a natural disaster or other potentially disruptive event occurs concurrently with the COVID-19 pandemic, such disaster or event could deplete our inventory levels and we could experience a disruption to our manufacturing or ability to supply our products. Further, the global pandemic has exacerbated geopolitical tensions, and some countries, such as China, may be especially vulnerable to such dynamics. If relations between the United States and China or other governments deteriorates, our business and investments in China or other such markets may also be adversely affected. See our Annual Report on Form 10-K for the year ended December 31, 2020, Part I, Item 1A. Risk Factors—Our sales and operations are subject to the risks of doing business internationally, including in emerging markets.
The rapid development and fluidity of the pandemic preclude any prediction as to the ultimate effect of COVID-19 on us. The duration of the measures being taken by the authorities to mitigate against the spread of COVID-19 (including the distribution and/or availability of vaccines), and the extent to which such measures are effective, if at all, remain highly uncertain. The magnitude and degree of COVID-19’s adverse effect on our business (including our product development, product sales, operating results and resulting cash flows) and financial condition will be driven by the severity and duration of the pandemic, the pandemic’s effect on the United States and global economies and the timing, scope and effectiveness of federal, state, local and international governmental responses to the pandemic. If mitigation of the pandemic continues to require further shelter-in-place and shut-down orders and/or restrictions on individual and/or group conduct, any adverse effects of the COVID-19 pandemic will likely grow and could be enduring and our business and financial position could be materially
adversely affected.
A breakdown, cyberattack or information security breach could compromise the confidentiality, integrity and availability of our information technology systems, network-connected control systems and/or our data, interrupt the operation of our business and/or affect our reputation.
To achieve our business objectives, we rely on sophisticated information technology systems, including software, mobile applications, cloud services and network-connected control systems, some of which are managed, hosted, provided or serviced by third parties. Internal or external events that compromise the confidentiality, integrity and availability of our systems and data may significantly interrupt the operation of our business, result in significant costs and/or adversely affect our reputation.
Our information technology systems are highly integrated into our business, including our R&D efforts, our clinical and commercial manufacturing processes and our product sales and distribution processes. Further, as the majority of our employees are working remotely, our reliance on our and third-party information technology systems has increased substantially and is expected to continue to increase. The complexity and interconnected nature of our systems makes them potentially vulnerable to breakdown or other service interruptions. Our systems are also subject to frequent cyberattacks. As the cyber-threat landscape evolves, these attacks are growing in frequency, sophistication and intensity and are becoming increasingly difficult to detect. Such attacks could include the use of harmful and virulent malware, including ransomware or other denials of service, that can be deployed through various means, including the software supply chain, e-mail, malicious websites and/or the use of social engineering. We have also experienced unsuccessful denial of service attacks against our network, and although such attacks did not succeed, there can be no assurance that our efforts to guard against the wide and growing variety of potential attack techniques will be successful in the future. Attacks such as those experienced by governmental entities (including those that approve and/or regulate our products, such as the European Medicines Agency (EMA)) and other multi-national companies, including some of our peers, could leave us unable to utilize key business systems or access or protect important data, and could have a material adverse effect on our ability to operate our business, including developing, gaining regulatory approval for, manufacturing, selling and/or distributing our products. For example, in 2017, a pharmaceutical company experienced a cyberattack involving virulent malware that significantly disrupted its operations, including its research and sales operations and the production of some of its medicines and vaccines. As a result of the cyberattack, its orders and sales for certain products in certain markets were negatively affected. In December 2020, SolarWinds Corporation, a leading provider of software for monitoring and managing information technology infrastructure, disclosed that it had suffered a cybersecurity incident whereby attackers had inserted malicious code into legitimate software updates for its products that were installed by myriad private and government customers, enabling the attackers to access a backdoor to such systems. See our Annual Report on Form 10-K for the year ended December 31, 2020, Part I, Item 1A. Risk Factors—The COVID-19 pandemic, and the public and governmental effort to mitigate against the spread of the disease, have had, and are expected to continue to have, an adverse effect, and may have a material adverse effect, on our clinical trials, operations, supply chains, distribution systems, product development, product sales, business and results of operations for a discussion of the cyberattack on the EMA.
Our systems also contain and utilize a high volume of sensitive data, including intellectual property, trade secrets, financial information, regulatory information, strategic plans, sales trends and forecasts, litigation materials and/or personal information belonging to us, our staff, our patients, customers and/or other parties. In some cases, we utilize third-party service providers to process, store, manage or transmit such data, which may increase our risk. Intentional or inadvertent data privacy or security breaches (including cyberattacks) resulting from attacks or lapses by employees, service providers (including providers of information technology-specific services), nation states (including groups associated with or supported by foreign intelligence agencies), organized crime organizations, “hacktivists” or others, create risks that our sensitive data may be exposed to unauthorized persons, our competitors, or the public. For example, a supplier recently experienced a data breach in which an unauthorized third party acquired access to certain information provided to the supplier in the course of its provision of services to us, including business documents and certain personally identifiable patient information (not including social security or other financial or health insurance information). As required, we promptly notified the applicable state attorneys general and the individuals whose personally identifiable information was affected of this data breach at the supplier. Although the supplier data breach did not result in a material adverse effect on our business, there can be no assurance that a similar future cybersecurity incident would not result in a material adverse effect on our business or results of operations.
Domestic and global government regulators, our business partners, suppliers with whom we do business, companies that provide us or our partners with business services and companies we may acquire may face similar risks, and security breaches of their systems could adversely affect our security, leave us without access to important systems, products, raw materials, components, services or information or expose our confidential data or sensitive personal information. For example, in 2019, two vendors that perform testing and analytical services that we use in developing and manufacturing our products have experienced cyberattacks, and in April and September of 2020, vendors that provide us with information technology services and clinical data services, respectively, each experienced ransomware attacks. Although there was no breach of our systems,
each of these incidents required us to disconnect our systems from those vendors’ systems. While we were able to reconnect our systems following restoration of these vendor’s capabilities without significantly affecting product availability, a more extended service outage affecting these or other vendors, particularly where such vendor is the single source from which we obtain the services, could have a material adverse effect on our business or results of operations. In addition, we distribute our products in the United States primarily through three pharmaceutical wholesalers, and a security breach that impairs the distribution operations of our wholesalers could significantly impair our ability to deliver our products to healthcare providers and patients.
