What changed in this filing

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Item 2. Management’s Discussion and Analysis

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

MD&A is provided as a supplement to and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.

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, 2023, and our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

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

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

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made.

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

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

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

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

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

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.

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

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

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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, 2023.

For additional developments, see our Annual Report on Form 10-K for the year ended December 31, 2023.

Obesity Program Update

On May 2, 2024, the Company provided an update on the interim analysis of the maridebart cafraglutide (MariTide) Phase 2 study in adults with overweight or obesity, with or without type 2 diabetes mellitus.

The Company reported that the interim analysis of this ongoing Phase 2 study is complete and it is actively planning and expects to initiate a broad Phase 3 program, including obesity, obesity related conditions, and diabetes.

The Company also announced its plans to initiate an additional, dedicated Phase 2 trial investigating MariTide for the treatment of diabetes in patients with and without obesity.

As part of this announcement, the Company also indicated that it is not planning to pursue further development of AMG 786, a small molecule obesity program.

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, 2024.

For additional developments, see our Annual Report on Form 10-K for the year ended December 31, 2023, and our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

Products/pipeline

In May 2024, we announced IMDELLTRA received accelerated approval from the FDA for the treatment of adult patients with extensive-stage small cell lung cancer (ES-SCLC) with disease progression on or after platinum-based chemotherapy.

In June 2024, we announced BLINCYTO received approval from the FDA in frontline consolidation for patients with CD19-positive Philadelphia chromosome-negative B-cell precursor acute lymphoblastic leukemia (B-ALL).

In June 2024, we announced positive topline results from our Phase 3 registrational trial evaluating UPLIZNA for the treatment of Immunoglobulin G4-related disease (IgG4-RD).

The trial met its primary endpoint, showing a statistically significant 87% reduction in the risk of IgG4-RD flare compared to placebo during the 52-week placebo-controlled period.

All key secondary endpoints were also met, which were annualized flare rate;

flare-free, treatment-free complete remission;

and flare-free, corticosteroid-free complete remission.

No new safety signals were identified.

Selected financial information

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Product sales

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Operating income $ 1,909 $ 2,684 (29) % $ 2,900 $ 4,605 (37) %

Net (loss) income $ (113) $ 2,841 *

Diluted (loss) earnings per share $ (0.21) $ 5.28 *

Net income $ 746 $ 1,379 (46) % $ 633 $ 4,220 (85) %

Diluted EPS $ 1.38 $ 2.57 (46) % $ 1.17 $ 7.86 (85) %

Diluted shares 541 537 1 % 541 537 1 %

* Change in excess of 100%

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

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

Total product sales increased 22% for the three months ended March 31, 2024, primarily driven by 25% volume growth.

Total product sales increased 20% and 21% for the three and six months ended June 30, 2024, respectively, driven by volume growth of 26% for both periods, partially offset by declines in net selling price of 3% and 2%, respectively.

For the three months ended June 30, 2024, U.S.

volume grew 30% and ROW volume grew 15%.

Product sales from acquired Horizon products contributed $914 million to product sales, and volume growth from our other brands, including Repatha, TEZSPIRE, EVENITY, Prolia and BLINCYTO, was 9%.

Net selling price remained relatively unchanged for the three months ended March 31, 2024, compared to the prior period.

Product sales from acquired Horizon products contributed $1.1 billion, with volume growth of 10% from our other brands, including Repatha, TEZSPIRE, Prolia and EVENITY.

For the six months ended June 30, 2024, U.S.

volume grew 30% and ROW volume grew 16%.

Product sales from

acquired Horizon products contributed $2.0 billion, with volume growth of 9% from our other brands, including Repatha, TEZSPIRE, EVENITY and Prolia.

For the remainder of 2024, we expect product sales growth from acquired Horizon products and volume growth from our other brands to be partially offset by net selling price declines on a year-over-year basis at a portfolio level.

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Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1A.

Risk Factors, of this Quarterly Report.

Other revenues increased for the three months ended March 31, 2024, primarily driven by higher corporate partner revenue from a licensed product.

Operating expenses increased for the three months ended March 31, 2024, driven by higher amortization and acquisition-related expenses incurred as a result of the Horizon acquisition, higher SG&A and R&D expenses, including expenses related to Horizon-acquired products and programs, and higher profit share and royalty expense.

Risk Factors, of our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

Other revenues increased for the three months ended June 30, 2024, driven by higher royalty income from licensed products.

Other revenues increased for the six months ended June 30, 2024, driven by higher royalty income and corporate partner revenue from licensed products.

Operating expenses increased for the three and six months ended June 30, 2024, primarily driven by higher amortization expense from Horizon acquisition-related assets and expenses from the acquired Horizon business.

Results of operations

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Prolia $ 1,165 $ 1,028 13 % $ 2,164 $ 1,955 11 %

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Otezla 544 600 (9) % 938 992 (5) %

479 — N/A 903 — N/A

KYPROLIS 377 346 9 % 753 704 7 %

Aranesp 349 355 (2) %

EVENITY 391 281 39 % 733 535 37 %

Aranesp 348 365 (5) % 697 720 (3) %

Nplate 346 310 12 % 663 672 (1) %

KRYSTEXXA (1)

294 — N/A 529 — N/A

Vectibix 270 248 9 % 517 481 7 %

BLINCYTO 264 206 28 % 508 400 27 %

KRYSTEXXA (1)

234 133 76 % 407 229 78 %

Other products (3)

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(i) Part I, Item 1.

Business—Marketing, Distribution and Selected Marketed Products;

Business—Marketing, Distribution and Selected Marketed

(ii) Part I, Item 1A.

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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, 2024:

(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):

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Prolia — U.S.

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Total Prolia $ 1,165 $ 1,028 13 % $ 2,164 $ 1,955 11 %

The increase in global Prolia sales for the three months ended March 31, 2024 was primarily driven by volume growth.

The increase in global Prolia sales for the three and six months ended June 30, 2024 was primarily driven by volume growth.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, Part I, Item 1.

Business—Marketing, Distribution and Selected Marketed Products—Patents, our U.S.

patent for RANKL antibodies (including sequences) for Prolia and XGEVA expires in February 2025.

For information about our settlement with Sandoz Inc., see Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

For a discussion of litigation related to Prolia, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023;

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

and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

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

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ENBREL — U.S.

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Total ENBREL $ 909 $ 1,068 (15) % $ 1,476 $ 1,647 (10) %

The decrease in ENBREL sales for the three months ended March 31, 2024 was driven by lower volume, partially offset by higher inventory levels.

ENBREL typically has lower sales in the first quarter relative to subsequent quarters of the year due to the impact of benefit plan changes, insurance reverifications and increased co-pay expenses as U.S.

patients work through deductibles.

Moving forward, we expect modest volume growth offset by declining net selling price.

The decrease in ENBREL sales for the three and six months ended June 30, 2024 was primarily driven by lower net selling price.

Going forward, we expect relatively flat volumes with continued declines in net selling price, including the impact from the IRA Medicare Part D price set by CMS beginning in 2026.

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

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$ 399 $ 387 3 % $ 765 $ 771 (1) %

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Total XGEVA $ 562 $ 530 6 % $ 1,123 $ 1,066 5 %

The increase in global XGEVA sales for the three months ended March 31, 2024 was primarily driven by volume growth outside the United States and higher net selling price, partially offset by lower volume in the United States.

The increase in global XGEVA sales for the three and six months ended June 30, 2024 was driven by higher net selling price.

As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, Part I, Item 1.

Business—Marketing, Distribution and Selected Marketed Products—Patents, our U.S.

patent for RANKL antibodies (including sequences) for Prolia and XGEVA expires in February 2025.

For a discussion of litigation related to XGEVA, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023;

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

and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024.

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

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Repatha — U.S.

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Total Repatha $ 532 $ 424 25 % $ 1,049 $ 812 29 %

The increase in global Repatha sales for the three months ended March 31, 2024 was driven by volume growth of 44%, partially offset by lower net selling price of 13%.

For a discussion of ongoing litigation related to Repatha, see Part IV—Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in this Quarterly Report.

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

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TEPEZZA — U.S.

