UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~ FORM 10-Q

(Mark One)



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

For the quarterly period ended June 30, ~~2018~~2019

ORor



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

Commission ~~file number~~ 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 ~~Thousand Oaks, California~~		91320-1799
Thousand Oaks
California
(Address of principal executive offices)		(Zip Code)

~~(805)~~ (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 Global Select Market
1.250% Senior Notes Due 2022	AMGN22	New York Stock Exchange
2.00% Senior Notes Due 2026	AMGN26	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 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 þ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files).Yes þ☑ 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. ~~(Check one):~~



Large accelerated filerþ	☑	Accelerated filer¨	☐	Non-accelerated filer¨ ~~(Do not check if a smaller reporting company)~~	☐
Smaller reporting company¨	☐	Emerging growth company¨	☐

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)Yes~~ ¨ No þ

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 July ~~18, 2018,~~24, 2019, the registrant had ~~647,272,067~~ 599,701,222shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX

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 June 30,					Six months ended June 30,					Three months ended June 30,						Six months ended June 30,
	2018			2017		2018			2017		2019			2018			2019			2018
Revenues:
Product sales	$	5,679		$	5,574	$	11,022		$	10,773	$	5,574		$	5,679		$	10,860		$	11,022
Other revenues	380			236		591			501		297			380			568			591
Total revenues	6,059			5,810		11,613			11,274		5,871			6,059			11,428			11,613

Operating expenses:
Cost of sales	1,024			1,024		1,968			2,020		1,012			1,024			2,067			1,968
Research and development	869			873		1,629			1,642		924			869			1,803			1,629
Selling, general and administrative	1,353			1,209		2,480			2,273		1,260			1,353			2,414			2,480
Other	(19		)	6		(22		)	50		(3		)	(19		)	(6		)	(22		)
Total operating expenses	3,227			3,112		6,055			5,985		3,193			3,227			6,278			6,055

Operating income	2,832			2,698		5,558			5,289		2,678			2,832			5,150			5,558

Interest expense, net	347			321		685			647		332			347			675			685
Interest and other income, net	162			165		393			360		218			162			403			393

Income before income taxes	2,647			2,542		5,266			5,002		2,564			2,647			4,878			5,266

Provision for income taxes	351			391		659			780		385			351			707			659

Net income	$	2,296		$	2,151	$	4,607		$	4,222	$	2,179		$	2,296		$	4,171		$	4,607

Earnings per share:
Basic	$	3.50		$	2.93	$	6.76		$	5.74	$	3.59		$	3.50		$	6.78		$	6.76
Diluted	$	3.48		$	2.91	$	6.73		$	5.71	$	3.57		$	3.48		$	6.75		$	6.73

Shares used in calculation of earnings per share:
Basic	656			734		682			736		607			656			615			682
Diluted	660			738		685			740		610			660			618			685

Dividends paid per share	$	1.32		$	1.15	$	2.64		$	2.30

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net income	$	2,296		$	2,151		$	4,607		$	4,222		$	2,179		$	2,296		$	4,171		$	4,607
Other comprehensive income (loss), net of reclassification adjustments and taxes:
(Losses) gains on foreign currency translation	(111		)	35			(82		)	59
Gains (losses) on cash flow hedges	223			(201		)	229			(274		)
Losses on foreign currency translation													(4		)	(111		)	(17		)	(82		)
(Losses) gains on cash flow hedges													(104		)	223			(59		)	229
Gains (losses) on available-for-sale securities	9			80			(334		)	238			153			9			374			(334		)
Other	—			(1		)	2			(1		)	6			—			6			2
Other comprehensive income (loss), net of taxes	121			(87		)	(185		)	22			51			121			304			(185		)
Comprehensive income	$	2,417		$	2,064		$	4,422		$	4,244		$	2,230		$	2,417		$	4,475		$	4,422

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per-share data)


	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	10,131		$	3,800		$	5,525		$	6,945
Marketable securities	19,264			37,878			16,233			22,359
Trade receivables, net	3,504			3,237			3,801			3,580
Inventories	3,063			2,834			3,176			2,940
Other current assets	2,008			1,727			2,011			1,794
Total current assets	37,970			49,476			30,746			37,618

Property, plant and equipment, net	4,922			4,989			4,882			4,958
Intangible assets, net	8,443			8,609			6,813			7,443
Goodwill	14,724			14,761			14,689			14,699
Other assets	1,625			2,119			2,243			1,698
Total assets	$	67,684		$	79,954		$	59,373		$	66,416

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,026		$	1,352		$	1,001		$	1,207
Accrued liabilities	5,891			6,516			6,805			7,862
Current portion of long-term debt	4,288			1,152			2,816			4,419
Total current liabilities	11,205			9,020			10,622			13,488

Long-term debt	30,209			34,190			27,798			29,510
Long-term deferred tax liabilities	1,155			1,166			763			864
Long-term tax liabilities	8,763			9,099			7,861			8,770
Other noncurrent liabilities	1,443			1,238			1,535			1,284

Contingencies and commitments

Stockholders’ equity:
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding — 649.0 shares in 2018 and 722.2 shares in 2017	31,048			30,992
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding — 602.1 shares in 2019 and 629.6 shares in 2018							31,313			31,246
Accumulated deficit	(15,266		)	(5,072		)	(20,054		)	(17,977		)
Accumulated other comprehensive loss	(873		)	(679		)	(465		)	(769		)
Total stockholders’ equity	14,909			25,241			10,794			12,500
Total liabilities and stockholders’ equity	$	67,684		$	79,954		$	59,373		$	66,416

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, 2018	629.6		$	31,246		$	(17,977	)	$	(769	)	$	12,500
Net income	—		—			1,992			—			1,992
Other comprehensive income, net of taxes	—		—			—			253			253
Dividends declared on common stock ($1.45 per share)	—		—			(879		)	—			(879		)
Issuance of common stock in connection with the Company’s equity award programs	0.7		6			—			—			6
Stock-based compensation expense	—		64			—			—			64
Tax impact related to employee stock-based compensation expense	—		(73		)	—			—			(73		)
Repurchases of common stock	(15.9	)	—			(3,031		)	—			(3,031		)
Balance as of March 31, 2019	614.4		31,243			(19,895		)	(516		)	10,832
Net income	—		—			2,179			—			2,179
Other comprehensive income, net of taxes	—		—			—			51			51
Issuance of common stock in connection with the Company’s equity award programs	0.8		23			—			—			23
Stock-based compensation expense	—		97			—			—			97
Tax impact related to employee stock-based compensation expense	—		(50		)	—			—			(50		)
Repurchases of common stock	(13.1	)	—			(2,349		)	—			(2,349		)
Other	—		—			11			—			11
Balance as of June 30, 2019	602.1		$	31,313		$	(20,054	)	$	(465	)	$	10,794

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, 2017	722.2		$	30,992		$	(5,072	)	$	(679	)	$	25,241
Cumulative effect of changes in accounting principles, net of taxes	—		—			38			(9		)	29
Net income	—		—			2,311			—			2,311
Other comprehensive loss, net of taxes	—		—			—			(306		)	(306		)
Dividends declared on common stock ($1.32 per share)	—		—			(877		)	—			(877		)
Issuance of common stock in connection with the Company’s equity award programs	0.6		5			—			—			5
Stock-based compensation expense	—		61			—			—			61
Tax impact related to employee stock-based compensation expense	—		(57		)	—			—			(57		)
Repurchases of common stock	(56.4	)	—			(10,787		)	—			(10,787		)
Balance as of March 31, 2018	666.4		31,001			(14,387		)	(994		)	15,620
Net income	—		—			2,296			—			2,296
Other comprehensive income, net of taxes	—		—			—			121			121
Issuance of common stock in connection with the Company’s equity award programs	0.8		19			—			—			19
Stock-based compensation expense	—		93			—			—			93
Tax impact related to employee stock-based compensation expense	—		(65		)	—			—			(65		)
Repurchases of common stock	(18.2	)	—			(3,190		)	—			(3,190		)
Other	—		—			15			—			15
Balance as of June 30, 2018	649.0		$	31,048		$	(15,266	)	$	(873	)	$	14,909

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six months ended June 30,						Six months ended June 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	4,607		$	4,222		$	4,171		$	4,607
Depreciation and amortization	955			1,042
Share-based compensation expense	147			156
Depreciation, amortization and other							996			955
Deferred income taxes	(114		)	(180		)	(70		)	(114		)
Other items, net	34			109			32			181
Changes in operating assets and liabilities, net of acquisition:
Trade receivables, net	(348		)	(391		)	(228		)	(348		)
Inventories	(135		)	(90		)	(118		)	(135		)
Other assets	(232		)	(194		)	(158		)	(232		)
Accounts payable	(329		)	(43		)	(205		)	(329		)
Accrued income taxes, net	(314		)	(120		)	(257		)	(314		)
Long-term tax liability	134			186
Long-term tax liabilities							(322		)	134
Other liabilities	424			14			(582		)	424
Net cash provided by operating activities	4,829			4,711			3,259			4,829
Cash flows from investing activities:
Purchases of marketable securities	(6,733		)	(19,244		)	(7,250		)	(6,733		)
Proceeds from sales of marketable securities	23,723			14,425			217			23,723
Proceeds from maturities of marketable securities	993			3,284			13,617			993
Cash acquired in acquisition, net of cash paid	197			—			—			197
Purchases of property, plant and equipment	(342		)	(353		)	(260		)	(342		)
Other	6			(82		)	(24		)	6
Net cash provided by (used in) investing activities	17,844			(1,970		)
Net cash provided by investing activities							6,300			17,844
Cash flows from financing activities:
Net proceeds from issuance of debt	—			3,485
Repayment of debt	(500		)	(4,405		)	(3,650		)	(500		)
Net change in commercial paper	—			959
Repurchases of common stock	(13,941		)	(1,562		)	(5,447		)	(13,941		)
Dividends paid	(1,816		)	(1,693		)	(1,781		)	(1,816		)
Other	(85		)	(137		)	(101		)	(85		)
Net cash used in financing activities	(16,342		)	(3,353		)	(10,979		)	(16,342		)
Increase (decrease) in cash and cash equivalents	6,331			(612		)
(Decrease) increase in cash and cash equivalents							(1,420		)	6,331
Cash and cash equivalents at beginning of period	3,800			3,241			6,945			3,800
Cash and cash equivalents at end of period	$	10,131		$	2,629		$	5,525		$	10,131

See accompanying notes.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2018~~2019

(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 and six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, 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, ~~2017,~~2018, and with our condensed consolidated financial statements and the notes thereto contained in our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019.

Principles of consolidation

The condensed consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. We do not have any significant interests in anyvariable interest entities. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (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 ~~$7.8~~$8.1 billion and ~~$7.6~~$7.8 billion as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~Revenues~~Leases

Adoption of new ~~revenue recognition~~lease standard

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for the recognition of revenue from contracts with customers to transfer goods and services. The FASB subsequently issued additional, clarifying standards to address issues arising from implementation of the new revenue recognition standard. The new revenue recognition standard and clarifying standards require an entity to recognize revenue when control of promised goods or services is transferred to the customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this new standard as of January 1, 2018, by applying the modified-retrospective method to those contracts that were not completed as of that date.

The results for reporting periods beginning after January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods. See Note 1, Summary of significant accounting policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017.

Upon adoption, we recorded a net decrease of $25 million to Accumulated deficit due to the cumulative impact of adopting the new standard—with the impact related primarily to the acceleration of deferred revenue, net of related deferred tax impact. The adoption of this new standard had an immaterial impact on our reported total revenues and operating income as compared to what reported amounts would have been under the prior standard, and we expect the impact of adoption in future periods to be immaterial. Our accounting policies under the new standard were applied prospectively and are described below. See Note 4, Revenues.

~~Product sales and sales deductions~~

Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon delivery, based on an amount that reflects the consideration to which we expect to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales deductions) and returns established at the time of sale.

We analyze the adequacy of our accruals for sales deductions quarterly. Amounts accrued for sales deductions are adjusted when trends or significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. Accruals for sales deductions are based primarily on estimates of the amounts earned or to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product specific and therefore, for any given period, can be affected by the mix of products sold. Included in sales deductions are immaterial net adjustments related to prior-period sales due to changes in estimates. Historically, such amounts have represented less than 1% of the aggregate sales deductions charged against product sales.

Returns are estimated through comparison of historical return data to their related sales on a production lot basis. Historical rates of return are determined for each product and are adjusted for known or expected changes in the marketplace specific to each product, when appropriate. Historically, sales return provisions have amounted to less than 1% of gross product sales. Changes in estimates for prior-period sales return provisions have historically been insignificant.

~~Taxes collected from customers and remitted to government authorities and that are related to sales of the Company’s products, primarily in Europe, are excluded from revenues.~~

As a practical expedient, sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Income.

~~Other revenues~~

Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on third-party sales of licensed products and are recorded when the related third-party product sale occurs. Royalty estimates are based on historical and forecasted sales trends. Corporate partner revenues are composed primarily of license fees and milestones earned and our share of commercial profits generated from collaborations. See Arrangements with multiple-performance obligations, discussed below.

~~Arrangements with multiple-performance obligations~~

From time to time, we enter into arrangements for the research and development (R&D), manufacture and/or commercialization of products and product candidates. Such arrangements may require us to deliver various rights, services and/or goods, including (i) intellectual property rights or licenses; (ii) R&D services; (iii) manufacturing services; and/or (iv) commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen in the form of nonrefundable, up-front license payments, R&D and commercial performance milestone payments, cost sharing and/or royalty payments.

In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.

~~Other recent accounting pronouncements~~

In January 2016, the FASB issued a new accounting standard that amends the accounting and disclosures of financial instruments, including a provision requiring that equity investments (except for investments accounted for under the equity method of accounting) be measured at fair value, with changes in fair value recognized in current earnings. With the exception of equity investments that were previously accounted for at cost, a modified-retrospective approach was used to reflect the cumulative effect of adoption as an adjustment to Accumulated deficit as of the beginning of the fiscal year. The new standard will be applied prospectively to investments that were previously accounted for at cost. Upon adoption, on January 1, 2018, we recorded an immaterial adjustment to Accumulated deficit from Accumulated other comprehensive income (loss) (AOCI), which represented

the net unrealized gain on all equity investments with a readily determinable fair value as of December 31, 2017. The impact that this new standard has on our Condensed Consolidated Statements of Income after adoption will depend on changes in fair values of equity securities in our portfolio in the future. See Note 8, Investments.

In October 2016, the FASB issued a new accounting standard that amends the income tax accounting guidance for intra-entity transfers of assets other than inventory. The new standard requires that entities recognize the income tax consequences of an intercompany transfer of an asset, other than inventory, in the period the transfer occurs. The current exception to defer the recognition of any tax impact on intercompany transfers of inventory until the inventory is sold to a third party remains unaffected. We adopted this standard as of January 1, 2018, and will apply it prospectively to any transaction occurring on or after the adoption date. The adoption of this standard did not have a material impact on our condensed consolidated financial statements, however the impact on our condensed consolidated financial statements in future periods will depend on the facts and circumstances of future transactions.

In March 2018, the FASB issued a new accounting standard to incorporate Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 118 (SAB 118), which addresses accounting implications of major tax reform legislation Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the 2017 Tax Act), enacted on December 22, 2017. SAB 118 allows a company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date and was effective upon issuance. We continue to analyze the 2017 Tax Act, and in certain areas, have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures. See Note 5, Income taxes.

In August 2017, the FASB issued a new accounting standard that amends the accounting and reporting of hedging activities, which we elected to adopt early during the second quarter of 2018. Among its provisions, the new standard: (i) eliminates the separate measurement and reporting of hedge ineffectiveness and (ii) permits an entity to recognize in earnings the initial fair value of an excluded component of a hedging instrument’s fair value under a systematic and rational method over the life of the derivative instrument. In accordance with the transition provisions of the new standard, the separate measurement of ineffectiveness for our cash flow hedging instruments existing as of the date of adoption is required to be eliminated through a cumulative-effect adjustment to Accumulated deficit as of January 1, 2018, the beginning of the fiscal year. The ineffective portions of our cash flow hedges were not material to our previously issued condensed consolidated financial statements. In addition, certain provisions in the guidance require modifications to existing presentation and disclosure requirements on a prospective basis. The adoption of this standard did not have a material impact on our condensed consolidated financial statements. See Note 14, Derivative instruments.

In January 2017, the FASB issued a new accounting standard that changes the definition of a business to assist entities with the evaluation of when a set of assets acquired or disposed of should be considered a business. The new standard requires that an entity evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets; if so, the set of assets would not be considered a business. The new standard also requires that a business include at least one substantive process, and it narrows the definition of outputs. We adopted this standard as of January 1, 2018, and will apply it prospectively. Adoption of this new standard may result in more transactions being accounted for as asset acquisitions versus business combinations; however, the impact on our condensed consolidated financial statements in future periods will depend on the facts and circumstances of future transactions.

~~In February 2016, the FASB~~ issued a new accounting standard that amends the guidance for the accounting and disclosure of leases. This new standard requires that lessees recognize ~~on the balance sheet~~ the assets and liabilities that arise from leases on the balance sheet, including leases classified as operating leases, ~~under current GAAP,~~ and that they disclose qualitative and quantitative information about leasing arrangements. The FASB subsequently issued additional amendments to address issues arising from the implementation of the new lease standard. We adopted this standard ~~requires a modified-retrospective approach to adoption and is effective for interim and annual periods beginning on~~as of January 1, 2019, ~~but may be adopted earlier.~~using the modified-retrospective method. This approach provides a method for recording existing leases at adoption. We ~~expect~~used the adoption date as our date of initial application, and thus comparative-period financial information is not presented for periods prior to ~~adopt this~~the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, ~~beginning~~which, among other things, allowed us to carry forward the historical lease classification.

Adoption of the new standard resulted in total lease liabilities of $510 million and right-of-use (ROU) assets of $439 million as of January 1, 2019. The difference between the ~~first quarter~~initial lease liabilities and the ROU assets is related primarily to previously existing lease liabilities. The standard did not materially impact our Condensed Consolidated Statements of ~~2019. We do not expect that this standard will have a material~~Income and had no impact on our Condensed Consolidated Statements of ~~Income, but~~Cash Flows. Our accounting policies under the new standard are described below. See Note 8, Leases.

Lease recognition

At inception of a contract, we ~~do expect that upon adoption, it will have~~determine whether an arrangement is or contains a ~~material impact on our~~lease. For all leases, we determine the classification as either operating or financing. Operating leases are included in Other assets, Accrued liabilities and Other noncurrent liabilities onin our Condensed Consolidated Balance Sheets. ~~The primary effect~~

ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments under the lease. Lease recognition occurs at the commencement date, and lease liability amounts are based on the present value of ~~adoption~~lease payments made during the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will beexercise that option. Because most of our leases do not provide information to determine an implicit interest rate, we use our incremental borrowing rate in determining the ~~requirement~~present value of lease payments. ROU assets also include any lease payments made prior to ~~record right-of-use assets~~the commencement date and ~~corresponding~~exclude lease ~~obligation liabilities~~incentives received. Operating lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with both lease and nonlease components, which are generally accounted for ~~current operating leases.~~together as a single lease component. In addition, for certain vehicle and equipment leases, we apply a portfolio approach to determine the ~~standard requires that we update the systems, processes~~lease term and ~~controls we use to track, record and account for our lease portfolio. We have selected a lease~~discount rate.

Other recent accounting information system and engaged third-party consultants to provide system implementation services. System readiness, including the implementation and functionality of software procured from third-party providers, is essential to enable preparation of the financial information required for this standard.pronouncements

In June 2016, the FASB issued a new accounting standard that amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the ~~“incurred loss”~~incurred-loss model with an ~~“expected loss”~~expected-loss model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than by reducing the carrying amount under the current, other-than-temporary-impairment model. The new standard is effective for interim and annual periods beginning on January 1, 2020, but may be adopted ~~earlier, beginning on January 1, 2019.~~earlier. With certain exceptions, adjustments are to be applied by using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained

earnings as of the beginning of the fiscal year of adoption. We are currently evaluating the impact that this new standard will have on our condensed consolidated financial statements.

2. ~~Restructuring~~

In 2014, we initiated a restructuring plan to invest in continuing innovation and the launch of our new pipeline molecules, while improving our cost structure. As part of the plan, we closed facilities in Washington State and Colorado and are reducing the number of buildings we occupy at our headquarters in Thousand Oaks, California, as well as at other locations.

We estimate that we will incur $800 million to $900 million of pretax charges in connection with our restructuring, including (i) separation and other headcount-related costs of $540 million to $600 million with respect to staff reductions and (ii) asset-related charges of $260 million to $300 million that consist primarily of asset impairments, accelerated depreciation and other related costs resulting from the consolidation of our worldwide facilities. Through June 30, 2018, we incurred $549 million of separation costs and other headcount-related costs and $245 million of net asset-related charges.

The amounts related to the restructuring recorded in the Condensed Consolidated Statements of Income during the three and six months ended June 30, 2018 and 2017, were not significant. As of June 30, 2018, the total restructuring liability was not significant.

~~3. Business combinations~~

~~Kirin-Amgen, Inc.~~

During the first quarter of 2018, we acquired the remaining 50% ownership of Kirin-Amgen, Inc. (K-A) from Kirin Holdings Company, Limited (Kirin), making K-A a wholly owned subsidiary of Amgen. Upon its acquisition, K-A’s operations have been included in our condensed consolidated financial statements commencing on the share acquisition date. The acquisition relieved Amgen of future royalty obligations to K-A.

~~K-A is a corporation that was established in 1984 as a 50-50 joint venture with Kirin to fund the global development of EPOGEN~~^® ~~(epoetin alfa). Over time, the scope of the collaboration was expanded to also include the products NEUPOGEN~~^® ~~(filgrastim), Neulasta~~^® ~~(pegfilgrastim), Aranesp~~^® ~~(darbepoetin alfa), Nplate~~^® (romiplostim) and brodalumab. K-A held the intellectual property for each of these products and licensed the associated marketing rights in Asia to Kyowa Hakko Kirin (KHK), Kirin’s pharmaceutical subsidiary, and in most other territories to Amgen. In return, Amgen and KHK paid royalties to K-A, and K-A reimbursed Amgen and KHK’s R&D expenses. K-A had also given Johnson & Johnson (J&J) exclusive licenses to manufacture and market recombinant human erythropoietin for all geographic areas of the world outside the United States, China and Japan. Under this agreement, J&J pays royalties to K-A based on product sales.

Prior to the share acquisition date, we owned 50% of K-A and accounted for our interest in K-A by using the equity method of accounting, which included recording our share of K-A’s profits or losses in Selling, general and administrative expenses in the Condensed Consolidated Statements of Income. The carrying value of our equity method investment in K-A was $570 million as of December 31, 2017, and was included in Other assets in the Condensed Consolidated Balance Sheet.

The transaction was accounted for as a step acquisition of a business in which we were required to remeasure our existing 50% ownership interest at fair value. In addition, we were required to effectively settle our preexisting relationship with K-A, which resulted in a loss. Together the gain on the remeasurement of our existing ownership interest and the loss from the settlement of the preexisting relationship resulted in a net gain of $80 million, which was recorded in Interest and other income, net, in the Condensed Consolidated Statements of Income.

The primary means of consideration for this transaction was a payment of $780 million in cash. The aggregate share acquisition date consideration to acquire the remaining 50% ownership in K-A and the fair value of Amgen’s preacquisition investment consisted of the following (in millions):

Amount
Total cash paid to Kirin $ 780
Fair value of contingent consideration obligation 45
Loss on settlement of preexisting relationship (168 )
Total consideration transferred to acquire K-A 657

Fair value of Amgen’s investment in K-A 825
Total acquisition date fair value $ 1,482

In connection with this acquisition, we are obligated to make single-digit-percentage royalty payments to Kirin contingent upon sales of brodalumab. The estimated fair value of this contingent consideration obligation was $45 million as of the share acquisition date.

The fair values of assets acquired and liabilities assumed included cash of $977 million, licensing rights of $470 million, deferred tax liabilities of $102 million, other assets and liabilities of $131 million and goodwill of $6 million. The estimated fair value of acquired licensing rights was determined by using a probability-weighted-income approach, which discounts expected future cash flows to present value by using a discount rate that represents the estimated rate that market participants would use to value the assets. The projected cash flows were based on certain assumptions, including estimates of future revenues and expenses and the time and resources needed to maintain the assets through commercialization. The licensing rights will be amortized over a weighted-average period of four years by using the straight-line method. The excess of the share acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $6 million was recorded as goodwill, which is not deductible for tax purposes. The $131 million in other assets and liabilities represents primarily receivables for royalties earned by K-A but not yet received, offset partially by payables representing R&D expenses incurred but not yet reimbursed by K-A. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations and valuations, and our estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the share acquisition date). The primary areas of those preliminary estimates that are not yet finalized relate to tax-related items.

~~Pro forma results of operations for this acquisition have not been presented because this acquisition is not material to our consolidated results of operations.~~

4. Revenues

~~Revenues by product and by geographic area~~

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. Rest-of-world (ROW) revenues relate to products that are sold ~~principally~~primarily in Europe.