Although we have experienced system breakdowns, attacks and information security breaches, we do not believe such breakdowns, attacks and breaches have had a material adverse effect on our business or results of operations. We continue to invest in the monitoring, protection and resilience of our critical and/or sensitive data and systems. However, there can be no assurances that our efforts will detect, prevent or fully recover systems or data from all breakdowns, service interruptions, attacks and/or breaches of our systems that could adversely affect our business and operations and/or result in the loss or exposure of critical, proprietary, private, confidential or otherwise sensitive data, which could result in material financial, legal, business or reputational harm to us or negatively affect our stock price. While we maintain cyber-liability insurance, our insurance is not sufficient to cover us against all losses that could potentially result from a service interruption, breach of our systems or loss of our critical or sensitive data.
We are also subject to various laws and regulations globally regarding privacy and data protection, including laws and regulations relating to the collection, storage, handling, use, disclosure, transfer and security of personal data. The legislative and regulatory environment regarding privacy and data protection is continuously evolving and developing and the subject of significant attention globally. For example, we are subject to the European Union’s General Data Protection Regulation, which became effective in May 2018, and the California Consumer Privacy Act of 2018 (CCPA), which became effective in January 2020, both of which provide for substantial penalties for non-compliance. The CCPA was amended in late 2020, to create the California Privacy Rights Act to create opt in requirements for the use of sensitive personal data and the formation of a new dedicated agency for the enforcement of the law, the California Privacy Protection Agency. Since then, Virginia and Colorado both passed similar consumer privacy laws that will go into effect in 2023. Other jurisdictions where we operate continue to propose similar legislation and/or regulations with others expected to pass in 2021. Failure to comply with these current and future laws could result in significant penalties and reputational harm and could have a material adverse effect on our business and results of operations.
RISKS RELATED TO GOVERNMENT REGULATIONS AND THIRD-PARTY POLICIES
Our sales depend on coverage and reimbursement from government and commercial third-party payers, and pricing and reimbursement pressures have affected and are likely to continue to affect our profitability.
Sales of our products depend on the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans. Governments and private payers continue to pursue initiatives to manage drug utilization and contain costs. These payers are increasingly focused on the effectiveness, benefitscosts, which have resulted, and costs of similar treatments, which couldare expected to continue to result, in lower reimbursement rates for our products or narrower populations for whom payers will reimburse. Continued intense public scrutiny of the price of drugs and other healthcare costs, together with payer dynamics, have limited, and are likely to continue to limit, our ability to set or adjust the price of our products based on their value, which couldcan have a material adverse effect on our business. In the United States, particularly over the past few years, a number of legislative and regulatory proposals have been introduced in anto attempt to lower drug prices. These include proposals that would allowenable the U.S. government to negotiate drug priceprices directly, limit drug reimbursement in Medicare and/or the commercial market based on reference prices, abroadimpose penalties if drug prices are increased at a rate faster than inflation or permit importation of drugs from Canada. ProposalsAdditional proposals would require a rebate to the government for any price increase in excess of the Consumer Price Index for All Urban Consumers and/or to shift some of the costs of these Medicare Part D reforms to manufacturers to offset the costs. Certain proposals focused on drug pricing have been implementedadopted, and additional proposals are likely to continue to be proposed and may be adopted and implemented in some form. See our Annual Report on Form 10-K for the year ended December 31, 2020, Part I, Item 1A. Risk Factors—Our sales depend on coverage and reimbursement from government and commercial third-party payers, and pricing and reimbursement pressures have affected, and are likely to continue to affect, our profitability.
—Changing U.S. federal coverage and reimbursement policies and practices have affected and may continue to affect access to, pricing of and sales of our products
A substantial portion of our U.S. business relies on reimbursement from federal government healthcare programs and commercial insurance plans regulated by federal and state governments. See Part I, Item 1. Business—Reimbursement of our Annual Report on Form 10-K for the year ended December 31, 2020, Part I, Item 1. Business—Reimbursement.2021. Our business has been and will continue to be affected by legislative actions changing U.S. federal reimbursement policy. Congress has been focused on drug pricing reforms and oversight since 2018, and thatthis activity continues today. For example,is still ongoing and has intensified.Since 2019, a number of Congressional committees debated drug pricing reform proposals, and in 2020, Amgen participated in House Oversight and Reform Committee hearings on drug pricing practices. Additionally, in 2019 and 2020, a number of other Congressional committees debated drug pricing reform proposals. For example, inIn 2019, the Senate Finance Committee advanced a bill that would, among other things, penalize pharmaceutical manufacturers for raising prices on drugs covered by Medicare Parts B
and/or D faster than the rate of inflation, cap out-of-pocket expenses for Medicare Part D beneficiaries and require higher/higher or additional manufacturer discounts in Medicare Part D. Additionally, in late 2019, a drug-pricing bill, H.R. 3, passed the House of Representatives which would,and included provisions that, among other things, enableenabled direct price negotiations by the federal government on certain drugs, (with the maximum price paid by Medicare capped by prices derived from an international index), includes a penalty for failingpenalized failures to reach agreement with the government and requiresrequired that manufacturers offer these negotiated prices to other payers. We expectProvisions from H.R. 3 to again be debatedhave
