Item 1. FINANCIAL STATEMENTS

134K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per-share data)

(Unaudited)

Three months ended September 30,Nine months ended September 30,
2024202320242023
Revenues:
Product sales$8,151$6,548$23,310$19,077
Other revenues3523551,028917
Total revenues8,5036,90324,33819,994
Operating expenses:
Cost of sales3,3101,8069,7465,339
Research and development1,4501,0794,2403,250
Selling, general and administrative1,6251,3535,2183,905
Other71644187874
Total operating expenses6,4564,88219,39113,368
Operating income2,0472,0214,9476,626
Other income (expense):
Interest expense, net(776)(759)(2,408)(2,054)
Other income, net1,8306851,2882,431
Income before income taxes3,1011,9473,8277,003
Provision for income taxes2712173641,053
Net income$2,830$1,730$3,463$5,950
Earnings per share:
Basic$5.27$3.23$6.45$11.12
Diluted$5.22$3.22$6.40$11.06
Weighted-average shares used in calculation of earnings per share:
Basic537535537535
Diluted542538541538

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

Three months ended September 30,Nine months ended September 30,
2024202320242023
Net income$2,830$1,730$3,463$5,950
Other comprehensive (loss) income, net of reclassification adjustments and taxes:
Foreign currency translation adjustments71(44)32(5)
Cash flow hedges(253)181(76)73
Other117(3)37
Other comprehensive (loss) income, net of reclassification adjustments and taxes(181)154(47)105
Comprehensive income$2,649$1,884$3,416$6,055

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per-share data)

September 30, 2024December 31, 2023
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$9,011$10,944
Trade receivables, net7,3177,268
Inventories7,3629,518
Other current assets3,0762,602
Total current assets26,76630,332
Property, plant and equipment, net6,1565,941
Intangible assets, net28,92032,641
Goodwill18,65818,629
Other noncurrent assets10,3839,611
Total assets$90,883$97,154
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$2,147$1,590
Accrued liabilities14,62115,359
Current portion of long-term debt3,5441,443
Total current liabilities20,31218,392
Long-term debt56,85463,170
Long-term deferred tax liabilities1,7112,354
Long-term tax liabilities2,2804,680
Other noncurrent liabilities2,1992,326
Contingencies and commitments (see Note 13)
Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—537.5 shares in 2024 and 535.4 shares in 202333,39333,070
Accumulated deficit(25,530)(26,549)
Accumulated other comprehensive loss(336)(289)
Total stockholders’ equity7,5276,232
Total liabilities and stockholders’ equity$90,883$97,154

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per-share data)

(Unaudited)

Number of shares of common stockCommon stock and additional paid-in capitalAccumulated deficitAccumulated other comprehensive lossTotal
Balance as of December 31, 2023535.4$33,070$(26,549)$(289)$6,232
Net loss——(113)—(113)
Other comprehensive income, net of taxes———9999
Dividends declared on common stock ($2.25 per share)——(1,208)—(1,208)
Issuance of common stock in connection with equity award programs1.034——34
Stock-based compensation expense—103——103
Tax impact related to employee stock-based compensation expense—(125)——(125)
Balance as of March 31, 2024536.433,082(27,870)(190)5,022
Net income——746—746
Other comprehensive income, net of taxes———3535
Issuance of common stock in connection with equity award programs0.865——65
Stock-based compensation expense—157——157
Tax impact related to employee stock-based compensation expense—(100)——(100)
Balance as of June 30, 2024537.233,204(27,124)(155)5,925
Net income——2,830—2,830
Other comprehensive loss, net of taxes———(181)(181)
Dividends declared on common stock ($2.25 per share)——(1,236)—(1,236)
Issuance of common stock in connection with equity award programs0.367——67
Stock-based compensation expense—136——136
Tax impact related to employee stock-based compensation expense—(14)——(14)
Balance as of September 30, 2024537.5$33,393$(25,530)$(336)$7,527

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(In millions, except per-share data)

(Unaudited)

Number of shares of common stockCommon stock and additional paid-in capitalAccumulated deficitAccumulated other comprehensive lossTotal
Balance as of December 31, 2022534.0$32,514$(28,622)$(231)$3,661
Net income——2,841—2,841
Other comprehensive loss, net of taxes———(37)(37)
Dividends declared on common stock ($2.13 per share)——(1,138)—(1,138)
Issuance of common stock in connection with equity award programs0.311——11
Stock-based compensation expense—47——47
Tax impact related to employee stock-based compensation expense—(37)——(37)
Balance as of March 31, 2023534.332,535(26,919)(268)5,348
Net income——1,379—1,379
Other comprehensive loss, net of taxes———(12)(12)
Issuance of common stock in connection with equity award programs0.616——16
Stock-based compensation expense—119——119
Tax impact related to employee stock-based compensation expense—(69)——(69)
Balance as of June 30, 2023534.932,601(25,540)(280)6,781
Net income——1,730—1,730
Other comprehensive income, net of taxes———154154
Dividends declared on common stock ($2.13 per share)——(1,161)—(1,161)
Issuance of common stock in connection with equity award programs0.233——33
Stock-based compensation expense—124——124
Tax impact related to employee stock-based compensation expense—(5)——(5)
Balance as of September 30, 2023535.1$32,753$(24,971)$(126)$7,656

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Nine months ended September 30,
20242023
Cash flows from operating activities:
Net income$3,463$5,950
Noncash adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other4,1952,691
Stock-based compensation expense396270
Deferred income taxes(894)(650)
Adjustments for equity method investments(11)(17)
Gains on equity securities(717)(1,304)
Other items, net1579
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net(32)(582)
Inventories2,209(82)
Other assets(638)(332)
Accounts payable544(215)
Accrued income taxes, net(1,064)998
Long-term tax liabilities(561)293
Accrued liabilities(636)69
Accrued sales incentives and allowance536415
Other liabilities(72)(150)
Net cash provided by operating activities6,7197,933
Cash flows from investing activities:
Proceeds from sales of marketable securities—1,125
Proceeds from maturities of marketable securities—550
Purchases of property, plant and equipment(725)(863)
Other8173
Net cash (used in) provided by investing activities(644)885
Cash flows from financing activities:
Net proceeds from issuance of debt—23,781
Extinguishment of debt(659)(550)
Repayment of debt(3,600)(1,454)
Dividends paid(3,627)(3,416)
Other(122)(67)
Net cash (used in) provided by financing activities(8,008)18,294
(Decrease) increase in cash and cash equivalents(1,933)27,112
Cash and cash equivalents at beginning of period10,9447,629
Cash and cash equivalents at end of period$9,011$34,741

See accompanying notes.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(Unaudited)

1. Summary of significant accounting policies

Business

Amgen Inc. (including its consolidated 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.

