AMGN-12.31.2012-10K


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-12477
Amgen Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
95-3540776
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
One Amgen Center Drive,
 
91320-1799
Thousand Oaks, California
 
(Zip Code)
(Address of principal executive offices)
 
 
(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 of Each Exchange on Which Registered
Common stock, $0.0001 par value
 
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ý    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    Yes  ¨    No  ý
The approximate aggregate market value of voting and non-voting stock held by non-affiliates of the registrant was $56,028,159,915 as of June 30, 2012(A) 
 
(A)
Excludes 771,532 shares of common stock held by directors and executive officers at June 30, 2012. 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, or that such person is controlled by or under common control with the registrant.
748,430,018
(Number of shares of common stock outstanding as of February 19, 2013)
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s Proxy Statement with respect to the 2013 Annual Meeting of stockholders to be held May 22, 2013, are incorporated by reference into Part III of this annual report.



INDEX
 
 
 
Page No.
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
Item 15.
 
 

i


PART I

Item 1.
BUSINESS
Overview
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.  Our medicines help millions of patients in the fight against cancer, kidney disease, rheumatoid arthritis (RA), bone disease, and other serious illnesses.  We operate in one business segment: human therapeutics.
We were incorporated in 1980 and organized as a Delaware corporation in 1987. Our public website is www.amgen.com. On our website, investors can find press releases, financial filings and other information about the Company. The U.S. Securities and Exchange Commission (SEC) website, www.sec.gov, also offers access to reports and documents we have electronically filed with or furnished to the SEC. These website addresses are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing.
Our principal products are Neulasta® (pegfilgrastim), a pegylated protein, based on the Filgrastim molecule, and NEUPOGEN® (Filgrastim), a recombinant-methionyl human granulocyte colony-stimulating factor (G-CSF), both of which stimulate the production of neutrophils (a type of white blood cell that helps the body fight infection); Enbrel® (etanercept), an inhibitor of tumor necrosis factor (TNF), a substance that plays a role in inflammatory diseases; Aranesp® (darbepoetin alfa) and EPOGEN® (epoetin alfa), erythropoiesis-stimulating agents (ESAs) that stimulate the production of red blood cells; and XGEVA®/Prolia® (denosumab), two products that contain the same active ingredient but which are approved for different indications, patient populations, doses and frequencies of administration. Denosumab is a human monoclonal antibody that specifically targets RANKL, an essential regulator of osteoclasts (the cells that break down bone). Our principal products represented 89%, 90% and 92% of our sales in 2012, 2011 and 2010, respectively. Our other marketed products include primarily Sensipar®/Mimpara® (cinacalcet), a small molecule calcimimetic that lowers serum calcium levels; Vectibix® (panitumumab), a monoclonal antibody that binds specifically to the epidermal growth factor receptor (EGFr); and Nplate® (romiplostim), a thrombopoietin (TPO) receptor agonist that mimics endogenous TPO, the primary driver of platelet production.
We maintain sales and marketing forces primarily in the United States, Europe and Canada. We have also entered into agreements with third parties to assist in the commercialization and marketing of certain of our products in specified geographic areas. (See Business Relationships.) Together with our partners, we market our products to healthcare providers, including physicians or their clinics, dialysis centers, hospitals and pharmacies.
In addition to our marketed products, we have various product candidates in mid- to late-stage development in a variety of therapeutic areas, including oncology, hematology, inflammation, bone health, nephrology, cardiovascular and general medicine, which includes neuroscience. Our research and development (R&D) organization has expertise in multiple treatment modalities, including large molecules (such as proteins, antibodies and peptibodies) and small molecules.
Our manufacturing operations consist of bulk manufacturing, formulation, fill and finish and distribution activities for all of our principal products as well as most of our product candidates. We operate a number of commercial and/or clinical manufacturing facilities, and our primary manufacturing facilities are located in the United States, Puerto Rico and the Netherlands. See Item 2. Properties.
Drug development in our industry is complex, challenging and risky; and failure rates are high. Product development cycles are very long — approximately 10 to 15 years from discovery to market. A potential new medicine must undergo many years of preclinical and clinical testing to establish its safety and efficacy for use in humans at appropriate dosing levels and with an acceptable benefit-risk profile. Biological products, which are produced in living systems, are inherently complex due to naturally occurring molecular variations. Highly specialized knowledge and extensive process and product characterization are required to transform laboratory-scale processes into reproducible commercial manufacturing processes. Upon approval, marketed products in our industry generally face substantial competition.
Our industry is highly regulated, and various U.S. and foreign regulatory bodies have substantial authority over how we conduct our business. Government authorities in the United States and other countries regulate the manufacturing and marketing of our products as well as our ongoing R&D activities. In recent years, regulators have placed a greater scrutiny on drug safety. This has led to, and may in the future lead to: fewer products being approved by the U.S. Food and Drug Administration (FDA) or other regulatory bodies; delays in receiving approvals; additional safety-related requirements; restrictions on the use of products, including expanded safety labeling, or required risk management activities.

1


Significant Developments
Following is a summary of significant developments that occurred in 2012 affecting our business.
Products/Pipeline
AMG 145
•
In November 2012, we presented data from four phase 2 studies evaluating AMG 145 as monotherapy, in combination with statin therapy, in heterozygous familial hypercholesterolemia, and in statin-intolerant subjects. In each of these studies, treatment with AMG 145 resulted in statistically significant reductions in low-density lipoprotein cholesterol compared to the control arms at 12 weeks. Based on the study results, phase 3 enrollment is underway in these populations.
Sensipar®/Mimpara®
•
In November 2012, we presented at American Society of Nephrology's (ASN) Kidney Week the results of the phase 3 E.V.O.L.V.E™ (EValuation Of Cinacalcet HCl Therapy to Lower CardioVascular Events) trial. As previously reported, the primary analysis showed that the trial did not reach its primary endpoint (time to composite event comprising all-cause mortality or first non-fatal cardiovascular event, including myocardial infarction, hospitalization for unstable angina, heart failure or peripheral vascular event) in the intent-to-treat analysis. See Significant Developments in our Quarterly Report on Form 10-Q for the period ended June 30, 2012.
Rilotumumab
•
In November 2012, we initiated a phase 3 study for the treatment of gastric cancer.
Brodalumab (AMG 827)
•
In October 2012, we announced the start of a phase 3 program in moderate-to-severe psoriasis. The program consists of three phase 3 studies, with ustekinumab and/or placebo controls. Brodalumab is one of five inflammation monoclonal antibodies being jointly developed in the collaboration with AstraZeneca Plc. (AstraZeneca).
XGEVA® 
•
In April 2012, we announced that the FDA issued a Complete Response Letter for the supplemental Biologics License Application (sBLA) for XGEVA® to treat men with castration-resistant prostate cancer at high risk of developing bone metastases. The Complete Response Letter states that the FDA cannot approve the application in its present form. The FDA determined that the effect on bone metastases-free survival was of insufficient magnitude to outweigh the risks (including osteonecrosis of the jaw) of XGEVA® in the intended population.
Romosozumab (AMG 785)
•
In April 2012, we along with our partner UCB announced the start of two phase 3 clinical studies in postmenopausal osteoporosis (PMO). The registrational study is a placebo-controlled trial that will evaluate incidence of new vertebral fractures at 12 and 24 months in 6,000 patients. We are also conducting an active-controlled trial versus alendronate that will evaluate the incidence of clinical fracture and new vertebral fracture at 12 and 24 months in 4,000 patients.
Acquisitions/Collaborations
•
In June 2012, we acquired substantially all of the outstanding stock of Mustafa Nevzat Pharmaceuticals (MN), a privately held company that is a leading supplier of pharmaceuticals to the hospital sector and a major supplier of injectable medicines in Turkey. The acquisition provides us with the opportunity to expand our presence in Turkey and the surrounding region.
•
In March 2012, we entered into a collaboration agreement with AstraZeneca to jointly develop and commercialize certain monoclonal antibodies from Amgen's clinical inflammation portfolio including brodalumab, AMG 139, AMG 157, AMG 181 and AMG 557. The agreement covers the worldwide development and commercialization except for certain Asian countries for brodalumab and Japan for AMG 557, which are licensed to other third parties.
•
In March 2012, we acquired Micromet, Inc. (Micromet), a publicly held biotechnology company focused on the discovery, development and commercialization of innovative antibody-based therapies for the treatment of cancer.
 

2


Marketed Products
We market our principal products, Neulasta®, NEUPOGEN®, ENBREL, Aranesp®, EPOGEN®, XGEVA® and Prolia®, in supportive cancer care, inflammation, nephrology and bone disease. Certain of our marketed products face — and our product candidates, if approved, are also expected to face — substantial competition. Our products’ competitive positions among other biological and pharmaceutical products may be based on, among other things, safety, efficacy, reliability, availability, patient convenience/delivery devices, price, reimbursement, timing of market entry and patent position and expirations.
Over the next several years, certain of the existing patents on our principal products will expire, and we expect to face increasing competition thereafter, including from biosimilars. A biosimilar is another version of a biological product for which marketing approval is sought or has been obtained based on a demonstration that it is “biosimilar” to the original reference product. This demonstration will typically consist of comparative analytical, preclinical and clinical data from the biosimilar to show that it has similar safety and efficacy as the reference product. The 2010 U.S. healthcare reform legislation authorized the FDA to approve biosimilars under a new, abbreviated pathway. In February 2012, the FDA released three draft guidance documents that provide insight into the FDA’s current thinking on the development of biosimilars and broad parameters for the scientific assessment of biosimilar applications. The FDA guidance documents leave room for the FDA to consider, on a case-by-case basis, the specifics of what evidence would be required for a biosimilar to gain approval. (See Government Regulation.) In the European Union (EU), there is already an established regulatory pathway for biosimilars and we are facing increasing competition from biosimilars. In the United States after patent expiration, we expect to face greater competition than today, including from manufacturers with biosimilars approved in Europe, that may seek to obtain U.S. approval. In some cases we may experience additional competition prior to the expiration of our patents as a result of agreements we have made in connection with the settlement of patent litigation with companies developing potentially competing products. See the discussions of Neulasta®/NEUPOGEN® and Aranesp® later in this section.
Further, the introduction of new products or the development of new processes or technologies by competitors or new information about existing products may result in increased competition for our marketed products, even for those protected by patents, or in a reduction of price that we receive from selling our products. In addition, the development of new treatment options or standards of care may reduce the use of our products or may limit the utility and application of ongoing clinical trials for our product candidates.
In addition to the challenges presented by competition, our existing products and product candidates are also subject to increasing regulatory compliance requirements that could be imposed as conditions of approval or after a product has been approved. This is increasingly true of new therapies with novel mechanisms of action. While such therapies may offer important benefits and/or better treatment alternatives, they may also involve relatively new or higher levels of scientific complexity and may therefore generate increased safety concerns. We design and implement comprehensive proactive pharmacovigilance programs for all of our products to help ensure the detection, assessment and communication of adverse effects. When deemed necessary and appropriate, additional measures for risk communication and mitigation are designed and implemented in consultation with regulatory agencies. As a condition of approval or due to safety concerns after a product has been approved, we may be required to perform additional clinical trials or studies, including postmarketing requirements (PMRs) and postmarketing commitments (PMCs). A PMR is a trial or study that a sponsor company is required by statute or regulation to conduct. A PMC is a trial or study that a sponsor company agrees to in writing, but is not required by law, to conduct. In addition, we may be required to implement risk management plans for our products in the various regions in which they are approved. The FDA requires risk evaluation and mitigation strategies (REMS) for various approved products to ensure that the benefits of the drugs outweigh the risks. A REMS may also be imposed as a condition of approval or after a product has been on the market. A REMS may include a medication guide or a patient package insert, a healthcare provider communication plan or elements to assure safe use that the FDA deems necessary. While the elements of REMS may vary, all REMS require the sponsor company to submit periodic assessment reports to the FDA to demonstrate that the goals of the REMS are being met. The FDA evaluates such assessments and may require additional modifications to the REMS elements. REMS may also be modified as the FDA and companies gain more experience with REMS and how they are implemented, operated and monitored. We currently have REMS for a number of our marketed products. See discussion on PMRs, PMCs and REMS in Government Regulation.
Most patients receiving our principal products for approved indications are covered by either government or private payer healthcare programs, which influence demand. The reimbursement environment continues to evolve with greater emphasis on both cost containment and demonstration of the economic value of products. In addition, the current worldwide economic conditions have also contributed to increasing pressures on cost containment.
Neulasta® (pegfilgrastim)/NEUPOGEN® (Filgrastim)
We were granted an exclusive license to manufacture and market Neulasta® and NEUPOGEN® in the United States, Europe, Canada and Australia under a licensing agreement with Kirin-Amgen, Inc. (K-A), a joint venture between Kirin Holdings Company, Limited (Kirin), and Amgen. See Business Relationships — Kirin-Amgen, Inc.

3


Neulasta® and NEUPOGEN® stimulate production of neutrophils, a type of white blood cell important in the body’s fight against infection. Both the treatments for various diseases and the diseases themselves can result in extremely low numbers of neutrophils, a condition called neutropenia. Myelosuppressive chemotherapy, one treatment option for individuals with certain types of cancers, targets cell types that grow rapidly, such as tumor cells. Normal cells that divide rapidly, such as those in the bone marrow that become neutrophils, are also vulnerable to the cytotoxic effects of myelosuppressive chemotherapy, resulting in neutropenia with an increased risk of severe infection. NEUPOGEN® is our registered trademark for Filgrastim, our recombinant-methionyl human G-CSF. Neulasta® is our registered trademark for pegfilgrastim, a pegylated protein based on the Filgrastim molecule. A polyethylene glycol molecule is added to the Filgrastim molecule to make pegfilgrastim. Because pegfilgrastim is eliminated from the body through binding to its receptor on neutrophils and neutrophil precursor cells, pegfilgrastim remains in circulation in the body until neutrophil recovery has occurred. This neutrophil-mediated clearance allows for administration as a single dose per chemotherapy cycle, compared with NEUPOGEN®, which requires more frequent dosing.
We market Neulasta® and NEUPOGEN® primarily in the United States and Europe. Neulasta® was launched in the United States and Europe in 2002 and is indicated to decrease the incidence of infection associated with chemotherapy-induced febrile neutropenia in cancer patients with non-myeloid malignancies. Administration of Neulasta® in all cycles of chemotherapy is approved for patients receiving myelosuppressive chemotherapy associated with a clinically significant risk of febrile neutropenia. NEUPOGEN® was launched in the United States and Europe in 1991. NEUPOGEN® is indicated for reducing the incidence of infection as manifested by febrile neutropenia for patients with non-myeloid malignancies undergoing myelosuppressive chemotherapy associated with a significant incidence of severe neutropenia with fever; reducing the duration of neutropenia and neutropenia-related consequences for patients with non-myeloid malignancies undergoing myeloablative chemotherapy followed by bone marrow transplantation; reducing the incidence and duration of neutropenia-related consequences in symptomatic patients with congenital neutropenia, cyclic neutropenia or idiopathic neutropenia (collectively, severe chronic neutropenia); mobilizing peripheral blood progenitor cells (PBPC) in cancer patients who have undergone myeloablative chemotherapy for stem cell transplantation; and reducing the recovery time of neutrophils and the duration of fever following induction or consolidation chemotherapy treatment in adult patients with acute myeloid leukemia (AML).
Total Neulasta®/NEUPOGEN® sales were as follows (in millions):
 
2012
 
2011
 
2010
Neulasta®  —  U.S.
$
3,207

 
$
3,006

 
$
2,654

Neulasta®  —  rest-of-the-world (ROW)
885

 
946

 
904

Total Neulasta®
4,092

 
3,952

 
3,558

NEUPOGEN® — U.S.
1,007

 
959

 
932

NEUPOGEN® — ROW
253

 
301

 
354

Total NEUPOGEN®
1,260

 
1,260

 
1,286

Total Neulasta®/NEUPOGEN®
$
5,352

 
$
5,212

 
$
4,844

Our outstanding material patents for pegfilgrastim are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Pegylated G-CSF
 
10/20/2015
Europe(1) 
 
Pegylated G-CSF
 
2/8/2015
(1) 
This European patent is also entitled to supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering pegfilgrastim have issued in France, Germany, Italy, Spain, and the United Kingdom, and will expire in 2017.
Our outstanding material patents for Filgrastim are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
G-CSF polypeptides
 
12/3/2013
U.S.
 
Methods of treatment using G-CSF polypeptides
 
12/10/2013
Our principal European patent related to G-CSF expired in August 2006. Upon expiration of that patent, some companies received approval to market products, including biosimilars, that compete with NEUPOGEN® and Neulasta® in Europe, as further discussed below.

4


Our outstanding material U.S. patents for Filgrastim (NEUPOGEN®) expire in December 2013. We expect to face competition in the United States beginning in the fourth quarter of 2013, which may have a material adverse impact over time on future sales of NEUPOGEN® and, in turn, Neulasta®. See discussion of Teva below.
Any products or technologies that are directly or indirectly successful in treating neutropenia associated with chemotherapy, for bone marrow and PBPC transplant patients, severe chronic neutropenia and AML could negatively impact Neulasta® and/or NEUPOGEN® sales. Neulasta® and/or NEUPOGEN® sales may also be impacted by increases or decreases in the use of myelosuppressive chemotherapy, which may result from changes in the number of patients being treated, changes to treatment protocols or the introduction of new cancer treatments that may not be myelosuppressive. Further, NEUPOGEN® competes with Neulasta® in the United States and Europe, and NEUPOGEN® sales have been adversely impacted by conversion to Neulasta®, which we believe is substantially complete.
The following table reflects companies and their currently marketed products that compete with Neulasta® and/or NEUPOGEN® in the United States and Europe in the supportive cancer care setting. The table below and the following discussion of competitor marketed products and products in development may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S.
 
Leukine®
 
Bayer HealthCare Pharmaceuticals (Bayer)
Europe
 
Granocyte®
 
Chugai Pharmaceuticals Co., Ltd./Sanofi-Aventis (Sanofi)
Europe
 
Ratiograstim®(1)/Biograstim®(1)
 
ratiopharm GmbH (ratiopharm)(2)/CT Arzneimittel GmbH (CT Arzneimittel)
Europe
 
Tevagrastim®(1)
 
Teva Pharmaceutical Industries Ltd. (Teva Pharmaceutical)
Europe
 
Zarzio®(1)/Filgrastim Hexal®(1)
 
Sandoz GmbH (Sandoz)/Hexal Biotech Forschungs GmbH (Hexal)
Europe
 
Nivestim®(1)
 
Hospira Inc. (Hospira)
(1) 
Approved via the EU biosimilar regulatory pathway.
(2) 
A subsidiary of Teva Pharmaceutical.
In August 2012, the FDA approved Sicor Biotech's (Teva Corporation) tbo-filgrastim product to reduce the time that certain patients receiving cancer chemotherapy experience severe neutropenia. The approval was on the basis of a full BLA rather than under the FDA's new biosimilar approval pathway. This drug may compete with NEUPOGEN® subject to the terms of the injunction and settlement agreement discussed below.
In November 2009, Teva Pharmaceutical filed a declaratory judgment action against us alleging that certain of our NEUPOGEN® patents are invalid and not infringed by its tbo-filgrastim product, and in January 2010, we filed an answer and counterclaims seeking a declaratory judgment that our patents are valid and infringed. In July 2011, we announced that the U.S. District Court in Pennsylvania entered final judgment and a permanent injunction against Teva Pharmaceutical and Teva Pharmaceuticals USA, Inc. (together defined as Teva) prohibiting them from infringing our patents relating to human G-CSF polypeptides and methods of treatment. The court’s injunction extends until November 10, 2013, after which date Teva will no longer be prohibited by the injunction from selling its tbo-filgrastim product in the United States. Teva also agreed not to sell balugrastim, a long-acting product candidate, in the United States before November 10, 2013, unless it first obtains a final court decision that our patents are not infringed by balugrastim. Pursuant to the parties’ settlement, the launch date for either product could be sooner if certain unexpected events occur: a third party launches a similar G-CSF polypeptide product and we fail to sue that third party, or the patents are held invalid or unenforceable in a final court decision in an action brought by a third party.
Several companies have short-acting filgrastim product candidates in phase 3 clinical development, including:
•
Merck & Company, Inc. (Merck) (MK-4214)
•
Intas/Apotex Inc. (Neukine)
•
Reliance Life Sciences Pvt. Ltd. (ReliGrast)
•
Biocon Ltd./Celgene Corporation (Celgene) (Nufil)
In addition, several companies have long-acting filgrastim product candidates in phase 3 clinical development, including:
•
Teva Pharmaceutical (balugrastim and Lonquex)
•
Sandoz (LA-EP2006)
•
Intas/Apotex Inc. (Neupeg)

5


Enbrel® (etanercept)
ENBREL is our registered trademark for etanercept, our TNF receptor fusion protein that inhibits the binding of TNF to its receptors, which can result in a significant reduction in inflammatory activity. TNF is one of the chemical messengers that help regulate the inflammatory process. When the body produces too much TNF, it overwhelms the immune system’s ability to control inflammation of the joints or of psoriasis-affected skin areas. ENBREL binds certain TNF molecules before they can trigger inflammation.
ENBREL was launched in the United States in November 1998 and in Canada in March 2001. ENBREL is indicated for the treatment of adult patients with the following conditions: moderate to severe active RA; chronic moderate to severe plaque psoriasis patients who are candidates for systemic therapy or phototherapy; active psoriatic arthritis; and active ankylosing spondylitis. It is also indicated for reducing signs and symptoms of moderately to severely active polyarticular juvenile idiopathic arthritis in patients ages two and older.
We market ENBREL under a collaboration agreement with Pfizer Inc. (Pfizer) in the United States and Canada, which expires October 31, 2013. (See Business Relationships — Pfizer Inc.) The rights to market and sell ENBREL outside the United States and Canada are reserved to Pfizer.
Total ENBREL sales were as follows (in millions):
 
 
2012
 
2011
 
2010
Total ENBREL
 
$
4,236

 
$
3,701

 
$
3,534

Our outstanding material patents for etanercept are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Methods of treating psoriasis
 
8/13/2019
U.S.
 
Aqueous formulation and methods of treatment using the formulation(1)
 
6/8/2023
U.S.
 
Fusion protein, and pharmaceutical compositions
 
11/22/2028
U.S.
 
DNA encoding fusion protein, and methods of making fusion protein
 
4/24/2029
(1) 
This formulation patent relates to the currently approved liquid formulation of ENBREL, which formulation accounts for the majority of ENBREL sales in the United States. However, ENBREL is also sold as an alternative lyophilized formulation that requires reconstituting before it can be administered to the patient.
Any products or technologies that are directly or indirectly successful in treating rheumatologic conditions, which includes moderate to severe RA; moderate to severe polyarticular juvenile idiopathic arthritis; ankylosing spondylitis and psoriatic arthritis; and dermatologic conditions, which includes moderate to severe plaque psoriasis, could negatively impact ENBREL sales. Certain of the treatments for these indications include generic methotrexate and other products.
The following table reflects companies and their currently marketed products that compete with ENBREL in the United States and Canada in the inflammatory disease setting. The table below and the following discussion of competitor marketed products and products in development may not be exhaustive.
Territory
 
Therapeutic Area
 
Competitor
Marketed
Product
 
Competitor
U.S. & Canada
 
Rheumatology & Dermatology
 
REMICADE®
 
Janssen Biotech, Inc. (Janssen)(1)/Merck
U.S. & Canada
 
Rheumatology & Dermatology
 
HUMIRA®
 
Abbott Laboratories (Abbott) (2)
U.S. & Canada
 
Rheumatology & Dermatology
 
Simponi®
 
Janssen (1)
U.S. & Canada
 
Rheumatology
 
Cimzia®
 
UCB/Nektar Therapeutics (Nektar)
U.S. & Canada
 
Rheumatology
 
Orencia®
 
Bristol-Myers Squibb Company (BMS)
U.S. & Canada
 
Rheumatology
 
Rituxan®
 
F. Hoffmann-La Roche Ltd (Roche)
U.S.
 
Rheumatology
 
Actemra®
 
Roche
U.S. & Canada
 
Dermatology
 
Stelara®
 
Janssen (1)
U.S.
 
Rheumatology
 
Xeljanz®
 
Pfizer

6


(1) 
A subsidiary of Johnson & Johnson (J&J).
(2) 
In January 2013, Abbott announced that it completed the separation of its research-based pharmaceuticals business, which became AbbVie, Inc. (AbbVie), a new independent biopharmaceutical company which now owns the rights to this product.
In November 2012, the FDA approved Pfizer's Xeljanz® (tofacitinib), an oral treatment for patients with moderate to severe RA who have had an inadequate response or intolerance to methotrexate. In addition, a number of companies have product candidates in phase 3 clinical development which may compete with ENBREL in the future, including:
•
Celgene (apremilast), in both psoriasis and psoriatic arthritis
•
AstraZeneca and Rigel Pharmaceuticals Inc. (fostamatinib) in RA
•
Eli Lilly and Company (Eli Lilly) (ixekizumab) for moderate to severe plaque psoriasis
•
UCB/Nektar’s Cimzia® in psoriatic arthritis
•
Janssen’s Simponi® IV in RA and Stelara® in psoriatic arthritis
•
Roche’s Actemra® SC in RA
ESAs
Aranesp® and EPOGEN® are our registered trademarks for darbepoetin alfa and epoetin alfa, respectively, both of which are proteins that stimulate red blood cell production in a process known as erythropoiesis. Red blood cells transport oxygen to all cells of the body. Without adequate amounts of a protein called erythropoietin, the red blood cell count is reduced. A deficient red blood cell count can result in anemia, a condition in which insufficient oxygen is delivered to the body’s organs and tissues. Anemia can be associated with chronic kidney disease (CKD) in patients either on or not on dialysis. Individuals with CKD may suffer from anemia because they do not produce sufficient amounts of erythropoietin, which is normally produced in healthy kidneys and stimulates erythropoiesis. Anemia can also result from chemotherapy treatments for patients with non-myeloid malignancies.
ESAs, including ours, have faced and continue to face challenges. For example, based on adverse safety results observed beginning in late 2006 in various studies, performed by us and by others, that explored the use of ESAs in settings different from those outlined in the FDA approved label, the product labeling of our ESAs in the United States and the EU has been updated several times to reflect those safety concerns. In addition, due in part to certain of these developments, reimbursement of our ESAs in the United States was also revised. These regulatory and reimbursement changes have led to changes in the way ESAs are used in clinical practice, including by decreasing the number of patients treated with ESAs as well as the average dose and duration of ESA therapy.
In 2010 and 2011, the FDA and Centers for Medicare & Medicaid Services (CMS) took a number of actions with respect to the label for and the reimbursement of ESAs:
•
Effective January 1, 2011, CMS implemented the Final Rule on Bundling in Dialysis, providing a single payment for all dialysis services (with the exception of oral drugs without intravenous equivalents). 
•
In June 2011, the FDA approved ESA label changes impacting both patients on dialysis and those not on dialysis.  While the previous label language specified a hemoglobin (Hb) target range of 10-12 grams per deciliter (g/dL) for patients in both populations, the new label advises physicians treating patients on dialysis to initiate ESA therapy when the Hb level is less than 10 g/dL and to reduce or interrupt the dose when the Hb approaches or exceeds 11 g/dL. For CKD patients not on dialysis receiving ESA treatment, the new label advises physicians to initiate ESA therapy when the Hb level is less than 10 g/dL and to reduce or interrupt the dose when the Hb exceeds 10 g/dL.
•
In November 2011, CMS finalized a rule to update various provisions of its bundled-payment system for dialysis services and the related end stage renal disease (ESRD) Quality Incentive Program (QIP). The final rule eliminated for payment year 2013 and beyond the QIP's measure that tracks the percent of a provider's Medicare patients with a Hb level below 10 g/dL. 
•
In June 2010, CMS opened a National Coverage Analysis (NCA) to examine the use of ESAs to manage anemia in patients with CKD and dialysis-related anemia.  Following further analysis, in June 2011, CMS issued a Final Decision Memorandum (FDM) in which it determined that it would not issue a National Coverage Determination (NCD) at that time for ESAs for treatment of anemia in adults with CKD. In the absence of an NCD, Local Coverage Determinations (LCDs) may be made by regional contractors called Medicare Administrative Contractors (MACs).  Since CMS issued their FDM, three MACs have issued a revised LCD relating to anemia in patients with CKD not on dialysis. These three MACs provide ESA coverage no more restrictive than the revised label.