Revenues were as follows (in millions):

Three months ended June 30,
2018 2017
US ROW Total US ROW Total
Enbrel^®
1,252
50
1,302
1,411
55
1,466
Neulasta^®
948
152
1,100
937
150
1,087
Prolia^®
396
214
610
326
179
505
Aranesp^®
241
231
472
288
247
535
Sensipar^® / Mimpara^®
330
90
420
342
85
427
XGEVA^®
339
113
452
292
103
395
EPOGEN^®
250
—
250
292
—
292
Other products 611
462
1,073
498
369
867
Total product sales⁽¹⁾
$ 4,367
$ 1,312
$ 5,679
$ 4,386
$ 1,188
$ 5,574
Other revenues 380
236
Total revenues⁽²⁾
$ 6,059
$ 5,810



	Three months ended June 30,
	2019						2018
	US		ROW		Total		US		ROW		Total
Enbrel^®(etanercept)	$	1,315	$	48	$	1,363	$	1,252	$	50	$	1,302
Neulasta^®(pegfilgrastim)	719		105		824		948		152		1,100
Prolia^®(denosumab)	458		240		698		396		214		610
XGEVA^® (denosumab)	379		120		499		339		113		452
Aranesp^®(darbepoetin alfa)	192		244		436		241		231		472
KYPROLIS^®(carfilzomib)	166		101		267		151		112		263
EPOGEN^®(epoetin alfa)	223		—		223		250		—		250
Sensipar^®/Mimpara^®(cinacalcet)	43		79		122		330		90		420
Other products	647		495		1,142		460		350		810
Total product sales⁽¹⁾	$	4,142	$	1,432	5,574		$	4,367	$	1,312	5,679
Other revenues					297						380
Total revenues					$	5,871					$	6,059


	Six months ended June 30,												Six months ended June 30,
	2018						2017						2019						2018
	US		ROW		Total		US		ROW		Total		US		ROW		Total		US		ROW		Total
Enbrel^®	2,302		105		2,407		2,529		118		2,647
ENBREL													$	2,421	$	93	$	2,514	$	2,302	$	105	$	2,407
Neulasta^®	1,957		298		2,255		1,985		312		2,297		1,612		233		1,845		1,957		298		2,255
Prolia^®	716		388		1,104		605		325		930		848		442		1,290		716		388		1,104
XGEVA^®													735		235		970		671		226		897
Aranesp^®	466		460		926		566		480		1,046		374		476		850		466		460		926
Sensipar^® / Mimpara^®	739		178		917		679		169		848
XGEVA^®	671		226		897		590		207		797
KYPROLIS^®													320		192		512		288		197		485
EPOGEN^®	494		—		494		562		—		562		442		—		442		494		—		494
Sensipar^®/Mimpara^®													178		157		335		739		178		917
Other products	1,169		853		2,022		965		681		1,646		1,203		899		2,102		881		656		1,537
Total product sales⁽¹⁾	$	8,514	$	2,508	$	11,022	$	8,481	$	2,292	$	10,773	$	8,133	$	2,727	10,860		$	8,514	$	2,508	11,022
Other revenues					591						501						568						591
Total revenues⁽²⁾					$	11,613					$	11,274
Total revenues																	$	11,428					$	11,613

^____________

⁽¹⁾

~~Total~~Hedging gains and losses, which are included in product sales, ~~includes $20 million related to hedging losses and $33 million related to hedging gains~~were not material for the three ~~months ended June 30, 2018~~ and ~~2017, respectively. Total product sales includes $54 million related to hedging losses and $90 million related to hedging gains for the~~ six months ended June 30, ~~2018~~2019 and ~~2017, respectively.~~2018.


⁽²⁾	~~Prior-period amounts are not adjusted under the modified-retrospective method of adoption.~~

~~Financing and payment~~

Our payment terms vary by types and locations of customers and the products or services offered. Payment terms differ by jurisdiction and customer, but payment is generally required in a term ranging from 30 to 120 days from date of shipment or satisfaction of the performance obligation.

~~For certain products or services and certain customer types, we may require payment before products are delivered or services are rendered to customers.~~

~~Optional exemptions~~

We do not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

5.3. Income taxes

The effective tax rates for the three and six months ended June 30, ~~2018,~~2019, were ~~13.3%~~15.0% and ~~12.5%~~14.5%, respectively, compared with ~~15.4%~~13.3% and ~~15.6%~~12.5%, respectively, for the corresponding periods of the prior year.

The ~~decrease~~increase in our effective tax ~~rate~~rates for the three and six months ended June 30, ~~2018,~~2019, was due primarily to ~~the impacts of~~a prior-year tax benefit associated with intercompany sales under U.S. corporate tax ~~reform, offset partially by~~reform. The effective tax rates differ from the federal statutory rate primarily as a ~~prior year benefit associated with~~result of foreign earnings from the ~~effective settlement~~Company’s operations conducted in Puerto Rico, a territory of ~~certain state and federal tax matters.~~

~~On December 22, 2017,~~ the United States enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreign subsidiaries, implements a hybrid territorial tax system together with a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In March 2018, the FASB issued a new accounting standard to incorporate SAB 118, which permits us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We continue to analyze the 2017 Tax Act and in certain areas have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures.

The 2017 Tax Act includes U.S. taxation on certain foreign earnings, referred to as Global Intangible Low-Taxed Income (foreign intangible income), effective January 1, 2018. The FASB allows an entity to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as foreign intangible income in future years or provide for the tax expense related to the foreign intangible incomethat is treated as a ~~period expense in the year it~~foreign jurisdiction for U.S. tax purposes and that is ~~incurred. We have recorded no provisional amount for deferred taxes on foreign intangible income because more time is needed~~subject to ~~analyze the data in order~~tax incentive grants through 2035; these earnings are subject to ~~make an accounting policy election.~~U.S. tax at a reduced 10.5% rate.

We consider our key estimates on the repatriation tax, the net deferred tax remeasurement, the impact on our unrealized tax benefits and the accounting policy election on temporary basis differences related to foreign intangible income to be incomplete due to our continuing analysis of final year-end data and tax positions. We are still accumulating and processing data to update our underlying calculations, and we expect the U.S. Treasury and regulators may issue further guidance, among other things; therefore, our estimates may change during 2018. However, we expect to complete our analysis within the measurement period.

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, 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 ~~audited~~examined by ~~the~~ tax authorities in those jurisdictions. Significant disputes may arise with authorities involving issues of 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 and regulations and the ~~interpretation~~interpretations of the relevant facts. As previously disclosed, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the years 2010, 2011 and 2012. The RAR proposes to make significant adjustments that relate primarily to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. OnIn November ~~29,~~ 2017, we received a modified RAR that revised the ~~IRS calculations~~IRS’s calculation but continued to propose substantial adjustments. We disagree with the proposed adjustments and are pursuing resolution ~~through~~with the IRS administrative appeals ~~process,~~office, which currently has jurisdiction over the matter. If we ~~believe~~deem necessary, we will ~~likely~~vigorously contest the proposed adjustments through the judicial process. Final resolution of this complex matter is not ~~be concluded~~likely within the next 12 ~~months. Final resolution of the IRS audit~~months and could have a material impact on our ~~results of operations and cash flows if not resolved favorably, however, we~~condensed consolidated financial statements. We believe our accrual for income tax ~~reserves are appropriately provided~~liabilities is appropriate based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the complexity of the provision for ~~all open~~income taxes, the ultimate resolution of any tax ~~years.~~matters may result in payments greater or less than amounts accrued. We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009. WeIn addition, we are currently under examination by a number of other state and foreign tax jurisdictions.

During the three and six months ended June 30, ~~2018,~~2019, the gross amounts of our unrecognized tax benefits (UTBs) increased ~~$80~~$60 million and ~~$155~~$110 million, respectively, as a result of tax positions taken during the current year. Substantially all of the UTBs as of June 30, ~~2018,~~2019, if recognized, would affect our effective tax rate.

6.4. Earnings per share

The computation of basic earnings per share (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 include primarily 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 (collectively, dilutive securities).~~method.

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



	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Income (Numerator):
Net income for basic and diluted EPS	$	2,179	$	2,296	$	4,171	$	4,607

Shares (Denominator):
Weighted-average shares for basic EPS	607		656		615		682
Effect of dilutive securities	3		4		3		3
Weighted-average shares for diluted EPS	610		660		618		685

Basic EPS	$	3.59	$	3.50	$	6.78	$	6.76
Diluted EPS	$	3.57	$	3.48	$	6.75	$	6.73

Three months ended
June 30, Six months ended
June 30,
2018 2017 2018 2017
Income (Numerator):
Net income for basic and diluted EPS $ 2,296
$ 2,151
$ 4,607
$ 4,222

Shares (Denominator):
Weighted-average shares for basic EPS 656
734
682
736
Effect of dilutive securities 4
4
3
4
Weighted-average shares for diluted EPS 660
738
685
740

Basic EPS $ 3.50
$ 2.93
$ 6.76
$ 5.74
Diluted EPS $ 3.48
$ 2.91
$ 6.73
$ 5.71

For the three and six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, the number of ~~anti-dilutive~~antidilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

~~7. 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 up-front 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 is unique in nature. The following describes a significant arrangement that had a material change since the filing of our Annual Report on Form 10-K for the year ended December 31, 2017.

~~Novartis AG~~

~~In April 2017, we expanded our existing migraine collaboration with Novartis AG (Novartis). In the United States, Amgen and Novartis jointly develop and collaborate on the commercialization of Aimovig~~^TM~~(erenumab -aooe). Amgen, as the principal, recognizes product sales of Aimovig~~^TM 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^TM 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. As a result of certain regulatory and commercial events, during the three months ended June 30, 2018, we received a milestone payment of $148 million from Novartis, which was recorded in Other revenues in the Condensed Consolidated Statement of Income. In addition, Novartis will make payments to Amgen that could collectively amount to approximately $250 million if certain commercial thresholds are achieved with respect to Aimovig^TM ~~in the United States. Amgen manufactures and supplies Aimovig~~^TM ~~worldwide.~~

~~The migraine collaboration will continue for the commercial lives of the products unless terminated in accordance with its terms.~~

8.5. 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, ~~investments~~ by type of security were as follows (in millions):


Types of securities as of June 30, 2018	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair values
U.S. Treasury securities	$	3,477	$	—	$	(86	)	$	3,391
Types of securities as of June 30, 2019										Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair values
U.S. Treasury notes										$	2,709	$	10	$	(2	)	$	2,717
U.S. Treasury bills										3,497		—		—			3,497
Other government-related debt securities:
U.S.	132		—		(4		)	128		112		—		—			112
Foreign and other	1,451		1		(62		)	1,390		962		18		(3		)	977
Corporate debt securities:
Financial	4,091		1		(124		)	3,968		2,755		19		(1		)	2,773
Industrial	3,957		4		(122		)	3,839		2,400		14		(6		)	2,408
Other	699		—		(23		)	676		558		4		—			562
Residential-mortgage-backed securities	1,632		—		(53		)	1,579		1,335		2		(4		)	1,333
Other mortgage- and asset-backed securities	672		—		(20		)	652		469		—		(6		)	463
Money market mutual funds	7,341		—		—			7,341		3,886		—		—			3,886
Other short-term interest-bearing securities	5,872		—		—			5,872		2,389		—		—			2,389
Total available-for-sale investments	$	29,324	$	6	$	(494	)	$	28,836
Total interest-bearing securities										$	21,072	$	67	$	(22	)	$	21,117



Types of securities as of December 31, 2018	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair values
U.S. Treasury notes	$	2,710	$	—	$	(47	)	$	2,663
U.S. Treasury bills	8,191		—		—			8,191
Other government-related debt securities:
U.S.	112		—		(2		)	110
Foreign and other	972		1		(41		)	932
Corporate debt securities:
Financial	2,778		—		(81		)	2,697
Industrial	2,603		—		(99		)	2,504
Other	583		—		(21		)	562
Residential-mortgage-backed securities	1,458		—		(36		)	1,422
Other mortgage- and asset-backed securities	483		—		(14		)	469
Money market mutual funds	5,659		—		—			5,659
Other short-term interest-bearing securities	3,515		—		—			3,515
Total interest-bearing securities	$	29,064	$	1	$	(341	)	$	28,724

Types of securities as of December 31, 2017
Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
values
U.S. Treasury securities $ 8,313
$ 1
$ (72 ) $ 8,242
Other government-related debt securities:
U.S. 225
—
(2 ) 223
Foreign and other 2,415
18
(11 ) 2,422
Corporate debt securities:
Financial 10,089
17
(34 ) 10,072
Industrial 9,688
34
(52 ) 9,670
Other 1,393
3
(6 ) 1,390
Residential-mortgage-backed securities 2,198
—
(30 ) 2,168
Other mortgage- and asset-backed securities 2,312
—
(15 ) 2,297
Money market mutual funds 3,245
—
—
3,245
Other short-term interest-bearing securities 1,440
—
—
1,440
Total interest-bearing securities 41,318
73
(222 ) 41,169
Equity securities 135
14
—
149
Total available-for-sale investments $ 41,453
$ 87
$ (222 ) $ 41,318

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



Condensed Consolidated Balance Sheets locations	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	4,884	$	6,365
Marketable securities	16,233		22,359
Total interest-bearing securities	$	21,117	$	28,724

Condensed Consolidated Balance Sheets locations June 30,
2018 December 31,
2017
Cash and cash equivalents $ 9,572
$ 3,291
Marketable securities 19,264
37,878
Other assets —
149
Total available-for-sale investments $ 28,836
$ 41,318

Cash and cash equivalents in the above table excludes bank account cash of ~~$559~~$641 million and ~~$509~~$580 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. ~~Other assets as of December 31, 2017, consisted of equity securities, which are no longer classified as available-for-sale.~~

As a result of the adoption of the new accounting standard related to the classification and measurement of financial instruments on January 1, 2018, equity investments (except for investments accounted for under the equity method of accounting) are now measured at fair value, with changes in fair value recognized in earnings. These investments were previously measured at fair value, with changes in fair value recognized in AOCI. Accordingly, these securities are no longer classified as available-for-sale and their presentation is not comparable to the presentation as of December 31, 2017. See Equity securities, discussed below, and Note 1, Summary of significant accounting policies.

The fair values of ~~available-for-sale~~ interest-bearing ~~security investments~~securities by contractual maturity, except for mortgage- and asset-backed securities that do not have a single maturity date, were as follows (in millions):



Contractual maturities	June 30, 2019		December 31, 2018
Maturing in one year or less	$	9,872	$	17,424
Maturing after one year through three years	5,730		3,356
Maturing after three years through five years	2,961		5,168
Maturing after five years through ten years	758		885
Mortgage- and asset-backed securities	1,796		1,891
Total interest-bearing securities	$	21,117	$	28,724

Contractual maturities June 30,
2018 December 31,
2017
Maturing in one year or less $ 13,265
$ 6,733
Maturing after one year through three years 4,066
12,820
Maturing after three years through five years 7,940
13,836
Maturing after five years through ten years 1,334
3,263
Maturing after ten years —
52
Mortgage- and asset-backed securities 2,231
4,465
Total interest-bearing securities $ 28,836
$ 41,169

For the three months ended June 30, ~~2018~~2019 and ~~2017,~~2018, realized gains on interest-bearing securities were $5$1 million and ~~$34~~$5 million, respectively, and realized losses on interest-bearing securities were ~~$120~~$3 million and ~~$87~~$120 million, respectively. For the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, realized gains on interest-bearing securities were ~~$22~~$2 million and ~~$65~~$22 million, respectively, and realized losses on interest-bearing securities were $8 million and $271 million, respectively. Realized gains and ~~$171 million, respectively.~~losses on interest-bearing securities are recorded in Interest and other income, net, in the Condensed Consolidated Statements of Income. The cost of securities sold is based on the specific-identification method.

The fair values and gross unrealized losses of ~~available-for-sale investments~~interest-bearing securities in an unrealized loss position aggregated by type and length of time that the securities have been in a continuous loss position were as follows (in millions):


	Less than 12 months					12 months or more					Less than 12 months					12 months or more
Types of securities as of June 30, 2018	Fair values		Unrealized losses			Fair values		Unrealized losses
U.S. Treasury securities	$	3,355	$	(85	)	$	36	$	(1	)
Types of securities as of June 30, 2019											Fair values		Unrealized losses			Fair values		Unrealized losses
U.S. Treasury notes											$	105	$	—		$	724	$	(2	)
Other government-related debt securities:
U.S.	102		(3		)	26		(1		)	—		—			48		—
Foreign and other	1,209		(56		)	112		(6		)	6		—			115		(3		)
Corporate debt securities:
Financial	3,673		(115		)	258		(9		)	121		—			320		(1		)
Industrial	3,244		(110		)	314		(12		)	191		(3		)	500		(3		)
Other	584		(20		)	65		(3		)	30		—			40		—
Residential-mortgage-backed securities	1,267		(42		)	303		(11		)	93		—			685		(4		)
Other mortgage- and asset-backed securities	540		(16		)	112		(4		)	—		—			401		(6		)
Total	$	13,974	$	(447	)	$	1,226	$	(47	)	$	546	$	(3	)	$	2,833	$	(19	)



	Less than 12 months					12 months or more
Types of securities as of December 31, 2018	Fair values		Unrealized losses			Fair values		Unrealized losses
U.S. Treasury notes	$	1,219	$	(21	)	$	1,444	$	(26	)
Other government-related debt securities:
U.S.	—		—			110		(2		)
Foreign and other	631		(31		)	240		(10		)
Corporate debt securities:
Financial	1,968		(59		)	718		(22		)
Industrial	1,898		(81		)	529		(18		)
Other	529		(20		)	28		(1		)
Residential-mortgage-backed securities	576		(14		)	840		(22		)
Other mortgage- and asset-backed securities	17		—			451		(14		)
Total	$	6,838	$	(226	)	$	4,360	$	(115	)

Less than 12 months 12 months or more
Types of securities as of December 31, 2017 Fair values Unrealized losses Fair values Unrealized losses
U.S. Treasury securities $ 7,728
$ (70 ) $ 195
$ (2 )
Other government-related debt securities:
U.S. 188
(1 ) 34
(1 )
Foreign and other 1,163
(9 ) 115
(2 )
Corporate debt securities:
Financial 5,928
(28 ) 462
(6 )
Industrial 5,760
(43 ) 612
(9 )
Other 868
(4 ) 117
(2 )
Residential-mortgage-backed securities 1,838
(24 ) 276
(6 )
Other mortgage- and asset-backed securities 1,777
(12 ) 250
(3 )
Total $ 25,250
$ (191 ) $ 2,061
$ (31 )

The primary objective of our investment portfolio is to enhance overall returns in an efficient manner while maintaining 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 primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below our cost basis ~~and~~as well as adverse conditions related specifically to the security, ~~including~~such as any changes to the credit rating of the security and the intent to sell or whether we will more likely than not be required to sell the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could change in the future based on new developments or changes in assumptions related to that particular security. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we believe the cost bases for our available-for-sale investments were recoverable in all material respects.

Equity securities

We held investments in equity securities with readily determinable fair values of ~~$200~~$287 million and ~~$149~~$176 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, which are included in Other assets in the Condensed Consolidated Balance Sheets. As a result of the adoption of the new accounting standard related to the classification and measurement of financial instruments on January 1, 2018, equity investments (except for investments accounted for under the equity method of accounting) are now measured at fair value, with changes in fair value recognized in earnings. These investments were previously measured at fair value, with changes in fair value recognized in AOCI. Accordingly, these securities are no longer classified as available-for-sale and their presentation is not comparable to the presentation as of December 31, 2017. See Available-for-sale investments, discussed above, and Note 1, Summary of significant accounting policies. Gains and losses recognized on equity securities with readily determinable fair values, including gains and losses recognized on sales, were not material for the three and six months ended June 30, 2019 and 2018.

As of June 30, 2019 and December 31, 2018, respectively, we held investments of $169 million and ~~2017.~~$222 million in equity securities without readily determinable fair values, which are included in Other assets in the Condensed Consolidated Balance Sheets. Adjustments to the carrying values of these securities were not material for the three and six months ended June 30, 2019 and 2018.

Limited partnership investments

We held limited partnership investments of ~~$266~~$312 million and ~~$213~~$285 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, which are included in Other assets in the Condensed Consolidated Balance Sheets. These investments are measured by using the net asset values of the underlying investments as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of June 30, ~~2018,~~2019, unfunded additional commitments to be made during the next several years for these investments were not material. Gains and losses recognized on our limited partnership investments were not material for the three and six months ended June 30, 2019 and 2018.

6. Inventories

Inventories consisted of the following (in millions):



	June 30, 2019		December 31, 2018
Raw materials	$	294	$	257
Work in process	1,788		1,660
Finished goods	1,094		1,023
Total inventories	$	3,176	$	2,940

June 30,
2018 December 31,
2017
Raw materials $ 303
$ 232
Work in process 1,702
1,668
Finished goods 1,058
934
Total inventories $ 3,063
$ 2,834

~~10.~~7. Goodwill and other intangible assets

Goodwill

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



	Six months ended June 30, 2019
Beginning balance	$	14,699
Currency translation adjustment	(10		)
Ending balance	$	14,689

Six months ended
June 30, 2018
Beginning balance $ 14,761
Addition from K-A acquisition 6
Currency translation adjustment (43 )
Ending balance $ 14,724

Other intangible assets

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



	June 30, 2019							December 31, 2018
	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	$	12,563	$	(7,812	)	$	4,751	$	12,573	$	(7,479	)	$	5,094
Licensing rights	3,693		(2,174		)	1,519		3,772		(2,032		)	1,740
Marketing-related rights	1,209		(959		)	250		1,297		(1,019		)	278
Research and development technology rights	1,148		(910		)	238		1,148		(872		)	276
Total finite-lived intangible assets	18,613		(11,855		)	6,758		18,790		(11,402		)	7,388
Indefinite-lived intangible assets:
In-process research and development	55		—			55		55		—			55
Total other intangible assets	$	18,668	$	(11,855	)	$	6,813	$	18,845	$	(11,402	)	$	7,443

June 30, 2018 December 31, 2017

Gross
carrying
amounts

Accumulated
amortization

Intangible
assets, net

Gross
carrying
amounts

Accumulated
amortization

Intangible
assets, net
Finite-lived intangible assets:
Developed-product-technology rights $ 12,581
$ (7,139 ) $ 5,442
$ 12,589
$ (6,796 ) $ 5,793
Licensing rights 3,772
(1,810 ) 1,962
3,275
(1,601 ) 1,674
Marketing-related rights 1,303
(967 ) 336
1,319
(920 ) 399
R&D technology rights 1,155
(838 ) 317
1,161
(804 ) 357
Total finite-lived intangible assets 18,811
(10,754 ) 8,057
18,344
(10,121 ) 8,223
Indefinite-lived intangible assets:
In-process research and development 386
—
386
386
—
386
Total other intangible assets $ 19,197
$ (10,754 ) $ 8,443
$ 18,730
$ (10,121 ) $ 8,609

Developed-product-technology rights ~~consist~~consists of rights related to marketed products acquired in business combinations. Licensing rights ~~consist~~consists primarily of contractual rights acquired in business combinations to receive future milestone, royalty and ~~profit sharing~~profit-sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and up-front payments associated with royalty obligations for marketed products. ~~During the six months ended June 30, 2018, licensing~~Marketing-related rights ~~increased due to the K-A share acquisition. See Note 3, Business combinations. Marketing-related intangible assets consist~~consists primarily of rights related to the sale and distribution of marketed products. ~~R&D~~Research and development (R&D) technology rights ~~consist of~~pertains to technology used in R&D ~~with~~that have alternative future uses.

In-process research and development (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. ~~As of June 30, 2018, IPR&D consists primarily of the oprozomib project, acquired in the acquisition of Onyx Pharmaceuticals, Inc., in 2013.~~

All IPR&D projects have major risks and uncertainties associated with the timely and successful completion of the development and commercialization of product candidates, including our ability to confirm safety and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. We are not permitted to market a human therapeutic without obtaining regulatory approvals, and such approvals require the completion of clinical trials that demonstrate that a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans as well as competitive product launches, affect the revenues a product can generate. Consequently, the eventual realized value, if any, of acquired IPR&D projects may vary from their estimated fair values. 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 June 30, ~~2018~~2019 and ~~2017,~~2018, we recognized amortization ~~expense~~ associated with our finite-lived intangible assets of ~~$332~~$315 million and ~~$371~~$332 million, respectively. During the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, we recognized amortization ~~expense~~ associated with our finite-lived intangible assets of ~~$652~~$630 million and ~~$744~~$652 million, respectively. Amortization of intangible assets is included primarily in Cost of sales in the Condensed Consolidated Statements of Income. The total estimated amortization ~~expense~~ for our finite-lived intangible assets for the remaining six months ending December 31, ~~2018,~~2019, and the years ending December 31, ~~2019,~~ 2020, 2021, 2022, 2023 and ~~2023,~~2024, are ~~$0.7 billion, $1.3~~$0.6 billion, $1.2 billion, $1.0 billion, $0.9 billion, ~~and~~ $0.9 billion and $0.8 billion, respectively.

8. Leases

On January 1, 2019, we adopted a new accounting standard that amends the guidance for the accounting and reporting of leases. Certain required disclosures have been made on a prospective basis in accordance with the guidance of the standard. See Note 1, Summary of significant accounting policies.

We lease certain facilities and equipment related primarily to administrative, R&D and sales and marketing activities. Leases with lease terms of 12 months or less are expensed on a straight-line basis over the lease term and are not recorded in the Condensed Consolidated Balance Sheets.

Most leases include one or more options to renew, with renewal terms that may extend the lease term up to seven years. The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements neither contain any residual value guarantees nor impose any significant restrictions or covenants. We sublease certain real estate to third parties. Our sublease portfolio consists of operating leases from former R&D and administrative space.

The following table summarizes information related to our leases, all of which are classified as operating, included in our Condensed Consolidated Balance Sheets (in millions):



Condensed Consolidated Balance Sheets locations	June 30, 2019
Assets:
Other assets	$	430
Liabilities:
Accrued liabilities	$	134
Other noncurrent liabilities	363
Total lease liabilities	$	497

The components of net lease costs were as follows (in millions):



Lease costs	Three months ended June 30, 2019			Six months ended June 30, 2019
Operating⁽¹⁾	$	51		$	99
Sublease income	(9		)	(17		)
Total net lease costs	$	42		$	82

^____________


⁽¹⁾	Includes short-term leases and variable lease costs, which were not material for the three and six months ended June 30, 2019.

~~11.~~Maturities of lease liabilities as of June 30, 2019, were as follows (in millions):



Maturity dates	Operating leases
Remaining six months ending December 31, 2019	$	69
2020	152
2021	132
2022	73
2023	62
Thereafter	48
Total lease payments⁽¹⁾	536
Less imputed interest	(39		)
Present value of lease liabilities	$	497

^____________


⁽¹⁾	Includes future rental commitments for abandoned leases of $200 million. We expect to receive total future rental income of $158 million related to noncancelable subleases for abandoned facilities.

The weighted-average remaining lease term and weighted-average discount rate of our leases were 4.2 years and 3.32%, respectively, as of June 30, 2019.

