Business combinations

Onyx Pharmaceuticals

On October 1, 2013, we acquired all of the outstanding stock of Onyx Pharmaceuticals, Inc. (Onyx), a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people with cancer. Onyx has a multiple myeloma franchise, with Kyprolis^® for Injection already approved in the United States, and with oprozomib being evaluated in clinical trials for patients with hematologic malignancies. In addition, Onyx has three partnered oncology assets: Nexavar^® tablets (an Onyx and Bayer compound), Stivarga^® tablets (a Bayer compound), and palbociclib (a Pfizer, Inc. (Pfizer) compound). This transaction, which was accounted for as a business combination, provides us with an opportunity to expand our oncology franchise. Onyx’s operations have been included in our consolidated financial statements commencing on the acquisition date.

The aggregate consideration to acquire Onyx was paid in cash and consisted of (in millions):



Total consideration transferred	$	9,515
Compensation expense	197
Total cash paid	$	9,712

The $9,515 million cash payment consisted of a $9,184 million cash payment to the outstanding common stockholders and $331 million cash payment to the Onyx equity award holders for services rendered prior to October 1, 2013 under the Onyx equity award plans. The remaining $197 million of cash, which related to the accelerated vesting of the remaining Onyx equity awards, was recognized as compensation expense during the three months ended December 31, 2013. This amount was included primarily in Selling, general and administrative expense in the Consolidated Statement of Income.

The consideration to acquire Onyx was preliminarily allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):



Cash and cash equivalents	$	319
Marketable securities	337
Inventories	250
Indefinite-lived intangible assets - IPR&D	1,160
Finite-lived intangible assets - Developed product technology rights	5,910
Finite-lived intangible assets - Licensing rights	2,792
Goodwill	2,526
Convertible debt	(742		)
Assumed contingent consideration	(261		)
Deferred income taxes, net	(2,918		)
Other assets (liabilities), net	142
Total consideration	$	9,515

The developed product technology rights acquired relate to Kyprolis^® which is approved in the U.S. This product technology is being amortized on a straight-line basis over the estimated useful life of 12 years.

Licensing rights acquired represent the aggregate estimated fair values of receiving future milestone, royalty and/or profit sharing payments associated with various contract agreements that were entered into by Onyx prior to the acquisition. The weighted-average useful life of these finite-lived intangible assets is ten years and they are primarily being amortized on a straight-line basis.

The fair value of the developed product technology rights and licensing rights acquired were determined by estimating the probability-weighted net cash flows attributable to these rights discounted to present value using a discount rate that represents the estimated rate that market participants would use to value this intangible asset.

The estimated fair value of acquired IPR&D is related to: (i) the development of Kyprolis^® in the territories outside the U.S. (excluding Japan), where regulatory approval to market the product has not been received, and (ii) oprozomib. The estimated fair values were determined using a probability-weighted income approach, which discounts expected future cash flows to present value using a discount rate that represents the estimated rate that market participants would use to value the assets. The projected cash flows from these projects were based on certain assumptions, including estimates of future revenues and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from regulatory agencies.

We assumed contingent consideration obligations upon the acquisition of Onyx arising from Onyx's 2009 acquisition of Proteolix, Inc. There are two separate milestone payments of $150 million each which would be triggered if Kyprolis^® receives specified marketing approvals for relapsed multiple myeloma on or before March 31, 2016, by each of the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA). The assumed contingent consideration value was determined by discounting probability-adjusted cash outflows to present value using a discount rate that represents the estimated rate that market participants would use.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $2.5 billion was recorded as goodwill, which is not deductible for tax purposes and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized and the expected synergies and other benefits that we believe will result from combining the operations of Onyx with our operations.

Our accounting for this acquisition is preliminary. The fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of those preliminary estimates that are not yet finalized relate to certain tangible assets and liabilities acquired, identifiable intangible assets and tax related items.

We incurred $36 million of transaction-related expense which was recorded in Selling, general, and administrative expenses in the Consolidated Statement of Income for the year ended December 31, 2013.

