Related party transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related party transactions

Related party transactions

We own a 50% interest in K-A, a corporation formed in 1984 with Kirin Holdings Company, Limited (Kirin) for the development and commercialization of certain products based on advanced biotechnology. All of our rights to manufacture and market certain products including pegfilgrastim, granulocyte colony-stimulating factor, darbepoetin alfa, recombinant human erythropoietin and romiplostim are pursuant to exclusive licenses from K-A, which we currently market under the brand names Neulasta^®, NEUPOGEN^®, Aranesp^®, EPOGEN^®, and Nplate^®, respectively.

We account for our interest in K-A using the equity method and include our share of K-A’s profits or losses in Selling, general and administrative expense in the Consolidated Statements of Income. Our share of K-A’s profits and losses was losses of $6 million and $24 million, and profit of $47 million, for the years ended December 31, 2013, 2012 and 2011, respectively. The carrying value of our equity method investment in K-A, net of dividends received, was approximately $0.3 billion and $0.4 billion, as of December 31, 2013 and 2012, respectively, and is included in noncurrent Other assets in the Consolidated Balance Sheets.

K-A’s revenues consist of royalty income related to its licensed technology rights. K-A receives royalty income from us, as well as from Kirin and J&J under separate product license contracts for certain geographic areas outside the United States. During the years ended December 31, 2013, 2012 and 2011, K-A earned royalties from us of $272 million, $274 million and $298 million, respectively. These amounts are included in Cost of sales in the Consolidated Statements of Income.

K-A’s expenses consist primarily of costs related to R&D activities conducted on its behalf by Amgen and Kirin. K-A pays Amgen and Kirin for such services at negotiated rates. During the years ended December 31, 2013, 2012 and 2011, we earned revenues from K-A of $117 million, $115 million and $130 million, respectively, for certain R&D activities performed on K-A’s behalf. These amounts are recognized as Other revenues in the Consolidated Statements of Income. We may also receive several individually immaterial milestones aggregating $85 million upon the achievement of various substantive success-based development and regulatory approval milestones contingent upon the occurrence of various future events, most of which have a high degree of uncertainty of occurring. During the years ended December 31, 2013, 2012 and 2011, we recorded cost recoveries from K-A of $218 million, $142 million and $85 million, respectively, related to certain third-party costs. These amounts are included in Research and development expense in the Consolidated Statements of Income.

As of December 31, 2013 and 2012, K-A owed us $22 million and we owed K-A $31 million, respectively, which are included in Other current assets and Accrued liabilities in the Consolidated Balance Sheets, respectively.