UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

OR

Commission file number 000-12477

AMGEN INC.

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   [X]   No   [   ]

     Indicate by check mark whether the registrant is an accelerated filer. [X]

     As of July 16, 2004, the registrant had 1,266,016,718 shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

     The information in this report for the three and six months ended June 30, 2004 and 2003 is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise indicated) which Amgen Inc., including its subsidiaries, (“Amgen” or the “Company”) considers necessary for a fair presentation of the results of operations for those periods.

     The Condensed Consolidated Financial Statements should be read in conjunction with the Company’s financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

     Interim results are not necessarily indicative of results for future quarters or the full fiscal year.

3

AMGEN INC.

See accompanying notes.

4

AMGEN INC.

See accompanying notes.

5

AMGEN INC.

See accompanying notes.

6

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

   Business

     Amgen Inc., including its subsidiaries, (“Amgen” or the “Company”) is a global biotechnology company that discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology.

   Basis of presentation

     The financial information for the three and six months ended June 30, 2004 and 2003 is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise indicated), which the Company considers necessary for a fair presentation of the results of operations for these periods. Interim results are not necessarily indicative of results for the full fiscal year.

   Principles of consolidation

     The Condensed Consolidated Financial Statements include the accounts of the Company as well as its wholly owned subsidiaries and majority-owned affiliates (affiliated companies in which the Company has a majority ownership interest and exercises control over their operations) that are not considered variable interest entities. As of June 30, 2004, the Company does not have any significant interests in variable interest entities. All material intercompany transactions and balances have been eliminated in consolidation.

   Use of estimates

     The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates.

   Inventories

     Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first-out (FIFO) method. Inventories are shown net of applicable reserves and allowances. Inventories consisted of the following (in millions):

7

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

   Intangible assets and goodwill

     Intangible assets are recorded at cost, less accumulated amortization. Amortization of intangible assets is provided over their estimated useful lives ranging from 7 to 15 years on a straight-line basis (weighted average amortization period of 14.6 years at June 30, 2004). As of June 30, 2004 and December 31, 2003, accumulated amortization of intangible assets amounted to $668.9 million and $512.2 million, respectively. Intangible assets primarily consist of acquired product technology rights of $4,803.2 million, net of accumulated amortization of $658.8 million, which relate to the identifiable intangible assets acquired in connection with the Immunex Corporation (“Immunex”) acquisition in July 2002. Amortization of acquired product technology rights is included in “Amortization of acquired intangible assets” in the accompanying Condensed Consolidated Statements of Operations. The Company reviews its intangible assets for impairment periodically and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

     In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill, which primarily relates to the Immunex acquisition, is no longer amortized, but is subject to an annual impairment test.

   Product sales

     Product sales primarily consist of sales of EPOGEN® (Epoetin alfa), Aranesp® (darbepoetin alfa), ENBREL® (etanercept), Neulasta® (pegfilgrastim), and NEUPOGEN® (Filgrastim).

     The Company has the exclusive right to sell Epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses in the United States. The Company sells Epoetin alfa under the brand name EPOGEN®. Amgen has granted to Ortho Pharmaceutical Corporation (which has assigned its rights under the product license agreement to Ortho Biotech Products, L.P.), a subsidiary of Johnson & Johnson (“Johnson & Johnson”), a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. The license agreement, which is perpetual, can be terminated upon mutual agreement of the parties, or default. Pursuant to this license, the Company and Johnson & Johnson are required to compensate each other for Epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover”. Accordingly, Amgen does not recognize product sales it makes into the exclusive market of Johnson & Johnson and does recognize the product sales made by Johnson & Johnson into Amgen’s exclusive market. Sales in Amgen’s exclusive market are derived from the Company’s sales to its customers, as adjusted for spillover. The Company is employing an arbitrated audit methodology to measure each

8

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to end users and their usage.

     Sales of the Company’s other products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of accruals for estimated rebates, including Medicaid, discounts, incentives, and returns.

   Research and development costs

     Research and development expenses are comprised of the following types of costs incurred in performing R&D activities: salaries and benefits, allocated overhead and occupancy costs, clinical trial and related clinical manufacturing costs, contract services, and other outside costs, which include milestones, consulting fees, and regulatory fees. Research and development expenses also include such costs related to activities performed on behalf of corporate partners. Research and development costs are expensed as incurred.

   Earnings per share

     Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share is based upon the weighted-average number of common shares and dilutive potential common shares outstanding. Potential common shares outstanding include stock options under the Company’s employee stock option plans, potential issuances of stock under the employee stock purchase plans, and restricted stock plans under the treasury stock method (collectively “Dilutive Securities”). Common shares to be issued under the assumed conversion of the outstanding 30-year, zero-coupon senior convertible notes (the “Convertible Notes”) (see Note 5, “Convertible notes”) are included under the if-converted method when dilutive.

     The following table sets forth the computation for basic and diluted earnings per share (in millions, except per share information):

9

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

   Employee stock option and stock purchase plans

     The Company accounts for its employee stock option and stock purchase plans under the recognition and measurement principles of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Under APB No. 25, no stock-based compensation is reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant and the related number of shares granted is fixed at that point in time.

10

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

     The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended:

     The weighted average fair value of common stock and stock options on the date of grant, and the weighted average assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model, were as follows for the three months ended June 30:

   Recent accounting developments

     In March 2004, the Financial Accounting Standards Board (“FASB”) issued a Proposed SFAS, “Share-Based Payment, an amendment of FASB Statements Nos. 123 and 95” (“Exposure Draft”). The Exposure Draft would eliminate the ability to account for share-based compensation transactions using APB No. 25, Accounting for Stock Issued to Employees, and generally would require such transactions be accounted for using a fair-value-based method and the resulting cost recognized in the financial statements. The Company is closely monitoring developments related to the Exposure Draft and will adopt the final standard upon issuance.

   Reclassification

     Certain prior year amounts have been reclassified to conform to the current year presentation.

11

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

     The Company owns a 50% interest in Kirin-Amgen (“KA”), a corporation formed in 1984 with Kirin Brewery Company, Limited (“Kirin”) for the development and commercialization of certain products based on advanced biotechnology. The Company accounts for its interest in KA under the equity method and includes its share of KA’s profits or losses in “Selling, general, and administrative” in the Condensed Consolidated Statements of Operations. KA’s revenues consist of royalty income related to its licensed technology rights. All of Amgen’s rights to manufacture and market certain products including erythropoietin, granulocyte colony-stimulating factor (“G-CSF”), darbepoetin alfa, and pegfilgrastim are pursuant to exclusive licenses from KA. The Company currently markets certain of these products under the brand names EPOGEN® (erythropoietin), NEUPOGEN® (G-CSF), Aranesp® (darbepoetin alfa), and Neulasta® (pegfilgrastim). KA receives royalty income from Amgen, as well as Kirin, Johnson & Johnson, F. Hoffmann-La Roche Ltd, and others under separate product license agreements for certain geographic areas outside of the United States. During the three and six months ended June 30, 2004, KA earned royalties from Amgen of $68.3 million and $130.5 million, respectively. During the three and six months ended June 30, 2003, KA earned royalties from Amgen of $54.6 million and $99.9 million, respectively. These amounts are included in “Cost of sales” in the accompanying Condensed Consolidated Statements of Operations.

     KA’s expenses primarily consist of costs related to research and development activities conducted on its behalf by Amgen and Kirin. KA pays Amgen and Kirin for such services at negotiated rates. During the three and six months ended June 30, 2004, Amgen earned revenues from KA of $57.7 million and $91.6 million, respectively, for certain research and development activities performed on KA’s behalf. During the three and six months ended June 30, 2003, Amgen earned revenues from KA of $21.7 million and $48.0 million, respectively. These amounts are included in “Other revenues” in the accompanying Condensed Consolidated Statements of Operations.

     The tax rates for the three and six months ended June 30, 2004, are different from the statutory rate primarily as a result of permanently reinvested earnings of the Company’s foreign operations. The Company does not provide for U.S. income taxes on undistributed earnings of its foreign operations that are intended to be permanently reinvested outside of the United States. During 2002, the Company restructured its Puerto Rico manufacturing operations using a controlled foreign corporation.

     The Company’s income tax returns are routinely audited by the Internal Revenue Service and various state tax authorities. While disputes may arise with these tax authorities, some of which may be significant, the Company believes that adequate tax liabilities have been established for all open audit years.

12

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

   Stock repurchase program

     The Company has a stock repurchase program primarily to reduce the dilutive effect of its employee stock option and stock purchase plans. Additionally, stock repurchases beyond this level reflect a measure of the Company’s confidence in the long-term value of Amgen common stock. A summary of the Company’s repurchase activity for the six months ended June 30, 2004 and 2003 is as follows (amounts in millions):

     In December 2003, the Board of Directors authorized the Company to repurchase up to an additional $5.0 billion of common stock allowing for a multi-year stock repurchase program. As of June 30, 2004, $3.4 billion was available for stock repurchases. The amount the Company spends and the number of shares repurchased varies based on a variety of factors, including the stock price and blackout periods in which the Company is restricted from repurchasing shares.

