AMGEN INC - Annual Report: 2019 (Form 10-K)

(A)

Excludes 744,928 shares of common stock held by directors and executive officers, and any stockholders whose ownership exceeds ten percent of the shares outstanding, at June 30, 2019. 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.

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In June 2019, the U.S. Food and Drug Administration (FDA) approved KANJINTITM for all approved indications of the reference product Herceptin® (trastuzumab) for the treatment of HER2-overexpressing adjuvant and metastatic breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. In July 2019, we and Allergan plc (Allergan) launched KANJINTITM in the United States.

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In September 2019, we announced that the phase 3 CANDOR (Carfilzomib, Daratumumab and Dexamethasone for Patients With Relapsed and/or Refractory Multiple Myeloma) study evaluating KYPROLIS® in combination with dexamethasone and DARZALEX® (daratumumab) compared to KYPROLIS® and dexamethasone alone in patients with relapsed multiple myeloma met its primary endpoint of progression-free survival (PFS).

•	In January 2020, a supplemental New Drug Application (sNDA) was submitted to the FDA to expand the Prescribing Information to include KYPROLIS® in combination with dexamethasone and DARZALEX® for patients with relapsed or refractory multiple myeloma based on data from the phase 3 CANDOR study.

•	In January 2020, our Marketing Authorization Application (MAA) was accepted by the China National Medical Products Administration for the use of KYPROLIS® and dexamethasone for the treatment of relapsed or refractory multiple myeloma.

•	In July 2019, we and Allergan launched MVASITM in the United States.

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•	In January 2020, we entered into a strategic collaboration with BeiGene, Ltd. (BeiGene) to support our oncology pipeline and expand our oncology presence in China. As part of the agreement we acquired a 20.5% stake in BeiGene for $2.8 billion in cash.

•	In October 2019, the FDA granted AMG 510 fast track designation for the treatment of patients with previously treated metastatic non-small cell lung cancer (NSCLC) with Kirsten rat sarcoma viral oncogene homolog (KRAS) G12C mutation. AMG 510 is a small molecule inhibitor of KRAS G12C.

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In August 2019, we and Allergan announced positive top-line results from a comparative clinical study evaluating the efficacy and safety of ABP 798, a biosimilar candidate to Rituxan® (rituximab), compared to Rituxan® in patients with CD20-positive B-cell non-Hodgkin’s lymphoma. The primary endpoint, an assessment of overall response rate by week 28, was within the prespecified margin for ABP 798 compared to Rituxan®, showing clinical equivalence. Safety and immunogenicity of ABP 798 were comparable to Rituxan®.

•	In December 2019, we and Allergan submitted a Biologics License Application (BLA) to the FDA for ABP 798.

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In August 2019, the U.S. District Court for the District of Delaware overturned a unanimous jury verdict upholding the validity of two of our patents related to proprotein convertase subtilisin/kexin type 9 (PCSK9) antibodies in our infringement action against Sanofi, Sanofi-Aventis U.S. LLC, Aventisub LLC and Regeneron Pharmaceuticals, Inc. See Part IV—Note 19, Contingencies and commitments, to the Consolidated Financial Statements.

•	In December 2019, the FDA approved AVSOLATM for all approved indications of the reference product REMICADE® (infliximab).

•	In August 2019, the U.S. District Court for the District of New Jersey ruled in Amgen’s favor on validity of the two patents that describe and claim ENBREL and methods for making it. See Part IV—Note 19, Contingencies and commitments, to the Consolidated Financial Statements.

•	In November 2019, we completed our acquisition of the worldwide rights to Otezla®, the only oral, non-biologic treatment for psoriasis and psoriatic arthritis from Celgene Corporation (Celgene). Otezla®, along with certain related assets and liabilities, was acquired for $13.4 billion in cash.

•	In April 2019, the FDA approved EVENITY® for the treatment of osteoporosis in postmenopausal women at high risk for fracture.

•	In December 2019, the European Commission (EC) granted marketing authorization for EVENITY® for the treatment of severe osteoporosis in postmenopausal women at high risk of fracture.

•	In July 2019, we and Novartis AG (Novartis) discontinued investigating AMG 520/CNP520, a small molecule inhibitor of beta-site amyloid precursor protein-cleaving enzyme-1 (BACE), for the prevention of Alzheimer’s disease.

