UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended March 31, 20072008

OR

Commission file number 000-12477

Amgen Inc.

(Exact name of registrant as specified in its charter)

(805) 447-1000

(Registrant’s (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

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

As of April 16, 2007,May 5, 2008, the registrant had 1,159,644,5241,088,696,087 shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX

i

PART I - FINANCIAL INFORMATION

The information in this report for the three months ended March 31, 2007 and 2006 is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise indicated) which Amgen Inc., including its subsidiaries (referred to as “Amgen,” “we,” “our” and “us”), considers necessary for a fair presentation of the results of operations for those periods.

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, 2006.

Interim results are not necessarily indicative of results for the full fiscal year.

1

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSINCOME

(In millions, except per share data)

(Unaudited)

See accompanying notes.

2

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

See accompanying notes.

3

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

See accompanying notes.

4

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 20072008

(Unaudited)

1. Summary of significant accounting policies

Business

Amgen Inc. is a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology.

Basis of presentation

The financial information for the three months ended March 31, 20072008 and 20062007 is unaudited but includes all adjustments (consisting of only of normal recurring accruals,adjustments, unless otherwise indicated), which we considerAmgen Inc., including its subsidiaries (referred to as “Amgen,” “the Company,” “we,” “our” or “us”), considers necessary for a fair presentation of the 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, 2007.

Principles of consolidation

The condensed consolidated financial statements include the accounts of Amgen as well as its wholly owned subsidiaries. We do not have any significant interests in any variable 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 accounting principles generally accepted in the United States (“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.

Inventories

Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner which approximates the first-in, first-out (“FIFO”) method. Inventories consisted of the following (in millions):

5

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS (Continued)

Intangible assets and goodwillGoodwill

Intangible assets are recorded at cost, less accumulated amortization. Amortization of intangible assets is provided over their estimated useful lives ranging from 5 to 15 years on a straight-line basis (weighted-average amortization period of 14 years at March 31, 2007). Intangible assets primarily consist of acquired product technology rights of $3,030 million, net of accumulated amortization of $1,386 million, which relate to the identifiable intangible assets acquired in connection with the Immunex Corporation (“Immunex”) acquisition in July 2002. Amortization of acquired product technology rights is included in “Amortization of acquired intangible assets” in the Condensed Consolidated Statements of Operations. Intangible assets also include technology used in research and development (“R&D”) with alternative future uses (“acquired R&D technology rights”), primarily the XenoMouse^® technology acquired in the Abgenix, Inc. (“Abgenix”) acquisition. Amortization of the acquired R&D technology rights is included in “Research and development” in the Condensed Consolidated Statements of Operations. Amortization of other intangible assets is principally included in “Cost of sales (excludes amortization of acquired intangible assets)” and “Selling, general and administrative” expense in the Condensed Consolidated Statements of Operations. We review our intangible assets for impairment periodically and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Goodwill principally relates to the acquisition of Immunex.Immunex Corporation (“Immunex”). The increase over the balance at December 31, 2007 is related to the goodwill associated with our acquisition of the remaining 51% ownership interest of Dompé Biotec, S.p.A (“Dompé”) on January 4, 2008 (see Note 7, “Acquisition” for further discussion). We perform an impairment test annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.

Fair value measurement

The Company adopted the provisions of the Financial Accounting Standards Board’s (“FASB’s”) Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), effective January 1, 2008, for its financial assets and liabilities. The FASB delayed the effective date of SFAS 157 until January 1, 2009, with respect to the fair value measurement requirements for non-financial assets and liabilities that are not remeasured on a recurring basis. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on the Company’s consolidated financial statements.

In determining the fair value of its financial assets and liabilities, the Company uses various valuation approaches. SFAS 157 establishes a hierarchy for inputs used in measuring fair value 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 the 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 the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

6The 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 to measure 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 input that is significant to the overall fair value measurement.

The Company’s available-for-sale securities, substantially all of which are fixed income investments, are comprised of U.S. Treasury securities, obligations of U.S. government agencies, money market funds, corporate debt securities, other interest bearing securities and publicly traded equity investments. U.S. Treasury securities, money market funds and publicly traded equity investments are valued using quoted market prices with no valuation adjustments applied. Accordingly, these securities are categorized in Level 1. Obligations of U.S. government agencies, corporate debt securities and other interest bearing securities are valued using

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS (Continued)

quoted market prices of recent transactions or are benchmarked to transactions of very similar securities. When observable price quotations are not available, cash flow models are used to incorporate benchmark yields and issuer spreads. Obligations of U.S. government agencies, corporate debt securities and other interest bearing securities are categorized in Level 2.

Derivatives assets and liabilities include interest rate swaps and foreign currency forward and option contracts. The fair values of these derivatives are determined using models based on market observable inputs, including interest rate curves and both forward and spot prices for foreign currencies. All of these derivative contracts are categorized in Level 2.

The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2008 (in millions):

There were no remeasurements to fair value during the three months ended March 31, 2008 of financial assets and liabilities that are not measured at fair value on a recurring basis.

Product sales

Product sales primarily consist of sales of Aranesp^® (darbepoetin alfa), EPOGEN^® (Epoetin alfa), Neulasta^® (pegfilgrastim)/, NEUPOGEN^® (Filgrastim) and Enbrel^® (etanercept).

Sales of our products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of accrualsprovisions for estimated rebates, wholesaler chargebacks, discounts and other incentives (collectively “sales incentives”) and returns. Taxes assessed by government authorities on the sales of the Company’s products, primarily in Europe, are excluded from revenues.

We have the exclusive right to sell Epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses in the United States. We sell Epoetin alfa under the brand name EPOGEN^®. We granted to Ortho Pharmaceutical Corporation (which has assigned its rights under the product license agreement to Ortho Biotech Products, L.P.), a subsidiary of Johnson & Johnson (“Johnson & Johnson”J&J”), a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. This license agreement, which is perpetual, may be terminated for various reasons, including upon mutual agreement of the parties, or default. The parties are required to compensate each other for Epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover.” Accordingly, we do not recognize product sales we make into the exclusive market of Johnson & JohnsonJ&J and do recognize the product sales made by Johnson & JohnsonJ&J into our exclusive

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

market. Sales in our exclusive market are derived from our sales to our customers, as adjusted for spillover. We are employing an arbitrated audit methodology to measure each party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to end users and their usage.

Research and development costs

Research and development (“R&D&D”) costs which are expensed as incurred areand primarily comprised of costsinclude salaries, benefits and expenses for salariesother staff related costs; facilities and benefits associated with R&D personnel; overhead and occupancy;costs; clinical trial and related clinical manufacturing includingcosts; contract services and other outside costs, process development and quality assurance;costs; information systems and amortization of technology used in R&D with alternative future uses. R&D expenses also includeconsist of internal R&D costs, costs incurred under R&D arrangements with our corporate partners, such costs related toas activities performed on behalf of corporate partners.Kirin-Amgen Inc. (“KA”), and costs associated with collaborative R&D and in-licensing arrangements, including upfront fees and milestones paid to collaboration partners in connection with technologies that have no alternative future use. R&D collaborations resulting in a net payment or reimbursement of R&D costs are recognized as the obligation has been incurred or we become entitled to the cost recovery.

Selling, general and administrative costs

Selling, general and administrative (“SG&A”) expenses are primarily comprised of salaries and benefits associated with sales and marketing, finance, legal and other administrative personnel; outside marketing expenses; overhead and facilities costs and other general and administrative costs.

Earnings per share

Basic earnings per share (“EPS”) is based upon the weighted-average number of common shares outstanding. Diluted EPS is based upon the weighted-average number of common shares and dilutive potential common shares outstanding. Potential common shares outstanding principally include stock options, restricted stock (including restricted stock units) and other equity awards under our employee compensation plans and potential issuance of stock upon the assumed conversion of our 2032 Modified Convertible Notes, 2011 Convertible Notes and 2013 Convertible Notes, as discussed below, and upon the assumed exercise of our warrants using the treasury stock method (collectively “Dilutive Securities”). The convertible note hedges purchased in connection with the issuance of our 2011 Convertible Notes and 2013 Convertible Notes are excluded from the calculation of diluted EPS as their impact is always anti-dilutive.

7Our 2011 Convertible Notes and 2013 Convertible Notes are considered Instrument C securities as defined by Emerging Issues Task Force (“EITF”) Issue No. 90-19 “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion.” Therefore, only the shares of common stock potentially issueable with respect to the excess of the notes’ conversion value over their principal amount, if any, are considered as dilutive potential common shares for purposes of calculating diluted EPS. For the three months ended March 31, 2008 and 2007, the conversion values for our convertible notes were less than the related principal amounts and, accordingly, no shares were assumed to be issued for purposes of computing diluted EPS.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS (Continued)

The following table sets forth the computation for basic and diluted EPS (in millions, except per share information):

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncementsaccounting pronouncements

In July 2006,December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”) and SFAS No. 160, “Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income TaxesStatements – an interpretationamendment of FASB StatementARB No. 109”51” (“FIN 48”SFAS 160”). These standards will significantly change the accounting and reporting for business combination transactions and noncontrolling (minority) interests in consolidated financial statements, including capitalizing at the acquisition date the fair value of acquired in-process research and development (“IPR&D”), and testing for impairment and writing down these assets, if necessary, in subsequent periods during their development. These new standards will be applied prospectively for business combinations that occur on or after January 1, 2009, except that presentation and disclosure requirements of SFAS 160 regarding noncontrolling interests shall be applied retrospectively.

In December 2007, the FASB ratified EITF No. 07-1, “Accounting for Collaborative Agreements” (“EITF 07-1”). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements, as defined, which becameincludes arrangements the Company has entered into regarding development and commercialization of products and product candidates. EITF 07-1 is effective for usthe Company as of January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement2009, and classification in our financial statements of tax positions taken orits adoption is not expected to be takenhave a material impact on our consolidated results of operations or financial position.

2. Restructuring

On August 15, 2007, we announced a plan to restructure our worldwide operations in order to improve our cost structure while continuing to make significant R&D investments and build the framework for our future growth. This restructuring plan was primarily the result of regulatory and reimbursement developments that began in 2007 involving erythropoietic stimulating agent (“ESA”) products, including our marketed ESA products Aranesp^® and EPOGEN^®, and the resulting impact on our operations. Our ESA products have and will continue to face current and future regulatory and reimbursement challenges, including the potential for further revisions to product labels and loss of or restrictions on reimbursement coverage. In addition, the restructuring plan is also, to a tax return.

For tax benefits to be recognized under FIN 48, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured aslesser degree, the largest amountresult of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of January 1, 2007, the gross amountvarious challenges facing certain of our liabilities for unrecognized tax benefits (“UTBs”) was approximately $945 million and accrued interest related to these UTBs totaled approximately $106 million. Included in the balance is approximately $776 million of UTBs (net of the federal benefit on state taxes) that, if recognized, would affect our annual effective tax rate. The cumulative effect of applying the recognition and measurement provisions upon adoption of FIN 48 was not material.

FIN 48 also provides guidance on the balance sheet classification of liabilities for UTBs as either current or non-current depending on the expected timing of payments. Upon adoption of FIN 48, we reclassified approximately $240 million of UTBs from current income taxes payable to non-current liabilities.

8other products.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS (Continued)

InterestThrough March 31, 2008, we have completed a majority of the actions included in our restructuring plan and penaltiesexpect that all remaining actions will be substantially completed in 2008. Key components of our restructuring plan include: (i) worldwide staff reductions aggregating approximately 2,500 positions, (ii) rationalization of our worldwide network of manufacturing facilities in order to gain cost efficiencies while continuing to meet future commercial and clinical demand for our products and product candidates and, to a lesser degree, changes to certain R&D capital projects and (iii) abandoning leases for certain R&D facilities that will not be used in our operations. We currently estimate that $775 million to $825 million of restructuring charges will be incurred in connection with these actions, of which $751 million has been incurred through March 31, 2008. Such cost estimates and amounts incurred to date are net of amounts recoverable from our co-promotion partner, Wyeth.

The following table summarizes the charges (credits) recorded during the three months ended March 31, 2008 related to UTBs are classified as a componentthe restructuring plan by type of activity (in millions):

As noted above, since the inception of our provisionrestructuring plan through March 31, 2008, we have incurred $751 million of the estimated $775 million to $825 million of charges expected to be incurred. The charges incurred through March 31, 2008 include $184 million of separation costs, $411 million of asset impairments, $148 million of accelerated depreciation and $8 million of other charges, which primarily include $123 million of loss accruals for income taxes.leases offset by $115 million of cost recoveries from Wyeth.

The following table summarizes the charges and spending relating to the restructuring plan (in millions):

The Company records restructuring activities in accordance with SFAS 88,Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,SFAS 144,Accounting for the Impairment and Disposal of Long-Lived Assets and SFAS 146,Accounting for Costs Associated with Exit or Disposal Activities.

AMGEN INC.

2.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Related party transactions

We own a 50% interest in Kirin-Amgen, Inc. (“KA”),KA, a corporation formed in 1984 with Kirin BreweryHoldings Company, Limited (“Kirin”) for the development and commercialization of certain products based on advanced biotechnology. We account for our interest in KA under the equity method and include our share of KA’s profits or losses in “Selling, general and administrative” in the Condensed Consolidated Statements of Operations.Income. During the three months ended March 31, 20072008 and 2006,2007, our share of KA’s profits was $7$14 million and $12$7 million, respectively. At March 31, 20072008 and December 31, 2006,2007, the carrying value of our equity method investment in KA was $248$306 million and $241$292 million, respectively, and is included in non-current “Other assets” in the Condensed Consolidated Balance Sheets. KA’s revenues consist of royalty income related to its licensed technology rights. All of our rights to manufacture and market certain products including darbepoetin alfa, pegfilgrastim, granulocyte colony-stimulating factor (“G-CSF”) and recombinant human erythropoietin are pursuant to exclusive licenses from KA, which we currently market certain of these products under the brand names Aranesp^®, Neulasta^®, NEUPOGEN^® and EPOGEN^®, respectively. KA receives royalty income from us, as well as Kirin, Johnson & JohnsonJ&J and F. Hoffmann-La Roche Ltd. (“Roche”) under separate product license agreements for certain geographic areas outside of the United States. During the three months ended March 31, 20072008 and 2006,2007, KA earned royalties from us of $75 million and $85 million, and $74 million, respectively, whichrespectively. These amounts are included in “Cost of sales (excludes amortization of acquired intangible assets)” in the Condensed Consolidated Statements of Operations.Income. At March 31, 2008, KA owed us $6 million, which was included in “Other current assets” in the Condensed Consolidated Balance Sheets. At December 31, 2007, we owed KA $91 million, which was included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

KA’s expenses primarily consist of costs related to R&D activities conducted on its behalf by Amgen and Kirin. KA pays Amgen and Kirin for such services at negotiated rates. During the three months ended March 31, 20072008 and 2006,2007, we earned revenues from KA of $56$32 million and $28$56 million, respectively, for certain R&D activities performed on KA’s behalf, whichbehalf. These amounts are included in “Other revenues” in the Condensed Consolidated Statements of Operations.Income.

3.4. Income taxes

The effective tax rate for the three months ended March 31, 20072008 is different from the statutory rate primarily as a result of indefinitely invested earnings of our foreign operations. We do not provide for U.S. income taxes on undistributed earnings of our controlled foreign corporationsoperations that are intended to be invested indefinitely outside the United States.

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 by the tax authorities in those jurisdictions. Significant disputes can arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions because of differing interpretations of tax laws and regulations. We are no longer subject to U.S. federal income tax examinations for tax years ending on or before December 31, 20012004 or to California state income tax examinations for tax years ending on or before December 31, 2003.

9During the three months ended March 31, 2008, the gross amount of our unrecognized tax benefits (“UTBs”) increased approximately $100 million as a result of tax positions taken during the current year, and decreased approximately $185 million, net, related to tax positions taken in prior years, primarily as a result of an agreement with the Internal Revenue Service related to certain transfer pricing positions for the years 2005 and 2006. The majority of our UTBs at March 31, 2008, if recognized, would affect our effective tax rate.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-STATEMENTS (Continued)

The Internal Revenue Service (“IRS”) is currently examining our U.S. income tax returns for the years ended December 31, 2002 through 2004 which is anticipated to be completed in 2007. As of March 31, 2007, the IRS has proposed certain adjustments primarily related to our transfer pricing tax positions. Management is currently evaluating those proposed adjustments to determine if it agrees, but if accepted, the Company does not anticipate that the adjustments would result in a material adverse impact to our consolidated financial position, results of operations or cash flows.

As of January 1, 2007, the gross amount of our liabilities for unrecognized tax benefits was approximately $945 million. Assuming the above noted IRS audit is satisfactorily completed and assuming the application of the proposed adjustments related to our transfer pricing tax positions to subsequent periods, we believe that it is reasonably possible that our liabilities for unrecognized tax benefits may decrease by $350 million to $600 million within the next twelve months.