Cash and noncash information related to our leases was as follows (in millions):



	Three months ended June 30, 2019		Six months ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	39	$	73
ROU assets obtained in exchange for lease obligations:
Operating leases	$	46	$	54

9. Financing arrangements

Our borrowings consisted of the following (in millions):



	June 30, 2019			December 31, 2018
5.70% notes due 2019 (5.70% 2019 Notes)	$	—		$	1,000
1.90% notes due 2019 (1.90% 2019 Notes)	—			700
Floating Rate Notes due 2019	—			550
2.20% notes due 2019 (2.20% 2019 Notes)	—			1,400
2.125% €675 million notes due 2019 (2.125% 2019 euro Notes)	768			774
4.50% notes due 2020 (4.50% 2020 Notes)	300			300
2.125% notes due 2020 (2.125% 2020 Notes)	750			750
Floating Rate Notes due 2020	300			300
2.20% notes due 2020 (2.20% 2020 Notes)	700			700
3.45% notes due 2020 (3.45% 2020 Notes)	900			900
4.10% notes due 2021 (4.10% 2021 Notes)	1,000			1,000
1.85% notes due 2021 (1.85% 2021 Notes)	750			750
3.875% notes due 2021 (3.875% 2021 Notes)	1,750			1,750
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes)	1,422			1,433
2.70% notes due 2022 (2.70% 2022 Notes)	500			500
2.65% notes due 2022 (2.65% 2022 Notes)	1,500			1,500
3.625% notes due 2022 (3.625% 2022 Notes)	750			750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)	717			713
2.25% notes due 2023 (2.25% 2023 Notes)	750			750
3.625% notes due 2024 (3.625% 2024 Notes)	1,400			1,400
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)	853			860
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)	603			606
3.20% notes due 2027 (3.20% 2027 Notes)	1,000			1,000
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)	889			893
6.375% notes due 2037 (6.375% 2037 Notes)	552			552
6.90% notes due 2038 (6.90% 2038 Notes)	291			291
6.40% notes due 2039 (6.40% 2039 Notes)	466			466
5.75% notes due 2040 (5.75% 2040 Notes)	412			412
4.95% notes due 2041 (4.95% 2041 Notes)	600			600
5.15% notes due 2041 (5.15% 2041 Notes)	974			974
5.65% notes due 2042 (5.65% 2042 Notes)	487			487
5.375% notes due 2043 (5.375% 2043 Notes)	261			261
4.40% notes due 2045 (4.40% 2045 Notes)	2,250			2,250
4.563% notes due 2048 (4.563% 2048 Notes)	1,415			1,415
4.663% notes due 2051 (4.663% 2051 Notes)	3,541			3,541
Other notes due 2097	100			100
Unamortized bond discounts, premiums and issuance costs, net	(882		)	(896		)
Fair value adjustments	295			(53		)
Total carrying value of debt	30,614			33,929
Less current portion	(2,816		)	(4,419		)
Total long-term debt	$	27,798		$	29,510

June 30,
2018 December 31,
2017
6.15% notes due 2018 (6.15% 2018 Notes) $ —
$ 500
4.375% €550 million notes due 2018 (4.375% 2018 euro Notes) 642
653
5.70% notes due 2019 (5.70% 2019 Notes) 1,000
1,000
1.90% notes due 2019 (1.90% 2019 Notes) 700
700
Floating Rate Notes due 2019 550
550
2.20% notes due 2019 (2.20% 2019 Notes) 1,400
1,400
2.125% €675 million notes due 2019 (2.125% 2019 euro Notes) 789
810
4.50% notes due 2020 (4.50% 2020 Notes) 300
300
2.125% notes due 2020 (2.125% 2020 Notes) 750
750
Floating Rate Notes due 2020 300
300
2.20% notes due 2020 (2.20% 2020 Notes) 700
700
3.45% notes due 2020 (3.45% 2020 Notes) 900
900
4.10% notes due 2021 (4.10% 2021 Notes) 1,000
1,000
1.85% notes due 2021 (1.85% 2021 Notes) 750
750
3.875% notes due 2021 (3.875% 2021 Notes) 1,750
1,750
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes) 1,461
1,501
2.70% notes due 2022 (2.70% 2022 Notes) 500
500
2.65% notes due 2022 (2.65% 2022 Notes) 1,500
1,500
3.625% notes due 2022 (3.625% 2022 Notes) 750
750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds) 707
719
2.25% notes due 2023 (2.25% 2023 Notes) 750
750
3.625% notes due 2024 (3.625% 2024 Notes) 1,400
1,400
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) 876
901
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) 627
642
3.20% notes due 2027 (3.20% 2027 Notes)
1,000
1,000
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes) 925
946
6.375% notes due 2037 (6.375% 2037 Notes) 552
552
6.90% notes due 2038 (6.90% 2038 Notes) 291
291
6.40% notes due 2039 (6.40% 2039 Notes) 466
466
5.75% notes due 2040 (5.75% 2040 Notes) 412
412
4.95% notes due 2041 (4.95% 2041 Notes) 600
600
5.15% notes due 2041 (5.15% 2041 Notes) 974
974
5.65% notes due 2042 (5.65% 2042 Notes) 487
487
5.375% notes due 2043 (5.375% 2043 Notes) 261
261
4.40% notes due 2045 (4.40% 2045 Notes) 2,250
2,250
4.563% notes due 2048 (4.563% 2048 Notes) 1,415
1,415
4.663% notes due 2051 (4.663% 2051 Notes) 3,541
3,541
Other notes due 2097 100
100
Unamortized bond discounts, premiums, issuance costs and fair value adjustments, net (1,129 ) (929 )
Total carrying value of debt 34,497
35,342
Less current portion (4,288 ) (1,152 )
Total noncurrent debt $ 30,209
$ 34,190

There are no material differences between the effective interest rates and coupon rates of any of our borrowings, except for the 4.563% 2048 Notes and the 4.663% 2051 Notes, which have effective interest rates of 6.3% and 5.6%, respectively.

~~12.~~10. Stockholders’ equity

Stock repurchase program

Activity under our stock repurchase program, on a trade date basis, was as follows (in millions):



	2019			2018
	Shares *	Dollars		Shares	Dollars
First quarter	15.9	$	3,031	56.4	$	10,787
Second quarter	13.1	2,349		18.2	3,190
Total stock repurchases	28.9	$	5,380	74.6	$	13,977

2018 2017
Shares Dollars Shares Dollars
First quarter 56.4
$ 10,787
3.4
$ 555
Second quarter 18.2
3,190
6.2
1,006
Total stock repurchases 74.6
$ 13,977
9.6
$ 1,561
* Total shares do not add due to rounding.

In January 2018, our Board of Directors authorized an increase of $10.0 billion available under our stock repurchase program. Repurchase activity for the three months ended March 31, 2018, included 52.1 million shares of our common stock acquired under a tender offer at an aggregate cost of $10.0 billion. In April 2018,May 2019, our Board of Directors increased the amount authorized under our stock repurchase program by an ~~additional$5.0~~additional $5.0 billion. As of June 30, ~~2018, $5.4~~2019, $4.7 billion of authorization remained available under our stock repurchase program.

Dividends

In March ~~2018~~2019 and December ~~2017,~~2018, the Board of Directors declared quarterly cash dividends of ~~$1.32~~$1.45 per share, ~~of common stock,~~ which were paid in June ~~2018~~2019 and March ~~2018,~~2019, respectively.

Accumulated other comprehensive income (loss)

The components of ~~AOCI~~Accumulated other comprehensive income (loss) (AOCI) were as follows (in millions):



	Foreign currency translation			Cash flow hedges			Available-for-sale securities			Other			AOCI
Balance as of December 31, 2018	$	(670	)	$	241		$	(338	)	$	(2	)	$	(769	)
Foreign currency translation adjustments	(13		)	—			—			—			(13		)
Unrealized gains	—			30			218			—			248
Reclassification adjustments to income	—			28			4			—			32
Income taxes	—			(13		)	(1		)	—			(14		)
Balance as of March 31, 2019	(683		)	286			(117		)	(2		)	(516		)
Foreign currency translation adjustments	(4		)	—			—			—			(4		)
Unrealized (losses) gains	—			(96		)	161			—			65
Reclassification adjustments to income	—			(36		)	2			—			(34		)
Other	—			—			—			6			6
Income taxes	—			28			(10		)	—			18
Balance as of June 30, 2019	$	(687	)	$	182		$	36		$	4		$	(465	)

Foreign
currency
translation

Cash flow
hedges

Available-for-sale
securities
Other AOCI
Balance as of December 31, 2017 $ (529 ) $ (6 ) $ (144 ) $ —
$ (679 )
Cumulative effect of change in accounting principle, net of tax⁽¹⁾
—
—
(9 ) —
(9 )
Foreign currency translation adjustments 29
—
—
—
29
Unrealized gains (losses) —
149
(482 ) —
(333 )
Reclassification adjustments to income —
(130 ) 134
—
4
Other —
—
—
2
2
Income taxes —
(13 ) 5
—
(8 )
Balance as of March 31, 2018 (500 ) —
(496 ) 2
(994 )
Foreign currency translation adjustments (111 ) —
—
—
(111 )
Unrealized losses —
(34 ) (106 ) —
(140 )
Reclassification adjustments to income —
318
115
—
433
Other —
—
—
—
—
Income taxes —
(61 ) —
—
(61 )
Balance as of June 30, 2018 $ (611 ) $ 223
$ (487 ) $ 2
$ (873 )

^____________


⁽¹⁾	See Note 1, Summary of significant accounting policies, for additional information regarding the adoption on January 1, 2018, of the new accounting standard related to the classification and measurement of financial instruments and the related cumulative effect from the change in accounting principle.

Reclassifications out of AOCI and into earnings were as follows (in millions):


	Three months ended June 30,							Three months ended June 30,
Components of AOCI	2018			2017			Condensed Consolidated Statements of Income locations	2019			2018			Condensed Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract (losses) gains	$	(20	)	$	33		Product sales
Cross-currency swap contract (losses) gains	(298		)	297			Interest and other income, net
Foreign currency contract gains (losses)								$	22		$	(20	)	Product sales
Cross-currency swap contract gains (losses)								14			(298		)	Interest and other income, net
	(318		)	330			Income before income taxes	36			(318		)	Income before income taxes
	68			(117		)	Provision for income taxes	(8		)	68			Provision for income taxes
	$	(250	)	$	213		Net income	$	28		$	(250	)	Net income
Available-for-sale securities:
Net realized losses	$	(115	)	$	(47	)	Interest and other income, net	$	(2	)	$	(115	)	Interest and other income, net
	1			(2		)	Provision for income taxes	—			1			Provision for income taxes
	$	(114	)	$	(49	)	Net income	$	(2	)	$	(114	)	Net income



	Six months ended June 30,
Components of AOCI	2019			2018			Condensed Consolidated Statements of Income locations
Cash flow hedges:
Foreign currency contract gains (losses)	$	36		$	(54	)	Product sales
Cross-currency swap contract losses	(28		)	(134		)	Interest and other income, net
	8			(188		)	Income before income taxes
	(2		)	40			Provision for income taxes
	$	6		$	(148	)	Net income
Available-for-sale securities:
Net realized losses	$	(6	)	$	(249	)	Interest and other income, net
	—			2			Provision for income taxes
	$	(6	)	$	(247	)	Net income

Six months ended
June 30,
Components of AOCI 2018 2017 Condensed Consolidated
Statements of Income locations
Cash flow hedges:
  Foreign currency contract (losses) gains $ (54 ) $ 90
Product sales
  Cross-currency swap contract (losses) gains (134 ) 371
Interest and other income, net
(188 ) 461
Income before income taxes
40
(164 ) Provision for income taxes
$ (148 ) $ 297
Net income
Available-for-sale securities:
  Net realized losses $ (249 ) $ (96 ) Interest and other income, net
2
(2 ) Provision for income taxes
$ (247 ) $ (98 ) Net income

~~13.~~11. Fair value measurement

To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing an asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:



Level 1	—	Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
Level 2	—	Valuations for which all significant inputs are observable either directly or ~~indirectly,~~ indirectly—other than ~~level~~Level 1 inputs
Level 3	—	Valuations based on inputs that are unobservable and significant to the overall fair value measurement

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.

The fair values of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows (in millions):



	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)

Fair value measurement as of June 30, 2019, using:							Total
Assets:
Interest-bearing securities:
U.S. Treasury notes	$	2,717	$	—	$	—	$	2,717
U.S. Treasury bills	3,497		—		—		3,497
Other government-related debt securities:
U.S.	—		112		—		112
Foreign and other	—		977		—		977
Corporate debt securities:
Financial	—		2,773		—		2,773
Industrial	—		2,408		—		2,408
Other	—		562		—		562
Residential-mortgage-backed securities	—		1,333		—		1,333
Other mortgage- and asset-backed securities	—		463		—		463
Money market mutual funds	3,886		—		—		3,886
Other short-term interest-bearing securities	—		2,389		—		2,389
Equity securities	287		—		—		287
Derivatives:
Foreign currency contracts	—		205		—		205
Cross-currency swap contracts	—		150		—		150
Interest rate swap contracts	—		258		—		258
Total assets	$	10,387	$	11,630	$	—	$	22,017

Liabilities:
Derivatives:
Foreign currency contracts	$	—	$	15	$	—	$	15
Cross-currency swap contracts	—		515		—		515
Contingent consideration obligations	—		—		63		63
Total liabilities	$	—	$	530	$	63	$	593

Quoted prices in
active markets for
identical assets
(Level 1)
Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Fair value measurement as of June 30, 2018, using: Total
Assets:
Interest-bearing securities:
U.S. Treasury securities $ 3,391
$ —
$ —
$ 3,391
Other government-related debt securities:
U.S. —
128
—
128
Foreign and other —
1,390
—
1,390
Corporate debt securities:
Financial —
3,968
—
3,968
Industrial —
3,839
—
3,839
Other —
676
—
676
Residential-mortgage-backed securities —
1,579
—
1,579
Other mortgage- and asset-backed securities —
652
—
652
Money market mutual funds 7,341
—
—
7,341
Other short-term interest-bearing securities —
5,872
—
5,872
Equity securities 200
—
—
200
Derivatives:
Foreign currency contracts —
106
—
106
Cross-currency swap contracts —
272
—
272
Total assets $ 10,932
$ 18,482
$ —
$ 29,414

Liabilities:
Derivatives:
Foreign currency contracts $ —
$ 65
$ —
$ 65
Cross-currency swap contracts —
296
—
296
Interest rate swap contracts —
266
—
266
Contingent consideration obligations —
—
72
72
Total liabilities $ —
$ 627
$ 72
$ 699



	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)

Fair value measurement as of December 31, 2018, using:							Total
Assets:
Interest-bearing securities:
U.S. Treasury notes	$	2,663	$	—	$	—	$	2,663
U.S. Treasury bills	8,191		—		—		8,191
Other government-related debt securities:
U.S.	—		110		—		110
Foreign and other	—		932		—		932
Corporate debt securities:
Financial	—		2,697		—		2,697
Industrial	—		2,504		—		2,504
Other	—		562		—		562
Residential-mortgage-backed securities	—		1,422		—		1,422
Other mortgage- and asset-backed securities	—		469		—		469
Money market mutual funds	5,659		—		—		5,659
Other short-term interest-bearing securities	—		3,515		—		3,515
Equity securities	176		—		—		176
Derivatives:
Foreign currency contracts	—		182		—		182
Cross-currency swap contracts	—		170		—		170
Interest rate swap contracts	—		56		—		56
Total assets	$	16,689	$	12,619	$	—	$	29,308

Liabilities:
Derivatives:
Foreign currency contracts	$	—	$	26	$	—	$	26
Cross-currency swap contracts	—		401		—		401
Interest rate swap contracts	—		149		—		149
Contingent consideration obligations	—		—		72		72
Total liabilities	$	—	$	576	$	72	$	648

Quoted prices in
active markets for
identical assets
(Level 1)

Significant
other observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Fair value measurement as of December 31, 2017, using: Total
Assets:
Interest-bearing securities:
U.S. Treasury securities $ 8,242
$ —
$ —
$ 8,242
Other government-related debt securities:
U.S. —
223
—
223
Foreign and other —
2,422
—
2,422
Corporate debt securities:
Financial —
10,072
—
10,072
Industrial —
9,670
—
9,670
Other —
1,390
—
1,390
Residential-mortgage-backed securities —
2,168
—
2,168
Other mortgage- and asset-backed securities —
2,297
—
2,297
Money market mutual funds 3,245
—
—
3,245
Other short-term interest-bearing securities —
1,440
—
1,440
Equity securities 149
—
—
149
Derivatives:
Foreign currency contracts —
6
—
6
Cross-currency swap contracts —
270
—
270
Interest rate swap contracts —
10
—
10
Total assets $ 11,636
$ 29,968
$ —
$ 41,604

Liabilities:
Derivatives:
Foreign currency contracts $ —
$ 204
$ —
$ 204
Cross-currency swap contracts —
220
—
220
Interest rate swap contracts —
61
—
61
Contingent consideration obligations —
—
69
69
Total liabilities $ —
$ 485
$ 69
$ 554

Interest-bearing and equity securities

The fair values of our U.S. Treasury securities, money market mutual funds and equity securities are based on quoted market prices in active markets, with no valuation adjustment.

Most of our other government-related and corporate debt securities are investment grade and have maturity dates offiveyears or less from the balance sheet date. Our other government-related debt securities portfolio is composed of securities with weighted-average credit ratings of ~~BBB+~~A– or equivalent by Standard & Poor’s Financial Services LLC (S&P), ~~and A- or equivalent by~~ Moody’s Investors Service, Inc. (Moody’s), or Fitch Ratings, Inc. (Fitch); and our corporate debt securities portfolio has a weighted-average credit ~~rating~~ratings of ~~A- or equivalent~~A– by Fitch and BBB+ or equivalent by S&P or Moody’s. We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services use ~~industry standard~~industry-standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable either directly or indirectly to estimate fair value. The inputs include reported trades of and broker-dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

Our residential-mortgage-, other-mortgage- and asset-backed-securities portfolio is composed entirely of senior tranches with credit ratings of AAA by S&P, Moody’s or Fitch. We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services use ~~industry standard~~industry-standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable either directly or indirectly to estimate fair value. The inputs include reported trades of and broker-dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment or default projections based on historical data; and other observable inputs.

We value our other short-term interest-bearing securities at amortized cost, which approximates fair value given their near-term maturity dates.

Derivatives

All of our foreign currency forward and option derivative contracts have maturities of three years or less, and all are with counterparties that have minimum credit ratings of A-A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based ~~industry standard~~industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, the London Interbank Offered Rate (LIBOR), swap rates and obligor credit default swap rates. In addition, inputs for our foreign currency option contracts include implied volatility measures. These inputs, ~~where~~when applicable, are at commonly quoted intervals. See Note ~~14,~~12, Derivative instruments.

Our cross-currency swap contracts are with counterparties that have minimum credit ratings of A-A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that uses an income-based ~~industry standard~~industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, LIBOR, swap rates, obligor credit default swap rates and ~~cross-currency basis~~cross-currency-basis swap spreads. See Note ~~14,~~12, Derivative instruments.

Our interest rate swap contracts are with counterparties that have minimum credit ratings of A-A– or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by using an income-based ~~industry standard~~industry-standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include LIBOR, swap rates and obligor credit default swap rates. See Note ~~14,~~12, Derivative instruments.

Contingent consideration obligations

As a result of our business acquisitions, we have incurred contingent consideration ~~obligations, as discussed below.~~obligations. The contingent consideration obligations are recorded at their fair values by using probability-adjusted discounted cash flows, and we revalue these obligations each reporting period until the related contingencies have been resolved. The fair value measurements of these obligations are based on significant unobservable inputs related to licensing rights and product candidates acquired in business combinations, and they are reviewed quarterly by management in our R&D and commercial sales organizations. These inputs include, as applicable, estimated probabilities and timing of achieving specified regulatory and commercial milestones and estimated annual sales. Significant changes that increase or decrease the probabilities of achieving the related regulatory and commercial events, or that shorten or lengthen the time required to achieve such events, or that increase or decrease estimated annual sales would result in corresponding increases or decreases in the fair values of the obligations, as applicable. Changes in the fair values of contingent consideration obligations are recognized in Other operating expenses in the Condensed Consolidated Statements of Income.

Changes in the carrying amounts of contingent consideration obligations ~~were as follows (in millions):~~

Three months ended
June 30, Six months ended
June 30,
2018 2017 2018 2017
Beginning balance $ 110
$ 184
$ 69
$ 179
Addition from K-A acquisition —
—
45
—
Net changes in valuations (38 ) (2 ) (42 ) 3
Ending balance $ 72
$ 182
$ 72
$ 182

As a result of our acquisition of BioVex Group, Inc., in 2011, we are obligated to pay its former shareholders additional consideration contingent upon achieving certain sales-related milestones with regard to IMLYGIC^®~~(talimogene laherparepvec).~~

~~As a result of our acquisition of K-A in 2018, we are obligated to make single-digit-percentage royalty payments to Kirin contingent upon sales of brodalumab. See Note 3, Business combinations.~~

~~During~~for the three and six months ended June 30, 2019 and 2018, were not material.

During the three and ~~2017,~~six months ended June 30, 2019 and 2018, there were no transfers of assets or liabilities between fair value measurement levels, and there were no material remeasurements to the fair values of assets and liabilities that are not measured at fair value on a recurring basis.

Summary of the fair values of other financial instruments

Cash equivalents

The fair values of cash equivalents approximate their carrying values due to the short-term nature of such financial instruments.

Borrowings

We estimated the fair values of our borrowings by using Level 2 inputs. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the aggregate fair values of our borrowings were ~~$36.0~~$33.4 billion and ~~$38.6~~$35.0 billion, respectively, and the carrying values were ~~$34.5~~$30.6 billion and ~~$35.3~~$33.9 billion, respectively.

~~14.~~

12. Derivative instruments

The Company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. To reduce our risks related to such exposures, we use or have used certain derivative instruments, including foreign currency forward, foreign currency option, cross-currency swap, forward interest rate and interest rate swap contracts. We do not use derivatives for speculative trading purposes.

During the second quarter of 2018, we adopted early a new accounting standard that amends the accounting and reporting of hedging activities. Certain required disclosures have been made on a prospective basis in accordance with the guidance of the standard. See Note 1, Summary of significant accounting policies.

Cash flow hedges

We are exposed to possible changes in the values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates associated primarily with our euro-denominated international product sales. Increases and decreases in the cash flows associated with our international product sales due to movements in foreign currency exchange rates are offset partially by corresponding increases and decreases in the cash flows from our international operating expenses resulting from these foreign currency exchange rate movements. To further reduce our exposure to foreign currency exchange rate fluctuations with regard to our international product sales, we enter into foreign currency forward and option contracts to hedge a portion of our projected international product sales primarily over a three-year time horizon, with, at any given point in time, a higher percentage of nearer-term projected product sales being hedged than in successive periods.

As of both June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had outstanding foreign currency forward contracts with aggregate notional amounts of ~~$4.8~~$4.5 billion and ~~$4.6 billion, respectively, and~~outstanding foreign currency option contracts with aggregate notional amounts of $21 ~~million and $74 million, respectively.~~million. We have designated these foreign currency forward and foreign currency option contracts, which are primarily euro based, as cash flow hedges. Accordingly, we report the unrealized gains and losses on these contracts in AOCI in the Condensed Consolidated Balance Sheets, and we reclassify them to Product sales in the Condensed Consolidated Statements of Income in the same periods during which the hedged transactions affect earnings.

To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term debt denominated in foreign currencies, we enter into cross-currency swap contracts. Under the terms of such contracts, we paid euros, pounds sterling and Swiss francs and received U.S. dollars for the notional amounts at the inception of the contracts; and based on these notional amounts, we exchange interest payments at fixed rates over the lives of the contracts by paying U.S. dollars and receiving euros, pounds sterling and Swiss francs. In addition, we will pay U.S. dollars to and receive euros, pounds sterling and Swiss francs from the counterparties at the maturities of the contracts for these same notional amounts. The terms of these contracts correspond to the related hedged debt, thereby effectively converting the interest payments and principal repayment on the debt from euros, pounds sterling and Swiss francs to U.S. dollars. We have designated these cross-currency swap contracts as cash flow hedges. Accordingly, the unrealized gains and losses on these contracts are reported in AOCI in the Condensed Consolidated Balance Sheets and reclassified to Interest and other income, net, in the Condensed Consolidated Statements of Income in the same periods during which the hedged debt affects earnings.

The notional amounts and interest rates of our cross-currency swaps as of June 30, ~~2018,~~2019, were as follows (notional amounts in millions):



	Foreign currency				U.S. dollars
Hedged notes	Notional amounts		Interest rates		Notional amounts		Interest rates
2.125% 2019 euro Notes	€	675	2.1	%	$	864	2.6	%
1.25% 2022 euro Notes	€	1,250	1.3	%	$	1,388	3.2	%
0.41% 2023 Swiss franc Bonds	CHF	700	0.4	%	$	704	3.4	%
2.00% 2026 euro Notes	€	750	2.0	%	$	833	3.9	%
5.50% 2026 pound sterling Notes	£	475	5.5	%	$	747	6.0	%
4.00% 2029 pound sterling Notes	£	700	4.0	%	$	1,111	4.5	%

Foreign currency U.S. dollars
Hedged notes Notional amounts Interest rates Notional amounts Interest rates
2.125% 2019 euro Notes € 675
2.125 % $ 864
2.6 %
1.25% 2022 euro Notes € 1,250
1.25 % $ 1,388
3.2 %
0.41% 2023 Swiss franc Bonds CHF 700
0.41 % $ 704
3.4 %
2.00% 2026 euro Notes € 750
2.00 % $ 833
3.9 %
5.50% 2026 pound sterling Notes £ 475
5.50 % $ 747
6.0 %
4.00% 2029 pound sterling Notes £ 700
4.00 % $ 1,111
4.5 %

In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable U.S. Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on forward interest rate contracts, which are designated as cash flow hedges, are recognized in AOCI in the Condensed Consolidated Balance Sheets and are amortized into Interest expense, net, in the Condensed Consolidated Statements of Income over the lives of the associated debt issuances. Amounts recognized in connection with forward interest rate swaps during the six months ended June 30, ~~2018,~~2019, and amounts expected to be recognized during the subsequent 12 months are not material.

The unrealized gains and losses recognized in AOCI for our derivative instruments designated as cash flow hedges were as follows (in millions):



	Three months ended June 30,						Six months ended June 30,
Derivatives in cash flow hedging relationships	2019			2018			2019			2018
Foreign currency contracts	$	(16	)	$	281		$	69		$	192
Cross-currency swap contracts	(80		)	(315		)	(135		)	(77		)
Total unrealized (losses) gains	$	(96	)	$	(34	)	$	(66	)	$	115

Three months ended
June 30, Six months ended
June 30,
Derivatives in cash flow hedging relationships 2018 2017 2018 2017
Foreign currency contracts $ 281
$ (203 ) $ 192
$ (250 )
Cross-currency swap contracts (315 ) 217
(77 ) 281
Forward interest rate contracts —
3
—
3
Total unrealized (losses) gains $ (34 ) $ 17
$ 115
$ 34

The locations in the Condensed Consolidated Statements of Income and the gains and losses reclassified out of AOCI and into earnings for our derivative instruments designated as cash flow hedges were as follows (in millions):

Three months ended
June 30, Six months ended
June 30,
Derivatives in cash flow hedging relationships
Condensed Consolidated
Statements of Income locations
2018 2017 2018 2017
Foreign currency contracts Product sales $ (20 ) $ 33
$ (54 ) $ 90
Cross-currency swap contracts Interest and other income, net (298 ) 297
(134 ) 371
Total realized (losses) gains $ (318 ) $ 330
$ (188 ) $ 461

No portions of our cash flow hedge contracts are excluded from the assessment of hedge effectiveness. As of June 30, 2018, the amount expected to be reclassified out of AOCI and into earnings during the next 12 months is $119 million of net losses on our foreign currency and cross-currency swap contracts.

Fair value hedges

To achieve a desired mix of fixed-rate and floating-rate debt, we entered into interest rate swap contracts that qualified for and were designated as fair value hedges. ~~The terms of these~~These interest rate swap contracts ~~correspond to the related hedged debt and~~ effectively ~~converted~~convert fixed-rate coupons to floating-rate LIBOR-based coupons over the ~~lives~~terms of the ~~respective notes.~~related hedge contracts. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had interest rate swap contracts with an aggregate notional ~~amount~~amounts of ~~$9.45~~$9.55 billion and $10.95 billion respectively, that hedge certain portions of our long-term debt issuances. ~~The contracts have rates that range from three-month LIBOR plus 0.3% to three-month LIBOR plus 2.0%.~~

For interest rate swap contracts that qualify for and are designated as fair value hedges, we recognize in Interest expense, net, in the Condensed Consolidated Statements of Income the unrealized gain or loss on the derivative resulting from the change

in fair value during the period, as well as the offsetting unrealized loss or gain of the hedged item resulting from the change in fair value during the period attributable to the hedged risk. If a hedging relationship involving an interest rate swap contract is terminated, the gain or loss realized on contract termination is recorded as an adjustment to the carrying value of the debt and amortized into Interest expense, net, over the remaining life of the previously hedged debt.

~~Net unrealized gains and losses on our outstanding interest rate swap contracts were as follows (in millions):~~

Three months ended
June 30, Six months ended
June 30,
Derivatives in fair value hedging relationships 2018 2017 2018 2017
Net unrealized (losses) gains recognized for interest rate swap contracts $ (51 ) $ 37
$ (215 ) $ 18
Net unrealized gains (losses) recognized for related hedged debt $ 51
$ (37 ) $ 215
$ (18 )

The hedged liabilities and related cumulative-basis adjustments for fair value hedges of those liabilities were recorded in the Condensed Consolidated Balance Sheets as follows (in millions):


	Carrying amounts of hedged liabilities⁽¹⁾				Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities⁽²⁾						Carrying amounts of hedged liabilities⁽¹⁾				Cumulative amounts of fair value hedging adjustments related to the carrying amounts of the hedged liabilities⁽²⁾
	June 30, 2018		December 31, 2017		June 30, 2018			December 31, 2017
Condensed Consolidated Balance Sheets locations											June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Current portion of long-term debt	$	2,398	$	500	$	—		$	23		$	—	$	2,396	$	—	$	(3	)
Long-term debt	$	7,905	$	10,516	$	(217	)	$	(11	)	$	9,712	$	9,361	$	295	$	(50	)

^____________

⁽¹⁾

Current portion of long-term debt includes $1.0 billion of carrying value with discontinued hedging relationships as of December 31, 2018. Long-term debt includes $136 million and ~~$500~~$137 million of carrying value with discontinued hedging relationships as of June 30, ~~2018~~2019 and December 31, ~~2017, respectively. Long-term debt includes $137 million and $1.1 billion of carrying value with discontinued hedging relationships as of June 30,~~ 2018, ~~and December 31, 2017,~~ respectively.

⁽²⁾

Current portion of long-term debt includes ~~$11~~$3 million of hedging adjustments on discontinued hedging relationships as of December 31, 2018. Long-term debt includes $36 million and ~~$23~~$37 million of hedging adjustments on discontinued hedging relationships as of June 30, ~~2018~~2019 and December 31, ~~2017, respectively. Long-term debt includes $37 million and $40 million of hedging adjustments on discontinued hedging relationships as of June 30,~~ 2018, ~~and December 31, 2017,~~ respectively.

Impact of hedging transactions

The following ~~table summarizes~~tables summarize the amounts ofrecorded in income and expense line items and the effects thereon from fair value and cash flow hedging, including discontinued hedging relationships (in millions):


	Three months ended June 30, 2018									Six months ended June 30, 2018									Three months ended June 30, 2019							Six months ended June 30, 2019
	Product sales			Interest and other income, net			Interest (expense), net			Product sales			Interest and other income, net			Interest (expense), net			Product sales		Interest and other income, net		Interest (expense), net			Product sales		Interest and other income, net			Interest (expense), net
Total amounts of income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,679		$	162		$	(347	)	$	11,022		$	393		$	(685	)
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income																			$	5,574	$	218	$	(332	)	$	10,860	$	403		$	(675	)
The effects of cash flow and fair value hedging:
Losses on cash flow hedging relationships reclassified out of AOCI:
Gains (losses) on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	(20	)	$	—		$	—		$	(54	)	$	—		$	—		$	22	$	—	$	—		$	36	$	—		$	—
Cross-currency swap contracts	$	—		$	(298	)	$	—		$	—		$	(134	)	$	—		$	—	$	14	$	—		$	—	$	(28	)	$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
(Losses) gains on fair value hedging relationships—interest rate swap agreements:
Hedged items⁽¹⁾	$	—		$	—		$	58		$	—		$	—		$	230		$	—	$	—	$	(218	)	$	—	$	—		$	(348	)
Derivatives designated as hedging instruments	$	—		$	—		$	(51	)	$	—		$	—		$	(215	)	$	—	$	—	$	218		$	—	$	—		$	351



	Three months ended June 30, 2018									Six months ended June 30, 2018
	Product sales			Interest and other income, net			Interest (expense), net			Product sales			Interest and other income, net			Interest (expense), net
Total amounts recorded in income and (expense) line items presented in the Condensed Consolidated Statements of Income	$	5,679		$	162		$	(347	)	$	11,022		$	393		$	(685	)
The effects of cash flow and fair value hedging:
Losses on cash flow hedging relationships reclassified out of AOCI:
Foreign currency contracts	$	(20	)	$	—		$	—		$	(54	)	$	—		$	—
Cross-currency swap contracts	$	—		$	(298	)	$	—		$	—		$	(134	)	$	—
Gains (losses) on fair value hedging relationships—interest rate swap agreements:
Hedged items⁽¹⁾	$	—		$	—		$	58		$	—		$	—		$	230
Derivatives designated as hedging instruments	$	—		$	—		$	(51	)	$	—		$	—		$	(215	)

^__________

⁽¹⁾

~~The amounts include benefits of $7 million and $15 million~~Gains (losses) on hedged items do not completely offset (losses) gains on the related designated hedging instruments due to ~~the~~ amortization of the cumulative ~~amount~~amounts of fair value hedging adjustments included in the carrying amount of the hedged debt for discontinued hedging ~~relationships for the three and six months ended June 30, 2018, respectively.~~relationships.

No portions of our cash flow hedge contracts were excluded from the assessment of hedge effectiveness. As of June 30, 2019, we expected to reclassify $86 million of net losses on our foreign currency and cross-currency swap contracts out of AOCI and into earnings during the next 12 months.

Derivatives not designated as hedges

To reduce our exposure to foreign currency fluctuations ofin certain assets and liabilities denominated in foreign currencies, we enter into foreign currency forward contracts that are not designated as hedging transactions. ~~These~~Most of these exposures are hedged on a month-to-month basis. As of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the total notional amounts of these foreign currency forward contracts were ~~$268 million~~$1.2 billion and ~~$757 million,~~$0.7 billion, respectively. ~~The fair values of these derivatives as of June 30, 2018~~Gains and ~~December 31, 2017, were not material.~~

~~The location in the Condensed Consolidated Statements of Income and the amounts of gains~~losses recognized in earnings for our derivative instruments not designated as hedging instruments were ~~as follows (in millions):~~not material for the three and six months ended June 30, 2019 and 2018.

Three months ended
June 30, Six months ended
June 30,
Derivatives not designated as hedging instruments
Condensed Consolidated
Statements of Income location
2018 2017 2018 2017
Foreign currency contracts Interest and other income, net $ 26
$ 13
$ 33
$ 14

The fair values of derivatives included in the Condensed Consolidated Balance Sheets were as follows (in millions):


	Derivative assets			Derivative liabilities			Derivative assets			Derivative liabilities
June 30, 2018	Condensed Consolidated Balance Sheet locations	Fair values		Condensed Consolidated Balance Sheet locations	Fair values
June 30, 2019							Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	106	Accrued liabilities/ Other noncurrent liabilities	$	65	Other current assets/ Other assets	$	203	Accrued liabilities/ Other noncurrent liabilities	$	15
Cross-currency swap contracts	Other current assets/ Other assets	272		Accrued liabilities/ Other noncurrent liabilities	296		Other current assets/ Other assets	150		Accrued liabilities/ Other noncurrent liabilities	515
Interest rate swap contracts	Other current assets/ Other assets	—		Accrued liabilities/ Other noncurrent liabilities	266		Other current assets/ Other assets	258		Accrued liabilities/ Other noncurrent liabilities	—
Total derivatives designated as hedging instruments		$	378		$	627		611			530
Derivatives not designated as hedging instruments:
Foreign currency contracts							Other current assets	2		Accrued liabilities	—
Total derivatives not designated as hedging instruments								2			—
Total derivatives								$	613		$	530



	Derivative assets			Derivative liabilities
December 31, 2018	Condensed Consolidated Balance Sheets locations	Fair values		Condensed Consolidated Balance Sheets locations	Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets/ Other assets	$	181	Accrued liabilities/ Other noncurrent liabilities	$	26
Cross-currency swap contracts	Other current assets/ Other assets	170		Accrued liabilities/ Other noncurrent liabilities	401
Interest rate swap contracts	Other current assets/ Other assets	56		Accrued liabilities/ Other noncurrent liabilities	149
Total derivatives designated as hedging instruments		407			576
Derivatives not designated as hedging instruments:
Foreign currency contracts	Other current assets	1		Accrued liabilities	—
Total derivatives not designated as hedging instruments		1			—
Total derivatives		$	408		$	576

Derivative assets Derivative liabilities
December 31, 2017
Condensed Consolidated
Balance Sheet locations
Fair values Condensed Consolidated
Balance Sheet locations Fair values
Derivatives designated as hedging instruments:
Foreign currency contracts Other current assets/ Other assets $ 6
Accrued liabilities/ Other noncurrent liabilities $ 204
Cross-currency swap contracts Other current assets/ Other assets 270
Accrued liabilities/ Other noncurrent liabilities 220
Interest rate swap contracts Other current assets/ Other assets 10
Accrued liabilities/ Other noncurrent liabilities 61
Total derivatives designated as hedging instruments $ 286
$ 485

Our derivative contracts that were in liability positions as of June 30, ~~2018,~~2019, contain certain credit-risk-related contingent provisions that would be triggered if (i) we were to undergo a change in control and (ii) our or the surviving entity’s creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment grade or a materially weaker creditworthiness after the change in control. If these events were to occur, the counterparties would have the right but not the obligation to close the contracts under early-termination provisions. In such circumstances, the counterparties could request immediate settlement of these contracts for amounts that approximate the then current fair values of the contracts. In addition, our derivative contracts are not subject to any type of master netting arrangement, and amounts due either to or from a counterparty

under the contracts may be offset against other amounts due either to or from the same counterparty only if an event of default or termination, as defined, were to occur.

The cash flow effects of our derivative contracts are included ~~within~~in Net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

~~15.~~

13. Contingencies and commitments

Contingencies

In the ordinary course of business, we are involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that are difficult to predict. See our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, Part I, Item 1A. Risk Factors—Our business may be affected by litigation and government investigations.We describe our legal proceedings and other matters that are significant or that we believe could become significant in this footnote; in Note ~~18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017;~~2018; and in Note ~~14,~~13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019.

We record accruals for loss contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously.

Our legal proceedings involve various aspects of our business and a variety of ~~claims—including but not limited to patent validity and infringement, regulatory standards, and other matters—~~claims, some of which present novel factual allegations and/or unique legal theories. In each of the matters described in this filing, in Note ~~18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, or in Note ~~14,~~13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ~~ending~~ended March 31, ~~2018, plaintiffs~~2019, in which we could incur a liability, our opponents seek an award of a not-yet-quantified amount of damages or an amount that is not material. In addition, a number of the matters pending against us are at very early stages of the legal process, which in complex proceedings of the sort we face often extend for several years. As a result, none of the matters ~~pending against us~~ described in this filing, in Note ~~18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, or in Note ~~14,~~13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ~~ending~~ended March 31, ~~2018,~~2019, in which we could incur a liability, have progressed sufficiently through discovery and/or the development of important factual information and legal issues to enable us to estimate a range of possible loss, if any, or such amounts are not material. While it is not possible to accurately predict or determine the eventual outcomes of these matters, an adverse determination in one or more of these matters currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Certain recent developments concerning our legal proceedings and other matters are discussed below:

~~PCSK9 Antibody~~Novartis Breach of Contract Action

On July 16, 2019, Novartis Pharma AG (Novartis) filed an amended complaint in the U.S. District Court for the Southern District of New York adding a claim for breach of contract alleging Novartis is owed amounts associated with 2018 budget overruns and Amgen responded with a counterclaim alleging additional breaches by Novartis of the collaboration agreements between the parties.

Repatha^® (evolocumab) Patent Litigation

~~U.S. Patent Litigation~~-~~Sanofi/Regeneron~~

~~As previously disclosed, the U.S. Court of Appeals for the Federal Circuit denied Amgen’s petition for rehearing~~ ~~en banc~~On June 6, 13 and ~~issued a March 2, 2018 mandate returning the case to~~21, 2019, the U.S. District Court for the District of Delaware (the Delaware District Court) held evidentiary hearings on Amgen’s motion for a ~~new trial~~permanent injunction against PRALUENT^®. The Delaware District Court has scheduled an August 8, 2019 hearing on ~~two~~the post-trial motion for a judgment notwithstanding the jury verdict filed by Sanofi, Sanofi-Aventis U.S. LLC, Aventisub LLC, formerly doing business as Aventis Pharmaceuticals Inc., and Regeneron Pharmaceuticals, Inc.

Sensipar^®(cinacalcet) Litigation

Cipla Ltd. v. Amgen Inc.

On May 2, 2019, the Delaware District Court denied Amgen’s motion for preliminary injunction in the lawsuit by Cipla Limited and Cipla USA, Inc. (collectively, Cipla) seeking a declaration that provisions of its settlement agreement with Amgen have been triggered by the at-risk launch of a generic cinacalcet product by Teva Pharmaceutical Industries Ltd. (Teva). On the same day, Amgen filed its notice of appeal of the ~~defendants’ challenges to the validity~~Delaware District Court’s denial of Amgen’s ~~patents (lack~~motion for preliminary injunction in the United States Court of ~~written description and enablement~~Appeals for the Third Circuit (the Third Circuit Court of ~~the claimed inventions) and for further consideration of a permanent injunction.~~Appeals). On ~~July 23, 2018,~~May 3, 2019, Amgen filed a ~~petition~~motion for ~~certiorari with~~injunction pending appeal in the Delaware District Court, which was denied on May 9, 2019. On May 13, 2019, Amgen filed a motion for injunction pending appeal and expedited briefing in the Third Circuit Court of Appeals. On May 23, 2019, the Third Circuit Court of Appeals denied the motion for injunction pending appeal and granted the request for expedited briefing. On July 16, 2019, the Third Circuit Court of Appeals affirmed the Delaware District Court’s decision denying Amgen’s motion for a preliminary injunction. With respect to Cipla’s pending claims, the Delaware District Court has given Cipla until July 31, 2019 to amend its complaint.

Amgen Inc. v. Amneal Pharmaceuticals LLC, et al. Abbreviated New Drug Application (ANDA) Patent Litigation

On June 13, 2019, the Delaware District Court held a hearing on the motion filed by Sun Pharma Global FZE, Sun Pharmaceutical Industries, Ltd. and Sun Pharmaceutical Industries, Inc. (collectively, Sun) to enforce the settlement agreement entered between Amgen and Sun. By its complaint, Sun is contending that its generic cinacalcet product should not be held off the U.S. ~~Supreme Court seeking review of~~market.

On July 17, 2019, Amgen filed a motion requesting the U.S. Court of Appeals for the Federal Circuit ~~conclusion that~~(the Federal Circuit Court) to vacate the Delaware District Court’s noninfringement judgment ~~affirming the validity~~in favor of ~~Amgen’s patents was based, in part, on an erroneous application~~Watson Laboratories, Inc. and Actavis Pharma, Inc. and direct entry of the ~~law of written description.~~parties’ proposed consent judgment.

~~Sensipar~~KYPROLIS^® ~~(cinacalcet) Litigation~~

~~Sensipar~~^®~~Abbreviated New Drug Application (ANDA)~~ (carfilzomib) ANDA Patent Litigation

~~As previously disclosed,~~On May 6, 2019, the Delaware District Court ~~held~~commenced trial ~~on the infringement claims and defenses~~ in the ~~Amgen~~Onyx Therapeutics, Inc. v. ~~Aurobindo Pharma Ltd.~~Cipla Limited., et ~~al.~~al. consolidated ~~lawsuit. Post-trial briefing on the infringement claims and defenses was completed on~~case. On May ~~18, 2018.~~

~~On June 12, 2018,~~7, 2019, the Delaware District Court ~~entered an order dismissing the lawsuit~~signed consent judgments filed ~~in December 2017 against Torrent Pharmaceuticals Ltd. on stipulation between the parties and subject~~prior to ~~the terms of a confidential settlement agreement.~~

In June 2018, Amgen filed lawsuits in the Delaware District Court and the U.S. District Court for the Middle District of North Carolina, each against Accord Healthcare, Inc. and Intas Pharmaceuticals Ltd. (collectively, Accord) for infringement of our U.S. Patent No. 9,375,405 (the ’405 Patent). In each lawsuit, Amgen seeks an order making any U.S. Food and Drug Administration (FDA) approval of Accord’s generic version of Sensipar^® ~~effective no earlier than the expiration of the ’405 Patent in 2026.~~

~~Sensipar~~^®~~Pediatric Exclusivity Litigation~~

~~As previously disclosed, on February 17, 2018, the U.S. District Court for the District of Columbia entered final judgment for the FDA in the lawsuit filed~~trial by ~~Amgen seeking effectively to reverse the FDA’s May 22, 2017 rejection of Amgen’s request for pediatric exclusivity for cinacalcet hydrochloride (Sensipar~~^®~~/ Mimpara~~^®). A grant of pediatric exclusivity by the FDA would have provided Amgen with an additional six months of exclusivity (i.e., through September 8, 2018) following the March 8, 2018 expiration of Amgen’s U.S. composition of matter patent. Oral arguments in the U.S. Court of Appeals for the District of Columbia Circuit on Amgen’s appeal of the final judgment took place on May 17, 2018.

~~KYPROLIS~~^® ~~(carfilzomib) ANDA Patent Litigation~~

~~During May, June and July of 2018, the Delaware District Court entered orders on stipulations between~~ Onyx Therapeutics, Inc. (Onyx Therapeutics) and each of Aurobindo Pharma USA, Inc. (Aurobindo); InnoPharma Inc. (InnoPharma); Sagent Pharmaceuticals, Inc. (Sagent); Apotex Inc. and Apotex Corp. (collectively, Apotex); Fresenius Kabi USA, Inc. and Fresenius Kabi USA, LLC (collectively, Fresenius) and ~~Fresenius Kabi USA, Inc.; Breckenridge Pharmaceutical, Inc.; Aurobindo Pharma USA, Inc.; Cipla Limited and Cipla USA, Inc. (collectively, Cipla); and Innopharma, Inc., respectively,~~signed a consent judgment filed that each defendant infringes U.S. Patent Nos. 7,417,042; 7,737,112 (the ’112 Patent); 8,207,125; 8,207,126; and 8,207,127. Onyx Therapeutics had previously provided those defendants a covenant that it would not assert patent infringement of U.S. Patent Nos. 7,232,818; 7,491,704; 8,129,346; and 8,207,297 against certain of the respective defendants’ ANDA applications and products. On June 4, 2018, the Delaware District Court also entered an order on a stipulation betweensame day by Onyx Therapeutics and MSN Laboratories Private Limited and MSN Pharmaceuticals, Inc. (collectively, MSN)~~, that MSN infringes the ’112 Patent. In June and July 2018,~~. On May 14, 2019, the Delaware District Court ~~consolidated for purposes of discovery into the existing consolidated case~~ signed consent judgments filed during trial by Onyx Therapeutics and each of Dr. Reddy’s Laboratories, Inc. ~~v. Cipla Limited, et al.,~~ ~~the lawsuits that were filed against~~and Dr. Reddy’s Laboratories, Ltd. (collectively, DRL) and ~~Dr. Reddy’s Laboratories,~~Breckenridge Pharmaceutical, Inc. ~~in December 2017; against~~(Breckenridge). In the consent judgments between Onyx Therapeutics and each of Aurobindo, InnoPharma, Sagent, Apotex, ~~Corp.~~Fresenius, DRL, and ~~Apotex Inc. in January 2018; against~~ Breckenridge, ~~Pharmaceuticals, Inc. in February 2018;~~the parties stipulated to entry of: (1) judgment dismissing with prejudice all of the parties’ claims, counterclaims, affirmative defenses and ~~against Cipla in April 2018, respectively~~.demands; and (2) an injunction prohibiting infringement of U.S. Patent Nos. 7,417,042; 7,737,112 (the ’112 Patent); and 8,207,125 by the manufacture, use, sale, offer to sell, or importation into the United States of the applicable defendant’s carfilzomib product unless specifically authorized pursuant to the applicable confidential settlement agreement. In the consent judgment between Onyx Therapeutics and MSN, the parties stipulated to entry of: (1) judgment dismissing with prejudice all of the parties’ claims, counterclaims, affirmative defenses and demands; and (2) an injunction prohibiting infringement of the ’112 Patent by the manufacture, use, sale, offer to sell, or importation into the United States of MSN’s carfilzomib product unless specifically authorized pursuant to the confidential settlement agreement. On May 16, 2019, trial concluded between Onyx Therapeutics and the lone remaining defendant, Cipla. The parties await the judgment of the Delaware District Court.

NEUPOGEN^® (filgrastim)/ Neulasta^®(pegfilgrastim) Patent Litigation

~~Adello NEUPOGEN~~Coherus Neulasta^® Patent Litigation

~~As previously disclosed,~~On July 29, 2019, the Federal Circuit Court affirmed the Delaware District Court’s final judgment dismissing Amgen’s lawsuit against Coherus BioSciences, Inc. (Coherus) for infringement of U.S. Patent No. 8,273,707.

Sandoz NEUPOGEN^® / Neulasta^® Patent Litigation

On May 8, 2019, the Federal Circuit Court affirmed the U.S. District Court for the Northern District of California’s grant of summary judgment of noninfringement of U.S. Patent Nos. 8,940,878 and 6,162,427 by Sandoz Inc., Sandoz International GmbH and Sandoz GmbH. On June 7, 2019, Amgen ~~Inc.~~ and Amgen Manufacturing, ~~Ltd. (collectively, Amgen)~~Limited (AML) filed a ~~patent infringement~~petition for rehearing en banc in the Federal Circuit Court.

On May 13, 2019, Sandoz Inc. voluntarily dismissed, without prejudice, the separate lawsuit it had filed in the U.S. District Court for the Northern District of California against Amgen and AML seeking a judgment of noninfringement and invalidity of the U.S. Patent No. 9,643,997 (the ’997 Patent).

Mylan Neulasta^® Patent Litigation

On June 13, 2019, the District Court for the Western District of Pennsylvania granted the request by Mylan Inc., Mylan Pharmaceuticals Inc., Mylan GmbH, and Mylan N.V. (collectively, Mylan) for a temporary stay pending the outcome of Amgen’s Federal Circuit Court appeal in the Coherus Neulasta^® Patent Litigation, and Amgen’s petition for en banc review of the Federal Circuit Court’s May 8, 2019 decision in the Sandoz NEUPOGEN^® / Neulasta^® Patent Litigation (each case discussed above).

Tanvex NEUPOGEN^® Patent Litigation

On July 23, 2019, Amgen filed a lawsuit in the U.S. District Court for the Southern District of ~~New Jersey~~California against ~~Adello~~Tanvex BioPharma USA, Inc., Tanvex BioPharma, Inc., and Tanvex Biologics ~~LLC (Adello). On May 17, 2018, Adello responded to the lawsuit, denying infringement and seeking judgment that the patents-in-suit are invalid and not infringed.~~

~~Coherus Neulasta~~^® ~~Patent Litigation~~

~~As previously disclosed, the Delaware District Court entered final judgment dismissing Amgen’s complaint against Coherus BioSciences, Inc. (Coherus)~~Corp. (collectively, Tanvex) for infringement of ~~our~~ U.S. Patent No. ~~8,273,707. On May 17, 2018, Amgen filed an appeal~~9,856,287 (the ’287 Patent) in accordance with the patent provisions of the ~~Delaware District Court’s judgment.~~

~~Pfizer NEUPOGEN~~^® ~~Patent Litigation~~

~~On July 18, 2018, Amgen Inc.~~Biologics Price Competition and ~~Amgen Manufacturing Ltd. (collectively, Amgen) filed a lawsuit in the Delaware District Court against Pfizer Inc. and Hospira Inc. (collectively, Pfizer)~~Innovation Act (BPCIA). This lawsuit stems from ~~Pfizer’s submission~~Tanvex’s submissions of an application for ~~FDA~~U.S. Food and Drug Administration (FDA) licensure of a filgrastim product as biosimilar to Amgen’s NEUPOGEN^®. By its complaint, Amgen ~~has asserted infringement of U.S. Patent No. 9,643,997 and~~ seeks, among other remedies, ~~injunctive relief~~an injunction prohibiting Tanvex from infringing the ’287 Patent.

Coherus Neulasta^® Trade Secret Litigation

Following a May 1, 2019 settlement between Amgen and Coherus, on May 2, 2019, pursuant to ~~prohibit Pfizer from practicing~~a joint request regarding settlement, the ~~patented invention prior to~~Ventura County Superior Court dismissed Amgen’s claims against Coherus with prejudice.

Patent Trial and Appeal Board Patent Challenges

On May 20, 2019, the ~~expiry of this patent.~~

~~ENBREL (etanercept) Litigation~~

~~Coherus ENBREL~~U.S. Patent ~~Challenge~~

~~As previously disclosed, the~~and Trademark Office’s Patent Trial and Appeal Board (PTAB) issued a decision denying Apotex’s request for rehearing on the PTAB’s finding and sua sponte amending the final decision with a finding the one remaining claim in Amgen’s U.S. Patent No. 8,952,138 is unpatentable. On July 22, 2019, Amgen filed a notice of appeal to the Federal Circuit Court with respect to all claims held to be unpatentable.