been incorporated and adapted into other proposed legislation, including the most recent reconciliation bill released by the Senate in July 2022, which included penalties if drug price benchmarks rise faster than inflation, Medicare price setting for certain drugs paid for under Parts B and D (whereby manufacturers must accept a price established by the government or face penalties on all U.S. sales), and Part D redesign including a cap on beneficiary spending and a new manufacturer discount program. This framework remains in discussion with policymakers in Congress inand the coming months. Most recently, Congress passed the American Rescue Plan Act of 2021 to provide additional stimulus money and support for COVID relief. As part of that legislation, a provision that is expected to be implemented in 2024 was included that has the effect of increasing the Medicaid rebate liability for some medicines that increase prices in excess of inflation.Administration. There are other outstanding proposals that have been introduced by the prior Administration that, if enacted and implemented, in whole or in part, could also affect access to and sales of our products, including, but not limited to, federal and various state proposals to allow importation of prescription medications from Canada or other countriescountries. See —Changing reimbursement and pricing actions in various states have negatively affected and may continue to set Medicare payment rates using internationalnegatively affect access to and have affected and may continue to affect sales of our products. In July 2021, the Administration issued an Executive Order designed to address anticompetitive behavior across multiple sectors, and for the healthcare sector, called for, among other things, the FDA to work with states and Indian tribes to develop prescription drug importation programs, more scrutiny of anticompetitive activity by the FTC, emphasized the need for actions to allow for greater competition from generics and biosimilars, and included a process and timeline for federal agencies to deliver to the Administration ideas that address drug pricing. Subsequently, in September 2021, HHS released a report that presented guiding principles for the Administration’s drug pricing proposals, including changes to promote competition throughout the prescription drug industry, highlighting potential legislative policies that Congress could pursue (including drug price referencing. Further,negotiation in mid-2020, the prior Administration announced a number of Executive Orders intended to reduce the cost of biopharmaceuticals for patients, including a most favored nation (MFN) policy for Medicare Parts B and D, under whichmaking those negotiated prices available to commercial plans and legislation to speed the Health & Human Services (HHS) was directedentry of biosimilar and generic drugs) and examples of potential administrative tools available to take stepsthe HHS (including testing various models and enhanced focus of the FTC and the USPTO to implement payment models that set Medicare purchase prices based on the lowest price available in economically comparable countries for certain Part Baddress impediments to generic drug and Part D medicines. In September 2020,biosimilar competition). Also, in response to the correspondingJuly 2021 Executive Order, HHSthe FDA sent a letter to the USPTO describing ways to strengthen coordination between the two agencies, offering training to help identify prior art and seeking USPTO’s views on practices that extend market exclusivities, whether pharmaceutical patent examiners need additional resources, and the effect of post-grant challenges at the PTAB on drug patents. In its reply to the FDA, on July 6, 2022, the USPTO affirmed its interest in coordinating with the FDA and outlined specific initiatives, including enhancing procedures for obtaining patents and easing the process for challenging issued patents before the PTAB.
Legislation enacted in 2021 also contained drug pricing reforms. For example, the Infrastructure Investment and Jobs Act includes a provision requiring manufacturers to provide refunds, beginning in 2023, to the government for discarded amounts of certain drugs (including certain Amgen products) from single use containers under Medicare Part B, and CMS recently released proposed regulations to implement this requirement. Also, the American Rescue Plan Act of 2021 includes a provision that increases the Medicaid rebate liability, beginning in 2024, by no longer capping Medicaid rebates at 100% of the Average Manufacturer Price for certain medicines that raise prices in excess of inflation. The implementation of a final rule issued by HHS that revises regulations under the federal antikickback statute to allow states (orencourage PBMs to use rebates received from biopharmaceutical manufacturers to reduce patient cost-sharing at the point of sale under Medicare Part D has been delayed to January 1, 2027. However, the future of this rule remains uncertain because, among other nonfederal government entities)issues, it is subject to submit proposals to the FDA allowing for the importation of certain nonbiologic prescription drugs from Canada. Currently, the rulelitigation and because a permanent repeal is being challenged by litigation, however, should such litigation be unsuccessful and should the Secretary of HHS authorize state proposals for importation, this rule could allow the importation of Canadian versions of certain of Amgen’s products (including Otezla®), that could have a material adverse effect on Amgen’s business. Further,considered in November 2020, also in response to the corresponding Executive Order, HHS released an interim final rule to implement the MFN pricing approach. If implemented, the MFN rule would set the reimbursement rate for 50 Medicare Part B drugs (including our products, such as Prolia®, XGEVA®, KYPROLIS®, Neulasta®, Nplate®, EPOGEN® and Aranesp®) equal to the lowest adjusted price for such products of the 22 OECD nations. Lawsuits have been filed by certain trade groups challenging the implementation of this MFN rule based on, among other things, procedural defects. Late in 2020, in the case filed by the Biotechnology Innovation Organization (BIO) and others, the U.S. District Court for the Northern District of California issued a preliminary injunction preventing the rule from taking effect nationwide, pending the government’s completion of required administrative procedures. The case was subsequently stayed by the court. On July 29, 2021, the court granted the parties’ request for the stay to remain in place and ordered the parties to file their joint status report by September 27, 2021. Another case, filed by the Pharmaceutical Research and Manufacturers of America and others in the U.S. District Court for the District of Maryland, was also stayed until either a final rule based on the MFN interim rule is published in the Federal Register, or until the court orders a lifting of the stay based on, among other things, the status of the nationwide preliminary injunction issued in the BIO case. Notwithstanding these stays, the MFN rule’s approach to drug pricing and other similar approaches, remain of interest. Further, despite the change in Administration, we expect continued significant focus on healthcare and similar drug pricing proposals for the foreseeable future, including proposals similar to the MFN rule or other proposals that would grant the HHS secretary the authority to negotiate drug prices directly with manufacturers.legislation.