4.5. Financing arrangements

The following table reflects the carrying value of our long-term borrowings under our various financing arrangements as of March 31, 20072008 and December 31, 20062007 (in millions):

On March 2, 2007, asApril 17, 2008, we filed a resultshelf registration statement with the Securities and Exchange Commission (“SEC”), which replaced our previous $1.0 billion shelf registration statement, which allows us to issue an unspecified amount of certain holdersdebt securities, common stock, preferred stock, warrants to purchase debt securities, common stock, preferred stock or depository shares, rights to purchase common stock or preferred stock, securities purchase contracts, securities purchase units and depository shares. Under this registration statement, all of the 2032 Modified Convertible Notes exercising their March 1, 2007 put option,securities available for issuance may be offered from time to time with terms to be determined at the time of issuance.

In May 2008, we repurchased $2,253 millionincreased our commercial paper program by $1.3 billion, which provides for unsecured, short-term borrowings of up to an aggregate principal amount of these convertible notes$2.5 billion. We also have a $2.5 billion unsecured revolving credit facility to be used for their then-accreted valuegeneral corporate purposes, including commercial paper backup, which matures in November 2012. No amounts were outstanding under the commercial paper program or credit facility as of $1,702 million in cash, representing approximately 96% of the outstanding balance of these notes. Upon the repurchase of these notes, a pro rata portion, $51 million, of deferred financing and related costs were immediately charged to interest expense during the three months ended March 31, 2007.

10

AMGEN INC.2008.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.6. Stockholders’ equity

Stock repurchase programs

A summary of activity under our stock repurchase programs for the three months ended March 31, 20072008 and 20062007 is as follows (in millions):

As of March 31, 2007, $6,002 million2008, $6.4 billion was available for stock repurchases under our stockthe $5.0 billion repurchase programs authorized byauthorization received from the Board of Directors.Directors in July 2007 and amounts remaining from the Board of Director’s previous authorization in December 2006. The manner of purchases, the amount we spend, and the number of shares repurchased will vary based on a variety of factors, including the stock price, and blackout periods, in which we are restricted from repurchasing shares, and our credit rating and may include private block purchases as well as market transactions.

Comprehensive incomeAMGEN INC.

Our comprehensive income includesNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Acquisition

On January 4, 2008, we completed the acquisition of Dompé, a privately held company that marketed certain of our products in Italy. This cash acquisition was accounted for as a business combination. The purchase price was approximately $162 million, which included the carrying value of our existing 49% ownership in Dompé. The purchase price paid was preliminarily allocated to net income, unrealized gainsassets acquired of approximately $55 million based on their estimated fair values at the acquisition date and losses on our available-for-sale securities and foreign currency forward and option contracts, which qualify and are designated as cash flow hedges, and foreign currency translation adjustments. Duringthe excess of the purchase price over the fair values of net assets acquired of approximately $107 million was assigned to goodwill. The results of Dompé’s operations have been included in the condensed consolidated financial statements commencing January 4, 2008. Pro forma results of operations for the three months ended March 31, 2007 and 2006, total comprehensive income was $1,117 million and $972 million, respectively.2008 assuming the acquisition of Dompé had taken place at the beginning of 2008 would not differ significantly from the actual reported results.

6.8. Contingencies

In the ordinary course of business, we are involved in various legal proceedings and other matters that are complex in nature and have outcomes that are difficult to predict. In accordance with SFAS 5, “Accounting for Contingencies,” we record accruals for such contingencies to the extent that we conclude that it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. See Note 10, “Contingencies” to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2007 for further discussion of certain of our legal proceedings and other matters.

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

Average Wholesale Price Litigation

On March 7, 2008, the Track II defendants reached a tentative class settlement of the in the federal Multi-District Litigation proceeding (“the MDL Proceeding”), captioned In Re: Pharmaceutical Industry Average Wholesale Price Litigation MDL No. 1456 pending in the Massachusetts District Court, which was subsequently amended on April 3, 2008. The tentative Track II settlement relates to claims against numerous defendants including Abbott Laboratories, Inc., Amgen Inc., Aventis Pharmaceuticals Inc., Hoechst Marion Roussel, Baxter Healthcare Corp., Baxter International Inc., Bayer Corporation, Dey, Inc., Fujisawa Healthcare, Inc., Fujisawa USA, Inc., Immunex Corporation, Pharmacia Corporation, Pharmacia & Upjohn LLC (f/k/a Pharmacia & Upjohn, Inc.), Sicor, Inc., Gensia, Inc., Gensia Sicor Pharmaceuticals, Inc., Watson Pharmaceuticals, Inc., and ZLB Behring, L.L.C. A hearing before the Massachusetts District Court was held on April 9, 2008, following which the Massachusetts District Court docketed its preliminarily approval of the proposed settlement and scheduled a fairness hearing for December 16, 2008.

Johnson & Johnson Matters

Arbitration/Demand for Separate BLA

In March 2008, Ortho Biotech Products, L.P., Ortho Biotech Inc., and Ortho-McNeil Pharmaceutical (each a wholly owned subsidiary of Johnson & Johnson, collectively, “Ortho”) and Amgen reached an agreement in principle resolving the claims raised in the arbitration demand.

Ortho Biotech Spillover Arbitration

Ortho Biotech Products, L.P. and Amgen are currently engaged in a joint review of the matters raised in Ortho’s demand and have temporarily stayed the arbitration proceedings to pursue this review.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Roche Matters

Amgen Inc. v. F. Hoffmann-La Roche Ltd., et al (“Roche”).

On February 29, 2008, the U.S. District Court for the District of Massachusetts (the “Court”) entered an Order making a preliminary ruling that the jury’s verdict will stand in all respects and that the parties’ post-trial motions are denied. The Order also preliminarily enjoined Roche, for the life of the patents-in-suit, from infringing the claims of the patents-in-suit found to have been infringed. The February 29, 2008 Order also notified the parties that the Court might modify the preliminary injunction to impose a royalty on Roche along with other conditions in lieu of an injunction. On April 2, 2008, the Court denied Roche’s request for a second extension of time to appeal the preliminary injunction or, in the alternative to modify the injunction to impose a royalty in lieu of the preliminary injunction. On April 9, 2008, Roche filed a Notice of Appeal of the preliminary injunction. Still pending before the Court is Amgen’s motion requesting a permanent injunction upon entry of final judgment that would prevent Roche from commercializing MIRCERA^® in the United States during the term of Amgen’s patents which have been found to be infringed by Roche. Roche in turn has requested the Massachusetts District Court’s impose a royalty on future sales of MIRCERA^® in the United States in lieu of a permanent injunction.

U.S. International Trade Commission (“ITC”)

On March 19, 2008, the United States Court of Appeals for the Federal Circuit issued a ruling on Amgen’s appeal reversing the ITC’s dismissal of the investigation on jurisdictional grounds and remanding the case for further proceeding to determine if infringement has occurred or will occur and to provide a remedy, if appropriate.

Amgen Inc., et al. v. Ariad Pharmaceuticals, Inc. (“Ariad”)

On January 31, 2008, Ariad agreed to dismiss with prejudice its claims of infringement with respect to U.S. Patent Nos. 6,150,090 and 5,804,374 for any of Amgen’s activities as of the date of the dismissal. The United States District Court for the district of Delaware (the “Delaware District Court”) granted the dismissal with prejudice on February 1, 2008. Both parties filed dispositive motions on April 25, 2008. The Delaware District Court will hold a hearing on the motions on June 19, 2008.

Federal Derivative Litigation – Rosenblum v. Sharer et al

On May 1, 2008, plaintiff in Rosenblum v. Sharer et al filed an amended complaint which removes Dennis Fenton as a defendant and also eliminates the claims for insider selling by defendants. Defendants’ response to the amended complaint is currently due on June 3, 2008.

State Derivative Litigation – Larson v. Sharer et al

In the three state shareholder derivative cases consolidated into one action captionedLarson v. Sharer et al, an amended consolidated complaint was filed on March 13, 2008, adding Anthony Gringeri as a defendant and removing the causes of action for insider selling and misappropriation of information, violation of California Corporations Code Section 25402, and violation of California Corporations Code Section 25403. Defendants’ demurrers and alternative motion to stay this action were filed on April 14, 2008, and are currently scheduled for hearing on June 10, 2008 in the Superior Court of the State of California, Ventura County.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ERISA Litigation

On February 1, 2008, the plaintiffs in the ERISA class action lawsuit ofHarris v. Amgen Inc. et alappealed the decision by the U.S. District Court for the Central District of California to dismiss the claims by both plaintiffs Harris and Ramos to the U.S. Court of Appeals for the 9^th Circuit.

Third-party Payors Litigation

On April 8, 2008, the Judicial Panel on Multi-District Litigation granted plaintiffs’ motion in the United Food & Commercial Workers Central Pennsylvania and Regional Health & Welfare Fund v. Amgen Inc. to centralize the five third-party payor lawsuits into one multi-district litigation (“MDL”) case for the purpose of consolidated pretrial proceedings and the five cases are being transferred back to the U.S. District Court for the Central District of California. The cases will be transferred back to the home jurisdictions if and when they are set for trial.