On June 8, 2019, Fresenius Kabi USA, LLC and Fresenius Kabi SwissBioSim GmbH filed a petition seeking to institute inter partes review (IPR) proceedings before the PTAB to challenge the patentability of the ~~U.S.~~’997 Patent. The ’997 Patent is also among the patents at issue in the Mylan Neulasta^® Patent Litigation, the previously-disclosed litigation between Amgen and ~~Trademark Office denied Coherus’ petitions~~Kashiv Biosciences, LLC (formerly known as Adello Biologics, LLC), Amneal Pharmaceuticals LLC, and Amneal Pharmaceuticals, Inc., and the previously-disclosed litigation between Amgen and Pfizer Inc. and Hospira Inc. Amgen’s patent owner preliminary response to this IPR petition is due September 11, 2019, after which the PTAB will have three months to render a decision regarding whether to institute ~~inter partes~~ ~~review~~PTAB trial proceedings on ~~U.S. Patent Nos. 8,163,522 and 8,063,182 and Coherus filed requests for rehearing on these two denied petitions. On July 13, 2018~~ the ~~PTAB denied both requests for rehearing.~~’997 Patent.

~~MVASI~~^™~~(bevacizumab-awwb)~~ Patent Litigation Relating to our Biosimilar Products

AMJEVITA^TM (adalimumab-atto) / AMGEVITA^TMPatent Litigation

As previously disclosed, Amgen has been sued in a number of European countries by Fresenius Kabi Deutschland GmbH (Fresenius), alleging that AMGEVITA^TM infringes various patents of Fresenius and seeking, among other remedies, injunctive relief prohibiting patent infringement. In May 2019, the parties acted jointly, to the extent necessary, to withdraw from and/or seek dismissal of the lawsuits.

KANJINTI^TM (trastuzumab) Patent Litigation

On July 10, 2019, Genentech, Inc. (Genentech) ~~and City of Hope~~ filed ~~lawsuits in~~a motion asking the Delaware District Court ~~alleging~~for a temporary restraining order and preliminarily injunction prohibiting Amgen from commercially launching, marketing or selling KANJINTI^TM until the Delaware District Court renders a decision on the merits of Genentech’s asserted U.S. Patent Nos. 6,627,196; 7,371,379; and 10,160,811. Following Amgen’s opposition, on July 18, 2019, the Delaware District Court denied Genentech’s motion. On July 19, 2019, Genentech filed a notice of appeal and a motion requesting the Federal Circuit Court to enter an injunction prohibiting Amgen from continuing with its launch of KANJINTI^TM until final resolution of Genentech’s appeal. On July 24, 2019, the Delaware District Court entered an order dismissing City of Hope as a party to the lawsuit and dismissing with prejudice Genentech’s claims for infringement of a number of expired patents, ~~listed~~leaving eight patents asserted by Genentech in the ~~Biologics Price Competition and Innovation Act (BPCIA) exchange~~litigation.

MVASI^TM(bevacizumab-awwb) Patent Litigation

~~by MVASI~~^™,On July 10, 2019, Genentech, alleging that Amgen’s ~~biosimilar version~~notice of ~~Avastin~~^® ~~(bevacizumab), and for non-compliance with certain provisions of the BPCIA. On June 5, 2018, Amgen responded~~commercial marketing pursuant to the ~~complaint denying patent infringement~~BPCIA is insufficient, filed motions asking the Delaware District Court for a temporary restraining order and ~~any violation~~enforcement of the BPCIA to prohibit Amgen from commercially marketing MVASI^TM until Amgen has provided new notice and ~~seeking judgment~~waited until the expiry of the notice period. Following Amgen’s opposition, on July 18, 2019, the Delaware District Court denied Genentech’s motions. On July 19, 2019, Genentech filed a notice of appeal and a motion requesting the Federal Circuit Court to enter an injunction prohibiting Amgen from marketing MVASI^TM until final resolution of Genentech’s appeal.

Antitrust Class Actions

Humira^® Biosimilar Antitrust Class Actions

As previously disclosed, in March and April 2019, ten purported class actions against Amgen, along with AbbVie Inc. and AbbVie Biotechnology Ltd. (collectively, AbbVie), were filed in U.S. District Court for the Northern District of Illinois (the Illinois Northern District Court). In April and May 2019, two additional purported class actions against Amgen and AbbVie were filed in the Illinois Northern District Court. The additional cases are captioned: Louisiana Health Service & Indemnity Co., d/b/a Blue Cross and Blue Shield of Louisiana, and HMO Louisiana, Inc. v. AbbVie Inc., et al. (April 30, 2019) (Louisiana Health); and Cleveland Bakers and Teamsters Health and Welfare Fund v. AbbVie Inc., et al. (May 10, 2019) (Cleveland Bakers, and together with Louisiana Health, the New Humira^® Antitrust Class Actions). In each of the New Humira^® Antitrust Class Actions, the plaintiffs bring federal antitrust claims along with various state law claims under common law and antitrust, consumer protection, and unfair competition statutes. The plaintiffs in the New Humira^® Antitrust Class Actions specifically allege that AbbVie has unlawfully monopolized the ~~patents-in-suit are invalid, unenforceable~~alleged market for Humira^® and biosimilars of Humira^®, including by creating an allegedly unlawful so-called patent thicket around Humira^®. The plaintiffs in the New Humira^® Antitrust Class Actions allege that AbbVie and Amgen entered into an allegedly unlawful settlement agreement under which Amgen allegedly agreed to delay its entry into the U.S. market with AMGEVITA^TM, its Humira^® biosimilar, in exchange for an alleged promise of exclusivity as the sole Humira^® biosimilar in that market for five months, beginning in January 2023. In each of the New Humira^® Antitrust Class Actions, plaintiffs seek injunctive relief, treble damages and attorney’s fees on behalf of a putative class of third-party payers and/or ~~not infringed by Amgen.~~consumers that have indirectly purchased, paid for or provided reimbursement for Humira^® in the United States. On June ~~19, 2018, Genentech and City of Hope moved to dismiss all of Amgen’s counterclaims and certain of Amgen’s defenses.~~

~~KANJINTI~~^™ ~~(trastuzumab) Patent Litigation~~

4, 2019, the Illinois Northern District Court entered an order consolidating the twelve purported class action cases for pre-trial purposes. On June ~~21, 2018, Genentech~~13, 2019, the Illinois Northern District Court entered an order requiring the plaintiffs to file a consolidated complaint by August 12, 2019.

Sensipar^® Antitrust Class Actions

As previously disclosed, a plaintiff in one of the class action lawsuits against Amgen and ~~City of Hope~~various entities affiliated with Teva filed a ~~lawsuit~~motion seeking to have the four class action lawsuits consolidated and designated as a multidistrict litigation (MDL) in the U.S. District Court for the Eastern District of Pennsylvania, and a different plaintiff in another of the class action lawsuits filed a motion seeking to have the four class action lawsuits, along with Cipla Ltd. v. Amgen Inc., consolidated and designated as a MDL in the Delaware District ~~Court alleging Amgen’s infringement of 37 patents by Amgen’s submission of an application for FDA licensure of KANJINTI~~^™~~, Amgen’s biosimilar version of Genentech’s Herceptin~~^® ~~(trastuzumab).~~Court. On July ~~19, 2018, Genentech, City of Hope and Amgen filed~~25, 2019, the MDL panel held a ~~joint stipulation~~hearing on the motions to dismiss certain of the patents from the lawsuit and Genentech and City of Hope filed an amended complaint narrowing its allegations of infringement to 18 of the 37 patents. Among other remedies, Genentech and City of Hope seek injunctive relief prohibiting patent infringement.consolidate.



Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (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 Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019. Our results of operations discussed in MD&A are presented in conformity with GAAP. Amgen operates in one business segment: human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.

Forward-looking statements

This report and other documents we file with the ~~SEC~~Securities and Exchange Commission (SEC) contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, 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,”~~“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 they 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 in Part II herein. 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~~forecasted by our forward-looking statements. Reference is made in particular to forward-looking statements regarding product sales, regulatory activities, clinical trial results, reimbursement, expenses, EPS, liquidity and capital resources, trends, planned dividends, stock repurchases and restructuring plans. 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

Amgen is a highly focused biotechnology company committed to unlocking the potential of biology for patients suffering from serious illness. A biotechnology pioneer since 1980, Amgen has grown to be one of the world’s leading independent biotechnology companies, has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential.

~~Currently, we market in six therapeutic areas: cardiovascular, oncology/hematology, neuroscience, inflammation, nephrology and bone health.~~ Our principal products—those with the most significant annual commercial sales—are ENBREL, Neulasta^®, ~~ENBREL, Sensipar~~Prolia^®~~/Mimpara~~, XGEVA^®, ~~Prolia~~Aranesp^® ~~(denosumab)~~, ~~Aranesp~~KYPROLIS^®, ~~XGEVA~~^®~~(denosumab) and~~ EPOGEN^® and Sensipar^®/Mimpara^®. We also market a number of other products, including ~~KYPROLIS~~Nplate^® (romiplostim), ~~Nplate~~Vectibix^® (panitumumab), ~~Vectibix~~Parsabiv^® (etelcalcetide), Repatha^®, NEUPOGEN^®, BLINCYTO^® (blinatumomab), Aimovig^®~~(panitumumab)~~(erenumab-aooe), ~~Repatha~~AMGEVITA^{® TM}~~(evolocumab)~~, ~~NEUPOGEN~~KANJINTI^TM, EVENITY^TM (romosozumab-aqqg), IMLYGIC^®~~, BLINCYTO~~ (talimogene laherparepvec) and Corlanor^® ~~(blinatumomab), Parsabiv~~^TM~~(etelcalcetide), IMLYGIC~~^®~~, Corlanor~~^® (ivabradine)~~, Aimovig~~^TM~~and KANJINTI~~^TM~~(biosimilar trastuzumab)~~.

Significant developments

Following is a summary of selected significant developments affecting our business that have occurred since the filing of our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019. For additional developments or for a more comprehensive discussion of certain developments discussed below, see our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019.

Products/Pipeline

Bone health

~~Prolia~~EVENITY^{® TM}

•

In ~~May 2018~~June 2019, we and June 2018, the FDA and the European Commission (EC), respectively, approved a new indication for the treatment of glucocorticoid-induced osteoporosis in adult patients at high risk of fracture. Both approvals were based on data from a phase 3 study, which showed patients on glucocorticoid therapy who received Prolia^® ~~had greater gains in bone mineral density compared to those who received the active comparator risedronate.~~

~~EVENITY~~^TM~~(romosozumab)~~^*


•	~~In July 2018, we announced the resubmission of the Biologics License Application to the FDA for EVENITY~~^TM~~, an investigational monoclonal antibody for the treatment of osteoporosis in postmenopausal women at high risk for fracture.~~

~~Cardiovascular~~

~~Repatha~~^®


•	~~In May 2018, we announced that the EC approved a new indication~~UCB, our global collaboration partner in the ~~Repatha~~^® label for adults with established atherosclerotic cardiovascular disease (myocardial infarction, stroke or peripheral arterial disease) to reduce cardiovascular risk by lowering low-density lipoprotein cholesterol levels.

~~Neuroscience~~

~~Aimovig~~^TM


•	~~In May 2018, we announced that the FDA approved Aimovig~~development of EVENITY^TM~~for the preventive treatment of migraine in adults. We are in collaboration with Novartis on the development and commercialization of Aimovig~~^TM.

~~Oncology/Hematology~~

~~BLINCYTO~~^®


•	~~In June 2018, we announced that the EC granted a full marketing authorization for BLINCYTO~~^®~~based on the overall survival data from the phase 3 TOWER study in adult patients with Philadelphia chromosome-negative relapsed or refractory B-cell precursor acute lymphoblastic leukemia.~~

~~KYPROLIS~~^®

•

~~In April 2018, we~~, announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has adopted a ~~positive~~negative opinion ~~recommending a label variation~~on the Marketing Authorization Application for ~~KYPROLIS~~EVENITY^{® TM}~~to include the final overall survival data from the phase 3 ASPIRE (CArfilzomib, Lenalidomide, and DexamethaSone versus Lenalidomide and Dexamethasone~~ for the treatment of ~~PatIents with Relapsed Multiple MyEloma) study. The ASPIRE study demonstrated that the addition of KYPROLIS~~^®to lenalidomide and dexamethasone reduced the risk of death by 21% versus lenalidomide and dexamethasone alone and extended overall survival by 7.9 months in patients with relapsed or refractory multiple myeloma.severe osteoporosis. In ~~June 2018, we announced that the FDA approved the supplemental New Drug Application to add the positive overall survival data from the phase 3 ASPIRE study~~July 2019, UCB submitted a written notice to the ~~U.S. Prescribing Information for KYPROLIS~~^®.

•

~~In June 2018, we presented results from~~EMA requesting a reexamination of the phase 3 ARROW (RAndomized, Open-label, Phase 3 Study in Subjects with Relapsed and Refractory Multiple Myeloma Receiving Carfilzomib in Combination with Dexamethasone, Comparing Once-Weekly versus Twice-weekly Carfilzomib Dosing) study of a once-weekly KYPROLIS^® ~~dosing regimen in patients with relapsed or refractory multiple myeloma. In the study, KYPROLIS~~^® ~~administered once-weekly at 70 mg/m~~² ~~with dexamethasone achieved superior progression-free survival and overall response rates, with a comparable safety profile, versus twice-weekly KYPROLIS~~^® ~~at 27 mg/m~~² ~~and dexamethasone.~~CHMP opinion.

Neuroscience

AMG 520 / CNP520

In July 2019, we and Novartis discontinued investigating AMG 520 / CNP520, a small-molecule inhibitor of beta-site amyloid precursor protein-cleaving enzyme-1 (BACE), for the prevention of Alzheimer’s disease.

Biosimilars

~~KANJINTI~~^TM^*~~(formerly~~ ABP ~~980)~~710 (biosimilar infliximab)


•	In ~~May 2018, the EC granted marketing authorization for KANJINTI~~^TM~~, a biosimilar candidate to Herceptin~~^®~~, for the treatment of HER2-positive metastatic breast cancer, HER2-positive early breast cancer and HER2-positive metastatic adenocarcinoma of the stomach or gastroesophageal junction.~~


•	~~In May 2018,~~July 2019, we announced that ~~we received~~the FDA has set a ~~Complete Response Letter from the FDA~~December 14, 2019 Biosimilar User Fee Act target action date for the Biologics License Application ~~for KANJINTI~~of ABP 710, a biosimilar candidate to REMICADE^TM®.

~~ABP 710~~KANJINTI^TM

•

In June ~~2018,~~2019, we and Allergan plc (Allergan) announced ~~results from a phase 3 study evaluating~~that the ~~efficacy~~FDA approved KANJINTI^TM for all approved indications of the reference product Herceptin^® (trastuzumab) for the treatment of HER2-overexpressing adjuvant and ~~safety~~metastatic breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarcinoma. In July 2019, we and Allergan announced the launch of ~~biosimilar candidate ABP 710 compared with REMICADE~~KANJINTI^{® TM}~~(infliximab)~~ in ~~patients with moderate-to-severe rheumatoid arthritis. The results confirm noninferiority compared to infliximab but could not rule out superiority based on its primary efficacy endpoint.~~the United States.

*FDA conditionally approved trade nameMVASI^TM


•	In July 2019, we and Allergan announced the launch of MVASI^TM in the United States.

For a discussion of litigations relating to KANJINTI^TM and MVASI^TM, see Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019.

Selected financial information

The following is an overview of our results of operations (in millions, except percentages and per-share data):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
Product sales
U.S.	$	4,367	$	4,386	—	%	$	8,514	$	8,481	—	%	$	4,142	$	4,367	(5	)%	$	8,133	$	8,514	(4	)%
ROW	1,312		1,188		10	%	2,508		2,292		9	%	1,432		1,312		9	%	2,727		2,508		9	%
Total product sales	5,679		5,574		2	%	11,022		10,773		2	%	5,574		5,679		(2	)%	10,860		11,022		(1	)%
Other revenues	380		236		61	%	591		501		18	%	297		380		(22	)%	568		591		(4	)%
Total revenues	$	6,059	$	5,810	4	%	$	11,613	$	11,274	3	%	$	5,871	$	6,059	(3	)%	$	11,428	$	11,613	(2	)%
Operating expenses	$	3,227	$	3,112	4	%	$	6,055	$	5,985	1	%	$	3,193	$	3,227	(1	)%	$	6,278	$	6,055	4	%
Operating income	$	2,832	$	2,698	5	%	$	5,558	$	5,289	5	%	$	2,678	$	2,832	(5	)%	$	5,150	$	5,558	(7	)%
Net income	$	2,296	$	2,151	7	%	$	4,607	$	4,222	9	%	$	2,179	$	2,296	(5	)%	$	4,171	$	4,607	(9	)%
Diluted EPS	$	3.48	$	2.91	20	%	$	6.73	$	5.71	18	%	$	3.57	$	3.48	3	%	$	6.75	$	6.73	—	%
Diluted shares	660		738		(11	)%	685		740		(7	)%	610		660		(8	)%	618		685		(10	)%

In the following discussion of changes in product sales, any reference to unit demand 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. In addition, any reference to increases or decreases in inventory refers to changes in inventory held by wholesaler customers and end users (such as pharmacies).

Total product sales ~~increased~~decreased for the three months ended June 30, ~~2018,~~2019, driven primarily by ~~higher unit demand,~~a decline in net selling price, offset partially by ~~unfavorable changes in inventory.~~higher unit demand. Total product sales ~~increased~~decreased for the six months ended June 30, ~~2018,~~2019, driven primarily by a decline in net selling price and unfavorable changes in inventory, offset partially by higher unit demand. ~~The increases in total product sales~~For the remainder of 2019, we continue to expect a lower net selling price compared with 2018.

Other revenues decreased for the three and six months ended June 30, ~~2018, have not benefited from net selling price.~~2019, driven primarily by lower milestone payments, offset partially by higher royalties.

~~Other revenues increased~~Operating expenses for the three months ended June 30, ~~2018, driven primarily by a milestone payment received from Novartis. Other revenues~~2019, were relatively flat. Operating expenses increased for the six months ended June 30, ~~2018,~~2019, driven primarily by ~~higher milestone payments~~increased spending in research and early pipeline in support of our oncology programs and higher ~~Ibrance~~^® ~~(palbociclib) royalty income.~~

Operating expenses increased for the three and six months ended June 30, 2018, driven primarily by higher investments in product launches and marketed product support, offset partially by decreased Other expenses. All expense categories continued to benefit from our transformation and process improvement efforts, which enabled investment in newer and recently launched products.cost of sales.

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. The net impact from changes in foreign currency exchange rates was not material for the three and six months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

Results of operations

Product sales

Worldwide product sales were as follows (dollar amounts in millions):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
ENBREL	$	1,302	$	1,466	(11	)%	$	2,407	$	2,647	(9	)%	$	1,363	$	1,302	5	%	$	2,514	$	2,407	4	%
Neulasta^®	1,100		1,087		1	%	2,255		2,297		(2	)%	824		1,100		(25	)%	1,845		2,255		(18	)%
Prolia^®	610		505		21	%	1,104		930		19	%	698		610		14	%	1,290		1,104		17	%
XGEVA^®													499		452		10	%	970		897		8	%
Aranesp^®	472		535		(12	)%	926		1,046		(11	)%	436		472		(8	)%	850		926		(8	)%
KYPROLIS^®													267		263		2	%	512		485		6	%
EPOGEN^®													223		250		(11	)%	442		494		(11	)%
Sensipar^®/Mimpara^®	420		427		(2	)%	917		848		8	%	122		420		(71	)%	335		917		(63	)%
XGEVA^®	452		395		14	%	897		797		13	%
EPOGEN^®	250		292		(14	)%	494		562		(12	)%
Other products	1,073		867		24	%	2,022		1,646		23	%	1,142		810		41	%	2,102		1,537		37	%
Total product sales	$	5,679	$	5,574	2	%	$	11,022	$	10,773	2	%	$	5,574	$	5,679	(2	)%	$	10,860	$	11,022	(1	)%

Future sales of our products will depend in part on the factors discussed below and in the following sections of our Annual Report on Form 10-K for the year ended December 31, ~~2017:~~2018: (i) ~~Overview,~~ Item 1. Business—Marketing, Distribution and Selected Marketed ~~Products;~~Products, (ii) Item 1A. Risk ~~Factors;~~Factors and (iii) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview, and Results of Operations—Product Sales, as well as in our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018~~2019, in (i) Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Product ~~Sales.~~Sales; and (ii) Part II, Item 1A. Risk Factors.

ENBREL

Total ENBREL sales by geographic region were as follows (dollar amounts in millions):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
ENBREL — U.S.	$	1,252	$	1,411	(11	)%	$	2,302	$	2,529	(9	)%	$	1,315	$	1,252	5	%	$	2,421	$	2,302	5	%
ENBREL — Canada	50		55		(9	)%	105		118		(11	)%	48		50		(4	)%	93		105		(11	)%
Total ENBREL	$	1,302	$	1,466	(11	)%	$	2,407	$	2,647	(9	)%	$	1,363	$	1,302	5	%	$	2,514	$	2,407	4	%

The ~~decrease~~increase in ENBREL sales for the three months ended June 30, 2018, was driven primarily by unfavorable changes in inventory and lower unit demand. The decrease in ENBREL sales for the six months ended June 30, 2018, was driven primarily by lower unit demand and a decline in net selling price.

~~For 2018, we expect the trend of lower unit demand to continue. In addition, we expect the 2018 net selling price to decline slightly compared with 2017.~~

~~Neulasta~~^®

~~Total Neulasta~~^®~~sales by geographic region were as follows (dollar amounts in millions):~~

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
Neulasta^®— U.S.
$ 948
$ 937
1 % $ 1,957
$ 1,985
(1 )%
Neulasta^®— ROW
152
150
1 % 298
312
(4 )%
Total Neulasta^®
$ 1,100
$ 1,087
1 % $ 2,255
$ 2,297
(2 )%

~~The increase in global Neulasta~~^®~~sales for the three months ended June 30, 2018,~~2019, was driven primarily by an increase in net selling price and ~~to a lesser extent,~~ favorable changes in inventory, offset partially by lower unit demand. The ~~decrease~~increase in ~~global Neulasta~~^®ENBREL sales for the six months ended June 30, ~~2018,~~2019, was driven primarily by ~~lower unit demand and~~ favorable ~~prior-period~~impacts from changes in accounting estimates ~~offset partially by~~of sales deductions and product returns and an increase in net selling ~~price.~~price, offset partially by unfavorable changes in inventory and lower unit demand. In 2019, we continue to expect lower unit demand compared with 2018.

~~Neulasta~~^® ~~sales have been and will continue to be affected by~~In April 2019, the development of new protocols, tests and/or treatments for cancer and/or new treatment alternatives, including those that have reduced and may continue to reduce the use of myelosuppressive regimens in some patients.

~~Our final material U.S. patent for Neulasta~~^® ~~expired in October 2015. Therefore, we expect to face competition in the United States, which over time may have~~FDA approved a ~~material adverse impact on future sales of Neulasta~~^®~~. A~~second biosimilar version of ~~Neulasta~~^® ~~was approved~~ENBREL, and we are involved in patent litigations with the ~~second quarter of 2018 and launched in July 2018. Other~~two companies seeking to market their FDA-approved biosimilar versions of ~~Neulasta~~^®~~may also receive approval in the second half of 2018. For a discussion of ongoing patent litigations with these and other companies that are developing proposed biosimilar versions of Neulasta~~^®,~~see~~ENBREL. See Note ~~15, Contingencies and commitments, to the condensed consolidated financial statements, Note 18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and Note ~~14,~~13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the period ended March 31, ~~2018.~~2019. Other companies are also developing purposed biosimilar versions of ENBREL. Companies with approved biosimilar versions of ENBREL may seek to enter the U.S. market if we are not successful in our litigations, or even earlier.

~~In addition, supplementary protection certificates issued by certain countries, including France, Germany, Italy, Spain and the United Kingdom, that are related to our European patent for~~ Neulasta^® ~~expired in August 2017.~~

~~Prolia~~^®

Total ~~Prolia~~Neulasta^®sales by geographic region were as follows (dollar amounts in millions):

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
Prolia^® — U.S.
$ 396
$ 326
21 % $ 716
$ 605
18 %
Prolia^® — ROW
214
179
20 % 388
325
19 %
Total Prolia^®
$ 610
$ 505
21 % $ 1,104
$ 930
19 %



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
Neulasta^®— U.S.	$	719	$	948	(24	)%	$	1,612	$	1,957	(18	)%
Neulasta^®— ROW	105		152		(31	)%	233		298		(22	)%
Total Neulasta^®	$	824	$	1,100	(25	)%	$	1,845	$	2,255	(18	)%

The ~~increases~~decreases in global ~~Prolia~~Neulasta^®sales for the three and six months ended June 30, ~~2018,~~2019, were driven ~~primarily~~by lower net selling price and the impact of biosimilar competition on unit demand. Neulasta^® sales included a $98 million order from the U.S. government in the first quarter of 2019.

Biosimilar versions of Neulasta^® have been approved and launched, and other biosimilar versions may also receive approval in the near future. Therefore, we face increased competition in the United States and Europe, which has had and will continue to have a material adverse impact on sales of Neulasta^®. For a discussion of ongoing patent litigations relating to these and other biosimilars, see Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019.

Prolia^®

Total Prolia^® sales by geographic region were as follows (dollar amounts in millions):



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
Prolia^® — U.S.	$	458	$	396	16	%	$	848	$	716	18	%
Prolia^® — ROW	240		214		12	%	442		388		14	%
Total Prolia^®	$	698	$	610	14	%	$	1,290	$	1,104	17	%

The increases in global Prolia^®sales for the three and six months ended June 30, 2019, were driven by higher unit ~~demand and, to a lesser extent, higher net selling price.~~demand. Prolia^®, which has a six-month dosing interval, has exhibited a historical sales pattern, with the first and third quarters of a year representing lower sales than the second and fourth quarters of a year.

~~Aranesp~~XGEVA^®

Total XGEVA^®

~~Total Aranesp~~^® sales by geographic region were as follows (dollar amounts in millions):

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
Aranesp^® — U.S.
$ 241
$ 288
(16 )% $ 466
$ 566
(18 )%
Aranesp^® — ROW
231
247
(6 )% 460
480
(4 )%
Total Aranesp^®
$ 472
$ 535
(12 )% $ 926
$ 1,046
(11 )%



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
XGEVA^® — U.S.	$	379	$	339	12	%	$	735	$	671	10	%
XGEVA^® — ROW	120		113		6	%	235		226		4	%
Total XGEVA^®	$	499	$	452	10	%	$	970	$	897	8	%

The ~~decreases~~increases in global ~~Aranesp~~XGEVA^®sales for the three and six months ended June 30, ~~2018,~~2019, were driven primarily by ~~the impact of competition on~~higher unit ~~demand and, to a lesser extent, lower net selling price.~~demand.