Basis of presentation

The interim unaudited financial information for the three and nine months ended September 30, 2024 and 2023, has been prepared in accordance with GAAP and includes all adjustments (consisting of only normal, recurring adjustments unless otherwise indicated) that Amgen considers necessary for a fair presentation, in all material respects, of its condensed consolidated results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.

The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023, and with our condensed consolidated financial statements and the notes thereto contained in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

Principles of consolidation

The condensed 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. Certain reclassifications have been made to prior periods in the condensed consolidated financial statements and accompanying notes to conform with the current presentation.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Property, plant and equipment, net

Property, plant and equipment is recorded at historical cost, net of accumulated depreciation and amortization, of $10.3 billion and $9.8 billion as of September 30, 2024 and December 31, 2023, respectively.

Recent accounting pronouncements

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve income tax disclosure requirements by requiring more detailed information on several income tax disclosures, such as enhancing disclosure of income taxes paid and requiring disaggregation of the effective income tax rate reconciliation. The standard is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted, and entities may apply the standard prospectively or may elect retrospective application. We are currently evaluating the impact of adopting this new standard on our related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improving Reportable Segment Disclosures, to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses and additional interim segment reporting disclosures, including for companies with a single reportable segment. The standard is effective for public business entities for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted, and the standard requires retrospective application to all prior

periods presented. We expect the adoption of this new standard to result in incremental disclosures to the notes to our financial statements.

2. Acquisitions

Acquisition of Horizon Therapeutics plc

On October 6, 2023, Amgen completed its acquisition of Horizon by acquiring all of the outstanding shares of Horizon for $116.50 per share in cash, representing a total consideration of approximately $27.8 billion. Horizon is a global biotechnology company focused on the discovery, development and commercialization of medicines that address critical needs of patients impacted by rare, autoimmune and severe inflammatory diseases. The acquisition, which was accounted for as a business combination, aligns with Amgen’s core strategy of delivering innovative medicines that make a significant difference for patients suffering from serious diseases and strengthens Amgen’s leading rare disease portfolio by adding first-in-class, early-in-lifecycle medicines, including TEPEZZA for thyroid eye disease, KRYSTEXXA for chronic refractory gout and UPLIZNA for neuromyelitis optica spectrum disorder. Upon its acquisition, Horizon became a wholly owned subsidiary of Amgen, and its operations have been included in our consolidated financial statements commencing on the acquisition date.

During the nine months ended September 30, 2024, the purchase price allocation of the acquisition was completed and measurement period adjustments were finalized, which included changes to the purchase price allocation that resulted in a net increase of approximately $25 million to goodwill. The measurement period adjustments resulted primarily from adjustments to acquired assets and liabilities, including deferred tax attributes, based on facts and circumstances that existed as of the acquisition date and did not result from events subsequent to the acquisition date. The adjustments did not have a significant impact on Amgen’s results of operations during the nine months ended September 30, 2024, and would not have had a significant impact on prior period results if the adjustments had been made as of the acquisition date.

The following table summarizes the final total consideration and allocated acquisition date fair values of assets acquired and liabilities assumed, inclusive of measurement period adjustments (in millions):

Cash and cash equivalents$681
Inventories5,014
Property, plant and equipment, net318
Finite-lived intangible assets – developed-product-technology rights19,590
IPR&D1,060
Goodwill3,136
Deferred tax asset795
Deferred tax liability(2,488)
Other assets and liabilities, net(273)
Total assets acquired, net of liabilities assumed$27,833

The $27.8 billion total consideration for this transaction consisted of (i) cash consideration transferred to common shareholders of $26.7 billion; (ii) cash consideration transferred to vested and outstanding stock options, outstanding restricted stock unit (RSU) awards and outstanding performance stock unit (PSU) awards of $523 million; (iii) the fair value of Amgen replacement awards (based on conversion of outstanding employee RSU awards) of $180 million representing noncash consideration; and (iv) a portion of Horizon’s debt, settled by Amgen on the acquisition closing date, of $382 million. Amgen issued 1.7 million replacement equity awards with the original vesting conditions, the fair value of which was determined based on the acquisition date fair value based on the conversion calculation.

The estimated fair values of $20.7 billion for the developed-product-technology rights and IPR&D 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. The developed-product-technology rights are being amortized on a straight-line basis over a weighted-average period of approximately 10 years from the acquisition date using the straight-line methodology.

The estimated fair value of the acquired inventory of $5.0 billion 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. The inventory fair value adjustment is being amortized using a weighted-average inventory turnover, which we estimate to approximate 27 months from the acquisition date.

A deferred tax liability of $2.5 billion 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, as well as an associated deferred tax asset for anticipatory foreign tax credits of $795 million.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $3.1 billion was recorded as goodwill, which is not deductible for tax purposes. The goodwill value represents expected synergies from the marketed products acquired and other benefits.

Supplemental Pro Forma Financial Information

The following table presents the unaudited supplemental pro forma results of a hypothetical combined Amgen and Horizon entity for the three and nine months ended September 30, 2023, as if the acquisition of Horizon had occurred on January 1, 2022 (in millions):

Three months ended September 30, 2023Nine months ended September 30, 2023
Total revenues$7,854$22,728
Net income$902$3,518

The unaudited supplemental pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of Amgen and Horizon. In order to reflect the occurrence of the acquisition on January 1, 2022, the unaudited supplemental pro forma financial information includes adjustments to reflect the following: (i) incremental amortization expense based on the fair values of the identifiable intangible assets and inventory step-up; (ii) the additional interest expense associated with the issuance of debt to finance the acquisition; and (iii) the income tax impact using an estimated effective tax rate applied to the combined entity. The unaudited supplemental pro forma financial information is not necessarily indicative of what the condensed consolidated results of operations would have been had the acquisition been completed on January 1, 2022. In addition, the unaudited supplemental pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

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):

