Forward-looking statements
This report and other documents we file with the 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. Such words as "expect," "anticipate," "outlook," "could," "target," "project," "intend," "plan," "believe," "seek," "estimate," "should," "may," "assume" and "continue," as well as 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 Item 1A. Risk Factors. 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, regulatory activities, clinical trial results, reimbursement, expenses, earnings per share (EPS), liquidity and capital resources, trends and planned dividends and stock repurchases. 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
The following management's discussion and analysis (MD&A) is intended to assist the reader in understanding Amgen's business. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and accompanying notes. Our results of operations discussed in MD&A are presented in conformity with accounting principles generally accepted in the United States (GAAP).
We are a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. Our medicines help millions of patients in the fight against cancer, kidney disease, RA, bone disease and other serious illnesses. We operate in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis. We earn revenues and income and generate cash primarily from sales of human therapeutic products in the areas of supportive cancer care, inflammation, nephrology and bone disease. Our principal products include Neulasta®, NEUPOGEN®, ENBREL, Aranesp®, EPOGEN®, XGEVA® and Prolia®. For additional information about our products, their approved indications and where they are marketed, see Item 1. Business - Marketed Products.
In 2012, we had several notable accomplishments, including achieving 11% revenue growth driven by strong performance across the portfolio. Product sales grew 9% in the United States and 7% in the ROW. We also continued paying quarterly dividends in 2012, and in December, we declared a dividend of $0.47 per share of common stock payable in March 2013, representing a 31% increase over the quarterly dividend paid in each of the past four quarters. Additionally, we repurchased 62 million shares of our common stock at an aggregate cost of $4.7 billion in 2012. Under our $10 billion authorized stock repurchase program announced in October 2011, we have repurchased a total of 146 million shares of our common stock for an aggregate cost of $9.7 billion at an average price of $66.37. Finally, we made significant advances in our product pipeline in 2012 including advancing AMG 145, brodalumab, romosozumab and rilotumumab to phase 3 clinical trials.
We enter 2013 with various opportunities to continue growing our business. We believe the currently approved indications for XGEVA® and Prolia® represent significant commercial opportunities. Longer-term growth may also be achieved by the successful development of our later stage pipeline, by expansion into emerging markets and Japan, and through strategic business development opportunities, such as our acquisitions of Micromet and MN in 2012. Our continued focus on increasing cost efficiencies will assist in providing the necessary resources to fund many of these future opportunities.
Our business will, however, continue to face various challenges. Certain of our products will face increasing competitive pressure as a result of competitive product launches. In the United States, ENBREL, EPOGEN® and XGEVA®, in particular, will be facing increased competition. Additionally, over the next several years, starting in 2013, certain of the existing patents on our principal products - including NEUPOGEN®, EPOGEN® and Aranesp® - will expire and, as a result, we expect to face increasing competition from biosimilars. For additional information, including with regard to the expiration of the patents for various products, see Item 1. Business - Marketed Products.

Current global economic conditions also pose challenges to our business, including continued pressure to reduce healthcare expenditures. Efforts to reduce health care costs are being made by third-party payers including governments and private payers. In the United States, various actions have been taken aimed at reducing healthcare spending. The continuing prominence of U.S. budget deficits increases the risk that taxes, fees, rebates, or other federal measures that would further reduce our revenues or increase our expenses may be enacted. As a result of the economic condition, the industry continues to experience significant pricing pressures and other cost containment measures in certain European countries also.
Our long-term success depends to a great extent on our ability to continue to discover, develop and commercialize innovative products and acquire or collaborate on therapies currently in development by other companies. The discovery and development of safe and effective new products, as well as the development of additional indications for existing products, are necessary for the continued strength of our businesses. Our product lines must be replenished over time in order to offset revenue losses when products lose their exclusivity or competing products are launched, as well as to provide for revenue and earnings growth. We devote considerable resources to R&D activities. However, successful product development in the biotechnology industry is highly uncertain. We are also confronted by increasing regulatory scrutiny of safety and efficacy before and after products have been launched.
Finally, our product sales are subject to certain influences throughout the year, including wholesaler and end-user buying patterns (e.g., wholesaler and end-user stocking, contract-driven buying and patients delaying certain purchasing or physician visits). Such factors can result in higher demand for our products and/or higher wholesaler inventory levels and, therefore, higher product sales for a given three-month period, generally followed by a decline in product sales in the subsequent three-month period. For example, sales of certain of our products in the United States for the three months ended March 31 can be slightly lower relative to the immediately preceding three-month period. While this can result in variability in quarterly product sales on a sequential basis, these effects have generally not been significant when comparing product sales in the three months ended March 31 with product sales in the corresponding period of the prior year.
See Item 1. Business - Marketed Products and Item 1A. Risk Factors for further discussion of certain of the factors that could impact our future product sales. Selected financial information
The following is an overview of our results of operations as well as our financial condition (in millions, except percentages and per share data):

                      2012      Change      2011
Product sales:
U.S.                $ 12,815       9  %   $ 11,725
ROW                    3,824       7  %      3,570
Total product sales   16,639       9  %     15,295
Other revenues           626       *           287
Total revenues      $ 17,265      11  %   $ 15,582
Operating expenses  $ 11,688       4  %   $ 11,270
Operating income    $  5,577      29  %   $  4,312
Net income          $  4,345      18  %   $  3,683
Diluted EPS         $   5.52      37  %   $   4.04

* Change in excess of 100% When discussing changes in product sales below, any reference to unit growth or decline refers to changes in the purchases of our products by healthcare providers, such as physicians or their clinics, dialysis centers, hospitals and pharmacies. The increase in U.S. product sales for 2012 reflects growth across the portfolio except ESAs, which declined 10%. Excluding ESAs, U.S. product sales increased 16% driven primarily by unit growth and, to a lesser extent, increases in average net sales prices. The increase in ROW product sales for 2012 reflects growth for all of our marketed products except Aranesp®, which declined 4%, and combined Neulasta®/NEUPOGEN®, which declined 9%. The increase in other revenues for 2012 was driven by a modification to our Takeda collaboration, which replaced a global co-development and profit share agreement for motesanib, originally signed in 2008, with an exclusive license for Takeda to

develop, manufacture and commercialize motesanib. That modification resulted in revenue recognition of $232 million. The increase also reflects milestone payments received from AstraZeneca and Astellas Pharma Inc. Operating expenses in 2011 included a previously disclosed charge for a legal settlement reserve of $780 million.
The increase in net income for 2012 was due primarily to higher operating income, offset partially by higher interest expense, net, and higher effective income tax rates.
The increase in diluted EPS for 2012 was driven primarily by increases in net income and by the favorable impacts of our stock repurchase program, which reduced the number of shares used to compute diluted EPS.
Although changes in foreign currency exchange rates result in increases or decreases in our reported international product sales, the benefit or detriment that such movements have on our international product sales is offset partially by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities. Our hedging activities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros. Commencing January 1, 2011, Puerto Rico imposes a temporary excise tax on the purchase of goods and services from a related manufacturer in Puerto Rico. The excise tax is imposed on the gross intercompany purchase price of the goods and services and is effective for a six-year period beginning in 2011, with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015 and 1% in 2016). In February 2013, the Puerto Rico government proposed an amendment to the excise tax legislation which, if approved, would increase the excise tax rate to 4% effective July 1, 2013 through 2017. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes in the year in which the excise tax is incurred. This excise tax has had and will continue to have a significant adverse impact on our cost of sales and a significant favorable impact on our provision for income taxes. In addition, the overall impact of the excise tax will vary from period to period as a result of the timing difference between recognizing the expense and the applicable foreign tax credit. As a result of the excise tax in 2012, cost of sales increased by $343 million, the provision for income taxes was reduced by $337 million and EPS was unfavorably impacted by $0.01. In 2011, cost of sales increased by $211 million, the provision for income taxes was reduced by $321 million and EPS was favorably impacted by $0.12.

As of December 31, 2012, our cash, cash equivalents and marketable securities totaled $24.1 billion, and total debt outstanding was $26.5 billion. Of our total cash, cash equivalents and marketable securities balance as of December 31, 2012, approximately $18.9 billion was generated from operations in foreign tax jurisdictions and is intended to be invested indefinitely outside the United States. Under current tax laws, if these funds were repatriated for use in our U.S. operations, we would be required to pay additional income taxes at the tax rates then in effect.
Results of Operations
Product sales
Worldwide product sales were as follows (dollar amounts in millions):
2012 Change 2011 Change 2010 Neulasta®/NEUPOGEN ® $ 5,352 3 % $ 5,212 8 % $ 4,844 ENBREL 4,236 14 % 3,701 5 % 3,534

Aranesp®                2,040     (11 )%      2,303      (7 )%      2,486
EPOGEN®                 1,941      (5 )%      2,040     (19 )%      2,524
XGEVA®                    748       *           351       *             8
Prolia®                   472       *           203       *            33
Other products          1,850      25  %      1,485      21  %      1,231
Total product sales  $ 16,639       9  %   $ 15,295       4  %   $ 14,660
Total U.S.           $ 12,815       9  %   $ 11,725       4  %   $ 11,254
Total ROW               3,824       7  %      3,570       5  %      3,406
Total product sales  $ 16,639       9  %   $ 15,295       4  %   $ 14,660

* Change in excess of 100% Future sales of our products will depend, in part, on the factors discussed in the Overview, Item 1. Business - Marketed Products, Item 1A. Risk Factors and any additional factors discussed in the individual product sections below.

Neulasta®/NEUPOGEN®
Total Neulasta® and total NEUPOGEN® sales by geographic region were as follows
(dollar amounts in millions):
                            2012     Change      2011     Change      2010
Neulasta® - U.S.          $ 3,207       7  %   $ 3,006      13  %   $ 2,654
Neulasta® - ROW               885      (6 )%       946       5  %       904
Total Neulasta®             4,092       4  %     3,952      11  %     3,558
NEUPOGEN® - U.S.            1,007       5  %       959       3  %       932
NEUPOGEN® - ROW               253     (16 )%       301     (15 )%       354
Total NEUPOGEN®             1,260       -  %     1,260      (2 )%     1,286
Total Neulasta®/NEUPOGEN® $ 5,352       3  %   $ 5,212       8  %   $ 4,844

The increase in U.S. Neulasta® sales for 2012 was driven by an increase in the average net sales price. The decrease in ROW Neulasta® sales for 2012 was due primarily to a decrease in unit demand from loss of share to biosimilars in Europe and a decrease in the average net sales price.
The increase in U.S. NEUPOGEN® sales for 2012 was driven by an increase in the average net sales price. The decrease in ROW NEUPOGEN® sales for 2012 was driven by a decrease in unit demand from loss of share to biosimilars in Europe. The increase in U.S. Neulasta® sales for 2011 was driven by increases in both unit demand and the average net sales price. The increase in ROW Neulasta® sales for 2011 was driven primarily by an increase in unit demand.
The increase in U.S. NEUPOGEN® sales for 2011 was driven by an increase in the average net sales price, offset partially by a decrease in unit demand. The decrease in ROW NEUPOGEN® sales for 2011 was driven by a decrease in unit demand, in part, from loss of share to biosimilars in Europe, and a decrease in the average net sales price.
Our outstanding material U.S. patents for Filgrastim (NEUPOGEN®) expire in December 2013. We expect to face competition in the United States beginning in the fourth quarter of 2013, which may have a material adverse impact over time on future sales of NEUPOGEN® and, in turn, Neulasta®. See Financial Condition, Liquidity and Capital Resources for further discussion of the potential impact of patent expiration. Our outstanding material U.S. patent for pegfilgrastim (Neulasta®) expires in 2015.
Future Neulasta®/NEUPOGEN® sales will also depend, in part, on the development of new protocols, tests and/or treatments for cancer and/or new chemotherapy treatments or alternatives to chemotherapy that may have reduced and may continue to reduce the use of chemotherapy in some patients.

ENBREL
Total ENBREL sales by geographic region were as follows (dollar amounts in
millions):
                    2012     Change      2011     Change      2010
ENBREL - U.S.     $ 3,967      15 %    $ 3,458      5 %     $ 3,304
ENBREL - Canada       269      11 %        243      6 %         230
Total ENBREL      $ 4,236      14 %    $ 3,701      5 %     $ 3,534

The increase in ENBREL sales for 2012 was driven primarily by an increase in the average net sales price and, to a lesser extent, an increase in unit demand. The increase in ENBREL sales for 2011 was driven primarily by an increase in the average net sales price.
ENBREL also faces increased competition. See Item 1. Business - Marketed Products.

Aranesp®
Total Aranesp® sales by geographic region were as follows (dollar amounts in
millions):
                  2012     Change      2011     Change      2010
Aranesp® - U.S. $   782     (21 )%   $   986     (11 )%   $ 1,103
Aranesp® - ROW    1,258      (4 )%     1,317      (5 )%     1,383
Total Aranesp®  $ 2,040     (11 )%   $ 2,303      (7 )%   $ 2,486

The decrease in U.S. Aranesp® sales for 2012 was driven by a decline in unit demand. The unit decline reflects changes in practice patterns resulting from changes to the label and to the reimbursement environment that occurred during 2011 (2011 changes). The decrease in ROW Aranesp® sales for 2012 was due primarily to a decrease in the average net sales price.
Sequentially, global Aranesp® unit demand was down 5% in the quarter ended December 31, 2012, compared with the quarter ended September 30, 2012. The decrease in U.S. Aranesp® sales for 2011 was driven primarily by a decline in unit demand due to the impact of the 2011 changes, offset partially by an increase in the average net sales price. The decrease in ROW Aranesp® sales for 2011 was due to a decrease in the average net sales price and a unit decline, reflecting segment contraction.
EPOGEN®
Total EPOGEN® sales were as follows (dollar amounts in millions):
2012 Change 2011 Change 2010 EPOGEN® - U.S. $ 1,941 (5 )% $ 2,040 (19 )% $ 2,524

The decrease in EPOGEN® sales for 2012 was driven by a 23% decrease in unit demand, driven by reductions in dose utilization due to changes to the label and to the reimbursement environment that occurred in 2011. This decrease was offset partially by reductions in customer discounts, as part of new provider contracts that became effective January 1, 2012, and by a year-over-year favorable change in accounting estimates of $96 million.
The decrease in EPOGEN® sales for 2011 was due primarily to a decrease in unit demand due to the impact of the 2011 changes, offset partially by an increase in the average net sales price and patient population growth. Future EPOGEN® sales will also depend, in part, on such factors as:
• increased competition in the U.S. dialysis setting;

• changes in dose utilization as healthcare providers continue to refine their treatment practices in accordance with approved labeling;

• new or amended contracts with dialysis centers; and

• adoption of alternative therapies or development of new modalities to treat anemia associated with CKD.

XGEVA® and Prolia®
Total XGEVA® and total Prolia® sales by geographic region were as follows
(dollar amounts in millions):
                       2012     Change     2011    Change    2010
XGEVA® - U.S.        $   644      88 %    $ 343         *   $   8
XGEVA® - ROW             104       *          8       N/A       -
Total XGEVA®             748       *        351         *       8
Prolia® - U.S.           292       *        130         *      26
Prolia® - ROW            180       *         73         *       7
Total Prolia®            472       *        203         *      33
Total XGEVA®/Prolia® $ 1,220       *      $ 554         *   $  41

* Change in excess of 100%

The increases in global XGEVA® and Prolia® sales for 2012 and 2011 were driven primarily by unit growth.
Sequentially, global XGEVA® and Prolia® sales increased 7% and 40%, respectively, in the quarter ended December 31, 2012, compared with the quarter ended September 30, 2012.
XGEVA® also faces increased competition. See Item 1. Business - Marketed Products.
Other products
Other product sales by geographic region were as follows (dollar amounts in millions):

                             2012     Change      2011     Change      2010
Sensipar®-U.S.             $   639      23 %    $   518       13 %   $   459
Sensipar®/Mimpara®-ROW         311       7 %        290       14 %       255
Vectibix®-U.S.                 122       - %        122        6 %       115
Vectibix®-ROW                  237      19 %        200       16 %       173
Nplate®-U.S.                   214      31 %        163       26 %       129
Nplate®-ROW                    154      15 %        134       34 %       100
Other-ROW                      173       *           58      N/A           -
Total other product sales  $ 1,850      25 %    $ 1,485       21 %   $ 1,231
Total U.S.- other products $   975      21 %    $   803       14 %   $   703
Total ROW- other products      875      28 %        682       29 %       528
Total other product sales  $ 1,850      25 %    $ 1,485       21 %   $ 1,231

* Change in excess of 100% Operating expenses Operating expenses were as follows (dollar amounts in millions):

                                  2012         Change         2011         Change          2010
Operating expenses:
Cost of sales (excludes
amortization of
certain acquired intangible
assets presented separately)   $   2,918           20  %   $   2,427            9 %    $    2,220
% of product sales                  17.5 %                      15.9 %                       15.1 %
Research and development       $   3,380            7  %   $   3,167            9 %    $    2,894
% of product sales                  20.3 %                      20.7 %                       19.7 %
Selling, general and
administrative                 $   4,801            7  %   $   4,486           13 %    $    3,983
% of product sales                  28.9 %                      29.3 %                       27.2 %
Amortization of certain
acquired intangible assets     $     294            -  %   $     294            - %    $      294

* Change in excess of 100% Cost of sales Cost of sales, which excludes the amortization of certain acquired intangible assets, increased to 17.5% of product sales for 2012, driven primarily by product mix and the Puerto Rico excise tax. Excluding the impacts of the Puerto Rico excise tax, cost of sales would have been 15.5% and 14.5% of product sales for 2012 and 2011, respectively. Cost of sales increased to 15.9% of product sales for 2011. Excluding the impact of the Puerto Rico excise tax, cost of sales would have been 14.5% of product sales compared with 15.1% for 2010. The decrease was driven by improved productivity, offset partially by certain expenses related to actions to improve cost efficiencies.

Research and development
R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems' costs and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs and cost recoveries associated with K-A and third-party R&D arrangements, including upfront fees and milestones paid to third parties in connection with technologies which had not reached technological feasibility and did not have an alternative future use. Net payment or reimbursement of R&D costs is recognized when the obligations are incurred or as we become entitled to the cost recovery. The Company groups all of its R&D activities and related expenditures into three categories: (1) Discovery Research and Translational Sciences, (2) later stage clinical programs and (3) marketed products. These categories include the Company's R&D activities as set forth in the following table:

        Category                                 Description
Discovery Research and      R&D expenses incurred in activities substantially in
Translational Sciences      support of early research through the completion of
                            phase 1 clinical trials. These activities encompass
                            our discovery research and translational sciences
                            functions, including drug discovery, toxicology,
                            pharmacokinetics and drug metabolism, and process
                            development.
Later stage clinical        R&D expenses incurred in or related to phase 2 and
programs                    phase 3 clinical programs intended to result in
                            registration of a new product or a new indication for
                            an existing product in the United States or the EU.
Marketed products           R&D expenses incurred in support of the Company's
                            marketed products that are authorized to be sold in
                            the United States or the EU. Includes clinical trials
                            designed to gather information on product safety
                            (certain of which may be required by regulatory
                            authorities) and their product characteristics after
                            regulatory approval has been obtained, as well as the
                            costs of obtaining regulatory approval of a product
. . .