   Other comprehensive income

     SFAS No. 130, “Reporting Comprehensive Income”, requires unrealized gains and losses on the Company’s available-for-sale securities and foreign currency forward contracts, which qualify and are designated as cash flow hedges, and foreign currency translation adjustments to be included in other comprehensive income. During the three and six months ended June 30, 2004, total comprehensive income was $712.5 million and $1,417.3 million, respectively. During the three and six months ended June 30, 2003, total comprehensive income was $646.9 million and $1,117.4 million, respectively.

     As of June 30, 2004, the Company had Convertible Notes (30-year, zero-coupon senior convertible notes) with an accreted value of $2.9 billion outstanding and having an aggregate face amount of $3.95 billion and yield to maturity of 1.125%. The original issue discount of $1.13 billion is being accreted to the balance of the Convertible Notes and recognized as interest expense over the life of the Convertible Notes using the effective interest method. The holders of the Convertible Notes may require the Company to purchase all or a portion of their notes on various dates, the earliest of which is March 1, 2005, at a price equal to the original issuance price plus the accrued original issue discount to the purchase dates, and accordingly, the Convertible Notes were classified as current in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2004. In such

13

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

event, under the terms of the Convertible Notes, the Company has the right to pay the purchase price in cash and/or shares of common stock, which would be issued at the then current market price.

     Holders of the Convertible Notes may convert each of their notes into 8.8601 shares of common stock of the Company (the “conversion rate”) at any time on or before the maturity date, or approximately 35.0 million shares in the aggregate. The conversion price per share as of any day will equal the original issuance price plus the accrued original issue discount to that day, divided by the conversion rate, or $82.75 per share as of June 30, 2004.

   License Agreement arbitration

     In September 1985, the Company granted Johnson & Johnson’s affiliate, Ortho Pharmaceutical Corporation, a license relating to certain patented technology and know-how of the Company to sell Epoetin alfa throughout the United States for all human uses except dialysis and diagnostics. A number of disputes arose between Amgen and Johnson & Johnson as to their respective rights and obligations under the various agreements between them, including the agreement granting the license (the “License Agreement”). These disputes between Amgen and Johnson & Johnson have been resolved through binding arbitration. One of these disputes related to the alleged violation of the License Agreement by Johnson & Johnson. In October 2002, the Arbitrator issued a final order awarding the Company $150.0 million for Johnson & Johnson’s breach of the License Agreement. The legal award of $151.2 million, which included interest, was recorded in the fourth quarter of 2002. In January 2003, the Company was awarded reimbursement of its costs and expenses, as the successful party in the arbitration. In May 2003, the Arbitrator issued a final order awarding the Company $74.0 million in such costs and expenses, which were recorded in the three months ended June 30, 2003.

   Amgen Foundation contribution

     During the three months ended June 30, 2003, the Company made a $50.0 million cash contribution to the Amgen Foundation. This contribution will allow the Amgen Foundation to continue its support of non-profit organizations that focus on issues in health and medicine, science education, and other activities that strengthen local communities.

     In the ordinary course of business, the Company is involved in various legal proceedings. While it is not possible to accurately predict or determine the eventual outcome of these proceedings, the Company does not believe any such proceedings currently pending will have a material adverse effect on its annual consolidated financial statements, although an adverse resolution in any reporting period of one or more of the proceedings could have a material impact on the results of operations for that period.

14

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

     On March 28, 2004, the Company signed a definitive agreement to acquire Tularik Inc. (“Tularik”) in a transaction to be accounted for as a business combination. Tularik is a pioneer in drug discovery related to cell signaling and the control of gene expression. Under the terms of the agreement, each share of Tularik common stock outstanding at the close of the merger will be converted into Amgen common stock based on an exchange ratio that will be determined by dividing $25 by the average closing price of Amgen common stock for the ten trading day period ending two trading days prior to the closing of the merger. In addition, at the closing of the merger each option and warrant outstanding to purchase a share of Tularik common stock will be assumed by Amgen and converted into an option or warrant to purchase Amgen common stock based on the terms of the merger agreement. The estimated purchase price is approximately $1.5 billion, which includes Amgen’s existing ownership of Tularik of approximately 21%, the estimated fair value of Amgen stock issued, options and warrants to be converted, and the direct transaction costs. The final purchase price will be determined based upon the number of Tularik shares, options, and warrants outstanding at the closing date. The transaction is expected to close in the second half of 2004, subject to approval by shareholders of Tularik, customary regulatory approvals, as well as certain other closing conditions. It is expected that the merger will qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

     In July 2004, the Company established a $1.0 billion five-year unsecured revolving credit facility to be used for general corporate purposes, including commercial paper support. Additionally, the Company increased the size of its commercial paper authorization by $1.0 billion. No amounts were outstanding under the credit facility or commercial paper program.

15

   Forward looking statements

     This report and other documents we file with the Securities and Exchange Commission (“SEC”) contain forward looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business or others on our behalf, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, and conference calls. Words such as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” “continue,” variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. We describe our respective risks, uncertainties, and assumptions that could affect the outcome or results of operations in “Factors that may affect Amgen”. 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. We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward looking statements. Reference is made in particular to forward looking statements regarding product sales, reimbursement, expenses, earnings per share, liquidity and capital resources, and trends. 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.

Overview

   Business

     Amgen Inc. (including its subsidiaries, “Amgen” or the “Company”) is a global biotechnology company that discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology.

     The Company focuses its research and development (“R&D”) efforts on human therapeutics delivered in the form of proteins, monoclonal antibodies, and small molecules in the areas of hematology, oncology, inflammation, metabolic and bone disorders, and neuroscience. In addition to internal R&D efforts, the Company has acquired certain product and technology rights and has established R&D collaborations.

     The Company primarily earns revenues and income and generates cash from sales of human therapeutic products in the areas of hematology, oncology, and inflammation. In the near-term, the Company expects business growth to be primarily driven by sales of Aranesp®, Neulasta®, and ENBREL®. For the three and six months ended June 30, 2004, total revenues were $2,584.9 million and $4,927.9 million, respectively, and net income was $748.1 million and $1,438.3 million, respectively. As of June 30, 2004, cash and marketable securities were approximately $4.3 billion.

16

     Net income was $748.1 million, or $0.57 per share, for the three months ended June 30, 2004 compared with $607.2 million, or $0.45 per share, for the three months ended June 30, 2003. These increases were primarily driven by a 27% increase in product sales partially offset by a 29% increase in total operating expenses from the same period of the prior year.

     The Medicare Prescription Drug, Improvement and Modernization Act (or the Medicare Modernization Act (MMA)) was enacted into law in December 2003. The Company is closely monitoring the impact on its business of the change from the current Average Wholesale Price (AWP) mechanism as the basis of Medicare Part B payment for covered outpatient drugs and biologics to an “average sales price” (ASP) methodology. The Company expects that effective January 1, 2005, in the physician clinic market segment, Aranesp®, NEUPOGEN® and Neulasta® will be reimbursed under a new Part B system that reimburses each product at 106% of its ASP (sometimes referred to as “ASP + 6%”). The Centers for Medicare and Medicaid Services (CMS) is in the process of determining what each product’s ASP will be and on July 28, 2004, CMS issued ASPs for Aranesp®, Neupogen®, and Neulasta® based on data submitted by the Company from first quarter 2004. Although ASP + 6% does not become effective in the physician clinic market segment until January 1, 2005, the reimbursement rates for Aranesp®, NEUPOGEN® and Neulasta® calculated at 106% of the ASPs issued on July 28, 2004, and based on first quarter 2004 Company data, are lower than the current 2004 reimbursement rates. The MMA calls for quarterly payment rates based on updated ASP information. The Company expects that the respective ASPs for these products will change, that the first quarter 2005 reimbursement rate for these products will be based on third quarter 2004 Company data, and that these reimbursement rates are likely to change in every quarter thereafter. Effective January 1, 2006, the Outpatient Prospective Payment System, which determines payment rates for specified covered outpatient drugs and biologics in the hospital outpatient setting, will change from an AWP based reimbursement system to a system based on “average acquisition cost” as determined by CMS considering surveys by the General Accounting Office in 2004 and 2005. This change will affect Aranesp®, NEUPOGEN®, and Neulasta® when administered in the hospital outpatient setting.

