Collaborations

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Collaborations

Collaborations

A collaborative arrangement is a contractual arrangement that involves a joint operating activity. Such arrangements involve two or more parties that are both (i) active participants in the activity and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.

From time to time, we enter into collaborative arrangements for the R&D, manufacture and/or commercialization of products and/or product candidates. These collaborations generally provide for nonrefundable upfront license fees, development and commercial-performance milestone payments, cost sharing, royalty payments and/or profit sharing. Our collaboration arrangements are performed with no guarantee of either technological or commercial success, and each arrangement is unique in nature. See Note 1, Summary of significant accounting policies, for additional discussion of revenues recognized for these types of arrangements. Operating expenses for costs incurred pursuant to these arrangements are reported in their respective expense line items in the Consolidated Statements of Income, net of any payments due to or reimbursements due from our collaboration partners, with such reimbursements being recognized at the time the party becomes obligated to pay. Our significant arrangements are discussed below.

Novartis AG

We are in a collaboration with Novartis AG (Novartis) to jointly develop and commercialize Aimovig^® (erenumab-aooe). In the United States, Amgen and Novartis jointly develop and collaborate on the commercialization of Aimovig^®. Amgen, as the principal, recognizes product sales of Aimovig^® in the United States, shares U.S. commercialization costs with Novartis and pays Novartis a significant royalty on net sales in the United States. Novartis holds global co-development rights and exclusive commercial rights outside the United States and Japan for Aimovig^® and other specified migraine programs. Novartis pays Amgen double-digit royalties on net sales of the products in the Novartis exclusive territories and funds a portion of global R&D expenses. In addition, Novartis will make a payment to Amgen of up to $100 million if certain commercial and expenditure thresholds are achieved with respect to Aimovig^® in the United States. Amgen manufactures and supplies Aimovig^® worldwide. The migraine collaboration will continue for the commercial lives of the products unless terminated in accordance with its terms.

We are currently involved in litigation with Novartis over our collaboration agreements for the development and commercialization of Aimovig^®. See Note 19, Contingencies and commitments.

During the year ended December 31, 2019, net costs recovered from Novartis for migraine products were $187 million and were recorded primarily in Selling, general and administrative expense in the Consolidated Statements of Income. During the year ended December 31, 2018, net costs paid to Novartis for migraine products were $44 million and were recorded primarily in Selling, general and administrative expense in the Consolidated Statements of Income. During the year ended December 31, 2017, net costs recovered from Novartis for migraine products were $124 million and were recorded primarily in R&D expense in the Consolidated Statements of Income. During the years ended December 31, 2019 and 2018, royalties due to Novartis for the migraine products were $115 million and $43 million, respectively, and were recorded in Cost of sales in the Consolidated Statements of Income. During the years ended December 31, 2019 and 2018, royalties due from Novartis for the migraine products were not material. As a result of certain regulatory and commercial events, we received milestone payments from Novartis of $295 million during the year ended December 31, 2018, which was recorded in Other revenues in the Consolidated Statements of Income.

Bayer HealthCare LLC

We are in a collaboration with Bayer HealthCare LLC (Bayer) to jointly develop and commercialize Nexavar^® (sorafenib) worldwide, except in Japan. The rights to develop and market Nexavar^® in Japan are reserved to Bayer. Nexavar^® is currently marketed and sold in more than 100 countries around the world for the treatment of unresectable liver cancer and advanced kidney cancer. In the United States, Nexavar^® is also approved for the treatment of patients with locally recurrent or metastatic, progressive, differentiated thyroid carcinoma refractory to radioactive iodine treatment.

In 2015, we amended the terms of our collaboration agreement with Bayer, which terminated the co-promotion agreement in the United States and transferred all U.S. operational responsibilities to Bayer, including commercial and medical affairs activities. Prior to the termination of the co-promotion agreement, we co-promoted Nexavar^® with Bayer and shared equally in the profits or losses in the United States. In lieu of this profit share, Bayer now pays Amgen a royalty on U.S. sales of Nexavar^® at a percentage rate in the high 30s. Amgen no longer contributes sales force personnel or medical liaisons to support Nexavar^® in the United States. There are no changes to the global R&D or non-U.S. profit share arrangements in the original agreement, as discussed below.

In all countries outside the United States and Japan, Bayer manages all commercialization activities and incurs all of the sales and marketing expenditures and mutually agreed R&D expenses, for which we continue to reimburse Bayer for half. In these countries, we continue to receive 50% of net profits on sales of Nexavar^® after deducting certain Bayer-related costs.

The agreement with Bayer will terminate at the later of the date when patents expire that were issued in connection with product candidates discovered under the agreement or on the last day that we or Bayer market or sell products commercialized under the agreement anywhere in the world. Patents related to Nexavar^® begin to expire in 2020.

During the years ended December 31, 2019, 2018 and 2017, Amgen recorded Nexavar^® net profits of $210 million, $164 million and $161 million, respectively, which were recognized as Other revenues in the Consolidated Statements of Income. During the years ended December 31, 2019, 2018 and 2017, Amgen recorded royalty income of $79 million, $91 million and $133 million, respectively, in Other revenues in the Consolidated Statements of Income, pursuant to the 2015 amendment to the collaboration agreement. Net R&D expenses related to the agreement were not material for the years ended December 31, 2019, 2018 and 2017.

Other

In addition to the collaborations discussed above, we have various other collaborations that are not individually significant to our business at this time. Pursuant to the terms of those agreements, we may be required to pay additional amounts or we may receive additional amounts upon the achievement of various development and commercial milestones, which in the aggregate could be significant. We may also incur or have reimbursed to us significant R&D costs if the related product candidate were to advance to late-stage clinical trials. In addition, if any products related to these collaborations are approved for sale, we may be required to pay significant royalties or we may receive significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.