Item 16. FORM 10-K SUMMARY

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		AMGEN INC.
		(Registrant)
Date:	February 12, 2020	By:		/S/ PETER H. GRIFFITH
				Peter H. Griffith
				Executive Vice President and Chief Financial Officer
				(Principal Financial and Accounting Officer)

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

•	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;

of our reports dated February 12, 2020, with respect to the consolidated financial statements and schedule of Amgen Inc. and the effectiveness of internal control over financial reporting of Amgen Inc. included in this Annual Report (Form 10-K) of Amgen Inc. for the year ended December 31, 2019.

/s/ Ernst & Young LLP

Los Angeles, California

February 12, 2020

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter H. Griffith, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming that said attorney-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature		Title		Date
/S/ ROBERT A. BRADWAY		Chairman of the Board, Chief Executive Officer and President, and Director (Principal Executive Officer)		2/12/2020
Robert A. Bradway
/S/ PETER H. GRIFFITH		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)		2/12/2020
Peter H. Griffith
/S/ WANDA M. AUSTIN		Director		2/12/2020
Wanda M. Austin
/S/ BRIAN J. DRUKER		Director		2/12/2020
Brian J. Druker
/S/ ROBERT A. ECKERT		Director		2/12/2020
Robert A. Eckert
/S/ GREG C. GARLAND		Director		2/12/2020
Greg C. Garland
/S/ FRED HASSAN		Director		2/12/2020
Fred Hassan
/S/ REBECCA M. HENDERSON		Director		2/12/2020
Rebecca M. Henderson
/S/ CHARLES M. HOLLEY, JR.		Director		2/12/2020
Charles M. Holley, Jr.
/S/ TYLER JACKS		Director		2/12/2020
Tyler Jacks
/S/ ELLEN J. KULLMAN		Director		2/12/2020
Ellen J. Kullman
/S/ RONALD D. SUGAR		Director		2/12/2020
Ronald D. Sugar
/S/ R. SANDERS WILLIAMS		Director		2/12/2020
R. Sanders Williams

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Amgen Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Amgen Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 12, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-1

	Sales deductions
Description of the Matter	As of December 31, 2019, the Company recorded accrued sales deductions of $3.9 billion. As described in Note 1 to the financial statements under the caption “Product sales and sales deductions,” revenues from product sales are recognized net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions, (collectively sales deductions), which are established at the time of sale. Auditing the estimation of sales deductions, which are netted against product sales, is complex, requires significant judgment, and the amounts involved are material to the financial statements taken as a whole. Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon delivery, and is based on an amount that reflects the consideration to which the Company expects to be entitled, which represents an amount that is net of accruals for estimated sales deductions. The estimated sales deductions are based on current contractual and statutory requirements, market events and trends, internal and external historical data, and forecasted customer buying patterns.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the sales deduction processes. This included testing controls over management’s review of significant assumptions and inputs used in the estimate of sales deductions, including actual sales, contractual terms, historical experience, wholesaler inventory levels, demand data and estimated patient population. We also tested management’s controls over the accuracy of forecasting demand activity as well as the completeness and accuracy of all other components included in the final sales deduction estimates. To test management’s estimated sales deductions, we obtained management’s calculations for the respective estimates and performed the following procedures, among others. We tested management’s estimation process over the determination of sales discount accruals by developing an independent expectation of the estimated accrual rate, including a comparison of rates used in management’s forecast to rates in the underlying contracts, performing a lookback analysis using actual historical data to evaluate the forecasted amounts, assessing subsequent events to determine whether there was any new information that would require adjustment to the initial accruals, evaluating trends in actual sales and discount accrual balances, comparing cash receipts to product sales, confirming terms and conditions for a sample of contracts with the Company’s customers, testing a sample of credits issued and payments made throughout the year, and agreeing rates to underlying contract terms.

F-2

	Unrecognized Tax Benefits
Description of the Matter	As discussed in Notes 1 and 6 to the consolidated financial statements, the Company operates in various jurisdictions in which differing interpretations of complex tax laws and regulations create uncertainty and necessitate the use of significant judgment in the determination of the Company’s unrecognized tax benefits related to allocation of profits among various jurisdictions (“transfer pricing”), particularly in the U.S. federal tax jurisdiction where the Company has significant assets and operations. In this regard, the Company uses significant judgment in (1) determining whether a tax position’s technical merits are more-likely-than-not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition. As of December 31, 2019, the Company accrued $3.3 billion of gross unrecognized tax benefits including transfer pricing. Auditing the assessment of the technical merits and measurement of the Company’s unrecognized tax benefits is challenging because they can be complex, highly judgmental, and based on interpretations of tax laws and regulations.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s process to assess the technical merits of its tax positions, as well as management’s process to measure the unrecognized tax benefits of those tax positions, particularly in regard to transfer pricing. This included testing controls over management’s review of the inputs, calculations, assumptions and methods selected to measure the amount of tax benefits that qualify for recognition. We involved tax and transfer pricing professionals to assist in assessing the technical merits and measurement of certain of the Company’s unrecognized tax benefits. Depending on the nature of the specific tax position and, as applicable, developments with the relevant tax authorities, our procedures included obtaining and reviewing the Company’s correspondence with such tax authorities and evaluating certain third-party advice to support the Company’s evaluations and recorded positions. We used our knowledge of and experience with how the income tax laws and regulations related to transfer pricing are applied by the relevant tax authorities to evaluate the Company’s accounting for its unrecognized tax benefits. We evaluated developments in the applicable regulatory environments to assess potential effects on the Company’s recorded positions. We analyzed the assumptions and data used by the Company when it determined the amount of tax benefits to recognize, including applicable interest and penalties, and we tested the accuracy of those underlying calculations. We have also evaluated the Company’s income tax disclosures included in Note 6 in relation to these matters.

We have served as the Company’s auditor since 1980.

Los Angeles, California

February 12, 2020

F-3

AMGEN INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2019**,** 2018 and 2017

(In millions, except per-share data)

	2019				2018				2017
Revenues:
Product sales	$	22,204			$	22,533			$	21,795
Other revenues	1,158				1,214				1,054
Total revenues	23,362				23,747				22,849
Operating expenses:
Cost of sales	4,356				4,101				4,069
Research and development	4,116				3,737				3,562
Selling, general and administrative	5,150				5,332				4,870
Other	66				314				375
Total operating expenses	13,688				13,484				12,876
Operating income	9,674				10,263				9,973
Interest expense, net	1,289				1,392				1,304
Interest and other income, net	753				674				928
Income before income taxes	9,138				9,545				9,597
Provision for income taxes	1,296				1,151				7,618
Net income	$	7,842			$	8,394			$	1,979
Earnings per share:
Basic	$	12.96			$	12.70			$	2.71
Diluted	$	12.88			$	12.62			$	2.69
Shares used in the calculation of earnings per share:
Basic	605				661				731
Diluted	609				665				735

See accompanying notes.

F-4

AMGEN INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2019**,** 2018 and 2017

(In millions)

	2019				2018				2017
Net income	$	7,842			$	8,394			$	1,979
Other comprehensive income (loss), net of reclassification adjustments and taxes:
(Losses) gains on foreign currency translation	(48		)		(141		)		81
(Losses) gains on cash flow hedges	(66		)		247				(288		)
Gains (losses) on available-for-sale securities	360				(185		)		(6		)
Other (losses) gains	(5		)		(2		)		5
Other comprehensive income (loss), net of taxes	241				(81		)		(208		)
Comprehensive income	$	8,083			$	8,313			$	1,771

See accompanying notes.

F-5

AMGEN INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2019 and 2018

(In millions, except per-share data)

	2019				2018
ASSETS
Current assets:
Cash and cash equivalents	$	6,037			$	6,945
Marketable securities	2,874				22,359
Trade receivables, net	4,057				3,580
Inventories	3,584				2,940
Other current assets	1,888				1,794
Total current assets	18,440				37,618
Property, plant and equipment, net	4,928				4,958
Intangible assets, net	19,413				7,443
Goodwill	14,703				14,699
Other assets	2,223				1,698
Total assets	$	59,707			$	66,416
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,371			$	1,207
Accrued liabilities	8,511				7,862
Current portion of long-term debt	2,953				4,419
Total current liabilities	12,835				13,488
Long-term debt	26,950				29,510
Long-term deferred tax liabilities	606				864
Long-term tax liabilities	8,037				8,770
Other noncurrent liabilities	1,606				1,284
Contingencies and commitments
Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value per share; 2,750.0 shares authorized; outstanding—591.4 shares in 2019 and 629.6 shares in 2018	31,531				31,246
Accumulated deficit	(21,330		)		(17,977		)
Accumulated other comprehensive loss	(528		)		(769		)
Total stockholders’ equity	9,673				12,500
Total liabilities and stockholders’ equity	$	59,707			$	66,416

See accompanying notes.

F-6

AMGEN INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2019**,** 2018 and 2017

(In millions, except per-share data)

	Number of shares of common stock			Common stock and additional paid-in capital				Accumulated deficit				Accumulated other comprehensive loss				Total
Balance as of December 31, 2016	738.2			$	30,784			$	(438	)		$	(471	)		$	29,875
Net income	—			—				1,979				—				1,979
Other comprehensive loss, net of taxes	—			—				—				(208		)		(208		)
Dividends declared on common stock ($4.77 per share)	—			—				(3,487		)		—				(3,487		)
Issuance of common stock in connection with the Company’s equity award programs	2.5			52				—				—				52
Stock-based compensation expense	—			347				—				—				347
Tax impact related to employee stock-based compensation expense	—			(191		)		—				—				(191		)
Repurchases of common stock	(18.5	)		—				(3,126		)		—				(3,126		)
Balance as of December 31, 2017	722.2			30,992				(5,072		)		(679		)		25,241
Cumulative effect of changes in accounting principles, net of taxes	—			—				38				(9		)		29
Net income	—			—				8,394				—				8,394
Other comprehensive loss, net of taxes	—			—				—				(81		)		(81		)
Dividends declared on common stock ($5.41 per share)	—			—				(3,482		)		—				(3,482		)
Issuance of common stock in connection with the Company’s equity award programs	1.9			56				—				—				56
Stock-based compensation expense	—			327				—				—				327
Tax impact related to employee stock-based compensation expense	—			(129		)		—				—				(129		)
Repurchases of common stock	(94.5	)		—				(17,855		)		—				(17,855		)
Balance as of December 31, 2018	629.6			31,246				(17,977		)		(769		)		12,500
Net income	—			—				7,842				—				7,842
Other comprehensive income, net of taxes	—			—				—				241				241
Dividends declared on common stock ($5.95 per share)	—			—				(3,555		)		—				(3,555		)
Issuance of common stock in connection with the Company’s equity award programs	2.0			97				—				—				97
Stock-based compensation expense	—			323				—				—				323
Tax impact related to employee stock-based compensation expense	—			(135		)		—				—				(135		)
Repurchases of common stock	(40.2	)		—				(7,640		)		—				(7,640		)
Balance as of December 31, 2019	591.4			$	31,531			$	(21,330	)		$	(528	)		$	9,673

See accompanying notes.

F-7

AMGEN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2019**,** 2018 and 2017

(In millions)

	2019				2018				2017
Cash flows from operating activities:
Net income	$	7,842			$	8,394			$	1,979
Depreciation, amortization and other	2,206				1,946				1,955
Stock-based compensation expense	308				311				329
Deferred income taxes	(289		)		(363		)		(1,330		)
Other items, net	(186		)		386				334
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net	(504		)		(378		)		(58		)
Inventories	(66		)		(3		)		133
Other assets	10				35				(24		)
Accounts payable	164				(143		)		424
Accrued income taxes, net	(585		)		(361		)		523
Long-term tax liabilities	(146		)		258				6,681
Other liabilities	396				1,214				231
Net cash provided by operating activities	9,150				11,296				11,177
Cash flows from investing activities:
Purchases of marketable securities	(9,394		)		(18,741		)		(33,607		)
Proceeds from sales of marketable securities	8,842				28,356				24,240
Proceeds from maturities of marketable securities	20,548				5,412				6,174
Purchases of property, plant and equipment	(618		)		(738		)		(664		)
Cash paid for acquisitions, net of cash acquired	(13,617		)		195				(19		)
Other	(52		)		(145		)		(148		)
Net cash provided by (used in) investing activities	5,709				14,339				(4,024		)
Cash flows from financing activities:
Net proceeds from issuance of debt	—				—				4,476
Repayment of debt	(4,514		)		(1,121		)		(4,405		)
Repurchases of common stock	(7,702		)		(17,794		)		(3,160		)
Dividends paid	(3,509		)		(3,507		)		(3,365		)
Withholding taxes arising from shares withheld for share-based payments	(137		)		(126		)		(191		)
Other	95				58				51
Net cash used in financing activities	(15,767		)		(22,490		)		(6,594		)
(Decrease) increase in cash and cash equivalents	(908		)		3,145				559
Cash and cash equivalents at beginning of year	6,945				3,800				3,241
Cash and cash equivalents at end of year	$	6,037			$	6,945			$	3,800

See accompanying notes.

F-8

AMGEN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

1. Summary of significant accounting policies

Business

Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. We operate in one business segment: human therapeutics.

Principles of consolidation

The consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. We do not have any significant interests in any variable interest entities. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Revenues

Product sales and sales deductions

Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon delivery, based on an amount that reflects the consideration to which we expect to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales deductions) and returns established at the time of sale.

We analyze the adequacy of our accruals for sales deductions quarterly. Amounts accrued for sales deductions are adjusted when trends or significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. Accruals for sales deductions are based primarily on estimates of the amounts earned or to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product specific and therefore, for any given period, can be affected by the mix of products sold. Included in sales deductions are immaterial net adjustments related to prior-period sales due to changes in estimates. Historically, such amounts have represented less than 1% of the aggregate sales deductions charged against product sales.

Returns are estimated through comparison of historical return data to their related sales on a production lot basis. Historical rates of return are determined for each product and are adjusted for known or expected changes in the marketplace specific to each product, when appropriate. Historically, sales return provisions have amounted to less than 1% of gross product sales. Changes in estimates for prior-period sales return provisions have historically been immaterial.

Our payment terms vary by types and locations of customers and the products or services offered. Payment terms differ by jurisdiction and customer, but payment is generally required in a term ranging from 30 to 120 days from date of shipment or satisfaction of the performance obligation. For certain products or services and certain customer types, we may require payment before products are delivered or services are rendered to customers.

Indirect taxes collected from customers and remitted to government authorities and that are related to sales of the Company’s products, primarily in Europe, are excluded from revenues.

As a practical expedient, sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, general and administrative expense in the Consolidated Statements of Income.

F-9

Other revenues

Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on third-party sales of licensed products and are recorded when the related third-party product sale occurs. Royalty estimates are based on historical and forecasted sales trends. Corporate partner revenues are composed mainly of license fees and milestones earned and our share of commercial profits generated from collaborations. See Arrangements with multiple-performance obligations, discussed below.

Arrangements with multiple-performance obligations

From time to time, we enter into arrangements for the research and development (R&D), manufacture and/or commercialization of products and product candidates. Such arrangements may require us to deliver various rights, services and/or goods, including intellectual property rights/licenses, R&D services, manufacturing services and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen in the form of nonrefundable, upfront license fees; development and commercial performance milestone payments; royalty payments; and/or profit sharing.

In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or by using an adjusted market assessment approach if selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur. We utilize the sales- and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizing revenues generated from royalties or profit sharing as the underlying sales occur.

Research and development costs

R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems’ costs; and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs and cost recoveries associated with third-party R&D arrangements, including upfront fees and milestones paid to third parties in connection with technologies that had not reached technological feasibility and did not have an alternative future use. Net payment or reimbursement of R&D costs is recognized when the obligations are incurred or as we become entitled to the cost recovery. See Note 8, Collaborations and Note 21, Subsequent events.

Selling, general and administrative costs

Selling, general and administrative (SG&A) costs are composed primarily of salaries, benefits and other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses; the U.S. healthcare reform federal excise fee on Branded Prescription Pharmaceutical Manufacturers and Importers; and other general and administrative costs. Advertising costs are expensed as incurred and were $789 million, $674 million and $620 million during the years ended December 31, 2019, 2018 and 2017, respectively. SG&A expenses also include costs and cost recoveries associated with marketing and promotion efforts under certain collaborative arrangements. Net payment or reimbursement of SG&A costs is recognized when the obligations are incurred or we become entitled to the cost recovery. See Note 8, Collaborations.

Leases

Adoption of new lease standard

In February 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for the accounting and disclosure of leases. This new standard requires that lessees recognize the assets and liabilities that arise from leases on the balance sheet, including leases classified as operating leases, and that they disclose qualitative and quantitative information about leasing arrangements. The FASB subsequently issued additional amendments to address issues arising from the implementation of the new lease standard. We adopted this standard as of January 1, 2019, using the modified-retrospective method, which provides a method for recording existing leases at adoption. We used the adoption date as our date of initial application, and thus, comparative-period financial information is not presented for periods prior to the adoption date.

F-10

In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification.

Adoption of the new standard resulted in total lease liabilities of $510 million and right-of-use (ROU) assets of $439 million as of January 1, 2019. The difference between the initial lease liabilities and the ROU assets is related primarily to previously existing lease liabilities. The standard did not materially impact our Consolidated Statements of Income and had no impact on our Consolidated Statements of Cash Flows. Our accounting policies under the new standard are described below. See Note 13, Leases.

Lease recognition

At inception of a contract, we determine whether an arrangement is or contains a lease. For all leases, we determine the classification as either operating or financing. Operating leases are included in Other assets, Accrued liabilities and Other noncurrent liabilities in our Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments under the lease. Lease recognition occurs at the commencement date, and lease liability amounts are based on the present value of lease payments made during the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Because most of our leases do not provide information to determine an implicit interest rate, we use our incremental borrowing rate in determining the present value of lease payments. ROU assets also include any lease payments made prior to the commencement date and exclude lease incentives received. Operating lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with both lease and nonlease components, which are generally accounted for together as a single lease component. In addition, for certain vehicle and equipment leases, we apply a portfolio approach to determine the lease term and discount rate.

Stock-based compensation

We have stock-based compensation plans under which various types of equity-based awards are granted, including restricted stock units (RSUs), performance units and stock options. The fair values of RSUs and stock option awards, which are subject only to service conditions with graded vesting, are recognized as compensation expense, generally on a straight-line basis over the service period, net of estimated forfeitures. The fair values of performance unit awards are recognized as compensation expense, generally on a straight-line basis from the grant date to the end of the performance period. See Note 4, Stock-based compensation.

Income taxes

We provide for income taxes based on pretax income and applicable tax rates in the various jurisdictions in which we operate. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the bases of assets and liabilities, as well as for loss and tax credit carryforwards for financial reporting purposes and amounts recognized for income tax purposes. We record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that is more likely than not to be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. See Note 6, Income taxes.

Acquisitions

We first determine whether a set of assets acquired constitute a business and should be accounted for as a business combination. If the assets acquired are not a business, we account for the transaction as an asset acquisition. Business combinations are accounted for by using the acquisition method of accounting. Under the acquisition method, assets acquired, including in-process research and development (IPR&D) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination (including the assumption of an acquiree’s liability arising from an acquisition it consummated prior to our acquisition) are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings. In contrast, asset acquisitions are accounted for using a cost accumulation and allocation model. Under this model, the cost of the acquisition is allocated to the assets acquired

F-11

and liabilities assumed. Contingent consideration obligations incurred in connection with an asset acquisition are recorded when it is probable that they will occur and they can be reasonably estimated. See Note 2, Acquisitions, and Note 17, Fair value measurement.

Cash equivalents

We consider cash equivalents to be only those investments that are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.