     Further, the MMA changes Medicare reimbursement for EPOGEN® used in the dialysis setting for calendar year 2005 from the current rate of $10 per 1,000 units to a rate based upon an acquisition cost determined by the Office of the Inspector General (OIG), or to an amount set by the Secretary of Health and Human Services if the OIG has not determined an acquisition cost. On July 28, 2004, CMS announced a proposed rule suggesting that 2005 Medicare payments to dialysis facilities for all drugs separately billed when used in dialysis (including EPOGEN®) be set based on an ASP calculation of 97% of ASP (sometimes referred to as “ASP –3%”). The proposal calls for quarterly updates to the payment rates based on updated ASP information from the manufacturer. Pursuant to the MMA and the CMS proposed rule, the difference between the 2004 reimbursement rates for all drugs separately billed (including EPOGEN®) and the 2005 reimbursement rates for such drugs will be added to the composite rate that dialysis providers receive for dialysis treatment. CMS has solicited comments on its proposal and the Company plans on working with CMS to ensure continued patient access to EPOGEN® therapy in 2005 and beyond. CMS is expected to issue a final rule on or about November 1, 2004. Under the MMA, effective January 1, 2006, reimbursement for EPOGEN® in the dialysis setting will be based on the acquisition cost as determined by the OIG or based on the amount determined under the ASP +6% methodology established in the MMA for Medicare-reimbursed drugs provided in certain other settings, at the discretion of the Secretary.

     In addition, the Company believes that beginning on January 1, 2006, ENBREL®, Sensipar^TM, and Kineret® will be covered by the MMA-mandated outpatient prescription drug benefit (also known as “Part D”). These changes driven by the MMA are lowering the 2005 reimbursement rate for EPOGEN® and may lower reimbursement rates for certain of our other products.

     However, because additional information and decisions are expected to be made by CMS regarding reimbursement affecting our products, and because the Company cannot predict the impact of any such changes on how, or under what circumstances, healthcare providers will prescribe or administer our products, as of the date of this filing, the Company has not determined the full impact of this new law on its business.

     On July 8, 2004, CMS released a proposed revision to the Hematocrit Measurement Audit Program Memorandum (HMA-PM), a Medicare payment review mechanism used by CMS to audit appropriate hematocrit outcomes of dialysis patients. As of the date of this filing, the proposed revision is in a 60-day comment period, but is expected to go into effect on or after January 1, 2005. Among other things, the proposed policy would establish new guidelines defining a maximum number of units of EPOGEN® that will be paid for by Medicare per month for dialysis patients whose hematocrits exceed a specified amount. The Medicare EPOGEN® usage limits would not be applied if there is medical justification for the higher hematocrit. The Company is currently reviewing the draft guidelines to assess its impact and will provide comments to CMS, as appropriate.

     The Company believes that legislation or regulations that reduce reimbursement for its products could adversely impact how much or under what circumstances healthcare providers will prescribe or administer its products.

17

   Key products

     The Company markets human therapeutic products in the areas of hematology, oncology, and inflammation. The Company’s key products include EPOGEN® (Epoetin alfa), Aranesp® (darbepoetin alfa), Neulasta® (pegfilgrastim), NEUPOGEN® (Filgrastim), and ENBREL® (etanercept), which is marketed under a co-promotion agreement with Wyeth.

     EPOGEN® and Aranesp® stimulate the production of red blood cells. EPOGEN® is marketed in the United States for the treatment of anemia associated with chronic renal failure in patients on dialysis. Aranesp® is marketed in the United States, most countries in Europe, Canada, Australia, and New Zealand for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. Aranesp® is also marketed in the United States for the treatment of chemotherapy-induced anemia in patients with non-myeloid malignancies. Aranesp® is marketed in Europe for the treatment of anemia in adult cancer patients with solid tumors receiving chemotherapy and for the treatment of chemotherapy-induced anemia in adult patients with non-myeloid malignancies.

     Neulasta® and NEUPOGEN® selectively stimulate the production of neutrophils, one type of white blood cell. Neulasta® is marketed in the United States to decrease the incidence of infection, as manifested by febrile neutropenia in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. Neulasta® is marketed in most countries in Europe and Canada for the reduction in the duration of neutropenia and the incidence of febrile neutropenia in patients with cytotoxic chemotherapy for malignancy. NEUPOGEN® is marketed in the United States, certain countries in Europe, Canada, and Australia for use in decreasing the incidence of infection in patients undergoing myelosuppressive chemotherapy. In addition, NEUPOGEN® is marketed in most of these countries for use in increasing neutrophil counts in various other treatment modalities.

     ENBREL® blocks the biologic activity of tumor necrosis factor (“TNF”) by competitively inhibiting TNF, a substance induced in response to inflammatory and immunological responses. In April 2004, the FDA approved ENBREL® for the treatment of adult patients with moderate to severe plaque psoriasis who are candidates for systemic therapy or phototherapy and immediately launched ENBREL® for this indication. ENBREL® is marketed in the United States for reducing the signs and symptoms, improving physical function, and inhibiting the progression of structural damage in patients with moderately to severely active rheumatoid arthritis; and for reducing the signs and symptoms and inhibiting the progression of structural damage in patients with psoriatic arthritis. In addition, ENBREL is approved for reducing the signs and symptoms of moderately to severely active polyarticular-course juvenile rheumatoid arthritis in patients who have had an inadequate response to one or more disease-modifying medicines; to treat the signs and symptoms in patients with active ankylosing spondylitis; and for the treatment of adult patients with moderate to severe plaque psoriasis who are candidates for systemic therapy or phototherapy.

     For additional information about these and the Company’s other products and their approved indications see “Item 1. Business – Products” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

18

Results of Operations

   Product sales

     For the three and six months ended June 30, 2004 and 2003, total product sales by geographic region were as follows (in millions):

     See “Overview – Key products” for a discussion of these products and their approved indications. Product sales are influenced by a number of factors, including demand, third-party reimbursement availability and policies, wholesaler inventory management practices, foreign exchange effects, new product launches and indications, competitive products, pricing strategies, product supply, and acquisitions.

     Sales growth was principally driven by demand for Aranesp®, ENBREL®, and Neulasta®. Excluding the beneficial impact of foreign currency exchange rates of $33.8 million and $96.1 million, respectively, international product sales increased 50% and 53%, respectively, for the three and six months ended June 30, 2004.

     In the near-term, the Company expects growth of its businesses to be driven primarily by Aranesp®, Neulasta®, and ENBREL®.

   EPOGEN®/Aranesp®

     (Amounts in millions)

     The increase in combined EPOGEN® and worldwide Aranesp® sales was primarily driven by strong worldwide Aranesp® demand.

     The growth in reported EPOGEN® sales for the three months ended June 30, 2004 was primarily due to demand partially offset by changes in wholesaler inventory levels. For the six months ended June 30, 2004, the growth in reported EPOGEN® sales was primarily due to demand.

19

     The Company believes EPOGEN® sales growth will primarily depend on dialysis patient population growth. Patients receiving treatment for end stage renal disease are covered primarily under medical programs provided by the federal government. The Company believes future EPOGEN® sales growth may also be affected by future changes in reimbursement rates or a change in the basis for reimbursement by the federal government and governmental or private organization regulations or guidelines relating to the use of our products. EPOGEN® competes to a slight degree with Aranesp® in the United States as some health care providers use Aranesp® to treat anemia associated with chronic renal failure instead of EPOGEN®. Additionally, reported sales in the first quarter for EPOGEN® have tended to be comparable or slightly less than reported sales in the fourth quarter of the previous year.

     The increase in Aranesp® sales in the United States was driven by demand. The increase in international Aranesp® sales was principally driven by demand, and to a lesser extent, favorable changes in foreign currency exchange rates. International Aranesp® sales growth for the three and six months ended June 30, 2004, benefited by $19.1 million and $53.3 million, respectively, from foreign currency exchange rate changes.

     The Company believes future worldwide Aranesp® sales growth will be dependent, in part, on such factors as: reimbursement by third party payors (including governments and private insurance plans); governmental or private organization regulations or guidelines relating to the use of our products; the effects and pricing of competitive products or therapies; penetration of existing and new market opportunities; and changes in foreign currency exchange rates. In addition, future worldwide sales growth may be affected by cost containment pressures from governments and private insurers on health care providers.

   Neulasta®/NEUPOGEN®

     (Amounts in millions)

     The increase in combined worldwide Neulasta® and NEUPOGEN® sales was driven by demand for Neulasta®.

     The increase in Neulasta® sales in the United States was primarily driven by demand partially offset by changes in wholesaler inventory levels. The increase in international Neulasta® sales was primarily due to demand, which reflects the January 2003 launch of Neulasta® in Europe.

     The decrease in NEUPOGEN® sales in the United States was principally due to a decline in demand. Additionally, for the three months ended June 30, 2004, changes in wholesaler inventory

20

levels also contributed to the decrease in U.S. NEUPOGEN® sales. The increase in international NEUPOGEN® sales was due to favorable changes in foreign currency exchange rates partially offset by a decline in demand.