Our business has been, and is expected to continue to be, affected by changes in U.S. federal reimbursement policy resulting from federal regulations and federal demonstration projects. Over the past threeseveral years, federal agencies, including the Centers for Medicare & Medicaid Services (CMS),CMS, announced a number of recommendations, policies, proposals and demonstration projects addressing drug pricing. CMS is the federal agency responsible for administering Medicare and overseeing state Medicaid programs and Health Insurance Marketplaces and has substantial power to implement policy changes or demonstration projects that can quickly and significantly affect how drugs, including our products, are covered and reimbursed. CMS issued guidance to allow certain Medicare plans offered by private insurance companies to require that patients receiving Medicare Part B drugs first try a drug preferred by the plan before covering another therapy (Step Therapy) and lowered reimbursement rates for new Medicare Part B drugs. Further, HHS issued a final rule under Medicare Part D revising the regulations under the federal antikickback statute to encourage Pharmacy Benefit Managers (PBMs) to use rebates received from biopharmaceutical manufacturers to reduce patient cost-sharing at the point of sale. While the implementation date for the rule is January 1, 2023, the rule remains subject to litigation, there are numerous logistical hurdles to overcome before it can be effectively implemented, and it is unclear how PBMs will respond and what the current Administration’s position is on such rule. Further, while the prior Administration finalized a rule (effective January 1, 2022) mandating price and cost-sharing transparency for almost all health plans and insurers in the individual and group commercial markets, it also is unclear how the current Administration views this rule and how plans and PBMs may respond when it goes into effect. Separately, the Administration is seeking information on how best to implement new reporting requirements relating to the cost of pharmacy benefits, including premiums for drug coverage, manufacturer rebates and the most utilized drugs under group health plans. Such reporting requirements begin no later than December 27, 2021. It is unclear how group health plans and health insurers may respond. The Administration has also could developdeveloped and seeksought to advance a range of policy proposals that could impactaffect U.S. federal reimbursement policy for drugs and biologics, including changes to Medicare Parts B and D. For example, in 2020, in response to an Executive Order, HHS released a rule to allow states to potentially enable the importation of certain drugs from Canada. This rule is in litigation, but should such litigation be unsuccessful, it could allow for the importation of Canadian versions of certain of Amgen’s products (including Otezla), that could have a material adverse effect on Amgen’s business. Also in response to an Executive Order, CMS released an interim final rule to implement the MFN pricing approach aimed at setting the reimbursement rate for 50 Medicare Part B.B drugs (including our products, such as Prolia, XGEVA, KYPROLIS, Neulasta, Nplate, EPOGEN and Aranesp) equal to the lowest adjusted price in 22 OECD nations for these drugs. In December 2021, subsequent to challenges, including procedural defects, CMS announced it was withdrawing the MFN rule. Notwithstanding the withdrawal of the rule, the MFN rule’s approach to drug pricing and other similar approaches remain of interest to policymakers. In connection with its withdrawal of the MFN rule, CMS noted that it will “… explore all options to incorporate value into payments for Medicare Part B drugs, improve beneficiaries’ access to evidence-based care, and reduce drug spending for consumers and throughout the health care system.” Further, we expect continued significant focus on healthcare and similar drug pricing proposals for the foreseeable future, including proposals under which the government would set drug prices or limit drug reimbursement. In the second quarter of 2022, several Medicare Administrative Contractors issued notice, in contravention of TEZSPIRE’s FDA approved labeling, that TEZSPIRE would be added to their “self-administered drug” exclusion lists. While the effective date for adding TEZSPIRE to the exclusion list has been deferred until further notice, this exclusion, if implemented, would result in Medicare beneficiaries with severe asthma losing access to TEZSPIRE coverage under Medicare Part B and potentially also under Medicare Advantage.
CMS policy changes and demonstration projects to test new care, delivery and payment models can also significantly affect how drugs, including our products, are covered and reimbursed. In end-stage renal disease (ESRD), CMS uses bundled payment rates. Between 2018 and 2020, Sensipar® and Parsabiv®, our calcimimeticsFor example, we believe that are used in dialysis clinics, were eligible for temporary drug add-on payment adjustments (TDAPA) to the bundled rate. In November 2020, CMS released its final rule ending the TDAPA for calcimimetics and adjusting ESRD Prospective Payment System bundled rates on January 1, 2021 by $9.93 per dialysis treatment for calcimimetics. As a result, sales of Parsabiv® have been materially adversely affected by this rule change. Additionally, CMS created a new mandatory payment model, effective January 1, 2021, focused on encouraging greater use of home dialysis and kidney transplants for ESRD patients that could result in changes to treatment of dialysis patients, including reduction of the use of our ESAs. Further, in November 2019, CMS announced additional voluntary payment models for nephrologists and dialysis facility partners that also seek to encourage home dialysis and preemptive transplantation through increased risk sharing, but the start date of such programs has been pushed back to January 1, 2022. CMS has also solicited suggestions regarding other potential care models. In 2016, CMS initiated theCMS’s Oncology Care Model demonstration which provides(which has, beginning in 2016, provided participating physician practices with performance-based financial incentives that aim to manage or reduce Medicare costs without negatively affecting the efficacy of care, that has been extended by one year (to 2022) due to COVID-19. We believe the Oncology Care Model hascare) reduced utilization of certain of our oncology products by participating physician practices and expect it to continue to do so inpractices. While the future. Additionally, in late 2019,Oncology Care Model demonstration ended on June 30, 2022, CMS announced a requestnew oncology model (the Enhancing Oncology Model) that will run for information on the Oncology Care First model, a new voluntary modelfive years (from July 2023 through June 2028) that builds on the Oncology Care Model. CMS has indicated a continued interest in exploring demonstrations ofthis prior demonstration program. Further, HHS’s September 2021 comprehensive plan to address drug pricing included potential future mandatory models that link payment for prescription drugs and may propose both new mandatorybiologics to factors such as: improved patient outcomes, reductions in health disparities, patient affordability and lower overall costs; bundled payment models; total cost of care models; models in which Medicare Part B savings from utilization of biosimilars, generics, or other high-value products are shared between prescribing providers and the future that could adversely affect our business.government; additional Medicare Part D cost-sharing support for biosimilars and generics; and potential expansion of the Part D Senior Savings Model to additional classes of drugs. CMS also recently finalized a rulenational Medicare coverage determination for certain Alzheimer’s disease medications that starting January 1, 2023, unless a manufacturer can ensurereceived accelerated FDA approvals that thelimits coverage to only patients in qualifying clinical trials, thereby suggesting that accelerated regulatory approval does not necessarily result in full amount of manufacturer patient assistance programs is passed on to the patient, such amount will be treated as a price reduction that will be taken into account when reporting our Best Price and/or Average Manufacturer Price. Given the use by PBMs and insurers of copay accumulator adjustment programs to apply such patient assistance for the benefit of such companies and not to defray costs to patients, it could be difficult to impossible for manufacturers to ensure that the full value of such amounts is being passed on to the patient. This new policy, if implemented, would have significant implications for our ability to offer copay assistance programs.
