Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

64K characters. Original on sec.gov · Markdown

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, both the condensed consolidated financial statements and accompanying notes of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024. Our results of operations discussed in MD&A are presented in conformity with GAAP. Amgen operates in one operating 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, 2024. 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, and collaborations. 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 Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) discovers, develops, manufactures and delivers innovative medicines to fight some of the world’s toughest diseases. We focus on areas of high unmet medical need and leverage our expertise to strive for solutions that dramatically improve people’s lives, while also reducing the social and economic burden of disease. We helped launch the biotechnology industry more than 40 years ago and have grown to be one of the world’s leading independent biotechnology companies. Our robust pipeline includes potential first-in-class medicines at all stages of development.

Our principal products are Prolia, Repatha, XGEVA, ENBREL, EVENITY, Otezla, TEPEZZA, BLINCYTO, Aranesp, KYPROLIS, Nplate, TEZSPIRE, Vectibix and KRYSTEXXA. We also market a number of other products, including but not limited to MVASI, WEZLANA/WEZENLA, AMJEVITA/AMGEVITA, Neulasta, PAVBLU, RAVICTI, UPLIZNA, TAVNEOS, Aimovig, Parsabiv, LUMAKRAS/LUMYKRAS, IMDELLTRA/IMDYLLTRA and PROCYSBI.

Tariffs and trade protection measures

The imposition of tariffs and trade protection measures by the United States and other countries, including the universal 10% tariff on goods imported into the United States, the currently-suspended country-specific tariffs, the China retaliatory tariffs on U.S. goods, the imposition of new and/or other retaliatory tariffs, and potential sector-specific tariffs on our industry and others, may adversely affect our business and operations. While existing tariffs have not had a material adverse effect on our results of operations for the first quarter of 2025, we are currently evaluating the potential impact of such tariffs on our business in future periods and our ability to mitigate such impacts. For example, the tariffs that are currently in effect, or anticipated to take effect in the future, will increase our manufacturing and operating expenses in future quarters, including the cost to deliver products to markets, cost of sourcing materials for the manufacturing of our products and cost of materials used in our research and development activities. Such tariffs may also adversely affect the cost to expand our manufacturing capacity in the United States, including increased construction costs and/or delays in construction for our Ohio and North Carolina facilities. Furthermore, retaliatory tariffs imposed by other countries may adversely affect our business, operations and delivery and launches of products in such markets, including the performance of our collaborations in such markets. However, the degree of adverse effects of any tariffs on our business and operations in future periods will depend on various factors, including the rates of such tariffs, the expansion of such tariffs to include certain goods such as pharmaceutical products, the magnitude of response by other countries to U.S. tariffs and the length of time such tariffs are in effect. For additional

information, see Part II, Item 1A. Risk Factors—Global economic conditions may negatively affect us and may magnify certain risks that affect our business.

Macroeconomic and other challenges

Uncertain macroeconomic conditions, including the risk of inflation, fluctuating interest rates and instability in the financial system, as well as rising healthcare costs, continue to pose challenges to our business. Further, uncertainty around tariffs and trade protection measures in the United States and other countries, including the imposition of new or retaliatory tariffs, along with ongoing geopolitical conflicts, continue to create additional uncertainty in global macroeconomic conditions. Additionally, with public and private healthcare-provider focus, the industry continues to be subject to cost containment measures and significant pricing pressures, resulting in net price declines. Moreover, provisions of the IRA, as well as the 340B Program, have affected, and are likely to continue to affect, our business. For example, ENBREL and Otezla have been selected by CMS for Medicare price setting beginning in 2026 and 2027, respectively. Finally, wholesale and end-user buying patterns can affect our product sales. These buying patterns can cause fluctuations in quarterly product sales, but have generally not been significant to date when comparing full-year product performance to the prior year. See Part II, Item 1A. Risk Factors, of this Quarterly Report on Form 10-Q.

Significant developments

The following is a summary of select significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2024. For additional developments, see our Annual Report on Form 10-K for the year ended December 31, 2024.

