Factors That May Affect Future Results
Amgen operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The
following discussion highlights some of these risks and others are
discussed elsewhere herein and in other documents filed by the
Company with the Securities and Exchange Commission.
Period to period fluctuations
The Company's operating results may fluctuate for a number of
reasons. The forecasting of revenue is inherently uncertain for a
variety of reasons. Because the Company plans its operating
expenses, many of which are relatively fixed in the short term, on
the basis that revenues will continue to grow, even a relatively
small revenue shortfall may cause a period's results to be below
expectations. Such a revenue shortfall could arise from any number
of factors, including lower than expected demand, wholesalers' buying
patterns, product pricing strategies, fluctuations in foreign
currency exchange rates, changes in government or private
reimbursement, transit interruptions, overall economic conditions or
natural disasters (including earthquakes).
See "Results of Operations - Product sales - NEUPOGEN(R)
(Filgrastim)" for a discussion regarding quarterly NEUPOGEN(R) sales.
The Company's stock price, like that of other biotechnology
companies, is subject to significant volatility. If revenues or
earnings in any quarter fail to meet the investment community's
expectations, there could be an immediate impact on the Company's
stock price. The stock price may also be affected by, among other
things, clinical trial results and other product development related
announcements by Amgen or its competitors, regulatory matters,
intellectual property and legal matters, or broader industry and
market trends unrelated to the Company's performance.
Rapid growth
In light of management's views of the potential for future
growth of the Company's business, the Company has adopted an
aggressive growth plan that includes substantial and increased
investments in research and development and investments in facilities
that will be required to support significant growth. This plan
carries with it a number of risks, including a higher level of
operating expenses, the difficulty of attracting and assimilating a
large number of new employees, and the complexities associated with
managing a larger and faster growing organization.
Product development
The Company intends to continue to develop product candidates.
Successful product development in the biotechnology industry is
highly uncertain and only a small minority of research and
development programs ultimately result in commercially successful
drugs. Product development is dependent on numerous factors, many of
which are beyond the Company's control. Product candidates that
appear promising in the early phases of development may fail to reach
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market for numerous reasons. They may be found to be ineffective or
to have harmful side effects in clinical or preclinical testing, fail
to receive necessary regulatory approvals, be uneconomic because of
manufacturing costs or other factors, or be precluded from
commercialization by the proprietary rights of others. Success in
preclinical and early clinical trials does not ensure that large
scale clinical trials will be successful. Clinical results are
frequently susceptible to varying interpretations which may delay,
limit or prevent further clinical development or regulatory
approvals. The length of time necessary to complete clinical trials
and receive approval for product marketing by regulatory authorities
varies significantly by product and indication and is often difficult
to predict.
Regulatory approvals
The success of current products and future product candidates of
the Company will depend in part upon maintaining and obtaining
regulatory approval to market products. Domestic and foreign
statutes and regulations govern matters relating to the Company's
products and product candidates and the research and development
activities associated with them. The Company's product candidates
may prove to have undesirable side effects that may interrupt or
delay clinical studies and could ultimately prevent or limit their
commercial use. The Company or regulatory authorities may suspend or
terminate clinical trials at any time if the participants in such
trials are believed to be exposed to unacceptable health risks. Even
if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continued review. Later discovery of
previously unknown problems with a product or manufacturer may result
in restrictions on such product or manufacturer, including withdrawal
of the product from the market. Failure to obtain necessary
approvals, or the restriction, suspension, or revocation of any
approvals, or the failure to comply with regulatory requirements
could have a material adverse effect on the Company.
Reimbursement
The success of the Company's products partially depends upon the
extent to which a consumer is willing to pay the price or able to
obtain reimbursement for the cost of these products from government
health administration authorities, private health insurers, and other
organizations. Significant uncertainties exist as to the
reimbursement status of newly approved therapeutic products, and
current reimbursement policies for existing products may change. It
is possible that changes in reimbursement or failure to obtain
reimbursement may reduce the demand for or the price of the Company's
products.
Several factors could influence the pricing or reimbursement for
the Company's products including: (1) third-party payors continuing
to challenge the prices charged for medical services and products,
(2) the trend towards managed care in the United States, (3) the
growth of organizations which could control or significantly
influence the purchase of health care services and products, and (4)
legislative proposals to reform health care or reduce government
insurance programs. NEUPOGEN(R) usage has been and is expected to
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continue to be affected by cost containment pressures on health care
providers worldwide. In addition, patients receiving EPOGEN(R) in
connection with treatment for end stage renal disease are covered
primarily under medical programs provided by the federal government.
Therefore, EPOGEN(R) sales may also be affected by future changes in
reimbursement rates or the basis for reimbursement by the federal
government.
Competition
Substantial competition exists in the biotechnology industry
from pharmaceutical and biotechnology companies which may have
technical or competitive advantages. The Company competes with these
companies in the development of technologies and processes and
sometimes competes with them in acquiring technology from academic
institutions, government agencies, and other private and public
research organizations. There can be no assurance that the Company
will be able to produce or acquire rights to products that have
commercial potential. Even if the Company achieves product
commercialization, there can be no assurance that one or more of the
Company's competitors may not: (1) achieve product commercialization
earlier than the Company, (2) receive patent protection that
dominates or adversely affects the Company's activities, or (3) have
significantly greater marketing capabilities.
The field of biotechnology has undergone rapid and significant
technological change. The Company expects that the technology
associated with the Company's research and development will continue
to develop rapidly, and the Company's future success will depend in
large part on its ability to maintain a competitive position with
respect to this technology. Rapid technological development by the
Company or others may result in some of the Company's product
candidates, products, or processes becoming obsolete before the
Company recovers a significant portion of the research, development,
manufacturing, and commercialization expenses it incurs. This could
have a material adverse effect on the Company.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions. Accordingly the breadth of claims allowed in such
companies' patents cannot be predicted. Patent disputes are frequent
and can preclude commercialization of products. The Company is and
may in the future be involved in material patent litigation. Such
litigation, if decided adversely, could subject the Company to
significant liabilities and cause the Company to obtain third party
licenses or cease using the technology or product in dispute.
The Company is involved in arbitration proceedings with Ortho
Pharmaceutical Corporation, a subsidiary of Johnson & Johnson
("Johnson & Johnson"), relating to a license granted by the Company
to Johnson & Johnson for sales of Epoetin alfa in the United States
for all human uses except dialysis and diagnostics. See Note 4 to
the Condensed Consolidated Financial Statements - "Contingencies -
Johnson and Johnson arbitrations." While it is impossible to predict
accurately or determine the outcome of these proceedings, based
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primarily upon the merits of its claims and based upon certain
liabilities established due to the inherent uncertainty of any
arbitrated result, the Company believes that the outcome of these
proceedings will not have a material adverse effect on its financial
statements. However, it is possible that an adverse decision could,
depending on its magnitude, have a material adverse effect on the
financial statements.
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