What changed in this filing

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Item 2. Management’s Discussion and Analysis

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The following MD&A is intended to assist the reader in understanding Amgen’s business.

MD&A is provided as a supplement to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021.

MD&A is provided as a supplement to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, and our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

Our results of operations discussed in MD&A are presented in conformity with GAAP.

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Risk Factors in Part II herein and in Part I, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

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.

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A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

Our principal products are ENBREL, Prolia, XGEVA, Otezla, Aranesp, Neulasta, Repatha, KYPROLIS and Nplate.

We also m arket a number of other products, including MVASI, Vectibix, EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, KANJINTI, Parsabiv, LUMAKRAS/LUMYKRAS, NEUPOGEN, Sensipar/Mimpara and TEZSPIRE.

Our principal products are ENBREL, Prolia, Otezla, XGEVA, Aranesp, Neulasta, Repatha, KYPROLIS and Nplate.

We also market a number of other products, including MVASI, Vectibix, EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, Parsabiv, KANJINTI, LUMAKRAS/LUMYKRAS, NEUPOGEN, Sensipar/Mimpara and TEZSPIRE.

COVID-19 pandemic

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To date, our remote working arrangements have not significantly affected our ability to maintain critical business operations, and we have not experienced disruptions to or shortages of our supply of medicines.

Since the beginning of the COVID-19 pandemic, we have seen changes in demand for some of our products driven by changes in the frequency of patient visits to doctors’ offices that has impacted the provision of treatments to existing patients and reduced diagnoses in new patients.

During 2021, there was gradual recovery in both patient visits and diagnoses that approached pre-COVID-19 levels early in the fourth quarter.

However, in late 2021, Omicron and other variants began to impact the healthcare sector and, as a result, COVID-19 continued to affect our business around the world through the first quarter of 2022.

Going forward, we may experience ongoing variability in demand patterns from COVID-19 for 2022.

Further, the cumulative decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which continues to impact our business.

We will continue to closely monitor the effects of COVID-19 on patient behavior and access to care.

Since early 2021, global vaccination efforts have been under way to control the pandemic.

Challenges to vaccination efforts, new variants and other causes of virus spread may require governments to issue additional restrictions and/or order shutdowns in various geographies.

As a result, we expect to see continued volatility for at least the duration of the pandemic as governments respond to current local conditions.

With respect to our drug development activities, we are continuously monitoring COVID-19 infection rates, including changes from new variants, and working to mitigate effects on future study enrollment in our clinical trials and evaluating the impacts in all countries where our clinical trials occur.

We remain focused on supporting our active clinical sites in their provision of care to patients and in our provision of investigational drug supply.

Over the course of the pandemic we have experienced changes in demand for some of our products as fluctuations in the frequency of patient visits to doctors’ offices have impacted the provision of treatments to existing patients and reduced diagnoses in new patients.

During 2021, there was a gradual recovery in both patient visits and diagnosis rates that approached pre-pandemic levels.

In 2022, the pandemic has continued to impact the healthcare sector, and our business, to varying degrees across our markets.

To date in 2022, in most of our major markets, with the exception of the Asia Pacific region that has been affected by sustained lockdowns, we have seen greater stability in patient visits and demand patterns even in areas facing surges in the virus.

Given the evolution of COVID-19 since its onset, including the proliferation of variants, we cannot predict the impact of future virus surges on our business and will continue to closely monitor the impact of COVID-19 on our business and on the healthcare sector more generally.

With respect to our drug development activities, we continue to work to mitigate COVID-19 effects on future study enrollment in our clinical trials around the world.

We remain focused on effectively supporting the delivery of care and investigational drug supply to patients enrolled in our active clinical sites.

Despite the ongoing pandemic and business impacts noted above, we believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures and debt service requirements as well as to engage in capital-return and other business initiatives that we plan to pursue.

For a discussion of the risks the COVID-19 pandemic presents to our results, see Part 1, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

For a discussion of risks the COVID-19 pandemic presents to our results, see Risk Factors in Part I, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

Significant developments

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2021.

For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, 2021.

