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Cost savings initiatives
6 Months Ended
Jun. 30, 2011
Cost savings initiatives [Abstract]  
Cost savings initiatives
5. Cost savings initiatives
Manufacturing operations at Fremont, California
As part of continuing efforts to optimize our network of manufacturing facilities and improve cost efficiencies, on January 18, 2011, we entered into an agreement whereby Boehringer Ingelheim (BI) agreed to acquire all of our rights in and substantially all assets at our manufacturing operations located in Fremont, California. The transaction was approved by Amgen’s Board of Directors in December 2010 and closed in March 2011. In connection with the closing of this transaction, BI has assumed our obligations under the facility’s operating lease agreements and has entered into an agreement to manufacture certain quantities of our marketed product Vectibix®, for us at this facility through December 31, 2012 (the “supply agreement”).
Due to the lack of sufficient initial investment by BI in the acquisition of this facility and our ongoing involvement with these operations, the transaction did not meet the accounting requirements to be treated as a sale involving real estate. As a result, the related assets will continue to be carried on our Condensed Consolidated Balance Sheet.
We considered this transaction with BI to be a potential indicator of impairment and, accordingly, we performed an impairment analysis of the carrying values of the related fixed assets as of December 31, 2010. Based on this analysis, we determined that no future economic benefit would be received from a manufacturing line at the facility that had not yet been completed. As a result, we wrote off its entire carrying value, which aggregated $118 million during the three months ended December 31, 2010.
The carrying values of the remaining fixed assets, aggregating approximately $133 million, were determined to be fully recoverable. However, as a result of this transaction, we reduced the estimated remaining useful lives of these fixed assets to coincide with the period covered by the supply agreement. During the three and six months ended June 30, 2011, we recorded incremental depreciation in excess of what otherwise would have been recorded of approximately $11 million and $21 million, respectively. These amounts are included in Cost of sales (excludes amortization of certain acquired intangible assets presented below) in the Condensed Consolidated Statements of Income. In addition, due to the assignment to BI of the obligations under certain of the facility’s operating leases, we recorded charges of approximately $12 million and $23 million during the three and six months ended June 30, 2011, respectively, with respect to the lease period beyond the end of the supply agreement. These amounts are recorded in Cost of sales (excludes amortization of certain acquired intangible assets presented below) in the Condensed Consolidated Statements of Income.
Other
As part of continuing efforts to improve cost efficiencies in our manufacturing operations, we also recorded certain charges aggregating $11 million during the six months ended June 30, 2011 which are included in Other operating expenses in the Condensed Consolidated Statement of Income.