~~Aranesp~~^® ~~faces competition from a long-acting product. We could also face competition from biosimilar versions of EPOGEN~~^®~~. A biosimilar version of EPOGEN~~^® ~~was approved in the second quarter of 2018 and may launch. Other biosimilar versions of EPOGEN~~^® ~~may also receive approval.~~

~~Sensipar~~^®~~/Mimpara~~Aranesp^®

Total ~~Sensipar~~Aranesp^®~~/Mimpara~~^® sales by geographic region were as follows (dollar amounts in millions):

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
Sensipar^® — U.S.
$ 330
$ 342
(4 )% $ 739
$ 679
9 %
Sensipar^®/Mimpara^® — ROW
90
85
6 % 178
169
5 %
Total Sensipar^®/Mimpara^®
$ 420
$ 427
(2 )% $ 917
$ 848
8 %



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
Aranesp^® — U.S.	$	192	$	241	(20	)%	$	374	$	466	(20	)%
Aranesp^® — ROW	244		231		6	%	476		460		3	%
Total Aranesp^®	$	436	$	472	(8	)%	$	850	$	926	(8	)%

The ~~decrease~~decreases in global ~~Sensipar~~Aranesp^®~~/Mimpara~~^® sales for the three ~~months ended June 30, 2018, was driven primarily by unfavorable changes in inventory~~ and ~~lower unit demand as a result of a shift to Parsabiv~~^TM~~, offset partially by higher net selling price. The increase in global Sensipar~~^®~~/Mimpara~~^® ~~sales for the~~ six months ended June 30, 2019, were driven by the impact of competition on unit demand in the United States.

Aranesp^® faces competition from a long-acting erythropoiesis-stimulating agent. Aranesp^®also faces competition from a biosimilar version of EPOGEN^®. Other biosimilar versions of EPOGEN^® may also receive approval in the future. In 2019, sales in the United States have declined, and we expect them to continue to decline at a faster rate than in 2018 ~~was~~due to short- and long-acting competition.

KYPROLIS^®

Total KYPROLIS^® sales by geographic region were as follows (dollar amounts in millions):



	Three months ended June 30, 2019						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
KYPROLIS^® — U.S.	$	166	$	151	10	%	$	320	$	288	11	%
KYPROLIS^® — ROW	101		112		(10	)%	192		197		(3	)%
Total KYPROLIS^®	$	267	$	263	2	%	$	512	$	485	6	%

The increases in global KYPROLIS^®sales for the three and six months ended June 30, 2019, were driven primarily by higher unit demand ~~and increases in net selling price and inventory. There was a shift in reimbursement from U.S. Medicare Part D to Part B at the beginning of 2018, and providers may have ordered additional supply~~ in the ~~first quarter of 2018~~United States.

We are engaged in ~~order to ensure patient treatment was not interrupted.~~

~~Our U.S. composition of matter patent~~litigation with two related companies that are challenging our material patents related to ~~Sensipar~~KYPROLIS^®~~, a small molecule, expired in March 2018. We are also involved in a number of litigation matters related to Sensipar~~^®~~, including patent litigations with a number of companies~~and seeking to market generic ~~versions~~carfilzomib products. Under the Hatch-Waxman Act, FDA approval of ~~Sensipar~~^®the ANDA at issue is stayed until at least January 20, 2020 (although the stay may be lifted in connection with a court order, or in certain other instances permitted under the statute). Separately, we have entered into confidential settlement agreements with other companies developing generic carfilzomib products, and ~~litigation regarding~~the court has entered consent judgments enjoining those companies from infringing certain of our ~~request for pediatric exclusivity for Sensipar~~^®.patents, subject to terms of the confidential settlement agreements. See Note ~~15, Contingencies and commitments, to the condensed consolidated financial statements, Note 18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and Note ~~14,~~13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly ~~Report~~Reports on Form 10-Q for the ~~period~~periods ended March 31, ~~2018.~~2019 and June 30, 2019. The ~~2018 outlook~~FDA has reported that it has tentatively approved ANDAs filed by two companies for ~~Sensipar~~generic carfilzomib products. The date of final approval of those ANDAs is governed by the Hatch-Waxman Act and any applicable settlement agreements between the parties.

EPOGEN^® ~~is uncertain as generic competitors may enter the market at risk in the second half of 2018.~~

~~XGEVA~~^®

Total ~~XGEVA~~EPOGEN^® sales ~~by geographic region~~ were as follows (dollar amounts in millions):

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
XGEVA^® — U.S.
$ 339
$ 292
16 % $ 671
$ 590
14 %
XGEVA^® — ROW
113
103
10 % 226
207
9 %
Total XGEVA^®
$ 452
$ 395
14 % $ 897
$ 797
13 %



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
EPOGEN^® — U.S.	$	223	$	250	(11	)%	$	442	$	494	(11	)%

The ~~increases~~decreases in ~~global XGEVA~~EPOGEN^®sales for the three and six months ended June 30, ~~2018, were driven primarily by higher unit demand and, to a lesser extent, higher net selling price.~~

~~EPOGEN~~^®

~~Total EPOGEN~~^® ~~sales were as follows (dollar amounts in millions):~~

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
EPOGEN^® — U.S.
$ 250
$ 292
(14 )% $ 494
$ 562
(12 )%

~~The decreases in EPOGEN~~^® ~~sales for the three and six months ended June 30, 2018,~~2019, were driven primarily by a ~~decrease~~decline in net selling price due to ~~contractual terms negotiated~~our contract with DaVita Inc. In 2019, we continue to expect a lower net selling price compared with 2018.

A biosimilar version of EPOGEN^®has been approved and ~~to a lesser extent, lower unit demand.~~

~~Our final material U.S. patent for EPOGEN~~^® ~~expired~~launched, and other biosimilar versions may also receive approval in ~~May 2015. We~~the future. Therefore, we face increased competition in the United States, which has had and will continue to have a material adverse impact on sales of EPOGEN^®. ~~Multiple companies are developing proposed biosimilar versions of EPOGEN~~^®~~. A biosimilar version of EPOGEN~~^® ~~was approved in the second quarter of 2018 and may launch. Other biosimilar versions of EPOGEN~~^® ~~may also receive approval.~~ For a discussion of ongoing patent litigation ~~with~~relating to one of these ~~companies,~~biosimilars, see Note ~~15, Contingencies and commitments, to the condensed consolidated financial statements and Note 18,~~20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Sensipar^®/Mimpara^®

Total Sensipar^®/Mimpara^® sales by geographic region were as follows (dollar amounts in millions):



	Three months ended June 30,						Six months ended June 30,
	2019		2018		Change		2019		2018		Change
Sensipar^® — U.S.	$	43	$	330	(87	)%	$	178	$	739	(76	)%
Sensipar^®/Mimpara^® — ROW	79		90		(12	)%	157		178		(12	)%
Total Sensipar^®/Mimpara^®	$	122	$	420	(71	)%	$	335	$	917	(63	)%

The decreases in global Sensipar^®/Mimpara^® sales for the three and six months ended June 30, 2019, were driven primarily by the impact of at-risk launches by generic competitors.

Our U.S. composition-of-matter patent related to Sensipar^®, a small molecule, expired in March 2018. We are involved in litigation with a number of companies seeking to market generic cinacalcet products surrounding our U.S. formulation patent, which expires in September 2026. Separately, we have entered into confidential settlement agreements with other companies developing generic cinacalcet products, and the court has entered consent judgments enjoining those companies from infringing certain of our patents, subject to terms of the confidential settlement agreements. See Note 20, Contingencies and commitments, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 13, Contingencies and commitments, to the condensed consolidated financial statements in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019. Certain companies manufacturing generics began selling their generic cinacalcet products in the United States in late 2018 and 2019, and some of this generic product remains commercially available in the United States from third-party distributors. Sensipar^® sales have been and will continue to be adversely impacted as a result of generic-product sales in the U.S. market.

Other products

Other product sales by geographic region were as follows (dollar amounts in millions):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018		2017		Change		2018		2017		Change		2019		2018		Change		2019		2018		Change
KYPROLIS^®— U.S.	$	151	$	140	8	%	$	288	$	277	4	%
KYPROLIS^®— ROW	112		71		58	%	197		124		59	%
Nplate^®— U.S.	107		99		8	%	219		196		12	%	$	122	$	107	14	%	236		219		8	%
Nplate^®— ROW	72		65		11	%	139		122		14	%	79		72		10	%	154		139		11	%
Vectibix^®— U.S.	68		62		10	%	143		123		16	%	79		68		16	%	157		143		10	%
Vectibix^®— ROW	105		106		(1	)%	199		192		4	%	117		105		11	%	209		199		5	%
Parsabiv^® — U.S.													148		66		*		257		102		*
Parsabiv^® — ROW													20		7		*		37		12		*
Repatha^®— U.S.	98		60		63	%	182		93		96	%	91		98		(7	)%	174		182		(4	)%
Repatha^®— ROW	50		23		*		89		39		*		61		50		22	%	119		89		34	%
NEUPOGEN^®— U.S.	63		90		(30	)%	128		191		(33	)%	55		63		(13	)%	105		128		(18	)%
NEUPOGEN^®— ROW	39		47		(17	)%	77		94		(18	)%	20		39		(49	)%	43		77		(44	)%
Parsabiv^TM — U.S.	66		—		*		102		—		*
Parsabiv^TM — ROW	7		—		*		12		—		*
BLINCYTO^®— U.S.	34		28		21	%	64		51		25	%	39		34		15	%	79		64		23	%
BLINCYTO^®— ROW	26		15		73	%	45		26		73	%	39		26		50	%	68		45		51	%
Aimovig^®— U.S.													83		2		*		142		2		*
Biosimilars — ROW													82		2		*		137		2		*
EVENITY^TM— U.S.													3		—		*		3		—		*
EVENITY^TM— ROW													25		—		*		42		—		*
Other — U.S.	24		19		26	%	43		34		26	%	27		22		23	%	50		41		22	%
Other — ROW	51		42		21	%	95		84		13	%	52		49		6	%	90		93		(3	)%
Total other products	$	1,073	$	867	24	%	$	2,022	$	1,646	23	%	$	1,142	$	810	41	%	$	2,102	$	1,537	37	%
Total U.S. — other products	$	611	$	498	23	%	$	1,169	$	965	21	%	$	647	$	460	41	%	$	1,203	$	881	37	%
Total ROW — other products	462		369		25	%	853		681		25	%	495		350		41	%	899		656		37	%
Total other products	$	1,073	$	867	24	%	$	2,022	$	1,646	23	%	$	1,142	$	810	41	%	$	2,102	$	1,537	37	%

* Change in excess of 100%.

Operating expenses

Operating expenses were as follows (dollar amounts in millions):

Three months ended
June 30, Six months ended
June 30,
2018 2017 Change 2018 2017 Change
Operating expenses:
Cost of sales $ 1,024
$ 1,024
— % $ 1,968
$ 2,020
(3 )%
% of product sales 18.0 % 18.4 % 17.9 % 18.8 %
% of total revenues 16.9 % 17.6 % 16.9 % 17.9 %
Research and development $ 869
$ 873
— % $ 1,629
$ 1,642
(1 )%
% of product sales 15.3 % 15.7 % 14.8 % 15.2 %
% of total revenues 14.3 % 15.0 % 14.0 % 14.6 %
Selling, general and administrative $ 1,353
$ 1,209
12 % $ 2,480
$ 2,273
9 %
% of product sales 23.8 % 21.7 % 22.5 % 21.1 %
% of total revenues 22.3 % 20.8 % 21.4 % 20.2 %
Other $ (19 ) $ 6
*
$ (22 ) $ 50
*

* Change in excess of 100%.

~~Transformation and process improvements~~

During 2014, we announced transformation and process improvement efforts that we continue to execute. As part of these efforts, we committed to a more agile and efficient operating model. Our transformation and process improvement efforts across the Company are enabling us to reallocate resources to fund many of our innovative pipeline and growth opportunities that deliver value to patients and stockholders.

The transformation includes a restructuring plan that we estimate will result in pretax accounting charges in the range of $800 million to $900 million. As of June 30, 2018, restructuring costs incurred to date were $794 million. The charges that were recorded related to the restructuring during the three and six months ended June 30, 2018, were not significant. Since 2014, we have realized approximately $1.6 billion of transformation and process improvement savings. Net savings have not been significant as savings were reinvested in product launches, clinical programs and external business development.



	Three months ended June 30,								Six months ended June 30,
	2019			2018			Change		2019			2018			Change
Operating expenses:
Cost of sales	$	1,012		$	1,024		(1	)%	$	2,067		$	1,968		5	%
% of product sales	18.2		%	18.0		%			19.0		%	17.9		%
% of total revenues	17.2		%	16.9		%			18.1		%	16.9		%
Research and development	$	924		$	869		6	%	$	1,803		$	1,629		11	%
% of product sales	16.6		%	15.3		%			16.6		%	14.8		%
% of total revenues	15.7		%	14.3		%			15.8		%	14.0		%
Selling, general and administrative	$	1,260		$	1,353		(7	)%	$	2,414		$	2,480		(3	)%
% of product sales	22.6		%	23.8		%			22.2		%	22.5		%
% of total revenues	21.5		%	22.3		%			21.1		%	21.4		%
Other	$	(3	)	$	(19	)	(84	)%	$	(6	)	$	(22	)	(73	)%

Cost of sales

Cost of sales ~~decreased~~increased to ~~16.9%~~17.2% of total revenues for the three months ended June 30, 2019, driven primarily by unfavorable product mix, offset partially by the benefit of Hurricane Maria insurance proceeds and lower manufacturing costs.

Cost of sales increased to 18.1% of total revenues for the six months ended June 30, 2019, driven primarily by unfavorable product mix and higher manufacturing costs, offset partially by lower royalty costs and by the benefit of Hurricane Maria insurance proceeds. In 2019, product mix will continue to negatively impact cost of sales.

Research and development

The increases in R&D expense for the three and six months ended June 30, ~~2018,~~2019, were driven ~~primarily~~ by ~~lower royalty costs~~increased spending in research and ~~a decrease~~early pipeline in ~~acquisition-related amortization~~support of ~~intangible assets,~~our oncology programs, offset partially by ~~higher manufacturing costs and unfavorable product mix.~~

~~Research and development~~

~~R&D expenses for the three months ended June 30, 2018, were relatively flat as a decrease~~decreased spending in ~~marketed-product~~ support of ~~$70 million was offset by increases in later-stage clinical programs of $37 million and Discovery Research and Translation Sciences of $32 million.~~

R&D expenses for the six months ended June 30, 2018, were relatively flat as a decrease in marketed-product support of $77 million was offset by increases in later-stage clinical programs of $31 million and Discovery Research and Translation Sciences of $36 million.marketed products.

Selling, general and administrative

The ~~increases~~decrease in Selling, general and administrative expenses for the three months ended June 30, 2019, was driven primarily by lower discretionary general and administrative expenses and the end of certain amortization of intangible assets in 2018.

The decrease in Selling, general and administrative expenses for the six months ended June 30, ~~2018, were~~2019, was driven primarily by the end of certain amortization of intangible assets in 2018 and lower discretionary general and administrative expenses, offset partially by investments in ~~product launches and marketed product support.~~launch products.

Other

Other operating expenses for the three and six months ended June 30, 2019 and 2018, ~~and 2017, decreased due primarily to~~include changes in the ~~change in~~ fair values of contingent consideration liabilities related to business ~~combinations and lower net charges related to our restructuring plan, offset partially by~~combinations. Other operating expenses included expenses related to legal ~~proceedings.~~proceedings in the second quarter of 2018.

Nonoperating expense/income and income taxes

Nonoperating expense/income and income taxes were as follows (dollar amounts in millions):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Interest expense, net	$	347		$	321		$	685		$	647		$	332		$	347		$	675		$	685
Interest and other income, net	$	162		$	165		$	393		$	360		$	218		$	162		$	403		$	393
Provision for income taxes	$	351		$	391		$	659		$	780		$	385		$	351		$	707		$	659
Effective tax rate	13.3		%	15.4		%	12.5		%	15.6		%	15.0		%	13.3		%	14.5		%	12.5		%

Interest expense, net

The ~~increase~~decreases in Interest expense, net, for the three and six months ended June 30, ~~2018,~~2019, was due primarily to a reduction in outstanding long-term debt as a result of maturities in the ~~impact of~~current year, offset partially by rising interest rates on ~~debt on which we pay variable rates of interest.~~variable-rate debt.

Interest and other income, net

The ~~slight decrease~~increases in Interest and other income, net, for the three ~~months ended June 30, 2018, was due primarily to higher net investment losses~~ and reduced returns as a result of the liquidation of a portion of our portfolio, substantially offset by gains recognized on our equity investments, principally as a result of the adoption of a new accounting standard in the current year that changed prospectively the accounting for equity investments (see Note 1, Summary of significant accounting policies, to the

~~condensed consolidated financial statements). The increase in Interest and other income, net, for the~~ six months ended June 30, ~~2018,~~2019 was due primarily to lower losses on sales of investments in interest-bearing securities, offset partially by reduced interest income as a ~~net~~result of lower average cash balances and lower gains on our strategic equity investments. In addition, the increase for the six-month period was reduced by a gain recognized in connection with our acquisition of ~~K-A (see Note 3, Business combinations, to~~Kirin-Amgen, Inc., during the ~~condensed consolidated financial statements) and gains on our equity investments, offset partially by net investment losses recognized as a result~~first quarter of ~~the liquidation of a portion of our portfolio.~~2018.

Income taxes

The ~~decrease~~increases in our effective tax ~~rate~~rates for the three and six months ended June 30, ~~2018,~~2019, was due primarily to ~~the impacts of~~a prior-year tax benefit associated with intercompany sales under U.S. corporate tax ~~reform, offset partially by a prior year benefit associated with the effective settlement of certain state and federal tax matters.~~

On December 22, 2017, the U.S. enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreign subsidiaries, implements a hybrid territorial tax system together with a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In March 2018, the FASB issued a new accounting standard to incorporate SAB 118, which permits us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We continue to analyze the 2017 Tax Act and in certain areas have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures.

The 2017 Tax Act includes U.S. taxation on foreign intangible income, effective January 1, 2018. The FASB allows an entity to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as foreign intangible income in future years or provide for the tax expense related to the foreign intangible income as a period expense in the year it is incurred. We have recorded no provisional amount for deferred taxes on foreign intangible income because more time is needed to analyze the data in order to make an accounting policy election.

As previously disclosed, we received ana RAR from the IRS for the years 2010, 2011 and 2012. The RAR proposes to make significant adjustments that relate primarily to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. OnIn November ~~29,~~ 2017, we received a modified RAR that revised the ~~IRS calculations~~IRS’s calculation but continued to propose substantial adjustments. We disagree with the proposed adjustments and are pursuing resolution ~~through~~with the IRS administrative appeals ~~process,~~office, which currently has jurisdiction over the matter. If we ~~believe~~deem necessary, we will ~~likely~~vigorously contest the proposed adjustments through the judicial process. Final resolution of this complex matter is not ~~be concluded~~likely within the next 12 ~~months. Final resolution of the IRS audit~~months and could have a material impact on our ~~results of operations and cash flows if not resolved favorably, however, we~~condensed consolidated financial statements. We believe our accrual for income tax ~~reserves are appropriately provided~~liabilities is appropriate based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the complexity of the provision for ~~all open~~income taxes, the ultimate resolution of any tax ~~years.~~ matters may result in payments greater or less than amounts accrued.

See Note 5,3, Income taxes, to the condensed consolidated financial statements for further discussion.

Financial condition, liquidity and capital resources

Selected financial data was as follows (in millions):


	June 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Cash, cash equivalents and marketable securities	$	29,395	$	41,678	$	21,758	$	29,304
Total assets	$	67,684	$	79,954	$	59,373	$	66,416
Current portion of long-term debt	$	4,288	$	1,152	$	2,816	$	4,419
Long-term debt	$	30,209	$	34,190	$	27,798	$	29,510
Stockholders’ equity	$	14,909	$	25,241	$	10,794	$	12,500

Cash, cash equivalents and marketable securities

We have global access to our ~~$29~~$21.8 billion balance of cash, cash equivalents and marketable securities asbecause we no longer reinvest ~~our~~the related undistributed foreign earnings indefinitely outside the United States. As a result of ~~the~~U.S. corporate tax reform in 2017, ~~Tax Act,~~ we recorded a repatriation tax liability on undistributed earnings generated from operations in foreign tax jurisdictions, ~~estimated at $7.3 billion, that~~which will be paid over eight years. The first two annual ~~payment was~~payments were made in April ~~2018.~~2018 and April 2019, and the remaining scheduled payments total $6.2 billion.

investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

Capital allocation

Consistent with the objective to optimize our capital structure, we seek to deploy our accumulated cash balances in an efficient manner, and we consider several alternatives such as ~~share repurchases,~~ payment of ~~cash~~ dividends, stock repurchases, repayment of debt and strategic transactions that expand our portfolio of products in areas of therapeutic interest.

We intend to continue to invest in our business ~~and return~~while returning capital to stockholders through the payment of cash dividends and stock repurchases, thereby reflecting our confidence in the future cash flows of our business. The timing and amount of future dividends and stock repurchases will vary based on a number of factors, including future capital requirements for strategic transactions, ~~the~~ availability of financing on acceptable terms, debt service requirements, our credit rating, changes to applicable tax laws or corporate laws, changes to our business model and periodic determination by our Board of Directors that cash dividends and/or stock repurchases are in the best interests of stockholders and are in compliance with applicable laws and ~~agreements of~~ the ~~Company.~~Company’s agreements. In addition, the timing and amount of stock repurchases may also be affected by stock price and blackout periods, during which we are restricted from repurchasing stock. The manner of stock repurchases may include private block purchases, tender offers and market transactions.

In March ~~2018~~2019 and December ~~2017,~~2018, the Board of Directors declared quarterly cash dividends of ~~$1.32~~$1.45 per share of common stock, which were paid on June 7, 2019 and March 8, ~~2018 and June 8,~~2019, respectively, an increase of 10% over the quarterly cash dividend paid in each quarter of 2018.

We have also returned capital to stockholders through our stock repurchase program. During the six months ended June 30, ~~2018,~~2019, we repurchased ~~$14.0~~$5.4 billion of ~~our stock and paid $13.9 billion in cash during the period, which included 52.1 million shares of~~ common ~~stock repurchased through a $10.0 billion tender offer.~~stock. In ~~April 2018,~~May 2019, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $5.0 billion. As of June 30, ~~2018, $5.4~~2019, $4.7 billion of authorization remained available under ~~the Board of Directors-approved~~our stock repurchase program.

As a result of stock repurchases ~~including our recent tender offer,~~ and quarterly dividend payments, we have an accumulated deficit as of June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Our accumulated deficit is not expected to affect our future ability to operate, repurchase stock, pay dividends or repay our debt given our continuing profitability and strong financial position.

We believe that existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our needs for working capital; capital expenditure and debt service requirements; our plans to pay dividends and repurchase stock; and other business initiatives we plan to strategically pursue, including acquisitions and licensing activities. We anticipate that our liquidity needs can be met through a variety of sources, including cash provided by operating activities, sales of marketable securities, borrowings through commercial paper and/or syndicated credit facilities and access to other domestic and foreign debt markets and equity markets. See our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, Part I, Item 1A. Risk Factors—Global economic conditions may negatively affect us and may magnify certain risks that affect our business.

Certain of our financing arrangements contain nonfinancial covenants. In addition, our revolving credit agreement includes a financial covenant, which ~~was modified during the three months ended March 31, 2018. The modified covenant~~ requires that we maintain a specified minimum interest coverage ratio of (i) the sum of consolidated net income, interest expense, provision for income taxes, depreciation expense, amortization expense, unusual or nonrecurring charges and other noncash items (Consolidated EBITDA) to (ii) Consolidated Interest Expense, each as defined and described in the ~~amended~~ credit agreement. We were in compliance with all applicable covenants under these arrangements as of June 30, ~~2018.~~2019.

Cash flows

Our summarized cash flow activity was as follows (in millions):


	Six months ended June 30,						Six months ended June 30,
	2018			2017			2019			2018
Net cash provided by operating activities	$	4,829		$	4,711		$	3,259		$	4,829
Net cash provided by (used in) investing activities	$	17,844		$	(1,970	)
Net cash provided by investing activities							$	6,300		$	17,844
Net cash used in financing activities	$	(16,342	)	$	(3,353	)	$	(10,979	)	$	(16,342	)

Operating

Cash provided by operating activities has been and is expected to continue to be our primary recurring source of funds. Cash provided by operating activities during the six months ended June 30, ~~2018, increased~~2019, decreased compared with the same period in the prior year due primarily to ~~higher~~an increase in payments to the IRS related to an advance deposit, an increase in sales deductions paid to customers and lower net income, offset partially by higher cash taxes resulting from the first installment payment of repatriation tax arising from the 2017 Tax Act, net of reduced payments on our ongoing income tax liability.income.

Investing

Cash provided by investing activities during the six months ended June 30, 2019 and 2018, was due primarily to net ~~activity~~cash inflows related to marketable securities of $6.6 billion and $18.0 billion, ~~offset partially by capital expenditures of $342 million. Cash used~~respectively. Higher cash inflows in ~~investing activities during~~ the ~~six months ended June 30, 2017, was due primarily~~prior year reflect the cash to ~~net activity related~~fund a $10.0 billion tender offer completed in 2018 to ~~marketable securities of $1.5 billion and capital expenditures of $353 million.~~repurchase our common stock. Capital expenditures during the six months ended June 30, 2019 and 2018, were $260 million and ~~2017, were associated primarily with manufacturing-capacity expansions in various locations, as well as other site developments.~~$342 million, respectively. We currently estimate ~~2018~~2019 spending on capital projects ~~and equipment~~ to be approximately ~~$750~~$700 million.

Financing

Cash used in financing activities during the six months ended June 30, 2019, was due primarily to repurchases of our common stock of $5.4 billion, repayment of debt of $3.7 billion and payment of dividends of $1.8 billion. Cash used in financing activities during the six months ended June 30, 2018, was due primarily to repurchases of our common stock of $13.9 billion, repayment of debt of $0.5 billion and payment of dividends of $1.8 billion and repayment of debt of $500 million. Cash used in financing activities during the six months ended June 30, 2017, was due primarily to the payment of dividends of $1.7 billion, repurchases of our common stock of $1.6 billion and repayment of long-term debt, net of proceeds from debt issuances, of $920 million, offset partially by proceeds from the issuance of commercial paper of $959 million.billion. See Note ~~12,~~9, Financing arrangements, and Note 10, Stockholders’ equity, to the condensed consolidated financial statements for further discussion.

Critical accounting policies

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore, ~~under different assumptions or conditions,~~ actual results could differ materially from those ~~estimates.~~estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. There were no material changes to our critical accounting policies during the six months ended June 30, ~~2018.~~2019.



Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about our market risk is disclosed in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, and is incorporated herein by reference. There have been no material changes during the six months ended June 30, ~~2018,~~2019, to the information provided in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.



Item 4.	CONTROLS AND PROCEDURES

We maintain “disclosure controls and procedures,” as such term is defined under the Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in Amgen’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Amgen’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Amgen’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and, in reaching a reasonable level of assurance, Amgen’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation under the supervision and with the participation of our management, including Amgen’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Amgen’s disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2018.~~2019.

Management determined that, as of June 30, ~~2018,~~2019, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter then ended that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION



Item 1.	LEGAL PROCEEDINGS

See Note ~~15,~~13, Contingencies and commitments, to the condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the ~~period ended June 30, 2018 and Note 14, Contingencies and commitments, to the condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the period~~periods ended March 31, ~~2018,~~2019 and June 30, 2019, for discussions that are limited to certain recent developments concerning our legal proceedings. Those discussions should be read in conjunction with Note ~~18,~~20, Contingencies and commitments, to the consolidated financial statements in Part IV of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.



Item 1A.	RISK FACTORS

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, our beliefs and our management’s assumptions. These statements are not guarantees of future performance, and involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties our business faces. We have described in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2017,~~2018, the primary risks related to our business, and we periodically update those risks for material developments. Those risks are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employment relations, general economic conditions, geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price.

Below, we are providing, in supplemental form, the material changes to our risk factors that occurred during the past quarter. Our risk factors disclosed in Part I, Item 1A, of our Annual Report, on Form 10-K for the year ended December 31, ~~2017,~~2018, provide additional disclosure for these supplemental risks and are incorporated herein by reference.

Our sales depend on coverage and reimbursement from third-party payers, and pricing and reimbursement pressures may affect our profitability.

Sales of our products depend on the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans. Governments and private payers continue to pursue initiatives to contain costs and manage drug utilization. These payers are increasingly focused on the effectiveness, benefits and costs of similar treatments, which could result for our products in lower reimbursement rates or narrower populations for whom payers will reimburse. Continued intense public scrutiny of the price of drugs and other healthcare costs, together with payer dynamics, may limit our ability to set or adjust the price of our products based on their value, which could have a material adverse effect on our business. In the United States, the public discussions of drug pricing issues are likely to continue.

—Changing federal coverage and reimbursement policies and practices have impacted and may continue to impact access to and sales of our products

A substantial portion of our U.S. business relies on reimbursement from U.S. federal government healthcare programs and commercial insurance plans regulated by the U.S. federal and state governments. See our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, Part I, Item 1. Business—Reimbursement. ~~Changes~~Our business has and will continue to be impacted by legislative actions changing U.S. federal reimbursement ~~policy may come through legislative and/or administrative actions.~~policy. For example, in February 2018, the U.S. Congress passed legislation ~~that requires pharmaceutical~~requiring biopharmaceutical manufacturers to ~~pay~~provide greater discounts ~~for~~beginning in 2019 on products dispensed to patients in the coverage gap between the initial coverage limit of Medicare Part D ~~coverage gap beginning in 2019,~~and the program’s catastrophic-coverage threshold, which ~~may~~has and will continue to reduce our net product sales relating to such patients. Additional legislative proposals have been introduced by members of Congress to overhaul provisions of the Patient Protection and Affordable Care Act, to allow commercial-level reimportation of prescription medications from Canada or other countries and to enable Medicare to negotiate drug prices with biopharmaceutical manufacturers. Congressional focus on drug pricing has increased since the Democrats took control of the U.S. House of Representatives following the November 2018 election. Recent proposed legislation has been introduced in Congress that would, among other things, penalize pharmaceutical manufacturers for raising prices on drugs covered by Medicare Parts B and D faster than the rate of inflation, cap out-of-pocket expenses for Medicare Part D beneficiaries and significantly change the way Medicare reimburses for drugs in Medicare Part B. In addition, in January 2019, the chair of the House Oversight and Reform Committee sent letters to twelve different biopharmaceutical manufacturers, including Amgen, seeking documents and detailed information about such companies’ drug pricing. A number of other Congressional committees have also held hearings during the first half of 2019 on drug pricing.

Also our business has been and is expected to continue to be impacted by changes in U.S. federal reimbursement policy resulting from executive actions, federal regulations, or federal demonstration projects. For example, in May 2018, the U.S. ~~President Donald Trump and his~~presidential administration (the Administration) released a drug pricing “blueprint” and requested public comment on an array of policy ideas intended to increase competition, improve the negotiating power of the federal government, reduce drug prices and lower patient out-of-pocket costs. ~~The~~This blueprint ~~included~~includes a number of policy ideas with the potential to significantly impact, ~~our industry,~~ whether individually or collectively, ~~including~~our industry. Such proposals ~~to move~~include moving coverage and reimbursement for ~~all~~ Medicare Part B drugs into Medicare Part D, instituting a competitive acquisition program for Part B drugs in which competing third-party vendors take on the financial risk of acquiring drugs and ~~to remove~~billing Medicare, removing the ~~safe-harbor~~safe harbor protection under the federal anti-kickback statute for drug rebates paid to ~~payers. Prior to~~payers, and requiring the ~~release~~inclusion of drug price information in direct-to-consumer drug advertising.

Since that time, the drug pricing blueprint, other legislative proposals had been introduced into the U.S. Congress to overhaul provisions of the ACA and to enable commercial-level re-importation of prescription medications from Canada president and/or ~~other countries. Changes in U.S. federal reimbursement policy may also arise as a result of executive actions, federal regulations, or demonstration projects implemented by~~ federal agencies, ~~including~~such as the Centers for Medicare &and Medicaid Services (CMS), have announced a number of demonstration projects, recommendations and proposals to implement various elements described in the drug pricing blueprint. CMS, the federal agency responsible for administering Medicare and overseeing state Medicaid programs and ~~the~~ Health Insurance ~~Marketplaces. CMS~~Marketplaces, has substantial power to implement policy changes or demonstration projects that can quickly and significantly affect how drugs, including our products, are covered and reimbursed. For example, in October 2018, President Trump announced that CMS was evaluating a pilot program proposed to initially cover fifty percent of spending on Part B single-source drugs referred to as the “International Price Index” (IPI) model that would, among other things, set the Medicare payment amount for such single-source drugs to more closely align with international drug prices. In June 2019, Administration officials announced that the Office of Management and Budget is reviewing a draft of a proposed rule to implement the IPI model in the United States. CMS has ~~already begun implementing~~also issued guidance to allow certain Medicare plans offered by private insurance companies to require that patients receiving Medicare Part B drugs first try a drug preferred by the plan before such plan will cover another therapy and proposing lower reimbursement rates for new Part B drugs. Some of the efforts of CMS and the U.S. Department of Health and Human Services (HHS, the federal agency of which CMS is a part) to implement elements ~~described in~~of the ~~administration’s~~ drug pricing blueprint ~~including warning Medicare Part D plan insurers~~have not ultimately resulted in policy changes. For example, in July 2019 Administration officials announced the withdrawal of a proposed HHS rule that ~~they could face compliance actions if they implement contractual “gag clauses”~~would have excluded from federal anti-kickback safe harbor protection certain rebates paid to ~~prevent pharmacies~~PBMs under Medicare. However, following the withdrawal of this rebate rule, the Administration might pursue the IPI model or other drug pricing initiatives.

Separate from ~~alerting patients to lower priced cash payment options.~~the drug pricing blueprint, CMS has ~~also~~ undertaken other demonstration projects to test care models, such as the CMS Oncology Care Model, ~~that~~which provides participating physician practices with performance-based financial incentives that aim

to manage or reduce Medicare costs without negatively impacting the efficacy of care. We believe the Oncology Care Model has ~~negatively impacted~~reduced utilization of certain of our oncology products by participating physician practices and ~~may~~expect it to continue to do so in the future. And in July 2019, CMS released a proposed rule creating a new mandatory payment model focused on encouraging greater use of home dialysis and kidney transplants for end-stage renal disease patients that, if finalized as proposed, could result in changes to treatment of such patients, including reduction of the use of our erythropoiesis-stimulating agents and calcimimetic products. CMS has also solicited suggestions regarding other potential care models. President Trump’s administration is also seeking to address drug prices through other federal agency actions. For example, to promote greater drug price competition, the FDA is pursuing policies that would ease generic and biosimilar entry requirements, including the lowering of standards for demonstrating biosimilarity or interchangeability. While

In this dynamic environment, we are unable to predict ifwhich or how many of these various federal policy, legislative or regulatory changes may ultimately be ~~enacted,~~enacted. However, to the extent that these or other federal government initiatives decrease or modify the coverage or reimbursement available for our products, limit our ability to offer co-pay payment assistance to commercial patients, require that we pay increased rebates or shift other costs to us, limit ~~our ability to offer co-pay payment assistance to commercial patients, limit~~ or impact our decisions regarding the pricing of ~~pharmaceutical~~biopharmaceutical products or otherwise reduce the use of our U.S. products, such actions could have a material adverse effect on our business and results of operations.

We also face risks relating to the reporting of pricing data that affects the reimbursement of and discounts provided for our products. Government price reporting regulations are complex and may require a manufacturer to update certain previously submitted data. If our submitted pricing data are incorrect, we may become subject to substantial fines and penalties or other government enforcement actions, which could have a material adverse effect on our business and results of operations. In addition, as a result of restating previously reported price data, we also may be required to pay additional rebates and provide additional discounts.

—Changing state reimbursement and pricing actions may impact access to and have impacted and may continue to impact sales of our products

At the state level, government actions or ballot initiatives can also affect how our products are covered and reimbursed and/or create additional pressure on our pricing decisions. A number of states have adopted, and many other states have discussed and debated and are considering, new pricing ~~legislation,~~actions, including proposals designed to require biopharmaceutical manufacturers to publicly report proprietary pricing information, limit price increases or to place a maximum price ceiling or cap on ~~pharmaceutical~~biopharmaceutical products. Existing and proposed state pricing laws have added complexity to the pricing of drugs and may already be impacting industry pricing decisions. For example, in October 2017, California enacted a ~~drug pricing~~drug-pricing transparency bill that requires ~~pharmaceutical~~biopharmaceutical manufacturers to notify health insurers and government health plans at least 60 days before scheduled prescription drug price increases that exceed certain thresholds. ~~These existing~~Oregon and ~~proposed~~Washington passed similar laws in 2019 requiring notices to a state ~~pricing~~agency of certain price increases. Other states are seeking to change the way their states pay for drugs for patients covered by state programs. For example, in August 2018 the Ohio Department of Medicaid ordered that all the state’s Medicaid managed care plans terminate and renegotiate contracts with PBMs to eliminate the drug purchasing model in which PBMs bill the state more than they reimburse pharmacists for filling Medicaid patient prescriptions. In January 2019, California’s governor issued an executive order expanding state Medicaid coverage and directing state agencies and programs to consolidate drug purchases and to negotiate drug prices with manufacturers. Additionally, four states have enacted laws ~~have added complexity~~ to facilitate the ~~pricing~~importation of drugs from Canada. These state importation programs must first be approved by HHS under a federal statute that excludes biologics, but state and federal legislatures and agencies may ~~already be impacting industry pricing decisions.~~seek ways to extend such measures to biologics. Other states could adopt similar approaches or could pursue different policy changes in a continuing effort to reduce their costs. Ultimately, as with U.S. federal government actions, existing or future state government actions or ballot initiatives may also have a material adverse effect on our product sales, business and results of operations.

—U.S. commercial payer actions have impacted and may continue to impact access to and sales of our products

Payers, including healthcare insurers, ~~Pharmacy Benefit Managers (PBMs)~~PBMs, integrated healthcare delivery systems and group purchasing organizations, increasingly seek ways to reduce their and their respective members’ costs. ~~Many~~With increasing frequency, payers ~~continue to adopt~~are adopting benefit plan changes that shift a greater portion of ~~prescription~~drug costs to patients. Such measures include more limited benefit plan designs, high deductible plans, higher patient co-pay or ~~co-insurance~~coinsurance obligations and more significant limitations on patients’ use of manufacturer commercial ~~manufacturer~~ co-pay payment assistance programs (including through co-pay accumulator adjustment or maximization programs). Payers have sought and will likely continue to seek price discounts or rebates in connection with the placement of our products on their formularies or those they manage, particularly in treatment areas where the payer has taken the position that multiple branded products are therapeutically comparable. Payers also control costs by imposing restrictions on access to or usage of our products, such as requiring that patients first try a drug preferred by ~~requiring~~the payer or receive the payer’s prior ~~authorizations~~authorization before covering the product, or ~~step therapy, and~~that patients use a mail-order pharmacy or a limited network of fully-owned specialty pharmacies; payers may also choose to exclude certain indications for which our products are approved or even choose to exclude coverage entirely. For example, the burdensome administrative ~~process~~processes required for physicians to demonstrate or document that the patients for whom Repatha^®has been prescribed meet ~~the payers’~~payer utilization management criteria has limited and may continue to limit patient access to Repatha^® treatment. ~~Even with increased~~In an effort to reduce barriers to access, we reduced the net price of Repatha^® by providing greater discounts and rebates to payers, including PBMs that administer Medicare Part D prescription drug plans. However, affordability of patient out-of-pocket ~~expense~~co-pay cost has and may continue to limit patient use. For example, ~~other~~a very high percentage of Medicare patients ~~with coverage for Repatha~~^® have abandoned their Repatha^® prescriptions rather than pay their co-pay payment. In ~~an effort~~late 2018 and early 2019, we introduced a set of new National Drug Codes (NDCs) to ~~reduce access burdens,~~make Repatha^® available at a lower list price to attempt to address affordability for patients, particularly those on Medicare. To allow payers time to make a smooth transition to the lower list price and avoid incentivizing PBMs to immediately switch patients to the other available proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor that offered them a higher overall rebate due to its higher list price, we ~~have taken~~also continued to offer Repatha^® at the original list price for a ~~number~~period of ~~actions to reduce the~~time. Despite these net ~~price of Repatha~~^® ~~through offering greater discounts~~ and ~~rebates to payers. Despite the recent net~~list price reductions, some payers have and may continue to ~~impose~~restrict patient access, ~~burdens,~~ change formulary coverage for Repatha^®, seek further discounts or rebates or take other actions that could reduce our sales of Repatha^®. Further, in the competitive PCSK9 inhibitor marketplace, many payers have not yet adopted the new NDCs we introduced for lower-list price Repatha^®, including a number of PBMs that continue to cover Repatha^® at the original list price in part because of the higher rebates they receive for it. These factors have and may continue to limit patient affordability and use and to negatively impact our sales of Repatha^®.

Significant consolidation in the health insurance industry has resulted in a few large insurers and PBMs exerting greater pressure in pricing and usage negotiations with drug manufacturers, significantly increasing discounts and rebates required of manufacturers and limiting patient access and usage. For example, in the United States, the top three PBMs now oversee ~~more~~greater than ~~70%~~two-thirds of prescription claims ~~and the top three health insurance companies’ coverage is approaching half of~~as well as government and commercial covered lives. ~~Consolidation between pharmacies is also increasing, with the top three pharmacies now responsible for half of U.S. drug sales. Consolidation~~The consolidation among insurers, PBMs and other payers, including through integrated healthcare delivery systems and/or with specialty or mail-order pharmacies and pharmacy retailers, has increased the negotiating leverage such entities have over us and other drug manufacturers and has resulted in greater price discounts, ~~on our products,~~rebates and fees for other services being realized by those payers. For example, during the

fourth quarter of 2018, two of the nation’s largest PBMs, Express Scripts and ~~rebates. Further~~CVS Health, completed their combinations with major insurance companies Cigna and Aetna, respectively. Additional consolidation ~~(including as a result~~would further increase the leverage of ~~a number of merger transactions that have been announced but not yet completed) would increase this leverage.~~such entities. Ultimately, ~~further~~additional discounts, rebates, coverage or plan changes, restrictions or exclusions ~~as described above~~imposed by these commercial payers could have a material adverse effect on our product sales, business and results of operations.

—Government and commercial payer actions outside the United States have impacted and will continue to impact access to and sales of our ~~affected products.~~products

Outside the United States, we expect countries will continue to take actions to reduce their drug expenditures. See our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, Part I, Item 1. Business—Reimbursement. ~~For example, international~~International reference pricing (IRP) ishas been widely used by ~~a large number of~~many countries outside the United States to control costs based on an external benchmark of a product’s price in other countries. IRP policies can quickly and frequently change and may not reflect differences in the burden of disease, indications, market structures, or affordability differences across countries or regions. ~~Any deterioration~~In addition, countries may refuse to reimburse or may restrict the reimbursed population for a product when their national health technology assessments do not consider a medicine to demonstrate sufficient clinical benefit beyond existing therapies or that it does not meet certain cost effectiveness thresholds. For example, despite the EMA’s May 2018 approval of Repatha^® for the treatment of patients with established atherosclerotic disease, reimbursement for Repatha^® in ~~the~~France and Germany has remained limited to narrower patient populations (such as those with homozygous familial hypercholesterolemia) following national health technology assessments in mid-2018. Failure to obtain coverage and reimbursement ~~available~~ for our products, a deterioration in their existing coverage and reimbursement, or a decline in the timeliness or certainty of payment by payers to physicians and other providers ~~could~~has impacted and may further negatively impact the ability or willingness of healthcare providers to prescribe our products for their patients ~~or could~~and otherwise negatively affect the use of our products or the prices we receive for them. Such changes ~~could~~can and have had a material adverse effect on our product sales, business and results of operations.

We perform a substantial majority of our commercial manufacturing activities at our facility in the U.S. territory of Puerto Rico and a substantial majority of our clinical manufacturing activities at our facility in Thousand Oaks, California; significant disruptions or production failures at these facilities could significantly impair our ability to supply our products or continue our clinical trials.

The global supply of our products and product candidates for commercial sales and for use in our clinical trials is significantly dependent on the uninterrupted and efficient operation of our manufacturing facilities, in particular those in the U.S. territory of Puerto Rico and Thousand Oaks, California. See our Annual Report on Form 10-K for the year ended December 31, 2018, Part I, Item 1A. Risk Factors—Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.

We currently perform a substantial majority of our clinical manufacturing activities at our facility in Thousand Oaks, California. A substantial disruption in our ability to operate our Thousand Oaks, California manufacturing facility could materially and adversely affect our ability to supply our product candidates for use in our clinical trials, leading to delays in development of our product candidates.

In addition, we currently perform a substantial majority of our commercial manufacturing activities at our facility in the U.S. territory of Puerto Rico. In late September 2017, Hurricane Maria made landfall on the island of Puerto Rico. The hurricane destroyed residential and commercial buildings, agriculture, communications networks and most of Puerto Rico’s electric grid. While the critical manufacturing areas of our commercial manufacturing facility were not significantly impacted by the storm, the restoration of electrical service on the island was a slow process, and our facility operated with electrical power from back-up diesel powered generators for some time. In January 2018, we reconnected to the Puerto Rico electric grid but have continued to use diesel generators as needed when sufficient electric power has not been reliably available. Further instability of the electric grid could require us to increase the use of our generators or even return to using them exclusively. In addition, future storms or other disasters or events could cause a more significant impact to our manufacturing operations. Also, there is political instability in the Puerto Rican government that has led to civil unrest and the recent resignation of the governor. While our ability to manufacture and supply our products has not, to date, been impacted by the political instability, any substantial disruption in our ability to operate our Puerto Rico manufacturing facility (whether due to problems with the facility itself, compliance with regulatory requirements, the infrastructure and services available on the island, the unavailability of raw materials or supplies from vendors, the unavailability of key staff or otherwise) or get supplies and manufactured products transported to and from that location could materially and adversely affect our ability to supply our products and affect our product sales. See our Annual Report on Form 10-K for the year ended December 31, 2018, Part I, Item 1A. Risk Factors—Manufacturing difficulties, disruptions or delays could limit supply of our products and limit our product sales.

~~We also face risks relating~~The impact of Hurricane Maria and the political instability in Puerto Rico have placed greater stress on the island’s already challenged economy. Prior to Hurricane Maria, the government of Puerto Rico was unable to pay its roughly $72 billion in debt. In June 2016, the U.S. Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which established a Financial Oversight and Management Board (Oversight Board) to provide fiscal oversight through the development and approval of fiscal plans and budgets for Puerto Rico and to assist in its debt restructuring. In May 2017, after negotiations for debt restructuring with creditors were unsuccessful, the Oversight Board approved and certified the filing in the U.S. District Court for the District of Puerto Rico of a voluntary petition under Title III of PROMESA for the government of Puerto Rico and certain of its governmental entities, including the Puerto Rico Electric Power Authority (PREPA). Title III of PROMESA provides Puerto Rico with a judicial process for restructuring its debt similar to, but not identical to, Chapter 9 of the U.S. Bankruptcy Code. The governor of Puerto Rico declared a state of emergency and authorized a moratorium on the payment of general obligation bonds and other debts issued by certain instrumentalities, which moratorium has been extended and may continue to be extended while the Oversight Board is in effect. Given the severe conditions in Puerto Rico after Hurricane Maria, resolution of Puerto Rico’s debt situation through the PROMESA judicial process has been delayed. In the case of PREPA, the effects of Hurricane Maria and several changes in PREPA’s management have delayed reconstruction efforts.

In June 2018, the Oversight Board certified a budget for Puerto Rico’s fiscal year 2019 that imposes significant expense reductions across the government. The Title III Court dismissed most of the government’s challenges to the ~~reporting~~budget, and the governor and legislature of ~~pricing data~~Puerto Rico filed appeals before the U.S. Court of Appeals for the First Circuit (First Circuit Court). In February 2019, the First Circuit Court affirmed the Title III Court’s dismissal of the legislature’s appeal; however, the governor’s appeal is still pending before the First Circuit Court.

In addition, certain non-governmental entities have brought suit claiming the appointment process of the Oversight Board members set forth in PROMESA conflicts with the appointments clause of the U.S. Constitution. In February 2019, the First Circuit Court ruled that ~~affects~~ the ~~reimbursement~~appointment was unconstitutional and in June 2019, the U.S. Supreme Court accepted the case for review. If the U.S. Supreme Court were to hold that PROMESA has a constitutional infirmity and that actions taken by the Oversight Board are invalid, the commencement of all Title III proceedings could be invalid. In such event, the current debt restructuring process and ~~discounts provided~~the debtholder litigation stay under Title III of PROMESA could be in jeopardy.

In October 2018, the fiscal plan for Puerto Rico was updated, including a projected increase in federal disaster funding and projected material deficits once the stimulus effects of the disaster recovery dissipate. The fiscal plan stresses the importance of structural reforms to address Puerto Rico’s challenging economic and demographic trends that may be difficult to implement as well as have a material adverse impact on our ~~products.~~ consolidated financial statements.

In May 2019, the fiscal plan was further updated to incorporate a revised projection on federal disaster spending. The new fiscal plan projects a smaller surplus in the short-term due to a longer rollout in federal disaster assistance. In June 2019, the Oversight Board certified the fiscal year 2020 budget, which is higher than the 2019 budget.

In addition, the Tax Cuts and Jobs Act (2017 Tax Act) will no longer permit deferral of U.S. taxation on Puerto Rico earnings of U.S. companies (or their foreign subsidiaries), although these earnings generally will be taxed in the United States ~~pricing data~~at a reduced 10.5% rate. Given Puerto Rico’s challenged economy and hurricane recovery needs, it may be difficult for Puerto Rico to sustain or grow its manufacturing base due to competition from other foreign locations subject to a similar level of U.S. taxation, or U.S. locations due to the reduction in the U.S. corporate tax rate from 35% to 21%. The manufacturing sector contributes more than 45% of Puerto Rico’s gross domestic product, and multinational companies with Puerto Rico operations contribute approximately 30% of Puerto Rico’s revenue base.

While PROMESA and the actions above continue to be important factors in moving Puerto Rico toward economic stability, there is still a risk that Puerto Rico’s ongoing economic challenges, the effects of Hurricane Maria and the potential impact of the 2017 Tax Act could negatively affect the territorial government’s provision of utilities or other services in Puerto Rico that we ~~submit~~use in the operation of our business, create the potential for increased taxes or fees to operate in Puerto Rico, result in a migration of workers from Puerto Rico to the ~~U.S.~~mainland United States, or make it more expensive or difficult for us to operate in Puerto Rico. In addition, the political instability in Puerto Rico described above may cause additional disruption and further delay the resolution of Puerto Rico’s debt restructuring and economic recovery. These factors could materially and adversely affect our ability to supply our products and affect our product sales.

A breakdown, cyberattack or information security breach could compromise the confidentiality, integrity and availability of our information technology systems and network-connected control systems and our data, interrupt the operation of our business and affect our reputation.

To achieve our business objectives, we rely to a large extent upon sophisticated information technology systems and network-connected control systems, some of which are managed, hosted, provided or serviced by third parties. Internal or external events that compromise the confidentiality, integrity and availability of our systems and data may significantly interrupt the operation of our business, result in significant costs and/or affect our reputation.

Our information technology systems are highly integrated into our business, including our R&D efforts, our clinical and commercial manufacturing processes and our product sales and distribution processes. The complexity and interconnected nature of our systems makes them potentially vulnerable to breakdown or other service interruptions. Our systems are also subject to frequent cyberattacks. As the cyber-threat landscape evolves, these attacks are growing in frequency, sophistication and intensity, and are becoming increasingly difficult to detect. Such attacks could include the use of harmful and virulent malware, including ransomware or other denials of service, and can be deployed through various means including the software supply chain, e-mail, malicious websites, and the use of social engineering. Attacks such as those seen with other multi-national companies, including some of our peers, could leave us unable to utilize key business systems or access important data needed to operate our business, including developing, gaining regulatory approval for, manufacturing, selling and/or distributing our products. For example, in 2017, a pharmaceutical company experienced a cyberattack involving virulent malware that significantly disrupted its operations, including its research and sales operations and the production of some of its medicines and vaccines. As a result of the cyberattack, its orders and sales for certain products in certain markets were negatively impacted. Our systems also contain and utilize a high volume of sensitive data, including intellectual property, trade secrets, financial information, regulatory information, strategic plans, sales trends and forecasts, litigation materials and/or personal information belonging to us, our staff, our patients, customers and/or other parties. In some cases, we utilize third-party service providers to process, store, manage or transmit such data, which may increase our risk. Intentional or inadvertent data privacy or security breaches (including cyberattacks) or lapses by employees, service providers, nation states, organized crime organizations, “hacktivists” or others, create risks that our sensitive data may be exposed to unauthorized persons, our competitors, or the public. Finally, domestic and global government ~~impacts the payment rates for providers, rebates~~regulators, our business partners, suppliers with whom we ~~pay,~~do business, companies that provide us or our partners with business services and ~~discounts~~companies we ~~are required~~may acquire may face similar risks, and security breaches of their systems could adversely affect our security, leave us without access to ~~provide under Medicare, Medicaid~~important systems, products, raw materials, components, services or information or expose our confidential data. For example, in June 2019, a vendor that performs a variety of tests and analytical services that we and other ~~government drug programs. Government price reporting regulations are complex~~biopharmaceutical companies use in developing and ~~may require~~manufacturing our products experienced a ~~manufacturer~~cyberattack requiring us to ~~update certain previously submitted data. Our price reporting data calculations are reviewed monthly and quarterly, and based on such reviews~~disconnect our systems from the vendor’s systems. While we ~~have on occasion restated previously reported pricing data~~were able to ~~reflect changes in calculation methodology, reasonable assumptions and/or underlying data. If~~reconnect our ~~submitted pricing data are incorrect, we may become subject to substantial fines and penalties~~systems after several weeks, an extended service outage impacting this or other ~~government enforcement actions,~~vendors, particularly where such vendor is the single source from which we obtain the services, could have a material adverse effect on our business ~~and~~or results of operations. In addition, aswe distribute our products in the United States primarily through three pharmaceutical wholesalers, and a security breach that impairs the distribution operations of our wholesalers could significantly impair our ability to deliver our products to healthcare providers.

Although we have experienced system breakdowns, attacks and information security breaches, we do not believe such breakdowns, attacks and breaches have had a material adverse effect on our business or results of operations. We continue to invest in the monitoring, protection, and resilience of our critical or sensitive data and systems. However, there can be no assurance that our efforts will detect, prevent or fully recover systems or data from all breakdowns, service interruptions, attacks, or breaches of our systems that could adversely affect our business and operations and/or result in the loss or exposure of ~~restating previously reported price~~critical, proprietary, private, confidential or otherwise sensitive data, which could result in financial, legal, business or reputational harm to us or impact our stock price. While we ~~also may be required~~maintain cyber-liability insurance, our insurance is not sufficient to ~~pay additional rebates and provide additional discounts.~~cover us against all losses that could potentially result from a service interruption, breach of our systems or loss of our critical or sensitive data.



Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended June 30, ~~2018,~~2019, we had one outstanding stock repurchase program, under which the repurchase activity was as follows:


	Total number of shares purchased	Average price paid per share ⁽¹⁾		Total number of shares purchased as part of publicly announced program	Maximum dollar value that may yet be purchased under the program ⁽²⁾
Period							Total number of shares purchased	Average price paid per share ⁽¹⁾		Total number of shares purchased as part of publicly announced program	Maximum dollar value that may yet be purchased under the program⁽²⁾
April 1 - 30	7,368,600	$	171.94	7,368,600	$	7,313,546,088	5,910,200	$	186.39	5,910,200	$	981,408,982
May 1 - 31	7,365,100	$	173.00	7,365,100	$	6,039,390,454	4,457,100	$	170.96	4,457,100	$	5,219,445,027
June 1 - 30	3,502,600	$	184.52	3,502,600	$	5,393,102,210	2,718,800	$	178.60	2,718,800	$	4,733,865,620
	18,236,300	$	174.78	18,236,300
Total							13,086,100	$	179.51	13,086,100

^{(1) ___________}~~Average price paid per share includes related expenses.~~

⁽²⁾ ~~In April 2018, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $5.0 billion.~~


⁽¹⁾	Average price paid per share includes related expenses.


⁽²⁾	In May 2019, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $5.0 billion.



Item 6.	EXHIBITS

Reference is made to the Index to Exhibits included herein.

INDEX TO EXHIBITS



Exhibit No.		Description
3.1		Restated Certificate of Incorporation of Amgen Inc. (As Restated March 6, 2013.) (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2013 on May 3, 2013 and incorporated herein by reference.)

3.2		Amended and Restated Bylaws of Amgen Inc. (As Amended and Restated February 15, 2016.) (Filed as an exhibit to Form 8-K on February 17, 2016 and incorporated herein by reference.)

4.1		Form of stock certificate for the common stock, par value $.0001 of the Company. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 1997 on May 14, 1997 and incorporated herein by reference.)

4.2		Form of Indenture, dated January 1, 1992. (Filed as an exhibit to Form S-3 Registration Statement filed on December 19, 1991 and incorporated herein by reference.)

4.3		Agreement of Resignation, Appointment and Acceptance dated February 15, 2008. (Filed as an exhibit to Form 10-K for the year ended December 31, 2007 on February 28, 2008 and incorporated herein by reference.)

4.4		First Supplemental Indenture, dated February 26, 1997. (Filed as an exhibit to Form 8-K on March 14, 1997 and incorporated herein by reference.)

4.5		8-1/8% Debentures due April 1, 2097. (Filed as an exhibit to Form 8-K on April 8, 1997 and incorporated herein by reference.)

4.6		Officer’s Certificate of Amgen Inc., dated April 8, 1997, establishing a series of securities entitled “8 1/8% Debentures due April 1, 2097.” (Filed as an exhibit to Form 8-K on April 8, 1997 and incorporated herein by reference.)

4.7		Indenture, dated August 4, 2003. (Filed as an exhibit to Form S-3 Registration Statement on August 4, 2003 and incorporated herein by reference.)
	��
4.8		Corporate Commercial Paper - Master Note between and among Amgen Inc., as Issuer, Cede & Co., as Nominee of The Depository Trust Company, and Citibank, N.A., as Paying Agent.~~(Filed~~ (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 1998 on May 13, 1998 and incorporated herein by reference.)

4.9		Officers’ Certificate of Amgen Inc., dated May 30, 2007, including forms of the Company’s Senior Floating Rate Notes due 2008, 5.85% Senior Notes due 2017 and 6.375% Senior Notes due 2037. (Filed as an exhibit to Form 8-K on May 30, 2007 and incorporated herein by reference.)

4.10		Officers’ Certificate of Amgen Inc., dated May 23, 2008, including forms of the Company’s 6.15% Senior Notes due 2018 and 6.90% Senior Notes due 2038. (Filed as exhibit to Form 8-K on May 23, 2008 and incorporated herein by reference.)

4.11		Officers’ Certificate of Amgen Inc., dated January 16, 2009, including forms of the Company’s 5.70% Senior Notes due 2019 and 6.40% Senior Notes due 2039. (Filed as exhibit to Form 8-K on January 16, 2009 and incorporated herein by reference.)

4.12		Officers’ Certificate of Amgen Inc., dated March 12, 2010, including forms of the Company’s 4.50% Senior Notes due 2020 and 5.75% Senior Notes due 2040. (Filed as exhibit to Form 8-K on March 12, 2010 and incorporated herein by reference.)

4.13		Officers’ Certificate of Amgen Inc., dated September 16, 2010, including forms of the Company’s 3.45% Senior Notes due 2020 and 4.95% Senior Notes due 2041. (Filed as an exhibit to Form 8-K on September 17, 2010 and incorporated herein by reference.)

4.14		Officers’ Certificate of Amgen Inc., dated June 30, 2011, including forms of the Company’s 2.30% Senior Notes due 2016, 4.10% Senior Notes due 2021 and 5.65% Senior Notes due 2042. (Filed as an exhibit to Form 8-K on June 30, 2011 and incorporated herein by reference.)

4.15		Officers’ Certificate of Amgen Inc., dated November 10, 2011, including forms of the Company’s 1.875% Senior Notes due 2014, 2.50% Senior Notes due 2016, 3.875% Senior Notes due 2021 and 5.15% Senior Notes due 2041. (Filed as an exhibit to Form 8-K on November 10, 2011 and incorporated herein by reference.)

4.16		Officers’ Certificate of Amgen Inc., dated December 5, 2011, including forms of the Company’s 4.375% Senior Notes due 2018 and 5.50% Senior Notes due 2026. (Filed as an exhibit to Form 8-K on December 5, 2011 and incorporated herein by reference.)



~~Exhibit No.~~		~~Description~~
4.17		Officers’ Certificate of Amgen Inc., dated May 15, 2012, including forms of the Company’s 2.125% Senior Notes due 2017, 3.625% Senior Notes due 2022 and 5.375% Senior Notes due 2043. (Filed as an exhibit to Form 8-K on May 15, 2012 and incorporated herein by reference.)

4.18		Officers’ Certificate of Amgen Inc., dated September 13, 2012, including forms of the Company’s 2.125% Senior Notes due 2019 and 4.000% Senior Notes due 2029. (Filed as an exhibit to Form 8-K on September 13, 2012 and incorporated herein by reference.)

4.19		Indenture, dated May 22, 2014, between Amgen Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee. (Filed as an exhibit to Form 8-K on May 22, 2014 and incorporated herein by reference.)

4.20		Officers’ Certificate of Amgen Inc., dated May 22, 2014, including forms of the Company’s Senior Floating Rate Notes due 2017, Senior Floating Rate Notes due 2019, 1.250% Senior Notes due 2017, 2.200% Senior Notes due 2019 and 3.625% Senior Notes due 2024. (Filed as an exhibit to Form 8-K on May 22, 2014 and incorporated herein by reference.)

4.21		Officer’s Certificate of Amgen Inc., dated May 1, 2015, including forms of the Company’s 2.125% Senior Notes due 2020, 2.700% Senior Notes due 2022, 3.125% Senior Notes due 2025 and 4.400% Senior Notes due 2045. (Filed as an exhibit on Form 8-K on May 1, 2015 and incorporated herein by reference.)

4.22		Officer’s Certificate of Amgen Inc., dated as of February 25, 2016, including forms of the Company’s 1.250% Senior Notes due 2022 and 2.000% Senior Notes due 2026. (Filed as an exhibit on Form 8-K on February 26, 2016 and incorporated herein by reference.)

4.23		Form of Permanent Global Certificate for the Company’s 0.410% bonds due 2023.(Filed as an exhibit on Form 8-K on March 8, 2016 and incorporated herein by reference.)

4.24		Terms of the Bonds for the Company’s 0.410% bonds due 2023. (Filed as an exhibit on Form 8-K on March 8, 2016 and incorporated herein by reference.)

~~4.24~~		~~Terms of the Bonds for the Company’s 0.410% bonds due 2023.~~ ~~(Filed as an exhibit on Form 8-K on March 8, 2016 and incorporated herein by reference.)~~

4.25		Officer’s Certificate of Amgen Inc., dated as of June 14, 2016, including forms of the Company’s 4.563% Senior Notes due 2048 and 4.663% Senior Notes due 2051. (Filed as an exhibit to Form 8-K on June 14, 2016 and incorporated herein by reference.)

4.26		Registration Rights Agreement, dated as of June 14, 2016, by and among Amgen Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Mizuho Securities USA Inc., as lead dealer managers, and Drexel Hamilton, LLC and The Williams Capital Group, L.P., as co-dealer managers. ~~(Filed as an exhibit to Form 8-K on June 14, 2016 and incorporated herein by reference.)~~

~~4.27~~		Officer’s Certificate of Amgen Inc., dated as of August 19, 2016, including forms of the Company’s 1.850% Senior Notes due 2021, 2.250% Senior Notes due 2023 and 2.600% Senior Notes due 2026. (Filed as an exhibit to Form 8-K on August 19, 2016 and incorporated herein by reference.)

~~4.28~~4.27		Officer’s Certificate of Amgen Inc., dated as of May 11, 2017 including forms of the Company’s Senior Floating Rate Notes due 2019, Senior Floating Rate Notes due 2020, 1.900% Senior Notes due 2019, 2.200% Senior Notes due 2020 and 2.650% Senior Notes due 2022. (Filed as an exhibit to Form 8-K on May 11, 2017 and incorporated herein by reference.)

~~4.29~~4.28		Officer’s Certificate of Amgen Inc., dated as of November 2, 2017, including in the form of the Company’s 3.200% Senior Notes due 2027. (Filed as an exhibit to Form 8-K on November 2, 2017 and incorporated by reference.)

10.1+		Amgen Inc. Amended and Restated 2009 Equity Incentive Plan. (Filed as Appendix C to the Definitive Proxy Statement on Schedule 14A on April 8, 2013 and incorporated herein by reference.)

10.2+		First Amendment to Amgen Inc. Amended and Restated 2009 Equity Incentive Plan, effective March 4, 2015. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2015 on April 27, 2015 and incorporated herein by reference.)

10.3+		Second Amendment to Amgen Inc. Amended and Restated 2009 Equity Incentive Plan, effective March 2, 2016. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2016 on May 2, 2016 and incorporated herein by reference.)

10.4+		Form of Stock Option Agreement for the Amgen Inc. Amended and Restated 2009 Equity Incentive Plan. (As Amended on December 7, 2018.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2018 on February 13, 2019 and incorporated herein by reference.)

10.5+		Form of Restricted Stock Unit Agreement for the Amgen Inc. Amended and Restated 2009 Equity Incentive Plan. (As Amended on December 7, 2018.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2018 on February 13, 2019 and incorporated herein by reference.)

10.6+		Amgen Inc. 2009 Performance Award Program. (As Amended on December 12, ~~2017~~2017.).) (Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)



~~Exhibit No.~~		~~Description~~
~~10.5+~~10.7+		Form of ~~Restricted Stock~~Performance Unit Agreement for the Amgen Inc. ~~Amended and Restated~~ 2009 ~~Equity Incentive Plan.~~Performance Award Program. (As Amended on December ~~12,~~7, 2018.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2018 on February 13, 2019 and incorporated herein by reference.)

10.8+		Amgen Inc. 2009 Director Equity Incentive Program. (As Amended on October 24, 2017.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)

~~10.6+~~10.9+		Form of Grant of Non-Qualified Stock Option Agreement for the Amgen Inc. 2009 ~~Performance Award~~Director Equity Incentive Program. ~~(As Amended on December 31, 2017.)~~ (Filed as an exhibit to Form ~~10-K for the year ended December 31, 2017~~8-K on ~~February 13, 2017~~May 8, 2009 and incorporated herein by reference.)

~~10.7+~~10.10+		Form of ~~Performance~~Restricted Stock Unit Agreement for the Amgen Inc. 2009 ~~Performance Award~~Director Equity Incentive Program. (As Amended on ~~December 12,~~October 24, 2017.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)

~~10.8+~~10.11+		Form of Cash-Settled Restricted Stock Unit Agreement for the Amgen ~~Inc.~~ 2009 Director Equity Incentive Program. ~~(As Amended on October 24, 2017.)~~ (Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)

~~10.9+~~		~~Form of Grant of Non-Qualified Stock Option Agreement for the Amgen Inc. 2009 Director Equity Incentive Program.~~ ~~(Filed as an exhibit to Form 8-K on May 8, 2009 and incorporated herein by reference.)~~

~~10.10+~~		~~Form of Restricted Stock Unit Agreement for the Amgen Inc. 2009 Director Equity Incentive Program. (As Amended on October 24, 2017.)~~ ~~(Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)~~

~~10.11+~~		~~Form of Cash-Settled Restricted Stock Unit Agreement for the Amgen 2009 Director Equity Incentive Program.~~ ~~(Filed as an exhibit to Form 10-K for the year ended December 31, 2017 on February 13, 2018 and incorporated herein by reference.)~~

10.12+		Amgen Inc. Supplemental Retirement Plan. (As Amended and Restated effective October 16, 2013.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2013 on February 24, 2014 and incorporated herein by reference.)

10.13+		First Amendment to the Amgen Inc. Supplemental Retirement Plan, effective October 14, 2016. (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2016 on October 28, 2016 and incorporated herein by reference.)

10.14+		Amended and Restated Amgen Change of Control Severance Plan. (As Amended and Restated effective December 9, 2010 and subsequently amended effective March 2, 2011.)~~(Filed~~ (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2011 on May 10, 2011 and incorporated herein by reference.)

10.15+		Amgen Inc. Executive Incentive Plan. (As Amended and Restated effective January 1, 2009.)~~(Filed~~ (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2008 on November 7, 2008 and incorporated herein by reference.)

10.16+		First Amendment to the Amgen Inc. Executive Incentive Plan, effective December 13, ~~2012~~2012.. (Filed as an exhibit to Form 10-K for the year ended December 31, 2012 on February 27, 2013 and incorporated herein by reference.)

10.17+		Second Amendment to the Amgen Inc. Executive Incentive Plan, effective January 1, 2017.~~(Filed~~ (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2017 on April 27, 2017 and incorporated herein by reference.)

10.18+		Amgen Nonqualified Deferred Compensation Plan. (As Amended and Restated effective October 16, 2013.) (Filed as an exhibit to Form 10-K for the year ended December 31, 2013 on February 24, 2014 and incorporated herein by reference.)

10.19+		First Amendment to the Amgen Nonqualified Deferred Compensation Plan, effective October 14, 2016. (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2016 on October 28, 2016 and incorporated herein by reference.)

10.20+		Agreement between Amgen Inc. and David W. Meline, effective July 21, 2014. (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2014 on October 29, 2014 and incorporated herein by reference.)

10.21+		Agreement between Amgen Inc. and Jonathan Graham, dated May 11, 2015.~~(Filed~~ (Filed as an exhibit to Form 10-Q/A for the quarter ended June 30, 2015 on August 6, 2015 and incorporated herein by reference.)

10.22+		Agreement between Amgen Inc. and Lori Johnston, dated October 25, 2016.~~(Filed~~ (Filed as an exhibit to Form 10-K for the year ended December 31, 2016 on February 14, 2017 and incorporated herein by reference.)

~~10.23~~10.23+		Agreement between Amgen Inc. and Murdo Gordon, dated July 25, 2018. (Filed as an exhibit to Form 10-Q for the quarter ended September 30, 2018 on October 31, 2018 and incorporated herein by reference.)

10.24		Amended and Restated Credit Agreement, dated July 30, 2014, among Amgen Inc., the Banks therein named, Citibank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as syndication agent (the “Credit Agreement”).. (Filed as an exhibit to Form 8-K on July 30, 2014 and incorporated herein by reference.)



~~Exhibit No.~~		~~Description~~
~~10.24~~10.25		Amendment No. 1 to the Credit Agreement, dated March 9, 2018, among Amgen Inc., the Banks therein named, and Citibank, N.A., as administrative agent.~~(Filed~~ (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2018 on April 25, 2018 and incorporated herein by reference.)

~~10.25~~

10.26		Collaboration and License Agreement between Amgen Inc. and Celltech R&D Limited dated May 10, 2002 (portions of the exhibit have been omitted pursuant to a request for confidential treatment) and Amendment No. 1, effective June 9, 2003, to Collaboration and License Agreement between Amgen Inc. and Celltech R&D Limited (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-K/A for the year ended December 31, 2012 on July 31, 2013 and incorporated herein by reference.)

~~10.26~~10.27		Amendment No. 2 to Collaboration and License Agreement, effective November 14, 2016, between Amgen Inc. and Celltech R&D Limited (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-K for the year ended December 31, 2016 on February 14, 2017 and incorporated herein by reference.)

~~10.27~~10.28*		Letter Agreement, dated June 25, 2019, by and between Amgen Inc. and UCB Celltech (portions of the exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed).

10.29		Collaboration Agreement, dated April 22, 1994, by and between Bayer Corporation (formerly Miles, Inc.) and Onyx Pharmaceuticals, Inc.(Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2011 by Onyx Pharmaceuticals, Inc. on May 10, 2011 and incorporated herein by reference.)

~~10.28~~10.30		Amendment to Collaboration Agreement, dated April 24, 1996, by and between Bayer Corporation and Onyx Pharmaceuticals, Inc. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2006 by Onyx Pharmaceuticals, Inc. on May 10, 2006 and incorporated herein by reference.)

~~10.29~~10.31		Amendment to Collaboration Agreement, dated February 1, 1999, by and between Bayer Corporation and Onyx Pharmaceuticals, Inc. (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2006 by Onyx Pharmaceuticals, Inc. on May 10, 2006 and incorporated herein by reference.)

~~10.30~~10.32		Settlement Agreement and Release, dated October 11, 2011, by and between Bayer Corporation, Bayer AG, Bayer HealthCare LLC and Bayer Pharma AG and Onyx Pharmaceuticals, Inc. (Filed as an exhibit to Form 10-K for the year ended December 31, 2011 by Onyx Pharmaceuticals, Inc. on February 27, 2012 and incorporated herein by reference.)

~~10.31~~10.33		Fourth Amendment to Collaboration Agreement, dated October 11, 2011, by and between Bayer Corporation and Onyx Pharmaceuticals, Inc. (Filed as an exhibit to Form 10-K for the year ended December 31, 2011 by Onyx Pharmaceuticals, Inc. on February 27, 2012 and incorporated herein by reference.)

~~10.32~~10.34		Side Letter Regarding Collaboration Agreement, dated May 29, 2015, by and between Bayer HealthCare LLC and Onyx Pharmaceuticals, Inc. (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2015 on August 5, 2015 and incorporated herein by reference.)

~~10.33~~10.35		Sourcing and Supply Agreement, dated January 6, 2017, by and between Amgen USA Inc., a wholly owned subsidiary of Amgen Inc., and DaVita Inc. (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2017 on April 27, 2017 and incorporated herein by reference.)

~~10.34~~10.36		Exclusive License and Collaboration Agreement, dated August 28, 2015, by and between Amgen Inc. and Novartis Pharma AG (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2017 on July 26, 2017 and incorporated herein by reference.)

~~10.35~~10.37		Amendment No. 1 to the Exclusive License and Collaboration Agreement, dated April 21, 2017, by and between Amgen Inc. and Novartis Pharma AG (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2017 on July 26, 2017 and incorporated herein by reference.)

~~10.36~~10.38		Amendment No. 2 to the Exclusive License and Collaboration Agreement, dated April 21, 2017, by and between Amgen Inc. and Novartis Pharma AG (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2017 on July 26, 2017 and incorporated herein by reference.)

~~10.37~~10.39		Collaboration Agreement, dated April 21, 2017, by and between Amgen Inc. and Novartis Pharma AG (portions of the exhibit have been omitted pursuant to a request for confidential treatment). (Filed as an exhibit to Form 10-Q for the quarter ended June 30, 2017 on July 26, 2017 and incorporated herein by reference.)



~~Exhibit No.~~		~~Description~~
~~10.38~~10.40		Amendment No. 1 to the Collaboration Agreement, dated March 20, 2018, by and between Novartis Pharma AG and Amgen Inc. (portions of the exhibit have been omitted pursuant to a request for confidential ~~treatment.)~~treatment). (Filed as an exhibit to Form 10-Q for the quarter ended March 31, 2018 on April 25, 2018 and incorporated herein by reference.)



31*		Rule 13a-14(a) Certifications.

32**		Section 1350 Certifications.

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101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

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____________________________

(* = filed herewith)

(** = furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended)

(+ = management contract or compensatory plan or arrangement)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.



		Amgen Inc.
		(Registrant)

Date:	July ~~26, 2018~~30, 2019	By:	/S/ DAVID W. MELINE
			David W. Meline
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)

4955



		Page No.
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 ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	57
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	3031
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4042
Item 4.	CONTROLS AND PROCEDURES	4042
PART II - OTHER INFORMATION		4143
Item 1.	LEGAL PROCEEDINGS	4143
Item 1A.	RISK FACTORS	4143
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4349
Item 6.	EXHIBITS	43
~~INDEX TO EXHIBITS~~		44
~~SIGNATURES~~		49
INDEX TO EXHIBITS		50
SIGNATURES		55



	Amount
Total cash paid to Kirin	$	780
Fair value of contingent consideration obligation	45
Loss on settlement of preexisting relationship	(168		)
Total consideration transferred to acquire K-A	657

Fair value of Amgen’s investment in K-A	825
Total acquisition date fair value	$	1,482



	Six months ended June 30, 2018
Beginning balance	$	14,761
Addition from K-A acquisition	6
Currency translation adjustment	(43		)
Ending balance	$	14,724



	June 30, 2018			December 31, 2017
6.15% notes due 2018 (6.15% 2018 Notes)	$	—		$	500
4.375% €550 million notes due 2018 (4.375% 2018 euro Notes)	642			653
5.70% notes due 2019 (5.70% 2019 Notes)	1,000			1,000
1.90% notes due 2019 (1.90% 2019 Notes)	700			700
Floating Rate Notes due 2019	550			550
2.20% notes due 2019 (2.20% 2019 Notes)	1,400			1,400
2.125% €675 million notes due 2019 (2.125% 2019 euro Notes)	789			810
4.50% notes due 2020 (4.50% 2020 Notes)	300			300
2.125% notes due 2020 (2.125% 2020 Notes)	750			750
Floating Rate Notes due 2020	300			300
2.20% notes due 2020 (2.20% 2020 Notes)	700			700
3.45% notes due 2020 (3.45% 2020 Notes)	900			900
4.10% notes due 2021 (4.10% 2021 Notes)	1,000			1,000
1.85% notes due 2021 (1.85% 2021 Notes)	750			750
3.875% notes due 2021 (3.875% 2021 Notes)	1,750			1,750
1.25% €1,250 million notes due 2022 (1.25% 2022 euro Notes)	1,461			1,501
2.70% notes due 2022 (2.70% 2022 Notes)	500			500
2.65% notes due 2022 (2.65% 2022 Notes)	1,500			1,500
3.625% notes due 2022 (3.625% 2022 Notes)	750			750
0.41% CHF700 million bonds due 2023 (0.41% 2023 Swiss franc Bonds)	707			719
2.25% notes due 2023 (2.25% 2023 Notes)	750			750
3.625% notes due 2024 (3.625% 2024 Notes)	1,400			1,400
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)	876			901
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)	627			642
3.20% notes due 2027 (3.20% 2027 Notes)	1,000			1,000
4.00% £700 million notes due 2029 (4.00% 2029 pound sterling Notes)	925			946
6.375% notes due 2037 (6.375% 2037 Notes)	552			552
6.90% notes due 2038 (6.90% 2038 Notes)	291			291
6.40% notes due 2039 (6.40% 2039 Notes)	466			466
5.75% notes due 2040 (5.75% 2040 Notes)	412			412
4.95% notes due 2041 (4.95% 2041 Notes)	600			600
5.15% notes due 2041 (5.15% 2041 Notes)	974			974
5.65% notes due 2042 (5.65% 2042 Notes)	487			487
5.375% notes due 2043 (5.375% 2043 Notes)	261			261
4.40% notes due 2045 (4.40% 2045 Notes)	2,250			2,250
4.563% notes due 2048 (4.563% 2048 Notes)	1,415			1,415
4.663% notes due 2051 (4.663% 2051 Notes)	3,541			3,541
Other notes due 2097	100			100
Unamortized bond discounts, premiums, issuance costs and fair value adjustments, net	(1,129		)	(929		)
Total carrying value of debt	34,497			35,342
Less current portion	(4,288		)	(1,152		)
Total noncurrent debt	$	30,209		$	34,190



	Three months ended June 30,						Six months ended June 30,
Derivatives in fair value hedging relationships	2018			2017			2018			2017
Net unrealized (losses) gains recognized for interest rate swap contracts	$	(51	)	$	37		$	(215	)	$	18
Net unrealized gains (losses) recognized for related hedged debt	$	51		$	(37	)	$	215		$	(18	)