AMGEN INC [AMGN] Filings

10-Q 1 amgn-20220331.htm 10-Q amgn-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37702

Amgen Inc.

(Exact name of registrant as specified in its charter)


Delaware						95-3540776
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Amgen Center Drive						91320-1799
Thousand Oaks
California
(Address of principal executive offices)						(Zip Code)

(805) 447-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value	AMGN	The Nasdaq Stock Market LLC
2.00% Senior Notes due 2026	AMGN26	The Nasdaq Stock Market LLC

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of April 22, 2022, the registrant had 534,199,933 shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX


		Page No.
	Defined Terms and Products	ii
PART I - FINANCIAL INFORMATION		1
Item 1.	FINANCIAL STATEMENTS	1
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	1
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	2
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
Item 4.	CONTROLS AND PROCEDURES	40
PART II - OTHER INFORMATION		41
Item 1.	LEGAL PROCEEDINGS	41
Item 1A.	RISK FACTORS	41
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	43
Item 6.	EXHIBITS	44
INDEX TO EXHIBITS		45
SIGNATURES		51

Defined Terms and Products

Defined terms

We use several terms in this Form 10-Q—including but not limited to those that are finance, regulation and disease-state related as well as names of other companies, which are given below.

Term

Description

ANDA

Abbreviated New Drug Application

AOCI

accumulated other comprehensive income (loss)

ASR

accelerated share repurchase

BeiGene

BeiGene, Ltd.

BiTE®

bispecific T-cell engager

COVID-19

coronavirus disease 2019

EPS

earnings per share

ESA

erythropoiesis-stimulating agent

European Union

FASB

Financial Accounting Standards Board

FDA

U.S. Food and Drug Administration

Fitch

Fitch Ratings, Inc.

GAAP

U.S. generally accepted accounting principles

HGRAC

Human Genetic Resources Administration of China

IPR&D

in-process research and development

IRS

Internal Revenue Service

LIBOR

London Interbank Offered Rate

mCRPC

metastatic castration-resistant prostate cancer

MD&A

management’s discussion and analysis

Moody’s

Moody’s Investors Service, Inc.

Neumora

Neumora Therapeutics, Inc.

NSCLC

non-small cell lung cancer

OECD

Organization for Economic Co-operation and Development

ORR

objective response rate

PFS

progression-free survival

PTAB

Patent Trial and Appeal Board

R&D

research and development

RAR

Revenue Agent Report

ROW

rest of world

S&P

Standard & Poor’s Financial Services LLC

SEC

U.S. Securities and Exchange Commission

SOFR

Secured Overnight Financing Rate

SG&A

selling, general and administrative

Teneobio

Teneobio, Inc.

U.S. Treasury

U.S. Department of Treasury

UTB

unrecognized tax benefit

Products

The brand names of our products, our delivery devices and certain of our product candidates and their associated generic names are given below.


Term						Description
Aimovig						Aimovig® (erenumab-aooe)
AMGEVITA						AMGEVITA™ (adalimumab)
Aranesp						Aranesp® (darbepoetin alfa)
BLINCYTO						BLINCYTO® (blinatumomab)
ENBREL						Enbrel® (etanercept)
EPOGEN						EPOGEN® (epoetin alfa)
EVENITY						EVENITY® (romosozumab-aqqg)
KANJINTI						KANJINTI® (trastuzumab-anns)
KYPROLIS						KYPROLIS® (carfilzomib)
LUMAKRAS/LUMYKRAS						LUMAKRAS® / LUMYKRAS™ (sotorasib)
MVASI						MVASI® (bevacizumab-awwb)
Neulasta						Neulasta® (pegfilgrastim)
NEUPOGEN						NEUPOGEN® (filgrastim)
Nplate						Nplate® (romiplostim)
Onpro						Onpro®
Otezla						Otezla® (apremilast)
Parsabiv						Parsabiv® (etelcalcetide)
Prolia						Prolia® (denosumab)
Repatha						Repatha® (evolocumab)
Sensipar/Mimpara						Sensipar®/Mimpara™ (cinacalcet)
TEZSPIRE						TEZSPIRE™ (tezepelumab-ekko)
Vectibix						Vectibix® (panitumumab)
XGEVA						XGEVA® (denosumab)

iii

PART I — FINANCIAL INFORMATION


Item 1.			FINANCIAL STATEMENTS

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per-share data)