New manufacturing facilities

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

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, 2021, and our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

Products/Pipeline

Oncology/Hematology

LUMAKRAS/LUMYKRAS

• In April 2022, we announced long-term efficacy and safety data from the CodeBreaK 100 Phase 1/2 trial in patients with KRAS G12C-mutated advanced NSCLC who received LUMAKRAS.

Data from 174 heavily pre-treated patients (172 with baseline measurable lesion(s)) were featured in an oral presentation at the American Association for Cancer Research annual meeting.

LUMAKRAS demonstrated a centrally confirmed ORR of 40.7%, disease control rate of 83.7% and median duration of response of 12.3 months.

The results also showed median PFS of 6.3 months and overall survival of 12.5 months, with 32.5% of patients still alive at two years.

No new safety signals for LUMAKRAS were identified with the long-term follow-up.

• In April 2022, we announced preliminary results from a Phase 3 study evaluating the efficacy and safety of ABP 654 compared to STELARA ® (ustekinumab) in adult patients with moderate to severe plaque psoriasis.

The study met the primary efficacy endpoint, demonstrating no clinically meaningful differences between ABP 654 and STELARA ® .

• In April 2022, we announced top-line results from the Repatha FOURIER-OLE studies, two open label extension (OLE) studies to the Phase 3 FOURIER cardiovascular outcomes trial, composed of a study with 5,035 patients enrolled in Eastern Europe and the United States and a study with 1,600 patients enrolled in Western Europe.

FOURIER-OLE was designed to assess the long-term safety and tolerability of Repatha over five years in adults with clinically evident atherosclerotic cardiovascular disease.

The FOURIER-OLE studies showed that Repatha, administered at 140 mg every two weeks or 420 mg monthly, was safe and well-tolerated.

Patients received Repatha for approximately 5 years, with some patients receiving Repatha for up to 8.5 years in aggregate across the FOURIER and OLE studies.

No new long-term safety findings were observed.

In addition, medically significant and sustained reduction in low-density lipoprotein cholesterol (LDL-C) levels were observed in most patients, with greater than 85 percent of patients achieving an LDL-C level of <40 mg/dL during the OLE period.

General Medicine

• In May 2022, we announced positive topline data from the Phase 2 OCEAN(a)-DOSE clinical study, evaluating olpasiran (formerly AMG 890) in adult patients with lipoprotein(a), or Lp(a), levels over 150 nmol/L and evidence of atherosclerotic cardiovascular disease (ASCVD).

Olpasiran is a small interfering RNA (siRNA) designed to lower the body’s production of apolipoprotein(a), a key component of Lp(a) that has been associated with an increased risk of cardiovascular events.

In the double-blind placebo-controlled treatment period, olpasiran was administered up to 225 mg subcutaneously every 12 weeks to patients with a median baseline Lp(a) of approximately 260 nmol/L.

These data demonstrated a significant reduction from baseline in Lp(a) of up to or greater than 90 percent at week 36 (primary endpoint) and week 48 (end of treatment period) for the majority of doses.

No new safety concerns were identified during this treatment period.

• In July 2022, our partner AstraZeneca plc announced that the Committee for Medicinal Products for Human Use of the EMA has recommended TEZSPIRE for marketing authorization in the European Union as an add-on therapy in patients 12 years and older with severe asthma who are inadequately controlled with high dose inhaled corticosteroids plus another medicinal product for maintenance treatment.

Business development

Proposed acquisition of ChemoCentryx, Inc.

• On August 4, 2022, Amgen announced its proposed acquisition of ChemoCentryx for $52.00 per share in cash, for a total transaction price of approximately $4.0 billion.

ChemoCentryx is a biopharmaceutical company focused on orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer.

In the United States, ChemoCentryx markets TAVNEOS ® , the first approved orally administered inhibitor of the complement 5a receptor as an adjunctive treatment for adult patients with severe active anti-neutrophil cytoplasmic autoantibody-associated vasculitis (ANCA vasculitis) .

The transaction is expected to close in the fourth quarter of 2022.

Selected financial information

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Product sales

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Diluted shares 537 576 (7) % 544 578 (6) %

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

* 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).