Three months ended September 30,
20242023
U.S.ROWTotalU.S.ROWTotal
Prolia$683$362$1,045$673$313$986
ENBREL81788251,02691,035
XGEVA373168541374145519
Repatha281286567183223406
Otezla460104564462105567
TEPEZZA(1)4826488———
EVENITY28911039921493307
KYPROLIS238140378231118349
Nplate34511145632297419
Aranesp105232337107216323
KRYSTEXXA(1)310—310———
BLINCYTO2379032714773220
Vectibix132150282116136252
TEZSPIRE(2)269—269161—161
Other products(3)9584051,3636753291,004
Total product sales(4)$5,979$2,1728,151$4,691$1,8576,548
Other revenues352355
Total revenues$8,503$6,903
Nine months ended September 30,
20242023
U.S.ROWTotalU.S.ROWTotal
Prolia$2,110$1,099$3,209$1,987$954$2,941
ENBREL2,280212,3012,645372,682
XGEVA1,1385261,6641,1454401,585
Repatha8247921,6165926261,218
Otezla1,1853171,5021,2513081,559
TEPEZZA(1)1,379121,391———
EVENITY8063261,132570272842
KYPROLIS7124191,1316993541,053
Nplate7493701,1197443471,091
Aranesp2967381,0343456981,043
KRYSTEXXA(1)839—839———
BLINCYTO555280835418202620
Vectibix385414799345388733
TEZSPIRE(2)676—676390—390
Other products(3)2,8581,2044,0622,2711,0493,320
Total product sales(4)$16,792$6,51823,310$13,402$5,67519,077
Other revenues1,028917
Total revenues$24,338$19,994

(1) TEPEZZA and KRYSTEXXA were acquired from the acquisition of Horizon on October 6, 2023, and include product sales in the periods after the acquisition date.

(2) TEZSPIRE is marketed by our collaborator AstraZeneca outside the United States.

(3) Consists of product sales of our non-principal products.

(4) Hedging gains and losses, which are included in product sales, were not material for the three and nine months ended September 30, 2024 and 2023.

4. Income taxes

The effective tax rates for the three and nine months ended September 30, 2024, were 8.7% and 9.5%, respectively, compared with 11.1% and 15.0%, respectively, for the corresponding periods in the prior year.

The decrease in our effective tax rate for the three months ended September 30, 2024, was primarily due to the earnings mix as a result of the inclusion of the Horizon business (including the amortization of Horizon acquired assets), partially offset by the quarter-to-date unrealized gains on our strategic equity investments (primarily BeiGene). See Note 6, Investments*—BeiGene, Ltd.* The decrease in our effective tax rate for the nine months ended September 30, 2024, was primarily due to the earnings mix as a result of the inclusion of the Horizon business (including the amortization of Horizon acquired assets). The effective tax rates differ from the federal statutory rate primarily due to the impact of the jurisdictional mix of income and expenses. Substantially all of the benefit to our effective tax rate from foreign earnings results from locations where the Company has significant manufacturing operations, including Singapore, Ireland and 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 a tax incentive grant through 2050. Additionally, the Company’s operations conducted in Singapore are subject to a tax incentive grant through 2036. Our foreign earnings are also subject to U.S. tax at a reduced rate of 10.5%. Additionally, effective January 1, 2024, selected individual countries, including the United Kingdom and EU member countries, have enacted the global minimum tax agreement. Our legal entities in such countries, along with their direct and indirect subsidiaries, are now subject to a 15% minimum tax rate on adjusted financial statement income.

Beginning on January 1, 2023, we were no longer subject to a 4% excise tax in the U.S. territory of Puerto Rico on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. We qualify for and are subject to the alternative income tax rate on industrial development income of our Puerto Rico affiliate. In the United States, this income tax qualifies for foreign tax credits. Both this income tax and the associated foreign tax credits are generally recognized in our provision for income taxes. We accounted for the 2022 excise tax that was capitalized in Inventories as an expense in Cost of sales when the related products were sold in the first half of 2023, and a foreign tax credit was not recognized with respect to the excise tax expense in 2023. We do not have this excise tax exposure in 2024.

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 can and have arisen 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 2010–2012, 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 the years 2010–2012 that we received in May and July 2021, which seek to increase our U.S. taxable income for the years 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 the years 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 2013–2015, 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 2010–2012. We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution. In July 2022, we filed a petition in the U.S. Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S. taxable income for the years 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 the years 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 and 2013–2015 Notices through the judicial process. The two cases were consolidated in the U.S. Tax Court on December 19, 2022. The trial is currently scheduled to begin on November 4, 2024.

We are currently under examination by the IRS for the years 2016–2018 with respect to issues similar to those for the 2010 through 2015 period. In addition, we are under examination by a number of state and foreign tax jurisdictions.

Final resolution of these complex matters is not likely within the next 12 months. We continue to 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.

During the three and nine months ended September 30, 2024, the gross amounts of our UTBs increased by $40 million and $120 million, respectively, as a result of tax positions taken during the current year. Substantially all of the UTBs as of September 30, 2024, if recognized, would affect our effective tax rate.

5. 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):

Three months ended September 30,Nine months ended September 30,
2024202320242023
Income (Numerator):
Net income for basic and diluted EPS$2,830$1,730$3,463$5,950
Shares (Denominator):
Weighted-average shares for basic EPS537535537535
Effect of dilutive securities5343
Weighted-average shares for diluted EPS542538541538
Basic EPS$5.27$3.23$6.45$11.12
Diluted EPS$5.22$3.22$6.40$11.06

For the three and nine months ended September 30, 2024 and 2023, the number of antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

6. Investments

Available-for-sale investments

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

Types of securities as of September 30, 2024Amortized costGross unrealized gainsGross unrealized lossesFair values
U.S. Treasury bills$996$—$—$996
Money market mutual funds7,437——7,437
Other short-term interest-bearing securities143——143
Total interest-bearing securities$8,576$—$—$8,576
Types of securities as of December 31, 2023Amortized costGross unrealized gainsGross unrealized lossesFair values
U.S. Treasury bills$—$—$—$—
Money market mutual funds10,266——10,266
Other short-term interest-bearing securities138——138
Total interest-bearing securities$10,404$—$—$10,404

The fair values of interest-bearing securities by location in the Condensed Consolidated Balance Sheets were as follows (in millions):

Condensed Consolidated Balance Sheets locationsSeptember 30, 2024December 31, 2023
Cash and cash equivalents$8,576$10,404
Total interest-bearing securities$8,576$10,404

Cash and cash equivalents in the above table excludes bank account cash of $435 million and $540 million as of September 30, 2024 and December 31, 2023, respectively.

All interest-bearing securities as of September 30, 2024 and December 31, 2023, mature in one year or less.

For the three and nine months ended September 30, 2024 and 2023, realized gains and losses on interest-bearing securities were not material. Realized gains and losses on interest-bearing securities are recorded in Other income, net, in the Condensed 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

BeiGene, Ltd.

Our ownership interest in BeiGene was approximately 18% as of both September 30, 2024 and December 31, 2023, and the fair values of our investment were $4.3 billion and $3.4 billion, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. In the first quarter of 2023, we began to account for our ownership interest as an equity security with a readily determinable fair value, with changes in fair value recorded in Other income, net, in our Condensed Consolidated Statements of Income. See Note 11, Fair value measurement. During the three months ended September 30, 2024 and 2023, we recognized unrealized gains of $1.6 billion and $30 million, respectively, recorded in Other income, net, in our Condensed Consolidated Statements of Income. During the nine months ended September 30, 2024 and 2023, we recognized unrealized gains of $836 million and $1.2 billion, respectively, recorded in Other income, net, in our Condensed Consolidated Statements of Income.

Subject to certain exceptions or otherwise agreed to by BeiGene, while Amgen holds at least 5.0% of BeiGene’s outstanding common stock, (A) we may only sell our BeiGene equity investment via: (i) a registered public offering, (ii) a sale under Rule 144 of the Securities Act of 1933 (the “Securities Act”) or (iii) a private sale exempt from registration requirements under the Securities Act, and (B) we may not sell more than 5.0% of BeiGene’s outstanding common stock in any rolling 12-month period.

Other equity securities

Excluding our equity investments in BeiGene (discussed above) and Neumora (discussed below), we held investments in other equity securities with readily determinable fair values (publicly traded securities) of $336 million and $494 million as of September 30, 2024 and December 31, 2023, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024 and 2023, net unrealized gains and losses on these publicly traded securities were not material. Additionally, net realized gains and losses on sales of publicly traded securities for the three and nine months ended September 30, 2024 and 2023, were not material.

We held investments of $318 million and $309 million in equity securities without readily determinable fair values as of September 30, 2024 and December 31, 2023, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024 and 2023, upward and downward adjustments on these securities were not material. Adjustments were based on observable price transactions. Net realized gains and losses on sales of securities without readily determinable fair values for the three and nine months ended September 30, 2024 and 2023, were not material.

Equity method investments

Neumora Therapeutics, Inc.

As of September 30, 2024 and December 31, 2023, our ownership interests in Neumora were approximately 22.1% and 23.2%, respectively, and the fair values of our investment were $467 million and $603 million, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. Although our equity investment qualifies us for the equity method of accounting, we have elected the fair value option to account for our investment. Under the fair value option, changes in the fair value of the investment are recognized through earnings in Other income, net, in our Condensed Consolidated Statements of Income each reporting period. See Note 11, Fair value measurement. We believe the fair value option best reflects the economics of the underlying transaction. During the three months ended September 30, 2024 and 2023, we recognized unrealized gains of $119 million and $153 million, respectively, and during the nine months ended September 30, 2024 and 2023, we recognized $136 million of unrealized losses and $134 million of unrealized gains, respectively.

We are contractually restricted from selling more than 5.0% of Neumora’s outstanding common stock in any rolling 12-month period for as long as we hold at least 10.0% of their outstanding common stock, subject to certain exceptions or otherwise agreed to by Neumora.

Limited partnerships

We held limited partnership investments of $272 million and $251 million as of September 30, 2024 and December 31, 2023, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. These investments, 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 September 30, 2024, unfunded additional commitments to be made for these investments during the next several years amounted to $139 million. For the three and nine months ended September 30, 2024 and 2023, net unrealized gains and losses from our limited partnership investments were not material.

7. Inventories

Inventories consisted of the following (in millions):

September 30, 2024December 31, 2023
Raw materials$788$993
Work in process4,3395,747
Finished goods2,2352,778
Total inventories$7,362$9,518

8. Goodwill and other intangible assets

Goodwill

The change in the carrying amount of goodwill was as follows (in millions):

Balance at January 1, 2024$18,629
Adjustments to goodwill resulting from acquisitions (1)25
Foreign currency translation adjustments4
Balance at September 30, 2024$18,658

(1) For the nine months ended September 30, 2024, adjustments to goodwill consisted of measurement period adjustments related to our Horizon acquisition. See Note 2, Acquisitions.

Other intangible assets

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

September 30, 2024December 31, 2023
Gross carrying amountsAccumulated amortizationOther intangible assets, netGross carrying amountsAccumulated amortizationOther intangible assets, net
Finite-lived intangible assets:
Developed-product-technology rights$48,636$(21,472)$27,164$48,631$(18,049)$30,582
Licensing rights3,864(3,360)5043,865(3,265)600
Marketing-related rights1,203(1,188)151,339(1,264)75
Research and development technology rights1,400(1,253)1471,394(1,228)166
Total finite-lived intangible assets55,103(27,273)27,83055,229(23,806)31,423
Indefinite-lived intangible assets:
In-process research and development1,090—1,0901,218—1,218
Total other intangible assets$56,193$(27,273)$28,920$56,447$(23,806)$32,641

Developed-product-technology rights consists of rights related to marketed products. Licensing rights primarily consists of contractual rights to receive future milestone, royalty and profit-sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and upfront payments associated with royalty obligations for marketed products. Marketing-related rights primarily consists of rights related to the sale and distribution of marketed products. R&D technology rights pertain 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. 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 three months ended September 30, 2024 and 2023, we recognized amortization associated with our finite-lived intangible assets of $1.2 billion and $693 million, respectively. During the nine months ended September 30, 2024 and 2023, we recognized amortization associated with our finite-lived intangible assets of $3.6 billion and $2.1 billion, respectively. Amortization of intangible assets is primarily included in Cost of sales in the Condensed Consolidated Statements of Income. As of September 30, 2024, the total estimated amortization of our finite-lived intangible assets for the remaining three months ending December 31, 2024, and the years ending December 31, 2025, 2026, 2027, 2028 and 2029, are $1.2 billion, $4.5 billion, $3.9 billion, $3.9 billion, $2.9 billion and $2.2 billion, respectively.