7


Certain of these developments have had a material adverse impact on sales of our ESAs.
In addition, in November 2011, we entered into a seven-year supply agreement with DaVita Inc. (DaVita), commencing January 1, 2012, to supply EPOGEN® in amounts necessary to meet no less than 90% of DaVita’s and its affiliates’ requirements for ESAs used in providing dialysis services in the United States and Puerto Rico.
We have an ongoing oncology pharmacovigilance program in place for Aranesp®. The five clinical trials originally included in the program explored the use of ESAs in settings different from those outlined in the FDA approved label and were designated by the FDA as PMCs. Of the five studies, one was sponsored by Amgen while the other four were investigator-sponsored. Four of the studies are complete and analysis of the results from the fifth study is currently ongoing. The results of certain of those studies contributed to safety-related product labeling changes for our ESAs and changes in reimbursement, as noted above. In addition, Janssen Research & Development, LLC (JRD), a subsidiary of J&J, and/or its investigators have conducted numerous studies that contribute to the understanding of ESA safety. Results of the JRD studies were submitted to the FDA.
Additionally, based on discussions with the FDA, we and JRD have carefully considered potential new study designs to determine the effects of ESAs on survival and tumor outcomes in anemic patients with metastatic cancer receiving concomitant myelosuppressive chemotherapy. Based on those discussions, we are conducting a randomized, double-blind, placebo-controlled, phase 3 non-inferiority study evaluating overall survival when comparing advanced non small cell lung cancer (NSCLC) patients on Aranesp® to patients receiving placebo (Study '782) as part of our Aranesp® pharmacovigilance program. In addition, JRD’s EPO-ANE-3010 study in breast cancer is ongoing. Both studies are designated by the FDA as PMR clinical trials. For the nephrology setting, we have been engaged in ongoing discussions with the FDA regarding additional PMRs to explore alternative ESA dosing strategies in CKD patients on dialysis and not on dialysis. In July 2012 we initiated study '226 to evaluate Aranesp® use in CKD patients not on dialysis. We expect to discuss further with the FDA a potential study in CKD patients on dialysis.
In January 2013, we announced the top-line results of the phase 3 Aranesp® RED-HF® (Reduction of Events With Darbepoetin Alfa in Heart Failure) Trial. The trial was initiated in 2006, and a total of 2,278 patients with symptomatic systolic heart failure and anemia (Hb levels ranging from 9.0-12.0 g/dL) were randomized to receive either treatment with Aranesp® to achieve a target Hb of at least 13.0 g/dL (not to exceed 14.5 g/dL), or placebo. The study did not meet its primary endpoint of reducing the composite endpoint of time to death from any cause or first hospital admission for worsening heart failure. There were no new safety findings identified in the study. These summary results will be followed by full efficacy and safety analyses, which will be shared and discussed with global regulatory agencies and submitted for presentation at an upcoming medical meeting.
Adverse events or results of any of these studies could further affect product labeling, healthcare provider prescribing behavior, regulatory or private healthcare organization medical guidelines and/or reimbursement practices related to Aranesp® or EPOGEN®.
Aranesp® (darbepoetin alfa)
We were granted an exclusive license by K-A to manufacture and market Aranesp® in the United States, all European countries, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East.
We market Aranesp® primarily in the United States and Europe, and it was launched in 2001 in both regions. It is indicated for the treatment of anemia associated with CKD (in both patients on dialysis and patients not on dialysis) and also for the treatment of anemia due to concomitant chemotherapy in patients with non-myeloid malignancies.
Total Aranesp® sales were as follows (in millions):
 
2012
 
2011
 
2010
Aranesp® — U.S.
$
782

 
$
986

 
$
1,103

Aranesp® — ROW
1,258

 
1,317

 
1,383

Total Aranesp®
$
2,040

 
$
2,303

 
$
2,486

Our outstanding material patents for darbepoetin alfa are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Glycosylation analogs of erythropoietin proteins
 
5/15/2024
Europe(1)
 
Glycosylation analogs of erythropoietin proteins
 
8/16/2014

8


(1) 
This European patent is also entitled to supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering darbepoetin alfa have issued in France, Germany, Italy, Spain, and the United Kingdom, and will expire in 2016.
Our principal European patent related to epoetin alfa expired in December 2004. Although we do not market EPOGEN® in Europe, upon expiration of this patent, some companies received approval to market products, including biosimilars, that compete with Aranesp® in Europe, as further discussed below.
Any products or technologies that are directly or indirectly successful in addressing anemia associated with chemotherapy and/or renal failure could negatively impact Aranesp® sales. In the United States, Aranesp® competes with EPOGEN®, primarily in the U.S. hospital dialysis clinic setting.
The following table reflects companies and their currently marketed products that compete with Aranesp® in the United States and Europe in the supportive cancer care and nephrology segments, unless otherwise indicated. The table below and the following discussion of competitor products in development may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S.
 
PROCRIT®(1)
 
Janssen(2) 
Europe
 
EPREX®/ERYPO®
 
Janssen-Cilag(2) 
Europe
 
NeoRecormon®
 
Roche
Europe
 
Retacrit™(3)/Silapo®(3)
 
Hospira/Stada Arzneimittel AG
Europe
 
Binocrit®(3)/epoetin alfa Hexal®(3)/Abseamed®(3)
 
Sandoz/Hexal/Medice Arzneimittel Pütter GmbH & Co. KG
Europe
 
MIRCERA®(4) 
 
Roche
Europe
 
Eporatio®/Biopoin® 
 
ratiopharm (5)/CT Arzneimittel
(1) 
PROCRIT® competes with Aranesp® in the supportive cancer care and pre-dialysis settings.
(2) 
A subsidiary of J&J.
(3) 
Approved via the EU biosimilar regulatory pathway.
(4) 
Competes with Aranesp® in the nephrology segment only. Pursuant to a December 2009 settlement agreement between Amgen and Roche, Roche is allowed to begin selling MIRCERA® in the United States in mid-2014 under terms of a limited license agreement. MIRCERA® has been approved by the FDA for the treatment of anemia associated with chronic renal failure (CRF) in patients on and not on dialysis.
(5) 
A subsidiary of Teva Pharmaceutical.
Several companies have short-acting ESA candidates in late stage clinical development, some of which may be pursued as biosimilars with U.S.-sourced epoetin alfa as the comparator product, including:
•
APOTEX Inc. (APO-EPO)
•
Hospira (Retacrit)
•
Sandoz (HX-575)
EPOGEN® (epoetin alfa)
We were granted an exclusive license to manufacture and market EPOGEN® in the United States under a licensing agreement with K-A. We have retained exclusive rights to market EPOGEN® in the United States for dialysis patients. We granted Ortho Pharmaceutical Corporation, a subsidiary of J&J (which has assigned its rights under the Product License Agreement to Janssen), a license to commercialize recombinant human erythropoietin as a human therapeutic in the United States in all indications other than dialysis.
We market EPOGEN® in the United States and it was launched in 1989. EPOGEN® is indicated to treat a lower than normal number of red blood cells (anemia) caused by CKD in patients on dialysis to lessen the need for red blood cell transfusions.

9


Total EPOGEN® sales were as follows (in millions):
 
2012
 
2011
 
2010
EPOGEN® — U.S.
$
1,941

 
$
2,040

 
$
2,524

Our outstanding material patents for epoetin alfa are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Product claims to erythropoietin
 
8/20/2013
U.S.
 
Pharmaceutical compositions of erythropoietin
 
8/20/2013
U.S.
 
Pharmaceutical erythropoietin formulation with certain stabilizers
 
9/24/2014
U.S.
 
Cells that make certain levels of erythropoietin
 
5/26/2015
Any products or technologies that are directly or indirectly successful in addressing anemia associated with renal failure could negatively impact EPOGEN® sales. In the United States, as noted above, EPOGEN® and Aranesp® compete with each other, primarily in the U.S. hospital dialysis clinic setting.
In March 2012, the FDA approved OMONTYS® (peginesatide), a synthetic, PEGylated peptidic compound that binds to and stimulates the erythropoietin receptor and thus acts as an ESA. OMONTYS® was co-developed by Affymax, Inc. and Takeda Pharmaceutical Company Limited (Takeda) and competes with EPOGEN® in the United States in the nephrology segment in patients with CKD who are on dialysis. On February 23, 2013, Affymax, Inc. and Takeda announced that they had decided to voluntarily recall all lots of OMONTYS® Injection to the user level as a result of new postmarketing reports regarding serious hypersensitivity reactions, including anaphylaxis, which can be life-threatening or fatal.
XGEVA®/Prolia® (denosumab)
In 2010, we launched XGEVA® and Prolia®, both of which contain the same active ingredient but which are approved for different indications, patient populations, doses and frequencies of administration. We have a collaboration agreement with Glaxo Group Limited (Glaxo), a wholly owned subsidiary of GlaxoSmithKline plc (GSK), for the commercialization of denosumab in certain countries. See Business Relationships — Glaxo Group Limited.
Total XGEVA® and Prolia® sales were as follows (in millions):
 
2012
 
2011
 
2010
XGEVA®  —  U.S.
$
644

 
$
343

 
$
8

XGEVA®  —  ROW
104

 
8

 
—

Total XGEVA®
748

 
351

 
8

Prolia® — U.S.
292

 
130

 
26

Prolia® — ROW
180

 
73

 
7

Total Prolia®
472

 
203

 
33

Total XGEVA®/Prolia®
$
1,220

 
$
554

 
$
41

XGEVA® 
In November 2010, the FDA approved XGEVA® for the prevention of skeletal-related events (SREs) (pathological fracture, radiation to bone, spinal cord compression or surgery to bone) in patients with bone metastases from solid tumors. XGEVA® is not indicated for the prevention of SREs in patients with multiple myeloma.
In July 2011, we announced that the European Commission (EC) granted marketing authorization for XGEVA® for the prevention of SREs in adults with bone metastases from solid tumors. The EC also granted XGEVA® an additional year of data and market exclusivity in the EU since the indication was considered new for denosumab and based on the significant clinical benefit of XGEVA® in comparison with existing therapies.
Any products or technologies that are directly or indirectly successful in treating for the prevention of SREs in patients with bone metastases from solid tumors could negatively impact XGEVA® sales.

10


The following table reflects currently marketed products that compete with XGEVA®. The table below and the following discussion of competitor products in development may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S. & Europe
 
Zometa®(1)
 
Novartis AG (Novartis)
U.S. & Europe
 
Aredia®(2)
 
Novartis
(1) 
Novartis has indicated that patent protection on the active ingredient for Zometa® will expire in 2013 in the United States. At such time, we expect that generic forms of zoledronic acid may become commercially available and compete with Zometa® and XGEVA®. Generic forms of zoledronic acid became available in other major markets in 2012.
(2) 
This product has lost its patent protection and generic versions of this product are available.
In addition, Bayer has filed with the FDA for approval of alpharadin for the treatment of castration-resistant prostate cancer patients with bone metastases, that may compete with XGEVA® in the future.
Prolia® 
In June 2010, the FDA approved Prolia® for the treatment of postmenopausal women with osteoporosis at high risk for fracture, defined as a history of osteoporotic fracture, or multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. In September 2011, we announced that the FDA approved two additional indications for Prolia® as a treatment to increase bone mass in women at high risk for fracture receiving adjuvant aromatase inhibitor therapy for breast cancer and as a treatment to increase bone mass in men at high risk for fracture receiving androgen deprivation therapy for non-metastatic prostate cancer. In September 2012, the FDA approved Prolia® for a treatment to increase bone mass in men with osteoporosis at high risk for fracture.
In May 2010, the EC granted marketing authorization for Prolia® for the treatment of osteoporosis in postmenopausal women at increased risk of fractures and for the treatment of bone loss associated with hormone ablation in men with prostate cancer at increased risk of fractures.
Any products or technologies that are directly or indirectly successful in treating osteoporosis in patients at high risk for fracture could negatively impact Prolia® sales.
The following table and discussion reflect other companies and their currently marketed products that compete with Prolia®. The table below and the following discussion of competitor marketed products and products in development may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S. & Europe
 
FOSAMAX®(1) 
 
Merck
U.S. & Europe
 
Actonel®/Atelvia™
 
Warner Chilcott PLC
U.S. & Europe
 
Boniva®(1)/Bonviva®(1)
 
Roche
U.S. & Europe
 
Evista®
 
Eli Lilly
U.S. & Europe
 
Forteo®/Forsteo™
 
Eli Lilly
U.S. & Europe
 
Miacalcin®
 
Novartis
U.S. & Europe
 
Aclasta®(1)/Reclast®
 
Novartis
Europe
 
Conbriza®
 
Pfizer
Europe
 
Fablyn®
 
Pfizer
(1) 
This product has lost its patent protection and generic versions of this product are available.
We expect several additional marketed products noted above to lose patent protection over the next several years.
Merck (odanacatib) and Radius Health, Inc. (BA058) have product candidates in phase 3 clinical development for PMO.

11


Our outstanding material patents for denosumab are described in the following table.
Territory
 
General Subject Matter
 
Expiration(1)
U.S.
 
RANKL antibodies; and methods of use
 
12/22/2017
U.S.
 
Methods of treatment
 
11/11/2018
U.S.
 
RANKL antibodies including sequences
 
2/19/2025
U.S.
 
Nucleic acids encoding RANKL antibodies, and methods of producing RANKL antibodies
 
11/30/2023
Europe
 
RANKL antibodies
 
12/22/2017
Europe
 
Medical use of RANKL antibodies
 
4/15/2018
Europe
 
RANKL antibodies including epitope binding
 
2/23/2021
Europe
 
RANKL antibodies including sequences
 
6/25/2022
(1) 
In some cases, these patents may be entitled to patent term extension in the United States or supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering denosumab have issued in France, Italy and Spain, and will expire in 2025.
Other Marketed Products
Our other marketed products include Sensipar®/Mimpara® (cinacalcet), Vectibix® (panitumumab) and Nplate® (romiplostim).
Sensipar®/Mimpara® (cinacalcet)
Sensipar® is our registered trademark in the United States and Mimpara® is our registered trademark in Europe for cinacalcet, our small molecule medicine used in treating CKD patients on dialysis who produce too much parathyroid hormone (PTH), a condition known as secondary hyperparathyroidism. In 2004, Sensipar®/Mimpara® was approved in the United States and Europe for the treatment of secondary hyperparathyroidism in CKD patients on dialysis and for the treatment of hypercalcemia in patients with parathyroid carcinoma. In 2008, Mimpara® was approved in Europe for the reduction of hypercalcemia in patients with primary hyperparathyroidism (PHPT) where a parathyroidectomy is not clinically appropriate or is contraindicated. In 2011, Sensipar® was approved in the United States for the treatment of severe hypercalcemia in patients with PHPT who are unable to undergo parathyroidectomy. We market Sensipar® primarily in the United States and Mimpara® primarily in Europe.
As previously discussed, CMS’s Final Rule on Bundling in Dialysis became effective on January 1, 2011, and provides a single payment for all dialysis services. Oral drugs without intravenous equivalents, such as Sensipar® and phosphate binders, will continue to be reimbursed separately under the Medicare Part D benefit until they are included in the bundled-payment system, which was delayed by Congress from 2014 to 2016 in connection with the passage in January 2013 of the American Taxpayer Relief Act (ATRA). Inclusion in the bundled-payment system may reduce utilization of these oral drugs and have an adverse impact on our sales. See Reimbursement.
In November 2012, we presented at ASN's Kidney Week the results of the phase 3 E.V.O.L.V.E™ trial. As previously reported, the primary analysis showed that the trial did not reach its primary endpoint (time to composite event comprising all-cause mortality or first non-fatal cardiovascular event, including myocardial infarction, hospitalization for unstable angina, heart failure or peripheral vascular event) in the intent-to-treat analysis. See Significant Developments in our Quarterly Report on Form 10-Q for the period ended June 30, 2012.
Total Sensipar®/Mimpara® sales were as follows (in millions):
 
2012
 
2011
 
2010
Total Sensipar®/Mimpara®
$
950

 
$
808

 
$
714


12


Our outstanding material patents for cinacalcet are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Calcium receptor-active molecules including species
 
10/23/2015
U.S.
 
Calcium receptor-active molecules
 
3/8/2018
U.S.
 
Methods of treatment
 
12/14/2016
Europe(1)
 
Calcium receptor-active molecules
 
10/23/2015
(1) 
This European patent is also entitled to supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering cinacalcet have issued in France, Germany, Italy, Spain, and the United Kingdom, and will expire in 2019.
Any products or technologies that are directly or indirectly successful in treating secondary hyperparathyroidism in patients with CKD on dialysis and/or hypercalcemia in patients with parathyroid carcinoma could negatively impact Sensipar®/Mimpara® sales.
The following table reflects companies and their currently marketed products that compete with Sensipar® in the United States and with Mimpara® in Europe in the nephrology segment for patients with CKD on dialysis and may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S.
 
Hectorol®
 
Genzyme Corporation (Genzyme)
U.S.
 
Rocaltrol®
 
Roche
U.S.
 
Calcijex®
 
Abbott (1)
U.S.
 
Calcium Acetate®
 
Roxane Laboratories/Sandoz
U.S. & Europe
 
Zemplar®
 
Abbott (1)
U.S. & Europe
 
Renagel®
 
Genzyme
U.S. & Europe
 
Renvela®
 
Genzyme
U.S. & Europe
 
PhosLo®/Rephoren®
 
Fresenius Medical Care AG & Co. KGaA (Fresenius Medical Care)
U.S. & Europe
 
OsvaRen®
 
Fresenius Medical Care
U.S. & Europe
 
Fosrenol®
 
Shire Pharmaceuticals Group Plc
(1) 
In January 2013, Abbott announced that it completed the separation of its research-based pharmaceuticals business, which became AbbVie, a new independent biopharmaceutical company which now owns the rights to this product.
In July 2008, we filed a lawsuit against Teva and Barr Pharmaceuticals Inc. (Barr) for infringement of four Sensipar® patents. The lawsuit was based on Abbreviated New Drug Applications (NDA) filed by Teva and Barr that sought approval to market generic versions of Sensipar®. Following trial, in January 2011, the U.S. District Court for the District of Delaware granted an injunction prohibiting Teva and Barr from commercializing generic versions of Sensipar® in the United States until expiration of three of those patents. These generic versions could compete with Sensipar® in the future.
Vectibix® (panitumumab)
Vectibix® is our registered trademark for panitumumab, our monoclonal antibody for the treatment of patients with EGFr expressing metastatic colorectal cancer (mCRC) after disease progression on, or following fluoropyrimidine-, oxaliplatin- and irinotecan- containing chemotherapy regimens. EGFr is a protein that plays an important role in cancer cell signaling and is over-expressed in many human cancers. Vectibix® binds with high affinity to EGFrs and interferes with signals that might otherwise stimulate growth and survival of the cancer cell. In September 2006, Vectibix® received FDA accelerated approval in the United States, based upon clinical trial data from a study demonstrating a statistically significant improvement in progression-free survival and with the condition that Amgen conduct a confirmatory trial to verify the clinical benefit of panitumumab through demonstration of an improvement in overall survival. (See discussion of the '181 trial below.) In the EU, the conditional approval of Vectibix® as monotherapy, for the treatment of patients with EGFr expressing metastatic colorectal carcinoma with non-mutated (wild-type) KRAS genes after failure of fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy regimens, was received in December 2007 and is reviewed annually by the Committee for Medicinal Products for Human Use (CHMP). Each year thereafter, the EU conditional marketing authorization was renewed with an additional specific obligation to conduct a clinical trial in the approved monotherapy indication. In 2010, we began enrollment for this additional clinical trial which compares the effect of Vectibix® versus Erbitux® (cetuximab) on overall survival for chemorefractory mCRC patients with wild-type KRAS genes. KRAS

13


is a protein found in all human cells. Some colorectal cancers have mutations in the KRAS gene. Vectibix® has been shown to be ineffective in people whose tumors had KRAS mutations in codon 12 or 13.
In 2009, we announced results from the ‘203 and ‘181 pivotal phase 3 trials evaluating Vectibix® in combination with chemotherapy (FOLFOX or FOLFIRI) as a first- and second-line treatment for mCRC, respectively. Both studies demonstrated that Vectibix® administered with chemotherapy significantly improved progression-free survival in patients with wild-type KRAS mCRC. Additionally, both studies showed numeric improvements in median overall survival in the same patient population. The numeric improvements in median overall survival failed to achieve statistical significance. It was previously agreed with the FDA that the '181 study would serve as the confirmatory trial for establishing full approval for the mCRC indication.
In July 2011, we announced that we received Complete Response Letters from the FDA on the first- and second-line mCRC sBLAs that we filed in late 2010. The FDA did not ask for new clinical studies but did request an updated safety analysis and additional analyses of the overall survival data in the ’181 and ’203 studies using more mature data sets. The FDA has also informed us that approval for the first- and second-line mCRC indications will be contingent upon approval of the companion diagnostic device being developed in collaboration with QIAGEN N.V. (QIAGEN), which identifies a patient’s KRAS gene status. We are currently working on addressing the FDA’s requests in the Complete Response Letters.
In November 2011, the EC approved a variation to the marketing authorization for Vectibix® to include indications for the treatment of patients with wild-type KRAS mCRC in first- and second-line in combination with chemotherapy.
Total Vectibix® sales were as follows (in millions):
 
2012
 
2011
 
2010
Total Vectibix®
$
359

 
$
322

 
$
288

Our outstanding material patents for panitumumab are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Human monoclonal antibodies to EGFr
 
4/8/2020
U.S.
 
Human monoclonal antibodies to EGFr
 
5/5/2017
Europe
 
Fully human antibodies that bind EGFr
 
12/3/2017
Europe(1)
 
Human monoclonal antibodies to EGFr
 
5/5/2018
(1) 
This European patent is also entitled to supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering panitumumab have issued in France, Italy, Spain, and the United Kingdom, and will expire in 2022.
Any products or technologies that are directly or indirectly successful in treating mCRC after disease progression either on or following fluoropyrimidine-, oxaliplatin- and irinotecan-containing chemotherapy regimens could negatively impact Vectibix® sales.
The following table reflects companies and their currently marketed products that compete with Vectibix® in the United States and Europe and may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S.
 
Erbitux®
 
Eli Lilly/BMS
U.S.
 
Zaltrap®
 
Sanofi
U.S.
 
Avastin®
 
Genentech, Inc. (Genentech)
U.S.
 
Stivarga®
 
Bayer
Europe
 
Erbitux®
 
Merck KGaA
Nplate® (romiplostim)
In August 2008, the FDA approved Nplate® for the treatment of thrombocytopenia in splenectomized (spleen removed) and non-splenectomized adults with chronic immune thrombocytopenic purpura (ITP). Nplate® works by raising and sustaining platelet counts. We were granted an exclusive license by K-A to manufacture and market Nplate® in the United States, all European countries, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East. In February 2009, we announced that the EC had granted marketing authorization for Nplate®

14


for the treatment of splenectomized adult chronic ITP patients who are refractory to other treatments (e.g., corticosteroids, immunoglobulins). In the EU, Nplate® may also be considered as second-line treatment for adult non-splenectomized ITP patients where surgery is contraindicated.
Total Nplate® sales were as follows (in millions):
 
2012
 
2011
 
2010
Total Nplate®
$
368

 
$
297

 
$
229

Our outstanding material patents for romiplostim are described in the following table.
Territory
 
General Subject Matter
 
Expiration
U.S.
 
Thrombopoietic compounds
 
1/19/2022
U.S.
 
Thrombopoietic compounds
 
10/22/2019
Europe(1)
 
Thrombopoietic compounds
 
10/22/2019
(1) 
This European patent is also entitled to supplemental protection in one or more countries in Europe and the length of any such extension will vary by country. For example, supplementary protection certificates covering romiplostim have issued in France, Italy, Spain, and the United Kingdom, and will expire in 2024.
Any products or technologies that are directly or indirectly successful in treating thrombocytopenia in splenectomized and non-splenectomized adults with chronic ITP could negatively impact Nplate® sales.
The following table reflects companies and their currently marketed products that compete with Nplate® in the United States and Europe and may not be exhaustive.
Territory
 
Competitor Marketed Product
 
Competitor
U.S.
 