Total product sales increased for the three months ended March 31, 2022, primarily driven by higher unit demand for certain brands, including Repatha, Prolia, EVENITY and LUMAKRAS/LUMYKRAS, and by favorable changes to estimated sales deductions, partially offset by declines in the net selling prices of certain products and the negative impact of foreign currency exchange.

Total product sales increased for the three months ended June 30, 2022, primarily driven by higher unit demand for certain brands including Repatha, Prolia, EVENITY, LUMAKRAS/LUMYKRAS and KYPROLIS, partially offset by declines in the net selling prices of certain products and unfavorable changes in foreign currency exchange rates.

Total product sales increased for the six months ended June 30, 2022, primarily driven by higher unit demand for certain brands, including Repatha, Prolia, EVENITY, LUMAKRAS/LUMYKRAS and KYPROLIS, and by favorable changes to estimated sales deductions, partially offset by declines in the net selling prices of certain products and unfavorable changes in foreign currency exchange rates.

For the remainder of 2022, we expect that net selling prices will continue to decline at a portfolio level, driven by increased competition.

In addition, in the first quarter of 2022, ENBREL and Otezla followed the historic pattern of lower first quarter sales relative to the remainder of the year due to the impact of benefit plan changes, insurance reverifications and increased co-pay expenses as U.S.

patients work through deductibles.

Throughout the COVID-19 pandemic, we experienced changes in demand for some of our products.

The pandemic has interrupted many physician–patient interactions, which has led to delays in diagnoses and treatments, with varying degrees of impact across our portfolio.

Over the course of the COVID-19 pandemic we experienced changes in demand for some of our products as fluctuations in the frequency of patient visits to doctors’ offices have impacted the provision of treatments to existing patients and reduced diagnoses in new patients.

In general, declines in the sales of our products that were impacted by the dynamics of the pandemic were most significant in the early months of the pandemic, with product demand beginning to show some recovery in late 2020.

During 2021, we observed gradual recovery from the COVID-19 pandemic, with patient visits and diagnosis rates that approached pre-pandemic levels early in the fourth quarter.

However, late in 2021, Omicron and other variants began to impact the healthcare sector.

During 2021, there was a gradual recovery in both patient visits and diagnosis rates that approached pre-pandemic levels;

however, variants (including Omicron) began to impact the healthcare sector and our business in late 2021 and early 2022.

This led to diminished capacity in the healthcare sector and reduced working days for our own sales force.

In March and continuing into April we have seen the impact of Omicron in the U.S.

recede, which allowed us to engage in increased field-facing activities.

Provider and patient activity has also increased leading to improvements in demand for our products.

For the second quarter 2022, we have seen the impact of these variants recede in most markets, with the exception of some markets in the Asia Pacific region, which has allowed us to engage in increased field-facing activities.

Provider and patient activity has also increased, leading to improvements in demand for our products to pre-pandemic levels.

However, the cumulative decrease in diagnoses over the course of the pandemic has suppressed the volume of new patients starting treatment, which continues to impact our business.

Given the unpredictable nature of the pandemic, we expect there could be ongoing intermittent disruptions in physician–patient interactions, and as a result, we may experience quarter-to-quarter variability.

Given the unpredictable nature of the pandemic, there could be intermittent disruptions in physician–patient interactions, and as a result, we may experience quarter-to-quarter variability.

In addition, other changes in the healthcare ecosystem have the potential to introduce variability into product sales trends.

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See Part I, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021.

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

Operating expenses decreased for the three months ended March 31, 2022, primarily driven by lower SG&A expense and expenses associated with cost-saving initiatives that occurred in the three months ended March 31, 2021, partially offset by higher cost of sales.

Our operating expenses are expected to be higher in the remaining quarters of the year as we continue to invest in innovation and long-term growth.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

Other revenues decreased for the three months ended June 30, 2022, driven by lower revenue from COVID-19 antibody material and increased for the six months ended June 30, 2022, primarily driven by higher revenue from COVID-19 antibody material.

Operating expenses decreased for the three and six months ended June 30, 2022, primarily due to the Acquired IPR&D expense related to the Five Prime acquisition in 2021, partially offset by a loss on a nonstrategic divestiture in 2022.

See Note 2, Acquisitions and divestitures.

Although changes in foreign currency exchange rates result in increases or decreases in our reported international product sales, the benefit or detriment that such movements have on our international product sales is partially offset by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities.

