Amgen 2014 Annual Report Download

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Dear Shareholders,
2014 was an extraordinary year for Amgen—
financially, scientifically and organizationally. We
moved markedly forward in growing our
compelling portfolio of innovative and biosimilar
medicines, and in transforming our company to
deliver long-term, industry-leading innovation
and financial returns.
Delivering for Shareholders
In 2014, we grew revenues at Amgen by
7 percent, surpassing $20 billion for the first
time. Consistent with our international expansion
objectives, we grew sales outside of the U.S. by
double digits. We grew adjusted operating
income* by 22 percent, reflecting our
commitment to expense discipline across the
company. In addition, we grew free cash flow*
40 percent to $7.8 billion. This strong financial
performance, and our confidence in the
longer-term outlook, enabled us to increase our
dividend by 30 percent in 2014 and increase our
share repurchase authorization to $4 billion in
total. We are on the path to meeting our
commitment to return approximately 60 percent
of adjusted net income* to shareholders annually
through 2018, on average.
Beginning a New Product Launch Cycle
We delivered an extraordinary flow of data from
our late-stage pipeline in 2014 and entered an
exciting new product launch cycle. We advanced
eight innovative, late-stage molecules in five
therapeutic areas, all addressing serious illness
and high unmet medical need. Six late-stage
molecules generated positive, registration-
enabling data in 2014, and four were filed
with regulators.
In December 2014, we received approval from
the U.S. Food and Drug Administration (FDA) and
began marketing our bispecific T-cell engager
(BiTE®) immunotherapy BLINCYTO™
(blinatumomab) for a type of acute
lymphoblastic leukemia less than three months
after submission. BLINCYTO™ is an important
new treatment option for patients and serves
as proof of concept for our novel BiTE®
technology platform in the potential treatment
of other cancers.
In 2014, we advanced talimogene
laherparepvec, an oncolytic immunotherapy
designed to harness the body’s immune system
to fight melanoma and potentially other cancers.
Following Phase 3 trials, we filed U.S. and
European marketing applications for metastatic
melanoma.
We received FDA approval in late 2014 for our
Neulasta® (pegfilgrastim) Delivery Kit, which
includes the On-body Injector, and we have
already entered the market with this important
innovation. This injection system allows cancer
patients who are at high risk of infection
undergoing chemotherapy to receive Neulasta®
automatically, and at the appropriate time
following chemotherapy, without having to return
to the doctor’s office.
Following Phase 3 data published in the New
England Journal of Medicine, we submitted U.S.
and European marketing applications in early
2015 for Kyprolis® (carfilzomib) in patients
with relapsed multiple myeloma. In early 2015,
we also received positive Phase 3 data that
demonstrated the superiority of Kyprolis® over
Velcade® in patients with relapsed multiple
myeloma.
Following robust, positive data from five Phase 3
studies, in 2014 we submitted U.S. and
European marketing applications for Repatha™
(evolocumab) for the treatment of high
cholesterol.
The FDA is also reviewing our application for
Corlanor® (ivabradine), which was granted
priority FDA review status in late 2014 for the
Letter to
Shareholders
*This is a non-GAAP financial measure. See reconciliation to U.S. generally accepted accounting principles (GAAP) accompanying this letter.
Robert A. Bradway, Chairman and Chief Executive Officer, Amgen Inc.

Table of contents

  • Page 1
    ...melanoma and potentially other cancers. Following Phase 3 trials, we filed U.S. and European marketing applications for metastatic melanoma. Following Phase 3 data published in the New We delivered an extraordinary flow of data from our late-stage pipeline in 2014 and entered an exciting new product...

  • Page 2
    ... at Amgen, we have also identified significant external innovation opportunities. A great example is the collaboration and license agreement we established in 2014 with Kite Pharma to develop and commercialize novel Chimeric Antigen Receptor (CAR) T cell immunotherapies. This agreement broadens...

  • Page 3
    ...amortization of intangible assets, including developed product technology rights, acquired in business combinations. The year ended December 31, 2013, also included adjustments related primarily to charges associated with the Onyx Pharmaceuticals, Inc. (Onyx) business combination, which included the...

  • Page 4
    ... safety, side effects or manufacturing problems with our products after they are on the market. Our business may be impacted by government investigations, litigation and products liability claims. If we fail to meet the compliance obligations in the corporate integrity agreement between us and the...

  • Page 5
    ... Drive, Thousand Oaks, California (Address of principal executive offices) 95-3540776 (I.R.S. Employer Identification No.) 91320-1799 (Zip Code) (805) 447-1000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name...

  • Page 6
    ... shares of common stock held by directors and executive officers at June 30, 2014. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, directly or indirectly, to direct or cause the direction of the management or policies of the registrant...