(Unaudited)


	Three months ended March 31,
	2022		2021
Revenues:
Product sales	$	5,731	$	5,592
Other revenues	507		309
Total revenues	6,238		5,901

Operating expenses:
Cost of sales	1,561		1,490
Research and development	959		967

Selling, general and administrative	1,228		1,254
Other	(10)		61
Total operating expenses	3,738		3,772

Operating income	2,500		2,129

Other income (expense):
Interest expense, net	(295)		(285)
Other (expense) income, net	(530)		13

Income before income taxes	1,675		1,857

Provision for income taxes	199		211

Net income	$	1,476	$	1,646

Earnings per share:
Basic	$	2.69	$	2.85
Diluted	$	2.68	$	2.83

Shares used in calculation of earnings per share:
Basic	548		577
Diluted	551		581

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three months ended March 31,
	2022		2021
Net income	$	1,476	$	1,646
Other comprehensive income, net of reclassification adjustments and taxes:
Foreign currency translation	(51)		(39)
Cash flow hedges	84		190

Other	—		1
Other comprehensive income, net of reclassification adjustments and taxes	33		152
Comprehensive income	$	1,509	$	1,798

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per-share data)


	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,528	$	7,989
Marketable securities	16		48
Trade receivables, net	5,077		4,895
Inventories	4,411		4,086
Other current assets	2,488		2,367
Total current assets	18,520		19,385

Property, plant and equipment, net	5,142		5,184
Intangible assets, net	14,567		15,182
Goodwill	14,897		14,890
Other noncurrent assets	6,070		6,524
Total assets	$	59,196	$	61,165

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,403	$	1,366
Accrued liabilities	10,639		10,731
Current portion of long-term debt	844		87
Total current liabilities	12,886		12,184

Long-term debt	36,010		33,222
Long-term tax liabilities	6,652		6,594
Other noncurrent liabilities	2,732		2,465

Contingencies and commitments

Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding—534.2 shares in 2022 and 558.3 shares in 2021	31,247		32,096
Accumulated deficit	(29,568)		(24,600)
Accumulated other comprehensive loss	(763)		(796)
Total stockholders’ equity	916		6,700
Total liabilities and stockholders’ equity	$	59,196	$	61,165

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except per-share data)

(Unaudited)


	Number of shares of common stock	Common stock and additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total
Balance as of December 31, 2021	558.3	$	32,096	$	(24,600)	$	(796)	$	6,700

Net income	—	—		1,476		—		1,476
Other comprehensive income, net of taxes	—	—		—		33		33
Dividends declared on common stock ($1.94 per share)	—	—		(1,034)		—		(1,034)
Issuance of common stock in connection with the Company’s equity award programs	0.5	18		—		—		18
Stock-based compensation expense	—	78		—		—		78
Tax impact related to employee stock-based compensation expense	—	(45)		—		—		(45)
Repurchases of common stock (Note 10)	(24.6)	(900)		(5,410)		—		(6,310)
Balance as of March 31, 2022	534.2	$	31,247	$	(29,568)	$	(763)	$	916


	Number of shares of common stock	Common stock and additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total
Balance as of December 31, 2020	578.3	$	31,802	$	(21,408)	$	(985)	$	9,409

Net income	—	—		1,646		—		1,646
Other comprehensive income, net of taxes	—	—		—		152		152
Dividends declared on common stock ($1.76 per share)	—	—		(1,012)		—		(1,012)
Issuance of common stock in connection with the Company’s equity award programs	0.7	6		—		—		6
Stock-based compensation expense	—	57		—		—		57
Tax impact related to employee stock-based compensation expense	—	(59)		—		—		(59)
Repurchases of common stock	(3.7)	—		(865)		—		(865)
Balance as of March 31, 2021	575.3	$	31,806	$	(21,639)	$	(833)	$	9,334

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three months ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	1,476	$	1,646
Depreciation, amortization and other	841		841
Deferred income taxes	(251)		(91)

Adjustments for equity method investments	305		(85)
Other items, net	240		164
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net	(195)		91
Inventories	(230)		(126)
Other assets	(43)		(146)
Accounts payable	42		(29)
Accrued income taxes, net	318		52
Long-term tax liabilities	57		69
Other liabilities	(396)		(282)
Net cash provided by operating activities	2,164		2,104
Cash flows from investing activities:

