AMGEN INC (AMGN)

Item 7. 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, our consolidated financial statements and accompanying notes. 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 Part I, Item 1A. Risk Factors. 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, ENBREL, XGEVA, Repatha, Otezla, TEPEZZA, EVENITY, KYPROLIS, Nplate, Aranesp, BLINCYTO, KRYSTEXXA, Vectibix and TEZSPIRE. We also market a number of other products, including but not limited to AMJEVITA/AMGEVITA, MVASI, Neulasta, RAVICTI, UPLIZNA, Parsabiv, LUMAKRAS/LUMYKRAS, Aimovig, TAVNEOS, PROCYSBI, EPOGEN and IMDELLTRA. For additional information about our products, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products.

Our strategy is the integrated set of actions we take to improve our competitive position in the industry. In 2024, we advanced our innovative pipeline; generated strong sales growth across our product portfolio and regions; and expanded our world-class manufacturing network. We accomplished these objectives while maintaining a strategic and disciplined approach to capital allocation.

We received regulatory approvals for BLINCYTO in CD19-positive Philadelphia chromosome-negative B-ALL and IMDELLTRA in extensive-stage small cell lung cancer (ES-SCLC) and reported five Phase 3 data readouts, including for BLINCYTO, UPLIZNA, rocatinlimab and TEZSPIRE, as well as MariTide Phase 2 top-line results. For more information on our pipeline and clinical development updates, see Part I, Item 1. Business—Research and Development and Selected Product Candidates, and Part I, Item 1. Business—Significant Developments.

Total product sales increased in 2024, primarily driven by volume growth of 23%, partially offset by declines in net selling price of 2%. Product sales from acquired Horizon products contributed $4.2 billion in 2024 compared to $954 million in 2023, with volume growth from our other brands of 11%.

Cash flows from operating activities in 2024 totaled $11.5 billion, which supported investment in our business, including capital expenditures of $1.1 billion to enhance and expand our manufacturing network, and allowed us to both reduce our debt outstanding and return capital to shareholders through the payment of cash dividends. For 2024, we increased our quarterly cash dividend by 6% to $2.25 per share of common stock. In December 2024, the Board of Directors declared a cash dividend of

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$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, to be paid in March 2025.

Amgen’s approach to and investment in human capital resource management is directed at attracting, motivating, developing and retaining talent to tackle the challenges of running an enterprise focused on the discovery, development and commercialization of innovative medicines. Our compensation, benefits and development programs are designed to encourage performance, promote accountability and adherence to Company values, and align with the interests of the Company’s shareholders. In our effort to attract and retain the best talent, we seek out and support talent across the globe. Further, we believe that an inclusive culture helps attract and retain a strong and engaged workforce informed by the varied backgrounds and experiences represented, which fosters innovation, collaboration and productivity as we execute on our mission to serve patients. For further information on these and other efforts, see Part I, Item 1. Business—Human Capital Resources.

We have a long-standing ambition to be environmentally responsible, and we regularly set targets to challenge ourselves to deliver further improvements. To continue on our path to greater environmental sustainability, in January 2021 we announced a new set of long-term environmental targets to achieve by 2027, including achieving carbon neutrality, reducing water consumption by 40% and reducing waste disposed by 75%.2,3

Our long-term success depends, to a great extent, on our ability to continue to discover, develop and commercialize innovative products and acquire or collaborate on therapies currently in development by other companies. We must grow sales from existing and new products to achieve revenue growth and to offset revenue losses caused by products’ loss of their exclusivity or launches of competing products. For example, our patents for RANKL antibodies, including sequences, for Prolia and XGEVA expire in February 2025 in the United States and in November 2025 in select countries in Europe. Certain of our products face increasing pressure from competition, including biosimilars and generics. For additional information, including information on the expirations of patents for various products, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, and Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition. We devote considerable resources to R&D activities, but successful product development in the biotechnology industry is highly uncertain. We also face increasing regulatory scrutiny of safety and efficacy both before and after products launch.

Macroeconomic and other challenges

Uncertain macroeconomic conditions, including the risk of inflation, tariffs or trade protection measures, higher interest rates and instability in the financial system, as well as rising healthcare costs, continue to pose challenges to our business. Further, 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 I, Item 1. Business—Marketing, Distribution and Selected Marketed Products, and Part I, Item 1A. Risk Factors for further discussion of certain factors that could impact our future product sales.

2 Represents reductions against established baselines, taking into account only verified reduction projects and does not take into account changes associated with contraction or expansion of the Company.

3 Carbon neutrality goal refers to Scopes 1 and 2.

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Selected Financial Information

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

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

Total product sales increased 19% in 2024, primarily driven by volume growth of 23%, partially offset by declines in net selling price of 2%. U.S. volume grew 26% and ROW volume grew 17%. Product sales from acquired Horizon products contributed $4.2 billion in 2024 compared to $954 million in 2023, with volume growth of 11% from our other brands, including Repatha, TEZSPIRE, EVENITY, BLINCYTO and Prolia.

For 2025, we expect volume growth from certain brands to be partially offset by net selling price declines. Further, the first quarter of a year historically represents the lowest product sales quarter for the year, in part due to plan changes, insurance reverifications and higher co-pay expenses as U.S. patients work through deductibles, particularly for products acquired through pharmacy benefit programs.

Uncertain macroeconomic conditions, changes in the healthcare ecosystem and geopolitical conflicts 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 Risk Factors in Part I, Item 1A. of this Form 10-K.

Other revenues increased for 2024, primarily driven by higher corporate partner revenue from licensed products and royalty income.

Operating expenses increased for 2024, driven by higher amortization expense from Horizon acquisition-related assets, higher R&D and SG&A expenses, including expenses from the acquired Horizon business, and higher profit share and royalty expense.