Medicare coverage. In this dynamic environment, particularly in light of the pressures on healthcare budgets as a result of the pandemic, we are unable to predict which or how many federal policy, legislative, regulatory, executive or administrative changes may ultimately be, or effectively estimate the consequences to our business if, enacted and implemented. However, to the extent that these or other federal government initiatives further decrease or modify the coverage or reimbursement available for our products, require that we pay increased rebates or shift other costs to us, limit or affect our decisions regarding the pricing of or otherwise reduce the use of our U.S. products, or limit our ability to offer co-pay payment assistance to commercial patients, such actions could have a material adverse effect on our business and results of operations.
We also face risks relatingrelated to the reporting of pricing data that affects the reimbursement of and discounts provided for our products. U.S. government price reporting regulations are complex and may require a biopharmaceutical manufacturermanufacturers to update certain previously submitted data. If our submitted pricing data are incorrect, we may become subject to substantial fines and penalties or other government enforcement actions, which could have a material adverse effect on our business and results of operations. In addition, as a result of restating previously reported price data, we also may be required to pay additional rebates and provide additional discounts. The prior Administration finalized a rule (the implementation of which has been delayed by the current Administration) mandating price and cost-sharing transparency for almost all health plans and insurers in the individual and group commercial markets. Further, the current Administration finalized transparency provisions required under the Consolidated Appropriations Act of 2021 for health plans and insurer reporting of certain drug pricing information by December 27, 2022, and each June thereafter, resulting in a biennial public report highlighting drug pricing trends and the impact of prescription drug costs on premiums and out-of-pocket costs. It is unclear how group health plans and health insurers may respond.
—Changing reimbursement and pricing actions in various states have negatively affected and may continue to negatively affect access to and have affected and may continue to affect sales of our products
At the state level, government actions or ballot initiatives can also affect how our products are covered and reimbursed and/or create additional pressure on our pricing decisions. A number of states have adopted, and many other states are considering, drug importation programs or other new pricing actions, including proposals designed to require biopharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or place a maximum price ceiling or cap on biopharmaceutical products. Existing and proposed state pricing laws have added complexity to the pricing of drugs and may already be affecting industry pricing decisions. For example, a California law, the constitutionality of which is currently being challenged, purports to require biopharmaceutical manufacturers to notify health insurers and government health plans at least 60 days before scheduled prescription drug price increases that exceed certain thresholds. Similar laws exist in Oregon and Washington. States are also seeking to change the way they pay for drugs for patients covered by state programs. California adopted a 2020–21 budget that incorporates international pricing into Medicaid supplemental rebate negotiations and allows its Medicaid program to seek federal approval to extend supplemental rebates to non-Medicaid populations. New York has established a Medicaid drug spending cap, and Massachusetts implemented a new review and supplemental rebate negotiation process. Other states may consider implementing similar policies and procedures as they face budget deficits from the effects of the COVID-19 pandemic. Additionally, Colorado, Florida, Maine, New Hampshire, New Mexico and Vermont have enacted laws, and several other states have proposed bills, to implementimportation of drugs from Canada. The FDA recently met with representatives from Colorado, Florida, Maine and New Mexico to discuss those states’ proposed importation programs, and the FDA may be working towards approving such plans. Other states could adopt similar approaches or could pursue different policy changes in a continuing effort to reduce their costs. Ultimately, as with U.S. federal government actions, existing or future state government actions or ballot initiatives may also have a material adverse effect on our product sales, business and results of operations.
—U.S. commercial payer actions have affected and may continue to affect access to and sales of our products
Payers, including healthcare insurers, PBMs, integrated healthcare delivery systems (vertically-integrated organizations built from consolidations of healthcare insurers and PBMs) and group purchasing organizations, increasingly seek ways to reduce their costs. With increasing frequency, payers are adopting benefit plan changes that shift a greater proportion of drug costs to patients. Such measures include more limited benefit plan designs, high deductible plans, higher patient copay or coinsurance obligations and more significant limitations on patients’ use of manufacturer commercial copay assistance programs. Further, government regulation of payers may affect these trends. For example, CMS finalized a policy in May 2020 (for plan years starting on or after January 1, 2021, which remains standing policy for 2022) that has caused commercial payers to more widely adopt copay accumulator adjustment programs. Payers have sought, and continue to seek, price discounts or rebates in connection with the placement of our products on their formularies or those they manage, particularly in treatment areas in which the payer has taken the position that multiple branded products are therapeutically comparable. Payers also control costs by imposing restrictions on access to or usage of our products, such as Step Therapy, or requiring that patients receive the payer’s prior authorization before covering the product or that patients use a mail-order pharmacy or a limited network of payer fully-owned mail-order or specialty pharmacies. Payers have also chosen to exclude certain indications for which our products are approved or chosen to exclude coverage entirely. For example, some payers require physicians to demonstrate or document that the patients for whom Repatha has been prescribed meet payer utilization management criteria, and these requirements have served to limit and may continue to limit patient access to Repatha treatment. In an effort to reduce barriers to access, we reduced the net price of Repatha by providing greater discounts and rebates to payers, including PBMs that administer Medicare Part D prescription drug plans. However, affordability of patient out-of-pocket co-pay cost has limited and may continue to limit patient use. For example, in late 2018 and early 2019, in response to a very high percentage of Medicare patients abandoning their Repathaprescriptions rather than paying their co-pay, we introduced a set of new National Drug Codes to make Repatha available at a lower list price in an attempt to address affordability for patients, particularly those on Medicare, and on December 31, 2019, we discontinued the higher list price option for Repatha. Despite these net and list price reductions, some payers have restricted and may continue to restrict patient access, and have changed and may continue to change formulary coverage for Repatha, and they may seek further discounts or rebates or take other actions that could reduce our sales of Repatha. These factors have served to limit and may continue to limit patient affordability and use, and negatively affect Repatha sales.
