Amgen 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37702

Amgen Inc.

(Exact name of registrant as specified in its charter)

Delaware						95-3540776
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
One Amgen Center Drive						91320-1799
Thousand Oaks
California
(Address of principal executive offices)						(Zip Code)

(805) 447-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common stock, $0.0001 par value			AMGN			The Nasdaq Stock Market LLC
2.00% Senior Notes due 2026			AMGN26			The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑			Accelerated filer			☐			Non-accelerated filer			☐
Smaller reporting company			☐			Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of April 22, 2022, the registrant had 534,199,933 shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX

						Page No.
			Defined Terms and Products			ii
PART I - FINANCIAL INFORMATION						1
Item 1.			FINANCIAL STATEMENTS			1
			CONDENSED CONSOLIDATED STATEMENTS OF INCOME			1
			CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME			2
			CONDENSED CONSOLIDATED BALANCE SHEETS			3
			CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY			4
			CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			5
			NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			27
Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			40
Item 4.			CONTROLS AND PROCEDURES			40
PART II - OTHER INFORMATION						41
Item 1.			LEGAL PROCEEDINGS			41
Item 1A.			RISK FACTORS			41
Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			43
Item 6.			EXHIBITS			44
INDEX TO EXHIBITS						45
SIGNATURES						51

i

Defined Terms and Products

Defined terms

We use several terms in this Form 10-Q—including but not limited to those that are finance, regulation and disease-state related as well as names of other companies, which are given below.

Term			Description
ANDA			Abbreviated New Drug Application
AOCI			accumulated other comprehensive income (loss)
ASR			accelerated share repurchase
BeiGene			BeiGene, Ltd.
BiTE®			bispecific T-cell engager
COVID-19			coronavirus disease 2019
EPS			earnings per share
ESA			erythropoiesis-stimulating agent
EU			European Union
FASB			Financial Accounting Standards Board
FDA			U.S. Food and Drug Administration
Fitch			Fitch Ratings, Inc.
GAAP			U.S. generally accepted accounting principles
HGRAC			Human Genetic Resources Administration of China
IPR&D			in-process research and development
IRS			Internal Revenue Service
LIBOR			London Interbank Offered Rate
mCRPC			metastatic castration-resistant prostate cancer
MD&A			management’s discussion and analysis
Moody’s			Moody’s Investors Service, Inc.
Neumora			Neumora Therapeutics, Inc.
NSCLC			non-small cell lung cancer
OECD			Organization for Economic Co-operation and Development
ORR			objective response rate
PFS			progression-free survival
PTAB			Patent Trial and Appeal Board
R&D			research and development
RAR			Revenue Agent Report
ROW			rest of world
S&P			Standard & Poor’s Financial Services LLC
SEC			U.S. Securities and Exchange Commission
SOFR			Secured Overnight Financing Rate
SG&A			selling, general and administrative
Teneobio			Teneobio, Inc.
U.S. Treasury			U.S. Department of Treasury
UTB			unrecognized tax benefit

ii

Products

The brand names of our products, our delivery devices and certain of our product candidates and their associated generic names are given below.

Term						Description
Aimovig						Aimovig® (erenumab-aooe)
AMGEVITA						AMGEVITA™ (adalimumab)
Aranesp						Aranesp® (darbepoetin alfa)
BLINCYTO						BLINCYTO® (blinatumomab)
ENBREL						Enbrel® (etanercept)
EPOGEN						EPOGEN® (epoetin alfa)
EVENITY						EVENITY® (romosozumab-aqqg)
KANJINTI						KANJINTI® (trastuzumab-anns)
KYPROLIS						KYPROLIS® (carfilzomib)
LUMAKRAS/LUMYKRAS						LUMAKRAS® / LUMYKRAS™ (sotorasib)
MVASI						MVASI® (bevacizumab-awwb)
Neulasta						Neulasta® (pegfilgrastim)
NEUPOGEN						NEUPOGEN® (filgrastim)
Nplate						Nplate® (romiplostim)
Onpro						Onpro®
Otezla						Otezla® (apremilast)
Parsabiv						Parsabiv® (etelcalcetide)
Prolia						Prolia® (denosumab)
Repatha						Repatha® (evolocumab)
Sensipar/Mimpara						Sensipar®/Mimpara™ (cinacalcet)
TEZSPIRE						TEZSPIRE™ (tezepelumab-ekko)
Vectibix						Vectibix® (panitumumab)
XGEVA						XGEVA® (denosumab)

iii

PART I — FINANCIAL INFORMATION

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per-share data)

(Unaudited)

			Three months ended March 31,
			2022						2021
Revenues:
Product sales			$	5,731					$	5,592
Other revenues			507						309
Total revenues			6,238						5,901
Operating expenses:
Cost of sales			1,561						1,490
Research and development			959						967
Selling, general and administrative			1,228						1,254
Other			(10)						61
Total operating expenses			3,738						3,772
Operating income			2,500						2,129
Other income (expense):
Interest expense, net			(295)						(285)
Other (expense) income, net			(530)						13
Income before income taxes			1,675						1,857
Provision for income taxes			199						211
Net income			$	1,476					$	1,646
Earnings per share:
Basic			$	2.69					$	2.85
Diluted			$	2.68					$	2.83
Shares used in calculation of earnings per share:
Basic			548						577
Diluted			551						581

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

			Three months ended March 31,
			2022						2021
Net income			$	1,476					$	1,646
Other comprehensive income, net of reclassification adjustments and taxes:
Foreign currency translation			(51)						(39)
Cash flow hedges			84						190
Other			—						1
Other comprehensive income, net of reclassification adjustments and taxes			33						152
Comprehensive income			$	1,509					$	1,798

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per-share data)

			March 31, 2022						December 31, 2021
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	6,528					$	7,989
Marketable securities			16						48
Trade receivables, net			5,077						4,895
Inventories			4,411						4,086
Other current assets			2,488						2,367
Total current assets			18,520						19,385
Property, plant and equipment, net			5,142						5,184
Intangible assets, net			14,567						15,182
Goodwill			14,897						14,890
Other noncurrent assets			6,070						6,524
Total assets			$	59,196					$	61,165
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	1,403					$	1,366
Accrued liabilities			10,639						10,731
Current portion of long-term debt			844						87
Total current liabilities			12,886						12,184
Long-term debt			36,010						33,222
Long-term tax liabilities			6,652						6,594
Other noncurrent liabilities			2,732						2,465
Contingencies and commitments
Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—534.2 shares in 2022 and 558.3 shares in 2021			31,247						32,096
Accumulated deficit			(29,568)						(24,600)
Accumulated other comprehensive loss			(763)						(796)
Total stockholders’ equity			916						6,700
Total liabilities and stockholders’ equity			$	59,196					$	61,165

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per-share data)

(Unaudited)

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The following MD&A is intended to assist the reader in understanding Amgen’s business. MD&A is provided as a supplement to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. Our results of operations discussed in MD&A are presented in conformity with GAAP. Amgen operates in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.

Forward-looking statements

This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases, written statements or our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We describe our respective risks, uncertainties and assumptions that could affect the outcome or results of operations in Item 1A. Risk Factors in Part II herein and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. Reference is made in particular to forward-looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, EPS, liquidity and capital resources, trends, planned dividends, stock repurchases, collaborations and effects of pandemics. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Overview

Amgen is a biotechnology company committed to unlocking the potential of biology for patients suffering from serious illnesses. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

Our principal products are ENBREL, Prolia, XGEVA, Otezla, Aranesp, Neulasta, Repatha, KYPROLIS and Nplate. We also market a number of other products, including MVASI, Vectibix, EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, KANJINTI, Parsabiv, LUMAKRAS/LUMYKRAS, NEUPOGEN, Sensipar/Mimpara and TEZSPIRE.

COVID-19 pandemic

Since the onset of the pandemic in 2020, we have been closely monitoring the pandemic’s effects on our global operations. We continue to take appropriate steps to minimize risks to our employees, a significant number of whom have continued to work virtually. To date, our remote working arrangements have not significantly affected our ability to maintain critical business operations, and we have not experienced disruptions to or shortages of our supply of medicines.

Since the beginning of the COVID-19 pandemic, we have seen changes in demand for some of our products driven by changes in the frequency of patient visits to doctors’ offices that has impacted the provision of treatments to existing patients and reduced diagnoses in new patients. During 2021, there was gradual recovery in both patient visits and diagnoses that approached pre-COVID-19 levels early in the fourth quarter. However, in late 2021, Omicron and other variants began to impact the healthcare sector and, as a result, COVID-19 continued to affect our business around the world through the first quarter of 2022. Going forward, we may experience ongoing variability in demand patterns from COVID-19 for 2022. Further, the cumulative decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which continues to impact our business. We will continue to closely monitor the effects of COVID-19 on patient behavior and access to care.

Since early 2021, global vaccination efforts have been under way to control the pandemic. Challenges to vaccination efforts, new variants and other causes of virus spread may require governments to issue additional restrictions and/or order shutdowns in various geographies. As a result, we expect to see continued volatility for at least the duration of the pandemic as governments respond to current local conditions.

With respect to our drug development activities, we are continuously monitoring COVID-19 infection rates, including changes from new variants, and working to mitigate effects on future study enrollment in our clinical trials and evaluating the impacts in all countries where our clinical trials occur. We remain focused on supporting our active clinical sites in their provision of care to patients and in our provision of investigational drug supply.

Despite the ongoing pandemic and business impacts noted above, we believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures and debt service requirements as well as to engage in capital-return and other business initiatives that we plan to pursue. For a discussion of the risks the COVID-19 pandemic presents to our results, see Part 1, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

Significant developments

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2021. For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, 2021.

Operations

New manufacturing facilities

• In March 2022, we broke ground to build a drug substance plant in North Carolina that will increase our manufacturing network capacity.

Products/Pipeline

Oncology/Hematology

LUMAKRAS/LUMYKRAS

• In April 2022, we announced long-term efficacy and safety data from the CodeBreaK 100 Phase 1/2 trial in patients with KRAS G12C-mutated advanced NSCLC who received LUMAKRAS. Data from 174 heavily pre-treated patients (172 with baseline measurable lesion(s)) were featured in an oral presentation at the American Association for Cancer Research annual meeting. LUMAKRAS demonstrated a centrally confirmed ORR of 40.7%, disease control rate of 83.7% and median duration of response of 12.3 months. The results also showed median PFS of 6.3 months and overall survival of 12.5 months, with 32.5% of patients still alive at two years. No new safety signals for LUMAKRAS were identified with the long-term follow-up.

Inflammation

ABP 654

• In April 2022, we announced preliminary results from a Phase 3 study evaluating the efficacy and safety of ABP 654 compared to STELARA® (ustekinumab) in adult patients with moderate to severe plaque psoriasis. The study met the primary efficacy endpoint, demonstrating no clinically meaningful differences between ABP 654 and STELARA®.

Repatha

• In April 2022, we announced top-line results from the Repatha FOURIER-OLE studies, two open label extension (OLE) studies to the Phase 3 FOURIER cardiovascular outcomes trial, composed of a study with 5,035 patients enrolled in Eastern Europe and the United States and a study with 1,600 patients enrolled in Western Europe. FOURIER-OLE was designed to assess the long-term safety and tolerability of Repatha over five years in adults with clinically evident atherosclerotic cardiovascular disease. The FOURIER-OLE studies showed that Repatha, administered at 140 mg every two weeks or 420 mg monthly, was safe and well-tolerated. Patients received Repatha for approximately 5 years, with some patients receiving Repatha for up to 8.5 years in aggregate across the FOURIER and OLE studies. No new long-term safety findings were observed. In addition, medically significant and sustained reduction in low-density lipoprotein cholesterol (LDL-C) levels were observed in most patients, with greater than 85 percent of patients achieving an LDL-C level of <40 mg/dL during the OLE period.

Selected financial information

The following is an overview of our results of operations (in millions, except percentages and per-share data):

			Three months ended March 31,
			2022						2021						Change
Product sales
U.S.			$	4,037					$	3,903					3		%
ROW			1,694						1,689						—		%
Total product sales			5,731						5,592						2		%
Other revenues			507						309						64		%
Total revenues			$	6,238					$	5,901					6		%
Operating expenses			$	3,738					$	3,772					(1)		%
Operating income			$	2,500					$	2,129					17		%
Net income			$	1,476					$	1,646					(10)		%
Diluted EPS			$	2.68					$	2.83					(5)		%
Diluted shares			551						581						(5)		%

In the following discussion of changes in product sales, any reference to unit demand growth or decline refers to changes in the purchases of our products by healthcare providers (such as physicians or their clinics), dialysis centers, hospitals and pharmacies. In addition, any reference to increases or decreases in inventory refers to changes in inventory held by wholesaler customers and end users (such as pharmacies).

Total product sales increased for the three months ended March 31, 2022, primarily driven by higher unit demand for certain brands, including Repatha, Prolia, EVENITY and LUMAKRAS/LUMYKRAS, and by favorable changes to estimated sales deductions, partially offset by declines in the net selling prices of certain products and the negative impact of foreign currency exchange. For the remainder of 2022, we expect that net selling prices will continue to decline at a portfolio level driven by increased competition. In addition, in the first quarter of 2022, ENBREL and Otezla followed the historic pattern of lower first quarter sales relative to the remainder of the year due to the impact of benefit plan changes, insurance reverifications and increased co-pay expenses as U.S. patients work through deductibles.

Throughout the COVID-19 pandemic, we experienced changes in demand for some of our products. The pandemic has interrupted many physician–patient interactions, which has led to delays in diagnoses and treatments, with varying degrees of impact across our portfolio. In general, declines in the sales of our products that were impacted by the dynamics of the pandemic were most significant in the early months of the pandemic, with product demand beginning to show some recovery in late 2020. During 2021, we observed gradual recovery from the COVID-19 pandemic, with patient visits and diagnosis rates that approached pre-pandemic levels early in the fourth quarter. However, late in 2021, Omicron and other variants began to impact the healthcare sector. This led to diminished capacity in the healthcare sector and reduced working days for our own sales force. In March and continuing into April we have seen the impact of Omicron in the U.S. recede, which allowed us to engage in increased field-facing activities. Provider and patient activity has also increased leading to improvements in demand for our products. However, the cumulative decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which continues to impact our business. Given the unpredictable nature of the pandemic, we expect there could be ongoing intermittent disruptions in physician–patient interactions, and as a result, we may experience quarter-to-quarter variability. In addition, other changes in the healthcare ecosystem have the potential to introduce variability into product sales trends. For example, changes in U.S. employment have led to changes to the insured population. Growth in numbers of Medicaid enrollees and uninsured individuals may have a negative impact on product demand and sales. Overall, uncertainty remains around the timing and magnitude of our sales during the COVID-19 pandemic. See Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

Other revenues increased for the three months ended March 31, 2022, primarily driven by the sale of COVID-19 antibody material.

Operating expenses decreased for the three months ended March 31, 2022, primarily driven by lower SG&A expense and expenses associated with cost-saving initiatives that occurred in the three months ended March 31, 2021, partially offset by higher cost of sales. Our operating expenses are expected to be higher in the remaining quarters of the year as we continue to invest in innovation and long-term growth.

Although changes in foreign currency exchange rates result in increases or decreases in our reported international product sales, the benefit or detriment that such movements have on our international product sales is partially offset by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities. Our hedging activities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros. The net impact from changes in foreign currency exchange rates was not material for the three months ended March 31, 2022 and 2021.

Results of operations

Product sales

Worldwide product sales were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
ENBREL			$	862					$	924					(7)		%
Prolia			852						758						12		%
XGEVA			502						468						7		%
Otezla			451						476						(5)		%
Aranesp			358						355						1		%
Neulasta			348						482						(28)		%
Repatha			329						286						15		%
KYPROLIS			287						251						14		%
Nplate			266						227						17		%
Other products			1,476						1,365						8		%
Total product sales			$	5,731					$	5,592					2		%

Future sales of our products will depend in part on the factors discussed below and in the following sections of this report: (i) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview and Selected Financial Information; and (ii) Part II, Item 1A. Risk Factors; and in the following sections of our Annual Report on Form 10-K for the year ended December 31, 2021: (i) Item 1. Business—Marketing, Distribution and Selected Marketed Products, (ii) Item 1A. Risk Factors and (iii) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of Operations—Product Sales.

ENBREL

Total ENBREL sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
ENBREL — U.S.			$	843					$	894					(6)		%
ENBREL — Canada			19						30						(37)		%
Total ENBREL			$	862					$	924					(7)		%

The decrease in ENBREL sales for the three months ended March 31, 2022, was driven by declines in net selling price and unfavorable changes in inventory.

Prolia

Total Prolia sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Prolia — U.S.			$	582					$	501					16		%
Prolia — ROW			270						257						5		%
Total Prolia			$	852					$	758					12		%

The increase in global Prolia sales for the three months ended March 31, 2022, was driven by higher unit demand and net selling price.

XGEVA

Total XGEVA sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
XGEVA — U.S.			$	368					$	334					10		%
XGEVA — ROW			134						134						—		%
Total XGEVA			$	502					$	468					7		%

The increase in global XGEVA sales for the three months ended March 31, 2022, was driven by favorable changes to estimated sales deductions and higher net selling price partially offset by lower unit demand.

Otezla

Total Otezla sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Otezla — U.S.			$	350					$	366					(4)		%
Otezla — ROW			101						110						(8)		%
Total Otezla			$	451					$	476					(5)		%

The decrease in global Otezla sales for the three months ended March 31, 2022, was primarily driven by lower net selling price and unfavorable changes in inventory, partially offset by higher unit demand.

For a discussion of litigation related to Otezla, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

Aranesp

Total Aranesp sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Aranesp — U.S.			$	137					$	125					10		%
Aranesp — ROW			221						230						(4)		%
Total Aranesp			$	358					$	355					1		%

The increase in global Aranesp sales for the three months ended March 31, 2022, was driven by favorable changes to estimated sales deductions, partially offset by lower net selling price due to competition.

Aranesp continues to face competition from a long-acting ESA and also faces competition from biosimilar versions of EPOGEN, which will continue to impact sales in the future.

Neulasta

Total Neulasta sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Neulasta — U.S.			$	304					$	421					(28)		%
Neulasta — ROW			44						61						(28)		%
Total Neulasta			$	348					$	482					(28)		%

The decrease in global Neulasta sales for the three months ended March 31, 2022, was driven by net selling price and unit demand. Increased competition as a result of biosimilar versions of Neulasta has had and will continue to have a significant adverse impact on brand sales, including accelerating net price erosion and lower unit demand. We also expect other biosimilar versions, including biosimilars that will use an on-body injector that would compete with our Onpro injector, to be approved in the future.

For a discussion of ongoing patent litigations related to biosimilars, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 and Note 13, Contingencies and commitments, to the condensed consolidated financial statements.

Repatha

Total Repatha sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Repatha — U.S.			$	165					$	139					19		%
Repatha — ROW			164						147						12		%
Total Repatha			$	329					$	286					15		%

The increase in global Repatha sales for the three months ended March 31, 2022, was driven by higher unit demand, partially offset by lower net selling price. Contracting changes to improve Medicare Part D and commercial patient access resulted in the decrease to net selling price.

For a discussion of ongoing litigation related to Repatha, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 and Note 13, Contingencies and commitments, to the condensed consolidated financial statements.

KYPROLIS

Total KYPROLIS sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
KYPROLIS — U.S.			$	196					$	159					23		%
KYPROLIS — ROW			91						92						(1)		%
Total KYPROLIS			$	287					$	251					14		%

The increase in global KYPROLIS sales for the three months ended March 31, 2022, was driven by higher unit demand.

The FDA has reported that it has granted tentative or final approval of ANDAs for generic carfilzomib products filed by a number of companies. The date of approval of those ANDAs for generic carfilzomib products is governed by the Hatch–Waxman Act and any applicable settlement agreements between us and certain companies that seek to develop generic carfilzomib products.

Nplate

Total Nplate sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Nplate — U.S.			$	156					$	112					39		%
Nplate — ROW			110						115						(4)		%
Total Nplate			$	266					$	227					17		%

The increase in global Nplate sales for the three months ended March 31, 2022, was driven by higher unit demand and favorable changes to estimated sales deductions.

Other products

Other product sales by geographic region were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
MVASI — U.S.			$	168					$	224					(25)		%
MVASI — ROW			76						70						9		%
Vectibix — U.S.			85						79						8		%
Vectibix— ROW			116						112						4		%
EVENITY — U.S.			110						57						93		%
EVENITY— ROW			60						50						20		%
BLINCYTO — U.S.			79						65						22		%
BLINCYTO — ROW			59						42						40		%
EPOGEN — U.S.			120						125						(4)		%
AMGEVITA — ROW			108						106						2		%
Aimovig — U.S.			98						66						48		%
Aimovig — ROW			3						—						NA
KANJINTI — U.S.			80						130						(38)		%
KANJINTI — ROW			16						31						(48)		%
Parsabiv — U.S.			57						46						24		%
Parsabiv — ROW			29						33						(12)		%
LUMAKRAS — U.S.			48						—						NA
LUMYKRAS — ROW			14						—						NA
NEUPOGEN — U.S.			23						18						28		%
NEUPOGEN — ROW			15						16						(6)		%
Sensipar — U.S.			4						—						NA
Sensipar/Mimpara — ROW			16						23						(30)		%
Other — U.S.			64						42						52		%
Other — ROW			28						30						(7)		%
Total other products			$	1,476					$	1,365					8		%
Total U.S. — other products			$	936					$	852					10		%
Total ROW — other products			540						513						5		%
Total other products			$	1,476					$	1,365					8		%

NA - not applicable

Operating expenses

Operating expenses were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021						Change
Operating expenses:
Cost of sales			$	1,561					$	1,490					5		%
% of product sales			27.2		%				26.6		%
% of total revenues			25.0		%				25.2		%
Research and development			$	959					$	967					(1)		%
% of product sales			16.7		%				17.3		%
% of total revenues			15.4		%				16.4		%
Selling, general and administrative			$	1,228					$	1,254					(2)		%
% of product sales			21.4		%				22.4		%
% of total revenues			19.7		%				21.3		%
Other			$	(10)					$	61					*
Total operating expenses			$	3,738					$	3,772					(1)		%

• • Change in excess of 100%

Cost of sales

Cost of sales decreased to 25.0% of total revenues for the three months ended March 31, 2022, primarily driven by the COVID-19 antibody profit share agreement and lower amortization expense from acquisition-related assets, partially offset by higher manufacturing costs and increased royalties and profit share.

Research and development

The decrease in R&D expense for the three months ended March 31, 2022, was driven by lower marketed product support and research and early pipeline spend, which included a business development acquisition in the three months ended March 31, 2021, partially offset by higher late-stage development program spend.

Selling, general and administrative

The decrease in SG&A expense for the three months ended March 31, 2022, was primarily driven by lower spend in general and administrative activities.

Other

Other operating expenses for the three months ended March 31, 2022, consisted primarily of an IPR&D asset adjustment. Other operating expenses for the three months ended March 31, 2021, consisted primarily of expenses related to cost savings initiatives.

Nonoperating expense/income and income taxes

Nonoperating expense/income and income taxes were as follows (dollar amounts in millions):

			Three months ended March 31,
			2022						2021
Interest expense, net			$	(295)					$	(285)
Other (expense) income, net			$	(530)					$	13
Provision for income taxes			$	199					$	211
Effective tax rate			11.9		%				11.4		%

Interest expense, net

The increase in Interest expense, net, for the three months ended March 31, 2022, was primarily due to higher overall debt outstanding and higher LIBOR rates in the current year period on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps.

Other (expense) income, net

The decrease in Other (expense) income, net, for the three months ended March 31, 2022, was primarily due to net losses recognized on our strategic equity investments in the current year compared with net gains recognized in the prior year.

Income taxes

The increase in our effective tax rate for the three months ended March 31, 2022, was primarily due to current year net unfavorable items compared to last year, offset by changes in earnings mix.

The Administration proposed and Congress is considering significant changes to existing tax law. These changes, if enacted, could substantially increase taxes we pay to the U.S. government. Further, the OECD recently reached agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries. If enacted, this agreement could result in tax increases in both the United States and foreign jurisdictions. The U.S. Treasury recently released final foreign tax credit regulations that eliminate U.S. creditability of the Puerto Rico Excise Tax beginning in 2023, which will increase our U.S. tax liability. The U.S. territory of Puerto Rico is considering changes to its tax system that may minimize or eliminate this impact, but the outcome of such potential changes is uncertain. Changes to existing tax law in the United States, the U.S. territory of Puerto Rico, or other jurisdictions, including the potential changes discussed above, could result in tax increases where we do business and could have a material adverse effect on the results of our operations.

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 Statutory Notices of Deficiency (Notices) for 2010, 2011 and 2012 that we received in May and July 2021, which seek to increase our U.S. taxable income for 2010-2012 by an amount that would result in additional federal tax of approximately $3.6 billion plus interest. Any additional tax that could be imposed for 2010-2012 would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings.

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 but were unable to reach resolution. In April 2022, we received a Notice that seeks to increase our U.S. taxable income for 2013-2015 by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest. In addition, the Notice asserts penalties of approximately $2.0 billion. Any additional tax that could be imposed for 2013-2015 would be reduced by up to approximately $2.2 billion of repatriation tax previously accrued on our foreign earnings.

We firmly believe that the IRS positions set forth in the 2010-2012 and 2013-2015 Notices are without merit. We are contesting the 2010-2012 Notices through the judicial process, and we expect to file a Petition in the U.S. Tax Court to contest the 2013-2015 Notice through the judicial process. We will seek consolidation of the two periods into one case in Tax Court.

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.

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 condensed consolidated financial statements.

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

See Part II, Item 1A, Risk Factors—The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability, and Note 4, Income taxes, to the condensed consolidated financial statements for further discussion.

Financial condition, liquidity and capital resources

Selected financial data were as follows (in millions):

			March 31, 2022						December 31, 2021
Cash, cash equivalents and marketable securities			$	6,544					$	8,037
Total assets			$	59,196					$	61,165
Current portion of long-term debt			$	844					$	87
Long-term debt			$	36,010					$	33,222
Stockholders’ equity			$	916					$	6,700

Cash, cash equivalents and marketable securities

Our balance of cash, cash equivalents and marketable securities was $6.5 billion at March 31, 2022. The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

Capital allocation

Consistent with the objective to optimize our capital structure, we deploy our accumulated cash balances in a strategic manner and consider a number of alternatives, including strategic transactions (including those that expand our portfolio of products in areas of therapeutic interest), payment of dividends, stock repurchases and repayment of debt.

We intend to continue to invest in our business while returning capital to stockholders through the payment of cash dividends and stock repurchases, thereby reflecting our confidence in the future cash flows of our business and our desire to optimize our cost of capital. The timing and amount of future dividends and stock repurchases will vary based on a number of factors, including future capital requirements for strategic transactions, availability of financing on acceptable terms, debt service requirements, our credit rating, changes to applicable tax laws or corporate laws, changes to our business model and periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and the Company’s agreements. In addition, the timing and amount of stock repurchases may also be affected by our overall level of cash, stock price and blackout periods, during which we are restricted from repurchasing stock. The manner of stock repurchases may include block purchases, tender offers, ASRs and market transactions.

In December 2021, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock for the first quarter of 2022, an increase of 10% for this period, which was paid on March 8, 2022. In March 2022, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which will be paid on June 8, 2022.

We also returned capital to stockholders through our stock repurchase program. During the three months ended March 31, 2022, we executed trades to repurchase $5.4 billion of common stock, including $5.1 billion of an initial purchase under the ASR agreements described below. As of March 31, 2022, $4.6 billion of authorization remained available under our stock repurchase program.

In February 2022, we entered into ASR agreements under which we paid an aggregate amount of $6.0 billion to the Dealers and retired an initial 23.3 million shares of common stock. Approximately $0.9 billion of stock remains to be delivered by the Dealers pending final settlement, which will be based on the daily volume-weighted average stock price of our common stock during the terms of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. At settlement, which is scheduled to occur in the third quarter of 2022, the Dealers may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or to make a cash payment, at our election, to the Dealers.

As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of March 31, 2022 and December 31, 2021. Our accumulated deficit is not anticipated to affect our future ability to operate, repurchase stock, pay dividends or repay our debt given our continuing profitability and strong financial position.

We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, our plans to pay dividends and repurchase stock and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities. We anticipate that our liquidity needs can be met through a variety of sources, including cash provided by operating activities, sales of marketable securities, borrowings through commercial paper and/or syndicated credit facilities and access to other domestic and foreign debt markets and equity markets. See our Annual Report on Form 10-K for the year ended December 31, 2021, Part I, Item 1A. Risk Factors—Global economic conditions may negatively affect us and may magnify certain risks that affect our business.

Certain of our financing arrangements contain nonfinancial covenants. In addition, our revolving credit agreement includes a financial covenant that 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 March 31, 2022.

Cash flows

Our summarized cash flow activity was as follows (in millions):

			Three months ended March 31,
			2022						2021
Net cash provided by operating activities			$	2,164					$	2,104
Net cash used in investing activities			$	(111)					$	(319)
Net cash used in financing activities			$	(3,514)					$	(1,939)

Operating

Cash provided by operating activities has been and is expected to continue to be our primary recurring source of funds. Cash provided by operating activities during the three months ended March 31, 2022, increased primarily due to higher net income, after adjustments for noncash items, partially offset by the impact of working capital items.

Investing

Cash used in investing activities during the three months ended March 31, 2022, was primarily due to $190 million of capital expenditures, partially offset by proceeds from sales of property, plant and equipment. Cash used in investing activities during the three months ended March 31, 2021, was primarily due to cash outflows related to capital expenditures of $166 million and net activity related to marketable securities of $74 million. We currently estimate 2022 spending on capital projects to be approximately $950 million.

Financing

Cash used in financing activities during the three months ended March 31, 2022, was primarily due to payments to repurchase our common stock of $6.4 billion, including amounts paid under the ASR agreements discussed above, and the payment of dividends of $1.1 billion, partially offset by proceeds from the issuance of debt of $4.0 billion. Cash used in financing activities during the three months ended March 31, 2021, was primarily due to the payment of dividends of $1.0 billion and payments to repurchase our common stock of $871 million. See Note 9, Financing arrangements, and Note 10, Stockholders’ equity, to the condensed consolidated financial statements for further discussion.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. A summary of our critical accounting policies and estimates is presented in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2021.