  • Page 7
    ...Selected Marketed Products Reimbursement Manufacturing, Distribution and Raw Materials Government Regulation Research and Development and Selected Product Candidates Business Relationships Human Resources Executive Officers of the Registrant Geographic Area Financial Information Investor Information...

  • Page 8
    ... biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential. Amgen was incorporated in California in 1980 and became a Delaware corporation in 1987. Amgen operates in one business segment: human therapeutics...

  • Page 9
    ... with regionally and distantly metastatic melanoma. • In January 2015, we announced a three-month extension of the PDUFA target action date for our BLA due to a request from the FDA for submission of additional existing manufacturing data, which has been submitted. Trebananib • In November 2014...

  • Page 10
    ...in Singapore. We believe, when licensed, this facility will enable us to increase our manufacturing productivity versus conventional alternatives at lower capital costs and operating expense. Reallocating Resources to Drive Growth • During the second half of 2014, we announced a restructuring plan...

  • Page 11
    ... requiring letters of credit. For financial information related to our one business segment, see Part IV-Consolidated Statements of Income, Consolidated Balance Sheets and Note 19, Segment information, to the Consolidated Financial Statements. We market our principal products primarily in the United...

  • Page 12
    ... associated with chemotherapy-induced febrile neutropenia in cancer patients with non-myeloid malignancies. In December 2014, the FDA granted approval of the Neulasta® Delivery Kit, including the On-body Injector for Neulasta®. We market NEUPOGEN®, a recombinant-methionyl human granulocyte...

  • Page 13
    ...general subject matter and latest expiry date. One or more patents with the same or earlier expiry date may fall under the same "general subject matter" and are not separately listed. Product Territory General Subject Matter Expiration Neulasta (pegfilgrastim) Enbrel® (etanercept) ® U.S. Europe...

  • Page 14
    ... products, where we are developing product candidates or new indications for existing products. Our competitive positions may be based on, among other things, safety, efficacy, reliability, availability, patient convenience/delivery devices, price, reimbursement, timing of market entry and patent...

  • Page 15
    ... Group) GlaxoSmithKline plc Millennium Pharmaceuticals, Inc.(9) Celgene Corporation Celgene Corporation (1) Granix® launched at the end of 2013 and could have an impact over time on sales of NEUPOGEN® and, to a lesser extent, Neulasta®. Lonquex® is a long-acting filgrastim product launched...

  • Page 16
    ... of new therapies, and these organizations are proliferating in established and emerging markets. See Item 1A. Risk Factors-Our sales depend on coverage and reimbursement from third-party payers. Manufacturing, Distribution and Raw Materials Manufacturing The products we manufacture include...

  • Page 17
    ... and regulations govern, among other things, the production, research, development, testing, manufacture, quality control, labeling, storage, record keeping, approval, advertising and promotion, reporting of certain payments and other transfers of value, and distribution of our products. Failure to...

  • Page 18
    ... manufacturing and testing of products prior to providing approval to market products. If after receiving approval from the FDA, we make a material change in manufacturing equipment, location or process, additional regulatory review may be required. We also must adhere to current Good Manufacturing...

  • Page 19
    ... includes manufacturing/testing facility inspections, testing of drug product upon importation and other domestic requirements. In Asia, a number of countries such as China, South Korea, and Taiwan may require local clinical trials as part of the drug registration process in addition to the global...

  • Page 20
    ...Amgen's promotional, contracting, sales and marketing activities and arrangements caused the submission of various false claims under the Federal Civil False Claims Act and various State False Claims Acts. In connection with entering into the settlement agreement, Amgen also entered into a corporate...

  • Page 21
    ... in several locations throughout the United States and in the United Kingdom, as well as smaller research centers and development facilities globally. See Item 2. Properties. We conduct clinical trial activities using both our internal staff and third-party contract clinical trial service providers...

  • Page 22
    ... AMG 139 AMG 157 AMG 181 AMG 334 AMG 337 BLINCYTO™ Brodalumab Kyprolis®* Omecamtiv mecarbil Oprozomib* XGEVA ® Phase 1 Programs AMG 172 AMG 208 AMG 211 AMG 232 AMG 282 AMG 319 AMG 357 AMG 557 AMG 581 AMG 595 AMG 780 AMG 811 AMG 820 AMG 876 AMG 900 Oprozomib* * Being developed by Onyx, an Amgen...

  • Page 23
    ... 3 development that have yet to be approved for any indication. Patents for products already approved for one or more indications but currently undergoing phase 3 clinical trials for additional indications are previously described. See Marketing, Distribution and Selected Marketed Products-Patents...