     The Company believes future worldwide Neulasta® and NEUPOGEN® sales growth will be dependent, in part, on such factors as: reimbursement by third-party payors (including governments and private insurance plans); penetration of existing markets; patient population growth; price increases; the effects of competitive products or therapies; the development of new treatments for cancer; governmental or private organization regulations or guidelines relating to the use of our products; and changes in foreign currency exchange rates. In addition, future worldwide sales growth may be affected by cost containment pressures from governments and private insurers on health care providers. Further, chemotherapy treatments that are less myelosuppressive may require less Neulasta®/NEUPOGEN®. NEUPOGEN® competes with Neulasta® in the United States and Europe. The Company believes that U.S. NEUPOGEN® sales have and will continue to be adversely impacted by Neulasta®. However, the Company believes that most of the conversion in the U.S. has occurred due to the rapid adoption of Neulasta®. The Company believes that it is experiencing conversion of NEUPOGEN® patients to Neulasta® in Europe, but believes this conversion will occur to a lesser extent than that experienced in the United States. The Company cannot accurately predict the rate or timing of future conversion of NEUPOGEN® patients to Neulasta® worldwide. Additionally, reported sales in the first quarter for combined Neulasta®/NEUPOGEN® have tended to be comparable or slightly less than respective reported sales in the fourth quarter of the previous year.

   ENBREL®

   (Amounts in millions)

     ENBREL® sales growth was driven by growing demand in rheumatology due to greater use of biologics and increased use by dermatologists driven by the 2004 approval of ENBREL® for use in psoriasis. ENBREL® was re-launched in the first quarter of 2003, following FDA approval of the Company’s Rhode Island manufacturing facility.

     The Company believes that future sales growth of ENBREL® will be dependent, in part, on such factors as: limits on the current supply of and sources of ENBREL®; the effects of competing products or therapies; penetration of existing and new market opportunities, including potential new indications; governmental or private organization regulations or guidelines relating to the use of our products; and the availability and extent of reimbursement by third-party payors.

21

   Selected operating expenses

     The following table summarizes selected operating expenses (dollars in millions):

     Cost of sales

     Cost of sales, which excludes the amortization of acquired intangible assets (see “Condensed Consolidated Statements of Operations”), increased 32% for the three and six months ended June 30, 2004, respectively, primarily due to higher sales. Cost of sales as a percent of product sales was slightly higher for the three months ended June 30, 2004, primarily due to costs incurred at certain manufacturing facilities which are temporarily operating at less than normal capacity as they transition to other products, as well as changes in the product mix. Cost of sales as a percent of product sales was comparable for the six months ended June 30, 2004 and 2003.

     Research and development

     R&D expenses increased 19% for the three months ended June 30, 2004 primarily due to: 1) higher staff-related costs, and 2) higher outside R&D costs. During the three months ended June 30, 2004, staff-related costs and outside R&D costs increased approximately $42 million and $28 million, respectively. R&D expenses increased 22% for the six months ended June 30, 2004, respectively, primarily due to: 1) higher staff-related costs, (2) higher outside R&D costs, including collaboration agreements, and 3) higher clinical manufacturing costs. During the six months ended June 30, 2004, staff-related costs, outside R&D costs, and clinical manufacturing costs increased approximately $90 million, $51 million, and $23 million, respectively.

     Selling, general and administrative

     Selling, general and administrative (“SG&A”) expenses increased 34% and 35% for the three and six months ended June 30, 2004, respectively, primarily due to higher staff-related costs and higher outside marketing expenses, to support products in competitive markets and sales growth. Outside marketing expenses include the Wyeth profit share related to ENBREL®. During the three months ended June 30, 2004, staff-related costs increased approximately $62 million and outside marketing expenses increased approximately $64 million. During the six months ended June 30, 2004, staff-related costs increased approximately $134 million and outside marketing expenses increased approximately $107 million.

22

     SG&A expenses in the fourth quarter are expected to increase over the first three quarters of the year in a trend similar to that seen in previous years.

   Other items, net

     During the three and six months ended June 30, 2003, other items, net consisted of a benefit for the recovery of costs and expenses associated with a legal award related to an arbitration proceeding with Johnson & Johnson of $74.0 million, partially offset by a charitable contribution to the Amgen Foundation of $50.0 million (See Note 6, “Other items, net”).

     Income taxes

     The Company’s effective tax rates for the three and six months ended June 30, 2004, were 26.4% and 26.8%, respectively, compared with 28.5% and 28.4%, respectively, for the same periods last year. The Company’s effective tax rates for the three and six months ended June 30, 2004, have decreased primarily due to an increase in the amount of permanently reinvested foreign earnings.

     During 2002, the Company restructured its Puerto Rico manufacturing operations using a controlled foreign corporation. As permitted in APB No. 23, the Company does not provide U.S. income taxes on its controlled foreign corporations’ undistributed earnings that are intended to be permanently reinvested outside the U.S.

Financial Condition, Liquidity and Capital Resources

     The following table summarizes selected financial data (amounts in millions):

     The Company believes that existing funds, cash generated from operations, and existing sources of and access to financing are adequate to satisfy its working capital, capital expenditure and debt service requirements for the foreseeable future, as well as to support its stock repurchase program. However, in order to provide for greater financial flexibility and liquidity, the Company may raise additional capital from time to time.

  Cash, cash equivalents, and marketable securities

     Of the total cash, cash equivalents, and marketable securities at June 30, 2004, approximately $1.9 billion represents cash generated from operations in foreign tax jurisdictions and is intended for use outside the United States (see “Results of Operations – Income taxes”). If these funds are repatriated for use in the Company’s U.S. operations, additional taxes on certain of these amounts would be required to be paid. The Company does not currently anticipate a need to repatriate these funds to the United States.

23

     Financing activities

     As of June 30, 2004, the Company had Convertible Notes (30-year, zero-coupon senior convertible notes) with an accreted value of $2.9 billion outstanding and having an aggregate face amount of $3.95 billion and yield to maturity of 1.125%. The original issue discount of $1.13 billion is being accreted to the balance of the Convertible Notes and recognized as interest expense over the life of the Convertible Notes using the effective interest method. The holders of the Convertible Notes may require the Company to purchase all or a portion of their notes on various dates, the earliest of which is March 1, 2005, at a price equal to the original issuance price plus the accrued original issue discount to the purchase dates, and accordingly, the Convertible Notes are classified as current in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2004. In such event, under the terms of the Convertible Notes, the Company has the right to pay the purchase price in cash and/or shares of common stock, which would be issued at the then current market price.

     Holders of the Convertible Notes may convert each of their notes into 8.8601 shares of common stock of the Company (the “conversion rate”) at any time on or before the maturity date, or approximately 35.0 million shares in the aggregate. The conversion price per share as of any day will equal the original issuance price plus the accrued original issue discount to that day, divided by the conversion rate, or $82.75 per share as of June 30, 2004. The Company’s Convertible Notes are rated A2 by Moody’s and A+ by Standard & Poor’s.

     In July 2004, the Company established a $1.0 billion five-year unsecured revolving credit facility to be used for general corporate purposes, including commercial paper support. Additionally, the Company increased the size of its commercial paper authorization by $1.0 billion. No amounts were outstanding under the credit facility or commercial paper program.

     The Company has a $1.0 billion shelf registration (the “$1 Billion Shelf”), which allows the Company to issue debt securities, common stock, and associated preferred share purchase rights, preferred stock, warrants to purchase debt securities, common stock or preferred stock, securities purchase contracts, securities purchase units and depositary shares of the Company. The $1 Billion Shelf was established to provide for further financial flexibility and the securities available for issuance may be offered from time to time with terms to be determined at the time of issuance. As of June 30, 2004, no securities had been issued under the $1 Billion Shelf.

     The Company has $100 million of debt securities outstanding bearing interest at a fixed rate of 6.5% and maturing in 2007 (the “Notes”) under a $500 million debt shelf registration (the “$500 Million Shelf”). Under the $500 Million Shelf, all of the remaining $400 million of debt securities available for issuance may be offered from time to time under the Company’s medium-term note program with terms to be determined at the time of issuance.

  Cash flows

     The following table summarizes the Company’s cash flow activity (amounts in millions):

24

     Operating

     Cash provided by operating activities has been and is expected to continue to be the Company’s primary recurring source of funds. The decrease in cash provided by operating activities during the six months ended June 30, 2004 resulted primarily from the timing of accrued liability payments partially offset by higher earnings (See Condensed Consolidated Statements of Cash Flows).

     Investing

     Capital expenditures totaled $741.8 million during the six months ended June 30, 2004, compared with $544.0 million during the same period last year. The increase in capital expenditures during the six months ended June 30, 2004 resulted primarily from capital expenditures related to the new ENBREL® manufacturing plant in Rhode Island, the Thousand Oaks site expansion, and the Puerto Rico manufacturing expansion.

     The Company currently estimates spending on capital projects and equipment to be approximately $1.3 billion to $1.5 billion in 2004, the most significant of which relate to the new ENBREL® manufacturing plant in Rhode Island, the Puerto Rico manufacturing expansion, and the Thousand Oaks site expansion.

     Financing

     The Company receives cash from the exercise of employee stock options and proceeds from the sale of stock by Amgen pursuant to the employee stock purchase plan. Employee stock option exercises and proceeds from the sale of stock by Amgen pursuant to the employee stock purchase plans provided $194.8 million and $302.9 million of cash during the six months ended June 30, 2004 and 2003, respectively. Proceeds from the exercise of employee stock options will vary from period to period based upon, among other factors, fluctuations in the market value of the Company’s stock relative to the exercise price of such options.

     The Company has a stock repurchase program primarily to reduce the dilutive effect of its employee stock option and stock purchase plans. Additionally, stock repurchases beyond this level reflect the Company’s confidence in the long-term value of Amgen common stock. A summary of the Company’s repurchase activity for the six months ended June 30, 2004 and 2003 is as follows (amounts in millions):

     In December 2003, the Board of Directors authorized the Company to repurchase up to an additional $5.0 billion of common stock allowing for a multi-year stock repurchase program. As of June 30, 2004, $3.4 billion was available for stock repurchases. The amount the Company spends and the number of shares repurchased varies based on a variety of factors, including employee stock option grants, the stock price and blackout periods in which the Company is restricted from repurchasing shares. See Part II – Other Information, Item 2. Changes in Securities, Use of Proceeds

25

and Issuer Purchases of Equity Securities for additional information regarding the Company’s stock repurchase program.

     Summary of Critical Accounting Policies

     The preparation of the Company’s consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.

   EPOGEN® revenue recognition

     The Company has the exclusive right to sell Epoetin alfa for dialysis, certain diagnostics, and all non-human, non-research uses in the United States. Amgen has granted to Johnson & Johnson a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. Pursuant to this license, the Company and Johnson & Johnson are required to compensate each other for Epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover”. Accordingly, Amgen does not recognize product sales it makes into the exclusive market of Johnson & Johnson and does recognize the product sales made by Johnson & Johnson into Amgen’s exclusive market. Sales in Amgen’s exclusive market are derived from the Company’s sales to its customers, as adjusted for spillover. The Company is employing an arbitrated audit methodology to measure each party’s spillover based on independent third-party data on shipments to end users and their estimated usage. Data on end user usage is derived in part using market sampling techniques, and accordingly, the results of such sampling can produce variability in the amount of recognized spillover. The Company initially recognizes spillover based on estimates of shipments to end users and their usage, utilizing historical third-party data and subsequently adjusts such amounts based on revised third-party data as received. Differences between initial estimates of spillover and amounts based on revised third-party data could produce materially different amounts for recognized EPOGEN® sales. However, such differences to date have not been material.

  Deferred income taxes

     The Company’s effective tax rate reflects the impact of undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are intended to be permanently reinvested internationally based on the Company’s projected cash flow, working capital, and long- term investment requirements of its U.S. and foreign operations. If future events, including material changes in estimates of cash, working capital, and long-term investment requirements necessitate that certain assets associated with these earnings be repatriated to the United States, an additional tax provision and related liability would be required which could materially impact the Company’s effective future tax rate.

   Sales incentives and returns

     Product sales are recorded net of accruals for estimated rebates including Medicaid, discounts, incentives, and returns. These accruals are established in the same period the related sales are recognized and are included in accrued liabilities. The accruals are based on reasonable estimates of the amounts earned or to be claimed during the related periods. These estimates take into

26

consideration current contractual and statutory requirements, specific known market events and trends, historical data (both internal and external) and forecasted activity of the number of customers that ultimately earn or claim such amounts. Rebates, discounts, incentives and returns are product-specific and, therefore, for any given year, can be impacted by the mix of products sold.

     The most significant and difficult to estimate of these accruals relates to rebates earned by healthcare providers such as clinics, hospitals and pharmacies which are performance-based incentive offers, primarily based on sales volumes and growth. As a result, the calculation of the accrual for these rebates is complicated by the need to estimate customer buying patterns and the resulting applicable contractual rebate rate(s) to be earned over a contractual period. The Company believes that the accruals we have established for rebates are reasonable and appropriate given current facts and circumstances. However, actual results may differ. For example, a 5 percent change in the revenue reduction attributable to rebates recognized in 2003 would have had an approximate $35 million effect on the Company’s reported product sales in 2003.

     Amounts accrued for rebates, discounts, incentives and returns are adjusted when trends or significant events indicate that adjustment is appropriate. Accruals are also adjusted to reflect actual results. However, such adjustments to date have not been material to results of operations or financial position

   Factors that may affect Amgen

     The following items are representative of the risks, uncertainties, and assumptions that could affect the outcome of the forward looking statements.

Our sales depend on payment and reimbursement from third-party payors, and a reduction in the payment rate or reimbursement could result in decreased use or sales of our products.

     In both domestic and foreign markets, sales of our products are dependent, in part, on the availability of reimbursement from third-party payors such as state and federal governments, under programs such as Medicare and Medicaid in the United States, and private insurance plans. Medicare does not cover prescriptions for ENBREL®. In certain foreign markets, the pricing and profitability of our products generally are subject to government controls. In the United States, there have been, there are, and we expect there will continue to be, a number of state and federal proposals that could limit the amount that state or federal governments will pay to reimburse the cost of pharmaceutical and biologic products. The Medicare Prescription Drug, Improvement and Modernization Act (or the Medicare Modernization Act (MMA)) was enacted into law in December 2003. We are closely monitoring the impact on our business of the change from the current Average Wholesale Price (AWP) mechanism as the basis of Medicare Part B payment for covered outpatient drugs and biologics to an “average sales price” (ASP) methodology. We expect that effective January 1, 2005, in the physician clinic market segment, Aranesp®, NEUPOGEN®, and Neulasta® will be reimbursed under a new Part B system that reimburses each product at 106% of its ASP (sometimes referred to as “ASP + 6%”). The Centers for Medicare and Medicaid Services (CMS) is in the process of determining what each product’s ASP will be and on July 28, 2004, CMS issued ASPs for Aranesp®, Neupogen® and Neulasta® based on data submitted by us from first quarter 2004. Although ASP + 6% does not become effective in the physician clinic market segment until January 1, 2005, the reimbursement rates for Aranesp®, NEUPOGEN® and Neulasta® calculated at 106% of the ASPs issued on July 28, 2004, and based on first quarter 2004 Company data, are lower than the current 2004 reimbursement rates. The MMA calls for quarterly payment rates based on updated ASP information. We expect that the respective ASPs for these products will change, that the first quarter 2005 reimbursement rate for these products will be based on third quarter 2004 Company data, and that these reimbursement rates are likely to change in every quarter thereafter. Effective January 1, 2006, the Outpatient Prospective Payment System, which determines payment rates for specified covered outpatient drugs and biologics in the hospital outpatient setting, will change from an AWP based reimbursement system to a system based on “average acquisition cost” as determined by CMS considering surveys by the General Accounting Office in 2004 and 2005. This change will affect Aranesp®, NEUPOGEN®, and Neulasta® when administered in the hospital outpatient setting.

27

     Further, the MMA changes Medicare reimbursement for EPOGEN® used in the dialysis setting for calendar year 2005 from the current rate of $10 per 1,000 units to a rate based upon an acquisition cost determined by the Office of the Inspector General (OIG), or to an amount set by the Secretary of Health and Human Services if the OIG has not determined an acquisition cost. On July 28, 2004, CMS announced a proposed rule suggesting that 2005 Medicare payments to dialysis facilities for all drugs separately billed when used in dialysis (including EPOGEN®) be set based on an ASP calculation of 97% of ASP (sometimes referred to as “ASP –3%”). The proposal calls for quarterly updates to the payment rates based on updated ASP information from the manufacturer. Pursuant to the MMA and the CMS proposed rule, the difference between the 2004 reimbursement rates for all drugs separately billed (including EPOGEN®) and the 2005 reimbursement rates for such drugs will be added to the composite rate that dialysis providers receive for dialysis treatment. CMS has solicited comments on its proposal and we plan on working with CMS to ensure continued patient access to EPOGEN® therapy in 2005 and beyond. CMS is expected to issue a final rule on or about November 1, 2004. Under the MMA, effective January 1, 2006, reimbursement for EPOGEN® in the dialysis setting will be based on the acquisition cost as determined by the OIG or based on the amount determined under the ASP +6% methodology established in the MMA for Medicare-reimbursed drugs provided in certain other settings, at the discretion of the Secretary.

     In addition, we believe that beginning on January 1, 2006, ENBREL®, Sensipar^TM, and Kineret® will be covered by the MMA-mandated outpatient prescription drug benefit (also known as “Part D”). These changes driven by the MMA are lowering the 2005 reimbursement rate for EPOGEN® and may lower reimbursement rates for certain of our other products.

     However, because additional information and decisions are expected to be made by CMS regarding reimbursement affecting our products, and because we cannot predict the impact of any such changes on how, or under what circumstances, healthcare providers will prescribe or administer our products, as of the date of this filing, we have not determined the full impact of this new law on our business.