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Results of Operations

Product sales

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

* Change in excess of 100%

N/A = not applicable

____________

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

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

Future sales of our products will depend in part on the factors discussed in the Overview, Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition, Part I, Item 1. Business—Reimbursement, Part I, Item 1A. Risk Factors, and any additional factors discussed in the individual product sections below. In addition, for a list of our products’ significant competitors, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition.

Prolia

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

The increase in global Prolia sales for 2024 was driven by volume growth.

The increase in global Prolia sales for 2023 was primarily driven by volume growth and higher net selling price.

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As disclosed in Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, our patents for RANKL antibodies, including sequences, for Prolia expire in February 2025 in the United States and in November 2025 in select countries in Europe. For 2025, we expect sales erosion driven by biosimilar competition.

For a discussion of ongoing litigation related to Prolia, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

ENBREL

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

The decrease in ENBREL sales for 2024 was driven by lower net selling price. For 2025, we expect ENBREL to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles. In addition, going forward, we expect relatively flat volumes with continued declines in net selling price, including the impact from the IRA Medicare Part D price set by CMS beginning in 2026.

The decrease in ENBREL sales for 2023 was driven by lower net selling price, lower inventory and unfavorable changes to estimated sales deductions.

XGEVA

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

The increases in global XGEVA sales for 2024 and 2023 were driven by higher net selling price.

As disclosed in Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, our patents for RANKL antibodies, including sequences, for XGEVA expire in February 2025 in the United States and in November 2025 in select countries in Europe. For 2025, we expect sales erosion driven by biosimilar competition.

For a discussion of ongoing litigation related to XGEVA, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

Repatha

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

The increase in global Repatha sales for 2024 was primarily driven by volume growth of 43%, partially offset by lower net selling price of 10%.

The increase in global Repatha sales for 2023 was driven by volume growth, partially offset by lower net selling price.

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For 2025, we expect lower declines in net selling price.

For a discussion of ongoing litigation related to Repatha, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

Otezla

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

The decrease in global Otezla sales for 2024 was primarily driven by lower net selling price of 8%, partially offset by volume growth of 3%. For 2025, we expect Otezla to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles. In January 2025, Otezla was selected by CMS for Medicare price setting that will be applicable beginning on January 1, 2027.

The decrease in global Otezla sales for 2023 was driven by lower net selling price and inventory, partially offset by volume growth.

TEPEZZA

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

* Change in excess of 100%

N/A = not applicable

TEPEZZA was acquired on October 6, 2023 from our Horizon acquisition and generated $1.9 billion and $448 million in product sales for 2024 and 2023, respectively. As TEPEZZA was acquired on October 6, 2023, there were no recorded product sales in the periods prior to the acquisition date.

EVENITY

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

The increases in global EVENITY sales for 2024 and 2023 were driven by volume growth.

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KYPROLIS

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

The increase in global KYPROLIS sales for 2024 was driven by volume growth outside the United States.

The increase in global KYPROLIS sales for 2023 was driven by volume growth.

Nplate

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

Global Nplate sales for 2024 decreased 1% and included U.S. government orders of $128 million and $286 million for 2024 and 2023, respectively. Excluding the U.S. government orders from this comparison, global Nplate sales increased 12% for 2024, driven by volume growth of 8% and higher net selling price of 6%.

The increase in global Nplate sales for 2023 was primarily driven by volume growth, including U.S. government orders totaling $286 million.

Aranesp

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

Global Aranesp sales for 2024 remained relatively unchanged as unfavorable changes to both estimated sales deductions and foreign currency exchange rates were offset by volume growth outside the United States.

The decrease in global Aranesp sales for 2023 was driven by unfavorable changes to foreign currency exchange rates and lower net selling price. U.S. Aranesp sales for 2023 decreased due to lower unit demand as a result of independent and medium-sized dialysis organizations transitioning from Aranesp to EPOGEN.

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BLINCYTO

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

The increases in global BLINCYTO sales for 2024 and 2023 were primarily driven by volume growth.

KRYSTEXXA

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

* Change in excess of 100%

N/A = not applicable

KRYSTEXXA was acquired on October 6, 2023 from our Horizon acquisition and generated $1.2 billion and $272 million in product sales for 2024 and 2023, respectively. As KRYSTEXXA was acquired on October 6, 2023, there were no recorded product sales in the periods prior to the acquisition date.

Vectibix

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

The increase in global Vectibix sales for 2024 was driven by higher net selling price of 8% and volume growth of 4%, partially offset by unfavorable changes to foreign currency exchange rates.

The increase in global Vectibix sales for 2023 was driven by volume growth.

TEZSPIRE

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

* Change in excess of 100%

The increases in TEZSPIRE sales for 2024 and 2023 were primarily driven by volume growth.

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Other products

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

N/A = not applicable

* Change in excess of 100%

____________

(1)    RAVICTI, UPLIZNA and PROCYSBI were acquired from our Horizon acquisition on October 6, 2023, and include product sales in the periods after the acquisition date.

(2)    Consists of product sales from (i) KANJINTI, RIABNI, AVSOLA, NEUPOGEN, Corlanor, IMLYGIC, BEKEMV, PAVBLU, WEZLANA/WEZENLA and Sensipar/Mimpara; and (ii) ACTIMMUNE, RAYOS, BUPHENYL, QUINSAIR, PENNSAID and DUEXIS in the periods after our Horizon acquisition on October 6, 2023.

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Operating expenses

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

Cost of sales

Cost of sales increased to 38.5% of total revenues for 2024, driven by higher amortization expense from Horizon acquisition-related assets and, to a lesser extent, higher profit share and royalty expense, partially offset by the prior year impact of the 2022 Puerto Rico tax law change that replaced an excise tax with an income tax beginning in 2023. For 2024, the unfavorable impact from product sales mix of certain Amgen products was offset by the favorable impact on product sales mix of the addition of acquired Horizon products. See Part IV—Note 4, Acquisitions and divestitures, and Note 7, Income taxes, to the Consolidated Financial Statements.

