What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-04-28 compared with 2022-11-04 · 186 added, 253 removed, 194 unchanged (69% of the section changed)

1 unchanged sentence

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, and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022.

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, 2022.

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

9 unchanged sentences

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, and in Part II, Item 1A.

Risk Factors of our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022.

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

4 unchanged sentences

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, Otezla, XGEVA, Aranesp, Repatha, KYPROLIS, Neulasta and Nplate.

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

COVID-19 pandemic

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

We also market a number of other products, including Neulasta, Vectibix, MVASI, BLINCYTO, AMJEVITA/AMGEVITA, TEZSPIRE, Parsabiv, LUMAKRAS/LUMYKRAS, Aimovig, EPOGEN, KANJINTI and TAVNEOS.

Macroeconomic challenges, including effects from the COVID-19 pandemic

Uncertain macroeconomic conditions, including higher inflation, rising interest rates and instability in the financial system, geopolitical conflicts and rising healthcare costs continue to pose challenges to our business.

As a result of 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.

See Part II, Item 1A.

Risk Factors— Global economic conditions may negatively affect us and may magnify certain risks that affect our business .

Since the onset of the pandemic in 2020, we have been closely monitoring the pandemic’s effects on our global operations.

We continue to take appropriate steps to minimize risks to our employees, a significant number of whom have continued to work virtually.

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

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.

To date, we have been able to effectively serve physicians and patients as we have avoided disruptions to delivery and shortages of our supply of medicines.

With regard to our clinical trial activities, we are continuously monitoring COVID-19 infection rates, including changes from new 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.

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 risks the COVID-19 pandemic presents to our results, see Part I, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021, and 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 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 Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022.

ChemoCentryx, Inc.

• On October 20, 2022, Amgen completed its acquisition of ChemoCentryx for $52.00 per share in cash, for an aggregate merger consideration of approximately $3.7 billion.

Products/Pipeline

Oncology/Hematology

LUMAKRAS/LUMYKRAS

• In September 2022, we announced results from the global Phase 3 CodeBreaK 200 trial, which showed once-daily oral LUMAKRAS/LUMYKRAS led to significantly superior progression-free survival (PFS;

primary endpoint) and a significantly higher objective response rate (ORR;

a key secondary endpoint) in patients with KRAS G12C-mutated non-small cell lung cancer (NSCLC), compared with intravenous chemotherapy, docetaxel.

LUMAKRAS/LUMYKRAS significantly improved PFS compared to docetaxel in heavily pre-treated patients.

The proportion of patients with PFS at one year was 25% for LUMAKRAS/LUMYKRAS versus 10% for docetaxel.

LUMAKRAS/LUMYKRAS demonstrated a significantly higher ORR than docetaxel with double the response rates in the LUMAKRAS/LUMYKRAS arm (28% versus 13%, respectively).

• In August 2022, we announced positive top-line results from the DAHLIA study, a randomized, double-blind, active-controlled, two-period crossover Phase 3 study evaluating the efficacy and safety of ABP 959, a biosimilar candidate to SOLIRIS ® (eculizumab), compared with SOLIRIS ® in adult patients with paroxysmal nocturnal hemoglobinuria (PNH).

The study met its primary endpoints, demonstrating no clinically meaningful differences between ABP 959 and SOLIRIS ® .

The safety and immunogenicity profile of ABP 959 was comparable to that of SOLIRIS ® .

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, 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, 2022.

Proposed acquisition of Horizon Therapeutics plc

The Irish High Court set a court hearing date of May 22, 2023, to consider the application to sanction our proposed acquisition of Horizon.

The Irish High Court will be informed in advance if the hearing date needs to be adjourned to a later date as a result of a condition to closing, including required regulatory clearances, not having been satisfied by the scheduled hearing date.

In connection with our proposed acquisition of Horizon, in March 2023 we issued $24.0 billion of senior notes and subsequently terminated our bridge credit agreement.

Selected financial information

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

Product sales

11 unchanged sentences

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 decreased for the three months ended September 30, 2022, primarily driven by declines in the net selling prices of certain products and unfavorable changes to foreign currency exchange rates, inventory and estimated sales deductions, partially offset by higher unit demand for certain brands, including Repatha, Prolia, EVENITY, Otezla, TEZSPIRE and Vectibix.

