01—Abstract
Summary
Summary of the 10-K filed February 9, 2023. Cited figures are marked; the original filing is the authoritative source.
Amgen's FY2022 10-K (filed February 9, 2023) shows a company with stable core revenue and strong cash generation, but with a heavy near-term balance sheet load tied to its pending Horizon Therapeutics acquisition.
Total revenues rose 1% to $26.3 billiona and product sales rose 2% to $24.8 billion, driven by volume growth in Repatha, Prolia, EVENITY, Nplate, and Tezspire, partly offset by net price erosion and biosimilar pressure on Neulasta, ENBREL, and MVASI. Diluted EPS rose 18% to $12.11, helped by lower acquired IPR&D expense versus 2021 (which had a $1.5 billion Five Prime charge). Operating cash flow was $9.7 billion, and the company returned capital through $4.2 billion in dividends and $6.4 billion in buybacks.
The key investor issue is leverage and deal risk. Long-term debt rose to $37.4 billion, and stockholders' equity fell to $3.7 billionb from $6.7 billion, reflecting buybacks and an accumulated deficit. The $27.8 billion Horizon acquisition is financed with bridge and term loan commitments totaling $28.5 billion, and the FTC issued a Second Request in January 2023, which extends the regulatory review.
Management guides to continued net price declines in 2023, and ENBREL and Neulasta face ongoing erosion, so the company's growth depends on newer launches and on the Horizon transaction closing. Risk items to monitor include the IRS tax dispute covering 2010-2015 (Notices seeking roughly $8.7 billionc of additional federal tax plus penalties and interest, partly offset by repatriation tax), Medicare drug price negotiation under the Inflation Reduction Act starting in 2026, and patent litigation on Otezla and Repatha. Amgen's manufacturing concentration in Puerto Rico and Thousand Oaks is also a noted operational risk.
02—Key points
Key Highlights
- Total revenues grew 1% to $26.3B; product sales grew 2% to $24.8B, led by Repatha (+16%), Prolia (+12%), EVENITY (+48%), and Nplate (+27%), offset by Neulasta (-35%) and ENBREL (-8%).
- Diluted EPS rose 18% to $12.11 on net income of $6.55B, aided by the absence of the 2021 $1.5B acquired IPR&D charge.
- Proposed Horizon Therapeutics acquisition (~$27.8B equity value, $116.50/share cash) is financed by $28.5B of bridge and term loan commitments; the FTC issued a Second Request on January 30, 2023, extending the antitrust review.
- Long-term debt increased to $37.4B from $33.2B, while stockholders' equity fell to $3.7B from $6.7B and the company carries an accumulated deficit.
- ChemoCentryx acquisition closed October 2022 for ~$3.9B, adding TAVNEOS; the acquisition is accounted for as a business combination with $3.5B of developed-product-technology intangibles.
- Management expects net selling prices to keep declining in 2023 and cites IRA Medicare price-setting starting in 2026, with potentially ~100 drugs subject to government prices by 2031.
- Operating cash flow was $9.7B; capital returns were $10.6B in 2022 ($6.4B buybacks and $4.2B dividends), with the quarterly dividend raised 10% to $2.13 per share for Q1 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Amgen Inc kept $0.25.
- Revenue$26.32B100.0%
- Cost of revenue−$6.41B24.3%
- Gross profit$19.92B75.7%
- Operating costs−$10.35B39.3%
- Operating income$9.57B36.3%
- Interest, other & tax−$3.01B11.5%
- Net income$6.55B24.9%
Where FY2022 revenue went
$26.32B- Net income: $6.55B, 25% of revenue
- Cost of revenue: $6.41B, 24% of revenue
- SG&A: $5.41B, 21% of revenue
- Other operating costs: $4.94B, 19% of revenue
- Interest, other & tax: $3.01B, 11% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 9, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $26.32B$25.98B | +1.3% |
| Cost of Revenue | $6.41B$6.45B | −0.7% |
| Gross Profit | $19.92B$19.52B | +2.0% |
| SG&A Expenses | $5.41B$5.37B | +0.9% |
| Operating Expenses | $16.76B$18.34B | −8.6% |
| Operating Income | $9.57B$7.64B | +25.2% |
| Interest Expense | $1.41B$1.20B | +17.5% |
| Net Income | $6.55B$5.89B | +11.2% |
| EPS (Basic) | $12.18$10.34 | +17.8% |
| EPS (Diluted) | $12.11$10.28 | +17.8% |
| Shares Outstanding (Basic) | 538.00M570.00M | −5.6% |
| Shares Outstanding (Diluted) | 541.00M573.00M | −5.6% |
05—Questions
Frequently Asked Questions
How is the Horizon Therapeutics acquisition being financed, and what could delay it?
Amgen is financing the ~$27.8B deal with a $28.5B package of bridge and term loan credit agreements, of which the bridge was reduced to $24.5B after a $4.0B term loan. Closing depends on regulatory approval, including FTC review. The January 30, 2023 Second Request extends the Hart-Scott-Rodino waiting period until 30 days after substantial compliance, so timing is uncertain.
Why did operating expenses fall in 2022 and does that reflect underlying profitability?
Total operating expenses fell 9% to $16.8B mainly because 2021 included a $1.5B acquired IPR&D charge for bemarituzumab (Five Prime) and a licensing upfront payment to Kyowa Kirin. The decline is largely a non-recurring comparison, not a structural cost cut. Operating income rose 25% to $9.6B, partly reflecting that comparison and partly offset by a $567M loss on the Gensenta divestiture.
What are the biggest threats to Amgen's revenue base?
Biosimilar and generic competition is the primary risk: Neulasta sales fell 35% as multiple biosimilars launched, and ENBREL sales fell 8%. Amgen expects further net price declines in 2023, and payer consolidation and IRA Medicare price-setting, starting in 2026, add pressure. Patent expirations, including ENBREL and Prolia/XGEVA in the U.S. and Europe, also loom.
How large is the IRS tax exposure?
Amgen is contesting IRS notices for 2010-2012 and 2013-2015 tied to profit allocation with its Puerto Rico operations. The notices seek about $3.6B and $5.1B of additional federal tax plus interest, with about $2.0B of penalties asserted for 2013-2015, and both cases were consolidated in U.S. Tax Court in December 2022. Some of the amounts would be offset by up to roughly $3.1B of previously accrued repatriation tax. Gross unrecognized tax benefits were $3.8B at year-end, and final resolution is not expected within 12 months.
06—Continue