Financial information

AMGEN INC MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

The following MD&A is intended to assist the reader in understanding Amgen's
business. MD&A is provided as a supplement to and should be read in conjunction
with our Annual Report on Form 10-K for the year ended December 31, 2021, and
our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June
30, 2022. Our results of operations discussed in MD&A are presented in
conformity with GAAP. Amgen operates in one business segment: human
therapeutics. Therefore, our results of operations are discussed on a
consolidated basis.

Forward-looking statements

This report and other documents we file with the SEC contain forward-looking
statements that are based on current expectations, estimates, forecasts and
projections about us, our future performance, our business, our beliefs and our
management's assumptions. In addition, we, or others on our behalf, may make
forward-looking statements in press releases, written statements or our
communications and discussions with investors and analysts in the normal course
of business through meetings, webcasts, phone calls and conference calls. Such
words as "expect," "anticipate," "outlook," "could," "target," "project,"
"intend," "plan," "believe," "seek," "estimate," "should," "may," "assume" and
"continue" as well as variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and they involve certain risks, uncertainties
and assumptions that are difficult to predict. We describe our respective risks,
uncertainties and assumptions that could affect the outcome or results of
operations in Item 1A. Risk Factors in Part II herein and in Part I, Item 1A.
Risk Factors of our Annual Report on Form 10-K for the year ended December 31,
2021, and in Part II, Item 1A. Risk Factors of our Quarterly Reports on Form
10-Q for the periods ended March 31, 2022 and June 30, 2022. 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 forecasted by our forward-looking statements. Reference is
made in particular to forward-looking statements regarding product sales,
regulatory activities, clinical trial results, reimbursement, expenses, EPS,
liquidity and capital resources, trends, planned dividends, stock repurchases,
collaborations and effects of pandemics. 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.


Insight

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

Our main products are ENBREL, Prolia, Otezla, XGEVA, Aranesp, Repatha, KYPROLIS, Neulasta and Nplate. We also market a number of other products including MVASI, Vectibix, EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, Parsabiv, KANJINTI, LUMAKRAS/LUMYKRAS, NEUPOGEN, TEZSPIRE and Sensipar/Mimpara.

Covid-19 pandemic

Since the onset of the pandemic in 2020, we have been closely monitoring the
pandemic's effects on our global operations. We continue to take appropriate
steps to minimize risks to our employees, a significant number of whom have
continued to work virtually. To date, our remote working arrangements have not
significantly affected our ability to maintain critical business operations, and
we have not experienced disruptions to or shortages of our supply of medicines.

Over the course of the pandemic we have experienced changes in demand for some
of our products as fluctuations in the frequency of patient visits to doctors'
offices have impacted the provision of treatments to existing patients and
reduced diagnoses in new patients. During 2021, there was a gradual recovery in
both patient visits and diagnosis rates that approached pre-pandemic levels. In
2022, the pandemic has continued to impact the healthcare sector and our
business, to varying degrees across our markets. To date in 2022, in most of our
major markets, with the exception of the Asia Pacific region that has been
affected by sustained lockdowns, we have seen greater stability in patient
visits and demand patterns even in areas facing surges in the virus. Given the
evolution of COVID-19 since its onset, including the proliferation of variants,
we cannot predict the impact of future virus surges on our business and will
continue to closely monitor the impact of COVID-19 on our business and on the
healthcare sector more generally.

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With respect to our drug development activities, we continue to work to mitigate
COVID-19 effects on future study enrollment in our clinical trials around the
world. We remain focused on effectively supporting the delivery of care and
investigational drug supply to patients enrolled in our active clinical sites.

Despite the ongoing pandemic and business impacts noted above, we believe that
existing funds, cash generated from operations and existing sources of and
access to financing are adequate to satisfy our needs for working capital,
capital expenditures and debt service requirements as well as to engage in
capital-return and other business initiatives that we plan to pursue. For a
discussion of risks the COVID-19 pandemic presents to our results, see Part I,
Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended
December 31, 2021, and Part II, Item 1A. Risk Factors of our Quarterly Report on
Form 10-Q for the period ended March 31, 2022.


Significant developments

Following is a summary of selected significant developments affecting our
business that occurred since the filing of our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2022. For additional developments or for a more
comprehensive discussion of certain developments discussed below, see our Annual
Report on Form 10-K for the year ended December 31, 2021, and our Quarterly
Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022.

Acquisition

ChemoCentryx, Inc.

•On October 20, 2022, Amgen completed its acquisition of ChemoCentryx for $52.00
per share in cash, for a total merger amount of approximately
$3.7 billion.

Products/Pipeline

Oncology/Hematology

LUMAKRAS/LUMYKRAS

•In September 2022, we announced results from the global Phase 3 CodeBreaK 200
trial, which showed once-daily oral LUMAKRAS/LUMYKRAS led to significantly
superior progression-free survival (PFS; primary endpoint) and a significantly
higher objective response rate (ORR; a key secondary endpoint) in patients with
KRAS G12C-mutated non-small cell lung cancer (NSCLC), compared with intravenous
chemotherapy, docetaxel. LUMAKRAS/LUMYKRAS significantly improved PFS compared
to docetaxel in heavily pre-treated patients. The proportion of patients with
PFS at one year was 25% for LUMAKRAS/LUMYKRAS versus 10% for docetaxel.
LUMAKRAS/LUMYKRAS demonstrated a significantly higher ORR than docetaxel with
double the response rates in the LUMAKRAS/LUMYKRAS arm (28% versus 13%,
respectively).

ABP 959

•In August 2022, we announced positive top-line results from the DAHLIA study, a
randomized, double-blind, active-controlled, two-period crossover Phase 3 study
evaluating the efficacy and safety of ABP 959, a biosimilar candidate to
SOLIRIS® (eculizumab), compared with SOLIRIS® in adult patients with paroxysmal
nocturnal hemoglobinuria (PNH). The study met its primary endpoints,
demonstrating no clinically meaningful differences between ABP 959 and SOLIRIS®.
The safety and immunogenicity profile of ABP 959 was comparable to that of
SOLIRIS®.


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Selected financial information

Here is an overview of our operating results (in millions, except percentages and per share data):

                           Three months ended                          Nine months ended
                              September 30,                              September 30,
                            2022            2021        Change        2022           2021        Change
Product sales
U.S.                  $    4,466          $ 4,558         (2) %    $  12,949      $ 12,835          1  %
ROW                        1,771            1,762          1  %        5,300         5,191          2  %
Total product sales        6,237            6,320         (1) %       18,249        18,026          1  %
Other revenues               415              386          8  %        1,235         1,107         12  %
Total revenues        $    6,652          $ 6,706         (1) %    $  19,484      $ 19,133          2  %
Operating expenses    $    3,992          $ 4,328         (8) %    $  12,148      $ 13,798        (12) %
Operating income      $    2,660          $ 2,378         12  %    $   7,336      $  5,335         38  %
Net income            $    2,143          $ 1,884         14  %    $   4,936      $  3,994         24  %
Diluted EPS           $     3.98          $  3.31         20  %    $    9.11      $   6.93         31  %
Diluted shares               538              570         (6) %          542           576         (6) %



In the following discussion of changes in product sales, any reference to unit
demand growth or decline refers to changes in purchases of our products by
healthcare providers (such as physicians or their clinics), dialysis centers,
hospitals and pharmacies. In addition, any reference to increases or decreases
in inventory refers to changes in inventory held by wholesaler customers and end
users (such as pharmacies).

Total product sales decreased for the three months ended September 30, 2022,
primarily driven by declines in the net selling prices of certain products and
unfavorable changes to foreign currency exchange rates, inventory and estimated
sales deductions, partially offset by higher unit demand for certain brands,
including Repatha, Prolia, EVENITY, Otezla, TEZSPIRE and Vectibix. Total product
sales increased for the nine months ended September 30, 2022, primarily driven
by higher unit demand for certain brands, including Repatha, Prolia, EVENITY,
LUMAKRAS/LUMYKRAS, KYPROLIS and Otezla, partially offset by declines in the net
selling prices of certain products and unfavorable changes to foreign currency
exchange rates and inventory. For the remainder of 2022, we expect that net
selling prices will continue to decline at a portfolio level, driven by
increased competition.

Further, we expect international product sales to continue to be unfavorably
impacted by foreign currency exchange rates for the remainder of the year. The
impact of such changes to foreign currency exchange rates will be partially
offset by corresponding decreases in our international operating expenses. While
not designed to completely address foreign currency changes, our hedging
activities also seek to offset, in part, such effects on our net income by
hedging our net foreign currency exposure, primarily with respect to product
sales denominated in euros.

Over the course of the COVID-19 pandemic we experienced changes in demand for
some of our products as fluctuations in the frequency of patient visits to
doctors' offices have impacted the provision of treatments to existing patients
and reduced diagnoses in new patients. In general, declines in the sales of our
products that were impacted by the dynamics of the pandemic were most
significant in the early months of the pandemic, with product demand beginning
to show some recovery in late 2020. During 2021, there was a gradual recovery in
both patient visits and diagnosis rates that approached pre-pandemic levels;
however, variants (including Omicron) began to impact the healthcare sector and
our business in late 2021 and early 2022. This led to diminished capacity in the
healthcare sector and reduced working days for our own sales force. As of the
second quarter of 2022, we have seen the impact of these variants recede in most
markets, with the exception of some markets in the Asia Pacific region, which
has allowed us to engage in increased field-facing activities. Provider and
patient activity has also increased, leading to improvements in demand for our
products to pre-pandemic levels. However, the cumulative decrease in diagnoses
over the course of the pandemic has suppressed the volume of new patients
starting treatment, which continues to impact our business. Given the
unpredictable nature of the pandemic, there could be intermittent disruptions in
physician-patient interactions, and as a result, we may experience
quarter-to-quarter variability. In addition, other changes in the healthcare
ecosystem have the potential to introduce variability into product sales trends.
For example, changes in U.S. employment have led to changes to the insured
population. Growth in numbers of Medicaid enrollees and uninsured individuals
may have a negative impact on product demand and sales. Overall, uncertainty
remains around the timing and magnitude of our sales during the COVID-19
pandemic. See Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K
for the year ended December 31, 2021, and Part II, Item 1A. Risk Factors of our
Quarterly Report on Form 10-Q for the period ended March 31,

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2022.

Other revenues increased for the three months ended September 30, 2022, due to
higher licensing-related revenues. Other revenues increased for the nine months
ended September 30, 2022, due to higher revenue from COVID-19 antibody material.

Operating expenses decreased for the three months ended September 30, 2022,
primarily due to a licensing-related upfront payment to KKC in 2021. Operating
expenses decreased for the nine months ended September 30, 2022, primarily due
to the Acquired IPR&D expense related to the Five Prime acquisition and a
licensing-related upfront payment to KKC in 2021, partially offset by a loss on
a nonstrategic divestiture in 2022. See Note 2, Acquisitions and divestitures.


Results of operations

Product sales

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

                                Three months ended                          Nine months ended
                                   September 30,                              September 30,
                                 2022            2021        Change        2022           2021        Change
     ENBREL                $    1,106          $ 1,289        (14) %    $   3,019      $  3,357        (10) %
     Prolia                       862              803          7  %        2,636         2,375         11  %
     Otezla                       627              609          3  %        1,672         1,619          3  %
     XGEVA                        495              517         (4) %        1,530         1,473          4  %
     Aranesp                      358              396        (10) %        1,073         1,118         (4) %
     Repatha                      309              272         14  %          963           844         14  %
     KYPROLIS                     318              293          9  %          922           824         12  %
     Neulasta                     247              415        (40) %          905         1,383        (35) %
     Nplate                       288              273          5  %          838           745         12  %
     Other products(1)          1,627            1,453         12  %        4,691         4,288          9  %
     Total product sales   $    6,237          $ 6,320         (1) %    $  18,249      $ 18,026          1  %


____________

(1) Includes product sales of our non-core products, as well as our Gensenta products and Bergamo subsidiaries.

Future sales of our products, including the potential impact of the IRA, will
depend in part on the factors discussed below and in the following sections of
this report: (i) Part I, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Overview, and Selected financial
information; and (ii) Part II, Item 1A. Risk Factors, and in the following
sections of our Annual Report on Form 10-K for the year ended December 31, 2021:
(i) Part I, Item 1. Business-Marketing, Distribution and Selected Marketed
Products; (ii) Part I, Item 1A. Risk Factors; and (iii) Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Overview, and Results of operations-Product sales, as well as in our
Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June 30,
2022: (i) Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Results of operations-Product sales; and
(ii) Part II, Item 1A. Risk Factors.








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ENBREL

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

                              Three months ended                          Nine months ended
                                 September 30,                              September 30,
                               2022            2021        Change         2022          2021        Change
       ENBREL - U.S.     $    1,086          $ 1,263        (14) %    $    2,965      $ 3,270         (9) %
       ENBREL - Canada           20               26        (23) %            54           87        (38) %
       Total ENBREL      $    1,106          $ 1,289        (14) %    $    3,019      $ 3,357        (10) %

The decline in ENBREL sales for the quarter ended September 30, 2022explained by the decrease in the net selling price, unfavorable changes in deductions on estimated sales and a decrease in unit demand.

The decrease in ENBREL sales for the nine months ended September 30, 2022, was
driven by unfavorable changes to estimated sales deductions, lower unit demand
and lower net selling price.

For the remainder of 2022, we expect the net selling price to continue to decline due to increased competition.

Prolia

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

                             Three months ended                           Nine months ended
                                September 30,                               September 30,
                               2022             2021       Change         2022          2021        Change
       Prolia - U.S.   $      590              $ 530         11  %    $    1,783      $ 1,569         14  %
       Prolia - ROW           272                273          -  %           853          806          6  %
       Total Prolia    $      862              $ 803          7  %    $    2,636      $ 2,375         11  %

The increase in worldwide sales of Prolia for the three and nine months ended
September 30, 2022was driven by higher unit demand.

Otezla

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

                      Three months ended                           Nine months ended
                         September 30,                               September 30,
                        2022             2021       Change         2022          2021        Change
Otezla - U.S.   $      529              $ 495          7  %    $    1,366      $ 1,284          6  %
Otezla - ROW            98                114        (14) %           306          335         (9) %
Total Otezla    $      627              $ 609          3  %    $    1,672      $ 1,619          3  %


The increase in global Otezla sales for the three months ended September 30,
2022, was driven by higher unit demand, partially offset by unfavorable changes
to inventory and foreign currency exchange rates.

Otezla’s global sales increase for the nine months ended September 30, 2022was driven by higher unit demand, partially offset by a lower net selling price.

For a discussion of litigation related to Otezla, see Part IV-Note 19,
Contingencies and commitments, to the consolidated financial statements in our
Annual Report on Form 10-K for the year ended December 31, 2021, and Part I-Note
13, Contingencies and commitments, to the condensed consolidated financial
statements in our Quarterly Reports on Form 10-Q for the periods ended June 30,
2022 and September 30, 2022.

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XGEVA

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

                             Three months ended                           Nine months ended
                                September 30,                               September 30,
                               2022             2021       Change         2022          2021        Change
        XGEVA - U.S.   $      363              $ 372         (2) %    $    1,122      $ 1,061          6  %
        XGEVA - ROW           132                145         (9) %           408          412         (1) %
        Total XGEVA    $      495              $ 517         (4) %    $    1,530      $ 1,473          4  %

The decline in global sales of XGEVA for the three months ended September 30, 2022was driven by lower unit demand and unfavorable changes in inventory and exchange rates, partially offset by a higher net selling price.

The increase in global sales of XGEVA for the nine months ended September 30, 2022mainly due to the increase in the net selling price.

Aranesp

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

                              Three months ended                           Nine months ended
                                 September 30,                               September 30,
                                2022             2021       Change         2022          2021        Change
       Aranesp - U.S.   $      128              $ 149        (14) %    $      397      $   409         (3) %
       Aranesp - ROW           230                247         (7) %           676          709         (5) %
       Total Aranesp    $      358              $ 396        (10) %    $    1,073      $ 1,118         (4) %


The decrease in global Aranesp sales for the three months ended September 30,
2022, was primarily driven by lower net selling price and unfavorable changes to
foreign currency exchange rates.

The decrease in global Aranesp sales for the nine months ended September 30,
2022, was primarily driven by lower net selling price and unfavorable changes to
foreign currency exchange rates, partially offset by favorable changes to
estimated sales deductions.

Aranesp continues to face competition from a long-acting erythropoiesis-stimulating agent (ESA), as well as competition from biosimilar versions of EPOGEN, which will continue to impact sales at the future.

Repatha

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

                            Three months ended                             Nine months ended
                               September 30,                                 September 30,
                              2022             2021       Change            2022            2021       Change
     Repatha - U.S.   $      142              $ 139          2  %    $     461             $ 421         10  %
     Repatha - ROW           167                133         26  %          502               423         19  %
     Total Repatha    $      309              $ 272         14  %    $     963             $ 844         14  %


The increase in global Repatha sales for the three and nine months ended
September 30, 2022, was driven by higher unit demand, partially offset by lower
net selling price and unfavorable changes to foreign currency exchange rates.
Higher unit demand benefited from contracting changes to support and expand
Medicare Part D and commercial patient access and the inclusion of Repatha on
China's National Reimbursement Drug List as of January 1, 2022, both of which
resulted in decreases to the net selling price in 2022.

For a discussion of ongoing litigation related to Repatha, see Part IV-Note 19,
Contingencies and commitments, to the consolidated financial statements in our
Annual Report on Form 10-K for the year ended December 31, 2021, and Part I-Note
13, Contingencies and commitments, to the condensed consolidated financial
statements in our Quarterly Reports on Form 10-Q for the periods ended March 31,
2022, June 30, 2022 and September 30, 2022.

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KYPROLIS

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

                            Three months ended                             Nine months ended
                               September 30,                                 September 30,
                              2022             2021       Change            2022            2021       Change
    KYPROLIS - U.S.   $      217              $ 198         10  %    $     626             $ 547         14  %
    KYPROLIS - ROW           101                 95          6  %          296               277          7  %
    Total KYPROLIS    $      318              $ 293          9  %    $     922             $ 824         12  %

The increase in global sales of KYPROLIS for the three and nine months ended
September 30, 2022was driven by higher unit demand, partially offset by unfavorable changes in exchange rates.

The FDA has reported that it has granted tentative or final approval of ANDAs
for generic carfilzomib products filed by a number of companies. The date of
approval of those ANDAs for generic carfilzomib products is governed by the
Hatch-Waxman Act and any applicable settlement agreements between us and certain
companies that seek to develop generic carfilzomib products.

Neulasta

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

                             Three months ended                            Nine months ended
                                September 30,                                September 30,
                               2022             2021       Change          2022            2021        Change
     Neulasta - U.S.   $      205              $ 360        (43) %    $    772           $ 1,215        (36) %
     Neulasta - ROW            42                 55        (24) %         133               168        (21) %
     Total Neulasta    $      247              $ 415        (40) %    $    905           $ 1,383        (35) %

The decline in global sales of Neulasta for the three and nine months ended
September 30, 2022mainly due to the decrease in net selling price and unit demand.

Increased competition as a result of biosimilar versions of Neulasta has had and
will continue to have a significant adverse impact on brand sales, including
accelerating net price erosion and lower unit demand. We also expect other
biosimilar versions, including biosimilars that will use an on-body injector
that would compete with our Onpro injector, to be approved in the future.

For a discussion of ongoing patent litigations related to these and other
biosimilars, see Part IV-Note 19, Contingencies and commitments, to the
consolidated financial statements in our Annual Report on Form 10-K for the year
ended December 31, 2021, and Part I-Note 13, Contingencies and commitments, to
the condensed consolidated financial statements in our Quarterly Report on Form
10-Q for the period ended March 31, 2022.

Nplate

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

                           Three months ended                             Nine months ended
                              September 30,                                 September 30,
                             2022             2021       Change            2022            2021       Change
     Nplate - U.S.   $      162              $ 156          4  %    $     474             $ 404         17  %
     Nplate - ROW           126                117          8  %          364               341          7  %
     Total Nplate    $      288              $ 273          5  %    $     838             $ 745         12  %


The increase in global Nplate sales for the three months ended September 30,
2022, was driven by higher unit demand and net selling price, partially offset
by unfavorable changes to estimated sales deductions and foreign currency
exchange rates.

The increase in global Nplate sales for the nine months ended September 30,
2022, was driven by higher unit demand, higher net selling price and favorable
changes to estimated sales deductions, partially offset by unfavorable changes
to foreign currency exchange rates.

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Others products

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

                                    Three months ended                          Nine months ended
                                       September 30,                              September 30,
                                     2022            2021        Change         2022          2021        Change
 MVASI - U.S.                  $      139          $   187        (26) %    $      468      $   617        (24) %
 MVASI - ROW                           70               87        (20) %           228          245         (7) %
 Vectibix - U.S.                      106               84         26  %           287          255         13  %
 Vectibix- ROW                        141              116         22  %           368          375         (2) %
 EVENITY - U.S.                       136               94         45  %           376          230         63  %
 EVENITY- ROW                          65               55         18  %           186          157         18  %
 BLINCYTO - U.S.                       84               74         14  %           240          201         19  %
 BLINCYTO - ROW                        58               51         14  %           179          139         29  %
 EPOGEN - U.S.                        136              138         (1) %           392          393          -  %
 AMGEVITA - ROW                       117              111          5  %           341          324          5  %
 Aimovig - U.S.                       103               77         34  %           289          225         28  %
 Aimovig - ROW                          4                2        100  %            11            2             *
 Parsabiv - U.S.                       61               24             *           189          107         77  %
 Parsabiv - ROW                        39               37          5  %           100          104         (4) %
 KANJINTI - U.S.                       58               92        (37) %           207          354        (42) %
 KANJINTI - ROW                        14               24        (42) %            46           79        (42) %
 LUMAKRAS - U.S.                       61               33         85  %           160           42             *
 LUMYKRAS - ROW                        14                3             *            54            3             *
 NEUPOGEN - U.S.                       21               32        (34) %            65           86        (24) %
 NEUPOGEN - ROW                        14               20        (30) %            45           51        (12) %
 TEZSPIRE - U.S.                       55                -            NM            91            -            NM
 Sensipar - U.S.                        4                -            NM            13            4             *
 Sensipar/Mimpara - ROW                13               19        (32) %            44           62        (29) %
 Other - U.S.(1)                       80               61         31  %           206          141         46  %
 Other - ROW(1)                        34               32          6  %           106           92         15  %
 Total other products          $    1,627          $ 1,453         12  %    $    4,691      $ 4,288          9  %
 Total U.S. - other products   $    1,044          $   896         17  %    $    2,983      $ 2,655         12  %
 Total ROW - other products           583              557          5  %         1,708        1,633          5  %
 Total other products          $    1,627          $ 1,453         12  %    $    4,691      $ 4,288          9  %


NM = not meaningful

* Change in excess of 100%

____________

(1) Includes Corlanor, AVSOLA, IMLYGIC and RIABNI, as well as sales of our Gensenta and Bergamo subsidiaries.

                                       37

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Operating Expenses

Operating expenses were as follows (amounts in millions of dollars):

                                               Three months ended                                      Nine months ended
                                                  September 30,                                          September 30,
                                              2022              2021             Change             2022              2021              Change
Operating expenses:
Cost of sales                             $   1,588          $ 1,609                 (1) %       $  4,659          $  4,736                 (2) %
% of product sales                             25.5  %          25.5  %                              25.5  %           26.3  %
% of total revenues                            23.9  %          24.0  %                              23.9  %           24.8  %
Research and development                  $   1,112          $ 1,422                (22) %       $  3,110          $  3,471                (10) %
% of product sales                             17.8  %          22.5  %                              17.0  %           19.3  %
% of total revenues                            16.7  %          21.2  %                              16.0  %           18.1  %
Acquired in-process research and
development                               $       -          $     -                    NM       $      -          $  1,505                    NM
% of product sales                                -  %             -  %                                 -  %            8.3  %
% of total revenues                               -  %             -  %                                 -  %            7.9  %

Selling, general and administrative expenses $1,287 $1,305

         (1) %       $  3,842          $  3,943                 (3) %
% of product sales                             20.6  %          20.6  %                              21.1  %           21.9  %
% of total revenues                            19.3  %          19.5  %                              19.7  %           20.6  %
Other                                     $       5          $    (8)                    *       $    537          $    143                     *
Total operating expenses                  $   3,992          $ 4,328                 (8) %       $ 12,148          $ 13,798                (12) %


NM = not meaningful

* Change in excess of 100%

Cost of sales

Cost of sales was essentially flat, at 23.9% of total revenues for the three
months ended September 30, 2022, driven by lower costs associated with COVID-19
antibody shipments and lower manufacturing costs, offset by changes in product
mix.

Cost of sales decreased to 23.9% of total revenues for the nine months ended
September 30, 2022, driven by lower costs associated with COVID-19 antibody
shipments, manufacturing costs and amortization expense from acquisition-related
assets, partially offset by changes in product mix.

Research and development

The decrease in R&D expense for the three and nine months ended September 30,
2022, was driven by a licensing-related upfront payment to KKC in 2021 and lower
marketed product support, partially offset by higher spend in late-stage
development and research and early pipeline programs.

Research and development in progress acquired

The decrease in Acquired IPR&D expense for the nine months ended September 30,
2022, was due to the bemarituzumab program, which was acquired as part of the
Five Prime acquisition in 2021. See Note 2, Acquisitions and divestitures.

Selling, general and administrative expenses

The decrease in SG&A expenses for the three and nine months ended September 30, 2022was mainly due to a decline in marketed product support.

Other

Other operating expenses for the three months ended September 30, 2022,
consisted primarily of an impairment-related charge associated with an
intangible asset acquired in a business combination. Other operating expenses
for the nine months ended September 30, 2022, consisted primarily of a loss on a
nonstrategic divestiture. See Note 2, Acquisitions and divestitures.

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Other operating expenses for the three months ended September 30, 2021,
consisted primarily of changes in the fair values of contingent consideration
liabilities. Other operating expenses for the nine months ended September 30,
2021, consisted primarily of expenses related to cost savings initiatives.

Non-operating expenses/income and income taxes

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

                                           Three months ended            Nine months ended
                                             September 30,                 September 30,
                                           2022           2021           2022          2021

Interest expense, net ($368) ($296) ($991) ($862)

Other income (expenses), net $100 $73 ($747) $97

         Provision for income taxes    $     249        $  271       $     662       $  576
         Effective tax rate                 10.4   %      12.6  %         11.8  %      12.6  %


Interest expense, net

The increase in Interest expense, net, for the three and nine months ended
September 30, 2022, was primarily due to higher overall debt outstanding and
higher LIBORs on debt for which we effectively pay a variable rate of interest
through the use of interest rate swaps.

Other income (expenses), net

The increase in Other income (expense), net, for the three months ended
September 30, 2022, was primarily due to the gain recognized on the
extinguishment of debt and higher interest income, partially offset by lower
current year net gains on our strategic equity investments and higher current
year losses in connection with our BeiGene investment.

The decrease in Other income (expense), net, for the nine months ended September
30, 2022, was primarily due to net losses on our strategic equity investments in
the current year compared with net gains recognized in the prior year and higher
current year net losses in connection with our BeiGene investment, partially
offset by the gain recognized on the extinguishment of debt and higher interest
income in the current year.

Income taxes

The decrease in our effective tax rate for the three months ended September 30,
2022, was primarily due to the prior year nondeductible IPR&D expense arising
from the acquisition of Five Prime and net favorable items, partially offset by
a nondeductible loss from a nonstrategic divestiture. The decrease in our
effective tax rate for the nine months ended September 30, 2022, was primarily
due to the prior year nondeductible IPR&D expense arising from the acquisition
of Five Prime, partially offset by current year net unfavorable items compared
to last year and a nondeductible loss from a nonstrategic divestiture. See Note
2, Acquisitions and divestitures.

The Administration and Congress continue to discuss changes to existing tax law
that could substantially increase the taxes we pay to the U.S. government.
Further, the OECD recently reached an agreement to align countries on a minimum
corporate tax rate and an expansion of the taxing rights of market countries. If
enacted, either by all OECD participants or unilaterally by individual
countries, this agreement could result in tax increases in both the United
States and foreign jurisdictions. The U.S. Treasury recently released final
foreign tax credit regulations that eliminate U.S. creditability of the Puerto
Rico Excise Tax beginning in 2023, which would increase our U.S. tax liability.
However, the U.S. territory of Puerto Rico recently enacted Act 52-2022, which
provides for an alternate fixed tax rate on industrial development income that
the U.S. Treasury recently confirmed will be creditable under U.S. law. As part
of this new law, eligible businesses would be subject to incremental income and
withholding taxes in lieu of payment of the Puerto Rico Excise Tax. In order to
qualify for the alternative fixed tax rate, we must amend our current tax grant
with the Puerto Rico government by December 31, 2022. Once we qualify for this
alternative fixed tax rate, which we expect to occur as of January 1, 2023, our
tax expense will increase.

                                       39
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In 2017, we received an RAR and a modified RAR from the IRS for the years
2010-2012, proposing significant adjustments that primarily relate to the
allocation of profits between certain of our entities in the United States and
the U.S. territory of Puerto Rico. We disagreed with the proposed adjustments
and calculations and pursued resolution with the IRS appeals office but were
unable to reach resolution. In July 2021, we filed a petition in the U.S. Tax
Court to contest two duplicate Statutory Notices of Deficiency (Notices) for the
years 2010-2012 that we received in May and July 2021, which seek to increase
our U.S. taxable income for the years 2010-2012 by an amount that would result
in additional federal tax of approximately $3.6 billion plus interest. Any
additional tax that could be imposed for the years 2010-2012 would be reduced by
up to approximately $900 million of repatriation tax previously accrued on our
foreign earnings.

In 2020, we received an RAR and a modified RAR from the IRS for the years
2013-2015, also proposing significant adjustments that primarily relate to the
allocation of profits between certain of our entities in the United States and
the U.S. territory of Puerto Rico similar to those proposed for the years
2010-2012. We disagreed with the proposed adjustments and calculations and
pursued resolution with the IRS appeals office but were unable to reach
resolution. In July 2022, we filed a petition in the U.S. Tax Court to contest a
Notice for the years 2013-2015 that we previously reported receiving in April
2022 that seeks to increase our U.S. taxable income for the years 2013-2015 by
an amount that would result in additional federal tax of approximately
$5.1 billion, plus interest. In addition, the Notice asserts penalties of
approximately $2.0 billion. Any additional tax that could be imposed for the
years 2013-2015 would be reduced by up to approximately $2.2 billion of
repatriation tax previously accrued on our foreign earnings.

We firmly believe that the IRS positions set out in Opinions 2010-2012 and 2013-2015 are unfounded. We are challenging the 2010-2012 and 2013-2015 notices in court and have filed a motion to combine the two periods into a single case in the WE Tax court.

We are currently under review by the IRS for the years 2016-2018 on issues similar to those of the 2010-2015 period. Additionally, we have reviews by a number of state and foreign tax jurisdictions.

Final resolution of these complex matters is not likely within the next 12
months. We believe our accrual for income tax liabilities is appropriate based
on past experience, interpretations of tax law, application of the tax law to
our facts and judgments about potential actions by tax authorities; however, due
to the complexity of the provision for income taxes and uncertain resolution of
these matters, the ultimate outcome of any tax matters may result in payments
substantially greater than amounts accrued and could have a material adverse
impact on our condensed consolidated financial statements.

We are no longer subject to WE federal income tax audits for years ending on or before December 31, 2009.

See Part II, Item 1A, Risk Factors-The adoption and interpretation of new tax
legislation or exposure to additional tax liabilities could affect our
profitability in our Quarterly Report on Form 10-Q for the period ended June 30,
2022, and Note 4, Income taxes, to the condensed consolidated financial
statements for further discussion.


Financial position, liquidity and capital resources

The selected financial data is as follows (in millions):

                                                               September 30, 2022           December 31, 2021
Cash, cash equivalents and marketable securities             $            11,478          $            8,037
Total assets                                                 $            63,700          $           61,165
Current portion of long-term debt                            $             1,543          $               87
Long-term debt                                               $            37,161          $           33,222
Stockholders' equity                                         $             3,653          $            6,700

Cash, cash equivalents and marketable securities

Our balance of cash, cash equivalents and marketable securities was $11.5
billion as of September 30, 2022. The primary objective of our investment
portfolio is to maintain safety of principal, prudent levels of liquidity and
acceptable levels of risk. Our investment policy limits interest-bearing
security investments to certain types of debt and money market instruments
issued by institutions with primarily investment-grade credit ratings, and it
places restrictions on maturities and concentration by asset class and issuer.


                                       40
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Capital allocation

Consistent with the objective to optimize our capital structure, we deploy our
accumulated cash balances in a strategic manner and consider a number of
alternatives, including investments in innovation, both internally and
externally, strategic transactions (including those that expand our portfolio of
products in areas of therapeutic interest), payment of dividends, stock
repurchases and repayment of debt.

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

In August 2022, March 2022 and December 2021, the Board of Directors declared
quarterly cash dividends of $1.94 per share of common stock, which were paid in
September 2022, June 2022 and March 2022, respectively, an increase of 10% over
the quarterly cash dividend paid each quarter in 2021. In October 2022, the
Board of Directors declared a quarterly cash dividend of $1.94 per share of
common stock, which will be paid in December 2022.

We also returned capital to stockholders through our stock repurchase program.
During the nine months ended September 30, 2022, we executed trades to
repurchase $6.3 billion of common stock, including $6.0 billion related to our
ASR agreements described below. As of September 30, 2022, $4.6 billion of
authorization remained available under our stock repurchase program. In October
2022, the Board of Directors increased the amount authorized under our stock
repurchase program by an additional $2.4 billion.

In February 2022, we entered into ASR agreements under which we paid an
aggregate amount of $6.0 billion to the Dealers and retired an initial 23.3
million shares of common stock. Approximately $0.9 billion in value of stock
remained to be delivered by the Dealers upon final settlement. Final settlement
under the ASR agreements occurred in September 2022 resulting in an additional
1.5 million shares received from the Dealers. In total, 24.8 million shares of
common stock were repurchased under the ASR agreements.

As a result of stock repurchases and quarterly dividend payments, we have an
accumulated deficit as of September 30, 2022 and December 31, 2021. Our
accumulated deficit is not anticipated to affect our future ability to operate,
repurchase stock, pay dividends or repay our debt given our continuing
profitability and strong financial position.

We believe that existing funds, cash generated from operations and existing
sources of and access to financing are adequate to satisfy our needs for working
capital, capital expenditure and debt service requirements, our plans to pay
dividends and repurchase stock and other business initiatives we plan to
strategically pursue, including acquisitions and licensing activities. We
anticipate that our liquidity needs can be met through a variety of sources,
including cash provided by operating activities, sales of marketable securities,
borrowings through commercial paper and/or syndicated credit facilities and
access to other domestic and foreign debt markets and equity markets. See our
Annual Report on Form 10-K for the year ended December 31, 2021, Part I,
Item 1A. Risk Factors-Global economic conditions may negatively affect us and
may magnify certain risks that affect our business.

Certain of our financing arrangements contain nonfinancial covenants. In
addition, our revolving credit agreement includes a financial covenant that
requires us to maintain a specified minimum interest coverage ratio of (i) the
sum of consolidated net income, interest expense, provision for income taxes,
depreciation expense, amortization expense, unusual or nonrecurring charges and
other noncash items (consolidated earnings before interest, taxes, depreciation
and amortization) to (ii) consolidated interest expense, each as defined and
described in the credit agreement. We were in compliance with all applicable
covenants under these arrangements as of September 30, 2022.

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Cash flow

Our summary treasury activity was as follows (in millions):

                                                          Nine months ended
                                                            September 30,
                                                         2022           

2021

Net cash provided by operating activities             $   7,072      $  

6,453

Net cash (used) from investing activities $(2,571) $963
Net cash used in financing activities

                 $  (2,988)     $ (1,713)


Operating

Cash provided by operating activities has been and is expected to continue to be
our primary recurring source of funds. Cash provided by operating activities
during the nine months ended September 30, 2022, increased primarily due to
higher net income, after adjustments for noncash items, and the impact of
working capital items.

Invest

Cash used in investing activities during the nine months ended September 30,
2022, was primarily due to net cash outflows related to marketable securities
activity of $1.9 billion and capital expenditures of $596 million. Cash provided
by investing activities during the nine months ended September 30, 2021, was
primarily due to net cash inflows related to marketable securities activity of
$3.4 billion, partially offset by the acquisition of Five Prime for $1.6
billion, net of cash acquired, and capital expenditures of $593 million. We
currently estimate 2022 spending on capital projects to be approximately
$950 million.

Funding

Cash used in financing activities during the nine months ended September 30,
2022, was primarily due to payments to repurchase our common stock of $6.4
billion, including amounts paid under the ASR agreements discussed above, the
payment of dividends of $3.2 billion and the extinguishment of debt of $297
million, partially offset by proceeds from the issuance of debt of $6.9 billion.
Cash used in financing activities during the nine months ended September 30,
2021, was primarily due to payments to repurchase our common stock of $3.5
billion and the payment of dividends of $3.0 billion, partially offset by
proceeds from the issuance of debt of $4.9 billion. See Note 9, Financing
arrangements, and Note 10, Stockholders' equity, to the condensed consolidated
financial statements for further discussion.


Significant Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and the notes to the financial
statements. Some of those judgments can be subjective and complex, and
therefore, actual results could differ materially from those estimates under
different assumptions or conditions. A summary of our critical accounting
policies and estimates is presented in Part II, Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations, of our Annual
Report on Form 10-K for the year ended December 31, 2021.

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