Significant developments

Products/pipeline

Maridebart cafraglutide (MariTide*™**)*

In March 2025, we announced the initiation of two Phase 3 studies to evaluate MariTide, a differentiated peptide-antibody conjugate subcutaneously administered monthly or less frequently, in chronic weight management: one study in adults living with obesity or overweight without Type 2 diabetes and another study in adults living with obesity or overweight with Type 2 diabetes.

Rocatinlimab

In March 2025, we announced results from the ongoing ROCKET Phase 3 clinical trial program evaluating rocatinlimab, an investigational T-cell rebalancing therapy targeting the OX40 receptor, in moderate to severe atopic dermatitis (AD). The IGNITE study, which evaluated two dose strengths of rocatinlimab, met its co-primary endpoints and all key secondary endpoints, achieving statistical significance for both rocatinlimab dose strengths versus placebo. The SHUTTLE study, which evaluated two dose strengths of rocatinlimab in combination with topical corticosteroids (TCS) and/or topical calcineurin inhibitors (TCI) using the same co-primary endpoints as IGNITE, met its co-primary endpoints and all key secondary endpoints. Lastly, the VOYAGER study successfully demonstrated that rocatinlimab does not interfere with responses to tetanus and meningococcal vaccinations.

Across ROCKET program results to date, safety findings were generally consistent with the safety profile of rocatinlimab previously observed. The most frequent treatment-emergent adverse events (≥5%) with higher observed proportion in rocatinlimab groups were pyrexia, chills and headache. A higher number of patients receiving rocatinlimab compared with placebo experienced gastrointestinal ulceration events, with an overall incidence of less than 1%.

UPLIZNA

In April 2025, we announced the FDA approved UPLIZNA for the treatment of Immunoglobulin G4-related disease (IgG4-RD) in adult patients. UPLIZNA is the first and only FDA approved treatment for adults living with IgG4-RD.

IMDELLTRA

In April 2025, we announced that the global Phase 3 DeLLphi-304 clinical trial evaluating IMDELLTRA as a treatment for patients with small cell lung cancer (SCLC) who progressed on or after a single line of platinum-based chemotherapy met its primary endpoint at a planned interim analysis. IMDELLTRA demonstrated statistically significant and clinically meaningful improvement in overall survival (OS) compared to local standard-of-care (SOC) chemotherapy. The safety profile for IMDELLTRA was consistent with its known profile.

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,
20252024Change
Product sales
U.S.$5,662$4,97314%
ROW2,2112,1453%
Total product sales7,8737,11811%
Other revenues276329(16)%
Total revenues$8,149$7,4479%
Operating expenses$6,971$6,4568%
Operating income$1,178$99119%
Net income (loss)$1,730$(113)*
Diluted earnings (loss) per share$3.20$(0.21)*
Diluted shares5415361%
  • Change in excess of 100%

In the following discussion of changes in product sales, any reference to unit demand growth or decline refers to changes in 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) as may be noted.

Total product sales increased 11% for the three months ended March 31, 2025, primarily driven by volume growth of 14%, partially offset by declines in net selling price of 6%.

For the three months ended March 31, 2025, U.S. volume grew 16% and ROW volume grew 11%, driven by volume growth in certain brands, including Repatha, WEZLANA/WEZENLA, Prolia, BLINCYTO, TEZSPIRE and EVENITY.

For the remainder of 2025, we expect volume growth from certain brands to be partially offset by net selling price declines.

Uncertain macroeconomic conditions, including uncertainty around tariffs and trade production measures and ongoing geopolitical conflicts, and changes in the healthcare ecosystem have the potential to introduce variability into product sales. Furthermore, product sales continue to be impacted by actions from governments and other entities to curb high inflation, provisions of the IRA, inappropriate expanded utilization of the 340B Program and growth in numbers of Medicaid enrollees and uninsured individuals. See Part I, Item 1. Business—Reimbursement, and Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024; and Part II, Item 1A. Risk Factors, of this Quarterly Report on Form 10-Q.

Other revenues decreased for the three months ended March 31, 2025, driven by lower corporate partner revenue.

