UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 28, 2015
AMGEN INC.
(Exact name of registrant as specified in its charter)
| Delaware | 000-12477 | 95-3540776 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) | ||
|
One Amgen Center Drive Thousand Oaks, CA (Address of principal executive offices) |
91320-1799 (Zip Code) |
Registrant’s telephone number, including area code
805-447-1000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On July 30, 2015, Amgen Inc. (the “Company”) issued a press release announcing its unaudited results of operations for the three and six months ended June 30, 2015 and its unaudited financial position as of June 30, 2015. The full text of the press release is furnished as Exhibit 99.1 hereto.
In its press release the Company included certain non-U.S. Generally Accepted Accounting Principles (GAAP) financial measures as defined in Regulation G promulgated by the Securities and Exchange Commission. The non-GAAP financial measures included in the press release are adjusted earnings per share, free cash flow, adjusted operating income, adjusted operating margin, adjusted tax rate, adjusted net income, adjusted operating expenses and non-GAAP sub-components of adjusted operating expenses such as adjusted cost of sales, adjusted research and development expenses and adjusted selling, general and administrative expenses. Reconciliations for such non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the press release.
The press release also contains a discussion of why the Company’s management believes that presentation of the non-GAAP financial measures included in the press release provides useful information to investors regarding the Company’s financial condition and results of operations, as well as a discussion of the additional purposes for which the Company’s management uses these non-GAAP financial measures.
This information and the information contained in the press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in Item 2.02 of this Current Report is not incorporated by reference into any filings of the Company made under the Securities Act of 1933, as amended, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing unless specifically stated so therein.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
| (d) | Election of Directors. |
On July 28, 2015, the Board of Directors (the “Board”) of the Company appointed Fred Hassan as a director of the Company, effective immediately. Mr. Hassan is Partner and Managing Director at Warburg Pincus LLC, a global private equity investment institution, since 2011 and, prior to that, served as Senior Advisor from 2009 to 2010. Mr. Hassan was Chairman of the Board and Chief Executive Officer of Schering-Plough Corporation from 2003 to 2009. Prior to this, Mr. Hassan was Chairman, President and Chief Executive Officer of Pharmacia Corporation, from 2001 to 2003. Before assuming these roles, he had served as President and Chief Executive Officer of Pharmacia Corporation from its creation in 2000 as a result of the merger of Pharmacia & Upjohn, Inc. with Monsanto Company. He was President and Chief Executive Officer of Pharmacia & Upjohn, Inc. beginning in 1997. Mr. Hassan previously held senior positions with Wyeth (formerly known as American Home Products), including that of Executive Vice President with responsibility for its pharmaceutical and medical products businesses, and served as a member of the board from 1995 to 1997. Prior to that, Mr. Hassan held various roles at Sandoz Pharmaceuticals and headed its U.S. pharmaceuticals businesses.
Mr. Hassan has been a director of Time Warner Inc., a media company, since 2009. Mr. Hassan was a director of Avon Products, Inc., a manufacturer and marketer of beauty and related products, from 1999 until 2013 and served as lead independent director from 2009 to 2012 and Chairman of the Board between January and April 2013. Mr. Hassan was Chairman of the Board of Bausch & Lomb, from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc., a pharmaceutical company, in 2013. Mr. Hassan served on the board of directors of Valeant Pharmaceuticals International, Inc. between August 2013 and May 2014.
Mr. Hassan will serve as a member of the Audit Committee and the Compensation and Management Development Committee of the Board.
There are no transactions between Mr. Hassan (or any member of his immediate family) and the Company (or any of its subsidiaries) and there is no arrangement or understanding between Mr. Hassan and any other persons or entities pursuant to which Mr. Hassan was appointed as a director of the Company.
Upon his appointment to the Board, Mr. Hassan became entitled to receive a pro-rated portion of the annual retainer of $100,000 through December 31, 2015 and will receive $2,000 for each committee meeting he attends in person ($1,000 for telephonic attendance). In accordance with the Company’s policy, Mr. Hassan will also be entitled to reimbursement of his expenses incurred in connection with attendance at Board and committee meetings and conferences with our senior management. Further, under the provisions of the Amgen Inc. 2009 Director Equity Incentive Program, as Amended and Restated December 13, 2012, with an effective date of January 1, 2013, and subsequently amended March 6, 2013, under the Amgen Inc. Amended and Restated 2009 Equity Incentive Plan, effective May 22, 2013, non-employee directors receive an annual grant of restricted stock units with a grant date fair value of $200,000 (rounded down to the nearest whole number of shares of stock), measured by the closing market price of a share of Common Stock on the date of grant. Subsequent to his appointment, Mr. Hassan will receive a pro-rated portion of the annual grant of restricted stock units. Pursuant to such director equity program, such restricted stock units vest immediately as of the date of grant.