Other

On April 4, 2008, the Attorney General for the State of Louisiana filed a Notice of Dismissal Without Prejudice for the lawsuit filed against Amgen on January 14, 2008 in the Civil District Court for the Parish of Orleans, State of Louisiana.

In the ordinary course of business, we are involved in various legal proceedings and other matters, including those that are tax-related.discussed above. While it is not possible to accurately predict or determine the eventual outcome of these items, we do not believe any suchone or more of these items currently pending willcould have a material adverse effect on our consolidated results of operations, financial position or liquidity, although an adverse resolution in any quarterly or annual reporting period of one or more of these items could have a material impact on the consolidated results of our operations for that period.

11cash flows.

Forward looking statements

This report and other documents we file with the Securities and Exchange Commission (“SEC”)SEC contain forward looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business or others on our behalf, 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. Words such as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” “continue,” variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and 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“Item 1A. Risk Factors.Factors.” 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 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 and trends. 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

The following management’s discussionManagement’s Discussion and analysisAnalysis 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 Condensed Consolidated Financial Statementscondensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and our Consolidated Financial Statementsconsolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2006.2007.

We are a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology. Our mission is to serve patients. As a science-based, patient-focused organization, we discover and develop innovative therapies to treat grievous illness. We operate in one business segment – human therapeutics. Therefore, our results of operations are discussed on a consolidated basis.

We primarily earn revenues and income and generate cash from sales of human therapeutic products in the areas of supportive cancer care, nephrology inflammation and beginning in the third quarter 2006, in oncology when we received U.S. Food and Drug Administration (“FDA”) approval and launched Vectibix™ (panitumumab), our first cancer therapeutic. For the three months ended March 31, 2007, total revenues were $3.7 billion and net income was $1.1 billion or $0.94 per share. The results of our operations for the three months ended March 31, 2007 reflect the $51 million write-off of deferred financing and related costs resulting from the repayment of the $1.7 billion of convertible debt. As of March 31, 2007, cash, cash equivalents and marketable securities were $4.8

12

billion, of which approximately $3.8 billion was generated from operations in foreign tax jurisdictions and is intended for use outside the United States. The total debt outstanding was $7.3 billion as of March 31, 2007.

inflammation. Our principal products include Aranesp^®, EPOGEN^®, Neulasta^®/, NEUPOGEN^® and ENBREL, all of which are sold in the United States. Aranesp^® and EPOGEN^® stimulate the production of red blood cells to treat anemia and belong to a class of drugs referred to as erythropoiesis-stimulating agents, or ESAs. Aranesp^® is used for the treatment of anemia both in supportive cancer care and in nephrology. EPOGEN^® is used to treat anemia associated with chronic renal failure (“CRF”). Neulasta^® and NEUPOGEN^®, which are used in supportive cancer care, selectively stimulate the production of neutrophils, one type of white blood cell that helps the body fight infections. ENBREL is marketed under a co-promotion agreement with Wyeth in the United States and Canada. ENBREL blocks the biologic activity of tumor necrosis factor (“TNF”) by inhibiting TNF, a substance induced in response to inflammatory and immunological responses, such as rheumatoid arthritis and psoriasis. For each of the three months ended March 31, 2008 and 2007, our principal products represented 95% of total worldwide product sales. Our international product sales consist principally of European sales of Aranesp^® and, Neulasta^®/ and NEUPOGEN^®. International product sales represented approximately 19%21% and 18%19% of total product sales for each of the three months ended March 31, 2008 and 2007, respectively. For additional information about our principal products, their

approved indications and 2006, respectively.where they are marketed, see “Item 1. Business – Principal products” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2007.

We operate in a highly regulated industry and various U.S. and foreign regulatory bodies have substantial authority over how we conduct our business. Government authorities in the United States and in other countries regulate the manufacturing and marketing of our products and our ongoing R&D activities. The regulatory environment is evolving and there is increased scrutiny on drug safety and increased authority being granted to regulatory bodies, in particular the U.S. Food and Drug Administration (“FDA”), to assist in ensuring the safety of therapeutic products. Most patients receiving our principal products for approved indications are covered by either government or private payer health care programs. The reimbursement environment is also evolving with greater emphasis on cost containment. Therefore, sales of our principal products and sales growth are and will continue to be affected by the availability and extent of reimbursement from third-party payers, including government and private insurance plans and administration of those programs. For additional information aboutFurther, safety signals or adverse events or results from clinical trials or studies performed by us or by others (including our principal products, their approved indications and where they arelicensees or independent investigators) or from the marketed see “Item 1. Business – Principal products” in Part Iuse of our Annual Report on Form 10-Kproducts may expand safety labeling, restrict the use for the year ended December 31, 2006.our approved products or may result in additional regulatory requirements, such as requiring risk management activities and/or additional or more extensive clinical trials as part of postmarketing commitments (“PMCs”) or a pharmacovigilance program, and may negatively impact worldwide reimbursement for our products.

ForTotal product sales for the three months ended March 31, 2007 and 2006, product sales represented 97% of total revenues, which was mainly comprised of our principal products. During this period, our product sales growth has been primarily driven by sales of2008 decreased 1%, principally due to a decline in U.S. Aranesp^® sales, which was substantially offset by an increase in ENBREL sales. In particular, for the three months ended March 31, 2008, U.S. Aranesp^® sales declined $249 million, or 38%, Neulastareflecting the negative impact on demand, primarily in the supportive cancer care setting, of ongoing regulatory and reimbursement developments that were principally realized in the second half of 2007. Sales of ENBREL increased $221 million, or 30%, for the three months ended March 31, 2008. This increase includes an initial wholesaler inventory stocking of approximately $120 million resulting from the shift to a wholesaler distribution model. During the three months ended March 31, 2008, ENBREL’s distribution model was converted from primarily being drop shipped directly to pharmacies to a wholesaler distribution model similar to our other products. The increase in ENBREL’s sales also reflects higher demand due to increases in both patients and average net sales price.

Certain of our products, principally our marketed ESA products, face various challenges resulting from regulatory and reimbursement developments. Late in 2006 and throughout 2007, adverse safety results involving ESA products were observed in various studies that were performed by us and by others (including our licensees or independent investigators) that explored the use of ESAs in settings different from those outlined in the FDA approved label, including targeting higher hemoglobin (“Hb”) levels and/or use in non-approved patient populations. The results of these studies culminated in significant regulatory and reimbursement developments affecting the class of ESA products, including Aranesp^® and ENBREL, which have benefited primarilyEPOGEN^®. For example, in February 2007, following the reported results from segment growth and/or share gains. We believe that maintaining or increasing our segments and share will be more difficult than in previous years since, as discussed below, certain of our principal products face various challenges primarily arising from clinical trial results that led to regulatory activities, including revisions to labeling of certain of our products, coverage and reimbursement reviews, and new competition.

Our anemia products have and are continuing to experience significant regulatory challenges. Various clinical studies by Amgen, including our Anemia of Cancer phase 3 study (the “AoC 103 Study”study”), and third-party studies involving erythropoiesis-stimulating agents (“ESAs”) in off-label uses have recently reported negative safety results. Due to the reported results of our AoC 103 Study, the United States Pharmacopoeia Dispensing Information (“USP DI”) Drug Reference Guides removed Aranesp^® for use in the treatment of Anemia of Cancer (“AoC”).AoC. Thereafter, nearly all Medicare contractors have stopped reimbursing for Aranesp^® use in AoC patients. Further, on March 9,decreased significantly. In addition, during 2007, based upon data from our AoC 103 Studywe had ongoing discussions with the FDA and other third-party studies,regulatory authorities and meetings with certain of the FDA approved updated safety information, including a boxed warning, inFDA’s advisory panels, namely the prescribing information forOncologic Drugs Advisory Committee (“ODAC”), the class of ESAs, including Aranesp^® and EPOGEN^®. The label changesCardiovascular-Renal Drug Advisory Committee (“CRDAC”) and the lossDrug Safety and Risk Management Advisory Committee (“DSaRMAC”), regarding the administration of substantially all of the Medicare coverage for Aranesp^®our ESA products in AoC could materially impact futurecertain settings. These adverse safety results involving ESA products in various studies and related discussions with regulatory authorities led to several key regulatory and reimbursement developments, including safety-related revisions to ESA product sales, as applicable, for Aranesp^® and EPOGEN^®. Sales growth slowed for Aranesp^®labels in the United States in the latter part of the three months ended March 31,and November 2007. Further, in July 2007, reflecting these developments. Through March 31, 2007, the impact on product sales has been primarily observed in oncology due to the loss of nearly all Medicare coverage in the AoC setting.

However, on April 19, 2007, we announced the results from our “145 study” of Aranesp^® in small-cell lung cancer which demonstrated no statistically significant difference in risk of death or in investigator determined progression-free survival. This study had higher initiation and maintenance hemoglobin targets (Hb less than or equal to 13 g/dl) than in the U.S. label. We believe these results contribute to the growing body of evidence on ESA safety when used on label, reinforcing the neutral impact of ESAs on survival in cancer patients suffering from chemotherapy-induced anemia.

13

In addition, the outcome of certain future key events could also impact future Aranesp^® and EPOGEN^® sales as they may influence healthcare provider prescribing behavior, use of our products, regulatory or private healthcare organization medical guidelines and reimbursement practices. For example, the following could impact future Aranesp^® sales: On March 14, 2007, shortly after the label changes for all ESAs, the Centers for Medicare and Medicaid Services (“CMS”) issued its National Coverage Decision Memorandum for Use of Erythropoiesis Stimulating Agents in Cancer and Related Neoplastic Conditions (the “Decision Memorandum”). The Decision Memorandum established the ESA reimbursement policy for Medicare and other government beneficiaries who are treated for chemotherapy-induced anemia (“CIA”) with ESAs. We believe that the restrictions in the Decision Memorandum changed the way ESAs are used in clinical practice,

for example, by decreasing the number of treated patients, the average ESA dose and the duration of ESA therapy. These developments have had a material adverse impact on sales of our marketed ESA products, in particular Aranesp^® sales in the U.S. supportive cancer care setting. Furthermore, our ESA products continue to face future challenges, including those described below under“ESA Developments” and also the potential for further revisions to product labels and changes to reimbursement. In addition, increased competition, including additional approved indications for existing products, has and will continue to present challenges to certain of our products.

As a result of the challenges facing certain of our products and, in particular, the regulatory and reimbursement developments involving our marketed ESA products that began in 2007 and their resulting impact on our operations, on August 15, 2007, we announced a plan to restructure our worldwide operations in order to improve our cost structure while continuing to make significant R&D investments and build the framework for our future growth. Through March 31, 2008, we have completed a majority of the actions included in our restructuring plan and expect that all remaining actions will be substantially completed in 2008. Key components of our restructuring plan include: (i) worldwide staff reductions aggregating approximately 2,500 positions, (ii) rationalization of our worldwide network of manufacturing facilities in order to gain cost efficiencies while continuing to meet future commercial and clinical demand for our products and product candidates and, to a lesser degree, changes to certain R&D capital projects and (iii) abandoning leases for certain R&D facilities that will not be used in our operations. We currently anticipate that we will incur approximately $775 million to $825 million of restructuring charges in connection with these actions, of which $751 million has been incurred through March 31, 2008.

The following is a discussion of select key developments affecting our business that occurred in 2008 and should be read in conjunction with “Item 1. Business – Key Developments” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2007.

ESA Developments

EPOGEN® and (iii) conduct clinical trials to determine the effects of Aranesp® and EPOGEN® on survival and tumor outcomes. We are in the process of preparing the submissions responsive to the FDA’s recent requests.

Other Regulatory Developments

from April 23, 2008 to July 23, 2008. As noted above, the ODAC is advisory only and FDA officials are not bound to or limited by their recommendations, however the FDA commonly follows the recommendations of its advisory panels.

Licensing Developments

In connection with our efforts to assess the potential impactimprove our cost structure, we refocused our spending on critical R&D and operational priorities and sought greater efficiencies in how we conduct our business, including optimizing on-going clinical trials and trial initiation. These efforts will assist in allowing us to provide continued support of key activities including (i) current and future sales of EPOGEN^®. The potential impact of these key events on future sales forpostmarketing studies, including those with respect to our ESA products, Aranesp^® and EPOGEN^®, as applicable, is highly uncertain; (ii) regulatory affairs, safety and currently not determinable.

Our anemia productscompliance functions; (iii) clinical studies to advance our late-stage pipeline; (iv) the advancement of earlier stage compounds and certain other principal products are also facing a number of competitive challenges as well. Roche is developing a pegylated erythropoietin molecule (“peg-EPO”) product for the United States for which they have filed a biologic license application (“BLA”) with the FDA, which Roche has stated has a Prescription Drug User Fee Act (“PDUFA”) date of May 19, 2007. Roche has announced plans to launch(v) research efforts in the U.S. nephrology segment in 2007, upon regulatory approval, despite our ongoing lawsuitcore areas of oncology, inflammation, bone and their acknowledgment of our U.S. erythropoietin patents. We also expect Roche’s peg-EPO product to be launched in the European Union (“EU”) nephrology segment in 2007 upon regulatory approval.metabolic disorders. Further, in order to continue advancing our expanding pipeline of product candidates and to assist in ensuring that patients around the first quarter of 2007, Shire received approval in the EU for Dynepo™ (Epoetin delta), a competing erythropoietin product. Additionally,world are able to benefit from our future products, we cannot predict with certainty when the first biosimilar products could appear on the market in the EU, however we believe that the first biosimilar erythropoietin products, which would compete with Aranesp^®, may be approved in 2007 and could be available in the EU shortly after approval and the first biosimilar G-CSF products, which would compete with Neulasta^® and NEUPOGEN^®, may be approved sometime in 2007 or early 2008, and could be available in the EU soon thereafter. In addition, ENBREL operates in an extremely competitive environment as evidenced by the number of competitive products, including HUMIRA^®, Remicade^®, Orencia^®, Rituxan^®, Raptiva^® and Amevive^®. Although these competing products have helpedseek partners to grow both the rheumatology and dermatology segments, they have also resulted in ENBREL experiencing share loss in both of these segments.

Further, as a result of safety concerns related to patient survival, we recently announced that we had discontinued Vectibix™ treatmentdevelop selected product candidates in our Panitumumab Advanced Colorectal Cancer Evaluation (“PACCE”) trial, a non-registration-enabling trial evaluating the additionpipeline in certain countries and/or worldwide. We may also divest of Vectibix™ to standard chemotherapy and Avastin^®certain less significant marketed products. (bevacizumab) for the treatment of first-line metastatic colorectal cancer. We are in discussions with the FDA with respect to the Vectibix™ label and expect

14

that we will add the data from the PACCE trial to the label. The language is still in development, discussions with the FDA are on-going and any label change is subject to FDA approval. The results of the PACCE trial do not influence ongoing registrational studies in combination with chemotherapy in first and second line metastatic colorectal cancer. Further, we continue to be in discussions with the EMEA and the Committee for Medicinal Products for Human Use (“CHMP”) with respect to the approval of Vectibix™ in the EU to treat patients with metastatic colorectal cancer whose disease has progressed on or following all standard chemotherapy regimens. In the event that Amgen should not obtain an initial positive CHMP opinion, we can request re-examination of the CHMP opinion as part of the EU regulatory process.

For the three months ended March 31, 20072008, net income and 2006, operating income was as follows (in millions):

Operating income as a percentagediluted earnings per share were $1.1 billion and $1.04, respectively. As of product sales was 39% for both the three months ended March 31, 20072008, cash, cash equivalents and 2006. As a resultmarketable securities were $8.6 billion, of which approximately $4.5 billion was generated from operations in foreign tax jurisdictions and is intended for use in our foreign operations. If these funds are repatriated for use in our U.S. operations, we would be required to pay additional U.S. federal and state income taxes at the impactapplicable marginal tax rates. Our total debt outstanding was $11.2 billion as of recent developments discussed above on Aranesp^® and EPOGEN^® sales, management has begun taking actions to reduce operating expense growth in order to offset any decline in revenues.March 31, 2008.

We focus our R&D on novel human therapeutics for the treatment of grievous illness. We have substantially expanded our R&D capabilities to manage and execute increasingly larger and more complex clinical trials and to build the capacity to advance more compounds into and through the clinic. In the near term, we expect to see further growth in R&D expense in 2007, but not to the same extent experienced in 2006. For example, the nine “mega-site” trials, which we began in 2006, will continue to require significant time, resources and expense to execute. However, as a result of recent regulatory and reimbursement challenges related to Aranesp^® and EPOGEN^®, we have been and will continue to assess the optimal level of our R&D investment. To the extent future sales of Aranesp^® and EPOGEN^®There are negatively impacted as a result of these recent events, we may defer or possibly cancel previously planned clinical trials in order to adjust our R&D investment plans. In order to increase the number of patients available for enrollment for our clinical trials, we have and will continue to open clinical sites and enroll patients in a number of new geographic locations where our experience conducting clinical trials is more limited, including Russia, China, India and some Central and South American countries utilizing third-party contract clinical trial providers.