Purchases of marketable securities	—		(7,597)
Proceeds from sales of marketable securities	—		3,999
Proceeds from maturities of marketable securities	32		3,524

Purchases of property, plant and equipment	(190)		(166)

Other	47		(79)
Net cash used in investing activities	(111)		(319)
Cash flows from financing activities:
Net proceeds from issuance of debt	3,952		—


Repurchases of common stock (Note 10)	(6,360)		(871)
Dividends paid	(1,080)		(1,016)

Other	(26)		(52)
Net cash used in financing activities	(3,514)		(1,939)
Decrease in cash and cash equivalents	(1,461)		(154)
Cash and cash equivalents at beginning of period	7,989		6,266
Cash and cash equivalents at end of period	$	6,528	$	6,112

See accompanying notes.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

1. Summary of significant accounting policies

Business

Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. We operate in one business segment: human therapeutics.

Basis of presentation

The financial information for the three months ended March 31, 2022 and 2021, is unaudited but includes all adjustments (consisting of only normal, recurring adjustments unless otherwise indicated), which Amgen considers necessary for a fair presentation of its condensed consolidated results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.

The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

Principles of consolidation

The condensed consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. In determining whether we are the primary beneficiary of a variable interest entity, we consider whether we have both the power to direct activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of or the right to receive benefits from the entity that could potentially be significant to that entity. We do not have any significant interests in any variable interest entities of which we are the primary beneficiary. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with 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.

Property, plant and equipment, net

Property, plant and equipment is recorded at historical cost, net of accumulated depreciation and amortization of $8.9 billion and $8.8 billion as of March 31, 2022 and December 31, 2021, respectively.

Recent accounting pronouncements

In March 2020, the FASB issued a new accounting standard to ease the financial reporting burdens caused by the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, commonly referred to as reference rate reform. The new standard provides temporary optional expedients and exceptions to current GAAP guidance on contract modifications and hedge accounting. Specifically, a modification to transition to an alternative reference rate is treated as an event that does not require contract remeasurement or reassessment of a previous accounting treatment. Moreover, for all types of hedging relationships, an entity is permitted to change the reference rate without having to dedesignate the hedging relationship. The standard is generally effective for all contract modifications made and hedging relationships evaluated through December 31, 2022. In January 2021, the FASB issued a new accounting standard that expanded the scope of the original March 2020 standard to include derivative instruments on discounting transactions. We do not expect the two standards to have a material impact on our condensed consolidated financial statements.

In November 2021, the FASB issued a new accounting standard around the recognition and measurement of contract assets and contract liabilities from revenue contracts with customers acquired in a business combination. The new standard clarifies that contract assets and contract liabilities acquired in a business combination from an acquiree should initially be recognized by applying revenue recognition principles and not at fair value. The standard is effective for interim and annual periods beginning on January 1, 2023, and early adoption is permitted. The impact of this standard will depend on the facts and circumstances of future transactions.

2. Acquisitions

Teneobio, Inc.

On October 19, 2021, we acquired all of the outstanding stock of Teneobio, a privately held, clinical-stage biotechnology company developing a new class of biologics called human heavy-chain antibodies, which are single-chain antibodies composed of the human heavy-chain domain. The transaction, which was accounted for as a business combination, includes Teneobio’s proprietary bispecific and multispecific antibody technologies, which complement Amgen’s existing antibody capabilities and BiTE® platform and will enable significant acceleration and efficiency in the discovery and development of new molecules to treat diseases across Amgen’s core therapeutic areas. Upon its acquisition, Teneobio became a wholly owned subsidiary of Amgen, and its operations have been included in our condensed consolidated financial statements commencing on the acquisition date.