The full text of the press release announcing Mr. Hassan’s appointment is furnished as Exhibit 99.2 to this Current Report on Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| 99.1 | Press Release dated July 30, 2015 | |
| 99.2 | Press Release dated July 30, 2015 | |
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 hereunto duly authorized.
| AMGEN INC. | ||||||||||
| Date: | July 30, 2015 |
By: |
/s/ David W. Meline | |||||||
| Name: | David W. Meline | |||||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||||
EXHIBIT INDEX
| Exhibit Number |
Document Description | |
| 99.1 | Press Release dated July 30, 2015 | |
| 99.2 | Press Release dated July 30, 2015 | |
EXHIBIT 99.1
|
News Release |
One Amgen Center Drive Thousand Oaks, CA 91320-1799 Telephone 805-447-1000 www.amgen.com |
AMGEN’S SECOND QUARTER 2015 REVENUES INCREASED
4 PERCENT TO $5.4 BILLION AND ADJUSTED EARNINGS PER
SHARE (EPS) INCREASED 8 PERCENT TO $2.57
Second Quarter 2015 GAAP EPS Increased 7 Percent to $2.15
2015 Total Revenues and Adjusted EPS Guidance
Increased to $21.1-$21.4 Billion and $9.55-$9.80, Respectively
THOUSAND OAKS, Calif. (July 30, 2015) – Amgen (NASDAQ:AMGN) today announced financial results for the second quarter of 2015. Key results include:
| • | Total revenues increased 4 percent versus the second quarter of 2014 to $5,370 million, with 6 percent product sales growth driven primarily by Enbrel® (etanercept), Prolia® (denosumab), Sensipar® (cinacalcet), Kyprolis® (carfilzomib) and XGEVA® (denosumab). Unfavorable changes in foreign exchange rates impacted total revenue and product sales growth by approximately 2.5 percentage points. |
| • | Adjusted EPS grew 8 percent versus the second quarter of 2014 to $2.57 driven by higher revenues and lower operating expenses. Adjusted operating income increased 10 percent to $2,551 million. |
| • | Adjusted operating margin improved by approximately 2 percentage points to 49 percent. |
| • | GAAP EPS were $2.15 compared to $2.01 and GAAP operating income was $2,076 million compared to $1,902 million. |
| • | The Company generated $2.7 billion of free cash flow compared to $2.1 billion in the second quarter of 2014. |
“Focused execution with our growth products drove record revenues in the second quarter, and expense discipline further
leveraged earnings and our ability to invest in new and forthcoming launches,” said Robert A. Bradway, chairman
and chief executive officer. “Our pipeline continues to deliver, with Repatha approval in the European Union and
Kyprolis approval for relapsed multiple myeloma in the United States. We are on track to deliver on our
long-term objectives for patients and shareholders.”
| Year-over-Year | ||||||||||||
| $Millions, except EPS and percentages | Q2 ‘15 | Q2 ‘14 | YOY D | |||||||||
| Total Revenues |
$ | 5,370 | $ | 5,180 | 4 | % | ||||||
| Adjusted Operating Income |
$ | 2,551 | $ | 2,319 | 10 | % | ||||||
| Adjusted Net Income |
$ | 1,977 | $ | 1,823 | 8 | % | ||||||
| Adjusted EPS |
$ | 2.57 | $ | 2.37 | 8 | % | ||||||
| GAAP Operating Income |
$ | 2,076 | $ | 1,902 | 9 | % | ||||||
| GAAP Net Income |
$ | 1,653 | $ | 1,547 | 7 | % | ||||||
| GAAP EPS |
$ | 2.15 | $ | 2.01 | 7 | % | ||||||
References in this release to “adjusted” measures, measures presented “on an adjusted basis” or to free cash flow refer to non-GAAP financial measures. These adjustments and other items are presented on the attached reconciliations.
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 2
Second Quarter 2015 Product Sales Performance
| • | Total product sales increased 6 percent for the second quarter of 2015 versus the second quarter of 2014. The increase was driven primarily by ENBREL, Prolia, Sensipar, Kyprolis and XGEVA. Growth for the quarter was due to price and higher unit demand. |
| • | Neulasta® (pegfilgrastim) sales increased 2 percent year-over-year driven by price. NEUPOGEN® (filgrastim) sales decreased 14 percent year-over-year driven primarily by the impact of competition in the United States (U.S.). |
| • | ENBREL sales increased 8 percent year-over-year driven by price, offset partially by the impact of competition. |
| • | Prolia sales increased 29 percent year-over-year driven by higher unit demand. |
| • | XGEVA sales increased 11 percent year-over-year driven primarily by higher unit demand. |
| • | EPOGEN® (epoetin alfa) sales decreased 4 percent year-over-year driven primarily by a shift in dialysis customer purchases to Aranesp® (darbepoetin alfa), as well as the impact of competition, offset partially by price. |
| • | Aranesp sales decreased 7 percent year-over-year driven by unfavorable changes in foreign exchange rates and a prior year positive Medicaid rebate estimate adjustment, offset partially by higher unit demand, including the shift from EPOGEN. |
| • | Sensipar/Mimpara® sales increased 15 percent year-over-year driven by higher unit demand and price. |
| • | Vectibix® (panitumumab) sales increased 21 percent year-over-year driven by higher unit demand. |
| • | Nplate® (romiplostim) sales increased 6 percent year-over-year driven primarily by higher unit demand. |
| • | Kyprolis sales increased 53 percent year-over-year driven by higher unit demand. |
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 3
Product Sales Detail by Product and Geographic Region
| $Millions, except percentages | Q2 ‘15 | Q2 ‘14 | YOY D | |||||||
| US |
ROW |
TOTAL |
TOTAL |
TOTAL | ||||||
| Neulasta®/ NEUPOGEN® |
$1,144 | $270 | $1,414 | $1,429 | (1%) | |||||
| Neulasta® |
953 | 205 | 1,158 | 1,133 | 2% | |||||
| NEUPOGEN® |
191 | 65 | 256 | 296 | (14%) | |||||
| Enbrel® |
1,280 | 68 | 1,348 | 1,243 | 8% | |||||
| XGEVA®/ Prolia® |
449 | 222 | 671 | 563 | 19% | |||||
| Prolia® |
215 | 125 | 340 | 264 | 29% | |||||
| XGEVA® |
234 | 97 | 331 | 299 | 11% | |||||
| EPOGEN® |
491 | 0 | 491 | 512 | (4%) | |||||
| Aranesp® |
223 | 256 | 479 | 517 | (7%) | |||||
| Sensipar® / Mimpara® |
261 | 83 | 344 | 298 | 15% | |||||
| Vectibix® |
52 | 108 | 160 | 132 | 21% | |||||
| Nplate® |
73 | 52 | 125 | 118 | 6% | |||||
| Kyprolis® |
112 | 7 | 119 | 78 | 53% | |||||
| Other |
20 | 54 | 74 | 59 | 25% | |||||
|
|
|
| ||||||||
| Total product sales |
$4,105 | $1,120 | $5,225 | $4,949 | 6% | |||||
|
|
|
| ||||||||
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 4
Second Quarter Operating Expense, Operating Margin and Tax Rate Analysis, on an Adjusted Basis
| • | Operating Expenses decreased 1 percent, including a 3 percentage point benefit from foreign exchange rates. |
| • | Cost of Sales margin improved 0.8 points driven by lower royalty expense and higher product sales. |
| • | Research & Development (R&D) expenses decreased 6 percent driven by savings from transformation and process improvement efforts, offset partially by increased support for later-stage clinical programs. |
| • | Selling, General & Administrative expenses increased 2 percent as increased commercial expenses for new product launches were enabled by savings from transformation and process improvement efforts. |
| • | Operating Margin improved by approximately 2 percentage points to 49 percent. |
| • | Tax Rate increased 3.8 percentage points to 20.0 percent primarily due to changes in the geographic mix of earnings. |
| $Millions, except percentages | ||||||
| On an Adjusted Basis | Q2 ‘15 | Q2 ‘14 | YOY D | |||
| Cost of Sales* |
$789 | $789 | 0% | |||
| % of sales |
15.1% | 15.9% | (0.8) pts. | |||
| Research & Development |
$918 | $979 | (6%) | |||
| % of sales |
17.6% | 19.8% | (2.2) pts. | |||
| Selling, General & Administrative |
$1,112 | $1,093 | 2% | |||
| % of sales |
21.3% | 22.1% | (0.8) pts. | |||
| TOTAL Operating Expenses |
$2,819 | $2,861 | (1%) | |||
| Operating Margin |
48.8% | 46.9% | 1.9 pts. | |||
| Tax Rate* |
20.0% | 16.2% | 3.8 pts. | |||
| pts: percentage points |
||||||
| * Impact of Puerto Rico excise tax is included in Cost of Sales and Tax Rate. Excluding Puerto Rico excise tax, Cost of Sales would be 1.9 pts. lower for both 2015 and 2014; and the Tax Rate would be 2.7 pts. and 3.5 pts. higher for 2015 and 2014, respectively. | ||||||
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 5
Cash Flow and Balance Sheet Discussion
| • | The Company generated $2.7 billion of free cash flow in the second quarter of 2015 versus $2.1 billion in the second quarter of 2014. The increase was driven by improved working capital and higher operating income, as well as the termination of foreign exchange forward contracts. |
| • | The Company’s third quarter 2015 dividend of $0.79 per share declared on July 28, 2015, will be paid on Sept. 8, 2015, to all stockholders of record as of the close of business on Aug. 17, 2015. |
| • | During the second quarter, the Company repurchased 3.3 million shares of common stock at a total cost of $0.5 billion. At the end of the second quarter, the Company had $2.9 billion remaining under its stock repurchase authorization. |
| $Billions, except shares | Q2 ‘15 | Q2 ‘14 | YOY D | |||
| Operating Cash Flow |
$2.8 | $2.2 | $0.6 | |||
| Capital Expenditures |
0.1 | 0.2 | (0.1) | |||
| Free Cash Flow |
2.7 | 2.1 | 0.6 | |||
| Dividends Paid |
0.6 | 0.5 | 0.1 | |||
| Share Repurchase |
0.5 | 0.0 | 0.5 | |||
| Avg. Diluted Shares (millions) |
768 | 768 | 0 | |||
| Cash and Investments |
30.0 | 26.2 | 3.8 | |||
| Debt Outstanding |
32.0 | 33.3 | (1.3) | |||
| Stockholders’ Equity |
27.5 | 24.4 | 3.1 | |||
| Note:Numbers may not add due to rounding |
||||||
2015 Guidance
For the full year 2015, the Company now expects:
| • | Total revenues in the range of $21.1 billion to $21.4 billion and adjusted EPS in the range of $9.55 to $9.80. Previously, the Company expected total revenues in the range of $20.9 billion to $21.3 billion and adjusted EPS in the range of $9.35 to $9.65. |
| • | Adjusted tax rate to be in the range of 18 percent to 19 percent. This excludes the benefit of the federal R&D tax credit, which has not yet been extended for 2015. |
| • | Capital expenditures to be approximately $700 million. |
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 6
Second Quarter Product and Pipeline Update
Anticipated key milestones:
| Clinical Program | Indication | Milestone | ||
| Repatha™ (evolocumab) |
Dyslipidemia | Approved in European Union (EU) U.S. regulatory review Phase 3 cardiovascular imaging | ||
| Kyprolis |
Relapsed multiple myeloma | Approved in U.S. EU regulatory review | ||
| Talimogene laherparepvec |
Metastatic melanoma | Global regulatory reviews | ||
| AMG 416 |
Secondary hyperparathyroidism | Global submissions in Q3 2015 | ||
| Omecamtiv mecarbil* |
Heart failure | Phase 2 data in Q4 2015 | ||
|
Romosozumab† |
Postmenopausal osteoporosis | Phase 3 data in H1 2016 | ||
| AMG 334 |
Migraine Prophylaxis | Phase 2b chronic migraine data in 2016 | ||
| ABP 215 (biosimilar bevacizumab) |
Non-small cell lung cancer | Phase 3 data in H2 2015 |
| *Developed | in collaboration with Cytokinetics; †Developed in collaboration with UCB, as well as Astellas in Japan |
The Company provided the following updates on selected product and pipeline programs:
Repatha
| • | In July, the European Commission approved Repatha for the treatment of high cholesterol, as an adjunct to diet: |
| • | In combination with statins or other lipid lowering therapies in patients unable to control their LDL cholesterol with maximum tolerated statin doses, or |
| • | Alone or in combination with other lipid lowering therapies in patients who are statin intolerant or for whom a statin is contraindicated. |
| • | Repatha is also approved in the EU in combination with other lipid-lowering agents in patients with homozygous familial hypercholesterolemia (age 12 and over). |
| • | Enrollment has completed in the Phase 3 cardiovascular outcomes study. |
Kyprolis
| • | In July, the U.S. Food and Drug Administration expanded the indication of Kyprolis to include the treatment of patients who have received 1 to 3 prior lines of therapy, in combination with lenalidomide and dexamethasone. |
| • | A Marketing Authorization Application (MAA) is currently under accelerated assessment in the EU for relapsed multiple myeloma. |
| • | Supplemental New Drug Application submitted in the U.S. based on data from the phase 3 ENDEAVOR study. |
| • | Enrollment recently completed in the Phase 3 CLARION study versus Velcade® (bortezomib) in newly diagnosed multiple myeloma patients. |
| • | A Phase 3 study initiated with weekly dosing in relapsed and refractory multiple myeloma. |
AMG 416
| • | Submissions of a New Drug Application in the U.S. and a MAA in the EU are planned for the third quarter of 2015 for secondary hyperparathyroidism. |
AMG 334
| • | Phase 3 studies initiated in episodic migraine. |
Note: VELCADE is a registered trademark of Millennium Pharmaceuticals, Inc.
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 7
Non-GAAP Financial Measures
In this news release, management has presented its operating results for the second quarters of 2015 and 2014 in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and on an adjusted (or non-GAAP) basis. In addition, management has presented its full year 2015 EPS and tax rate guidance in accordance with GAAP and on an adjusted (or non-GAAP) basis. These non-GAAP financial measures are computed by excluding certain items related to acquisitions, restructuring and certain other items from the related GAAP financial measures. Management has also presented Free Cash Flow (FCF), which is a non-GAAP financial measure, for the second quarters of 2015 and 2014. FCF is computed by subtracting capital expenditures from operating cash flow, each as determined in accordance with GAAP. Reconciliations for these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the news release.
The Company believes that its presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses certain non-GAAP financial measures to enhance an investor’s overall understanding of the financial performance and prospects for the future of the Company’s core business activities by facilitating comparisons of results of core business operations among current, past and future periods. In addition, the Company believes that excluding the non-cash amortization of intangible assets, including developed product technology rights, acquired in business combinations treats those assets as if the Company had developed them internally in the past, and thus provides a supplemental measure of profitability in which the Company’s acquired intellectual property is treated in a comparable manner to its internally developed intellectual property. The Company believes that FCF provides a further measure of the Company’s liquidity.
The Company uses the non-GAAP financial measures set forth in the press release in connection with its own budgeting and financial planning. The non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
About Amgen
Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.
Amgen focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
For more information, visit www.amgen.com and follow us on www.twitter.com/amgen.
Forward-Looking Statements
This news release contains forward-looking statements that involve significant risks and uncertainties, including those discussed below and others that can be found in our Form 10-K for the year ended Dec. 31, 2014, and in any subsequent periodic reports on Form 10-Q and Form 8-K. Amgen is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 8
No forward-looking statement can be guaranteed and actual results may differ materially from those we project. The Company’s results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments (domestic or foreign) involving current and future products, sales growth of recently launched products, competition from other products (domestic or foreign), and difficulties or delays in manufacturing our products. In addition, sales of our products are affected by reimbursement policies imposed by third-party payors, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and guideline developments and domestic and international trends toward managed care and healthcare cost containment as well as U.S. legislation affecting pharmaceutical pricing and reimbursement. Government and others’ regulations and reimbursement policies may affect the development, usage and pricing of our products. Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by domestic and foreign government regulatory authorities. We or others could identify safety, side effects or manufacturing problems with our products after they are on the market. Our business may be impacted by government investigations, litigation and product liability claims. If we fail to meet the compliance obligations in the corporate integrity agreement between us and the U.S. government, we could become subject to significant sanctions. Further, while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors. We depend on third parties for a significant portion of our manufacturing capacity for the supply of certain of our current and future products and limits on supply may constrain sales of certain of our current products and product candidate development. In addition, we compete with other companies with respect to some of our marketed products as well as for the discovery and development of new products. Discovery or identification of new product candidates cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate will be successful and become a commercial product. Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers. Our efforts to integrate the operations of companies we have acquired may not be successful. We may experience difficulties, delays or unexpected costs and not achieve anticipated benefits and savings from our ongoing restructuring plan. Our business performance could affect or limit the ability of our Board of Directors to declare a dividend or our ability to pay a dividend or repurchase our common stock.
###
CONTACT: Amgen, Thousand Oaks
Kristen Davis, 805-447-3008 (media)
Trish Hawkins, 805-447-5631 (media)
Arvind Sood, 805-447-1060 (investors)
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 9
Amgen Inc.
Condensed Consolidated Statements of Income - GAAP
(In millions, except per share data)
(Unaudited)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: |
||||||||||||||||
| Product sales |
$ | 5,225 | $ | 4,949 | $ | 10,099 | $ | 9,305 | ||||||||
| Other revenues |
145 | 231 | 304 | 396 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
5,370 | 5,180 | 10,403 | 9,701 | ||||||||||||
|
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|||||||||
| Operating expenses: |
||||||||||||||||
| Cost of sales |
1,089 | 1,081 | 2,122 | 2,171 | ||||||||||||
| Research and development |
964 | 1,018 | 1,858 | 2,045 | ||||||||||||
| Selling, general and administrative |
1,160 | 1,136 | 2,186 | 2,159 | ||||||||||||
| Other |
81 | 43 | 139 | 60 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
3,294 | 3,278 | 6,305 | 6,435 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
2,076 | 1,902 | 4,098 | 3,266 | ||||||||||||
| Interest expense, net |
277 | 282 | 529 | 541 | ||||||||||||
| Interest and other income, net |
198 | 138 | 304 | 237 | ||||||||||||
|
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|
|
|
|
|
|
|||||||||
| Income before income taxes |
1,997 | 1,758 | 3,873 | 2,962 | ||||||||||||
| Provision for income taxes |
344 | 211 | 597 | 342 | ||||||||||||
|
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| Net income |
$ | 1,653 | $ | 1,547 | $ | 3,276 | $ | 2,620 | ||||||||
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| Earnings per share: |
||||||||||||||||
| Basic |
$ | 2.18 | $ | 2.04 | $ | 4.30 | $ | 3.46 | ||||||||
| Diluted |
$ | 2.15 | $ | 2.01 | $ | 4.26 | $ | 3.41 | ||||||||
| Weighted average shares used in calculation of earnings per share: |
| |||||||||||||||
| Basic |
760 | 759 | 761 | 758 | ||||||||||||
| Diluted |
768 | 768 | 769 | 768 | ||||||||||||
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 10
Amgen Inc.
Condensed Consolidated Balance Sheets - GAAP
(In millions)
(Unaudited)
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash, cash equivalents and marketable securities |
$ | 29,993 | $ | 27,026 | ||||
| Trade receivables, net |
2,779 | 2,546 | ||||||
| Inventories |
2,567 | 2,647 | ||||||
| Other current assets |
2,397 | 2,494 | ||||||
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|
|
|
|||||
| Total current assets |
37,736 | 34,713 | ||||||
| Property, plant and equipment, net |
5,050 | 5,223 | ||||||
| Intangible assets, net |
11,988 | 12,693 | ||||||
| Goodwill |
14,723 | 14,788 | ||||||
| Other assets |
1,712 | 1,592 | ||||||
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|
|
|
|
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| Total assets |
$ | 71,209 | $ | 69,009 | ||||
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|
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| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities |
$ | 5,641 | $ | 6,508 | ||||
| Current portion of long-term debt |
1,250 | 500 | ||||||
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|
|
|
|
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| Total current liabilities |
6,891 | 7,008 | ||||||
| Long-term debt |
30,702 | 30,215 | ||||||
| Long-term deferred tax liability |
3,227 | 3,461 | ||||||
| Other noncurrent liabilities |
2,905 | 2,547 | ||||||
| Stockholders’ equity |
27,484 | 25,778 | ||||||
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|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 71,209 | $ | 69,009 | ||||
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| Shares outstanding |
759 | 760 | ||||||
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 11
Amgen Inc.
GAAP to Adjusted Reconciliations
(In millions)
(Unaudited)
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| GAAP cost of sales |
$ | 1,089 | $ | 1,081 | $ | 2,122 | $ | 2,171 | ||||||||
| Adjustments to cost of sales: |
||||||||||||||||
| Acquisition-related expenses (a) |
(285) | (290) | (569) | (694) | ||||||||||||
| Accelerated depreciation and other charges pursuant to our restructuring initiative |
(15) | - | (29) | - | ||||||||||||
| Stock option expense |
- | (2) | - | (4) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total adjustments to cost of sales |
(300) | (292) | (598) | (698) | ||||||||||||
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|
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| Adjusted cost of sales |
$ | 789 | $ | 789 | $ | 1,524 | $ | 1,473 | ||||||||
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|
|
|||||||||
| GAAP research and development expenses |
$ | 964 | $ | 1,018 | $ | 1,858 | $ | 2,045 | ||||||||
| Adjustments to research and development expenses: |
||||||||||||||||
| Acquisition-related expenses (b) |
(28) | (38) | (49) | (69) | ||||||||||||
| Accelerated depreciation and other charges pursuant to our restructuring initiative |
(18) | - | (35) | - | ||||||||||||
| Stock option expense |
- | (1) | - | (3) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total adjustments to research and development expenses |
(46) | (39) | (84) | (72) | ||||||||||||
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|
|||||||||
| Adjusted research and development expenses |
$ | 918 | $ | 979 | $ | 1,774 | $ | 1,973 | ||||||||
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|
|||||||||
| GAAP selling, general and administrative expenses |
$ | 1,160 | $ | 1,136 | $ | 2,186 | $ | 2,159 | ||||||||
| Adjustments to selling, general and administrative expenses: |
||||||||||||||||
| Acquisition-related expenses (b) |
(28) | (42) | (57) | (80) | ||||||||||||
| Certain charges pursuant to our restructuring initiative |
(20) | - | (24) | - | ||||||||||||
| Stock option expense |
- | (1) | - | (3) | ||||||||||||
|
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|
|
|
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|
|||||||||
| Total adjustments to selling, general and administrative expenses |
(48) | (43) | (81) | (83) | ||||||||||||
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|
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| Adjusted selling, general and administrative expenses |
$ | 1,112 | $ | 1,093 | $ | 2,105 | $ | 2,076 | ||||||||
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|
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| GAAP operating expenses |
$ | 3,294 | $ | 3,278 | $ | 6,305 | $ | 6,435 | ||||||||
| Adjustments to operating expenses: |
||||||||||||||||
| Adjustments to cost of sales |
(300) | (292) | (598) | (698) | ||||||||||||
| Adjustments to research and development expenses |
(46) | (39) | (84) | (72) | ||||||||||||
| Adjustments to selling, general and administrative expenses |
(48) | (43) | (81) | (83) | ||||||||||||
| Certain charges pursuant to our restructuring and other cost savings initiatives (c) |
(10) | (23) | (67) | (38) | ||||||||||||
| (Expense)/Benefit related to various legal proceedings |
(71) | - | (71) | 3 | ||||||||||||
| Expense resulting from changes in the estimated fair values of the contingent consideration obligations related to prior year business combinations |
- | (14) | (1) | (15) | ||||||||||||
| Other (d) |
- | (6) | - | (10) | ||||||||||||
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|
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| Total adjustments to operating expenses |
(475) | (417) | (902) | (913) | ||||||||||||
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| Adjusted operating expenses |
$ | 2,819 | $ | 2,861 | $ | 5,403 | $ | 5,522 | ||||||||
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|||||||||
| GAAP operating income |
$ | 2,076 | $ | 1,902 | $ | 4,098 | $ | 3,266 | ||||||||
| Adjustments to operating expenses |
475 | 417 | 902 | 913 | ||||||||||||
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| Adjusted operating income |
$ | 2,551 | $ | 2,319 | $ | 5,000 | $ | 4,179 | ||||||||
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| GAAP income before income taxes |
$ | 1,997 | $ | 1,758 | $ | 3,873 | $ | 2,962 | ||||||||
| Adjustments to operating expenses |
475 | 417 | 902 | 913 | ||||||||||||
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| Adjusted income before income taxes |
$ | 2,472 | $ | 2,175 | $ | 4,775 | $ | 3,875 | ||||||||
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| GAAP provision for income taxes |
$ | 344 | $ | 211 | $ | 597 | $ | 342 | ||||||||
| Adjustments to provision for income taxes: |
||||||||||||||||
| Income tax effect of the above adjustments (e) |
151 | 148 | 290 | 279 | ||||||||||||
| Other income tax adjustments (f) |
- | (7) | - | (7) | ||||||||||||
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| Total adjustments to provision for income taxes |
151 | 141 | 290 | 272 | ||||||||||||
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| Adjusted provision for income taxes |
$ | 495 | $ | 352 | $ | 887 | $ | 614 | ||||||||
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| GAAP net income |
$ | 1,653 | $ | 1,547 | $ | 3,276 | $ | 2,620 | ||||||||
| Adjustments to net income: |
||||||||||||||||
| Adjustments to income before income taxes, net of the income tax effect of the above adjustments |
324 | 269 | 612 | 634 | ||||||||||||
| Other income tax adjustments (f) |
- | 7 | - | 7 | ||||||||||||
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| Total adjustments to net income |
324 | 276 | 612 | 641 | ||||||||||||
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| Adjusted net income |
$ | 1,977 | $ | 1,823 | $ | 3,888 | $ | 3,261 | ||||||||
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Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 12
Amgen Inc.
GAAP to Adjusted Reconciliations
(In millions, except per share data)
(Unaudited)
The following table presents the computations for GAAP and Adjusted diluted EPS.
| Three months ended | Three months ended | |||||||||||||||
| June 30, 2015 | June 30, 2014 | |||||||||||||||
| GAAP | Adjusted | GAAP | Adjusted | |||||||||||||
| Net income |
$ | 1,653 | $ | 1,977 | $ | 1,547 | $ | 1,823 | ||||||||
| Weighted-average shares for diluted EPS |
768 | 768 | 768 | 768 | ||||||||||||
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| Diluted EPS |
$ | 2.15 | $ | 2.57 | $ | 2.01 | $ | 2.37 | ||||||||
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| Six months ended | Six months ended | |||||||||||||||
| June 30, 2015 | June 30, 2014 | |||||||||||||||
| GAAP | Adjusted | GAAP | Adjusted | |||||||||||||
| Net income |
$ | 3,276 | $ | 3,888 | $ | 2,620 | $ | 3,261 | ||||||||
| Weighted-average shares for diluted EPS |
769 | 769 | 768 | 768 | ||||||||||||
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| Diluted EPS |
$ | 4.26 | $ | 5.06 | $ | 3.41 | $ | 4.25 | ||||||||
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| (a) | The adjustments related primarily to non-cash amortization of intangible assets, including developed product technology rights, acquired in business combinations. For the six months ended June 30, 2014, the adjustments also included a $99-million charge related to the termination of a supply contract with F. Hoffmann-La Roche Ltd. as a result of acquiring the licenses to filgrastim and pegfilgrastim in certain territories effective January 1, 2014. |
| (b) | The adjustments related primarily to non-cash amortization of intangible assets acquired in business combinations. |
| (c) | The adjustments related primarily to severance expenses. |
| (d) | The 2014 adjustments related primarily to various acquisition-related expenses. |
| (e) | The tax effect of the adjustments between our GAAP and Adjusted results takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). Generally, this results in a tax impact at the U.S. marginal tax rate for certain adjustments, including the majority of amortization of intangible assets, whereas the tax impact of other adjustments, including restructuring expense, depends on whether the amounts are deductible in the respective tax jurisdictions and the applicable tax rate(s) in those jurisdictions. Due to these factors, the effective tax rates for the adjustments to our GAAP income before income taxes, for the three and six months ended June 30, 2015, were 31.8% and 32.2%, respectively, compared with 35.5% and 30.6% for the corresponding periods of the prior year. |
| (f) | The 2014 adjustments related to certain prior period items excluded from adjusted earnings. |
Second Quarter 2015 Revenues Increased 4 Percent to $5.4 Billion and Adjusted Earnings Per Share Increased 8 Percent to $2.57
Page 13
Amgen Inc.
Reconciliations of Free Cash Flow
(In millions)
(Unaudited)
| Three months ended | ||||||||||
| June 30, | ||||||||||
| 2015 | 2014 | |||||||||
| Operating Cash Flow |
$ 2,814 | $ 2,227 | ||||||||
| Capital Expenditures |
(133) | (173) | ||||||||
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|||||||
| Free Cash Flow |
$ 2,681 | $ 2,054 | ||||||||
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Reconciliation of GAAP EPS Guidance to Adjusted
EPS Guidance for the Year Ending December 31, 2015
(Unaudited)
| 2015 | ||||||||||||
| GAAP diluted EPS guidance |
$ | 8.06 | - | $ | 8.35 | |||||||
| Known adjustments to arrive at Adjusted earnings*: |
||||||||||||
| Acquisition-related expenses(a) |
1.18 | |||||||||||
| Restructuring charges |
0.19 | - | 0.23 | |||||||||
| Legal proceeding expense |
0.08 | |||||||||||
|
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|
|||||||||||
| Adjusted diluted EPS guidance |
$ | 9.55 | - | $ | 9.80 | |||||||
|
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| * | The known adjustments are presented net of their related tax impact which amount to approximately $0.70 to $0.72 per share in the aggregate. |
| (a) | The adjustments relate primarily to non-cash amortization of intangible assets acquired in prior year business combinations. |
Reconciliation of GAAP Tax Rate Guidance to Adjusted
Tax Rate Guidance for the Year Ending December 31, 2015
(Unaudited)
| 2015 | ||||||||||||
| GAAP tax rate guidance |
14% | - | 16% | |||||||||
| Tax rate effect of known adjustments discussed above |
3% | - | 4% | |||||||||
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|
|
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| Adjusted tax rate guidance |
18% | - | 19% | |||||||||
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Exhibit 99.2
|
One Amgen Center Drive Thousand Oaks, CA 91320-1799 Telephone 805-447-1000 www.Amgen.com | |||
News Release
AMGEN ANNOUNCES APPOINTMENT OF FRED HASSAN TO
BOARD OF DIRECTORS
THOUSAND OAKS, Calif. (July 30, 2015) – Amgen (NASDAQ:AMGN) today announced the appointment of Fred Hassan, Partner and Managing Director of Warburg Pincus LLC, to the Amgen Board of Directors.
“We are pleased to welcome Fred Hassan and the deep, global experiences he brings in the biopharmaceuticals sector to the Amgen Board,” said Robert A. Bradway, chairman and chief executive officer of Amgen. “Fred’s breadth of operational expertise and commitment to innovation will serve Amgen well.”
Mr. Hassan has been Partner and Managing Director at Warburg Pincus LLC, a global private equity investment institution, since 2011 and, prior to that, served as Senior Advisor from 2009 to 2010. Mr. Hassan was Chairman of the Board and Chief Executive Officer of Schering-Plough Corporation from 2003 to 2009. Prior to this, Mr. Hassan was Chairman, President and Chief Executive Officer of Pharmacia Corporation, from 2001 to 2003. Before assuming these roles, he had served as President and Chief Executive Officer of Pharmacia Corporation from its creation in 2000 as a result of the merger of Pharmacia & Upjohn, Inc. with Monsanto Company. He was President and Chief Executive Officer of Pharmacia & Upjohn, Inc. beginning in 1997. Mr. Hassan previously held senior positions with Wyeth (formerly known as American Home Products), including that of Executive Vice President with responsibility for its pharmaceutical and medical products businesses, and served as a member of the board from 1995 to 1997. Prior to that, Mr. Hassan held various roles at Sandoz Pharmaceuticals and headed its U.S. pharmaceuticals businesses.
Mr. Hassan has been a director of Time Warner Inc., a media company, since 2009. Mr. Hassan was a director of Avon Products, Inc., a manufacturer and marketer of beauty and related products, from 1999 until 2013 and served as lead independent director from 2009 to 2012 and Chairman of the Board between January and April 2013. Mr. Hassan was Chairman of the Board of Bausch & Lomb, from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc., a pharmaceutical company, in 2013. Mr. Hassan served on the board of directors of Valeant Pharmaceuticals International, Inc. between August 2013 and May 2014.
Mr. Hassan’s book, “Reinvent - A Leader’s Playbook for Serial Success,” was published in 2013 by Wiley and describes the linkage between attitude, culture, execution and driven performance. In 2014, a CNBC panel named Mr. Hassan to a list of those who have had the most profound impact on the world of business in the previous quarter century.
Mr. Hassan will serve on the Audit Committee and the Compensation and Management Development Committee of the Board.
AMGEN ANNOUNCES APPOINTMENT OF FRED HASSAN TO BOARD OF DIRECTORS
PAGE 2
About Amgen
Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.
Amgen focuses on areas of high unmet medical need and leverages its biologics manufacturing expertise to strive for solutions that improve health outcomes and dramatically improve people’s lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.
For more information, visit www.amgen.com and follow us on www.twitter.com/amgen.
###
CONTACT: Amgen, Thousand Oaks
Kristen Davis, 805-447-3008 (media)
Trish Hawkins, 805-447-5631 (media)
Arvind Sood, 805-447-1060 (investors)