There arealso many economic and industry-wide factors that affect our business generally and uniquely, including, among others, those relating to increased complexity and cost of R&D due, in part, to greater scrutiny of clinical trials with respect to safety which may lead to fewer treatments being approved by the FDA or other regulatory bodies;bodies and/or safety-related label changes for approved products; increasingly intense competition for marketed products and product candidates; broad reimbursement changes; healthcare provider prescribing behavior, regulatory or private healthcare organization medical guidelines and reimbursement practices; complex and expanding regulatory requirements; and intellectual property protection. See “Item“Item 1. Business”Business” in Part I of our Annual Report on Form 10-K for the year ended December 31, 20062007 and “Item“Item 1A. Risk Factors”Factors” in Part II herein for further information on these economic and industry-wide factors and their impact and potential impact on our business.

15

Reimbursement

Sales of all of our principal products are dependent, in part, on the availability and extent of reimbursement from third-party payers, including governments and private insurance plans. Generally, in Europe and other countries outside the United States, the government sponsored healthcare system is the primary payer of healthcare costs of patients. Governments may regulate access to, prices or reimbursement levels of our products to control costs or to affect levels of use of our products. Worldwide use of our products may be affected by these cost containment pressures and cost shifting from governments and private insurers to healthcare providers or patients in response to ongoing initiatives to reduce or reallocate healthcare expenditures. Further, adverse events or results from clinical trials or studies performed by us or by others or from the marketed use of our drugs may expand safety labeling for our approved products and may negatively impact worldwide reimbursement for our products. On July 30, 2007, the CMS issued its Decision Memorandum and on January 14, 2008, issued changes to its Medicare National Coverage Determinations Manual, effective for claims with dates of service on or after July 30, 2007, with an implementation date of April 7, 2008. A discussion of the Decision Memorandum follows below. (See also “—“Item 1A. Risk Factors—Our current products and products in development cannot be sold if we do not gain or maintain regulatory approval of our products and we may be required to perform additional clinical trials or change the labeling of our products or takeconduct other potentially limiting or costly actionsrisk management activities if we or others identify side effects or safety concerns after our products are on the market.” and “—Guidelines and recommendations published by various organizations can reduce the use of our products.products.”)

Most patients receiving Aranesp^®, Neulasta^® and NEUPOGEN^® for approved indications are covered by both government andand/or private payer healthcare programs. GovernmentMedicare and Medicaid government healthcare programsprograms’ payment policies for drugs and biologicals are governed bysubject to various laws and regulations. Beginning in January 1, 2005 under the Medicare Prescription Drug Improvement and Modernization Act (the “MMA”) which was enacted into law in December 2003 and became effective January 1, 2005. Since January 1, 2005,, in the physician clinic setting and since January 1, 2006, in the hospital outpatient setting,and dialysis settings, Aranesp^®, Neulasta^® and NEUPOGEN^® have been reimbursed under a Medicare Part B payment methodology that reimburses each product at 106% of its “averageaverage sales price”price (“ASP”) (sometimes referred to as “ASP+6%”). Effective January 1, 2008, Medicare payment in the hospital outpatient setting reimburses each product at 105% of its ASP. ASP is calculated by the manufacturer based on a statutorily defined formula and submitted to CMS. A product’s ASP is calculated on a quarterly basis and therefore may change each quarter. The ASP in effect for a given quarter (the “Current Period”) is based upon certain historical sales and sales incentive data covering a statutorily defined period of time preceding the Current Period. For example, the ASP based payment rate for Aranesp^® that will be in effect for the third quarter of 20072008 will be based in part on certain historical sales and sales incentive data for Aranesp^® from April 1, 20062007 through March 30, 2007.31, 2008. CMS publishes the ASPs for products in advance of the quarter in which they go into effect. Any changes to the ASP calculation could adversely affect the Medicare reimbursement for our products administered in the physician office and the hospital outpatient setting. Prior to January 1, 2006, Medicare’s hospital outpatient prospective payment system (“OPPS”), which determines payment rates for specified covered outpatient drugs and biologics in the hospital outpatient setting, utilized the average wholesale price (“AWP”) as the basis of Medicare Part B payment for covered outpatient drugs and biologics administered in the hospital outpatient setting. From 2003 to 2005, CMS applied an “equitable adjustment” such that the Aranesp^® reimbursement rate was based on the AWP of PROCRIT^®, Johnson & Johnson’s recombinant human erythropoietin product marketed in the United States, using a dose conversion ratio. In 2006 and 2007, CMS did not apply an “equitable adjustment” to tie the reimbursement rate for Aranesp^® to PROCRIT^®. However, CMS has maintained that it reserves the right to apply an “equitable adjustment” to the payment rate for Aranesp^® in future years.

In the United States, dialysis providers are primarily reimbursed for EPOGEN^® by the federal government through the End Stage Renal Disease (“ESRD ProgramProgram”) of Medicare. The ESRD Program reimburses approved providers for 80% of allowed dialysis costs; the remainder is paid by other sources, including patients, state Medicaid programs, private insurance, and to a lesser extent, state kidney patient programs. The ESRD Program reimbursement ratemethodology is established by federal law and is monitored and implemented by CMS. Effective January 1, 2006, the payment mechanism for separately reimbursed

16

dialysis drugs in both free-standing and hospital-based dialysis centers, including EPOGEN^® and Aranesp^®, is reimbursed by Medicare at ASP+6% using the same payment amounts used in the physician clinic setting. Beginning in the third quarter of 2007, based on its ongoing assessment for payment of Part B drugs, CMS instituted a single payment limit for Epoetin alfa (EPOGEN^® and PROCRIT^®) in all provider settings. Although we cannot predict the payment levels of EPOGEN^® in future quarters or whether Medicare payments for dialysis drugs may be modified by future federal legislation, a decrease in the reimbursement rate for EPOGEN^® may have a material adverse effect on our business and results of operations. Any changes to the ASP calculations directly affect the Medicare reimbursement for our products administered in the physician office, dialysis facility and hospital outpatient setting. These calculations are regularly reviewed for completeness and based on such review, we have revised our reported ASPs to reflect calculation changes both

prospectively and retroactively. Partially as a result of our methodology changes, our ASP reimbursement rate for EPOGEN^® was reduced for the third quarter of 2007.

Since April 1, 2006, the ESRD ProgramMedicare reimbursement for ESAs administered to dialysis patients has been subject to a revised Hematocrit Measurement Audit Program Memorandum (“HMA-PM”), a Medicare payment review mechanism used by CMS to auditmonitor EPOGEN^® and Aranesp^® (when used in dialysis) utilization and appropriate hematocrit outcomes of dialysis patients. This policy, the EMP, was further revised, effective OctoberJanuary 1, 2006. The revised EMP provides that2008, requiring a 50% reduction in Medicare reimbursement if a patient’s hemoglobinHb is greater thanabove 13 grams per deciliter, providers are instructedg/dL for three or more consecutive months. In addition, the revised EMP reduces the monthly dosing limits to reduce the patient’s400,000 IUs of EPOGEN^®, from 500,000 IUs, and to 1,200 mcgs of Aranesp^® dose, from 1,500 mcgs. The implementation of the revised EMP and report this reduction on claims usingESA label changes have led to a coding modifier. If the provider does not reduce the patient’sdecline in EPOGEN^® and Aranesp^® dose andsales for the provider does not submit medical documentation to support maintaining a patient’s hemoglobin above 13 grams per deciliter, reimbursement will be reducedfirst quarter of 2008 compared to the level it wouldfirst quarter of 2007 primarily due to a decline in both overall utilization and as well as average dosing per patient. We believe that pronounced dose declines, which have been hadobserved in the provider reduced dosage by twenty-five percent.quarter of EMP implementation, will moderate in subsequent quarters, as has been observed with prior years’ EMP changes.

Changes resulting from the MMA, which beginning in 2005 lowered reimbursement for our products, could negatively affect product sales of some of our marketed products. However, we believe that our product sales for 2005, 2006 and 20062007 were not significantly impacted by the reimbursement changes resulting from the MMA. While we cannot accurately predict the impact of any such changes on how, or under what circumstances, healthcare providers will prescribe or administer our products and we cannot estimate the full impact of the MMA on our business, we believe that it is not likely to be significant to our business in 2007. However, additional provisions of the MMA and other regulations affecting reimbursement that have gone or may go into effect could affect our product sales and related sales growth in the future. For example, the MMA required a report to Congress and a demonstration project ofwith regard to a bundled payment system for dialysis, including separately billable drugs and EPOGEN^®. The report to Congress was issued on February 20, 2008, but the demonstration project, which was scheduled to start in January 2006, but has been delayed with no announced start date. Bundling initiatives that have been implemented in other healthcare settings have resulted in lower utilization of services that had not previously been a part of the bundled payment. Because CMS is continuing to study bundled payments in the ESRD setting and legislation is possible, we cannot predict what impact a bundled payments system would have on sales of EPOGEN^® or Aranesp^® used in the treatment of persons receiving outpatient dialysis services.

In addition, in response to CMS considering and rejecting changes to the Medicare Physician Fee Schedule Proposed Rule for 2007, CMS invited comment on the need for future guidance concerning theASP calculation methodology for calculatingaccounting for discounts in multi-product contracts in the ASP of drugs sold under market-based pricing arrangements, including “bundled arrangements,” described by CMS as, for example, when a purchaser’s price for one or more drugs is contingent upon the purchase of other drugs or items. In the2007 Medicare Physician Fee Schedule Final Rule, for 2007, CMS chose not to establish a specific methodology that manufacturers must use for the treatment of bundled price concessions for the purposes of the ASP calculation at this time. However, CMS stated that it may provide more specific guidance in the future through rulemaking, program instruction or other guidance. Further, on December 29, 2006, the Medicare Payment Advisory Commission (“MedPAC”)MedPAC released its second Congressionally-mandated report on December 29, 2006 on the impact of changes in Medicare payments for Part B Drugs specifically recommending that the Secretary of the Department of Health and Human Services clarify ASP reporting requirements “to ensure that ASP calculations allocate discounts to reflect the transaction price for each drug.” Under the ASP system, the Company allocates itswe allocate our discounts based on the prices paid for individual drugs, according to the terms of its contracts with physicians and other purchasers, and we believe that the resulting ASPs reflect the transaction prices for individual drugs. AsReferencing a MedPAC December 2006 report, CMS proposed in the Medicare Physician Fee Schedule Proposed Rule for 2008 revising the methodology for calculating ASP to require the reallocation of price concessions of drugs sold under “bundled arrangements,” described by CMS in part as an arrangement regardless of physical packaging under which the rebate, discount or other price concession is conditioned upon the purchase of the same drug or biological or other drugs or biologicals or some other performance requirement. In the Medicare Physician Fee Schedule Final Rule for 2008, CMS stated that it was not finalizing the proposed regulatory change at this time, based on comments recommending a delay and raising concerns about the proposal. The agency also clarified that in the absence of specific guidance, manufacturers may continue to make “reasonable assumptions” in the calculation of ASP, consistent with the general requirements and the intent of the Medicare statute and regulations and their customary business practices. The agency stated that it will continue to monitor this issue and may provide more specific guidance in the future. Related to this issue, CMS issued a final Medicaid rule on July 6, 2007 that covered a broad range of topics concerning the calculation and use of average manufacturing price (“AMP”) and best price as well as a definition for bundled sales under the Medicaid program. Although it has minor differences, the definition of “bundled sale” under this rule is premature to speculate on howessentially the same as what CMS and other government organizations may react toproposed under the MedPAC’s recommendations, we cannot predict definition of “bundled arrangement” in

the potentialMedicare Physician Fee Schedule Proposed Rule for 2008 but which was not adopted for ASP reporting in the Final Rule for 2008. We continue in the process of evaluating what impact the report mayfinal Medicaid rule will have on our business.

In addition to private payers, since January 1, 2006, ENBREL and Sensipar^® (cinacalcet HCl) have been eligible for coverage from the U.S. government under Medicare Part D. Although both ENBREL and

17

Sensipar^® have received broad formulary placement in 2006 and 2007, Part D formulary placements are made by individual Part D plan sponsors with oversight by CMS and are subject to revision in the future.

Other initiatives reviewing the coverage or reimbursement of our products, including those related to safety, could result in less extensive coverage or lower reimbursement and could negatively affect sales of some of our marketed products. For example, on March 14, 2007, shortly after the March 9, 2007 label changes for all ESAs, CMS announced that the agency had begun reviewing all Medicare policies related to the administration of ESAs in non-renal disease applications as part of a NCAnational coverage analysis (“NCA”) which is generally CMS’ first step toward developing a NCD.national coverage determination (“NCD”). Generally, a NCD is a national policy statement granting, limiting or excluding Medicare coverage or reimbursement for a specific medical item or service. DuringOn May 14, 2007, CMS issued the initialproposed NCD following a review of data and public comments submitted as part of the NCA, which under the MMA, was subject to a 30-day public comment period that ended June 13, 2007. On July 30, 2007, CMS issued its Decision Memorandum which endedwas substantially altered from the proposed NCD. On January 14, 2008, CMS issued changes to its Medicare NCD Manual, adding the ESA Decision Memorandum, effective for claims with dates of service on and after July 30, 2007 with an implementation date of April 13, 2007, we submitted comments to7, 2008. In the Decision Memorandum, CMS which included a detaileddetermined that ESA treatment was not reasonable and thorough review ofnecessary for certain clinical conditions. The Decision Memorandum established the availableESA reimbursement policy for Medicare and other government beneficiaries who are treated for CIA with ESAs. We believe that the restrictions in the Decision Memorandum changed the way ESAs are used in clinical data, noted a series of important considerations and made apractice, for example, by decreasing the number of specific recommendations fortreated patients, the agency to consider in developing a NCD. CMS is required to issue a proposed NCD by September 14, 2007, but could propose a NCD at any time prior to that deadline. Givenaverage ESA dose and the uncertaintyduration of what recommendations a final NCD would consist of, we cannot predict what impact a NCD would haveESA therapy.

We believe this restriction on our business. Following CMS’ announcement that it had begun reviewing all Medicare policies related to the administrationreimbursement of ESAs in non-renal disease applicationsthe Decision Memorandum has had a material adverse effect on March 14, 2007, CMS also stated that the agency is currently reviewinguse, reimbursement and sales of Aranesp^®, and our business and results of operations. Additionally, based on our knowledge, although no private payers have implemented the EMPDecision Memorandum to date, many private payers have implemented the restrictions included in the Decision Memorandum. Further, due to difficulties in administering a two-tier medical practice, we believe many healthcare providers have reduced ESA utilization for all of their patients with ESRD who are dialyzed in renal facilities although they have not yet announced further changes toregardless of insurance coverage.

In addition, the EMP. The FDA may also scheduleheld a joint meeting of the Cardio Renal Advisory Committee to reviewCRDAC and the DSaRMAC on September 11, 2007, which evaluated the safety data on ESA use in renal disease. Although CMS has made no announcement of a nephrology focused NCA, any NCD for ESAs in the renal setting, although no public announcement has been made. As a resultwhich may include non-coverage and/or new dosing and treatment restrictions similar to those proposed in Decision Memorandum for treatment of the revisionsanemia in oncology with ESAs, would negatively affect use, reduce reimbursement and current review of the EMP, we cannot predict the potential full impact any revisions to the EMP may have on our business. However, changes reducing reimbursement coverage, could negatively affect product sales of our ESA products.

Further, the Deficit Reduction Act of 2005 (“DRA”) included provisions, which are phased in over time, regarding state collectionproducts and submission of data for the purpose of collecting Medicaid drug rebates from manufacturers for physician-administered drugs. We expect that state compliance with elements of these provisions that become effective in 2007 will increase the level of Medicaid rebates paid by us. We are currently in the process of further evaluating the impact of the DRA and are uncertain as to the potential full impactmay have a material adverse effect on our business. Related to this issue, CMS issued a proposed Medicaid rule on December 18, 2006 that covered a broad rangebusiness and results of topics concerning the calculation and use of AMP and best price as well as a proposed definition for bundled sales under the Medicaid program. We submitted a comment to CMS on the proposed rule which the DRA specifies that CMS issue a final rule no later than July 1, 2007. While we cannot predict the impact of the final rule prior to its issuance, changes reducing reimbursement could negatively affect our business.operations.

Results of Operations

Product sales

For the three months ended March 31, 20072008 and 2006,2007, worldwide product sales and total product sales by geographic region were as follows (in(dollar amounts in millions):

18

Product sales are influenced by a number of factors, including demand, third-party reimbursement availability and policies, government programs, regulatory developments or guidelines, clinical trial outcomes, clinical practice, pricing strategies, wholesaler and end-user inventory management practices, patient population, fluctuations in foreign currency exchange rates, new product launches and indications, competitive products, product supply and acquisitions.

Sales growth for the three months ended March 31, 2007 was principally driven by demand for Aranesp^®, Neulasta^® and ENBREL, which benefited from segment growth and to a lesser degree share gains. InternationalTotal product sales for the three months ended March 31, 20072008 decreased 1%, principally due to a decline in U.S. Aranesp^® sales, which was substantially offset by an increase in ENBREL sales. In particular, for the three months ended March 31, 2008, U.S. Aranesp^® sales declined $249 million, or 38%, reflecting the negative impact on demand, primarily in the supportive cancer care setting, of ongoing regulatory and reimbursement developments that were principally realized in the second half of 2007. Sales of ENBREL increased $221 million, or 30%, for the three months ended March 31, 2008, which includes an initial wholesaler inventory stocking of approximately $120 million resulting from the shift to a wholesaler distribution model. During the three months ended March 31, 2008, ENBREL’s distribution model was converted from primarily being drop shipped directly to pharmacies to a wholesaler distribution model similar to our other products. The increase in ENBREL sales in the first quarter of 2008 also reflects higher demand due to increases in both patients and average net sales price. Total international product sales for the three months ended March 31, 2008 increased 10% and were favorably impacted by $42$72 million from foreign currency exchange rate changes. Excluding the favorable impact of foreign currency exchange rate changes, international product sales increased 15%decreased 1% over the three months ended March 31, 2006.2007.

Aranesp^®

For the three months ended March 31, 20072008 and 2006,2007, total Aranesp^® sales by geographic region were as follows (in(dollar amounts in millions):

The increasedecrease in U.S. Aranesp^® sales for the three months ended March 31, 2007 was driven by2008 reflects the negative impact on demand, due to segment growth and to a lesser degree favorable wholesaler inventory changes. The slowing growth rateprimarily in the United Statessupportive cancer care setting, of physician conformance to ongoing regulatory and reimbursement developments, which were principally realized in the second half of 2007, and a slight decline in our segment share. This decrease in Aranesp^® sales was drivenpartially offset by initial customer reactiona slight benefit from a change in accounting estimates related to sales return reserves. The regulatory and reimbursement developments include in particular, (i) the ESA product label changes regarding safety discussed above and the resulting loss of substantially allCMS’ Decision Memorandum issued in July 2007, which significantly restricted Medicare

19

reimbursement for use of Aranesp^® in AoC. U.S. sales results forCIA and which we believe has also negatively impacted Aranesp^® use in CIA for patients covered by private insurance plans, (ii) the loss of Aranesp^® for use in the treatment of AoC and (iii) the March 9, 2007 and November 8, 2007 product safety-related label changes in the United States. During the latter part of the three months ended December 31, 2007 and during the three months ended March 31, 2007 do not fully reflect the significant impact of these developments, which occurred throughout, but primarily2008, Aranesp^® sales were relatively stable as we realized only a slight decrease in the latter half, of the first quarter of 2007. underlying demand.

The increasedecrease in international Aranesp^® sales for the three months ended March 31, 2007 was also2008 principally drivenreflects continued ESA dosing conservatism and pricing pressures in Europe, partially offset by increased demand due to segment growth and share gains and was favorably impacted by $24 million due to changes in foreign currency exchange rates. It is not clear what the impact of the developments in the United States will have on international Aranesp^® sales.rates, which positively impacted sales by approximately $35 million. Excluding the favorable impact of foreign currency exchange rate changes, international Aranesp^® sales increased 15% overfor the three months endedmonth period decreased 12%. Through March 31, 2006.2008, biosimilars and other recently introduced marketed products in Europe have not had a significant impact on total international Aranesp^® sales.

In addition to the factors mentioned in the “Product sales” section above, future worldwide Aranesp^® sales growth will be dependent, in part, on such factors as:

¡

future product label changes;

any or all of which could negatively impact future healthcare provider prescribing behavior, use of our product, regulatory or private healthcare organization medical guidelines and reimbursement practices;

20

any or all of which could have a material adverse impact on future sales of Aranesp^®.

(See “Item“Item 1A. Risk Factors”Factors” in Part II herein for further discussion of certain of the above factors that could impact our future product sales.)

EPOGEN^®

For the three months ended March 31, 20072008 and 2006,2007, total EPOGEN^® sales were as follows (in(dollar amounts in millions):

ReportedThe decrease in EPOGEN^® sales for the three months ended March 31, 2007 increased2008 was primarily driven by a reduction in dose/utilization due to favorableESA label changes and the CMS’ revisions to its EMP, that became effective January 1, 2008, as well as unfavorable wholesaler inventory changes and unfavorable revised estimates of dialysis demand primarily spillover,(primarily spillover) for prior quarters (see Note 1, “Summary“Summary of significant accounting policespolicies – Product sales”sales” to the Condensed Consolidated Financial Statements for further discussion), and favorable wholesaler inventory changes, partially offset by changes.

We believe that the EMP implementation in customer purchasing patterns versusJanuary 2008 has significantly impacted physician behavior resulting in declines in dosing trends, however we believe that the firstpronounced dose declines, which have been observed in the quarter of theimplementation, will moderate in subsequent quarters, as has been observed with prior year. The ESA product label changes regarding safety discussed above did not significantly impact EPOGEN^® sales results for the three months ended March 31, 2007.years’ EMP changes.

In addition to the factors mentioned in the “Product sales” section above, future EPOGEN^® sales will be dependent, in part, on such factors as:

21

(See “Itemthe “Overview” section above and “Item 1A. Risk Factors”Factors” in Part II herein for further discussion of certain of the above factors that could impact our future product sales.)

Neulasta^®/NEUPOGEN^®

For the three months ended March 31, 20072008 and 2006,2007, total Neulasta^®/NEUPOGEN^® sales by geographic region were as follows (in(dollar amounts in millions):

The increase in U.S. sales of Neulasta^®/NEUPOGEN^® sales for the three months ended March 31, 20072008 was primarily driven primarily by higher demand for Neulasta^® due to segment growth and to a lesser degree favorableprimarily reflecting increases in average net sales price, partially offset by unfavorable wholesaler inventory changes. Neulasta^® segment growth is attributable to an increase in

22

patients in part due to the continued increase of Neulasta^® in first-cycle use, as well as higher net sales prices. The increase in international Neulasta^®/NEUPOGEN^® sales for the three months ended March 31, 2007 was2008 reflects changes in foreign currency exchange rates, which positively impacted first quarter combined international sales by $28 million, as well as increased demand driven by the continued conversion from NEUPOGEN^® to Neulasta^® and was favorably impacted by $16 million in foreign currency exchange rate changes.. Excluding the favorable impact of foreign currency exchange rate changes, combined international Neulasta^®/NEUPOGEN^® sales increased 8% over the three months ended March 31, 2006.

For the remainder of 2007, we believe sales growth for Neulasta^®/NEUPOGEN^® will depend on patient growth and further segment penetration of Neulasta^® in the moderate-risk population that would benefit from its use in first and subsequent chemotherapy cycles. NEUPOGEN^® competes with Neulasta^® in the United States and Europe. Worldwide NEUPOGEN^® sales have been adversely impacted by conversion to Neulasta^®10%. However, we believe that most of the conversion in the United States and Europe has occurred.

In addition to the factors mentioned in the “Product sales” section above, future worldwide Neulasta^®/NEUPOGEN^® sales growth will be dependent, in part, on such factors as:

(See “Item“Item 1A. Risk Factors”Factors” in Part II herein for further discussion of certain of the above factors that could impact our future product sales.)

23

ENBREL

For the three months ended March 31, 20072008 and 2006,2007, total ENBREL sales by geographic region were as follows (in(dollar amounts in millions):

ENBREL sales growth for the three months ended March 31, 20072008 includes an initial wholesaler inventory stocking of approximately $120 million resulting from the shift to a wholesaler distribution model in the first quarter of 2008. During the three months ended March 31, 2008, ENBREL’s distribution model was driven byconverted from primarily being drop shipped directly to pharmacies to a wholesaler distribution model similar to our other products. We believe that this estimated initial wholesaler inventory stocking is within the expected normal inventory range. The increase in ENBREL sales in the first quarter of 2008 also reflects higher demand due to increases in both patients and average net sales price. While ENBREL continued to maintain a leading position in both rheumatology and dermatology, the sales growth induring the first quarterthree months ended March 31, 2008 was affected by slight share declinedeclines in the United States in both segments versus the first quarter of the prior year2007 due to increased competitive activity.

We believe sales growth for the remainder of 2007 will be principally driven by growth in the rheumatology and dermatology segments.

In addition to the factors mentioned in the “Product sales” section above, future worldwide ENBREL sales growth will be dependent, in part, on such factors as:

severe plaque psoriasis, who are inadequately controlled with topical therapy or who have received systemic therapy or phototherapy;

(See “Item“Item 1A. Risk Factors”Factors” in Part II herein for further discussion of certain of the above factors that could impact our future product sales.)

24

Selected operating expenses

The following table summarizes selected operating expenses for the three months ended March 31, 2008 and 2007 and 2006 (in(dollar amounts in millions):