Cost of sales increased to 30.0% of total revenues for 2023, driven by higher amortization expense from acquisition-related assets primarily associated with the Horizon acquisition, higher profit share and royalty expense and changes in our product sales mix, partially offset by the impact of the 2022 Puerto Rico tax law change.

Research and development

The Company groups all of its R&D activities and related expenditures into three categories: (i) research and early pipeline, (ii) later-stage clinical programs and (iii) marketed products. These categories are described below:

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R&D expense by category was as follows (in millions):

The increase in R&D expense for 2024 was driven by higher spend in later-stage clinical programs and marketed product support, including Horizon-acquired programs. We expect to continue to grow our spend on later-stage clinical programs as we advance our pipeline.

The increase in R&D expense for 2023 was driven by higher spend in later-stage clinical programs and marketed product support, including Horizon-acquired programs.

Selling, general and administrative

The increase in SG&A expense for 2024 was primarily driven by expenses from the acquired Horizon business and other commercial expenses, partially offset by lower acquisition-related expenses related to the Horizon acquisition incurred in 2024.

The increase in SG&A expense for 2023 was primarily driven by acquisition-related expenses, in addition to commercial and general and administrative expenses related to the Horizon acquisition, partially offset by lower spend for other marketed products.

Other

Other operating expenses for 2024 primarily consisted of impairment charges associated with IPR&D intangible assets related to our Teneobio acquisition in 2021 and expenses related to cost-savings initiatives incurred in 2024.

Other operating expenses for 2023 primarily consisted of a net IPR&D intangible asset impairment charge for AMG 340 and expenses related to our restructuring plan that were both initiated and substantially completed in 2023.

Other operating expenses for 2022 primarily consisted of a loss on the divestiture of Gensenta.

Nonoperating expenses/income and income taxes

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

Interest expense, net

The increases in Interest expense, net, in 2024 and 2023 over the respective prior years were primarily due to higher average debt outstanding and higher weighted-average fixed and floating interest rates on the debt. See Part IV—Note 16, Financing arrangements, to the Consolidated Financial Statements.

Other income (expense), net

The change in Other income (expense), net, for 2024 was primarily due to current year net unrealized losses on our strategic equity investments compared with net unrealized gains in the prior year, as well as reduced interest income as a result of lower average cash balances. The 2023 net unrealized gains on our strategic equity investments were principally composed of amounts recognized on our BeiGene investment in the first quarter of 2023 as a result of a change from the equity method of accounting to recording this investment at fair value with changes in fair value recognized in earnings. See Part IV—Note 10, Investments, to the Consolidated Financial Statements.

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The change in Other income (expense), net, for 2023    was primarily due to gains recognized in connection with recording our BeiGene investment at fair value and an increase in interest income due to higher average cash balances and higher interest rates as compared to the prior year.

Income taxes

The decrease in our effective tax rate for 2024 compared with 2023 was primarily due to a change in earnings mix, including the net unrealized impact of our strategic equity investments, partially offset by the deferred tax adjustments associated with U.S. minimum tax on the earnings of our foreign subsidiaries.

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. As of January 1, 2025, select individual countries, including the United Kingdom, EU member countries and Singapore, have enacted the global minimum tax agreement. 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.

A 2022 Puerto Rico tax law change replaced the excise tax with an income tax, beginning in 2023. As of January 1, 2023, we are 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 under the U.S. Treasury final foreign tax credit regulations. See Part IV—Note 7, Income taxes, to the Consolidated Financial Statements for further discussion.

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 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 consolidated financial statements.

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See 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; Part II, Item 7. Management’s Discussion and Analysis or Financial Condition and Results of Operations—Critical Accounting Policies and Estimates, Income taxes; and Part IV—Note 7, Income taxes, to the Consolidated Financial Statements for further discussion.

Financial Condition, Liquidity and Capital Resources

Selected financial data was as follows (in millions):

Cash and cash equivalents

Our balance of cash and cash equivalents was $12.0 billion on December 31, 2024. 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, ASRs and market transactions.

The Board of Directors declared quarterly cash dividends of $2.25, $2.13 and $1.94 per share of common stock paid in 2024, 2023 and 2022, respectively, reflecting year-over-year increases of 6% and 10% for 2024 and 2023, respectively. In December 2024, the Board of Directors declared a 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, to be paid in March 2025.

We also returned capital to stockholders through our stock repurchase program. During 2024, we repurchased $200 million of common stock under the stock repurchase program. During 2023, we did not repurchase any of our common stock under the stock repurchase program. During 2022, we repurchased $6.3 billion of common stock, including $6.0 billion under ASR agreements and had cash settlements for stock repurchases of $6.4 billion. As of December 31, 2024, $6.8 billion remained available under the stock repurchase program.

As a result of stock repurchases and quarterly dividend payments, we had an accumulated deficit as of December 31, 2024 and 2023. 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.

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

Financing arrangements

To help meet our liquidity requirements, we have entered into various financing arrangements. The noncurrent portions of our long-term borrowings as of December 31, 2024 and 2023, were $56.5 billion and $63.2 billion, respectively. The carrying values of our long-term borrowings are net of fair value adjustments for interest rate swaps and unamortized discounts, premiums and offering costs. As of December 31, 2024, S&P, Moody’s and Fitch assigned credit ratings to our outstanding senior notes of BBB+, Baa1 and BBB, respectively, which are considered investment grade. Unfavorable changes to these ratings may have an adverse impact on future financings.

In December 2022, in connection with the acquisition of Horizon, we entered into a bridge credit agreement and a term loan credit agreement, which provided for borrowings in the aggregate of $28.5 billion. During 2023, we issued $24.0 billion of debt composed of eight series of notes, terminated the bridge credit agreement and borrowed $4.0 billion under the term loan credit agreement, of which $1.8 billion of borrowings was outstanding as of December 31, 2024. During 2022, we issued debt with an aggregate principal amount of $7.0 billion.

During 2024, debt repayments totaled $3.6 billion, of which $2.2 billion was composed of repayments on our term loans. During 2023, debt repayments totaled $1.5 billion, and we had no debt repayments in 2022. In addition, we opportunistically repurchase our debt when market conditions are favorable. During 2024, 2023 and 2022, we repurchased aggregate principal amounts of our debt of $875 million, $881 million and $378 million, respectively, for aggregate costs of $659 million, $647 million and $297 million, respectively, which resulted in the recognition of gains on extinguishment of debt of $215 million, $225 million and $78 million, respectively, recorded in Other income (expense), net in the Consolidated Statements of Income.

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that effectively converted a fixed-rate interest coupon for certain of our debt issuances to a floating, SOFR-based coupon over the terms of the respective notes. These interest rate swap contracts qualify and are designated as fair value hedges. As of both December 31, 2024 and 2023, we had interest rate swap contracts with an aggregate notional amount of $6.7 billion.

To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term notes denominated in foreign currencies, we entered into cross-currency swap contracts, which effectively convert the interest payments and principal repayment of the respective notes from euros, pounds sterling and Swiss francs to U.S. dollars. These cross-currency swap contracts qualify and are designated as cash flow hedges. As of both December 31, 2024 and 2023, we had cross-currency swap contracts with an aggregate notional amount of $2.7 billion.

As of December 31, 2024, our commercial paper program allows us to issue up to $2.5 billion of unsecured commercial paper to fund our working capital needs. During 2024, 2023 and 2022, we did not issue any commercial paper. No commercial paper was outstanding as of December 31, 2024 and 2023.

In 2023, we amended and restated our syndicated, unsecured, revolving credit agreement, under which we may borrow up to $4.0 billion for general corporate purposes, including as a liquidity backstop for our commercial paper program. The commitments under the revolving credit agreement may be increased by up to $1.25 billion with the agreement of the banks. Each bank that is a party to the agreement has an initial commitment term of five years. This term may be extended for up to two additional one-year periods with the agreement of the banks. Annual commitment fees for this agreement are 0.09% of the unused portion of the facility based on our current credit rating. Generally, we would be charged interest for any amounts borrowed under this facility, based on our current credit rating, at (i) SOFR plus 1.01% or (ii) the highest of (A) the administrative agent bank base commercial lending rate, (B) the overnight federal funds rate plus 0.50% or (C) one-month SOFR plus 1.1%. As of December 31, 2024 and 2023, no amounts were outstanding under this facility.

Also in 2023, we filed a shelf registration statement with the SEC that allows us to issue unspecified amounts of debt securities; common stock; preferred stock; warrants to purchase debt securities, common stock, preferred stock or depositary shares; rights to purchase common stock or preferred stock; securities purchase contracts; securities purchase units; and depositary shares. Under this shelf registration statement, all of the securities available for issuance may be offered from time to time, with terms to be determined at the time of issuance. This shelf registration statement expires in February 2026.

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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 December 31, 2024.

These financing arrangements are more fully discussed in Part IV—Note 16, Financing arrangements, and Note 19, Derivative instruments, to the Consolidated Financial Statements.

Cash flows

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

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 increased in 2024 as compared to 2023 due to higher net income after adjustments for noncash items and timing of working capital items primarily driven by higher collections in the fourth quarter.

Cash provided by operating activities decreased in 2023 as compared to 2022 due to lower net income after adjustments for noncash items, primarily transaction and integration payments made in connection with the Horizon acquisition, as well as higher tax payments, partially offset by changes in working capital items.

Investing

Cash used in investing activities during 2024 was primarily due to $1.1 billion of capital expenditures, including construction costs for new plants in North Carolina and Ohio.

Cash used in investing activities during 2023 was primarily due to $27.0 billion of net cash used for the purchase of Horizon and $1.1 billion of capital expenditures, partially offset by net cash inflows related to marketable securities of $1.7 billion.

Cash used in investing activities during 2022 was primarily due to our $3.8 billion purchase of ChemoCentryx, net cash outflows related to marketable securities of $1.4 billion and $936 million of capital expenditures.

We currently estimate 2025 investments in capital projects to be approximately $2.3 billion. A majority of the increase in expenditures relates to expansion of manufacturing capacity to enable supply of products and product candidates.

Financing

Cash used in financing activities during 2024 was primarily due to the payment of dividends of $4.8 billion, the repayment and extinguishment of debt of $3.6 billion and $659 million, respectively, and payments to repurchase our common stock of $200 million.

Cash provided by financing activities during 2023 was primarily due to net proceeds from long-term debt issuances of $27.8 billion primarily in connection with the acquisition of Horizon, partially offset by the payment of dividends of $4.6 billion and the repayment and extinguishment of debt of $1.5 billion and $647 million, respectively.

Cash used in financing activities during 2022 was primarily due to payments to repurchase our common stock of $6.4 billion and the payment of dividends of $4.2 billion, partially offset by net proceeds from the issuance of debt of $6.9 billion.

See Part IV—Note 10, Investments; Note 16, Financing arrangements; and Note 17, Stockholders’ equity, to the Consolidated Financial Statements.

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Capital requirements

We have material cash requirements to pay third parties under various contractual obligations discussed below.