Operating expenses increased for the three months ended March 31, 2025, driven by the Otezla intangible asset impairment charge, partially offset by lower amortization expense from the fair value step-up of inventory acquired from Horizon. See Note 8, Goodwill and other intangible assets, to the condensed consolidated financial statements, for additional information related to the Otezla intangible asset impairment charge.

Results of operations

Product sales

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

Three months ended March 31,
20252024Change
Prolia$1,099$99910%
Repatha65651727%
XGEVA5665611%
ENBREL510567(10)%
EVENITY44234229%
Otezla43739411%
TEPEZZA381424(10)%
BLINCYTO37024452%
Aranesp340349(3)%
KYPROLIS324376(14)%
Nplate313317(1)%
TEZSPIRE(1)28517365%
Vectibix2672478%
KRYSTEXXA2362350%
Other products(2)1,6471,37320%
Total product sales$7,873$7,11811%

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

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

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, 2024: (i) Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products; (ii) Part I, Item 1. Business—Reimbursement; (iii) Part I, Item 1A. Risk Factors; and (iv) Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of operations—Product sales.

Prolia

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

Three months ended March 31,
20252024Change
Prolia — U.S.$720$65710%
Prolia — ROW37934211%
Total Prolia$1,099$99910%

The increase in global Prolia sales for the three months ended March 31, 2025 was primarily driven by volume growth of 13%, partially offset by lower net selling price of 5%.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, our patents for RANKL antibodies, including sequences, for Prolia and XGEVA expired in February 2025 in the United States and will expire in November 2025 in select countries in Europe. For 2025, we expect sales erosion driven by biosimilar competition, particularly in the second half of the year.

For a discussion of litigation, including associated settlements, related to Prolia, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024; and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for the period ended March 31, 2025.

Repatha

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

Three months ended March 31,
20252024Change
Repatha — U.S.$343$27326%
Repatha — ROW31324428%
Total Repatha$656$51727%

The increase in global Repatha sales for the three months ended March 31, 2025 was primarily driven by volume growth of 41%, partially offset by lower net selling price of 9%.

For a discussion of ongoing litigation related to Repatha, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024; and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for the period ended March 31, 2025.

XGEVA

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

Three months ended March 31,
20252024Change
XGEVA — U.S.$360$366(2)%
XGEVA — ROW2061956%
Total XGEVA$566$5611%

Global XGEVA sales for the three months ended March 31, 2025 increased 1%.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, our patents for RANKL antibodies, including sequences, for Prolia and XGEVA expired in February 2025 in the United States and will expire in November 2025 in select countries in Europe. For 2025, we expect sales erosion driven by biosimilar competition, particularly in the second half of the year.

For a discussion of litigation, including associated settlements, related to XGEVA, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024; and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for the period ended March 31, 2025.

ENBREL

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

Three months ended March 31,
20252024Change
ENBREL — U.S.$504$561(10)%
ENBREL — Canada66—%
Total ENBREL$510$567(10)%

The decrease in ENBREL sales for the three months ended March 31, 2025 was driven by lower net selling price of 47% resulting from increased 340B Program mix and higher commercial discounts, partially offset by favorable changes to estimated sales deductions of 19%, higher inventory and volume growth. The year-over-year impact on net selling price is expected to be less pronounced in future quarters.

EVENITY

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

Three months ended March 31,
20252024Change
EVENITY — U.S.$320$23636%
EVENITY — ROW12210615%
Total EVENITY$442$34229%

The increase in global EVENITY sales for the three months ended March 31, 2025 was driven by volume growth.

Otezla

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

Three months ended March 31,
20252024Change
Otezla — U.S.$343$29317%
Otezla — ROW94101(7)%
Total Otezla$437$39411%

The increase in global Otezla sales for the three months ended March 31, 2025 was driven by favorable changes to estimated sales deductions of 12%, as volume growth of 4% was offset by lower net selling price of 5%.

In January 2025, Otezla was selected by CMS for Medicare price setting that will be applicable beginning in 2027. See Note 8, Goodwill and other intangible assets, to the condensed consolidated financial statements, for additional information related to the Otezla intangible asset impairment charge of $800 million.

