What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-04-28 · 166 added, 111 removed, 269 unchanged (51% 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, 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, and our Quarterly Report on Form 10-Q for the period ended March 31, 2023.

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, 2022.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2023.

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 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

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

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

Macroeconomic challenges

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.

1 unchanged sentence

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.

See our Quarterly Report on Form 10-Q for the period ended March 31, 2023, 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.

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.

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, 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.

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 period ended March 31, 2023.

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, and our Quarterly Report on Form 10-Q for the period ended March 31, 2023.

FTC challenges to our proposed acquisition of Horizon Therapeutics plc

In May 2023, the FTC filed a complaint in the U.S.

District Court for the Northern District of Illinois (Northern Illinois District Court) seeking a temporary restraining order and preliminary injunction enjoining our proposed acquisition of Horizon, and the parties have since agreed to, and the Northern Illinois District Court has granted, a stipulated temporary restraining order providing that Horizon and Amgen would not close the proposed acquisition until the earlier of October 31, 2023, or the second business day after the Northern Illinois District Court rules on the FTC’s request for a preliminary injunction.

The Northern Illinois District Court scheduled an evidentiary hearing on the FTC’s request for a preliminary injunction beginning on September 11, 2023.

Attorneys general for California, Minnesota, New York, Illinois, Washington and Wisconsin joined the Northern Illinois District Court lawsuit as co-complainants.

On June 22, 2023, the FTC filed an administrative complaint alleging that our proposed acquisition of Horizon would violate federal antitrust laws.

See Note 14, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

Products/Pipeline

On August 3, 2023, the Company announced positive top-line results from two late stage clinical studies in oncology.

The DeLLphi-301 study, evaluating tarlatamab, a first-in-class DLL3 targeting bi-specific T-cell engager (BiTE ® ) molecule, in patients with relapsed or refractory small cell lung cancer (SCLC) who had failed two or more prior lines of treatment, demonstrated a durable objective response rate (primary endpoint) that substantially exceeds what was previously reported in the Phase 1 study.

Safety and tolerability were also more favorable compared to the Phase 1 study, with no new safety signals identified.

The Company will discuss these potentially registrational data with regulatory agencies to evaluate tarlatamab as a potential treatment for patients with relapsed or refractory SCLC.

Detailed results will be presented at an upcoming medical congress.

LUMAKRAS/LUMYKRAS

The CodeBreaK 300 study, a global Phase 3 study evaluating LUMAKRAS/LUMYKRAS combined with Vectibix in patients with chemorefractory metastatic KRAS G12C mutated colorectal cancer (CRC), met its primary endpoint of progression-free survival (PFS) for both the 240 mg and 960 mg doses of LUMAKRAS/LUMYKRAS.

At comparable doses, efficacy results were consistent with what was observed in CodeBreaK 101 with no new safety signals.

The Company will discuss these data with regulatory agencies to evaluate LUMAKRAS/LUMYKRAS in combination with Vectibix as a potential treatment for patients with metastatic KRAS G12C mutated CRC.

Detailed results will be presented at an upcoming medical congress.

The FDA recently granted Breakthrough Therapy Designation to LUMAKRAS in combination with Vectibix for the treatment of patients with metastatic KRAS G12C mutated CRC, as determined by an FDA approved test, who have received prior chemotherapy, based on data from the previous CodeBreaK 101 study.

Selected financial information

1 unchanged sentence

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 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 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.

Total product sales increased for the three months ended June 30, 2023, driven by volume growth for certain brands, including Repatha, Prolia, TEZSPIRE, EVENITY, AMJEVITA/AMGEVITA and BLINCYTO, partially offset by declines in net selling prices of certain products, including Neulasta, MVASI and KANJINTI, higher inventory drawdowns compared to the prior year and unfavorable changes to foreign currency exchange rates.

Total product sales increased for the six months ended June 30, 2023, driven by volume growth for certain brands, including Repatha, EVENITY, TEZSPIRE, Prolia, Nplate, BLINCYTO and AMJEVITA/AMGEVITA, partially offset by declines in net selling prices of certain products, including Neulasta, MVASI and KANJINTI, higher inventory drawdowns compared to the prior year, unfavorable changes to estimated sales deductions 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.

6 unchanged sentences

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.

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.

Risk Factors, of this Quarterly Report.