Promacta®
 
GSK
Europe
 
Revolade®
 
GSK
Marketing and Distribution
We maintain sales and marketing forces primarily in the United States, Europe and Canada to support our currently marketed products. We have also entered into agreements with third parties to assist in the commercialization and marketing of certain of our products in specified geographic areas. (See Business Relationships.) Together with our partners, we market our products to healthcare providers, including physicians or their clinics, dialysis centers, hospitals and pharmacies. We also market certain products directly to consumers through direct-to-consumer print and television advertising, as well as through the Internet. In addition, for certain of our products, we promote programs to increase public awareness of the health risks associated with the diseases these products treat and we provide support for various patient education and support programs in the related therapeutic areas. See Government Regulation — FDA Regulation of Product Marketing and Promotion for a discussion of government regulation of product marketing and promotion.
In the United States, we sell primarily to pharmaceutical wholesale distributors. We utilize those wholesale distributors as the principal means of distributing our products to healthcare providers. In Europe, we sell principally to healthcare providers and/or pharmaceutical wholesale distributors depending on the distribution practice in each country. We monitor the financial condition of our larger customers, and we limit our credit exposure by setting credit limits and, for certain customers, by requiring letters of credit.
Our product sales to three large wholesalers, AmerisourceBergen Corporation, McKesson Corporation and Cardinal Health, Inc., each accounted for more than 10% of total revenues for each of the years ended December 31, 2012, 2011 and 2010. On a combined basis, these wholesalers accounted for approximately 94%, 90% and 88% of our gross product sales in the United States, respectively and approximately 76%, 72% and 71% of our total worldwide gross revenues, respectively in 2012, 2011 and 2010.
Reimbursement
Sales of all of our principal products are dependent in large part on the availability and extent of coverage and reimbursement from third-party payers, including government and private insurance plans. Most patients receiving our products are covered by government healthcare programs or private insurers. Governments may regulate coverage, reimbursement and/or pricing of our products to control costs or to affect levels of use of our products; and private insurers may adopt or be influenced by government

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coverage and reimbursement methodologies. Worldwide use of our products may be affected by cost containment pressures and cost shifting from governments and private insurers to healthcare providers or patients in response to ongoing initiatives to reduce or reallocate healthcare expenditures. An increasing worldwide focus on patient access controls and cost containment by public and private insurers has resulted, and may continue to result, in reduced reimbursement rates for our products. In addition, healthcare reforms enacted in the United States have made substantial long-term changes to the reimbursement of our products, and those changes have had, and are expected to continue to have, a material adverse impact on our business.
U.S. Reimbursement System
Our principal products are sold primarily in the United States, and healthcare providers, including doctors, hospitals and other healthcare professionals and providers, are reimbursed by the government through Medicare, Medicaid and other government healthcare programs as well as through private payers for covered services and products they use. Government healthcare programs are funded primarily through the payment of taxes by individuals and businesses. The public and private components of this multi-payer system are described below.
Medicare and Other Forms of Public Health Insurance
Medicare is a federal program administered by the federal government that covers individuals 65 years or older as well as those with certain disabilities or ESRD regardless of their age. The primary Medicare programs that affect reimbursement for our products are Medicare Part B, which covers physician services and outpatient care, and Medicare Part D, which provides a voluntary outpatient prescription drug benefit. CMS is the federal agency responsible for administering Medicare (as well as Medicaid, described below) and, among its responsibilities, has authority to promulgate regulations and policies, as well as issue reimbursement codes for drugs, all of which can determine how medical items and services are covered and reimbursed by Medicare. CMS can also issue Medicare NCDs, which are national policy determinations granting, limiting or excluding Medicare coverage for specific medical items or services applicable throughout the United States. In the absence of a relevant NCD, Medicare coverage determinations for a particular medical item or service are left to MACs, who issue LCDs, which are binding on providers within their respective jurisdictions. CMS sometimes uses advisory committees of external experts in order to obtain independent expert advice on scientific, technical and policy matters. For example, the Medicare Evidence Development & Coverage Advisory Committee (MEDCAC) was established to provide independent guidance and expert advice for CMS on specific clinical topics. The MEDCAC reviews and evaluates medical literature and technology assessments and examines data and information on the effectiveness and appropriateness of medical items and services that are covered under Medicare or that may be eligible for coverage under Medicare.
Medicare Part B Coverage of Drugs. Medicare Part B provides limited coverage of outpatient drugs and biologicals that are reasonable and necessary for a medically accepted diagnosis or treatment of an illness or injury and that fall into a statutory benefit category. One such category relevant to our products covers drugs and biologicals furnished incident to a physician’s services. Generally, incident-to drugs and biologicals are covered if they satisfy certain criteria, including that they are of the type that are not usually self-administered by the patient. Medicare Part B also covers certain drugs pursuant to specific statutory benefit categories, such as blood-clotting factors and certain immunosuppressive drugs, erythropoietin and certain oral cancer drugs. Many of our principal products are currently covered under Medicare Part B (as well as other government healthcare programs).
Medicare Part D Coverage of Drugs. Medicare Part D provides a voluntary prescription drug benefit for Medicare eligible beneficiaries. The coverage is available through private plans that provide insurance coverage for prescription drugs for a monthly premium and with patient cost sharing. The list of prescription drugs covered by Medicare Part D plans varies by plan, but drug lists maintained by individual plans must cover certain classes of drugs and biologicals; specifically the statute stipulates that Medicare Part D plans have at least two drugs in each unique therapeutic category or class, subject to certain exceptions.
Medicare ESRD Program. Most patients with ESRD, regardless of age, are eligible for coverage of dialysis treatment through Medicare's ESRD Program. Because Medicare is the primary payer for dialysis treatment in the United States, reimbursement for products, such as EPOGEN®, that are typically administered in dialysis centers and other settings is particularly sensitive to changes in Medicare coverage and reimbursement policy. Since January 1, 2011, dialysis treatment under the ESRD Program has been reimbursed under a bundled-payment system described in more detail below. See Dialysis Reimbursement.
Medicaid. Medicaid is a joint federal and state program administered by individual states for low-income and disabled eligible beneficiaries. CMS also has responsibility for federal administration of the Medicaid program. Under federal law, states must cover low-income adults and children, pregnant women, disabled individuals and seniors, and states have the option of expanding eligibility beyond those groups of beneficiaries. Medicaid is financed jointly by the states and the federal government through taxes. Medicaid offers a broad set of benefits, including prescription drugs, although coverage varies by state. Medicaid includes the Drug Rebate Program, which requires that manufacturers provide rebates for the states for products covered and reimbursed by state Medicaid programs.
See Item 1A. Risk Factors — Our sales depend on coverage and reimbursement from third-party payers.

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Private Health Insurance
Employer-sponsored insurance. Employer-sponsored insurance currently represents the main pathway by which Americans receive private health insurance. Many employers provide health insurance as part of employees’ benefit packages. Insurance plans are administered by private companies — both for-profit and not-for-profit — and some companies are self-insured (i.e., they pay directly through a plan administered by a third party for all healthcare costs incurred by employees). Generally, employer-sponsored insurance premiums are paid primarily by employers and secondarily by employees.
Individual market. The individual market covers part of the population that is self-employed or retired. In addition, it covers some people who are unable to obtain insurance through their employers. The plans are administered by private insurance companies. Individuals pay out-of-pocket insurance premiums for coverage, and the benefits vary widely according to plan specifications.
Efforts to reduce health care costs are being made in the private sector, notably by health care payers and providers, which have instituted various cost reduction and containment measures. Amgen expects insurers and providers to continue attempts to reduce the cost and/or utilization of healthcare products including our products.
Reimbursement of Our Principal Products
Neulasta®, NEUPOGEN®, Aranesp®, Prolia® and XGEVA®. Medicare and Medicaid payment policies for drugs and biologicals are subject to various laws and regulations. The Medicare program covers our principal products Neulasta®, NEUPOGEN®, Aranesp®, Prolia® and XGEVA® (as well as certain of our other products, including Vectibix® and Nplate®) primarily under Part B, when administered in the physician clinic setting and the hospital outpatient setting. Healthcare providers are reimbursed for these products under a buy-and-bill process whereby providers purchase the product in advance of treatment and then submit a reimbursement claim to Medicare following administration of the product. Medicare reimburses providers by using a payment methodology based on a fixed percentage of each product’s average sales price (ASP). ASP is calculated by the manufacturer based on a statutorily defined formula and submitted to CMS. A product’s ASP is calculated and reported to CMS on a quarterly basis and therefore may change each quarter. The ASP in effect for a given quarter (the Current Period) is based on certain historical sales and sales incentive data covering a defined period of time preceding the Current Period. CMS publishes the ASPs for products in advance of the quarter in which they go into effect so healthcare providers will know the applicable reimbursement rates. In the calculation of ASP, CMS currently allows manufacturers to make reasonable assumptions consistent with the general requirements and the intent of the Medicare statute and regulations and their customary business practices; in the future, CMS may provide more specific guidance. Any changes to the ASP calculations directly affect the Medicare reimbursement for our products administered in the physician clinic setting, hospital outpatient setting and, to a lesser extent, the dialysis facility setting. (See Dialysis Reimbursement.) Our ASP calculations are reviewed quarterly for completeness, and based on such review, we have on occasion restated our reported ASPs to reflect calculation changes both prospectively and retroactively. See Items 1A. Risk Factors — Our sales depend on coverage and reimbursement from third-party payers.
In general, drugs and biologicals provided in the physician clinic setting and in the hospital outpatient setting are reimbursed under Medicare Part B at a certain percentage of their ASP (sometimes referred to as “ASP +X%”). The 2013 reimbursement rates in both settings will be ASP +6%. The rate for the physician clinic setting is set by statute, but CMS has authority to adjust the rate for the hospital outpatient setting annually. Commercial payers may use the government's ASP data in setting their payment methodologies for drugs and biologicals provided in the physician clinic and hospital outpatient settings. The extent to which commercial payers rely on the government's ASP data and the specific ASP +X% used is often based on the contractual relationship between the provider and the insurer.
For fiscal years 2013-21, Medicare payment rates are scheduled to be affected by across-the-board budget cuts (referred to commonly as “sequestration”) mandated under the Budget Control Act (the BCA) and revised by the ATRA, as explained more fully below in Impact of Budget Control Act on U.S. Reimbursement. Under sequestration, CMS can reduce Medicare payments to providers, including ASP-based reimbursement, by up to 2% per fiscal year.
Dialysis Reimbursement. Currently, dialysis providers in the United States are reimbursed for EPOGEN® primarily by Medicare through the ESRD Program, which is established by federal law and implemented by CMS. Historically, the ESRD Program reimbursed Medicare providers for 80% of allowed dialysis costs; the remainder was paid by other sources, including patients, state Medicaid programs, private insurance, and to a lesser extent, state kidney patient programs. Until January 1, 2011, Medicare reimbursed for separately billable dialysis drugs (including Aranesp® and EPOGEN®) administered in both freestanding and hospital-based dialysis centers, at ASP +6%, by using the same payment amount methodology used in the physician clinic setting under Part B. On January 1, 2011, CMS’s bundled-payment system went into effect for dialysis providers by establishing a single payment for all dialysis services, including drugs, supplies and non-routine laboratory tests that had previously been reimbursed separately. ESRD providers receive a designated payment for each dialysis treatment and can be paid for up to three treatments per week unless medical necessity justifies more frequent treatments. Oral drugs without intravenous equivalents, such

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as Sensipar® and phosphate binders, will continue to be reimbursed separately under the Medicare Part D benefit until they are included in the bundled-payment system in 2016. Inclusion in the bundled-payment system may reduce utilization of these oral drugs and have an adverse impact on our sales.
To encourage dialysis providers to continue to provide quality dialysis treatment under the new bundled-payment system, CMS also implemented the ESRD QIP. Under the QIP, beginning in 2012, ESRD facilities are subject to a payment penalty of up to 2% of amounts reimbursed for failure to meet or exceed CMS’s quality performance standards, including performance standards related to anemia management and dialysis adequacy. In November 2011, following our June 2011 announcement of changes to the labels for the use of ESAs in patients with CKD, CMS finalized a rule to update various provisions of its bundled-payment system for dialysis services and the related ESRD QIP. The final rule eliminated for payment year 2013 and beyond one of the QIP's measures that tracks the percent of a provider's Medicare patients with a Hb level below 10 g/dL. CMS indicated that removal of this quality measure from the QIP was being done in response to the June 2011 ESA label changes. We believe that the implementation of these various changes in the dialysis setting has resulted and could result in a material adverse impact on the reimbursement, use and sales of EPOGEN® and on our business and results of operations. Data available through October 2012 indicates a stabilization of Hb levels.
ENBREL Reimbursement. The majority of prescription claims for ENBREL are paid through private insurance companies. Under Medicare, ENBREL is reimbursed through the Part D program, although less than 10% of all ENBREL U.S. prescriptions are reimbursed by Medicare.
Mandatory Government Rebates and Discounts
Since 1991, we have participated in the Medicaid drug rebate program established in Section 1927 of the Social Security Act by the Omnibus Budget Reconciliation Act of 1990 and subsequent amendments of that law. Under the Medicaid drug rebate program, we pay a rebate to the states for each unit of our product reimbursed by state Medicaid programs. The amount of the rebate for each of our products is currently set by law as a minimum of 23.1% of the Average Manufacturer Price (AMP) of that product, or if it is greater, the difference between AMP and the best price available from us to any non-government customer. The rebate amount is determined for each quarter based on our reports to CMS of the quarter’s AMP and best price for each of our products. The rebate amount also includes an inflation adjustment if AMP increases faster than inflation. The statutory definition of AMP changed in 2010 as a result of the U.S. healthcare reform law, and in January 2012, CMS issued a proposed rule further defining the new AMP definition. Until that rule is finalized, we are required to make reasonable assumptions when calculating AMP. Once CMS’s proposed rule is finalized, we will have to determine whether our calculations should be amended and whether we will need to restate our prior AMPs. The terms of our participation in the Medicaid drug rebate program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in an overage or underage in our rebate liability for past quarters, depending on the direction of the correction. In addition to retroactive rebates, if we were found to have knowingly submitted false information to the government, in addition to other penalties available to the government, the statute provides for civil monetary penalties in the amount of $100,000 per item of false information.
Related to our participation in the Medicaid drug rebate program is a requirement that we extend comparable discounts under the Public Health Service (PHS) drug pricing program to eligible community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of Medicare and Medicaid beneficiaries.
We also make our products available to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration. Since 1993, as a result of the Veterans Health Care Act of 1992 (VHC Act), federal law has required that we offer deeply discounted FSS contract pricing for purchases by the Department of Veterans Affairs, the Department of Defense, the Coast Guard and the PHS (including the Indian Health Service) in order for federal funding to be available for reimbursement of our products under the Medicaid program or purchase of our products by those four federal agencies and certain federal grantees. FSS pricing to those four federal agencies must be equal to or less than the Federal Ceiling Price (FCP), which is 24% below the Non-Federal Average Manufacturer Price (Non-FAMP) for the prior fiscal year. The accuracy of our reported Non-FAMPs, FCPs and our FSS contract prices may be audited by the government under applicable federal procurement laws and the terms of our FSS contract. Among the remedies available to the government for inaccuracies in calculation of Non-FAMPs and FCPs is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies. Also, if we were found to have knowingly reported a false Non-FAMP, in addition to other penalties available to the government, the VHC Act provides for civil monetary penalties of $100,000 per item that is incorrect. Finally, we are required to disclose in our FSS contract proposal all commercial pricing that is equal to or less than our proposed FSS pricing, and subsequent to award of an FSS contract, we are required to monitor certain commercial price reductions and extend commensurate price reductions to the government, under the terms of the FSS contract price reductions clause. Among the remedies available to the government for any failure to properly disclose commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS overcharges that may result from such omissions.

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U.S. Healthcare Reform. In March 2010, the Patient Protection and Affordable Care Act (PPACA) and the companion Health Care and Education Reconciliation Act, which made certain changes and adjustments to the PPACA, primarily with respect to the PPACA’s financial and budgetary impacts, were signed into law. We refer to those two laws collectively as the “U.S. healthcare reform law.” The U.S. healthcare reform law imposes additional costs on and reduces the revenue of companies in the biotechnology and pharmaceutical industries. The following paragraphs describe certain provisions of the healthcare reform law that are affecting and will affect our business.
The U.S. healthcare reform law also imposed a new fee (the U.S. healthcare reform federal excise fee) on manufacturers and importers of “branded prescription drugs,” which includes drugs approved under section 505(b) of the Federal Food, Drug and Cosmetic Act (FDCA) or biological products licensed under section 351(a) of the Public Health Service Act. The U.S. healthcare reform law set an aggregate annual fee, to be paid by these manufacturers and importers, totaling $28 billion over 10 years beginning in 2011. This annual fee is apportioned among the participating companies, including us, based on each company’s sales of qualifying products to, and utilization by, certain U.S. government programs during the preceding calendar year. The additional fee is not deductible for U.S. federal income tax purposes. Manufacturers and importers of generic or biosimilar drugs are not subject to the fee.
Other changes under the U.S. healthcare reform law that became effective in 2010 include: (i) an increase in the rebates we pay to the states for our products that are covered and reimbursed by state Medicaid programs, (ii) the extension of the Medicaid drug rebate program to patients in Medicaid managed care insurance plans for whom rebates were not previously required and (iii) the expansion of the list of provider institutions to which we must extend discounts under the PHS 340B drug-pricing program.
When the Medicare Part D drug benefit took effect in 2006, standard benefit Part D plan enrollees were required to pay 100% of their prescription drug costs after their total drug spending exceeded an initial coverage limit and until they qualified for catastrophic coverage. This coverage gap is sometimes referred to as the Part D “doughnut hole.” Then the PPACA directed CMS to phase out up to 50% of this coverage gap from 2011 to 2020. Under the standard benefit, cost sharing for both brand and generic drugs will be reduced each year until 2020, when the coverage gap will be eliminated and beneficiaries will pay 25% cost sharing for all drugs until they reach the out-of-pocket threshold. Manufacturers like Amgen are presently required to provide a 50% cost sharing discount for beneficiaries in the doughnut hole.
The U.S. healthcare reform law also expands Medicaid eligibility to include those with incomes up to 133% of the federal poverty level (FPL), from 100% of the FPL. This provision becomes effective January 1, 2014.
Impact of Budget Control Act on U.S. Reimbursement
The Budget Control Act of 2011, signed into law in the United States in August 2011, mandated a 2% reduction in government payments for all Medicare services (including the administration of separately billable drugs and payment for drugs in all Medicare programs) for federal fiscal years 2013-21. The impact of sequestration remains subject to administrative implementation of the Budget Control Act, as updated by the more recent ATRA, or future statutory revision by Congress, which could block, limit or otherwise modify the automatic spending cuts. Several alternative deficit reduction proposals have been put forth by President Obama and/or congressional committees, including proposals designed to further limit federal healthcare expenditures. We cannot predict whether any deficit reduction actions will be approved by Congress and/or whether a budget sequestration will ultimately occur for Medicare services. A reduction in reimbursement for drugs and biologics for U.S. healthcare programs as a result of changes such as those that have been proposed or as a result other changes designed to achieve similar federal budget savings could have a material adverse effect on the sales of our products, our business and results of operations.
Reimbursement Outside the United States
Generally, in Europe and other countries outside the United States, government-sponsored healthcare systems have traditionally been the primary payers of all healthcare costs, including payment for drugs and biologicals. Over the past several years, the reimbursement environment in Europe has become very challenging. The proliferation of Health Technology Assessment (HTA) organizations (e.g., National Institute for Health and Clinical Excellence (NICE) in the UK and the German Institute for Quality and Efficiency in Health Care (IQWiG) in Germany) has led to recommendations and/or determinations of coverage and reimbursement based on both the clinical as well as the economic value of a product. Although the methods employed by different HTA agencies vary from country to country, the use of formal economic metrics has been increasing across Europe as well as in several emerging markets throughout the world. In addition to determining whether or not a new product will be reimbursed, these agencies are becoming increasingly involved in setting the maximum price at which the product will be reimbursed - the “value-based” price for a product.
With increased budgetary constraints, payers in many countries employ a variety of measures to exert downward price pressure. Mandatory price controls continue to be a significant aspect of business for the pharmaceutical and biotechnology industries in most countries outside the United States. In some countries, international price referencing is the primary mechanism for price control, whereby the ceiling price of a pharmaceutical or biological product is set based on prices in particular benchmark

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countries. These price-referencing rules are increasing in complexity as payers seek lower-price benchmarks against which to compare themselves. Trends across Europe are also leading toward increased price transparency, with the development of databases to include prices across Europe and requests from specific national payers that manufacturers provide commercially confidential net price information. Additional cost-containment measures can include therapeutic reference pricing (e.g., setting the reimbursement rate for a given class of agents at the lowest price within the class), increasing mandates or incentives for generic substitution and biosimilar usage, and government-mandated price cuts. In addition, healthcare reform and related legislative proposals in such countries as France, Germany, and Poland, as well as austerity plans in a number of countries, including Spain, Greece, Italy, Ireland and Portugal, have targeted the pharmaceutical sector with multiple mechanisms to reduce government healthcare expenditures. We expect that countries will continue to take aggressive actions to reduce expenditures on drugs and biologics, including mandatory price reductions, clawbacks of payments made to companies when drug spending thresholds are exceeded, preferences for biosimilars, changes in international price referencing, price transparency to achieve prices similar to those in lower-priced countries, and reductions in the amount of reimbursement, sometimes with the imposition of patient copayments. Similarly, fiscal constraints may also impact the extent to which countries are willing to reward new innovative therapies and/or allow access to new technologies. This could impact coverage, price, time to achieve reimbursement, and ultimate level of reimbursement.
In many countries, the influence of regional and hospital payers also contributes to whether patients have access to certain products. For example, a product may be listed successfully on a national formulary, but may also be subject to further evaluations or competitive bidding by payers at a regional or hospital level. The impact of multiple layers of assessment can result in delay or failure to secure access and/or net price pressure.
Payers in some countries are using and others are beginning to experiment with alternative payment mechanisms (e.g., payment caps, risk sharing) as a means to achieve or maintain access to innovative therapies while increasing their budget certainty. Requirements for such payment mechanisms can adversely impact Amgen’s business through increased net price concessions and added administrative burden.
While we cannot fully predict either the extent of further price reductions and/or reimbursement restrictions taken by governmental payers outside the United States or the impact such actions will have on our business, such reductions in price and/or the coverage and reimbursement for our products could have a material adverse effect on the sales of our products, our business and results of operations.

Fraud and Abuse Regulations Related to Reimbursement
As participants in government reimbursement programs, we are subject to various U.S. federal and state laws, as well as foreign laws, pertaining to healthcare “fraud and abuse,” including anti-kickback laws and false claims laws. (See Government Regulation — Other.) Violations of fraud and abuse laws can result in stringent enforcement penalties up to and including complete exclusion from federal healthcare programs (including Medicare and Medicaid).
Manufacturing, Distribution and Raw Materials
Manufacturing
Biological products, which are produced in living systems, are inherently complex due to naturally-occurring molecular variations. Highly specialized knowledge and extensive process and product characterization are required to transform laboratory-scale processes into reproducible commercial manufacturing processes. Our manufacturing operations consist of bulk manufacturing, formulation, fill and finish and distribution activities. Bulk manufacturing includes fermentation and/or cell culture — processes by which our proteins are produced — and also includes purification of the proteins to a high quality. The proteins are then formulated into stable forms. The fill process dispenses the formulated bulk protein into vials or syringes. Finally, in the finish process, our products are packaged for distribution.
We operate a number of commercial and/or clinical manufacturing facilities, and our primary facilities are located in the United States, Puerto Rico and the Netherlands. (See Item 2. Properties.) We also use and expect to continue to use third-party contract manufacturers to produce or assist in the production of certain of our large molecule marketed products as well as a number of our clinical product candidates. Manufacturing of Sensipar®/Mimpara®, our small molecule product, is currently performed by third-party contract manufacturers, except for certain fill and finish activities performed by us in Puerto Rico.
The global supply of our products depends on actively managing the inventory produced at our facilities and by third-party contract manufacturers and the uninterrupted and efficient operation of these facilities. During the manufacturing scale-up process, and even after achieving sustainable commercial manufacturing, we may encounter difficulties or disruptions due to defects in raw materials or equipment, contamination or other factors that could impact product availability. See Item 1A. Risk Factors — Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales and — We rely on third-party suppliers for certain of our raw materials, medical devices and components.

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Commercial Bulk Manufacturing
We operate commercial bulk manufacturing facilities in Puerto Rico and in several locations throughout the United States for most of our products. (See Item 2. Properties.) We have the option to supplement commercial bulk manufacturing for ENBREL, Prolia®, XGEVA® and Vectibix® with a third-party contract manufacturer.
Commercial Formulation, Fill and Finish Manufacturing
We perform most of our commercial protein formulation, fill and finish manufacturing in our Puerto Rico facility. Formulation, fill and finish manufacturing for Nplate® and Vectibix® is performed by third-party contract manufacturers. In addition to the formulation, fill and finish of ENBREL performed by us in Puerto Rico, fill and finish of a certain portion of ENBREL is also performed by third-party contract manufacturers. We also conduct finish activities in the Netherlands. See Item 2. Properties.
Clinical Manufacturing
Clinical bulk, formulation, fill and finish manufacturing facilities are operated primarily in our Thousand Oaks, California, location. We also utilize third-party contract manufacturers for certain clinical products.
See Item 1A. Risk Factors — We perform a substantial amount of our commercial manufacturing activities at our Puerto Rico manufacturing facility and a substantial amount of our clinical manufacturing activities at our Thousand Oaks, California manufacturing facility; if significant natural disasters or production failures occur at the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials.
Distribution
We operate distribution centers in the United States, principally in Kentucky, California and the Netherlands for worldwide distribution of the majority of our commercial and clinical products. In addition, we also use third-party distributors to supplement distribution of our commercial and clinical products in certain areas of the world.
Other
In addition to the manufacturing and distribution activities noted above, our operations in the United States, Puerto Rico and the Netherlands perform key manufacturing support functions, including quality control, process development, procurement, distribution and production scheduling. Certain of those manufacturing and distribution activities are highly regulated by the FDA as well as other international regulatory agencies. See Government Regulation — FDA Regulation of Manufacturing Standards.
Manufacturing Initiatives
We have multiple ongoing initiatives that are designed to optimize our manufacturing network and/or mitigate risks while continuing to ensure adequate supply of our commercial products. The facilities impacted by each of these initiatives will require qualification and licensure by various regulatory authorities. These initiatives include the construction of a formulation and fill facility at our Puerto Rico site; and as part of a risk mitigation strategy, we plan modification and expansion of our recently acquired formulation, fill and finish site in Ireland to manufacture our products.
In addition to these initiatives, we have projects designed to operate our facilities at appropriate production capacity over the next few years, further optimize manufacturing asset utilization, continue our use of third-party contract manufacturers and maintain a state of regulatory compliance. See Item 1A. Risk Factors — Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.
Raw Materials and Medical Devices
Certain raw materials necessary for the commercial and clinical bulk manufacturing of our products are provided by unaffiliated third-party suppliers, certain of which may be our only sources for such materials. Also, certain medical devices and components necessary for the formulation, fill and finish of our products are provided by unaffiliated third-party suppliers, certain of which may be the sole sources. Certain of the 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 must be obtained from the specific sole source or sources and could not be obtained from another supplier unless and until the regulatory agency approved such supplier. We currently attempt to manage the risk associated with such suppliers by inventory management, relationship management and evaluation of alternative sources when feasible. We also monitor the financial condition of certain suppliers and their ability to supply our needs.
Certain of the raw materials required in the commercial and clinical manufacturing of our products are sourced from other countries and/or derived from biological sources, including mammalian tissues. In addition, one of our marketed products also uses bovine serum and human serum albumin. Some countries in which we market our products may restrict the use of certain

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biologically derived substances in the manufacture of drugs. We continue to investigate alternatives to certain biological sources and alternative manufacturing processes that do not require the use of certain biologically derived substances because such raw materials may be subject to contamination and/or recall. A material shortage, contamination, recall and/or restriction of the use of certain biologically derived substances or other raw materials that may be sourced from other countries and that are used in the manufacture of our products could adversely impact or disrupt the commercial manufacturing of our products or could result in a mandated withdrawal of our products from the market. See Item 1A. Risk Factors — We rely on third-party suppliers for certain of our raw materials, medical devices and components.
We perform various procedures to assist in authenticating the source of raw materials, including intermediary materials used in the manufacture of our products, which include verification of the country of origin. These procedures are incorporated into the manufacturing processes we and our third-party contract manufacturers perform.
Government Regulation
Regulation by government authorities in the United States and other countries is a significant factor in the production and marketing of our products and our ongoing R&D activities.
In order to clinically test, manufacture and market products for therapeutic use, we must satisfy mandatory procedures and safety and effectiveness standards established by various regulatory bodies. In the United States, the Public Health Service Act, the FDCA and the regulations promulgated thereunder, as well as other federal and state statutes and regulations govern, among other things, the raw materials and components used in the production, research, development, testing, manufacture, quality control, labeling, storage, record keeping, approval, advertising and promotion, and distribution of our products. Failure to comply with the applicable regulatory requirements may subject us to a variety of administrative and/or judicially imposed sanctions. The sanctions could include the FDA’s refusal to approve pending applications, withdrawals of approvals, delay or suspension of clinical trials, warning letters, product recalls, product seizures, total or partial suspension of our operations, injunctions, fines, civil penalties and/or criminal prosecution.
Clinical Development. We must conduct extensive clinical trials designed to establish the safety and efficacy of product candidates in order to file for regulatory approval to market a product. Product development and approval within that regulatory framework take a number of years and involve our expenditure of substantial resources, and any approval we obtain remains costly for us to maintain. After laboratory analysis and preclinical testing in animals, we file an Investigational New Drug Application (IND) with the FDA to begin human testing. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions. In such a case, we and the FDA must resolve any outstanding concerns before the clinical trial can begin.
Typically, we undertake a three-phase human clinical testing program. In phase 1, we conduct small clinical trials to investigate the safety and proper dose ranges of our product candidates in a small number of human subjects. In phase 2, we conduct clinical trials to investigate side effect profiles and the efficacy of our product candidates in a larger number of patients who have the disease or condition under study. In phase 3, we conduct clinical trials to investigate the safety and efficacy of our product candidates in a large number of patients who have the disease or condition under study. The time and expense required for us to perform this clinical testing are substantial and may vary by product. For example, the phase 3 ongoing clinical trials for AMG 145 are large and require substantial time and resources to recruit patients and significant expense to execute. Foreign studies performed under an IND must meet the same requirements that apply to U.S. studies. The FDA will accept a foreign clinical study not conducted under an IND only if the study is well-designed, well-conducted, performed by qualified investigators and conforms to good clinical practice. Phase 1, 2 and 3 testing may not be completed successfully within any specified time period, if at all. (See Item 1A. Risk Factors — We may not be able to develop commercial products.) The FDA monitors the progress of each trial conducted under an IND and may, at its discretion, re-evaluate, alter, suspend or terminate the testing based on the data accumulated to that point and the FDA’s risk/benefit assessment with regard to the patients enrolled in the trial. See Item 1A. Risk Factors — We must conduct clinical trials in humans before we can commercialize and sell any of our product candidates or existing products for new indications.
Applications. The results of preclinical and clinical trials are submitted to the FDA in the form of a BLA for biologic products subject to the Public Health Service Act or an NDA for drugs subject to the approval provisions of the FDCA. Submission of the application is no guarantee that the FDA will find it complete and accept it for filing. If an application is accepted for filing, following the FDA’s review, the FDA may grant marketing approval, request additional information or deny the application if it determines that the application does not provide an adequate basis for approval. We cannot take any action to market any new drug or biologic product in the United States until our appropriate marketing application has been approved by the FDA.
Post-approval Phase. After we have obtained approval to market our products, we monitor adverse events from the use of our products and report such events to regulatory agencies, along with information from post marketing surveillance or studies. We may utilize other research approaches to learn or confirm information about our marketed products, including observational

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studies and patient registries, and may engage in risk management activities such as physician education initiatives and patient advocacy group initiatives. We may also conduct or be required by regulatory agencies to conduct further clinical trials to provide additional information on our marketed products’ safety and efficacy. Those additional trials may include studying doses or schedules of administration different from those used in previous studies, use in other patient populations or other stages of the disease or use over a longer period of time. Additional trials of this nature are sometimes required by regulatory agencies as a condition of their approval to market our products, and they might also request or require that we conduct specific studies, including observational epidemiological studies, in order to identify or assess possible safety risks of our marketed products that are observed or suggested by available scientific data and such trials are sometimes referred to as PMCs or PMRs. In the United States, if the FDA becomes aware of new safety information after approval of a product, it may require us to conduct further clinical trials to assess a known or potential serious risk. If we are required to conduct such a post-approval study, periodic status reports must be submitted to the FDA. Failure to conduct such post-approval studies in a timely manner may result in substantial civil or criminal penalties. Data resulting from these clinical trials may result in expansions or restrictions to the labeled indications for which our products have already been approved and to the reimbursement provided by government and commercial payers for our products.
The FDA also has the authority to require companies to implement a REMS for a product to ensure that the benefits of the drug outweigh the risks. The FDA may require the submission of a REMS before a product is approved or after approval based on new safety information, including new analyses of existing safety information. In determining whether a product will require a REMS before the product is approved, the FDA may consider a number of factors.
Each REMS is unique and varies depending on the specific factors required. While the elements of REMS may vary, all REMS require the sponsor to submit periodic assessment reports to the FDA to demonstrate that the goals of the REMS are being met. Failure to comply with a REMS, including submission of a required assessment or any modification to a REMS, may result in substantial civil or criminal penalties and can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market. We currently have approved REMS for our ESAs, Prolia® and Nplate®. The FDA and sponsor companies continue to learn how best to implement, operate and monitor the effectiveness of REMS, and the requirements of our REMS and those of other companies may change over time. The FDA published guidance intended to limit or remove REMS requirements for certain products. The FDA will also be looking at ways to standardize REMS programs, with the intent to make the establishment, review and assessment of these programs less burdensome on the agency and the sponsor. The FDA will hold a series of public meetings on REMS over the next several years and will solicit stakeholder feedback in an effort to continue to focus and improve their risk management oversight.
Adverse events that are reported after marketing approval also can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market. The FDA has authority to mandate labeling changes to products at any point in a product’s lifecycle based on new safety information or as part of an evolving label change to a particular class of products.
The FDA also uses various advisory committees of external experts to assist in its mission to protect and promote the public health and to obtain independent expert advice on scientific, technical and policy matters. The committees are generally advisory only and FDA officials are not bound to or limited by their recommendations. We have participated in meetings of the Oncology Drug Advisory Committee, the Cardiovascular and Renal Drug Advisory Committee and the Advisory Committee for Reproductive Health Drugs, among others, to address certain issues related to our products, including Aranesp®, EPOGEN®, Prolia® and XGEVA®.
FDA Approval of Biosimilars. The PPACA authorizes the FDA to approve biosimilars via a separate, abbreviated pathway. The law establishes a period of 12 years of data exclusivity for reference products in order to preserve incentives for future innovation and outlines statutory criteria for science-based biosimilar approval standards that take into account patient safety considerations. Under this framework, data exclusivity protects the data in the innovator’s regulatory application by prohibiting others, for a period of 12 years, from gaining FDA approval based in part on reliance on or reference to the innovator’s data in their application to the FDA. The new law does not change the duration of patents granted on biologic products. In February 2012, the FDA released three draft guidance documents as part of the implementation of the abbreviated approval pathway for biosimilars. While the FDA guidance documents are not legally binding on the public or on the FDA, they indicate the FDA’s current thinking on the development of biosimilars. The draft guidance documents provide insight on a range of technical, scientific and regulatory issues. The guidance documents generally provide that, for approval, a sponsor must demonstrate that the proposed product is “biosimilar” (a term defined by statute) to a single reference product already licensed by the FDA. In assessing biosimilarity, the FDA indicated that it intends to use a risk-based “totality of the evidence” approach to evaluate all available data submitted by the applicant. Generally, a biosimilar application must include a clinical study or studies sufficient to demonstrate safety, purity and potency in one or more indications for which the reference product is licensed and the biosimilar applicant seeks approval. The scope and magnitude of clinical data needed will depend on the extent of uncertainty about the biosimilarity of the product as well as the frequency and severity of safety risks associated with the reference product. The FDA indicated that it is still

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evaluating a number of relevant issues, and additional guidance documents are expected to be released, including guidance on the criteria for interchangeability (which the FDA has indicated would be a “higher standard” than biosimilarity).
FDA Regulation of Product Marketing and Promotion. The FDA closely reviews and regulates the marketing and promotion of products. We are required to obtain the FDA approval before marketing or promoting a product as a treatment for a particular indication. Our product promotion for approved product indications must comply with the statutory standards of the FDCA, and the FDA’s implementing regulations and standards. The FDA’s review of marketing and promotional activities encompasses, but is not limited to, direct-to-consumer advertising, healthcare provider-directed advertising and promotion, sales representative communications to healthcare professionals, promotional programming and promotional activities involving the Internet. The FDA may also review industry-sponsored scientific and educational activities. The FDA may take enforcement action against a company for promoting unapproved uses of a product or for other violations of its advertising and labeling laws and regulations. Enforcement action may include product seizures, injunctions, civil or criminal penalties or regulatory letters, which may require corrective advertising or other corrective communications to healthcare professionals. Failure to comply with the FDA’s regulations also can result in adverse publicity or increased scrutiny of company activities by the U.S. Congress or other legislators.
FDA Regulation of Manufacturing Standards. The FDA regulates and inspects equipment, facilities, laboratories and processes used in the 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 Practice regulations and product-specific regulations enforced by the FDA through its facilities inspection program. The FDA also conducts regular, periodic visits to re-inspect our equipment, facilities, laboratories and processes following an initial approval. If, as a result of those inspections, the FDA determines that our equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against us, including suspension of our manufacturing operations. Such issues may also delay the approval of new products undergoing FDA review.
Regulation of Combination Products. When our products are used with medical devices, they may be considered combination products, which are defined by the FDA to include products comprised of two or more regulated components or parts (e.g., a biologic and a device). When regulated independently, biologics and devices each have their own regulatory requirements. However, the regulatory requirements for a combination product comprised of a biologic administered with a delivery device are more complex, as in addition to the individual regulatory requirements for each component, additional combination product regulatory requirements may apply. We expect that in the future a number of our pipeline products may meet this definition and be evaluated for regulatory approval under this framework. In addition, due to regional differences in regulation structures and systems outside the United States, the definition and regulatory requirements for combination products may differ significantly depending on the region.
New Innovation Provisions Available to Regulatory Agencies Reviewing Drug Applications. In the United States, the FDA may grant accelerated approval status to products that treat serious or life-threatening illnesses and that provide meaningful therapeutic benefits to patients over existing treatments. Under accelerated approval regulations, the FDA may approve a product based on a surrogate endpoint that is reasonably likely to predict clinical benefit or based on an effect on a clinical endpoint other than survival or irreversible morbidity. The sponsor/marketing applicant will then be required to conduct additional, post-approval confirmatory trials to verify and describe clinical benefit, and the product may have certain post-marketing restrictions as necessary to assure safe use. The FDA is also given greater flexibility to withdraw approval granted under accelerated approval, if it is warranted. Additional legislation has been approved in 2012 that could further expand the FDA's authority. For example, the FDA may consider ways to more greatly use the accelerated approval pathway for rare or very rare diseases, and a new review designation was created to help foster the innovation of promising new therapies with the potential to shorten the timeframe for conducting pivotal trials and speed up patient access to the approved product.
In Europe, the preexisting conditional approval pathway provides for the European Medicines Agency (EMA) to apply greater flexibility in terms of their benefit/risk evaluation in order to promote innovation. While no plans to revise or add to this statutory provision have been announced, there are on-going discussions at the EMA to consider so-called “adaptive licensing”. It is not clear at this stage whether such proposals will result in meaningful changes to the EU regulatory approval pathway.
Approval and Post-Approval Regulation Outside the United States. In the EU countries, Switzerland, Canada and Australia, regulatory requirements and approval processes are similar in principle to those in the United States. Additionally, depending on the type of drug for which approval is sought, there are currently two potential tracks for marketing approval in the EU, including a centralized procedure. In the centralized procedure, which is required of all products derived from biotechnology, a company submits a single marketing authorization application to the EMA which conducts a thorough evaluation, drawing from its scientific resources across Europe. If the drug product is proven to fulfill the requirements for quality, safety and efficacy, the CHMP adopts a positive opinion, which is transmitted to the EC for final approval of the marketing authorization. While the EC generally follows the CHMP's opinion, it is not bound to do so. In the EU, biosimilars have been approved under a sub-pathway of the centralized procedure since 2006. The pathway allows sponsors of a biosimilar to seek and obtain regulatory approval based in part on the

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clinical trial data of an originator product to which the biosimilar has been demonstrated to be “similar.” In many cases, this allows biosimilars to be brought to market without conducting the full suite of clinical trials typically required of originators. After evaluation and marketing authorization, various parties, including the national competent authorities, the EMA, the EC and the marketing authorization holders share pharmacovigilance responsibilities regarding the detection, assessment and prevention of adverse effects and other medicine-related problems. Healthcare professionals and patients are also encouraged to report adverse effects and other medicine-related problems. This process includes the collection of adverse drug reaction reports as part of the follow-up on any side effects of a product, and upon assessment, the authorities can decide to demand that product labels be updated with safety data or warnings, that safety data or warnings be provided to healthcare professionals, or recommend the temporary suspension or complete withdrawal of a product from the market. In 2012, new pharmacovigilance legislation became effective in the EU that contains new and revised requirements for conducting pharmacovigilance, as well as codifying various existing requirements previously set out as guidance. The new legislation enhanced the authority of European regulators to require pharmaceutical companies to conduct post-authorization efficacy and safety studies, both at the time of approval and at any time afterwards in light of scientific developments. There are also additional requirements to include statements in product labeling with regard to adverse drug reaction reporting and additional monitoring of products. There also is expected to be significantly greater transparency of the safety review process as a result of the new legislation.
Other countries such as those in Latin America, Mexico, Brazil, Russia, Turkey and the Middle East have a less comprehensive review process in terms of data requirements and for the most part rely on prior marketing approval (as demonstrated by a certificate of pharmaceutical product) from a foreign regulatory authority in the United States or EU. The regulatory process in these countries is less well defined than in the United States and frequently includes manufacturing/testing facility inspections, testing of drug product on importation and other domestic requirements.
Other. We are also subject to various federal and state laws, as well as foreign laws, pertaining to healthcare “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal to solicit, offer, receive or pay any remuneration in exchange for or to induce the referral of business, including the purchase or prescription of a particular drug that is reimbursed by a state or federal program. The federal government and the states have published regulations that identify “safe harbors” or exemptions for certain arrangements that do not violate the anti-kickback statute. We seek to comply with the safe harbors whenever possible. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing some of our practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit knowingly and willingly presenting, or causing to be presented for payment to third-party payers (including Medicare and Medicaid) any claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed or claims for medically unnecessary items or services. Our activities related to the sale and marketing of our products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid). On December 19, 2012, Amgen announced that it had finalized a settlement agreement with the U.S. government, 49 states and the District of Columbia regarding allegations that 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 integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services that requires Amgen to maintain its corporate compliance program and to undertake a set of defined corporate integrity obligations for a period of five years. See Note 18, Contingencies and commitments, to the Consolidated Financial Statements for further information. Our activities could be subject to challenge for the reasons discussed above and due to the broad scope of those laws and the increasing attention being given to them by law enforcement authorities.
We are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other current and potential future federal, state or local laws, rules and/or regulations. Our R&D activities involve the controlled use of hazardous materials, chemicals, biological materials and various radioactive compounds. We believe our procedures comply with the standards prescribed by federal, state or local laws, rules and/or regulations; however, the risk of injury or accidental contamination cannot be completely eliminated. While we are not required to do so, we strive to conduct our research and manufacturing activities in a manner that meets the intents and purposes of the National Institutes of Health Guidelines for Recombinant DNA Research.
Additionally, the U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. corporations and their representatives from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Other countries have enacted similar anti-corruption laws and/or regulations.
Our present and future business has been and will continue to be subject to various other U.S. and foreign laws, rules and/or regulations.


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Research and Development and Selected Product Candidates
We focus our R&D on novel human therapeutics for the treatment of grievous illness in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular and general medicine, which includes neuroscience. We take a modality-independent approach to R&D with a focus on biologics. Our discovery research programs may therefore yield targets that lead to the development of human therapeutics delivered as large molecules, small molecules, or other combination or new modalities.
We have major R&D centers 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. To increase the number of patients available for enrollment in our clinical trials, we have opened clinical sites and will continue to open clinical sites and to enroll patients in a number of geographic locations. See Item 1A. Risk Factors — We must conduct clinical trials in humans before we can commercialize and sell any of our product candidates or existing products for new indications.
Some of our competitors are actively engaged in R&D in areas where we have products or where we are developing product candidates or new indications for existing products. For example, we compete with other clinical trials for eligible patients, which may limit the number of available patients who meet the criteria for certain clinical trials. The competitive marketplace for our product candidates is significantly dependent on the timing of entry into the market. Early entry may have important advantages in gaining product acceptance, thereby contributing to the product’s eventual success and profitability. Accordingly, we expect that in some cases, the relative speed with which we can develop products, complete clinical testing, receive regulatory approval and supply commercial quantities of the product to the market will be important to our competitive position.
In addition to product candidates and marketed products generated from our internal R&D efforts, we acquire companies, acquire and license certain product and R&D technology rights and establish R&D arrangements with third parties to enhance our strategic position within our industry by strengthening and diversifying our R&D capabilities, product pipeline and marketed product base. Those licenses and arrangements generally provide for non-refundable, upfront license fees, R&D and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing.
Various public and privately owned companies, research organizations, academic institutions and government agencies conduct a significant amount of R&D in the biotechnology industry. In pursuing R&D arrangements and licensing or acquisition activities, we face competition from other pharmaceutical and biotechnology companies that also seek to license or acquire technologies, product candidates or marketed products from those entities. Accordingly, we may have difficulty entering into R&D arrangements and licensing or acquiring technologies, product candidates and marketed products on acceptable terms.
See Government Regulation — Clinical Development for a discussion of government regulation over clinical development.
The following table is a selection of certain of our product candidates by phase of development in our therapeutic areas of focus as of February 11, 2013, unless otherwise indicated. Each disease or condition for our product candidates in phase 3 is listed separately. Additional product candidate (pipeline) information can be found on our website at http://www.amgen.com. (This website address is not intended to function as a hyperlink, and the information contained on our website is not intended to be a part of this filing.) The information in this section does not include other, non-registrational clinical trials, such as the Pegfilgrastim and Anti-VEGF Evaluation Study (PAVES) trial evaluating Neulasta® (pegfilgrastim) use in patients receiving chemotherapy and bevacizumab for the first-line treatment of locally-advanced or metastatic colorectal cancer, that we may conduct for purposes other than for submission to regulatory agencies for their approval of a new product indication. We may conduct non-registrational clinical trials for various reasons including to evaluate real-world outcomes or to collect additional safety information with the use of our products. See, for example, the discussion of our ESA pharmacovigilance trials under — Marketed Products — ESAs.

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Molecule
 
Disease/Condition
Phase 3 Programs
 
 
AMG 145
 
Hyperlipidemia

Aranesp® (darbepoetin alfa)
 
Myelodysplastic syndromes
Brodalumab (AMG 827)
 
Psoriasis
Prolia® (denosumab)
 
Glucocorticoid-induced osteoporosis
Prolia® (denosumab) - EU
 
Male osteoporosis
Rilotumumab
 
Gastric cancer
Romosozumab (AMG 785)
 
PMO
Sensipar®/Mimpara® (cinacalcet)
 
Post renal transplant
Talimogene laherparepvec
 
Melanoma
Trebananib (AMG 386)
 
Ovarian cancer
Vectibix® (panitumumab) - U.S.
 
First- and second-line colorectal cancer
XGEVA® (denosumab)
 
Delay or prevention of bone metastases in breast cancer
XGEVA® (denosumab) - EU
 
Delay or prevention of bone metastases in prostate cancer
XGEVA® (denosumab)
 
Cancer-related bone damage (SREs) in patients with multiple myeloma
Phase 2 Programs
 
 
AMG 151
 
Type 2 diabetes
AMG 181
 
Inflammatory bowel disease
AMG 416
 
Secondary hyperparathyroidism in patients with CKD receiving dialysis
AMG 747
 
Schizophrenia
Blinatumomab (AMG 103)
 
Acute lymphoblastic leukemia (ALL)
Blinatumomab
 
Non-Hodgkin's Lymphoma (NHL)
Brodalumab
 
Inflammatory diseases
Omecamtiv mecarbil
 
Heart failure
Prolia® (denosumab)
 
RA
Trebananib
 
Various cancer types
Vectibix® (panitumumab)
 
Squamous cell head and neck cancer
XGEVA® (denosumab)
 
Giant cell tumor of the bone (GCTB)
XGEVA® (denosumab)
 
Hypercalcemia of malignancy
Phase 1 Programs
 
 
AMG 110
 
Various cancer types
AMG 139
 
Inflammatory diseases
AMG 157
 
Asthma
AMG 167
 
Bone-related conditions
AMG 172
 
Various cancer types
AMG 208
 
Various cancer types
AMG 232
 
Various cancer types
AMG 319
 
Hematologic malignancies
AMG 334
 
Migraine
AMG 337
 
Various cancer types
AMG 357
 
Autoimmune diseases
AMG 557
 
Systemic lupus erythematosus
AMG 595
 
Glioblastoma
AMG 729
 
Autoimmune diseases
AMG 780
 
Various cancer types
AMG 811
 
Systemic lupus erythematosus
AMG 820
 
Various cancer types
AMG 876
 
Type 2 diabetes
AMG 900
 
Various cancer types

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Phase 1
clinical trials investigate safety and proper dose ranges of a product candidate in a small number of human subjects.
Phase 2
clinical trials investigate side effect profiles and efficacy of a product candidate in a large number of patients who have the disease or condition under study.
Phase 3
clinical trials investigate the safety and efficacy of a product candidate in a large number of patients who have the disease or condition under study.

The following text provides additional information about selected product candidates that have advanced into human clinical trials.
AMG 145
AMG 145 is a human monoclonal antibody that inhibits Proprotein Convertase Subtilisin/Kexin Type 9 (PCSK9). It is being investigated as a treatment for hyperlipidemia.
Phase 2 study results evaluating AMG 145 were reported at a medical meeting in November 2012 in the following four areas: as monotherapy, in combination with statin therapy, in heterozygous familial hypercholesterolemia, and in statin-intolerant subjects. Based on the study results, phase 3 enrollment is underway in these populations.
Aranesp® (darbepoetin alfa)
Aranesp® is a recombinant human protein agonist of the erythropoietin receptor.
The phase 3 study of Aranesp® for the treatment of low risk myelodysplastic syndromes is ongoing.
Brodalumab
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 one of five inflammation monoclonal antibodies being jointly developed in collaboration with AstraZeneca.
In 2012, we initiated three phase 3 studies for the treatment of psoriasis. We completed our phase 2 study in psoriatic arthritis in 2012. Brodalumab is also being evaluated for the treatment of asthma.
Denosumab
Denosumab is a human monoclonal antibody that specifically targets a ligand known as RANKL (that binds to a receptor known as RANK) which is a key mediator of osteoclast formation, function, and survival. It is being investigated across a range of conditions including osteoporosis, treatment-induced bone loss, RA and numerous tumor types across the spectrum of cancer-related bone diseases, including hypercalcemia of malignancy.
Prolia® (denosumab)
In September 2012, Prolia® was approved by the FDA for the treatment to increase bone mass in men with osteoporosis at high risk for fracture in the US. A phase 3 study of Prolia® for the treatment of glucocorticoid-induced osteoporosis was initiated in 2012.
XGEVA® (denosumab)
In June 2012, we submitted a marketing application to the EMA for XGEVA® to treat men with castration-resistant prostate cancer at high risk of developing bone metastases.
In December 2012, we submitted marketing applications to the FDA and EMA for XGEVA® for the treatment of GCTB in adults or skeletally mature adolescents.
Phase 3 studies for the delay or prevention of bone metastases in patients with adjuvant breast cancer and prevention of SRE in patients with multiple myeloma are ongoing.
Rilotumumab
Rilotumumab is a human monoclonal antibody that inhibits the action of hepatocyte growth factor/scatter factor. It is being investigated as a cancer treatment.
In 2012, we initiated a phase 3 study for the treatment of gastric cancer.

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Romosozumab
Romosozumab is a humanized monoclonal antibody that inhibits the action of sclerostin. Romosozumab is being developed in collaboration with UCB for PMO.
In 2012, we initiated two phase 3 studies for the treatment of PMO in women.
After reviewing the 52-week tibia data and recent regulatory guidance that deemed acceleration of fracture healing a non-viable endpoint for a phase 3 program, it was determined that we would not pursue this indication. This decision is based on the regulatory guidance and on the efficacy results from the acceleration of fracture healing endpoint in the tibia trial, not on safety. The safety profile remains consistent with what has been seen in the PMO program.
Sensipar®/Mimpara® (cinacalcet)
Sensipar®/Mimpara® is an orally-administered small molecule that lowers PTH levels in blood by increasing sensitivity of the calcium-sensing receptor (CaSR) to extracellular calcium. It is being evaluated in post renal transplant patients.
Talimogene laherparepvec
Talimogene laherparepvec is an oncolytic immunotherapy derived from HSV-1. It is being investigated as a cancer treatment.
The phase 3 study for the treatment of melanoma is ongoing.
Trebananib
Trebananib is a peptibody that inhibits the interaction between the endothelial cell-selective Tie2 receptor and its ligands Ang1 and Ang2. It is being investigated as a cancer treatment.
Phase 3 studies of trebananib for the treatment of first-line and recurrent ovarian cancer are ongoing. Phase 2 studies of trebananib for treatment of renal cell carcinoma, hepatocellular carcinoma and NSCLC are ongoing.
Vectibix® (panitumumab)
Vectibix® is a human monoclonal antibody antagonist of the EGFr pathway. It is being investigated as a cancer treatment.
In July 2011, we announced that we received Complete Response Letters from the FDA on the first- and second-line line mCRC sBLAs requesting additional information from the '181 and '203 studies. We are currently working on addressing the FDA's requests in the Complete Response Letters.
AMG 151
AMG 151 is a small molecule glucokinase activator. It is being investigated as a treatment for type 2 diabetes. We completed our phase 2 study in 2012.
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 initiated in 2012. AMG 181 is one of five inflammation monoclonal antibodies being jointly developed in collaboration with AstraZeneca.
AMG 416
AMG 416 is a peptide agonist of the human cell surface CaSR. It is being investigated as a treatment for secondary hyperparathyroidism in patients with CKD receiving dialysis.
We completed two phase 2 studies in 2012. Phase 3 initiation is planned in 2013.
AMG 747
AMG 747 is a small molecule inhibitor of glycine transporter type-1 (GlyT-1). It is being investigated as a treatment for negative symptoms and cognitive deficits associated with schizophrenia, with two phase 2 studies initiated in 2012.
Blinatumomab
Blinatumomab is an anti-CD19 x anti-CD3 (BiTE®) bispecific antibody. It is being investigated as a cancer treatment.