The following table presents supplemental pro forma information for the year ended December 31, 2013 and 2012, as if the acquisition of Onyx had occurred on January 1, 2012 (in millions, unaudited):



	2013		2012
Pro forma net revenues	$	19,141	$	17,616
Pro forma net income	4,848		3,700

The unaudited pro forma consolidated results include pro forma adjustments that assume the acquisition occurred on January 1, 2012. The primary adjustments include: (i) the $197 million cash payment that was paid and recognized as compensation expense during the fourth quarter of 2013 related to the accelerated vesting of the remaining Onyx equity awards was included in the net income attributable to Amgen for the year ended December 31, 2012, and (ii) additional intangible amortization expense of $488 million and $412 million was included in the year ended December 31, 2013 and 2012, respectively. The adjustments also include the impact of additional interest expense on debt issued in connection with the acquisition of Onyx assuming the debt was incurred on January 1, 2012. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2012. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the combined company nor do they reflect the expected realization of any cost savings associated with the acquisition.

deCODE Genetics

On December 10, 2012, we acquired for cash all of the outstanding stock of deCODE Genetics (deCODE), a privately held company that is a global leader in human genetics. The transaction provides us with an opportunity to enhance our efforts to identify and validate human disease targets. Consideration was allocated primarily to a finite-lived intangible asset of discovery capacity in the genetics of human diseases with an estimated useful life of 10 years.

KAI Pharmaceuticals

On July 5, 2012, we acquired for cash all of the outstanding stock of KAI Pharmaceuticals (KAI), a privately held biotechnology company that is developing velcalcetide (formerly AMG 416), its lead product candidate, which is in phase 3 clinical development for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease (CKD) who are on dialysis. The transaction provides us with an opportunity to further expand our nephrology pipeline. The acquired IPR&D is related to velcalcetide.

Goodwill is attributable primarily to expected synergies and other benefits from combining KAI with our nephrology development and commercialization activities.

Mustafa Nevzat Pharmaceuticals

On June 12, 2012, we acquired for cash substantially all of the outstanding stock of Mustafa Nevzat Pharmaceuticals (MN), a privately held company that is a leading supplier of pharmaceuticals to the hospital sector and a major supplier of injectable medicines in Turkey. The transaction provides us with the opportunity to expand our presence in Turkey and the surrounding region.

The finite-lived intangible assets acquired are related primarily to the fair values of MN's regulatory approvals and customer relationships with regard to the marketing of pharmaceutical products and are being amortized on a straight-line basis over their estimated useful lives. The weighted-average useful life of these intangible assets is eight years.

Goodwill is attributable primarily to MN's expected continued commercial presence in Turkey and other benefits.

Micromet, Inc.

On March 7, 2012, we acquired for cash consideration Micromet, Inc. (Micromet), a publicly held biotechnology company focused on the discovery, development and commercialization of innovative antibody-based therapies for the treatment of cancer. This transaction provides us with an opportunity to further expand our oncology pipeline.

The estimated fair value of acquired IPR&D is related to blinatumomab, which is in phase 3 clinical development for the treatment of acute lymphoblastic leukemia (ALL) and outlicense agreements entered into by Micromet prior to our acquisition of the company where we continue to play an active role in the development of the respective programs.

During 2012, a non-key program under one of these outlicensing arrangements was terminated and resulted in an impairment charge of $19 million which was included in Other operating expenses.

The R&D technology rights acquired relate to Micromet's BiTE^® technology platform which has produced various product candidates that are currently being developed as cancer treatments by Micromet and others and may lead to the development of additional product candidates. The fair value of this technology is being amortized on a straight-line basis over its estimated useful life of 10 years.

Goodwill is attributable primarily to expected synergies and other benefits from combining Micromet with our oncology development and commercialization activities.

BioVex Group, Inc.

On March 4, 2011, we acquired all of the outstanding stock of BioVex Group, Inc. (BioVex), a privately held biotechnology company developing treatments for cancer and for the prevention of infectious disease, including talimogene laherparepvec, a novel oncolytic vaccine in phase 3 clinical development for the treatment of melanoma. The transaction provides us with an opportunity to expand our efforts to bring novel therapeutics to market.

The acquisition date consideration consisted of $407 million of cash and contingent consideration obligations with an aggregate acquisition date fair value of $190 million. The contingent consideration obligations are additional payments to be made to the former shareholders of BioVex of up to $575 million contingent upon the achievement of various regulatory and sales milestones with regard to talimogene laherparepvec, including the filing of a Biologics License Application (BLA) with the FDA; the first commercial sale in each of the United States and the European Union (EU) following receipt of marketing approval, which includes use of the product in specified patient populations; and upon achieving specified levels of sales. No payments have been made as of December 31, 2013.