     On July 8, 2004, CMS released a proposed revision to the Hematocrit Measurement Audit Program Memorandum (HMA-PM), a Medicare payment review mechanism used by CMS to audit appropriate hematocrit outcomes of dialysis patients. As of the date of this filing, the proposed revision is in a 60-day comment period, but is expected to go into effect on or after January 1, 2005. Among other things, the proposed policy would establish new guidelines defining a maximum number of units of EPOGEN® that will be paid for by Medicare per month for dialysis patients whose hematocrits exceed a specified amount. The Medicare EPOGEN® usage limits would not be applied if there is medical justification for the higher hematocrit. We are currently reviewing the draft guidelines to assess its impact and will provide comments to CMS, as appropriate.

     However, we believe that legislation or regulations that reduce reimbursement for our products could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our products. In addition, we believe that private insurers, such as managed care organizations, may adopt their own reimbursement reductions in response to such legislation or regulations. Reduction in reimbursement for our products could have a material adverse effect on our results of operations. Also, we believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of our products, which may adversely impact product sales. Further, when a new therapeutic product is approved, the availability of governmental and/or private reimbursement for that product is uncertain, as is the amount for which that product will be reimbursed. We cannot predict the availability or amount of reimbursement for our approved products or product candidates, including those at a late stage of development, and current reimbursement policies for marketed products may change at any time. Sales of all our products are and will be affected by government and private payor reimbursement policies

     If reimbursement for our marketed products changes adversely or if we fail to obtain adequate reimbursement for our other current or future products, health care providers may limit how much or under what circumstances they will prescribe or administer them, which could reduce the use of our products or cause us to reduce the price of our products. This could result in lower product sales or revenues, which could have a material adverse effect on us and our results of operations. For example, in the United States the use of EPOGEN® in connection with treatment for end-stage renal disease is funded primarily by the U.S. federal government. In early 1997, CMS, formerly known as HCFA, instituted a reimbursement change for EPOGEN®, which materially and adversely affected our EPOGEN® sales until the policies were revised.

28

Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.

     We conduct research, preclinical testing, and clinical trials and we manufacture and contract manufacture our product candidates. We also manufacture and contract manufacture, price, sell, distribute, and market or co-market our products for their approved indications. These activities are subject to extensive regulation by numerous state and federal governmental authorities in the United States, such as the FDA and CMS, as well as in foreign countries, including Europe. Currently, we are required in the United States and in foreign countries to obtain approval from those countries’ regulatory authorities before we can manufacture (or have our third-party manufacturers produce product), market and sell our products in those countries. In our experience, obtaining regulatory approval is costly and takes many years, and after it is obtained, it remains costly to maintain. The FDA and other U.S. and foreign regulatory agencies have substantial discretion to terminate clinical trials, require additional testing, delay or withhold registration and marketing approval, require changes in labeling of our products, and mandate product withdrawals. Substantially all of our marketed products are currently approved in the United States and most are approved in Europe and in other foreign countries for specific uses. We currently manufacture and market all our approved key products, and we plan to manufacture and market many of our potential products. See “–We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market.” Even though we have obtained regulatory approval for our marketed products, these products and our manufacturing processes are subject to continued review by the FDA and other regulatory authorities. In addition, ENBREL® is manufactured both by us at our Rhode Island manufacturing facility and by a third-party contract manufacturer, Boehringer Ingelheim Pharma KG (“BI Pharma”), and fill and finish of bulk product produced at our Rhode Island manufacturing facility is done by third-party service providers. BI Pharma and these third-party service providers are subject to FDA regulatory authority. See “–Limits on supply for ENBREL® may constrain ENBREL® sales.” In addition, later discovery of unknown problems with our products or manufacturing processes or those of our contract manufacturers or third-party service providers could result in restrictions on such products or manufacturing processes, including potential withdrawal of the products from the market. If regulatory authorities determine that we or our contract manufacturers or third-party service providers have violated regulations or if they restrict, suspend, or revoke our prior approvals, they could prohibit us from manufacturing or selling our marketed products until we or our contract manufacturers or third-party service providers comply, or indefinitely. In addition, if regulatory authorities determine that we have not complied with regulations in the research and development of a product candidate, then they may not approve the product candidate and we will not be able to market and sell it. If we were unable to market and sell our products or product candidates, our business and results of operations would be materially and adversely affected.

If our intellectual property positions are challenged, invalidated, circumvented or expire, or if we fail to prevail in present and future intellectual property litigation, our business could be adversely affected.

     The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and often involve complex legal, scientific, and factual questions. To date, there has emerged no consistent policy regarding breadth of claims allowed in such companies’ patents. Third parties may challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates, and technologies. In addition, our patent positions might not protect us against competitors with similar products or technologies because competing products or technologies may

29

not infringe our patents. For certain of our product candidates, there are third parties who have patents or pending patents that they may claim prevent us from commercializing these product candidates in certain territories. Patent disputes are frequent, costly, and can preclude commercialization of products. We are currently, and in the future may be, involved in patent litigation. For example, we are involved in ongoing patent infringement lawsuits against Transkaryotic Therapies, Inc. (“TKT”) and Aventis with respect to our erythropoietin patents. If we lose or settle these or other litigations at certain stages or entirely, we could be: subject to competition and/or significant liabilities; required to enter into third-party licenses for the infringed product or technology; or required to cease using the technology or product in dispute. In addition, we cannot guarantee that such licenses will be available on terms acceptable to us, or at all.

     Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates. We have filed applications for a number of patents and have been granted patents or obtained rights relating to erythropoietin, recombinant G-CSF, darbepoetin alfa, pegfilgrastim, etanercept, and our other products and potential products. We market our erythropoietin, recombinant G-CSF, darbepoetin alfa, pegfilgrastim, and etanercept products as EPOGEN®, NEUPOGEN®, Aranesp®, Neulasta®, and ENBREL®, respectively. Our material patents are listed in the table below:

30

31

     We also have been granted or obtained rights to patents in Europe relating to: erythropoietin; G-CSF; pegfilgrastim (pegylated G-CSF); etanercept; two relating to darbepoetin alfa; and hyperglycosylated erythropoietic proteins. Our European patents relating to erythropoietin and G-CSF expire on December 12, 2004 and August 22, 2006, respectively, and we believe that after the expiration of these patents, other companies could develop and market follow-on or biosimilar products to our products in Europe; presenting additional competition to our products. While we do not market erythropoietin in Europe as this right belongs to Johnson & Johnson (through KA), we do market Aranesp® in the EU, which competes with Johnson & Johnson’s and others’ erythropoietin products. We believe that the EU is currently in the process of developing regulatory requirements that would affect the development and approval of new competitive products. Until such requirements are finalized, we cannot predict when follow-on or biosimilar products could appear on the market in the EU or to what extent such additional competition would impact future Aranesp® and NEUPOGEN®/Neulasta® sales in the EU.

     Limits on supply for ENBREL® may constrain ENBREL® sales.

     U.S. and Canadian supply of ENBREL® is impacted by many manufacturing variables, such as the timing and actual number of production runs, production success rate, bulk drug yield, and the timing and outcome of product quality testing. For example, in the second quarter of 2002, the prior co-marketer with respect to ENBREL®, experienced a brief period where no ENBREL® was available to fill patient prescriptions, primarily due to variation in the expected production yield from BI Pharma. If we are at any time unable to provide an uninterrupted supply of ENBREL® to patients, we may lose patients, physicians may elect to prescribe competing therapeutics instead of ENBREL®, and ENBREL® sales will be adversely affected, which could materially and adversely affect our results of operations. See “–We are dependent on third parties for a significant portion of our supply and the fill and finish of ENBREL®; and our sources of supply are limited.”

We are dependent on third parties for a significant portion of our supply and the fill and finish of ENBREL®; and our sources of supply are limited.

     We currently produce a substantial portion of annual ENBREL® supply at our Rhode Island manufacturing facility. However, we also depend on third parties for a significant portion of our ENBREL® supply as well as for the fill and finish of ENBREL® that we manufacture. BI Pharma is currently our sole third-party manufacturer of ENBREL® bulk drug; accordingly, our U.S. and Canadian supply of ENBREL® is currently significantly dependent on BI Pharma’s production schedule for ENBREL®. We would be unable to produce ENBREL® in sufficient quantities to substantially offset shortages in BI Pharma’s scheduled production if BI Pharma or other third-party manufacturers used for the fill and finish of ENBREL® bulk drug were to cease or interrupt production or services or otherwise fail to supply materials, products, or services to us for any reason, including due to labor shortages or disputes, due to regulatory requirements or action, or due to contamination of product lots or product recalls. This in turn could materially reduce our ability to satisfy demand for ENBREL®, which could materially and adversely affect our operating results. Factors that will affect our actual supply of ENBREL® at any time include, without limitation, the following:

32

     We are dependent on third parties for fill and finish of ENBREL® bulk drug manufactured at our Rhode Island facility. If third-party fill and finish manufacturers are unable to provide sufficient capacity or otherwise unable to provide services to us, then supply of ENBREL® could be adversely affected.

     Our current plan to increase U.S. and Canadian supply of ENBREL® includes construction of an additional large-scale cell culture commercial manufacturing facility adjacent to the current Rhode Island manufacturing facility. Additionally, we have entered into a manufacturing agreement with Genentech, Inc. (“Genentech”) to produce ENBREL® at Genentech’s manufacturing facility in South San Francisco, California. These manufacturing facilities are subject to FDA approval. Under the terms of the agreement, Genentech is expected to produce ENBREL® through 2005, with an extension through 2006 by mutual agreement. However, certain milestones under the manufacturing agreement, including obtaining FDA approval for the manufacturing process, have not been met in the pre-agreed time frame and there can be no assurance that Genentech will be able to obtain the requisite FDA approval. If and when approval is received, Enbrel® bulk drug produced at the Genentech facility is expected to be produced in campaigns similar to those conducted at BI Pharma. Consequently, supply from the Genentech facility is expected to also be dependent on the timing and number of production runs in addition to the other manufacturing risk discussed above. In addition, Wyeth is constructing a new manufacturing facility in Ireland, which is expected to increase the U.S. and Canadian supply of ENBREL®. If the additional ENBREL® manufacturing capacity at the Rhode Island site, or at Genentech, or in Ireland are not completed on time, or if these manufacturing facilities do not receive FDA or The European Agency for the Evaluation of Medicinal Products (EMEA) approval before we encounter supply constraints, our ENBREL® sales would be restricted, which could have a material adverse effect on our results of operations. See “–Limits on supply for ENBREL® may constrain ENBREL® sales.” If these third-party manufacturing facilities are completed and approved by the various regulatory authorities, our costs of acquiring bulk drug may fluctuate.

Continual manufacturing process improvement efforts may result in the carrying value of certain existing manufacturing facilities or other assets becoming impaired.

     In connection with our ongoing process improvement activities associated with products we manufacture, we continually invest in our various manufacturing practices and related processes with the objective of increasing production yields and success rates to gain increased cost efficiencies and capacity utilization. Depending on the timing and outcomes of these efforts and our other

33

estimates and assumptions regarding future product sales, the carrying value of certain manufacturing facilities or other assets may not be fully recoverable and could result in the recognition of an impairment in the carrying value at the time that such effects are identified. The potential recognition of impairment in the carrying value, if any, could have a material and adverse affect on our results of operations.

Our marketed products face substantial competition and other companies may discover, develop, acquire or commercialize products before or more successfully than we do.

     We operate in a highly competitive environment. Our products compete with other products or treatments for diseases for which our products may be indicated. For example, ENBREL® competes in certain circumstances with rheumatoid arthritis products marketed by Abbott Laboratories/Knoll, Centocor Inc./Johnson & Johnson, Aventis Pharmaceuticals, Inc., Pfizer Inc., and Merck & Co., Inc. (“Merck) as well as the generic drug methotrexate, and may face competition from other potential therapies being developed. Additionally, Aranesp® competes with Johnson & Johnson in the United States and the EU. Further, if our currently marketed products are approved for new uses, or if we sell new products, we may face new, additional competition that we do not face today. Additionally, some of our competitors, including biotechnology and pharmaceutical companies, market products or are actively engaged in research and development in areas where we have products or where we are developing product candidates or new indications for existing products. In the future, we expect that our products will compete with new drugs currently in development, drugs approved for other indications that may be approved for the same indications as those of our products, and off-label use of drugs approved for other indications. Our European patents relating to erythropoietin and G-CSF expire on December 12, 2004 and August 22, 2006, respectively, and we believe that after the expiration of these patents, other companies could develop and market follow-on or biosimilar products to our products in Europe; presenting additional competition to our products. While we do not market erythropoietin in Europe as this right belongs to Johnson & Johnson (through KA), we do market Aranesp® in the EU, which competes with Johnson & Johnson’s and others’ erythropoietin products. We believe that the EU is currently in the process of developing regulatory requirements that would affect the development and approval of follow-on or biosimilar products. Until such requirements are finalized, we cannot predict when follow-on or biosimilar products could appear on the market in the EU or to what extent such additional competition would impact future Aranesp® and NEUPOGEN®/Neulasta® sales in the EU. Our products may compete against products that have lower prices, superior performance, are easier to administer, or that are otherwise competitive with our products. Our inability to compete effectively could adversely affect product sales.

     Large pharmaceutical corporations may have greater clinical, research, regulatory, manufacturing, marketing, financial and human resources than we do. In addition, some of our competitors may have technical or competitive advantages over us for the development of technologies and processes. These resources may make it difficult for us to compete with them to successfully discover, develop, and market new products and for our current products to compete with new products or new product indications that these competitors may bring to market. Business combinations among our competitors may also increase competition and the resources available to our competitors.

34

Certain of our raw materials, medical devices and components are single-sourced from third parties; third-party supply failures could adversely affect our ability to supply our products.

     Certain raw materials necessary for commercial manufacturing and formulation of our products are provided by single-source unaffiliated third-party suppliers. Also, certain medical devices and components necessary for fill, finish, and packaging of our products are provided by single-source unaffiliated third-party suppliers. Certain of these raw materials, medical devices, and components are the proprietary products of these unaffiliated third-party suppliers and, in some cases, such proprietary products are specifically cited in our drug application with the FDA so that they must be obtained from that specific sole source and could not be obtained from another supplier unless and until the FDA approved that other supplier. We would be unable to obtain these raw materials, medical devices, or components for an indeterminate period of time if these third-party single-source suppliers were to cease or interrupt production or otherwise fail to supply these materials or products to us for any reason, including due to regulatory requirements or action, due to adverse financial developments at or affecting the supplier, or due to labor shortages or disputes. This, in turn, could materially and adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

     Also, certain of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including mammalian tissues, bovine serum and human serum albumin, or HSA. We are investigating alternatives to certain biological sources. Raw materials may be subject to contamination and/or recall. A material shortage, contamination, and/or recall could adversely impact or disrupt our commercial manufacturing of our products or could result in a mandated withdrawal of our products from the market. This too, in turn, could adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

     Our product development efforts may not result in commercial products.

     We intend to continue an aggressive research and development program. Successful product development in the biotechnology industry is highly uncertain, and very few research and development projects produce a commercial product. Product candidates that appear promising in the early phases of development, such as in early human clinical trials, may fail to reach the market for a number of reasons, such as:

35

     Several of our product candidates have failed or been discontinued at various stages in the product development process, including Brain Derived Neurotrophic Factor (“BDNF”) and Megakaryocyte Growth and Development Factor (“MGDF”). For example, in 1997, we announced the failure of BDNF for the treatment of amyotrophic lateral sclerosis, or Lou Gehrig’s Disease, because the product candidate, when administered by injection, did not produce acceptable clinical results for a specific use after a phase 3 trial, even though BDNF had progressed successfully through preclinical and earlier clinical trials. In addition, in 1998, we discontinued development of MGDF, a novel platelet growth factor, at the phase 3 trial stage after several people in platelet donation trials developed low platelet counts and neutralizing antibodies. Of course, there may be other factors that prevent us from marketing a product. We cannot guarantee we will be able to produce commercially successful products. Further, clinical trial results are frequently susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians, and others, which may delay, limit, or prevent further clinical development or regulatory approvals of a product candidate. Also, the length of time that it takes for us to complete clinical trials and obtain regulatory approval for product marketing has in the past varied by product and by the intended use of a product. We expect that this will likely be the case with future product candidates and we cannot predict the length of time to complete necessary clinical trials and obtain regulatory approval. See “–Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.”

We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market.

     If we or others identify side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products, and changes to or re-approvals of our manufacturing facilities may be required, any of which could have a material adverse effect on sales of the affected products and on our business and results of operations.

     After any of our products are approved for commercial use, we or regulatory bodies could decide that changes to our product labeling are required. Label changes may be necessary for a number of reasons, including: the identification of actual or theoretical safety or efficacy concerns by regulatory agencies or the discovery of significant problems with a similar product that implicates an entire class of products. Any significant concerns raised about the safety or efficacy of our products could also result in the need to reformulate those products, to conduct additional clinical trials, to make changes to our manufacturing processes, or to seek re-approval of our manufacturing facilities. Significant concerns about the safety and effectiveness of one of our products could ultimately lead to the revocation of its marketing approval. The revision of product labeling or the regulatory actions described above could be required even if there is no clearly established connection between the product and the safety or efficacy concerns that have been raised. The revision of product labeling or the regulatory actions described above could have a material adverse effect on sales of the affected products and on our business and results of operations. See “–Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.”

36

     Our business may be impacted by government investigations or litigation

     We and certain of our subsidiaries are involved in legal proceedings relating to various patent matters, government investigations, and other legal proceedings that arise from time to time in the ordinary course of our business. Matters required to be disclosed by us are set forth in “Item 3. Legal Proceedings” in our Form 10-K for the year ended December 31, 2003 and are updated as required in subsequently filed Form 10-Qs. Litigation is inherently unpredictable, and excessive verdicts can occur. Consequently, it is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages that could have a material adverse effect on our results of operations in the period in which such amounts are incurred.

     The Federal government, state governments and private payors are investigating, and many have filed actions against, numerous pharmaceutical and biotechnology companies, including Amgen and Immunex, alleging that the reporting of prices for pharmaceutical products has resulted in false and overstated Average Wholesale Price (“AWP”), which in turn is alleged to have improperly inflated the reimbursement paid by Medicare beneficiaries, insurers, state Medicaid programs, medical plans and other payors to health care providers who prescribed and administered those products. Fifteen of these actions have been brought against us and/or Immunex, now a wholly owned subsidiary of ours. Eleven states and Puerto Rico have pending investigations regarding our drug pricing practices and the U.S. Departments of Justice and Health and Human Services have requested that Immunex produce documents relating to pricing issues. Further, certain state government entity plaintiffs in some of these AWP cases are also alleging that companies, including ours, are not reporting their “best price” to the states under the Medicaid program. These cases and investigations are described in “Item 3. Legal Proceedings – Average Wholesale Price Litigation” in our Form 10-K for the year ended December 31, 2003, and are updated as required in subsequent Form 10-Qs (See Part II – Other Information, Item 1. Legal Proceedings). Other states and agencies could initiate investigations of our pricing practices. A decision adverse to our interests on these actions and/or investigations could result in substantial economic damages and could have a material adverse effect on our results of operations in the period in which such amounts are incurred.

     We may be required to defend lawsuits or pay damages for product liability claims.

     Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and divert management’s attention, and adversely affect our reputation and the demand for our products.

     Our operating results may fluctuate, and this fluctuation could cause financial results to be below expectations.

     Our operating results may fluctuate from period to period for a number of reasons. In budgeting our operating expenses, we assume that revenues will continue to grow; however, some of our operating expenses are fixed in the short term. Because of this, even a relatively small revenue shortfall may cause a period’s results to be below our expectations or projections. A revenue shortfall could arise from any number of factors, some of which we cannot control. For example, we may face:

37

     Of these, we would only have control over changes in our product pricing strategies and, of course, there may be other factors that affect our revenues in any given period.

     We have grown rapidly, and if we fail to adequately manage that growth our business could be adversely impacted.

     We have had an aggressive growth plan that has included substantial and increasing investments in research and development, sales and marketing, and facilities. We plan to continue to grow and our plan has a number of risks, some of which we cannot control. For example:

     Of course, there may be other risks and we cannot guarantee that we will be able to successfully manage these or other risks.

     Our stock price is volatile, which could adversely affect your investment.

     Our stock price, like that of other biotechnology companies, is highly volatile. For example, in the fifty-two weeks prior to June 30, 2004, the trading price of our common stock has ranged from a high of $72.37 per share to a low of $52.15 per share. Our stock price may be affected by a number of factors, such as:

38

     In addition, if our revenues, earnings or other financial results in any period fail to meet the investment community’s expectations, there could be an immediate adverse impact on our stock price.

Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable federal and state regulations.

     The development, manufacturing, distribution, pricing, sales, and reimbursement of our products, together with our general operations, is subject to extensive federal and state regulation. See “–Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.” and “–We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market.” While we have developed and instituted a corporate compliance program based on current best practices, we cannot assure you that we or our employees are or will be in compliance with all potentially applicable federal and state regulations. If we fail to comply with any of these regulations a range of actions could result, including, but not limited to, the termination of clinical trials, the failure to approve a product candidate, restrictions on our products or manufacturing processes, including withdrawal of our products from the market, significant fines, or other sanctions or litigation.

     Our marketing of ENBREL® will be dependent in part upon Wyeth.

     Under a co-promotion agreement, we and Wyeth market and sell ENBREL® in the United States and Canada. A management committee comprised of an equal number of representatives from us and Wyeth is responsible for overseeing the marketing and sales of ENBREL®: including strategic planning, the approval of an annual marketing plan, product pricing, and the establishment of a brand team. The brand team, with equal representation from us and Wyeth, will prepare and implement the annual marketing plan, which includes a minimum level of financial and sales personnel commitment from each party, and is responsible for all sales activities. If Wyeth fails to market ENBREL® effectively or if we and Wyeth fail to coordinate our efforts effectively, our sales of ENBREL® may be adversely affected.

     Guidelines and recommendations published by various organizations can reduce the use of our products.

39

     Government agencies promulgate regulations and guidelines directly applicable to us and to our products. However, professional societies, practice management groups, private health/science foundations, and organizations involved in various diseases from time to time may also publish guidelines or recommendations to the health care and patient communities. Recommendations of government agencies or these other groups/organizations may relate to such matters as usage, dosage, route of administration, and use of related therapies. Organizations like these have in the past made recommendations about our products. Recommendations or guidelines that are followed by patients and health care providers could result in decreased use of our products. In addition, the perception by the investment community or stockholders that recommendations or guidelines will result in decreased use of our products could adversely affect prevailing market prices for our common stock.

40

Item 4. Controls and Procedures

     The Company maintains “disclosure controls and procedures”, as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, the Company’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance the Company’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in ensuring that material information relating to the Company, is made known to the Chief Executive Officer and Chief Financial Officer by others within the Company during the period in which this report was being prepared.

41

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Israel Bio-Engineering Project Litigation

     Israel Bio-Engineering Project filed its appeal brief on June 2, 2004.

Columbia Litigation

     On May 6, 2004, the U.S. Patent and Trademark Office (“PTO”) granted a request to reexamine Columbia’s U.S. Patent No. 6,455,275 (“the ‘275 patent”). On June 18, 2004, Columbia filed a reissue application in the PTO of the ‘275 patent. On June 23, 2004, the U.S. District Court of the District of Massachusetts denied Columbia’s request to stay the litigation pending the reexamination and reissue proceedings before the PTO. The court also scheduled a November 22, 2004 hearing regarding motions for summary judgment that the ‘275 patent is invalid for double patenting and a December 13, 2004 trial date on that issue.

Average Wholesale Price Litigation

     On June 3, 2004 a civil action was filed in Dane County Circuit Court in Madison, Wisconsin broadly alleging that the Company, together with many other pharmaceutical manufacturers, reported prices for certain products in a manner that allegedly inflated reimbursement under Medicare and/or Medicaid, including co-payments paid to providers who prescribe and administer the products. This action, captioned State of Wisconsin v. Abbott Laboratories, et al. is the fifteenth such civil action naming the Company and/or Immunex Corporation as defendants, either separately or together.

Tularik Inc. Stockholder Litigation

   Janis Zvokel v. Tularik Inc. et al and Fred Zucker v. David V. Goeddel et al

     On June 15, 2004, the Court of Chancery in the State of Delaware in and for New Castle County issued an order consolidating the above matters into In re: Tularik Inc. Shareholders Litigation.

   Mary Kahler v. Tularik, Inc. et al

     On July 2, 2004, the plaintiff filed an amended complaint. In addition to the allegations in the initial complaint, the plaintiff also alleges that the defendants breached their fiduciary duties by failing to provide Tularik’s stockholders with material information necessary for them to make a fully informed decision concerning the merger of Tularik Inc. with and into Arrow Acquisition, LLC, a wholly owned subsidiary of the Company, in exchange for shares of common stock of the Company. In connection with the amended complaint, the plaintiff sought the permission of the Superior Court of the state of California for the County of San Mateo to take expedited discovery in support of the plaintiff’s claims and to schedule a preliminary injunction hearing before the Tularik stockholders’ meeting on August 12, 2004. These matters were heard by the court on July 8, 2004. At the hearing, the court denied the plaintiff’s motion to take expedited discovery and set a preliminary injunction hearing date of August 6, 2004.

42

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

     During the three months ended June 30, 2004, the Company had two outstanding stock repurchase programs. As of January 2004, all of the shares authorized under one of these programs were repurchased. The Company’s stock repurchase program is primarily intended to reduce the dilutive effect of its employee stock option and stock purchase plans. Additionally, stock repurchases beyond this level reflect the Company’s confidence in the long-term value of Amgen common stock. The amount the Company spends and the number of shares repurchased varies based on a variety of factors, including employee stock option grants, the stock price and blackout periods in which the Company is restricted from repurchasing shares.

     A summary of the Company’s repurchase activity for the three months ended June 30, 2004 is as follows:

Item 4. Submission of Matters to a Vote of Security Holders

43

     The voting was as follows:

Item 5. Other Information

     The Company’s 2005 Annual Meeting of Stockholders will be held on May 11, 2005.

Item 6. Exhibits and Reports on Form 8-K

44

     The Company also furnished, but did not file, one Current Report on Form 8-K during the three months ended June 30, 2004. The report dated April 27, 2004 contained the Company’s press release announcing its earnings for the three months ended March 31, 2004.

45

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

46

AMGEN INC.

INDEX TO EXHIBITS

47

48

49

50

51