9. Financing arrangements

Our borrowings consisted of the following (in millions):

September 30, 2024December 31, 2023
3.625% notes due 2024 (3.625% 2024 Notes)$—$1,400
1.90% notes due 2025 (1.90% 2025 Notes)500500
5.25% notes due 2025 (5.25% 2025 Notes)2,0002,000
Term loan due April 2025—2,000
3.125% notes due 2025 (3.125% 2025 Notes)1,0001,000
2.00% €750 million notes due 2026 (2.00% 2026 euro Notes)835828
5.507% notes due 2026 (5.507% 2026 Notes)1,5001,500
2.60% notes due 2026 (2.60% 2026 Notes)1,2501,250
Term loan due October 20261,8002,000
5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes)635605
2.20% notes due 2027 (2.20% 2027 Notes)1,7241,724
3.20% notes due 2027 (3.20% 2027 Notes)1,0001,000
5.15% notes due 2028 (5.15% 2028 Notes)3,7503,750
1.65% notes due 2028 (1.65% 2028 Notes)1,2341,234
3.00% notes due 2029 (3.00% 2029 Notes)750750
4.05% notes due 2029 (4.05% 2029 Notes)1,2501,250
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)936892
2.45% notes due 2030 (2.45% 2030 Notes)1,2501,250
5.25% notes due 2030 (5.25% 2030 Notes)2,7502,750
2.30% notes due 2031 (2.30% 2031 Notes)1,2501,250
2.00% notes due 2032 (2.00% 2032 Notes)1,0011,001
3.35% notes due 2032 (3.35% 2032 Notes)1,0001,000
4.20% notes due 2033 (4.20% 2033 Notes)750750
5.25% notes due 2033 (5.25% 2033 Notes)4,2504,250
6.375% notes due 2037 (6.375% 2037 Notes)478478
6.90% notes due 2038 (6.90% 2038 Notes)254254
6.40% notes due 2039 (6.40% 2039 Notes)333333
3.15% notes due 2040 (3.15% 2040 Notes)1,6681,803
5.75% notes due 2040 (5.75% 2040 Notes)373373
2.80% notes due 2041 (2.80% 2041 Notes)776949
4.95% notes due 2041 (4.95% 2041 Notes)600600
5.15% notes due 2041 (5.15% 2041 Notes)729729
5.65% notes due 2042 (5.65% 2042 Notes)415415
5.60% notes due 2043 (5.60% 2043 Notes)2,7502,750
5.375% notes due 2043 (5.375% 2043 Notes)185185
4.40% notes due 2045 (4.40% 2045 Notes)2,2502,250
4.563% notes due 2048 (4.563% 2048 Notes)1,4151,415
3.375% notes due 2050 (3.375% 2050 Notes)1,7642,132
4.663% notes due 2051 (4.663% 2051 Notes)3,5413,541
3.00% notes due 2052 (3.00% 2052 Notes)890999
4.20% notes due 2052 (4.20% 2052 Notes)895950
4.875% notes due 2053 (4.875% 2053 Notes)1,0001,000
5.65% notes due 2053 (5.65% 2053 Notes)4,2504,250
2.77% notes due 2053 (2.77% 2053 Notes)940940
4.40% notes due 2062 (4.40% 2062 Notes)1,1651,200
September 30, 2024December 31, 2023
5.75% notes due 2063 (5.75% 2063 Notes)2,7502,750
Other notes due 2097100100
Unamortized bond discounts, premiums and issuance costs, net(1,373)(1,420)
Fair value adjustments(192)(314)
Other2717
Total carrying value of debt60,39864,613
Less current portion(3,544)(1,443)
Total long-term debt$56,854$63,170

There are no material differences between the effective interest rates and coupon rates of our notes 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.

The Term loans have an interest rate of three-month SOFR plus 1.225%.

Debt repayments

During the nine months ended September 30, 2024, we repaid the $2.0 billion aggregate principal amount on the Term loan due April 2025, $200 million aggregate principal amount of the Term loan due October 2026 and the $1.4 billion aggregate principal amount of the 3.625% 2024 Notes.

Debt extinguishment

During the nine months ended September 30, 2024, we repurchased an aggregate principal amount of our debt of $875 million, including portions of the 3.15% 2040 Notes, 2.80% 2041 Notes, 3.375% 2050 Notes, 3.00% 2052 Notes, 4.20% 2052 Notes and 4.40% 2062 Notes, for an aggregate cost of $659 million, which resulted in the recognition of a $215 million gain on extinguishment of debt recorded in Other income, net, in the Condensed Consolidated Statements of Income.

Interest rate swap contracts

See Note 12, Derivative instruments, for a discussion of interest rate swap contracts related to certain of our notes.

10. Stockholders’ equity

Stock repurchase program

During the nine months ended September 30, 2024 and 2023, we did not repurchase shares under our stock repurchase program. As of September 30, 2024, $7.0 billion of authorization remained available under our stock repurchase program.

Dividends

In August 2024, March 2024 and December 2023, our Board of Directors declared quarterly cash dividends of $2.25 per share, which were paid in September 2024, June 2024 and March 2024, respectively. In October 2024, our Board of Directors declared a quarterly cash dividend of $2.25 per share that will be paid in December 2024.

Accumulated other comprehensive income (loss)

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

Foreign currency translation adjustmentsCash flow hedgesOtherAOCI
Balance as of December 31, 2023$(298)$(22)$31$(289)
Foreign currency translation adjustments(24)——(24)
Unrealized gains—178—178
Reclassification adjustments into earnings—(20)—(20)
Other——(3)(3)
Income taxes—(32)—(32)
Balance as of March 31, 2024(322)10428(190)
Foreign currency translation adjustments(15)——(15)
Unrealized gains—117—117
Reclassification adjustments into earnings—(52)—(52)
Other——(1)(1)
Income taxes—(14)—(14)
Balance as of June 30, 2024(337)15527(155)
Foreign currency translation adjustments71——71
Unrealized losses—(158)—(158)
Reclassification adjustments into earnings—(166)—(166)
Other——11
Income taxes—71—71
Balance as of September 30, 2024$(266)$(98)$28$(336)

Reclassifications out of AOCI and into earnings, including related income tax expenses, were as follows (in millions):

Three months ended September 30,
Components of AOCI20242023Condensed Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract gains$45$33Product sales
Cross-currency swap contract gains (losses)121(86)Other income, net
166(53)Income before income taxes
(36)11Provision for income taxes
$130$(42)Net income
Nine months ended September 30,
Components of AOCI20242023Condensed Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract gains$151$121Product sales
Cross-currency swap contract gains (losses)87(57)Other income, net
23864Income before income taxes
(51)(14)Provision for income taxes
$187$50Net income

11. Fair value measurement

To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximize the use of observable inputs and minimize 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 sources 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 different 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, 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):

Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Fair value measurement as of September 30, 2024, using:Total
Assets:
Available-for-sale securities:
U.S. Treasury bills$—$996$—$996
Money market mutual funds7,437——7,437
Other short-term interest-bearing securities—143—143
Equity securities5,057——5,057
Derivatives:
Foreign currency forward contracts—99—99
Cross-currency swap contracts—4—4
Interest rate swap contracts—9—9
Total assets$12,494$1,251$—$13,745
Liabilities:
Derivatives:
Foreign currency forward contracts$—$121$—$121
Cross-currency swap contracts—361—361
Interest rate swap contracts—404—404
Contingent consideration obligations——112112
Total liabilities$—$886$112$998
Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Fair value measurement as of December 31, 2023, using:Total
Assets:
Available-for-sale securities:
U.S. Treasury bills$—$—$—$—
Money market mutual funds10,266——10,266
Other short-term interest-bearing securities—138—138
Equity securities4,514——4,514
Derivatives:
Foreign currency forward contracts—145—145
Cross-currency swap contracts————
Interest rate swap contracts————
Total assets$14,780$283$—$15,063
Liabilities:
Derivatives:
Foreign currency forward contracts$—$116$—$116
Cross-currency swap contracts—405—405
Interest rate swap contracts—571—571
Contingent consideration obligations——9696
Total liabilities$—$1,092$96$1,188

Interest-bearing and equity securities

The fair values of our money market mutual funds and equity investments in publicly traded securities, including our equity investments in BeiGene and Neumora, as of September 30, 2024 and December 31, 2023, are based on quoted market prices in active markets, with no valuation adjustment.

Derivatives

All of our foreign currency forward contracts, cross-currency swap contracts and 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 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, as applicable, include foreign currency exchange rates, SOFR, swap rates, obligor credit default swap rates and cross-currency basis swap spreads. Certain inputs, when applicable, are at commonly quoted intervals. See Note 12, Derivative instruments.

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 Condensed Consolidated Statements of Income.

Changes in the carrying amounts of contingent consideration obligations were as follows (in millions):

Three months ended September 30,Nine months ended September 30,
2024202320242023
Beginning balance$107$248$96$270
Payments(2)(3)(6)(7)
Net changes in valuations7(147)22(165)
Ending balance$112$98$112$98

As of September 30, 2024 and December 31, 2023, our contingent consideration obligations are primarily the result of our acquisition of Teneobio, Inc. in October 2021, which obligates us to pay the former shareholders payments upon achieving separate development and regulatory milestones with regard to various R&D programs.

Summary of the fair values of other financial instruments

Cash equivalents

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

Borrowings

We estimate the fair values of our fixed-rate notes by using Level 2 inputs. As of September 30, 2024 and December 31, 2023, the aggregate fair values of our fixed-rate notes were $58.0 billion and $59.2 billion, respectively, and the carrying values of this debt were $58.6 billion and $60.6 billion, respectively. The estimate of the fair values of our Term loans is approximated as the carrying values as of September 30, 2024 and December 31, 2023 as these debt instruments bear interest at floating rates.

During the nine months ended September 30, 2024 and 2023, 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.

12. 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 have designated certain of our derivatives as cash flow and fair value hedges; we also have derivatives not designated as hedges. 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. The foreign currency exchange rate fluctuation exposure associated with cash inflows from our international product sales is partially offset by corresponding cash outflows from our international operating expenses. To further reduce our exposure, 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 September 30, 2024 and December 31, 2023, we had outstanding foreign currency forward contracts with aggregate notional amounts of $7.1 billion and $6.6 billion, respectively. We have designated these foreign currency forward contracts, which are primarily euro based, as cash flow hedges. Accordingly, we report the unrealized gains and losses on these contracts in AOCI in the Condensed Consolidated Balance Sheets, and we reclassify them to Product sales in the Condensed 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 and pounds sterling and received U.S. dollars for the notional amounts at the inception of the contracts; and based on these notional amounts, we exchange interest payments at fixed rates over the terms of the contracts by paying U.S. dollars and receiving euros and pounds sterling. In addition, we will pay U.S. dollars to and receive euros and pounds sterling 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 and pounds sterling 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 Condensed Consolidated Balance Sheets and reclassified to Other income, net, in the Condensed 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 September 30, 2024, were as follows (notional amounts in millions):

Foreign currencyU.S. dollars
Hedged notesNotional amountsInterest ratesNotional amountsInterest rates
2.00% 2026 euro Notes€7502.0%$8333.9%
5.50% 2026 pound sterling Notes£4755.5%$7476.0%
4.00% 2029 pound sterling Notes£7004.0%$1,1114.6%

In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable U.S. Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on forward interest rate contracts, which are designated as cash flow hedges, are recognized in AOCI in the Condensed Consolidated Balance Sheets and are amortized into Interest expense, net, in the Condensed Consolidated Statements of Income over the terms of the associated debt issuances. Amounts recognized in connection with forward interest rate contracts during the nine months ended September 30, 2024, and amounts expected to be recognized during the subsequent 12 months are not material.

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

Three months ended September 30,Nine months ended September 30,
Derivatives in cash flow hedging relationships2024202320242023
Foreign currency forward contracts$(238)$198$87$222
Cross-currency swap contracts80(22)50(36)
Forward interest rate contracts———(31)
Total unrealized (losses) gains$(158)$176$137$155

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 coupons over the terms of the related hedge contracts. As of both September 30, 2024 and December 31, 2023, we had interest rate swap contracts with aggregate notional amounts of $6.7 billion, that hedge certain portions of our long-term debt issuances. During the nine months ended September 30, 2024, interest rate swaps with an aggregate notional amount of $1.4 billion matured in connection with the repayment of the 3.625% 2024 Notes. In addition, we entered into new interest rate swaps with respect to the 5.25% 2033 Notes for an aggregate notional amount of $1.4 billion at an interest rate of SOFR plus 1.8%.

For interest rate swap contracts that qualify for and are designated as fair value hedges, we recognize in Interest expense, net, in the Condensed 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 term of the previously hedged debt.

The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed 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)**
Condensed Consolidated Balance Sheets locationsSeptember 30, 2024December 31, 2023September 30, 2024December 31, 2023
Current portion of long-term debt$1,039$1,441$39$41
Long-term debt$5,307$4,788$(231)$(355)

(1) Current portion of long-term debt includes $58 million and $69 million of carrying value with discontinued hedging relationships as of September 30, 2024 and December 31, 2023, respectively. Long-term debt includes $245 million and $288 million of carrying value with discontinued hedging relationships as of September 30, 2024 and December 31, 2023, respectively.