Further, significant consolidation in the health insurance industry has resulted in a few large insurers and PBMs, which places greater pressure on pricing and usage negotiations with biopharmaceutical manufacturers, significantly increasing discount and rebate requirements and limiting patient access and usage. For example, in the United States, as of the beginning of 2021, the top five integrated health plans and PBMs controlled about 85% of all pharmacy prescriptions. The consolidation among insurers, PBMs and other payers, including through integrated healthcare delivery systems and/or with specialty or mail-order pharmacies and pharmacy retailers, has increased the negotiating leverage such entities have over us and other biopharmaceutical manufacturers, and has resulted in greater price discounts, rebates and service fees realized by those payers. In 2019, 2020 and 2021, CVS, Express Scripts and United Health Group, respectively, each created Rebate Management Organizations that further increase their respective leverage to negotiate deeper discounts. Ultimately, additional discounts, rebates, fees, coverage changes, plan changes, restrictions or exclusions imposed by these commercial payers could have a material adverse effect on our product sales, business and results of operations. Policy reforms advanced by Congress or the Administration that refine the role of PBMs in the U.S. marketplace could have downstream implications or consequences for our business and how we interact with these entities. For example, on June 7, 2022, the FTC launched an inquiry into the business practices of PBMs, and the results of such inquiry could have an effect on manufacturer interactions with PBMs, resulting in changes to access to certain medicines. See our Annual Report on Form 10-K for the year ended December 31, 2021, Part I, Item 1A. Risk Factors—Concentration of sales at certain of our wholesaler distributors and at one free-standing dialysis clinic business and consolidation of private payers may negatively affect our business.
—Government and commercial payer actions outside the United States have affected and will continue to affect access to and sales of our products
Outside the United States, we expect countries will also continue to take actions to reduce their drug expenditures. See Part I, Item 1. Business—Reimbursement of our Annual Report on Form 10-K for the year ended December 31, 2021. IRP has been widely used by many countries outside the United States to control costs based on an external benchmark of a product’s price in other countries. IRP policies can change quickly and frequently and may not reflect differences in the burden of disease, indications, market structures, or affordability differences across countries or regions. Other expenditure control practices, including but not limited to the use of revenue clawbacks, rebates and percentage caps on price increases, are used in various foreign jurisdictions as well. In addition, countries may refuse to reimburse or may restrict the reimbursed population for a product when their national health technology assessments do not consider a medicine to demonstrate sufficient clinical benefit beyond existing therapies or to meet certain cost effectiveness thresholds. For example, despite the EMA’s approval of Repatha for the treatment of patients with established atherosclerotic disease, the reimbursement for Repatha in France prior to
2020 was limited to a narrower patient population (such as those with homozygous familial hypercholesterolemia (HoFH)) following a national health technology assessment, which had limited our efforts in France to expand Repatha access to the broader patient population covered by the approved label. Some countries decide on reimbursement between potentially competing products through national or regional tenders that often result in one product receiving most or all of the sales in that country or region. Failure to obtain coverage and reimbursement for our products, a deterioration in their existing coverage and reimbursement, or a decline in the timeliness or certainty of payment by payers to physicians and other providers has negatively affected, and may further negatively affect, the ability or willingness of healthcare providers to prescribe our products for their patients and otherwise negatively affect the use of our products or the prices we realize for them. Such changes have had, and could in the future have, a material adverse effect on our product sales, business and results of operations.
The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability.
We are subject to income and other taxes in the United States and other jurisdictions in which we do business. As a result, our provision for income taxes is derived from a combination of applicable tax rates in the various places we operate. Significant judgment is required for determining our provision for income tax.
One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely examined by tax authorities in those jurisdictions. Significant disputes can ariseand have arisen with tax authorities involving issues regarding the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and relevant facts, and such tax authorities (including the IRS) are becoming more aggressive in their audits and are particularly focused on such matters. In 2017, we received aan RAR and a modified RAR from the IRS for the years 2010, 2011 and 2010–2012, proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. As previously reported, weWe disagreed with the proposed adjustments and calculations and pursued a resolution with the IRS administrative appeals office. However, weoffice but were unable to reach resolution with the IRS appeals office.resolution. In July 2021, we filed a petition in the U.S. Tax Court to contest two duplicativeduplicate Notices for 2010, 2011 and the years 2010–2012 that we received in May and July 2021 which seek to increase our U.S. taxable income. We firmly believe thatincome for the IRS’ positions set forth in the Notices are without merit, and we will vigorously contest the Notices through the judicial
process. See Note 4, Income taxes, to the condensed consolidated financial statements.years 2010–2012.
In addition, in 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2010–2012. We disagreedisagreed with the 2013, 2014 and 2015 proposed adjustments and calculations and are pursuingpursued resolution with the IRS administrative appeals office.office but were unable to reach resolution. In July 2022, we filed a petition in the U.S. Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S. taxable income for the years 2013–2015 and asserts penalties.
We firmly believe that the IRS positions set forth in the 2010–2012 and 2013–2015 Notices are without merit. We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process, and we will seek consolidation of the two periods into one case in the U.S. Tax Court.
