Related party transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions [Abstract]

Related party transaction

7. Related party transactions

We own a 50% interest in K-A, a corporation formed in 1984 with Kirin Holdings Company, Limited (Kirin) for the development and commercialization of certain products based on advanced biotechnology. All of our rights to manufacture and market certain products including pegfilgrastim, granulocyte colony-stimulating factor, darbepoetin alfa, recombinant human erythropoietin and romiplostim are pursuant to exclusive licenses from K-A, which we currently market under the brand names Neulasta ^®, NEUPOGEN^®, Aranesp ^®, EPOGEN ^®, and Nplate^®, respectively.

We account for our interest in K-A using the equity method and include our share of K-A’s profits or losses in Selling, general and administrative expense in the Consolidated Statements of Income. For the years ended December 31, 2011, 2010 and 2009, our share of K-A’s profits was $47 million, $71 million and $72 million, respectively. During 2009, we received $110 million in dividends from K-A. At both December 31, 2011 and 2010, the carrying value of our equity method investment in K-A, net of dividends received, was approximately $0.4 billion and is included in noncurrent Other assets in the Consolidated Balance Sheets.

K-A’s revenues consist of royalty income related to its licensed technology rights. K-A receives royalty income from us, as well as from Kirin, J&J and F. Hoffmann-La Roche Ltd. (Roche) under separate product license contracts for certain geographic areas outside of the United States. During the years ended December 31, 2011, 2010 and 2009, K-A earned royalties from us of $298 million, $322 million and $327 million, respectively. These amounts are included in Cost of sales (excludes amortization of certain acquired intangible assets) in the Consolidated Statements of Income.

K-A’s expenses consist primarily of costs related to R&D activities conducted on its behalf by Amgen and Kirin. K-A pays Amgen and Kirin for such services at negotiated rates. During the years ended December 31, 2011, 2010 and 2009, we earned revenues from K-A of $130 million, $96 million and $102 million, respectively, for certain R&D activities performed on K-A’s behalf. These amounts are recognized as Other revenues in the Consolidated Statements of Income. We may also receive numerous individually immaterial milestones aggregating $125 million upon the achievement of various substantive success-based development and regulatory approval milestones contingent upon the occurrence of various future events, most of which have a high degree of uncertainty of occurring. During the years ended December 31, 2011, 2010 and 2009, we recorded cost recoveries from K-A of $85 million, $88 million and $96 million, respectively, related to certain third-party costs. These amounts are included in Research and development expense in the Consolidated Statements of Income.

As of December 31, 2011 and 2010, we owed K-A $75 million and $62 million, respectively, which are included in Accrued liabilities in the Consolidated Balance Sheets.