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Item 7. Management’s Discussion and Analysis

2024-02-14 compared with 2023-02-09 · 215 added, 219 removed, 457 unchanged (49% of the section changed)

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Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Amgen is a biotechnology company committed to unlocking the potential of biology for patients suffering from serious illnesses.

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, Nplate, Repatha, KYPROLIS, Neulasta and EVENITY.

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

(including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) discovers, develops, manufactures and delivers innovative medicines to fight some of the world’s toughest diseases.

Amgen focuses on areas of high unmet medical need and leverages its expertise to strive for solutions that dramatically improve people’s lives, while also reducing the social and economic burden of disease.

We helped launch the biotechnology industry more than 40 years ago and have grown to be one of the world’s leading independent biotechnology companies.

Our robust pipeline includes potential first-in-class medicines at all stages of development.

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

We also market a number of other products, including but not limited to Neulasta, MVASI, AMJEVITA/AMGEVITA, TEZSPIRE, Parsabiv, Aimovig, LUMAKRAS/LUMYKRAS, EPOGEN, KANJINTI, TAVNEOS, RAVICTI, UPLIZNA and PROCYSBI.

For additional information about our products, see Part I, Item 1.

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Our strategy includes integrated activities intended to strengthen our competitive position in the industry.

We operate in six commercial areas:

inflammation, oncology/hematology, bone health, cardiovascular (CV) disease, nephrology and neuroscience.

We conduct discovery research primarily in three therapeutic areas:

inflammation, oncology/hematology and general medicine.

In 2022, we advanced our innovative pipeline, grew our international business, completed a strategic transaction to augment our marketed product portfolio, announced our intention to acquire Horizon and continued providing uninterrupted supplies of our medicines globally through the third year of the COVID-19 pandemic.

We accomplished these objectives while maintaining a strategic and disciplined approach to capital allocation and advancing our ESG efforts.

In 2022, we continued to advance our pipeline, initiating phase 3 clinical trials for a number of programs, including LUMAKRAS/LUMYKRAS for advanced colorectal cancer, olpasiran for CV disease and rocatinlimab for atopic dermatitis.

We continued to grow our international business, including achieving key regulatory approvals for TEZSPIRE in the EU and Japan.

Our external business development activities for 2022 included the acquisition of ChemoCentryx, adding recently launched TAVNEOS to our inflammation portfolio.

We also continued to advance our biosimilar program, with launches in new markets.

Our biosimilars are expected to continue launching in new markets throughout 2023, including the U.S.

launch of AMJEVITA in January 2023.

During 2022, while gradually recovering from the global pandemic and facing increased competition from biosimilars and generics, total product sales increased 2%, primarily driven by volume growth for certain brands, partially offset by declines in net selling prices of certain products and unfavorable changes to foreign currency exchange rates.

Product sales increased 3% in the United States, primarily driven by volume growth, partially offset by declines in net selling prices, and increased 1% in ROW, primarily driven by volume growth, partially offset by unfavorable changes to foreign currency exchange rates and declines in net selling prices.

Total operating expenses decreased 9% due to both the acquired IPR&D write-off from 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.

Cash flows from operating activities totaled $9.7 billion, which supported investment in our business while returning capital to shareholders through the payment of cash dividends and stock repurchases.

In 2023, we completed our acquisition of Horizon, advanced our innovative pipeline and generated strong volume growth across our product portfolio and regions.

We accomplished these objectives while maintaining a strategic and disciplined approach to capital allocation.

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

We are advancing our pipeline of innovative medicines, including initiating and completing enrollment of our Phase 2 study of maridebart cafraglutide for the treatment of obesity;

announcing results from our Phase 2 study of tarlatamab in patients with SCLC;

and rapidly enrolling patients in Phase 2 and Phase 3 studies for several of our later-stage clinical programs across our therapeutic areas.

For more information on our pipeline, including programs acquired from our Horizon acquisition, see Part I, Item 1.

Business—Research and Development and Selected Product Candidates.

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

Cash flows from operating activities totaled $8.5 billion, which supported investment in our business, including our Horizon acquisition, while returning capital to shareholders through the payment of cash dividends.

For 2023, we increased our quarterly cash dividend by 10% to $2.13 per share of common stock.

In December 2023, we declared a cash dividend of $2.25 per share of common stock for the first quarter of 2024, an increase of 6% for this period, to be paid in March 2024.

We also repurchased 26.1 million shares of our common stock during 2022 at an aggregate cost of $6.3 billion.

In 2022, we received net proceeds from the issuance of debt of $6.9 billion and extinguished $0.3 billion of debt.

In December 2022, in connection with the proposed acquisition of Horizon, we entered into a bridge credit agreement and a term loan credit agreement which provide for borrowings in the aggregate of $28.5 billion.

Amgen’s approach to and investment in human capital resource management is directed at attracting, motivating, developing and retaining talent to tackle the challenges of running an enterprise focused on the discovery, development and commercialization of innovative medicines.

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Further, we believe that a diverse and inclusive culture fosters innovation, which supports our ability to serve patients.

We are engaging in activities and setting goals to improve our focus on diversity, inclusion and belonging.

In our effort to attract and retain the best talent, we seek out and support talent across the globe, including in underrepresented populations, consistent with our commitment to equal opportunity.

For further information on these and other efforts, see Part I, Item 1.

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To continue on our path to greater environmental sustainability, in January 2021 we announced a new set of long-term environmental targets to achieve by 2027, including achieving carbon neutrality, reducing water consumption by 40% and reducing waste disposed by 75%.

(1)(2) Additionally, in 2022 we issued our first green bonds to finance eligible projects that meet specified criteria to reduce our impact on the environment.

(2)(3) Additionally, in 2022 we issued our first green bonds, which were used to finance eligible projects that met specified criteria to reduce our impact on the environment.

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

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

Our long-term success depends, to a great extent, on our ability to continue to discover, develop and commercialize innovative products and acquire or collaborate on therapies currently in development by other companies.

We must develop new products to achieve revenue growth and to offset revenue losses from when products lose their exclusivity or when competing products are launched.

We must grow sales from existing and new products to achieve revenue growth and to offset revenue losses from when products lose their exclusivity or when competing products are launched.

Certain of our products face increasing pressure from competition, including biosimilars and generics.

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We also face increasing regulatory scrutiny of safety and efficacy both before and after products launch.

Rising healthcare costs, uncertain macroeconomic conditions, including higher inflation and rising interest rates, and geopolitical conflicts 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.

Macroeconomic and other challenges

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

Further, ongoing geopolitical conflicts continue to create additional uncertainty in global macroeconomic conditions.

Additionally, with public and private healthcare-provider focus, the industry continues to be subject to cost containment measures and significant pricing pressures, including net price declines.

Moreover, legislation enacted to reduce healthcare expenditures, including provisions of the IRA, have affected, and are likely to continue to affect, our business.

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Risk Factors for further discussion of certain factors that could impact our future product sales.

COVID-19 pandemic

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 continued to impact the healthcare sector and our business, to varying degrees across our markets.

During 2022, with the exception of the Asia Pacific region that was affected by lockdowns during most of the year, we saw greater stability in patient visits and demand patterns even in areas that were facing surges in the virus.

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

Since early 2021, efforts have been under way to control the COVID-19 pandemic.

However, uncertainty remains as to the efficacy of these activities with respect to the ongoing trajectory of the pandemic.

Challenges to vaccination efforts, new variants and other causes of virus spread may require governments to change restrictions and/or shutdown requirements in various geographies.

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

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

Our product sales were affected by reduced demand as a result of the COVID-19 pandemic, and the cumulative decrease in diagnoses over the course of the pandemic suppressed the volume of new patients starting treatment, which continues to impact the business.

Given the unpredictable nature of future virus surges, there could be similar intermittent disruptions in the future in physician–patient interactions.

With regard to our clinical trial activities, we are continuously monitoring the possible impacts from health-related events, including changes from new COVID-19 variants;

we are working to mitigate effects on future study enrollment in our clinical trials;

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We remain focused on supporting our active clinical sites in their providing care for patients and in our providing investigational drug supply.

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

Risk Factors of this Form 10-K.

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

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

Selected Financial Information

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In addition, any reference to increases or decreases in inventory refers to changes in inventory held by wholesaler customers and end users (such as pharmacies).

Total product sales increased in 2022, primarily driven by volume growth for certain brands, including Repatha, Prolia, EVENITY, Nplate, LUMAKRAS/LUMYKRAS, KYPROLIS, Otezla and TEZSPIRE, partially offset by declines in net selling prices of certain products, including Neulasta, Repatha and MVASI, and unfavorable changes to foreign currency exchange rates.

acquisition during the period from the acquisition date of October 6, 2023 through December 31, 2023, partially offset by declines in net selling prices of certain products, including Neulasta, MVASI and ENBREL.

For 2024, we expect that net selling prices will continue to decline at a portfolio level driven by increased competition.

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patients work through deductibles, particularly for products acquired through pharmacy benefit programs.

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.

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

While not designed to completely address foreign currency changes, our hedging activities also seek to offset, in part, such effects on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros.

As discussed above, 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, with demand beginning to show some recovery in late 2020.

In late 2021 and early 2022, increased infection rates caused by variants of the virus (including Omicron) led to diminished capacity in the healthcare sector and reduced working days for our own sales force, which impacted our business.

As of the second quarter of 2022, we saw the effects of these variants recede in most markets, which allowed us to engage in increased field-facing activities .

Provider and patient activity 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, along with provisions of the IRA, may have a negative impact on product sales.

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

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

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

Furthermore, our product sales were affected by reduced demand as a result of the COVID-19 pandemic, and the cumulative decrease in diagnoses over the course of the pandemic suppressed the volume of new patients starting treatment, which continues to impact the business.

Given the unpredictable nature of future virus surges, there could be future intermittent disruptions in physician–patient interactions.

See Risk Factors in Part I, Item 1A.

of this Form 10-K.

Other revenues decreased for 2022, driven by lower revenue from COVID-19 antibody material and licensing-related revenues.

Operating expenses decreased for 2022 due to both the acquired IPR&D write-off related to the bemarituzumab program acquired as part of 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 Part IV—Note 2, Acquisitions and divestitures, and Note 8, Collaborations, to the Consolidated Financial Statements.

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

Operating expenses increased for 2023, due to higher amortization and acquisition-related expenses incurred as a result of the Horizon acquisition, a net impairment charge resulting from the termination of AMG 340, higher profit share and royalty expense, changes in our product mix and higher spend in later-stage clinical programs and marketed products support, partially offset by a loss on the divestiture of Gensenta in 2022.

See Part IV—Note 3, Acquisitions and divestitures;

Note 13, Goodwill and other intangible assets;

and Note 18, Fair value measurement, to the Consolidated Financial Statements.

Results of Operations

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Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

ENBREL $ 4,117 (8) % $ 4,465 (11) % $ 4,996

Prolia $ 4,048 12 % $ 3,628 12 % $ 3,248

ENBREL 3,697 (10) % 4,117 (8) % 4,465

Otezla 2,188 (4) % 2,288 2 % 2,249

XGEVA 2,112 5 % 2,014 — % 2,018

Aranesp 1,421 (4) % 1,480 (6) % 1,568

Nplate 1,307 27 % 1,027 21 % 850

Repatha 1,635 26 % 1,296 16 % 1,117

Nplate 1,477 13 % 1,307 27 % 1,027

KYPROLIS 1,403 13 % 1,247 13 % 1,108

Neulasta 1,126 (35) % 1,734 (24) % 2,293

Aranesp 1,362 (4) % 1,421 (4) % 1,480

EVENITY 1,160 47 % 787 48 % 530

Vectibix 984 10 % 893 2 % 873

BLINCYTO 861 48 % 583 24 % 472

448 NM — NM —

KRYSTEXXA (1)

272 NM — NM —

Other products (2)

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Total product sales $ 26,910 9 % $ 24,801 2 % $ 24,297

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

NM = not meaningful

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

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

Future sales of our products will depend in part on the factors discussed in the Overview, Part I, Item 1.

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Business—Marketing, Distribution and Selected Marketed Products—Competition.

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

Prolia — U.S.

$ 2,733 11 % $ 2,465 15 % $ 2,150

Prolia — ROW 1,315 13 % 1,163 6 % 1,098

Total Prolia $ 4,048 12 % $ 3,628 12 % $ 3,248

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

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

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

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

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Total ENBREL $ 3,697 (10) % $ 4,117 (8) % $ 4,465

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

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

For 2024, we expect ENBREL to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S.

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In addition, for 2024, we expect further declines in net selling price.

The decrease in ENBREL sales for 2021 was driven by lower net selling price, volume and unfavorable changes to inventory.

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

Year ended December 31, 2022 Change Year ended December 31, 2021 Change Year ended December 31, 2020

Prolia — U.S.

$ 2,465 15 % $ 2,150 17 % $ 1,830

Prolia — ROW 1,163 6 % 1,098 18 % 933

Total Prolia $ 3,628 12 % $ 3,248 18 % $ 2,763

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

The increase in global Prolia sales for 2021 was primarily driven by volume growth.

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

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

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Total Otezla $ 2,188 (4) % $ 2,288 2 % $ 2,249

The increase in global Otezla sales for 2022 was primarily driven by volume growth, partially offset by lower net selling price.

ROW Otezla sales for 2022 were impacted by unfavorable changes to foreign currency exchange rates.

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

For 2024, we expect Otezla to follow the historical pattern of lower sales in the first quarter relative to subsequent quarters due to the impact of benefit plan changes, insurance reverification and increased co-pay expenses as U.S.

patients work through deductibles.

The increase in global Otezla sales for 2021 was driven by volume growth, partially offset by lower net selling price and unfavorable changes to inventory.

For a discussion of ongoing litigation related to Otezla, see Part IV—Note 19, Contingencies and commitments, to the Consolidated Financial Statements.

The increase in global Otezla sales for 2022 was primarily driven by volume growth, partially offset by lower net selling price.

ROW Otezla sales for 2022 were impacted by unfavorable changes to foreign currency exchange rates.

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

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Total XGEVA $ 2,112 5 % $ 2,014 — % $ 2,018

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

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

The increase in global XGEVA sales for 2021 was primarily driven by volume growth, partially offset by lower net selling price.

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

Year ended December 31, 2022 Change Year ended December 31, 2021 Change Year ended December 31, 2020

Aranesp — U.S.

$ 521 (3) % $ 537 (15) % $ 629

Aranesp — ROW 900 (5) % 943 — % 939

Total Aranesp $ 1,421 (4) % $ 1,480 (6) % $ 1,568

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

The decrease in global Aranesp sales for 2021 was primarily driven by lower net selling price.

Aranesp continues to face competition from a long-acting erythropoiesis-stimulating agent (ESA) and from a biosimilar version of EPOGEN, which will impact net selling price and volume in the future.

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

Year ended December 31, 2022 Change Year ended December 31, 2021 Change Year ended December 31, 2020

Nplate — U.S.

