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 16, 2022			By:						/S/ PETER H. GRIFFITH
												Peter H. Griffith
												Executive Vice President and Chief Financial Officer
												(Principal Financial 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. Amended and Restated 2009 Equity Incentive Plan,

• Registration Statement (Form S-8 No. 33-39183) pertaining to the Amgen Inc. 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 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, 333-216723 and 333-260723) pertaining to the Amgen Nonqualified Deferred Compensation Plan, and

• Registration Statement (Form S-8 Nos. 333-176240 and 333-260724) pertaining to the Amgen Profit Sharing Plan for Employees in Ireland;

of our reports dated February 16, 2022, with respect to the consolidated financial statements 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, 2021.

/s/ Ernst & Young LLP

Los Angeles, California

February 16, 2022

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert A. Bradway, Peter H. Griffith and Jonathan P. Graham, or any of them, his or her attorney-in-fact, each with the power of substitution and re-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 all that each of said attorneys-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)						2/16/2022
Robert A. Bradway
/S/ PETER H. GRIFFITH						Executive Vice President and Chief Financial Officer (Principal Financial Officer)						2/16/2022
Peter H. Griffith
/S/ LINDA H. LOUIE						Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer)						2/16/2022
Linda H. Louie
/S/ WANDA M. AUSTIN						Director						2/16/2022
Wanda M. Austin
/S/ BRIAN J. DRUKER						Director						2/16/2022
Brian J. Druker
/S/ ROBERT A. ECKERT						Director						2/16/2022
Robert A. Eckert
/S/ GREG C. GARLAND						Director						2/16/2022
Greg C. Garland
/S/ CHARLES M. HOLLEY, JR.						Director						2/16/2022
Charles M. Holley, Jr.
/S/ S. OMAR ISHRAK						Director						2/16/2022
S. Omar Ishrak
/S/ TYLER JACKS						Director						2/16/2022
Tyler Jacks
/S/ ELLEN J. KULLMAN						Director						2/16/2022
Ellen J. Kullman
/S/ AMY E. MILES						Director						2/16/2022
Amy E. Miles
/S/ RONALD D. SUGAR						Director						2/16/2022
Ronald D. Sugar
/S/ R. SANDERS WILLIAMS						Director						2/16/2022
R. Sanders Williams

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors 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, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 16, 2022 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 consolidated 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, 2021, the Company recorded accrued sales deductions of $5.2 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 the significant 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 balances, including comparing accrual balances recorded by management to those implied by historical payment trends, 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, 2021, the Company accrued $3.5 billion of gross unrecognized tax benefits including those related to transfer pricing. Auditing the assessment of the technical merits and measurement of the Company’s unrecognized tax benefits is challenging and can be complex, highly judgmental, and based on interpretations of tax laws and regulations and application of those interpretations to the Company’s facts and circumstances.
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 specialists 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.
						/s/ Ernst & Young LLP

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

Los Angeles, California

February 16, 2022

F-3

AMGEN INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2021, 2020 and 2019

(In millions, except per-share data)

			2021						2020						2019
Revenues:
Product sales			$	24,297					$	24,240					$	22,204
Other revenues			1,682						1,184						1,158
Total revenues			25,979						25,424						23,362
Operating expenses:
Cost of sales			6,454						6,159						4,356
Research and development			4,819						4,207						4,116
Acquired in-process research and development			1,505						—						—
Selling, general and administrative			5,368						5,730						5,150
Other			194						189						66
Total operating expenses			18,340						16,285						13,688
Operating income			7,639						9,139						9,674
Other income (expense):
Interest expense, net			(1,197)						(1,262)						(1,289)
Other income, net			259						256						753
Income before income taxes			6,701						8,133						9,138
Provision for income taxes			808						869						1,296
Net income			$	5,893					$	7,264					$	7,842
Earnings per share:
Basic			$	10.34					$	12.40					$	12.96
Diluted			$	10.28					$	12.31					$	12.88
Shares used in the calculation of earnings per share:
Basic			570						586						605
Diluted			573						590						609

See accompanying notes.

F-4

AMGEN INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2021, 2020 and 2019

(In millions)

			2021						2020						2019
Net income			$	5,893					$	7,264					$	7,842
Other comprehensive income (loss), net of reclassification adjustments and taxes:
(Losses) gains on foreign currency translation			(135)						9						(48)
Gains (losses) on cash flow hedges			324						(438)						(66)
(Losses) gains on available-for-sale securities			(1)						(21)						360
Other			1						(7)						(5)
Other comprehensive income (loss), net of taxes			189						(457)						241
Comprehensive income			$	6,082					$	6,807					$	8,083

See accompanying notes.

F-5

AMGEN INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2021 and 2020

(In millions, except per-share data)

			2021						2020
ASSETS
Current assets:
Cash and cash equivalents			$	7,989					$	6,266
Marketable securities			48						4,381
Trade receivables, net			4,895						4,525
Inventories			4,086						3,893
Other current assets			2,367						2,079
Total current assets			19,385						21,144
Property, plant and equipment, net			5,184						4,889
Intangible assets, net			15,182						16,587
Goodwill			14,890						14,689
Other noncurrent assets			6,524						5,639
Total assets			$	61,165					$	62,948
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	1,366					$	1,421
Accrued liabilities			10,731						10,141
Current portion of long-term debt			87						91
Total current liabilities			12,184						11,653
Long-term debt			33,222						32,895
Long-term tax liabilities			6,594						6,968
Other noncurrent liabilities			2,465						2,023
Contingencies and commitments
Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value per share; 2,750.0 shares authorized; outstanding—558.3 shares in 2021 and 578.3 shares in 2020			32,096						31,802
Accumulated deficit			(24,600)						(21,408)
Accumulated other comprehensive loss			(796)						(985)
Total stockholders’ equity			6,700						9,409
Total liabilities and stockholders’ equity			$	61,165					$	62,948

See accompanying notes.

F-6

AMGEN INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2021, 2020 and 2019

(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) income						Total
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
Cumulative effect of changes in accounting principles, net of taxes			—						—						(2)						—						(2)
Net income			—						—						7,264						—						7,264
Other comprehensive loss, net of taxes			—						—						—						(457)						(457)
Dividends declared on common stock ($6.56 per share)			—						—						(3,843)						—						(3,843)
Issuance of common stock in connection with the Company’s equity award programs			2.1						91						—						—						91
Stock-based compensation expense			—						349						—						—						349
Tax impact related to employee stock-based compensation expense			—						(169)						—						—						(169)
Repurchases of common stock			(15.2)						—						(3,497)						—						(3,497)
Balance as of December 31, 2020			578.3						31,802						(21,408)						(985)						9,409
Net income			—						—						5,893						—						5,893
Other comprehensive income, net of taxes			—						—						—						189						189
Dividends declared on common stock ($7.22 per share)			—						—						(4,098)						—						(4,098)
Issuance of common stock in connection with the Company’s equity award programs			1.7						82						—						—						82
Stock-based compensation expense			—						361						—						—						361
Tax impact related to employee stock-based compensation expense			—						(149)						—						—						(149)
Repurchases of common stock			(21.7)						—						(4,987)						—						(4,987)
Balance as of December 31, 2021			558.3						$	32,096					$	(24,600)					$	(796)					$	6,700

See accompanying notes.

F-7

AMGEN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2021, 2020 and 2019

(In millions)

			2021						2020						2019
Cash flows from operating activities:
Net income			$	5,893					$	7,264					$	7,842
Depreciation, amortization and other			3,398						3,601						2,206
Stock-based compensation expense			341						330						308
Deferred income taxes			(453)						(287)						(289)
Acquired in-process research and development			1,505						—						—
Other items, net			(229)						(195)						(186)
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net			(429)						(427)						(504)
Inventories			(165)						(215)						(66)
Other assets			(237)						129						10
Accounts payable			(69)						45						164
Accrued income taxes, net			(854)						(249)						(585)
Long-term tax liabilities			204						(482)						(146)
Other liabilities			356						983						396
Net cash provided by operating activities			9,261						10,497						9,150
Cash flows from investing activities:
Purchases of marketable securities			(8,900)						(8,477)						(9,394)
Proceeds from sales of marketable securities			4,403						2,597						8,842
Proceeds from maturities of marketable securities			8,831						4,381						20,548
Purchases of property, plant and equipment			(880)						(608)						(618)
Cash paid for acquisitions, net of cash acquired			(2,529)						—						(13,617)
Purchases of equity method investments			(157)						(3,219)						(24)
Other			(35)						(75)						(28)
Net cash provided by (used in) investing activities			733						(5,401)						5,709
Cash flows from financing activities:
Net proceeds from issuance of debt			4,945						8,914						—
Repayment of debt			(4,150)						(6,450)						(4,514)
Repurchases of common stock			(4,975)						(3,486)						(7,702)
Dividends paid			(4,013)						(3,755)						(3,509)
Other			(78)						(90)						(42)
Net cash used in financing activities			(8,271)						(4,867)						(15,767)
Increase (decrease) in cash and cash equivalents			1,723						229						(908)
Cash and cash equivalents at beginning of year			6,266						6,037						6,945
Cash and cash equivalents at end of year			$	7,989					$	6,266					$	6,037

See accompanying notes.

F-8

AMGEN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

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. In determining whether we are the primary beneficiary of a variable interest entity, we consider whether we have both the power to direct activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. We do not have any significant interests in any variable interest entities of which we are the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of consolidated financial statements in conformity with 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.

Returns are estimated through comparison of historical return data with 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 by 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 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 SG&A 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 income is estimated 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 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 primarily include 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.

Selling, general and administrative costs

SG&A costs are primarily composed 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 $843 million, $962 million and $789 million during the years ended December 31, 2021, 2020 and 2019, 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

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 noncurrent assets, Accrued liabilities and Other noncurrent liabilities in our Consolidated Balance Sheets.

F-10

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 a 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 less 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 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 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, when 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 do not constitute a business, we account for the transaction as an asset acquisition. Business combinations are accounted for by means of the acquisition method of accounting. Under the acquisition method, assets acquired, including 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 have been resolved. The resulting changes in fair values are recorded in earnings. In contrast, asset acquisitions are accounted for by using a cost accumulation and allocation model. Under this model, the cost of the acquisition is allocated to the assets acquired and liabilities assumed. IPR&D projects with no alternative future use are recorded in R&D expense upon acquisition, and 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, that are readily convertible to cash and that mature within three months from the date of purchase.

F-11

Interest-bearing securities

We consider our interest-bearing securities investment portfolio as available-for-sale, and accordingly, these investments are recorded at fair value, with unrealized gains and losses recorded in 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 recorded 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 recorded over the assets’ 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. Major risks and uncertainties are often associated with IPR&D projects because we are required to obtain regulatory approvals before marketing 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.

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.

F-12

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 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 functional currencies are not in U.S. dollars are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translation of the net assets of these subsidiaries at changing rates are recognized in AOCI. The subsidiaries’ earnings are translated into U.S. dollars by using average exchange rates.

Equity investments

Marketable and nonmarketable equity securities

Investments in publicly traded equity securities with readily determinable fair values are recorded at quoted market prices for identical securities, with changes in fair value recorded in Other Income, net, in the Consolidated Statements of Income. Investments in equity securities without readily determinable fair values are recorded at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for identical or similar securities. Such adjustments are recorded in Other Income, net, in the Consolidated Statements of Income.