$ 419 $ — N/A

TEPEZZA — ROW 5 — N/A

Total TEPEZZA $ 424 $ — N/A

N/A = not applicable

TEPEZZA was acquired on October 6, 2023 from our Horizon acquisition and generated $424 million in product sales for the three months ended March 31, 2024.

As TEPEZZA was acquired on October 6, 2023, there were no recorded product sales for the comparative prior period.

The increase in global Repatha sales for the three and six months ended June 30, 2024 was driven by volume growth of 46% and 45%, respectively, partially offset by lower net selling price of 20% and 16%, respectively.

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

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Otezla — U.S.

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Total Otezla $ 544 $ 600 (9) % $ 938 $ 992 (5) %

Global Otezla sales for the three months ended March 31, 2024 increased 1%.

Otezla typically has lower sales in the first quarter relative to subsequent quarters of the year due to the impact of benefit plan changes, insurance reverifications and increased co-pay expenses as U.S.

patients work through deductibles.

The decrease in global Otezla sales for the three months ended June 30, 2024 was driven by lower net selling price of 7% and unfavorable changes to estimated sales deductions of 6%, partially offset by volume growth of 2%.

The decrease in global Otezla sales for the six months ended June 30, 2024 was driven by lower net selling price of 7% and unfavorable changes to estimated sales deductions of 4%, partially offset by higher inventory of 4%.

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

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TEPEZZA — U.S.

$ 478 $ — N/A $ 897 $ — N/A

TEPEZZA — ROW 1 — N/A 6 — N/A

Total TEPEZZA $ 479 $ — N/A $ 903 $ — N/A

N/A = not applicable

TEPEZZA was acquired on October 6, 2023 from our Horizon acquisition and generated $479 million and $903 million in product sales for the three and six months ended June 30, 2024, respectively.

As TEPEZZA was acquired on October 6, 2023, there were no recorded product sales for the comparative prior periods.

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

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KYPROLIS — U.S.

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Total KYPROLIS $ 377 $ 346 9 % $ 753 $ 704 7 %

The increase in global KYPROLIS sales for the three months ended March 31, 2024 was primarily driven by volume growth outside the United States.

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

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Aranesp — U.S.

$ 100 $ 115 (13) %

Aranesp — ROW 249 240 4 %

Total Aranesp $ 349 $ 355 (2) %

The decrease in global Aranesp sales for the three months ended March 31, 2024 was driven by unfavorable changes to estimated sales deductions of 3%, partially offset by volume growth outside the United States.

Aranesp sales were impacted by independent and medium-sized dialysis organizations transitioning from Aranesp to EPOGEN.

The increase in global KYPROLIS sales for the three and six months ended June 30, 2024 was primarily driven by volume growth outside the United States.

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

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EVENITY — U.S.

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Total EVENITY $ 391 $ 281 39 % $ 733 $ 535 37 %

The increase in global EVENITY sales for the three months ended March 31, 2024 was primarily driven by volume growth.

The increase in global EVENITY sales for the three and six months ended June 30, 2024 was primarily driven by volume growth.

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

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Aranesp — U.S.

$ 91 $ 123 (26) % $ 191 $ 238 (20) %

Aranesp — ROW 257 242 6 % 506 482 5 %

Total Aranesp $ 348 $ 365 (5) % $ 697 $ 720 (3) %

The decrease in global Aranesp sales for the three and six months ended June 30, 2024 was driven by unfavorable changes to estimated sales deductions of 8% and 5%, respectively, partially offset by volume growth outside the United States and higher net selling price.

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

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Nplate — U.S.

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Total Nplate $ 346 $ 310 12 % $ 663 $ 672 (1) %

The decrease in global Nplate sales for the three months ended March 31, 2024 was primarily driven by lower volume in comparison to the first quarter of 2023, which included a U.S.

government order of $82 million.

Excluding the U.S.

government order from this comparison, global Nplate sales grew 13% for the three months ended March 31, 2024, primarily driven by

volume growth.

The increase in global Nplate sales for the three months ended June 30, 2024 was driven by higher net selling price and volume growth.

Global Nplate sales for the six months ended June 30, 2024 decreased 1%.

Excluding a U.S.

government order of $82 million in the first quarter of 2023 from this comparison, Nplate sales increased 12% for the six months ended June 30,

2024, driven by higher net selling price and volume growth.