  • Page 24
    ...Brodalumab is a human monoclonal antibody that inhibits the interleukin-17 receptor. It is being investigated as a treatment for a variety of inflammatory diseases. Brodalumab is being jointly developed in collaboration with AstraZeneca. In 2014, we and AstraZeneca announced results from three phase...

  • Page 25
    ... AMG 181 AMG 181 is a human monoclonal antibody that inhibits the action of alpha4/beta7. It is being investigated as a treatment for ulcerative colitis and Crohn's disease, with phase 2 studies ongoing. AMG 181 is being jointly developed in collaboration with AstraZeneca. AMG 334 AMG 334 is a human...

  • Page 26
    ...We are developing this product in collaboration with Cytokinetics, Inc. A phase 2 dose escalation study to select and evaluate an oral modified release formulation of omecamtiv mecarbil in subjects with heart failure and left ventricular systolic dysfunction is ongoing. Onyx Pharmaceuticals Kyprolis...

  • Page 27
    ...Company, Limited (Kirin). K-A develops and then out-licenses to third parties certain product rights which have been transferred to this joint venture from Amgen and Kirin. K-A has given us exclusive licenses to manufacture and market: (i) G-CSF and pegfilgrastim in the United States, Europe, Canada...

  • Page 28
    ... brodalumab and Japan for AMG 557 and AMG 570, which are licensed to other third parties. Under the terms of the agreement, approximately 65% of related development costs for the 2012-2014 periods were funded by AstraZeneca; now, the companies share costs equally. If approved for sale, Amgen would...

  • Page 29
    ...-Plough Corporation. Prior to Schering-Plough, Mr. Piacquad served in a series of leadership roles in finance and business development at J&J, with his last position being Vice President, Ventures and Business Development. Mr. David J. Scott, age 62, became Senior Vice President, General Counsel and...

  • Page 30
    ... trial authorization process, the new requirements also provide for increased transparency of clinical trial results and submission of quality data relating to the products and product candidates used for such trials. Starting in 2015, the EMA will make certain clinical trial reports publicly...

  • Page 31
    ... or perceived safety problems or concerns can lead to revised or restrictive labeling for our products; requirement of risk management activities or other regulatory agency compliance actions related to the promotion and sale of our products; mandated post-marketing commitments or pharmacovigilance...

  • Page 32
    ... various stages in the product development process. Inability to bring a product to market or a significant delay in the expected approval and related launch date of a new product for any of the reasons discussed could potentially have a negative impact on our net sales and earnings and could result...

  • Page 33
    .... (See Our current products and products in development cannot be sold without regulatory approval.) We are required to conduct clinical trials using an appropriate number of trial sites and patients to support the product label claims. The length of time, number of trial sites and patients required...

  • Page 34
    ... compete with new drugs currently in development, drugs currently approved for other indications that may later be approved for the same indications as those of our products and drugs approved for other indications that are used off-label. Large pharmaceutical companies and generics manufacturers of...

  • Page 35
    ... necessary for the manufacturing of our commercial and clinical products. Certain of those raw materials, medical devices and components are the proprietary products of those unaffiliated third-party suppliers and are specifically cited in our drug application with regulatory agencies so that they...

  • Page 36
    ... or action by regulatory agencies or others; adverse financial or other strategic developments at or affecting the supplier; unexpected demand for or shortage of raw materials, medical devices or components; failure to comply with our quality standards which results in quality and product failures...

  • Page 37
    ... quality control sample following distribution of that lot. We may experience the same or other problems in the future, resulting in broader product recalls, adverse event trends, delayed shipments, supply constraints, contract disputes and/or stock-outs of our products. If we are at any time unable...

  • Page 38
    ... product offerings and/or our R&D pipeline. Acquisitions 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 result in the diversion of our management's attention from other business...

  • Page 39
    ... emerging markets around the world, through acquisitions and licensing transactions as well as through the development and introduction of our current products into new markets, we face numerous risks to our business. There is no guarantee that the Company's efforts and strategies to expand sales in...

  • Page 40
    ... on our business and results of operations. Changes in credit ratings issued by nationally recognized credit rating agencies could adversely affect our cost of financing and have an adverse effect on the market price of our securities. Our risk mitigation measures and corporate compliance program...

  • Page 41
    ...in the United States in 2015 and 2016, some employers may seek to reduce costs by reducing or eliminating employer group healthcare plans or transferring a greater portion of healthcare costs to their employees. Job losses or other economic hardships may also result in reduced levels of coverage for...

  • Page 42
    ... products. Government agencies promulgate regulations and guidelines directly applicable to us and to our products. However, professional societies, practice management groups, insurance carriers, physicians, private health/science foundations and organizations involved in various diseases from time...

  • Page 43
    ..., including advancing our pipeline and addressing competition from competitor products and biosimilars, with fewer human resources. We must also attract, retain and motivate key employees that are critical to our business. If we are unable to effectively execute with fewer staff members and/ or...

  • Page 44
    ... contracting manufacturing agreements, provide adequate capacity and are sufficient to meet our expected needs. See Item 1A. Risk Factors for a discussion on the factors that could adversely impact our manufacturing operations and the global supply of our products. See Item 1. Business-Manufacturing...

  • Page 45
    ... periods indicated, the range of high and low quarterly closing sales prices of the common stock as quoted on The NASDAQ Global Select Market: Year ended December 31, 2014 High Low Fourth quarter Third quarter Second quarter First quarter Year ended December 31, 2013 $ 171.64 144.01 126.07 127.47...

  • Page 46
    ... indicative of future stock price performance. Amgen vs. Amex Biotech, Amex Pharmaceutical and S&P 500 Indices Comparison of Five-Year Cumulative Total Return Value of Investment of $100 on December 31, 2009 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 Amgen (AMGN) Amex...

  • Page 47
    ... related expenses. In October 2014, our Board of Directors authorized an increase that resulted in a total of $4.0 billion available under the stock repurchase program. Dividends For the years ended December 31, 2014 and 2013, we paid quarterly dividends. We expect to continue to pay quarterly...

  • Page 48
    ...sales Other revenues Total revenues Operating expenses: Cost of sales Research and development Selling, general and administrative Other(1) Net income Diluted earnings per share Dividends paid per share Consolidated Balance Sheet Data: $ 19,327 736 20,063 4,422 4,297 4,699 454 5,158 6.70 2.44 2014...

  • Page 49
    ... medicines to address serious illnesses, development of branded biosimilars, global expansion, next-generation manufacturing of high quality biologics, development of improved biologic drug delivery systems and return of capital to shareholders. In 2014, we advanced our strategy. Revenues increased...

  • Page 50
    ...** AMG 416 AMG 334 US submission EU submission US submission Phase 3 ASPIRE data US submission EU submission US approval EU submission Phase 3 data Phase 3 data Phase 2b data (episodic) * Marketed by Onyx, an Amgen subsidiary ** Developed in collaboration with AstraZeneca During 2014, six...

  • Page 51
    ...in wholesaler and, based on prescription data for ENBREL and Sensipar®, end-user inventory levels. Also, 2014 included a full year of Kyprolis® product sales as a result of the Onyx acquisition on October 1, 2013. The increase in ROW product sales for 2014 reflects growth primarily in our marketed...

  • Page 52
    ... exchange rates was not material in 2014, 2013 or 2012. Results of Operations Product sales Worldwide product sales were as follows (dollar amounts in millions): Year ended December 31, 2014 Change Year ended December 31, 2013 Change Year ended December 31, 2012 Neulasta®/NEUPOGEN® ENBREL XGEVA...

  • Page 53
    ... and Sandoz. See Part 1, Item 1. Business-Marketing, Distribution and Selected Marketed Products-Competition and Part IV-Note 18, Contingencies and commitments, to the Consolidated Financial Statements. Future Neulasta®/NEUPOGEN® sales will also depend, in part, on the development of new protocols...

  • Page 54
    ... partially by unit declines. EPOGEN® sales for 2013 increased by 1% due to unit growth. Our remaining material U.S. patent for EPOGEN® expires in May 2015. As a result, we may face competition in the United States, which may have a material adverse impact over time on EPOGEN® sales. In addition...

  • Page 55
    ... plan, we stated that we would reduce our staff by 3,500 to 4,000 by the end of 2015 and close our facilities in Washington state and Colorado and reduce the number of buildings at our headquarters in Thousand Oaks, California. Company-wide, these actions will result in an approximate 23% reduction...

  • Page 56
    ... of total revenues for 2014, 2013 and 2012, respectively. Research and development R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and...

  • Page 57
    ... for new product launches. Historically, under our ENBREL collaboration agreement, we paid Pfizer a percentage of annual gross profits on our ENBREL sales in the United States and Canada on a scale that increased with gross profits. The ENBREL co-promotion term expired on October 31, 2013, and...

  • Page 58
    ... debt and financing fees paid in association with the acquisition of Onyx. Interest and other income, net The increase in interest and other income, net for 2014 compared with 2013 was due primarily to interest earned as a result of a higher average balance of cash and investments offset partially...

  • Page 59
    ... 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 places restrictions on maturities and concentration by asset class and issuer. Financing...

  • Page 60
    ... 31, 2014 and 2013, no securities were outstanding under this medium-term note program. Certain of our financing arrangements contain non-financial covenants. In addition, our revolving credit agreement and Term Loan Credit Facility each includes a financial covenant with respect to the level of our...