TEPEZZA

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

Three months ended March 31,
20252024Change
TEPEZZA — U.S.$365$419(13)%
TEPEZZA — ROW165*
Total TEPEZZA$381$424(10)%
  • Change in excess of 100%

The decrease in global TEPEZZA sales for the three months ended March 31, 2025 was primarily driven by lower volume of 9% and lower inventory of 8%, partially offset by higher net selling price.

BLINCYTO

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

Three months ended March 31,
20252024Change
BLINCYTO — U.S.$273$15378%
BLINCYTO — ROW97917%
Total BLINCYTO$370$24452%

The increase in global BLINCYTO sales for the three months ended March 31, 2025 was primarily driven by volume growth.

Aranesp

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

Three months ended March 31,
20252024Change
Aranesp — U.S.$91$100(9)%
Aranesp — ROW249249—%
Total Aranesp$340$349(3)%

The decrease in global Aranesp sales for the three months ended March 31, 2025 was driven by unfavorable changes to foreign currency exchange rates of 4% and unfavorable changes to estimated sales deductions of 3%, partially offset by volume growth outside the United States.

KYPROLIS

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

Three months ended March 31,
20252024Change
KYPROLIS — U.S.$216$234(8)%
KYPROLIS — ROW108142(24)%
Total KYPROLIS$324$376(14)%

The decrease in global KYPROLIS sales for the three months ended March 31, 2025 was driven by lower volume due to increased competition.

Nplate

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

Three months ended March 31,
20252024Change
Nplate — U.S.$201$1906%
Nplate — ROW112127(12)%
Total Nplate$313$317(1)%

Global Nplate sales for the three months ended March 31, 2025 decreased 1% as volume growth was more than offset by unfavorable changes to both estimated sales deductions and foreign currency exchange rates.

TEZSPIRE

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

Three months ended March 31,
20252024Change
TEZSPIRE — U.S.$285$17365%

The increase in TEZSPIRE sales for the three months ended March 31, 2025 was driven by volume growth.

Vectibix

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

Three months ended March 31,
20252024Change
Vectibix — U.S.$135$12013%
Vectibix — ROW1321274%
Total Vectibix$267$2478%

The increase in global Vectibix sales for the three months ended March 31, 2025 was driven by volume growth.

KRYSTEXXA

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

Three months ended March 31,
20252024Change
KRYSTEXXA — U.S.$236$2350%

KRYSTEXXA sales for the three months ended March 31, 2025 remained relatively unchanged as volume growth of 11% was offset by lower inventory of 10%.

Other products

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

Three months ended March 31,
20252024Change
MVASI — U.S.$138$10531%
MVASI — ROW4197(58)%
WEZLANA — U.S.123—N/A
WEZENLA — ROW271*
AMJEVITA — U.S.430(87)%
AMGEVITA — ROW132138(4)%
Neulasta — U.S.1098725%
Neulasta — ROW2031(35)%
PAVBLU — U.S.99—N/A
RAVICTI — U.S.9192(1)%
RAVICTI — ROW3250%
UPLIZNA — U.S.827017%
UPLIZNA — ROW910(10)%
TAVNEOS — U.S.774571%
TAVNEOS — ROW136*
Aimovig — U.S.856531%
Aimovig — ROW55—%
Parsabiv — U.S.5065(23)%
Parsabiv — ROW3840(5)%
LUMAKRAS — U.S.55534%
LUMYKRAS — ROW30293%
IMDELLTRA — U.S.79—N/A
IMDYLLTRA — ROW2—N/A
PROCYSBI — U.S.574916%
PROCYSBI — ROW21100%
Other — U.S.(1)221302(27)%
Other — ROW(1)555010%
Total other products$1,647$1,37320%
Total U.S. — other products$1,270$96332%
Total ROW — other products377410(8)%
Total other products$1,647$1,37320%

N/A = not applicable

  • Change in excess of 100%

(1) Consists of product sales from AVSOLA, KANJINTI, RIABNI, EPOGEN, BEKEMV, ACTIMMUNE, NEUPOGEN, IMLYGIC, Corlanor, RAYOS, BUPHENYL, Sensipar/Mimpara, QUINSAIR, DUEXIS and PENNSAID.

Operating expenses

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

Three months ended March 31,
20252024Change
Operating expenses:
Cost of sales$2,968$3,200(7)%
% of product sales37.7%45.0%
% of total revenues36.4%43.0%
Research and development$1,486$1,34311%
% of product sales18.9%18.9%
% of total revenues18.2%18.0%
Selling, general and administrative$1,687$1,808(7)%
% of product sales21.4%25.4%
% of total revenues20.7%24.3%
Other$830$105*
Total operating expenses$6,971$6,4568%
  • Change in excess of 100%

Cost of sales

Cost of sales decreased to 36.4% of total revenues for the three months ended March 31, 2025, driven by lower amortization expense from the fair value step-up of inventory acquired from Horizon and lower manufacturing costs, partially offset by changes in our sales mix.

Research and development

The increase in R&D expense for the three months ended March 31, 2025, was driven by higher spend in later-stage clinical programs, partially offset by lower spend in marketed product support and research and early pipeline. We expect to continue to grow our spend on later-stage clinical programs as we advance our pipeline.

Selling, general and administrative

The decrease in SG&A expense for the three months ended March 31, 2025, was driven by lower commercial product-related expenses and lower Horizon acquisition-related expenses, partially offset by higher general and administrative expenses.

Other

Other operating expenses for the three months ended March 31, 2025, consisted primarily of the Otezla intangible asset impairment charge of $800 million following its selection for price setting under the IRA. See Note 8, Goodwill and other intangible assets, to the condensed consolidated financial statements.

Other operating expenses for the three months ended March 31, 2024, consisted primarily of a net impairment charge associated with an IPR&D intangible asset and changes in the fair values of contingent consideration liabilities, both related to our Teneobio, Inc. acquisition from 2021.

Nonoperating expenses/income and income taxes

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

Three months ended March 31,
20252024
Interest expense, net$(723)$(824)
Other income (expense), net$1,518$(235)
Provision for income taxes$243$45
Effective tax rate12.3%(66.2)%

Interest expense, net

Interest expense, net, decreased for the three months ended March 31, 2025 primarily due to lower average debt outstanding.

Other income (expense), net

The change in Other income (expense), net, for the three months ended March 31, 2025, was primarily due to net unrealized gains on equity investments, primarily BeiGene, compared to net unrealized losses on equity investments, primarily BeiGene, in the prior year period.

Income taxes

The increase in our effective tax rate for the three months ended March 31, 2025, was primarily due to the change in earnings mix as a result of net unrealized gains in the first quarter of 2025 compared to net unrealized losses in the first quarter of 2024 on equity investments (primarily BeiGene). See Note 6, Investments*—BeiGene, Ltd.,* to the condensed consolidated financial statements.

As previously reported, the OECD reached an agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries. Effective January 1, 2024, select individual countries, including the United Kingdom and EU member countries, have enacted the global minimum tax agreement. Additional countries, including Singapore, enacted the minimum tax agreement, effective January 1, 2025. Singapore’s enactment of the agreement applies irrespective of the Company’s incentive grant. Our legal entities in the countries that have enacted the agreement, along with their direct and indirect subsidiaries, are now subject to a 15% minimum tax rate on adjusted financial statement income. Other countries, including the United States and the U.S. territory of Puerto Rico, have not yet enacted the OECD agreement, and implementation remains highly uncertain. The continued enactment of the agreement, either by all OECD participants or unilaterally by individual countries, could result in tax increases or double taxation in the United States or foreign jurisdictions.

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 began on November 4, 2024 and concluded on January 17, 2025. With the conclusion of the trial, the parties will file post-trial briefs and make closing arguments in 2025. The Company expects a decision from the U.S. Tax Court no earlier than the second half of 2026.

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. We believe that the IRS may also seek to continue to audit similar issues related to the allocation of income between the United States and the U.S. territory of Puerto Rico for years beyond 2018. 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.