Other revenues decreased for the three and six months ended June 30, 2023, due to lower revenue from our COVID-19 manufacturing collaboration.

Operating expenses decreased for the three months ended June 30, 2023, driven by a loss on a nonstrategic divestiture in the prior period, partially offset by higher Cost of sales, higher R&D spend and an impairment charge associated with an IPR&D asset.

Operating expenses increased for the six months ended June 30, 2023, driven by higher Cost of sales, expenses related to our restructuring plan, higher R&D spend and an impairment charge associated with an IPR&D asset, partially offset by a loss on a nonstrategic divestiture in the prior period.

See Note 2, Restructuring, and Note 3, Acquisitions and divestitures, to the condensed consolidated financial statements.

Results of operations

2 unchanged sentences

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Prolia $ 1,028 $ 922 11 % $ 1,955 1,774 10 %

3 unchanged sentences

Repatha 424 325 30 % 812 654 24 %

Nplate 362 266 36 %

KYPROLIS 358 287 25 %

Aranesp 365 357 2 % 720 715 1 %

KYPROLIS 346 317 9 % 704 604 17 %

Nplate 310 284 9 % 672 550 22 %

EVENITY 281 191 47 % 535 361 48 %

13 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.

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, 2023:

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Prolia — U.S.

2 unchanged sentences

Total Prolia $ 1,028 $ 922 11 % $ 1,955 $ 1,774 10 %

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

The increase in global Prolia sales for the three and six months ended June 30, 2023, was driven by volume growth.

For a discussion of litigation related to Prolia, see Note 14, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

ENBREL — U.S.

2 unchanged sentences

Total ENBREL $ 1,068 $ 1,051 2 % $ 1,647 $ 1,913 (14) %

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.

The increase in ENBREL sales for the three months ended June 30, 2023, was driven by favorable changes to estimated sales deductions and higher net selling price, partially offset by lower inventory.

The decrease in ENBREL sales for the six months ended June 30, 2023, was driven by lower inventory, unfavorable changes to estimated sales deductions and lower net selling price.

For the remainder of 2023, we expect improved payer coverage will lead to continued growth in new patients that supports volume, and declining net selling price.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

$ 387 $ 391 (1) % $ 771 $ 759 2 %

1 unchanged sentence

Total XGEVA $ 530 $ 533 (1) % $ 1,066 $ 1,035 3 %

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

The decrease in global XGEVA sales for the three months ended June 30, 2023, was primarily driven by unfavorable changes to estimated sales deductions, lower inventory and unfavorable changes to foreign currency exchange rates, partially offset by higher net selling price.

The increase in global XGEVA sales for the six months ended June 30, 2023, was driven by higher net selling price and volume growth, partially offset by unfavorable changes to estimated sales deductions and foreign currency exchange rates.

For a discussion of litigation related to XGEVA, see Note 14, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Otezla — U.S.

2 unchanged sentences

Total Otezla $ 600 $ 594 1 % $ 992 $ 1,045 (5) %

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.

The increase in global Otezla sales for the three months ended June 30, 2023, was driven by volume growth.

The decrease in global Otezla sales for the six months ended June 30, 2023, was driven by lower inventory and net selling price and unfavorable changes to foreign currency exchange rates, partially offset by volume growth.

For the remainder of 2023, we expect new patient demand to continue to be impacted by free drug programs from newly launched competition.

and Part I—Note 14, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2023.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Repatha — U.S.

2 unchanged sentences

Total Repatha $ 424 $ 325 30 % $ 812 $ 654 24 %

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):

The increase in global Repatha sales for the three and six months ended June 30, 2023, was primarily driven by volume growth, partially offset by lower net selling price.

Part I—Note 14, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2023;

and Note 14, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

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

Three months ended

2023 2022 Change

Nplate — U.S.

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Aranesp — U.S.

$ 123 $ 132 (7) % $ 238 $ 269 (12) %

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.

Aranesp — ROW 242 225 8 % 482 446 8 %

Total Aranesp $ 365 $ 357 2 % $ 720 $ 715 1 %

The increase in global Aranesp sales for the three months ended June 30, 2023, was driven by volume growth and favorable changes to estimated sales deductions, partially offset by unfavorable changes to foreign currency exchange rates and lower net selling price.

The increase in global Aranesp sales for the six months ended June 30, 2023, was driven by volume growth, partially offset by unfavorable changes to foreign currency exchange rates and lower net selling price.