  • Page 61
    ...rate swap agreements and $197 million received under a government-funded program in Spain with regard to trade receivables. Investing Capital expenditures, which were associated primarily with manufacturing capacity expansions in Singapore, Puerto Rico and Ireland, as well as other site developments...

  • Page 62
    ...2014. See Part IV-Note 14, Financing arrangements, to the Consolidated Financial Statements for further discussion of our long-term debt obligations. Purchase obligations relate primarily to: (i) R&D commitments (including those related to clinical trials) for new and existing products; (ii) capital...

  • Page 63
    ... earned or to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product...

  • Page 64
    ... outside the United States in Puerto Rico pertaining to manufacturing, distribution and other related functions to meet its worldwide product demand. Income from the Company's operations in Puerto Rico is subject to a tax incentive grant that expires in 2020. Our effective tax rate reflects the...

  • Page 65
    ... acquisition date; projecting the probability and timing of obtaining marketing approval from the FDA and other regulatory agencies for product candidates; estimating the timing of and future net cash flows from product sales resulting from completed products and in-process projects; and developing...

  • Page 66
    ... 31, 2014 and 2013. Interest rate sensitive financial instruments Our portfolio of available-for-sale interest-bearing securities at December 31, 2014 and 2013, was comprised of: U.S. Treasury securities and other government-related debt securities; corporate debt securities; residential mortgage...

  • Page 67
    ... as cash flow hedges. A hypothetical 100 basis point adverse movement in interest rates relative to interest rates at December 31, 2014 and 2013, would have resulted in reductions in the fair values of our cross-currency swap contracts of approximately $260 million and $320 million, respectively...

  • Page 68
    ... the promotion of business and strategic objectives. These investments are generally in small capitalization stocks in the biotechnology industry sector. Price risk relative to our equity investment portfolio as of December 31, 2014 and 2013, was not material. Counterparty credit risks Our financial...

  • Page 69
    ... of the Company's internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based...

  • Page 70
    ... internal control over financial reporting as of December 31, 2014, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheets as of December 31, 2014 and 2013, and the related...

  • Page 71
    ... EXECUTIVE COMPENSATION in our Proxy Statement. Information about compensation committee matters is incorporated by reference from the sections entitled CORPORATE GOVERNANCE - Board Committees and Charters - Compensation and Management Development Committee and CORPORATE GOVERNANCE - Compensation...

  • Page 72
    ... earned, and related dividend equivalents have been granted). (a) (b) Plan Category Equity compensation plans approved by Amgen security holders: Amended and Restated 2009 Equity Incentive Plan(1) Amended and Restated 1991 Equity Incentive Plan(2) Amended and Restated Employee Stock Purchase Plan...

  • Page 73
    ... salary to the purchase the Company's Common Stock on the open market at the market price by a third-party trustee as described in the Profit Sharing Plan. (3) (4) (5) (6) Security Ownership of Directors and Executive Officers and Certain Beneficial Owners Information about security ownership...

  • Page 74
    ... years in the period ended December 31, 2014 Notes to Consolidated Financial Statements (a)2. Index to Financial Statement Schedules F-1 F-2 F-3 F-4 F-5 F-6 F-7 The following Schedule is filed as part of this Annual Report on Form 10-K: Page number II. Valuation and Qualifying Accounts F-52 All...

  • Page 75
    ... Statement on Schedule 14A on April 8, 2013 and incorporated herein by reference.) Form of Stock Option Agreement for the Amgen Inc. Amended and Restated 2009 Equity Incentive Plan. (As Amended on March 6, 2013.) (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2013 on May 3, 2013...

  • Page 76
    ....) Agreement between Amgen Inc. and David W. Meline, effective July 21, 2014. (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2014 on October 29, 2014 and incorporated herein by reference.) Shareholders' Agreement, dated May 11, 1984, among Amgen, Kirin Brewery Company, Limited...

  • Page 77
    ... Kirin-Amgen, Inc. and Amgen Inc. (Filed as exhibits to Form 10-K for the year ended December 31, 2000 on March 7, 2001 and incorporated herein by reference.) Amended and Restated Promotion Agreement, dated December 16, 2001, by and among Immunex Corporation, American Home Products Corporation...

  • Page 78
    ... to Form 10-Q for the quarter ended March 31, 2012 on May 8, 2012 and incorporated herein by reference.) Amendment No. 1 to Collaboration Agreement, dated October 1, 2014, by and among Amgen Inc., AstraZeneca Collaboration Ventures, LLC and AstraZeneca Pharmaceuticals LP (portions of the exhibit...