See our Annual Report on Form 10-K for the year ended December 31, 2024, Part I, Item 1A, Risk Factors—We could be subject to additional tax liabilities, including from an adverse outcome in our ongoing tax dispute with the IRS and other tax examinations, enactment of the OECD minimum corporate tax rate agreement and the adoption and interpretation of new tax legislation, and we anticipate additional tax liabilities from certain provisions of the 2017 Tax Act that will go into effect in 2026; such tax liabilities could adversely affect our profitability and results of operations, and Note 4, Income taxes, to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q for further discussion.

Financial condition, liquidity and capital resources

Selected financial data were as follows (in millions):

March 31, 2025December 31, 2024
Cash and cash equivalents$8,810$11,973
Total assets$89,367$91,839
Current portion of long-term debt$3,368$3,550
Long-term debt$54,013$56,549
Stockholders’ equity$6,207$5,877

Cash and cash equivalents

Our balance of cash and cash equivalents was $8.8 billion as of March 31, 2025. 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 investments in innovation both internally and externally (including investments that expand our portfolio of products in areas of therapeutic interest), capital expenditures, repayment of debt, payment of dividends and stock repurchases.

We intend to continue investing in our business while reducing our debt and returning capital to stockholders through the payment of cash dividends and stock repurchases. This reflects our desire to optimize our cost of capital and our confidence in the future cash flows of our business. 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, debt levels and debt service requirements, our credit rating, availability of financing on acceptable terms, 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, accelerated share repurchases and market transactions.

In December 2024, our Board of Directors declared a quarterly cash dividend of $2.38 per share of common stock for the first quarter of 2025, an increase of 6% over the same period in the prior year, which was paid in March 2025. In March 2025, our Board of Directors declared a quarterly cash dividend of $2.38 per share of common stock to be paid in June 2025.

During the three months ended March 31, 2025, we did not repurchase shares under our stock repurchase program. As of March 31, 2025, $6.8 billion of authorization remained available under the stock repurchase program.

As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of March 31, 2025 and December 31, 2024. Our accumulated deficit is not anticipated to affect our future ability to operate, repurchase stock, pay dividends or repay our debt given our expected continued profitability and strong financial position.

During the three months ended March 31, 2025, debt repayments totaled $2.5 billion, compared to no debt repayments during the same period in the prior year. In addition, we opportunistically repurchase our debt when market conditions are favorable. During the three months ended March 31, 2025 and 2024, we repurchased aggregate principal amounts of our debt of $414 million and $544 million, respectively, for aggregate costs of $301 million and $410 million, respectively, which resulted in the recognition of gains on extinguishment of debt of $111 million and $133 million respectively, recorded in Other income (expense), net, in the Condensed Consolidated Statements of Income (Loss).

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, as well as our plans to reduce debt, 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, 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, 2024, 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 and term loan credit agreement include 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 earnings before interest, taxes, depreciation and amortization) to (ii) Consolidated Interest Expense, each as defined and described in the respective agreements. We were in compliance with all applicable covenants under these arrangements as of March 31, 2025.

Cash flows

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

Three months ended March 31,
20252024
Net cash provided by operating activities$1,391$689
Net cash used in investing activities$(447)$(217)
Net cash used in financing activities$(4,107)$(1,708)

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, 2025, increased as compared to the same period in the prior year primarily due to an $800 million tax deposit made in the first quarter of 2024 and higher net income in the first quarter of 2025 after adjustments for noncash items, partially offset by the timing of working capital items.

Investing

Cash used in investing activities during the three months ended March 31, 2025 and 2024, was primarily due to capital expenditures of $411 million and $230 million, respectively, including construction costs for new plants in Ohio and North Carolina to expand our manufacturing capacity. We currently estimate full year 2025 investments in capital projects to be approximately $2.3 billion.

Financing

Cash used in financing activities during the three months ended March 31, 2025, was primarily due to the repayment and extinguishment of debt of $2.5 billion and $301 million, respectively, and the payment of dividends of $1.3 billion. Cash used in financing activities during the three months ended March 31, 2024, was primarily due to the payment of dividends of $1.2 billion and the extinguishment of debt of $410 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, 2024. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2025.

Recently issued accounting standards

For a discussion of recently issued accounting standards, see Note 1, Significant accounting policies, to the condensed consolidated financial statements.

Previous: Item 1. FINANCIAL STATEMENTS · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK