01—Abstract
Summary
Summary of the 10-K filed February 14, 2024. Cited figures are marked; the original filing is the authoritative source.
Amgen's FY2023 10-K shows a transformative but leveraged year.
Total revenues rose 7% to $28.2 billiona and product sales grew 9% to $26.9 billion, driven by volume growth in Repatha, TEZSPIRE, EVENITY, Prolia and BLINCYTO, plus $954 million of product sales from Horizon after its October 6, 2023 closing. GAAP operating income fell 17% to $7.9 billion, however, because of higher cost of sales from Horizon-related amortization, a $783 million AMG 340 impairment, and higher SG&A. Net income rose 3% to $6.7 billion and diluted EPS reached $12.49.
Operating cash flow was $8.5 billionb, down from $9.7 billion, reflecting Horizon transaction and integration payments. The key investor issue is the balance sheet. The $27.8 billion Horizon acquisition was funded mainly by $24 billion of senior notes and a $4 billion term loan, pushing long-term debt to $63.2 billion from $37.4 billion.
Stockholders' equity was only $6.2 billionc, and the company has an accumulated deficit. Management stated that S&P, Moody's and Fitch ratings were BBB+, Baa1 and BBB, all still investment grade, but the filing acknowledges downgrades. Management plans to reduce leverage before returning to debt markets, and it paused share buybacks in 2023 while keeping the quarterly dividend, raised 10% to $2.13 per share for 2023 and to $2.25 for Q1 2024.
The main medium-term risks are concentrated. Three wholesalers account for 79%d of gross revenue, and the top PBMs and insurers control about 92% of prescriptions. The IRA's Medicare price-setting begins in 2026 with ENBREL selected, and biosimilar competition is intensifying for ENBREL, EPOGEN, Neulasta and others.
The company also faces a large IRS tax dispute covering 2010–2015, with Tax Court trial set for November 2024 and $3.6 billion plus $5.1 billion of asserted federal tax and about $2.0 billion of penalties. Pipeline catalysts include the tarlatamab BLA decision (PDUFA June 12, 2024), while the LUMAKRAS full-approval application received a Complete Response Letter.
02—Key points
Key Highlights
- Revenue growth of 7% to $28.2 billion, with product sales up 9% to $26.9 billion; Horizon contributed $954 million in product sales from October 6 to December 31, 2023.
- GAAP operating income fell 17% to $7.9 billion due to Horizon amortization, acquisition costs, and a $783 million AMG 340 impairment; diluted EPS rose 3% to $12.49.
- Long-term debt more than tripled to $63.2 billion after the $27.8 billion Horizon acquisition, against stockholders' equity of only $6.2 billion and an accumulated deficit.
- Credit ratings remain investment grade (BBB+/Baa1/BBB), but management acknowledges downgrades and intends to reduce leverage before returning to debt markets.
- Dividend increased 10% to $2.13 per share for 2023, with the Q1 2024 dividend raised to $2.25; no share repurchases were made in 2023 and $7.0 billion remains authorized.
- Medicare price setting under the IRA begins in 2026 with ENBREL selected, and biosimilar and generic competition is accelerating across ENBREL, Neulasta, EPOGEN and other products.
- Significant tax exposure: the IRS seeks roughly $3.6 billion for 2010–2012 and $5.1 billion plus about $2.0 billion in penalties for 2013–2015, with Tax Court trial set for November 4, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Amgen Inc kept $0.24.
- Revenue$28.19B100.0%
- Cost of revenue−$8.45B30.0%
- Gross profit$19.74B70.0%
- Operating costs−$11.84B42.0%
- Operating income$7.90B28.0%
- Interest, other & tax−$1.18B4.2%
- Net income$6.72B23.8%
Where FY2023 revenue went
$28.19B- Cost of revenue: $8.45B, 30% of revenue
- Net income: $6.72B, 24% of revenue
- SG&A: $6.18B, 22% of revenue
- Other operating costs: $5.66B, 20% of revenue
- Interest, other & tax: $1.18B, 4.2% of revenue
Kept 24% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 14, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $28.19B$26.32B | +7.1% |
| Cost of Revenue | $8.45B$6.41B | +31.9% |
| Gross Profit | $19.74B$19.92B | −0.9% |
| SG&A Expenses | $6.18B$5.41B | +14.1% |
| Operating Expenses | $20.29B$16.76B | +21.1% |
| Operating Income | $7.90B$9.57B | −17.4% |
| Interest Expense | $2.88B$1.41B | +104.5% |
| Net Income | $6.72B$6.55B | +2.5% |
| EPS (Basic) | $12.56$12.18 | +3.1% |
| EPS (Diluted) | $12.49$12.11 | +3.1% |
| Shares Outstanding (Basic) | 535.00M538.00M | −0.6% |
| Shares Outstanding (Diluted) | 538.00M541.00M | −0.6% |
05—Questions
Frequently Asked Questions
How did the Horizon acquisition change Amgen's financial position?
The $27.8 billion Horizon deal, closed October 6, 2023, added rare-disease products including TEPEZZA, KRYSTEXXA and UPLIZNA. It was funded mainly by $24 billion of senior notes issued in March 2023 and a $4 billion term loan, raising long-term debt to $63.2 billion and total assets to $97.2 billion. Amortization and integration costs reduced operating income in 2023, but Horizon products contributed $954 million in product sales in the partial year.
Is Amgen's dividend at risk given the higher debt load?
Management said it expects to continue quarterly dividends, and the Board raised the Q1 2024 dividend 6% to $2.25 per share. Dividends paid in 2023 were $4.6 billion against operating cash flow of $8.5 billion. However, the company has an accumulated deficit and is prioritizing debt reduction, and dividend amounts are subject to Board approval.
What are the biggest near-term threats to Amgen's revenue?
Key threats include the IRA Medicare price setting for ENBREL starting January 2026, with a possible Colorado upper payment limit as early as Q4 2024, and accelerating biosimilar competition for ENBREL, Neulasta, EPOGEN and Aranesp. Net selling prices are expected to keep declining in 2024. Concentration among PBMs and insurers, which control about 92% of prescriptions, adds rebate pressure on products like Repatha and Otezla.
What is the status of the IRS tax dispute?
Amgen is contesting IRS notices for 2010–2012 and 2013–2015 that relate to profit allocation between the U.S. and Puerto Rico. The IRS seeks about $3.6 billion for 2010–2012 and about $5.1 billion plus roughly $2.0 billion in penalties for 2013–2015, before offsets of up to about $3.1 billion for previously accrued repatriation tax. The Tax Court trial is set for November 4, 2024, and management believes the IRS positions are without merit, though outcomes could be substantially greater than accrued amounts.
What pipeline catalysts should investors watch in 2024?
The tarlatamab BLA for extensive-stage small cell lung cancer has Priority Review with a PDUFA date of June 12, 2024, following Breakthrough Therapy Designation. The LUMAKRAS full-approval application received a Complete Response Letter, with a confirmatory study required by February 2028. Phase 3 programs include MariDebart cafraglutide for obesity in Phase 2, olpasiran for cardiovascular disease, and dazodalibep for Sjögren's syndrome. Phase 3 programs rose to 24 from 18 a year earlier.
06—Continue