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

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

Further, we expect international product sales to continue to be unfavorably impacted by foreign currency exchange rates for the remainder of the year.

The impact of such changes to foreign currency exchange rates will be partially offset by corresponding decreases in our international operating expenses.

Total product sales increased for the three months ended March 31, 2023, driven by volume growth for certain brands, including Nplate, Repatha, EVENITY, TEZSPIRE, Prolia, BLINCYTO and KYPROLIS, partially offset by declines in net selling prices of certain products, including ENBREL, Neulasta and MVASI, unfavorable changes to estimated sales deductions, higher inventory drawdowns compared to the prior year and unfavorable changes to foreign currency exchange rates.

For the remainder of 2023, we expect that net selling price will continue to decline year-over-year at a portfolio level, driven by increased competition.

As a result of uncertain macroeconomic conditions, we expect volatility around foreign currency exchange rates to continue.

The impact of unfavorable changes to foreign currency exchange rates will be partially offset by corresponding decreases 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.

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, 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.

As of the second quarter of 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, 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.

For example, changes in U.S.

employment have led to changes to the insured population.

Growth in numbers of Medicaid enrollees and uninsured individuals may have a negative impact on product demand and sales.

Overall, uncertainty remains around the timing and magnitude of our sales during the COVID-19 pandemic.

See Part I, Item 1A.

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

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

Other revenues increased for the three months ended September 30, 2022, due to higher licensing-related revenues.

Other revenues increased for the nine months ended September 30, 2022, due to higher revenue from COVID-19 antibody material.

Operating expenses decreased for the three months ended September 30, 2022, primarily due to a licensing-related upfront payment to KKC in 2021.

Operating expenses decreased for the nine months ended September 30, 2022, primarily due to the Acquired IPR&D expense related to the Five Prime acquisition and a licensing-related upfront payment to KKC in 2021, partially offset by a loss on a nonstrategic divestiture in 2022.

See Note 2, Acquisitions and divestitures.

Our product sales have been affected by reduced demand as a result of the COVID-19 pandemic.

In general, the dynamics of the pandemic were most significant on our product sales in the early months of the pandemic.

Further, 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 the pandemic, there could be future intermittent disruptions in physician–patient interactions, and as a result, we may again experience quarter-to-quarter variability.

In addition, other

disruptions, including changes in the healthcare ecosystem, uncertain macroeconomic conditions and geopolitical conflicts, have the potential to introduce variability into product sales.

For example, growth in numbers of Medicaid enrollees and uninsured individuals, provisions of the IRA and actions by governments and other entities to curb high inflation may have a negative impact on product sales.

See Part II, Item 1A.

Risk Factors, of this Quarterly Report on Form 10-Q.

Other revenues decreased for the three months ended March 31, 2023, due to lower revenue from our COVID-19 manufacturing collaboration.

Operating expenses increased for the three months ended March 31, 2023, primarily due to expenses related to our restructuring plan, higher research and development spend, changes in our product mix and higher amortization expense from acquisition-related assets.

See Note 2, Restructuring, to the condensed consolidated financial statements.

Results of operations

2 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

ENBREL $ 1,106 $ 1,289 (14) % $ 3,019 $ 3,357 (10) %

2023 2022 Change

Prolia $ 927 $ 852 9 %

Otezla 627 609 3 % 1,672 1,619 3 %

ENBREL 579 862 (33) %

XGEVA 536 502 7 %

Aranesp 358 396 (10) % 1,073 1,118 (4) %

Otezla 392 451 (13) %

Repatha 388 329 18 %

KYPROLIS 318 293 9 % 922 824 12 %

Neulasta 247 415 (40) % 905 1,383 (35) %

Nplate 362 266 36 %

KYPROLIS 358 287 25 %

Aranesp 355 358 (1) %

EVENITY 254 170 49 %

Other products (1)

1 unchanged sentence

Total product sales $ 5,846 $ 5,731 2 %

(1) Consists of product sales of our non-principal products, as well as our Gensenta and Bergamo subsidiaries.

Future sales of our products, including the potential impact of the IRA, will depend in part on the factors discussed below and in the following sections of this report:

(1) Consists of product sales of our non-principal products, as well as our Bergamo and Gensenta subsidiaries.