Equity method investments

Equity investments that give us the ability to exert significant influence, but not control, over an investee for which we have not elected the fair value option are accounted for under the equity method of accounting. In concluding whether we have the ability to exercise significant influence over an investee, we consider factors such as our ownership percentage, voting and other shareholder rights, board of directors representation and the existence of other collaborative or business relationships. The equity method of accounting requires us to allocate the difference between the fair value of securities acquired and our proportionate share of the carrying value of the underlying assets (the basis difference) to various items and amortize such differences over their useful lives. Our share of investees’ earnings or losses and amortization of basis differences, if any, are recorded one quarter in arrears in Other income, net, in the Consolidated Statements of Income. We record impairment losses on our equity method investments if we deem the impairment to be other-than-temporary. We deem an impairment to be other-than-temporary based on various factors, including but not limited to, the length of time the fair value is below the carrying value, volatility of the security price and our intent and ability to retain the investment to allow for a recovery in fair value.

For equity method investments for which we have elected the fair value option, changes in fair value are recorded in Other income, net, in the Consolidated Statements of Income.

Additionally, we hold investments in limited partnerships, which primarily invest in early-stage biotechnology companies. As a practical expedient, such limited partnership investments are measured by using our proportionate share of the net asset values of the underlying investments held by the limited partnerships, with such changes included in Other income, net, in the Consolidated Statements of Income.

Recent accounting pronouncements

In March 2020, the FASB issued a new accounting standard to ease the financial reporting burdens caused by the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates, commonly referred to as reference rate reform. The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting. Specifically, a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment of a previous accounting treatment. Moreover, for all types of hedging relationships, an entity is permitted to change the reference rate without having to dedesignate the hedging relationship. The standard is generally effective for all contract modifications made and hedging relationships evaluated through December 31, 2022. In January 2021, the FASB issued a new accounting standard to expand the scope of the original March 2020 standard to include derivative instruments on discounting transactions. We do not expect the two standards to have a material impact on our consolidated financial statements.

F-13

In November 2021, the FASB issued a new accounting standard around the recognition and measurement of contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The new standard clarifies that contract assets and contract liabilities acquired in a business combination from an acquiree should initially be recognized by applying revenue recognition principles and not at fair value. The standard is effective for interim and annual periods beginning on January 1, 2023, and early adoption is permitted. The impact of this standard will depend on the facts and circumstances of future transactions.

2. Acquisitions

Teneobio, Inc.

On October 19, 2021, we acquired all of the outstanding stock of Teneobio, a privately held, clinical-stage biotechnology company developing a new class of biologics called human heavy-chain antibodies, which are single-chain antibodies composed of the human heavy-chain domain. The transaction, which was accounted for as a business combination, includes Teneobio’s proprietary bispecific and multispecific antibody technologies, which complement Amgen’s existing antibody capabilities and BiTE® platform and will enable significant acceleration and efficiency in the discovery and development of new molecules to treat diseases across Amgen’s core therapeutic areas. Upon its acquisition, Teneobio became a wholly owned subsidiary of Amgen, and its operations have been included in our consolidated financial statements commencing on the acquisition date.

The following table summarizes the total consideration and allocated acquisition date fair values of assets acquired and liabilities assumed (in millions):

						Amounts
Cash purchase price						$	994
Contingent consideration						309
Total consideration						$	1,303
Cash and cash equivalents						$	100
IPR&D						1,054
Finite-lived intangible asset – R&D technology rights						94
Finite-lived intangible assets – licensing rights						41
Goodwill						251
Other assets, net						16
Deferred tax liability						(253)
Total assets acquired, net						$	1,303

The consideration for this transaction were (i) an upfront cash payment of $994 million, which included a working-capital adjustment and (ii) future contingent milestone payments to Teneobio’s former equity holders of up to $1.6 billion in cash, based on the achievement of various development and regulatory milestones with regard to the leading asset (AMG 340, formerly TNB-585) and to various development milestones for other drug candidates. The estimated fair value of the contingent consideration obligations aggregated $309 million as of the acquisition date and were determined using a probability-weighted expected return methodology. The assumptions in this method include the probability of achieving the milestones and the expected payment dates, with such amounts discounted to present value based on our pre-tax cost of debt. See Note 17, Fair value measurement, for information regarding the estimated fair value of these obligations as of December 31, 2021.

The estimated fair values of acquired IPR&D assets totaled $1.1 billion, of which $784 million relates to AMG 340, that is in a phase 1 clinical trial for the treatment of mCRPC, and the balance relates to four separate preclinical oncology programs. The R&D technology rights of $94 million relate to Teneobio’s proprietary bispecific and multispecific antibody technologies and will be amortized over ten years using the straight-line method. Teneobio has also licensed its technology and certain identified targets to various third parties, representing contractual agreements valued at $41 million. The estimated fair values for these intangible assets were determined using a multi-period excess earnings income approach that discounts expected future cash flows to present value by applying a discount rate that represents the estimated rate that market participants would use to value the intangible assets. The projected cash flows were based on certain assumptions attributable to the respective intangible asset, including estimates of future revenues and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from the FDA and other regulatory agencies.

F-14

A deferred tax liability of $253 million was recognized on the temporary differences related to the book bases and tax bases of the acquired identifiable assets and assumed liabilities, primarily driven by the intangible assets acquired.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $251 million was recorded as goodwill, which is not deductible for tax purposes. The goodwill value represents expected synergies from both AMG 340 and the technologies acquired.

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, liabilities assumed and tax-related items as we obtain additional information during the measurement period of up to one year from the acquisition date.

Five Prime Therapeutics, Inc.

On April 16, 2021, Amgen acquired the outstanding stock of Five Prime for total consideration of $1.6 billion, net of cash acquired. The purchase price was funded with cash on hand. This transaction was accounted for as an asset acquisition because substantially all the value of the assets acquired was concentrated in the intellectual property rights of bemarituzumab, a phase 3 trial-ready, first-in-class program for gastric cancer. The operations of Five Prime have been included in our consolidated financial statements commencing after the acquisition date.

We allocated the consideration to acquire Five Prime to the bemarituzumab IPR&D program of $1.5 billion, which was expensed immediately in Acquired IPR&D expense in the Consolidated Statements of Income; deferred tax assets of $177 million; and other net liabilities of $47 million. The acquired IPR&D expense was not tax deductible.

Otezla

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. Otezla is primarily used 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 of the value of the assets acquired was concentrated in the global intellectual property rights of Otezla. The operations of Otezla have been included in our consolidated financial statements commencing on the acquisition date.

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 is being amortized over a weighted-average period of 8.5 years by using the straight-line method.

F-15

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 is being 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 is being amortized as inventory turns over, which we estimate to approximate 2.5 years.

Upon closing, we had a difference between the book basis and tax basis of the assets acquired. The Company used the simultaneous equations method to determine the assigned value of the net assets acquired and the related deferred tax assets or liabilities. Use of this methodology resulted in an increase to the carrying value of the intangible assets of $119 million, a net deferred tax liability of $24 million and a deferred credit of $96 million. The tax effects of the acquisition are based on Amgen’s estimated blended statutory tax rate of 20%.

Nuevolution AB

On July 15, 2019, we acquired all of the outstanding stock of 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, primarily comprised 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.

F-16

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. The majority of ROW revenues relates to products sold in Europe.

Revenues were as follows (in millions):

						Year ended December 31, 2021																		Year ended December 31, 2020																		Year ended December 31, 2019
						U.S.						ROW						Total						U.S.						ROW						Total						U.S.						ROW						Total
Enbrel						$	4,352					$	113					$	4,465					$	4,855					$	141					$	4,996					$	5,050					$	176					$	5,226
Prolia						2,150						1,098						3,248						1,830						933						2,763						1,772						900						2,672
Otezla(1)						1,804						445						2,249						1,790						405						2,195						139						39						178
XGEVA						1,434						584						2,018						1,405						494						1,899						1,457						478						1,935
Neulasta						1,514						220						1,734						2,001						292						2,293						2,814						407						3,221
Aranesp						537						943						1,480						629						939						1,568						758						971						1,729
Repatha						557						560						1,117						459						428						887						376						285						661
KYPROLIS						736						372						1,108						710						355						1,065						654						390						1,044
Nplate						566						461						1,027						485						365						850						480						315						795
Other products						3,636						2,215						5,851						3,821						1,903						5,724						3,031						1,712						4,743
Total product sales(2)						17,286						7,011						24,297						17,985						6,255						24,240						16,531						5,673						22,204
Other revenues						908						774						1,682						511						673						1,184						693						465						1,158
Total revenues						$	18,194					$	7,785					$	25,979					$	18,496					$	6,928					$	25,424					$	17,224					$	6,138					$	23,362

---

(1) Otezla was acquired on November 21, 2019.

(2) Hedging gains and losses, which are included in product sales, were not material for the years ended December 31, 2021, 2020 and 2019.

In the United States, we sell primarily to pharmaceutical wholesale distributors that we use 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, 2021, 2020 and 2019. For the year ended December 31, 2021, on a combined basis, these customers accounted for 82% 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,
			2021						2020						2019
McKesson Corporation:
Gross product sales			$	15,187					$	13,779					$	11,795
% of total gross revenues			33		%				32		%				31		%
AmerisourceBergen Corporation:
Gross product sales			$	14,783					$	14,743					$	12,301
% of total gross revenues			32		%				34		%				33		%
Cardinal Health, Inc.:
Gross product sales			$	7,681					$	7,332					$	6,538
% of total gross revenues			17		%				17		%				17		%

F-17

As of December 31, 2021 and 2020, amounts due from these three customers each exceeded 10% of gross trade receivables and accounted for 73% and 74%, respectively, of net trade receivables on a combined basis. As of December 31, 2021 and 2020, 27% and 28%, respectively, of net trade receivables 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, 2021 and 2020, was not material.

4. Stock-based compensation

Our Amended 2009 Plan authorizes for issuance to employees of Amgen 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 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, 2021, the Amended 2009 Plan provides for future grants and/or issuances of up to approximately 19 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,
			2021						2020						2019
RSUs			$	183					$	178					$	168
Performance units			121						118						105
Stock options			37						34						35
Total stock-based compensation expense, pretax			341						330						308
Tax benefit from stock-based compensation expense			(74)						(72)						(67)
Total stock-based compensation expense, net of tax			$	267					$	258					$	241

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 per unit of RSUs granted during the years ended December 31, 2021, 2020 and 2019, were $233.10, $235.63 and $182.12, respectively.

F-18

The following table summarizes information regarding our RSUs:

			Year ended December 31, 2021
			Units (in millions)						Weighted-average grant date fair value
Balance nonvested as of December 31, 2020			3.0						$	198.11
Granted			1.3						$	233.10
Vested			(0.9)						$	177.27
Forfeited			(0.4)						$	213.32
Balance nonvested as of December 31, 2021			3.0						$	217.95

The total grant date fair values of RSUs that vested during the years ended December 31, 2021, 2020 and 2019, were $166 million, $161 million and $160 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,
			2021						2020						2019
Closing price of our common stock on grant date			$	237.17					$	236.36					$	177.31
Expected volatility (average of implied and historical volatility)			25.6		%				28.1		%				23.5		%
Expected life (in years)			5.7						5.8						5.8
Risk-free interest rate			1.0		%				0.4		%				2.4		%
Expected dividend yield			2.9		%				3.0		%				3.1		%
Fair value of stock options granted			$	40.43					$	42.34					$	30.47

The following table summarizes information regarding our stock options:

			Year ended December 31, 2021
			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, 2020			4.7						$	179.90
Granted			1.3						$	237.17
Exercised			(0.5)						$	137.95
Expired/forfeited			(0.4)						$	208.56
Balance unexercised as of December 31, 2021			5.1						$	197.27					7.3						$	168
Vested or expected to vest as of December 31, 2021			4.9						$	195.64					7.2						$	167
Exercisable as of December 31, 2021			2.0						$	165.46					5.6						$	120

The total intrinsic values of options exercised during the years ended December 31, 2021, 2020 and 2019, were $56 million, $98 million and $68 million, respectively. The actual tax benefits realized from tax deductions from option exercises during the years ended December 31, 2021, 2020 and 2019, were $12 million, $21 million and $15 million, respectively.