  • Page 79
    ... Taxonomy Extension Label Linkbase Document. XBRL Taxonomy Extension Presentation Linkbase Document. _____ (* = 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...

  • Page 80
    ... Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. AMGEN INC. (Registrant) Date: February 19, 2015 By: /S / DAVID W. MELINE David W. Meline Executive Vice President and Chief Financial Officer...

  • Page 81
    ...securities purchase contracts, securities purchase units and depositary shares of Amgen Inc. and in the related Prospectus; and Registration Statement (Form S-8 No. 333-176240) pertaining to the Amgen Profit Sharing Plan for Employees in Ireland; • • • of our reports dated February 19, 2015...

  • Page 82
    ... Director (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Director Director Director Director Director Director Director Director Director Director Director Director 2/19/2015 /S/ DAVID W. MELINE David W. Meline 2/19...

  • Page 83
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Amgen Inc. We have audited the accompanying Consolidated Balance Sheets of Amgen Inc. (the "Company") as of December 31, 2014 and 2013, and the related Consolidated Statements of Income, Comprehensive ...

  • Page 84
    AMGEN INC. CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 2014, 2013 and 2012 (In millions, except per share data) 2014 2013 2012 Revenues: Product sales Other revenues Total revenues Operating expenses: Cost of sales Research and development Selling, general and administrative Other ...

  • Page 85
    ... 31, 2014, 2013 and 2012 (In millions) 2014 2013 2012 Net income Other comprehensive income (loss), net of reclassification adjustments and taxes: Foreign currency translation losses Effective portion of cash flow hedges Net unrealized gains (losses) on available-for-sale securities Other Other...

  • Page 86
    AMGEN INC. CONSOLIDATED BALANCE SHEETS December 31, 2014 and 2013 (In millions, except per share data) 2014 2013 ASSETS Current assets: Cash and cash equivalents Marketable securities Trade receivables, net Inventories Other current assets Total current assets Property, plant and equipment, net ...

  • Page 87
    AMGEN INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 31, 2014, 2013 and 2012 (In millions) Number of shares of common stock Common stock and additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total Balance at December 31, 2011 ...

  • Page 88
    ... taxes Legal reserve Other liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Cash paid for acquisitions, net of cash acquired Purchases of intangible assets Purchases of marketable securities Proceeds from sales of...

  • Page 89
    ... FINANCIAL STATEMENTS December 31, 2014 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...

  • Page 90
    ... other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses; the U.S. healthcare reform federal excise fee on Branded Prescription Pharmaceutical Manufacturers and...

  • Page 91
    ..., may be classified as short-term marketable securities in the Consolidated Balance Sheets due to their highly liquid nature and because they represent the Company's investments that are available for current operations. See Note 9, Available-for-sale investments, and Note 16, Fair value measurement...

  • Page 92
    ... of interest-bearing securities, cash and related interest receivable as of December 31, 2013. On May 22, 2014, the Company repurchased all of the outstanding Class A preferred shares, and therefore, there were no remaining restricted investments on our Consolidated Balance Sheet as of December...

  • Page 93
    ... severance-related. The 2012 charges also included expenses associated with abandoning leased facilities. • 3. Business combinations Onyx Pharmaceuticals On October 1, 2013, we acquired all of the outstanding stock of Onyx Pharmaceuticals, Inc. (Onyx), a global biopharmaceutical company engaged...

  • Page 94
    ... to acquire Onyx was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions): Cash and cash equivalents Marketable securities Inventories Indefinite-lived intangible assets - IPR&D Finite-lived intangible assets - Developed product technology...

  • Page 95
    ...entered into an agreement to acquire the licenses to filgrastim and pegfilgrastim effective January 1, 2014 (acquisition date), that were held by F. Hoffmann-La Roche Ltd. (Roche) in approximately 100 markets in Eastern Europe, Latin America, Asia, the Middle East and Africa (Product Rights), and to...

  • Page 96
    ... us with the opportunity to expand our presence in Turkey and the surrounding region. The finite-lived intangible assets acquired are related primarily to the fair values of MN's regulatory approvals and customer relationships with regard to the marketing of pharmaceutical products and are being...

  • Page 97
    ... deCODE, KAI, MN, and Micromet was allocated to the acquisition date fair values of the assets acquired and liabilities assumed as follows (in millions): deCODE KAI MN Micromet IPR&D Developed product technology rights R&D technology rights Marketing-related rights Deferred income taxes, net Other...

  • Page 98
    ... of award generally determined by the employee's salary grade and performance level. In addition, certain management and professional level employees typically receive RSU grants upon commencement of employment. Prior to 2012, eligible employees also received a grant of stock options annually. Prior...

  • Page 99
    ... three years ended December 31, 2014, 2013 and 2012, were $83 million, $77 million and $117 million, respectively. Performance units Certain management-level employees also receive annual grants of performance units, which give the recipient the right to receive common stock that is contingent upon...

  • Page 100
    ... upon the number of performance units earned multiplied by the closing stock price of our common stock on the last day of the performance period. As of December 31, 2014, there was approximately $133 million of unrecognized compensation cost related to the 2014 and 2013 performance unit grants that...

  • Page 101
    ... 31, 2014 2013 Deferred income tax assets: NOL and credit carryforwards Expense accruals Expenses capitalized for tax Stock-based compensation Other Total deferred income tax assets Valuation allowance Net deferred income tax assets Deferred income tax liabilities: Acquired intangibles Other...

  • Page 102
    ... to be invested indefinitely outside the United States. Substantially all of the benefit from foreign earnings on our effective tax rate results from foreign income associated with the Company's operation conducted in Puerto Rico that is subject to a tax incentive grant that expires in 2020. At...

  • Page 103
    ... manufacturer in Puerto Rico. The rate was 3.75% in 2012, 2.75% in the first half of 2013 and 4.0% effective July 1, 2013 through December 31, 2017. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold...

  • Page 104
    ... brodalumab and Japan for AMG 557 and AMG 570, which are licensed to other third parties. Under the terms of the agreement, approximately 65% of related development costs for the 2012-2014 periods were funded by AstraZeneca; now, the companies share costs equally. If approved for sale, Amgen would...

  • Page 105
    ... the related agreements, we are currently funding 50% of mutually agreed R&D costs worldwide, excluding Japan. In the United States, we co-promote Nexavar® with Bayer and share equally in the profits or losses. We contribute half of the overall number of sales force personnel required to market and...

  • Page 106
    ... sales in the Consolidated Statements of Income. K-A's expenses consist primarily of costs related to R&D activities conducted on its behalf by Amgen and Kirin. K-A pays Amgen and Kirin for such services at negotiated rates. During the years ended December 31, 2014, 2013 and 2012, we earned revenues...

  • Page 107
    ... 31, 2014 Amortized cost Estimated fair value U.S. Treasury securities Other government-related debt securities: U.S. Foreign and other Corporate debt securities: Financial Industrial Other Residential mortgage-backed securities Other mortgage- and asset-backed securities Money market mutual...

  • Page 108
    ...were as follows (in millions): December 31, Classification in the Consolidated Balance Sheets 2014 2013 Cash and cash equivalents Marketable securities Other assets - noncurrent Restricted investments Total available-for-sale investments $ $ 3,293 23,295 144 - 26,732 $ $ 3,266 15,596 95 3,406...

  • Page 109
    ... could change in the future due to new developments or changes in assumptions related to any particular security. As of December 31, 2014 and 2013, we believe the costs basis for our availablefor-sale investments were recoverable in all material aspects. 10. Inventories Inventories consisted of the...

  • Page 110
    ... of rights related to the sale and distribution of marketed products, including licenses to filgrastim and pegfilgrastim acquired from Roche (see Note 3, Business combinations). Marketing-related intangible assets also includes $275 million paid to Glaxo during the year ended December 31, 2014, for...

  • Page 111
    ... million in 2015, 2016, 2017, 2018 and 2019, respectively. 13. Accrued liabilities Accrued liabilities consisted of the following (in millions): December 31, 2014 2013 Sales deductions Employee compensation and benefits Clinical development costs Dividends payable Sales returns reserve Other Total...

  • Page 112
    14. Financing arrangements The carrying values and the fixed contractual coupon rates of our long-term borrowings were as follows (in millions): December 31, 2014 2013 1.875% notes due 2014 (1.875% 2014 Notes) 4.85% notes due 2014 (4.85% 2014 Notes) 2.30% notes due 2016 (2.30% 2016 Notes) 2.50% ...

  • Page 113
    ... these debt issuances in 2014, 2013 and 2012 totaled $18 million, $46 million and $25 million, respectively. These debt issuance costs are being amortized over the respective lives of the debt, and the related charge is included in Interest expense, net, in the Consolidated Statements of Income. All...

  • Page 114
    ... proceeds from the sale of the warrants and the settlement of these contracts were classified in Stockholders' equity in the Consolidated Balance Sheets. In addition, because both of these contracts are classified in Stockholders' equity and were indexed to our common stock, they were not accounted...

  • Page 115
    ... 31, 2014 and 2013, no securities were outstanding under this medium-term note program. Certain of our financing arrangements contain non-financial covenants. In addition, our revolving credit agreement and Term Loan Credit Facility each include a financial covenant with respect to the level of our...

  • Page 116
    ... 5, and December 5, 2014, respectively. Additionally, on December 17, 2014, the Board of Directors declared a quarterly cash dividend of $0.79 per share of common stock, which will be paid on March 6, 2015, to all stockholders of record as of the close of business on February 12, 2015. F-34

  • Page 117
    ... million benefit in 2012, respectively. Income tax expenses/benefits for unrealized gains and losses and the related reclassification adjustments to income for available-for-sale securities were a $14 million expense and $0 million for 2014, a $105 million benefit and $28 million benefit in 2013 and...

  • Page 118
    ... 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...

  • Page 119
    ...inputs (Level 2) Significant unobservable inputs (Level 3) Fair value measurement as of December 31, 2014, using: Total Assets: Available-for-sale investments: U.S. Treasury securities Other government-related debt securities: U.S. Foreign and other Corporate debt securities: Financial Industrial...

  • Page 120
    .... Most of our other government-related and corporate debt securities are investment grade with maturity dates of five years or less from the balance sheet date. Our other government-related debt securities portfolio is composed of securities with weightedaverage credit ratings of A or equivalent by...

  • Page 121
    ... on significant unobservable inputs related to product candidates acquired in the business combinations and are reviewed quarterly by management in our R&D and commercial sales organizations. These inputs include, as applicable, estimated probabilities and timing of achieving specified regulatory...

  • Page 122
    ... to the former shareholders of BioVex by using a combination of probabilityadjusted discounted cash flows, option pricing techniques and a simulation model of expected annual sales. As a result of our quarterly review of the key assumptions during the years ended December 31, 2014 and 2013, the...

  • Page 123
    ... Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on such contracts, which are designated as cash flow hedges, are reported in AOCI in the Consolidated Balance Sheets and amortized into earnings over the lives of the associated...

  • Page 124
    ... on a month-to-month basis. As of December 31, 2014, 2013 and 2012, the total notional amounts of these foreign currency forward contracts were $875 million, $999 million and $629 million, respectively. The location in the Consolidated Statements of Income and the amount of gain/(loss) recognized in...

  • Page 125
    ..., 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...

  • Page 126
    ... sale of Sanofi and Regeneron's alirocumab, a monoclonal antibody targeting PCSK9. On December 15, 2014, Sanofi and Regeneron filed their answer and, on that same day, the Delaware District Court consolidated these lawsuits into a single case. Sandoz Filgrastim Litigation On October 24, 2014, Amgen...

  • Page 127
    ...on these three motions has been set for March 13, 2015. Onyx Litigation Between August 28, 2013 and September 16, 2013, nine plaintiffs filed purported class action lawsuits against Onyx, its directors, Amgen and Arena Acquisition Company (Arena), and unnamed "John Doe" defendants in connection with...

  • Page 128
    ... securities class action lawsuit. While the new complaint was filed under seal, like the first consolidated class action complaint the new complaint alleges that the Federal Defendants made false statements that resulted in: (i) deceiving the investing public regarding Amgen's prospects and business...

  • Page 129
    ... Court granted Amgen and the defendants' motion to dismiss without prejudice and also granted a stay of the case pending resolution of the In re Amgen Inc. Securities Litigation action. ERISA Litigation On August 20, 2007, the Employee Retirement Income Security Act (ERISA) class action lawsuit...

  • Page 130
    ... 2014. In Fifth Third, the U.S. Supreme Court held that no presumption of prudence exists for employee stock ownership plan fiduciaries regardless of plan language and the court provided general guidance as to what factors courts should consider when assessing whether plan fiduciaries breached their...

  • Page 131
    ... reporting. Enterprise-wide disclosures about product sales; revenues and long-lived assets by geographic area; and revenues from major customers are presented below. Revenues Revenues were as follows (in millions): Years ended December 31, 2014 2013 2012 Product sales: Neulasta® NEUPOGEN® ENBREL...

  • Page 132
    ... letters of credit. We had product sales to three customers each accounting for more than 10% of total revenues for each of the years ended December 31, 2014, 2013 and 2012. For 2014, on a combined basis, these customers accounted for 77% and 94% of worldwide gross revenues and U.S. gross product...

  • Page 133
    ...Quarterly financial data (unaudited) 2014 Quarters ended (In millions, except per share data) December 31 September 30 June 30 March 31 Product sales Gross profit from product sales Net income Earnings... $ 2013 Quarters ended Product sales Gross profit from product sales Net income Earnings per ...

  • Page 134
    SCHEDULE II AMGEN INC. VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2014, 2013 and 2012 (In millions) Additions charged to costs and expenses Balance at end of period Allowance for doubtful accounts Balance at beginning of period Other additions Deductions Year ended December 31, ...