Future sales of our products will depend in part on the factors discussed below and in the following sections of this report:

(i) Part I, Item 2.

7 unchanged sentences

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 Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 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):

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

ENBREL — U.S.

$ 1,086 $ 1,263 (14) % $ 2,965 $ 3,270 (9) %

ENBREL — Canada 20 26 (23) % 54 87 (38) %

Total ENBREL $ 1,106 $ 1,289 (14) % $ 3,019 $ 3,357 (10) %

The decrease in ENBREL sales for the three months ended September 30, 2022, was driven by lower net selling price, unfavorable changes to estimated sales deductions and lower unit demand.

The decrease in ENBREL sales for the nine months ended September 30, 2022, was driven by unfavorable changes to estimated sales deductions, lower unit demand and lower net selling price.

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

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

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

Prolia — U.S.

2 unchanged sentences

Total Prolia $ 927 $ 852 9 %

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

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

The increase in global Prolia sales for the three months ended March 31, 2023, was driven by volume growth.

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

Otezla — U.S.

2023 2022 Change

ENBREL — U.S.

$ 564 $ 843 (33) %

Otezla — ROW 98 114 (14) % 306 335 (9) %

Total Otezla $ 627 $ 609 3 % $ 1,672 $ 1,619 3 %

The increase in global Otezla sales for the three months ended September 30, 2022, was driven by higher unit demand, partially offset by unfavorable changes to inventory and foreign currency exchange rates.

The increase in global Otezla sales for the nine months ended September 30, 2022, was driven by higher unit demand, partially offset by lower net selling price.

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 Part I—Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended June 30, 2022 and September 30, 2022.

ENBREL — Canada 15 19 (21) %

Total ENBREL $ 579 $ 862 (33) %

The decrease in ENBREL sales for the three months ended March 31, 2023, was driven by lower net selling price and inventory and unfavorable changes to estimated sales deductions.

ENBREL followed the historical 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 worked through deductibles.

For the remainder of 2023, we expect reduced year-over-year declines in net selling price.

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

$ 384 $ 368 4 %

1 unchanged sentence

Total XGEVA $ 536 $ 502 7 %

The decrease in global XGEVA sales for the three months ended September 30, 2022, was driven by lower unit demand and unfavorable changes to inventory and foreign currency exchange rates, partially offset by higher net selling price.

The increase in global XGEVA sales for the nine months ended September 30, 2022, was primarily driven by higher net selling price.

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

The increase in global XGEVA sales for the three months ended March 31, 2023, was driven by higher net selling price and volume growth.

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

Aranesp — U.S.

2023 2022 Change

Otezla — U.S.

$ 294 $ 350 (16) %

Aranesp — ROW 230 247 (7) % 676 709 (5) %

Total Aranesp $ 358 $ 396 (10) % $ 1,073 $ 1,118 (4) %

The decrease in global Aranesp sales for the three months ended September 30, 2022, was primarily driven by lower net selling price and unfavorable changes to foreign currency exchange rates.

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

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.

Otezla — ROW 98 101 (3) %

Total Otezla $ 392 $ 451 (13) %

The decrease in global Otezla sales for the three months ended March 31, 2023, was driven by lower inventory and net selling price, partially offset by volume growth.

Otezla followed the historical 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 worked through deductibles.

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, 2022, and Note 14, Contingencies and commitments, to the condensed consolidated financial statements.

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

Repatha — U.S.

2 unchanged sentences

Total Repatha $ 388 $ 329 18 %

The increase in global Repatha sales for the three and nine months ended September 30, 2022, was driven by higher unit demand, partially offset by lower net selling price and unfavorable changes to foreign currency exchange rates.

Higher unit demand benefited from 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, 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 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 Reports on Form 10-Q for the periods ended March 31, 2022, June 30, 2022 and September 30, 2022.

The increase in global Repatha sales for the three months ended March 31, 2023, was driven by volume growth, partially offset by lower 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, 2022, and Note 14, Contingencies and commitments, to the condensed consolidated financial statements.

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

Three months ended

2023 2022 Change

Nplate — U.S.

$ 246 $ 156 58 %

Nplate — ROW 116 110 5 %

Total Nplate $ 362 $ 266 36 %

The increase in global Nplate sales for the three months ended March 31, 2023, was driven by volume growth.