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

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KRYSTEXXA — U.S.

$ 294 $ — N/A $ 529 $ — N/A

KRYSTEXXA — ROW

— — N/A — — N/A

Total KRYSTEXXA

$ 294 $ — N/A $ 529 $ — N/A

N/A = not applicable

KRYSTEXXA was acquired on October 6, 2023 from our Horizon acquisition and generated $294 million and $529 million in product sales for the three and six months ended June 30, 2024, respectively.

As KRYSTEXXA was acquired on October 6, 2023, there were no recorded product sales for the comparative prior periods.

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

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Vectibix — U.S.

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Total Vectibix $ 270 $ 248 9 % $ 517 $ 481 7 %

The increase in global Vectibix sales for the three months ended March 31, 2024 was driven by higher net selling price and volume growth, partially offset by unfavorable changes to foreign currency exchange rates.

The increase in global Vectibix sales for the three and six months ended June 30, 2024 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):

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BLINCYTO — U.S.

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Total BLINCYTO $ 264 $ 206 28 % $ 508 $ 400 27 %

The increase in global BLINCYTO sales for the three months ended March 31, 2024 was driven by volume growth resulting from broad prescribing across academic and community segments for patients with B-cell precursor acute lymphoblastic leukemia.

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

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KRYSTEXXA — U.S.

$ 235 $ — N/A

KRYSTEXXA — ROW

Total KRYSTEXXA

$ 235 $ — N/A

N/A = not applicable

KRYSTEXXA was acquired on October 6, 2023 from our Horizon acquisition and generated $235 million in product sales for the three months ended March 31, 2024.

As KRYSTEXXA was acquired on October 6, 2023, there were no recorded product sales for the comparative prior period.

The increase in global BLINCYTO sales for the three and six months ended June 30, 2024 was driven by volume growth resulting from broad prescribing across academic and community segments for patients with B-ALL.

In June 2024, BLINCYTO was granted approval by the FDA in frontline consolidation for patients with CD-19 positive Philadelphia chromosome-negative B-ALL.

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

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TEZSPIRE — U.S.

$ 234 $ 133 76 % $ 407 $ 229 78 %

The increase in TEZSPIRE sales for the three months ended March 31, 2024 was primarily driven by volume growth.

The increase in TEZSPIRE sales for the three and six months ended June 30, 2024 was primarily driven by volume growth.

Other products

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$ 100 $ 123 (19) % $ 205 $ 244 (16) %

57 74 (23) % 154 155 (1) %

AMJEVITA — U.S.

(9) 19 N/A 21 70 (70) %

AMGEVITA — ROW

142 131 8 % 280 244 15 %

Neulasta — U.S.

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Parsabiv — U.S.

67 54 24 % 132 112 18 %

Parsabiv — ROW 39 33 18 % 79 66 20 %

RAVICTI — U.S.

96 — N/A 188 — N/A

RAVICTI — ROW (2)

LUMAKRAS — U.S.

LUMYKRAS — ROW

1 — N/A 3 — N/A

UPLIZNA — U.S.

77 — N/A 147 — N/A

UPLIZNA — ROW (2)

15 — N/A 25 — N/A

LUMAKRAS — U.S.

55 50 10 % 108 98 10 %

LUMYKRAS — ROW

30 27 11 % 59 53 11 %

Aimovig — U.S.

80 78 3 % 145 142 2 %

Aimovig — ROW 5 4 25 % 10 9 11 %

TAVNEOS — U.S.

TAVNEOS — ROW 6 — N/A

61 29 * 106 52 *

TAVNEOS — ROW 10 1 * 16 1 *

PROCYSBI — U.S.

54 — N/A 103 — N/A

PROCYSBI — ROW (2)

4 — N/A 5 — N/A

EPOGEN — U.S.

32 61 (48) % 73 121 (40) %

IMDELLTRA — U.S.

12 — N/A 12 — N/A

237 162 46 % 498 347 44 %

Other — ROW (3)

56 62 (10) % 107 117 (9) %

Total other products $ 1,326 $ 1,144 16 % $ 2,699 $ 2,316 17 %

3 unchanged sentences

N/A = not applicable

* Change in excess of 100%

AMJEVITA product sales for the three and six months ended June 30, 2024, included unfavorable changes to estimated sales deductions.

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

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

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

and (ii) ACTIMMUNE, RAYOS, BUPHENYL, PENNSAID, QUINSAIR and DUEXIS in the periods after our Horizon acquisition on October 6, 2023.

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Operating expenses:

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Cost of sales

Cost of sales increased to 43.0% of total revenues for the three months ended March 31, 2024, driven by higher amortization expense from Horizon acquisition-related assets and, to a lesser extent, higher profit share and royalty expense.

This increase was partially offset by the impact of the 2022 Puerto Rico tax law change, which replaced an excise tax with an income tax beginning in 2023.

Cost of sales increased to 38.6% and 40.6% of total revenues for the three and six months ended June 30, 2024, respectively, driven by higher amortization expense from Horizon acquisition-related assets and, to a lesser extent, higher royalty and profit share expense.

The increases were partially offset by the impact of the 2022 Puerto Rico tax law change, which replaced an excise tax with an income tax beginning in 2023.

See Note 4, Income taxes, to the condensed consolidated financial statements.

Research and development

The increase in R&D expense for the three months ended March 31, 2024, was driven by higher spend in later-stage clinical programs and marketed product support, including Horizon-acquired programs.

The increase in R&D expense for the three months ended June 30, 2024, was driven by higher spend in later-stage clinical programs and research and early pipeline, including Horizon-acquired programs.

The increase in R&D expense for the six months ended June 30, 2024, was driven by higher spend in later-stage clinical programs, marketed product support and research and early pipeline, including Horizon-acquired programs.

Selling, general and administrative

The increase in SG&A expense for the three months ended March 31, 2024, was primarily driven by commercial expenses related to Horizon-acquired products, general and administrative expenses and acquisition-related expenses.

Other operating expenses for the three months ended March 31, 2024, consisted primarily of a net impairment charge associated with an IPR&D asset and changes in the fair values of contingent consideration liabilities, both related to our Teneobio, Inc.

The increase in SG&A expense for the three and six months ended June 30, 2024, was primarily driven by expenses from the acquired Horizon business and other commercial expenses.

Other operating expenses for the three months ended June 30, 2024, consisted primarily of changes in the fair values of contingent consideration liabilities related to our Teneobio, Inc.

acquisition from 2021.

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

Other operating expenses for the six months ended June 30, 2024, consisted primarily of a net impairment charge associated with an IPR&D asset and changes in the fair values of contingent consideration liabilities, both related to our Teneobio, Inc.

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

Nonoperating expense/income and income taxes

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Interest expense, net $ (808) $ (752) $ (1,632) $ (1,295)

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Interest expense, net

The increase in Interest expense, net, for the three months ended March 31, 2024, was primarily due to higher average debt outstanding and higher weighted-average fixed and variable interest rates on the debt.

The increase in Interest expense, net, for the three and six months ended June 30, 2024, was primarily due to higher average debt outstanding and higher weighted-average fixed and variable interest rates on the debt.

Other (expense) income, net

The change in Other (expense) income, net, for the three months ended March 31, 2024, was primarily due to unrealized losses on our strategic equity investments, primarily BeiGene and Neumora, compared with unrealized gains on these investments in the prior period.

Prior period gains were principally composed of amounts recognized on our BeiGene investment as a result of a change from the equity method of accounting for this investment to recording the investment at fair value, with changes in fair value recognized in earnings.

The change in Other (expense) income, net, for the three months ended June 30, 2024, was primarily due to lower unrealized losses on our strategic equity investments, primarily BeiGene and Neumora, offset by reduced interest income as a result of lower average cash balances.

The change in Other (expense) income, net, for the six months ended June 30, 2024, was primarily due to current year unrealized losses on our strategic equity investments, primarily BeiGene and Neumora, compared with net unrealized gains in the prior comparative period.

Prior period net gains were principally composed of amounts recognized on our BeiGene investment in the first quarter of 2023 as a result of a change from the equity method of accounting to recording this investment at fair value, with changes in fair value recognized in earnings.

See Note 6, Investments, to the condensed consolidated financial statements.

The decrease in our effective tax rate for the three months ended March 31, 2024, was primarily due to the earnings mix as a result of the inclusion of the Horizon business, amortization of Horizon acquired assets and the first quarter 2024 unrealized loss on BeiGene investment.

See Note 6, Investments —BeiGene, Ltd., to the condensed consolidated financial statements.

The decrease in our effective tax rate for the three months ended June 30, 2024, was primarily due to the earnings mix as a result of the inclusion of the Horizon business (including the amortization of Horizon acquired assets).

The decrease in our effective tax rate for the six months ended June 30, 2024, was primarily due to the earnings mix as a result of the inclusion of the Horizon business (including the amortization of Horizon acquired assets) and the year-to-date 2024 unrealized losses on our equity investments.

See Note 6, Investments —BeiGene, Ltd.

and Neumora Therapeutics, Inc., to the condensed consolidated financial statements.

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.

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Selected financial data were as follows (in millions):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and cash equivalents $ 9,301 $ 10,944

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Cash and cash equivalents

Our balance of cash and cash equivalents was $9.7 billion as of March 31, 2024.

Our balance of cash and cash equivalents was $9.3 billion as of June 30, 2024.

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

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

In December 2023, our Board of Directors declared a quarterly cash dividend of $2.25 per share of common stock for the first quarter of 2024, an increase of 6% for this period, which was paid in March 2024.

In March 2024, our Board of Directors declared a quarterly cash dividend of $2.25 per share of common stock to be paid in June 2024.

During the three months ended March 31, 2024, we did not repurchase any of our common stock.

As of March 31, 2024, $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, 2024 and December 31, 2023.

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

In March 2024 and December 2023, our Board of Directors declared quarterly cash dividends of $2.25 per share of common stock, which were paid in June 2024 and March 2024, respectively, and was an increase of 6% over the quarterly cash dividends paid each quarter in 2023.

In August 2024, our Board of Directors declared a quarterly cash dividend of $2.25 per share of common stock that will be paid in September 2024.

During the six months ended June 30, 2024, we did not repurchase any of our common stock under our stock repurchase program.

As of June 30, 2024, $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, 2024 and December 31, 2023.

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

We opportunistically repurchase our debt when market conditions are favorable.

During the three months ended March 31, 2024 and 2023, we spent $410 million and $420 million to extinguish principal amounts of debt of $544 million and $539 million, respectively.

During the six months ended June 30, 2024 and 2023, debt repayments totaled $1.4 billion and $704 million, respectively.

In addition, we opportunistically repurchase our debt when market conditions are favorable.

During the six months ended June 30, 2024 and 2023, we spent $410 million and $420 million, respectively, to extinguish principal amounts of debt of $544 million and $539 million, respectively.

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.

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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 March 31, 2024.

We were in compliance with all applicable covenants under these arrangements as of June 30, 2024.

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

Three months ended

Six months ended

Net cash provided by operating activities $ 3,148 $ 5,173

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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, 2024, decreased compared with the prior year period due to higher payments to the IRS related to an advance deposit of $800 million, partially offset by timing of working capital items.

Cash used in investing activities during the three months ended March 31, 2024, was primarily due to capital expenditures of $230 million, including construction costs of new plants in North Carolina and Ohio.

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.

Cash provided by operating activities during the six months ended June 30, 2024, decreased compared with the prior year period due to timing of payments to the IRS, including repatriation taxes of $1.5 billion paid in the second quarter of 2024 and an advance deposit of $800 million paid in the first quarter of 2024.

Cash used in investing activities during the six months ended June 30, 2024, was primarily due to capital expenditures of $468 million, including construction costs of new plants in North Carolina and Ohio.

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.

We currently estimate 2024 spending on capital projects to be approximately $1.3 billion.

Cash used in financing activities during the three months ended March 31, 2024, was primarily due to the payment of dividends of $1.2 billion and the extinguishment of debt of $410 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 six months ended June 30, 2024, was primarily due to the payment of dividends of $2.4 billion and the repayment and extinguishment of debt of $1.4 billion and $410 million, respectively.

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 $704 million and $420 million, respectively.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis