AMGEN INC. The following MD&A is intended to assist the reader in understandingAmgen '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 endedDecember 31, 2021 . 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 theSEC 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 endedDecember 31, 2021 . 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 theSEC , 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. OverviewAmgen 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 principal products are ENBREL, Prolia, XGEVA, Otezla, Aranesp, Neulasta, Repatha, KYPROLIS and Nplate. We also market a number of other products, including MVASI, Vectibix, EVENITY, BLINCYTO, EPOGEN, AMGEVITA, Aimovig, KANJINTI, Parsabiv, LUMAKRAS/LUMYKRAS, NEUPOGEN, Sensipar/Mimpara and TEZSPIRE.
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.
Since the beginning of the COVID-19 pandemic, we have seen changes in demand for
some of our products driven by changes in the frequency of patient visits to
doctors' offices that has impacted the provision of treatments to existing
patients and reduced diagnoses in new patients. During 2021, there was gradual
recovery in both patient visits and diagnoses that approached pre-COVID-19
levels early in the fourth quarter. However, in late 2021, Omicron and other
variants began to impact the healthcare sector and, as a result, COVID-19
continued to affect our business around the world through the first quarter of
2022. Going forward, we may experience ongoing variability in demand patterns
from COVID-19 for 2022. Further, 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. We will continue to closely
monitor the effects of COVID-19 on patient behavior and access to care.
Since early 2021, global vaccination efforts have been under way to control the
pandemic. Challenges to vaccination efforts, new variants and other causes of
virus spread may require governments to issue additional restrictions and/or
order shutdowns in various geographies. As a result, we expect to see continued
volatility for at least the duration of the pandemic as governments respond to
current local conditions.
27
-------------------------------------------------------------------------------- With respect to our drug development activities, we are continuously monitoring COVID-19 infection rates, including changes from new variants, and working to mitigate effects on future study enrollment in our clinical trials and evaluating the impacts in all countries where our clinical trials occur. We remain focused on supporting our active clinical sites in their provision of care to patients and in our provision of investigational drug supply. 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 the risks the COVID-19 pandemic presents to our results, see Part 1, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Significant developments Following is a summary of selected significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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 endedDecember 31, 2021 .
Operations
New manufacturing facilities
•In
Products/Pipeline Oncology/Hematology LUMAKRAS/LUMYKRAS •InApril 2022 , we announced long-term efficacy and safety data from the CodeBreaK 100 Phase 1/2 trial in patients with KRAS G12C-mutated advanced NSCLC who received LUMAKRAS. Data from 174 heavily pre-treated patients (172 with baseline measurable lesion(s)) were featured in an oral presentation at theAmerican Association for Cancer Research annual meeting. LUMAKRAS demonstrated a centrally confirmed ORR of 40.7%, disease control rate of 83.7% and median duration of response of 12.3 months. The results also showed median PFS of 6.3 months and overall survival of 12.5 months, with 32.5% of patients still alive at two years. No new safety signals for LUMAKRAS were identified with the long-term follow-up. Inflammation ABP 654 •InApril 2022 , we announced preliminary results from a Phase 3 study evaluating the efficacy and safety of ABP 654 compared to STELARA® (ustekinumab) in adult patients with moderate to severe plaque psoriasis. The study met the primary efficacy endpoint, demonstrating no clinically meaningful differences between ABP 654 and STELARA®. Repatha •InApril 2022 , we announced top-line results from the Repatha FOURIER-OLE studies, two open label extension (OLE) studies to the Phase 3 FOURIER cardiovascular outcomes trial, composed of a study with 5,035 patients enrolled inEastern Europe andthe United States and a study with 1,600 patients enrolled inWestern Europe . FOURIER-OLE was designed to assess the long-term safety and tolerability of Repatha over five years in adults with clinically evident atherosclerotic cardiovascular disease. The FOURIER-OLE studies showed that Repatha, administered at 140 mg every two weeks or 420 mg monthly, was safe and well-tolerated. Patients received Repatha for approximately 5 years, with some patients receiving Repatha for up to 8.5 years in aggregate across the FOURIER and OLE studies. No new long-term safety findings were observed. In addition, medically significant and sustained reduction in low-density lipoprotein cholesterol (LDL-C) levels were observed in most patients, with greater than 85 percent of patients achieving an LDL-C level of <40 mg/dL during the OLE period. 28
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Selected financial information
The following is an overview of our results of operations (in millions, except percentages and per-share data):
Three months ended
March 31,
2022 2021 Change
Product sales
U.S. $ 4,037 $ 3,903 3 %
ROW 1,694 1,689 - %
Total product sales 5,731 5,592 2 %
Other revenues 507 309 64 %
Total revenues $ 6,238 $ 5,901 6 %
Operating expenses $ 3,738 $ 3,772 (1) %
Operating income $ 2,500 $ 2,129 17 %
Net income $ 1,476 $ 1,646 (10) %
Diluted EPS $ 2.68 $ 2.83 (5) %
Diluted shares 551 581 (5) %
In the following discussion of changes in product sales, any reference to unit
demand growth or decline refers to changes in the purchases of our products by
healthcare providers (such as physicians or their clinics), dialysis centers,
hospitals and pharmacies. In addition, any reference to increases or decreases
in inventory refers to changes in inventory held by wholesaler customers and end
users (such as pharmacies).
Total product sales increased for the three months ended March 31, 2022 ,
primarily driven by higher unit demand for certain brands, including Repatha,
Prolia, EVENITY and LUMAKRAS/LUMYKRAS, and by favorable changes to estimated
sales deductions, partially offset by declines in the net selling prices of
certain products and the negative impact of foreign currency exchange. For the
remainder of 2022, we expect that net selling prices will continue to decline at
a portfolio level driven by increased competition. In addition, in the first
quarter of 2022, ENBREL and Otezla followed the historic pattern of lower first
quarter sales relative to the remainder of the year due to the impact of benefit
plan changes, insurance reverifications and increased co-pay expenses as U.S.
patients work through deductibles.
Throughout the COVID-19 pandemic, we experienced changes in demand for some of
our products. The pandemic has interrupted many physician-patient interactions,
which has led to delays in diagnoses and treatments, with varying degrees of
impact across our portfolio. 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, we observed gradual recovery from the
COVID-19 pandemic, with patient visits and diagnosis rates that approached
pre-pandemic levels early in the fourth quarter. However, late in 2021, Omicron
and other variants began to impact the healthcare sector. This led to diminished
capacity in the healthcare sector and reduced working days for our own sales
force. In March and continuing into April we have seen the impact of Omicron in
the U.S. recede, which allowed us to engage in increased field-facing
activities. Provider and patient activity has also increased leading to
improvements in demand for our products. 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, we expect there could be ongoing
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 .
Other revenues increased for the three months ended
Operating expenses decreased for the three months endedMarch 31, 2022 , primarily driven by lower SG&A expense and expenses associated with cost-saving initiatives that occurred in the three months endedMarch 31, 2021 , partially offset by higher cost of sales. Our operating expenses are expected to be higher in the remaining quarters of the year as we continue to invest in innovation and long-term growth. 29
-------------------------------------------------------------------------------- Although changes in foreign currency exchange rates result in increases or decreases in our reported international product sales, the benefit or detriment that such movements have on our international product sales is partially offset by corresponding increases or decreases in our international operating expenses and our related foreign currency hedging activities. Our hedging activities seek to offset the impacts, both positive and negative, that foreign currency exchange rate changes may have on our net income by hedging our net foreign currency exposure, primarily with respect to product sales denominated in euros. The net impact from changes in foreign currency exchange rates was not material for the three months endedMarch 31, 2022 and 2021. Results of operations Product sales
Worldwide product sales were as follows (dollar amounts in millions):
Three months ended
March 31,
2022 2021 Change
ENBREL $ 862 $ 924 (7) %
Prolia 852 758 12 %
XGEVA 502 468 7 %
Otezla 451 476 (5) %
Aranesp 358 355 1 %
Neulasta 348 482 (28) %
Repatha 329 286 15 %
KYPROLIS 287 251 14 %
Nplate 266 227 17 %
Other products 1,476 1,365 8 %
Total product sales $ 5,731 $ 5,592 2 %
Future sales of our products 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) Item 1. Business-Marketing,
Distribution and Selected Marketed Products, (ii) Item 1A. Risk Factors and
(iii) Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Overview, and Results of Operations-Product Sales.
ENBREL
Total ENBREL sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
ENBREL - U.S. $ 843 $ 894 (6) %
ENBREL - Canada 19 30 (37) %
Total ENBREL $ 862 $ 924 (7) %
The decrease in ENBREL sales for the three months ended
30
--------------------------------------------------------------------------------Prolia
Total Prolia sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Prolia - U.S. $ 582 $ 501 16 %
Prolia - ROW 270 257 5 %
Total Prolia $ 852 $ 758 12 %
The increase in global Prolia sales for the three months ended
XGEVA
Total XGEVA sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
XGEVA - U.S. $ 368 $ 334 10 %
XGEVA - ROW 134 134 - %
Total XGEVA $ 502 $ 468 7 %
The increase in global XGEVA sales for the three months ended March 31, 2022 ,
was driven by favorable changes to estimated sales deductions and higher net
selling price partially offset by lower unit demand.
Otezla
Total Otezla sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Otezla - U.S. $ 350 $ 366 (4) %
Otezla - ROW 101 110 (8) %
Total Otezla $ 451 $ 476 (5) %
The decrease in global Otezla sales for the three months ended
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
31
--------------------------------------------------------------------------------Aranesp
Total Aranesp sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Aranesp - U.S. $ 137 $ 125 10 %
Aranesp - ROW 221 230 (4) %
Total Aranesp $ 358 $ 355 1 %
The increase in global Aranesp sales for the three months ended March 31, 2022 ,
was driven by favorable changes to estimated sales deductions, partially offset
by lower net selling price due to competition.
Aranesp continues to face competition from a long-acting
Neulasta
Total Neulasta sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Neulasta - U.S. $ 304 $ 421 (28) %
Neulasta - ROW 44 61 (28) %
Total Neulasta $ 348 $ 482 (28) %
The decrease in global Neulasta sales for the three months ended March 31, 2022 ,
was driven by 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 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 Note 13, Contingencies and commitments, to the condensed consolidated
financial statements.
Repatha
Total Repatha sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Repatha - U.S. $ 165 $ 139 19 %
Repatha - ROW 164 147 12 %
Total Repatha $ 329 $ 286 15 %
The increase in global Repatha sales for the three months ended March 31, 2022 ,
was driven by higher unit demand, partially offset by lower net selling price.
Contracting changes to improve Medicare Part D and commercial patient access
resulted in the decrease to net selling price.
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 Note 13,
Contingencies and commitments, to the condensed consolidated financial
statements.
32
--------------------------------------------------------------------------------KYPROLIS
Total KYPROLIS sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
KYPROLIS - U.S. $ 196 $ 159 23 %
KYPROLIS - ROW 91 92 (1) %
Total KYPROLIS $ 287 $ 251 14 %
The increase in global KYPROLIS sales for the three months ended
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.