We are obligated to pay interest and repay principal under our various financing arrangements, including amounts under interest rate swap and cross-currency swap contracts related to certain of our long-term debt obligations. For information on scheduled debt maturities and payments under derivative contracts associated with our long-term debt obligations, see Part IV—Note 16, Financing arrangements, and Note 19, Derivative instruments, to the Consolidated Financial Statements.

We are obligated to make payments for operating leases, including rental commitments on abandoned leases and leases that have not yet commenced. For information on these obligations, see Part IV—Note 14, Leases, to the Consolidated Financial Statements.

Under the 2017 Tax Act, we elected to pay in eight annual installments the repatriation tax related primarily to prior indefinitely invested earnings of our foreign operations, of which the final installment will be paid in 2025.

As of December 31, 2024, we have purchase obligations of $5.7 billion primarily related to (i) R&D commitments (including those related to clinical trials) for new and existing products, (ii) capital expenditures and (iii) open purchase orders for the acquisition of goods and services in the ordinary course of business. Most of these obligations are expected to be paid within one year, and payment of certain of these amounts may be reduced based on certain future events.

In addition to the purchase obligations noted above and upon the achievement of various development, regulatory and commercial milestones for agreements we have entered into with third parties, we are contractually obligated to pay additional amounts that, in the aggregate, are significant. These payments are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring, and any resulting cash requirements are managed through our operational budgeting processes. Except with respect to the fair value of the contingent consideration of approximately $106 million as of December 31, 2024, these obligations are not recorded on our Consolidated Balance Sheets. As of December 31, 2024, the maximum amount that may be payable in the future for agreements we have entered into with third parties is $5.6 billion.

We have recorded liabilities for UTBs that, because of their nature, have a high degree of uncertainty regarding the timing of future cash payment and other events that extinguish these liabilities. See Part IV—Note 7, Income taxes, to the Consolidated Financial Statements.

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Critical Accounting Policies and Estimates

The preparation of our 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. Our significant accounting policies are included in Part IV—Note 1, Summary of significant accounting policies, to the Consolidated Financial Statements. The following are considered critical to our consolidated financial statements because they require the most difficult, subjective or complex judgments, often because of the need to make estimates about matters that are inherently uncertain.

Product sales and sales deductions

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

We analyze the adequacy of our accruals for sales deductions quarterly. Amounts accrued for sales deductions are adjusted when trends or significant events indicate that adjustment is appropriate. Accruals are also adjusted to reflect actual results. Amounts recorded in Accrued liabilities in the Consolidated Balance Sheets for sales deductions were as follows (in millions):

____________

(1)    Represents sales deductions assumed from the Horizon acquisition.

For the years ended December 31, 2024, 2023 and 2022, total sales deductions were 52%, 53% and 51% of gross product sales, respectively. The increase in the total sales deductions balance as of December 31, 2024, compared with December 31, 2023, was primarily driven by higher gross sales. Included in the amounts are immaterial net adjustments related to prior-year sales due to changes in estimates.

In the United States, we use wholesalers as the principal means of distributing our products to healthcare providers such as physicians or their clinics, dialysis centers, hospitals and pharmacies. Products we sell in Europe are distributed principally to hospitals and/or wholesalers depending on the distribution practice in each country where the products are sold. We monitor the inventory levels of our products at our wholesalers by using data from our wholesalers and other third parties, and we believe wholesaler inventories have been maintained at appropriate levels (generally two to three weeks) given end-user demand. Accordingly, historical fluctuations in wholesaler inventory levels have not significantly affected our method of estimating sales deductions.

Accruals for sales deductions are based primarily on estimates of the amounts earned or to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product specific and therefore, for any given year, can be affected by the mix of products sold.

Rebates include primarily amounts paid to payers and providers in the United States, including those paid to state Medicaid programs and those related to the IRA, and are based on contractual arrangements or statutory requirements that vary by product, by payer and by individual payer plans. As we sell products, we estimate the amount of rebate we will pay based on

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the product sold, contractual terms, estimated patient population, historical experience and wholesaler inventory levels; and we accrue these rebates in the period the related sales are recorded. We then adjust the rebate accruals as more information becomes available and to reflect actual claims experience. Estimating such rebates is complicated, in part because of the time delay between the date of sale and the actual settlement of the liability. We believe the methodology we use to accrue for rebates is reasonable and appropriate given current facts and circumstances, but actual results may differ.

Wholesaler chargebacks relate to our contractual agreements to sell products to healthcare providers in the United States at fixed prices that are lower than the prices we charge wholesalers. When healthcare providers purchase our products through wholesalers at these reduced prices, wholesalers charge us for the difference between their purchase prices and the contractual prices between Amgen and the healthcare providers. The provision for chargebacks is based on expected sales by our wholesaler customers to healthcare providers. Accruals for wholesaler chargebacks are less difficult to estimate than rebates are, and they closely approximate actual results because chargeback amounts are fixed at the date of purchase by the healthcare providers and because we generally settle the liability for these deductions within a few weeks.

Income taxes

We provide for income taxes based on pretax income and applicable tax rates in the various jurisdictions in which we operate.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position. The tax benefit recognized in the consolidated financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of UTBs is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination. We believe our estimates for uncertain tax positions are appropriate and sufficient for any assessments that may result from examinations of our tax returns. We recognize both accrued interest and penalties, when appropriate, related to UTBs in income tax expense. See Part IV—Note 7, Income taxes, to the Consolidated Financial Statements.

Certain items are included in our tax return at different times than they are reflected in the financial statements, and they cause temporary differences between the tax bases of assets and liabilities and their reported amounts. Such temporary differences create deferred tax assets and liabilities. Deferred tax assets are generally items that can be used as tax deductions or credits in tax returns in future years but for which we have already recorded the tax benefit in the consolidated financial statements. We establish valuation allowances against our deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities are either (i) tax expenses recognized in the consolidated financial statements for which payment has been deferred, (ii) expenses for which we have already taken a deduction on the tax return but have not yet recognized in the consolidated financial statements or (iii) liabilities for the difference between the book basis and the tax basis of the intangible assets acquired in many business combinations, because future expenses associated with these assets most often will not be tax deductible.