Interest-bearing securities

We consider our interest-bearing securities investment portfolio available-for-sale, and accordingly, these investments are recorded at fair value, with unrealized gains and losses recorded in Accumulated other comprehensive income (loss) (AOCI). Investments with maturities beyond one year may be classified as short-term marketable securities in the Consolidated Balance Sheets due to their highly liquid nature and because they represent the Company’s investments that are available for current operations. See Note 9, Investments, and Note 17, Fair value measurement.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner that approximates the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. See Note 10, Inventories.

Derivatives

We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The accounting for changes in the fair value of a derivative instrument depends on whether the derivative has been formally designated and qualifies as part of a hedging relationship under the applicable accounting standards and, further, on the type of hedging relationship. For derivatives formally designated as hedges, we assess both at inception and quarterly thereafter whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. Our derivatives that are not designated and do not qualify as hedges are adjusted to fair value through current earnings. See Note 17, Fair value measurement, and Note 18, Derivative instruments.

Property, plant and equipment, net

Property, plant and equipment is recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. We review our property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 11, Property, plant and equipment.

Goodwill and other intangible assets

Finite-lived intangible assets are recorded at cost, net of accumulated amortization, and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis or based on the pattern in which economic benefits are consumed, if reliably determinable. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 12, Goodwill and other intangible assets.

The fair values of IPR&D projects acquired in a business combination that are not complete are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market the resulting products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.

Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider various factors for potential impairment, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining marketing approval, the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets.

F-12

We perform an impairment test of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To date, an impairment of goodwill has not been recorded. See Note 12, Goodwill and other intangible assets.

Contingencies

In the ordinary course of business, we are involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that are difficult to predict. Certain of these proceedings are discussed in Note 19, Contingencies and commitments. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously.

Foreign currency translation

The net assets of international subsidiaries whose local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating net assets of these subsidiaries at changing rates are recognized in AOCI. The subsidiaries’ earnings are translated into U.S. dollars using average exchange rates.

Other recent accounting pronouncements

In June 2016, the FASB issued a new accounting standard that amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The new standard is effective for interim and annual periods beginning on January 1, 2020. With certain exceptions, adjustments are to be applied using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained earnings as of the beginning of the fiscal year of adoption. We have substantially completed our impact assessment and do not currently anticipate a material impact on our consolidated financial statements.

2. Acquisitions

Otezla*®* (apremilast)

On November 21, 2019, we acquired worldwide rights to Otezla®, the only oral, non-biologic treatment for psoriasis and psoriatic arthritis, along with certain related assets and liabilities, from Celgene Corporation (Celgene). Otezla® is used primarily for the treatment of patients with moderate-to-severe plaque psoriasis for whom phototherapy or systemic therapy is appropriate and is approved in more than 50 markets outside the United States, including the European Union and Japan. The acquisition was accounted for as an asset acquisition under GAAP because substantially all the value of the assets acquired was concentrated in the global intellectual property rights of Otezla®. Otezla®’s operations have been included in our consolidated financial statements commencing on the acquisition date.

F-13

The following table summarizes the consideration transferred and the allocation of the estimated accumulated cost, including tax adjustments, to the assets acquired and liabilities assumed (in millions):

		Amounts
Cash purchase price		$	13,400
Transaction costs		40
Accumulated cost (consideration transferred)		$	13,440
Intangible assets:
Developed-product-technology rights		$	13,007
Marketing-related rights		195
Inventory		367
Deferred tax liability, net		(24		)
Deferred credit		(96		)
Other liabilities, net		(9		)
Total assets acquired, net		$	13,440

Amgen allocated the accumulated cost of the acquisition to the assets acquired based on their relative fair values. The accumulated cost of the acquisition includes direct acquisition-related costs and applicable taxes. Goodwill is not recognized in the accounting for an asset acquisition. Rather, the excess of the accumulated cost over the fair value of the net assets acquired is reallocated to the nonfinancial assets acquired.

The developed-product-technology rights acquired relate to Otezla®. The estimated fair value was determined by using a multi-period excess earnings income approach, which is based on the present value of the incremental after-tax cash flows attributable only to the intangible asset. The developed-product-technology rights will be amortized over a weighted-average period of 8.5 years by using the straight-line method.

The estimated fair value of marketing-related rights, which relate to assembled workforce, was determined using a replacement cost approach, which consists of developing an estimate of the current cost of a similar new asset having the nearest equivalent utility to the asset being valued. The assembled workforce will be amortized over a period of 5 years by using the straight-line method.

The estimated fair value of the acquired inventory was determined using the comparative sales method, which uses actual or expected selling prices of inventory as the base amount to which adjustments for selling effort and a profit on the buyer’s effort are applied. Inventory fair value adjustments will be amortized as inventory turns over, which we estimate to approximate 2.5 years.

Nuevolution AB

On July 15, 2019, we acquired all of the outstanding stock of Nuevolution AB (Nuevolution), a publicly traded, Denmark-based biotechnology company with a leading small molecule drug discovery platform, for total consideration of $183 million in cash. The transaction, which was accounted for as a business combination, expands our ability to discover novel small molecules against difficult-to-drug targets and with greater speed and efficiency. Nuevolution’s operations, which are not material, have been included in our consolidated financial statements commencing on the acquisition date.

We allocated the consideration to acquire Nuevolution to finite-lived intangible assets of $150 million, comprised primarily of technology rights for a drug discovery platform with an estimated useful life of 10 years; goodwill of $26 million, which is not tax deductible; deferred tax liabilities of $22 million; and other net assets of $29 million.

The estimated fair values of intangible assets were determined primarily by using a probability-weighted-income approach, which discounts expected future cash flows to present value by using a discount rate that represents the estimated rate that market participants would use to value the intangible assets.

Our accounting for this acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, tax-related items and the residual impact on goodwill.

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Kirin-Amgen, Inc.

During the first quarter of 2018, we acquired the remaining 50% ownership of Kirin-Amgen, Inc. (K-A), from Kirin Holdings Company, Limited (Kirin), making K-A a wholly owned subsidiary of Amgen. Upon its acquisition, K-A’s operations have been included in our consolidated financial statements commencing on the share acquisition date. The acquisition relieved Amgen of future royalty obligations to K-A.

Prior to the share acquisition date, we owned 50% of K-A and accounted for our interest in K-A by using the equity method of accounting.

The transaction was accounted for as a step acquisition of a business in which we were required to remeasure our existing 50% ownership interest at fair value. In addition, we were required to effectively settle our preexisting relationship with K-A, which resulted in a loss. Together the gain on the remeasurement of our existing ownership interest and the loss from the settlement of the preexisting relationship resulted in a net gain of $80 million, which was recorded in Interest and other income, net, in the Consolidated Statements of Income.

The primary means of consideration for this transaction was a payment of $780 million in cash. The aggregate share acquisition date consideration to acquire the remaining 50% ownership in K-A and the fair value of Amgen’s preacquisition investment consisted of the following (in millions):

		Amounts
Total cash paid to Kirin		$	780
Fair value of contingent consideration obligation		45
Loss on settlement of preexisting relationship		(168		)
Total consideration transferred to acquire K-A		657
Fair value of Amgen’s investment in K-A		825
Total acquisition date fair value		$	1,482

In connection with this acquisition, we are obligated to make single-digit royalty payments to Kirin contingent upon sales of brodalumab. The estimated fair value of this contingent consideration obligation was $45 million as of the share acquisition date.

The fair values of assets acquired and liabilities assumed consisted of cash of $977 million, licensing rights of $470 million, deferred tax liabilities of $102 million, other assets and liabilities of $131 million and goodwill of $6 million. The estimated fair value of acquired licensing rights was determined by using a probability-related-income approach, which is based on the present value of the incremental after-tax cash flows attributable only to the intangible asset. The projected cash flows were based on certain assumptions, including estimates of future revenues and expenses and the time and resources needed to maintain the assets through commercialization. The licensing rights will be amortized over a weighted-average period of four years by using the straight-line method. The excess of the share acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $6 million was recorded as goodwill, which is not deductible for tax purposes. The $131 million in other assets and liabilities represents primarily receivables for royalties earned by K-A but not yet received, offset partially by payables representing R&D expenses incurred but not yet reimbursed by K-A.

Pro forma results of operations for this acquisition have not been presented because this acquisition was not material to our consolidated results of operations.

3. Revenues

We operate in one business segment: human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Revenues by product and by geographic area, based on customers’ locations, are presented below. Rest-of-world (ROW) revenues relate to products that are sold primarily in Europe.

F-15

Revenues were as follows (in millions):

		Year ended December 31, 2019
		U.S.				ROW				Total
Enbrel® (etanercept)		$	5,050			$	176			$	5,226
Neulasta® (pegfilgrastim)		2,814				407				3,221
Prolia® (denosumab)		1,772				900				2,672
XGEVA® (denosumab)		1,457				478				1,935
Aranesp® (darbepoetin alfa)		758				971				1,729
KYPROLIS® (carfilzomib)		654				390				1,044
EPOGEN® (epoetin alfa)		867				—				867
Sensipar®/Mimpara® (cinacalcet)		252				299				551
Other products		2,907				2,052				4,959
Total product sales(1)		16,531				5,673				22,204
Other revenues		693				465				1,158
Total revenues		$	17,224			$	6,138			$	23,362

		Year ended December 31, 2018
		U.S.				ROW				Total
ENBREL		$	4,807			$	207			$	5,014
Neulasta®		3,866				609				4,475
Prolia®		1,500				791				2,291
Aranesp®		942				935				1,877
XGEVA®		1,338				448				1,786
Sensipar®/Mimpara®		1,436				338				1,774
EPOGEN®		1,010				—				1,010
KYPROLIS®		583				385				968
Other products		1,947				1,391				3,338
Total product sales(1)		17,429				5,104				22,533
Other revenues		929				285				1,214
Total revenues		$	18,358			$	5,389			$	23,747

F-16

		Year ended December 31, 2017
		U.S.				ROW				Total
ENBREL		$	5,206			$	227			$	5,433
Neulasta®		3,931				603				4,534
Aranesp®		1,114				939				2,053
Prolia®		1,272				696				1,968
Sensipar®/Mimpara®		1,374				344				1,718
XGEVA®		1,157				418				1,575
EPOGEN®		1,096				—				1,096
KYPROLIS®		562				273				835
Other products		1,419				1,164				2,583
Total product sales(1)		17,131				4,664				21,795
Other revenues		898				156				1,054
Total revenues		$	18,029			$	4,820			$	22,849

---

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

In the United States, we sell primarily to pharmaceutical wholesale distributors that we utilize as the principal means of distributing our products to healthcare providers. Outside the United States, 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 limit our credit exposure by setting credit limits and, in certain circumstances, by requiring letters of credit or obtaining credit insurance.

We had product sales to three customers, each of them accounting for more than 10% of total revenues for each of the years ended December 31, 2019, 2018 and 2017. For the year ended December 31, 2019, on a combined basis, these customers accounted for 81% of total gross revenues as shown in the following table. Certain information with respect to these customers was as follows (dollar amounts in millions):

	Years ended December 31,
	2019				2018				2017
AmerisourceBergen Corporation:
Gross product sales	$	12,301			$	12,091			$	10,742
% of total gross revenues	33		%		33		%		31		%
McKesson Corporation:
Gross product sales	$	11,795			$	11,434			10,625
% of total gross revenues	31		%		31		%		30		%
Cardinal Health, Inc.:
Gross product sales	$	6,538			$	7,475			$	7,049
% of total gross revenues	17		%		20		%		20		%

As of December 31, 2019 and 2018, amounts due from these three customers each exceeded 10% of gross trade receivables and accounted for 73% and 76%, respectively, of net trade receivables on a combined basis. As of December 31, 2019 and 2018, 27% and 23%, respectively, of trade receivables, net, were due from customers located outside the United States, the majority of which were from Europe. Our total allowance for doubtful accounts as of December 31, 2019 and 2018 was not material.

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4. Stock-based compensation

Our Amended and Restated 2009 Equity Incentive Plan (the Amended 2009 Plan) authorizes for issuance to employees of Amgen, employees of Amgen subsidiaries and nonemployee members of our Board of Directors shares of our common stock pursuant to grants of equity-based awards, including RSUs, stock options and performance units. The pool of shares available under the Amended 2009 Plan is reduced by one share for each stock option granted and by 1.9 shares for other types of awards granted, including RSUs and performance units (full-value awards). In general, if any shares subject to an award granted under the Amended 2009 Plan expire or become forfeited, terminated or canceled without the issuance of shares, the shares subject to such awards are added back into the authorized pool on the same basis that they were removed. In addition, under the Amended 2009 Plan, shares withheld to pay for minimum statutory tax obligations with respect to full-value awards are added back into the authorized pool on the basis of 1.9 shares. As of December 31, 2019, the Amended 2009 Plan provides for future grants and/or issuances of up to 28 million shares of our common stock. Stock-based awards under our employee compensation plans are made with newly issued shares reserved for this purpose.

The following table reflects the components of stock-based compensation expense recognized in our Consolidated Statements of Income (in millions):

	Years ended December 31,
	2019				2018				2017
RSUs	$	168			$	165			$	174
Performance units	105				117				133
Stock options	35				29				22
Total stock-based compensation expense, pretax	308				311				329
Tax benefit from stock-based compensation expense	(67		)		(67		)		(118		)
Total stock-based compensation expense, net of tax	$	241			$	244			$	211

Restricted stock units and stock options

Eligible employees generally receive an annual grant of RSUs and, for certain executive-level employees, stock options, with the size and type of award generally determined by the employee’s salary grade and performance level. Certain management and professional-level employees typically receive RSU grants upon commencement of employment. Nonemployee members of our Board of Directors also receive an annual grant of RSUs.

Our RSU and stock option grants provide for accelerated or continued vesting in certain circumstances as defined in the plans and related grant agreements, including upon death, disability, termination in connection with a change in control and the retirement of employees who meet certain service and/or age requirements. RSUs and stock options generally vest in equal amounts on the second, third and fourth anniversaries of the grant date. RSUs accrue dividend equivalents, which are typically payable in shares, only when and to the extent the underlying RSUs vest and are issued to the recipient.

Restricted stock units

The grant date fair value of an RSU equals the closing price of our common stock on the grant date, as RSUs accrue dividend equivalents during their vesting period. The weighted-average grant date fair values of RSUs granted during the years ended December 31, 2019, 2018 and 2017, were $182.12, $179.18 and $163.99, respectively.

The following table summarizes information regarding our RSUs:

	Year ended December 31, 2019
	Units (in millions)			Weighted-average grant date fair value
Balance nonvested as of December 31, 2018	3.1			$	168.11
Granted	1.2			$	182.12
Vested	(1.0	)		$	163.21
Forfeited	(0.2	)		$	170.52
Balance nonvested as of December 31, 2019	3.1			$	174.97

F-18

The total grant date fair values of RSUs that vested during the years ended December 31, 2019, 2018 and 2017, were $160 million, $167 million and $182 million, respectively.

Stock options

The exercise price of stock options is set as the closing price of our common stock on the grant date, and the related number of shares granted is fixed at that point in time. Awards expire 10 years from the date of grant. We use the Black–Scholes option valuation model to estimate the grant date fair value of stock options.

The weighted-average assumptions used in the option valuation model and the resulting weighted-average grant date fair values of stock options granted were as follows:

	Years ended December 31,
	2019				2018				2017
Closing price of our common stock on grant date	$	177.31			$	177.46			$	162.60
Expected volatility (average of implied and historical volatility)	23.5		%		24.6		%		22.7		%
Expected life (in years)	5.8				5.8				5.8
Risk-free interest rate	2.4		%		2.8		%		2.1		%
Expected dividend yield	3.1		%		2.9		%		2.8		%
Fair value of stock options granted	$	30.47			$	34.60			$	27.54

The following table summarizes information regarding our stock options:

	Year ended December 31, 2019
	Options (in millions)			Weighted- average exercise price				Weighted- average remaining contractual life (in years)		Aggregate intrinsic value (in millions)
Balance unexercised as of December 31, 2018	4.4			$	143.57
Granted	1.4			$	177.31
Exercised	(0.7	)		$	107.13
Expired/forfeited	(0.3	)		$	171.01
Balance unexercised as of December 31, 2019	4.8			$	157.00			7.2		$	406
Vested or expected to vest as of December 31, 2019	4.6			$	156.02			7.1		$	390
Exercisable as of December 31, 2019	1.3			$	117.13			4.3		$	162

The total intrinsic values of options exercised during the years ended December 31, 2019, 2018 and 2017, were $68 million, $53 million and $60 million, respectively. The actual tax benefits realized from tax deductions from option exercises during the years ended December 31, 2019, 2018 and 2017, were $15 million, $12 million and $21 million, respectively.

As of December 31, 2019, $308 million of unrecognized compensation cost was related to nonvested restricted stock units and unvested stock options, which is expected to be recognized over a weighted-average period of 1.8 years.

Performance units

Certain management-level employees also receive annual grants of performance units, which give the recipient the right to receive common stock that is contingent upon achievement of specified preestablished goals over the performance period, which is generally three years. The performance goals for the units granted during the years ended December 31, 2019, 2018 and 2017, which are accounted for as equity awards, are based on (i) Amgen’s stockholder return compared with a comparator group of companies, which are considered market conditions and are therefore reflected in the grant date fair values of the units, and (ii) Amgen’s stand-alone financial performance measures, which are considered performance conditions. The expense recognized for awards is based on the grant date fair value of a unit multiplied by the number of units expected to be earned with respect to the related performance conditions, net of estimated forfeitures. Depending on the outcome of these performance goals, a recipient may ultimately earn a number of units greater or less than the number of units granted. Shares of our common stock are issued on a one-for-one basis for each performance unit earned. In general, performance unit awards vest at the end of the performance period. The performance award program provides for accelerated or continued vesting in certain circumstances as defined in the plan, including upon death, disability, a change in control and retirement of employees who meet certain service and/or age

F-19

requirements. Performance units accrue dividend equivalents that are typically payable in shares only when and to the extent the underlying performance units vest and are issued to the recipient, including with respect to market and performance conditions that affect the number of performance units earned.

We use a payout simulation model to estimate the grant date fair value of performance units. The weighted-average assumptions used in the payout simulation model and the resulting weighted-average grant date fair values of performance units granted were as follows:

	Years ended December 31,
	2019				2018				2017
Closing price of our common stock on grant date	$	177.31			$	177.93			$	162.60
Volatility	22.1		%		23.8		%		25.9		%
Risk-free interest rate	2.3		%		2.6		%		1.4		%
Fair value of units granted	$	188.40			$	189.21			$	178.87

The payout simulation model assumes correlations of returns of the stock prices of our common stock and the common stocks of the comparator groups of companies and stock price volatilities of the comparator groups of companies to simulate stockholder returns over the performance periods and their resulting impact on the payout percentages based on the contractual terms of the performance units.

As of December 31, 2019 and 2018, 2.0 million and 2.0 million performance units were outstanding with weighted-average grant date fair values of $185.64 and $180.12 per unit, respectively. During the year ended December 31, 2019, 0.8 million performance units with a weighted-average grant date fair value of $188.40 were granted, and 0.2 million performance units with a weighted-average grant date fair value of $186.66 were forfeited.

The total fair values of performance units paid during the years ended December 31, 2019, 2018 and 2017 were $176 million, $133 million and $219 million, respectively, based on the number of performance units earned multiplied by the closing stock price of our common stock on the last day of the performance period.

As of December 31, 2019, $113 million of unrecognized compensation cost was related to nonvested performance units, which is expected to be recognized over a weighted-average period of one year.

5. Defined contribution plan

The Company has defined contribution plans to which certain employees of the Company and participating subsidiaries may defer compensation for income tax purposes. Participants are eligible to receive matching contributions based on their contributions, in addition to other Company contributions. Defined contribution plan expenses were $220 million, $173 million and $196 million for the years ended December 31, 2019, 2018 and 2017, respectively.

6. Income taxes

Income before income taxes included the following (in millions):

	Years ended December 31,
	2019				2018				2017
Domestic	$	4,371			$	4,856			$	4,436
Foreign	4,767				4,689				5,161
Total income before income taxes	$	9,138			$	9,545			$	9,597

F-20

The provision for income taxes included the following (in millions):

	Years ended December 31,
	2019				2018				2017
Current provision:
Federal	$	1,284			$	1,270			$	8,615
State	39				17				5
Foreign	277				227				275
Total current provision	1,600				1,514				8,895
Deferred (benefit) provision:
Federal	(276		)		(317		)		(1,120		)
State	(22		)		(7		)		—
Foreign	(6		)		(39		)		(157		)
Total deferred (benefit) provision	(304		)		(363		)		(1,277		)
Total provision for income taxes	$	1,296			$	1,151			$	7,618

Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax credit carryforwards and the tax effects of net operating loss (NOL) carryforwards. Significant components of our deferred tax assets and liabilities were as follows (in millions):

	December 31,
	2019				2018
Deferred income tax assets:
NOL and credit carryforwards	$	800			$	810
Accrued expenses	457				428
Expenses capitalized for tax	170				185
Stock-based compensation	91				95
Other	269				174
Total deferred income tax assets	1,787				1,692
Valuation allowance	(517		)		(509		)
Net deferred income tax assets	1,270				1,183
Deferred income tax liabilities:
Acquired intangible assets	(1,288		)		(1,509		)
Debt	(210		)		(184		)
Other	(286		)		(267		)
Total deferred income tax liabilities	(1,784		)		(1,960		)
Total deferred income taxes, net	$	(514	)		$	(777	)

Valuation allowances are provided to reduce the amounts of our deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts.

The valuation allowance increased in 2019 due primarily to the Company’s expectation that some state R&D credits will not be utilized.

As of December 31, 2019, we had $20 million of federal tax credit carryforwards available to reduce future federal income taxes and have provided no valuation allowance for those federal tax credit carryforwards. The federal tax credit carryforwards expire between 2023 and 2035. We had $605 million of state tax credit carryforwards available to reduce future state income taxes and have provided a valuation allowance for $482 million of those state tax credit carryforwards. A portion of the state credits for which no valuation allowance has been provided will expire between 2022 and 2034.

F-21

As of December 31, 2019, we had $144 million of federal NOL carryforwards available to reduce future federal income taxes and have provided a valuation allowance for $6 million of those federal NOL carryforwards. The federal NOL carryforwards, for which no valuation allowance has been provided, expire between 2020 and 2035. We had $196 million of state NOL carryforwards available to reduce future state income taxes and have provided a valuation allowance for $196 million of those state NOL carryforwards. We had $2.0 billion of foreign NOL carryforwards available to reduce future foreign income taxes and have provided a valuation allowance for $516 million of those foreign NOL carryforwards. For the foreign NOLs with no valuation allowance provided, $822 million has no expiry; and the remainder will expire between 2020 and 2024.

The reconciliations of the total gross amounts of UTBs were as follows (in millions):

	Years ended December 31,
	2019				2018				2017
Beginning balance	$	3,061			$	2,953			$	2,543
Additions based on tax positions related to the current year	215				173				447
Additions based on tax positions related to prior years	22				13				1
Reductions for tax positions of prior years	(11		)		(17		)		(5		)
Reductions for expiration of statute of limitations	—				—				(5		)
Settlements	—				(61		)		(28		)
Ending balance	$	3,287			$	3,061			$	2,953

Substantially all of the UTBs as of December 31, 2019, if recognized, would affect our effective tax rate.

Interest and penalties related to UTBs are included in our provision for income taxes. During the years ended December 31, 2019, 2018 and 2017, we recognized $198 million, $137 million and $56 million, respectively, of interest and penalties through the income tax provision in the Consolidated Statements of Income. As of December 31, 2019 and 2018, accrued interest and penalties associated with UTBs were $667 million and $469 million, respectively.

The reconciliations between the federal statutory tax rate applied to income before income taxes and our effective tax rate were as follows:

	Years ended December 31,
	2019			2018			2017
Federal statutory tax rate	21.0	%		21.0	%		35.0	%
2017 Tax Act, net repatriation tax	—	%		—	%		70.7	%
Foreign earnings	(4.5	)%		(4.3	)%		(15.8	)%
2017 Tax Act, net deferred tax remeasurement	—	%		—	%		(6.9	)%
Credits, Puerto Rico Excise Tax	(2.6	)%		(2.5	)%		(2.2	)%
2017 Tax Act, net impact on intercompany sales	—	%		(1.8	)%		—	%
Interest on uncertain tax positions	1.6	%		1.2	%		0.6	%
Credits, primarily federal R&D	(1.0	)%		(0.8	)%		(0.6	)%
Share-based payments	(0.3	)%		(0.2	)%		(0.7	)%
Other, net	—	%		(0.5	)%		(0.7	)%
Effective tax rate	14.2	%		12.1	%		79.4	%

The effective tax rates for the years ended December 31, 2019 and 2018 differ from the federal statutory rate due primarily to impacts of the jurisdictional mix of income and expenses. The effective tax rate for 2017 differs from the federal statutory rate primarily as a result of the Tax Cuts and Jobs Act (the 2017 Tax Act). Primarily all of the benefit to our effective tax rate from foreign earnings results from the Company’s operations conducted in Puerto Rico, a territory of the United States that is treated as a foreign jurisdiction for U.S. tax purposes and are subject to tax incentive grants through 2035. Additionally, the Company’s operations conducted in Singapore is subject to a tax incentive grant through 2034. These earnings are also subject to U.S. tax at a reduced rate of 10.5%.

F-22

The U.S. territory of Puerto Rico imposes an excise tax on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. The rate of 4% is effective through December 31, 2027. We account for the excise tax as a manufacturing cost that is capitalized in 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 when the excise tax is incurred.

Income taxes paid during the years ended December 31, 2019, 2018 and 2017, were $1.9 billion, $1.9 billion and $1.5 billion, respectively.

One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely examined by tax authorities in those jurisdictions. Significant disputes may arise with tax authorities involving issues regarding the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and relevant facts. As previously disclosed, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the years 2010, 2011 and 2012. The RAR proposes to make significant adjustments that relate primarily to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. In November 2017, we received a modified RAR that revised the IRS’s calculation but continued to propose substantial adjustments. We disagree with the proposed adjustments and are pursuing resolution with the IRS administrative appeals office, which currently has jurisdiction over the matter. If we deem necessary, we will vigorously contest the proposed adjustments through the judicial process. Final resolution of this complex matter is not likely within the next 12 months and could have a material impact on our consolidated financial statements. We believe our accrual for income tax liabilities is appropriate 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 substantially greater or less than amounts accrued. We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009. In addition, we are currently under examination by a number of state and foreign tax jurisdictions.

7. Earnings per share

The computation of basic earnings per share (EPS) is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which include primarily shares that may be issued under our stock option, restricted stock and performance unit award programs (collectively, dilutive securities), as determined by using the treasury stock method.

The computations for basic and diluted EPS were as follows (in millions, except per-share data):

	Years ended December 31,
	2019				2018				2017
Income (Numerator):
Net income for basic and diluted EPS	$	7,842			$	8,394			$	1,979
Shares (Denominator):
Weighted-average shares for basic EPS	605				661				731
Effect of dilutive securities	4				4				4
Weighted-average shares for diluted EPS	609				665				735
Basic EPS	$	12.96			$	12.70			$	2.71
Diluted EPS	$	12.88			$	12.62			$	2.69

For each of the three years ended December 31, 2019, the number of antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

F-23

8. Collaborations

A collaborative arrangement is a contractual arrangement that involves a joint operating activity. Such arrangements involve two or more parties that are both (i) active participants in the activity and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.

From time to time, we enter into collaborative arrangements for the R&D, manufacture and/or commercialization of products and/or product candidates. These collaborations generally provide for nonrefundable upfront license fees, development and commercial-performance milestone payments, cost sharing, royalty payments and/or profit sharing. Our collaboration arrangements are performed with no guarantee of either technological or commercial success, and each arrangement is unique in nature. See Note 1, Summary of significant accounting policies, for additional discussion of revenues recognized for these types of arrangements. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line items in the Consolidated Statements of Income, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Our significant arrangements are discussed below.

Novartis AG

We are in a collaboration with Novartis AG (Novartis) to jointly develop and commercialize Aimovig® (erenumab-aooe). In the United States, Amgen and Novartis jointly develop and collaborate on the commercialization of Aimovig®. Amgen, as the principal, recognizes product sales of Aimovig® in the United States, shares U.S. commercialization costs with Novartis and pays Novartis a significant royalty on net sales in the United States. Novartis holds global co-development rights and exclusive commercial rights outside the United States and Japan for Aimovig® and other specified migraine programs. Novartis pays Amgen double-digit royalties on net sales of the products in the Novartis exclusive territories and funds a portion of global R&D expenses. In addition, Novartis will make a payment to Amgen of up to $100 million if certain commercial and expenditure thresholds are achieved with respect to Aimovig® in the United States. Amgen manufactures and supplies Aimovig® worldwide. The migraine collaboration will continue for the commercial lives of the products unless terminated in accordance with its terms.

We are currently involved in litigation with Novartis over our collaboration agreements for the development and commercialization of Aimovig®. See Note 19, Contingencies and commitments.

During the year ended December 31, 2019, net costs recovered from Novartis for migraine products were $187 million and were recorded primarily in Selling, general and administrative expense in the Consolidated Statements of Income. During the year ended December 31, 2018, net costs paid to Novartis for migraine products were $44 million and were recorded primarily in Selling, general and administrative expense in the Consolidated Statements of Income. During the year ended December 31, 2017, net costs recovered from Novartis for migraine products were $124 million and were recorded primarily in R&D expense in the Consolidated Statements of Income. During the years ended December 31, 2019 and 2018, royalties due to Novartis for the migraine products were $115 million and $43 million, respectively, and were recorded in Cost of sales in the Consolidated Statements of Income. During the years ended December 31, 2019 and 2018, royalties due from Novartis for the migraine products were not material. As a result of certain regulatory and commercial events, we received milestone payments from Novartis of $295 million during the year ended December 31, 2018, which was recorded in Other revenues in the Consolidated Statements of Income.

Bayer HealthCare LLC

We are in a collaboration with Bayer HealthCare LLC (Bayer) to jointly develop and commercialize Nexavar® (sorafenib) worldwide, except in Japan. The rights to develop and market Nexavar® in Japan are reserved to Bayer. Nexavar® is currently marketed and sold in more than 100 countries around the world for the treatment of unresectable liver cancer and advanced kidney cancer. In the United States, Nexavar® is also approved for the treatment of patients with locally recurrent or metastatic, progressive, differentiated thyroid carcinoma refractory to radioactive iodine treatment.

In 2015, we amended the terms of our collaboration agreement with Bayer, which terminated the co-promotion agreement in the United States and transferred all U.S. operational responsibilities to Bayer, including commercial and medical affairs activities. Prior to the termination of the co-promotion agreement, we co-promoted Nexavar® with Bayer and shared equally in the profits or losses in the United States. In lieu of this profit share, Bayer now pays Amgen a royalty on U.S. sales of Nexavar® at a percentage rate in the high 30s. Amgen no longer contributes sales force personnel or medical liaisons to support Nexavar® in the United States. There are no changes to the global R&D or non-U.S. profit share arrangements in the original agreement, as discussed below.

In all countries outside the United States and Japan, Bayer manages all commercialization activities and incurs all of the sales and marketing expenditures and mutually agreed R&D expenses, for which we continue to reimburse Bayer for half. In these countries, we continue to receive 50% of net profits on sales of Nexavar® after deducting certain Bayer-related costs.

F-24

The agreement with Bayer will terminate at the later of the date when patents expire that were issued in connection with product candidates discovered under the agreement or on the last day that we or Bayer market or sell products commercialized under the agreement anywhere in the world. Patents related to Nexavar® begin to expire in 2020.

During the years ended December 31, 2019, 2018 and 2017, Amgen recorded Nexavar® net profits of $210 million, $164 million and $161 million, respectively, which were recognized as Other revenues in the Consolidated Statements of Income. During the years ended December 31, 2019, 2018 and 2017, Amgen recorded royalty income of $79 million, $91 million and $133 million, respectively, in Other revenues in the Consolidated Statements of Income, pursuant to the 2015 amendment to the collaboration agreement. Net R&D expenses related to the agreement were not material for the years ended December 31, 2019, 2018 and 2017.

Other

In addition to the collaborations discussed above, we have various other collaborations that are not individually significant to our business at this time. Pursuant to the terms of those agreements, we may be required to pay additional amounts or we may receive additional amounts upon the achievement of various development and commercial milestones, which in the aggregate could be significant. We may also incur or have reimbursed to us significant R&D costs if the related product candidate were to advance to late-stage clinical trials. In addition, if any products related to these collaborations are approved for sale, we may be required to pay significant royalties or we may receive significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.

9. Investments

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of interest-bearing securities, all of which are considered available-for-sale, by type of security were as follows (in millions):

Types of securities as of December 31, 2019		Amortized cost				Gross unrealized gains				Gross unrealized losses				Fair values
U.S. Treasury notes		$	359			$	1			$	—			$	360
U.S. Treasury bills		—				—				—				—
Other government-related debt securities:
U.S.		—				—				—				—
Foreign and other		—				—				—				—
Corporate debt securities:
Financial		1,108				13				—				1,121
Industrial		824				10				—				834
Other		195				3				—				198
Residential-mortgage-backed securities		181				1				—				182
Other mortgage- and asset-backed securities		—				—				—				—
Money market mutual funds		5,250				—				—				5,250
Other short-term interest-bearing securities		289				—				—				289
Total available-for-sale investments		$	8,206			$	28			$	—			$	8,234

F-25

Types of securities as of December 31, 2018		Amortized cost				Gross unrealized gains				Gross unrealized losses				Fair values
U.S. Treasury notes		$	2,710			$	—			$	(47	)		$	2,663
U.S. Treasury bills		8,191				—				—				8,191
Other government-related debt securities:
U.S.		112				—				(2		)		110
Foreign and other		972				1				(41		)		932
Corporate debt securities:
Financial		2,778				—				(81		)		2,697
Industrial		2,603				—				(99		)		2,504
Other		583				—				(21		)		562
Residential-mortgage-backed securities		1,458				—				(36		)		1,422
Other mortgage- and asset-backed securities		483				—				(14		)		469
Money market mutual funds		5,659				—				—				5,659
Other short-term interest-bearing securities		3,515				—				—				3,515
Total available-for-sale investments		$	29,064			$	1			$	(341	)		$	28,724

The fair values of available-for-sale investments by location in the Consolidated Balance Sheets were as follows (in millions):

		December 31,
Consolidated Balance Sheets locations		2019				2018
Cash and cash equivalents		$	5,360			$	6,365
Marketable securities		2,874				22,359
Total available-for-sale investments		$	8,234			$	28,724

Cash and cash equivalents in the above table excludes bank account cash of $677 million and $580 million as of December 31, 2019 and 2018, respectively.

The fair values of available-for-sale investments by contractual maturity, except for mortgage- and asset-backed securities that do not have a single maturity date, were as follows (in millions):

		December 31,
Contractual maturities		2019				2018
Maturing in one year or less		$	5,629			$	17,424
Maturing after one year through three years		2,304				3,356
Maturing after three years through five years		119				5,168
Maturing after five years through ten years		—				885
Mortgage- and asset-backed securities		182				1,891
Total available-for-sale investments		$	8,234			$	28,724

For the years ended December 31, 2019, 2018 and 2017, realized gains on interest-bearing securities were $92 million, $29 million and $147 million, respectively, and realized losses on interest-bearing securities were $36 million, $394 million and $213 million, respectively. Realized gains and losses on interest-bearing securities are recorded in Interest and other income, net, in the Consolidated Statements of Income. The cost of securities sold is based on the specific-identification method.

F-26

As of December 31, 2019, aggregate gross unrealized losses of available-for-sale investments were not material. As of December 31, 2018, the fair values and gross unrealized losses of available-for-sale investments in an unrealized loss position aggregated by type and length of time that the securities have been in a continuous loss position were as follows (in millions):

		Less than 12 months								12 months or more
Types of securities as of December 31, 2018		Fair values				Unrealized losses				Fair values				Unrealized losses
U.S. Treasury notes		$	1,219			$	(21	)		$	1,444			$	(26	)
Other government-related debt securities:
U.S.		—				—				110				(2		)
Foreign and other		631				(31		)		240				(10		)
Corporate debt securities:
Financial		1,968				(59		)		718				(22		)
Industrial		1,898				(81		)		529				(18		)
Other		529				(20		)		28				(1		)
Residential-mortgage-backed securities		576				(14		)		840				(22		)
Other mortgage- and asset-backed securities		17				—				451				(14		)
Total		$	6,838			$	(226	)		$	4,360			$	(115	)

The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below our cost basis as well as adverse conditions related specifically to the security, such as any changes to the credit rating of the security and the intent to sell or whether we will more likely than not be required to sell the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could change in the future based on new developments or changes in assumptions related to that particular security. As of December 31, 2019 and 2018, we believe the cost bases for our available-for-sale investments were recoverable in all material respects.

Equity securities

We held investments in equity securities with readily determinable fair values of $303 million and $176 million as of December 31, 2019 and 2018, respectively, which are included in Other assets in the Consolidated Balance Sheets. Gains and losses recognized on equity securities with readily determinable fair values, including gains and losses recognized on sales, were not material for the years ended December 31, 2019, 2018 and 2017.

We held investments of $176 million and $222 million in equity securities without readily determinable fair values as of December 31, 2019 and 2018, respectively, which are included in Other assets in the Consolidated Balance Sheets. Adjustments to the carrying values of these securities were not material for the years ended December 31, 2019, 2018 and 2017.

Limited partnership investments

We held limited partnership investments of $320 million and $285 million as of December 31, 2019 and 2018, respectively, which are included in Other assets in the Consolidated Balance Sheets. These investments are measured by using the net asset values of the underlying investments as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of December 31, 2019, unfunded additional commitments to be made for these investments during the next several years were not material. Gains and losses recognized on our limited partnership investments were not material for the years ended December 31, 2019, 2018 and 2017.

F-27

10. Inventories

Inventories consisted of the following (in millions):

	December 31,
	2019				2018
Raw materials	$	358			$	257
Work in process	2,227				1,660
Finished goods	999				1,023
Total inventories	$	3,584			$	2,940

11. Property, plant and equipment

Property, plant and equipment consisted of the following (dollar amounts in millions):

			December 31,
	Useful life (in years)		2019				2018
Land	—		$	263			$	265
Buildings and improvements	10-40		3,757				3,616
Manufacturing equipment	8-12		2,655				2,418
Laboratory equipment	8-12		1,236				1,174
Capitalized software	3-5		1,154				1,124
Other	3-15		3,313				3,204
Construction in progress	—		907				953
Property, plant and equipment, gross			13,285				12,754
Less accumulated depreciation and amortization			(8,357		)		(7,796		)
Property, plant and equipment, net			$	4,928			$	4,958

During the years ended December 31, 2019, 2018 and 2017, we recognized depreciation and amortization expense associated with our property, plant and equipment of $635 million, $630 million and $604 million, respectively.

Geographic information

Certain geographic information with respect to property, plant and equipment, net (long-lived assets), was as follows (in millions):

	December 31,
	2019				2018
United States	$	2,433			$	2,373
Puerto Rico	1,402				1,476
ROW	1,093				1,109
Total property, plant and equipment, net	$	4,928			$	4,958

F-28

12. Goodwill and other intangible assets

Goodwill

The changes in the carrying amounts of goodwill were as follows (in millions):

	Years ended December 31,
	2019				2018
Beginning balance	$	14,699			$	14,761
Addition from acquisitions	26				6
Currency translation adjustments	(22		)		(68		)
Ending balance	$	14,703			$	14,699

Other intangible assets

Other intangible assets consisted of the following (in millions):

	December 31,
	2019												2018
	Gross carrying amounts				Accumulated amortization				Other intangible assets, net				Gross carrying amounts				Accumulated amortization				Other intangible assets, net
Finite-lived intangible assets:
Developed-product-technology rights	$	25,575			$	(8,322	)		$	17,253			$	12,573			$	(7,479	)		$	5,094
Licensing rights	3,761				(2,398		)		1,363				3,772				(2,032		)		1,740
Marketing-related rights	1,382				(965		)		417				1,297				(1,019		)		278
R&D technology rights	1,273				(947		)		326				1,148				(872		)		276
Total finite-lived intangible assets	31,991				(12,632		)		19,359				18,790				(11,402		)		7,388
Indefinite-lived intangible assets:
IPR&D	54				—				54				55				—				55
Total other intangible assets	$	32,045			$	(12,632	)		$	19,413			$	18,845			$	(11,402	)		$	7,443

Developed-product-technology rights consists of rights related to marketed products acquired in acquisitions. Licensing rights consists primarily of contractual rights acquired in acquisitions to receive future milestone, royalty and profit-sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and up-front payments associated with royalty obligations for marketed products. Marketing-related rights consists primarily of rights related to the sale and distribution of marketed products. R&D technology rights pertains to technologies used in R&D that have alternative future uses. Developed-product-technology rights and marketing-related rights include assets acquired with the Otezla*®* acquisition. R&D technology rights includes assets acquired with the Nuevolution acquisition. See Note 2, Acquisitions.

IPR&D consists of R&D projects acquired in a business combination that are not complete at the time of acquisition due to remaining technological risks and/or lack of receipt of required regulatory approvals. All IPR&D projects have major risks and uncertainties associated with the timely and successful completion of the development and commercialization of product candidates, including our ability to confirm safety and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. We are not permitted to market a human therapeutic without obtaining regulatory approvals, and such approvals require the completion of clinical trials that demonstrate that a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans as well as competitive product launches, affect the revenues a product can generate. Consequently, the eventual realized values, if any, of acquired IPR&D projects may vary from their estimated fair values. We review IPR&D projects for impairment annually, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and upon the establishment of technological feasibility or regulatory approval.

F-29

During the years ended December 31, 2019, 2018 and 2017, we recognized amortization associated with our finite-lived intangible assets of $1.4 billion, $1.3 billion and $1.3 billion, respectively. Amortization of intangible assets is included primarily in Cost of sales in the Consolidated Statements of Income. The total estimated amortization for our finite-lived intangible assets for the years ending December 31, 2020, 2021, 2022, 2023 and 2024, are $2.8 billion, $2.6 billion, $2.5 billion, $2.4 billion and $2.4 billion, respectively.

13. Leases

On January 1, 2019, we adopted a new accounting standard that amends the guidance for the accounting and reporting of leases. Certain required disclosures have been made on a prospective basis in accordance with the standard’s guidance. See Note 1, Summary of significant accounting policies.

We lease certain facilities and equipment related primarily to administrative, R&D and sales and marketing activities. Leases with terms of 12 months or less are expensed on a straight-line basis over the term and are not recorded in the Consolidated Balance Sheets.

Most leases include one or more options to renew, with renewal terms that may extend the lease term up to seven years. The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements neither contain residual value guarantees nor impose significant restrictions or covenants. We sublease certain real estate to third parties. Our sublease portfolio consists of operating leases from former R&D and administrative space.

The following table summarizes information related to our leases, all of which are classified as operating, included in our Consolidated Balance Sheets (in millions):

Consolidated Balance Sheets locations		December 31, 2019
Assets:
Other assets		$	469
Liabilities:
Accrued liabilities		$	140
Other noncurrent liabilities		388
Total lease liabilities		$	528

The components of net lease costs were as follows (in millions):

Lease costs		Year ended December 31, 2019
Operating(1)		$	204
Sublease income		(33		)
Total net lease costs		$	171

---

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

F-30

Maturities of lease liabilities as of December 31, 2019, were as follows (in millions):

Maturity dates		Amounts
2020		$	157
2021		150
2022		110
2023		88
2024		30
Thereafter		32
Total lease payments(1)		567
Less imputed interest		(39		)
Present value of lease liabilities		$	528

---

(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.

The weighted-average remaining lease term and weighted-average discount rate of our leases were 4.1 years and 3.3%, respectively, as of December 31, 2019.

Cash and noncash information related to our leases was as follows (in millions):

		Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	148
ROU assets obtained in exchange for lease obligations:
Operating leases		$	163

As of December 31, 2019, we have entered into leases that have not yet commenced, with total undiscounted future lease payments of $306 million. Theses leases will commence between 2020 and 2021 with lease terms from 5 years to 15 years.

The following table summarizes minimum future rental commitments related to noncancelable operating leases under the prior lease guidance as of December 31, 2018 (in millions):

	Amounts
2019	$	164
2020	126
2021	113
2022	64
2023	56
Thereafter	46
Total minimum operating lease commitments	$	569

Included in the table above are future rental commitments for abandoned leases in the amount of $222 million. As of December 31, 2018, we expect to receive total future rental income of $203 million related to noncancelable subleases for abandoned facilities. Rental expenses on operating leases under the prior lease guidance for the years ended December 31, 2018 and 2017, were $166 million and $159 million, respectively.

F-31

14. Other current assets and accrued liabilities

Other current assets consisted of the following (in millions):

	December 31,
	2019				2018
Prepaid expenses	$	939			$	907
Corporate partner receivables	485				444
Interest receivables	110				177
Other	354				266
Total other current assets	$	1,888			$	1,794

Accrued liabilities consisted of the following (in millions):

	December 31,
	2019				2018
Sales deductions	$	3,880			$	3,170
Employee compensation and benefits	981				1,001
Dividends payable	946				914
Sales returns reserve	564				535
Other	2,140				2,242
Total accrued liabilities	$	8,511			$	7,862

F-32

15. Financing arrangements

Our borrowings consisted of the following (in millions):

	December 31,
	2019				2018
5.70% notes due 2019 (5.70% 2019 Notes)	$	—			$	1,000
1.90% notes due 2019 (1.90% 2019 Notes)	—				700
Floating Rate Notes due 2019	—				550
2.20% notes due 2019 (2.20% 2019 Notes)	—				1,400
2.125% €675 million notes due 2019 (2.125% 2019 euro Notes)	—				774
4.50% notes due 2020 (4.50% 2020 Notes)	300				300
2.125% notes due 2020 (2.125% 2020 Notes)	750				750
Floating Rate Notes due 2020	300				300
2.20% notes due 2020 (2.20% 2020 Notes)	700				700
3.45% notes due 2020 (3.45% 2020 Notes)	900				900
4.10% notes due 2021 (4.10% 2021 Notes)	1,000				1,000
1.85% notes due 2021 (1.85% 2021 Notes)	750				750
3.875% notes due 2021 (3.875% 2021 Notes)	1,750				1,750
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes)	1,402				1,433
2.70% notes due 2022 (2.70% 2022 Notes)	500				500
2.65% notes due 2022 (2.65% 2022 Notes)	1,500				1,500
3.625% notes due 2022 (3.625% 2022 Notes)	750				750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)	725				713
2.25% notes due 2023 (2.25% 2023 Notes)	750				750
3.625% notes due 2024 (3.625% 2024 Notes)	1,400				1,400
3.125% notes due 2025 (3.125% 2025 Notes)	1,000				1,000
2.00% €750 million notes due 2026 (2.00% 2026 euro Notes)	841				860
2.60% notes due 2026 (2.60% 2026 Notes)	1,250				1,250
5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes)	630				606
3.20% notes due 2027 (3.20% 2027 Notes)	1,000				1,000
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)	928				893
6.375% notes due 2037 (6.375% 2037 Notes)	552				552
6.90% notes due 2038 (6.90% 2038 Notes)	291				291
6.40% notes due 2039 (6.40% 2039 Notes)	466				466
5.75% notes due 2040 (5.75% 2040 Notes)	412				412
4.95% notes due 2041 (4.95% 2041 Notes)	600				600
5.15% notes due 2041 (5.15% 2041 Notes)	974				974
5.65% notes due 2042 (5.65% 2042 Notes)	487				487
5.375% notes due 2043 (5.375% 2043 Notes)	261				261
4.40% notes due 2045 (4.40% 2045 Notes)	2,250				2,250
4.563% notes due 2048 (4.563% 2048 Notes)	1,415				1,415
4.663% notes due 2051 (4.663% 2051 Notes)	3,541				3,541
Other notes due 2097	100				100
Unamortized bond discounts, premiums and issuance costs, net	(868		)		(896		)
Fair value adjustments	296				(53		)
Total carrying value of debt	29,903				33,929
Less current portion	(2,953		)		(4,419		)
Total long-term debt	$	26,950			$	29,510

F-33

There are no material differences between the effective interest rates and the coupon rates of any of our borrowings, except for the 4.563% 2048 Notes and the 4.663% 2051 Notes, which have effective interest rates of 6.3% and 5.6%, respectively.

Under the terms of all of our outstanding notes, except our Other notes due 2097, in the event of a change-in-control triggering event we may be required to purchase all or a portion of these debt securities at prices equal to 101% of the principal amounts of the notes plus accrued and unpaid interest. In addition, all of our outstanding notes—except our floating-rate notes, 0.41% 2023 Swiss franc Bonds and Other notes due 2097—may be redeemed at any time at our option—in whole or in part—at the principal amounts of the notes being redeemed plus accrued and unpaid interest and make-whole amounts, which are defined by the terms of the notes. Certain of the redeemable notes do not require the payment of make-whole amounts if redeemed during a specified period of time immediately prior to the maturity of the notes. Such time periods range from one month to six months prior to maturity.

Debt issuances

During the year ended December 31, 2017, we issued $4.5 billion principal amount of notes, consisting of the Floating Rate Notes due 2019, the 1.90% 2019 Notes, the Floating Rate Notes due 2020, the 2.20% 2020 Notes, the 2.65% 2022 Notes and the 3.20% 2027 Notes. We did not issue any debt or debt securities during the years ended December 31, 2019 and 2018.

As of December 31, 2019, we have a commercial paper program that allows us to issue up to $2.5 billion of unsecured commercial paper to fund our working-capital needs. During the year ended December 31, 2017, we issued and repaid an aggregate of $12.3 billion of commercial paper and had a maximum outstanding balance of $1.5 billion under our commercial paper program. During the years ended December 31, 2019 and 2018, we did not issue any commercial paper.

Debt repayments

We made debt repayments during the years ended December 31, 2019, 2018 and 2017 as follows:

•

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.

Interest rate swaps

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that effectively converted fixed-rate interest coupons for certain of our debt issuances to floating London Interbank Offered Rate (LIBOR)-based coupons over the lives of the respective notes. These interest rate swap contracts qualified and are designated as fair value hedges.

F-34

The effective interest rates on notes for which we have entered into interest rate swap contracts and the related notional amounts of these contracts were as follows (dollar amounts in millions):

				December 31,
				2019				2018
Notes		Effective interest rates		Notional amounts
2.20% 2019 Notes		LIBOR + 0.6%		$	—			$	1,400
3.45% 2020 Notes		LIBOR + 1.1%		900				900
4.10% 2021 Notes		LIBOR + 1.7%		1,000				1,000
3.875% 2021 Notes		LIBOR + 2.0%		1,750				1,750
3.625% 2022 Notes		LIBOR + 1.6%		750				750
3.625% 2024 Notes		LIBOR + 1.4%		1,400				1,400
3.125% 2025 Notes		LIBOR + 0.9%		1,000				1,000
2.60% 2026 Notes		LIBOR + 0.3%		1,250				1,250
4.663% 2051 Notes		LIBOR + 0.0%		1,500				1,500
Total notional amounts				$	9,550			$	10,950

Cross-currency swaps

In order to hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term notes denominated in foreign currencies, we entered into cross-currency swap contracts. The terms of these contracts effectively convert the interest payments and principal repayments on our 1.25% 2022 euro Notes, 0.41% 2023 Swiss franc Bonds, 2.00% 2026 euro Notes, 5.50% 2026 pound sterling Notes and 4.00% 2029 pound sterling Notes from euros, pounds sterling and Swiss francs to U.S. dollars. These cross-currency swap contracts have been designated as cash flow hedges. For information regarding the terms of these contracts, see Note 18, Derivative instruments.

Shelf registration statements and other facilities

In 2019, we amended and restated our $2.5 billion syndicated, unsecured, revolving credit agreement, which is available for general corporate purposes or as a liquidity backstop to our commercial paper program. The commitments under the revolving credit agreement may be increased by up to $750 million with the agreement of the banks. Each bank that is a party to the agreement has an initial commitment term of five years. This term may be extended for up to two additional one-year periods with the agreement of the banks. Annual commitment fees for this agreement are 0.09% of the unused portion of the facility based on our current credit rating. Generally, we would be charged interest for any amounts borrowed under this facility, based on our current credit rating, at (i) LIBOR plus 1% or (ii) the highest of (A) the syndication agent bank base commercial lending rate, (B) the overnight federal funds rate plus 0.50% or (C) one-month LIBOR plus 1%. The agreement contains provisions relating to the determination of successor rates to address the possible phase-out or unavailability of designated reference rates. As of December 31, 2019 and 2018, no amounts were outstanding under this facility.

In February 2020, we filed a shelf registration statement with the SEC that allows us to issue unspecified amounts of debt securities; common stock; preferred stock; warrants to purchase debt securities, common stock, preferred stock or depositary shares; rights to purchase common stock or preferred stock; securities purchase contracts; securities purchase units; and depositary shares. Under this shelf registration statement, all of the securities available for issuance may be offered from time to time with terms to be determined at the time of issuance. This shelf registration statement expires in February 2023.

Certain of our financing arrangements contain nonfinancial covenants. In addition, our revolving credit agreement includes a financial covenant, which requires that we maintain a specified minimum interest coverage ratio of (i) the sum of consolidated net income, interest expense, provision for income taxes, depreciation expense, amortization expense, unusual or nonrecurring charges and other noncash items (Consolidated EBITDA) to (ii) Consolidated Interest Expense, each as defined and described in the credit agreement. We were in compliance with all applicable covenants under these arrangements as of December 31, 2019.

F-35

Contractual maturities of debt obligations

The aggregate contractual maturities of all borrowings due subsequent to December 31, 2019, are as follows (in millions):

Maturity dates		Amounts
2020		$	2,950
2021		3,500
2022		4,152
2023		1,474
2024		1,400
Thereafter		16,999
Total		$	30,475

Interest costs

Interest costs are expensed as incurred except to the extent such interest is related to construction in progress, in which case interest is capitalized. Interest costs capitalized for the years ended December 31, 2019, 2018 and 2017, were not material. Interest paid, including the ongoing impact of interest rate and cross-currency swap contracts, during the years ended December 31, 2019, 2018 and 2017, was $1.3 billion, $1.5 billion and $1.3 billion, respectively.

16. Stockholders’ equity

Stock repurchase program

Activity under our stock repurchase program, on a trade date basis, was as follows (in millions):

	Years ended December 31,
	2019							2018							2017
	Shares*			Dollars				Shares*			Dollars				Shares			Dollars
First quarter	15.9			$	3,031			56.4			$	10,787			3.4			$	555
Second quarter	13.1			2,349				18.2			3,190				6.2			1,006
Third quarter	6.2			1,170				8.7			1,713				4.4			769
Fourth quarter	5.1			1,090				11.1			2,165				4.5			796
Total stock repurchases	40.2			$	7,640			94.5			$	17,855			18.5			$	3,126

• Total shares do not add due to rounding.

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. As of December 31, 2019, $6.5 billion remained available under our stock repurchase program.

Dividends

Our Board of Directors declared quarterly dividends per share of $1.45, $1.32 and $1.15, which were paid in each of the four quarters of 2019, 2018, and 2017, respectively.

Historically, we have declared dividends in December of each year, which were paid in the first quarter of the following fiscal year and in March, July and October, which were paid in the second, third and fourth quarters, respectively, of the same fiscal year. Additionally, on December 11, 2019, the Board of Directors declared a quarterly cash dividend of $1.60 per share of common stock, which will be paid on March 6, 2020, to all stockholders of record as of the close of business on February 14, 2020.

F-36

Accumulated other comprehensive income (loss)

The components of AOCI were as follows (in millions):

	Foreign currency translation				Cash flow hedges				Available-for-sale securities				Other				AOCI
Balance as of December 31, 2016	$	(610	)		$	282			$	(138	)		$	(5	)		$	(471	)
Foreign currency translation adjustments	77				—				—				—				77
Unrealized gains (losses)	—				192				(46		)		—				146
Reclassification adjustments to income	—				(638		)		41				—				(597		)
Other gains	—				—				—				5				5
Income taxes	4				158				(1		)		—				161
Balance as of December 31, 2017	(529		)		(6		)		(144		)		—				(679		)
Cumulative effect of change in accounting principle, net of tax	—				—				(9		)		—				(9		)
Foreign currency translation adjustments	(141		)		—				—				—				(141		)
Unrealized gains (losses)	—				61				(556		)		—				(495		)
Reclassification adjustments to income	—				262				365				—				627
Other losses	—				—				—				(2		)		(2		)
Income taxes	—				(76		)		6				—				(70		)
Balance as of December 31, 2018	(670		)		241				(338		)		(2		)		(769		)
Foreign currency translation adjustments	(48		)		—				—				—				(48		)
Unrealized gains	—				127				424				—				551
Reclassification adjustments to income	—				(211		)		(56		)		—				(267		)
Other losses	—				—				—				(5		)		(5		)
Income taxes	—				18				(8		)		—				10
Balance as of December 31, 2019	$	(718	)		$	175			$	22			$	(7	)		$	(528	)

With respect to the table above, income tax expenses or benefits for unrealized gains and losses and the related reclassification adjustments to income for cash flow hedges were a $28 million expense and a $46 million benefit in 2019, a $21 million expense and a $55 million expense in 2018 and a $68 million expense and a $226 million benefit in 2017, respectively. Income tax expenses or benefits for unrealized gains and losses and the related reclassification adjustments to income for available-for-sale securities were a $22 million expense and a $14 million benefit in 2019, a $9 million benefit and a $3 million expense in 2018 and a $9 million expense and an $8 million benefit in 2017, respectively.

F-37

Reclassifications out of AOCI and into earnings were as follows (in millions):

		Years ended December 31,
Components of AOCI		2019				2018				2017				Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract gains (losses)		$	101			$	(21	)		$	65			Product sales
Cross-currency swap contract gains (losses)		110				(241		)		574				Interest and other income, net
Forward interest rate contract losses		—				—				(1		)		Interest expense, net
		211				(262		)		638				Income before income taxes
		(46		)		55				(226		)		Provision for income taxes
		$	165			$	(207	)		$	412			Net income
Available-for-sale securities:
Net realized gains (losses)		$	56			$	(365	)		$	(41	)		Interest and other income, net
		(14		)		3				(8		)		Provision for income taxes
		$	42			$	(362	)		$	(49	)		Net income

Other

In addition to common stock, our authorized capital includes 5 million shares of preferred stock, $0.0001 par value. As of December 31, 2019 and 2018, no shares of preferred stock were issued or outstanding.

17. Fair value measurement

To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing an asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:

Level 1	—	Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
Level 2	—	Valuations for which all significant inputs are observable either directly or indirectly—other than Level 1 inputs
Level 3	—	Valuations based on inputs that are unobservable and significant to the overall fair value measurement

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.

F-38

The fair values of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in millions):

Fair value measurement as of December 31, 2019, using:		Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)				Total
Assets:
Available-for-sale securities:
U.S. Treasury notes		$	360			$	—			$	—			$	360
U.S. Treasury bills		—				—				—				—
Other government-related debt securities:
U.S.		—				—				—				—
Foreign and other		—				—				—				—
Corporate debt securities:
Financial		—				1,121				—				1,121
Industrial		—				834				—				834
Other		—				198				—				198
Residential-mortgage-backed securities		—				182				—				182
Other mortgage- and asset-backed securities		—				—				—				—
Money market mutual funds		5,250				—				—				5,250
Other short-term interest-bearing securities		—				289				—				289
Equity securities		303				—				—				303
Derivatives:
Foreign currency contracts		—				224				—				224
Cross-currency swap contracts		—				66				—				66
Interest rate swap contracts		—				259				—				259
Total assets		$	5,913			$	3,173			$	—			$	9,086
Liabilities:
Derivatives:
Foreign currency contracts		$	—			$	31			$	—			$	31
Cross-currency swap contracts		—				315				—				315
Interest rate swap contracts		—				—				—				—
Contingent consideration obligations		—				—				61				61
Total liabilities		$	—			$	346			$	61			$	407

F-39

Fair value measurement as of December 31, 2018, using:		Quoted prices in active markets for identical assets (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)				Total
Assets:
Available-for-sale securities:
U.S. Treasury notes		$	2,663			$	—			$	—			$	2,663
U.S. Treasury bills		8,191				—				—				8,191
Other government-related debt securities:
U.S.		—				110				—				110
Foreign and other		—				932				—				932
Corporate debt securities:
Financial		—				2,697				—				2,697
Industrial		—				2,504				—				2,504
Other		—				562				—				562
Residential-mortgage-backed securities		—				1,422				—				1,422
Other mortgage- and asset-backed securities		—				469				—				469
Money market mutual funds		5,659				—				—				5,659
Other short-term interest-bearing securities		—				3,515				—				3,515
Equity securities		176				—				—				176
Derivatives:
Foreign currency contracts		—				182				—				182
Cross-currency swap contracts		—				170				—				170
Interest rate swap contracts		—				56				—				56
Total assets		$	16,689			$	12,619			$	—			$	29,308
Liabilities:
Derivatives:
Foreign currency contracts		$	—			$	26			$	—			$	26
Cross-currency swap contracts		—				401				—				401
Interest rate swap contracts		—				149				—				149
Contingent consideration obligations		—				—				72				72
Total liabilities		$	—			$	576			$	72			$	648

Interest-bearing and equity securities

The fair values of our U.S. Treasury securities, money market mutual funds and equity securities are based on quoted market prices in active markets, with no valuation adjustment.

As of December 31, 2019, our corporate debt securities are investment grade and have maturity dates of three years or less from the balance sheet date. Our corporate debt securities portfolio has weighted-average credit ratings of A– or equivalent by Standard & Poor’s Financial Services LLC (S&P) or Moody’s Investors Service, Inc. (Moody’s), and A by Fitch Ratings, Inc. (Fitch). We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services use industry-standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable either directly or indirectly to estimate fair value. The inputs include reported trades of and broker-dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

Our residential-mortgage-backed-securities portfolio is composed entirely of senior tranches with credit ratings of AAA by S&P, Moody’s or Fitch. We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services use industry-standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable either directly or indirectly to estimate fair value. The inputs include reported trades of and broker-dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment or default projections based on historical data; and other observable inputs.

F-40

We value our other short-term interest-bearing securities at amortized cost, which approximates fair value given their near-term maturity dates.

Derivatives

All of our foreign currency forward and option derivative contracts have maturities of three years or less, and all are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, the LIBOR, swap rates and obligor credit default swap rates. In addition, inputs for our foreign currency option contracts include implied volatility measures. These inputs, when applicable, are at commonly quoted intervals. See Note 18, Derivative instruments.

Our cross-currency swap contracts are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, LIBOR, swap rates, obligor credit default swap rates and cross-currency basis swap spreads. See Note 18, Derivative instruments.

Our interest rate swap contracts are with counterparties that have minimum credit ratings of A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by using an income-based industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include LIBOR, swap rates and obligor credit default swap rates. See Note 18, Derivative instruments.

Contingent consideration obligations

As a result of our acquisitions, we have incurred contingent consideration obligations. The contingent consideration obligations are recorded at their fair values by using probability-adjusted discounted cash flows, and we revalue these obligations each reporting period until the related contingencies have been resolved. The fair value measurements of these obligations are based on significant unobservable inputs related to licensing rights and product candidates acquired in business combinations, and they are reviewed quarterly by management in our R&D and commercial sales organizations. Changes in the fair values of contingent consideration obligations are recognized in Other operating expenses in the Consolidated Statements of Income. Changes in the carrying amounts of contingent consideration obligations for the years ended December 31, 2019 and 2018, were not material. During the year ended December 31, 2017, we recorded a $110 million reduction to contingent consideration obligations due substantially to amounts associated with the Dezima Pharma B.V. (Dezima) acquisition, discussed below.

As a result of our acquisition of K-A in 2018, we are obligated to make single-digit royalty payments to Kirin contingent upon sales of brodalumab. See Note 2, Acquisitions.

As a result of our acquisition of Dezima in 2015, we are obligated to pay its former shareholders up to $1.25 billion of additional consideration contingent upon achieving certain development and sales-related milestones and low single-digit royalties on net product sales above a certain threshold for AMG 899, an IPR&D asset. The fair values of the contingent consideration obligations had an aggregate value of $110 million at acquisition. During 2017, we decided to discontinue the internal development of AMG 899 and accordingly, we reduced from $116 million to $0 the related contingent consideration liabilities and recognized an impairment charge of $400 million on the IPR&D asset in Other operating expenses in the Consolidated Statements of Income. The remeasurement of these liabilities and the impairment charge are included in Other items, net, in the Consolidated Statements of Cash Flows.

As a result of our acquisition of BioVex Group Inc. in 2011, we are obligated to pay its former shareholders up to $325 million upon achieving separate regulatory and sales-related milestones with regard to IMLYGIC® (talimogene laherparepvec) if certain sales thresholds are met within specified periods of time.

During the years ended December 31, 2019 and 2018, there were no transfers of assets or liabilities between fair value measurement levels, and there were no material remeasurements to the fair values of assets and liabilities that are not measured at fair value on a recurring basis, except with respect to the 2018 discontinuance of the internal development of a program that resulted in an impairment of an IPR&D asset of $330 million, which was recognized in Other operating expenses in the Consolidated Statements of Income and included in Other items, net, in the Consolidated Statements of Cash Flows.

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Summary of the fair values of other financial instruments

Cash equivalents

The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.

Borrowings

We estimated the fair values of our borrowings by using Level 2 inputs. As of December 31, 2019 and 2018, the aggregate fair values of our borrowings were $33.7 billion and $35.0 billion, respectively, and the carrying values were $29.9 billion and $33.9 billion, respectively.

18. Derivative instruments

The Company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. To reduce our risks related to such exposures, we use or have used certain derivative instruments, including foreign currency forward, foreign currency option, cross-currency swap, forward interest rate and interest rate swap contracts. We do not use derivatives for speculative trading purposes.

Cash flow hedges

We are exposed to possible changes in the values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates associated primarily with our euro-denominated international product sales. Increases and decreases in the cash flows associated with our international product sales due to movements in foreign currency exchange rates are offset partially by corresponding increases and decreases in the cash flows from our international operating expenses resulting from these foreign currency exchange rate movements. To further reduce our exposure to foreign currency exchange rate fluctuations with regard to our international product sales, we enter into foreign currency forward and option contracts to hedge a portion of our projected international product sales primarily over a three-year time horizon, with, at any given point in time, a higher percentage of nearer-term projected product sales being hedged than in successive periods.

As of December 31, 2019, 2018 and 2017, we had outstanding foreign currency forward contracts with aggregate notional amounts of $5.0 billion, $4.5 billion and $4.6 billion, respectively. As of December 31, 2018 and 2017 we had outstanding foreign currency option contracts with aggregate notional amounts of $21 million and $74 million, respectively, and no such outstanding contracts as of December 31, 2019. We have designated these foreign currency forward and foreign currency option contracts, which are primarily euro based, as cash flow hedges. Accordingly, we report the unrealized gains and losses on these contracts in AOCI in the Consolidated Balance Sheets, and we reclassify them to Product sales in the Consolidated Statements of Income in the same periods during which the hedged transactions affect earnings.

To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term debt denominated in foreign currencies, we enter into cross-currency swap contracts. Under the terms of such contracts, we paid euros, pounds sterling and Swiss francs and received U.S. dollars for the notional amounts at the inception of the contracts; and based on these notional amounts, we exchange interest payments at fixed rates over the lives of the contracts by paying U.S. dollars and receiving euros, pounds sterling and Swiss francs. In addition, we will pay U.S. dollars to and receive euros, pounds sterling and Swiss francs from the counterparties at the maturities of the contracts for these same notional amounts. The terms of these contracts correspond to the related hedged debt, thereby effectively converting the interest payments and principal repayment on the debt from euros, pounds sterling and Swiss francs to U.S. dollars. We have designated these cross-currency swap contracts as cash flow hedges. Accordingly, the unrealized gains and losses on these contracts are reported in AOCI in the Consolidated Balance Sheets and reclassified to Interest and other income, net, in the Consolidated Statements of Income in the same periods during which the hedged debt affects earnings.

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The notional amounts and interest rates of our cross-currency swaps as of December 31, 2019, were as follows (notional amounts in millions):

		Foreign currency							U.S. dollars
Hedged notes		Notional amounts				Interest rates			Notional amounts				Interest rates
1.25% 2022 euro Notes		€	1,250			1.3	%		$	1,388			3.2	%
0.41% 2023 Swiss franc Bonds		CHF	700			0.4	%		$	704			3.4	%
2.00% 2026 euro Notes		€	750			2.0	%		$	833			3.9	%
5.50% 2026 pound sterling Notes		£	475			5.5	%		$	747			6.0	%
4.00% 2029 pound sterling Notes		£	700			4.0	%		$	1,111			4.5	%

During the year ended December 31, 2019, our 2.125% 2019 euro Notes matured, and the related cross-currency swaps were settled.

In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable U.S. Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on forward interest rate contracts, which are designated as cash flow hedges, are recognized in AOCI in the Consolidated Balance Sheets and are amortized into Interest expense, net, in the Consolidated Statements of Income over the lives of the associated debt issuances. Amounts recognized in connection with forward interest rate swaps during the year ended December 31, 2019, and amounts expected to be recognized during the subsequent 12 months are not material.

The unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):

				Years ended December 31,
Derivatives in cash flow hedging relationships				2019				2018				2017
Foreign currency contracts				$	148			$	348			$	(402	)
Cross-currency swap contracts				(21		)		(287		)		581
Forward interest rate contracts				—				—				13
Total unrealized gains				$	127			$	61			$	192

Fair value hedges

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that qualified for and were designated as fair value hedges. These interest rate swap contracts effectively convert fixed-rate coupons to floating-rate LIBOR-based coupons over the terms of the related hedge contracts. As of December 31, 2019 and 2018, we had interest rate swap contracts with aggregate notional amounts of $9.6 billion and $11.0 billion, respectively, that hedge certain portions of our long-term debt issuances.

For interest rate swap contracts that qualify for and are designated as fair value hedges, we recognize in Interest expense, net, in the Consolidated Statements of Income the unrealized gain or loss on the derivative resulting from the change in fair value during the period, as well as the offsetting unrealized loss or gain of the hedged item resulting from the change in fair value during the period attributable to the hedged risk. If a hedging relationship involving an interest rate swap contract is terminated, the gain or loss realized on contract termination is recorded as an adjustment to the carrying value of the debt and amortized into Interest expense, net, over the remaining life of the previously hedged debt.

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The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Consolidated Balance Sheets as follows (in millions):

		Carrying amounts of hedged liabilities**(1)**								Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities**(2)**
		December 31,								December 31,
Consolidated Balance Sheets locations		2019				2018				2019				2018
Current portion of long-term debt		$	903			$	2,396			$	4			$	(3	)
Long-term debt		$	8,814			$	9,361			$	292			$	(50	)

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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.

Impact of hedging transactions

The following tables summarize the amounts recorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):

		Year ended December 31, 2019
		Product sales				Interest and other income, net				Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Consolidated Statements of Income		$	22,204			$	753			$	(1,289	)
The effects of cash flow and fair value hedging:
Gains on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts		$	101			$	—			$	—
Cross-currency swap contracts		$	—			$	110			$	—
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)		$	—			$	—			$	(349	)
Derivatives designated as hedging instruments		$	—			$	—			$	352

		Year ended December 31, 2018
		Product sales				Interest and other income, net				Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Consolidated Statements of Income		$	22,533			$	674			$	(1,392	)
The effects of cash flow and fair value hedging:
Losses on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts		$	(21	)		$	—			$	—
Cross-currency swap contracts		$	—			$	(241	)		$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)		$	—			$	—			$	65
Derivatives designated as hedging instruments		$	—			$	—			$	(42	)

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		Year ended December 31, 2017
		Product sales				Interest and other income, net				Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Consolidated Statements of Income		$	21,795			$	928			$	(1,304	)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts		$	65			$	—			$	—
Cross-currency swap contracts		$	—			$	574			$	—
Forward interest rate contracts		$	—			$	—			$	(1	)
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)		$	—			$	—			$	127
Derivatives designated as hedging instruments		$	—			$	—			$	(85	)

---

(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.

No portions of our cash flow hedge contracts were excluded from the assessment of hedge effectiveness. As of December 31, 2019, we expected to reclassify $47 million of net gains on our foreign currency and cross-currency swap contracts out of AOCI and into earnings during the next 12 months.

Derivatives not designated as hedges

To reduce our exposure to foreign currency fluctuations in certain assets and liabilities denominated in foreign currencies, we enter into foreign currency forward contracts that are not designated as hedging transactions. Most of these exposures are hedged on a month-to-month basis. As of December 31, 2019, 2018 and 2017, the total notional amounts of these foreign currency forward contracts were $1.2 billion, $737 million and $757 million, respectively. Gains and losses recognized in earnings for our derivative instruments not designated as hedging instruments were not material for the years ended December 31, 2019, 2018 and 2017.

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The fair values of derivatives included in the Consolidated Balance Sheets were as follows (in millions):

		Derivative assets						Derivative liabilities
December 31, 2019		Consolidated Balance Sheets locations		Fair values				Consolidated Balance Sheets locations		Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts		Other current assets/ Other assets		$	223			Accrued liabilities/ Other noncurrent liabilities		$	31
Cross-currency swap contracts		Other current assets/ Other assets		66				Accrued liabilities/ Other noncurrent liabilities		315
Interest rate swap contracts		Other current assets/ Other assets		259				Accrued liabilities/ Other noncurrent liabilities		—
Total derivatives designated as hedging instruments				548						346
Derivatives not designated as hedging instruments:
Foreign currency contracts		Other current assets		1				Accrued liabilities		—
Total derivatives not designated as hedging instruments				1						—
Total derivatives				$	549					$	346
		Derivative assets						Derivative liabilities
December 31, 2018		Consolidated Balance Sheets locations		Fair values				Consolidated Balance Sheets locations		Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts		Other current assets/ Other assets		$	181			Accrued liabilities/ Other noncurrent liabilities		$	26
Cross-currency swap contracts		Other current assets/ Other assets		170				Accrued liabilities/ Other noncurrent liabilities		401
Interest rate swap contracts		Other current assets/ Other assets		56				Accrued liabilities/ Other noncurrent liabilities		149
Total derivatives designated as hedging instruments				407						576
Derivatives not designated as hedging instruments:
Foreign currency contracts		Other current assets		1				Accrued liabilities		—
Total derivatives not designated as hedging instruments				1						—
Total derivatives				$	408					$	576

Our derivative contracts that were in liability positions as of December 31, 2019, contain certain credit-risk-related contingent provisions that would be triggered if (i) we were to undergo a change in control and (ii) our, or the surviving entity’s, creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment grade or a materially weaker creditworthiness after the change in control. If these events were to occur, the counterparties would have the right but not the obligation to close the contracts under early-termination provisions. In such circumstances, the counterparties could request immediate settlement of these contracts for amounts that approximate the then current fair values of the contracts. In addition, our derivative contracts are not subject to any type of master netting arrangement, and amounts due either to or from a counterparty under the contracts may be offset against other amounts due either to or from the same counterparty only if an event of default or termination, as defined, were to occur.

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The cash flow effects of our derivative contracts in the Consolidated Statements of Cash Flows are included in Net cash provided by operating activities, except for the settlement of notional amounts of cross-currency swaps, which are included in Net cash used in financing activities.

19. Contingencies and commitments

Contingencies

In the ordinary course of business, we are involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that are difficult to predict. See Part I, Item 1A. Risk Factors—Our business may be affected by litigation and government investigations. We describe our legal proceedings and other matters that are significant or that we believe could become significant in this footnote.

We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously.

Our legal proceedings involve various aspects of our business and a variety of claims, some of which present novel factual allegations and/or unique legal theories. In each of the matters described in this filing, in which we could incur a liability, our opponents seek an award of a not-yet-quantified amount of damages or an amount that is not material. In addition, a number of the matters pending against us are at very early stages of the legal process, which in complex proceedings of the sort we face often extend for several years. As a result, none of the matters described in this filing, in which we could incur a liability, have progressed sufficiently through discovery and/or the development of important factual information and legal issues to enable us to estimate a range of possible loss, if any, or such amounts are not material. While it is not possible to accurately predict or determine the eventual outcomes of these matters, an adverse determination in one or more of these matters currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Certain recent developments concerning our legal proceedings and other matters are discussed below:

Abbreviated New Drug Application (ANDA) Patent Litigation

KYPROLIS® (carfilzomib) ANDA Patent Litigation

Onyx Therapeutics, Inc. v. Cipla Limited, et al.

Between October 2016 and April 2018, Onyx Therapeutics, Inc. (Onyx Therapeutics, a wholly-owned subsidiary of Amgen), filed separate lawsuits in the U.S. District Court for the District of Delaware (the Delaware District Court) against: (1) Cipla Limited and Cipla USA, Inc. (collectively, Cipla); (2) Sagent Pharmaceuticals, Inc. (Sagent); (3) Breckenridge Pharmaceutical, Inc. (Breckenridge); and (4) Fresenius Kabi, USA LLC, Fresenius Kabi USA, Inc., Fresenius Kabi Pharmaceuticals Holding, Inc. and Fresenius Kabi Oncology Limited; (5) Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd.; (6) MSN Laboratories Private Limited and MSN Pharmaceuticals, Inc. (collectively, MSN); (7) Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, DRL); (8) Qilu Pharma, Inc. and Qilu Pharmaceutical Co. Ltd. (collectively, Qilu); (9) Apotex Inc. and Apotex Corp. (Apotex); (10) InnoPharma, Inc. (InnoPharma); and (11) Aurobindo Pharma USA, Inc., each for infringement of one or more of our following patents, which are listed in the Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book) for KYPROLIS®: U.S. Patent Nos. 7,232,818 (the ’818 Patent), 7,417,042 (the ’042 Patent), 7,491,704 (the ’704 Patent), 7,737,112 (the ’112 Patent), 8,129,346 (the ’346 Patent), 8,207,125 (the ’125 Patent), 8,207,126 (the ’126 Patent), 8,207,127 (the ’127 Patent) and 8,207,297 (the ’297 Patent). Each of these lawsuits were based on each defendant’s submission of an ANDA seeking U.S. Food and Drug Administration (FDA) approval to market a generic version of KYPROLIS®. In each lawsuit, Onyx Therapeutics sought an order of the Delaware District Court making any FDA approval of the respective defendant’s ANDA effective no earlier than the expiration of the applicable patents.

The Delaware District Court consolidated these lawsuits for purposes of discovery into a single case, Onyx Therapeutics, Inc. v. Cipla Limited, et al.

In 2017, by stipulation with Onyx Therapeutics, Fresenius Kabi Pharmaceuticals Holding, Inc. and Fresenius Kabi Oncology Limited were dismissed from the lawsuit, leaving Fresenius Kabi, USA LLC and Fresenius Kabi USA, Inc. (collectively, Fresenius) as the remaining Fresenius defendants. In September 2017 and February 2018, respectively, by joint stipulation with Onyx Therapeutics, Teva Pharmaceutical Industries Ltd. and Teva Pharmaceuticals USA, Inc. were each dismissed from the lawsuit and in February 2018, Qilu was dismissed from the lawsuit by joint stipulation between Onyx Therapeutics and Qilu.

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Between April and July of 2018, the Delaware District Court entered orders on stipulations between Onyx Therapeutics and each of Apotex, DRL, Sagent, Fresenius, Breckenridge, Aurobindo Pharma USA, Inc., Cipla and InnoPharma, respectively, that each defendant infringes the ’042, ’112, ’125, ’126 and ’127 Patents. Onyx Therapeutics provided those defendants, either through a stipulated order or other agreement, a covenant that it would not assert patent infringement of the ’818,’704,’346 and ’297 Patents against certain of the respective defendants’ ANDA applications and products. In June 2018, the Delaware District Court entered an order on a stipulation between Onyx Therapeutics and MSN that MSN infringes the ’112 Patent. In December 2018, Apotex, DRL, Fresenius, InnoPharma, Sagent, Breckenridge, Aurobindo Pharma USA, Inc. and Cipla amended their responses to the complaints to add the defense of unclean hands and to seek declarations of unenforceability of the asserted patents based on allegations of inequitable conduct. In January 2019, MSN amended its responses to the complaints to add the defense of unclean hands.

On January 11, 2019, Onyx Therapeutics filed a separate lawsuit in the Delaware District Court against Breckenridge for infringement of the ’042, ’112 and ’125 Patents in connection with its ANDA that seeks approval to market generic versions of KYPROLIS®. On March 4, 2019, the Delaware District Court entered an order on a stipulation between Onyx Therapeutics and Breckenridge, providing that Breckenridge infringes the asserted claims of the ’042, ’112 and ’125 Patents, and consolidated this lawsuit against Breckenridge into the existing consolidated case, Onyx Therapeutics, Inc. v. Cipla Limited, et al., for all purposes.

On May 6, 2019, the Delaware District Court commenced trial in the Onyx Therapeutics, Inc. v. Cipla Limited, et al. consolidated case. During trial, the Delaware District Court signed consent judgments filed by Onyx Therapeutics and each of Aurobindo Pharma USA, Inc., InnoPharma, Sagent, Apotex, Fresenius, DRL and Breckenridge, in which the parties stipulated to entry of: (1) judgment dismissing with prejudice all of the parties’ claims, counterclaims, affirmative defenses and demands; and (2) an injunction prohibiting infringement of the ’042, ’112 and ’125 Patents by the manufacture, use, sale, offer to sell or importation into the United States of the applicable defendant’s carfilzomib product unless specifically authorized pursuant to the applicable confidential settlement agreement. During trial, the Delaware District Court also entered a consent judgment between Onyx Therapeutics and MSN, in which the parties stipulated to entry of: (1) judgment dismissing with prejudice all of the parties’ claims, counterclaims, affirmative defenses and demands; and (2) an injunction prohibiting infringement of the ’112 Patent by the manufacture, use, sale, offer to sell or importation into the United States of MSN’s carfilzomib product unless specifically authorized pursuant to the confidential settlement agreement. On May 16, 2019, trial concluded between Onyx Therapeutics and the lone remaining defendant, Cipla. On January 17, 2020, the Delaware District Court issued an order advising the parties that the court expects to issue its post-trial opinion by, on or about, March 31, 2020.

Otezla*®* (apremilast) ANDA Patent Litigation

Celgene Corp. v. Sandoz Inc., et al.

Beginning in June 2018, Celgene filed 19 separate lawsuits in the U.S. District Court for the District of New Jersey (the New Jersey District Court) against Alkem Laboratories Ltd. (Alkem); Amneal Pharmaceuticals LLC; Annora Pharma Private Ltd. and Hetero USA Inc. (collectively, Hetero); Aurobindo Pharma Ltd. and Aurobindo Pharma USA Inc. (collectively, Aurobindo); Cipla Limited (Cipla Ltd); DRL; Emcure Pharmaceuticals Ltd. and Heritage Pharmaceuticals Inc. (collectively, Emcure); Glenmark Pharmaceuticals Ltd. (Glenmark); Macleods Pharmaceuticals Ltd. (Macleods); Mankind Pharma Ltd. (Mankind); MSN Laboratories Private Limited; Pharmascience Inc. (Pharmascience); Prinston Pharmaceutical Inc. (Prinston); Sandoz Inc.; Shilpa Medicare Ltd. (Shilpa); Teva Pharmaceuticals USA, Inc. and Actavis LLC (collectively, Actavis); Torrent Pharmaceuticals Ltd. (Torrent); Unichem Laboratories, Ltd. (Unichem); and Zydus Pharmaceuticals (USA) Inc., each for infringement of one or more of the following patents: U.S. Patent Nos. 6,962,940 (the ’940 Patent); 7,208,516 (the ’516 Patent); 7,427,638 (the ’638 Patent); 7,659,302 (the ’302 Patent); 7,893,101 (the ’101 Patent); 8,455,536 (the ’536 Patent); 8,802,717 (the ’717 Patent); 9,018,243 (the ’243 Patent) and 9,872,854 (the ’854 Patent), which are listed in the Orange Book for Otezla®. Each of the defendants is seeking to market a generic version of Otezla® before expiration of the asserted patents. The New Jersey District Court consolidated these 19 lawsuits for discovery and case management purposes into a single case, Celgene Corp. v. Sandoz Inc., et al. Each lawsuit seeks an order of the New Jersey District Court making any FDA approval of the respective defendant’s ANDA effective no earlier than the expiration of the applicable patents.

Between August 8, 2018 and August 30, 2018, Celgene filed amended complaints against Alkem, Amneal Pharmaceuticals LLC, Aurobindo, Cipla Ltd, DRL, Glenmark, Pharmascience, Sandoz Inc., Actavis, Unichem and Zydus Pharmaceuticals (USA) Inc. additionally asserting U.S. Patent No. 9,724,330 (the ’330 Patent), which is listed in the Orange Book for Otezla®. Between October 15 and November 27, 2018, Celgene filed amended complaints against Alkem, Amneal Pharmaceuticals LLC, Hetero, Aurobindo, Cipla Ltd, DRL, Emcure, Glenmark, Macleods, Mankind, MSN Laboratories Private Limited, Pharmascience, Prinston, Sandoz Inc., Actavis, Torrent, Unichem and Zydus Pharmaceuticals (USA) Inc. additionally asserting U.S. Patent No. 10,092,541 (the ’541 Patent), which is listed in the Orange Book for Otezla®. Between March 1, 2019 and April 4, 2019, Celgene filed amended complaints against Hetero, MSN Laboratories Private Limited and Emcure for infringement of one or more of the above-listed patents. On October 1, 2019, Celgene filed an amended complaint against Mankind for infringement of the ’940, ’302, ’536, ’243 and ’330 Patents. On October 8, 2019, Celgene filed a separate lawsuit against Zydus Pharmaceuticals (USA) Inc. in the New

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Jersey District Court for infringement of U.S. Patent Nos. 8,093,283 (the ’283 Patent) and 8,629,173 (the ’173 Patent), which are not listed in the Orange Book for Otezla®. On December 19, 2019, the New Jersey District Court consolidated this lawsuit for discovery and case management purposes into the existing consolidated case, Celgene Corp. v. Sandoz Inc., et al.

Each defendant has filed an answer to the above-listed complaints and amended complaints disputing infringement and/or validity of the patents asserted against it. Along with their answers, each of Alkem, Hetero, Cipla Ltd, DRL, Emcure, Glenmark, Macleods, Mankind, Pharmascience, Sandoz Inc., Shilpa, Actavis, Torrent, Unichem and Zydus Pharmaceuticals (USA) Inc. filed declaratory judgment counterclaims asserting that some or all of the patents are not infringed and/or are invalid. In August 2019, based on a joint request by Celgene and Glenmark, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, having made, using, selling, offering to sell, importing, or distributing of Glenmark’s apremilast product during the term of the ’940, ’638, ’302, ’101, ’536, ’243, ’330 and’541 Patents, unless authorized pursuant to a confidential settlement agreement.

On December 20, 2019, following Amgen’s acquisition of the patents-in-suit and the new drug application for Otezla®, Amgen and Celgene jointly moved the New Jersey District Court for an order (1) substituting Amgen for Celgene for all purposes in this litigation; (2) terminating Celgene from this litigation; and (3) changing the consolidated case caption and all related actions to reflect Amgen as the sole plaintiff. Defendants have opposed the motion.

Sensipar® (cinacalcet) ANDA Patent Litigation

Amgen Inc. v. Amneal Pharmaceuticals LLC, et al. (formerly, Amgen Inc. v. Aurobindo Pharma Ltd. et al.) Consolidated Case

Beginning in September 2016, Amgen filed 14 separate lawsuits in the Delaware District Court for infringement of our U.S. Patent No. 9,375,405 (the ’405 Patent) against a number of manufacturers of purported generic versions of our Sensipar® product. In February 2017, the Delaware District Court consolidated these 14 lawsuits into a single case, Amgen Inc. v. Aurobindo Pharma Ltd. et al. In June 2017, Amgen filed an additional lawsuit in the Delaware District Court for infringement of the ’405 Patent which was consolidated into Amgen Inc. v. Aurobindo Pharma Ltd. et al. in August 2017. The ’405 Patent is entitled “Rapid Dissolution Formulation of a Calcium Receptor-Active Compound” and expires in 2026. All defendants responding to the complaint denied infringement and sought judgment that the ’405 Patent is invalid and/or not infringed.

Between September and November of 2017, Amgen filed, and the Delaware District Court signed, stipulated dismissals of the lawsuit against Micro Labs Ltd. and Micro Labs USA, Inc., and the lawsuit against Apotex, as well as consent judgments filed by Amgen and each of (1) Sun Pharma Global FZE, Sun Pharmaceutical Industries, Ltd. and Sun Pharmaceutical Industries, Inc. (collectively, Sun); (2) Ajanta Pharma Limited and Ajanta Pharma USA, Inc.; (3) Hetero USA Inc., Hetero Labs Ltd. and Hetero Labs Ltd. Unit V; and (4) Breckenridge. Each consent judgment stipulated to an entry of judgment of infringement and validity of the ’405 Patent and an injunction prohibiting the manufacture, use, sale, offer to sell, importation of or distribution into the United States of the respective defendant’s cinacalcet product during the term of the ’405 Patent unless specifically authorized pursuant to the confidential settlement agreement.

On March 5, 2018, the Delaware District Court commenced trial on the infringement claims and defenses in the Amgen Inc. v. Aurobindo Pharma Ltd. et al. consolidated lawsuit against the defendants that remained in the lawsuit, collectively consisting of (1) Watson Laboratories, Inc. and Actavis Pharma, Inc. (collectively, Watson); (2) Amneal Pharmaceuticals LLC and Amneal Pharmaceuticals of New York, LLC (collectively, Amneal); (3) Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (collectively, Zydus); and (4) Piramal Healthcare UK Limited (Piramal). Just prior to trial, the Delaware District Court signed consent judgments filed by Amgen and each of Cipla, and Strides Pharma Global Pte Limited and Strides Pharma, Inc. (collectively, Strides), and a consent judgment filed by Amgen and Aurobindo. In each consent judgment, the parties stipulated to an entry of judgment of infringement and validity of the ’405 Patent and an injunction prohibiting the manufacture, use, sale, offer to sell, importation of or distribution into the United States of the applicable defendant’s cinacalcet product during the term of the ’405 Patent unless specifically authorized pursuant to the applicable confidential settlement agreement. Just prior to trial, the Delaware District Court also entered orders dismissing each of DRL and Mylan Pharmaceuticals Inc. and Mylan Inc. (collectively, Mylan), on stipulations between Amgen and such parties, respectively, subject to the terms of confidential settlement agreements.

On July 27, 2018, the Delaware District Court issued a trial order finding on the infringement claims and defenses in the Amgen Inc. v. Aurobindo Pharma Ltd. et al. consolidated lawsuit that Zydus infringes the ’405 Patent and that Amneal, Piramal and Watson do not infringe the ’405 Patent. On August 24, 2018, the Delaware District Court issued an order dismissing, without prejudice, the invalidity counterclaims of Amneal, Piramal and Watson and entered judgment of noninfringement of the ’405 Patent in favor of Amneal, Piramal and Watson. On September 20, 2018, Amgen filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit (the Federal Circuit Court). On October 9, 2018, the Delaware District Court dismissed, without prejudice, the invalidity counterclaims of Zydus and entered judgment of infringement of the ’405 Patent by Zydus in favor of Amgen, including an order that the effective date of the FDA approval of Zydus’ generic version of Sensipar® shall be no earlier

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than the expiry date of our ’405 Patent. On October 11, 2018, Zydus filed a notice of appeal to the Federal Circuit Court, and on October 24, 2018, the Federal Circuit Court consolidated the appeals of Zydus and Amgen.

In December 2018, the FDA approved Watson’s generic version of Sensipar® and Watson’s parent company, Teva Pharmaceutical Industries Ltd. (Teva), began selling its product at-risk notwithstanding that the appeals were pending at the Federal Circuit Court. On January 2, 2019, Amgen, Watson and Teva entered into a settlement agreement in which Teva agreed to stop selling its generic product until the mid-year 2021, or earlier under certain circumstances and to pay Amgen an undisclosed amount. On January 9, 2019, Watson and Amgen filed a motion asking the Delaware District Court to vacate its final judgment of noninfringement as to Watson and to enter a proposed consent judgment of infringement and validity of the ’405 Patent and an injunction prohibiting the making, having made, using, selling, offering to sell, or distributing Watson’s cinacalcet product in the United States or importing Watson’s cinacalcet product into the United States, consistent with the confidential settlement agreement. On January 11, 2019, the Federal Circuit Court stayed the pending appeal as to Watson in order for the Delaware District Court to rule on the motion of Watson and Amgen. On January 18, 2019 and January 23, 2019, respectively, Cipla and Sun filed oppositions to the motion of Watson and Amgen.

On March 19, 2019, Amgen filed an emergency motion for an injunction pending appeal, seeking an order from the Delaware District Court enjoining defendant Piramal from making, using, selling, offering for sale or importing its generic cinacalcet product. Amgen’s motion follows an announcement that Slate Run Pharmaceuticals LLC (Slate Run), in partnership with Piramal, had begun selling Piramal’s generic cinacalcet product at-risk notwithstanding the appeals pending at the Federal Circuit Court. On April 15, 2019, the Delaware District Court signed an order enjoining Piramal and Slate Run from selling their generic cinacalcet product until certain events occur related to a decision by the Federal Circuit Court on the parties’ appeal. The order has no effect on the product that Piramal and Slate Run had already sold to third parties.

On March 26, 2019, the Delaware District Court denied the joint motion for indicative ruling of Watson and Amgen. On April 10, 2019, Amgen filed an appeal to the Federal Circuit Court. On April 29, 2019, the Federal Circuit Court lifted the stay of Amgen’s appeal of the judgment of noninfringement as to Watson and consolidated it with Amgen’s appeal of the Delaware District Court’s denial of the joint motion for indicative ruling. On July 17, 2019, Amgen filed a motion requesting the Federal Circuit Court to vacate the Delaware District Court’s noninfringement judgment with respect to Watson and direct entry of the parties’ proposed consent judgment. On July 18, 2019, Cipla filed an opposition to Amgen’s motion and also moved to participate in the appeal as either an intervenor or as amicus curiae. On September 13, 2019, the Federal Circuit Court denied Amgen’s motion, lifted the stay of the briefing schedule which had been stayed pending disposition of Amgen’s motion to vacate and granted Cipla permission to file a brief as amicus curiae.

On January 7, 2020, the Federal Circuit Court issued an opinion affirming the judgment of noninfringement with respect to Piramal, affirming the judgment of infringement with respect to Zydus and vacating and remanding to the Delaware District Court for further consideration the judgment of noninfringement with respect to Amneal.

Amgen Inc. v. The ACME Laboratories Ltd.

On September 11, 2019, Amgen filed a lawsuit in the Delaware District Court against The ACME Laboratories Ltd. (ACME) for infringement of Amgen’s ’405 Patent. On November 20, 2019, the Delaware District Court signed a consent judgment filed by Amgen and ACME in which the parties stipulated to an entry of judgment of infringement and validity of the ’405 Patent and an injunction prohibiting the manufacture, use, sale, offer to sell, importation of or distribution into the United States of ACME’s cinacalcet product during the term of the ’405 Patent unless specifically authorized pursuant to the confidential settlement agreement.

ENBREL (etanercept) Patent Litigation

Immunex Corporation, et al. v. Samsung Bioepis Co., Ltd.

On April 30, 2019, two affiliates of Amgen Inc., Immunex Corporation and Amgen Manufacturing, Limited (collectively, Amgen), along with Hoffmann-La Roche Inc. (Roche), filed a lawsuit in the New Jersey District Court against Samsung Bioepis Co., Ltd. (Bioepis). This lawsuit stems from Bioepis’ submission of an application for FDA licensure of an etanercept product as biosimilar to Amgen’s ENBREL. Amgen and Roche have asserted infringement of five patents: U.S. Patent Nos. 8,063,182 (the ’182 Patent); 8,163,522 (the ’522 Patent); 7,915,225 (the ’225 Patent); 8,119,605 (the ’605 Patent); and 8,722,631 (the ’631 Patent). By their complaint, Amgen and Roche seek an injunction to prohibit Bioepis from commercializing its biosimilar etanercept product in the United States prior to the expiry of such patents. On August 5, 2019, defendant Bioepis responded to the complaint, denying infringement and seeking judgment that the patents-in-suit are invalid, unenforceable and/or not infringed. On January 9, 2020 and subject to the terms of a confidential stipulation and court order of January 6, 2020, the New Jersey District Court entered a consent injunction that prohibits Bioepis from making, using, offering to sell, selling or importing into the United States Bioepis’ etanercept product. Amgen and Bioepis entered into an agreement with respect to an injunction regarding etanercept as

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set out in the New Jersey District Court’s order of January 6, 2020. On January 15, 2020, the New Jersey District Court entered an order administratively staying the case pursuant to a joint request of Amgen and Bioepis.

Immunex Corporation, et al. v. Sandoz Inc., et al.

On February 26, 2016, two affiliates of Amgen Inc., Immunex Corporation and Amgen Manufacturing, Limited (collectively, Amgen), along with Hoffmann-La Roche Inc. (Roche), filed a lawsuit in the New Jersey District Court against Sandoz Inc., Sandoz International GmbH and Sandoz GmbH (collectively, Sandoz). This lawsuit stems from Sandoz’s submission of an application for FDA licensure of an etanercept product as biosimilar to Amgen’s ENBREL. Amgen and Roche have asserted infringement of five patents: the ’182, ’522, ’225, ’605 and ’631 Patents. By their complaint, Amgen and Roche seek an injunction to prohibit Sandoz from commercializing its biosimilar etanercept product in the United States prior to the expiry of such patents. All Sandoz defendants responded by denying infringement and/or asserting that the patents at issue are invalid. On August 11, 2016, and subject to the terms of a confidential stipulation, the New Jersey District Court entered a preliminary injunction prohibiting Sandoz from making, using, importing, selling or offering for sale Sandoz’s etanercept product. On August 30, 2016, the FDA approved Sandoz’s ErelziTM, a biosimilar to ENBREL.

On September 10, 2018, the New Jersey District Court entered an order that the making, using, offering to sell or selling in the United States or the importation into the United States by Sandoz of Sandoz’s biosimilar etanercept product infringes the ’182 and ’522 Patents. The New Jersey District Court held a bench trial from September 11, 2018 to September 25, 2018, focusing on Sandoz’s challenges to the validity of these patents. On August 9, 2019, the New Jersey District Court issued its decision upholding the validity of the ’182 and ’522 Patents. On October 8, 2019, by stipulation of Amgen and Sandoz, the New Jersey District Court entered final judgment and a permanent injunction prohibiting Sandoz from making, using, importing, selling or offering for sale Sandoz’s etanercept product, and, on the same day, Sandoz appealed the final judgment to the Federal Circuit Court. Following a motion by Sandoz, the Federal Circuit Court ordered an expedited briefing schedule for the appeal and briefing on appeal has been completed. Oral argument has been set for March 4, 2020.

Repatha® (evolocumab) Patent Litigation

Amgen Inc., et al. v. Sanofi, et al.

In October 2014, Amgen initiated a series of lawsuits that were consolidated by the Delaware District Court in December 2014 into a single case against Sanofi, Sanofi-Aventis U.S. LLC and Aventisub LLC, formerly doing business as Aventis Pharmaceuticals Inc. (collectively, Sanofi) and Regeneron Pharmaceuticals, Inc. (Regeneron), addressing seven of our patents: U.S. Patent Nos. 8,563,698; 8,829,165 (the ’165 Patent); 8,859,741 (the ’741 Patent); 8,871,913; 8,871,914; 8,883,983; and 8,889,834. These patents describe and claim monoclonal antibodies to proprotein convertase subtilisin/kexin type 9 (PCSK9). By its complaints, Amgen seeks an injunction to prevent the infringing manufacture, use and sale of Sanofi and Regeneron’s alirocumab, a monoclonal antibody targeting PCSK9. On January 29, 2016, the Delaware District Court granted Amgen’s motion to amend the complaint to add its affiliates, Amgen Manufacturing, Limited and Amgen USA Inc., as plaintiffs and to add the allegation that Sanofi and Regeneron’s infringement of Amgen’s patents is willful.

On February 22, 2016, the Delaware District Court entered a stipulated order finding alirocumab and the drug product containing it, PRALUENT®, infringe certain of Amgen’s patents, including claims 2, 7, 9, 15, 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent. On March 18, 2016, the Delaware District Court entered judgment in favor of Amgen following a five-day jury trial and a unanimous jury verdict that these patent claims from the ’165 Patent and the ’741 Patent are all valid. On January 3, 2017, the Delaware District Court denied Sanofi and Regeneron’s post-trial motions seeking a new trial and for judgment as a matter of law, and on January 5, 2017, granted Amgen’s motion for a permanent injunction prohibiting the infringing manufacture, use, sale, offer for sale or import of alirocumab in the United States.

On January 12, 2017, Sanofi and Regeneron filed an appeal of the judgment and the permanent injunction to the Federal Circuit Court. On February 8, 2017, following a motion by Sanofi and Regeneron, the Federal Circuit Court entered a stay of the permanent injunction during the pendency of the appeal. On October 5, 2017, the Federal Circuit Court reversed in part the judgment of the Delaware District Court and remanded for a new trial two of the patent validity defenses (lack of written description and enablement of the claimed inventions), and affirmed the Delaware District Court’s judgment of infringement of claims 2, 7, 9, 15, 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent and the third patent validity defense (finding that the claimed inventions were not obvious to a person of ordinary skill in the field of the patents).

On December 6, 2017, Amgen petitioned the Federal Circuit Court for rehearing en banc, which was denied. The Federal Circuit Court issued a March 2, 2018 mandate returning the case to the Delaware District Court for a new trial on two of Sanofi and Regeneron’s challenges to the validity of our patents (lack of written description and enablement of the claimed inventions) and for further consideration of a permanent injunction. On July 23, 2018, Amgen filed a petition for certiorari with the U.S. Supreme Court seeking review of the Federal Circuit Court’s conclusion that the judgment affirming the validity of Amgen’s patents was based, in part, on an erroneous application of the law of written description. On January 7, 2019, the U.S. Supreme

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Court denied Amgen’s petition for certiorari. On remand, the Delaware District Court scheduled a new trial on Sanofi and Regeneron’s challenges to the validity of our patents based on lack of written description and enablement of the claimed inventions. The Delaware District Court also entered judgment on the pleadings for Sanofi and Regeneron on Amgen’s claim of willful infringement.

On February 25, 2019, a jury of the Delaware District Court unanimously upheld the validity of claims 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent. The jury also found that claims 7 and 15 of the ’165 Patent meet the enablement requirement, but are invalid for failure to meet the written description requirement. On March 18, 2019, Sanofi and Regeneron filed post-trial motions seeking to reverse judgment as a matter of law or for a new trial with respect to claims 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent, and Amgen filed a motion for a permanent injunction. On June 6, 13 and 21, 2019, the Delaware District Court held evidentiary hearings on Amgen’s motion for a permanent injunction against PRALUENT®. On August 28, 2019, the Delaware District Court ruled on the post-trial motions, denying Sanofi and Regeneron’s request for a new trial and their request to reverse the jury verdict that the ’165 Patent and the ’741 Patent provide written description support for the claimed inventions. The Delaware District Court also ruled as a matter of law that claims 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent are invalid for failing to meet the enablement requirement, overturning the jury verdict. On October 23, 2019, Amgen filed a notice of appeal to the Federal Circuit Court.

Patent Disputes in the International Region

On February 24, 2016, the European Patent Office (EPO) granted European Patent No. 2,215,124 (EP 2,215,124) to Amgen. This patent describes and claims monoclonal antibodies to PCSK9 and methods of treatment. On February 24, 2016, Sanofi filed an opposition to the patent in the EPO seeking to invalidate it. In November 2016, Sanofi-Aventis Deutschland GmbH, Sanofi-Aventis Groupe S.A. and Sanofi Winthrop Industrie S.A. filed a joint opposition against Amgen’s patent, and each of Eli Lilly and Company, Regeneron and Strawman Ltd. also filed oppositions to Amgen’s patent. On November 30, 2018, the EPO confirmed the validity of Amgen’s EP 2,215,124, which has been appealed to the Technical Board of Appeal. A two-day hearing is scheduled to begin on March 24, 2020.

We are also involved in and expect future involvement in additional disputes regarding our PCSK9 patents in other jurisdictions and regions, including matters filed against us and that we have filed in the United Kingdom, Germany, France, The Netherlands, Italy, Spain and Japan.

NEUPOGEN*®* (filgrastim)/Neulasta*®* (pegfilgrastim) Patent Litigation

Amgen Inc., et al. v. Accord BioPharma (formerly, Amgen Inc., et al. v. Apotex Inc., et al.)

On August 7, 2018, Amgen Inc. and its wholly-owned subsidiary, Amgen Manufacturing, Limited (collectively, Amgen), filed a lawsuit in the U.S. District Court for the Southern District of Florida (the Florida District Court) against Apotex for infringement of U.S. Patent No. 9,856,287 (the ’287 Patent) in accordance with the patent provisions of the Biologics Price Competition and Innovation Act (BPCIA). This lawsuit stemmed from Apotex’s submissions of applications for FDA licensure of a pegfilgrastim product as biosimilar to Amgen’s Neulasta® and a filgrastim product as biosimilar to Amgen’s NEUPOGEN®. By its complaint, Amgen sought, among other remedies, an injunction prohibiting Apotex from infringing the ’287 Patent. On April 18, 2019, Apotex answered the complaint including counterclaims seeking declaratory judgments of noninfringement and invalidity. On August 27, 2019, the Florida District Court granted an unopposed motion to substitute Accord BioPharma in place of Apotex. On November 14, 2019, the parties entered into a settlement agreement resolving all issues between the parties. On November 15, 2019, the Florida District Court issued an order dismissing the case without prejudice.

Apotex PTAB Challenge

On February 17, 2017, the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) granted Apotex’s petition to institute inter partes review (IPR) proceeding of the of U.S. Patent No. 8,952,138 (the ’138 Patent), challenging claims of the ’138 Patent as unpatentable. On May 22, 2017, Amgen filed its response. The PTAB issued a final decision holding all but one claim of the ’138 Patent as unpatentable, and on March 16, 2018, Apotex filed a request for rehearing. On May 20, 2019, the PTAB issued a decision denying Apotex’s request for rehearing on the PTAB’s finding and sua sponte amending the final decision with a finding that the one remaining claim in Amgen’s ’138 Patent is unpatentable. On July 22, 2019, Amgen filed a notice of appeal to the Federal Circuit Court with respect to all claims held to be unpatentable. On August 5, 2019, Apotex provided notice that it would not participate in the appeal. On September 16, 2019, the USPTO filed a notice of intervention on the appeal.

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Amgen Inc., et al. v. Kashiv Biosciences, LLC, et al.

On March 8, 2018, Amgen Inc. and its wholly-owned subsidiary, Amgen Manufacturing, Limited (collectively, Amgen), filed a lawsuit in the New Jersey District Court against Kashiv Biosciences, LLC, formerly known as Adello Biologics, LLC (Kashiv). This lawsuit stemmed from Kashiv’s submission of an application for FDA licensure of a filgrastim product as biosimilar to Amgen’s NEUPOGEN®. Amgen initially asserted infringement of 17 of our patents. Amgen sought an injunction to prohibit Kashiv from commercializing its biosimilar filgrastim product in the United States prior to the expiry of these patents. Following discovery in October 2018, Amgen filed a first amended complaint in the New Jersey District Court adding as defendants Amneal Pharmaceuticals LLC and Amneal Pharmaceuticals, Inc. and reducing the number of patents-in-suit from 17 to 4: U.S. Patent Nos. 8,940,878 (the ’878 Patent); the ’138 Patent; 9,643,997 (the ’997 Patent); and the ’287 Patent. Kashiv responded to the first amended complaint, seeking judgment that our patents-in-suit are not infringed by Kashiv’s biosimilar filgrastim product and that our patents are invalid.

On November 20, 2019, Amgen and Kashiv entered into a settlement agreement resolving all issues between the parties in the New Jersey District Court and PTAB proceedings (discussed below). On November 25, 2019, the New Jersey District Court entered the dismissal of all claims and counterclaims without prejudice.

Apotex/Kashiv PTAB Challenge

On April 19, 2019, the PTAB instituted post grant proceedings against the ’287 Patent in response to a petition filed by Apotex and Kashiv alleging the claimed invention is unpatentable. On October 4, 2019, the PTAB granted judgement adverse to Apotex and the review proceedings continued with Kashiv as the sole petitioner until December 6, 2019, when the PTAB dismissed the post grant review pursuant to the joint motion to terminate the proceeding due to settlement.

Kashiv PTAB Challenge

In a separate challenge, on September 11, 2019, the PTAB instituted IPR proceedings in response to a petition filed by Kashiv challenging the patentability of each claim of the ’878 Patent and the ’997 Patent. On December 6, 2019, pursuant to a joint motion to terminate the proceedings due to settlement, the PTAB dismissed the IPR proceedings.

Amgen Inc., et al. v. Pfizer Inc. et al.

On July 18, 2018, Amgen Inc. and its wholly owned subsidiary, Amgen Manufacturing, Limited (collectively, Amgen), filed a lawsuit in the Delaware District Court against Pfizer Inc. and Hospira Inc. (collectively, Pfizer). This lawsuit stems from Pfizer’s submission of an application for FDA licensure of a filgrastim product as biosimilar to Amgen’s NEUPOGEN®. Amgen has asserted infringement of the ’997 Patent and seeks, among other remedies, injunctive relief to prohibit Pfizer from infringing the ’997 Patent. On July 20, 2018, the FDA approved Pfizer’s NIVESTYMTM, a biosimilar to NEUPOGEN®, which was subsequently launched in October 2018.

On August 9, 2018, Pfizer answered the complaint and counterclaimed seeking a declaration that Pfizer does not infringe Amgen’s ’997 Patent and that the patent is invalid. On March 22, 2019, Amgen filed an amended complaint against Pfizer in the Delaware District Court narrowing the patent claims at issue in the infringement dispute and adding a request for damages. On April 11, 2019, Pfizer answered Amgen’s amended complaint including counterclaims seeking declaratory judgments of noninfringement and invalidity. Trial is scheduled to commence on June 15, 2020.

Amgen Inc., et al. v. Hospira Inc. et al.

On February 11, 2020, Amgen Inc. and its wholly owned subsidiary, Amgen Manufacturing, Limited (collectively, Amgen), filed a lawsuit in the Delaware District Court against Hospira, Inc. and Pfizer Inc. (collectively, Pfizer). This lawsuit stems from Pfizer’s submission of an application for FDA licensure of a pegfilgrastim product as biosimilar to Amgen’s Neulasta®. Amgen has asserted infringement of U.S. Patent No. 8,273,707 (the ’707 Patent) and seeks, among other remedies, injunctive relief to prohibit Pfizer from infringing the ’707 Patent.

Fresenius PTAB Challenge

On June 8, 2019, Fresenius Kabi USA, LLC and Fresenius Kabi SwissBioSim GmbH filed a petition seeking to institute IPR proceeding before the PTAB to challenge the patentability of the ’997 Patent. On December 10, 2019, the PTAB instituted the IPR proceeding.

In a separate action, on December 20, 2019, Fresenius Kabi USA, LLC and Fresenius Kabi SwissBioSim GmbH filed a petition seeking to institute IPR proceeding before the PTAB to challenge the patentability of the ’287 Patent. Amgen’s preliminary response is due in March 2020 after which the PTAB will have three months to render a decision on whether to institute trial proceedings.

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Amgen Inc., et al. v. Tanvex BioPharma USA, Inc., et al.

On July 23, 2019, Amgen and its wholly owned subsidiary, Amgen Manufacturing, Limited, filed a lawsuit in the U.S. District Court for the Southern District of California (the California Southern District Court) against Tanvex BioPharma USA, Inc., Tanvex BioPharma, Inc. and Tanvex Biologics Corporation (collectively, Tanvex) for infringement of the ’287 Patent in accordance with the patent provisions of the BPCIA. This lawsuit stemmed from Tanvex’s submission of an application for FDA licensure of a filgrastim product as biosimilar to Amgen’s NEUPOGEN®. By its complaint, Amgen sought, among other remedies, an injunction prohibiting Tanvex from infringing the ’287 Patent. On September 23, 2019, Tanvex responded to Amgen’s complaint, denying infringement and seeking judgment of noninfringement and invalidity of Amgen’s ’287 Patent. On December 17, 2019, Amgen and Tanvex entered into a settlement agreement resolving all issues between the parties. On December 20, 2019, the California Southern District Court dismissed all claims and counterclaims without prejudice.

EPOGEN*®* (epoetin alfa) Patent Litigation

Amgen Inc., et al. v. Hospira, Inc.

On September 18, 2015, Amgen Inc. and its wholly owned subsidiary, Amgen Manufacturing, Limited (collectively, Amgen), filed a lawsuit in the Delaware District Court against Hospira, Inc. (Hospira), a subsidiary of Pfizer Inc., for infringement of Amgen’s U.S. Patent Nos. 5,856,298 (the ’298 Patent) and 5,756,349 (the ’349 Patent) in accordance with the patent provisions of the BPCIA and for a declaration that Hospira has failed to comply with certain requirements of the BPCIA. This lawsuit stems from the submission by Hospira under the BPCIA of an application for FDA licensure of an epoetin product as biosimilar to Amgen’s EPOGEN®. By its complaint, Amgen seeks, among other remedies, an injunction prohibiting Hospira from using or selling infringing cells and/or product manufactured during the ’298 or the ’349 Patent terms and enjoining Hospira from commencing commercial marketing of any biosimilar epoetin product until a date that is at least 180 days after Hospira provides legally effective notice to Amgen. On August 19, 2016, Hospira responded to the complaint denying patent infringement and any violation of the BPCIA and seeking judgment that the patents-in-suit are invalid and not infringed by Hospira. On January 23, 2017, the Delaware District Court entered an order construing the claims of the ’349 and ’298 Patents and holding that two claims of the ’298 Patent are invalid for failure to properly narrow the claim on which they depend. On September 22, 2017, after a five-day trial, the jury returned a verdict finding the ’298 Patent valid and infringed by Hospira and the ’349 Patent not infringed. The jury awarded Amgen $70 million in damages for Hospira’s infringement. On October 23, 2017, Hospira moved for judgment as a matter of law of noninfringement and invalidity of the ’298 Patent or, in the alternative, for reduction of the damage award or a new trial on the ’298 Patent, which was denied on August 27, 2018. On May 15, 2018, the FDA approved Hospira’s RETACRIT®, a biosimilar to EPOGEN®, which was subsequently launched on November 14, 2018. On September 11, 2018, the Delaware District Court entered final judgment.

On October 3, 2018, Hospira filed a notice of appeal to the Federal Circuit Court and on October 15, 2018, Amgen filed a notice of cross-appeal. On December 16, 2019, the Federal Circuit Court affirmed the final judgment of the Delaware District Court. On January 15, 2020, Hospira petitioned the Federal Circuit Court for rehearing en banc.

Litigation relating to our Biosimilar Products

AMJEVITA**TM (adalimumab-atto)/AMGEVITA**TM Patent Litigation

Coherus BioSciences, Inc. v. Amgen Inc.

On January 24, 2019, Coherus BioSciences, Inc. (Coherus) filed a lawsuit in the Delaware District Court that the formulation of AMJEVITATM infringes three patents: U.S. Patent Nos. 10,155,039; 10,159,732; and 10,159,733. By its complaint, Coherus sought, among other remedies, injunctive relief prohibiting patent infringement. On April 18, 2019, Amgen responded to the lawsuit denying patent infringement and seeking judgment that the patents-in-suit are invalid, unenforceable and/or not infringed by Amgen. On November 26, 2019, the Delaware District Court entered a stipulated order dismissing Coherus’ infringement claims with prejudice and Amgen’s defenses and counterclaims as moot.

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*KANJINTITM (trastuzumab-anns) Patent Litigation

Genentech, Inc. v. Amgen Inc.

On June 21, 2018, Genentech Inc. (Genentech) and City of Hope filed a lawsuit in the Delaware District Court alleging Amgen’s infringement of 37 patents by Amgen’s submission of an application for FDA licensure of KANJINTITM, Amgen’s biosimilar version of Genentech’s Herceptin® (trastuzumab). On July 19, 2018, Genentech, City of Hope and Amgen filed a joint stipulation to dismiss certain of the patents from the lawsuit and Genentech and City of Hope filed an amended complaint narrowing its allegations of infringement to 18 of the 37 patents. Among other remedies, Genentech and City of Hope seek injunctive relief prohibiting patent infringement. On August 23, 2018, Genentech and City of Hope moved to dismiss Amgen’s unenforceability counterclaims and affirmative defense. On November 7, 2018, in accordance with the scheduling order issued by the Delaware District Court, Genentech and City of Hope reduced the number of asserted patents from 18 to 10. On January 17, 2019, Genentech and the City of Hope filed a second amended complaint that removed one of the remaining 10 asserted patents and added a different patent.

On July 10, 2019, Genentech filed a motion asking the Delaware District Court for a temporary restraining order and preliminarily injunction prohibiting Amgen from commercially launching, marketing or selling KANJINTITM until the Delaware District Court renders a decision on the merits of Genentech’s asserted U.S. Patent Nos. 6,627,196; 7,371,379; and 10,160,811. Following Amgen’s opposition, on July 18, 2019, the Delaware District Court denied Genentech’s motion. On July 19, 2019, Genentech filed a notice of appeal and a motion requesting the Federal Circuit Court to enter an injunction prohibiting Amgen from continuing with its launch of KANJINTITM until final resolution of Genentech’s appeal. On July 24, 2019, the Delaware District Court entered an order dismissing City of Hope as a party to the lawsuit and dismissing with prejudice Genentech’s claims for infringement of a number of expired patents, leaving eight patents asserted by Genentech in the litigation. On August 7, 2019, the Federal Circuit Court denied Genentech’s motion for an injunction pending appeal. Briefing of the appeal has been completed and argument has been scheduled for March 3, 2020. On September 4, 2019, Genentech filed its third amended complaint adding a demand for a jury trial and an award of damages for infringement. On September 23, 2019, the Delaware District Court ordered a stipulated dismissal with prejudice of all claims for infringement of certain asserted patents, leaving four patents asserted by Genentech in the litigation. On September 24, 2019, Amgen filed its answer to Genentech’s third amended complaint denying infringement of any valid patent claim. The jury trial has been rescheduled to begin on April 20, 2020.

*MVASITM (bevacizumab-awwb) Patent Litigation

Genentech, Inc. and City of Hope v. Amgen Inc.

On October 6 and October 18, 2017, Genentech and City of Hope filed separate lawsuits in the Delaware District Court respectively alleging Amgen’s infringement of (i) 24 of the 27 patents listed by Genentech in the BPCIA exchange and (ii) 25 of the same 27 patents, in each case by Amgen’s submission for FDA licensure of MVASITM as biosimilar to Genentech’s Avastin® (bevacizumab) and for noncompliance with certain provisions of the BPCIA. On December 6, 2017, Genentech and City of Hope amended their complaints to allege that Amgen will also infringe newly issued U.S. Patent No. 9,795,672. On April 17, 2018, the Delaware District Court granted Amgen’s motion to dismiss certain claims by Genentech and City of Hope that Amgen had not complied with the BPCIA.

Amgen responded to the complaints on May 1 and June 5, 2018, respectively, denying patent infringement and any violation of the BPCIA and seeking judgment that the patents-in-suit are invalid, unenforceable and/or not infringed by Amgen. On May 22 and June 19, 2018, respectively, Genentech and City of Hope moved to dismiss from each case all of Amgen’s counterclaims and certain of Amgen’s defenses.

On August 31, 2018, in accordance with the scheduling order issued by the Delaware District Court, Genentech and City of Hope reduced the number of asserted patents in each lawsuit to eight, asserting the same patents in each case. On October 22, 2018, the two cases were consolidated by the Delaware District Court. On August 22, 2019 and October 29, 2019, by stipulation of the parties, the Delaware District Court entered judgment of noninfringement, in each instance, with respect to one of the patents asserted in the consolidated lawsuit, leaving a total of six remaining patents asserted by Genentech in the litigation. Trial is scheduled to begin on November 30, 2020.

On February 11, 2020, the Delaware District Court granted Genentech’s motion to dismiss Amgen’s counterclaim seeking judgment that U.S. Patent Nos. 6,610,516 and 7,323,553 are invalid, unenforceable and not infringed based on the Court’s finding that Genentech has represented that it does not plan to assert those patents against Amgen’s MVASITM product. On February 12, 2020, the Delaware District Court denied Amgen’s motion for leave to amend its answer, affirmative defenses and counterclaims to add affirmative defenses and counterclaims that U.S. Patent No. 8,574,869 is unenforceable for inequitable conduct and unclean hands. The Delaware District Court also denied Genentech’s motion for leave to amend its complaint to add allegation of infringement of U.S. Patent No. 9,714,293.

• Registered in the United States.

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Genentech, Inc. and City of Hope v. Immunex Rhode Island Corp. and Amgen Inc.

On March 29, 2019, Genentech and City of Hope filed a lawsuit against Amgen in the Delaware District Court alleging infringement of 14 patents. All but two of the 14 patents asserted in this lawsuit have already been the subject of litigation pending among these parties in this court relating to Amgen’s submission of the application that led to the FDA licensure of MVASITM as biosimilar to Genentech’s Avastin® (bevacizumab). Among other remedies, Genentech and City of Hope are seeking injunctive relief. On July 10, 2019, Genentech, alleging that Amgen’s notice of commercial marketing pursuant to the BPCIA is insufficient, filed motions asking the Delaware District Court for a temporary restraining order and enforcement of the BPCIA to prohibit Amgen from commercially marketing MVASITM until Amgen has provided new notice and waited until the expiry of the notice period. Following Amgen’s opposition, on July 18, 2019, the Delaware District Court denied Genentech’s motions. On July 19, 2019, Genentech filed a notice of appeal and a motion requesting the Federal Circuit Court to enter an injunction prohibiting Amgen from marketing MVASITM until final resolution of Genentech’s appeal, which was denied on August 16, 2019. Briefing of the appeal has been completed.

Breach of Contract Action

Cipla Ltd. et al. v. Amgen Inc.

On January 8, 2019, Cipla filed a separate lawsuit in the Delaware District Court against Amgen seeking a declaration that provisions of its settlement agreement with Amgen have been triggered by Teva’s at-risk launch of Watson’s generic version of Sensipar®, giving Cipla a right to market its own generic version under its settlement agreement with Amgen. Cipla’s complaint also alleges antitrust violations by Amgen. The portions of the complaint covering Cipla’s settlement agreement were filed with the court under seal and remain confidential.

On March 11, 2019, following an announcement by Cipla that it had begun selling its generic cinacalcet product in the United States, Amgen filed a counterclaim and related motion for preliminary injunction in the Delaware District Court. Amgen’s motion seeks to prohibit Cipla from making, having made, using, selling, offering to sell or distributing its generic cinacalcet product in breach of the settlement agreement between the parties. On May 2, 2019, the Delaware District Court denied Amgen’s motion for preliminary injunction, and Amgen filed its notice of appeal in the United States Court of Appeals for the Third Circuit (the Third Circuit Court of Appeals). On May 3, 2019, Amgen filed a motion for injunction pending appeal in the Delaware District Court, which was denied on May 9, 2019. On May 13, 2019, Amgen filed a motion for injunction pending appeal and expedited briefing in the Third Circuit Court of Appeals. On May 23, 2019, the Third Circuit Court of Appeals denied the motion for injunction pending appeal and granted the request for expedited briefing. On July 16, 2019, the Third Circuit Court of Appeals affirmed the Delaware District Court’s decision denying Amgen’s motion for a preliminary injunction. On October 15, 2019, Amgen moved to dismiss Cipla’s antitrust and fraud claims brought in the Delaware District Court for lack of standing and failure to state a claim. On December 6, 2019, Cipla filed its response to Amgen’s complaint and, on January 10, 2020, Amgen filed its response.

Novartis Pharma AG v. Amgen Inc.

On April 4, 2019, Amgen filed a lawsuit in the U.S. District Court for the Southern District of New York against Novartis Pharma AG seeking a declaratory judgment that Novartis Pharma AG materially breached two collaboration agreements related to the development and commercialization of Aimovig® (erenumab-aooe) due to Novartis Pharma AG’s affiliate Sandoz Gmbh entering into a contract manufacturing agreement with Alder BioPharmaceuticals, Inc. (Alder) related to eptinezumab, an expected direct competitor to Aimovig® and entrant in the calcitonin gene-related peptide (CGRP)-related migraine therapy market. Amgen seeks to terminate its collaboration agreements with Novartis Pharma AG and also seeks damages from Novartis Pharma AG for breach of contract and negligent misrepresentation. Also on April 4, 2019, Novartis Pharma AG initiated a separate lawsuit against Amgen in the same court seeking declaratory judgment that Novartis Pharma AG, alternatively, did not materially breach the collaboration agreements or, even if it did breach the collaboration agreements, such breach was not material and has been cured, and that Amgen may not terminate the collaboration agreements. On April 8, 2019, Amgen answered Novartis Pharma AG’s complaint and filed counterclaims seeking a declaratory judgment that Novartis Pharma AG materially breached the collaboration agreements due to its affiliate Sandoz Gmbh entering into the contract manufacturing agreement with Alder. In its counterclaim, Amgen seeks to terminate its collaboration agreements with Novartis Pharma AG and also seeks damages from Novartis Pharma AG for breach of contract and negligent misrepresentation. On July 16, 2019, Novartis Pharma AG filed an amended complaint adding a claim for breach of contract alleging Novartis Pharma AG is owed amounts associated with 2018 budget overruns and Amgen responded with a counterclaim alleging additional breaches by Novartis Pharma AG of the collaboration agreements. On September 17, 2019 and October 8, 2019, Novartis Pharma AG and Amgen, respectively, each filed its motion for judgment on the pleadings. Amgen was granted leave to file its amended counterclaims on February 3, 2020 and filed its Amended Answer to Novartis’ First Amended Complaint and Second Amended Counterclaims for Affirmative Relief on February 4, 2020 to add a fraudulent inducement claim.

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Antitrust Class Action

Sensipar*®* Antitrust Class Actions

From February 21, 2019, to April 10, 2019, four plaintiffs filed putative class action lawsuits against Amgen and various entities affiliated with Teva alleging anticompetitive conduct in connection with settlements between Amgen and manufacturers of generic cinacalcet product. Two of those actions were brought in the Delaware District Court, captioned UFCW Local 1500 Welfare Fund v. Amgen Inc., et al. (February 21, 2019) (Local 1500) and Cesar Castillo, Inc. v. Amgen Inc., et al. (February 26, 2019) (Castillo). The third action was brought in the New Jersey District Court, captioned Teamsters Local 237 Welfare Fund, et al. v. Amgen Inc., et al. (March 14, 2019) (Local 237) and the fourth action was brought in the U.S. District Court for the Eastern District of Pennsylvania (the Eastern Pennsylvania District Court), captioned KPH Healthcare Services, Inc. a/k/a Kinney Drugs, Inc. v. Amgen Inc., et al (April 10, 2019) (KPH).

Each of the lawsuits is brought on behalf of a putative class of direct or indirect purchasers of Sensipar® and alleges that the plaintiffs have overpaid for Sensipar® as a result of Amgen’s conduct that allegedly improperly delayed market entry by manufacturers of generic cinacalcet products. The lawsuits focus predominantly on the settlement among Amgen, Watson and Teva of the parties’ patent infringement litigation. Each of the lawsuits seeks, among other things, treble damages, equitable relief and attorneys’ fees and costs. On April 10, 2019, the plaintiff in the KPH lawsuit filed a motion seeking to have the four lawsuits consolidated and designated as a multidistrict litigation (MDL) in the Eastern Pennsylvania District Court, and the plaintiff in the Local 1500 lawsuit filed a motion seeking to have the four lawsuits, along with Cipla Ltd. v. Amgen Inc., consolidated and designated as a MDL in the Delaware District Court. On July 31, 2019, the MDL panel entered an order consolidating in the Delaware District Court the four class action lawsuits. On September 13, 2019, the plaintiffs filed amended complaints, and on October 15, 2019, Amgen filed its motion to dismiss both the direct purchaser plaintiffs’ consolidated class action complaint and the indirect purchaser end payor plaintiffs’ complaint. On December 6, 2019, the plaintiffs responded to Amgen’s motion to dismiss and, on January 10, 2020, Amgen filed its response.

On February 6, 2020, an additional class action lawsuit was filed by MSP Recovery Claims against Amgen, Teva, Watson and Actavis also alleging anticompetitive conduct in connection with settlements between Amgen and manufacturers of generic cinacalcet product. This action was brought in the U.S. District Court for the Southern District of Florida, captioned MSP Recovery Claims v. Amgen Inc., et al.

Humira*®* Biosimilar Antitrust Class Actions

From March 18, 2019, to May 10, 2019, twelve purported class actions against Amgen, along with AbbVie Inc. and AbbVie Biotechnology Ltd. (collectively, AbbVie), were filed in the U.S. District Court for the Northern District of Illinois (the Illinois Northern District Court). The cases are captioned: UFCW Local 1500 Welfare Fund v. AbbVie Inc., et al. (March 18, 2019) (Local 1500); Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund v. AbbVie Inc., et al. (March 20, 2019); Mayor and City Council of Baltimore v. AbbVie Inc., et al. (March 22, 2019); Pipe Trades Services MN Welfare Fund v. AbbVie Inc., et al. (March 29, 2019); St. Paul Electrical Workers’ Health Plan v. AbbVie Inc., et al. (March 29, 2019); Welfare Plan of the International Union of Operating Engineers Locals 137, 137A, 137B, 137C and 137R v. AbbVie Inc., et al. (April 1, 2019); Law Enforcement Health Benefits, Inc. v. AbbVie, Inc., et al. (April 9, 2019) (Law Enforcement); Kentucky Laborers District Council Health and Welfare Fund v. AbbVie, Inc., et al. (April 16, 2019); Sheet Metal Workers’ Local Union No. 28 Welfare Fund v. AbbVie, Inc., et al. (April 19, 2019) (Sheet Metal Workers’); Locals 302 & 612 of The International Union of Operating Engineers-Employers Construction Industry Health And Security Trust Fund v. AbbVie Inc., et al. (April 25, 2019) (Construction Industry); Louisiana Health Service & Indemnity Co., d/b/a Blue Cross and Blue Shield of Louisiana and HMO Louisiana, Inc. v. AbbVie Inc., et al. (April 30, 2019) (Louisiana Health); and Cleveland Bakers and Teamsters Health and Welfare Fund v. AbbVie Inc., et al. (May 10, 2019) (Cleveland Bakers) collectively, Humira® Antitrust Class Actions).

In each of the Humira® Antitrust Class Actions, the plaintiffs bring federal antitrust claims along with various state law claims under common law and antitrust, consumer protection and unfair competition statutes. In each case, the plaintiffs specifically allege that AbbVie has unlawfully monopolized the alleged market for Humira® and biosimilars of Humira®, including by creating an allegedly unlawful so-called patent thicket around Humira®. In the Local 1500, Sheet Metal Workers’ and Construction Industry cases, the plaintiffs further allege that AbbVie entered into allegedly unlawful market division agreements with Amgen and other companies that had developed Humira® biosimilars, including Bioepis, Mylan, Sandoz, Inc., Fresenius Kabi USA, LLC, Pfizer Inc. and Momenta Pharmaceuticals, Inc., in connection with the settlement of patent litigation relating to Humira®, whereby Amgen and the other defendants that have developed Humira® biosimilars were permitted to market those products in Europe as early as October 2018, while remaining off the market in the United States until 2023. In each of the Humira® Antitrust Class Actions other than the Local 1500 and Construction Industry cases, the plaintiffs allege that AbbVie and Amgen entered into an allegedly unlawful settlement agreement under which Amgen allegedly agreed to delay its entry into the U.S. market with AMGEVITATM, its Humira® biosimilar, in exchange for an alleged promise of exclusivity as the sole Humira® biosimilar in that market for five months, beginning in January 2023. In each of the Humira® Antitrust Class Actions, plaintiffs seek injunctive relief, treble damages

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and attorney’s fees on behalf of a putative class of third-party payers and/or consumers that have indirectly purchased, paid for or provided reimbursement for Humira® in the United States. Defendants’ responses to the first six complaints were stayed by the court. On June 4, 2019, the Illinois Northern District Court entered an order consolidating the twelve purported class action cases for pre-trial purposes and on June 13, 2019, entered an order requiring the plaintiffs to file a consolidated complaint by August 12, 2019. On August 9, 2019, the plaintiffs filed their consolidated complaint in the Illinois Northern District Court. The consolidated class action complaint names as defendants Amgen, along with AbbVie, Bioepis, Sandoz, Inc. and Fresenius Kabi USA LLC. On October 11, 2019, the defendants filed a joint motion to dismiss the consolidated complaint (as well as brief individual motions), challenging the legal sufficiency of the plaintiffs’ allegations to state any claim for relief under the law. On November 19, 2019, plaintiffs filed their opposition to the motion to dismiss. On December 20, 2019, defendants filed their reply in support of the motion to dismiss. No argument date has been set.

Commitments – U.S. repatriation tax

Under the 2017 Tax Act, we elected to pay in eight annual installments the repatriation tax related primarily to prior indefinitely invested earnings of our foreign operations. See Note 6, Income taxes. The following table summarizes the remaining scheduled repatriation tax payments as of December 31, 2019 (in millions):

	Amounts
2020	$	587
2021	587
2022	587
2023	1,100
2024	1,467
Thereafter	1,834
Total remaining U.S. repatriation tax commitments	$	6,162

20. Quarterly financial data (unaudited)

The following tables summarize the Company’s unaudited financial data on a quarterly basis. The sum of the quarterly earnings per-share amounts may not equal the amount reported for the full year because per-share amounts are computed independently for each quarter and for the full year based on respective weighted-average shares outstanding and dilutive securities.

Quarterly financial data is summarized as follows (in millions, except per-share data):

	2019 Quarters ended
	December 31				September 30				June 30				March 31
Product sales	$	5,881			$	5,463			$	5,574			$	5,286
Gross profit from product sales	$	4,628			$	4,427			$	4,562			$	4,231
Net income	$	1,703			$	1,968			$	2,179			$	1,992
Earnings per share:
Basic	$	2.87			$	3.29			$	3.59			$	3.20
Diluted	$	2.85			$	3.27			$	3.57			$	3.18
	2018 Quarters ended
	December 31				September 30				June 30				March 31
Product sales	$	6,001			$	5,510			$	5,679			$	5,343
Gross profit from product sales	$	4,905			$	4,473			$	4,655			$	4,399
Net income	$	1,928			$	1,859			$	2,296			$	2,311
Earnings per share:
Basic	$	3.04			$	2.88			$	3.50			$	3.27
Diluted	$	3.01			$	2.86			$	3.48			$	3.25

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21. Subsequent events

On January 2, 2020, Amgen acquired a 20.5% stake in BeiGene, Ltd. (BeiGene) for approximately $2.8 billion in cash as part of a collaboration to expand our oncology presence in China. We will account for this investment by using the equity method. Under the collaboration, BeiGene will commercialize XGEVA®, KYPROLIS® and BLINCYTO® (blinatumomab) in China, and we will share profits and losses equally during the initial product-specific commercialization periods; thereafter, two of these products will revert to Amgen, and Amgen will pay royalties to BeiGene on sales in China of such products for a specified period.

In addition, Amgen and BeiGene will jointly develop 20 of our oncology product candidates, with BeiGene sharing in global R&D costs of up to $1.25 billion and assuming commercialization rights in China for a specified period. Amgen and BeiGene will share profits in China equally until certain of these product rights revert to Amgen. After reversion, Amgen will pay royalties to BeiGene on sales in China for a specified period. For product sales outside of China, Amgen will pay BeiGene royalties.

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SCHEDULE II

AMGEN INC.

VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2019**,** 2018 and 2017

(In millions)

Allowance for doubtful accounts		Balance at beginning of period				Additions charged to costs and expenses				Other additions				Deductions				Balance at end of period
Year ended December 31, 2019		$	48			$	—			$	—			$	22			$	26
Year ended December 31, 2018		$	51			$	1			$	—			$	4			$	48
Year ended December 31, 2017		$	51			$	4			$	—			$	4			$	51

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