Nplate
Total Nplate sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
Nplate - U.S. $ 156 $ 112 39 %
Nplate - ROW 110 115 (4) %
Total Nplate $ 266 $ 227 17 %
The increase in global Nplate sales for the three months ended
33
--------------------------------------------------------------------------------Other products
Other product sales by geographic region were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021 Change
MVASI - U.S. $ 168 $ 224 (25) %
MVASI - ROW 76 70 9 %
Vectibix - U.S. 85 79 8 %
Vectibix- ROW 116 112 4 %
EVENITY - U.S. 110 57 93 %
EVENITY- ROW 60 50 20 %
BLINCYTO - U.S. 79 65 22 %
BLINCYTO - ROW 59 42 40 %
EPOGEN - U.S. 120 125 (4) %
AMGEVITA - ROW 108 106 2 %
Aimovig - U.S. 98 66 48 %
Aimovig - ROW 3 - NA
KANJINTI - U.S. 80 130 (38) %
KANJINTI - ROW 16 31 (48) %
Parsabiv - U.S. 57 46 24 %
Parsabiv - ROW 29 33 (12) %
LUMAKRAS - U.S. 48 - NA
LUMYKRAS - ROW 14 - NA
NEUPOGEN - U.S. 23 18 28 %
NEUPOGEN - ROW 15 16 (6) %
Sensipar - U.S. 4 - NA
Sensipar/Mimpara - ROW 16 23 (30) %
Other - U.S. 64 42 52 %
Other - ROW 28 30 (7) %
Total other products $ 1,476 $ 1,365 8 %
Total U.S. - other products $ 936 $ 852 10 %
Total ROW - other products 540 513 5 %
Total other products $ 1,476 $ 1,365 8 %
NA - not applicable
34
--------------------------------------------------------------------------------Operating expenses
Operating expenses were as follows (dollar amounts in millions):
Three months ended
March 31,
2022 2021 Change
Operating expenses:
Cost of sales $ 1,561 $ 1,490 5 %
% of product sales 27.2 % 26.6 %
% of total revenues 25.0 % 25.2 %
Research and development $ 959 $ 967 (1) %
% of product sales 16.7 % 17.3 %
% of total revenues 15.4 % 16.4 %
Selling, general and administrative
(2) %
% of product sales 21.4 % 22.4 %
% of total revenues 19.7 % 21.3 %
Other $ (10) $ 61 *
Total operating expenses $ 3,738 $ 3,772 (1) % * - Change in excess of 100% Cost of sales Cost of sales decreased to 25.0% of total revenues for the three months endedMarch 31, 2022 , primarily driven by the COVID-19 antibody profit share agreement and lower amortization expense from acquisition-related assets, partially offset by higher manufacturing costs and increased royalties and profit share.
Research and development
The decrease in R&D expense for the three months ended
Selling, general and administrative
The decrease in SG&A expense for the three months ended
Other
Other operating expenses for the three months endedMarch 31, 2022 , consisted primarily of an IPR&D asset adjustment. Other operating expenses for the three months endedMarch 31, 2021 , consisted primarily of expenses related to cost savings initiatives. 35
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Nonoperating expense/income and income taxes
Nonoperating expense/income and income taxes were as follows (dollar amounts in
millions):
Three months ended
March 31,
2022 2021
Interest expense, net $ (295) $ (285)
Other (expense) income, net $ (530) $ 13
Provision for income taxes $ 199 $ 211
Effective tax rate 11.9 % 11.4 %
Interest expense, net
The increase in Interest expense, net, for the three months ended
Other (expense) income, net
The decrease in Other (expense) income, net, for the three months endedMarch 31, 2022 , was primarily due to net losses recognized on our strategic equity investments in the current year compared with net gains recognized in the prior year. Income taxes
The increase in our effective tax rate for the three months ended
The Administration proposed andCongress is considering significant changes to existing tax law. These changes, if enacted, could substantially increase taxes we pay to theU.S. government. Further, theOECD recently reached agreement to align countries on a minimum corporate tax rate and an expansion of the taxing rights of market countries. If enacted, this agreement could result in tax increases in boththe United States and foreign jurisdictions. TheU.S. Treasury recently released final foreign tax credit regulations that eliminateU.S. creditability of the Puerto Rico Excise Tax beginning in 2023, which will increase ourU.S. tax liability. TheU.S. territory ofPuerto Rico is considering changes to its tax system that may minimize or eliminate this impact, but the outcome of such potential changes is uncertain. Changes to existing tax law inthe United States , theU.S. territory ofPuerto Rico , or other jurisdictions, including the potential changes discussed above, could result in tax increases where we do business and could have a material adverse effect on the results of our operations. In 2017, we received an RAR and a modified RAR from theIRS for the years 2010, 2011 and 2012 proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities inthe United States and theU.S. territory ofPuerto Rico . We disagreed with the proposed adjustments and calculations and pursued resolution with theIRS appeals office but were unable to reach resolution. InJuly 2021 , we filed a petition in theU.S. Tax Court to contest two duplicate Statutory Notices of Deficiency (Notices) for 2010, 2011 and 2012 that we received in May andJuly 2021 , which seek to increase ourU.S. taxable income for 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 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 theIRS for the years 2013, 2014 and 2015, also proposing significant adjustments that primarily relate to the allocation of profits between certain of our entities inthe United States and theU.S. territory ofPuerto Rico similar to those proposed for the years 2010, 2011 and 2012. We disagreed with the proposed adjustments and calculations and pursued resolution with theIRS appeals office but were unable to reach resolution. InApril 2022 , we received a Notice that seeks to increase ourU.S. taxable income for 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 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 theIRS positions set forth in the 2010-2012 and 2013-2015 Notices are without merit. We are contesting the 2010-2012 Notices through the judicial process, and we expect to file a Petition in theU.S. Tax Court to contest the 2013-2015 Notice through the judicial process. We will seek consolidation of the two periods into one case in Tax Court. 36 --------------------------------------------------------------------------------
We are also currently under examination by the
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
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, and Note 4, Income taxes, to the condensed consolidated financial
statements for further discussion.
37
--------------------------------------------------------------------------------Financial condition, liquidity and capital resources
Selected financial data were as follows (in millions):
March 31, 2022 December 31, 2021
Cash, cash equivalents and marketable securities $ 6,544 $ 8,037
Total assets $ 59,196 $ 61,165
Current portion of long-term debt $ 844 $ 87
Long-term debt $ 36,010 $ 33,222
Stockholders' equity $ 916 $ 6,700
Cash, cash equivalents and marketable securities
Our balance of cash, cash equivalents and marketable securities was$6.5 billion atMarch 31, 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.
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 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. InDecember 2021 , the Board of Directors declared a quarterly cash dividend of$1.94 per share of common stock for the first quarter of 2022, an increase of 10% for this period, which was paid onMarch 8, 2022 . InMarch 2022 , the Board of Directors declared a quarterly cash dividend of$1.94 per share of common stock, which will be paid onJune 8, 2022 . We also returned capital to stockholders through our stock repurchase program. During the three months endedMarch 31, 2022 , we executed trades to repurchase$5.4 billion of common stock, including$5.1 billion of an initial purchase under the ASR agreements described below. As ofMarch 31, 2022 ,$4.6 billion of authorization remained available under our stock repurchase program. InFebruary 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 of stock remains to be delivered by the Dealers pending final settlement, which will be based on the daily volume-weighted average stock price of our common stock during the terms of the ASR agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR agreements. At settlement, which is scheduled to occur in the third quarter of 2022, the Dealers may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or to make a cash payment, at our election, to the Dealers. As a result of stock repurchases and quarterly dividend payments, we have an accumulated deficit as ofMarch 31, 2022 andDecember 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. 38
-------------------------------------------------------------------------------- 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 endedDecember 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 EBITDA) 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 ofMarch 31, 2022 .
Cash flows
Our summarized cash flow activity was as follows (in millions):
Three months ended
March 31,
2022 2021
Net cash provided by operating activities
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 three months endedMarch 31, 2022 , increased primarily due to higher net income, after adjustments for noncash items, partially offset by the impact of working capital items. Investing Cash used in investing activities during the three months endedMarch 31, 2022 , was primarily due to$190 million of capital expenditures, partially offset by proceeds from sales of property, plant and equipment. Cash used in investing activities during the three months endedMarch 31, 2021 , was primarily due to cash outflows related to capital expenditures of$166 million and net activity related to marketable securities of$74 million . We currently estimate 2022 spending on capital projects to be approximately$950 million .
Financing
Cash used in financing activities during the three months endedMarch 31, 2022 , was primarily due to payments to repurchase our common stock of$6.4 billion , including amounts paid under the ASR agreements discussed above, and the payment of dividends of$1.1 billion , partially offset by proceeds from the issuance of debt of$4.0 billion . Cash used in financing activities during the three months endedMarch 31, 2021 , was primarily due to the payment of dividends of$1.0 billion and payments to repurchase our common stock of$871 million . See Note 9, Financing arrangements, and Note 10, Stockholders' equity, to the condensed consolidated financial statements for further discussion.
Critical 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 endedDecember 31, 2021 . 39
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