We are currently also under examination by the IRS for the years 2016, 2017 and 2018. We2018 with respect to issues similar to those for the 2010 through 2015 period. In addition, we are also currently under examination by a number of other state and foreign tax jurisdictions.
Final resolution of these complex matters is not likely within the next 12 months. We continue to believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse effect on the results of our operations.
See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations, Income Taxes, and Part I—Note 4, Income taxes, to the condensed consolidated financial statements.
Our provision for income taxes and results of operations in the future could be adversely affected by changes to our operating structure, changes in the mix of income and expenses in countries with differing tax rates, changes in the valuation of deferred tax assets and liabilities and changes in applicable tax laws, regulations or administrative interpretations thereof. The Tax Cuts and Jobs Act (the 2017 Tax Act)Act is complex and a large volume of regulations and guidance has been issued and could be subject to different interpretations. We could face audit challenges to our application of the 2017 Tax Act. The Administration proposed and Congress areis considering a variety of potentially significant changes to existing tax law, including an increase in the corporate tax rate and the tax rate on foreign earnings.law. These changes, or others, could substantially increase U.S. taxation of our operations both in and outside the United States, includingtaxes we pay to the U.S. territory of Puerto Rico.government. Further, the OECD recently reached an agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries. If enacted, either by all OECD participants or unilaterally by individual countries, this agreement could result in tax increases in both the United States and
foreign jurisdictions. jurisdictions.
The U.S. Treasury recently released final foreign tax credit regulations that eliminate U.S. creditability of the Puerto Rico Excise Tax beginning 2023, which would increase our U.S. tax liability. However, the U.S. territory of Puerto Rico recently enacted Act 52-2022, which provides for an alternate fixed tax rate on industrial development income that is expected to be creditable under U.S. law. As part of this new law, eligible businesses would be subject to incremental income and withholding taxes in lieu of payment of the Puerto Rico Excise Tax. In order to qualify for the alternative fixed tax rate, we must amend our current tax grant with the Puerto Rico government by December 31, 2022. Once we qualify for this alternative fixed tax rate, which we expect to occur as of January 1, 2023, our tax expense will increase. While we expect these taxes to be partially offset by U.S. foreign tax credits, the U.S. Treasury has not yet issued guidance on whether the alternative fixed tax rate will be creditable under U.S. law.
Changes to existing tax law in the U.S.,United States, the U.S. territory of Puerto Rico, or other jurisdictions, that would likelyincluding the changes and potential changes discussed above, could result in tax increases where we do business and could have a material adverse effect on the results of our operations.
Our efforts to collaborate with or acquire other companies, products, or technology, and to integrate the operations of companies or to support the products or technology we have acquired, may not be successful, and may result in unanticipated costs, delays or failures to realize the benefits of the transactions.
We seek innovation through significant investment in both internal R&D and external transactions, including collaborations, partnerships, alliances, licenses, joint ventures, mergers and acquisitions (collectively, acquisition activity). Acquisition activities may be subject to regulatory approvals or other requirements that are not within our control. There can be no assurance that such regulatory or other approvals will be obtained or that all closing conditions required in connection with our acquisition activities will be satisfied or waived, which could result in us being unable to complete the planned acquisition activities. In addition, antitrust scrutiny by regulatory agencies and changes to regulatory approval process in the U.S. and foreign jurisdictions may cause approvals to take longer than anticipated to obtain, not be obtained at all, or contain burdensome conditions, which may jeopardize, delay or reduce the anticipated benefits of acquisitions to us and could impede the execution of our business strategy.
Acquisition activities are complex, time consuming and expensive and may result in unanticipated costs, delays or other operational or financial problems related to integrating the acquired company and business with our company, which may divert our management’s attention from other business issues and opportunities and restrict the full realization of the anticipated benefits of such transactions within the expected timeframe or at all. We may pay substantial amounts of cash, incur debt or issue equity securities to pay for acquisition activities, which could adversely affect our liquidity or result in dilution to our stockholders, respectively. Further, failures or difficulties in integrating or retaining new personnel or in integrating the operations of the businesses, products or assets we acquire (including related technology, commercial operations, compliance programs, manufacturing, distribution and general business operations and procedures) may affect our ability to realize the benefits of the transaction and grow our business and may result in us incurring asset impairment or restructuring charges. These and other challenges may arise in connection with our proposed acquisition of ChemoCentryx, in addition to our acquisitions of Otezla, Five Prime, Teneobio and/or our collaborations with BeiGene and Kyowa Kirin Co., Ltd., or with other acquisition activities, which could have a material adverse effect on our business, results of operations and stock price.
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Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
During the three months ended June 30, 2021,2022, we had one outstanding stock repurchase program, under which the repurchase activity was as follows:
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Period | | Total number of shares purchased | | Average price paid per share (1) | | Total number of shares purchased as part of publicly announced program | | Maximum dollar value that may yet be purchased under the program(2) |
April 1 - 30 | | 1,912,921 | | | $ | 244.13 | | | 1,912,921 | | | $ | 5,044,280,273 | |
May 1 - 31 | | 2,425,697 | | | $ | 248.21 | | | 2,425,697 | | | $ | 4,442,191,440 | |
June 1 - 30 | | 2,180,367 | | | $ | 239.80 | | | 2,180,367 | | | $ | 3,919,349,391 | |
Total | | 6,518,985 | | | $ | 244.20 | | | 6,518,985 | | | |
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Period | | Total number of shares purchased (1) | | Average price paid per share | | Total number of shares purchased as part of publicly announced program | | Maximum dollar value that may yet be purchased under the program |
April 1 - 30 | | — | | | — | | | — | | | 4,579,263,848 | |
May 1 - 31 | | — | | | — | | | — | | | 4,579,263,848 | |
June 1 - 30 | | — | | | — | | | — | | | 4,579,263,848 | |
Total | | — | | | | | — | | | |
___________
(1)Average price paid per share includes related expenses.
(2) In March 2021, our BoardAs part of Directors increased the amount authorized under our stock repurchase program, the Company entered into ASR agreements with three third-party financial institutions (Dealers) in February 2022. Under the ASR agreements, the Company made payments in an aggregate amount of $6.0 billion to the Dealers and received and retired an initial 23,258,997 shares of common stock. Approximately $0.9 billion of stock was held back by anthe Dealers pending final settlement of the ASR agreement, which will be based on the volume-weighted average stock price of the Company’s common stock during the term of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. At settlement, which is scheduled to occur in the third quarter of 2022, the Dealers may be required to deliver additional $3.4 billion.shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of common stock or to make a cash payment, at its election, to the Dealers.
Reference is made to the Index to Exhibits included herein.
INDEX TO EXHIBITS
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Exhibit No. | | Description |
2.1 | | |
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2.2 | | |
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2.3 | | |
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2.4 | | |
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2.5 | | |
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2.6 | | Agreement and Plan of Merger, dated as of March 4,July 27, 2021, by and among Amgen Inc., Franklin AcquisitionTeneobio, Inc., Tuxedo Merger Sub, Inc., and Five Prime Therapeutics, Inc.Fortis Advisors LLC. (Filed(portions of the exhibit have been omitted because they are both (i) not material and (ii) is the type of information that the Company treats as private or confidential)(Filed as an exhibit to Form 8-K10-Q for the quarter ended September 30, 2021 on March 4,November 3, 2021 and incorporated herein by reference.) |
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3.1 | | |
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3.2 | | |
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4.1 | | |
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4.2 | | Form of Indenture, dated January 1, 1992. (Filed as an exhibit to Form S-3 Registration Statement filed on December 19, 1991 and incorporated herein by reference.) |
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4.3 | | |
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4.4 | | |
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4.5 | | |
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4.6 | | |
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4.7 | | |
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4.8 | | |
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4.9 | | |
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4.10 | | |
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4.11 | | |
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Exhibit No. | | Description |
4.12 | | |
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4.13 | | |
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4.14 | | |
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4.15 | | |
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4.16 | | |
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4.17 | | |
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4.18 | | |
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4.19 | | |
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4.20 | | |
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4.21 | | |
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4.22 | | |
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4.23 | | |
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4.24 | | |
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4.25 | | |
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4.26 | | |
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4.27 | | |
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4.28 | | |
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4.294.28 | | |
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4.31Exhibit No. | | Description |
4.30 | | |
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4.324.31 | | Registration Rights Agreement, dated as of August 17, 2020, by and among Amgen Inc., BofA Securities, Inc. and J.P. Morgan Securities LLC, as lead dealer managers, and BNP Paribas Securities Corp., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Blaylock Van, LLC and Siebert Williams Shank & Co., LLC, as co-dealer managers. (Filed as an exhibit to Form 8-K on August 18, 2020 and incorporated herein by reference.) |
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4.32 | | |
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4.33 | | |
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10.1+ | | |
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10.2+ | | |
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10.3+ | | |
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10.4+ | | |
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10.5+ | | |
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10.6+ | | |
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10.7+ | | |
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10.8+ | | |
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10.9+ | | |
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10.10+ | | |
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10.11+ | | |
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10.12+ | | |
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10.13+ | | |
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Exhibit No. | | Description |
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10.14+ | | |
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10.15+ | | |
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10.16+ | | |
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10.16+10.17+ | | Amgen Inc. Executive Incentive Plan. (As Amended and Restated effective January 1, 2009.2022.) (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2008March 31, 2022 on November 7, 2008April 28, 2022 and incorporated herein by reference.) |
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10.17+ | | |
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10.18+ | | |
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10.19+ | | |
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10.20+10.19+ | | |
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10.21+10.20+ | | |
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10.22+10.21+ | | |
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10.23+10.22+ | | |
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10.23+ | | |
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10.24 | | Second Amended and Restated Credit Agreement, dated December 12, 2019, among Amgen Inc., the Banks therein named, Citibank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as syndication agent. (Filed as an exhibit to Form 8-K on December 12, 2019 and incorporated herein by reference.) |
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10.25 | | |
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10.26 | | |
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10.27 | | |
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10.28 | | |
| | |
10.29 | | |
| | |
| | | | | | | | |
Exhibit No. | | Description |
10.30 | | |
| | |
10.31 | | |
| | |
| | | | | | | | |
10.32 | | |
| | |
10.33 | | |
| | |
10.34 | | |
| | |
10.35 | | |
| | |
10.36 | | |
| | |
10.37 | | |
| | |
10.38 | | |
| | |
10.39*10.39 | | |
| | |
10.40 | | |
| | |
10.4110.41* | | |
| | |
10.42 | | |
| | |
10.4210.43 | | |
| | |
10.4310.44 | | |
| | | | | | | | |
Exhibit No. | | Description |
| | |
10.4410.45 | | |
| | |
10.4510.46* | | |
| | |
10.4610.47* | | |
| | |
| | | | | | | | |
10.4710.48 | | Amendment Nos. 2 through 6 to the March 30, 2012 Collaboration Agreement between Amgen Inc. and AstraZeneca Collaboration Ventures, LLC, dated May 2 and 27 and October 2, 2016, January 31, 2018, and May 15, 2020, respectively (portions of the exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed.) (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2020 on July 29, 2020 and incorporated herein by reference.) |
| | |
10.4810.49 | | |
| | |
10.49*10.50 | | |
| | |
10.51 | | |
| | |
10.52 | | reference.) |
| | |
31* | | |
| | |
32** | | |
| | |
101.INS | | Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
| | |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
____________________________
(* = filed herewith)
(** = furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended)
(+ = management contract or compensatory plan or arrangement)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | | | | |
| | Amgen Inc. |
| | (Registrant) |
| | | |
Date: | August 3, 20214, 2022 | By: | | /S/ PETER H. GRIFFITH |
| | | | Peter H. Griffith |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial Officer) |