ROW Aranesp sales for the three and six months ended June 30, 2023, were favorably impacted by the timing of orders in certain markets outside the United States.

Aranesp sales for the three and six months ended June 30, 2023, decreased due to lower unit demand as a result of 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 volume and net selling price in the future.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

KYPROLIS — U.S.

2 unchanged sentences

Total KYPROLIS $ 346 $ 317 9 % $ 704 $ 604 17 %

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

The increase in global KYPROLIS sales for the three months ended June 30, 2023, was driven by volume growth, partially offset by lower net selling price.

The increase in global KYPROLIS sales for the six months ended June 30, 2023, was driven by volume growth.

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

Three months ended

2023 2022 Change

Aranesp — U.S.

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Nplate — U.S.

$ 176 $ 156 13 % $ 422 $ 312 35 %

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.

Nplate — ROW 134 128 5 % 250 238 5 %

Total Nplate $ 310 $ 284 9 % $ 672 $ 550 22 %

The increase in global Nplate sales for the three months ended June 30, 2023, was driven by volume growth, partially offset by unfavorable changes to foreign currency exchange rates.

The increase in global Nplate sales for the six months ended June 30, 2023, was driven by volume growth, partially offset by unfavorable changes to estimated sales deductions and foreign currency exchange rates.

Nplate sales for the six months ended June 30, 2023, included an $82 million order from the U.S.

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

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

EVENITY — U.S.

2 unchanged sentences

Total EVENITY $ 281 $ 191 47 % $ 535 $ 361 48 %

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

The increase in global EVENITY sales for the three and six months ended June 30, 2023, was primarily driven by volume growth across our markets.

Other products

1 unchanged sentence

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Neulasta — U.S.

2 unchanged sentences

Vectibix — U.S.

Vectibix— ROW 122 116 5 %

118 96 23 % 229 181 27 %

Vectibix — ROW 130 111 17 % 252 227 11 %

BLINCYTO — U.S.

145 77 88 % 271 156 74 %

BLINCYTO — ROW 61 62 (2) % 129 121 7 %

123 161 (24) % 244 329 (26) %

74 82 (10) % 155 158 (2) %

AMJEVITA — U.S.

19 — NM 70 — NM

AMGEVITA — ROW

131 116 13 % 244 224 9 %

TEZSPIRE — U.S.

133 29 * 229 36 *

Parsabiv — U.S.

54 71 (24) % 112 128 (13) %

Parsabiv — ROW 33 32 3 % 66 61 8 %

LUMAKRAS — U.S.

LUMYKRAS — ROW

Aimovig — U.S.

78 88 (11) % 142 186 (24) %

Aimovig — ROW 4 4 — % 9 7 29 %

LUMAKRAS — U.S.

50 51 (2) % 98 99 (1) %

LUMYKRAS — ROW

27 26 4 % 53 40 33 %

EPOGEN — U.S.

1 unchanged sentence

KANJINTI — U.S.

38 69 (45) % 71 149 (52) %

KANJINTI — ROW

12 16 (25) % 26 32 (19) %

TAVNEOS — U.S.

29 — NM 52 — NM

TAVNEOS — ROW 1 — NM 1 — NM

124 95 31 % 276 179 54 %

Other — ROW (1)

50 75 (33) % 91 134 (32) %

Total other products $ 1,731 $ 1,707 1 % $ 3,426 $ 3,361 2 %

4 unchanged sentences

* Change in excess of 100%

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

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

Operating expenses

1 unchanged sentence

Three months ended

2023 2022 Change

June 30, Six months ended

2023 2022 Change 2023 2022 Change

Operating expenses:

10 unchanged sentences

Total operating expenses $ 4,302 $ 4,418 (3) % $ 8,486 $ 8,156 4 %

* Change in excess of 100%

Cost of sales

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.

Cost of sales increased to 26.0% and 27.0% of total revenues for the three and six months ended June 30, 2023, respectively, primarily driven by higher profit share expenses, higher amortization expense from acquisition-related assets and changes in our product mix.

Research and development

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.

The increase in R&D expense for the three months ended June 30, 2023, was driven by higher spend in late-stage development and marketed product support.

The increase in R&D expense for the six months ended June 30, 2023, was driven by higher spend in late-stage development, marketed product support, and research and early pipeline.

Selling, general and administrative

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.

The decrease in SG&A expense for the three months ended June 30, 2023, was primarily driven by lower marketed product support, partially offset by higher acquisition-related expenses.

SG&A expense for the six months ended June 30, 2023, remained relatively unchanged, as lower marketed product support was offset by higher general and administrative expenses, including acquisition-related expenses.

Other operating expenses for the three and six months ended June 30, 2023, consisted primarily of expenses related to our restructuring plan and an impairment charge associated with an IPR&D asset.

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.

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

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

Nonoperating expense/income and income taxes

1 unchanged sentence

Three months ended

June 30, Six months ended

2023 2022 2023 2022

Interest expense, net $ (752) $ (328) $ (1,295) $ (623)

Other income (expense), net $ 2,064 $ (530)

Other (expense) income, net $ (318) $ (317) $ 1,746 $ (847)

Provision for income taxes $ 235 $ 214 $ 836 $ 413

1 unchanged sentence

Interest expense, net

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 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.

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

Other (expense) income, net

During the first quarter of 2023, we changed the 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.

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.

Other (expense) income, net, for the three months ended June 30, 2023, was relatively unchanged compared with the prior period.

The losses recorded in the current period exceeded the losses recorded in the prior period for BeiGene and other strategic equity investments and were substantially offset by increased interest income due to the higher cash balance and higher interest rates.

The change in Other (expense) income, net, for the six months ended June 30, 2023, was primarily due to the net gain recognized in the current year period on our investment in BeiGene, the increase in interest income due to the higher cash balance and higher interest rates and the impact of higher losses on our other strategic equity investments recognized in the prior year.

The increase in our effective tax rate for the three months ended June 30, 2023, was primarily due to the new Puerto Rico income tax beginning in 2023, partially offset by the current period change in the fair value of our equity investments and net favorable items.

The increase in our effective tax rate for the six months ended June 30, 2023, was primarily due to the new Puerto Rico income tax beginning in 2023, current year change in the fair value of our equity investments and an increase in interest expense on tax reserves, partially offset by net favorable items.

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.

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

Some individual countries, including those in the EU, have begun to implement the global minimum tax agreement with effective dates as early as 2024.

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.

7 unchanged sentences

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.

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

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

16 unchanged sentences

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

The two cases were consolidated in U.S.

The two cases were consolidated in the U.S.

Tax Court on December 19, 2022.

11 unchanged sentences

Selected financial data were as follows (in millions):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash, cash equivalents and marketable securities $ 34,248 $ 9,305

4 unchanged sentences

Cash, cash equivalents and marketable securities

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.

Our balance of cash, cash equivalents and marketable securities was $34.2 billion as of June 30, 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.

2 unchanged sentences

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

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

We intend to continue 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.

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.

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

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

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

In December 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.

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

In March 2023 and December 2022, our Board of Directors declared quarterly cash dividends of $2.13 per share of common stock, which were paid in June 2023 and March 2023, respectively, and was an increase of 10% over the quarterly cash dividends paid each quarter in 2022.

In August 2023, our Board of Directors declared a quarterly cash dividend of $2.13 per share of common stock that will be paid in September 2023.

During the six months ended June 30, 2023, we did not repurchase any of our common stock.

As of June 30, 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 June 30, 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 Part II, Item 1A.

See our Quarterly Report on 10-Q for the period ended March 31, 2023, Part II, Item 1A.

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

20 unchanged sentences

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.

As of June 30, 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 March 31, 2023.

We were in compliance with all applicable covenants under these arrangements as of June 30, 2023.

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

Three months ended

Six months ended

Net cash provided by operating activities $ 5,173 $ 4,094

2 unchanged sentences

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, 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.

Cash provided by operating activities during the six months ended June 30, 2023, increased due to timing of payments to tax authorities and other working capital items, partially offset by lower net income after adjustments for noncash items.

Cash provided by investing activities during the six months ended June 30, 2023, was primarily due to net cash inflows from sales and maturities of marketable securities of $1.7 billion, partially offset by capital expenditures of $615 million, including construction costs of new plants in North Carolina and Ohio.

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

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

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.

Cash provided by financing activities during the six months ended June 30, 2023, was primarily due to proceeds from the issuance of debt of $23.8 billion, partially offset by the payment of dividends of $2.3 billion as well as the repayment and extinguishment of debt of $1.1 billion.

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 our ASR agreements, and the payment of dividends of $2.1 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