Amgen is subject to current U.S. minimum tax on foreign subsidiaries. Based on our election beginning in 2022, we have established deferred taxes with respect to the U.S. minimum tax on the earnings of our foreign subsidiaries. This requires us to recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-taxed income in future years. These are ongoing adjustments that are likely to occur in the future.

We are a vertically integrated enterprise with operations in the United States and various foreign jurisdictions. In the jurisdictions where we conduct operations, we are subject to income tax based on the tax laws and principles of such jurisdictions and on the functions, risks and activities performed therein. Our pretax income is therefore attributed to domestic or foreign sources based on the operations performed and the risks assumed in each location, as well as on the tax laws and principles of the respective taxing jurisdictions. For example, we conduct significant operations in Puerto Rico, a territory of the United States that is treated as a foreign jurisdiction for U.S. tax purposes, pertaining to manufacturing, distribution and other related functions to meet our worldwide product demand. Income from our operations in Puerto Rico is subject to tax incentive grants through 2050.

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

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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 Tax Court no earlier than 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 consolidated financial statements. See 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; Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations, Income taxes; and Part IV—Note 7, Income taxes, to the Consolidated Financial Statements for further discussion.

Our operations are subject to the tax laws, regulations and administrative practices of the United States, the U.S. territory of Puerto Rico, U.S. state jurisdictions and other countries in which we do business. Significant changes in these rules could have a material adverse effect on our results of operations. See 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.

Contingencies

In the ordinary course of business, we are involved in various legal proceedings, government investigations and other matters such as intellectual property disputes, contractual disputes and class action suits that are complex in nature and have outcomes that are difficult to predict. We describe our legal proceedings and other matters that are significant or that we believe could become significant in Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements. 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.

While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

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Valuation of assets and liabilities in connection with acquisitions

We have acquired and continue to acquire intangible assets in connection with business combinations and asset acquisitions. These intangible assets consist primarily of technology associated with currently marketed human therapeutic products and IPR&D product candidates. Discounted cash flow models are typically used to determine the fair values of these intangible assets for purposes of allocating consideration paid to the net assets acquired in an acquisition. See Part IV—Note 4, Acquisitions and divestitures, to the Consolidated Financial Statements. These models require the use of significant estimates and assumptions, including but not limited to:

•determining the timing and expected costs to complete in-process projects, taking into account the stage of completion at the acquisition date;

•projecting the probability and timing of obtaining marketing approval from the FDA and other regulatory agencies for product candidates;

•estimating the timing of and future net cash flows from product sales resulting from completed products and in-process projects; and

•developing appropriate discount rates to calculate the present values of the cash flows.

Significant estimates and assumptions are also required to determine the business combination date fair values of any contingent consideration obligations incurred in connection with business combinations. In addition, we must revalue these obligations each subsequent reporting period until the related contingencies are resolved and record changes in their fair values in earnings. The acquisition date fair values of contingent consideration obligations incurred or assumed in the acquisitions were determined using a combination of valuation techniques. Significant estimates and assumptions required for these valuations included but were not limited to the timing and probability of achieving regulatory milestones, product sales projections under various scenarios and discount rates used to calculate the present value of the required payments. These estimates and assumptions are required to be updated in order to revalue these contingent consideration obligations each reporting period. Accordingly, subsequent changes in underlying facts and circumstances could result in changes in these estimates and assumptions, which could have a material impact on the estimated future fair values of these obligations.

We believe the fair values used to record intangible assets acquired and contingent consideration obligations incurred in connection with business combinations and asset acquisitions are based on reasonable estimates and assumptions given the facts and circumstances as of the related valuation dates.

Impairment of long-lived assets

We review the carrying value of our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such circumstances exist, an estimate of undiscounted future cash flows to be generated by the long-lived asset is compared with the carrying value to determine whether an impairment exists. If an asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value.

Indefinite-lived intangible assets, composed of IPR&D projects acquired in a business combination that have not reached technological feasibility or that lack regulatory approval at the time of acquisition, are reviewed for impairment annually, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and upon establishment of technological feasibility or regulatory approval. We test for impairment by comparing the fair value of the asset to its carrying value. If the asset’s carrying value exceeds its fair value, an impairment charge is recorded for the difference, and its carrying value is reduced accordingly.

Estimating future cash flows of an IPR&D product candidate for purposes of an impairment analysis requires us to make significant estimates and assumptions regarding the amount and timing of costs to complete the project and the amount, timing and probability of achieving revenues from the completed product similar to how the acquisition date fair value of the project was determined, as described above. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market these products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods which could have a material adverse effect on our results of operations.

We believe our estimations of future cash flows used for assessing impairment of long-lived assets are based on reasonable assumptions given the facts and circumstances as of the related dates of the assessments.

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Recently Issued Accounting Standards

See Part IV—Note 1, Summary of significant accounting policies, to the Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Item 7. 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, our consolidated financial statements and accompanying notes. Our results of operations discussed in MD&A are presented in conformity with GAAP. Amgen operates in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.

Forward-looking statements

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

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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. Amgen focuses on areas of high unmet medical need and leverages its 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, ENBREL, Otezla, XGEVA, Repatha, Nplate, KYPROLIS, Aranesp, EVENITY, Vectibix, BLINCYTO, TEPEZZA and KRYSTEXXA. We also market a number of other products, including but not limited to Neulasta, MVASI, AMJEVITA/AMGEVITA, TEZSPIRE, Parsabiv, Aimovig, LUMAKRAS/LUMYKRAS, EPOGEN, KANJINTI, TAVNEOS, RAVICTI, UPLIZNA and PROCYSBI. For additional information about our products, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products.

Our strategy includes integrated activities intended to strengthen our competitive position in the industry. In 2023, we completed our acquisition of Horizon, advanced our innovative pipeline and generated strong volume growth across our product portfolio and regions. We accomplished these objectives while maintaining a strategic and disciplined approach to capital allocation.

Our newly established rare disease therapeutic area is designed to maximize the potential of medicines acquired in connection with our Horizon acquisition, including TEPEZZA for thyroid eye disease, KRYSTEXXA for chronic refractory gout and UPLIZNA for neuromyelitis optica spectrum disorder, as well as TAVNEOS, acquired from the ChemoCentryx acquisition in 2022, for severe active ANCA-associated vasculitis.

We are advancing our pipeline of innovative medicines, including initiating and completing enrollment of our Phase 2 study of maridebart cafraglutide for the treatment of obesity; announcing results from our Phase 2 study of tarlatamab in patients with SCLC; and rapidly enrolling patients in Phase 2 and Phase 3 studies for several of our later-stage clinical programs across our therapeutic areas. For more information on our pipeline, including programs acquired from our Horizon acquisition, see Part I, Item 1. Business—Research and Development and Selected Product Candidates.

Total product sales increased in 2023, primarily driven by volume growth for certain brands, including Repatha, TEZSPIRE, EVENITY, Prolia and BLINCYTO, and the contribution of $954 million in product sales from the Horizon acquisition during the period from the acquisition date of October 6, 2023 through December 31, 2023, partially offset by declines in net selling prices of certain products, including Neulasta, MVASI and ENBREL.

Cash flows from operating activities totaled $8.5 billion, which supported investment in our business, including our Horizon acquisition, while returning capital to shareholders through the payment of cash dividends. For 2023, we increased our quarterly cash dividend by 10% to $2.13 per share of common stock. In December 2023, we declared a cash dividend of $2.25 per share of common stock for the first quarter of 2024, an increase of 6% for this period, to be paid in March 2024.

Amgen’s approach to and investment in human capital resource management is directed at attracting, motivating, developing and retaining talent to tackle the challenges of running an enterprise focused on the discovery, development and commercialization of innovative medicines. Our compensation, benefits and development programs are designed to encourage performance, promote accountability and adherence to Company values, and align with the interests of the Company’s shareholders. Further, we believe that a diverse and inclusive culture fosters innovation, which supports our ability to serve patients. In our effort to attract and retain the best talent, we seek out and support talent across the globe, including in underrepresented populations, consistent with our commitment to equal opportunity. For further information on these and other efforts, see Part I, Item 1. Business—Human Capital Resources.

We have a long-standing ambition to be environmentally responsible, and we regularly set targets to challenge ourselves to deliver further improvements. We achieved our targets for the 2013–2020 period while growing revenues, increasing production capacity and expanding to approximately 100 countries over the same period. To continue on our path to greater environmental sustainability, in January 2021 we announced a new set of long-term environmental targets to achieve by 2027, including achieving carbon neutrality, reducing water consumption by 40% and reducing waste disposed by 75%.(2)(3) Additionally, in 2022 we issued our first green bonds, which were used to finance eligible projects that met specified criteria to reduce our impact on the environment.

(2) Represents reductions against established baselines, taking into account only verified reduction projects and does not take into account changes associated with contraction or expansion of the Company.

(3) Carbon neutrality goal refers to Scope 1 and 2.

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Our long-term success depends, to a great extent, on our ability to continue to discover, develop and commercialize innovative products and acquire or collaborate on therapies currently in development by other companies. We must grow sales from existing and new products to achieve revenue growth and to offset revenue losses from when products lose their exclusivity or when competing products are launched. Certain of our products face increasing pressure from competition, including biosimilars and generics. For additional information, including information on the expirations of patents for various products, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Patents, and Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition. We devote considerable resources to R&D activities, but successful product development in the biotechnology industry is highly uncertain. We also face increasing regulatory scrutiny of safety and efficacy both before and after products launch.

Macroeconomic and other challenges

Uncertain macroeconomic conditions, including higher inflation, rising interest rates and instability in the financial system, as well as rising healthcare costs continue to pose challenges to our business. Further, 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, including net price declines. Moreover, legislation enacted to reduce healthcare expenditures, including provisions of the IRA, have affected, and are likely to continue to affect, our business. 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 I, Item 1. Business—Marketing, Distribution and Selected Marketed Products, and Part I, Item 1A. Risk Factors for further discussion of certain factors that could impact our future product sales.

Our product sales were affected by reduced demand as a result of the COVID-19 pandemic, and the cumulative decrease in diagnoses over the course of the pandemic suppressed the volume of new patients starting treatment, which continues to impact the business. Given the unpredictable nature of future virus surges, there could be similar intermittent disruptions in the future in physician–patient interactions.

With regard to our clinical trial activities, we are continuously monitoring the possible impacts from health-related events, including changes from new COVID-19 variants; we are working to mitigate effects on future study enrollment in our clinical trials; and we are evaluating the impact in all relevant countries. We remain focused on supporting our active clinical sites in their providing care for patients and in our providing investigational drug supply.

Selected Financial Information

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

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

Total product sales increased in 2023, primarily driven by volume growth for certain brands, including Repatha, TEZSPIRE, EVENITY, Prolia and BLINCYTO, and the contribution of $954 million in product sales from the Horizon

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acquisition during the period from the acquisition date of October 6, 2023 through December 31, 2023, partially offset by declines in net selling prices of certain products, including Neulasta, MVASI and ENBREL. For 2024, we expect that net selling prices will continue to decline at a portfolio level driven by increased competition. Further, the first quarter of a year historically represents the lowest product sales quarter for the year, in part due to plan changes, insurance reverifications and higher co-pay expenses as U.S. patients work through deductibles, particularly for products acquired through pharmacy benefit programs.

The impact of changes to foreign currency exchange rates will be partially offset by corresponding changes in our international operating expenses. While not designed to completely address foreign currency changes, our hedging activities also seek to offset, in part, such effects on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.

Uncertain macroeconomic conditions, changes in the healthcare ecosystem and geopolitical conflicts have the potential to introduce variability into product sales. For example, actions by governments and other entities to curb high inflation, provisions of the IRA and growth in numbers of Medicaid enrollees and uninsured individuals may have a negative impact on product sales. Furthermore, our product sales were affected by reduced demand as a result of the COVID-19 pandemic, and the cumulative decrease in diagnoses over the course of the pandemic suppressed the volume of new patients starting treatment, which continues to impact the business. Given the unpredictable nature of future virus surges, there could be future intermittent disruptions in physician–patient interactions. See Risk Factors in Part I, Item 1A. of this Form 10-K.

Other revenues decreased for 2023, primarily due to lower revenue from our COVID-19 manufacturing collaboration.

Operating expenses increased for 2023, due to higher amortization and acquisition-related expenses incurred as a result of the Horizon acquisition, a net impairment charge resulting from the termination of AMG 340, higher profit share and royalty expense, changes in our product mix and higher spend in later-stage clinical programs and marketed products support, partially offset by a loss on the divestiture of Gensenta in 2022. See Part IV—Note 3, Acquisitions and divestitures; Note 13, Goodwill and other intangible assets; and Note 18, Fair value measurement, to the Consolidated Financial Statements.

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Results of Operations

Product sales

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

NM = not meaningful

____________

(1)    TEPEZZA and KRYSTEXXA were acquired from our Horizon acquisition on October 6, 2023, and include product sales from the acquisition date through December 31, 2023.

(2)    Consists of product sales of our non-principal products, as well as sales prior to the divestiture of our Bergamo and Gensenta subsidiaries in the second quarter of 2023 and fourth quarter of 2022, respectively.

Future sales of our products will depend in part on the factors discussed in the Overview, Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition, in Part I, Item 1A. Risk Factors, and any additional factors discussed in the individual product sections below. In addition, for a list of our products’ significant competitors, see Part I, Item 1. Business—Marketing, Distribution and Selected Marketed Products—Competition.

Prolia

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

The increase in global Prolia sales for 2023 was primarily driven by volume growth and higher net selling price.

The increase in global Prolia sales for 2022 was driven by volume growth and higher net selling price, partially offset by unfavorable changes to foreign currency exchange rates.

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For a discussion of ongoing litigation related to Prolia, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

ENBREL

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

The decrease in ENBREL sales for 2023 was driven by lower net selling price, lower inventory and unfavorable changes to estimated sales deductions. For 2024, we expect ENBREL to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles. In addition, for 2024, we expect further declines in net selling price.

The decrease in ENBREL sales for 2022 was primarily driven by unfavorable changes to estimated sales deductions, lower volume and lower net selling price.

Otezla

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

The decrease in global Otezla sales for 2023 was driven by lower net selling price and inventory, partially offset by volume growth. For 2024, we expect Otezla to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S. patients work through deductibles.

The increase in global Otezla sales for 2022 was primarily driven by volume growth, partially offset by lower net selling price. ROW Otezla sales for 2022 were impacted by unfavorable changes to foreign currency exchange rates.

XGEVA

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

The increase in global XGEVA sales for 2023 was primarily driven by higher net selling price.

Global XGEVA sales were relatively unchanged for 2022 as higher net selling price was offset by lower volume as a result of increased competition and unfavorable changes to foreign currency exchange rates.

For a discussion of ongoing litigation related to XGEVA, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

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Repatha

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

The increase in global Repatha sales for 2023 was driven by volume growth, partially offset by lower net selling price.

The increase in global Repatha sales for 2022 was driven by volume growth, partially offset by lower net selling price and unfavorable changes to foreign currency exchange rates. Volume benefited from contracting changes to support and improve Medicare Part D and commercial patient access and the inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, both of which resulted in decreases to the net selling price in 2022.

For a discussion of ongoing litigation related to Repatha, see Part IV—Note 20, Contingencies and commitments, to the Consolidated Financial Statements.

Nplate

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

The increase in global Nplate sales for 2023 was primarily driven by volume growth, including U.S. government orders totaling $286 million.

The increase in global Nplate sales for 2022 was driven by volume growth, including a U.S. government order of $207 million.

KYPROLIS

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

The increases in global KYPROLIS sales for 2023 and 2022 were driven by volume growth.

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Aranesp

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

The decrease in global Aranesp sales for 2023 was driven by unfavorable changes to foreign currency exchange rates and lower net selling price. U.S. Aranesp sales for 2023 decreased due to lower unit demand as a result of independent and medium-sized dialysis organizations transitioning from Aranesp to EPOGEN.

The decrease in global Aranesp sales for 2022 was driven by lower net selling price and unfavorable changes to foreign currency exchange rates, partially offset by favorable changes to estimated sales deductions and volume growth.

We expect Aranesp to continue to face competition from EPOGEN and its biosimilars, which will impact volume and net selling price in the future.

EVENITY

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

The increases in global EVENITY sales for 2023 and 2022 were driven by volume growth.

Vectibix

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

The increase in global Vectibix sales for 2023 was driven by volume growth.

The increase in global Vectibix sales for 2022 was driven by higher net selling price and volume growth, partially offset by unfavorable changes to foreign currency exchange rates.

BLINCYTO

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