As of December 31, 2021, $346 million of unrecognized compensation cost was related to nonvested RSUs and unvested stock options, which is expected to be recognized over a weighted-average period of 1.8 years.

F-19

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, 2021, 2020 and 2019, 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 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,
			2021						2020						2019
Closing price of our common stock on grant date			$	239.64					$	236.36					$	177.31
Volatility			29.3		%				27.5		%				22.1		%
Risk-free interest rate			0.3		%				0.2		%				2.3		%
Fair value of units granted			$	254.68					$	249.07					$	188.40

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, 2021 and 2020, 1.6 million and 1.8 million performance units were outstanding, with weighted-average grant date fair values per unit of $229.39 and $207.52 per unit, respectively. During the year ended December 31, 2021, 0.6 million performance units with a weighted-average grant date fair value per unit of $254.68 were granted, and 0.2 million performance units with a weighted-average grant date fair value per unit of $226.32 were forfeited.

The total fair values of performance units paid during the years ended December 31, 2021, 2020 and 2019, were $149 million, $230 million and $176 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, 2021, $130 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 $279 million, $231 million and $220 million for the years ended December 31, 2021, 2020 and 2019, respectively.

F-20

6. Income taxes

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

			Years ended December 31,
			2021						2020						2019
Domestic			$	1,850					$	4,087					$	4,371
Foreign			4,851						4,046						4,767
Total income before income taxes			$	6,701					$	8,133					$	9,138

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

			Years ended December 31,
			2021						2020						2019
Current provision:
Federal			$	865					$	921					$	1,284
State			18						34						39
Foreign			359						277						277
Total current provision			1,242						1,232						1,600
Deferred benefit:
Federal			(308)						(321)						(276)
State			(9)						9						(22)
Foreign			(117)						(51)						(6)
Total deferred benefit			(434)						(363)						(304)
Total provision for income taxes			$	808					$	869					$	1,296

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 NOL carryforwards. Significant components of our deferred tax assets and liabilities were as follows (in millions):

			December 31,
			2021						2020
Deferred income tax assets:
NOL and credit carryforwards			$	1,065					$	794
Accrued expenses			600						561
Expenses capitalized for tax			244						144
Stock-based compensation			96						92
Other			326						301
Total deferred income tax assets			2,331						1,892
Valuation allowance			(663)						(571)
Net deferred income tax assets			1,668						1,321
Deferred income tax liabilities:
Acquired intangible assets			(824)						(903)
Debt			(275)						(282)
Fixed assets			(129)						(148)
Other			(221)						(189)
Total deferred income tax liabilities			(1,449)						(1,522)
Total deferred income taxes, net			$	219					$	(201)

F-21

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 2021, primarily driven by the Company’s expectation that some state R&D credits will not be utilized and certain foreign and acquired net operating losses will expire unused.

As of December 31, 2021, we had $75 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 2040. We had $798 million of state tax credit carryforwards available to reduce future state income taxes and have provided a valuation allowance for $709 million of those state tax credit carryforwards.

As of December 31, 2021, we had $606 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. For the federal NOL carryforwards for which no valuation allowance has been provided, $426 million have no expiration; the remainder begin to expire between 2022 and 2037. We had $391 million of state NOL carryforwards available to reduce future state income taxes and have provided a valuation allowance for $330 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 $561 million of those foreign NOL carryforwards. For the foreign NOLs with no valuation allowance provided, $800 million has no expiry; and the remainder will expire between 2022 and 2031.

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

			Years ended December 31,
			2021						2020						2019
Beginning balance			$	3,352					$	3,287					$	3,061
Additions based on tax positions related to the current year			171						165						215
Additions based on tax positions related to prior years			35						3						22
Reductions for tax positions of prior years			(4)						(35)						(11)
Settlements			(8)						(68)						—
Ending balance			$	3,546					$	3,352					$	3,287

Substantially all of the UTBs as of December 31, 2021, if recognized, would affect our effective tax rate. During the year ended December 31, 2020, we effectively settled certain issues with the IRS. As a result, we remeasured our UTBs accordingly.

Interest and penalties related to UTBs are included in our provision for income taxes. During the years ended December 31, 2021, 2020 and 2019, we recognized $98 million, $116 million and $198 million, respectively, of interest and penalties through the income tax provision in the Consolidated Statements of Income. The decrease in interest expense for the year ended December 31, 2021, was primarily due to lower interest rates during 2021 and settlement of a prior year audit. As of December 31, 2021 and 2020, accrued interest and penalties associated with UTBs were $881 million and $783 million, respectively.

F-22

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,
			2021						2020						2019
Federal statutory tax rate			21.0		%				21.0		%				21.0		%
Foreign earnings			(7.8)		%				(4.7)		%				(4.5)		%
Foreign-derived intangible income			(1.0)		%				(0.7)		%				(0.7)		%
Credits, Puerto Rico excise tax			(3.4)		%				(2.9)		%				(2.6)		%
Interest on uncertain tax positions			1.1		%				1.1		%				1.6		%
Credits, primarily federal R&D			(2.1)		%				(1.4)		%				(1.0)		%
Acquisition IPR&D			4.9		%				—		%				—		%
Audit settlements			—		%				(1.0)		%				—		%
Other, net			(0.6)		%				(0.7)		%				0.4		%
Effective tax rate			12.1		%				10.7		%				14.2		%

The effective tax rates for the years ended December 31, 2021, 2020 and 2019, differ from the federal statutory rate primarily due to impacts of the jurisdictional mix of income and expenses. Substantially all of the benefit to our effective tax rate from foreign earnings results from the Company’s operations in Puerto Rico, a territory of the United States that is treated as a foreign jurisdiction for U.S. tax purposes. Our operations in Puerto Rico are subject to tax incentive grants through 2035. Additionally, the Company’s operations conducted in Singapore are subject to a tax incentive grant through 2034. Our foreign earnings are also subject to U.S. tax at a reduced rate of 10.5%.

The U.S. territory of Puerto Rico imposes an excise tax on the gross intercompany purchase price of goods and services from our manufacturing site 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 in 2021, 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, 2021, 2020 and 2019, were $1.9 billion, $1.4 billion and $1.9 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. Tax authorities (including the IRS) are becoming more aggressive and are particularly focused on such matters.

In 2017, we received an RAR and a modified RAR from the IRS for the years 2010, 2011 and 2012 proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution. In July 2021, we filed a petition in the U.S. Tax Court to contest two duplicate Notices for 2010, 2011 and 2012 that we received in May and July 2021, which seek to increase our U.S. taxable income. The Notices seek to increase our U.S. taxable income by an amount that would result in additional federal tax of approximately $3.6 billion plus interest. Any additional tax that could be imposed would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings. We firmly believe that the IRS’s positions set forth in the Notices are without merit, and we are contesting the Notices through the judicial process.

In 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2012. We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office. We were unable to reach resolution at the administrative appeals level, and we anticipate that we will receive a statutory notice of deficiency for these years as well. We expect to contest any such notice related to 2013–15 through the judicial process. We are also currently under examination by the IRS for the years 2016, 2017 and 2018 and by a number of state and foreign tax jurisdictions.

F-23

Final resolution of these complex matters is not likely within the next 12 months. We believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse impact on our consolidated financial statements.

We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009.

7. Earnings per share

The computation of basic 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 primarily include 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,
			2021						2020						2019
Income (Numerator):
Net income for basic and diluted EPS			$	5,893					$	7,264					$	7,842
Shares (Denominator):
Weighted-average shares for basic EPS			570						586						605
Effect of dilutive securities			3						4						4
Weighted-average shares for diluted EPS			573						590						609
Basic EPS			$	10.34					$	12.40					$	12.96
Diluted EPS			$	10.28					$	12.31					$	12.88

For each of the three years ended December 31, 2021, the number of antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

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 under 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.

BeiGene, Ltd.

On January 2, 2020, we acquired a 20.5% stake in BeiGene for approximately $2.8 billion in cash as part of a collaboration to expand our oncology presence in China. For additional information regarding our equity investment in BeiGene, see Note 9, Investments. Under the collaboration, BeiGene began selling XGEVA in 2020, BLINCYTO in 2021 and KYPROLIS in early 2022 in China, and Amgen shares profits and losses equally during the initial product-specific commercialization periods; thereafter, product rights may revert to Amgen, and Amgen will pay royalties to BeiGene on sales in China of such products for a specified period.

F-24

In addition, we jointly develop a portion of our oncology portfolio with BeiGene, which shares in global R&D costs by providing cash and development services of up to $1.25 billion. Upon regulatory approval, BeiGene will assume commercialization rights in China for a specified period, and Amgen and BeiGene will share profits equally until certain of these product rights revert to Amgen. Upon return of the product rights, Amgen will pay royalties to BeiGene on sales in China for a specified period. For product sales outside China, Amgen will also pay royalties to BeiGene.

During the years ended December 31, 2021 and 2020, net costs recovered from BeiGene for oncology product candidates were $220 million and $225 million, respectively, and were recorded as an offset to R&D expense in the Consolidated Statements of Income. During the year ended December 31, 2021, product sales from Amgen to BeiGene under the collaboration were $72 million and were recorded in Product sales in the Consolidated Statements of Income. During the year ended December 31, 2021, profit and loss share expenses related to the initial product-specific commercialization period were $64 million and were recorded primarily in SG&A expense in the Consolidated Statements of Income. Product sales from Amgen to BeiGene and profit and loss share expenses were not material during the year ended December 31, 2020. Amounts owed from BeiGene for product sales were $21 million and $22 million as of December 31, 2021 and 2020, respectively, which are included in Trade receivables, net, in the Consolidated Balance Sheets. Net amounts owed from BeiGene for cost recoveries and profit and loss share payments were $61 million and $99 million as of December 31, 2021 and 2020, respectively, which are included in Other current assets in the Consolidated Balance Sheets.

Novartis Pharma AG

We are in a collaboration with Novartis to jointly develop and commercialize Aimovig. On January 31, 2022, concurrent with the settlement of the previously disclosed litigation between Amgen and Novartis we modified the terms of the collaboration. See Note 19, Contingencies and commitments.

Arrangement through December 31, 2021

In the United States, Amgen and Novartis jointly developed and collaborated on the commercialization of Aimovig. Amgen, as the principal, recognized product sales of Aimovig in the United States, shared U.S. commercialization costs with Novartis and paid 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 (the ex-U.S. Novartis Rights). Novartis paid Amgen double-digit royalties on net sales of the product in the ex-U.S. Novartis Rights territories and funded a portion of global R&D expenses. In addition, Novartis was required to make a payment to Amgen of up to $100 million if certain commercial and expenditure thresholds were achieved with respect to Aimovig in the United States.

Arrangement after January 1, 2022

Pursuant to the amendment effective January 1, 2022, Novartis retains the ex-U.S. Novartis Rights and will continue to pay double-digit royalties on net sales in the ex-U.S. Novartis Rights territories. In the United States, Novartis will no longer collaborate with Amgen, share Aimovig commercialization costs or pay milestones and Amgen will no longer pay royalties to Novartis on sales of Aimovig. Amgen and Novartis will continue to share development expenses worldwide. In the United States, Novartis will no longer collaborate with Amgen or share Aimovig commercialization costs and Amgen will no longer pay royalties to Novartis on sales of Aimovig. Amgen and Novartis will continue to share development expenses worldwide.

Amgen manufactures and supplies Aimovig worldwide.

During the years ended December 31, 2021, 2020 and 2019, net costs recovered from Novartis for migraine products were $160 million, $192 million and $187 million, respectively, and were recorded primarily in SG&A expense in the Consolidated Statements of Income. During the years ended December 31, 2021, 2020 and 2019, royalties due to Novartis for Aimovig were $116 million, $139 million and $115 million, respectively, and were recorded in Cost of sales in the Consolidated Statements of Income. During the years ended December 31, 2021, 2020 and 2019, royalties due from Novartis for Aimovig were not material.

Kyowa Kirin Co., Ltd.

On July 30, 2021, we closed our collaboration and licensing agreement with KKC to jointly develop and commercialize an anti-OX40 fully human monoclonal antibody (AMG 451) worldwide, except in Japan. AMG 451 is for the treatment of atopic dermatitis, with potential for treatment of other autoimmune diseases.

Under the terms of the agreement, we will lead the global development, manufacture and commercialization of AMG 451, except in Japan. KKC will co-promote AMG 451 with Amgen in the United States and have opt-in rights to co-promote AMG 451 in various other markets outside the United States, including in Europe and Asia.

F-25

We made an upfront payment of $400 million to KKC that was recognized in R&D expense in the third quarter of 2021. Amgen and KKC will share equally the global development costs, except in Japan, and the U.S. commercialization costs. Outside the United States and Japan, any commercialization costs incurred by KKC will be reimbursed by Amgen. We may also be required to make milestone payments of up to $850 million contingent upon the achievement of certain regulatory events and commercial thresholds. We will also pay KKC significant double-digit royalties on global sales, except in Japan. Net costs due to KKC were not material during the year ended December 31, 2021.

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 that in the aggregate could be significant. We may also incur or have reimbursed to us significant R&D costs if a 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 payments of these amounts, however, are contingent upon the occurrence of various future events that have high degrees 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, 2021						Amortized cost						Gross unrealized gains						Gross unrealized losses						Fair values
U.S. Treasury notes						$	47					$	—					$	—					$	47
U.S. Treasury bills						1,400						—						—						1,400
Money market mutual funds						5,856						—						—						5,856
Other short-term interest-bearing securities						1						—						—						1
Total available-for-sale investments						$	7,304					$	—					$	—					$	7,304

Types of securities as of December 31, 2020						Amortized cost						Gross unrealized gains						Gross unrealized losses						Fair values
U.S. Treasury notes						$	129					$	1					$	—					$	130
U.S. Treasury bills						4,948						—						—						4,948
Money market mutual funds						4,765						—						—						4,765
Other short-term interest-bearing securities						2						—						—						2
Total available-for-sale investments						$	9,844					$	1					$	—					$	9,845

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						2021						2020
Cash and cash equivalents						$	7,256					$	5,464
Marketable securities						48						4,381
Total available-for-sale investments						$	7,304					$	9,845

Cash and cash equivalents in the above table excludes bank account cash of $733 million and $802 million as of December 31, 2021 and 2020, respectively.

F-26

The fair values of available-for-sale investments by contractual maturity were as follows (in millions):

						December 31,
Contractual maturities						2021						2020
Maturing in one year or less						$	7,304					$	9,795
Maturing after one year through three years						—						50
Total available-for-sale investments						$	7,304					$	9,845

For the years ended December 31, 2021 and 2020, realized gains and losses on interest-bearing securities were not material. For the year ended December 31, 2019, realized gains on interest-bearing securities were $92 million and realized losses were not material. Realized gains and losses on interest-bearing securities are recorded in Other income, net, in the Consolidated Statements of Income. The cost of securities sold is based on the specific-identification method.

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 investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

Equity securities

We held investments in equity securities with readily determinable fair values of $611 million and $477 million as of December 31, 2021 and 2020, respectively, which are included in Other noncurrent assets in the Consolidated Balance Sheets. For the years ended December 31, 2021, 2020 and 2019, net unrealized gains on publicly traded securities were $161 million, $174 million and $112 million, respectively. Realized gains and losses on publicly traded securities for the years ended December 31, 2021, 2020 and 2019, were not material.

We held investments of $262 million and $203 million in equity securities without readily determinable fair values as of December 31, 2021 and 2020, respectively, which are included in Other noncurrent assets in the Consolidated Balance Sheets. For the year ended December 31, 2021, gains due to upward adjustments on these securities were $152 million, and gains realized on the dispositions of these securities were $41 million; for the years ended December 31, 2020 and 2019, gains due to upward adjustments and gains realized upon dispositions of these securities were not material. For the years ended December 31, 2021, 2020 and 2019, downward adjustments to the carrying values of these securities were not material. Adjustments were based on observable price transactions.

Equity Method Investments

BeiGene, Ltd.

On January 2, 2020, we acquired a 20.5% ownership interest in BeiGene for $2.8 billion, of which $2.6 billion was attributed to the fair value of equity securities upon closing, with the remainder attributed to prepaid R&D. Our equity investment in BeiGene is included in Other noncurrent assets in the Consolidated Balance Sheets. Our equity investment is accounted for under the equity method of accounting due to our ability to exert significant influence over BeiGene. See Note 1, Summary of significant accounting policies, for factors in concluding our ability to exert significant influence over BeiGene. The fair value of equity securities acquired exceeded our proportionate share of the carrying value of the underlying net assets of BeiGene by approximately $2.4 billion. The equity method of accounting requires us to identify and allocate amounts to items that give rise to the basis difference and to amortize these items over their useful lives. This amortization, along with our share of the results of operations of BeiGene, is included in Other income, net, in our Consolidated Statements of Income. Recognition occurs one quarter in arrears, which began in the second quarter of 2020. The basis difference was allocated to finite-lived intangible assets, indefinite-lived intangible assets, equity-method goodwill and related deferred taxes. The finite-lived intangible assets are being amortized over a period ranging from 8 to 15 years.

During the years ended December 31, 2021 and 2020, the carrying value of the investment was reduced by our share of BeiGene’s net losses of $265 million and $229 million, respectively, and amortization of the basis difference of $172 million and $109 million, respectively. During the years ended December 31, 2021 and 2020, we increased the carrying value by $50 million and $569 million, respectively, as a result of our purchase of additional shares of BeiGene. In addition, during the years ended December 31, 2021 and 2020, the carrying value increased by $265 million and $34 million, respectively, from the impact of other BeiGene ownership transactions.

F-27

As of December 31, 2021 and 2020, our ownership interest in BeiGene was approximately 18.4% and 20.5%, respectively. As of December 31, 2021 and 2020, the carrying value of our investment in BeiGene was $2.8 billion and $2.9 billion, respectively. As of December 31, 2021 and 2020, the fair value of our investment in BeiGene was $5.1 billion and $4.9 billion, respectively. We believe that as of December 31, 2021, the carrying value of our equity investment in BeiGene is fully recoverable. For information on a collaboration agreement we entered into with BeiGene in connection with this investment, see Note 8, Collaborations.

Neumora Therapeutics, Inc.

On September 30, 2021, we acquired an approximately 25.9% ownership interest in Neumora, a privately held company, for $257 million, which is included in Other noncurrent assets in the Consolidated Balance Sheets, in exchange for a $100 million cash payment and $157 million in noncash consideration primarily related to future services. Although our equity investment provides us with the ability to exercise significant influence over Neumora, we have elected the fair value option to account for our equity investment. Under the fair value option, changes in the fair value of the investment are recognized through earnings each reporting period. We believe the fair value option best reflects the economics of the underlying transaction. As of December 31, 2021, our ownership interest in Neumora remained at approximately 25.9%, and the fair value of our investment was $220 million. Accordingly, during the fourth quarter of 2021, we recognized a loss of $37 million for the reduction in the fair value in Other income, net, in the Consolidated Statements of Income. For information on determination of fair values, see Note 17, Fair value measurement.

Limited partnerships

We held limited partnership investments of $573 million and $496 million as of December 31, 2021 and 2020, respectively, which are included in Other noncurrent assets in the Consolidated Balance Sheets. These investments, which are primarily investment funds of early-stage biotechnology companies, are accounted for by using the equity method of accounting and are measured by using our proportionate share of the net asset values of the underlying investments held by the limited partnerships as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of December 31, 2021, unfunded additional commitments to be made for these investments during the next several years were $185 million. For the years ended December 31, 2021, 2020 and 2019, net gains recognized from our limited partnership investments were $143 million, $241 million and $27 million, respectively.

10. Inventories

Inventories consisted of the following (in millions):

			December 31,
			2021						2020
Raw materials			$	647					$	486
Work in process			2,367						2,437
Finished goods			1,072						970
Total inventories			$	4,086					$	3,893

F-28

11. Property, plant and equipment

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

									December 31,
			Useful life (in years)						2021						2020
Land			—						$	279					$	259
Buildings and improvements			10-40						4,028						3,857
Manufacturing equipment			8-12						3,080						2,865
Laboratory equipment			8-12						1,193						1,257
Fixed equipment			12						2,402						2,406
Capitalized software			3-5						1,151						1,216
Other			5-10						862						1,091
Construction in progress			—						987						915
Property, plant and equipment, gross									13,982						13,866
Less accumulated depreciation and amortization									(8,798)						(8,977)
Property, plant and equipment, net									$	5,184					$	4,889

During the years ended December 31, 2021, 2020 and 2019, we recognized depreciation and amortization expense associated with our property, plant and equipment of $644 million, $640 million and $635 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,
			2021						2020
United States			$	2,801					$	2,473
Puerto Rico			1,311						1,331
ROW			1,072						1,085
Total property, plant and equipment, net			$	5,184					$	4,889

12. Goodwill and other intangible assets

Goodwill

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

			December 31,
			2021						2020
Beginning balance			$	14,689					$	14,703
Addition from acquisitions			251						—
Currency translation adjustments			(50)						(14)
Ending balance			$	14,890					$	14,689

F-29

Other intangible assets

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

			December 31,
			2021																		2020
			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			$	25,561					$	(12,769)					$	12,792					$	25,591					$	(10,564)					$	15,027
Licensing rights			3,807						(2,973)						834						3,743						(2,791)						952
Marketing-related rights			1,354						(1,112)						242						1,367						(1,041)						326
R&D technology rights			1,377						(1,133)						244						1,317						(1,065)						252
Total finite-lived intangible assets			32,099						(17,987)						14,112						32,018						(15,461)						16,557
Indefinite-lived intangible assets:
IPR&D			1,070						—						1,070						30						—						30
Total other intangible assets			$	33,169					$	(17,987)					$	15,182					$	32,048					$	(15,461)					$	16,587

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.

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.

During the year ended December 31, 2021, we acquired certain finite-lived and indefinite-lived intangible assets as a result of the Teneobio acquisition, including IPR&D of $1.1 billion, R&D technology rights of $94 million and licensing rights of $41 million. See Note 2, Acquisitions.

During the years ended December 31, 2021, 2020 and 2019, we recognized amortization associated with our finite-lived intangible assets of $2.6 billion, $2.8 billion and $1.4 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, 2022, 2023, 2024, 2025 and 2026, are $2.5 billion, $2.5 billion, $2.4 billion, $2.2 billion and $1.8 billion, respectively.

F-30

13. Leases

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):

						December 31,
Consolidated Balance Sheets locations						2021						2020
Assets:
Other noncurrent assets						$	566					$	408
Liabilities:
Accrued liabilities						$	145					$	153
Other noncurrent liabilities						525						306
Total lease liabilities						$	670					$	459

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

						Years ended December 31,
Lease costs						2021						2020						2019
Operating(1)						$	237					$	223					$	204
Sublease income						(38)						(34)						(33)
Total net lease costs						$	199					$	189					$	171

---

(1) Includes short-term leases and variable lease costs, which were not material for the years ended December 31, 2021, 2020 and 2019.

Maturities of lease liabilities as of December 31, 2021, were as follows (in millions):

Maturity dates						Amounts
2022						$	148
2023						148
2024						75
2025						49
2026						44
Thereafter						289
Total lease payments(1)						753
Less imputed interest						(83)
Present value of lease liabilities						$	670

---

(1) Includes future rental commitments for abandoned leases of $138 million. We expect to receive total future rental income of $108 million related to noncancelable subleases for abandoned facilities.

F-31

The weighted-average remaining lease terms and weighted-average discount rates were as follows:

												December 31,
												2021						2020
Weighted-average remaining lease term (in years)												8.3						3.7
Weighted-average discount rate												2.5		%				3.1		%

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

												Years ended December 31,
												2021						2020						2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases												$	190					$	177					$	148
ROU assets obtained in exchange for lease obligations:
Operating leases												$	340					$	101					$	163

As of December 31, 2021, we have entered into leases that have not yet commenced, with total undiscounted future lease payments of $35 million. These leases will commence in 2022 with lease terms from 4 to 6 years.

14. Other current assets and accrued liabilities

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

			December 31,
			2021						2020
Prepaid expenses			$	1,223					$	1,156
Corporate partner receivables			780						583
Tax receivables			164						216
Other			200						124
Total other current assets			$	2,367					$	2,079

Accrued liabilities consisted of the following (in millions):

			December 31,
			2021						2020
Sales deductions			$	5,174					$	4,801
Dividends payable			1,083						1,018
Employee compensation and benefits			1,081						1,098
Income taxes payable			701						828
Sales returns reserve			542						474
Other			2,150						1,922
Total accrued liabilities			$	10,731					$	10,141

F-32

15. Financing arrangements

Our borrowings consisted of the following (in millions):

			December 31,
			2021						2020
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes)			—						1,527
2.70% notes due 2022 (2.70% 2022 Notes)			—						500
2.65% notes due 2022 (2.65% 2022 Notes)			—						1,500
3.625% notes due 2022 (3.625% 2022 Notes)			—						750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)			767						791
2.25% notes due 2023 (2.25% 2023 Notes)			750						750
3.625% notes due 2024 (3.625% 2024 Notes)			1,400						1,400
1.90% notes due 2025 (1.90% 2025 Notes)			500						500
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)			853						916
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)			643						649
2.20% notes due 2027 (2.20% 2027 Notes)			1,750						1,750
3.20% notes due 2027 (3.20% 2027 Notes)			1,000						1,000
1.65% notes due in 2028 (1.65% 2028 Notes)			1,250						—
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)			947						957
2.45% notes due 2030 (2.45% 2030 Notes)			1,250						1,250
2.30% notes due 2031 (2.30% 2031 Notes)			1,250						1,250
2.00% notes due 2032 (2.00% 2032 Notes)			1,250						—
6.375% notes due 2037 (6.375% 2037 Notes)			478						478
6.90% notes due 2038 (6.90% 2038 Notes)			254						254
6.40% notes due 2039 (6.40% 2039 Notes)			333						333
3.15% notes due 2040 (3.15% 2040 Notes)			2,000						2,000
5.75% notes due 2040 (5.75% 2040 Notes)			373						373
2.80% notes due 2041 (2.80% 2041 Notes)			1,150						—
4.95% notes due 2041 (4.95% 2041 Notes)			600						600
5.15% notes due 2041 (5.15% 2041 Notes)			729						729
5.65% notes due 2042 (5.65% 2042 Notes)			415						415
5.375% notes due 2043 (5.375% 2043 Notes)			185						185
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
3.375% notes due 2050 (3.375% 2050 Notes)			2,250						2,250
4.663% notes due 2051 (4.663% 2051 Notes)			3,541						3,541
3.00% notes due 2052 (3.00% 2052 Notes)			1,350						—
2.77% notes due 2053 (2.77% 2053 Notes)			940						940
Other notes due 2097			100						100
Unamortized bond discounts, premiums and issuance costs, net			(1,213)						(1,188)
Fair value adjustments			284						566
Other			15						5
Total carrying value of debt			33,309						32,986
Less current portion			(87)						(91)
Total long-term debt			$	33,222					$	32,895

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, the 4.663% 2051 Notes and the 2.77% 2053 Notes, which have effective interest rates of 6.3%, 5.6% and 5.2%, respectively.

F-33

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 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 years ended December 31, 2021 and 2020, we issued debt securities in the following offerings:

• In 2021, we issued $5.0 billion of debt consisting of $1.25 billion of the 1.65% 2028 Notes, $1.25 billion of the 2.00% 2032 Notes, $1.15 billion of the 2.80% 2041 Notes and $1.35 billion of the 3.00% 2052 Notes.

• In 2020, we issued $9.0 billion of debt consisting of $500 million of the 1.90% 2025 Notes, $1.75 billion of the 2.20% 2027 Notes, $1.25 billion of the 2.45% 2030 Notes, $1.25 billion of the 2.30% 2031 Notes, $2.0 billion of the 3.15% 2040 Notes and $2.25 billion of the 3.375% 2050 Notes.

We did not issue any debt or debt securities during the year ended December 31, 2019.

Debt repayments/redemptions

We made debt repayments/redemptions during the years ended December 31, 2021, 2020 and 2019, as follows:

• In 2021, we redeemed $4.2 billion of debt, including the €1.25 billion aggregate principal amount ($1.4 billion upon settlement of the related cross-currency swap) of the 1.25% 2022 euro Notes, the $500 million aggregate principal amount of the 2.70% 2022 Notes, the $1.5 billion aggregate principal amount of the 2.65% 2022 Notes and the $750 million aggregate principal amount of the 3.625% 2022 Notes. In connection with the redemption of these notes, we paid a total of $24 million in make-whole amounts plus associated accrued and unpaid interest, all of which was recognized in Interest expense, net, in the Consolidated Statements of Income.

• In 2020, we repaid/redeemed $6.5 billion of debt, including the repayment at maturity of the $300 million aggregate principal amount of the 4.50% 2020 Notes, the $750 million aggregate principal amount of the 2.125% 2020 Notes, the $300 million Floating Rate Notes due 2020 and the $700 million aggregate principal amount of the 2.20% 2020 Notes. In connection with the redemption of the $900 million aggregate principal amount of the 3.45% 2020 Notes, the $1.0 billion aggregate principal balance of the 4.10% 2021 Notes, the $750 million aggregate principal balance of the 1.85% 2021 Notes and the $1.75 billion aggregate principal balance of the 3.875% 2021 Notes, we paid a total of $96 million in make-whole amounts plus associated accrued and unpaid interest, all of which was recognized in Interest expense, net, in the Consolidated Statements of Income.

• 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.

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 LIBOR-based coupons over the lives of the respective notes. These interest rate swap contracts qualified and are designated as fair value hedges.

During the year ended December 31, 2021, we entered into interest rate swap contracts with an aggregate notional amount of $1.0 billion with respect to the 2.45% 2030 Notes and an aggregate notional amount of $500 million with respect to the 2.30% 2031 Notes. In connection with the redemption of the 3.625% 2022 Notes, discussed above, associated interest rate swap contracts with an aggregate notional amount of $750 million were terminated.

F-34

In connection with the redemption of certain of the notes during the year ended December 31, 2020, discussed above, associated interest rate swap contracts with an aggregate notional value of $3.65 billion were terminated. In addition, because of historically low interest rates, during the year ended December 31, 2020, we terminated interest rate swaps with an aggregate notional amount of $5.2 billion that hedged the 3.625% 2024 Notes, the 2.60% 2026 Notes, the 4.663% 2051 Notes and portions of the 3.625% 2022 Notes and the 3.125% 2025 Notes, which resulted in the receipt of $576 million of cash and reduced counterparty credit risk. Immediately following the terminations of these contracts, we entered into new interest rate swap agreements at then-current interest rates on the same $5.2 billion principal amount of notes. See Note 18, Derivative instruments.

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, 2021									December 31, 2020
Notes						Notional amounts			Effective interest rates						Notional amounts			Effective interest rates
3.625% 2022 Notes						$	—		N/A						$	750		LIBOR + 2.7%
3.625% 2024 Notes						1,400			LIBOR + 3.2%						1,400			LIBOR + 3.2%
3.125% 2025 Notes						1,000			LIBOR + 1.8%						1,000			LIBOR + 1.8%
2.60% 2026 Notes						1,250			LIBOR + 1.8%						1,250			LIBOR + 1.8%
2.45% 2030 Notes						1,000			LIBOR + 1.0%						—			N/A
2.30% 2031 Notes						500			LIBOR + 0.8%						—			N/A
4.663% 2051 Notes						1,500			LIBOR +4.1%						1,500			LIBOR + 4.1%
Total notional amounts						$	6,650								$	5,900

N/A = not applicable

Debt exchange

In 2020, we completed a private offering to exchange portions of certain outstanding senior notes due 2037 through 2043 (collectively, Old Notes), listed below, for the $940 million principal amount of the newly issued 2.77% 2053 Notes (the Exchange Offer).

The following principal amounts of each series of Old Notes were validly tendered and subsequently canceled in connection with the Exchange Offer (in millions):

			Principal amount exchanged
6.375% 2037 Notes			$	74
6.90% 2038 Notes			$	37
6.40% 2039 Notes			$	133
5.75% 2040 Notes			$	39
5.15% 2041 Notes			$	245
5.65% 2042 Notes			$	72
5.375% 2043 Notes			$	76

The 2.77% 2053 Notes bear interest at a lower fixed coupon rate while requiring higher principal repayment at a later maturity date as compared to those of the Old Notes that were exchanged. There were no other significant changes to the terms between the Old Notes and the 2.77% 2053 Notes. In connection with the Exchange Offer, $85 million was paid to holders of the Old Notes (the cash consideration).

The Exchange Offer was accounted for as a debt modification, and accordingly, deferred financing costs and discounts associated with the Old Notes, the cash consideration and the $264 million discount associated with the 2.77% 2053 Notes are being accreted over the term of these newly issued notes and recorded as Interest expense, net, in the Consolidated Statements of Income.

F-35

Cross-currency swaps

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 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.

In connection with the redemption of the 1.25% 2022 euro Notes, discussed above, associated cross-currency swap contracts with an aggregate notional amount of €1.25 billion were terminated.

Shelf registration statement and other facilities

As of December 31, 2021, 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. As of December 31, 2021 and 2020, we had no amounts outstanding under our commercial paper program.

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, 2021 and 2020, 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 depository shares; rights to purchase common stock or preferred stock; securities purchase contracts; securities purchase units; and depository 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 us to 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, 2021.

Contractual maturities of debt obligations

The aggregate contractual maturities of all borrowings due subsequent to December 31, 2021, are as follows (in millions):

Maturity dates						Amounts
2022						$	—
2023						1,517
2024						1,400
2025						1,500
2026						2,746
Thereafter						27,075
Total						$	34,238

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, 2021, 2020 and 2019, were not material. Interest paid, including the ongoing impact of interest rate and cross-currency swap contracts, during the years ended December 31, 2021, 2020 and 2019, were $1.2 billion, $1.2 billion and $1.3 billion, respectively.

F-36

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,
			2021												2020												2019
			Shares						Dollars						Shares						Dollars						Shares*						Dollars
First quarter			3.7						$	865					4.3						$	933					15.9						$	3,031
Second quarter			6.5						1,592						2.6						591						13.1						2,349
Third quarter			4.6						1,069						3.0						752						6.2						1,170
Fourth quarter			6.9						1,461						5.3						1,221						5.1						1,090
Total stock repurchases			21.7						$	4,987					15.2						$	3,497					40.2						$	7,640

• Total shares do not add due to rounding.

In March 2021, October 2021 and December 2021, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $3.4 billion, $4.5 billion and $5.0 billion, respectively. As of December 31, 2021, $10.9 billion remained available under our stock repurchase program.

Dividends

Our Board of Directors declared quarterly dividends per share of $1.76, $1.60 and $1.45, which were paid in each of the four quarters of 2021, 2020 and 2019, 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 3, 2021, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which will be paid on March 8, 2022, to all stockholders of record as of the close of business on February 15, 2022.

F-37

Accumulated other comprehensive 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, 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)
Foreign currency translation adjustments			9						—						—						—						9
Unrealized (losses) gains			—						(61)						6						—						(55)
Reclassification adjustments to income			—						(501)						(33)						—						(534)
Other losses			—						—						—						(7)						(7)
Income taxes			—						124						6						—						130
Balance as of December 31, 2020			(709)						(263)						1						(14)						(985)
Foreign currency translation adjustments			(135)						—						—						—						(135)
Unrealized gains (losses)			—						159						(1)						—						158
Reclassification adjustments to income			—						253						—						—						253
Other gains			—						—						—						1						1
Income taxes			—						(88)						—						—						(88)
Balance as of December 31, 2021			$	(844)					$	61					$	—					$	(13)					$	(796)

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 $33 million expense and a $55 million expense in 2021, a $14 million benefit and a $110 million benefit in 2020 and a $28 million expense and a $46 million benefit in 2019, 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 $1 million expense and a $7 million benefit in 2020 and a $22 million expense and a $14 million benefit in 2019, respectively.

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

						Years ended December 31,
Components of AOCI						2021						2020						2019						Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract (losses) gains						$	(8)					$	178					$	101					Product sales
Cross-currency swap contract (losses) gains						(245)						323						110						Other income, net
						(253)						501						211						Income before income taxes
						55						(110)						(46)						Provision for income taxes
						$	(198)					$	391					$	165					Net income
Available-for-sale securities:
Net realized gains						$	—					$	33					$	56					Other income, net
						—						(7)						(14)						Provision for income taxes
						$	—					$	26					$	42					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, 2021 and 2020, no shares of preferred stock were issued or outstanding.

F-38

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.

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, 2021, 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						$	47					$	—					$	—					$	47
U.S. Treasury bills						1,400						—						—						1,400
Money market mutual funds						5,856						—						—						5,856
Other short-term interest-bearing securities						—						1						—						1
Equity securities						611						—						220						831
Derivatives:
Foreign currency contracts						—						183						—						183
Cross-currency swap contracts						—						66						—						66
Interest rate swap contracts						—						16						—						16
Total assets						$	7,914					$	266					$	220					$	8,400
Liabilities:
Derivatives:
Foreign currency contracts						$	—					$	39					$	—					$	39
Cross-currency swap contracts						—						339						—						339
Interest rate swap contracts						—						156						—						156
Contingent consideration obligations						—						—						342						342
Total liabilities						$	—					$	534					$	342					$	876

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Fair value measurement as of December 31, 2020, 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						$	130					$	—					$	—					$	130
U.S. Treasury bills						4,948						—						—						4,948
Money market mutual funds						4,765						—						—						4,765
Other short-term interest-bearing securities						—						2						—						2
Equity securities						477						—						—						477
Derivatives:
Foreign currency contracts						—						28						—						28
Cross-currency swap contracts						—						255						—						255
Interest rate swap contracts						—						66						—						66
Total assets						$	10,320					$	351					$	—					$	10,671
Liabilities:
Derivatives:
Foreign currency contracts						$	—					$	237					$	—					$	237
Cross-currency swap contracts						—						318						—						318
Interest rate swap contracts						—						15						—						15
Contingent consideration obligations						—						—						33						33
Total liabilities						$	—					$	570					$	33					$	603

Interest-bearing and equity securities

The fair values of our U.S. Treasury securities, money market mutual funds and equity investments in publicly traded securities are based on quoted market prices in active markets, with no valuation adjustment. The fair values of equity securities without readily determinable fair values are initially valued at the transaction price and subsequently valued based on a combination of market performance and publicly available information for similar companies that have actively traded equity securities.

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, 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.

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Contingent consideration obligations

As a result of our business acquisitions, we have incurred contingent consideration obligations as discussed below. 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. The inputs include, as applicable, estimated probabilities and the timing of achieving specified development, regulatory and commercial milestones as well as estimated annual sales. Significant changes that increase or decrease the probabilities of achieving the related development, regulatory and commercial events or that shorten or lengthen the time required to achieve such events or that increase or decrease estimated annual sales would result in corresponding increases or decreases in the fair values of the obligations, as applicable. 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 were as follows (in millions):

						Years ended December 31,
						2021						2020						2019
Beginning balance						$	33					$	61					$	72
Additions						309						—						—
Payments						(7)						(6)						—
Net changes in valuations						7						(22)						(11)
Ending balance						$	342					$	33					$	61

As a result of our acquisition of Teneobio in 2021, we are obligated to pay its former shareholders up to $1.6 billion upon achieving separate development and regulatory milestones with regard to various R&D programs. See Note 2, Acquisitions.

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.

As a result of our acquisition of BioVex Group Inc. in 2011, we were obligated to pay its former shareholders upon achieving separate sales-related milestones with regard to IMLYGIC if certain sales thresholds were met. During the year ended December 31, 2020, we determined that the likelihood of achieving these milestones was no longer probable, and accordingly, the obligations were written off.

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, 2021 and 2020, the aggregate fair values of our borrowings were $37.9 billion and $39.4 billion, respectively, and the carrying values were $33.3 billion and $33.0 billion, respectively.

Investment in BeiGene

We estimated the fair value of our investment in BeiGene by using Level 1 inputs. As of December 31, 2021 and 2020, the fair values were $5.1 billion and $4.9 billion, and the carrying values were $2.8 billion and $2.9 billion, respectively.

During the years ended December 31, 2021 and 2020, 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.

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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 primarily associated 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 partially offset 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 contracts to hedge a portion of our projected international product sales up to a maximum of three years into the future; and at any given point in time, a higher percentage of nearer-term projected product sales is being hedged than in successive periods.

As of December 31, 2021, 2020 and 2019, we had outstanding foreign currency forward contracts with aggregate notional amounts of $5.7 billion, $5.1 billion and $5.0 billion, respectively. We have designated these foreign currency forward contracts, which are primarily euro based, as cash flow hedges. Accordingly, we report 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 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 Other income, net, in the Consolidated Statements of Income in the same periods during which the hedged debt affects earnings.

The notional amounts and interest rates of our cross-currency swaps as of December 31, 2021, were as follows (notional amounts in millions):

						Foreign currency												U.S. dollars
Hedged notes						Notional amounts						Interest rates						Notional amounts						Interest rates
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, 2021, our 1.25% euro Notes were redeemed, and the related cross-currency swaps were settled, resulting in an immaterial loss. 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 to hedge 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, 2021, and amounts expected to be recognized during the subsequent 12 months are not material.

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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												2021						2020						2019
Foreign currency contracts												$	373					$	(251)					$	148
Cross-currency swap contracts												(214)						190						(21)
Total unrealized gains (losses)												$	159					$	(61)					$	127

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, 2021 and 2020, we had interest rate swap contracts with aggregate notional amounts of $6.7 billion and $5.9 billion, respectively, that hedge certain portions of our long-term debt issuances. See Note 15, Financing arrangements, for information on our interest rate swaps.

During the year ended December 31, 2021, we entered into interest rate swap contracts with an aggregate notional amount of $1.5 billion. Interest rate swaps with an aggregate notional value of $750 million were terminated in connection with the redemption of certain of our notes. The resulting gain on these terminations was immaterial.

During the year ended December 31, 2020, interest rate swaps with an aggregate notional value of $3.7 billion were terminated in connection with the redemption of certain of our notes. The terminations of these interest rate swaps resulted in a gain of $40 million, recognized in Interest expense, net, in the Consolidated Statements of Income. Additionally, we terminated $5.2 billion aggregate notional amount of interest rate swaps, which resulted in receipt of $576 million from the counterparties and which was included in Net cash provided by operating activities in the Consolidated Statements of Cash Flows for the year ended December 31, 2020. This amount is being recognized as a reduction in Interest expense, net, in the Consolidated Statements of Income over the remaining life of the underlying notes. Immediately following the terminations of these interest rate swap contracts, we entered into new interest rate swap agreements at then-current interest rates on the same $5.2 billion principal amount of notes.

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.

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						2021						2020						2021						2020
Current portion of long-term debt						$	85					$	89					$	85					$	89
Long-term debt						$	6,729					$	6,258					$	199					$	477

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(1)Current portion of long-term debt includes $85 million and $89 million of carrying value with discontinued hedging relationships as of December 31, 2021 and 2020, respectively. Long-term debt includes $440 million and $525 million of carrying value with discontinued hedging relationships as of December 31, 2021 and 2020, respectively.

(2)Current portion of long-term debt includes $85 million and $89 million of hedging adjustments on discontinued hedging relationships as of December 31, 2021 and 2020, respectively. Long-term debt includes $340 million and $425 million of hedging adjustments on discontinued hedging relationships as of December 31, 2021 and 2020, respectively.

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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, 2021
						Product sales						Other income, net						Interest expense, net
Total amounts recorded in income and (expense) line items presented in the Consolidated Statements of Income						$	24,297					$	259					$	(1,197)
The effects of cash flow and fair value hedging:
Losses on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts						$	(8)					$	—					$	—
Cross-currency swap contracts						$	—					$	(245)					$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)						$	—					$	—					$	281
Derivatives designated as hedging instruments						$	—					$	—					$	(192)

						Year ended December 31, 2020
						Product sales						Other income, net						Interest expense, net
Total amounts recorded in income and (expense) line items presented in the Consolidated Statements of Income						$	24,240					$	256					$	(1,262)
The effects of cash flow and fair value hedging:
Gains on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts						$	178					$	—					$	—
Cross-currency swap contracts						$	—					$	323					$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)						$	—					$	—					$	315
Derivatives designated as hedging instruments						$	—					$	—					$	(204)

						Year ended December 31, 2019
						Product sales						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

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(1) Gains on hedged items do not completely offset 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 and the recognition of gains on terminated hedges when the corresponding hedged item was paid down in the period.

No portions of our cash flow hedge contracts were excluded from the assessment of hedge effectiveness. As of December 31, 2021, we expected to reclassify $19 million of net gains on our foreign currency and cross-currency swap contracts out of AOCI and into earnings during the next 12 months.

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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, 2021, 2020 and 2019, the total notional amounts of these foreign currency forward contracts were $680 million, $1.0 billion and $1.2 billion, 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, 2021, 2020 and 2019.

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

						Derivative assets												Derivative liabilities
December 31, 2021						Consolidated Balance Sheets locations						Fair values						Consolidated Balance Sheets locations						Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts						Other current assets/ Other noncurrent assets						$	183					Accrued liabilities/ Other noncurrent liabilities						$	39
Cross-currency swap contracts						Other current assets/ Other noncurrent assets						66						Accrued liabilities/ Other noncurrent liabilities						339
Interest rate swap contracts						Other current assets/ Other noncurrent assets						16						Accrued liabilities/ Other noncurrent liabilities						156
Total derivatives designated as hedging instruments												265												534
Total derivatives												$	265											$	534
						Derivative assets												Derivative liabilities
December 31, 2020						Consolidated Balance Sheets locations						Fair values						Consolidated Balance Sheets locations						Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts						Other current assets/ Other noncurrent assets						$	28					Accrued liabilities/ Other noncurrent liabilities						$	237
Cross-currency swap contracts						Other current assets/ Other noncurrent assets						255						Accrued liabilities/ Other noncurrent liabilities						318
Interest rate swap contracts						Other current assets/ Other noncurrent assets						66						Accrued liabilities/ Other noncurrent liabilities						15
Total derivatives designated as hedging instruments												349												570
Total derivatives												$	349											$	570

Our derivative contracts that were in liability positions as of December 31, 2021, 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.

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.

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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:

ANDA Patent Litigation

Otezla ANDA Patent Litigation

Amgen Inc. 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 (Amneal); 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 (MSN); Pharmascience Inc. (Pharmascience); Prinston Pharmaceutical Inc. (Prinston); Sandoz Inc. (Sandoz); 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. (Zydus), 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 these lawsuits was based on each defendant’s submission of an ANDA seeking FDA approval to market a generic version of Otezla. 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.

In August 2018, Celgene filed amended complaints against Alkem, Amneal, Aurobindo, Cipla Ltd, DRL, Glenmark, Pharmascience, Sandoz, Actavis, Unichem and Zydus 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, Hetero, Aurobindo, Cipla Ltd, DRL, Emcure, Glenmark, Macleods, Mankind, MSN, Pharmascience, Prinston, Sandoz, Actavis, Torrent, Unichem and Zydus additionally asserting U.S. Patent No. 10,092,541 (the ’541 Patent), which is listed in the Orange Book for Otezla. Between March 1 and April 4, 2019, Celgene filed amended complaints against Hetero, MSN 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 in the New Jersey District Court for infringement of U.S. Patent Nos. 8,093,283 (the ’283 Patent) and 8,629,173, 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

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Ltd, DRL, Emcure, Glenmark, Macleods, Mankind, Pharmascience, Sandoz, Shilpa, Actavis, Torrent, Unichem and Zydus 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.

Following Amgen’s acquisition of the patents-in-suit and the new drug application for Otezla, on February 14, 2020, the New Jersey District Court issued an order substituting Amgen for Celgene as plaintiff in the consolidated action and all related actions, terminating Celgene as plaintiff in the consolidated action and all related actions, and amending the case caption in the consolidated action and all related actions to reflect Amgen as the sole plaintiff.

On March 25, 2020, based on a joint request by Amgen and Unichem, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Unichem’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 April 3, 2020, based on a joint request by Amgen and Hetero, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Hetero’s apremilast product during the term of the ’940, ’516, ’638, ’302, ’101, ’536, ’717, ’243, ’330, ’854 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 28, 2020, based on a joint request by Amgen and Emcure, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Emcure’s apremilast product during the term of the ’638, ’101, ’854 and ’541 Patents unless authorized pursuant to a confidential settlement agreement. On July 7, 2020, the New Jersey District Court ordered a stipulated dismissal without prejudice of all claims, counterclaims, and affirmative defenses between Amgen and Sandoz with respect to the ’717, ’516 and ’854 Patents, leaving the ’940, ’302, ’536, ’243, ’330, ’638, ’101 and ’541 Patents asserted by Amgen against Sandoz in the litigation. On August 6, 2020, based on a joint request by Amgen and Mankind, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Mankind’s apremilast product during the term of the ’940, ’302, ’536, ’243, ’330, ’638, ’101 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On August 14, 2020, based on a joint request by Amgen and Macleods, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Macleods’ apremilast product during the term of the ’638 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On October 7, 2020, based on a joint request by Amgen and Amneal, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Amneal’s apremilast product during the term of the ’101, ’940, ’638, ’302, ’536, ’243, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On December 30, 2020, based on a joint request by Amgen and Shilpa, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Shilpa’s apremilast product during the term of the ’638, ’101 and ’854 Patents, unless authorized pursuant to a confidential settlement agreement. On January 26, 2021, based on a joint request by Amgen and Actavis, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Actavis’ apremilast product during the term of the ’940, ’516, ’638, ’302, ’536, ’717, ’330, ’854 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On March 24, 2021, based on a joint request by Amgen and Prinston, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Prinston’s apremilast product during the term of the ’638 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On April 6, 2021, based on a joint request by Amgen and Aurobindo, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Aurobindo’s apremilast product during the term of the ’940, ’516, ’638, ’302, ’101, ’536, ’717, ’243, ’330, ’854 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement.

On May 5, 2021, based on a joint request by Amgen and Cipla, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Cipla’s apremilast product during the term of the ’940, ’638, ’302, ’536, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 14, 2021, based on a joint request by Amgen and Torrent, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Torrent’s apremilast product during the term of the ’101, ’638, ’854 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 19, 2021, based on a joint request by Amgen and Alkem, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of Alkem’s apremilast product during the term of the ’940, ’638, ’302, ’536, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On May 25, 2021, based on a joint request by Amgen and MSN, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of MSN’s apremilast product during the term of the ’940, ’638, ’302, ’536, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On June 11, 2021, based on a joint request by Amgen and Pharmascience, the New Jersey District Court entered a consent judgment and

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injunction prohibiting the making, using, selling, offering to sell, or importing of Pharmascience’s apremilast product during the term of the ’243, ’940, ’638, ’302, ’101, ’536, ’330 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement. On June 17, 2021, based on a joint request by Amgen and DRL, the New Jersey District Court entered a consent judgment and injunction prohibiting the making, using, selling, offering to sell, or importing of DRL’s apremilast product during the term of the ’638, ’101, ’536 and ’541 Patents, unless authorized pursuant to a confidential settlement agreement.

Trial on the consolidated patent infringement action against Sandoz and Zydus was held at the New Jersey District Court from June 14 to 25, 2021, with closing arguments on July 28, 2021.

On September 28, 2021, consistent with its September 20, 2021 opinion and order, the New Jersey District Court entered final judgment in favor of Amgen and against Zydus with respect to claims 3 and 6 of the ’638 Patent, claim 6 of the ’536 Patent and claims 2 and 27 of the ’283 Patent; and final judgment in favor of Zydus and against Amgen with respect to claims 1 and 15 of the ’101 Patent and claims 2, 19 and 21 of the ’541 Patent. The final judgment ordered that the effective date of any final approval by the FDA of Zydus’s ANDA must be after expiration of the three infringed patents (the ’638, ’536 and ’283 Patents) and any regulatory exclusivity to which Amgen may become entitled. The final judgment also includes an injunction prohibiting Zydus from making, using, offering to sell, or selling in the United States, or importing into the United States, Zydus’s generic apremilast products during the term of the three infringed patents. On October 27, 2021, Zydus filed a notice of appeal to the Federal Circuit Court with respect to the ’638 Patent. On October 28, 2021, Amgen filed a notice of appeal to the Federal Circuit Court.

On October 12, 2021, the New Jersey District Court also entered final judgment in favor of Amgen and against Sandoz with respect to claims 3 and 6 of the ’638 Patent, claim 6 of the ’536 Patent and claims 1 and 15 of the ’101 Patent; and final judgment in favor of Sandoz and against Amgen with respect to claims 2, 19 and 21 of the ’541 Patent. The final judgment ordered that the effective date of any final approval by the FDA of Sandoz’s ANDA must be after expiration of the three infringed patents (the ’638, ’536 and ’101 Patents) and any regulatory exclusivity to which Amgen may become entitled. The final judgment also includes an injunction prohibiting Sandoz from making, using, offering to sell, or selling in the United States, or importing into the United States, Sandoz’s generic apremilast products during the term of the three infringed patents. On November 9, 2021, Sandoz filed a notice of appeal to the Federal Circuit Court with respect to the ‘638 and ‘101 Patents. On November 10, 2021, Amgen filed a notice of appeal to the Federal Circuit Court.

ENBREL 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, 8,163,522 (the ’522 Patent), 7,915,225, 8,119,605 and 8,722,631. 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, 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 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.

On November 2, 2021, Amgen and Bioepis, with the consent of Roche, jointly submitted to the New Jersey District Court a confidential stipulation and a form of final judgment and order of permanent injunction resolving the dispute between the parties and enjoining Bioepis from making, using, offering to sell, or selling within the United States, or importing into the United States, any product containing etanercept until the April 24, 2029 expiry of Roche’s ’522 Patent. On November 3, 2021, the New Jersey District Court entered final judgment and ordered a permanent injunction against Bioepis in conformity with the parties’ submission.

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Repatha Patent Litigation

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

In October 2014, Amgen initiated a series of lawsuits that were consolidated by the U.S. District Court for the District of Delaware (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 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. In January 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.

In February 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. In March 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 are all valid. In January 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 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. Sanofi and Regeneron filed an appeal of the judgment and the permanent injunction to the Federal Circuit Court. In February 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. In October 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).

In March 2018, the Federal Circuit Court issued a 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. In July 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 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 again 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 the jury verdict against them or for a new trial, and Amgen filed a motion for a permanent injunction. 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 and based on the subsequent hearing, on February 11, 2021 the Federal Circuit Court issued a decision affirming the Delaware District Court’s ruling. Amgen filed a petition for rehearing en banc which was denied on June 21, 2021. On November 18, 2021, Amgen filed a petition for writ of certiorari with the U.S. Supreme Court seeking review of the invalidation of claims 19 and 29 of the ’165 Patent and claim 7 of the ’741 Patent as lacking an enabling disclosure of the invention. On January 11, 2022, the U.S. Supreme Court requested that Sanofi and Regeneron file a response to Amgen’s petition, which is due March 14, 2022.

Patent Disputes in the International Region

We are involved in and expect future involvement in additional disputes regarding our PCSK9 patents in other jurisdictions and regions. This includes matters filed against us and that we have filed in Germany, Spain and Japan.

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In February 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 and 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 Lilly, Regeneron and Strawman Ltd. also filed oppositions to Amgen’s patent. In November 2018, the EPO confirmed the validity of Amgen’s EP 2,215,124, which was appealed to the Technical Board of Appeal (TBA). On October 29, 2020, the TBA upheld the validity of certain claims, including claims that protect Repatha, but ruled that broader claims encompassing PRALUENT were invalid. As a result of the TBA’s decision, national litigations regarding PRALUENT in Europe are in the process of being resolved. In Germany, Sanofi-Aventis Deutschland GmbH and Regeneron have filed actions seeking damages arising from the provisional enforcement of an injunction against PRALUENT that was lifted after the TBA’s October 29, 2020 ruling.

On April 24, 2020, the Supreme Court of Japan declined to hear Sanofi K.K.’s appeals making final the Japanese High Court’s decisions that PRALUENT infringes Amgen’s valid patent rights in Japan. On June 24, 2020, Amgen filed written answers to the invalidity trials initiated by Regeneron on February 12, 2020 before the Japan Patent Office seeking to invalidate Amgen’s Japanese patents that were previously held infringed by PRALUENT and valid over challenges filed by Sanofi K.K. The Japanese Patent Office dismissed Regeneron’s invalidity trials and Regeneron has appealed the decisions to the Japanese High Court. Damages proceedings against Sanofi K.K. are ongoing before the Tokyo District Court, where Sanofi K.K. has initiated new validity challenges to Amgen patents in Japan.

NEUPOGEN (filgrastim)/Neulasta Patent Litigation

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. On March 4, 2020, Pfizer filed a motion requesting the Delaware District Court to dismiss the complaint by Amgen alleging noninfringement of the ’707 Patent. In June 2020, the FDA approved Pfizer’s NYVEPRIA, a biosimilar to Amgen’s Neulasta.

On April 6, 2021, the Delaware District Court stayed further proceedings in the matter pending claim construction of the patent claims and, based on a subsequent hearing, determined on June 11, 2021 that the term at issue required no construction. Currently pending before the Delaware District Court is Pfizer’s motion for summary judgment of noninfringement, which has been fully briefed. No date has been set for argument on the motion.

Patent Trial and Appeal Board (PTAB) Challenge

Apotex PTAB Challenge

In February 2017, the PTAB of the USPTO granted Apotex’s petition to institute inter partes review (IPR) proceeding of U.S. Patent No. 8,952,138 (the ’138 Patent), challenging claims of the ’138 Patent as unpatentable. In May 2017, Amgen filed its response. In February 2018, the PTAB issued a final decision holding all but one claim of the ’138 Patent as unpatentable and Apotex filed a request for rehearing in March 2018.

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. On March 24, 2020, the Federal Circuit Court vacated the decision by the PTAB and remanded the case to the PTAB for proceeding consistent with the Federal Circuit Court’s decision in Arthrex Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019).

On July 14, 2020, Amgen and Apotex filed a joint motion to terminate the IPR proceedings stating that there is no current dispute between the parties with respect to the ’138 Patent. On July 29, 2020, the U.S. government filed a petition for writ of certiorari with respect to the cases that the Federal Circuit Court remanded to the PTAB, including the case regarding the ’138 Patent, for proceedings consistent with its decision in Arthrex Inc. v. Smith & Nephew, Inc., requesting that such remanded cases be held pending the U.S. Supreme Court’s disposition of the petition for writ of certiorari in United States v. Arthrex, Inc., No. 19-1434. On August 25, 2020, Amgen filed its response to the U.S. government’s petition for writ of certiorari indicating that Amgen did not intend to respond unless requested by the U.S. Supreme Court.

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On June 21, 2021, the U.S. Supreme Court decided United States v. Arthrex, Inc. On June 28, 2021, the U.S. Supreme Court granted the government’s pending certiorari petition and vacated and remanded the Federal Circuit Court’s judgment for further consideration under Arthrex.

On September 2, 2021, the Federal Circuit Court issued a remand to permit Amgen to request rehearing of the PTAB’s final written decision holding that all claims of the ’138 Patent as unpatentable.

On October 4, 2021, Amgen filed a request for the USPTO Director for a rehearing and review of the Final Written Decision pursuant to Arthrex. On November 22, 2021, the Director denied this request. On December 6, 2021, Amgen filed the Notice of Director review with the patent office.

Pfizer PTAB Challenge

On February 10, 2021, Pfizer filed a petition to institute IPR proceeding at the USPTO of U.S. Patent No. 8,273,707 (the ’707 Patent), challenging claims of the ’707 Patent as unpatentable. Amgen’s preliminary response was filed on May 18, 2021.

On August 17, 2021, the PTAB of the USPTO granted Pfizer’s petition to institute IPR of the ’707 Patent. On August 23, 2021, the PTAB issued the schedule for the proceeding, including oral argument (if requested) on May 18, 2022. On November 17, 2021, Amgen filed its Patent Owner’s Response.

Breach of Contract Action

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 (the New York Southern District Court) against Novartis seeking a declaratory judgment that Novartis materially breached two collaboration agreements Amgen and Novartis entered into in 2015 and 2017 (the 2015 Agreement and the 2017 Agreement, respectively) related to the development and commercialization of Aimovig due to Novartis’ 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 CGRP-related migraine therapy market. Amgen seeks to terminate its collaboration agreements with Novartis and also seeks damages from Novartis for breach of contract and negligent misrepresentation. Also on April 4, 2019, Novartis initiated a separate lawsuit against Amgen in the same court seeking declaratory judgment that Novartis, 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’ complaint and filed counterclaims seeking a declaratory judgment that Novartis 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 and also seeks damages from Novartis for breach of contract and negligent misrepresentation. On July 16, 2019, Novartis filed an amended complaint adding a claim for breach of contract alleging Novartis is owed amounts associated with 2018 budget overruns, and Amgen responded with a counterclaim alleging additional breaches by Novartis of the collaboration agreements. On September 17, 2019 and October 8, 2019, Novartis and Amgen, respectively, each filed its motion for judgment on the pleadings. On February 3, 2020, Amgen was granted leave to file its amended counterclaims. On February 4, 2020, Amgen filed its amended answer to Novartis’ first amended complaint and second amended counterclaims for affirmative relief to add a fraudulent inducement claim. On February 18, 2020, Novartis filed its answer and affirmative defenses to Amgen’s second amended counterclaims.

On June 9, 2020, the New York Southern District Court entered an order granting Novartis’ motion for judgment on the pleadings that Novartis did not breach the 2017 Agreement, and denying Amgen’s motions for judgment on the pleadings seeking dismissal of Novartis’ amended complaint that Novartis did not breach the 2015 Agreement or the 2017 Agreement, and Novartis timely cured any breach. On June 23, 2020, Amgen filed a motion for clarification and/or reconsideration of the June 9, 2020 order, which was denied on September 14, 2020.

On June 2, 2021, the parties executed agreements to settle two claims in the litigation, relating to the 2018 budget overrun dispute and certain counterclaims alleging breaches by Novartis of the 2015 and 2017 Agreements related to the development and commercialization of Aimovig, and to amend and restate the 2017 collaboration agreement. As part of the agreement, Amgen paid $48 million to Novartis to resolve the 2018 budget dispute.

On October 26, 2021, the New York Southern District Court held a status conference with the parties and set the dates for Novartis’ opening brief for its motion for partial summary judgment on two claims, fraudulent inducement and negligent misrepresentation.

On January 31, 2022, the parties resolved all claims in the litigation.

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Antitrust Class Action

Sensipar Antitrust Class Actions

From February to April 2019, four plaintiffs filed putative class action lawsuits against Amgen and various entities affiliated with Teva Pharmaceuticals USA, Inc. (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 Laboratories, Inc. (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 an 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, the motions in the class action lawsuits were transferred to the U.S. Magistrate Judge for the District of Delaware (Magistrate Judge) for a recommendation. The MDL panel certified its conditional transfer order on February 6, 2020 transferring the additional class action lawsuit brought in the U.S. District Court for the Southern District of Florida, captioned MSP Recovery Claims v. Amgen Inc., et al., to the Delaware District Court.

On July 22, 2020, the Magistrate Judge issued a recommendation to the Delaware District Court that the claims against Amgen be dismissed but leave be given to plaintiffs to amend their complaints. On August 5, 2020, the plaintiffs filed objections to the Magistrate Judge’s report and recommendation. On August 19, 2020, Amgen filed a response to the plaintiffs’ objections. On November 30, 2020, the District Court adopted the Magistrate Judge’s recommendation in part and denied it in part, denying Amgen’s motion to dismiss on the grounds that plaintiffs adequately alleged reverse payment claims but granted Amgen’s motion to dismiss with respect to the other Federal antitrust claims. On December 23, 2020, Teva, Watson and Actavis filed a motion for interlocutory appeal and for a stay pending appeal and Amgen filed its joinder (the 1292 Motion). On January 5, 2021, a joint status report was filed advising the Delaware District Court that the defendants are still considering whether to withdraw the 1292 Motion and plaintiffs’ offer to stay discovery, pending further rulings on motions to dismiss the amended complaints. On January 19, 2021, a joint status report was filed pursuant to the Delaware District Court’s January 6, 2021 order along with a stipulation to defer the 1292 Motion until after rulings on the amended complaints.

On February 16, 2021, the plaintiffs in the antitrust class action lawsuit brought on behalf of putative classes of direct or indirect purchasers of Sensipar filed their amended complaints. On March 4, 2021, a stipulation and order regarding the filing of a second amended complaint were filed to add another plaintiff: Teamsters Western Region & Local 177 Health Care Fund. On March 17, 2021, a defendant, MSP Recovery Claims, Series LLC, filed its notice of voluntary dismissal. On March 30, 2021, the remaining defendants, including Amgen, filed their motions to dismiss the second amended complaint.

On April 27, 2021, plaintiffs filed their oppositions to defendants’ (including Amgen’s) motion to dismiss, and defendants’ reply was filed on May 25, 2021. A hearing on defendants’ motion to dismiss was held in the Delaware District Court on July 13, 2021.

Humira Biosimilar Antitrust Class Actions

From March to May 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,

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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, Fresenius Kabi USA, LLC (Fresenius), 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 AMGEVITA, 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 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.

On August 9, 2019, the plaintiffs filed their consolidated complaint, naming as defendants Amgen, along with AbbVie, Bioepis, Sandoz and Fresenius. 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. On June 8, 2020, the Illinois Northern District Court issued an order granting the motion by the defendants to dismiss the consolidated class action complaint. On June 29, 2020, the plaintiffs filed a status report asking the Illinois Northern District Court to convert the dismissal to one with prejudice. On June 30, 2020, the Illinois Northern District Court granted the motion. On July 28, 2020, the plaintiffs filed a notice of appeal. On October 5, 2020, the plaintiffs-appellants filed their opening brief to the U.S. Court of Appeals for the Seventh Circuit. Plaintiffs-appellants amicus briefs were filed in October 2020, including one by the FTC and one on behalf of 20 states, each filed on October 13, 2020. On December 21, 2020, the defendants-appellees filed their opposition brief. Defendants-appellees amicus briefs, including one by the DoJ, were filed on December 28, 2020. On February 25, 2021, oral argument was held by the U.S. Court of Appeals for the Seventh Circuit on the appeal by plaintiffs-appellants of the lower court’s dismissal of the consolidated complaint with prejudice.

U.S. Tax Litigation

Amgen Inc. & Subsidiaries v. Commissioner of Internal Revenue

See Note 6, Income taxes, for discussion of the IRS tax dispute and the Company’s petition in the U.S. Tax Court.

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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. The following table summarizes the remaining scheduled repatriation tax payments as of December 31, 2021 (in millions):

			Amounts
2022			$	587
2023			1,100
2024			1,467
2025			1,834
Total remaining U.S. repatriation tax commitments			$	4,988

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SCHEDULE II

AMGEN INC.

VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2021, 2020 and 2019

(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, 2021						$	32					$	—					$	—					$	(6)					$	26
Year ended December 31, 2020						$	26					$	8					$	—					$	(2)					$	32
Year ended December 31, 2019						$	48					$	—					$	—					$	(22)					$	26

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