Our hedging a ctivities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.

The net impact from changes in foreign currency exchange rates was not material for the three months ended March 31, 2022 and 2021.

Further, while not designed to completely address foreign currency changes, our hedging activities seek to offset, in part, the effects of foreign currency exchange rate changes, both favorable and unfavorable, on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.

The net impact from changes in foreign currency exchange rates was not material for the three and six months ended June 30, 2022 and 2021.

Results of operations

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ENBREL $ 1,051 $ 1,144 (8) % $ 1,913 $ 2,068 (7) %

Prolia 922 814 13 % 1,774 1,572 13 %

XGEVA 502 468 7 %

Otezla 594 534 11 % 1,045 1,010 3 %

XGEVA 533 488 9 % 1,035 956 8 %

Aranesp 357 367 (3) % 715 722 (1) %

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and (ii) Part II, Item 1A.

Risk Factors, and in the following sections of our Annual Report on Form 10-K for the year ended December 31, 2021:

(i) Part I, Item 1.

Business—Marketing, Distribution and Selected Marketed Products;

(ii) Part I, Item 1A.

Risk Factors;

and in the following sections of our Annual Report on Form 10-K for the year ended December 31, 2021:

Business—Marketing, Distribution and Selected Marketed Products, (ii) Item 1A.

Risk Factors and (iii) Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of Operations—Product Sales.

and (iii) Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of Operations—Product Sales, as well as in our Quarterly Report on Form 10-Q for the period ended March 31, 2022:

(i) Part I, Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Product Sales;

and (ii) Part II, Item 1A.

Risk Factors.

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

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ENBREL — U.S.

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Total ENBREL $ 1,051 $ 1,144 (8) % $ 1,913 $ 2,068 (7) %

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

The decrease in ENBREL sales for the three and six months ended June 30, 2022, was primarily driven by lower net selling price and lower unit demand.

For the remainder of 2022, we expect that net selling price will continue to decline driven by increased competition.

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

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Prolia — U.S.

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Total Prolia $ 922 $ 814 13 % $ 1,774 $ 1,572 13 %

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

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

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$ 368 $ 334 10 %

XGEVA — ROW 134 134 — %

Total XGEVA $ 502 $ 468 7 %

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

The increase in global Prolia sales for the three and six months ended June 30, 2022, was primarily driven by higher unit demand.

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

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Otezla — U.S.

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Total Otezla $ 594 $ 534 11 % $ 1,045 $ 1,010 3 %

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

The increase in global Otezla sales for the three months ended June 30, 2022, was driven by higher unit demand and favorable changes to estimated sales deductions, partially offset by lower net selling price.

The increase in global Otezla sales for the six months ended June 30, 2022, was primarily driven by higher unit demand and favorable changes to estimated sales deductions, partially offset by lower net selling price and unfavorable changes to inventory.

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

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

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$ 391 $ 355 10 % $ 759 $ 689 10 %

XGEVA — ROW 142 133 7 % 276 267 3 %

Total XGEVA $ 533 $ 488 9 % $ 1,035 $ 956 8 %

The increase in global XGEVA sales for the three and six months ended June 30, 2022, was primarily driven by higher net selling price and favorable changes to estimated sales deductions.

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

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Aranesp — U.S.

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Total Aranesp $ 357 $ 367 (3) % $ 715 $ 722 (1) %

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

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

The decrease in global Aranesp sales for the three months ended June 30, 2022, was primarily driven by lower net selling price.

The decrease in global Aranesp sales for the six months ended June 30, 2022, was driven by lower net selling price and unfavorable changes in foreign currency exchange rates, partially offset by favorable changes to estimated sales deductions and higher unit demand.

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

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

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Neulasta — U.S.

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Neulasta — ROW

47 52 (10) % 91 113 (19) %

Total Neulasta $ 310 $ 486 (36) % $ 658 $ 968 (32) %

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

The decrease in global Neulasta sales for the three and six months ended June 30, 2022, was primarily driven by lower net selling price and unit demand.

Increased competition as a result of biosimilar versions of Neulasta has had and will continue to have a significant adverse impact on brand sales, including accelerating net price erosion and lower unit demand.