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(1)	A European patent with this subject matter may also be 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 have been issued related to the indicated products for patents in at least the following countries:

(2)	A patent with this subject matter may be entitled to patent term extension in the United States.

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(1)	A subsidiary of Johnson & Johnson (J&J).

(2)	Dermatology only.

(3)	Other biosimilars under regulatory review in the United States and Europe.

(4)	PROCRIT® competes with Aranesp® in supportive cancer care and predialysis settings.

(5)	MIRCERA® competes with Aranesp® only in the nephrology segment.

(6)

Our U.S. composition-of-matter patent for Sensipar® expired in March 2018. We are engaged in litigation with a number of companies seeking to market generic versions of Sensipar® surrounding our U.S. formulation patent that expires in September 2026. See Part IV—Note 19, Contingencies and commitments, to the Consolidated Financial Statements, for further information. Several of these generic versions of Sensipar® have been approved by the FDA.

(7)	A subsidiary of Pfizer Inc.

(8)	A subsidiary of Takeda Pharmaceutical Company Limited.

(9)	KYPROLIS® is facing increased competition from several recently approved products.

(10)	A subsidiary of Bristol-Myers Squibb Company (BMS).

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•	investing billions of dollars annually in R&D;

•	developing more affordable therapeutic choices in the form of high-quality and reliably-supplied biosimilars;

•	pricing our medicines to reflect the value they provide;

•	partnering with payers to share risk and accountability for health outcomes;

•	providing patient support and education programs;

•	helping patients in financial need access our medicines; and

•	working with policy makers, patients and other stakeholders to establish a sustainable healthcare system with access to affordable care and where patients and their healthcare professionals are the primary decision makers.

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•	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 large 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.

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•	revised or restrictive labeling for our products, or the potential for restrictive labeling that has resulted, and may in the future result, in our decision not to commercialize a product candidate;

•	requirement of risk management or minimization activities or other regulatory agency compliance actions related to the promotion and sale of our products;

•	post-marketing commitments, mandated post-marketing requirements or pharmacovigilance programs for our approved products;

•	product recalls of our approved products;

•	required changes to the processes used in the manufacture of our products, which could increase our manufacturing costs and affect the availability of contract manufacturers we may utilize to assist in such manufacturing;

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

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

•	treatments or product candidates not being approved by regulatory bodies.

•	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;

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

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

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

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

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

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

•	we and certain of our licensees, partners, contracted organizations or independent investigators may have failed to effectively conduct clinical development or clinical manufacturing activities;

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•	the pathway to regulatory approval or reimbursement for product candidates was uncertain or not well-defined;

•	the biosimilar product candidate failed to demonstrate the requisite biosimilarity to the applicable reference product, or was otherwise determined by a regulatory authority to not meet applicable standards for approval; and

•	a companion diagnostic device that is required with the use of a product candidate is not approved by the necessary regulatory authority.

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•	regulatory requirements or action by regulatory agencies or others;

•	adverse financial or other strategic developments at or affecting the supplier, including bankruptcy;

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

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

•	a material shortage, contamination, recall and/or restrictions on the use of certain biologically derived substances or other raw materials;

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

•	cyber-attacks on supplier systems; and

•	labor disputes or shortages, including from the effects of health emergencies (such as novel viruses or pandemics) and natural disasters.

•	capacity of manufacturing facilities;

•	contamination by microorganisms or viruses, or foreign particles from the manufacturing process;

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

•	labor disputes or shortages, including the effects of health emergencies (such as novel viruses or pandemics) or natural disasters;

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•	compliance with regulatory requirements;

•	changes in forecasts of future demand;

•	timing and actual number of production runs and production success rates and yields;

•	updates of manufacturing specifications;

•	contractual disputes with our suppliers and contract manufacturers;

•	timing and outcome of product quality testing;

•	power failures and/or other utility failures;

•	cyber-attacks on supplier systems;

•	breakdown, failure, substandard performance or improper installation or operation of equipment (including our information technology systems and network-connected control systems or those of our contract manufacturers or third-party service providers); and/or

•	delays in the ability of the FDA or foreign regulatory agencies to provide us necessary reviews, inspections and approvals, including as a result of a subsequent extended U.S. federal government shutdown.

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(1)	Average price paid per share includes related expenses.

(2)	In May 2019 and December 2019, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $5.0 billion and $4.0 billion, respectively.

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(1)	In 2017, we recorded a net charge of $6.1 billion as a result of the 2017 Tax Act. See Part IV—Note 6, Income taxes, to the Consolidated Financial Statements.

(2)	See Part IV—Note 15, Financing arrangements, to the Consolidated Financial Statements, for discussion of our financing arrangements. In 2016, we issued $7.3 billion of debt and repaid $3.7 billion of debt. In 2015, we issued $3.5 billion of debt and repaid $2.4 billion of debt.

(3)	Throughout the five years ended December 31, 2019, we had a stock repurchase program authorized by the Board of Directors, through which we repurchased $7.6 billion, $17.9 billion, $3.1 billion, $3.0 billion and $1.9 billion, respectively, of Amgen common stock.

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(1)

Long-term debt obligations include future interest payments on our fixed-rate obligations at the contractual coupon rates. To achieve a desired mix of fixed-rate and floating-rate debt, we enter into interest rate swap contracts that effectively convert a fixed-rate interest coupon for certain of our debt issuances to a floating LIBOR-based coupon over the terms of the related hedge contracts. We used an interest rate forward curve as of December 31, 2019, in computing net amounts to be paid or received under our interest rate swap contracts, which resulted in an aggregate net decrease in future interest payments of $309 million. See Part IV—Note 15, Financing arrangements, to the Consolidated Financial Statements.

(2)	Long-term debt obligations include future interest payments on our LIBOR-based variable-rate obligations. We used an interest rate forward curve as of December 31, 2019, in computing the LIBOR-based portion of interest payments on these debt obligations. See Part IV—Note 15, Financing arrangements, to the Consolidated Financial Statements.

(3)

Long-term debt obligations include contractual interest payments and principal repayments of our foreign-denominated debt obligations. In order to hedge our exposure to foreign currency exchange rate risk associated with certain of our euro-, pound-sterling- and Swiss-franc-denominated long-term debt, we entered into cross-currency swap contracts that effectively converted interest payments and principal repayments on this debt from euros, pounds sterling and Swiss francs to U.S. dollars. For purposes of this table, we used the contracted exchange rates in the cross-currency swap contracts to compute the net amounts of future interest payments and principal repayments on this debt. See Part IV—Note 18, Derivative instruments, to the Consolidated Financial Statements.

(4)	Operating lease obligations includes payments for leases that have not yet commenced, net of lease incentives, and excludes $141 million of future receipts under noncancelable subleases of abandoned facilities.

(5)	Purchase obligations relate primarily to (i) R&D commitments (including those related to clinical trials) for new and existing products, (ii) capital expenditures and (iii) open purchase orders for the acquisition of goods and services in the ordinary course of business. Our obligation to pay certain of these amounts may be reduced based on certain future events.

(6)	Under the 2017 Tax Act, we elected to pay in eight annual installments the repatriation tax related primarily to our prior indefinitely invested earnings of our foreign operations. See Part IV—Note 19, Contingencies and commitments—Commitments – U.S. repatriation tax, to the Consolidated Financial Statements.

(7)	Liabilities for UTBs are not included in the table above because due to their nature there is a high degree of uncertainty regarding the timing of future cash outflows and other events that extinguish these liabilities. See Part IV—Note 6, Income taxes, to the Consolidated Financial Statements.

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•	determining the timing and expected costs to complete in-process projects, taking into account the stage of completion at the acquisition date;

•	projecting the probability and timing of obtaining marketing approval from the FDA and other regulatory agencies for product candidates;

•	estimating the timing of and future net cash flows from product sales resulting from completed products and in-process projects; and

•	developing appropriate discount rates to calculate the present values of the cash flows.

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(1)

The Amended and Restated 2009 Equity Incentive Plan employs a fungible share-counting formula for determining the number of shares available for issuance under the plan. In accordance with this formula, each option or stock appreciation right counts as one share, while each restricted stock unit, performance unit or dividend equivalent counts as 1.9 shares. The number under column (a) represents the actual number of shares issuable under our outstanding awards without giving effect to the fungible share-counting formula. The number under column (c) represents the number of shares available for issuance under this plan based on each such available share counting as one share. Commencing with the grants made in April 2012, RSUs and performance units accrue dividend equivalents that are payable in shares only to the extent and when the underlying RSUs vest or underlying performance units have been earned and the related shares are issued to the grantee. The performance units granted under this plan are earned based on the accomplishment of specified performance goals at the end of their respective three-year performance periods; the number of performance units granted represent target performance, and the maximum number of units that could be earned based on our performance is 200% of the performance units granted in 2017, 2018 and 2019.