The contingent consideration obligations to make regulatory milestone payments were valued based on assumptions regarding the probability of achieving the milestones and making the related payments, with such amounts discounted to present value based on our credit risk. The contingent consideration obligations to make sales milestone payments were valued based on assumptions regarding the probability of achieving specified product sales thresholds to determine the required payments, with such amounts discounted to present value based on our credit risk. See Note 16, Fair value measurement for information regarding the estimated fair values of these obligations as of December 31, 2013.

The estimated fair value of acquired IPR&D is related to talimogene laherparepvec. Goodwill is attributable primarily to future economic benefit arising from other assets acquired that could not be individually identified.

The consideration to acquire deCODE, KAI, MN, Micromet, and BioVex was allocated to the acquisition date fair values of the assets acquired and liabilities assumed as follows (in millions):



	deCODE			KAI			MN			Micromet			BioVex
IPR&D	$	—		$	240		$	—		$	570		$	675
Developed product technology rights	—			—			81			—			—
R&D technology rights	465			—			—			350			—
Marketing-related rights	—			—			82			—			—
Deferred income taxes, net	(37		)	(59		)	(45		)	(191		)	(246		)
Other assets (liabilities), net	(29		)	26			179			170			(2		)
Goodwill	—			125			380			247			170
Total consideration	$	399		$	332		$	677		$	1,146		$	597

deCODE’s preliminary goodwill estimate at December 31, 2012 has been revised primarily for adjustments of the preliminary amount allocated to the fair value of acquired R&D technology rights of $64 million based on finalizing our financial assumptions and net deferred tax adjustments of $43 million. Revisions to goodwill at December 31, 2012 for Micromet relate to net deferred tax adjustments of $83 million.

The estimated fair values of intangible assets were primarily determined using a probability-weighted income approach, which discounts expected future cash flows to present value by using a discount rate that represents the estimated rate that market participants would use to value this intangible asset. The projected cash flows were based on certain assumptions, including estimates of future revenues and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from the FDA and other regulatory agencies.

For all IPR&D projects in the acquisitions discussed above, including Onyx, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these product candidates, including our ability to confirm their safety and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. We are not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value, if any, of these acquired IPR&D projects may vary from their estimated fair values at the dates of acquisition.

Other acquisitions

We also acquired the businesses described below during 2011:

On April 7, 2011, we acquired all of the outstanding stock of Laboratório Químico Farmacêutico Bérgamo Ltda (Bergamo), a privately held Brazilian pharmaceutical company.

On May 16, 2011, we acquired a manufacturing facility in Dun Laoghaire, Ireland, from Pfizer. Under the terms of the agreement, most staff at the facility became Amgen employees, and we agreed to manufacture certain products for Pfizer at the facility for a certain period.

On June 15, 2011, we reacquired rights to distribute certain of our products in the Brazilian pharmaceutical market from our local distributor in Brazil and its parent company, Hypermarcas, and in connection therewith acquired all business operations related to these products in Brazil.

The aggregate acquisition date consideration for these businesses was approximately $453 million, composed primarily of cash paid to the former owners of the businesses. The aggregate acquisition date consideration was allocated to (i) goodwill of $265 million, of which $130 million related to Bergamo was tax deductible: (ii) property, plant and equipment of $99 million; (iii) amortizable intangible assets composed primarily of licenses to distribute products and customer contracts of $58 million; and (iv) other assets, net of $31 million. Goodwill resulting from these acquisitions is attributable primarily to the benefits of immediate, direct access to the Brazilian market for expediting our international expansion efforts and geographic diversification to assist in risk mitigation efforts related to our manufacturing operations.

The operations of each of the acquired businesses discussed above, excluding Onyx, were not material individually or in the aggregate to our consolidated financial statements. Pro forma supplemental consolidated results of operations that assumes the acquisitions of the businesses discussed above all occurred on January 1 of the year prior to the year of acquisition are not provided because the impact would not be material to our consolidated results of operations either individually or in the aggregate.

Results of operations from acquired companies have been included in our consolidated financial statements as of the acquisition date. The goodwill valued in these acquisitions, excluding Bergamo, is non-deductible for tax purposes.

Filgrastim and pegfilgrastim rights acquisition

In October 2013, we entered into an agreement to acquire the licenses to filgrastim and pegfilgrastim effective January 1, 2014, that were held by F. Hoffmann-La Roche Ltd. (“Roche”) in approximately 100 markets in Eastern Europe, Latin America, Asia, the Middle East and Africa, for total cash consideration of $479 million. This transaction will be accounted for as a business combination as the acquired rights and processes are capable of producing an immediate return to us. We are currently in the process of valuing the assets acquired and liabilities assumed in the business combination.