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In December 2012, we reported the results from a phase 2 adult ALL relapsed refractory study at a medical meeting. Phase 2 studies in adult patients with relapsed/refractory and minimal residual disease of ALL and a phase 2 study in adult patients with NHL are ongoing.
Omecamtiv mecarbil
Omecamtiv mecarbil is a small molecule activator of cardiac myosin. It is being investigated for the treatment of heart failure. We are developing this product in collaboration with Cytokinetics, Inc.
A phase 2 study of an intravenous formulation of omecamtiv mecarbil in patients with left ventricular systolic dysfunction, who are hospitalized with acute heart failure, is ongoing.
Amgen Development of Biosimilars
As previously announced, we are collaborating with Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.) to develop and commercialize, on a worldwide basis, several oncology antibody biosimilar medicines. The products our collaboration is pursuing include biosimilar versions of bevacizumab (sold by Genentech/Roche under the brand name Avastin®), trastuzumab (sold by Genentech/Roche under the brand names Herceptin®/Herclon®), rituximab (sold by Roche under the brand names Rituxan®/Mabthera®) and cetuximab (sold by Eli Lilly/BMS under the brand name Erbitux®).
We are also working to develop biosimilar versions of adalimumab (sold by AbbVie under the brand name HUMIRA®) and infliximab (sold by Janssen/Merck under the brand name REMICADE®).
Our biosimilar product candidates are in varying stages of regulatory development. We expect that any revenue contribution from these biosimilar programs, if successful, would not occur for a number of years.
Phase 3 Product Candidate Program Changes
As of February 10, 2012, we had 12 phase 3 programs. As of February 11, 2013, we had 14 phase 3 programs, as six programs had advanced into phase 3 trials, three programs had concluded and all rights to one program were out-licensed. These changes are set forth in the following table:
Molecule
 
Disease / Condition
 
Program Change
AMG 145
 
Hyperlipidemia
 
Advanced to phase 3
Aranesp®
 
Anemia in heart failure
 
Concluded - failed to meet primary endpoint(s)
Brodalumab (AMG 827)
 
Psoriasis
 
Advanced to phase 3
Ganitumab
 
Pancreatic cancer
 
Concluded - failed to meet primary endpoint(s)
Prolia® (denosumab)
 
Glucocorticoid-induced osteoporosis
 
Advanced to phase 3
Sensipar®/Mimpara® (cinacalcet)
 
Cardiovascular disease in patients with secondary hyperparathyroidism and CKD undergoing maintenance dialysis
 
Concluded - failed to meet primary endpoint(s)
Rilotumumab
 
Gastric cancer
 
Advanced to phase 3
Romosozumab (AMG 785)
 
PMO
 
Advanced to phase 3
Motesanib
 
First-line NSCLC
 
Licensed all rights to this program to Takeda(1)
XGEVA® (denosumab)
 
Cancer-related bone damage (SREs) in patients with multiple myeloma
 
Advanced to phase 3
(1) 
See Business Relationships.


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Phase 3 Product Candidate Patent Information

The following table describes our outstanding composition of matter patents that have issued thus far for our product candidates in phase 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 Marketed Products.
Molecule
 
Territory
 
General Subject Matter
 
Estimated Expiration*
AMG 145
 
U.S.
 
Polypeptides
 
2029
Brodalumab (AMG 827)
 
U.S.
 
Polynucleotides and polypeptides
 
2027
Romosozumab (AMG 785)
 
U.S.
 
Polypeptides
 
2026
Talimogene laherparepvec
 
U.S.
 
Modified HSV1 compounds and strains
 
2021
 
 
Europe
 
Modified HSV1 compounds and strains
 
2021
Trebananib (AMG 386)
 
U.S.
 
Polynucleotides and polypeptides
 
2025
 
 
Europe
 
Polynucleotides and polypeptides
 
2022
*
Patent expiration estimates are based on issued patents which may be challenged, invalidated, or circumvented by competitors. The patent expiration estimates do not include any term adjustments, extensions or supplemental protection certificates that may be obtained in the future and extend these dates. Corresponding patent applications are pending in other jurisdictions. Additional patents may be filed or issued in the future and may provide additional exclusivity for the product candidate or its use.
Business Relationships
From time to time, we enter into business relationships, including joint ventures and collaborative arrangements, for the R&D, manufacture and/or commercialization of products and/or product candidates. In addition, we also acquire product and R&D technology rights and establish R&D collaborations with third parties to enhance our strategic position within our industry by strengthening and diversifying our R&D capabilities, product pipeline and marketed product base. These arrangements generally provide for non-refundable, upfront license fees, development and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. The activities under these collaboration agreements are performed with no guarantee of either technological or commercial success, and each is unique in nature.

Trade secret protection for our unpatented confidential and proprietary information is important to us. To protect our trade secrets, we generally require counterparties to execute confidentiality agreements upon the commencement of the business relationship with us. However, others could either develop independently the same or similar information or obtain access to our information.

Kirin-Amgen, Inc.

K-A is a 50-50 joint venture with 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 and Australia, (ii) darbepoetin alfa, romiplostim and brodalumab in the United States, Europe, Canada, Australia, New Zealand, Mexico, all Central and South American countries and certain countries in Central Asia, Africa and the Middle East, and (iii) recombinant human erythropoietin in the United States. We currently market pegfilgrastim, G-CSF, darbepoetin alfa, recombinant human erythropoietin and romiplostim under the brand names Neulasta®, NEUPOGEN®/GRANULOKINE®, Aranesp®, EPOGEN® and Nplate®, respectively. Under these agreements, we pay K-A royalties based on product sales. In addition, we also receive payments from K-A for milestones earned and for conducting certain R&D activities on its behalf. See Note 7, Related party transactions, to the Consolidated Financial Statements.

K-A has also given Kirin exclusive licenses to manufacture and market: (i) G-CSF and pegfilgrastim in Japan, Taiwan and South Korea, (ii) darbepoetin alfa, romiplostim and brodalumab in Japan, China, Taiwan, South Korea and in certain other countries and/or regions in Asia and (iii) recombinant human erythropoietin in Japan. K-A also gave Kirin and Amgen co-exclusive licenses to manufacture and market G-CSF, pegfilgrastim and recombinant human erythropoietin in China, which Amgen subsequently assigned to Kirin, and as a result, Kirin now exclusively manufactures and markets G-CSF and recombinant human erythropoietin in China. Kirin markets G-CSF, pegfilgrastim, darbepoetin alfa, romiplostim and recombinant human erythropoietin under the

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brand names GRAN®/Grasin®, Neulasta®, NESP®, ROMIPLATE® and ESPO®, respectively. Under these agreements, Kirin pays K-A royalties based on product sales. In addition, Kirin also receives payments from K-A for conducting certain R&D activities on its behalf.

K-A has also given J&J exclusive licenses to manufacture and market recombinant human erythropoietin for all geographic areas of the world outside the United States, China and Japan. K-A has also given Roche exclusive licenses to market pegfilgrastim and G-CSF in all territories not licensed to Amgen and Kirin. Under these agreements, J&J and Roche pay royalties to K-A based on product sales.

Pfizer Inc.

We are in a collaboration with Pfizer to co-promote ENBREL in the United States and Canada. The rights to market ENBREL outside the United States and Canada are reserved to Pfizer. Under the agreement, a management committee comprised of equal representation from Amgen and Pfizer is responsible for overseeing the marketing and sales of ENBREL, including strategic planning, the approval of an annual marketing plan, product pricing and the establishment of a brand team. Amgen and Pfizer share in the agreed-upon selling and marketing expenses approved by the joint management committee. We currently pay Pfizer a percentage of annual gross profits on our ENBREL sales in the United States and Canada attributable to all approved indications on a scale that increases as gross profits increase; however, we maintain a majority share of ENBREL profits. After expiration of the co-promotion term on October 31, 2013, we will be required to pay Pfizer residual royalties based on a declining percentage of annual net ENBREL sales in the United States and Canada for three years, ranging from 12% to 10%. The amounts of such payments are anticipated to be significantly less than what would be owed based on the terms of the current ENBREL profit share. Effective November 1, 2016, there will be no further royalty payments.
 
Glaxo Group Limited

We are in a collaboration with Glaxo for the commercialization of denosumab for osteoporosis indications in Europe, Australia, New Zealand and Mexico (the Primary Territories). We have retained the rights to commercialize denosumab for all indications in the United States and Canada and for oncology indications in the Primary Territories. Under a related agreement, Glaxo will commercialize denosumab for all indications in countries, excluding Japan, where we did not have a commercial presence at the commencement of the agreement, including China, Brazil, India, Taiwan and South Korea (the Expansion Territories). In the Expansion Territories, Glaxo is responsible for all development and commercialization costs and will purchase denosumab from us to meet demand. We have the option of expanding our role in the commercialization of denosumab in the Primary Territories and certain of the Expansion Territories. In the Primary Territories, we share equally in the commercialization profits and losses related to the collaboration after accounting for expenses, including an amount payable to us in recognition of our discovery and development of denosumab. Glaxo is also responsible for bearing a portion of the cost of certain specified development activities in the Primary Territories.

Takeda Pharmaceutical Company Limited

In 2008, we entered into an arrangement with Takeda, that provided Takeda both: (i) the exclusive rights to develop and commercialize for the Japanese market up to 12 molecules from our portfolio across a range of therapeutic areas, including oncology and inflammation (collectively the “Japanese market products”) and (ii) the right to collaborate with us on the worldwide (outside Japan) development and commercialization of our product candidate, motesanib. The Japanese market products include Vectibix® and certain product candidates.

In 2011, we announced that the motesanib pivotal phase 3 trial (MONET1) did not meet its primary objective of demonstrating an improvement in overall survival.

In June 2012, the parties materially modified this arrangement such that Amgen licensed all of its rights to motesanib to Takeda which now has control over the worldwide development and commercialization of motesanib.

AstraZeneca Plc.
We are in a collaboration with AstraZeneca to jointly develop and commercialize certain monoclonal antibodies from Amgen's clinical inflammation portfolio, including brodalumab, AMG 139, AMG 157, AMG 181 and AMG 557. The agreement covers the worldwide development and commercialization, except for certain Asian countries for brodalumab and Japan for AMG 557, that are licensed to other third parties.

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Under the terms of the agreement, approximately 65% of related development costs for the 2012-2014 periods will be funded by AstraZeneca; thereafter, the companies will share costs equally. If approved for sale, Amgen would receive a low-single-digit royalty rate for brodalumab and a mid-single-digit royalty rate for the rest of the portfolio, after which the worldwide commercialization profits and losses related to the collaboration products would be shared equally.
UCB
We are in a collaboration with UCB for the development and commercialization of romosozumab. We have the rights to commercialize romosozumab for all indications in the United States, Canada, Mexico and Japan. UCB has the rights for all EU members at the time of first regulatory approval, Australia and New Zealand. Prior to commercialization, countries that have not been initially designated will be designated to Amgen or UCB in accordance with the terms of the agreement.
Generally, development costs are shared equally and we will share equally in the worldwide commercialization profits and losses related to the collaboration after accounting for expenses.
DaVita Inc.

We are in a seven-year supply agreement with DaVita that commenced January 1, 2012. Pursuant to this agreement, we will supply EPOGEN® in amounts necessary to meet no less than 90% of DaVita's and its affiliates' requirements for ESAs used in providing dialysis services in the United States and Puerto Rico. The agreement may be terminated by either party before expiration of its term in the event of certain breaches of the agreement by the other party.
Human Resources
As of December 31, 2012, Amgen had approximately 18,000 staff members. We consider our staff relations to be good.
Executive Officers of the Registrant
The executive officers of the Company as of February 13, 2013, are as follows:
Mr. Robert A. Bradway, age 50, has served as a director of the Company since October 2011 and Chairman of the Board of Directors since January 1, 2013. Mr. Bradway has been the Company's President since May 2010 and Chief Executive Officer since May 2012. From May 2010 to May 2012, Mr. Bradway served as the Company's President and Chief Operating Officer. Mr. Bradway joined the Company in 2006 as Vice President, Operations Strategy, and served as Executive Vice President and Chief Financial Officer from April 2007 to May 2010. Prior to joining the Company, he was a Managing Director at Morgan Stanley in London where he had responsibility for the firm's banking department and corporate finance activities in Europe and focused on healthcare.

Mr. Madhavan (Madhu) Balachandran, age 62, became Executive Vice President, Operations in August 2012. Mr. Balachandran joined the Company in 1997 and has held leadership positions in engineering, information systems and operations. From October 2007 to August 2012, Mr. Balachandran was Senior Vice President, Manufacturing. From February 2007 to October 2007, Mr. Balachandran was Vice President, Site Operations. From May 2002 to February 2007, Mr. Balachandran was Vice President, Puerto Rico Operations. Prior to 2002, Mr. Balachandran served as Associate Director, Capital Projects, before his promotion to Director, Engineering, and then to Vice President, Information Management.

Dr. Sean E. Harper, age 50, became Executive Vice President, Research and Development in February 2012. Dr. Harper joined the Company in 2002 and has held leadership roles in early development, medical sciences and global regulatory and safety. Dr. Harper served as Senior Vice President, Global Development and Corporate Chief Medical Officer from March 2007 to February 2012. Prior to joining the Company, Dr. Harper worked for five years at Merck Research Laboratories.

Mr. Anthony C. Hooper, age 58, became Executive Vice President, Global Commercial Operations, in October 2011. From March 2010 to October 2011, Mr. Hooper was Senior Vice President, Commercial Operations and President, U.S., Japan and Intercontinental of BMS, a pharmaceutical company. From January 2009 to March 2010, Mr. Hooper was President, Americas of BMS. From January 2004 to January 2009, Mr. Hooper was President, U.S. Pharmaceuticals, Worldwide Pharmaceuticals Group, a division of BMS. Prior to that, Mr. Hooper held various senior leadership positions at BMS. In his roles at BMS, Mr. Hooper led commercial operations in mature and emerging markets. Prior to joining BMS, Mr. Hooper was Assistant Vice President of Global Marketing for Wyeth Laboratories.

Mr. Brian McNamee, age 56, became Senior Vice President, Human Resources in June 2001. From November 1999 to June 2001, Mr. McNamee served as Vice President of Human Resources at Dell Computer Corp. From 1998 to 1999, Mr. McNamee served as Senior Vice President, Human Resources for the National Broadcasting Corporation, a division of GE. From July 1988

33


to November 1999, Mr. McNamee held human resources positions at GE.

Ms. Cynthia M. Patton, age 51, became Senior Vice President and Chief Compliance Officer in October 2012. Ms. Patton joined the Company in 2005. From September 2010 to October 2012, Ms. Patton was Vice President, Law. From July 2005 to September 2010, Ms. Patton was Associate General Counsel. Previously, Ms. Patton served as Senior Vice President, General Counsel and Secretary of SCAN Health Plan from 1999 to 2005.

Mr. Jonathan M. Peacock, age 54, became Executive Vice President and Chief Financial Officer in September 2010. Prior to joining Amgen and beginning in 2005, Mr. Peacock served as Chief Financial and Administration Officer of Novartis Pharmaceuticals AG, a healthcare company based in Switzerland. From 1998 to 2005, Mr. Peacock was a partner at McKinsey and Co., where he co-led the firm's European Corporate Finance Practice. Mr. Peacock was also a partner at Price Waterhouse in London and New York from 1993 to 1998.

Mr. David J. Scott, age 60, became Senior Vice President, General Counsel and Secretary in March 2004. From May 1999 to February 2004, Mr. Scott served as Senior Vice President and General Counsel of Medtronic, Inc., and also as Secretary from January 2000. From December 1997 to April 1999, Mr. Scott served as General Counsel of London-based United Distillers & Vintners. Mr. Scott also served in executive roles at Grand Metropolitan plc and RJR Nabisco, Inc., and was an attorney in private practice.
Geographic Area Financial Information
For financial information concerning the geographic areas in which we operate, see Note 19, Segment information — Geographic information, to the Consolidated Financial Statements.
Investor Information
Financial and other information about us is available on our website (http://www.amgen.com) (This website address is not intended to function as a hyperlink, and the information contained in our website is not intended to be a part of this filing). We make available on our website, free of charge, copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing or submitting such material electronically or otherwise furnishing it to the SEC. In addition, we have previously filed registration statements and other documents with the SEC. Any document we file may be inspected, without charge, at the SEC’s public reference room at 100 F Street NE, Washington, DC 20549, or at the SEC’s internet address at http://www.sec.gov. (This website address is not intended to function as a hyperlink, and the information contained in the SEC’s website is not intended to be a part of this filing). Information related to the operation of the SEC’s public reference room may be obtained by calling the SEC at 800-SEC-0330 (800-732-0330).

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Item 1A.
RISK FACTORS
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 or others on our behalf, our beliefs and our management's assumptions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties facing our business. The risks described below are not the only ones facing us. 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.

Our sales depend on coverage and reimbursement from third-party payers.

Sales of all of our principal products are dependent 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 may regulate prices, reimbursement levels and/or access to our products to control costs or to affect levels of use. We rely in large part on the reimbursement of our principal products through government programs such as Medicare and Medicaid in the United States and similar programs in foreign countries, and a reduction in the coverage and/or reimbursement for our products could have a material adverse effect on our product sales, business and results of operations.

In the United States, there is an increased focus by the federal government and others on analyzing the impact of various regulatory programs on the federal deficit, which could result in increased pressure on federal programs to reduce costs. For example, the Budget Control Act of 2011 mandated a two percent reduction in government payments for all Medicare services (including the administration of separately-billable drugs and payment for drugs in all Medicare programs) for federal fiscal years 2013 through 2021. This payment “sequestration” is currently scheduled to begin in 2013 and continue through 2021. The sequestration remains subject to administrative implementation of the Budget Control Act or future statutory revision by Congress, who could block, limit or otherwise modify the automatic spending cuts. Several alternative deficit reduction proposals have been put forth by President Obama and/or Congressional committees, including proposals designed to further limit federal healthcare expenditures. While we cannot predict whether any deficit reduction actions will be approved by Congress and/or whether a budget sequestration will ultimately occur for Medicare services, a reduction in the availability or extent of reimbursement for drugs and biologics for U.S. healthcare programs as a result of changes such as those that have been proposed or from other changes designed to achieve similar federal budget savings could have a material adverse effect on the sales of our products, our business and results of operations.

In March 2010 the United States adopted significant healthcare reform through the enactment of the PPACA and the Healthcare and Education Reconciliation Act (See Item 1. Business — Reimbursement — U.S. Healthcare Reform.) A major goal of the healthcare reform law is to provide greater access to healthcare coverage for more Americans. Accordingly, the healthcare reform law requires individual U.S. citizens and legal residents to maintain qualifying health coverage, imposes certain requirements on employers with respect to offering health coverage to employees, amends insurance regulations regarding when coverage can be provided and denied to individuals, and expands existing government healthcare coverage programs to more individuals in more situations, with most of these changes going into effect by January 2014. We do not expect a significant increase in sales of our products as a result of the 2014 expansions in healthcare coverage. While we cannot fully predict the ultimate impact the healthcare reform law will have on us, or how the law may change due to statutory revision or judicial review, we expect that the new law will continue to have a material adverse effect on our business and results of operations.

Public and private insurers have pursued, and continue to pursue, aggressive cost containment initiatives, including increased focus on comparing the effectiveness, benefits and costs of similar treatments, which could result in lower reimbursement rates for our products. A substantial portion of our U.S. business relies on reimbursement from the U.S. federal government under Medicare Part B coverage. Any deterioration in the timeliness or certainty of payment by Medicare to physicians, including as a result of changes in policy or regulations, or as a result of operational difficulties, could negatively impact the willingness of physicians to prescribe our products for patients relying on Medicare for their medical coverage. Most of our products furnished to Medicare beneficiaries in both a physician office setting and hospital outpatient setting are reimbursed under the Medicare Part B ASP payment methodology. (See Item1. Business — Reimbursement — Reimbursement of Our Principal Products.) ASP- based reimbursements of products under Medicare may be below or could fall below the cost that some medical providers pay for such products, which could materially and adversely affect sales of our products. Private payers also continue to seek to reduce their costs. Insurance plans administered by private companies frequently adopt their own payment or reimbursement reductions. Consolidation among managed care organizations may increase the negotiating power of these entities, potentially resulting in lower reimbursement rates for our products. Private third-party payers increasingly employ formularies to control costs by

35


negotiating discounted prices in exchange for formulary inclusion and/or favorable formulary positioning. Private health insurance companies also are increasingly adopting utilization management tools, such as prior authorization in order to limit payment to uses of the product that are in accordance with the FDA approved labeling or step therapy to ensure that payment for a branded product is only made if the patient has first failed a cheaper generic product. Consistent with recent healthcare reforms, we anticipate that future trends will include greater reliance upon comparative effectiveness to make formulary decisions. Additionally, private payers are experimenting with new models of payment whereby reimbursement for health care providers may be linked to bundled or capitated payments. Under these payment systems, providers would get a fixed payment amount to cover a broad range of products and services provided to each patient and would be significantly incentivized to utilize the lowest cost product or service, regardless of its overall benefit to the patient, or to minimize the provision of services. To the extent that such changes affect the price we receive for our products or the level of coverage and reimbursement available when healthcare providers prescribe our products, they could have a material adverse effect on the sales of our products, our business and results of operations.
 
We also face risks relating to the reporting of pricing data that affects the U.S. reimbursement of and discounts for our products. ASP data are calculated by the manufacturer based on a formula defined by statute and regulation and are then submitted to CMS. CMS uses those ASP data to determine the applicable reimbursement rates for our products under Medicare Part B. However, the statute, regulations and CMS guidance do not define specific methodologies for all aspects of the reporting of ASP data. For example, CMS has not provided specific guidance regarding the treatment of “bundled sale arrangements” or administrative fees paid to Group Purchasing Organizations in the ASP calculation. CMS directs that manufacturers make “reasonable assumptions” in their calculation of ASP data in the absence of specific CMS guidance on a topic, and requires that any such reasonable assumptions be consistent with the general requirements and the intent of the Medicare statute, federal regulations and the manufacturer's customary business practices. As a result, we are required to apply our reasonable judgment to certain aspects of calculating ASP data. We also submit AMP and BP data to the government on a periodic basis. The formulas for those price figures also are defined by statute and regulation and CMS similarly has directed manufacturers to make reasonable assumptions in the absence of specific guidance on a topic relating to the calculation of those pricing figures. We are also required to pay rebates to state Medicaid programs, when our products are paid for by Medicaid, at a rate of 23.1% of the product's AMP, or if it is greater, the difference between the product's AMP and the BP, subject to various adjustments. The AMP and BP regulations require a manufacturer to update previously submitted data for a period not to exceed three years.  Our ASP, AMP, and BP data calculations are reviewed on at least a quarterly basis, and based on such reviews we have on occasion restated previously reported ASP, AMP, and BP data to reflect changes in calculation methodology, reasonable assumptions, and/or underlying data. If our submitted ASP, AMP, or BP data are incorrect, we may become subject to substantial fines and penalties or other government enforcement actions, which could have a material adverse impact on our business and results of operations. In addition, if our calculations of AMP and/or BP are incorrect, we also may be required to make additional rebate payments to state Medicaid programs. In addition, the PPACA revised the definition of AMP, effective with submissions for the fourth quarter 2010, and in February 2012 CMS issued a proposed rule further clarifying the new AMP definition and other aspects of the AMP and BP calculations, and subsequently accepted public comments on the proposed rule. Until that rule is final, which is expected to occur later in 2013, we will be required to apply our reasonable judgment in certain aspects of the AMP and BP calculations. A significant change in the final rule regarding the AMP definition or the AMP and BP calculations could require us to pay higher rebates to state Medicaid programs in the future, which could have a material adverse impact on our business and results of operations.

Other initiatives reviewing the coverage or reimbursement of our products could result in less extensive coverage or lower reimbursement rates. For example, in July 2007, CMS issued an NCD where it determined that ESA treatment was not reasonable and necessary for certain clinical conditions and established Medicare coverage parameters for the FDA-approved ESA use in oncology. Generally, an NCD is a national policy statement granting, limiting or excluding Medicare coverage or reimbursement for a specific medical item or service. We believe the restrictions in the 2007 NCD changed the way ESAs are used in clinical practice, for example, by decreasing the number of treated patients, the average ESA dose and the duration of ESA therapy in the oncology setting. As a result, we believe these restrictions have had a material adverse effect on the use, reimbursement and sales of Aranesp®, which in turn had a material adverse effect on our business and results of operations. The reimbursement of ESAs in the nephrology setting has also been reviewed by CMS. On June 16, 2010, CMS opened an NCA to examine the use of ESAs to manage anemia in patients with CKD and dialysis-related anemia. Following further analysis, on June 16, 2011, CMS issued a FDM in which it determined that it would not issue an NCD at that time for ESAs for treatment of anemia in adults with CKD. In the absence of an NCD, Medicare determinations are made by regional MACs, three of which have issued revised LCDs relating to anemia in patients with CKD not on dialysis. All of the revised LCDs restrict reimbursement of ESAs to use in accordance with the revised FDA label. Other MACs could also issue LCDs that similarly or further restrict reimbursement for ESAs in this setting, and physician behavior may change to be consistent with the revised label even before formal LCDs are implemented, all of which could have a further material adverse effect on the reimbursement, use and sales of Aranesp®. Additionally, CMS could still further review or change the reimbursement of ESAs in the nephrology setting at some point in the future and/or propose an NCD for ESAs or other drug topics that could result in less extensive coverage for our products. For example, CMS periodically identifies topics for potential future NCDs, and while there were no drug products included on the 2012 CMS topic list, in prior years that

36


list has included the category of thrombopoiesis stimulating agents (platelet growth factors), the category of drugs that includes Nplate®.

In the dialysis setting, the reimbursement rates for our products are also subject to downward pressure. In the United States, dialysis providers are reimbursed for EPOGEN® primarily by the federal government through Medicare's ESRD Program. (See Item 1. Business — Reimbursement — Reimbursement of Our Principal Products — Dialysis Reimbursement.) Until January 1, 2011, Medicare reimbursed for separately billable dialysis drugs (including Aranesp® and EPOGEN®) administered in both freestanding and hospital-based dialysis centers at ASP +6%, using the same ASP payment amount methodology used in the physician clinic setting under Part B. On January 1, 2011, CMS's bundled-payment system went into effect for dialysis providers which provides a single payment for all dialysis services including drugs, supplies, and non-routine laboratory tests that were previously reimbursed separately. On November 1, 2011, following our June 2011 announcement of changes to the labels for the use of ESAs in patients with CKD (See Item 1. Business — Marketed Products — ESAs), CMS finalized a rule to update various provisions of its bundled-payment system for dialysis services and the related ESRD QIP. The final rule eliminated for payment year 2013 and beyond one of the QIP's measures which tracks the percent of a provider's Medicare patients with an Hb level below 10 g/dL. (See Item 1. Business — Reimbursement - Reimbursement of Our Principal Products — Dialysis Reimbursement.) CMS indicated that removal of this quality measure from the QIP was being done in response to the June 2011 ESA label changes. We believe that the implementation of these various changes in the dialysis setting has resulted and may continue to result in a material adverse impact on the reimbursement, use and sales of EPOGEN® and on our business and results of operations. Under the ATRA enacted in January 2013, CMS was directed to reduce the ESRD payment bundle amount effective January 1, 2014 to account for changes in the utilization of drugs and biologics (including Aranesp® and EPOGEN®) since the bundle was first implemented in 2011. Oral drugs without intravenous equivalents, such as Sensipar® and phosphate binders, will continue to be reimbursed separately under the Medicare Part D benefit until they are included in the bundled-payment system in 2016. However, efforts are underway to get Congress to repeal the provision of the ATRA that postponed the entry of these oral-only drugs into the bundled-payment system; if such efforts are successful, these oral drugs could enter into the bundled-payment system before 2016. Inclusion in the bundled-payment system may reduce utilization of these oral drugs and have an adverse impact on our sales.

The government-sponsored healthcare systems in Europe and many other foreign countries are the primary payers for healthcare expenditures, including payment for drugs and biologics, in those regions. Mandatory price controls continue to be a significant aspect of business for the pharmaceutical and biotechnology industries outside the United States. Healthcare reform and related legislative proposals in France, Germany and Poland, as well as austerity plans in a number of countries, including Spain, Italy, Greece, Ireland and Portugal, have targeted the pharmaceutical sector with multiple mechanisms to reduce government healthcare expenditures. We expect that countries will continue to take aggressive actions to reduce expenditures on drugs and biologics, including mandatory price reductions, clawbacks of payments made to companies when drug spending thresholds are exceeded, preferences for biosimilars, changes in international price referencing, price transparency to achieve prices similar to those in lower-priced countries, and reductions in the amount of reimbursement, sometimes with the imposition of patient copayments. Similarly, fiscal constraints may also impact the extent to which countries are willing to reward new innovative therapies and/or allow access to new technologies or the speed with which they make approval or reimbursement decisions. The proliferation of HTA organizations (e.g., NICE in the UK and IQWiG in Germany) has led to determinations of coverage and reimbursement based on both the clinical as well as the economic value of a product; these agencies are also increasingly setting the maximum price at which products will be reimbursed. While we cannot fully predict the extent of further price reductions and/or reimbursement restrictions taken by governmental payers outside the United States or the impact such actions will have on our business, such reductions in price and/or the coverage and reimbursement for our products could have a material adverse effect on the sales of our products, our business and results of operations.

Additional initiatives addressing the coverage or reimbursement of our products could result in less extensive coverage or lower reimbursement, which could negatively affect sales of our products. If, for any of these or other reasons, reimbursement rates are reduced, or if healthcare providers anticipate reimbursement being reduced, providers may narrow the circumstances in which they prescribe or administer our products, which could reduce the use and/or sales of our products. A reduction in the use and sales of our products could have a material adverse effect on our business and results of operations.

Our current products and products in development cannot be sold if we do not maintain or gain regulatory approval.

Our business is subject to extensive regulation by numerous state and federal governmental authorities in the United States, including the FDA, and by foreign regulatory authorities, including the EMA. We are required in the United States and in foreign countries to obtain approval from regulatory authorities before we can manufacture, market and sell our products. Once approved, the FDA and other U.S. and foreign regulatory agencies have substantial authority to require additional testing, perform inspections, change product labeling or mandate withdrawals of our products. Also, legislative bodies or regulatory agencies could enact new laws or regulations or change existing laws or regulations at any time, which could affect our ability to obtain or maintain approval of our products. For example, the 2007 creation of the Food and Drug Administration Amendments Act of 2007 (FDAAA)

37


significantly added to the FDA's authority, allowing the FDA to (i) require sponsors of marketed products to conduct post-approval clinical studies; (ii) mandate labeling changes to products and (iii) require sponsors to implement a REMS for a product. Failure to comply with FDAAA requirements could result in significant civil monetary penalties, reputational harm and increased product liability risk. In 2012, new pharmacovigilance legislation became effective in the EU that enhanced the authority of European regulatory authorities to require companies to conduct additional post-approval clinical efficacy and safety studies and increased the burden on sponsor companies in terms of adverse event management and reporting and safety data analyses.  As with FDAAA, failure to comply with the new EU pharmacovigilance legislation could result in significant monetary penalties as well as reputational and other harms. We are unable to predict when and whether any further changes to laws or regulatory policies affecting our business could occur, such as efforts to reform medical device regulation or the pedigree requirements for medical products or implement new requirements for combination products, and whether such changes could have a material adverse effect on our business and results of operations.

Obtaining and maintaining regulatory approval has been and will continue to be increasingly difficult, time-consuming and costly. For example, in October 2009 we received Complete Response Letters from the FDA for the BLA for Prolia® in the treatment and prevention of PMO and in the treatment and prevention of bone loss due to hormone ablation therapy (HALT) in breast and prostate cancer patients. The Complete Response Letter related to the PMO indication requested several items, including further information on the design of our previously submitted post-marketing surveillance program. The FDA also requested a new clinical program to support the approval of Prolia® for the prevention of PMO, updated safety data and stated that a REMS is necessary for Prolia®. The Complete Response Letter related to the HALT indication requested additional information regarding the safety of Prolia® in patients with breast cancer receiving aromatase inhibitor therapy and patients with prostate cancer receiving Androgen Deprivation Therapy. The FDA specifically requested results from additional adequate and well-controlled clinical trials demonstrating that Prolia® has no detrimental effects on either time to disease progression or overall survival. Following the submission of further information, including clinical trial data from a number of trials evaluating denosumab in various oncology indications, in September 2011 the FDA approved Prolia® as a treatment to increase bone mass in women at high risk for fracture receiving adjuvant aromatase inhibitor therapy for breast cancer and as a treatment to increase bone mass in men at high risk for fracture receiving androgen deprivation therapy for non-metastatic prostate cancer. In addition, there may be situations in which demonstrating the efficacy and safety of a product candidate may not be sufficient to gain regulatory approval unless superiority to comparative products can be shown.

In addition to our innovative products, we are working to develop and commercialize biosimilar versions of six products currently manufactured, marketed and sold by other pharmaceutical companies. (See Item 1. Research and Development and Selected Product Candidates — Amgen Development of Biosimilars.) In many markets there is not yet a legislative or regulatory pathway for the approval of biosimilars. In the United States, the U.S. healthcare reform law provided for such a pathway; while the FDA is working to establish regulations to implement it, significant questions remain as to how products will be approved under the pathway. (See We expect to face increasing competition from biosimilars.) Delays or uncertainties in the development of such pathways could result in delays or difficulties in getting our products approved by regulatory authorities, subject us to unanticipated development costs or otherwise reduce the value of the investments we have made in the biosimilars area.

Some of our products are approved by U.S. and foreign regulatory authorities on a conditional basis with full approval conditioned upon fulfilling the requirements of regulators. Regulatory authorities are placing greater focus on monitoring products originally approved on an accelerated or conditional basis and on whether the sponsors of such products have met the conditions of the accelerated or conditional approvals. Vectibix®, for example, received accelerated approval in the United States and conditional approval in the EU, with full approval conditioned on conducting additional clinical trials of the use of Vectibix® as a therapy in treating mCRC. (See Item 1. Business — Marketed Products — Other Marketed Products — Vectibix® (panitumumab).) If we are unable to fulfill the requirements of regulators that were conditions of our products' accelerated or conditional approval and/or if regulators re-evaluate the data or risk-benefit profile of our product in connection with a renewal assessment, our conditional approval may not be renewed or we may not receive full approval for these products or may be required to change the products' labeled indications or even withdraw the products from the market. 

Following recent FDA and FDA advisory committee discussions and actions with respect to other therapeutic oncology products previously granted accelerated approval by the FDA, questions remain about regulatory authorities' views regarding the adequacy for approval of therapeutic oncology products that have demonstrated a statistically significant improvement in progression-free survival but have not shown a statistically significant improvement in overall survival. A number of our products and product candidates have used endpoints other than overall survival, such as progression-free survival and bone-metastasis-free survival (BMFS), in clinical trials. The use of endpoints such as progression-free survival or BMFS, in the absence of other measures of clinical benefit, may not be sufficient for approval even when such results are statistically significant. For example, our pivotal phase 3 Study '147 evaluated XGEVA® for its ability to improve BMFS in men with castration-resistant prostate cancer that has not yet spread to bone. The '147 trial demonstrated that XGEVA® significantly improved median bone metastasis-free survival by 4.2 months compared to placebo and significantly prolonged median time to first bone metastases. However, overall

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survival (a secondary endpoint) was similar between the XGEVA® and placebo arms. On February 8, 2012, the FDA convened the ODAC to discuss our sBLA filing for XGEVA® to delay bone metastases in prostate cancer. During its presentation to the ODAC, the FDA questioned the magnitude of the improvement in BMFS demonstrated in Study '147, and indicated that a further clinical trial might help address some of the remaining unresolved questions regarding the clinical significance of the benefit achieved by XGEVA® in this setting. The ODAC panel concluded that the magnitude of benefit demonstrated with early treatment with XGEVA® to delay bone metastases was not sufficient to conclude a positive risk-benefit ratio for XGEVA® in the absence of additional measures impacting quality of life or other disease outcomes. On April 26, 2012, the FDA issued a Complete Response Letter to us citing the same conclusion.

In addition to the clinical trials that we choose to or are required to conduct, other organizations may also conduct clinical trials that use our products. Such clinical trials may evaluate our products in areas in which we do not have and are not seeking an approved indication. However, negative results or safety signals arising in other organizations' clinical trials may nonetheless prompt regulatory agencies to take regulatory actions that affect our approved indications, including requiring the addition of relevant safety data to the approved labeling or even withdrawing approval for our products.

The occurrence of a number of high profile safety events has caused an increased public and governmental concern about potential safety issues relating to pharmaceutical and biological products and certain of our products and product candidates. (See Our ESAs continue to be under review and receive scrutiny by regulatory authorities.) As a result of this increased concern in recent years, the U.S. regulatory environment has evolved and safety signals and safety concerns resulting from preclinical data, clinical trials (including sub-analyses and meta-analyses), market use or other sources are receiving greater scrutiny. For example, a number of regulatory agencies around the world, including the FDA and the EMA, have initiated programs to directly monitor for safety issues rather than wait for patients, providers or manufacturers to report safety problems with products or medical devices. And at least one private, for-profit company has begun aggregating and analyzing FDA adverse event data on its website using its own independent methodology, which could highlight new perceived risks of our products and product candidates. We are required to communicate to regulatory agencies adverse events reported to us by patients taking our products. Regulatory agencies may periodically perform inspections of our pharmacovigilance processes, including our adverse event reporting. If regulatory agencies determine that we have not complied with the applicable reporting or other pharmacovigilance requirements, we may become subject to additional inspections, warning letters or other enforcement actions, including monetary fines and other penalties. Actual or perceived safety problems or signals could lead to revised or restrictive labeling of our approved products or a class of products, potentially including limitations on the use of approved products in certain patients because of:

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the identification of actual or theoretical safety or efficacy concerns with respect to any of our products by regulatory agencies;

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an increased rate or number of previously-identified safety-related events;

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the discovery of significant problems or safety signals or trends with a similar product that implicates an entire class of products;

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subsequent concerns about the sufficiency of the data or studies underlying the label or changes to the underlying safety/efficacy analysis related to results from clinical trials, including sub-analyses, or meta-analysis (a meta-analysis is the review of studies using various statistical methods to combine results from previous separate but related studies) of clinical trials or clinical data performed by us or others; and

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new legislation or rules by regulatory agencies.

For example, in December 2009, based on the Trial to Reduce Cardiovascular Events with Aranesp® Therapy (TREAT) results, we updated the boxed warning in the labeling information for ESAs, to reflect an increased risk of stroke when ESAs are administered to CRF patients to target Hb levels of 13 g/dL and above. In October 2010, we submitted additional proposed labeling changes regarding the use of ESAs in CRF patients not on dialysis that would limit treatment to patients who are most likely to benefit, specifically those with significant anemia (<10 g/dL), and who are at high risk for transfusion and for whom transfusion avoidance is considered clinically important, including those in whom it is important to preserve kidney transplant eligibility. In June 2011, we announced that the FDA had approved further changes to the labels for the use of ESAs, including Aranesp® and EPOGEN®, in patients with CKD. (With the June 2011 label changes, the FDA changed the term CRF to CKD in the ESA labels. We use CRF when referring to labels prior to June 2011 for historical accuracy.) See Our ESAs continue to be under review and receive scrutiny by regulatory authorities.


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In addition to revised labeling for our products, discovery of new safety information or previously unknown safety concerns and/or safety signals with our products or similar products could also lead to:

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requirement of risk management activities (including a REMS) or other FDA compliance actions related to the promotion and sale of our products;

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mandated PMCs/PMRs or pharmacovigilance programs for our approved products;

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product recalls of our approved products;

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revocation of approval for our products from the market completely, or within particular therapeutic areas;

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increased timelines or delays in being approved by the FDA or other regulatory bodies; and/or

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fewer treatments or product candidates being approved by regulatory bodies.

Product safety concerns could cause regulatory agencies to impose risk management activities upon us (including a REMS), which may require substantial costs and resources to negotiate, develop, implement and administer. The results of these risk management activities could:

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impact the ability of healthcare providers to prescribe, dispense or use our products;

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limit patient access to our products;

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reduce patient willingness to use our products;

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place administrative burdens on healthcare providers in prescribing our products; and/or

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affect our ability to compete against products that do not have a REMS or similar risk management activities.

We currently have approved REMS for our ESAs, Prolia® and Nplate®, and we use third-party service providers to assist in the administration of our REMS that include elements to assure safe use. For example, our ESA REMS requires applicable healthcare providers and institutions to enroll in the program, receive education about the product and the REMS and document and report certain information to us over time. We are responsible for tracking and documenting certain elements of healthcare provider and institution compliance with the ESA REMS and providing the FDA with periodic assessment reports to demonstrate that the goals of the REMS are being met. The FDA may modify our REMS based on the results of the periodic assessment reports.  Also, if we or third-party service providers acting on our behalf fail to effectively implement and/or administer the REMS for our products, we may be required to modify such REMS, and we may be subject to FDA enforcement actions or to civil penalties.

Further, if new medical data or product quality issues suggest an unacceptable or potential safety risk or previously unidentified side-effects, we may withdraw some or all affected product-either voluntarily or by regulatory mandate-in certain therapeutic areas, or completely recall a product presentation from the market for some period or permanently. For example, in September 2009, we initiated a voluntary recall of a limited number of ENBREL SureClick® lots due to a defect in the glass syringe barrel which resulted in a small number of broken syringes following assembly of the autoinjector device. In October 2010, we initiated a voluntary recall of certain lots of ENBREL due to identification of cracks in a small number of the glass syringes which may have resulted in product leakage and syringe breakage. Further, beginning in September 2010, we initiated a voluntary recall of certain lots of EPOGEN® and J&J voluntarily recalled certain lots of PROCRIT®, manufactured by us, because a small number of vials in each lot were found to contain glass lamellae (extremely thin, barely visible glass flakes) which we believed was a result of the interaction of the product formulation with glass vials during the shelf life of the product. The recalls were executed in close cooperation with the FDA. 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, which may materially and adversely affect the sales of our products, our business and results of operations. Additionally, if we or other parties (including our independent clinical trial investigators or our licensees, such as J&J, Pfizer, Glaxo and Takeda) report or fail to effectively report to regulatory agencies side effects or other safety concerns that occur from their use of our products in clinical trials or studies or from marketed use, resulting regulatory action, including monetary fines and other penalties, could materially and adversely affect the sales of our products, our business and results of operations.


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Global economic conditions may negatively affect us and may magnify certain risks that affect our business.

Our operations and performance have been, and may continue to be, affected by economic conditions in the United States and throughout the world. Sales of our principal products are dependent, in part, on the availability and extent of reimbursement from third-party payers, including government programs such as Medicare and Medicaid and private payer healthcare and insurance programs. (See Our sales depend on coverage and reimbursement from third-party payers.) As more fully explained below, financial pressures may cause government or other third-party payers to more aggressively seek cost containment through mandatory discounts on our products, policies requiring the automatic substitution of generic or biosimilars, higher hurdles for initial reimbursement approval for new products or other similar measures. (See We expect to face increasing competition from biosimilars.) Additionally, as a result of the current or a future global economic downturn, our third-party payers may delay or be unable to satisfy their reimbursement obligations. A reduction in the availability or extent of reimbursement from government and/or private payer healthcare programs or increased competition from lower cost biosimilars could have a material adverse effect on the sales of our products, our business and results of operations. In addition, as a result of the economic conditions and/or employer decisions regarding the insurance coverage mandate that goes into effect in the United States in 2014, 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 some individuals, potentially resulting in lower levels of healthcare coverage for themselves or their families. These economic conditions may affect patients' ability to afford healthcare as a result of increased co-pay or deductible obligations, greater cost sensitivity to existing co-pay or deductible obligations, lost healthcare insurance coverage or for other reasons. We believe such conditions have led and could continue to lead to changes in patient behavior and spending patterns that negatively affect usage of certain of our products, including delaying treatment, rationing prescription medications, leaving prescriptions unfilled, reducing the frequency of visits to healthcare facilities, utilizing alternative therapies and/or foregoing healthcare insurance coverage. In addition to its effects on consumers, the economic downturn may have also increased cost sensitivities among medical providers in the United States, such as oncology clinics, particularly in circumstances where providers may experience challenges in the collection of patient co-pays or be forced to absorb treatment costs as a result of coverage decisions or reimbursement terms. Collectively, we believe these changes have resulted and may continue to result in reduced demand for our products, which could materially and adversely affect the sales of our products, our business and results of operations. Any resulting decrease in demand for our products could also cause us to experience excess inventory write-offs and/or excess capacity or impairment charges at certain of our manufacturing facilities.

In Europe, economic conditions across the region could potentially be impacted by countries of key concern, particularly countries in Southern Europe. Economic conditions continue to affect our operations and performance outside the United States as well, particularly in countries where government-sponsored healthcare systems are the primary payers for healthcare expenditures, including drugs and biologics. In Southern Europe, credit and economic conditions have adversely impacted the timing of collections of our trade receivables in this region. Global economic conditions may continue to impact the average length of time it takes to collect payments in Greece, Italy, Spain, Portugal or other countries, or we may never collect some or all of these receivables, which could have a material adverse impact on our operating cash flows and a material adverse effect on our financial position, liquidity or results of operations. See Our sales depend on coverage and reimbursement from third-party payers.

We also rely upon third parties for certain parts of our business, including licensees and partners, wholesale distributors of our products, contract clinical trial providers, contract manufacturers and single third-party suppliers. Because of the recent volatility in the financial markets, there may be a disruption or delay in the performance or satisfaction of commitments to us by these third parties which could have a material adverse effect on the sales of our products, our business and results of operations. Current economic conditions may adversely affect the ability of our distributors, customers and suppliers to obtain liquidity required to buy inventory or raw materials and to perform their obligations under agreements with us, which could disrupt our operations. Further, economic conditions appear to have affected, and may continue to affect, the business practices of our wholesale distributors in a manner that contributes to lower sales of our products. Although we monitor our distributors', customers' and suppliers' financial condition and their liquidity in order to mitigate our business risks, some of our distributors, customers and suppliers may become insolvent, which could have a material adverse effect on the sales of our products, our business and results of operations. These risks may be elevated with respect to our interactions with third parties with substantial operations in countries where current economic conditions are the most severe, particularly where such third parties are themselves exposed to sovereign risk from business interactions directly with fiscally-challenged government payers.

We maintain a significant portfolio of investments disclosed as cash equivalents and marketable securities on our Consolidated Balance Sheet. The value of our investments may be adversely affected by interest rate fluctuations, downgrades in credit ratings, illiquidity in the capital markets and other factors that may result in other than temporary declines in the value of our investments. Any of those events could cause us to record impairment charges with respect to our investment portfolio or to realize losses on the sale of investments.


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Some of our products are used with drug delivery or companion diagnostic devices which have their own regulatory, manufacturing, reimbursement and other risks.

Some of our products or product candidates may be used in combination with a drug delivery device, such as an injector or other delivery system. Our product candidates or expanded indications of our products used with such drug delivery devices may not be approved or may be substantially delayed in receiving regulatory approval if such devices do not gain or maintain regulatory approval or clearance. Where approval of the product and device is sought under a single marketing drug application, the increased complexity of the review process may also delay receipt of regulatory approval. In addition, some of these drug delivery devices may be provided by single-source unaffiliated third-party companies. We are dependent on the sustained cooperation and effort of those third-party companies both to supply the devices and, in some cases, to conduct the studies required for approval or clearance by the applicable regulatory agencies. We are also dependent on those third-party companies continuing to meet the applicable regulatory and other requirements to maintain that approval or clearance once it has been received. Failure to supply the devices, delays in or failure of the Amgen or third-party studies, or failure of the third-party company to obtain or maintain regulatory approval or clearance of the devices could result in increased development costs, delays in or failure to obtain regulatory approval and/or associated delays in a product candidate reaching the market or the expansion of existing product labels for new indications. Loss of regulatory approval or clearance of a device that is used with our product may also result in the removal of our product from the market.

Similarly, some of our products or product candidates may be used in combination with an in vitro companion diagnostic device, such as a test kit. In some cases, our product candidates or expanded indications of our products used with in vitro companion diagnostic devices may not be approved or may be substantially delayed in receiving regulatory approval if such devices do not gain or maintain regulatory approval or clearance. For example, the FDA has informed us that its approval of Vectibix® for the first- and second-line mCRC indications we are seeking will be contingent upon approval of the companion diagnostic device being developed in collaboration with QIAGEN, which identifies a patient's KRAS gene status. As with drug delivery devices used with our products, our ability to get and maintain the necessary regulatory approvals for our products or product candidates used with in vitro companion diagnostic devices can be substantially dependent on whether the manufacturers of such devices meet their contractual responsibilities to us and/or their obligations to regulatory authorities. Failures by these manufacturers can also result in the significant delays and added costs described above, or even result in the removal of our product from the market.

The in vitro companion diagnostic and drug delivery devices used with our products are also subject to many of the same reimbursement risks and challenges to which our products are subject. (See Our sales depend on coverage and reimbursement from third-party payers.) A reduction in the availability of, or the coverage and/or reimbursement for, in vitro companion diagnostic or drug delivery devices used with our products could have a material adverse effect on our product sales, business and results of operations.

Our ESAs continue to be under review and receive scrutiny by regulatory authorities.

Beginning in 2006, adverse safety results involving ESAs were observed and since that time our ESAs have been the subject of ongoing review and scrutiny by regulatory authorities and other agencies. In the United States, over this time frame the FDA has reviewed the benefit-risk profile of ESAs, which has resulted in changes to ESA labeling and usage in both the oncology and nephrology clinical settings. Over this same time period, CMS has also evaluated the use of ESAs and has made substantial reimbursement changes in the oncology and nephrology clinical settings. (See Our sales depend on coverage and reimbursement from third-party payers.) Together, these labeling and reimbursement changes, along with the approved REMS for ESAs, have had and may continue to have a material adverse effect on sales of our ESAs, our business and results of operations, and further labeling or reimbursement changes by these regulatory authorities could increase the severity of that effect.

We have also agreed with the FDA to conduct a number of PMCs for our ESAs. In 2004, we agreed with the FDA to a robust pharmacovigilance program to continue to study the safety surrounding the use of darbepoetin alfa in the oncology setting. Of the five studies originally included in that pharmacovigilance program, four are complete and analysis of the results from the fifth study, LHN03-6B, is currently ongoing. The results of certain of those studies contributed to safety-related product labeling changes for our ESAs and changes in reimbursement, as noted above. Other trials have subsequently been initiated to inform on the safety of ESAs. In 2009 we initiated Study '782, a phase 3 non-inferiority study evaluating overall survival when comparing NSCLC patients on Aranesp® to patients receiving placebo, as part of our Aranesp® pharmacovigilance program. In addition, JRD's EPO-ANE-3010 study, which evaluates the use of epoetin alfa in patients with breast cancer, is ongoing. Both of these studies are designated by the FDA as PMRs and must be conducted to maintain regulatory approval and marketing authorization. For the nephrology setting, we have been engaged in ongoing discussions with the FDA regarding additional PMRs to explore alternative ESA dosing strategies in CKD patients on dialysis and not on dialysis. In July 2012 we initiated study '226 to evaluate Aranesp® use in CKD patients not on dialysis. We expect to discuss further with the FDA another potential study in CKD patients on dialysis. Although we cannot predict the results or the outcomes of ongoing clinical trials, or the extent to which regulatory authorities may

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require additional labeling changes as a result of these or other trials, we cannot exclude the possibility that unfavorable results from clinical trials, including PMCs, could have a material adverse effect on the reimbursement, use and sales of our ESAs and on our business and results of operations.
  
Regulatory authorities outside the United States have also reviewed and scrutinized the use of ESAs. In June 2008, the EMA recommended updating the product information for ESAs with a new warning for their use in cancer patients, which was approved by the EC in October 2008. Following the October 2008 revision, we experienced a reduction of Aranesp® sales in the supportive cancer care setting in the EU. In addition, following the June 2011 ESA label changes in the United States, regulatory agencies outside the United States have sought additional information from us about the use and safety of ESAs in the CKD setting. Additional labeling or reimbursement changes by these regulatory authorities could materially and adversely affect the reimbursement, use and sales of our ESAs, our business and results of operations.

We continue to receive results from meta-analyses or previously initiated clinical trials using ESAs, including PMCs. For example, in May 2009, the Cochrane Collaboration published its independent meta-analysis of patient-level data from previously conducted, randomized, controlled, clinical studies evaluating ESAs in cancer patients which we submitted to the FDA and the EMA. This Cochrane meta-analysis of patient-level data from previous studies corroborates prior analyses indicating that the use of ESAs may increase the risk of death in cancer patients. The studies in the analysis all predate the current label, which advises using the least amount of ESA necessary to avoid transfusion, but they do not exclude the potential for adverse outcomes when ESAs are prescribed according to the current label. In addition, in January 2013 we announced data from the RED-HF® trial evaluating the effect of treatment of anemia with darbepoetin alfa on morbidity and mortality in patients with symptomatic left ventricular heart failure. The trial did not meet its primary endpoint of reducing the composite endpoint of time to death from any cause or first hospital admission for worsening heart failure. While there were no new safety findings identified in the RED-HF® trial, unfavorable results from similar trials or meta-analyses of previous clinical trials could materially and adversely affect the use and sales of our ESAs, our business and results of operations.

We must conduct clinical trials in humans before we can commercialize and sell any of our product candidates or existing products for new indications.

Before we can sell any products, we must conduct clinical trials to demonstrate that our product candidates are safe and effective for use in humans. The results of those clinical trials are used as the basis to obtain approval from regulatory authorities such as the FDA and EMA. (See Our current products and products in development cannot be sold if we do not maintain or gain 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 for clinical trials vary substantially and therefore, we may spend several years and incur substantial expense in completing certain clinical trials. We may have difficulty finding a sufficient number of clinical trial sites and subjects to participate in our clinical trials, particularly if competitors are conducting similar clinical trials in certain patient populations. Delays in planned clinical trials can result in increased development costs, delays in regulatory approvals, associated delays in product candidates reaching the market and revisions to existing product labels.

In addition, in order to increase the number of patients available for enrollment for our clinical trials, we have and will continue to open clinical sites and enroll patients in a number of new geographic locations where our experience conducting clinical trials is more limited, including Russia, India, China, South Korea, the Philippines, Singapore and some Central and South American countries either through utilization of third-party contract clinical trial providers entirely or in combination with local staff. Conducting clinical trials in locations where we have limited experience requires substantial time and resources to identify and understand the unique regulatory environments of individual countries. Further, we must ensure the timely production, distribution and delivery of the clinical supply of our product candidates to the numerous and varied clinical trial sites. If we fail to adequately manage the design, execution and regulatory aspects of our large, complex and regulatorily diverse clinical trials or manage the production or distribution of our clinical supply, corresponding regulatory approvals may be delayed or we may fail to gain approval for our product candidates or could lose our ability to market existing products in certain therapeutic areas or altogether. If we are unable to market and sell our product candidates or are unable to obtain approvals in the timeframe needed to execute our product strategies, our business and results of operations could be materially and adversely affected. Additional information on our clinical trials can be found on our website at www.amgen.com. (This website address is not intended to function as a hyperlink, and the information contained on our website is not intended to be a part of this filing.)

We rely on independent third-party clinical investigators to recruit subjects and conduct clinical trials in accordance with the applicable study protocols and laws and regulations. We also may acquire companies that have ongoing clinical trials. These trials may not be conducted to the same standards as ours; however, once an acquisition has been completed we assume responsibility for the conduct of the trial, including any potential risks and liabilities associated with the past and prospective conduct of those trials. If regulatory authorities determine that we or others, including our licensees or the independent investigators selected by

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us or by a company we have acquired, have not complied with regulations in the R&D of a product candidate, a new indication for an existing product or information to support a current indication, they may refuse to accept trial data from the site, not approve the product candidate or new indication or maintain approval of the current indication in its current form or at all, and we would not be able to market and sell it. If we were unable to market and sell our products or product candidates, our business and results of operations could be materially and adversely affected.

Further, we rely on unaffiliated third-party vendors to perform certain aspects of our clinical trial operations. In addition, some of our clinical trials involve drugs manufactured and marketed by other pharmaceutical companies. These drugs may be administered in a clinical trial in combination with one of our product candidates or in a head-to-head study comparing the products' relative efficacy and safety. In the event that any of these vendors or pharmaceutical companies have unforeseen issues that negatively impact the quality of their work or creates a shortage of supply, our ability to complete our applicable clinical trials and/or evaluate clinical results may also be negatively impacted. As a result, this could adversely affect our ability to file for, gain or maintain regulatory approvals worldwide on a timely basis, if at all.

Patients may also suffer adverse medical events or side effects in the course of our, our licensees, partners or independent investigators' clinical trials which could:

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delay the clinical trial program;

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require additional or longer trials to gain approval;

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prohibit regulatory approval of our product candidates or new indications for existing products; and

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render the product candidate commercially unfeasible or limit our ability to market existing products completely or in certain therapeutic areas.

Safety signals, trends, adverse events or results from clinical trials or studies performed by us or by others (including our licensees or independent investigators) or from the marketed use of our drugs or similar products that result in revised safety-related labeling or restrictions on the use of our approved products could negatively impact healthcare provider prescribing behavior, use and sales of our products, regulatory or private health organization medical guidelines and reimbursement for our products, all of which could have a material adverse effect on our business and results of operations.

Clinical trials must be designed based on the current standard of medical care. However in certain diseases, such as cancer, the standard of care is evolving rapidly. In these diseases, the duration of time needed to complete certain clinical trials may result in the design of such clinical trials being based on an out of date standard of medical care, limiting the utility and application of such trials. We may not obtain favorable clinical trial results and may not be able to obtain regulatory approval for new product candidates, new indications for existing products or maintenance of our current labels on this basis. Further, clinical trials conducted by others, including our licensees, partners or independent investigators, may result in unfavorable clinical trials results that may call into question the safety of our products in off-label or on label uses that may result in label restrictions and/or additional trials.

Even after a product is on the market, safety concerns may require additional or more extensive clinical trials as part of a pharmacovigilance program of our product or for approval of a new indication. For example, we initiated Study '782 as part of our Aranesp® oncology pharmacovigilance program. (See Our ESAs continue to be under review and receive scrutiny by regulatory authorities.) In connection with the June 2011 ESA label changes, we also agreed to conduct additional clinical trials examining the use of ESAs in CKD. Additional clinical trials we initiate, including those required by the FDA, could result in substantial additional expense and the outcomes could result in additional label restrictions or the loss of regulatory approval for an approved indication, each of which could have a material adverse effect on the sales of our products, our business and results of operations. Additionally, any negative results from such trials could materially affect the extent of approvals, the use, reimbursement and sales of our products.

We expect to face increasing competition from biosimilars.

We currently face competition in Europe from biosimilars, and we expect to face increasing competition from biosimilars in the future. In 2010, lawmakers in the United States enacted healthcare reform legislation which included an abbreviated regulatory pathway for the approval of biosimilars. The EU is already approving biosimilars under such a regulatory pathway. To the extent that governments adopt more permissive approval frameworks and competitors are able to obtain broader marketing approval for biosimilars, our products will become subject to increased competition. Expiration or successful challenge of applicable patent rights could trigger such competition, and we could face more litigation regarding the validity and/or scope of our patents. Our

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products may also experience greater competition from lower-cost generic or biosimilars that come to market as branded products that compete with our products lose patent protection.

In the EU, the EC has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In 2006, the EMA developed and issued regulatory guidelines related to the development and approval of biosimilars. The guidelines included clinical trial guidance for certain biosimilars, including erythropoietins and G-CSFs, recommending that applicants seeking approval of such biosimilars conduct pharmacodynamic, toxicological and clinical safety studies as well as a pharmacovigilance program. Some companies have received and other companies are seeking approval to market erythropoietin and G-CSF biosimilars in the EU, presenting additional competition for our products. (See Our marketed products face substantial competition.) For example, following the expiration of the principal European patent relating to recombinant G-CSF in August 2006, the EC issued marketing authorizations for the first G-CSF biosimilars and the products were launched in certain EU countries in 2008 and 2009. There are now several G-CSF biosimilars available in the EU marketed by different companies and these G-CSF biosimilars compete with NEUPOGEN® and Neulasta®. In December 2012, EMA guidelines on the approval process for monoclonal antibody biosimilars became effective. In an effort to spur biosimilar utilization and/or increase potential health care savings, countries in the EU may adopt biosimilar uptake measures such as requiring physician prescribing quotas or automatic substitution by pharmacists of biosimilars for the corresponding reference products. We cannot predict to what extent the entry of biosimilars or other competing products will impact future sales of our products in the EU. Our inability to compete effectively could reduce sales, which could have a material adverse effect on our business and results of operations.

In the United States, with the adoption of the healthcare reform law the FDA was authorized to approve biosimilars under a separate, abbreviated pathway. (See Our sales depend on coverage and reimbursement from third-party payers.) The law established a period of 12 years of data exclusivity for reference products in order to preserve incentives for future innovation and outlined statutory criteria for science-based biosimilar approval standards that take into account patient safety considerations. Under this framework, data exclusivity protects the data in the innovator's regulatory application by prohibiting, for a period of 12 years, others from gaining FDA approval based in part on reliance or reference to the innovator's data in their application to the FDA. The law does not change the duration of patents granted on biologic products. On February 9, 2012, the FDA released three draft guidance documents that provide insight into the FDA's current thinking on the development of biosimilars and broad parameters for the scientific assessment of biosimilar applications. The documents provide guidance in the development of biosimilar versions of currently approved biological products and indicate that the clinical trials and other steps required for approval of each biosimilar will depend on a variety of factors, including the complexity of the protein, the degree of analytical similarity with the reference product and the potential risks of the product. A growing number of companies have announced their intentions to develop biosimilar versions of existing biotechnology products, including a number of our products. Further, biosimilar manufacturers with approved products in Europe may seek to obtain U.S. approval now that the regulatory pathway for biosimilars has been enacted. In addition, critics of the 12-year exclusivity period in the biosimilar pathway law will likely seek to shorten the data exclusivity period. President Obama's proposed 2013 budget included a proposal to lower the data exclusivity period to seven years, but this would require new legislation be passed by Congress. Critics may also encourage the FDA to interpret narrowly the law's provisions regarding which new products receive data exclusivity. While we are unable to predict the precise impact of the pending introduction of biosimilars on our products, or the degree to which the FDA's 2012 biosimilar guidelines will contribute to that impact, we expect in the future to face greater competition in the United States as a result of biosimilars and downward pressure on our product prices and sales, subject to our ability to enforce our patents. (See Item 7A. Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources.) This additional competition could have a material adverse effect on our business and results of operations.

With respect to the biosimilars we are working to develop (see Item 1. Research and Development and Selected Product Candidates — Amgen Development of Biosimilars), a number of other companies have announced their intention to develop biosimilar versions of the same reference products that we are pursuing. Some of these companies may be ahead of us in their biosimilar development timelines, have certain technical or other advantages over us or have more experience producing or marketing generic or biosimilar products. Even if we are able to successfully get our biosimilar product candidates approved by regulatory authorities, this additional competition could limit the ability of our biosimilars to gain market acceptance with prescribers or payors or otherwise affect the sales of our biosimilars.

We may not be able to develop commercial products.

Successful product development in the biotechnology industry is highly uncertain, and very few R&D projects produce a commercial product. We intend to continue to make significant R&D investments. Product candidates or new indications for existing products (collectively, “product candidates”) that appear promising in the early phases of development may fail to reach the market for a number of reasons, such as:


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the product candidate did not demonstrate acceptable clinical trial results even though it demonstrated positive preclinical trial results, for reasons that could include changes in the standard of care of medicine;

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the product candidate was not effective or more effective than currently available therapies in treating a specified condition or illness;

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the product candidate is not cost effective in light of existing therapeutics;

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the product candidate had harmful side effects in humans or animals;

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the necessary regulatory bodies, such as the FDA or EMA, did not approve our product candidate for an intended use;

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the product candidate was not economical for us to manufacture and commercialize;

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the biosimilar product candidate fails to demonstrate the requisite bioequivalence to the applicable reference product, or is otherwise determined to be unacceptable for purposes of safety or efficacy, to gain approval under the biosimilar pathway;

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other parties have or may have proprietary rights relating to our product candidate, such as patent rights, and will not let us sell it on reasonable terms, or at all;

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we and certain of our licensees, partners or independent investigators may fail to effectively conduct clinical development or clinical manufacturing activities; and

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the regulatory pathway to approval for product candidates is uncertain or not well-defined.

Several of our product candidates have failed or been discontinued at various stages in the product development process. For example, in June 2004, we announced that the phase 2 study of Glial Cell Lined-Derived Neurotrophic Factor (GDNF) for the treatment of advanced Parkinson's disease did not meet the primary study endpoint upon completion of nine months of the double-blind treatment phase of the study. The conclusion was reached even though a small phase 1 pilot investigator-initiated open-label study over a three-year period appeared to result in improvements for advanced Parkinson's disease patients. Subsequently, we discontinued clinical development of GDNF in patients with advanced Parkinson's disease.

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 in a significant impairment of in-process research and development (IPR&D) or other intangible assets. 

Our marketed products face substantial competition.

We operate in a highly competitive environment. Our products compete with other products or treatments for diseases for which our products may be indicated. Our competitors market products or are actively engaged in R&D in areas where we have products, where we are developing product candidates or new indications for existing products. In the future, we expect that our products will 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 pharmaceutical products are expanding into the biotechnology field with increasing frequency, and some pharmaceutical companies and generics manufacturers have formed partnerships to pursue biosimilars. In addition, some of our competitors may have technical, competitive or other advantages over us for the development of technologies and processes. These advantages may make it difficult for us to compete with them to successfully discover, develop and market new products and for our current products to compete with new products or new product indications that these competitors may bring to market. As a result, our products may compete against products that have lower prices (including new generics or biosimilars that come to market as branded products that compete with our products lose patent protection), equivalent or superior performance, better safety profile, are easier to administer, achieve earlier entry into the market or that are otherwise competitive with our products.

Concentration of sales at certain of our wholesaler distributors and consolidation of free-standing dialysis clinic businesses may negatively impact our bargaining power and profit margins.

The substantial majority of our U.S. product sales are made to three pharmaceutical product wholesaler distributors, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. These distributors, in turn, sell our products

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to their customers, which include physicians or their clinics, dialysis centers, hospitals and pharmacies. One of our products, EPOGEN®, is sold primarily to free-standing dialysis clinics, which have experienced significant consolidation. Two organizations, DaVita and Fresenius Medical Care North America, own or manage a large number of the outpatient dialysis facilities located in the United States and account for a substantial majority of all EPOGEN® sales in the free-standing dialysis clinic setting. Due to this concentration, these entities have substantial purchasing leverage, which may put pressure on our pricing by their potential ability to extract price discounts on our products or fees for other services, correspondingly negatively impacting our bargaining position and profit margins.

Our business may be affected by litigation and government investigations.

We and certain of our subsidiaries are involved in legal proceedings. (See Note 18, Contingencies and commitments, to the Consolidated Financial Statements.) Civil and criminal litigation is inherently unpredictable, and the outcome can result in excessive verdicts, fines, penalties, exclusion from the federal healthcare programs and/or injunctive relief that affect how we operate our business. Defense of litigation claims can be expensive, time-consuming and distracting and it is possible that we could incur judgments or enter into settlements of claims for monetary damages or change the way we operate our business, which could have a material adverse effect on our business and results of operations. In addition, product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and divert management's attention and adversely affect our reputation and the demand for our products. Amgen and Immunex have previously been named as defendants in product liability actions for certain of our products.

We are also involved in government investigations that arise in the ordinary course of our business. As we announced on December 19, 2012, we finalized a settlement agreement with the U.S. government, 49 states and the District of Columbia to settle certain allegations regarding our sales and marketing practices arising out of ongoing civil and criminal investigations conducted by the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington (the “Federal Investigations”). As more fully described in Note 18, Contingencies and commitments, to the Consolidated Financial Statements, this settlement resolved the Federal Investigations, the related state Medicaid claims (except for those of the State of South Carolina) and the claims of ten civil qui tam actions that had been pending against us. However, the settlement does not resolve certain of other litigation matters that will continue to be pending against us, and we may also be subject to actions by governmental entities, including those not participating in the settlement, and may in the future become subject to claims by other parties, in each case with respect to the alleged conduct which is the subject of the settlement. We may see new governmental investigations of or actions against us citing novel theories of recovery. Any of these results could have a material adverse effect on our business and results of operations.
 
We rely on third-party suppliers for certain of our raw materials, medical devices and components.

We rely on unaffiliated third-party suppliers for certain raw materials, medical devices and components 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 must be obtained from that specific sole source or sources and could not be obtained from another supplier unless and until the regulatory agency approved such supplier.

Among the reasons we may be unable to obtain these raw materials, medical devices and components include:

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regulatory requirements or action by regulatory agencies or others;

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adverse financial or other strategic developments at or affecting the supplier;

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unexpected demand for or shortage of raw materials, medical devices or components;

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labor disputes or shortages, including the effects of a pandemic flu outbreak, natural disaster, or otherwise;

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failure to comply with our quality standards which results in quality and product failures, product contamination and/or recall; and

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discovery of previously unknown or undetected imperfections in raw materials, medical devices or components.

These events could negatively impact our ability to satisfy demand for our products, which could materially and adversely affect our product use and sales and our business and operating results. For example, in prior years we have experienced shortages

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in certain components necessary for the formulation, fill and finish of certain of our products in our Puerto Rico facility. Further quality issues which result in unexpected additional demand for certain components may lead to shortages of required raw materials or components (such as we have experienced with EPOGEN® glass vials). We may experience or continue to experience these or other shortages in the future resulting in delayed shipments, supply constraints, contract disputes and/or stock-outs of our products. Also, certain of the raw materials required in the commercial and clinical manufacturing of our products are sourced from other countries and/or derived from biological sources, including mammalian tissues. In addition, one of our marketed products also uses bovine serum and human serum albumin. Some countries in which we market our products may restrict the use of certain biologically derived substances in the manufacture of drugs. We continue to investigate alternatives to certain biological sources and alternative manufacturing processes that do not require the use of certain biologically derived substances because such raw materials may be subject to contamination and/or recall.

A material shortage, contamination, recall and/or restriction of the use of certain biologically derived substances or other raw materials, which may be sourced from other countries and that are used in the manufacture of our products could adversely impact or disrupt the commercial manufacturing of our products or could result in a mandated withdrawal of our products from the market. This could negatively impact our ability to satisfy demand for our products, which could materially and adversely affect our product sales, business and operating results. Further, any disruptions or delays by us or by third-party suppliers or partners in converting to alternatives to certain biologically derived substances and alternative manufacturing processes or our ability to gain regulatory approval for the alternative materials and manufacturing processes could increase our associated costs or result in the recognition of an impairment in the carrying value of certain related assets, which could have a material and adverse effect on our business and results of operations.

Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.

Manufacturing biologic human therapeutic products is difficult, complex and highly regulated. We currently are involved in the manufacture of all of our principal products and plan to manufacture many of our product candidates. In addition, we currently use third-party contract manufacturers to produce or assist in the production of ENBREL, Prolia®, Sensipar®/Mimpara®, Nplate®, XGEVA® and Vectibix® and plan to use contract manufacturers to produce or assist in the production of a number of our late-stage product candidates. Our ability to adequately and timely manufacture and supply our products is dependent on the uninterrupted and efficient operation of our facilities and those of our third-party contract manufacturers, which may be impacted by:

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availability or contamination of raw materials, components and equipment used in the manufacturing process, particularly those for which we have no other source or supplier;

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capacity of our facilities and those of our contract manufacturers;

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contamination by microorganisms or viruses;

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natural or other disasters, including hurricanes, earthquakes, volcanoes or fires;

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labor disputes or shortages, including the effects of a pandemic flu outbreak, natural disaster, or otherwise;

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degree of compliance with regulatory requirements;

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changes in forecasts of future demand;

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timing and actual number of production runs;

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updating of manufacturing specifications;

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production success rates and yields; and

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timing and outcome of product quality testing.

If the efficient manufacture and supply of our products is interrupted, we may experience delayed shipments, supply constraints, stock-outs and/or recalls of our products. For example, over the past several years we have initiated a number of voluntary recalls of certain lots of our products. (See Our current products and products in development cannot be sold if we do not maintain or gain regulatory approval.) If we are at any time unable to provide an uninterrupted supply of our products to

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patients, we may lose patients and physicians may elect to prescribe competing therapeutics instead of our products, which could materially and adversely affect our product sales, business and results of operations.

Our manufacturing processes and those of our third-party contract manufacturers must undergo a potentially lengthy FDA or other regulatory approval process and are subject to continued review by the FDA and other regulatory authorities. It can take longer than five years to build, validate and license a new manufacturing plant and it can take longer than three years to qualify and license a new contract manufacturer. For example, in order to mitigate the risk associated with the majority of our formulation and fill operations being performed in a single facility, we are completing the construction and qualification of a new formulation and filling facility at our Puerto Rico site, and we are modifying and expanding our recently acquired formulation, fill and finish manufacturing site in Ireland. Upon completion, these facilities will require licensure by the various regulatory authorities.

If regulatory authorities determine that we or our third-party contract manufacturers or certain of our third-party service providers have violated regulations or if they restrict, suspend or revoke our prior approvals, they could prohibit us from manufacturing our products or conducting clinical trials or selling our marketed products until we or the affected third-party contract manufacturers or third-party service providers comply, or indefinitely. Because our third-party contract manufacturers and certain of our third-party service providers are subject to the FDA and foreign regulatory authorities, alternative qualified third-party contract manufacturers and third-party service providers may not be available on a timely basis or at all. If we or our third-party contract manufacturers or third-party service providers cease or interrupt production or if our third-party contract manufacturers and third-party service providers fail to supply materials, products or services to us, we may experience delayed shipments, supply constraints, stock-outs and/or recalls of our products. Additionally, we distribute a substantial volume of our commercial products through our primary distribution centers in Louisville, Kentucky for the United States and in Breda, the Netherlands for Europe and much of the rest of the world. We also conduct all the labeling and packaging of our products distributed in Europe and much of the rest of the world in Breda, the Netherlands. Our ability to timely supply products is dependent on the uninterrupted and efficient operations of our distribution and logistics centers, our third-party logistics providers and our labeling and packaging facility in Breda. Further, we rely on commercial transportation for the distribution of our products to our customers which may be negatively impacted by natural disasters or security threats.

We perform a substantial amount of our commercial manufacturing activities at our Puerto Rico manufacturing facility and a substantial amount of our clinical manufacturing activities at our Thousand Oaks, California manufacturing facility; if significant natural disasters or production failures occur at the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials.

We currently perform all of the formulation, fill and finish for Neulasta®, NEUPOGEN®, Aranesp®, EPOGEN®, Prolia® and XGEVA® and substantially all of the formulation, fill and finish operations for ENBREL at our manufacturing facility in Juncos, Puerto Rico. We also currently perform all of the bulk manufacturing for Neulasta®, NEUPOGEN® and Aranesp®, all of the purification of bulk EPOGEN® material and substantially all of the bulk manufacturing for Prolia® and XGEVA® at this facility. We perform substantially all of the bulk manufacturing and formulation, fill and finish, and packaging for product candidates to be used in clinical trials at our manufacturing facility in Thousand Oaks, California. The global supply of our products and product candidates is significantly dependent on the uninterrupted and efficient operation of these facilities. A number of factors could materially and adversely affect our operations, including:

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power failures and/or other utility failures;

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breakdown, failure or substandard performance of equipment;

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improper installation or operation of equipment;

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labor disputes or shortages, including the effects of a pandemic flu outbreak;

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inability or unwillingness of third-party suppliers to provide raw materials and components;

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natural or other disasters, including hurricanes, earthquakes or fires; and

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failures to comply with regulatory requirements, including those of the FDA.

In the past, the Puerto Rico facility has experienced manufacturing component shortages and there was evidence of adverse trends in the microbial bioburden of the production environment that reduced the production output. The same or other problems may result in our being unable to supply these products, which could materially and adversely affect our product sales, business and operating results. Although we have obtained limited insurance to protect against certain business interruption losses, there

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can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all. The extent of the coverage of our insurance could limit our ability to mitigate for lost sales and such losses could materially and adversely affect our product sales, business and operating results. Our Puerto Rico facility is also subject to the same difficulties, disruptions or delays in manufacturing experienced in our other manufacturing facilities. For example, the limited number of lots of ENBREL and EPOGEN® voluntarily recalled in 2009 and 2010 were manufactured at our Puerto Rico facility. In future inspections, our failure to adequately address the FDA's expectations could lead to further inspections of the facility or regulatory actions. (See Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.)

Our intellectual property positions may be challenged, invalidated, circumvented or expire, or we may fail to prevail in present and future intellectual property litigation.

Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and often involve complex legal, scientific and factual questions. Third parties may challenge, invalidate or circumvent our patents and patent applications relating to our products, product candidates and technologies. In addition, our patent positions might not protect us against competitors with similar products or technologies because competing products or technologies may not infringe our patents. For certain of our product candidates, there are third parties who have patents or pending patent applications that they may claim necessitate payment of a royalty or prevent us from commercializing these product candidates in certain territories. Patent disputes are frequent, costly and can preclude, delay or increase the cost of commercialization of products. We have been in the past, and may be in the future, involved in patent litigation. A determination made by a court, agency or tribunal concerning infringement, validity, enforceability, injunctive or economic remedy, or the right to patent protection, for example, are typically subject to appellate or administrative review. Upon review, such initial determinations may be afforded little or no deference by the reviewing tribunal and may be affirmed, reversed, or made the subject of reconsideration through further proceedings. A patent dispute or litigation may not discourage a potential violator from bringing the product that is alleged to infringe to market prior to a final resolution of the dispute or litigation. For example, until the Pennsylvania District Court entered final judgment and a permanent injunction against Teva on July 15, 2011 pursuant to a joint stipulation and settlement agreement between the parties, Teva had announced that it intended to sell its filgrastim product, upon approval from the FDA, in the United States without a license from us and prior to the expiration of our G-CSF patents. The period of time from inception until resolution of a patent dispute or litigation is subject to the availability and schedule of the court, agency or tribunal before which the dispute or litigation is pending. We may be subject to competition during this period and may not be able to fully recover for the losses, damages, and harms we incur from infringement by the competitor product even if we prevail. Moreover, if we lose or settle current or future litigations at certain stages or entirely, we could be subject to competition and/or significant liabilities, be required to enter into third-party licenses for the infringed product or technology or be required to cease using the technology or product in dispute. In addition, we cannot guarantee that such licenses will be available on terms acceptable to us, or at all.

Further, under the Hatch-Waxman Act, our products approved by the FDA under the FDCA may be the subject of patent litigation with generic competitors before expiry of the five year period of data exclusivity provided for under the Hatch-Waxman Act and prior to the expiration of the patents listed for the product. Likewise, our innovative biologic products may be the subject of patent litigation prior to the expiration of our patents and, with respect to competitors seeking approval as a biosimilar or interchangeable version of our products, prior to the twelve year exclusivity period provided under the Biologics Price Competition and Innovation Act of 2009.  

Over the next several years, certain of the existing patents on our principal products will expire. (See Item 1. Business — Marketed Products.) As our patents expire, competitors may be able to legally produce and market similar products or technologies, including biosimilars, which may have a material adverse effect on our product sales, business and results of operations. (See Item 7A. Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition, Liquidity and Capital Resources.) We have received, and we continue to seek, additional patent protection relating to our products, including patents on our products, specific processes for making our products, formulations and particular uses of our products. However, competitors may be able to invalidate, design around or otherwise circumvent our patents and sell competing products. For example, there are a number of competing therapies currently on the market and more in clinical development that are different from ENBREL but are used to treat the same inflammatory diseases treated by ENBREL. Although we continue to develop new products, and obtain patent protection for these new product candidates, we may not be able to replace the revenue lost upon the expiration of the patents on our current products.