(2)	This plan has terminated as to future grants. The number under column (a) with respect to this plan includes 13,439 shares issuable upon the settlement of deferred RSUs (including 2,357 related dividend equivalents).

(3)

The Amgen Profit Sharing Plan for Employees in Ireland (the Profit Sharing Plan) was approved by the Board of Directors on July 28, 2011. The Profit Sharing Plan permits eligible employees of the Company’s subsidiaries located in Ireland who participate in the Profit Sharing Plan to apply a portion of their qualifying bonus and salary to the purchase the Company’s common stock on the open market at the market price by a third-party trustee as described in the Profit Sharing Plan.

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(a)1.	Index to Financial Statements

(a)2.	Index to Financial Statement Schedules

(a)3.	Exhibits

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•	Registration Statement (Form S-3 No. 333-236351) of Amgen Inc.,

•	Registration Statement (Form S-8 No. 333-159377) pertaining to the Amgen Inc. 2009 Equity Incentive Plan,

•	Registration Statement (Form S-8 No. 33-39183) pertaining to the Amended and Restated Employee Stock Purchase Plan,

•	Registration Statements (Form S-8 No. 33-39104, as amended by Form S-8 Nos. 333-144581 and 333-216719) pertaining to the Amended and Restated Amgen Retirement and Savings Plan (formerly known as the Amgen Retirement and Savings Plan),

•	Registration Statements (Form S-8 Nos. 33-47605, 333-144580 and 333-216715) pertaining to the Retirement and Savings Plan for Amgen Manufacturing, Limited (formerly known as the Retirement and Savings Plan for Amgen Manufacturing, Inc.),

•	Registration Statements (Form S-8 Nos. 333-81284, 333-177868 and 333-216723) pertaining to the Amgen Nonqualified Deferred Compensation Plan, and

•	Registration Statement (Form S-8 No. 333-176240) pertaining to the Amgen Profit Sharing Plan for Employees in Ireland;

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(1)	Hedging gains and losses, which are included in product sales, were not material for the years ended December 31, 2019, 2018 and 2017.

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(1)	Includes short-term leases and variable lease costs, which were not material for the year ended December 31, 2019.

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(1)	Includes future rental commitments for abandoned leases of $178 million. We expect to receive total future rental income of $141 million related to noncancelable subleases for abandoned facilities.

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In 2019, we repaid $4.5 billion of debt, including the $1.4 billion aggregate principal amount of the 2.20% 2019 Notes, the $1.0 billion aggregate principal amount of the 5.70% 2019 Notes, the €675 million aggregate principal amount ($864 million upon settlement of the related cross-currency swap) of the 2.125% 2019 euro Notes, the $700 million aggregate principal amount of the 1.90% 2019 Notes and the $550 million Floating Rate Notes due 2019.

•	In 2018, we repaid $1.1 billion of debt, including the $500 million aggregate principal amount of the 6.15% 2018 Notes and the €550 million aggregate principal amount of the 4.375% 2018 Notes revalued at $621 million upon maturity.

•	In 2017, we repaid $4.4 billion of debt, including the $605 million short-term floating-rate loan, the $1.25 billion aggregate principal amount of the 2.125% 2017 Notes, the $600 million aggregate principal amount of the Floating Rate Notes due 2017, the $850 million aggregate principal amount of the 1.25% 2017 Notes and the $1.1 billion aggregate principal amount of the 5.85% 2017 Notes.

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(1)	Current portion of long-term debt includes $1.0 billion of carrying value with discontinued hedging relationships as of December 31, 2018. Long-term debt includes $136 million and $137 million of carrying value with discontinued hedging relationships as of December 31, 2019 and 2018, respectively.

(2)	Current portion of long-term debt includes $3 million of hedging adjustments on discontinued hedging relationships as of December 31, 2018. Long-term debt includes $36 million and $37 million of hedging adjustments on discontinued hedging relationships as of December 31, 2019 and 2018, respectively.

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(1)	(Losses) gains on hedged items do not completely offset gains (losses) on the related designated hedging instruments due to amortization of the cumulative amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging relationships.

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