(2) Current portion of long-term debt includes $58 million and $69 million of hedging adjustments on discontinued hedging relationships as of September 30, 2024 and December 31, 2023, respectively. Long-term debt includes $145 million and $188 million of hedging adjustments on discontinued hedging relationships as of September 30, 2024 and December 31, 2023, respectively.

Impact of hedging transactions

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

Three months ended September 30, 2024Nine months ended September 30, 2024
Product salesOther income, netInterest expense, netProduct salesOther income, netInterest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income$8,151$1,830$(776)$23,310$1,288$(2,408)
The effects of cash flow and fair value hedging:
Gains on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts$45$—$—$151$—$—
Cross-currency swap contracts$—$121$—$—$87$—
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)$—$—$(153)$—$—$(122)
Derivatives designated as hedging instruments$—$—$168$—$—$176
Three months ended September 30, 2023Nine months ended September 30, 2023
Product salesOther income, netInterest expense, netProduct salesOther income, netInterest expense, net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income$6,548$685$(759)$19,077$2,431$(2,054)
The effects of cash flow and fair value hedging:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency forward contracts$33$—$—$121$—$—
Cross-currency swap contracts$—$(86)$—$—$(57)$—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items(1)$—$—$58$—$—$63
Derivatives designated as hedging instruments$—$—$(37)$—$—$5

(1) Gains (losses) on hedged items do not exactly offset losses (gains) 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 September 30, 2024, amounts expected to be recognized into earnings during the subsequent 12 months on our foreign currency and cross-currency swap contracts are not material.

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 September 30, 2024 and December 31, 2023, the total notional amounts of these foreign currency forward contracts were $82 million and $457 million, respectively. Gains and losses recognized in earnings for our derivative instruments not designated as hedging instruments were not material for the three and nine months ended September 30, 2024 and 2023.

Fair values of derivatives

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

Derivative assetsDerivative liabilities
September 30, 2024Condensed Consolidated Balance Sheets locationsFair valuesCondensed Consolidated Balance Sheets locationsFair values
Derivatives designated as hedging instruments:
Foreign currency forward contractsOther current assets/ Other noncurrent assets$99Accrued liabilities/ Other noncurrent liabilities$121
Cross-currency swap contractsOther current assets/ Other noncurrent assets4Accrued liabilities/ Other noncurrent liabilities361
Interest rate swap contractsOther current assets/ Other noncurrent assets9Accrued liabilities/ Other noncurrent liabilities404
Total derivatives designated as hedging instruments112886
Total derivatives$112$886
Derivative assetsDerivative liabilities
December 31, 2023Condensed Consolidated Balance Sheets locationsFair valuesCondensed Consolidated Balance Sheets locationsFair values
Derivatives designated as hedging instruments:
Foreign currency forward contractsOther current assets/ Other noncurrent assets$145Accrued liabilities/ Other noncurrent liabilities$116
Cross-currency swap contractsOther current assets/ Other noncurrent assets—Accrued liabilities/ Other noncurrent liabilities405
Interest rate swap contractsOther current assets/ Other noncurrent assets—Accrued liabilities/ Other noncurrent liabilities571
Total derivatives designated as hedging instruments1451,092
Total derivatives$145$1,092

For additional information, see Note 11, Fair value measurement.

Our derivative contracts that were in liability positions as of September 30, 2024, 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 Condensed 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) provided by financing activities.

13. 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 our Annual Report on Form 10-K for the year ended December 31, 2023, 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; in Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023; and in Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

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 Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023; and in Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, 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 Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023; and in Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, 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.

Repatha Patent Litigation

Patent Disputes in the International Region

Germany

On October 17, 2024 in Sanofi-Aventis Deutschland GmbH (Sanofi-Aventis) and Regeneron Pharmaceuticals, Inc.’s (Regeneron) actions seeking damages arising from the provisional enforcement of an injunction against PRALUENT®, the Munich Regional Court scheduled a hearing for February 26, 2025.

Unified Patent Court of the European Union

Amgen filed a Statement of Appeal on September 13, 2024, asking the Court of Appeals to the Unified Patent Court (UPC) to set aside the decision of the UPC Central Division revoking Amgen’s European Patent No. 3,666,797 (EP ‘797).

On September 25, 2024, Sanofi Biotechnologies SAS and Regeneron filed a brief seeking to expand the ongoing UPC action, alleging that Amgen’s Repatha infringes a newly-issued patent, European Patent No. 4,252,857, seeking an injunction against the marketing, use, or importation of Repatha in 18 countries (Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Romania, Slovenia and Sweden) and damages for past infringement.

European Patent Office

The European Patent Office (EPO) Opposition Division will hear argument on Sanofi-Aventis and Regeneron’s opposition against Amgen’s EP ‘797 from March 31 to April 4, 2025.

In Amgen’s opposition before the EPO against Regeneron’s European Patent No. 3,536,712, the Opposition Division will hear argument on March 11 and 12, 2025.

Japan

On September 16, 2024, Amgen filed an appeal brief with the Japanese Intellectual Property High Court, seeking to overturn the Japanese Patent Office’s decision to reject Amgen’s amended patent claims following a remand of the case to the Japanese Patent Office from the Japanese Intellectual Property High Court.

Prolia/XGEVA Biologics Price Competition and Innovation Act (BPCIA) Litigation

Amgen Inc. et al. v. Samsung Bioepis Co. Ltd., et al.

On August 12, 2024, Amgen Inc. and Amgen Manufacturing Limited LLC filed a lawsuit in the U.S. District Court for the District of New Jersey (New Jersey District Court) against Samsung Bioepis Co. Ltd. (Bioepis) and Samsung Biologics Co., Ltd., (Biologics, and collectively with Bioepis, Samsung) based on the submission to the FDA of a Biologics License Application (BLA) seeking approval to market and sell a biosimilar version of Amgen’s Prolia and XGEVA products. The complaint asserts infringement of the following 34 patents: U.S. Patent Nos. 7,364,736; 7,888,101; 7,928,205; 8,058,418; 8,247,210; 8,460,896; 8,680,248; 9,012,178; 9,320,816; 9,328,134; 9,359,435; 9,481,901; 10,106,829; 10,167,492; 10,227,627; 10,421,987; 10,513,723; 10,583,397; 10,655,156; 10,822,630; 10,894,972; 10,907,186; 11,098,079; 11,130,980; 11,254,963; 11,292,829; 11,299,760; 11,384,378; 11,427,848; 11,434,514; 11,634,476; 11,685,772; 11,744,950; and 11,946,085 (collectively, the Asserted Patents). Amgen seeks a judgment from the New Jersey District Court that Samsung has infringed or will infringe one or more claims of each of the Asserted Patents and, based on that judgment, a permanent injunction prohibiting the commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of Samsung’s proposed denosumab biosimilar before expiration of each of the Asserted Patents found infringed. Amgen also seeks monetary remedies for any past acts of infringement. Bioepis filed its Answer and Counterclaims in response to the Complaint on October 1, 2024. Biologic’s response to the Complaint is due on October 28, 2024.