From time to time, U.S. and other policymakers have proposed reforming the patent laws and regulations of their countries. In September 2011, after years of Congressional debate regarding patent reform legislation, President Obama signed into law the America Invents Act (the Act) considered by many to be the most substantial revision of U.S. patent law since 1952. The Act's

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various provisions take effect over an 18-month period. The Act changes the current “first-to-invent” system to a system that awards a patent to the “first-inventor-to-file” for an application for a patentable invention. This change alters the pool of available materials that can be used to challenge patents and eliminates the ability to rely on prior research work in order to lay claim to patent rights. Disputes as to whether the first filer is in fact the true inventor will be resolved through newly implemented derivation proceedings. The Act also creates mechanisms to allow challenges to newly issued patents in the patent office in post-grant proceedings and new inter partes reexamination proceedings. Although many of the changes bring U.S. law into closer harmony with European and other national patent laws, the new bases and procedures may make it easier for competitors to challenge our patents, which could result in increased competition and have a material adverse effect on our product sales, business and results of operations. The changes may also make it harder to challenge third-party patents and place greater importance on being the first inventor to file a patent application on an invention.

Our stock price is volatile.

Our stock price, like that of our peers in the biotechnology and pharmaceutical industries, is volatile. Our revenues and operating results may fluctuate from period to period for a number of reasons. Events such as a delay in product development or even a relatively small revenue shortfall may cause financial results for a period to be below our expectations or projections. As a result, our revenues and operating results and, in turn, our stock price may be subject to significant fluctuations.

We may not be able to access the capital and credit markets on terms that are favorable to us, or at all.

The capital and credit markets may experience extreme volatility and disruption which may lead to uncertainty and liquidity issues for both borrowers and investors. We may access the capital markets to supplement our existing funds and cash generated from operations in satisfying our needs for working capital; capital expenditure and debt service requirements; our plans to pay dividends and repurchase stock; and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities. In the event of adverse capital and credit market conditions, we may be unable to obtain capital market financing on similar favorable terms, or at all, which could have a material adverse effect 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.

Guidelines and recommendations published by various organizations can reduce the use of our products.

Government agencies promulgate regulations and guidelines directly applicable to us and to our products. However, professional societies, HTA organizations, practice management groups, insurance carriers, physicians, private health/science foundations and organizations involved in various diseases from time to time may also publish guidelines or recommendations to healthcare providers, administrators and payers, and patient communities. Recommendations by government agencies or those other groups/organizations may relate to such matters as usage, dosage, route of administration and use of related therapies as well as reimbursement of our products by government and private payers. Recommendations or guidelines that are followed by patients, healthcare providers and payers could result in decreased use and/or dosage of our products. Some examples of agency and organizational guidelines include:

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In August 2012, the Kidney Disease: Improving Global Outcomes group (KDIGO), a not-for-profit foundation managed by the National Kidney Foundation (NKF), published its updated global anemia guidelines in light of new study results, particularly the data from the TREAT trial, which had become available since the NKF-Kidney Disease Outcomes Quality Initiative (KDOQI™) clinical practice guidelines and clinical practice recommendations for anemia in CKD were released in 2007. The new guidelines recommend, among other things, that ESAs not be used to maintain Hb concentrations above 11.5 g/dL in adult patients with CKD. KDOQI has announced that it is preparing a U.S. commentary on the KDIGO global anemia guidelines which is expected to be released in 2013.

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In April 2012, the American Society of Clinical Oncology (ASCO) published a review in which it identified the top five opportunities to improve the quality and value of cancer care by curbing use of common tests and treatments that are not supported by clinical evidence. Among ASCO's suggestions in this review was that oncologists should avoid administering white blood cell stimulating factors (such as NEUPOGEN® and Neulasta®) to patients who have a very low risk for febrile neutropenia, a position consistent with ASCO's existing guidelines for the use of white blood cell stimulating factors.

In addition, HTA organizations, such as NICE in the UK and the Canadian Agency for Drugs and Technologies in Health, make reimbursement recommendations to payers in their jurisdictions based on the clinical effectiveness, cost-effectiveness and service impact of new, emerging and existing medicines and treatments.


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Any recommendations or guidelines that result in decreased use, dosage or reimbursement of our products could materially and adversely affect our product sales, business and operating results. In addition, the perception by the investment community or stockholders that such recommendations or guidelines will result in decreased use and dosage of our products could adversely affect the market price for our common stock.

The commercialization of certain of our product candidates and the marketing of certain of our products is dependent in part on our partners.

We have entered into agreements with third parties to assist in the commercialization of certain of our product candidates and the marketing of certain of our products in specified geographic areas. (See Item 1. Business — Business Relationships.) Many of these agreements involve the sharing of certain decisions and a division of responsibilities, costs and benefits. If our partners fail to effectively deliver on their marketing and commercialization commitments to us or if we and our partners fail to coordinate our efforts effectively, sales of our products may be materially and adversely affected.

Our risk mitigation measures and corporate compliance program cannot guarantee that we effectively manage all operational risks and that we are in compliance with all potentially applicable U.S. federal and state regulations and all potentially applicable foreign regulations and/or other requirements.

The development, manufacturing, distribution, pricing, sales, marketing and reimbursement of our products, together with our general operations, are subject to extensive federal and state regulation in the United States and to extensive regulation in foreign countries. (See Our current products and products in development cannot be sold if we do not maintain or gain regulatory approval and Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.) In addition, our business is complex and involves significant operational risks. While we have implemented numerous risk mitigation measures to comply with such regulations in this complex operating environment, we cannot guarantee that we will be able to effectively mitigate all operational risks. Further, we are now operating under a corporate integrity agreement with the U.S. Department of Health and Human Services, Office of Inspector General, which requires us to maintain our corporate compliance program and to undertake a set of defined corporate integrity obligations. The corporate integrity agreement requires us to make periodic attestations that we are implementing and following the provisions of the corporate integrity agreement, and provides for an independent third-party review organization to assess and report on our compliance. While we have developed and instituted a corporate compliance program, we cannot guarantee that we, our employees, our consultants or our contractors are or will be in compliance with all potentially applicable U.S. federal and state regulations and/or laws, all potentially applicable foreign regulations and/or laws and/or all requirements of the corporate integrity agreement. If we fail to adequately mitigate our operational risks or if we or our agents fail to comply with any of those regulations, laws and/or requirements of the corporate integrity agreement, a range of actions could result, including, but not limited to, the termination of clinical trials, the failure to approve a product candidate, restrictions on our products or manufacturing processes, withdrawal of our products from the market, significant fines, exclusion from government healthcare programs or other sanctions or litigation. Such occurrences could have a material and adverse effect on our product sales, business and results of operations.

Cost savings initiatives may result in the carrying value of certain existing manufacturing facilities or other assets becoming impaired or other related charges being incurred.

Our business continues to face many challenges. In response to these challenges, we have worked and continue to work to improve cost efficiencies and to reduce discretionary expenditures. As part of those efforts, we undertake cost savings initiatives to evaluate our processes and procedures in order to identify opportunities for achieving greater efficiencies in how we conduct our business. In particular, we evaluate our manufacturing operations to identify opportunities to increase production yields and/or success rates as well as capacity utilization. Depending on the timing and outcomes of these cost savings initiatives, the carrying value of certain manufacturing or other assets may not be fully recoverable and could result in the recognition of impairment and/or other related charges. The recognition of such charges, if any, could have a material adverse effect on our results of operations.

The adoption 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 and our tax returns are periodically examined by various tax authorities. We believe our accrual for tax liabilities is adequate for all open years based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. Our provision for income taxes and results of operations in the future could be adversely affected by changes to our operating structure, changes

52


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. For example, there are several proposals under consideration in the United States to reform tax law, including proposals that may reduce or eliminate the deferral of U.S. income tax on our unrepatriated foreign earnings. While it is uncertain how the U.S. Congress may address U.S. tax policy matters in the future, reform of U.S. taxation, including taxation of income earned outside the United States, continues to be a topic of discussion for the U.S. Congress and the Administration. A significant change to the U.S. tax system, such as a change to the taxation of income earned outside the United States, could have a material and adverse effect on our business and on the results of our operations.

There can be no assurance that we will continue to declare cash dividends or repurchase stock.

Our Board of Directors has declared quarterly dividends on our common stock since it adopted a dividend policy in 2011. In addition, in December 2012, our Board of Directors approved an increase in the total authorization for repurchases of our common stock in the amount of $2 billion. This amount was in addition to the approximately $0.5 billion then remaining under the existing stock repurchase authorization. Whether we continue and the amount and timing of such dividends and/or stock repurchases are subject to capital availability and periodic determinations by our Board of Directors that cash dividends and/or stock repurchases are in the best interest of our stockholders and are in compliance with all respective laws and agreements of the Company applicable to the declaration and payment of cash dividends and the repurchase of stock. Future dividends and stock repurchases, including their timing and amount, may be affected by, among other factors: our views on potential future capital requirements for strategic transactions, including acquisitions; debt service requirements; our credit rating; changes to applicable tax laws or corporate laws; and changes to our business model. In addition, the amount we spend and the number of shares we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares. Our dividend payments and/or stock repurchases may change from time to time, and we cannot provide assurance that we will continue to declare dividends and/or repurchase stock in any particular amounts or at all. A reduction in or elimination of our dividend payments and/or stock repurchases could have a negative effect on our stock price.

The illegal distribution and sale by third parties of counterfeit versions of our products or of stolen or diverted products could have a negative impact on our reputation and business.

Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet the exacting standards of our Company's development, manufacturing and distribution processes. Counterfeit medicines pose a significant risk to patient health and safety because of the conditions under which they are manufactured and the lack of regulation of their contents.  Counterfeit products are frequently unsafe or ineffective and can be potentially life-threatening. Our reputation and business could suffer harm as a result of counterfeit drugs sold under our brand name. In addition, products stolen from inventory, at warehouses, plants or while in transit or unlawfully diverted, which are not properly stored and which are sold through unauthorized channels, could adversely impact patient safety, our reputation and our business.  Public loss of confidence in the integrity of biologics and/or pharmaceutical products as a result of counterfeiting or theft could have a material adverse effect on our product sales, business and results of operations.

We are increasingly dependent on information technology systems and infrastructure.

We are increasingly dependent upon information technology systems and infrastructure. The multitude and complexity of our computer systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack. Likewise, data privacy or security breaches by employees or others may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to the Company, its patients, customers or other business partners, may be exposed to unauthorized persons or to the public. While we have in the past experienced cyber attacks and intrusions into our computer systems, we do not believe that such attacks have had a material adverse effect on our operations. While we have invested heavily in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us.

Our efforts to acquire other companies or products and to integrate their operations may not be successful, and may result in costs, delays or failures to realize the benefits of the transactions.

We have an ongoing process of evaluating potential merger, acquisition, partnering and in-license opportunities that we expect will contribute to our future growth and expand our geographic footprint, product offerings and/or our R&D pipeline.  Such 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

53


issues and opportunities. Failures or difficulties in integrating the operations of the businesses that we acquire, including their personnel, technology, financial systems, distribution and general business operations and procedures, may affect our ability to grow and may result in us incurring asset impairment or restructuring charges.
Item 1B.
UNRESOLVED STAFF COMMENTS
None.

54


Item 2.
PROPERTIES
The following table summarizes our significant properties and their primary functions as of December 31, 2012. For additional information regarding manufacturing initiatives, see Item 1. Business  —  Manufacturing, Distribution and Raw Materials.
        
Our corporate headquarters are located in Thousand Oaks, California. In addition to the properties listed above, we have undeveloped land at certain U.S. locations, principally in Thousand Oaks, California; Longmont, Colorado; Louisville, Kentucky; Allentown, Pennsylvania; West Greenwich, Rhode Island; Seattle and Bothell, Washington; and Juncos, Puerto Rico, to accommodate future expansion as required. Excluded from the table above are leased properties that have been abandoned and certain buildings that we still own but are no longer used in our business. There are no material encumbrances on our properties.

55


We believe that our facilities are suitable for their intended use and, in conjunction with our third-party contracting manufacturing agreements, provide adequate capacity. We also believe that our existing facilities, our third-party contract manufacturing agreements and our anticipated additions are sufficient to meet our expected needs. See Item 1A. Risk Factors — We perform a substantial amount of our commercial manufacturing activities at our Puerto Rico manufacturing facility and a substantial amount of our clinical manufacturing activities at our Thousand Oaks, California, manufacturing facility; if significant natural disasters or production failures occur at the Puerto Rico facility, we may not be able to supply these products or, at the Thousand Oaks facility, we may not be able to continue our clinical trials, — We rely on third-party suppliers for certain of our raw materials, medical devices and components and — Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.
Item 3.
LEGAL PROCEEDINGS
Certain of the legal proceedings in which we are involved are discussed in Note 18, Contingencies and commitments, to our Consolidated Financial Statements in this Annual Report on Form 10-K and are hereby incorporated by reference.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common stock
Our common stock trades on The NASDAQ Global Select Market under the symbol AMGN. As of February 19, 2013, there were approximately 8,466 holders of record of our common stock.
The following table sets forth, for the 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, 2012
 
High
 
Low
Fourth quarter
 
$
90.17

 
$
84.00

Third quarter
 
84.81

 
73.85

Second quarter
 
73.02

 
65.59

First quarter
 
69.84

 
63.76

Year ended December 31, 2011
 
 
 
 
Fourth quarter
 
$
64.74

 
$
53.90

Third quarter
 
58.28

 
48.27

Second quarter
 
61.17

 
53.08

First quarter
 
57.31

 
50.95


56


Performance graph
The following graph shows the value of an investment of $100 on December 31, 2007, in each of Amgen common stock, the Amex Biotech Index, the Amex Pharmaceutical Index and Standard & Poor’s 500 Index (S&P 500). All values assume reinvestment of the pretax value of dividends and are calculated as of December 31 of each year. The historical stock price performance of the Company’s common stock shown in the performance graph is not necessarily 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, 2007
 
12/31/2007
 
12/31/2008
 
12/31/2009
 
12/31/2010
 
12/31/2011
 
12/31/2012
Amgen (AMGN)
100.00

 
124.35

 
121.81

 
118.22

 
139.71

 
190.36

Amex Biotech (BTK)
100.00

 
82.29

 
119.79

 
164.99

 
138.85

 
196.61

Amex Pharmaceutical (DRG)
100.00

 
83.91

 
98.16

 
100.63

 
113.62

 
130.55

S&P 500 (SPX)
100.00

 
63.45

 
79.90

 
91.74

 
93.67

 
108.47

The material in this performance graph is not soliciting material, is not deemed filed with the SEC, and is not incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made on, before or after the date of this filing and irrespective of any general incorporation language in such filing.
Stock repurchase program
The Company intends to continue to return capital to stockholders through share repurchases, reflecting our confidence in the long-term value of the Company. The amount we spend, the number of shares repurchased and the timing of such repurchases will vary based on a number of factors, including the stock price, the availability of financing on acceptable terms, the amount and timing of dividend payments and blackout periods in which we are restricted from repurchasing shares; and the manner of purchases may include private block purchases, tender offers, as well as market transactions.

57


During the three months and year ended December 31, 2012, we had one outstanding stock repurchase program. Our repurchase activity for the three months and year ended December 31, 2012, was as follows:
 
 
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)
October 1 - October 31
 
2,215,600

 
$
86.39

 
2,215,600

 
$
1,372,784,941

November 1 - November 30
 
7,723,400

 
85.72

 
7,723,400

 
710,747,356

December 1 - December 31
 
4,304,000

 
88.16

 
4,304,000

 
2,331,298,539

 
 
14,243,000

 
86.56

 
14,243,000

 
 
January 1 - December 31
 
62,334,610

 
$
74.79

 
62,334,610

 
 
(1) 
Average price paid per share includes related expenses.
(2) 
On October 13, 2011, our Board of Directors increased the authorization for repurchase of our common stock to an aggregate of $10 billion. On December 13, 2012, our Board of Directors increased the authorization for repurchase of our common stock by an additional $2 billion.
Dividends
We began paying quarterly cash dividends in 2011. On July 28 and October 13, 2011, the Board of Directors declared quarterly cash dividends of $0.28 per share of common stock, which were paid on September 8 and December 8, 2011, respectively. On December 15, 2011, and March 15, July 19 and October 10, 2012, the Board of Directors declared quarterly cash dividends of $0.36 per share of common stock, which were paid on March 7, June 7, September 7 and December 7, 2012, respectively. Additionally, on December 13, 2012, the Board of Directors declared a quarterly cash dividend of $0.47 per share of common stock, which will be paid on March 7, 2013.
We expect to continue to pay quarterly dividends, although the amount and timing of any future dividends are subject to approval by our Board of Directors.

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Item 6.
SELECTED FINANCIAL DATA
 
Years ended December 31,
Consolidated Statement of Income Data:
2012
 
2011
 
2010
 
2009
 
2008
 
(In millions, except per share data)
Revenues:
 
 
 
 
 
 
 
 
 
Product sales
$
16,639

 
$
15,295

 
$
14,660

 
$
14,351

 
$
14,687

Other revenues
626

 
287

 
393

 
291

 
316

Total revenues
17,265

 
15,582

 
15,053

 
14,642

 
15,003

Operating expenses:
 
 
 
 
 
 
 
 
 
Cost of sales (excludes amortization of certain acquired intangible assets presented separately)
2,918

 
2,427

 
2,220

 
2,091

 
2,296

Research and development
3,380

 
3,167

 
2,894

 
2,864

 
3,030

Selling, general and administrative
4,801

 
4,486

 
3,983

 
3,820

 
3,789

Amortization of certain acquired intangible assets
294

 
294

 
294

 
294

 
294

Other(1) 
295

 
896

 
117

 
67

 
380

Net income
4,345

 
3,683

 
4,627

 
4,605

 
4,052

Diluted earnings per share
5.52

 
4.04

 
4.79

 
4.51

 
3.77

Dividends paid per share
1.44

 
0.56

 
—

 
—

 
—

 
As of December 31,
Consolidated Balance Sheet Data:
2012
 
2011
 
2010
 
2009
 
2008
 
(In millions)
Total assets
$
54,298

 
$
48,871

 
$
43,486

 
$
39,629

 
$
36,427

Total debt(2)
26,529

 
21,428

 
13,362

 
10,601

 
9,352

Total stockholders’ equity(3)
19,060

 
19,029

 
23,944

 
22,667

 
20,885

In addition to the following notes, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying notes and previously filed Annual Reports on Form 10-K for further information regarding our consolidated results of operations and financial position for periods reported therein and for known factors that will impact comparability of future results. Also, see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for information regarding cash dividends declared per share of common stock.
(1) 
In 2011, we recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices. In 2008, we recorded loss accruals for settlements of certain commercial legal proceedings aggregating $288 million, related principally to the settlement of the Ortho Biotech Products L.P. antitrust suit.
(2) 
See Note 14, Financing arrangements, to the Consolidated Financial Statements for discussion of our financing arrangements. In addition, in 2009 and 2008, we issued $2.0 billion and $1.0 billion, respectively, aggregate principal amount of notes. In 2009 and 2008 we repaid $1.0 billion of fixed interest rate notes and $2.0 billion of floating-rate notes, respectively.
(3) 
Throughout the five years ended December 31, 2012, we had a share repurchase program authorized by the Board of Directors through which we repurchased $4.7 billion, $8.3 billion, $3.8 billion, $3.2 billion and $2.3 billion, respectively, of Amgen common stock.



59


Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements
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 or others on our behalf, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, or in 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 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. 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 forecast by our forward-looking statements. Reference is made in particular to forward-looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, earnings per share (EPS), liquidity and capital resources, trends and planned dividends and stock repurchases. 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
The following management’s discussion and analysis (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 consolidated financial statements and accompanying notes. Our results of operations discussed in MD&A are presented in conformity with accounting principles generally accepted in the United States (GAAP).
We are a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics.  Our medicines help millions of patients in the fight against cancer, kidney disease, RA, bone disease and other serious illnesses.  We operate in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.
We earn revenues and income and generate cash primarily from sales of human therapeutic products in the areas of supportive cancer care, inflammation, nephrology and bone disease. Our principal products include Neulasta®, NEUPOGEN®, ENBREL, Aranesp®, EPOGEN®, XGEVA® and Prolia®. For additional information about our products, their approved indications and where they are marketed, see Item 1. Business  —  Marketed Products.
In 2012, we had several notable accomplishments, including achieving 11% revenue growth driven by strong performance across the portfolio. Product sales grew 9% in the United States and 7% in the ROW. We also continued paying quarterly dividends in 2012, and in December, we declared a dividend of $0.47 per share of common stock payable in March 2013, representing a 31% increase over the quarterly dividend paid in each of the past four quarters. Additionally, we repurchased 62 million shares of our common stock at an aggregate cost of $4.7 billion in 2012. Under our $10 billion authorized stock repurchase program announced in October 2011, we have repurchased a total of 146 million shares of our common stock for an aggregate cost of $9.7 billion at an average price of $66.37. Finally, we made significant advances in our product pipeline in 2012 including advancing AMG 145, brodalumab, romosozumab and rilotumumab to phase 3 clinical trials.
We enter 2013 with various opportunities to continue growing our business. We believe the currently approved indications for XGEVA® and Prolia® represent significant commercial opportunities. Longer-term growth may also be achieved by the successful development of our later stage pipeline, by expansion into emerging markets and Japan, and through strategic business development opportunities, such as our acquisitions of Micromet and MN in 2012. Our continued focus on increasing cost efficiencies will assist in providing the necessary resources to fund many of these future opportunities.
Our business will, however, continue to face various challenges. Certain of our products will face increasing competitive pressure as a result of competitive product launches. In the United States, ENBREL, EPOGEN® and XGEVA®, in particular, will be facing increased competition. Additionally, over the next several years, starting in 2013, certain of the existing patents on our principal products — including NEUPOGEN®, EPOGEN® and Aranesp® — will expire and, as a result, we expect to face increasing competition from biosimilars. For additional information, including with regard to the expiration of the patents for various products, see Item 1. Business  —  Marketed Products.

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Current global economic conditions also pose challenges to our business, including continued pressure to reduce healthcare expenditures. Efforts to reduce health care costs are being made by third-party payers including governments and private payers. In the United States, various actions have been taken aimed at reducing healthcare spending. The continuing prominence of U.S. budget deficits increases the risk that taxes, fees, rebates, or other federal measures that would further reduce our revenues or increase our expenses may be enacted. As a result of the economic condition, the industry continues to experience significant pricing pressures and other cost containment measures in certain European countries also.
Our long-term success depends to a great extent on our ability to continue to discover, develop and commercialize innovative products and acquire or collaborate on therapies currently in development by other companies. The discovery and development of safe and effective new products, as well as the development of additional indications for existing products, are necessary for the continued strength of our businesses. Our product lines must be replenished over time in order to offset revenue losses when products lose their exclusivity or competing products are launched, as well as to provide for revenue and earnings growth. We devote considerable resources to R&D activities. However, successful product development in the biotechnology industry is highly uncertain. We are also confronted by increasing regulatory scrutiny of safety and efficacy before and after products have been launched.
Finally, our product sales are subject to certain influences throughout the year, including wholesaler and end-user buying patterns (e.g., wholesaler and end-user stocking, contract-driven buying and patients delaying certain purchasing or physician visits). Such factors can result in higher demand for our products and/or higher wholesaler inventory levels and, therefore, higher product sales for a given three-month period, generally followed by a decline in product sales in the subsequent three-month period. For example, sales of certain of our products in the United States for the three months ended March 31 can be slightly lower relative to the immediately preceding three-month period. While this can result in variability in quarterly product sales on a sequential basis, these effects have generally not been significant when comparing product sales in the three months ended March 31 with product sales in the corresponding period of the prior year.
See Item 1. Business — Marketed Products and Item 1A. Risk Factors for further discussion of certain of the factors that could impact our future product sales.
Selected financial information
The following is an overview of our results of operations as well as our financial condition (in millions, except percentages and per share data):
 
2012
 
Change
 
2011
Product sales:
 
 
 
 
 
U.S.
$
12,815

 
9
 %
 
$
11,725

ROW
3,824

 
7
 %
 
3,570

Total product sales
16,639

 
9
 %
 
15,295

Other revenues
626

 
*

 
287

Total revenues
$
17,265

 
11
 %
 
$
15,582

Operating expenses
$
11,688

 
4
 %
 
$
11,270

Operating income
$
5,577

 
29
 %
 
$
4,312

Net income
$
4,345

 
18
 %
 
$
3,683

Diluted EPS
$
5.52

 
37
 %
 
$
4.04

Diluted shares
787

 
(14
)%
 
912

* Change in excess of 100%
When discussing changes in product sales below, any reference to unit growth or decline refers to changes in the purchases of our products by healthcare providers, such as physicians or their clinics, dialysis centers, hospitals and pharmacies.
The increase in U.S. product sales for 2012 reflects growth across the portfolio except ESAs, which declined 10%. Excluding ESAs, U.S. product sales increased 16% driven primarily by unit growth and, to a lesser extent, increases in average net sales prices. The increase in ROW product sales for 2012 reflects growth for all of our marketed products except Aranesp®, which declined 4%, and combined Neulasta®/NEUPOGEN®, which declined 9%.
The increase in other revenues for 2012 was driven by a modification to our Takeda collaboration, which replaced a global co-development and profit share agreement for motesanib, originally signed in 2008, with an exclusive license for Takeda to

61


develop, manufacture and commercialize motesanib. That modification resulted in revenue recognition of $232 million. The increase also reflects milestone payments received from AstraZeneca and Astellas Pharma Inc.
Operating expenses in 2011 included a previously disclosed charge for a legal settlement reserve of $780 million.
The increase in net income for 2012 was due primarily to higher operating income, offset partially by higher interest expense, net, and higher effective income tax rates.
The increase in diluted EPS for 2012 was driven primarily by increases in net income and by the favorable impacts of our stock repurchase program, which reduced the number of shares used to compute diluted EPS.
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 offset partially by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities. Our hedging activities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.
Commencing January 1, 2011, Puerto Rico imposes a temporary excise tax on the purchase of goods and services from a related manufacturer in Puerto Rico. The excise tax is imposed on the gross intercompany purchase price of the goods and services and is effective for a six-year period beginning in 2011, with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015 and 1% in 2016). In February 2013, the Puerto Rico government proposed an amendment to the excise tax legislation which, if approved, would increase the excise tax rate to 4% effective July 1, 2013 through 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. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes in the year in which the excise tax is incurred. This excise tax has had and will continue to have a significant adverse impact on our cost of sales and a significant favorable impact on our provision for income taxes. In addition, the overall impact of the excise tax will vary from period to period as a result of the timing difference between recognizing the expense and the applicable foreign tax credit. As a result of the excise tax in 2012, cost of sales increased by $343 million, the provision for income taxes was reduced by $337 million and EPS was unfavorably impacted by $0.01. In 2011, cost of sales increased by $211 million, the provision for income taxes was reduced by $321 million and EPS was favorably impacted by $0.12.

As of December 31, 2012, our cash, cash equivalents and marketable securities totaled $24.1 billion, and total debt outstanding was $26.5 billion. Of our total cash, cash equivalents and marketable securities balance as of December 31, 2012, approximately $18.9 billion was generated from operations in foreign tax jurisdictions and is intended to be invested indefinitely outside the United States. Under current tax laws, if these funds were repatriated for use in our U.S. operations, we would be required to pay additional income taxes at the tax rates then in effect.
Results of Operations
Product sales
Worldwide product sales were as follows (dollar amounts in millions):
 
2012
 
Change
 
2011
 
Change