Measurement period adjustments for the three months ended March 31, 2022, included changes to the purchase price allocation and total consideration, resulting in a net increase of $22 million to goodwill. The measurement period adjustments resulted primarily from valuation inputs pertaining to certain acquired assets based on facts and circumstances that existed as of the acquisition date and did not result from events subsequent to the acquisition date. These adjustments did not have a significant impact on Amgen’s results of operations for the three months ended March 31, 2022, and would not have had a significant impact on prior-period results if these adjustments had been made as of the acquisition date. The following table summarizes the total consideration and allocated acquisition date fair values of assets acquired and liabilities assumed, inclusive of measurement period adjustments (in millions):


	Amounts
Cash purchase price	$	993
Contingent consideration	299
Total consideration	$	1,292

Cash and cash equivalents	$	100
IPR&D	991
Finite-lived intangible asset – R&D technology rights	115
Finite-lived intangible assets – licensing rights	41
Goodwill	273
Other assets, net	16
Deferred tax liability	(244)
Total assets acquired, net	$	1,292

The consideration for this transaction comprised (i) an upfront cash payment of $993 million, which included a working-capital adjustment, and (ii) future contingent milestone payments to Teneobio’s former equity holders of up to $1.6 billion in cash, based on the achievement of various development and regulatory milestones with regard to the leading asset (AMG 340, formerly TNB-585) and to various development milestones for other drug candidates. The estimated fair values of the contingent consideration obligations aggregated $299 million as of the acquisition date and were determined using a probability-weighted expected return methodology. The assumptions in this method include the probability of achieving the milestones and the expected payment dates, with such amounts discounted to present value based on our pre-tax cost of debt. See Note 11, Fair value measurement, for information regarding the estimated fair value of these obligations as of March 31, 2022.

The estimated fair values of acquired IPR&D assets totaled $991 million, of which $784 million relates to AMG 340, that is in a phase 1 clinical trial for the treatment of mCRPC, and the balance relates to four separate preclinical oncology programs. The R&D technology rights of $115 million relate to Teneobio’s proprietary bispecific and multispecific antibody technologies and will be amortized over 10 years using the straight-line method. Teneobio has also licensed its technology and certain identified targets to various third parties, representing contractual agreements valued at $41 million. The estimated fair values for these intangible assets were determined using a multi-period excess earnings income approach that discounts expected future cash flows to present value by applying a discount rate that represents the estimated rate that market participants would use to value the intangible assets. The projected cash flows were based on certain assumptions attributable to the respective intangible asset, including estimates of future revenues and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from the FDA and other regulatory agencies.

A deferred tax liability of $244 million was recognized on the temporary differences related to the book bases and tax bases of the acquired identifiable assets and assumed liabilities, primarily driven by the intangible assets acquired.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $273 million was recorded as goodwill, which is not deductible for tax purposes. The goodwill value represents expected synergies from both AMG 340 and the technologies acquired.

Our accounting for this acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, liabilities assumed and tax-related items as we obtain additional information during the measurement period of up to one year from the acquisition date.

3. Revenues

We operate in one business segment: human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Revenues by product and by geographic area, based on customers’ locations, are presented below. The majority of ROW revenues relates to products sold in Europe.

Revenues were as follows (in millions):


	Three months ended March 31,
	2022						2021
	U.S.		ROW		Total		U.S.		ROW		Total
Enbrel	$	843	$	19	$	862	$	894	$	30	$	924
Prolia	582		270		852		501		257		758
XGEVA	368		134		502		334		134		468
Otezla	350		101		451		366		110		476
Aranesp	137		221		358		125		230		355
Neulasta	304		44		348		421		61		482
Repatha	165		164		329		139		147		286
KYPROLIS	196		91		287		159		92		251
Nplate	156		110		266		112		115		227
Other products	936		540		1,476		852		513		1,365
Total product sales(1)	$	4,037	$	1,694	5,731		$	3,903	$	1,689	5,592
Other revenues					507						309
Total revenues					$	6,238					$	5,901

____________

(1) Hedging gains and losses, which are included in product sales, were not material for the three months ended March 31, 2022 and 2021.

4. Income taxes

The effective tax rates for the three months ended March 31, 2022 and 2021, were 11.9% and 11.4%, respectively.

The increase in our effective tax rate for the three months ended March 31, 2022, was primarily due to current year net unfavorable items compared to last year, offset by changes in earnings mix. The effective tax rates differ from the federal statutory rate primarily as a result of foreign earnings from the Company’s operations conducted in Puerto Rico, a territory of the United States treated as a foreign jurisdiction for U.S. tax purposes, that are subject to a tax incentive grant through 2035. In addition, the Company’s operations conducted in Singapore are subject to a tax incentive grant through 2034. These foreign earnings are also subject to U.S. tax at a reduced rate of 10.5%.