Nplate sales for the first quarter of 2023 included an $82 million order from the U.S.

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

KYPROLIS — U.S.

2 unchanged sentences

Total KYPROLIS $ 358 $ 287 25 %

The increase in global KYPROLIS sales for the three and nine months ended September 30, 2022, was driven by higher unit demand, partially offset by unfavorable changes to foreign currency exchange rates.

The increase in global KYPROLIS sales for the three months ended March 31, 2023, was driven by volume growth and higher 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.

The date of approval of those ANDAs for generic carfilzomib products is governed by the Hatch–Waxman Act and any applicable settlement agreements between us and certain companies that seek to develop generic carfilzomib products.

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

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

Neulasta — U.S.

$ 205 $ 360 (43) % $ 772 $ 1,215 (36) %

Neulasta — ROW

2023 2022 Change

Aranesp — U.S.

$ 115 $ 137 (16) %

Total Neulasta $ 247 $ 415 (40) % $ 905 $ 1,383 (35) %

The decrease in global Neulasta sales for the three and nine months ended September 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.

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

Aranesp — ROW 240 221 9 %

Total Aranesp $ 355 $ 358 (1) %

The decrease in global Aranesp sales for the three months ended March 31, 2023, was driven by lower net selling price and unfavorable changes to foreign currency exchange rates, partially offset by volume growth.

ROW Aranesp sales for the three months ended March 31, 2023, were favorably impacted by the timing of orders in certain markets outside the United States.

Aranesp sales for the three months ended March 31, 2023, were unfavorably impacted by independent and medium-sized dialysis organizations transitioning from Aranesp to EPOGEN.

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

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

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

Nplate — U.S.

2023 2022 Change

EVENITY — U.S.

$ 164 $ 110 49 %

Nplate — ROW 126 117 8 % 364 341 7 %

Total Nplate $ 288 $ 273 5 % $ 838 $ 745 12 %

The increase in global Nplate sales for the three months ended September 30, 2022, was driven by higher unit demand and net selling price, partially offset by unfavorable changes to estimated sales deductions and foreign currency exchange rates.

The increase in global Nplate sales for the nine months ended September 30, 2022, was driven by higher unit demand, higher net selling price and favorable changes to estimated sales deductions, partially offset by unfavorable changes to foreign currency exchange rates.

EVENITY — ROW 90 60 50 %

Total EVENITY $ 254 $ 170 49 %

The increase in global EVENITY sales for the three months ended March 31, 2023, was primarily driven by volume growth across our markets.

Other products

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

$ 139 $ 187 (26) % $ 468 $ 617 (24) %

2023 2022 Change

Neulasta — U.S.

$ 211 $ 304 (31) %

Neulasta — ROW 38 44 (14) %

Vectibix — U.S.

106 84 26 % 287 255 13 %

Vectibix— ROW 122 116 5 %

EVENITY — U.S.

121 168 (28) %

EVENITY— ROW 65 55 18 % 186 157 18 %

BLINCYTO — U.S.

84 74 14 % 240 201 19 %

BLINCYTO — ROW 68 59 15 %

EPOGEN — U.S.

136 138 (1) % 392 393 — %

AMJEVITA — U.S.

AMGEVITA — ROW

117 111 5 % 341 324 5 %

Aimovig — U.S.

103 77 34 % 289 225 28 %

Aimovig — ROW 4 2 100 % 11 2 *

TEZSPIRE — U.S.

Parsabiv — U.S.

61 24 * 189 107 77 %

Parsabiv — ROW 33 29 14 %

KANJINTI — U.S.

58 92 (37) % 207 354 (42) %

KANJINTI — ROW

14 24 (42) % 46 79 (42) %

LUMAKRAS — U.S.

61 33 85 % 160 42 *

LUMYKRAS — ROW

14 3 * 54 3 *

NEUPOGEN — U.S.

21 32 (34) % 65 86 (24) %

NEUPOGEN — ROW

14 20 (30) % 45 51 (12) %

TEZSPIRE — U.S.

55 — NM 91 — NM

Sensipar — U.S.

4 — NM 13 4 *

Sensipar/Mimpara — ROW

13 19 (32) % 44 62 (29) %

Aimovig — U.S.

Aimovig — ROW 5 3 67 %

EPOGEN — U.S.

60 120 (50) %

KANJINTI — U.S.