We also expect other biosimilar versions, including biosimilars that will use an on-body injector that would compete with our Onpro injector, to be approved in the future.

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

For a discussion of ongoing patent litigations related to these and other biosimilars, see Part IV—Note 19, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021, and Part I—Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

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

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Repatha — U.S.

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Total Repatha $ 325 $ 286 14 % $ 654 $ 572 14 %

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

Contracting changes to improve Medicare Part D and commercial patient access resulted in the decrease to net selling price.

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

The increase in global Repatha sales for the three and six months ended June 30, 2022, was driven by higher unit demand, partially offset by lower net selling price.

Contracting changes to support and expand Medicare Part D and commercial patient access and the inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, resulted in the decrease to net selling price in 2022.

Part I—Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2022;

and Part I—Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

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

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KYPROLIS — U.S.

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Total KYPROLIS $ 317 $ 280 13 % $ 604 $ 531 14 %

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

The increase in global KYPROLIS sales for the three and six months ended June 30, 2022, was driven by higher unit demand, partially offset by lower net selling price.

The FDA has reported that it has granted tentative or final approval of ANDAs for generic carfilzomib products filed by a number of companies.

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Nplate — U.S.

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Total Nplate $ 284 $ 245 16 % $ 550 $ 472 17 %

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

The increase in global Nplate sales for the three and six months ended June 30, 2022, was primarily driven by higher unit demand and net selling price.

Other products

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$ 161 $ 206 (22) % $ 329 $ 430 (23) %

82 88 (7) % 158 158 — %

Vectibix — U.S.

96 92 4 % 181 171 6 %

Vectibix— ROW 111 147 (24) % 227 259 (12) %

EVENITY — U.S.

130 79 65 % 240 136 76 %

EVENITY— ROW 61 52 17 % 121 102 19 %

BLINCYTO — U.S.

77 62 24 % 156 127 23 %

BLINCYTO — ROW 62 46 35 % 121 88 38 %

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AMGEVITA — ROW

116 107 8 % 224 213 5 %

Aimovig — U.S.

Aimovig — ROW 3 — NA

KANJINTI — U.S.

88 82 7 % 186 148 26 %

KANJINTI — ROW

Aimovig — ROW 4 — NM 7 — NM

Parsabiv — U.S.

71 37 92 % 128 83 54 %

Parsabiv — ROW 32 34 (6) % 61 67 (9) %

KANJINTI — U.S.

69 132 (48) % 149 262 (43) %

KANJINTI — ROW

16 24 (33) % 32 55 (42) %

LUMAKRAS — U.S.

51 9 * 99 9 *

LUMYKRAS — ROW

26 — NM 40 — NM

NEUPOGEN — U.S.

21 36 (42) % 44 54 (19) %

NEUPOGEN — ROW

16 15 7 % 31 31 — %

Sensipar — U.S.

5 4 25 % 9 4 *

Sensipar/Mimpara — ROW

15 20 (25) % 31 43 (28) %

98 38 * 162 80 *

Other — ROW (1)

44 30 47 % 72 60 20 %

Total other products $ 1,588 $ 1,470 8 % $ 3,064 $ 2,835 8 %

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Total other products $ 1,588 $ 1,470 8 % $ 3,064 $ 2,835 8 %

NA - not applicable

NM = not meaningful

* Change in excess of 100%

(1) Other products include Corlanor, AVSOLA, TEZSPIRE, IMLYGIC and RIABNI as well as sales by Gensenta and Bergamo subsidiaries.

Operating expenses

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Operating expenses:

Cost of sales $ 1,510 $ 1,637 (8) % $ 3,071 $ 3,127 (2) %

$ 1,561 $ 1,490 5 %

% of product sales 24.0 % 26.8 % 25.6 % 26.7 %

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% of total revenues 15.8 % 16.6 % 15.6 % 16.5 %

Acquired in-process research and development $ — $ 1,505 NM $ — $ 1,505 NM

% of product sales — % 24.6 % — % 12.9 %

% of total revenues — % 23.1 % — % 12.1 %

Selling, general and administrative $ 1,327 $ 1,384 (4) % $ 2,555 $ 2,638 (3) %

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Total operating expenses $ 4,418 $ 5,698 (22) % $ 8,156 $ 9,470 (14) %

NM = not meaningful

* Change in excess of 100%

Cost of sales

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

Cost of sales decreased to 22.9% and 23.9% of total revenues for the three and six months ended June 30, 2022, respectively, driven by lower COVID-19 antibody shipments, lower manufacturing costs and lower amortization expense from acquisition-related assets, partially offset by unfavorable product mix.

Research and development

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

The decrease in R&D expense for the three months ended June 30, 2022, was driven by lower marketed product support and lower expense resulting from acquisition-related activity, partially offset by higher spend in research and early pipeline.

The decrease in R&D expense for the six months ended June 30, 2022, was driven by lower marketed product support and lower expense resulting from acquisition-related activity, partially offset by higher late-stage development program spend and research and early pipeline spend.

Acquired in-process research and development

The decrease in Acquired IPR&D expense for the three and six months ended June 30, 2022, was due to the bemarituzumab program, which was acquired as part of the Five Prime acquisition in 2021.

See Note 2, Acquisitions and divestitures.

Selling, general and administrative

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

Other operating expenses for the three months ended March 31, 2022, consisted primarily of an IPR&D asset adjustment.

Other operating expenses for the three months ended March 31, 2021, consisted primarily of expenses related to cost savings initiatives.

The decrease in SG&A expense for the three and six months ended June 30, 2022, was primarily driven by lower spend for marketed products and lower expense resulting from acquisition-related activity.

Other operating expenses for the three and six months ended June 30, 2022, consisted primarily of a loss on a nonstrategic divestiture.

See Note 2, Acquisitions and divestitures.

Other operating expenses for the three and six months ended June 30, 2021, consisted primarily of expenses related to cost saving initiatives.

Nonoperating expense/income and income taxes

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Three months ended

June 30, Six months ended

2022 2021 2022 2021

Interest expense, net $ (328) $ (281) $ (623) $ (566)

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Interest expense, net

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

The increase in Interest expense, net, for the three and six months ended June 30, 2022, was primarily due to higher overall debt outstanding and higher LIBOR rates on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps.

Other (expense) income, net

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

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

The Administration proposed and Congress is considering significant changes to existing tax law.

These changes, if enacted, could substantially increase taxes we pay to the U.S.

Further, the OECD recently reached agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries.

If enacted, this agreement could result in tax increases in both the United States and foreign jurisdictions.

The change in Other (expense) income, net, for the three and six months ended June 30, 2022, was primarily due to net losses recognized on our strategic equity investments in the current year compared with net gains recognized in the prior year and higher current year losses in connection with our BeiGene investment.

The decrease in our effective tax rate for the three months ended June 30, 2022, was primarily due to the prior year nondeductible IPR&D expense arising from the acquisition of Five Prime, partially offset by current year unfavorable items, including a loss on a nonstrategic divestiture.

The increase in our effective tax rate for the six months ended June 30, 2022, was primarily due to current year unfavorable items compared to last year including a loss on a nonstrategic divestiture, partially offset by the prior year nondeductible IPR&D expense arising from the acquisition of Five Prime and changes in earnings mix.

See Note 2, Acquisitions and divestitures.

The Administration proposed and Congress is considering a variety of potentially significant changes to existing tax law.

These changes, or others, could substantially increase taxes we pay to the U.S.

Further, the OECD recently reached an agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries.

If enacted, either by all OECD participants or unilaterally by individual countries, this agreement could result in tax increases in both the United States and foreign jurisdictions.

Treasury recently released final foreign tax credit regulations that eliminate U.S.

creditability of the Puerto Rico Excise Tax beginning in 2023, which will increase our U.S.

creditability of the Puerto Rico Excise Tax beginning in 2023, which would increase our U.S.

tax liability.

territory of Puerto Rico is considering changes to its tax system that may minimize or eliminate this impact, but the outcome of such potential changes is uncertain.

Changes to existing tax law in the United States, the U.S.

territory of Puerto Rico, or other jurisdictions, including the potential changes discussed above, could result in tax increases where we do business and could have a material adverse effect on the results of our operations.

In 2017, we received an RAR and a modified RAR from the IRS for the years 2010, 2011 and 2012 proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S.

However, the U.S.

territory of Puerto Rico recently enacted Act 52-2022, which provides for an alternate fixed tax rate on industrial development income that is expected to be creditable under U.S.

As part of this new law, eligible businesses would be subject to incremental income and withholding taxes in lieu of payment of the Puerto Rico Excise Tax.

In order to qualify for the alternative fixed tax rate, we must amend our current tax grant with the Puerto Rico government by December 31, 2022.

Once we qualify for this alternative fixed tax rate, which we expect to occur as of January 1, 2023, our tax expense will increase.

While we expect these taxes to be partially offset by U.S.

foreign tax credits, the U.S.

Treasury has not yet issued guidance on whether the alternative fixed tax rate will be creditable under U.S.

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.

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In July 2021, we filed a petition in the U.S.

Tax Court to contest two duplicate Statutory Notices of Deficiency (Notices) for 2010, 2011 and 2012 that we received in May and July 2021, which seek to increase our U.S.

taxable income for 2010-2012 by an amount that would result in additional federal tax of approximately $3.6 billion plus interest.

Any additional tax that could be imposed for 2010-2012 would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings.

In 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S.

territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2012.

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 April 2022, we received a Notice that seeks to increase our U.S.

taxable income for 2013-2015 by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest.

In 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 2013-2015 would be reduced by up to approximately $2.2 billion of repatriation tax previously accrued on our foreign earnings.

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 Notices through the judicial process, and we expect to file a Petition in the U.S.

Tax Court to contest the 2013-2015 Notice through the judicial process.

We will seek consolidation of the two periods into one case in Tax Court.

We are also currently under examination by the IRS for the years 2016, 2017 and 2018 and by a number of state and foreign tax jurisdictions.

We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process, and we will seek consolidation of the two periods into one case in the U.S.

We are currently under examination by the IRS for the years 2016–2018 with respect to issues similar to those for the 2010 through 2015 period.

In addition, we have examinations by a number of state and foreign tax jurisdictions.

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

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federal income tax examinations for years ended on or before December 31, 2009.

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

Financial condition, liquidity and capital resources

Selected financial data were as follows (in millions):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash, cash equivalents and marketable securities $ 7,183 $ 8,037

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Cash, cash equivalents and marketable securities

Our balance of cash, cash equivalents and marketable securities was $6.5 billion at March 31, 2022.

Our balance of cash, cash equivalents and marketable securities was $7.2 billion as of June 30, 2022.

The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk.

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Capital allocation

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

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, strategic transactions (including those that expand our portfolio of products in areas of therapeutic interest), payment of dividends, stock repurchases and repayment of debt.

We intend to continue to invest in our business while returning capital to stockholders through the payment of cash dividends and stock repurchases, thereby reflecting our confidence in the future cash flows of our business and our desire to optimize our cost of capital.

The timing and amount of future dividends and stock repurchases will vary based on a number of factors, including future capital requirements for strategic transactions, availability of financing on acceptable terms, debt service requirements, our credit rating, changes to applicable tax laws or corporate laws, changes to our business model and periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and the Company’s agreements.

periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and the Company’s agreements.

In addition, the timing and amount of stock repurchases may also be affected by our overall level of cash, stock price and blackout periods, during which we are restricted from repurchasing stock.

The manner of stock repurchases may include block purchases, tender offers, ASRs and market transactions.

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

In March 2022, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which will be paid on June 8, 2022.

In March 2022 and December 2021, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which were paid on June 8, 2022 and March 8, 2022, respectively, an increase of 10% over quarterly cash dividend paid in each quarter in 2021.

In August 2022, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which will be paid on September 8, 2022 to all stockholders of record as of the close of business on August 18, 2022.

We also returned capital to stockholders through our stock repurchase program.

During the three months ended March 31, 2022, we executed trades to repurchase $5.4 billion of common stock, including $5.1 billion of an initial purchase under the ASR agreements described below.

As of March 31, 2022, $4.6 billion of authorization remained available under our stock repurchase program.

During the six months ended June 30, 2022, we executed trades to repurchase $5.4 billion of common stock, including $5.1 billion of an initial purchase under the ASR agreements described below.

As of June 30, 2022, $4.6 billion of authorization remained available under our stock repurchase program.

In February 2022, we entered into ASR agreements under which we paid an aggregate amount of $6.0 billion to the Dealers and retired an initial 23.3 million shares of common stock.

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At settlement, which is scheduled to occur in the third quarter of 2022, the Dealers may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or to make a cash payment, at our election, to the Dealers.

As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of March 31, 2022 and December 31, 2021.

As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of June 30, 2022 and December 31, 2021.

Our accumulated deficit is not anticipated to affect our future ability to operate, repurchase stock, pay dividends or repay our debt given our continuing profitability and strong financial position.

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Certain of our financing arrangements contain nonfinancial covenants.

In addition, our revolving credit agreement includes a financial covenant that requires us to maintain a specified minimum interest coverage ratio of (i) the sum of consolidated net income, interest expense, provision for income taxes, depreciation expense, amortization expense, unusual or nonrecurring charges and other noncash items (Consolidated EBITDA) to (ii) Consolidated Interest Expense, each as defined and described in the credit agreement.

We were in compliance with all applicable covenants under these arrangements as of March 31, 2022.

In addition, our revolving credit agreement includes a financial covenant that requires us to maintain a specified minimum interest coverage ratio of (i) the sum of consolidated net income, interest expense, provision for income taxes, depreciation expense, amortization expense, unusual or nonrecurring charges and other noncash items (consolidated earnings before interest, taxes, depreciation and amortization) to (ii) consolidated interest expense, each as defined and described in the credit agreement.

We were in compliance with all applicable covenants under these arrangements as of June 30, 2022.

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

Three months ended

Six months ended

Net cash provided by operating activities $ 4,094 $ 4,035

Net cash used in investing activities $ (111) $ (319)

Net cash (used in) provided by investing activities $ (2,304) $ 890

Net cash used in financing activities $ (4,576) $ (4,561)

Cash provided by operating activities has been and is expected to continue to be our primary recurring source of funds.

Cash provided by operating activities during the three months ended March 31, 2022, increased primarily due to higher net income, after adjustments for noncash items, partially offset by the impact of working capital items.

Cash used in investing activities during the three months ended March 31, 2022, was primarily due to $190 million of capital expenditures, partially offset by proceeds from sales of property, plant and equipment.

Cash used in investing activities during the three months ended March 31, 2021, was primarily due to cash outflows related to capital expenditures of $166 million and net activity related to marketable securities of $74 million.

Cash provided by operating activities during the six months ended June 30, 2022, increased primarily due to higher net income, after adjustments for noncash items, partially offset by the impact of working capital items.

Cash used in investing activities during the six months ended June 30, 2022, was primarily due to net cash outflows related to marketable securities activity of $1.9 billion and capital expenditures of $436 million.

Cash provided by investing activities during the six months ended June 30, 2021, was primarily due to net cash inflows related to marketable securities activity of $2.9 billion, partially offset by the acquisition of Five Prime for $1.6 billion and capital expenditures of $351 million.

We currently estimate 2022 spending on capital projects to be approximately $950 million.

Cash used in financing activities during the three months ended March 31, 2022, was primarily due to payments to repurchase our common stock of $6.4 billion, including amounts paid under the ASR agreements discussed above, and the payment of dividends of $1.1 billion, partially offset by proceeds from the issuance of debt of $4.0 billion.

Cash used in financing activities during the three months ended March 31, 2021, was primarily due to the payment of dividends of $1.0 billion and payments to repurchase our common stock of $871 million.

Cash used in financing activities during the six months ended June 30, 2022, was primarily due to payments to repurchase our common stock of $6.4 billion, including amounts paid under the ASR agreements discussed above, and the payment of dividends of $2.1 billion, partially offset by proceeds from the issuance of debt of $4.0 billion.

Cash used in financing activities during the six months ended June 30, 2021, was primarily due to payments to repurchase our common stock of $2.5 billion and the payment of dividends of $2.0 billion.

See Note 9, Financing arrangements, and Note 10, Stockholders’ equity, to the condensed consolidated financial statements for further discussion.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis