Stock-based compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Our Amended 2009 Plan authorizes for issuance to employees of Amgen and nonemployee members of our Board of Directors shares of our common stock pursuant to grants of equity-based awards, including RSUs, stock options and performance units. The pool of shares available under the Amended 2009 Plan is reduced by one share for each stock option granted and by 1.9 shares for other types of awards granted, including full-value awards. In general, if any shares subject to an award granted under the Amended 2009 Plan expire or become forfeited, terminated or canceled without the issuance of shares, the shares subject to such awards are added back into the authorized pool on the same basis that they were removed. In addition, under the Amended 2009 Plan, shares withheld to pay for minimum statutory tax obligations with respect to full-value awards are added back into the authorized pool on the basis of 1.9 shares. As of December 31, 2021, the Amended 2009 Plan provides for future grants and/or issuances of up to approximately 19 million shares of our common stock. Stock-based awards under our employee compensation plans are made with newly issued shares reserved for this purpose.

The following table reflects the components of stock-based compensation expense recognized in our Consolidated Statements of Income (in millions):


	Years ended December 31,
	2021		2020		2019
RSUs	$	183	$	178	$	168
Performance units	121		118		105
Stock options	37		34		35
Total stock-based compensation expense, pretax	341		330		308
Tax benefit from stock-based compensation expense	(74)		(72)		(67)
Total stock-based compensation expense, net of tax	$	267	$	258	$	241

Restricted stock units and stock options

Eligible employees generally receive an annual grant of RSUs and, for certain executive-level employees, stock options, with the size and type of award generally determined by the employee’s salary grade and performance level. Certain management and professional-level employees typically receive RSU grants upon commencement of employment. Nonemployee members of our Board of Directors also receive an annual grant of RSUs.

Our RSU and stock option grants provide for accelerated or continued vesting in certain circumstances as defined in the plans and related grant agreements, including upon death, disability, termination in connection with a change in control and the retirement of employees who meet certain service and/or age requirements. RSUs and stock options generally vest in equal amounts on the second, third and fourth anniversaries of the grant date. RSUs accrue dividend equivalents, which are typically payable in shares only when and to the extent the underlying RSUs vest and are issued to the recipient.

Restricted stock units

The grant date fair value of an RSU equals the closing price of our common stock on the grant date, as RSUs accrue dividend equivalents during their vesting period. The weighted-average grant date fair values per unit of RSUs granted during the years ended December 31, 2021, 2020 and 2019, were $233.10, $235.63 and $182.12, respectively.

The following table summarizes information regarding our RSUs:


	Year ended December 31, 2021
	Units (in millions)	Weighted-average grant date fair value
Balance nonvested as of December 31, 2020	3.0	$	198.11
Granted	1.3	$	233.10
Vested	(0.9)	$	177.27
Forfeited	(0.4)	$	213.32
Balance nonvested as of December 31, 2021	3.0	$	217.95

The total grant date fair values of RSUs that vested during the years ended December 31, 2021, 2020 and 2019, were $166 million, $161 million and $160 million, respectively.

Stock options

The exercise price of stock options is set as the closing price of our common stock on the grant date, and the related number of shares granted is fixed at that point in time. Awards expire 10 years from the date of grant. We use the Black–Scholes option valuation model to estimate the grant date fair value of stock options.

The weighted-average assumptions used in the option valuation model and the resulting weighted-average grant date fair values of stock options granted were as follows:


	Years ended December 31,
	2021			2020			2019
Closing price of our common stock on grant date	$	237.17		$	236.36		$	177.31
Expected volatility (average of implied and historical volatility)	25.6		%	28.1		%	23.5		%
Expected life (in years)	5.7			5.8			5.8
Risk-free interest rate	1.0		%	0.4		%	2.4		%
Expected dividend yield	2.9		%	3.0		%	3.1		%
Fair value of stock options granted	$	40.43		$	42.34		$	30.47

The following table summarizes information regarding our stock options:


	Year ended December 31, 2021
	Options (in millions)	Weighted- average exercise price		Weighted- average remaining contractual life (in years)	Aggregate intrinsic value (in millions)
Balance unexercised as of December 31, 2020	4.7	$	179.90
Granted	1.3	$	237.17
Exercised	(0.5)	$	137.95
Expired/forfeited	(0.4)	$	208.56
Balance unexercised as of December 31, 2021	5.1	$	197.27	7.3	$	168
Vested or expected to vest as of December 31, 2021	4.9	$	195.64	7.2	$	167
Exercisable as of December 31, 2021	2.0	$	165.46	5.6	$	120

The total intrinsic values of options exercised during the years ended December 31, 2021, 2020 and 2019, were $56 million, $98 million and $68 million, respectively. The actual tax benefits realized from tax deductions from option exercises during the years ended December 31, 2021, 2020 and 2019, were $12 million, $21 million and $15 million, respectively.

As of December 31, 2021, $346 million of unrecognized compensation cost was related to nonvested RSUs and unvested stock options, which is expected to be recognized over a weighted-average period of 1.8 years.

Performance units

Certain management-level employees also receive annual grants of performance units, which give the recipient the right to receive common stock that is contingent upon achievement of specified preestablished goals over the performance period, which is generally three years. The performance goals for the units granted during the years ended December 31, 2021, 2020 and 2019, which are accounted for as equity awards, are based on (i) Amgen’s stockholder return compared with a comparator group of companies, which are considered market conditions and are therefore reflected in the grant date fair values of the units, and (ii) Amgen’s stand-alone financial performance measures, which are considered performance conditions. The expense recognized for awards is based on the grant date fair value of a unit multiplied by the number of units expected to be earned with respect to the related performance conditions, net of estimated forfeitures. Depending on the outcome of these performance goals, a recipient may ultimately earn a number of units greater or less than the number of units granted. Shares of our common stock are issued on a one-for-one basis for each performance unit earned. In general, performance unit awards vest at the end of the performance period. The performance award program provides for accelerated or continued vesting in certain circumstances as defined in the plan, including upon death, disability, a change in control and retirement of employees who meet certain service and/or age requirements. Performance units accrue dividend equivalents that are typically payable in shares only when and to the extent the underlying performance units vest and are issued to the recipient, including with respect to market and performance conditions that affect the number of performance units earned.

We use a payout simulation model to estimate the grant date fair value of performance units. The weighted-average assumptions used in the payout simulation model and the resulting weighted-average grant date fair values of performance units granted were as follows:


	Years ended December 31,
	2021			2020			2019
Closing price of our common stock on grant date	$	239.64		$	236.36		$	177.31
Volatility	29.3		%	27.5		%	22.1		%
Risk-free interest rate	0.3		%	0.2		%	2.3		%
Fair value of units granted	$	254.68		$	249.07		$	188.40

The payout simulation model assumes correlations of returns of the stock prices of our common stock and the common stocks of the comparator groups of companies and stock price volatilities of the comparator groups of companies to simulate stockholder returns over the performance periods and their resulting impact on the payout percentages based on the contractual terms of the performance units.

As of December 31, 2021 and 2020, 1.6 million and 1.8 million performance units were outstanding, with weighted-average grant date fair values per unit of $229.39 and $207.52 per unit, respectively. During the year ended December 31, 2021, 0.6 million performance units with a weighted-average grant date fair value per unit of $254.68 were granted, and 0.2 million performance units with a weighted-average grant date fair value per unit of $226.32 were forfeited.

The total fair values of performance units paid during the years ended December 31, 2021, 2020 and 2019, were $149 million, $230 million and $176 million, respectively, based on the number of performance units earned multiplied by the closing stock price of our common stock on the last day of the performance period.

As of December 31, 2021, $130 million of unrecognized compensation cost was related to nonvested performance units, which is expected to be recognized over a weighted-average period of one year.