KANJINTI — ROW

TAVNEOS — U.S.

Other — ROW (1)

34 32 6 % 106 92 15 %

Total other products $ 1,695 $ 1,654 2 %

4 unchanged sentences

* Change in excess of 100%

(1) Consists of Corlanor, AVSOLA, IMLYGIC and RIABNI, as well as sales by our Gensenta and Bergamo subsidiaries.

(1) Consists of Corlanor, AVSOLA, NEUPOGEN, RIABNI, IMLYGIC and Sensipar/Mimpara as well as sales by our Bergamo and Gensenta subsidiaries.

Operating expenses

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

2022 2021 Change 2022 2021 Change

2023 2022 Change

Operating expenses:

5 unchanged sentences

% of total revenues 17.3 % 15.4 %

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

% of product sales — % — % — % 8.3 %

% of total revenues — % — % — % 7.9 %

Selling, general and administrative $ 1,258 $ 1,228 2 %

3 unchanged sentences

Total operating expenses $ 4,184 $ 3,738 12 %

NM = not meaningful

* Change in excess of 100%

Cost of sales

Cost of sales was essentially flat, at 23.9% of total revenues for the three months ended September 30, 2022, driven by lower costs associated with COVID-19 antibody shipments and lower manufacturing costs, offset by changes in product mix.

Cost of sales decreased to 23.9% of total revenues for the nine months ended September 30, 2022, driven by lower costs associated with COVID-19 antibody shipments, manufacturing costs and amortization expense from acquisition-related assets, partially offset by changes in product mix.

Cost of sales increased to 28.2% of total revenues for the three months ended March 31, 2023, primarily driven by higher amortization expense from acquisition-related assets, changes in our product mix, expenses related to our restructuring plan and higher profit share expense.

Research and development

The decrease in R&D expense for the three and nine months ended September 30, 2022, was driven by a licensing-related upfront payment to KKC in 2021 and lower marketed product support, partially offset by higher spend in late-stage development and research and early pipeline programs.

Acquired in-process research and development

The decrease in Acquired IPR&D expense for the nine months ended September 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.

The increase in R&D expense for the three months ended March 31, 2023, was primarily driven by higher spend in late-stage development, research and early pipeline programs, and marketed product support.

Selling, general and administrative

The decrease in SG&A expense for the three and nine months ended September 30, 2022, was primarily driven by lower marketed product support.

Other operating expenses for the three months ended September 30, 2022, consisted primarily of an impairment-related charge associated with an intangible asset acquired in a business combination.

Other operating expenses for the nine months ended September 30, 2022, consisted primarily of a loss on a nonstrategic divestiture.

See Note 2, Acquisitions and divestitures.

Other operating expenses for the three months ended September 30, 2021, consisted primarily of changes in the fair values of contingent consideration liabilities.

Other operating expenses for the nine months ended September 30, 2021, consisted primarily of expenses related to cost savings initiatives.

The increase in SG&A expense for the three months ended March 31, 2023, was primarily driven by higher general and administrative expenses, including acquisition-related expenses.

Other operating expenses for the three months ended March 31, 2023, consisted primarily of expenses related to our restructuring plan.

See Note 2, Restructuring, to the condensed consolidated financial statements.

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

Nonoperating expense/income and income taxes

1 unchanged sentence

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Interest expense, net $ (543) $ (295)

3 unchanged sentences

Interest expense, net

The increase in Interest expense, net, for the three and nine months ended September 30, 2022, was primarily due to higher overall debt outstanding and higher LIBORs 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 months ended March 31, 2023, was primarily due to higher overall debt outstanding and higher LIBORs on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps.

Other income (expense), net

The increase in Other income (expense), net, for the three months ended September 30, 2022, was primarily due to the gain recognized on the extinguishment of debt and higher interest income, partially offset by lower current year net gains on our strategic equity investments and higher current year losses in connection with our BeiGene investment.

The decrease in Other income (expense), net, for the nine months ended September 30, 2022, was primarily due to net losses on our strategic equity investments in the current year compared with net gains recognized in the prior year and higher current year net losses in connection with our BeiGene investment, partially offset by the gain recognized on the extinguishment of debt and higher interest income in the current year.

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

The decrease in our effective tax rate for the nine months ended September 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 net unfavorable items compared to last year and a nondeductible loss from a nonstrategic divestiture.

See Note 2, Acquisitions and divestitures.

The increase in Other income (expense), net, for the three months ended March 31, 2023, was primarily due to the gain recognized from the change in method of accounting for our investment in BeiGene from the equity method to recording the investment at fair value, with changes in fair value recognized in earnings.

In addition, we recognized gains on our other strategic equity investments in the current year period compared with losses in the prior year.

See Note 7, Investments, to the condensed consolidated financial statements.

The increase in our effective tax rate for the three months ended March 31, 2023, was primarily due to the new Puerto Rico income tax beginning in 2023 and an increase in interest expense on tax reserves.

The Administration and Congress continue to discuss changes to existing tax law that could substantially increase the 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 would increase our U.S.

tax liability.

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 the U.S.

Treasury recently confirmed will 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.

Some individual countries, including those in the EU, have proposed legislation to implement the global minimum tax agreement .

If enacted, either by all OECD participants or unilaterally by individual countries, this agreement could result in a tax increase that could affect our U.S.

and foreign tax liabilities.

Treasury released final foreign tax credit regulations in December 2021 that eliminated U.S.

creditability of the Puerto Rico Excise Tax beginning in 2023.

In response, on June 30, 2022, the U.S.

territory of Puerto Rico enacted Act 52-2022, which provides for an alternative income tax rate on industrial development income that the U.S.

Treasury confirmed will be creditable under federal law.

As part of this new law, eligible businesses will 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 income tax, our current tax grant with the Puerto Rico government was amended in December 2022.

We qualified for this alternative income tax, beginning January 1, 2023, and our tax expense increased.

See Note 5, Income taxes, to the condensed consolidated financial statements.

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.

14 unchanged sentences

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, and we filed a motion to consolidate the two periods into one case in the U.S.

We are contesting the 2010–2012 and 2013–2015 Notices through the judicial process.

The two cases were consolidated in U.S.

Tax Court on December 19, 2022.

On February 10, 2023, the U.S.

Tax Court entered an order setting a trial date of November 4, 2024.

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

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

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 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;

We continue to believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities;

however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse impact on our condensed consolidated financial statements.

1 unchanged sentence

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 in our Quarterly Report on Form 10-Q for the period ended June 30, 2022 , and Note 4, Income taxes, to the condensed consolidated financial statements for further discussion.

See our Annual Report on Form 10-K for the year ended December 31, 2022, Part I, Item 1A, Risk Factors— The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability, and Note 5, Income taxes, to the condensed consolidated financial statements in this filing for further discussion.

Financial condition, liquidity and capital resources

Selected financial data were as follows (in millions):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash, cash equivalents and marketable securities $ 31,561 $ 9,305

4 unchanged sentences

Cash, cash equivalents and marketable securities

Our balance of cash, cash equivalents and marketable securities was $11.5 billion as of September 30, 2022.

Our balance of cash, cash equivalents and marketable securities was $31.6 billion as of March 31, 2023, of which $27.8 billion is anticipated to be used for the proposed acquisition of Horizon.

See Note 3, Acquisitions and divestitures, to the condensed consolidated financial statements.

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

1 unchanged sentence

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, 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), repayment of debt, payment of dividends and stock repurchases.

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.

service requirements, our credit rating, changes to applicable tax laws or corporate laws, changes to our business model and periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and the Company’s agreements.

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

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

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

In October 2022, the Board of Directors declared a quarterly cash dividend of $1.94 per share of common stock, which will be paid in December 2022.

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

During the nine months ended September 30, 2022, we executed trades to repurchase $6.3 billion of common stock, including $6.0 billion related to our ASR agreements described below.

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

In October 2022, the Board of Directors increased the amount authorized under our stock repurchase program by an additional $2.4 billion.

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

Approximately $0.9 billion in value of stock remained to be delivered by the Dealers upon final settlement.

Final settlement under the ASR agreements occurred in September 2022 resulting in an additional 1.5 million shares received from the Dealers.

In total, 24.8 million shares of common stock were repurchased under the ASR agreements.

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

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

In December 2022, the Board of Directors declared a quarterly cash dividend of $2.13 per share of common stock for the first quarter of 2023, an increase of 10% for this period, which was paid in March 2023.

In March 2023, the Board of Directors declared a quarterly cash dividend of $2.13 per share of common stock to be paid in June 2023.

During the three months ended March 31, 2023, we did not repurchase any of our common stock.

As of March 31, 2023, $7.0 billion of authorization remained available under our stock repurchase program.

As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as of March 31, 2023 and December 31, 2022.

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.

1 unchanged sentence

We anticipate that our liquidity needs can be met through a variety of sources, including cash provided by operating activities, sales of marketable securities, borrowings through commercial paper and/or syndicated credit facilities and access to other domestic and foreign debt markets and equity markets.

See our Annual Report on Form 10-K for the year ended December 31, 2021, Part I, Item 1A.

See Part II, Item 1A.

Risk Factors— Global economic conditions may negatively affect us and may magnify certain risks that affect our business .

Financing arrangements

In February 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.

During the three months ended March 31, 2023, in connection with the proposed acquisition of Horizon, we issued $24.0 billion of debt composed of eight series of notes.

If the proposed acquisition of Horizon does not occur by a specified date, or at all, we will be required to redeem all but one of the series of notes at a price equal to 101% of the principal amount of the notes plus accrued and unpaid interest.

In connection with the issue of these notes, we elected to terminate all remaining commitments under the bridge credit agreement we entered into in December 2022.

See Note 10, Financing arrangements, to the condensed consolidated financial statements.

During the three months ended March 31, 2023, we amended and restated our syndicated, unsecured, revolving credit agreement under which we may borrow up to $4.0 billion (increased from $2.5 billion prior to the amendment) 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 (increased from $750 million prior to the amendment).

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 March 31, 2023 and December 31, 2022, no amounts were outstanding under this facility.

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 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 September 30, 2022.

We were in compliance with all applicable covenants under these arrangements as of March 31, 2023.

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

Nine months ended

September 30,

Three months ended

Net cash provided by operating activities $ 1,064 $ 2,164

Net cash (used in) provided by investing activities $ (2,571) $ 963

Net cash used in financing activities $ (2,988) $ (1,713)

Net cash provided by (used in) investing activities $ 1,358 $ (111)

Net cash provided by (used in) financing activities $ 21,509 $ (3,514)

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 nine months ended September 30, 2022, increased primarily due to higher net income, after adjustments for noncash items, and the impact of working capital items.

Cash used in investing activities during the nine months ended September 30, 2022, was primarily due to net cash outflows related to marketable securities activity of $1.9 billion and capital expenditures of $596 million.

Cash provided by investing activities during the nine months ended September 30, 2021, was primarily due to net cash inflows related to marketable securities activity of $3.4 billion, partially offset by the acquisition of Five Prime for $1.6 billion, net of cash acquired, and capital expenditures of $593 million.

Cash provided by operating activities during the three months ended March 31, 2023, decreased primarily due to lower net income after adjustments for noncash items, as well as the impact of working capital items due to the timing of payments for sales incentives and discounts, partially offset by higher inventory build in the prior year.

Cash provided by investing activities during the three months ended March 31, 2023, was primarily due to net cash inflows related to marketable securities activity of $1.7 billion, partially offset by capital expenditures of $344 million, including construction costs of new plants in North Carolina and Ohio.

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.

We currently estimate 2023 spending on capital projects to be approximately $925 million.

Cash used in financing activities during the nine months ended September 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, the payment of dividends of $3.2 billion and the extinguishment of debt of $297 million, partially offset by proceeds from the issuance of debt of $6.9 billion.

Cash used in financing activities during the nine months ended September 30, 2021, was primarily due to payments to repurchase our common stock of $3.5 billion and the payment of dividends of $3.0 billion, partially offset by proceeds from the issuance of debt of $4.9 billion.

Cash provided by financing activities during the three months ended March 31, 2023, was primarily due to proceeds from the issuance of debt of $23.8 billion, partially offset by the payment of dividends of $1.1 billion as well as the repayment and extinguishment of debt of $1.1 billion.

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 accelerated stock repurchase agreements, and the payment of dividends of $1.1 billion, partially offset by proceeds from the issuance of debt of $4.0 billion.

See Note 10, Financing arrangements, and Note 11, Stockholders’ equity, to the condensed consolidated financial statements for further discussion.

5 unchanged sentences

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