$ 848 50 % $ 566 17 % $ 485

Nplate — ROW 459 — % 461 26 % 365

Total Nplate $ 1,307 27 % $ 1,027 21 % $ 850

The increase in global Nplate sales for 2022 was driven by volume growth.

Nplate sales for 2022 included a $207 million order in the fourth quarter from the U.S.

The increase in global Nplate sales for 2021 was primarily driven by volume growth.

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

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

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Total Repatha $ 1,635 26 % $ 1,296 16 % $ 1,117

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

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

Volume benefited from contracting changes to support and improve Medicare Part D and commercial patient access and the inclusion of Repatha on China’s National Reimbursement Drug List as of January 1, 2022, both of which resulted in decreases to the net selling price in 2022.

The increase in global Repatha sales for 2021 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 20, Contingencies and commitments, to the Consolidated Financial Statements.

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

Nplate — U.S.

$ 996 17 % $ 848 50 % $ 566

Nplate — ROW 481 5 % 459 — % 461

Total Nplate $ 1,477 13 % $ 1,307 27 % $ 1,027

The increase in global Nplate sales for 2023 was primarily driven by volume growth, including U.S.

government orders totaling $286 million.

The increase in global Nplate sales for 2022 was driven by volume growth, including a U.S.

government order of $207 million.

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

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Total KYPROLIS $ 1,403 13 % $ 1,247 13 % $ 1,108

The increases in global KYPROLIS sales for 2022 and 2021 were primarily driven by volume growth.

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):

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

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

Neulasta — U.S.

Aranesp — U.S.

$ 452 (13) % $ 521 (3) % $ 537

Neulasta — ROW 167 (24) % 220 (25) % 292

Total Neulasta $ 1,126 (35) % $ 1,734 (24) % $ 2,293

The decreases in global Neulasta sales for 2022 and 2021 were driven by lower net selling price and volume.

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 volume.

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.

Aranesp — ROW 910 1 % 900 (5) % 943

Total Aranesp $ 1,362 (4) % $ 1,421 (4) % $ 1,480

The decrease in global Aranesp sales for 2023 was driven by unfavorable changes to foreign currency exchange rates and lower net selling price.

Aranesp sales for 2023 decreased due to lower unit demand as a result of independent and medium-sized dialysis organizations transitioning from Aranesp to EPOGEN.

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

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Total EVENITY $ 1,160 47 % $ 787 48 % $ 530

The increases in global EVENITY sales for 2022 and 2021 were driven by volume growth across our markets.

Other products

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

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

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

$ 602 (27) % $ 826 26 % $ 656

MVASI — ROW 299 (12) % 340 * 142

Vectibix — U.S.

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Vectibix — ROW 523 5 % 497 (6) % 526

497 (6) % 526 12 % 469

Total Vectibix $ 984 10 % $ 893 2 % $ 873

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

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

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

BLINCYTO — U.S.

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BLINCYTO — ROW 295 19 % 247 27 % 194

Total BLINCYTO $ 861 48 % $ 583 24 % $ 472

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

The increase in global BLINCYTO sales for 2022 was driven by volume growth and higher net selling price.

Other products

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

Year ended December 31, 2023 Change Year ended December 31, 2022 Change Year ended December 31, 2021

Neulasta — U.S.

$ 710 (26) % $ 959 (37) % $ 1,514

EPOGEN — U.S.

Neulasta — ROW 138 (17) % 167 (24) % 220

511 (15) % 602 (27) % 826

MVASI — ROW 289 (3) % 299 (12) % 340

AMJEVITA — U.S.

126 NM — NM —

AMGEVITA — ROW

500 9 % 460 5 % 439

Aimovig — U.S.

398 27 % 313 (17) % 378

Aimovig — ROW 16 * 4 NM —

TEZSPIRE — U.S.

567 * 170 NM —

Parsabiv — U.S.

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Parsabiv— ROW 134 4 % 129 (1) % 130

KANJINTI — U.S.

Aimovig — U.S.

303 (24) % 398 27 % 313

KANJINTI — ROW 59 (37) % 93 1 % 92

Aimovig — ROW 20 25 % 16 * 4

LUMAKRAS — U.S.

222 * 82 NM —

197 (11) % 222 * 82

LUMYKRAS — ROW

TEZSPIRE — U.S.

170 NM — NM —

NEUPOGEN — U.S.

83 32 % 63 * 8

NEUPOGEN — ROW 57 (15) % 67 (17) % 81

Sensipar — U.S.

EPOGEN — U.S.

226 (55) % 506 (3) % 521

Sensipar/Mimpara — ROW 54 (31) % 78 (60) % 196

KANJINTI — U.S.

109 (58) % 257 (46) % 479

KANJINTI — ROW 50 (15) % 59 (37) % 93

TAVNEOS — U.S.

126 * 16 NM —

TAVNEOS — ROW (1)

8 60 % 5 NM —

RAVICTI — U.S.

RAVICTI — ROW (2)

UPLIZNA — U.S.

UPLIZNA — ROW (2)

PROCYSBI — U.S.

PROCYSBI — ROW (2)

576 47 % 393 27 % 309

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* Change in excess of 100%

(1) TAVNEOS was acquired on October 20, 2022 from our acquisition of ChemoCentryx.

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

(1) TAVNEOS was acquired from our ChemoCentryx acquisition on October 20, 2022.

(2) RAVICTI, UPLIZNA and PROCYSBI were acquired from our Horizon acquisition on October 6, 2023, and include product sales from the acquisition date through December 31, 2023.

(3) Consists of product sales from (i) AVSOLA, RIABNI, Corlanor, NEUPOGEN, IMLYGIC, Sensipar/Mimpara and BEKEMV;

(ii) ACTIMMUNE, RAYOS, BUPHENYL, PENNSAID, QUINSAIR and DUEXIS from our Horizon acquisition on October 6, 2023 through December 31, 2023;

and (iii) sales prior to the divestiture of our Bergamo and Gensenta subsidiaries in the second quarter of 2023 and fourth quarter of 2022, respectively.

Operating expenses

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% of total revenues 17.0 % 16.8 % 18.5 %

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

Acquired in-process research and development $ — NM $ — (100) % $ 1,505

% of product sales — % — % 6.2 %

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Cost of sales

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

The 2022 Puerto Rico tax law change replaced an excise tax with an income tax beginning in 2023.

See Part IV—Note 3, Acquisitions and divestitures, and Note 7, Income taxes, to the Consolidated Financial Statements.

Cost of sales decreased to 24.3% of total revenues for 2022, driven by lower COVID-19 antibody shipments and manufacturing costs, partially offset by changes in our product mix.

Cost of sales increased to 24.8% of total revenues for 2021, driven by changes in our product mix and higher profit share and royalties, partially offset by lower amortization expense from acquisition-related assets and lower manufacturing costs.

Research and development

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Total R&D expense $ 4,784 $ 4,434 $ 4,819

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

The decrease in R&D expense for 2022 was driven by higher business development activity in 2021 included in later-stage clinical programs and research and early pipeline and lower marketed products support, partially offset by higher later-stage clinical programs support and research and early pipeline spend.

The increase in R&D expense for 2021 was driven by a licensing-related upfront payment to KKC included in later-stage clinical programs and higher spend in research and early pipeline, including other business development activities.

Acquired in-process research and development

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Selling, general and administrative

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

See Part IV—Note 3, Acquisitions and divestitures, to the Consolidated Financial Statements.

The increase in SG&A expense for 2022 was primarily driven by higher acquisition-related expenses.

The decrease in SG&A expense for 2021 was primarily driven by lower spend for marketed products and lower general and administrative expenses.

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

Other operating expenses for 2023 primarily consisted of a net impairment charge for AMG 340 and expenses related to our restructuring plan initiated in the first quarter of 2023.

See Part IV—Note 2, Restructuring;

Note 13, Goodwill and other intangible assets;

and Note 18, Fair value measurement, to the Consolidated Financial Statements.

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

See Part IV—Note 3, Acquisitions and divestitures, to the Consolidated Financial Statements.

Other operating expenses for 2021 primarily consisted of expenses related to cost-savings initiatives and a legal judgment.

Other operating expenses for 2020 primarily consisted of legal settlement expenses.

Nonoperating expenses/income and income taxes

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Interest expense, net $ (2,875) $ (1,406) $ (1,197)

Other (expense) income, net $ (814) $ 259 $ 256

Other income (expense), net $ 2,833 $ (814) $ 259

Provision for income taxes $ 1,138 $ 794 $ 808

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Interest expense, net

The increase in Interest expense, net, for 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 decrease in Interest expense, net, for 2021 was primarily due to net higher costs associated with the early retirement of debt in 2020 and lower LIBORs in 2021 on debt for which we effectively pay a variable rate of interest through the use of interest rate swaps, partially offset by higher overall debt outstanding.

Other (expense) income, net

The change in Other (expense) income, net, for 2022 was primarily due to higher losses recognized in connection with our BeiGene investment compared with 2021 and losses recognized on our investments in limited partnerships, publicly traded equity securities and other strategic investments.

The change in Other (expense) income, net, for 2021 was primarily due to lower losses incurred in connection with our BeiGene investment compared with 2020, partially offset by lower income on our interest-bearing investments in 2021 and other nonrecurring gains recognized in 2020.

The decrease in our effective tax rate for 2022 compared with 2021 was primarily due to the nondeductible IPR&D expense arising from the acquisition of Five Prime in the prior year, partially offset by a nondeductible loss on a nonstrategic divestiture in 2022 and net unfavorable items as compared to the prior year.

The increase in our effective tax rate for 2021 compared with 2020 was primarily driven by the nondeductible IPR&D expense arising from the acquisition of Five Prime, partially offset by earnings mix and adjustments to prior-year tax liabilities.

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 a tax increase that could affect our U.S.

and foreign tax liabilities.

The increases in Interest expense, net, in 2023 and 2022 over the respective prior years was primarily due to higher overall debt outstanding and higher interest rates on debt.

See Part IV—Note 16, Financing arrangements, to the Consolidated Financial Statements.

Other income (expense), 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 Part IV—Note 10, Investments, to the Consolidated Financial Statements.

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

The change in Other income (expense), net, for 2022 was primarily due to higher losses recognized in connection with our BeiGene investment compared with 2021 and losses recognized on our investments in limited partnerships, publicly traded equity securities and other strategic investments.

The increase in our effective tax rate for 2023 compared with 2022 was primarily due to the 2022 Puerto Rico tax law change that replaced the excise tax with an income tax beginning in 2023.

The decrease in our effective tax rate for 2022 compared with 2021 was primarily due to the nondeductible IPR&D expense arising from the acquisition of Five Prime in the prior year, partially offset by a nondeductible loss on the divestiture of Gensenta in 2022 and net unfavorable items as compared to the prior year.

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

Effective January 1, 2024, selected individual countries, including the United Kingdom and EU member countries, have enacted the global minimum tax agreement.

Our legal entities that are doing business in the countries that have enacted the agreement are now subject to a 15% minimum tax rate on adjusted financial statement income.

Other countries, including the United States and the U.S.

territory of Puerto Rico, have not yet enacted the OECD agreement and implementation remains highly uncertain.

The continued enactment of the agreement, either by all OECD participants or unilaterally by individual countries, could result in tax increases or double taxation in the United States or foreign jurisdictions.

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

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

tax liability.

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 alternate fixed tax rate on industrial development income that 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 fixed tax rate, our current tax grant with the Puerto Rico government was amended in December 2022.

We qualify for this alternative fixed tax rate, beginning January 1, 2023 and our tax expense will increase.

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 on January 1, 2023, and our tax expense increased.

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.

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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.

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.

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

however, due to the complexity of the provision for income taxes and

uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse impact on our consolidated financial statements.

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

See Part I, Item 1A.

Risk Factors— The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability;

Risk Factors— We could be subject to additional tax liabilities, including from an adverse outcome in our ongoing tax dispute with the IRS and other tax examinations, enactment of the OECD minimum corporate tax rate agreement and the adoption and interpretation of new tax legislation, and we anticipate additional tax liabilities from certain provisions of the 2017 Tax Act that will go into effect in 2026;

such tax liabilities could adversely affect our profitability and results of operations;

Part II, Item 7.

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Cash, cash equivalents and marketable securities

Our balance of cash, cash equivalents and marketable securities was $9.3 billion at December 31, 2022.

Our balance of cash, cash equivalents and marketable securities was $10.9 billion on December 31, 2023.

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

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Capital allocation

Consistent with the objective to optimize our capital structure, we deploy our accumulated cash balances in a strategic manner and consider a number of alternatives, including 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 investing 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.

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

We intend to continue investing in our business while reducing our debt and returning capital to stockholders through the payment of cash dividends and stock repurchases.

This reflects our desire to optimize our cost of capital and our confidence in the future cash flows of our business.

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

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

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

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

The Board of Directors declared quarterly cash dividends of $2.13, $1.94 and $1.76 per share of common stock paid in 2023, 2022 and 2021, respectively, an increase of 10% over the prior year in both 2023 and 2022.

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

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

In December 2023, the Board

of Directors declared a cash dividend of $2.25 per share of common stock for the first quarter of 2024, an increase of 6% for this period, to be paid in March 2024.

During 2023, we did not repurchase any of our common stock.

During 2022, we repurchased $6.3 billion of common stock, including $6.0 billion under ASR agreements and had cash settlements for stock repurchases of $6.4 billion.

In 2021, we repurchased and had cash settlements of $5.0 billion of common stock.

In 2020, we repurchased and had cash settlements of $3.5 billion of common stock.

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

As of December 31, 2023, $7.0 billion remained available under the stock repurchase program.

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

We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, our plans to pay dividends and repurchase stock, and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities.

We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements as well as our plans to reduce debt, pay dividends and repurchase stock, and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities.

We anticipate that our liquidity needs can be met through a variety of sources, including cash provided by operating activities, 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.

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Unfavorable changes to these ratings may have an adverse impact on future financings.

During 2022, 2021 and 2020, we issued debt with aggregate principal amounts of $7.0 billion, $5.0 billion and $9.0 billion, respectively.

In December 2022, in connection with the acquisition of Horizon, we entered into a bridge credit agreement and a term loan credit agreement, which provided for borrowings in the aggregate of $28.5 billion.

In March 2023, we issued $24.0 billion of debt composed of eight series of notes and terminated the bridge credit agreement.

In October 2023, in connection with the completion of the acquisition of Horizon, we borrowed $4.0 billion under the term loan credit agreement.

During 2022 and 2021, we issued debt with aggregate principal amounts of $7.0 billion and $5.0 billion, respectively.

During 2023, we repurchased portions of our debt at an aggregate cost of $0.6 billion.

During 2022, we repurchased portions of our debt at a cost of $0.3 billion.

During 2021 and 2020, we repaid/redeemed debt of $4.2 billion and $6.5 billion, respectively.

In addition, during 2020, we exchanged $0.7 billion of certain of our outstanding note issuances with $0.9 billion of newly issued notes with a lower interest rate and later maturity date.

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that effectively converted a fixed-rate interest coupon for certain of our debt issuances to a floating, LIBOR-based coupon over the lives of the respective notes.

During 2021, we repaid/redeemed debt of $4.2 billion.

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that effectively converted a fixed-rate interest coupon for certain of our debt issuances to a floating, SOFR-based coupon over the lives of the respective notes.

These interest rate swap contracts qualify and are designated as fair value hedges.

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These cross-currency swap contracts qualify and are designated as cash flow hedges.

As of both December 31, 2022 and 2021, we had cross-currency swap contracts with aggregate notional amount of $3.4 billion.

As of both December 31, 2023 and 2022, we had cross-currency swap contracts with aggregate notional amount of $2.7 billion and $3.4 billion, respectively.

As of December 31, 2023, we had a commercial paper program that allows us to issue up to $2.5 billion of unsecured commercial paper to fund our working-capital needs.

During 2023, 2022 and 2021, we did not issue any commercial paper.

No commercial paper was outstanding as of December 31, 2022 and 2021.

In 2019, we amended and restated our $2.5 billion syndicated, unsecured, revolving credit agreement, which is available for general corporate purposes or as a liquidity backstop to our commercial paper program.

The commitments under the revolving credit agreement may be increased by up to $750 million with the agreement of the banks.

No commercial paper was outstanding as of both December 31, 2023 and 2022.

In 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.

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Annual commitment fees for this agreement are 0.09% of the unused portion of the facility based on our current credit rating.

In December 2022, this revolving credit agreement was further amended to replace LIBOR with SOFR as the reference rate, pursuant to provisions contained therein related to determination of successor rates in case of phaseout or unavailability of existing designated reference rates.

Generally, we would be charged interest for any amounts borrowed under this facility, based on our current credit rating, at (i) SOFR plus 1.125% or (ii) the highest of (A) the syndication agent bank base commercial lending rate, (B) the overnight federal funds rate plus 0.50% or (C) one-month SOFR plus 1.1%.

Generally, we would be charged interest for any amounts borrowed under this facility, based on our current credit rating, at (i) SOFR plus 1.01% or (ii) the highest of (A) the administrative agent bank base commercial lending rate, (B) the overnight federal funds rate plus 0.50% or (C) one-month SOFR plus 1.1%.

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

As of December 31, 2022, no amounts have been borrowed under either agreement.

See Part IV—Note 2, Acquisitions and divestitures, to the Consolidated Financial Statements.

It is anticipated that the U.S.

dollar LIBOR rate will be phased out and replaced by 2023.

The Alternative Reference Rates Committee, a group of private-market participants convened by the Federal Reserve Board and the Federal Reserve Bank of New York to help ensure a successful transition from U.S.

dollar LIBOR to a more robust reference rate, recommends SOFR as the U.S.

dollar LIBOR alternative.

As such, we expect SOFR to become widely adopted by market participants.

We do not expect this change to have a material impact on our consolidated financial statements.

See Part I, Item 1A.

Risk Factors— Our sales and operations are subject to the risks of doing business internationally, including in emerging markets.

In February 2023, we filed a shelf registration statement with the SEC that allows us to issue unspecified amounts of debt securities;

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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 2023, and our Board has approved a new shelf registration statement to replace it.

This shelf registration statement expires in February 2026.

Certain of our financing arrangements contain nonfinancial covenants.

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

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

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

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Net cash (used in) provided by investing activities $ (26,204) $ (6,044) $ 733

Net cash used in financing activities $ (4,037) $ (8,271) $ (4,867)

Net cash provided by (used in) financing activities $ 21,048 $ (4,037) $ (8,271)

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 decreased in 2023 due to lower net income adjusted for non-cash items, primarily transaction and integration payments made in connection with the Horizon acquisition, as well as higher tax payments, partially offset by changes in working capital items.

Cash provided by operating activities increased in 2022 primarily due to the timing of payments for sales incentives and discounts, vendor purchases, liabilities to tax authorities and receipts from corporate partners, partially offset by higher manufacturing activities in the current year.

Cash provided by operating activities decreased during 2021 primarily due to the monetization of interest rate swaps that occurred in 2020 and the timing of payments for sales incentives and discounts.

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

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

Cash provided by investing activities during 2021 was primarily due to net cash inflows related to marketable securities of $4.3 billion, partially offset by cash used in the acquisitions of Teneobio and Five Prime of $2.5 billion.

Cash used in investing activities during 2020 was primarily due to our $3.2 billion of purchases of equity method investments, primarily BeiGene, and net cash outflows related to marketable securities of $1.5 billion.

Capital expenditures were $936 million, $880 million and $608 million in 2022, 2021 and 2020, respectively.

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

Capital expenditures were $1.1 billion, $936 million and $880 million in 2023, 2022 and 2021, respectively.

We currently estimate 2024 spending on capital projects to be approximately $1.1 billion.

A majority of the increase in expenditures relates to expansion of manufacturing capacity to enable supply of products and product candidates.

Cash provided by financing activities during 2023 was primarily due to net proceeds from long-term debt of $27.8 billion primarily in connection with the acquisition of Horizon, partially offset by the payment of dividends of $4.6 billion and repayment/extinguishment of debt of $2.1 billion.

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

Cash used in financing activities during 2021 was primarily due to payments to repurchase our common stock of $5.0 billion and the payment of dividends of $4.0 billion, partially offset by proceeds from the issuance of debt, net of repayments of $0.8 billion.

Cash used in financing activities during 2020 was primarily due to the payment of dividends of $3.8 billion and payments to repurchase our common stock of $3.5 billion, partially offset by proceeds from issuance of debt, net of repayments of $2.5 billion.

See Part IV—Note 10, Investments;

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Most of these obligations are expected to be paid within one year, and payment of certain of these amounts may be reduced based on certain future events.

In addition to the purchase obligations noted above, we are contractually obligated to pay additional amounts that in the aggregate are significant, upon the achievement of various development, regulatory and commercial milestones for agreements we have entered into with third parties, including contingent consideration incurred in the acquisitions of Teneobio and K-A.

These payments are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring, and any resulting cash requirements are managed through our operational budgeting processes.

Except with respect to the fair value of the contingent consideration of approximately $0.3 billion, these obligations are not recorded on our Consolidated Balance Sheets.

Except with respect to the fair value of the contingent consideration of approximately $96 million, these obligations are not recorded on our Consolidated Balance Sheets.

As of December 31, 2023, the maximum amount that may be payable in the future for agreements we have entered into with third parties is $8.3 billion.

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Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.

Our significant accounting policies are included in Part IV—Note 1, Summary of significant accounting policies.

Our significant accounting policies are included in Part IV—Note 1, Summary of significant accounting policies, to the Consolidated Financial Statements.

The following are considered critical to our consolidated financial statements because they require the most difficult, subjective or complex judgments, often because of the need to make estimates about matters that are inherently uncertain.

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Balance as of December 31, 2022 4,879 849 258 5,986

Additions (1)

263 24 39 326

Amounts charged against product sales 14,328 13,349 2,533 30,210

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Balance as of December 31, 2023 $ 5,836 $ 1,097 $ 338 $ 7,271

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

For the years ended December 31, 2023, 2022 and 2021, total sales deductions were 53%, 51% and 47% of gross product sales, respectively.

The increase in the total sales deductions balance as of December 31, 2023, compared with December 31, 2022, was primarily driven by the impact of higher U.S.

chargeback and commercial rebate discount rates and an increase in gross sales, partially offset by timing of payments.

chargeback and commercial rebate discount rates, an increase in gross sales and Horizon integrated beginning balances, partially offset by timing of payments.

Included in the amounts are immaterial net adjustments related to prior-year sales due to changes in estimates.

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and we accrue these rebates in the period the related sales are recorded.

We then adjust the rebate accruals as more information becomes available and to reflect

actual claims experience.

We then adjust the rebate accruals as more information becomes available and to reflect actual claims experience.

Estimating such rebates is complicated, in part because of the time delay between the date of sale and the actual settlement of the liability.

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We recognize both accrued interest and penalties, when appropriate, related to UTBs in income tax expense.

See Part IV—Note 7, Income taxes, to the Consolidated Financial Statements.

Certain items are included in our tax return at different times than they are reflected in the financial statements, and they cause temporary differences between the tax bases of assets and liabilities and their reported amounts.

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territory of Puerto Rico.

We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution.

We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS

appeals office but were unable to reach resolution.

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

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In July 2022, we filed a petition in the U.S.

Tax Court to contest a Notice for the years 2013–2015 that we received in April 2022 that seeks to increase our U.S.

Tax Court to contest a Notice for the years 2013–2015 that we previously reported receiving in April 2022 that seeks to increase our U.S.

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

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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.

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.

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Final resolution of these complex matters is not li kely 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;

See Part I, Item 1A.

Risk Factors— The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability;

such tax liabilities could adversely affect our profitability and results of operations;

Part II, Item 7.

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See Part I, Item 1A.

Risk Factors— The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability .

such tax liabilities could adversely affect our profitability and results of operations.

Contingencies

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

Impairment of equity method investments

We review the carrying value of our equity method investments whenever events or changes in circumstances indicate that the carrying amount of an investment may not be recoverable.

We record impairment losses on our equity method investments if we deem the impairment to be other-than-temporary.

We deem an impairment to be other-than-temporary based on various factors, including but not limited to, the length of time and the extent to which the fair value is below the carrying value, volatility of the security price, the financial condition of the issuer, changes in technology that may impair the earnings potential of the investment and our intent and ability to retain the investment to allow for a recovery in fair value.

We believe our judgments used in assessing impairment of equity method investments are based on reasonable assumptions given the facts and circumstances as of the related dates of the assessments.

Recently Issued Accounting Standards

1 unchanged sentence

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-K

Item 7. Management’s Discussion and Analysis