The U.S. territory of Puerto Rico imposes an excise tax on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. The rate of 4% is effective through December 31, 2027. 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, in 2022 the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes when the excise tax is incurred.

One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely examined by tax authorities in those jurisdictions. Significant disputes can and have arisen with tax authorities involving issues regarding the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and relevant facts. Tax authorities (including the IRS) are becoming more aggressive and are particularly focused on such matters.

In 2017, we received an RAR and a modified RAR from the IRS for the years 2010, 2011 and 2012 proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution. In July 2021, we filed a petition in the U.S. Tax Court to contest two duplicate Statutory Notices of Deficiency (Notices) for 2010, 2011 and 2012 that we received in May and July 2021, which seek to increase our U.S. taxable income for 2010-2012 by an amount that would result in additional federal tax of approximately $3.6 billion plus interest. Any additional tax that could be imposed for 2010-2012 would be reduced by up to approximately $900 million of repatriation tax previously accrued on our foreign earnings.

In 2020, we received an RAR and a modified RAR from the IRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico similar to those proposed for the years 2010, 2011 and 2012. We disagreed with the proposed adjustments and calculations and pursued resolution with the IRS appeals office but were unable to reach resolution. In April 2022, we received a Notice that seeks to increase our U.S. taxable income for 2013-2015 by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest. In addition, the Notice asserts penalties of approximately $2.0 billion. Any additional tax that could be imposed for 2013-2015 would be reduced by up to approximately $2.2 billion of repatriation tax previously accrued on our foreign earnings.

We firmly believe that the IRS positions set forth in the 2010-2012 and 2013-2015 Notices are without merit. We are contesting the 2010-2012 Notices through the judicial process, and we expect to file a Petition in the U.S. Tax Court to contest the 2013-2015 Notice through the judicial process. We will seek consolidation of the two periods into one case in Tax Court.

We are also currently under examination by the IRS for the years 2016, 2017 and 2018 and by a number of state and foreign tax jurisdictions.

Final resolution of these complex matters is not likely within the next 12 months. We believe our accrual for income tax liabilities is appropriate based on past experience, interpretations of tax law, application of the tax law to our facts and judgments about potential actions by tax authorities; however, due to the complexity of the provision for income taxes and uncertain resolution of these matters, the ultimate outcome of any tax matters may result in payments substantially greater than amounts accrued and could have a material adverse impact on our condensed consolidated financial statements.

We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009.

See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Income Taxes for further discussion and Part II, Item 1A, Risk Factors—The adoption and interpretation of new tax legislation or exposure to additional tax liabilities could affect our profitability.

During the three months ended March 31, 2022, the gross amounts of our UTBs increased $45 million, as a result of tax positions taken during the current year. Substantially all of the UTBs as of March 31, 2022, if recognized, would affect our effective tax rate.

5. Earnings per share

The computation of basic EPS is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which primarily include shares that may be issued under our stock option, restricted stock and performance unit award programs (collectively, dilutive securities), as determined by using the treasury stock method.

The computations for basic and diluted EPS were as follows (in millions, except per-share data):


	Three months ended March 31,
	2022		2021
Income (Numerator):
Net income for basic and diluted EPS	$	1,476	$	1,646

Shares (Denominator):
Weighted-average shares for basic EPS	548		577
Effect of dilutive securities	3		4
Weighted-average shares for diluted EPS	551		581

Basic EPS	$	2.69	$	2.85
Diluted EPS	$	2.68	$	2.83

For the three months ended March 31, 2022 and 2021, the number of antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

6. Investments

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of interest-bearing securities, which are considered available-for-sale, by type of security were as follows (in millions):


Types of securities as of March 31, 2022	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair values
U.S. Treasury notes	$	16	$	—	$	—	$	16
U.S. Treasury bills	—		—		—		—









Money market mutual funds	5,837		—		—		5,837
Other short-term interest-bearing securities	—		—		—		—


Total interest-bearing securities	$	5,853	$	—	$	—	$	5,853


Types of securities as of December 31, 2021	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair values
U.S. Treasury notes	$	47	$	—	$	—	$	47
U.S. Treasury bills	1,400		—		—		1,400









Money market mutual funds	5,856		—		—		5,856
Other short-term interest-bearing securities	1		—		—		1
Total interest-bearing securities	$	7,304	$	—	$	—	$	7,304

The fair values of interest-bearing securities by location in the Condensed Consolidated Balance Sheets were as follows (in millions):


Condensed Consolidated Balance Sheets locations	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	5,837	$	7,256
Marketable securities	16		48
Total interest-bearing securities	$	5,853	$	7,304

Cash and cash equivalents in the above table excludes bank account cash of $691 million and $733 million as of March 31, 2022 and December 31, 2021, respectively.

The fair values of available-for-sale investments by contractual maturity were as follows (in millions):


Contractual maturities	March 31, 2022		December 31, 2021
Maturing in one year or less	$	5,853	$	7,304





Total available-for-sale investments	$	5,853	$	7,304

For the three months ended March 31, 2022 and 2021, realized gains and losses on interest-bearing securities were not material. Realized gains and losses on interest-bearing securities are recorded in Other (expense) income, net, in the Condensed Consolidated Statements of Income. The cost of securities sold is based on the specific-identification method.

The primary objective of our investment portfolio is to maintain safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

Equity securities

We held investments in equity securities with readily determinable fair values (publicly traded securities) of $473 million and $611 million as of March 31, 2022 and December 31, 2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2022 and 2021, net unrealized losses on publicly traded securities were $170 million and $56 million, respectively. Realized gains and losses on sales of publicly traded securities for the three months ended March 31, 2022 and 2021, were not material.

We held investments of $261 million and $262 million in equity securities without readily determinable fair values as of March 31, 2022 and December 31, 2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2022 and 2021, upward adjustments and downward adjustments on these securities were not material. Adjustments were based on observable price transactions.

Equity method investments

BeiGene, Ltd.

As of March 31, 2022 and December 31, 2021, we had an ownership interest of approximately 18.4% in BeiGene, which is included in Other noncurrent assets in the Condensed Consolidated Balance Sheets and accounted for under the equity method of accounting. We amortize the difference between the fair value of equity securities acquired and our proportionate share of the carrying value of the underlying net assets of BeiGene over the useful lives of the assets that gave rise to this basis difference. This amortization and our share of the results of operations of BeiGene are included in Other (expense) income, net, in the Condensed Consolidated Statements of Income one quarter in arrears.

During the three months ended March 31, 2022 and 2021, the carrying value of our equity investment was adjusted by our share of BeiGene’s net losses of $108 million and $97 million, respectively, and amortization of the basis difference of $47 million and $42 million, respectively. As of March 31, 2022 and December 31, 2021, the carrying values of our investment in BeiGene totaled $2.6 billion and $2.8 billion, respectively, and the fair values of the investment totaled $3.6 billion and $5.1 billion, respectively. As of March 31, 2022, we believe the carrying value of our equity investment in BeiGene is fully recoverable.

Neumora Therapeutics, Inc.

On September 30, 2021, we acquired approximately 25.9% ownership interest in Neumora, a privately held company, for $257 million, which is included in Other noncurrent assets in the Condensed Consolidated Balance Sheets, in exchange for a $100 million cash payment and $157 million in noncash consideration primarily related to future services. Although our equity investment provides us with the ability to exercise significant influence over Neumora, we have elected the fair value option to account for our equity investment. Under the fair value option, changes in the fair value of the investment are recognized through earnings each reporting period. We believe the fair value option best reflects the economics of the underlying transaction. As of March 31, 2022 and December 31, 2021, our ownership interest in Neumora was 25.8% and 25.9%, respectively, and the fair values of our investment were $170 million and $220 million, respectively. Accordingly, during the three months ended March 31, 2022, we recognized a loss of $50 million for the reduction in fair value of our investment in Other (expense) income, net, in the Condensed Consolidated Statements of Income. For information on determination of fair values, see Note 11, Fair value measurement.

Limited partnerships

We held limited partnership investments of $403 million and $573 million as of March 31, 2022 and December 31, 2021, respectively, which are included in Other noncurrent assets in the Condensed Consolidated Balance Sheets. These investments, primarily investment funds of early-stage biotechnology companies, are accounted for by using the equity method of accounting and are measured by using our proportionate share of the net asset values of the underlying investments held by the limited partnerships as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of March 31, 2022, unfunded additional commitments to be made for these investments during the next several years were $182 million. During the three months ended March 31, 2022 and 2021, we recognized net losses of $160 million and net gains of $208 million, respectively, in Other (expense) income, net in the Condensed Consolidated Statements of Income on these investments.

7. Inventories

Inventories consisted of the following (in millions):


	March 31, 2022		December 31, 2021
Raw materials	$	750	$	647
Work in process	2,582		2,367
Finished goods	1,079		1,072
Total inventories	$	4,411	$	4,086

8. Goodwill and other intangible assets

Goodwill

The change in the carrying amount of goodwill was as follows (in millions):


	Three months ended March 31, 2022
Beginning balance	$	14,890
Goodwill resulting from acquisition of a business(1)	22
Currency translation adjustment	(15)
Ending balance	$	14,897

____________

(1) Composed of adjustments to goodwill resulting from changes to the acquisition date fair values of net assets acquired in the acquisition of Teneobio (see Note 2, Acquisitions).

Other intangible assets

Other intangible assets consisted of the following (in millions):


	March 31, 2022						December 31, 2021
	Gross carrying amounts		Accumulated amortization		Other intangible assets, net		Gross carrying amounts		Accumulated amortization		Other intangible assets, net
Finite-lived intangible assets:
Developed-product-technology rights	$	25,550	$	(13,316)	$	12,234	$	25,561	$	(12,769)	$	12,792
Licensing rights	3,864		(3,013)		851		3,807		(2,973)		834
Marketing-related rights	1,350		(1,129)		221		1,354		(1,112)		242
Research and development technology rights	1,386		(1,146)		240		1,377		(1,133)		244
Total finite-lived intangible assets	32,150		(18,604)		13,546		32,099		(17,987)		14,112
Indefinite-lived intangible assets:
In-process research and development	1,021		—		1,021		1,070		—		1,070
Total other intangible assets	$	33,171	$	(18,604)	$	14,567	$	33,169	$	(17,987)	$	15,182

Developed-product-technology rights consists of rights related to marketed products. Licensing rights primarily consists of contractual rights to receive future milestone, royalty and profit-sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and upfront payments associated with royalty obligations for marketed products. Marketing-related rights primarily consists of rights related to the sale and distribution of marketed products. R&D technology rights pertains to technologies used in R&D that have alternative future uses.

IPR&D consists of R&D projects acquired in a business combination that are not complete at the time of acquisition due to remaining technological risks and/or lack of receipt of required regulatory approvals. We review IPR&D projects for impairment annually, whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable and upon the establishment of technological feasibility or regulatory approval.

During the three months ended March 31, 2022 and 2021, we recognized amortization associated with our finite-lived intangible assets of $637 million and $654 million, respectively. Amortization of intangible assets is primarily included in Cost of sales in the Condensed Consolidated Statements of Income. The total estimated amortization for our finite-lived intangible assets for the remaining nine months ending December 31, 2022, and the years ending December 31, 2023, 2024, 2025, 2026 and 2027, are $1.9 billion, $2.5 billion, $2.5 billion, $2.4 billion, $1.7 billion and $1.8 billion, respectively.

9. Financing arrangements

Our borrowings consisted of the following (in millions):


	March 31, 2022		December 31, 2021
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)	$	759	$	767
2.25% notes due 2023 (2.25% 2023 Notes)	750		750
3.625% notes due 2024 (3.625% 2024 Notes)	1,400		1,400
1.90% notes due 2025 (1.90% 2025 Notes)	500		500
3.125% notes due 2025 (3.125% 2025 Notes)	1,000		1,000
2.00% €750 million notes due 2026 (2.00% 2026 euro Notes)	830		853
2.60% notes due 2026 (2.60% 2026 Notes)	1,250		1,250
5.50% £475 million notes due 2026 (5.50% 2026 pound sterling Notes)	624		643
2.20% notes due 2027 (2.20% 2027 Notes)	1,750		1,750
3.20% notes due 2027 (3.20% 2027 Notes)	1,000		1,000
1.65% notes due 2028 (1.65% 2028 Notes)	1,250		1,250
3.00% notes due 2029 (3.00% 2029 Notes)	750		—
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)	920		947
2.45% notes due 2030 (2.45% 2030 Notes)