Amgen Inc. et al. v. Fresenius Kabi USA, LLC et al.

On October 4, 2024, Amgen Inc. and Amgen Manufacturing Limited LLC filed a lawsuit in the U.S. District Court for the Northern District of Illinois (Northern Illinois District Court) against Fresenius Kabi USA, LLC, Fresenius SwissBiosim GmbH, Fresenius Kabi Deutschland, GmbH, and Fresenius Kabi Austria GmbH (collectively, Fresenius) based on the submission to the FDA of a BLA seeking approval to market and sell a biosimilar version of Amgen’s Prolia and XGEVA products. The complaint asserts infringement of the following 33 patents: U.S. Patent Nos. 7,364,736; 7,888,101; 7,928,205; 8,053,236; 8,058,418; 8,460,896; 8,680,248; 9,012,178; 9,228,168; 9,320,816; 9,328,134; 9,359,435; 10,106,829; 10,167,492; 10,227,627; 10,513,723; 10,583,397; 10,655,156; 10,822,630; 10,894,972; 11,077,404; 11,098,079; 11,130,980; 11,254,963; 11,299,760; 11,319,568; 11,434,514; 11,459,595; 11,744,950; 11,786,866; 11,946,085; 11,952,605; and 12,084,686 (collectively, the Asserted Patents). Amgen seeks a judgment from the Northern Illinois District Court that Fresenius has infringed or will infringe one or more claims of each of the Asserted Patents and, based on that judgment, a permanent injunction prohibiting the commercial manufacture, use, offer to sell, or sale within the United States or importation into the United States of Fresenius’s proposed denosumab biosimilar before expiration of each of the Asserted Patents found infringed. Amgen also seeks monetary remedies for any past acts of infringement.

PAVBLU*™* (formerly ABP 938 (aflibercept-ayyh)) Patent Litigation

On September 23, 2024, the U.S. District Court for the Northern District of West Virginia denied Regeneron’s motion for a preliminary injunction, and Regeneron filed a notice of appeal, a motion to expedite the appeal, and an emergency motion for an injunction pending resolution of the appeal and for an administrative stay with the U.S. Court of Appeals for the Federal Circuit (the Federal Circuit Court). On September 25, 2024, the Federal Circuit Court issued an order temporarily enjoining the launch of PAVBLU on an administrative basis while it considered Regeneron’s motion for an injunction pending appeal. On October 22, 2024, the Federal Circuit Court denied Regeneron’s motion for an injunction pending appeal and lifted the temporary injunction that was entered on September 25, 2024. Amgen’s response brief to the appeal is due on November 4, 2024, Regeneron’s reply brief is due on November 13, 2024 and oral arguments for the appeal will be scheduled for January 2025.

Antitrust Class Actions

Sensipar Antitrust Class Actions

On September 13, 2024, the putative class of direct purchasers of Sensipar (Sensipar Plaintiffs) filed their opening brief in its appeal of the dismissal of its claims by the U.S. District Court for the District of Delaware (Delaware District Court). Amgen has obtained an extension until November 14, 2024 to file its opposing brief. The Sensipar Plaintiffs’ reply is due December 5, 2024.

Regeneron Pharmaceuticals, Inc. Antitrust Action

The trial before the Delaware District Court that had been set to begin on November 12, 2024 was taken off calendar. A new date for the trial has not yet been set. The Delaware District Court set a hearing on November 20, 2024 to hear Amgen’s motion for summary judgment and the parties’ motions to exclude expert testimony.

CareFirst of Maryland Antitrust Class Action

On August 6, 2024, CareFirst of Maryland, Inc., Group Hospitalization and Medical Services, Inc., and CareFirst BlueChoice, Inc. (collectively, CareFirst), filed a class action antitrust lawsuit against Amgen Inc., Amgen Manufacturing, Limited (corrected to Amgen Manufacturing Limited LLC in CareFirst’s amended complaint on October 11, 2024), and Immunex Corporation in the U.S. District Court for the Eastern District of Virginia, alleging federal and state antitrust claims and state consumer protection claims. The plaintiffs allege that, in 2004, Amgen entered into an anticompetitive agreement with certain F. Hoffman-La Roche AG entities (Roche) and other parties that provided Amgen with rights to Roche’s patents in a manner that enabled Amgen to allegedly unlawfully extend the life of patents applicable to ENBREL and, thereby, delay biosimilar entry. Amgen’s response to the complaint is due on November 4, 2024.

U.S. Tax Litigation and Related Matters

Amgen Inc. & Subsidiaries v. Commissioner of Internal Revenue

See Note 4, Income taxes, for discussion of the IRS tax dispute and the Company’s petitions in the U.S. Tax Court.

Securities Class Action Litigation (Roofers Local No. 149 Pension Fund)

On September 30, 2024, the U.S. District Court for the Southern District of New York denied Amgen’s motion to dismiss. Amgen's response to the complaint is due on November 20, 2024.

Shareholder Derivative Litigation (Hamilton)

On October 16, 2024, David Hamilton filed a derivative action captioned David Hamilton v. Robert A. Bradway, et al., No. 2024-1063 (Del. Chan. Ct. Oct. 16, 2024), purportedly on behalf of Amgen, against Amgen, Robert Bradway, Peter Griffith and Amgen’s Board members during the relevant time period. The action was filed in the Delaware Chancery Court. The complaint in this matter alleges claims for breach of fiduciary duty and unjust enrichment. The factual allegations that form the basis for these claims are fundamentally the same as those asserted by the Roofers Local No. 149 Pension Fund on March 13, 2023 (alleging false and misleading statements and omissions made from July 29, 2020 through April 27, 2022 relating to Amgen’s tax liabilities, business and finances, and the adequacy and maintenance of its internal controls).

ChemoCentryx, Inc. Securities Matters

On September 10, 2024, the U.S. District Court for the Northern District of California granted an administrative motion to extend certain case schedule deadlines, including setting the expert discovery cutoff to December 20, 2024 and setting the deadlines for summary judgment motions on April 4, 2025, summary judgment oppositions on April 25, 2025, and summary judgment replies on May 9, 2025. Trial is set for September 2025.

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS