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Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Feb. 19, 2013
Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name AMGEN INC
Entity Central Index Key 0000318154
Document Type 10-K
Document Period End Date Dec 31, 2012
Amendment Flag false
Document Fiscal Year Focus 2012
Document Fiscal Period Focus FY
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer Yes
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Filer Category Large Accelerated Filer
Entity Public Float $ 56,028,159,915
Entity Common Stock, Shares Outstanding 748,430,018
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Document and Entity Information (Parenthetical) Document and Entity Information (Parenthetical)
Jun. 30, 2012
Document and Entity Information [Abstract]
Shares of common stock held by directors and executive officers 771,532
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Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues:
Product sales $ 16,639 $ 15,295 $ 14,660
Other revenues 626 287 393
Total revenues 17,265 15,582 15,053
Operating expenses:
Cost of sales (excludes amortization of certain acquired intangible assets presented separately) 2,918 2,427 2,220
Research and development 3,380 3,167 2,894
Selling, general and administrative 4,801 4,486 3,983
Amortization of certain acquired intangible assets 294 294 294
Other 295 896 117
Total operating expenses 11,688 11,270 9,508
Operating income 5,577 4,312 5,545
Interest expense, net 1,053 610 604
Interest and other income, net 485 448 376
Income before income taxes 5,009 4,150 5,317
Provision for income taxes 664 467 690
Net income $ 4,345 $ 3,683 $ 4,627
Earnings per share:
Basic $ 5.61 $ 4.07 $ 4.82
Diluted $ 5.52 $ 4.04 $ 4.79
Shares used in calculation of earnings per share:
Basic 775 905 960
Diluted 787 912 965
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Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Statement of Other Comprehensive Income [Abstract]
Net income $ 4,345 $ 3,683 $ 4,627
Other comprehensive income (loss), net of reclassification adjustments and taxes:
Foreign currency translation losses (9) (1) (18)
Gains (losses) on the effective portion of cash flow hedges (78) 40 85
Net unrealized gains (losses) on available-for-sale securities 63 (15) 40
Other gains (losses) (1) (6) 1
Other comprehensive income (loss), net of tax (25) 18 108
Comprehensive income $ 4,320 $ 3,701 $ 4,735
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Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current assets:
Cash and cash equivalents $ 3,257 $ 6,946
Marketable securities 20,804 13,695
Trade receivables, net 2,518 2,896
Inventories 2,744 2,484
Other current assets 1,886 1,572
Total current assets 31,209 27,593
Property, plant and equipment, net 5,326 5,420
Intangible assets, net 3,968 2,584
Goodwill 12,662 11,750
Other assets 1,133 1,524
Total assets 54,298 48,871
Current liabilities:
Accounts payable 905 642
Accrued liabilities 4,791 5,028
Current portion of long-term debt 2,495 84
Total current liabilities 8,191 5,754
Long-term debt 24,034 21,344
Other noncurrent liabilities 3,013 2,744
Contingencies and commitments      
Stockholders' equity:
Common stock and additional paid-in capital; $0.0001 par value; 2,750.0 shares authorized; outstanding — 756.3 shares in 2012 and 795.6 shares in 2011 29,337 27,777
Accumulated deficit (10,423) (8,919)
Accumulated other comprehensive income 146 171
Total stockholders' equity 19,060 19,029
Total liabilities and stockholders' equity $ 54,298 $ 48,871
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Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
Common stock and additional paid-in capital, par value $ 0.0001 $ 0.0001
Common stock and additional paid-in capital, shares authorized 2,750 2,750
Common stock and additional paid-in capital, shares outstanding 756.3 795.6
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Consolidated Statements of Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
USD ($)
Number of shares of common stock [Member]
Common stock and additional paid-in capital [Member]
USD ($)
Accumulated deficit [Member]
USD ($)
Accumulated other comprehensive income [Member]
USD ($)
Beginning Balance at Dec. 31, 2009 $ 22,667 $ 26,944 $ (4,322) $ 45
Beginning Balance, Shares at Dec. 31, 2009 994.6
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 4,627 4,627
Other comprehensive income (loss), net of tax 108 108
Issuance of common stock in connection with the Company’s equity award programs 69 69
Issuance of common stock in connection with the Company’s equity award programs, Shares 4
Stock-based compensation 357 357
Tax impact related to employee stock-based compensation (71) (71)
Repurchases of common stock (3,800) (3,800)
Repurchases of common stock, Shares (66.5) (66.5)
Other (13) (13)
Ending Balance at Dec. 31, 2010 23,944 27,299 (3,508) 153
Ending Balance, Shares at Dec. 31, 2010 932.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 3,683 3,683
Other comprehensive income (loss), net of tax 18 18
Dividends (787) (787)
Issuance of common stock in connection with the Company’s equity award programs 230 230
Issuance of common stock in connection with the Company’s equity award programs, Shares 7.8
Stock-based compensation 337 337
Tax impact related to employee stock-based compensation (89) (89)
Repurchases of common stock (8,307) (8,307)
Repurchases of common stock, Shares (144.3) (144.3)
Ending Balance at Dec. 31, 2011 19,029 27,777 (8,919) 171
Ending Balance, Shares at Dec. 31, 2011 795.6 795.6
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income 4,345 4,345
Other comprehensive income (loss), net of tax (25) (25)
Dividends (1,187) (1,187)
Issuance of common stock in connection with the Company’s equity award programs 1,288 1,288
Issuance of common stock in connection with the Company’s equity award programs, Shares 23
Stock-based compensation 359 359
Tax impact related to employee stock-based compensation (87) (87)
Repurchases of common stock (4,662) (4,662)
Repurchases of common stock, Shares (62.3) (62.3)
Ending Balance at Dec. 31, 2012 $ 19,060 $ 29,337 $ (10,423) $ 146
Ending Balance, Shares at Dec. 31, 2012 756.3 756.3
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Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cash flows from operating activities:
Net income $ 4,345 $ 3,683 $ 4,627
Depreciation and amortization 1,088 1,060 1,017
Stock-based compensation expense 362 341 353
Deferred income taxes 28 (328) (151)
Property, plant and equipment impairments 178 6 118
Other items, net (74) 63 140
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net 348 (557) (210)
Inventories (150) (383) 153
Other assets 124 (204) 20
Accounts payable 161 (95) 142
Accrued income taxes 87 (20) (656)
Legal reserve (780) 780 0
Other liabilities 165 773 234
Net cash provided by operating activities 5,882 5,119 5,787
Cash flows from investing activities:
Purchases of property, plant and equipment (689) (567) (580)
Cash paid for acquisitions, net of cash acquired (2,390) (701) 0
Purchases of marketable securities (26,241) (21,183) (14,602)
Proceeds from sales of marketable securities 17,372 20,871 10,485
Proceeds from maturities of marketable securities 1,994 749 642
Other (36) 45 (97)
Net cash used in investing activities (9,990) (786) (4,152)
Cash flows from financing activities:
Net proceeds from issuance of debt 4,933 10,387 2,471
Repayment of debt (123) (2,500) 0
Net proceeds from issuance of commercial paper 0 762 0
Repayments of commercial paper 0 (762) 0
Repurchases of common stock (4,607) (8,315) (3,786)
Dividends paid (1,118) (500) 0
Net proceeds from issuance of common stock in connection with the Company's equity award programs 1,288 242 80
Other 46 12 3
Net cash provided by (used in) financing activities 419 (674) (1,232)
Increase (decrease) in cash and cash equivalents (3,689) 3,659 403
Cash and cash equivalents at beginning of period 6,946 3,287 2,884
Cash and cash equivalents at end of period $ 3,257 $ 6,946 $ 3,287
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Summary of significant accounting policies
12 Months Ended
Dec. 31, 2012
Accounting Policies [Abstract]
Summary of significant accounting policies
Summary of significant accounting policies
Business
Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics.  Our medicines help millions of patients in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease, and other serious illnesses.  We operate in one business segment: human therapeutics.

Principles of consolidation

The consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. We do not have any significant interests in variable interest entities that require consolidation. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Product sales
Sales of our products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively “sales deductions”) and returns. Taxes collected from customers and remitted to government authorities related to the sales of the Company’s products, primarily in Europe, are excluded from revenues.
With regard to EPOGEN® (epoetin alfa), we have the exclusive right to sell epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses in the United States. We granted to Ortho Pharmaceutical Corporation (which has assigned its rights under the product license agreement to Janssen Biotech, Inc., formerly known as Centocor Ortho Biotech Products, L.P.), a subsidiary of Johnson & Johnson (J&J), a license relating to epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. This license agreement, which is perpetual, may be terminated for various reasons, including upon mutual agreement of the parties, or default. The parties are required to compensate each other for epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover.” Accordingly, we do not recognize product sales we make into the exclusive market of J&J and do recognize product sales made by J&J into our exclusive market. Sales in our exclusive market are derived from our sales to our customers, as adjusted for spillover. We are employing an arbitrated audit methodology to measure each party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to and usage by end users.
Other revenues
Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectability is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends. Corporate partner revenues are comprised of amounts earned from Kirin-Amgen, Inc. (K-A) for certain research and development (R&D) activities, which are earned as the R&D activities are performed. Corporate partner revenues also include license fees and milestone payments earned from K-A and from third parties. See Multiple-deliverable revenue arrangements, discussed below, Note 6, Collaborative arrangements, and Note 7, Related party transactions.
Multiple-deliverable revenue arrangements
From time to time, we enter into arrangements for the R&D, manufacture and/or commercialization of products and product candidates. These arrangements may require us to deliver various rights, services and/or goods across the entire life cycle of a product or product candidate, including (i) intellectual property rights/licenses, (ii) R&D services, (iii) manufacturing services and/or (iv) commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen in the form of non-refundable upfront license payments, R&D and commercial performance milestone payments, cost sharing and/or royalty payments.
Effective January 1, 2011, we adopted a new accounting standard that amends the guidance on the accounting for arrangements involving the delivery of more than one element. Pursuant to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting. For Amgen this determination is generally based on whether the deliverable has “stand-alone value” to the customer. The arrangement’s consideration that is fixed and determinable is then allocated to each separate units of accounting based on the relative selling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence of selling price (TPE) and (iii) best estimate of selling price (BESP). The BESP reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. In most cases we expect to use TPE or BESP for allocating consideration to each deliverable. In general, the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. The Company adopted this new accounting standard on a prospective basis for all multiple-deliverable revenue arrangements (MDRAs) entered into on or after January 1, 2011, and for any MDRAs that were entered into prior to January 1, 2011, but materially modified on or after that date. Had the standard been adopted January 1, 2010, the impact on our consolidated financial statements would have been immaterial.
For MDRAs entered into prior to January 1, 2011, and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, in general, revenue from non-refundable, up-front fees related to intellectual property rights/licenses where we have continuing involvement is recognized ratably over the estimated period of ongoing involvement. In general, the consideration with respect to the other deliverables is recognized when the goods or services are delivered.
Under all of our MDRAs, consideration associated with at-risk substantive performance milestones is recognized as revenue upon the achievement of the related milestone, as defined in the respective contracts.
Research and development costs
R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems’ costs and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs and cost recoveries associated with third-party R&D arrangements such as with K-A, including upfront fees and milestones paid to third parties in connection with technologies which had not reached technological feasibility and did not have an alternative future use. Net payment or reimbursement of R&D costs is recognized when the obligations are incurred or as we become entitled to the cost recovery. See Note 6, Collaborative arrangements, and Note 7, Related party transactions.
Selling, general and administrative costs
Selling, general and administrative (SG&A) expenses are comprised primarily of salaries, benefits and other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses; and other general and administrative costs. Advertising costs are expensed as incurred. SG&A expenses also include costs and cost recoveries associated with marketing and promotion efforts under certain collaboration arrangements. Net payment or reimbursement of SG&A costs is recognized when the obligations are incurred or we become entitled to the cost recovery. See Note 6, Collaborative arrangements.
Beginning January 1, 2011, SG&A expenses also include amortization of the annual fee mandated by the Patient Protection and Affordable Care Act and the companion Health Care and Education Reconciliation Act (the U.S. healthcare reform federal excise fee). The liability for the annual U.S. healthcare reform federal excise fee is estimated and recorded in full upon the first qualifying sale of our covered products with a corresponding deferred cost established that is amortized on a straight-line basis over the calendar year that it is payable.
Stock-based compensation
We have stock-based compensation plans under which various types of equity-based awards are granted, including restricted stock units (RSUs), performance units and stock options. The estimated fair values of RSUs and stock option awards which are subject only to service conditions with graded vesting are generally recognized as compensation expense on a straight-line basis over the service period. The estimated fair values of performance unit awards are generally recognized as compensation expense as the awards vest ratably from the grant date to the end of the performance period. See Note 3, Stock-based compensation.
Income taxes
We provide for income taxes based on pretax income, applicable tax rates and tax planning opportunities available in the various jurisdictions in which we operate.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. See Note 4, Income taxes.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired, including in-process research and development (IPR&D) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings. See Note 2, Business combinations, and Note 16, Fair value measurement.
Cash equivalents
We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.
Available-for-sale investments
We consider our investment portfolio available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and losses generally recorded in other comprehensive income. See Note 9, Available-for-sale investments, and Note 16, Fair value measurement.
Inventories
Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner that approximates the first-in, first-out method. Cost also includes the Puerto Rico excise tax enacted in 2011 related to our manufacturing operations in Puerto Rico. See Note 10, Inventories.
Derivatives
We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The accounting for changes in the fair value of a derivative instrument depends upon whether it has been formally designated and qualifies as part of a hedging relationship under the applicable accounting standards and, further, on the type of hedging relationship. For derivatives formally designated as hedges, we assess both at inception and quarterly thereafter, whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. Our derivatives that are not designated and do not qualify as hedges are adjusted to fair value through current earnings. See Note 16, Fair value measurement, and Note 17, Derivative instruments.
Property, plant and equipment, net
Property, plant and equipment is recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. We review our property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 11, Property, plant and equipment.
Goodwill and other intangible assets
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 12, Goodwill and other intangible assets.
The estimated fair values of IPR&D projects acquired in a business combination which have not reached technological feasibility are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written-off immediately. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market these products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its estimated fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.
Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider various factors for potential impairment including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining market approval and the inability to bring a product to market could result in the related intangible assets to be partially or fully impaired.
We perform an impairment test of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To date, an impairment of goodwill has not been recorded. See Note 12, Goodwill and other intangible assets.
Contingencies
In the ordinary course of business, we are involved in various legal proceedings and other matters such as intellectual property disputes, contractual disputes, governmental investigations and class action suits which are complex in nature and have outcomes that are difficult to predict. Certain of these proceedings are discussed in Note 18, Contingencies and commitments. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We consider all relevant factors when making assessments regarding these contingencies.
While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Convertible debt
The debt and equity components of convertible debt instruments that may be partially or wholly cash settled (cash settleable convertible notes), including our 0.375% 2013 Convertible Notes, are bifurcated and accounted for separately. The debt component of cash settleable convertible notes, which excludes the associated equity conversion option, is recorded at fair value as of the issuance date. The difference between the amount allocated to the debt component and the proceeds received upon issuance of the debt is allocated to the equity component and recorded in Common stock and additional paid-in capital in the Consolidated Balance Sheets. The reduced or discounted carrying value of cash settleable convertible notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. This results in recognizing interest expense on the borrowing at an effective rate approximating what would have been incurred had nonconvertible debt with otherwise similar terms been issued. See Note 14, Financing arrangements.
Foreign currency translation
The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating net assets of these subsidiaries at changing rates are recognized in other comprehensive income. The earnings of these subsidiaries are translated into U.S. dollars using average exchange rates.
Reclassifications
Certain prior-period amounts shown within Cash flows from operating activities in our Consolidated Statements of Cash Flows and Note 4, Income taxes have been reclassified to conform to the current-period presentation.
Recent accounting pronouncements
In January 2012, we adopted a new accounting standard that requires additional disclosures for comprehensive income. As permitted under the standard, we have elected to present comprehensive income in two separate but consecutive financial statements, consisting of a statement of income followed by a separate statement of comprehensive income. The standard was required to be applied retrospectively beginning January 1, 2012.
In February 2013, a new accounting standard was issued that requires increased disclosure requirements regarding amounts that are reclassified out of accumulated other comprehensive income. The standard is required to be adopted prospectively beginning on January 1, 2013.
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Business combinations
12 Months Ended
Dec. 31, 2012
Business Combinations [Abstract]
Business combinations
Business combinations
deCODE Genetics
On December 10, 2012, we acquired all of the outstanding stock of deCODE Genetics (deCODE), a privately held company that is a global leader in human genetics, for total consideration of $401 million in cash. The transaction, which was accounted for as a business combination, provides us with an opportunity to enhance our efforts to identify and validate human disease targets. deCODE's operations have been included in our consolidated financial statements commencing on the acquisition date.
We allocated the consideration to acquire deCODE to finite-lived intangible assets of $401 million comprised of databases and other proprietary information with an estimated useful life of 10 years, $93 million to goodwill which is not deductible for tax purposes, deferred tax liabilities of $80 million and other net liabilities of $13 million.

Our accounting for the acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, liabilities assumed and tax-related items.

KAI Pharmaceuticals
On July 5, 2012, we acquired all of the outstanding stock of KAI Pharmaceuticals (KAI), a privately held biotechnology company that is developing AMG 416 (formerly referred to as KAI-4169), its lead product candidate, which is in phase 2 clinical development for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease who are on dialysis. The transaction, which was accounted for as a business combination, provides us with an opportunity to further expand our nephrology pipeline. KAI's operations have been included in our consolidated financial statements commencing on the acquisition date.
The consideration to acquire KAI totaled $332 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets - IPR&D
$
240

Goodwill
125

Deferred tax assets (liabilities), net
(59
)
Other assets (liabilities), net
26

      Total consideration
$
332


The estimated fair value of acquired IPR&D is related to AMG 416. The estimated fair value was 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 from AMG 416 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 U.S. Food and Drug Administration (FDA) and other regulatory agencies.

The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $125 million was recorded as goodwill, which is not deductible for tax purposes. Goodwill is attributable primarily to expected synergies and other benefits from combining KAI with our nephrology development and commercialization activities and the deferred tax consequences of indefinite-lived intangible assets recorded for financial statement purposes.

Our accounting for this acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, liabilities assumed and tax-related items.

Mustafa Nevzat Pharmaceuticals
On June 12, 2012, we acquired 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, which was accounted for as a business combination, provides us with the opportunity to expand our presence in Turkey and the surrounding region. MN's operations have been included in our consolidated financial statements commencing on the acquisition date.
The consideration to acquire MN totaled $677 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Finite-lived intangible assets
$
163

Property, plant and equipment
100

Trade receivables
79

Inventories
52

Goodwill
380

Deferred tax assets (liabilities), net
(45
)
Other assets (liabilities), net
(52
)
Total consideration
$
677


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.
The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $380 million was recorded as goodwill, which is not deductible for tax purposes. Goodwill is attributable primarily to MN's expected continued commercial presence in Turkey and other benefits.
Our accounting for the acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, liabilities assumed and tax-related items.
Micromet, Inc.
On March 7, 2012, we acquired 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, which became a wholly owned subsidiary of Amgen. This transaction, which was accounted for as a business combination, provides us with an opportunity to further expand our oncology pipeline. Micromet's operations have been included in our consolidated financial statements commencing on the acquisition date.
The consideration to acquire Micromet totaled $1,146 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets:
 
IPR&D
$
440

Contract assets
170

Finite-lived intangible assets — Developed technology
350

Goodwill
330

Cash and marketable securities
154

Deferred tax assets (liabilities), net
(274
)
Other assets (liabilities), net
(24
)
      Total consideration
$
1,146


The estimated fair value of acquired IPR&D is related to blinatumomab, which is in phase 2 clinical development for the treatment of acute lymphoblastic leukemia. The estimated fair value was 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 from blinatumomab 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.
Contract assets acquired represent the aggregate estimated fair values of receiving future milestone and royalty payments associated with various outlicensing arrangements entered into by Micromet prior to our acquisition of the company. The fair values of these contracts were determined by estimating the probability-weighted net cash flows associated with the agreements that may be received from the other parties discounted to present value by using a discount rate that represents the estimated rate that market participants would use to value these intangible assets. These contract assets are considered indefinite-lived intangible assets and their assigned values will be expensed when the related revenues are earned or the associated R&D efforts are abandoned by the licensees. 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 developed technology acquired relates to Micromet's bi-specific T-cell engager 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 was determined by estimating the probability-weighted net cash flows attributable to this technology discounted to present value by using a discount rate that represents the estimated rate that market participants would use to value this intangible asset. The fair value of this technology is being amortized on a straight-line basis over its estimated useful life of 10 years.
The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $330 million was recorded as goodwill, which is not deductible for tax purposes. Goodwill is attributable primarily to expected synergies and other benefits from combining Micromet with our oncology development and commercialization activities and the deferred tax consequences of indefinite-lived and finite-lived intangible assets recorded for financial statement purposes.
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 malignant melanoma. The transaction, which was accounted for as a business combination, provides us with an opportunity to expand our efforts to bring novel therapeutics to market. Upon its acquisition, BioVex became a wholly owned subsidiary of Amgen, and its operations have been included in our consolidated financial statements commencing on the acquisition date.
The aggregate acquisition date consideration to acquire BioVex consisted of (in millions):
Cash paid to former shareholders of BioVex
$
407

Fair value of contingent consideration obligations
190

Total consideration
$
597


In connection with this acquisition, we are obligated to make additional payments 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. The estimated fair values of the contingent consideration obligations aggregated $190 million as of the acquisition date and were determined using a combination of valuation techniques. (See Note 16, Fair value measurement for information regarding the estimated fair values of these obligations as of December 31, 2012.) 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.
We allocated the total consideration to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets — IPR&D
$
675

Goodwill
170

Deferred tax assets (liabilities), net
(246
)
Other assets (liabilities), net
(2
)
Total consideration
$
597


The estimated fair value of acquired IPR&D is related to talimogene laherparepvec. The estimated fair value was 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 from talimogene laherparepvec were based on certain assumptions, including estimates of future revenue and expenses, the time and resources needed to complete development and the probabilities of obtaining marketing approval from the FDA and other regulatory agencies.
The excess of the acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $170 million was recorded as goodwill, which is not deductible for tax purposes. Goodwill is attributable primarily to the deferred tax consequences of acquired IPR&D recorded for financial statement purposes.
Other acquisitions
We also acquired the businesses described below, which were accounted for as business combinations, and accordingly, their operations have been included in our consolidated financial statements commencing on their respective acquisition dates.
On April 7, 2011, we acquired all of the outstanding stock of Laboratório Químico Farmacêutico Bérgamo Ltda (Bergamo), a privately held Brazilian pharmaceutical company. Upon its acquisition, Bergamo became a wholly owned subsidiary of Amgen.
On May 16, 2011, we acquired a manufacturing facility in Dun Laoghaire, Ireland, from Pfizer Inc. (Pfizer) (Dun Laoghaire). 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 estimated incremental R&D costs to be incurred to obtain necessary regulatory approvals for the IPR&D projects in the acquisitions discussed above, including AMG 416, blinatumomab and talimogene laherparepvec, are individually immaterial in any given year. The major risks and uncertainties associated with the timely and successful completion of development and commercialization of these product candidates include 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.
The preliminary fair value estimates of assets acquired and liabilities assumed with respect to the acquisitions of deCODE, KAI, and MN were based on preliminary calculations and valuations. Our estimates and assumptions for each of these acquisitions, particularly with respect to identifiable intangible assets acquired and tax-related items, are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the respective acquisition dates).
The operations of each of the acquired businesses discussed above were not material individually or in the aggregate to our consolidated financial statements. Pro forma supplemental consolidated results of operations for the years ended December 31, 2012, 2011 and 2010, 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.
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Stock-based compensation
12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based compensation
Stock-based compensation
Our 2009 Equity Incentive Plan (the 2009 Plan) authorizes the issuance of 100 million shares of our common stock through grants of equity-based awards, including RSUs, stock options and performance units to employees and consultants of Amgen, its subsidiaries and non-employee members of our Board of Directors. The 2009 Plan, which was approved by our stockholders on May 6, 2009, replaced our prior equity plans (the Prior Plans), and no further awards may be made under these Prior Plans. Under the terms of the 2009 Plan, the pool of available shares that may be used for all types of awards, including those issued under our Prior Plans after December 31, 2008, and before May 6, 2009 (the stub period), is reduced by one share for each stock option granted and by 1.9 shares for other types of awards granted, including RSUs and performance units. If any shares subject to an award granted under our Prior Plans during the stub period or any awards granted under the 2009 Plan expire, or are forfeited, terminated or cancelled without the issuance of shares, the shares subject to such awards are added back to the pool of available shares under the 2009 Plan on the same basis that they were removed. As of December 31, 2012, the 2009 Plan provides for future grants and/or issuances of up to approximately 48 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 for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Stock options
$
59

 
$
85

 
$
124

RSUs
186

 
188

 
182

Performance units
117

 
68

 
47

Total stock-based compensation expense, pretax
362

 
341

 
353

Tax benefit from stock-based compensation expense
(134
)
 
(124
)
 
(120
)
Total stock-based compensation expense, net of tax
$
228

 
$
217

 
$
233


Restricted stock units and stock options
Eligible employees generally receive a grant of RSUs annually with the size and type of award generally determined by the employee’s salary grade and performance level. In addition, certain management and professional level employees typically receive RSU grants upon commencement of employment. Prior to 2012, eligible employees also received a grant of stock options annually. Prior to February 2013, non-employee members of our Board of Directors (outside directors) received a grant of RSUs and stock options annually and received a grant of stock options in connection with their appointment to the Board of Directors. Beginning in April 2013, outside directors will receive only annual grants 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, a change in control, 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 granted prior to April 25, 2011, generally vest in equal amounts on each of the first four anniversaries of the grant date. Stock options and RSUs granted on and after April 25, 2011, generally vest in approximately equal amounts on the second, third and fourth anniversaries of the grant date. RSUs granted on and after April 27, 2012, 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.
Stock options
The exercise price for stock options is set at the closing price of our common stock on the date of grant and the related number of shares granted is fixed at that point in time. Awards granted to employees on and after April 26, 2010, expire 10 years from the date of grant; options granted to employees prior to that date expire seven years from the date of grant.
We use an 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 estimated grant date fair values of stock options were as follows for the years ended December 31, 2012, 2011 and 2010:
 
2012
 
2011
 
2010
Closing price of our common stock on grant date
$
74.56

 
$
54.66

 
$
58.32

Expected volatility
22.2
%
 
23.5
%
 
28.0
%
Expected life (in years)
8.1

 
5.9

 
6.6

Risk-free interest rate
1.6
%
 
2.5
%
 
3.2
%
Expected dividend yield
2.1
%
 
2.0
%
 
0
%
Fair value of stock options granted
$
14.65

 
$
11.39

 
$
20.97


The expected volatility reflects consideration of the implied volatility in publicly traded instruments associated with Amgen’s common stock during the period the options were granted. We believe implied volatility in these instruments is more indicative of expected future volatility than the historical volatility in the price of our common stock. We use historical data to estimate the expected life of the options. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. The expected dividend yield for options granted on and after April 25, 2011, was based on expectations regarding our policy of paying dividends announced in April 2011.
The following summarizes select information regarding our stock options during the year ended December 31, 2012:
 
Options
(in millions)
 
Weighted-
average
exercise price
 
Weighted-
average
remaining
contractual
life (years)
 
Aggregate
intrinsic
value
(in millions)
Balance unexercised at December 31, 2011
34.2

 
$
59.11

 
 
 
 
Granted
0.1

 
$
74.56

 
 
 
 
Exercised
(20.9
)
 
$
60.67

 
 
 
 
Expired/forfeited
(1.1
)
 
$
63.97

 
 
 
 
Balance unexercised at December 31, 2012
12.3

 
$
56.09

 
4.9
 
$
371

Vested or expected to vest at December 31, 2012
12.2

 
$
56.10

 
4.9
 
$
367

Exercisable at December 31, 2012
6.3

 
$
56.59

 
3.1
 
$
187


The total intrinsic values of options exercised during the years ended December 31, 2012, 2011 and 2010, were $320 million, $47 million and $15 million, respectively. The actual tax benefits realized from tax deductions from option exercises during the three years ended December 31, 2012, 2011 and 2010, were $117 million, $14 million and $5 million, respectively.
Restricted stock units
The grant date fair value of an RSU equaled the closing price of our common stock on the grant date for RSUs granted prior to April 25, 2011, and on and after April 27, 2012. Prior to April 2011, we did not have a policy of paying dividends, and beginning April 27, 2012, RSUs granted accrue dividend equivalents during the vesting period. The fair values of RSUs granted on April 25, 2011 through April 26, 2012, are based on the closing price of our common stock on the grant date reduced by the weighted-average expected dividend yield of 2.0% over the weighted-average vesting period, discounted at a weighted-average risk-free interest rate of 1.0%. The weighted-average grant date fair values of RSUs granted in 2012, 2011 and 2010 were $72.99, $51.83 and $58.19, respectively. The following summarizes select information regarding our RSUs during the year ended December 31, 2012:
 
Units
(in millions)
 
Weighted-average
grant date
fair value
Balance nonvested at December 31, 2011
9.0

 
$
52.64

Granted
3.9

 
$
72.99

Vested
(2.8
)
 
$
50.64

Forfeited
(0.7
)
 
$
58.38

Balance nonvested at December 31, 2012
9.4

 
$
61.14


The total fair values of shares associated with RSUs that vested during the years ended December 31, 2012, 2011 and 2010, were $139 million, $176 million and $184 million, respectively.
As of December 31, 2012, there was approximately $388 million of unrecognized compensation costs related to nonvested stock option and RSU awards, which is expected to be recognized over a weighted-average period of 1.7 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 pre-established goals over the performance period, which is generally three years. The performance goals for the units granted in 2012, 2011 and 2010, which are accounted for as equity awards, are based upon Amgen’s stockholder return compared with a comparator group of companies, which are considered market conditions and are reflected in the grant date fair value of the units, and for units granted in 2010, Amgen’s standalone financial performance, which are considered performance conditions. The expense recognized for the awards granted in 2012 and 2011 is based on the grant date fair value of a unit multiplied by the number of units granted, net of estimated forfeitures. The expense recognized for the awards granted in 2010 was based on the grant date fair value of a unit multiplied by the number of units expected to be earned with respect to the 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, participants vest in their performance unit awards 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 granted in 2012 and later accrue dividend equivalents which 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 conditions that affect the number of performance units earned.
We used payout simulation models to estimate the grant date fair value of performance units granted in 2012, 2011 and 2010. The weighted-average assumptions used in these models and the resulting weighted-average grant date fair values of our performance units were as follows for the years ended December 31, 2012, 2011 and 2010:
 
2012
 
2011
 
2010
Closing price of our common stock on grant date
$
68.75

 
$
51.67

 
$
56.90

Volatility
22.9
%
 
32.8
%
 
34.7
%
Risk-free interest rate
0.5
%
 
1.2
%
 
1.3
%
Expected dividend yield
2.2
%
 
0.1
%
 
0
%
Fair value of unit
$
78.21

 
$
49.50

 
$
62.06


The payout simulation models also assumed 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.
As of December 31, 2012 and 2011, a total of 5.8 million and 4.1 million performance units were outstanding with weighted-average grant date fair values of $65.15 and $51.92 per unit, respectively. During the year ended December 31, 2012, 2.9 million performance units with a weighted-average grant date fair value of $78.21 were granted, 1.2 million performance units with a grant date fair value of $62.06 vested and 0.4 million performance units with a weighted-average grant date fair value of $62.60 were forfeited.
The total fair values of performance units that vested during 2012, 2011 and 2010 were $100 million, $25 million and $34 million, respectively, based upon 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, 2012, there was approximately $179 million of unrecognized compensation cost related to the 2012 and 2011 performance unit grants that is expected to be recognized over a weighted-average period of approximately 1.0 years.
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Income taxes
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income taxes
Income taxes
The provision for income taxes includes the following for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Current provision:
 
 
 
 
 
Federal
$
438

 
$
551

 
$
620

State
47

 
54

 
52

Foreign
158

 
148

 
153

Total current provision
643

 
753

 
825

Deferred provision (benefit):
 
 
 
 
 
Federal
83

 
(273
)
 
(180
)
State
(43
)
 
(12
)
 
43

Foreign
(19
)
 
(1
)
 
2

Total deferred provision (benefit)
21

 
(286
)
 
(135
)
Total provision
$
664

 
$
467

 
$
690


Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax credit carryforwards and the tax effects of net operating loss (NOL) carryforwards.
In 2012, we reclassified the prepaid taxes associated with intercompany profit in ending inventory from current deferred income tax assets to current prepaid tax. This change resulted in a reclassification of approximately $71 million and $16 million for 2011 and 2010, respectively, from the deferred provision to the current provision.
Significant components of our deferred tax assets and liabilities are as follows as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Deferred income tax assets (1):
 
 
 
Expense accruals
$
805

 
$
751

NOL and credit carryforwards
427

 
206

Expenses capitalized for tax
195

 
193

Stock-based compensation
115

 
241

Deferred revenue
40

 
133

Other
83

 
70

Total deferred income tax assets
1,665

 
1,594

Valuation allowance
(273
)
 
(126
)
Net deferred income tax assets
1,392

 
1,468

 
 
 
 
Deferred income tax liabilities:
 
 
 
Acquired intangibles
(1,249
)
 
(832
)
Fixed assets
(117
)
 
(219
)
Unremitted foreign earnings
(106
)
 
(61
)
Other
(145
)
 
(110
)
Total deferred income tax liabilities
(1,617
)
 
(1,222
)
Total deferred income taxes, net
$
(225
)
 
$
246

(1) 
In 2012, we reclassified certain prior period amounts to conform with current period reporting, primarily in connection with reclassifying prepaid taxes associated with intercompany profit in ending inventory from current deferred tax assets to prepaid taxes. Prepaid taxes are not included in the net deferred income tax table above; therefore, amounts related to these prepaid taxes which totaled $349 million for 2011 have been removed from the above table.

Valuation allowances are provided to reduce the amounts of our deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts.
The valuation allowance for deferred tax assets increased by $147 million and $46 million in 2012 and 2011, respectively, due primarily to valuation allowances established as part of acquisitions and the Company’s expectation that some state R&D credits will not be utilized, offset partially by the release of valuation allowance related to state investment credits.
At December 31, 2012, we had $242 million of tax credit carryforwards available to reduce future state income taxes and have provided a valuation allowance for $110 million of those state tax credit carryforwards. The majority of the state tax credit carryforwards have no expiry; the remainder expires between 2013 and 2019.
At December 31, 2012, we had $233 million of NOL carryforwards available to reduce future federal income taxes and have provided a valuation allowance for $75 million of those federal NOL carryforwards. The federal NOL carryforwards for which no valuation allowance has been provided expire between 2023 and 2032. We had $301 million of NOL carryforwards available to reduce future state income taxes and have provided a valuation allowance for $48 million of those state NOL carryforwards. The state NOLs for which no valuation allowance has been provided expire between 2014 and 2018. We had $383 million of NOL carryforwards available to reduce future foreign income taxes for which a full valuation allowance has been provided. The majority of the foreign NOLs have no expiry; the remainder of the foreign NOLs expire between 2017 and 2022.
The reconciliation of the total gross amounts of UTBs (excluding interest, penalties, foreign tax credits and the federal tax benefit of state taxes related to UTBs) for the years ended December 31, 2012, 2011 and 2010 is as follows (in millions):
 
2012
 
2011
 
2010
Balance at beginning of year
$
975

 
$
920

 
$
1,140

Additions based on tax positions related to the current year
300

 
283

 
305

Reductions for tax positions of prior years
(45
)
 
(7
)
 
(110
)
Settlements
(30
)
 
(221
)
 
(415
)
Balance at end of year
$
1,200

 
$
975

 
$
920


Substantially all of the UTBs as of December 31, 2012, if recognized, would affect our effective tax rate.
During the year ended December 31, 2012, we settled examinations with various state and foreign tax authorities for prior tax years. As a result of these developments, we remeasured our UTBs accordingly.
During the year ended December 31, 2011, we settled our examination with the Internal Revenue Service (IRS) related to certain transfer pricing tax positions for the years ended December 31, 2007, 2008 and 2009. As a result of these developments, we remeasured our UTBs accordingly.
During the year ended December 31, 2010, we settled our examination with the IRS related to certain transfer pricing tax positions for the years ended December 31, 2007 and 2008. In addition, we also settled issues under appeal with the IRS for the years ended December 31, 2005 and 2006, primarily related to the impact of transfer pricing adjustments on the repatriation of funds. During the year ended December 31, 2010, the IRS also agreed to Competent Authority relief for certain transfer pricing tax positions for the years ended December 31, 2002, through December 31, 2006. As a result of these developments, we remeasured our UTBs accordingly.
As of December 31, 2012, we believe it is reasonably possible that our gross liabilities for UTBs may decrease by approximately $280 million within the succeeding twelve months due to the resolution of federal and state audits, including a decrease related to the IRS settlement described below.
Interest and penalties related to UTBs are included in our provision for income taxes. During 2012, 2011 and 2010, we accrued approximately $30 million, $23 million and $41 million, respectively, of interest and penalties through the income tax provision in the Consolidated Statements of Income. At December 31, 2012 and 2011, accrued interest and penalties associated with UTBs totaled approximately $102 million and $105 million, respectively.
The reconciliation between the federal statutory tax rate applied to income before income taxes and our effective tax rate for the years ended December 31, 2012, 2011 and 2010, is as follows:
 
2012
 
2011
 
2010
Federal statutory tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Foreign earnings, including earnings invested indefinitely
(17.8
)%
 
(19.4
)%
 
(19.1
)%
State taxes
0.6
 %
 
0.7
 %
 
1.6
 %
Credits, Puerto Rico Excise Tax
(5.2
)%
 
(6.5
)%
 
0.0
 %
Credits, primarily federal R&D
0.0
 %
 
(1.5
)%
 
(0.9
)%
Legal settlements
(0.2
)%
 
2.2
 %
 
0.0
 %
Audit settlements (federal, state, foreign)
0.3
 %
 
0.0
 %
 
(3.1
)%
Other, net
0.6
 %
 
0.8
 %
 
(0.5
)%
Effective tax rate
13.3
 %
 
11.3
 %
 
13.0
 %

Because the American Taxpayer Relief Act of 2012 was not enacted until 2013, certain provisions of the Act benefiting the Company's 2012 federal taxes, including the retroactive extension of the R&D tax credit for 2012, cannot be recognized in the Company's 2012 financial results and instead will be reflected in the Company's 2013 financial results for the first quarter. The tax benefit of the retroactive extension of the 2012 R&D tax credit that will be recognized in the first quarter of 2013 is approximately $65 million.
The effective tax rates for the years ended December 31, 2012, 2011 and 2010, are different from the federal statutory rates primarily as a result of indefinitely invested earnings of our foreign operations. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the United States. Substantially all of the benefit from foreign earnings on our effective tax rate results from foreign income associated with the Company’s operation conducted in Puerto Rico that is subject to a tax incentive grant that expires in 2020. At December 31, 2012, the cumulative amount of these earnings was approximately $22.2 billion. If these earnings were repatriated to the United States, we would be required to accrue and pay approximately $7.9 billion of additional income taxes based on the current tax rates in effect.

Our total foreign income before income taxes was approximately $3.3 billion, $3.0 billion and $3.5 billion for the years ended December 31, 2012, 2011 and 2010, respectively.
    
Commencing January 1, 2011, Puerto Rico imposes a temporary excise tax on the purchase of goods and services from a related manufacturer in Puerto Rico. The excise tax is imposed on the gross intercompany purchase price of the goods and services and is effective for a six-year period beginning in 2011, with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in 2014, 2.25% in 2015 and 1% in 2016). In February 2013, the Puerto Rico government proposed an amendment to the excise tax legislation which, if approved, would increase the excise tax rate to 4% effective July 1, 2013 through 2017. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes when the excise tax is incurred.

Income taxes paid during the years ended December 31, 2012, 2011 and 2010, totaled $502 million, $595 million and $1,344 million, respectively.

One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely audited by the tax authorities in those jurisdictions. Significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income among various tax jurisdictions because of differing interpretations of tax laws and regulations. We are no longer subject to U.S. federal income tax examinations for tax years ending on or before December 31, 2009, or to California state income tax examinations for tax years ending on or before December 31, 2005.

Subsequent to December 31, 2012, we settled the examination of our U.S. tax returns with the IRS relating to years ended December 31, 2007, 2008, and 2009. We will remeasure our UTBs and recognize the tax impact of this settlement in the first quarter of 2013. We expect the settlement to result in a tax benefit of approximately $185 million.
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Earnings per share
12 Months Ended
Dec. 31, 2012
Earnings Per Share [Abstract]
Earnings per share
Earnings per share
The computation of basic earnings per share (EPS) is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which include principally shares that may be issued under: our stock option, restricted stock and performance unit awards, determined using the treasury stock method; our outstanding convertible notes, as discussed below; and our outstanding warrants (collectively “dilutive securities”). The convertible note hedges purchased in connection with the issuance of our convertible notes are excluded from the calculation of diluted EPS because their impact is always anti-dilutive. For further information regarding our convertible notes and warrants, see Note 14, Financing arrangements.
Prior to the conversion/maturity of our 0.375% 2013 Convertible Notes in February 2013 (see Note 14, Financing arrangements), the principal amount of the notes had to be settled in cash, and the excess of the conversion value, as defined, over the principal amount could have been settled in cash and/or shares of our common stock upon conversion. Therefore, only the shares of our common stock potentially issuable with respect to the excess of the notes’ conversion value over their principal amount, if any, are considered as dilutive potential common shares for purposes of calculating diluted EPS. For the year ended December 31, 2012, the conversion value of our convertible notes due in 2013 exceeded the related principal amount resulting in the assumed issuance of an additional one million shares calculated on a weighted-average basis for purposes of computing diluted EPS. For the years ended December 31, 2011 and 2010, the conversion values of our convertible notes were less than the related principal amounts, and accordingly, no shares were assumed to be issued for purposes of computing diluted EPS.
The computation for basic and diluted EPS was as follows (in millions, except per share data):
 
2012
 
2011
 
2010
Income (Numerator):
 
 
 
 
 
Net income for basic and diluted EPS
$
4,345

 
$
3,683

 
$
4,627

 
 
 
 
 
 
Shares (Denominator):
 
 
 
 
 
Weighted-average shares for basic EPS
775

 
905

 
960

Effect of dilutive securities
12

 
7

 
5

Weighted-average shares for diluted EPS
787

 
912

 
965

 
 
 
 
 
 
Basic EPS
$
5.61

 
$
4.07

 
$
4.82

Diluted EPS
$
5.52

 
$
4.04

 
$
4.79


For the years ended December 31, 2012, 2011 and 2010, there were employee stock-based awards, calculated on a weighted-average basis, to acquire 6 million, 33 million and 43 million shares of our common stock, respectively, that are not included in the computation of diluted EPS because their impact would have been anti-dilutive. In addition, shares of our common stock that may be issued upon exercise of our warrants are not included in the computation of diluted EPS for any of the periods presented above because their impact would have been anti-dilutive.
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Collaborative arrangements
12 Months Ended
Dec. 31, 2012
Collaborative arrangements [Abstract]
Collaborative arrangements
Collaborative arrangements
A collaborative arrangement is a contractual arrangement that involves a joint operating activity which involves two or more parties who are both: (i) active participants in the activity; and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.
From time to time, we enter into collaborative arrangements for the R&D, manufacture and/or commercialization of products and product candidates. These collaborations generally provide for non-refundable upfront license fees, development and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. Our collaboration agreements are performed with no guarantee of either technological or commercial success and each is unique in nature. Our significant arrangements are discussed below.
Pfizer Inc.
We are in a collaboration with Pfizer to co-promote Enbrel® in the United States and Canada. The rights to market ENBREL outside the United States and Canada are reserved to Pfizer. Under the agreement, a management committee comprised of equal representation from Amgen and Pfizer is responsible for overseeing the marketing and sales of ENBREL, including strategic planning, the approval of an annual marketing plan, product pricing and the establishment of a brand team. Amgen and Pfizer share in the agreed-upon selling and marketing expenses approved by the joint management committee. We currently pay Pfizer a percentage of annual gross profits on our ENBREL sales in the United States and Canada attributable to all approved indications on a scale that increases as gross profits increase; however, we maintain a majority share of ENBREL profits. After expiration of the co-promotion term on October 31, 2013, we will be required to pay Pfizer residual royalties based on a declining percentage of annual net ENBREL sales in the United States and Canada for three years, ranging from 12% to 10%. The amounts of such payments are anticipated to be significantly less than what would be owed based on the terms of the current ENBREL profit share. Effective November 1, 2016, there will be no further royalty payments.
We have determined that we are the principal participant in the collaboration with Pfizer to market ENBREL in the United States and Canada. Accordingly, we record our product sales of ENBREL to third parties net of estimated returns, rebates and other deductions. For the years ended December 31, 2012, 2011 and 2010, ENBREL sales aggregated $4.2 billion, $3.7 billion and $3.5 billion, respectively.
During the years ended December 31, 2012, 2011 and 2010, the ENBREL profit share expense was $1,495 million, $1,288 million and $1,184 million, respectively. In addition, cost recoveries from Pfizer for their share of the selling and marketing expense were $35 million, $84 million and $87 million for the years ended December 31, 2012, 2011 and 2010, respectively. Both the profit share expenses and the cost recoveries are included in Selling, general and administrative expense in the Consolidated Statements of Income.
Glaxo Group Limited
We are in a collaboration with Glaxo Group Limited (Glaxo), a wholly owned subsidiary of GlaxoSmithKline plc, for the commercialization of denosumab for osteoporosis indications in Europe, Australia, New Zealand and Mexico (the Primary Territories). We have retained the rights to commercialize denosumab for all indications in the United States and Canada and for oncology indications in the Primary Territories. Under a related agreement, Glaxo will commercialize denosumab for all indications in countries, excluding Japan, where we did not have a commercial presence at the commencement of the agreement, including China, Brazil, India, Taiwan and South Korea (the Expansion Territories). In the Expansion Territories, Glaxo is responsible for all development and commercialization costs and will purchase denosumab from us to meet demand. We have the option of expanding our role in the commercialization of denosumab in the Primary Territories and certain of the Expansion Territories.
In the Primary Territories, we share equally in the commercialization profits and losses related to the collaboration after accounting for expenses, including an amount payable to us in recognition of our discovery and development of denosumab. Glaxo is also responsible for bearing a portion of the cost of certain specified development activities in the Primary Territories.
The collaboration agreement with Glaxo for the Primary Territories will expire in 2022 and the related agreement for the Expansion Territories will expire in 2024, unless either agreement is terminated earlier in accordance with its terms.
As the principal participant in the Primary Territories, Amgen records related product sales to third parties net of estimated returns, rebates and other deductions. During the years ended December 31, 2012, 2011 and 2010, product sales in the Primary Territories for osteoporosis indications were $139 million, $62 million and $5 million, respectively. In the Expansion Territories, we record product sales to Glaxo. During the years ended December 31, 2012, 2011 and 2010, product sales of denosumab to Glaxo for the Expansion Territories were not material.
During the years ended December 31, 2012, 2011 and 2010, the net cost recoveries from Glaxo were $10 million, $30 million and $46 million, respectively, and are included in Selling, general and administrative expense in the Consolidated Statements of Income. In addition, during 2010, we received payments from Glaxo aggregating $75 million for the achievement of certain commercial milestones, which were recognized as Other revenues in our Consolidated Statement of Income.
AstraZeneca Plc.
We are in a collaboration with AstraZeneca Plc. (AstraZeneca) to jointly develop and commercialize certain monoclonal antibodies from Amgen's clinical inflammation portfolio, including brodalumab, AMG 139, AMG 157, AMG 181 and AMG 557. The agreement covers the worldwide development and commercialization, except for certain Asian countries for brodalumab and Japan for AMG 557, that are licensed to other third parties.
Under the terms of the agreement, approximately 65% of related development costs for the 2012-2014 periods will be funded by AstraZeneca, thereafter, the companies will share costs equally. If approved for sale, Amgen would receive a low-single-digit royalty rate for brodalumab and a mid-single-digit royalty rate for the rest of the portfolio, after which the worldwide commercialization profits and losses related to the collaboration products would be shared equally. In 2012, we received a payment of $50 million, in connection with the transfer of technology rights, which was recognized in Other revenues in the Consolidated Statement of Income. During the year ended December 31, 2012, cost recoveries recognized for development costs were $28 million, which are included in Research and development expense in the Consolidated Statement of Income.
The collaboration agreement will continue in effect unless terminated in accordance with its terms.

Takeda Pharmaceutical Company Limited
In 2008, we entered into an arrangement with Takeda Pharmaceutical Company Limited (Takeda), that provided Takeda both: (i) the exclusive rights to develop and commercialize for the Japanese market up to 12 molecules from our portfolio across a range of therapeutic areas, including oncology and inflammation (collectively the “Japanese market products”) and (ii) the right to collaborate with us on the worldwide (outside Japan) development and commercialization of our product candidate, motesanib. The Japanese market products include Vectibix® and certain product candidates. In connection with this 2008 arrangement, we received upfront payments of $300 million that were deferred and were being recognized as Other revenues in our Consolidated Statements of Income over the estimated period of continuing involvement of approximately 20 years. Additionally, during 2010, we received payments aggregating $55 million for the achievement of certain regulatory milestones which were recognized as Other revenues in our Consolidated Statement of Income upon the achievement of the related milestone events.
In 2011, we announced that the motesanib pivotal phase 3 trial (MONET1) had not met its primary objective of demonstrating an improvement in overall survival in patients with advanced non-squamous non small cell lung cancer (NSCLC).
In June 2012, the parties materially modified this arrangement such that Amgen licensed all of its rights to motesanib to Takeda which now has control over the worldwide development and commercialization of motesanib. Takeda subsequently announced initiation of a new phase 3 clinical trial in non-squamous NSCLC patients in Japan, Hong Kong, South Korea and Taiwan based on the prospectively-defined Asian subgroup analysis of the MONET1 data. Based on the modification of the parties' arrangement, we will no longer participate in the development of motesanib and our obligations with respect to motesanib are limited primarily to closing the MONET1 clinical trial and transitioning certain existing development data and manufacturing capabilities (collectively “transition services”) from our contract manufacturer to Takeda. In exchange for licensing motesanib to Takeda, we received an additional upfront payment of $3 million and will receive incremental cost recoveries of approximately $21 million. We may also receive substantive success-based regulatory approval milestones and royalties on global sales of motesanib, if approved for sale, that are substantially lower than those under the 2008 arrangement. As of the date of modification, $230 million of the up-front payment we received in 2008 remained in deferred revenue on the Consolidated Balance Sheet.
Upon the modification of the arrangement, we determined that the remaining deliverables are: (i) the additional license rights to motesanib granted to Takeda and related transition services, (ii) commercial supply of Vectibix® and (iii) clinical and commercial supply and data relating to certain development activities, to the extent undertaken by Amgen, for the Japanese market products other than Vectibix®. We considered several factors in determining whether stand-alone value exists for each deliverable, including the rights and ability to perform the R&D activities, as well as the ability of parties to use a third party to perform their respective designated activities under the arrangement. The estimated selling prices for the undelivered items were determined by using third party evidence and BESP where applicable as of the date of modification. BESP was determined primarily using a probability-weighted discounted cash flow analysis. The fixed or determinable arrangement consideration was allocated to the undelivered items based on the relative selling price method and will be recognized as the services are performed or product is delivered. This amount was deducted from the sum of the consideration to be received in the future plus deferred revenue from the original 2008 arrangement as of the date of the modification of $230 million with the remainder of $206 million recognized as Other revenues in our Consolidated Statements of Income upon modification. Subsequently during 2012, deferred revenue of $24 million was recognized as the related services were completed. In addition, the arrangement allows for the receipt of royalties and milestone payments upon the achievement of various substantive success-based development and regulatory approval milestones which are immaterial, individually and in the aggregate, with regard to product candidates that remain under development. The receipt of these amounts, however, is contingent upon the occurrence of various future events that have a high degree of uncertainty of occurring.
During the years ended December 31, 2012, 2011 and 2010, cost recoveries from Takeda were $74 million, $83 million and $91 million, respectively, and are included in Research and development expense in the Consolidated Statements of Income. In addition, for the years December 31, 2012, 2011 and 2010, we recognized royalties on sales of Vectibix® in Japan of $21 million, $20 million and $7 million respectively, in Other revenues in the Consolidated Statements of Income.
UCB
We are in a collaboration with UCB for the development and commercialization of romosozumab. We have the rights to commercialize romosozumab for all indications in the United States, Canada, Mexico and Japan. UCB has the rights for all EU members at the time of first regulatory approval, Australia and New Zealand. Prior to commercialization, countries that have not been initially designated will be designated to Amgen or UCB in accordance with the terms of the agreement.
Generally, development costs are shared equally and we will share equally in the worldwide commercialization profits and losses related to the collaboration after accounting for expenses.
The collaboration agreements will continue in effect unless terminated earlier in accordance with their terms.
During the years ended December 31, 2012, 2011 and 2010, the net costs recovered from UCB were $71 million, $35 million, and $28 million, respectively, and are included in Research and development expense in the Consolidated Statements of Income.
Other
In addition to the collaborations discussed above, we have various others that are not individually significant to our business at this time. Pursuant to the terms of those agreements, we may be required to pay or we may receive additional amounts upon the achievement of various development and commercial milestones which in the aggregate could be significant. We may also incur or have reimbursed to us significant R&D costs if the related product candidate were to advance to late stage clinical trials. In addition, if any products related to these collaborations are approved for sale, we may be required to pay or we may receive significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurring.
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Related party transactions
12 Months Ended
Dec. 31, 2012
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 a loss of $24 million, and profits of $47 million and $71 million, for the years ended December 31, 2012, 2011 and 2010, respectively. At both December 31, 2012 and 2011, the carrying value of our equity method investment in K-A, net of dividends received, was approximately $0.4 billion 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, J&J and F. Hoffmann-La Roche Ltd. under separate product license contracts for certain geographic areas outside the United States. During the years ended December 31, 2012, 2011 and 2010, K-A earned royalties from us of $274 million, $298 million and $322 million, respectively. These amounts are included in Cost of sales (excludes amortization of certain acquired intangible assets) 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, 2012, 2011 and 2010, we earned revenues from K-A of $115 million, $130 million and $96 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 numerous 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, 2012, 2011 and 2010, we recorded cost recoveries from K-A of $142 million, $85 million and $88 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, 2012 and 2011, we owed K-A $31 million and $75 million, respectively, which are included in Accrued liabilities in the Consolidated Balance Sheets.
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Cost savings initiatives and restructuring
12 Months Ended
Dec. 31, 2012
Restructuring and Related Activities [Abstract]
Cost savings initiatives
Cost savings initiatives
Manufacturing operations optimization
In order to optimize our network of manufacturing facilities and improve cost effectiveness, we determined that certain manufacturing facilities located in Boulder, Colorado, were no longer needed and accordingly, they were abandoned during the fourth quarter of 2012. This resulted in the write-off of the carrying value of the facility, which aggregated $118 million, during the year ended December 31, 2012. The amount is included in Cost of sales (excludes amortization of certain acquired intangible assets) in the Consolidated Statement of Income.
On January 18, 2011, we entered into an agreement whereby Boehringer Ingelheim (BI) agreed to acquire our rights in and substantially all assets at our manufacturing facility located in Fremont, California. The transaction closed in March 2011. In connection with the closing of the transaction, BI assumed our obligations under certain of the facility’s operating lease contracts and entered into an agreement to manufacture certain quantities of our marketed product Vectibix® for us at this facility through December 31, 2012 (the supply period).
As a result of the transaction with BI, an impairment analysis was performed on this facility which determined that a manufacturing line that had not yet been completed was impaired, and we wrote off its entire carrying value, which aggregated $118 million, during the year ended December 31, 2010. This amount is included in Other operating expenses in the Consolidated Statement of Income.
Due to the lack of sufficient initial investment by BI in the acquisition of this facility and our ongoing involvement with these operations, the transaction did not meet the accounting requirements to be treated as a sale involving real estate. As a result, the related assets continued to be carried on our Consolidated Balance Sheets with reduced estimated useful lives of the remaining fixed assets to coincide with the supply period. During each of the years ended December 31, 2012 and 2011, we recorded incremental depreciation of approximately $42 million in excess of what otherwise would have been recorded. In addition, due to the assignment to BI of the obligations under certain of the facility’s operating leases, we recorded charges of approximately $23 million during the year ended December 31, 2011, with respect to the lease period beyond the end of the supply period. These amounts are recorded in Cost of sales (excludes amortization of certain acquired intangible assets) in the Consolidated Statements of Income.
Other cost savings initiatives
As part of our continuing efforts to improve cost efficiencies in our operations, we recorded certain charges aggregating approximately $175 million and $109 million during the years ended December 31, 2012 and 2011, respectively, which are included in Other operating expenses in the Consolidated Statements of Income. The 2012 expenses are primarily severance-related and charges related to exiting leased facilities, and the 2011 expenses are primarily severance-related.
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Available-for-sale investments
12 Months Ended
Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract]
Available-for-sale investments
Available-for-sale investments
The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security were as follows (in millions):
Type of security as of December 31, 2012
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
U.S. Treasury securities
$
4,443

 
$
15

 
$

 
$
4,458

Other government-related debt securities:
 
 
 
 
 
 
 
U.S.
1,018

 
12

 

 
1,030

Foreign and other
1,549

 
60

 
(1
)
 
1,608

Corporate debt securities:
 
 
 
 
 
 
 
Financial
3,266

 
96

 
(1
)
 
3,361

Industrial
4,283

 
100

 
(3
)
 
4,380

Other
441

 
11

 

 
452

Residential mortgage-backed securities
1,828

 
9

 
(8
)
 
1,829

Other mortgage- and asset-backed securities
1,769

 
7

 
(9
)
 
1,767

Money market mutual funds
2,620

 

 

 
2,620

Other short-term interest-bearing securities
2,186

 

 

 
2,186

Total interest-bearing securities
23,403

 
310

 
(22
)
 
23,691

Equity securities
52

 
2

 

 
54

Total available-for-sale investments
$
23,455

 
$
312

 
$
(22
)
 
$
23,745


Type of security as of December 31, 2011
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
U.S. Treasury securities
$
3,878

 
$
68

 
$

 
$
3,946

Other government-related debt securities:
 
 
 
 
 
 
 
U.S.
1,548

 
23

 

 
1,571

Foreign and other
441

 
9

 

 
450

Corporate debt securities:
 
 
 
 
 
 
 
Financial
2,493

 
30

 
(15
)
 
2,508

Industrial
3,077

 
79

 
(10
)
 
3,146

Other
280

 
9

 

 
289

Residential mortgage-backed securities
518

 
3

 
(3
)
 
518

Other mortgage- and asset-backed securities
1,271

 
3

 
(7
)
 
1,267

Money market mutual funds
6,266

 

 

 
6,266

Total interest-bearing securities
19,772

 
224

 
(35
)
 
19,961

Equity securities
42

 

 

 
42

Total available-for-sale investments
$
19,814

 
$
224

 
$
(35
)
 
$
20,003


The fair values of available-for-sale investments by classification in the Consolidated Balance Sheets were as follows as of December 31, 2012 and 2011 (in millions):
Classification in the Consolidated Balance Sheets
2012
 
2011
Cash and cash equivalents
$
2,887

 
$
6,266

Marketable securities
20,804

 
13,695

Other assets — noncurrent
54

 
42

Total available-for-sale investments
$
23,745

 
$
20,003


Cash and cash equivalents in the table above excludes cash of $370 million and $680 million as of December 31, 2012 and 2011, respectively.
The fair values of available-for-sale interest-bearing security investments by contractual maturity, except for mortgage- and asset-backed securities that do not have a single maturity date, were as follows as of December 31, 2012 and 2011 (in millions):
Contractual maturity
2012
 
2011
Maturing in one year or less
$
7,175

 
$
6,791

Maturing after one year through three years
5,014

 
5,855

Maturing after three years through five years
6,286

 
5,379

Maturing after five years through ten years
1,620

 
151

Mortgage- and asset-backed securities
3,596

 
1,785

Total interest-bearing securities
$
23,691

 
$
19,961


For the years ended December 31, 2012, 2011 and 2010, realized gains totaled $186 million, $191 million and $115 million, respectively, and realized losses totaled $54 million, $37 million and $25 million, respectively. The cost of securities sold is based on the specific identification method.
The primary objective of our investment portfolio is to enhance overall returns in an efficient manner while maintaining 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 places restrictions on maturities and concentration by asset class and issuer.
We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation is based on a number of factors including, the length of time and the extent to which the fair value has been below our cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security. As of December 31, 2012 and 2011, we believe the cost bases for our available-for-sale investments were recoverable in all material respects.
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Inventories
12 Months Ended
Dec. 31, 2012
Inventory Disclosure [Abstract]
Inventories
Inventories
Inventories consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Raw materials
$
192

 
$
158

Work in process
1,723

 
1,802

Finished goods
829

 
524

Total inventories
$
2,744

 
$
2,484

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Property, plant and equipment
12 Months Ended
Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment consisted of the following as of December 31, 2012 and 2011 (dollar amounts in millions):
 
Useful life (in years)
 
2012
 
2011
Land

 
$
412

 
$
366

Buildings and improvements
10-40

 
3,510

 
3,463

Manufacturing equipment
8-12

 
2,007

 
1,897

Laboratory equipment
8-12

 
1,056

 
1,016

Other
3-15

 
3,891

 
3,745

Construction in progress

 
1,071

 
744

Property, plant and equipment, gross
 
 
11,947

 
11,231

Less accumulated depreciation and amortization
 
 
(6,621
)
 
(5,811
)
Property, plant and equipment, net
 
 
$
5,326

 
$
5,420


During the years ended December 31, 2012, 2011 and 2010, we recognized depreciation and amortization charges associated with our property, plant and equipment of $689 million, $679 million and $594 million, respectively.
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Goodwill and intangible assets
12 Months Ended
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and other Intangible assets
Goodwill and other intangible assets
Goodwill
The changes in the carrying amounts of goodwill for the years ended December 31, 2012 and 2011, were as follows (in millions):
 
2012
 
2011
Beginning balance
$
11,750

 
$
11,334

Goodwill resulting from acquisitions of businesses
928

 
435

Currency translation
(16
)
 
(19
)
Ending balance
$
12,662

 
$
11,750



Identifiable intangible assets
Identifiable intangible assets consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
 
Gross
carrying
amount
 
Accumulated
amortization
 
Intangible
assets, net
 
Gross
carrying
amount
 
Accumulated
amortization
 
Intangible
assets, net
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Acquired product technology rights:
 
 
 
 
 
 
 
 
 
 
 
Developed product technology
$
2,872

 
$
(2,003
)
 
$
869

 
$
2,872

 
$
(1,811
)
 
$
1,061

Core technology
1,348

 
(940
)
 
408

 
1,348

 
(850
)
 
498

Trade name
190

 
(133
)
 
57

 
190

 
(120
)
 
70

Acquired R&D technology rights
1,094

 
(381
)
 
713

 
350

 
(350
)
 

Other acquired intangible assets
896

 
(477
)
 
419

 
686

 
(406
)
 
280

Total finite-lived intangible assets
6,400

 
(3,934
)
 
2,466

 
5,446

 
(3,537
)
 
1,909

 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
IPR&D
1,346

 

 
1,346

 
675

 

 
675

Contract assets
156

 

 
156

 

 

 

Total indefinite-lived intangible assets
1,502

 

 
1,502

 
675

 

 
675

 
 
 
 
 
 
 
 
 
 
 
 
Total identifiable intangible assets
$
7,902

 
$
(3,934
)
 
$
3,968

 
$
6,121

 
$
(3,537
)
 
$
2,584

Amortization of finite-lived intangible assets is provided over their estimated useful lives ranging from 3 to 15 years on a straight-line basis.
Acquired product technology rights relate to the identifiable intangible assets acquired in connection with the 2002 Immunex Corporation acquisition, and the related amortization expense is included in Amortization of certain acquired intangible assets in the Consolidated Statements of Income. Acquired R&D technology rights, Other acquired intangible assets, IPR&D and Contract assets as of December 31, 2012 and 2011, included the identifiable intangible assets acquired in connection with the acquisitions of businesses that occurred during the years ended December 31, 2012 and 2011. (See Note 2, Business combinations.) Acquired R&D technology rights consist of technology used in R&D with alternative future uses and the related amortization expense is included in Research and development expense in the Consolidated Statements of Income. The amortization expense related to other acquired intangible assets is included principally in Cost of sales (excludes amortization of certain acquired intangible assets) and Selling, general and administrative expense in the Consolidated Statements of Income. During the years ended December 31, 2012, 2011 and 2010, we recognized amortization charges associated with our finite-lived intangible assets of $397 million, $380 million and $423 million, respectively. The total estimated amortization for each of the next five years for our intangible assets is $464 million, $446 million, $434 million, $413 million and $271 million in 2013, 2014, 2015, 2016 and 2017, respectively.
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Accrued liabilities
12 Months Ended
Dec. 31, 2012
Payables and Accruals [Abstract]
Accrued liabilities
Accrued liabilities
Accrued liabilities consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Sales deductions
$
1,129

 
$
1,326

Employee compensation and benefits
1,010

 
916

Sales returns reserve
346

 
339

Legal reserve

 
780

Other
2,306

 
1,667

Total accrued liabilities
$
4,791

 
$
5,028

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Financing arrangements
12 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]
Financing arrangements
Financing arrangements
The carrying values and the fixed contractual coupon rates of our long-term borrowings were as follows as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes)
$
2,488

 
$
2,346

1.875% notes due 2014 (1.875% 2014 Notes)
1,000

 
1,000

4.85% notes due 2014 (4.85% 2014 Notes)
1,000

 
1,000

2.30% notes due 2016 (2.30% 2016 Notes)
749

 
748

2.50% notes due 2016 (2.50% 2016 Notes)
999

 
999

2.125% notes due 2017 (2.125% 2017 Notes)
1,248

 

5.85% notes due 2017 (5.85% 2017 Notes)
1,099

 
1,099

6.15% notes due 2018 (6.15% 2018 Notes)
499

 
499

4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes)
723

 
714

5.70% notes due 2019 (5.70% 2019 Notes)
999

 
998

2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes)
887

 

4.50% notes due 2020 (4.50% 2020 Notes)
300

 
300

3.45% notes due 2020 (3.45% 2020 Notes)
897

 
897

4.10% notes due 2021 (4.10% 2021 Notes)
998

 
998

3.875% notes due 2021 (3.875% 2021 Notes)
1,745

 
1,745

3.625% notes due 2022 (3.625% 2022 Notes)
747

 

5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes)
763

 
739

4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes)
1,117

 

6.375% notes due 2037 (6.375% 2037 Notes)
899

 
899

6.90% notes due 2038 (6.90% 2038 Notes)
499

 
499

6.40% notes due 2039 (6.40% 2039 Notes)
996

 
996

5.75% notes due 2040 (5.75% 2040 Notes)
697

 
697

4.95% notes due 2041 (4.95% 2041 Notes)
595

 
595

5.15% notes due 2041 (5.15% 2041 Notes)
2,232

 
2,232

5.65% notes due 2042 (5.65% 2042 Notes)
1,244

 
1,244

5.375% notes due 2043 (5.375% 2043 Notes)
1,000

 

Other, including our zero-coupon convertible notes
109

 
184

Total debt
26,529

 
21,428

Less current portion
(2,495
)
 
(84
)
Total noncurrent debt
$
24,034

 
$
21,344


Debt repayments
During the year ended December 31, 2012, we repaid $123 million of debt, including the redemption of all of our outstanding zero-coupon convertible notes due in 2032 and debt assumed in the acquisition of MN and deCODE. In February 2011, our 0.125% 2011 Convertible Notes became due, and we repaid the $2.5 billion aggregate principal amount. No debt was due or repaid in 2010.
Debt issuances
We issued debt securities in various offerings during the three years ended December 31, 2012, including:
In 2012, we issued $5.0 billion aggregate principal amount of notes, comprised of the 2.125% 2017 Notes, the 2.125% 2019 euro Notes (€675 million aggregate principal amount), the 3.625% 2022 Notes, the 4.00% 2029 pound sterling Notes (£700 million aggregate principal amount) and the 5.375% 2043 Notes.
In 2011, we issued $10.5 billion aggregate principal amount of notes, comprised of the 1.875% 2014 Notes, the 2.30% 2016 Notes, the 2.50% 2016 Notes, the 4.375% 2018 euro Notes (€550 million aggregate principal amount), the 4.10% 2021 Notes, the 3.875% 2021 Notes, the 5.50% 2026 pound sterling Notes (£475 million aggregate principal amount), the 5.15% 2041 Notes and the 5.65% 2042 Notes.
In 2010, we issued $2.5 billion aggregate principal amount of notes, comprised of the 4.50% 2020 Notes, the 3.45% 2020 Notes, the 5.75% 2040 Notes and the 4.95% 2041 Notes.
Debt issuance costs incurred in connection with these debt offerings in 2012, 2011 and 2010 totaled $25 million, $55 million and $17 million, respectively. These debt issuance costs are being amortized over the respective lives of the notes, and the related charge is included in Interest expense, net, in the Consolidated Statements of Income.
All of our debt issuances other than our Other notes may be redeemed at any time at our option, in whole or in part, at the principal amount of the notes being redeemed plus accrued interest and a make-whole amount, as defined. In addition, except with respect to our 4.85% 2014 Notes and Other notes, in the event of a change-in-control triggering event, as defined, we may be required to purchase for cash all or a portion of these debt issuances at a price equal to 101% of the principal amount of the notes plus accrued interest.
Convertible Notes
In 2006, we issued $5.0 billion principal amount of convertible notes at par, including the 0.125% 2011 Convertible Notes and the 0.375% 2013 Convertible Notes. While outstanding, these notes were convertible into shares of our common stock upon the occurrence of specified events. The conversion rate on the $2.5 billion principal amount of the 0.375% 2013 Convertible Notes was 12.8809 shares per $1,000 principal amount of notes at December 31, 2012, which represents a conversion price of approximately $77.63 per share. While these notes were outstanding, this conversion rate was adjusted for certain transactions with respect to our common stock, including payment of cash dividends. Prior to their maturity, the 0.375% 2013 Convertible Notes could only be converted: (i) during any calendar quarter if the closing price of our common stock exceeded 130% of the then conversion price per share during a defined period at the end of the previous quarter, (ii) if we made specified distributions to holders of our common stock or specified corporate transactions occurred or (iii) within one month prior to the maturity date. Upon conversion, a holder would receive the conversion value equal to the conversion rate multiplied by the volume weighted-average price of our common stock during a specified conversion period following the conversion date. The conversion value was payable in: (i) cash equal to the lesser of the principal amount of the note or the conversion value, as defined, and (ii) cash, shares of our common stock, or a combination of cash and shares of our common stock, at our option, to the extent the conversion value exceeded the principal amount of the note (the excess conversion value). In February 2013, our 0.375% 2013 Convertible Notes matured/converted, and accordingly, the $2.5 billion principal amount was settled in cash. We also elected to pay the note holders who converted their notes $99 million of cash for the excess conversion value, as allowed by the original terms of the notes.
Concurrent with the issuance of the 0.375% 2013 Convertible Notes in February 2006, we purchased a convertible note hedge. The convertible note hedge allowed us to receive shares of our common stock and/or cash from the counterparty to the transaction equal to the amounts of common stock and/or cash related to the excess conversion value that we would issue and/or pay to the holders of the 0.375% 2013 Convertible Notes upon conversion. As a result of the conversion of the 0.375% 2013 Convertible Notes, we received $99 million of cash from the counterparty to offset the corresponding amount paid to the note holders. We also purchased a convertible note hedge with similar terms in connection with the issuance of the 0.125% 2011 Convertible Notes, which terminated unexercised when these notes were repaid.
Also concurrent with the issuance of the 0.375% 2013 Convertible Notes, we sold warrants to acquire 31.5 million shares of our common stock in May 2013 (the settlement date) that have an exercise price of $105.48 per share as of December 31, 2012. If the average price of our common stock during a defined period ending on or about the settlement date exceeds the exercise price of the warrants, the warrants will be net settled, at our option, in cash or shares of our common stock. In connection with the issuance of the 0.125% 2011 Convertible Notes, we sold warrants to purchase 31.3 million shares of our stock on similar terms, which expired unexercised in May 2011.
Because the convertible note hedges and warrants could be settled at our option in cash or shares of our common stock, and these contracts met all of the applicable criteria for equity classification under the applicable accounting standards, the cost of the convertible note hedges and net proceeds from the sale of the warrants are classified in Stockholders’ equity in the Consolidated Balance Sheets. In addition, because both of these contracts are classified in Stockholders’ equity and are indexed to our common stock, they are not accounted for as derivatives.
Because these convertible notes were cash settleable, their debt and equity components were bifurcated and accounted for separately. The discounted carrying value of the debt component resulting from the bifurcation was accreted back to the principal amount over the period the notes were outstanding, resulting in the recognition of non-cash interest expense. The total aggregate amount repaid, including the amount related to the debt discount, is included in Cash flows from financing activities in the Consolidated Statement of Cash Flows. After giving effect to this bifurcation, the effective interest rate on the 0.375% 2013 Convertible Notes was 6.35%. For the years ended December 31, 2012, 2011 and 2010, total interest expenses for the 0.375% 2013 Convertibles Notes were $151 million, $143 million and $134 million, respectively, including non-cash interest expenses of $142 million, $133 million and $125 million, respectively. While outstanding, the 0.125% 2011 Convertible Notes were accounted for in the same manner, resulting in an effective interest rate of 6.24%. For the years ended December 31, 2011 and 2010, total interest expenses for the 0.125% 2011 Convertible Notes were $13 million and $149 million, respectively, including non-cash interest expenses of $12 million and $146 million, respectively.
The principal balance, unamortized discount and net carrying amount of the liability and equity components of our 0.375% 2013 Convertible Notes were as follows as of December 31, 2012 and 2011 (in millions):
 
Liability component
 
Equity component
0.375% 2013 Convertible Notes
Principal
balance
 
Unamortized
discount
 
Net carrying
amount
 
Net carrying
amount
December 31, 2012
$
2,500

 
$
12

 
$
2,488

 
$
829

December 31, 2011
$
2,500

 
$
154

 
$
2,346

 
$
829


Other
Other notes include our notes due in 2097 with carrying value of $100 million, debt assumed in the acquisition of MN with a carrying value of $9 million at December 31, 2012, and the zero-coupon convertible notes due in 2032 which had a carrying value of $84 million at December 31, 2011.
Interest rate swaps
To achieve a desired mix of fixed and floating interest rate debt, we entered into interest rate swap contracts that effectively converted a fixed-rate interest coupon for certain of our debt issuances to a floating London Interbank Offered Rate (LIBOR)-based coupon over the life of the respective note. These interest rate swap contracts qualified and were designated as fair value hedges. As of December 31, 2011, we had interest rate swap contracts with aggregate notional amounts of $3.6 billion with respect to our 4.85% 2014 Notes, 5.85% 2017 Notes, 6.15% 2018 Notes and 5.70% 2019 Notes. While outstanding, the rates on these swaps ranged from LIBOR plus 0.3% to LIBOR plus 2.6%. Due to historically low interest rates, we terminated all of these swap contracts in May 2012. See Note 17, Derivative instruments.
Cross-currency swaps
In order to hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term notes denominated in foreign currencies, we entered into cross-currency swap contracts. The terms of these contracts effectively convert the interest payments and principal repayment on our 2.125% 2019 euro Notes, 5.50% 2026 pound sterling Notes and 4.00% 2029 pound sterling Notes from euros/pounds sterling to U.S. dollars. These cross-currency swap contracts have been designated as cash flow hedges. For information regarding the terms of these contracts, see Note 17, Derivative instruments.
Shelf registration statements and other facilities
As of December 31, 2012, we have a commercial paper program that allows us to issue up to $2.5 billion of unsecured commercial paper to fund our working capital needs. At December 31, 2012 and 2011, we had no amounts outstanding under our commercial paper program.
In December 2011, we entered into a $2.5 billion syndicated, unsecured, revolving credit agreement which is available for general corporate purposes or as a liquidity backstop to our commercial paper program. The commitments under the revolving credit agreement may be increased by up to $500 million with the agreement of the banks. Each bank which is a party to the agreement has an initial commitment term of five years. This term may be extended for up to two additional one-year periods with the agreement of the banks. Annual commitment fees for this agreement are 0.1% based on our current credit rating. Generally, we would be charged interest at LIBOR plus 0.9% for any amounts borrowed under this facility. As of December 31, 2012 and 2011, no amounts were outstanding under this facility. In connection with the new revolving credit agreement we terminated our prior $2.3 billion revolving credit agreement that was scheduled to expire in November 2012.
In March 2011, we filed a shelf registration statement with the U.S. Securities and Exchange Commission to replace an existing shelf registration statement that was scheduled to expire in April 2011. This shelf registration statement allows us to issue unspecified amounts of debt securities; common stock; preferred stock; warrants to purchase debt securities, common stock, preferred stock or depository shares; rights to purchase common stock or preferred stock; securities purchase contracts; securities purchase units; and depository shares. Under this shelf registration statement, all of the securities available for issuance may be offered from time to time with terms to be determined at the time of issuance. This shelf registration statement expires in March 2014.
In 1997, we established a $400 million medium-term note program under which medium-term debt securities may be offered from time to time with terms to be determined at the time of issuance. As of December 31, 2012 and 2011, no securities were outstanding under this medium-term note program.
Certain of our financing arrangements contain non-financial covenants. In addition, our revolving credit agreement includes a financial covenant with respect to the level of our borrowings in relation to our equity, as defined. We were in compliance with all applicable covenants under these arrangements as of December 31, 2012.
Contractual maturities of long-term debt obligations
The aggregate contractual maturities of all long-term debt obligations due subsequent to December 31, 2012, are as follows (in millions):
Maturity date
Amount
2013(1)
$
2,507

2014
2,002

2015

2016
1,750

2017
2,350

Thereafter
18,017

Total
$
26,626

(1) 
This amount includes the$2.5 billion principal amount for our 0.375% 2013 Convertible Notes after full accretion of the debt discount.
Interest costs
Interest costs are expensed as incurred, except to the extent such interest is related to construction in progress, in which case interest is capitalized. Interest expenses, net, for the years ended December 31, 2012, 2011 and 2010, were $1.1 billion, $610 million and $604 million, respectively. Interest costs capitalized for the years ended December 31, 2012, 2011 and 2010, were $26 million, $22 million and $33 million, respectively. Interest paid, net of interest rate swaps, during the years ended December 31, 2012, 2011 and 2010, totaled $406 million, $446 million and $323 million, respectively. Interest paid in 2012 is net of the $397 million received upon settlement of the interest rate swaps. See Note 17, Derivative instruments.
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Stockholders' equity
12 Months Ended
Dec. 31, 2012
Equity [Abstract]
Stockholders' equity
Stockholders’ equity
Stock repurchase program
Activity under our stock repurchase program was as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Shares
 
Dollars
First quarter
21.0

 
$
1,429

 

 
$

 
29.1

 
$
1,684

Second quarter
17.4

 
1,203

 
12.9

 
732

 
10.3

 
616

Third quarter
9.7

 
797

 
45.4

 
2,421

 
6.6

 
364

Fourth quarter
14.2

 
1,233

 
86.0

 
5,154

(1) 
20.5

 
1,136

Total stock repurchases
62.3
 
$
4,662

 
144.3

 
$
8,307

 
66.5

 
$
3,800

___________
(1)
Includes the repurchase of 83.3 million shares of our common stock at an average price paid per share of $60.08, including related expenses, for an aggregate cost of $5.0 billion, under a modified Dutch auction tender offer.
In December 2012, the Board of Directors approved an increase in the share repurchase authorization by $2.0 billion, and as of December 31, 2012, $2.3 billion remained available under this stock repurchase program.
Dividends
On July 28 and October 13, 2011, the Board of Directors declared quarterly cash dividends of $0.28 per share of common stock, which were paid on September 8 and December 8, 2011, respectively. On December 15, 2011, and March 15, July 19 and October 10, 2012, the Board of Directors declared quarterly cash dividends of $0.36 per share of common stock, which were paid on March 7, June 7, September 7 and December 7, 2012, respectively. Additionally, on December 13, 2012, the Board of Directors declared a quarterly cash dividend of $0.47 per share of common stock, which will be paid on March 7, 2013.
Accumulated other comprehensive income
The components of Accumulated other comprehensive income (AOCI) are as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
Foreign
currency
translation
 
Cash flow
hedges
 
Available-for-sale
securities
 
Other
 
AOCI
Balance as of December 31, 2009
$
40

 
$
(82
)
 
$
95

 
$
(8
)
 
$
45

Foreign currency translation adjustments
(29
)
 

 

 

 
(29
)
Unrealized gains

 
186

 
155

 
1

 
342

Reclassification adjustments to income

 
(46
)
 
(90
)
 

 
(136
)
Income taxes
11

 
(55
)
 
(25
)
 

 
(69
)
Balance as of December 31, 2010
22

 
3

 
135

 
(7
)
 
153

Foreign currency translation adjustments
(6
)
 

 

 

 
(6
)
Unrealized (losses) gains

 
(51
)
 
125

 
2

 
76

Reclassification adjustments to income

 
112

 
(154
)
 

 
(42
)
Other

 

 

 
(8
)
 
(8
)
Income taxes
5

 
(21
)
 
14

 

 
(2
)
Balance as of December 31, 2011
21

 
43

 
120

 
(13
)
 
171

Foreign currency translation adjustments
(13
)
 

 

 

 
(13
)
Unrealized (losses) gains

 
15

 
233

 
(1
)
 
247

Reclassification adjustments to income

 
(134
)
 
(132
)
 

 
(266
)
Income taxes
4

 
41

 
(38
)
 

 
7

Balance as of December 31, 2012
$
12

 
$
(35
)
 
$
183

 
$
(14
)
 
$
146


Income tax expenses/benefits for unrealized gains and losses and the related reclassification adjustments to income for cash flow hedges were an $8 million expense and $49 million benefit in 2012, a $20 million benefit and $41 million expense in 2011 and a $71 million expense and $16 million benefit in 2010, respectively. Income tax expenses/benefits for unrealized gains and losses and the related reclassification adjustments to income for available-for-sale securities were an $87 million expense and $49 million benefit for 2012, a $45 million expense and $59 million benefit in 2011 and a $60 million expense and $35 million benefit in 2010, respectively.
Other
In addition to common stock, our authorized capital includes 5 million shares of preferred stock, $0.0001 par value. As of December 31, 2012 and 2011, no shares of preferred stock were issued or outstanding.
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Fair value measurement
12 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]
Fair value measurement
Fair value measurement
To estimate the fair value of our financial assets and liabilities we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:
Level 1
Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
Level 2
Valuations for which all significant inputs are observable, either directly or indirectly, other than level 1 inputs
Level 3
Valuations based on inputs that are unobservable and significant to the overall fair value measurement
The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.
The fair value of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis was as follows (in millions):
Fair value measurement as of December 31, 2012, using:
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Available-for-sale investments:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,458

 
$

 
$

 
$
4,458

Other government-related debt securities:
 
 
 
 
 
 
 
 
U.S.
 

 
1,030

 

 
1,030

Foreign and other
 

 
1,608

 

 
1,608

Corporate debt securities:
 

 

 

 

Financial
 

 
3,361

 

 
3,361

Industrial
 

 
4,380

 

 
4,380

Other
 

 
452

 

 
452

Residential mortgage-backed securities
 

 
1,829

 

 
1,829

Other mortgage- and asset-backed securities
 

 
1,767

 

 
1,767

Money market mutual funds
 
2,620

 

 

 
2,620

Other short-term interest-bearing securities
 

 
2,186

 

 
2,186

Equity securities
 
54

 

 

 
54

Derivatives:
 

 

 

 

Foreign currency contracts
 

 
46

 

 
46

Cross-currency swap contracts
 

 
65

 

 
65

Total assets
 
$
7,132

 
$
16,724

 
$

 
$
23,856

Liabilities:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Foreign currency contracts
 
$

 
$
59

 
$

 
$
59

Cross-currency swap contracts
 

 
6

 

 
6

Contingent consideration obligations in connection with a business combination
 

 

 
221

 
221

Total liabilities
 
$

 
$
65

 
$
221

 
$
286

Fair value measurement as of December 31, 2011, using:
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant  other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Available-for-sale investments:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
3,946

 
$

 
$

 
$
3,946

Other government-related debt securities:
 
 
 
 
 
 
 
 
U.S.
 

 
1,571

 

 
1,571

Foreign and other
 

 
450

 

 
450

Corporate debt securities:
 

 

 

 

Financial
 

 
2,508

 

 
2,508

Industrial
 

 
3,146

 

 
3,146

Other
 

 
289

 

 
289

Residential mortgage-backed securities
 

 
518

 

 
518

Other mortgage- and asset-backed securities
 

 
1,267

 

 
1,267

Money market mutual funds
 
6,266

 

 

 
6,266

Equity securities
 
42

 

 

 
42

Derivatives:
 

 

 

 

Foreign currency contracts
 

 
172

 

 
172

Interest rate swap contracts
 

 
377

 

 
377

Total assets
 
$
10,254

 
$
10,298

 
$

 
$
20,552

Liabilities:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Foreign currency contracts
 
$

 
$
48

 
$

 
$
48

Cross-currency swap contracts
 

 
26

 

 
26

Contingent consideration obligations in connection with a business combination
 

 

 
190

 
190

Total liabilities
 
$

 
$
74

 
$
190

 
$
264


The fair values of our U.S. Treasury securities, money market mutual funds and equity securities are based on quoted market prices in active markets with no valuation adjustment.
Most of our other-government related and corporate debt securities are investment grade with maturity dates of five years or less from the balance sheet date. Our other-government related debt securities portfolio is composed of securities with weighted-average credit ratings of A+ by Standard & Poor’s (S&P) or Fitch, Inc. (Fitch) and AA- or equivalent by Moody’s Investors Service, Inc. (Moody’s); and our corporate debt securities portfolio has a weighted-average credit rating of A- or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.
Our residential mortgage-, other mortgage- and asset-backed securities portfolio is composed entirely of senior tranches, with credit ratings of AA+ by S&P and AAA or equivalent by Moody’s or Fitch. We estimate the fair values of these securities by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs.
We value our other short-term interest-bearing securities at amortized cost, which approximates fair value given their near term maturity dates.
Substantially all of our foreign currency forward and option derivatives contracts have maturities of three years or less and all are with counterparties that have minimum credit ratings of A- or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency rates, LIBOR cash and swap rates and obligor credit default swap rates. In addition, inputs for our foreign currency option contracts also include implied volatility measures. These inputs, where applicable, are at commonly quoted intervals. See Note 17, Derivative instruments.
Our cross-currency swap contracts are with counterparties that have minimum credit ratings of A- or equivalent by S&P, Moody’s or Fitch. We estimate the fair values of these contracts by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, LIBOR, swap rates, obligor credit default swap rates and cross-currency basis swap spreads. See Note 17, Derivative instruments.
All of our interest rate swap contracts were terminated in May 2012. (See Note 17, Derivative instruments.) While outstanding, our interest rate swap contracts were with counterparties that had minimum credit ratings of A- or equivalent by S&P, Moody’s or Fitch. We estimated the fair values of these contracts by using an income-based industry standard valuation model for which all significant inputs were observable either directly or indirectly. These inputs included LIBOR, swap rates and obligor credit default swap rates.
As a result of our acquisition of BioVex in March 2011, we are obligated to pay its former shareholders up to $575 million of additional consideration contingent upon achieving up to eight separate regulatory and sales-related milestones with regard to talimogene laherparepvec, which was acquired in the acquisition and is currently in phase 3 clinical development for the treatment of malignant melanoma. The three largest of these potential payments are $125 million each, including the amount due upon completion of the filing of a BLA with the FDA. Potential payments are also due upon the first commercial sale in each of the United States and the EU following receipt of marketing approval which includes use of the product in specified patient populations and upon achievement of specified levels of sales within specified periods of time.
These contingent consideration obligations are recorded at their estimated fair values with any changes in fair value recognized in earnings. The fair value measurements of these obligations are based on significant unobservable inputs, including the estimated probabilities and timing of achieving the related regulatory events in connection with these milestones and, as applicable, estimated annual sales. Significant changes (increases or decreases) in these inputs would result in corresponding changes in the fair values of the contingent consideration obligations.
We revalue these contingent consideration obligations each reporting period until the related contingencies are resolved. We estimate the fair values of these obligations by using a combination of probability-adjusted discounted cash flows, option pricing techniques and a simulation model of expected annual sales. Quarterly, management in our R&D and commercial sales organizations review key assumptions used in the fair value measurements of these obligations. In the absence of any significant changes in key assumptions, the changes in fair values of these contingent consideration obligations reflect the passage of time and changes in our credit risk adjusted rate used to discount obligations to present value. During the year ended December 31, 2012, the increase in the estimated aggregate fair value of these obligations was $31 million, which was recorded in Other operating expenses in the Consolidated Statement of Income.
There have been no transfers of assets or liabilities between the fair value measurement levels, and there were no material remeasurements to fair value during the years ended December 31, 2012 and 2011, of assets and liabilities that are not measured at fair value on a recurring basis, except as discussed in Note 2, Business combinations, regarding an impairment of an indefinite-lived intangible asset and Note 8, Cost savings initiatives, regarding an impairment of fixed assets which were recognized during the year ended December 31, 2012.
Summary of the fair value of other financial instruments
Cash equivalents
The estimated fair values of cash equivalents approximate their carrying values due to the short-term nature of these financial instruments.
Borrowings
We estimate the fair values of our convertible notes (Level 2) by using an income-based industry standard valuation model for which all significant inputs are observable either directly or indirectly, including benchmark yields adjusted for our credit risk. The fair value of our convertible notes represents only the liability components of these instruments, because their equity components are included in Common stock and additional paid-in capital in the Consolidated Balance Sheets. We estimate the fair values of our other long-term notes (Level 2) by taking into consideration indicative prices obtained from a third-party financial institution that utilizes industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable either directly or indirectly. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; credit spreads; benchmark yields; foreign currency exchange rates, as applicable; and other observable inputs. As of December 31, 2012 and 2011, the aggregate fair values of our long-term debt were $29.9 billion and $23.0 billion, respectively, and the carrying values were $26.5 billion and $21.4 billion, respectively.
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Derivative instruments
12 Months Ended
Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivative instruments
Derivative instruments
The Company is exposed to foreign currency exchange rate and interest rate risks related to its business operations. To reduce our risks related to these exposures, we utilize or have utilized certain derivative instruments, including foreign currency forward, foreign currency option, cross-currency swap, forward interest rate and interest rate swap contracts. We do not use derivatives for speculative trading purposes.
Cash flow hedges
We are exposed to possible changes in the values of certain anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates, associated primarily with our euro-denominated international product sales. Increases and decreases in the cash flows associated with our international product sales due to movements in foreign currency exchange rates are offset partially by the corresponding increases and decreases in our international operating expenses resulting from these foreign currency exchange rate movements. To further reduce our exposure to foreign currency exchange rate fluctuations on our international product sales, we enter into foreign currency forward and option contracts to hedge a portion of our projected international product sales over a three-year time horizon, with, at any given point in time, a higher percentage of nearer-term projected product sales being hedged than in successive periods. As of December 31, 2012, 2011 and 2010, we had open foreign currency forward contracts with notional amounts of $3.7 billion, $3.5 billion and $3.2 billion, respectively, and open foreign currency option contracts with notional amounts of $200 million, $292 million and $398 million, respectively. These foreign currency forward and option contracts, primarily euro based, have been designated as cash flow hedges, and accordingly, the effective portions of the unrealized gains and losses on these contracts are reported in AOCI and reclassified to earnings in the same periods during which the hedged transactions affect earnings.
To hedge our exposure to foreign currency exchange rate risk associated with certain of our long-term notes denominated in foreign currencies, we entered into cross-currency swap contracts. Under the terms of these contracts, we paid euros/pounds sterling and received U.S. dollars for the notional amounts at the inception of the contracts, and we exchange interest payments based on these notional amounts at fixed rates over the lives of the contracts in which we pay U.S. dollars and receive euros/pounds sterling. In addition, we will pay U.S. dollars to and receive euros/pounds sterling from the counterparties at the maturities of the contracts for these same notional amounts. The terms of these contracts correspond to the related hedged notes, effectively converting the interest payments and principal repayment on these notes from euros/pounds sterling to U.S. dollars. These cross-currency swap contracts have been designated as cash flow hedges, and accordingly, the effective portions of the unrealized gains and losses on these contracts are reported in AOCI and reclassified to earnings in the same periods during which the hedged debt affects earnings. The notional amounts and interest rates of our cross-currency swaps are as follows (notional amounts in millions):
 
 
Foreign currency
 
U.S. dollars
Hedged notes
 
Notional Amount
 
Interest rate
 
Notional Amount
 
Interest rate
2.125% 2019 euro Notes
 
675

 
2.125
%
 
$
864

 
2.6
%
5.50% 2026 pound sterling Notes
 
£
475

 
5.50
%
 
$
748

 
5.8
%
4.00% 2029 pound sterling Notes
 
£
700

 
4.00
%
 
$
1,122

 
4.3
%

In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable Treasury rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on such contracts, which are designated as cash flow hedges, are reported in AOCI and amortized into earnings over the lives of the associated debt issuances.
The effective portion of the unrealized gain/(loss) recognized in other comprehensive income for our derivative instruments designated as cash flow hedges was as follows (in millions):
 
Years ended December 31,
Derivatives in cash flow hedging relationships
2012
 
2011
 
2010
Foreign currency contracts
$
(63
)
 
$
(25
)
 
$
191

Cross-currency swap contracts
85

 
(26
)
 

Forward interest rate contracts
(7
)
 

 
(5
)
Total
$
15

 
$
(51
)
 
$
186


The location in the Consolidated Statements of Income and the effective portion of the gain/(loss) reclassified from AOCI into earnings for our derivative instruments designated as cash flow hedges were as follows (in millions):
 
 
 
 
Years ended December 31,
Derivatives in cash flow hedging relationships
 
Statements of Income location
 
2012
 
2011
 
2010
Foreign currency contracts
 
Product sales
 
$
74

 
$
(108
)
 
$
47

Cross-currency swap contracts
 
Interest and other income, net
 
61

 
(3
)
 

Forward interest rate contracts
 
Interest expense, net
 
(1
)
 
(1
)
 
(1
)
Total
 
 
 
$
134

 
$
(112
)
 
$
46


No portions of our cash flow hedge contracts are excluded from the assessment of hedge effectiveness, and the ineffective portions of these hedging instruments were approximately $1 million of losses for both the years ended December 31, 2012 and 2010, and approximately $1 million of gain for the year ended December 31, 2011. As of December 31, 2012, the amounts expected to be reclassified from AOCI into earnings over the next 12 months are approximately $20 million of net losses on our foreign currency and cross-currency swap contracts and approximately $1 million of losses on forward interest rate contracts.
Fair value hedges
To achieve a desired mix of fixed and floating interest rates on our long-term debt, we entered into interest rate swap contracts, which qualified and were designated as fair value hedges. The terms of these interest rate swap contracts corresponded to the related hedged debt instruments and effectively converted a fixed interest rate coupon to a floating LIBOR-based coupon over the lives of the respective notes. While outstanding, the rates on these swaps ranged from LIBOR plus 0.3% to LIBOR plus 2.6%. As of December 31, 2011 and 2010, we had interest rate swap contracts with aggregate notional amounts of $3.6 billion with respect to our 4.85% 2014 Notes, 5.85% 2017 Notes, 6.15% 2018 Notes and 5.70% 2019 Notes. Due to historically low interest rates, in May 2012 we terminated all of these interest rate swap contracts resulting in the receipt of $397 million from the counterparties, which was included in Net cash provided by operating activities in the Consolidated Statements of Cash Flows for the current year period. This amount is being recognized in Interest expense, net in the Consolidated Statements of Income over the remaining lives of the related debt issuances.
For derivative instruments that are designated and qualify as fair value hedges, the unrealized gain or loss on the derivative resulting from the change in fair value during the period as well as the offsetting unrealized loss or gain of the hedged item resulting from the change in fair value during the period attributable to the hedged risk is recognized in current earnings. While the interest rate swaps were outstanding during the year ended December 31, 2012, and the years ended December 31, 2011 and 2010, we included unrealized losses on the hedged debt of $20 million, $182 million and $105 million, respectively, in the same line item, Interest expense, net, in the Consolidated Statements of Income, as the offsetting unrealized gains of $20 million, $182 million and $105 million, respectively, on the related interest rate swap agreements.
Derivatives not designated as hedges
We enter into foreign currency forward contracts that are not designated as hedging transactions to reduce our exposure to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies. These exposures are hedged on a month-to-month basis. As of December 31, 2012, 2011 and 2010, the total notional amounts of these foreign currency forward contracts were $629 million, $389 million and $670 million, respectively.
The location in the Consolidated Statements of Income and the amount of gain/(loss) recognized in earnings for our derivative instruments not designated as hedging instruments were as follows (in millions):
 
 
 
 
Years ended December 31,
Derivatives not designated as hedging instruments
 
Statements of Income location
 
2012
 
2011
 
2010
Foreign currency contracts
 
Interest and other income, net
 
$
19

 
$
(1
)
 
$
32


The fair values of derivatives included in the Consolidated Balance Sheets were as follows (in millions):
 
Derivative assets
 
Derivative liabilities
December 31, 2012
Balance Sheet location
 
Fair value
 
Balance Sheet location
 
Fair value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Cross-currency swap contracts
Other current assets/ Other noncurrent assets
 
$
65

 
Accrued liabilities/ Other noncurrent liabilities
 
$
6

Foreign currency contracts
Other current assets/ Other noncurrent assets
 
45

 
Accrued liabilities/ Other noncurrent liabilities
 
58

Total derivatives designated as hedging instruments
 
 
110

 
 
 
64

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
1

 
Accrued liabilities
 
1

Total derivatives not designated as hedging instruments
 
 
1

 
 
 
1

Total derivatives
 
 
$
111

 
 
 
$
65

 
Derivative assets
 
Derivative liabilities
December 31, 2011
Balance Sheet location
 
Fair value
 
Balance Sheet location
 
Fair value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Interest rate swap contracts
Other current assets/ Other noncurrent assets
 
$
377

 
Accrued liabilities/ Other noncurrent liabilities
 
$

Cross-currency swap contracts
Other current assets/ Other noncurrent assets
 

 
Accrued liabilities/ Other noncurrent liabilities
 
26

Foreign currency contracts
Other current assets/ Other noncurrent assets
 
172

 
Accrued liabilities/ Other noncurrent liabilities
 
48

Total derivatives designated as hedging instruments
 
 
549

 
 
 
74

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 

 
Accrued liabilities
 

Total derivatives not designated as hedging instruments
 
 

 
 
 

Total derivatives
 
 
$
549

 
 
 
$
74


Our derivative contracts that were in liability positions as of December 31, 2012, contain certain credit-risk-related contingent provisions that would be triggered if: (i) we were to undergo a change in control and (ii) our or the surviving entity’s creditworthiness deteriorates, which is generally defined as having either a credit rating that is below investment grade or a materially weaker creditworthiness after the change in control. If these events were to occur, the counterparties would have the right, but not the obligation, to close the contracts under early-termination provisions. In such circumstances, the counterparties could request immediate settlement of these contracts for amounts that approximate the then current fair values of the contracts.
The cash flow effects of our derivatives contracts for the three years ended December 31, 2012, are included within Net cash provided by operating activities in the Consolidated Statements of Cash Flows.
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Contingencies and commitments
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Contingencies and commitments
Contingencies and commitments
Contingencies
In the ordinary course of business, we are involved in various legal proceedings and other matters, including those discussed in this Note, that are complex in nature and have outcomes that are difficult to predict.

We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We evaluate, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that has been accrued previously.

Our legal proceedings range from cases brought by a single plaintiff to a class action with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims (including but not limited to patent infringement, marketing, pricing and trade practices and securities law), some of which present novel factual allegations and/or unique legal theories. In each of the matters described in this filing, plaintiffs seek an award of a not-yet-quantified amount of damages or an amount that is not material. In addition, a number of the matters pending against us are at very early stages of the legal process (which in complex proceedings of the sort faced by us often extend for several years). As a result, none of the matters described in these filings have progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate a range of possible loss, if any, or such amounts are not material. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
 
Certain of our legal proceedings and other matters are discussed below:
    
Federal Securities Litigation - In re Amgen Inc. Securities Litigation

The six federal class action stockholder complaints filed against Amgen Inc., Kevin W. Sharer, Richard D. Nanula, Dennis M. Fenton, Roger M. Perlmutter, Brian M. McNamee, George J. Morrow, Edward V. Fritzky, Gilbert S. Omenn and Franklin P. Johnson, Jr., (the Federal Defendants) in the U.S. District Court for the Central District of California (the California Central District Court) on April 17, 2007 (Kairalla v. Amgen Inc., et al.), May 1, 2007 (Mendall v. Amgen Inc., et al., & Jaffe v. Amgen Inc., et al.), May 11, 2007 (Eldon v. Amgen Inc., et al.), May 21, 2007 (Rosenfield v. Amgen Inc., et al.) and June 18, 2007 (Public Employees' Retirement Association of Colorado v. Amgen Inc., et al.) were consolidated by the California Central District Court into one action captioned In re Amgen Inc. Securities Litigation. The consolidated complaint was filed with the California Central District Court on October 2, 2007. The consolidated complaint alleges that Amgen and these officers and directors made false statements that resulted in: (i) deceiving the investing public regarding Amgen's prospects and business; (ii) artificially inflating the prices of Amgen's publicly traded securities and (iii) causing plaintiff and other members of the class to purchase Amgen publicly traded securities at inflated prices. The complaint also makes off-label marketing allegations that, throughout the class period, the Federal Defendants improperly marketed Aranesp® and EPOGEN® for off-label uses while aware that there were alleged safety signals with these products. The plaintiffs seek class certification, compensatory damages, legal fees and other relief deemed proper. The Federal Defendants filed a motion to dismiss on November 8, 2007. On February 4, 2008, the California Central District Court granted in part, and denied in part, the Federal Defendants' motion to dismiss the consolidated amended complaint. Specifically, the California Central District Court granted the Federal Defendants' motion to dismiss as to individual defendants Fritzky, Omenn, Johnson, Fenton and McNamee, but denied the Federal Defendants' motion to dismiss as to individual defendants Sharer, Nanula, Perlmutter and Morrow.

A class certification hearing before the California Central District Court, was held on July 17, 2009 and on August 12, 2009, the California Central District Court granted plaintiffs' motion for class certification. On August 28, 2009, Amgen filed a petition for permission to appeal with the U.S. Court of Appeals for the Ninth Circuit (the Ninth Circuit Court) under Rule 23(f), regarding the Order on Class Certification and the Ninth Circuit Court granted Amgen's permission to appeal on December 11, 2009. On February 2, 2010, the California Central District Court granted Amgen's motion to stay the underlying action pending the outcome of the Ninth Circuit Court 23(f) appeal. On October 14, 2011, the appeal under Rule 23(f) was argued before the Ninth Circuit Court and on December 28, 2011, the Ninth Circuit Court denied the appeal. Amgen filed a petition for certiorari with the U.S. Supreme Court on March 3, 2012, and on June 11, 2012, the Court granted Amgen's petition. Oral argument occurred on November 5, 2012. On February 27, 2013, the U.S. Supreme Court affirmed the decision of the Ninth Circuit Court and remanded the case back to the California Central District Court for further proceedings.

State Derivative Litigation

Larson v. Sharer, et al.

The three state stockholder derivative complaints filed against Amgen Inc., Kevin W. Sharer, George J. Morrow, Dennis M. Fenton, Brian M. McNamee, Roger M. Perlmutter, David Baltimore, Gilbert S. Omenn, Judith C. Pelham, Frederick W. Gluck, Jerry D. Choate, J. Paul Reason, Frank J. Biondi, Jr., Leonard D. Schaeffer, Frank C. Herringer, Richard D. Nanula, Willard H. Dere, Edward V. Fritzky, Franklin P. Johnson, Jr. and Donald B. Rice as defendants (the State Defendants) on May 1, 2007 (Larson v. Sharer, et al., & Anderson v. Sharer, et al.), and August 13, 2007 (Weil v. Sharer, et al.) in the Superior Court of the State of California, Ventura County (the Superior Court) were consolidated by the Superior Court under one action captioned Larson v. Sharer, et al. The consolidated complaint was filed on July 5, 2007. The complaint alleges that the State Defendants breached their fiduciary duties, wasted corporate assets, were unjustly enriched and violated the California Corporations Code. Plaintiffs allege that the State Defendants failed to disclose and/or misrepresented results of Aranesp® clinical studies, marketed both Aranesp® and EPOGEN® for off-label uses and that these actions or inactions caused stockholders to suffer damages. The complaints also allege insider trading by the State Defendants. The plaintiffs seek treble damages based on various causes of action, reformed corporate governance, equitable and/or injunctive relief, restitution, disgorgement of profits, benefits and other compensation, and legal costs.

An amended consolidated complaint was filed on March 13, 2008, adding Anthony Gringeri as a State Defendant and removing the causes of action for insider selling and misappropriation of information, violation of California Corporations Code Section 25402 and violation of California Corporations Code Section 25403. On July 14, 2008, the Superior Court dismissed without prejudice the consolidated state derivative class action. The judge also ordered a stay of any re-filing of an amended complaint until the federal court has determined in the In re Amgen Inc. Securities Litigation action whether any securities fraud occurred.

Birch v. Sharer, et al.

On January 23, 2009, a stockholder derivative lawsuit titled Birch v. Sharer, et al. was filed in the Superior Court of the State of California, Los Angeles County (the Los Angeles Superior Court) naming Amgen Inc., Kevin W. Sharer, David Baltimore, Frank J. Biondi, Jr., Jerry D. Choate, Vance D. Coffman, Frederick W. Gluck, Frank C. Herringer, Gilbert S. Omenn, Judith C. Pelham, J. Paul Reason, Leonard D. Schaeffer and Tom Zindrick as defendants. The complaint alleges derivative claims for breach of fiduciary duty based on a purported failure to implement adequate internal controls and to oversee the Company's operations, which plaintiff claims resulted in numerous lawsuits and investigations over a number of years. Plaintiff seeks damages on behalf of Amgen, including costs and expenses, allegedly incurred, among other things, in connection with wrongful termination lawsuits and potential violations of the Health Insurance Portability and Accountability Act. On February 25, 2009, the case was reassigned to a judge in the Complex Department of the Los Angeles Superior Court. Amgen and the individual defendants filed motions to dismiss on June 23, 2009.

Oral argument on Amgen and the individual defendants' motions to dismiss were heard on September 25, 2009 before the Los Angeles Superior Court and the court granted the motions to dismiss but allowed the plaintiff an opportunity to amend her complaint by October 21, 2009. Plaintiff filed a request for dismissal without prejudice with the court on October 23, 2009. On October 29, 2009, Amgen received from plaintiff a stockholder demand on the Board of Directors to take action to remedy breaches of fiduciary duties by the directors and certain executive officers of the Company. Ms. Birch alleged that the directors and certain executive officers violated their core fiduciary principles, causing Amgen to suffer damages. She demanded that the Board of Directors take action against each of the officers and directors to recover damages and to correct deficiencies in the Company's internal controls that allowed the misconduct to occur. The Board of Directors completed its investigation and determined in its business judgment that it was not in the best interests of the Company to pursue the claims made in the demand against any of the individuals mentioned in the demand. Therefore, the Board voted to reject the demand and communicated this to Ms. Birch on May 19, 2010.

On February 8, 2010, plaintiff filed another stockholder demand lawsuit in the Los Angeles Superior Court against the same defendants in the original lawsuit but also added Board of Director members François de Carbonnel and Rebecca Henderson. The allegations in the new complaint are nearly identical to those in the previously filed complaint. The case filed on February 8, 2010 by plaintiff Birch was assigned to the Complex Division of the Los Angeles Superior Court. On June 30, 2010, Amgen filed its demurrer to plaintiff's complaint with the Complex Division of the Los Angeles Superior Court. On September 29, 2010, the Complex Division of the Los Angeles Superior Court denied Amgen's and the individual defendants' demurrers finding that the plaintiff had adequately pled wrongful refusal. Amgen and the individual defendants filed answers on October 29, 2010. On December 9, 2010, the Complex Division of the Los Angeles Superior Court stayed the underlying action and Amgen and the individual defendants filed a motion for judgment on the pleadings/motion for summary judgment. The motion for the judgment on the pleadings was heard on January 31, 2011 and the Complex Division of the Los Angeles Superior Court dismissed the entire lawsuit with prejudice against both Amgen and the individual defendants without leave to amend. Following an appeal by plaintiff, on June 21, 2012, the California State Appellate Court reversed the decision of the Complex Division of the Los Angeles Superior Court. The case has been re-assigned to Judge Kenneth Freeman and Amgen and the individual defendants filed motions for summary judgment on November 19, 2012. The motions for summary judgment will be heard on April 16, 2013.

Purnell v. Sharer, et al.

On January 24, 2013, a stockholder derivative lawsuit titled Purnell v. Sharer, et al. was filed in the Superior Court against Amgen Inc., Kevin W. Sharer, Robert A. Bradway, David Baltimore, Frank J. Biondi, Jr., Vance D. Coffman, François de Carbonnel, Rebecca M. Henderson, Frank C. Herringer, Leroy M. Hood, Tyler Jacks, Gilbert S. Omenn, Judith C. Pelham, J. Paul Reason, Leonard D. Schaeffer and Ronald D. Sugar as defendants. The lawsuit alleges that the individual defendants breached their fiduciary duties by failing to implement adequate internal controls which resulted on December 19, 2012 in the civil settlement, corporate integrity agreement and criminal misdemeanor plea in connection with the Federal Investigations (see Government Investigations and Qui Tam Actions below).

Federal Derivative Litigation

On May 7, 2007, the stockholder derivative lawsuit of Durgin v. Sharer, et al., was filed in the California Central District Court and named Amgen Inc., Kevin W. Sharer, George J. Morrow, Dennis M. Fenton, Brian M. McNamee, Roger M. Perlmutter, David Baltimore, Gilbert S. Omenn, Judith C. Pelham, Frederick W. Gluck, Jerry D. Choate, J. Paul Reason, Frank J. Biondi, Jr., Leonard D. Schaeffer, Frank C. Herringer, Richard D. Nanula, Edward V. Fritzky and Franklin P. Johnson, Jr. as defendants. The complaint alleges the same claims and requests the same relief as in the three state stockholder derivative complaints now consolidated as Larson v. Sharer, et al. The case has been stayed for all purposes until thirty days after a final ruling on the motion to dismiss by the California Central District Court in the In re Amgen Inc. Securities Litigation action.

On September 21, 2007, the stockholder derivative lawsuit of Rosenblum v. Sharer, et al., was filed in the California Central District Court. This lawsuit was brought by a stockholder who previously made a demand on the Amgen Board on May 14, 2007. The complaint alleges that the defendants breached their fiduciary duties, wasted corporate assets and were unjustly enriched. Plaintiffs allege that the defendants failed to disclose and/or misrepresented results of Aranesp® clinical studies, marketed both Aranesp® and EPOGEN® for off-label uses and that these actions or inactions as well as the Amgen market strategy caused damage to the Company resulting in several inquiries, investigations and lawsuits that are costly to defend. The complaint also alleges insider trading by the defendants. The plaintiffs seek treble damages based on various causes of action, reformed corporate governance, equitable and/or injunctive relief, restitution, disgorgement of profits, benefits and other compensation, and legal costs. The case was stayed for all purposes until thirty days after a final ruling on the motion to dismiss by the California Central District Court in the In re Amgen Inc. Securities Litigation action.

Thereafter, on May 1, 2008, plaintiff in Rosenblum v. Sharer, et al., filed an amended complaint which removed Dennis Fenton as a defendant and also eliminated the claims for insider selling by defendants. On July 28, 2008, the California Central District Court heard Amgen and the defendants' motion to dismiss and motion to stay. On July 30, 2008, the California Central District Court granted Amgen and the defendants' motion to dismiss without prejudice and also granted a stay of the case pending resolution of the In re Amgen Inc. Securities Litigation action.

ERISA Litigation

On August 20, 2007, the ERISA class action lawsuit of Harris v. Amgen Inc., et al., was filed in the California Central District Court and named Amgen Inc., Kevin W. Sharer, Frank J. Biondi, Jr., Jerry Choate, Frank C. Herringer, Gilbert S. Omenn, David Baltimore, Judith C. Pelham, Frederick W. Gluck, Leonard D. Schaeffer, Jacqueline Allred, Raul Cermeno, Jackie Crouse, Lori Johnston, Michael Kelly and Charles Bell as defendants. Plaintiffs claim that Amgen and the individual defendants breached their fiduciary duties by failing to inform current and former employees who participated in the Amgen Retirement and Savings Plan and the Retirement and Savings Plan for Amgen Manufacturing Limited of the alleged off-label promotion of both Aranesp® and EPOGEN® while a number of studies allegedly demonstrated safety concerns in patients using ESAs. On February 4, 2008, the California Central District Court dismissed the complaint with prejudice as to plaintiff Harris, who had filed claims against Amgen Inc. The claims alleged by the second plaintiff, Ramos, were also dismissed but the court granted the plaintiff leave to amend his complaint. On February 1, 2008, the plaintiffs appealed the decision by the California Central District Court to dismiss the claims of both plaintiffs Harris and Ramos to the Ninth Circuit Court. On May 19, 2008, plaintiff Ramos in the Harris v. Amgen Inc., et al., action filed another lawsuit captioned Ramos v. Amgen Inc., et al., in the California Central District Court. The lawsuit is another ERISA class action. The Ramos v. Amgen Inc., et al., matter names the same defendants in the Harris v. Amgen Inc., et al., matter plus four new defendants: Amgen Manufacturing Limited, Richard Nanula, Dennis Fenton and the Fiduciary Committee. On July 14, 2009, the Ninth Circuit Court reversed the California Central District Court's decision in the Harris matter and remanded the case back to the California Central District Court. In the meantime, a third ERISA class action was filed by Don Hanks on June 2, 2009 in the California Central District Court alleging the same ERISA violations as in the Harris and Ramos lawsuits.

On August 10, 2009, the Harris, Ramos and Hanks matters were consolidated by the California Central District Court into one action captioned Harris, et. al. v. Amgen Inc. On October 13, 2009, the California Central District Court granted plaintiffs Harris' and Ramos' motion to be appointed interim co-lead counsel. Plaintiffs filed an amended complaint on November 11, 2009 and added two additional plaintiffs, Jorge Torres and Albert Cappa. Amgen filed a motion to dismiss the amended/consolidated complaint, and on March 2, 2010, the California Central District Court dismissed the entire lawsuit without prejudice. Plaintiffs filed an amended complaint on March 23, 2010. Amgen then filed another motion to dismiss on April 20, 2010. On June 16, 2010, the California Central District Court entered an order dismissing the entire lawsuit with prejudice. On June 24, 2010, the plaintiffs filed a notice of appeal with the Ninth Circuit Court. Petitioner's opening brief was served on December 20, 2010 and Amgen's answering brief was filed on February 2, 2011. Oral argument occurred on February 17, 2012.

Government Investigations and Qui Tam Actions

On May 10, 2007, Amgen received a subpoena from the Attorney General of the State of New York seeking documents related to Amgen's promotional activities, sales and marketing activities, medical education, clinical studies, pricing and contracting, license and distribution agreements and corporate communications. Amgen fully cooperated in responding to the subpoena.

Beginning in late 2007, Amgen received a number of subpoenas from the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington, pursuant to the Health Insurance Portability and Accountability Act (18 U.S.C. 3486), for broad production of documents relating to its products and clinical trials. Amgen fully cooperated with the government's document requests. Over the next several years, numerous current and former Amgen employees received civil and grand jury subpoenas to provide testimony on a wide variety of subjects. We refer herein to these investigations conducted by the U.S. Attorney's Offices for the Eastern District of New York and the Western District of Washington as the Federal Investigations.

On January 14, 2008, Amgen received a subpoena from the New Jersey Attorney General's Office for production of documents relating to one of its products. Amgen completed its response per the terms of the subpoena.

A U.S. government filing in the U.S. District Court for the District of Massachusetts (the Massachusetts District Court) concerning the partially unsealed complaint filed pursuant to the Qui Tam provisions of the Federal Civil False Claims Act and on behalf of 17 named states and the District of Columbia under their respective State False Claims Acts (the Massachusetts Qui Tam Action) became public on or about May 7, 2009. The filing represented that, in addition to the Massachusetts Qui Tam Action, there were nine other actions under the False Claim Act pending under seal against Amgen, including eight pending in the U.S. District Court for the Eastern District of New York (the New York Eastern District Court) and one pending in the U.S. District Court for the Western District of Washington. Together, with the Massachusetts Qui Tam Action, we refer to these actions as the Original Qui Tam Actions. In the filing made public on May 7, 2009, the U.S. government represented that these ten Original Qui Tam Actions alleged that Amgen engaged in a wide variety of illegal marketing practices with respect to various Amgen products and that these were joint civil and criminal investigations being conducted by a wide variety and large number of federal and state agencies.

On September 1, 2009, the U.S. government filed a notice of non-intervention and 14 states and the District of Columbia filed notices of intervention in the Massachusetts Qui Tam Action. On October 30, 2009, 14 states and the District of Columbia filed an amended complaint in the Massachusetts District Court entitled The United States of America, States of California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Michigan, Nevada, New Hampshire, New Mexico, New York, Tennessee and Texas and the Commonwealths of Massachusetts and Virginia and the District of Columbia, ex rel Kassie Westmoreland v. Amgen Inc., Integrated Nephrology Network, AmerisourceBergen Specialty Group, ASD Healthcare and AmerisourceBergen Corporation. The relator, Kassie Westmoreland, also filed a second amended complaint with the Massachusetts District Court on the same day. The complaints alleged violations of the federal Anti-Kickback Statute and violations of state false claims act statutes with regard to Amgen's marketing of overfill in vials of Aranesp® and with regard to Amgen's relationship with the Integrated Nephrology Network (INN), a group purchasing organization. The relator's seconded amended complaint also alleged that Amgen retaliated against and wrongfully terminated Ms. Westmoreland.

On January 20, 2010, the states of Florida and Texas voluntarily dismissed their complaints against Amgen. On February 12, 2010, February 16, 2010 and February 18, 2010, respectively, the states of New Hampshire, Louisiana and Nevada voluntarily dismissed their complaints against Amgen. On February 23, 2010, the state of Delaware voluntarily dismissed its complaint against Amgen. Also, on February 23, 2010, the Massachusetts District Court granted Amgen's motion to stay and sever the relator's employment claims.

On April 23, 2010, the Massachusetts District Court dismissed all of the claims of the relator, on behalf of the federal government and the states of New Mexico and Georgia, and all of the claims of the remaining states, for failure to state valid legal grounds upon which relief could be granted. On May 26, 2010, the Massachusetts District Court granted leave for the relator to file a fourth amended complaint. On May 24, 2010, the states of New York, Massachusetts, Michigan, California, Illinois, and Indiana filed notices of intent to appeal the Massachusetts District Court's judgment to the U.S. Court of Appeals for the First Circuit (the First Circuit Court).

On September 20, 2010, the Massachusetts District Court entered a written ruling denying Amgen's motions to dismiss the relator's fourth amended complaint. On April 11, 2011, the Massachusetts District Court heard summary judgment arguments on the fourth amended complaint from Amgen, INN and the relator. On July 22, 2011, the First Circuit Court issued a written decision reversing the Massachusetts District Court's dismissal of the claims of the states of California, Illinois, Indiana, Massachusetts, New Mexico, and New York and affirming the dismissal of the claims of Georgia.

In March 2011, the U.S. Attorney's Office of the Western District of Washington informed Amgen that the subject matter of its investigation would be transferred to the U.S. Attorney's Office of the Eastern District of New York.

In October 2011, Amgen announced it had reached an agreement in principle to settle allegations relating to its sales and marketing practices arising out of the Federal Investigations, and on December 19, 2012, Amgen announced that it had finalized a settlement agreement (the Settlement Agreement), with the U.S. government, 49 states and the District of Columbia. The Settlement Agreement resolved the Federal Investigations, the related state Medicaid claims (except for those of the State of South Carolina) and the claims of nine of the ten Original Qui Tam Actions. The Settlement Agreement also resolved the claims of one of the other civil qui tam actions that had not been included in the agreement in principle but of which Amgen was made aware during settlement discussions (see below). This additional qui tam action resolved by the Settlement Agreement (the Additional Qui Tam) included allegations that Amgen's promotional, contracting, sales and marketing activities and arrangements relating to ENBREL caused the submission of various false claims under the Federal Civil False Claims Act and various State False Claims Acts. Under the Settlement Agreement, Amgen paid approximately $612 million to resolve its civil liability related to certain promotional practices related to the drugs Aranesp®, EPOGEN®, NEUPOGEN®, Neulasta®, ENBREL and Sensipar® as alleged in the unsealed qui tam complaints and $150 million to resolve its criminal liability relating to the marketing of Aranesp®, as well as accrued interest.

As part of the Settlement Agreement, Amgen pled guilty to a single misdemeanor count of misbranding Aranesp® by promoting it in a way that was different from the dosages in the label. The plea was entered on December 18, 2012 in the New York Eastern District Court and was accepted by the court on December 19, 2012. In connection with entering into the Settlement Agreement, Amgen also entered into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services that requires Amgen to maintain its corporate compliance program and to undertake a set of defined corporate integrity obligations for a period of five years. In February 2013, Amgen resolved the state Medicaid claims of the State of South Carolina related to the Federal Investigations for an immaterial amount. Amgen has accrued an immaterial amount to resolve the remaining Original Qui Tam Action, which remains pending in the New York Eastern District Court.

As part of the settlement described above, Amgen was made aware that it was a defendant in several other civil qui tam actions (the Other Qui Tams) in addition to those included in the October 2011 agreement in principle. As stated above, the Additional Qui Tam was resolved by the Settlement Agreement. Amgen has been dismissed from two of the Other Qui Tams: U.S. ex rel. May v. Amgen, et al. and another matter that continues under seal against other defendants. Amgen has reached a separate agreement in principle and continues to expect to enter into a written settlement agreement to resolve a fourth Other Qui Tam, for which Amgen has accrued an immaterial amount; that matter will remain under seal in the U.S. federal court where it was filed until the settlement agreement is signed. The fifth and final Other Qui Tam action remains under seal in the U.S. federal court in which it was filed and includes allegations that Amgen's promotional, contracting, sales and marketing activities and arrangements relating to Aranesp®, NEUPOGEN®, Neulasta®, XGEVA®, Prolia®, Vectibix® and Nplate® caused the submission of various false claims under the Federal Civil False Claims Act and various State False Claims Acts. Amgen continues to cooperate fully with the government in its investigation of these allegations.

Commitments
We lease certain facilities and equipment related primarily to administrative, R&D, sales and marketing activities under non-cancelable operating leases that expire through 2032. The following table summarizes the minimum future rental commitments under non-cancelable operating leases as of December 31, 2012 (in millions):
2013
$
121

2014
97

2015
90

2016
79

2017
67

Thereafter
287

Total minimum operating lease commitments
$
741


Included in the table above are future rental commitments for abandoned leases in the amount of $331 million. Rental expense on operating leases for the years ended December 31, 2012, 2011 and 2010, was $117 million, $131 million and $115 million, respectively.
In addition, we have minimum contractual purchase commitments with third-party manufacturers through 2014 that total $39 million as of December 31, 2012. Amounts purchased under these contractual purchase commitments for the years ended December 31, 2012, 2011 and 2010, were $123 million, $87 million and $68 million, respectively.
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Segment information
12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
Segment information
Segment information
We operate in one business segment — human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Enterprise-wide disclosures about product sales; revenues and long-lived assets by geographic area; and revenues from major customers are presented below.
Revenues
Revenues were as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Product sales:
 
 
 
 
 
Neulasta® 
$
4,092

 
$
3,952

 
$
3,558

NEUPOGEN® 
1,260

 
1,260

 
1,286

ENBREL
4,236

 
3,701

 
3,534

Aranesp® 
2,040

 
2,303

 
2,486

EPOGEN® 
1,941

 
2,040

 
2,524

Sensipar®/Mimpara®
950

 
808

 
714

Vectibix® 
359

 
322

 
288

Nplate® 
368

 
297

 
229

XGEVA® 
748

 
351

 
8

Prolia® 
472

 
203

 
33

Other
173

 
58

 

Total product sales
16,639

 
15,295

 
14,660

Other revenues
626

 
287

 
393

Total revenues
$
17,265

 
$
15,582

 
$
15,053


Geographic information
Outside the United States, we sell products principally in Europe and Canada. The geographic classification of product sales was based on the location of the customer. The geographic classification of all other revenues was based on the domicile of the entity from which the revenues were earned.
Certain geographic information with respect to revenues and long-lived assets (consisting of property, plant and equipment) was as follows (in millions):
 
Years ended December 31,
 
2012
 
2011
 
2010
Revenues:
 
 
 
 
 
United States
$
13,415

 
$
11,985

 
$
11,636

ROW
3,850

 
3,597

 
3,417

Total revenues
$
17,265

 
$
15,582

 
$
15,053

 
December 31,
 
2012
 
2011
Long-lived assets:
 
 
 
United States
$
2,906

 
$
3,144

Puerto Rico
1,908

 
1,993

ROW
512

 
283

Total long-lived assets
$
5,326

 
$
5,420


Major customers
In the United States, we sell primarily to pharmaceutical wholesale distributors. We utilize those wholesale distributors as the principal means of distributing our products to healthcare providers. In Europe, we sell principally to healthcare providers and/or pharmaceutical wholesale distributors depending on the distribution practice in each country. We monitor the financial condition of our larger customers, and we limit our credit exposure by setting credit limits and, for certain customers, by requiring letters of credit.
We had product sales to three customers each accounting for more than 10% of total revenues for the years ended December 31, 2012, 2011 and 2010. For 2012, on a combined basis, these customers accounted for 76% and 94% of worldwide gross revenues and U.S. gross product sales, respectively, as noted in the following table. Certain information with respect to these customers for the years ended December 31, 2012, 2011 and 2010, was as follows (dollar amounts in millions):
 
2012
 
2011
 
2010
AmerisourceBergen Corporation:
 
 
 
 
 
Gross product sales
$
7,556

 
$
7,574

 
$
7,678

% of total gross revenues
34
%
 
36
%
 
38
%
% of U.S. gross product sales
43
%
 
45
%
 
47
%
McKesson Corporation:
 
 
 
 
 
Gross product sales
$
5,898

 
$
4,591

 
$
3,913

% of total gross revenues
27
%
 
22
%
 
19
%
% of U.S. gross product sales
32
%
 
27
%
 
24
%
Cardinal Health, Inc.:
 
 
 
 
 
Gross product sales
$
3,245

 
$
3,021

 
$
2,813

% of total gross revenues
15
%
 
14
%
 
14
%
% of U.S. gross product sales
19
%
 
18
%
 
17
%

At December 31, 2012 and 2011, amounts due from these three customers each exceeded 10% of gross trade receivables and accounted for 61% and 60%, respectively, of net trade receivables on a combined basis. At December 31, 2012 and 2011, 36% and 39%, respectively, of trade receivables, net were due from customers located outside the United States, primarily in Europe. Our total allowance for doubtful accounts as of December 31, 2012 and 2011, was not material.
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Quarterly financial data
12 Months Ended
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
Quarterly financial data (unaudited)
Quarterly financial data (unaudited)
 
2012 Quarters ended
(In millions, except per share data)
December 31
 
September  30
 
June 30
 
March 31
Product sales
$
4,337

 
$
4,201

 
$
4,200

 
$
3,901

Gross profit from product sales
3,485

 
3,496

 
3,518

 
3,222

Net income
788

 
1,107

 
1,266

 
1,184

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.03

 
$
1.44

 
$
1.63

 
$
1.50

Diluted
$
1.01

 
$
1.41

 
$
1.61

 
$
1.48

 
2011 Quarters ended
(In millions, except per share data)
December  31
 
September  30(1)
 
June 30
 
March 31
Product sales
$
3,907

 
$
3,877

 
$
3,893

 
$
3,618

Gross profit from product sales
3,251

 
3,272

 
3,291

 
3,054

Net income
934

 
454

 
1,170

 
1,125

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.09

 
$
0.50

 
$
1.26

 
$
1.21

Diluted
$
1.08

 
$
0.50

 
$
1.25

 
$
1.20

(1) 
We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Valuation Accounts
12 Months Ended
Dec. 31, 2012
Valuation and Qualifying Accounts [Abstract]
Schedule of Valuation and Qualifying Accounts Disclosure
SCHEDULE II
AMGEN INC.
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2012, 2011 and 2010
(In millions)
Allowance for doubtful accounts
Balance at
beginning
of period
 
Additions
charged to
costs and
expenses
 
Other
additions
 
Deductions
 
Balance
at end
of
period
Year ended December 31, 2012
$
54

 
$
7

 
$

 
$

 
$
61

Year ended December 31, 2011
$
42

 
$
17

 
$

 
$
5

 
$
54

Year ended December 31, 2010
$
32

 
$
10

 
$

 
$

 
$
42

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Summary of significant accounting policies (Policies)
12 Months Ended
Dec. 31, 2012
Accounting Policies [Abstract]
Business
Business
Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” or “us”) is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics.  Our medicines help millions of patients in the fight against cancer, kidney disease, rheumatoid arthritis, bone disease, and other serious illnesses.  We operate in one business segment: human therapeutics.
Principles of consolidation
Principles of consolidation

The consolidated financial statements include the accounts of Amgen as well as its majority-owned subsidiaries. We do not have any significant interests in variable interest entities that require consolidation. All material intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Product sales
Product sales
Sales of our products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively “sales deductions”) and returns. Taxes collected from customers and remitted to government authorities related to the sales of the Company’s products, primarily in Europe, are excluded from revenues.
With regard to EPOGEN® (epoetin alfa), we have the exclusive right to sell epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses in the United States. We granted to Ortho Pharmaceutical Corporation (which has assigned its rights under the product license agreement to Janssen Biotech, Inc., formerly known as Centocor Ortho Biotech Products, L.P.), a subsidiary of Johnson & Johnson (J&J), a license relating to epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. This license agreement, which is perpetual, may be terminated for various reasons, including upon mutual agreement of the parties, or default. The parties are required to compensate each other for epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover.” Accordingly, we do not recognize product sales we make into the exclusive market of J&J and do recognize product sales made by J&J into our exclusive market. Sales in our exclusive market are derived from our sales to our customers, as adjusted for spillover. We are employing an arbitrated audit methodology to measure each party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to and usage by end users.
Other revenues
Other revenues
Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectability is reasonably assured. Royalty estimates are made in advance of amounts collected using historical and forecasted trends. Corporate partner revenues are comprised of amounts earned from Kirin-Amgen, Inc. (K-A) for certain research and development (R&D) activities, which are earned as the R&D activities are performed. Corporate partner revenues also include license fees and milestone payments earned from K-A and from third parties. See Multiple-deliverable revenue arrangements, discussed below, Note 6, Collaborative arrangements, and Note 7, Related party transactions.
Multiple-deliverable revenue arrangements
Multiple-deliverable revenue arrangements
From time to time, we enter into arrangements for the R&D, manufacture and/or commercialization of products and product candidates. These arrangements may require us to deliver various rights, services and/or goods across the entire life cycle of a product or product candidate, including (i) intellectual property rights/licenses, (ii) R&D services, (iii) manufacturing services and/or (iv) commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen in the form of non-refundable upfront license payments, R&D and commercial performance milestone payments, cost sharing and/or royalty payments.
Effective January 1, 2011, we adopted a new accounting standard that amends the guidance on the accounting for arrangements involving the delivery of more than one element. Pursuant to the new standard, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting. For Amgen this determination is generally based on whether the deliverable has “stand-alone value” to the customer. The arrangement’s consideration that is fixed and determinable is then allocated to each separate units of accounting based on the relative selling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence of selling price (TPE) and (iii) best estimate of selling price (BESP). The BESP reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. In most cases we expect to use TPE or BESP for allocating consideration to each deliverable. In general, the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. The Company adopted this new accounting standard on a prospective basis for all multiple-deliverable revenue arrangements (MDRAs) entered into on or after January 1, 2011, and for any MDRAs that were entered into prior to January 1, 2011, but materially modified on or after that date. Had the standard been adopted January 1, 2010, the impact on our consolidated financial statements would have been immaterial.
For MDRAs entered into prior to January 1, 2011, and not materially modified thereafter, we continue to apply our prior accounting policy with respect to such arrangements. Under this policy, in general, revenue from non-refundable, up-front fees related to intellectual property rights/licenses where we have continuing involvement is recognized ratably over the estimated period of ongoing involvement. In general, the consideration with respect to the other deliverables is recognized when the goods or services are delivered.
Under all of our MDRAs, consideration associated with at-risk substantive performance milestones is recognized as revenue upon the achievement of the related milestone, as defined in the respective contracts.
Research and development costs
Research and development costs
R&D costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems’ costs and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs and cost recoveries associated with third-party R&D arrangements such as with K-A, including upfront fees and milestones paid to third parties in connection with technologies which had not reached technological feasibility and did not have an alternative future use. Net payment or reimbursement of R&D costs is recognized when the obligations are incurred or as we become entitled to the cost recovery. See Note 6, Collaborative arrangements, and Note 7, Related party transactions.
Selling, general and administrative costs
Selling, general and administrative costs
Selling, general and administrative (SG&A) expenses are comprised primarily of salaries, benefits and other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses; and other general and administrative costs. Advertising costs are expensed as incurred. SG&A expenses also include costs and cost recoveries associated with marketing and promotion efforts under certain collaboration arrangements. Net payment or reimbursement of SG&A costs is recognized when the obligations are incurred or we become entitled to the cost recovery. See Note 6, Collaborative arrangements.
Beginning January 1, 2011, SG&A expenses also include amortization of the annual fee mandated by the Patient Protection and Affordable Care Act and the companion Health Care and Education Reconciliation Act (the U.S. healthcare reform federal excise fee). The liability for the annual U.S. healthcare reform federal excise fee is estimated and recorded in full upon the first qualifying sale of our covered products with a corresponding deferred cost established that is amortized on a straight-line basis over the calendar year that it is payable.
Stock-based compensation
Stock-based compensation
We have stock-based compensation plans under which various types of equity-based awards are granted, including restricted stock units (RSUs), performance units and stock options. The estimated fair values of RSUs and stock option awards which are subject only to service conditions with graded vesting are generally recognized as compensation expense on a straight-line basis over the service period. The estimated fair values of performance unit awards are generally recognized as compensation expense as the awards vest ratably from the grant date to the end of the performance period. See Note 3, Stock-based compensation.
Income taxes
Income taxes
We provide for income taxes based on pretax income, applicable tax rates and tax planning opportunities available in the various jurisdictions in which we operate.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. See Note 4, Income taxes.
Business combinations
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired, including in-process research and development (IPR&D) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings. See Note 2, Business combinations, and Note 16, Fair value measurement.
Cash equivalents
Cash equivalents
We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.
Available-for-sale investments
Available-for-sale investments
We consider our investment portfolio available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and losses generally recorded in other comprehensive income. See Note 9, Available-for-sale investments, and Note 16, Fair value measurement.
Inventories
Inventories
Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner that approximates the first-in, first-out method. Cost also includes the Puerto Rico excise tax enacted in 2011 related to our manufacturing operations in Puerto Rico. See Note 10, Inventories.
Derivatives
Derivatives
We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The accounting for changes in the fair value of a derivative instrument depends upon whether it has been formally designated and qualifies as part of a hedging relationship under the applicable accounting standards and, further, on the type of hedging relationship. For derivatives formally designated as hedges, we assess both at inception and quarterly thereafter, whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. Our derivatives that are not designated and do not qualify as hedges are adjusted to fair value through current earnings. See Note 16, Fair value measurement, and Note 17, Derivative instruments.
Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment is recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. We review our property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. See Note 11, Property, plant and equipment.
Goodwill and other intangible assets
Goodwill and other intangible assets
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis. We review our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 12, Goodwill and other intangible assets.
The estimated fair values of IPR&D projects acquired in a business combination which have not reached technological feasibility are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written-off immediately. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market these products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its estimated fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.
Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider various factors for potential impairment including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining market approval and the inability to bring a product to market could result in the related intangible assets to be partially or fully impaired.
We perform an impairment test of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To date, an impairment of goodwill has not been recorded. See Note 12, Goodwill and other intangible assets.
Contingencies
Contingencies
In the ordinary course of business, we are involved in various legal proceedings and other matters such as intellectual property disputes, contractual disputes, governmental investigations and class action suits which are complex in nature and have outcomes that are difficult to predict. Certain of these proceedings are discussed in Note 18, Contingencies and commitments. We record accruals for loss contingencies to the extent that we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. We consider all relevant factors when making assessments regarding these contingencies.
While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our consolidated results of operations, financial position or cash flows.
Convertible debt
Convertible debt
The debt and equity components of convertible debt instruments that may be partially or wholly cash settled (cash settleable convertible notes), including our 0.375% 2013 Convertible Notes, are bifurcated and accounted for separately. The debt component of cash settleable convertible notes, which excludes the associated equity conversion option, is recorded at fair value as of the issuance date. The difference between the amount allocated to the debt component and the proceeds received upon issuance of the debt is allocated to the equity component and recorded in Common stock and additional paid-in capital in the Consolidated Balance Sheets. The reduced or discounted carrying value of cash settleable convertible notes resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of non-cash interest expense. This results in recognizing interest expense on the borrowing at an effective rate approximating what would have been incurred had nonconvertible debt with otherwise similar terms been issued. See Note 14, Financing arrangements.
Foreign currency translation
Foreign currency translation
The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating net assets of these subsidiaries at changing rates are recognized in other comprehensive income. The earnings of these subsidiaries are translated into U.S. dollars using average exchange rates.
Reclassifications
Reclassifications
Certain prior-period amounts shown within Cash flows from operating activities in our Consolidated Statements of Cash Flows and Note 4, Income taxes have been reclassified to conform to the current-period presentation.
Recent accounting pronouncements
Recent accounting pronouncements
In January 2012, we adopted a new accounting standard that requires additional disclosures for comprehensive income. As permitted under the standard, we have elected to present comprehensive income in two separate but consecutive financial statements, consisting of a statement of income followed by a separate statement of comprehensive income. The standard was required to be applied retrospectively beginning January 1, 2012.
In February 2013, a new accounting standard was issued that requires increased disclosure requirements regarding amounts that are reclassified out of accumulated other comprehensive income. The standard is required to be adopted prospectively beginning on January 1, 2013.
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Business combinations (Tables)
12 Months Ended
Dec. 31, 2012
Kai Pharmaceuticals [Member]
Business Acquisition [Line Items]
Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
The consideration to acquire KAI totaled $332 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets - IPR&D
$
240

Goodwill
125

Deferred tax assets (liabilities), net
(59
)
Other assets (liabilities), net
26

      Total consideration
$
332

Mustafa Nevzat Pharmaceuticals [Member]
Business Acquisition [Line Items]
Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
The consideration to acquire MN totaled $677 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Finite-lived intangible assets
$
163

Property, plant and equipment
100

Trade receivables
79

Inventories
52

Goodwill
380

Deferred tax assets (liabilities), net
(45
)
Other assets (liabilities), net
(52
)
Total consideration
$
677

Micromet Inc [Member]
Business Acquisition [Line Items]
Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
The consideration to acquire Micromet totaled $1,146 million in cash which was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets:
 
IPR&D
$
440

Contract assets
170

Finite-lived intangible assets — Developed technology
350

Goodwill
330

Cash and marketable securities
154

Deferred tax assets (liabilities), net
(274
)
Other assets (liabilities), net
(24
)
      Total consideration
$
1,146

Biovex Group Inc [Member]
Business Acquisition [Line Items]
Aggregate acquisition date consideration to acquire an entity
The aggregate acquisition date consideration to acquire BioVex consisted of (in millions):
Cash paid to former shareholders of BioVex
$
407

Fair value of contingent consideration obligations
190

Total consideration
$
597

Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
We allocated the total consideration to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions):
Indefinite-lived intangible assets — IPR&D
$
675

Goodwill
170

Deferred tax assets (liabilities), net
(246
)
Other assets (liabilities), net
(2
)
Total consideration
$
597

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Stock-based compensation Stock-based compensation (Tables)
12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Components of stock-based compensation expense recognized in the Consolidated Statements of Income
The following table reflects the components of stock-based compensation expense recognized in our Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Stock options
$
59

 
$
85

 
$
124

RSUs
186

 
188

 
182

Performance units
117

 
68

 
47

Total stock-based compensation expense, pretax
362

 
341

 
353

Tax benefit from stock-based compensation expense
(134
)
 
(124
)
 
(120
)
Total stock-based compensation expense, net of tax
$
228

 
$
217

 
$
233

Weighted average assumptions used and the resulting weighted average grant date fair value of employee stock options
The weighted-average assumptions used in the option valuation model and the resulting weighted-average estimated grant date fair values of stock options were as follows for the years ended December 31, 2012, 2011 and 2010:
 
2012
 
2011
 
2010
Closing price of our common stock on grant date
$
74.56

 
$
54.66

 
$
58.32

Expected volatility
22.2
%
 
23.5
%
 
28.0
%
Expected life (in years)
8.1

 
5.9

 
6.6

Risk-free interest rate
1.6
%
 
2.5
%
 
3.2
%
Expected dividend yield
2.1
%
 
2.0
%
 
0
%
Fair value of stock options granted
$
14.65

 
$
11.39

 
$
20.97

Stock options information
The following summarizes select information regarding our stock options during the year ended December 31, 2012:
 
Options
(in millions)
 
Weighted-
average
exercise price
 
Weighted-
average
remaining
contractual
life (years)
 
Aggregate
intrinsic
value
(in millions)
Balance unexercised at December 31, 2011
34.2

 
$
59.11

 
 
 
 
Granted
0.1

 
$
74.56

 
 
 
 
Exercised
(20.9
)
 
$
60.67

 
 
 
 
Expired/forfeited
(1.1
)
 
$
63.97

 
 
 
 
Balance unexercised at December 31, 2012
12.3

 
$
56.09

 
4.9
 
$
371

Vested or expected to vest at December 31, 2012
12.2

 
$
56.10

 
4.9
 
$
367

Exercisable at December 31, 2012
6.3

 
$
56.59

 
3.1
 
$
187

Restricted stock units Information
The following summarizes select information regarding our RSUs during the year ended December 31, 2012:
 
Units
(in millions)
 
Weighted-average
grant date
fair value
Balance nonvested at December 31, 2011
9.0

 
$
52.64

Granted
3.9

 
$
72.99

Vested
(2.8
)
 
$
50.64

Forfeited
(0.7
)
 
$
58.38

Balance nonvested at December 31, 2012
9.4

 
$
61.14

Weighted average assumptions used and the resulting weighted average grant date fair value of performance units
The weighted-average assumptions used in these models and the resulting weighted-average grant date fair values of our performance units were as follows for the years ended December 31, 2012, 2011 and 2010:
 
2012
 
2011
 
2010
Closing price of our common stock on grant date
$
68.75

 
$
51.67

 
$
56.90

Volatility
22.9
%
 
32.8
%
 
34.7
%
Risk-free interest rate
0.5
%
 
1.2
%
 
1.3
%
Expected dividend yield
2.2
%
 
0.1
%
 
0
%
Fair value of unit
$
78.21

 
$
49.50

 
$
62.06

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Income taxes Income taxes (Tables)
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Provision for income taxes
The provision for income taxes includes the following for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Current provision:
 
 
 
 
 
Federal
$
438

 
$
551

 
$
620

State
47

 
54

 
52

Foreign
158

 
148

 
153

Total current provision
643

 
753

 
825

Deferred provision (benefit):
 
 
 
 
 
Federal
83

 
(273
)
 
(180
)
State
(43
)
 
(12
)
 
43

Foreign
(19
)
 
(1
)
 
2

Total deferred provision (benefit)
21

 
(286
)
 
(135
)
Total provision
$
664

 
$
467

 
$
690

Significant components of deferred tax assets and liabilities
Significant components of our deferred tax assets and liabilities are as follows as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Deferred income tax assets (1):
 
 
 
Expense accruals
$
805

 
$
751

NOL and credit carryforwards
427

 
206

Expenses capitalized for tax
195

 
193

Stock-based compensation
115

 
241

Deferred revenue
40

 
133

Other
83

 
70

Total deferred income tax assets
1,665

 
1,594

Valuation allowance
(273
)
 
(126
)
Net deferred income tax assets
1,392

 
1,468

 
 
 
 
Deferred income tax liabilities:
 
 
 
Acquired intangibles
(1,249
)
 
(832
)
Fixed assets
(117
)
 
(219
)
Unremitted foreign earnings
(106
)
 
(61
)
Other
(145
)
 
(110
)
Total deferred income tax liabilities
(1,617
)
 
(1,222
)
Total deferred income taxes, net
$
(225
)
 
$
246

(1) 
In 2012, we reclassified certain prior period amounts to conform with current period reporting, primarily in connection with reclassifying prepaid taxes associated with intercompany profit in ending inventory from current deferred tax assets to prepaid taxes. Prepaid taxes are not included in the net deferred income tax table above; therefore, amounts related to these prepaid taxes which totaled $349 million for 2011 have been removed from the above table.
Reconciliation of total gross amounts of unrecognized tax benefits (excluding interest, penalties, foreign tax credits and the federal tax benefit of state taxes related to unrecognized tax benefits)
The reconciliation of the total gross amounts of UTBs (excluding interest, penalties, foreign tax credits and the federal tax benefit of state taxes related to UTBs) for the years ended December 31, 2012, 2011 and 2010 is as follows (in millions):
 
2012
 
2011
 
2010
Balance at beginning of year
$
975

 
$
920

 
$
1,140

Additions based on tax positions related to the current year
300

 
283

 
305

Reductions for tax positions of prior years
(45
)
 
(7
)
 
(110
)
Settlements
(30
)
 
(221
)
 
(415
)
Balance at end of year
$
1,200

 
$
975

 
$
920

Reconciliation between the federal statutory tax rate and effective tax rate
The reconciliation between the federal statutory tax rate applied to income before income taxes and our effective tax rate for the years ended December 31, 2012, 2011 and 2010, is as follows:
 
2012
 
2011
 
2010
Federal statutory tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Foreign earnings, including earnings invested indefinitely
(17.8
)%
 
(19.4
)%
 
(19.1
)%
State taxes
0.6
 %
 
0.7
 %
 
1.6
 %
Credits, Puerto Rico Excise Tax
(5.2
)%
 
(6.5
)%
 
0.0
 %
Credits, primarily federal R&D
0.0
 %
 
(1.5
)%
 
(0.9
)%
Legal settlements
(0.2
)%
 
2.2
 %
 
0.0
 %
Audit settlements (federal, state, foreign)
0.3
 %
 
0.0
 %
 
(3.1
)%
Other, net
0.6
 %
 
0.8
 %
 
(0.5
)%
Effective tax rate
13.3
 %
 
11.3
 %
 
13.0
 %
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Earnings per share (Tables)
12 Months Ended
Dec. 31, 2012
Earnings Per Share [Abstract]
Computation for basic and diluted earnings per share
The computation for basic and diluted EPS was as follows (in millions, except per share data):
 
2012
 
2011
 
2010
Income (Numerator):
 
 
 
 
 
Net income for basic and diluted EPS
$
4,345

 
$
3,683

 
$
4,627

 
 
 
 
 
 
Shares (Denominator):
 
 
 
 
 
Weighted-average shares for basic EPS
775

 
905

 
960

Effect of dilutive securities
12

 
7

 
5

Weighted-average shares for diluted EPS
787

 
912

 
965

 
 
 
 
 
 
Basic EPS
$
5.61

 
$
4.07

 
$
4.82

Diluted EPS
$
5.52

 
$
4.04

 
$
4.79

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Available-for-sale investments (Tables)
12 Months Ended
Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Type of security as of December 31, 2011
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
U.S. Treasury securities
$
3,878

 
$
68

 
$

 
$
3,946

Other government-related debt securities:
 
 
 
 
 
 
 
U.S.
1,548

 
23

 

 
1,571

Foreign and other
441

 
9

 

 
450

Corporate debt securities:
 
 
 
 
 
 
 
Financial
2,493

 
30

 
(15
)
 
2,508

Industrial
3,077

 
79

 
(10
)
 
3,146

Other
280

 
9

 

 
289

Residential mortgage-backed securities
518

 
3

 
(3
)
 
518

Other mortgage- and asset-backed securities
1,271

 
3

 
(7
)
 
1,267

Money market mutual funds
6,266

 

 

 
6,266

Total interest-bearing securities
19,772

 
224

 
(35
)
 
19,961

Equity securities
42

 

 

 
42

Total available-for-sale investments
$
19,814

 
$
224

 
$
(35
)
 
$
20,003

The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security were as follows (in millions):
Type of security as of December 31, 2012
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair value
U.S. Treasury securities
$
4,443

 
$
15

 
$

 
$
4,458

Other government-related debt securities:
 
 
 
 
 
 
 
U.S.
1,018

 
12

 

 
1,030

Foreign and other
1,549

 
60

 
(1
)
 
1,608

Corporate debt securities:
 
 
 
 
 
 
 
Financial
3,266

 
96

 
(1
)
 
3,361

Industrial
4,283

 
100

 
(3
)
 
4,380

Other
441

 
11

 

 
452

Residential mortgage-backed securities
1,828

 
9

 
(8
)
 
1,829

Other mortgage- and asset-backed securities
1,769

 
7

 
(9
)
 
1,767

Money market mutual funds
2,620

 

 

 
2,620

Other short-term interest-bearing securities
2,186

 

 

 
2,186

Total interest-bearing securities
23,403

 
310

 
(22
)
 
23,691

Equity securities
52

 
2

 

 
54

Total available-for-sale investments
$
23,455

 
$
312

 
$
(22
)
 
$
23,745

Fair values of available-for-sale investments by classification in the Consolidated Balance Sheets
The fair values of available-for-sale investments by classification in the Consolidated Balance Sheets were as follows as of December 31, 2012 and 2011 (in millions):
Classification in the Consolidated Balance Sheets
2012
 
2011
Cash and cash equivalents
$
2,887

 
$
6,266

Marketable securities
20,804

 
13,695

Other assets — noncurrent
54

 
42

Total available-for-sale investments
$
23,745

 
$
20,003

Fair values of available-for-sale interest-bearing security investments by contractual maturity
The fair values of available-for-sale interest-bearing security investments by contractual maturity, except for mortgage- and asset-backed securities that do not have a single maturity date, were as follows as of December 31, 2012 and 2011 (in millions):
Contractual maturity
2012
 
2011
Maturing in one year or less
$
7,175

 
$
6,791

Maturing after one year through three years
5,014

 
5,855

Maturing after three years through five years
6,286

 
5,379

Maturing after five years through ten years
1,620

 
151

Mortgage- and asset-backed securities
3,596

 
1,785

Total interest-bearing securities
$
23,691

 
$
19,961

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Inventories (Tables)
12 Months Ended
Dec. 31, 2012
Inventory Disclosure [Abstract]
Inventories
Inventories consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Raw materials
$
192

 
$
158

Work in process
1,723

 
1,802

Finished goods
829

 
524

Total inventories
$
2,744

 
$
2,484

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Property, plant and equipment (Tables)
12 Months Ended
Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Property, plant and equipment
Property, plant and equipment consisted of the following as of December 31, 2012 and 2011 (dollar amounts in millions):
 
Useful life (in years)
 
2012
 
2011
Land

 
$
412

 
$
366

Buildings and improvements
10-40

 
3,510

 
3,463

Manufacturing equipment
8-12

 
2,007

 
1,897

Laboratory equipment
8-12

 
1,056

 
1,016

Other
3-15

 
3,891

 
3,745

Construction in progress

 
1,071

 
744

Property, plant and equipment, gross
 
 
11,947

 
11,231

Less accumulated depreciation and amortization
 
 
(6,621
)
 
(5,811
)
Property, plant and equipment, net
 
 
$
5,326

 
$
5,420

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Goodwill and intangible assets (Tables)
12 Months Ended
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of Goodwill
The changes in the carrying amounts of goodwill for the years ended December 31, 2012 and 2011, were as follows (in millions):
 
2012
 
2011
Beginning balance
$
11,750

 
$
11,334

Goodwill resulting from acquisitions of businesses
928

 
435

Currency translation
(16
)
 
(19
)
Ending balance
$
12,662

 
$
11,750

Schedule of Identifiable Intangible Assets
Identifiable intangible assets consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
 
Gross
carrying
amount
 
Accumulated
amortization
 
Intangible
assets, net
 
Gross
carrying
amount
 
Accumulated
amortization
 
Intangible
assets, net
Finite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
Acquired product technology rights:
 
 
 
 
 
 
 
 
 
 
 
Developed product technology
$
2,872

 
$
(2,003
)
 
$
869

 
$
2,872

 
$
(1,811
)
 
$
1,061

Core technology
1,348

 
(940
)
 
408

 
1,348

 
(850
)
 
498

Trade name
190

 
(133
)
 
57

 
190

 
(120
)
 
70

Acquired R&D technology rights
1,094

 
(381
)
 
713

 
350

 
(350
)
 

Other acquired intangible assets
896

 
(477
)
 
419

 
686

 
(406
)
 
280

Total finite-lived intangible assets
6,400

 
(3,934
)
 
2,466

 
5,446

 
(3,537
)
 
1,909

 
 
 
 
 
 
 
 
 
 
 
 
Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
IPR&D
1,346

 

 
1,346

 
675

 

 
675

Contract assets
156

 

 
156

 

 

 

Total indefinite-lived intangible assets
1,502

 

 
1,502

 
675

 

 
675

 
 
 
 
 
 
 
 
 
 
 
 
Total identifiable intangible assets
$
7,902

 
$
(3,934
)
 
$
3,968

 
$
6,121

 
$
(3,537
)
 
$
2,584

Amortization of finite-lived intangible assets is provided over their estimated useful lives ranging from 3 to 15 years on a straight-line basis.
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Accrued liabilities Accrued liabilities (Tables)
12 Months Ended
Dec. 31, 2012
Payables and Accruals [Abstract]
Accrued liabilities
Accrued liabilities consisted of the following as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
Sales deductions
$
1,129

 
$
1,326

Employee compensation and benefits
1,010

 
916

Sales returns reserve
346

 
339

Legal reserve

 
780

Other
2,306

 
1,667

Total accrued liabilities
$
4,791

 
$
5,028

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Financing arrangements (Tables)
12 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]
Carrying values and the fixed contractual coupon rates of long-term borrowings
The carrying values and the fixed contractual coupon rates of our long-term borrowings were as follows as of December 31, 2012 and 2011 (in millions):
 
2012
 
2011
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes)
$
2,488

 
$
2,346

1.875% notes due 2014 (1.875% 2014 Notes)
1,000

 
1,000

4.85% notes due 2014 (4.85% 2014 Notes)
1,000

 
1,000

2.30% notes due 2016 (2.30% 2016 Notes)
749

 
748

2.50% notes due 2016 (2.50% 2016 Notes)
999

 
999

2.125% notes due 2017 (2.125% 2017 Notes)
1,248

 

5.85% notes due 2017 (5.85% 2017 Notes)
1,099

 
1,099

6.15% notes due 2018 (6.15% 2018 Notes)
499

 
499

4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes)
723

 
714

5.70% notes due 2019 (5.70% 2019 Notes)
999

 
998

2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes)
887

 

4.50% notes due 2020 (4.50% 2020 Notes)
300

 
300

3.45% notes due 2020 (3.45% 2020 Notes)
897

 
897

4.10% notes due 2021 (4.10% 2021 Notes)
998

 
998

3.875% notes due 2021 (3.875% 2021 Notes)
1,745

 
1,745

3.625% notes due 2022 (3.625% 2022 Notes)
747

 

5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes)
763

 
739

4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes)
1,117

 

6.375% notes due 2037 (6.375% 2037 Notes)
899

 
899

6.90% notes due 2038 (6.90% 2038 Notes)
499

 
499

6.40% notes due 2039 (6.40% 2039 Notes)
996

 
996

5.75% notes due 2040 (5.75% 2040 Notes)
697

 
697

4.95% notes due 2041 (4.95% 2041 Notes)
595

 
595

5.15% notes due 2041 (5.15% 2041 Notes)
2,232

 
2,232

5.65% notes due 2042 (5.65% 2042 Notes)
1,244

 
1,244

5.375% notes due 2043 (5.375% 2043 Notes)
1,000

 

Other, including our zero-coupon convertible notes
109

 
184

Total debt
26,529

 
21,428

Less current portion
(2,495
)
 
(84
)
Total noncurrent debt
$
24,034

 
$
21,344

Principal balance, unamortized discount and net carrying amounts of the liability and equity components of our 0.375% 2013 convertible notes
The principal balance, unamortized discount and net carrying amount of the liability and equity components of our 0.375% 2013 Convertible Notes were as follows as of December 31, 2012 and 2011 (in millions):
 
Liability component
 
Equity component
0.375% 2013 Convertible Notes
Principal
balance
 
Unamortized
discount
 
Net carrying
amount
 
Net carrying
amount
December 31, 2012
$
2,500

 
$
12

 
$
2,488

 
$
829

December 31, 2011
$
2,500

 
$
154

 
$
2,346

 
$
829

Aggregate contractual maturities of long-term debt obligations
The aggregate contractual maturities of all long-term debt obligations due subsequent to December 31, 2012, are as follows (in millions):
Maturity date
Amount
2013(1)
$
2,507

2014
2,002

2015

2016
1,750

2017
2,350

Thereafter
18,017

Total
$
26,626

(1) 
This amount includes the$2.5 billion principal amount for our 0.375% 2013 Convertible Notes after full accretion of the debt discount.
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Stockholders' equity (Tables)
12 Months Ended
Dec. 31, 2012
Equity [Abstract]
Summary of activity under our stock repurchase program
Activity under our stock repurchase program was as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
 
Shares
 
Dollars
 
Shares
 
Dollars
 
Shares
 
Dollars
First quarter
21.0

 
$
1,429

 

 
$

 
29.1

 
$
1,684

Second quarter
17.4

 
1,203

 
12.9

 
732

 
10.3

 
616

Third quarter
9.7

 
797

 
45.4

 
2,421

 
6.6

 
364

Fourth quarter
14.2

 
1,233

 
86.0

 
5,154

(1) 
20.5

 
1,136

Total stock repurchases
62.3
 
$
4,662

 
144.3

 
$
8,307

 
66.5

 
$
3,800

___________
(1)
Includes the repurchase of 83.3 million shares of our common stock at an average price paid per share of $60.08, including related expenses, for an aggregate cost of $5.0 billion, under a modified Dutch auction tender offer.
Components of Accumulated Other Comprehensive Income
The components of Accumulated other comprehensive income (AOCI) are as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
Foreign
currency
translation
 
Cash flow
hedges
 
Available-for-sale
securities
 
Other
 
AOCI
Balance as of December 31, 2009
$
40

 
$
(82
)
 
$
95

 
$
(8
)
 
$
45

Foreign currency translation adjustments
(29
)
 

 

 

 
(29
)
Unrealized gains

 
186

 
155

 
1

 
342

Reclassification adjustments to income

 
(46
)
 
(90
)
 

 
(136
)
Income taxes
11

 
(55
)
 
(25
)
 

 
(69
)
Balance as of December 31, 2010
22

 
3

 
135

 
(7
)
 
153

Foreign currency translation adjustments
(6
)
 

 

 

 
(6
)
Unrealized (losses) gains

 
(51
)
 
125

 
2

 
76

Reclassification adjustments to income

 
112

 
(154
)
 

 
(42
)
Other

 

 

 
(8
)
 
(8
)
Income taxes
5

 
(21
)
 
14

 

 
(2
)
Balance as of December 31, 2011
21

 
43

 
120

 
(13
)
 
171

Foreign currency translation adjustments
(13
)
 

 

 

 
(13
)
Unrealized (losses) gains

 
15

 
233

 
(1
)
 
247

Reclassification adjustments to income

 
(134
)
 
(132
)
 

 
(266
)
Income taxes
4

 
41

 
(38
)
 

 
7

Balance as of December 31, 2012
$
12

 
$
(35
)
 
$
183

 
$
(14
)
 
$
146

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Fair value measurement (Tables)
12 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]
Fair value of each major class of financial assets and liabilities measured at fair value on a recurring basis
The fair value of each major class of the Company’s financial assets and liabilities measured at fair value on a recurring basis was as follows (in millions):
Fair value measurement as of December 31, 2012, using:
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Available-for-sale investments:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,458

 
$

 
$

 
$
4,458

Other government-related debt securities:
 
 
 
 
 
 
 
 
U.S.
 

 
1,030

 

 
1,030

Foreign and other
 

 
1,608

 

 
1,608

Corporate debt securities:
 

 

 

 

Financial
 

 
3,361

 

 
3,361

Industrial
 

 
4,380

 

 
4,380

Other
 

 
452

 

 
452

Residential mortgage-backed securities
 

 
1,829

 

 
1,829

Other mortgage- and asset-backed securities
 

 
1,767

 

 
1,767

Money market mutual funds
 
2,620

 

 

 
2,620

Other short-term interest-bearing securities
 

 
2,186

 

 
2,186

Equity securities
 
54

 

 

 
54

Derivatives:
 

 

 

 

Foreign currency contracts
 

 
46

 

 
46

Cross-currency swap contracts
 

 
65

 

 
65

Total assets
 
$
7,132

 
$
16,724

 
$

 
$
23,856

Liabilities:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Foreign currency contracts
 
$

 
$
59

 
$

 
$
59

Cross-currency swap contracts
 

 
6

 

 
6

Contingent consideration obligations in connection with a business combination
 

 

 
221

 
221

Total liabilities
 
$

 
$
65

 
$
221

 
$
286

Fair value measurement as of December 31, 2011, using:
 
Quoted prices in
active markets for
identical assets
(Level 1)
 
Significant  other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Available-for-sale investments:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
3,946

 
$

 
$

 
$
3,946

Other government-related debt securities:
 
 
 
 
 
 
 
 
U.S.
 

 
1,571

 

 
1,571

Foreign and other
 

 
450

 

 
450

Corporate debt securities:
 

 

 

 

Financial
 

 
2,508

 

 
2,508

Industrial
 

 
3,146

 

 
3,146

Other
 

 
289

 

 
289

Residential mortgage-backed securities
 

 
518

 

 
518

Other mortgage- and asset-backed securities
 

 
1,267

 

 
1,267

Money market mutual funds
 
6,266

 

 

 
6,266

Equity securities
 
42

 

 

 
42

Derivatives:
 

 

 

 

Foreign currency contracts
 

 
172

 

 
172

Interest rate swap contracts
 

 
377

 

 
377

Total assets
 
$
10,254

 
$
10,298

 
$

 
$
20,552

Liabilities:
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
Foreign currency contracts
 
$

 
$
48

 
$

 
$
48

Cross-currency swap contracts
 

 
26

 

 
26

Contingent consideration obligations in connection with a business combination
 

 

 
190

 
190

Total liabilities
 
$

 
$
74

 
$
190

 
$
264

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Derivative instruments (Tables)
12 Months Ended
Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Schedule of Notional Amounts and Interest Rates for Cross-Currency Swaps
The notional amounts and interest rates of our cross-currency swaps are as follows (notional amounts in millions):
 
 
Foreign currency
 
U.S. dollars
Hedged notes
 
Notional Amount
 
Interest rate
 
Notional Amount
 
Interest rate
2.125% 2019 euro Notes
 
675

 
2.125
%
 
$
864

 
2.6
%
5.50% 2026 pound sterling Notes
 
£
475

 
5.50
%
 
$
748

 
5.8
%
4.00% 2029 pound sterling Notes
 
£
700

 
4.00
%
 
$
1,122

 
4.3
%
Effective portion of the unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges
The effective portion of the unrealized gain/(loss) recognized in other comprehensive income for our derivative instruments designated as cash flow hedges was as follows (in millions):
 
Years ended December 31,
Derivatives in cash flow hedging relationships
2012
 
2011
 
2010
Foreign currency contracts
$
(63
)
 
$
(25
)
 
$
191

Cross-currency swap contracts
85

 
(26
)
 

Forward interest rate contracts
(7
)
 

 
(5
)
Total
$
15

 
$
(51
)
 
$
186

Location in the Consolidated Statements of Income and the effective portion of gain (loss) reclassified from Accumulated Other Comprehensive Income into earnings for our derivative instruments designated as cash flow hedges
The location in the Consolidated Statements of Income and the effective portion of the gain/(loss) reclassified from AOCI into earnings for our derivative instruments designated as cash flow hedges were as follows (in millions):
 
 
 
 
Years ended December 31,
Derivatives in cash flow hedging relationships
 
Statements of Income location
 
2012
 
2011
 
2010
Foreign currency contracts
 
Product sales
 
$
74

 
$
(108
)
 
$
47

Cross-currency swap contracts
 
Interest and other income, net
 
61

 
(3
)
 

Forward interest rate contracts
 
Interest expense, net
 
(1
)
 
(1
)
 
(1
)
Total
 
 
 
$
134

 
$
(112
)
 
$
46

Location in the Consolidated Statements of Income and the amount of gain (loss) recognized in earnings for the derivative instruments not designated as hedging instruments
The location in the Consolidated Statements of Income and the amount of gain/(loss) recognized in earnings for our derivative instruments not designated as hedging instruments were as follows (in millions):
 
 
 
 
Years ended December 31,
Derivatives not designated as hedging instruments
 
Statements of Income location
 
2012
 
2011
 
2010
Foreign currency contracts
 
Interest and other income, net
 
$
19

 
$
(1
)
 
$
32

Fair values of derivatives included in the Consolidated Balance Sheets
The fair values of derivatives included in the Consolidated Balance Sheets were as follows (in millions):
 
Derivative assets
 
Derivative liabilities
December 31, 2012
Balance Sheet location
 
Fair value
 
Balance Sheet location
 
Fair value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Cross-currency swap contracts
Other current assets/ Other noncurrent assets
 
$
65

 
Accrued liabilities/ Other noncurrent liabilities
 
$
6

Foreign currency contracts
Other current assets/ Other noncurrent assets
 
45

 
Accrued liabilities/ Other noncurrent liabilities
 
58

Total derivatives designated as hedging instruments
 
 
110

 
 
 
64

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 
1

 
Accrued liabilities
 
1

Total derivatives not designated as hedging instruments
 
 
1

 
 
 
1

Total derivatives
 
 
$
111

 
 
 
$
65

 
Derivative assets
 
Derivative liabilities
December 31, 2011
Balance Sheet location
 
Fair value
 
Balance Sheet location
 
Fair value
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
Interest rate swap contracts
Other current assets/ Other noncurrent assets
 
$
377

 
Accrued liabilities/ Other noncurrent liabilities
 
$

Cross-currency swap contracts
Other current assets/ Other noncurrent assets
 

 
Accrued liabilities/ Other noncurrent liabilities
 
26

Foreign currency contracts
Other current assets/ Other noncurrent assets
 
172

 
Accrued liabilities/ Other noncurrent liabilities
 
48

Total derivatives designated as hedging instruments
 
 
549

 
 
 
74

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Foreign currency contracts
Other current assets
 

 
Accrued liabilities
 

Total derivatives not designated as hedging instruments
 
 

 
 
 

Total derivatives
 
 
$
549

 
 
 
$
74

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Contingencies and commitments Contingencies and commitments (Tables)
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Minimum future rental commitments under non-cancelable operating leases
The following table summarizes the minimum future rental commitments under non-cancelable operating leases as of December 31, 2012 (in millions):
2013
$
121

2014
97

2015
90

2016
79

2017
67

Thereafter
287

Total minimum operating lease commitments
$
741

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Segment information Segment information (Tables)
12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
Revenues
Revenues were as follows for the years ended December 31, 2012, 2011 and 2010 (in millions):
 
2012
 
2011
 
2010
Product sales:
 
 
 
 
 
Neulasta® 
$
4,092

 
$
3,952

 
$
3,558

NEUPOGEN® 
1,260

 
1,260

 
1,286

ENBREL
4,236

 
3,701

 
3,534

Aranesp® 
2,040

 
2,303

 
2,486

EPOGEN® 
1,941

 
2,040

 
2,524

Sensipar®/Mimpara®
950

 
808

 
714

Vectibix® 
359

 
322

 
288

Nplate® 
368

 
297

 
229

XGEVA® 
748

 
351

 
8

Prolia® 
472

 
203

 
33

Other
173

 
58

 

Total product sales
16,639

 
15,295

 
14,660

Other revenues
626

 
287

 
393

Total revenues
$
17,265

 
$
15,582

 
$
15,053

Geographical information with respect to revenues and long-lived assets
Certain geographic information with respect to revenues and long-lived assets (consisting of property, plant and equipment) was as follows (in millions):
 
Years ended December 31,
 
2012
 
2011
 
2010
Revenues:
 
 
 
 
 
United States
$
13,415

 
$
11,985

 
$
11,636

ROW
3,850

 
3,597

 
3,417

Total revenues
$
17,265

 
$
15,582

 
$
15,053

 
December 31,
 
2012
 
2011
Long-lived assets:
 
 
 
United States
$
2,906

 
$
3,144

Puerto Rico
1,908

 
1,993

ROW
512

 
283

Total long-lived assets
$
5,326

 
$
5,420

Revenues earned from major customers
Certain information with respect to these customers for the years ended December 31, 2012, 2011 and 2010, was as follows (dollar amounts in millions):
 
2012
 
2011
 
2010
AmerisourceBergen Corporation:
 
 
 
 
 
Gross product sales
$
7,556

 
$
7,574

 
$
7,678

% of total gross revenues
34
%
 
36
%
 
38
%
% of U.S. gross product sales
43
%
 
45
%
 
47
%
McKesson Corporation:
 
 
 
 
 
Gross product sales
$
5,898

 
$
4,591

 
$
3,913

% of total gross revenues
27
%
 
22
%
 
19
%
% of U.S. gross product sales
32
%
 
27
%
 
24
%
Cardinal Health, Inc.:
 
 
 
 
 
Gross product sales
$
3,245

 
$
3,021

 
$
2,813

% of total gross revenues
15
%
 
14
%
 
14
%
% of U.S. gross product sales
19
%
 
18
%
 
17
%
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Quarterly financial data Quarterly financial data (Tables)
12 Months Ended
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
Quarterly financial data (unaudited)
 
2012 Quarters ended
(In millions, except per share data)
December 31
 
September  30
 
June 30
 
March 31
Product sales
$
4,337

 
$
4,201

 
$
4,200

 
$
3,901

Gross profit from product sales
3,485

 
3,496

 
3,518

 
3,222

Net income
788

 
1,107

 
1,266

 
1,184

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.03

 
$
1.44

 
$
1.63

 
$
1.50

Diluted
$
1.01

 
$
1.41

 
$
1.61

 
$
1.48

 
2011 Quarters ended
(In millions, except per share data)
December  31
 
September  30(1)
 
June 30
 
March 31
Product sales
$
3,907

 
$
3,877

 
$
3,893

 
$
3,618

Gross profit from product sales
3,251

 
3,272

 
3,291

 
3,054

Net income
934

 
454

 
1,170

 
1,125

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.09

 
$
0.50

 
$
1.26

 
$
1.21

Diluted
$
1.08

 
$
0.50

 
$
1.25

 
$
1.20

(1) 
We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices
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Business combinations Business combinations (Details) (USD $)
In Millions, unless otherwise specified
Jul. 05, 2012
Kai Pharmaceuticals [Member]
Jun. 12, 2012
Mustafa Nevzat Pharmaceuticals [Member]
Mar. 07, 2012
Micromet Inc [Member]
Mar. 07, 2012
Developed Technology [Member]
Micromet Inc [Member]
Jul. 05, 2012
In-Process Research and Development [Member]
Kai Pharmaceuticals [Member]
Mar. 07, 2012
In-Process Research and Development [Member]
Micromet Inc [Member]
Mar. 07, 2012
Contract Assets [Member]
Micromet Inc [Member]
Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
Indefinite-lived intangible assets--IPR&D $ 240 $ 440 $ 170
Finite-lived intangible assets 163 350
Property, plant and equipment 100
Trade receivables 79
Inventories 52
Goodwill 125 380 330
Cash and marketable securities 154
Deferred tax assets (liabilities), net (59) (45) (274)
Other assets (liabilities), net 26 (52) (24)
Total consideration $ 332 $ 677 $ 1,146
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Business combinations (Details 1) (Biovex Group Inc [Member], USD $)
In Millions, unless otherwise specified
Mar. 04, 2011
Biovex Group Inc [Member]
Aggregate acquisition date consideration to acquire an entity
Cash paid to former shareholders of acquired entity $ 407
Fair value of contingent consideration obligations 190
Total consideration 597
Allocation of the total consideration to the acquisition date fair values of assets acquired and liabilities assumed
Indefinite-lived intangible assets--IPR&D 675
Goodwill 170
Deferred tax assets (liabilities), net (246)
Other assets (liabilities), net (2)
Total consideration $ 597
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Business combinations (Details Textual) (USD $)
In Millions, unless otherwise specified
0 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended
Dec. 10, 2012
de CODE Genetics [Member]
Jul. 05, 2012
Kai Pharmaceuticals [Member]
Jun. 12, 2012
Mustafa Nevzat Pharmaceuticals [Member]
Dec. 31, 2012
Micromet Inc [Member]
Mar. 07, 2012
Micromet Inc [Member]
Mar. 07, 2012
Micromet Inc [Member]
Developed Technology [Member]
Dec. 31, 2012
Biovex Group Inc [Member]
Mar. 04, 2011
Biovex Group Inc [Member]
Dec. 31, 2011
Other Acquisitions [Member]
Dec. 31, 2011
Laboratorio Quimco Farmaceutico Bergamo Ltda [Member]
Business Acquisition [Line Items]
Total consideration $ 401 $ 332 $ 677 $ 1,146 $ 407
Finite-lived intangible assets comprised of databases and other proprietary information 401
Finite-lived intangible assets, estimated useful life (in years) 10 years 8 years 10 years
Deferred tax liabilities 80
Other assets and liabilities, net 13
Goodwill arising from business combinations 93 125 380 330 170 265
Impairment charge resulting from termination of a non-key program under an outlicensing arrangement 19
Contingent consideration obligations 575 575
Estimated aggregate fair value of the contingent consideration obligations 190
Aggregate acquisition date consideration for business combinations 597 453
Tax deductible portion of goodwill arising from a business combination 130
Property plant equipment acquired in business combinations 100 99
Amortizable intangible assets acquired in business combinations 163 350 58
Other assets (liabilities), net $ 26 $ (52) $ (24) $ (2) $ 31
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Stock-based compensation Stock-based compensation (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Components of stock-based compensation expense [Abstract]
Total stock-based compensation expense, pre-tax $ 362 $ 341 $ 353
Tax benefit from stock-based compensation expense (134) (124) (120)
Total stock-based compensation expense, net of tax 228 217 233
Stock Options [Member]
Components of stock-based compensation expense [Abstract]
Total stock-based compensation expense, pre-tax 59 85 124
Restricted Stock Units [Member]
Components of stock-based compensation expense [Abstract]
Total stock-based compensation expense, pre-tax 186 188 182
Performance Units [Member]
Components of stock-based compensation expense [Abstract]
Total stock-based compensation expense, pre-tax $ 117 $ 68 $ 47
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Stock-based compensation Stock-based compensation (Details 1) (Stock Options [Member], USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Stock Options [Member]
Weighted-average assumptions and resulting weighted-average grant date fair values [Abstract]
Closing price of our common stock on grant date $ 74.56 $ 54.66 $ 58.32
Expected volatility 22.20% 23.50% 28.00%
Expected life (in years) 8 years 1 month 6 days 5 years 10 months 24 days 6 years 7 months 6 days
Risk-free interest rate 1.60% 2.50% 3.20%
Expected dividend yield 2.10% 2.00% 0.00%
Fair value of stock options granted $ 14.65 $ 11.39 $ 20.97
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Stock-based compensation Stock-based compensation (Details 2) (Stock Options [Member], USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Stock Options [Member]
Stock Options [Roll Forward]
Stock options unexercised, beginning balance (in shares) 34.2
Stock options, granted (in shares) 0.1
Stock options, exercised (in shares) (20.9)
Stock options, expired/forfeited (in shares) (1.1)
Stock options unexercised, ending balance (in shares) 12.3
Stock Options, Weighted Average Exercise Price [Roll Forward]
Weighted-average exercise price, unexercised beginning balance (in usd per share) $ 59.11
Weighted-average exercise price, granted (in usd per share) $ 74.56
Weighted-average exercise price, exercised (in usd per share) $ 60.67
Weighted-average exercise price, expired/forfeited (in usd per share) $ 63.97
Weighted-average exercise price, unexercised ending balance (in usd per share) $ 56.09
Stock options information [Abstract]
Vested or expected to vest (in shares) 12.2
Exercisable (in shares) 6.3
Weighted-average exercise price, vested or expected to vest (in usd per share) $ 56.1
Weighted-average exercise price, exercisable (in usd per share) $ 56.59
Weighted-average remaining contractual life (years), unexercised 4 years 10 months 24 days
Weighted-average remaining contractual life (years), vested or expected to vest 4 years 10 months 24 days
Weighted-average remaining contractual life (years), exercisable 3 years 1 month 6 days
Aggregate intrinsic value, unexercised $ 371
Aggregate intrinsic value, vested or expected to vest 367
Aggregate intrinsic value, exercisable $ 187
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Stock-based compensation Stock-based compensation (Details 3) (Restricted Stock Units [Member], USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Restricted Stock Units [Member]
Restricted Stock Units, Nonvested, Number of Shares [Roll Forward]
Nonvested units, beginning balance (in shares) 9
Units granted (in shares) 3.9
Units, vested (in shares) (2.8)
Units, forfeited (in shares) (0.7)
Nonvested units, ending balance (in shares) 9.4 9
Restricted Stock Units, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Weighted average grant date fair value of units, beginning balance (in usd per share) $ 52.64
Weighted average grant date fair value, granted (in usd per share) $ 72.99 $ 51.83 $ 58.19
Weighted average grant date fair value, vested (in usd per share) $ 50.64
Weighted average grant date fair value, forfeited (in usd per share) $ 58.38
Weighted average grant date fair value of nonvested units, end of period (in usd per share) $ 61.14 $ 52.64
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Stock-based compensation Stock-based compensation (Details 4) (Performance Units [Member], USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Performance Units [Member]
Weighted-average assumptions and resulting weighted-average grant date fair values [Abstract]
Closing price of our common stock on grant date $ 68.75 $ 51.67 $ 56.9
Expected volatility 22.90% 32.80% 34.70%
Risk-free interest rate 0.50% 1.20% 1.30%
Expected dividend yield 2.20% 0.10% 0.00%
Fair value of unit (in usd per share) $ 78.21 $ 49.5 $ 62.06
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Stock-based compensation Stock-based compensation (Details Textual) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
May 06, 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock authorized to be issued under 2009 equity incentive plan 100,000,000
Amount by which the pool of available shares will be reduced for each stock option granted 1 1 1
The amount of common stock available under the plan for future grants and/or issuances (in shares) 48,000,000
Description of vesting of restricted stock units and stock options Stock options and RSUs granted on and after April 25, 2011, generally vest in approximately equal amounts on the second, third and fourth anniversaries of the grant date.
Actual tax benefits realized from tax deductions from option exercises $ 117 $ 14 $ 5
Number of common shares issued for each performance unit earned 1 1 1
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total intrinsic value of stock options exercised during the year 320 47 15
Expected dividend yield 2.10% 2.00% 0.00%
Weighted-average risk-free interest rate 1.60% 2.50% 3.20%
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
The number of shares by which the pool of available shares will be reduced for other types of awards granted 1.9 1.9 1.9
Period over which the grants of equity instruments vest 3 years 3 years 3 years
Expected dividend yield 2.20% 0.10% 0.00%
Weighted-average risk-free interest rate 0.50% 1.20% 1.30%
Weighted average grant date fair value, granted (in usd per share) $ 78.21 $ 49.5 $ 62.06
Total fair value of units that vested during the year 100 25 34
Total unrecognized compensation cost related to nonvested awards 179
Weighted average number of years over which compensation cost related to nonvested awards is expected to be recognized 1 year
Units outstanding (in shares) 5,800,000 4,100,000
Weighted average grant date fair value of units, outstanding $ 65.15 $ 51.92
Units granted (in shares) 2,900,000
Units, vested (in shares) 1,200,000
Weighted average grant date fair value, vested (in usd per share) $ 62.06
Weighted average grant date fair value, forfeited (in usd per share) $ 62.6
Units, forfeited (in shares) 400,000
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
The number of shares by which the pool of available shares will be reduced for other types of awards granted 1.9 1.9 1.9
Weighted average grant date fair value, granted (in usd per share) $ 72.99 $ 51.83 $ 58.19
Total fair value of units that vested during the year 139 176 184
Units outstanding (in shares) 9,400,000 9,000,000
Units granted (in shares) 3,900,000
Units, vested (in shares) 2,800,000
Weighted average grant date fair value, vested (in usd per share) $ 50.64
Weighted average grant date fair value, forfeited (in usd per share) $ 58.38
Units, forfeited (in shares) 700,000
Stock Option and Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation cost related to nonvested awards $ 388
Weighted average number of years over which compensation cost related to nonvested awards is expected to be recognized 1 year 8 months 12 days
Granted Prior to April 25, 2011 [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period over which the grants of equity instruments vest 4 years 4 years
Granted Prior to April 25, 2011 [Member] | Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period over which the grants of equity instruments vest 4 years 4 years
Granted on and After April 26, 2010 [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of stock options from date of grant 10 years 10 years 10 years
Granted Prior to April 26, 2010 [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of stock options from date of grant 7 years
Granted on April 25, 2011 through April 26, 2012 [Member] | Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield 2.00%
Weighted-average risk-free interest rate 1.00%
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Income taxes (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Current provision [Abstract]
Federal $ 438 $ 551 $ 620
State 47 54 52
Foreign 158 148 153
Total current provision 643 753 825
Deferred (benefit) provision [Abstract]
Federal 83 (273) (180)
State (43) (12) 43
Foreign (19) (1) 2
Total deferred provision (benefit) 21 (286) (135)
Total provision $ 664 $ 467 $ 690
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Income taxes (Details 1) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Deferred income tax assets [Abstract]
Expense accruals $ 805 $ 751
NOL and credit carryforwards 427 206
Expenses capitalized for tax 195 193
Stock-based compensation 115 241
Deferred revenue 40 133
Other 83 70
Total deferred income tax assets 1,665 [1] 1,594 [1]
Valuation allowance (273) (126)
Net deferred income tax assets 1,392 1,468
Deferred income tax liabilities [Abstract]
Acquired intangibles (1,249) (832)
Fixed assets (117) (219)
Unremitted foreign earnings (106) (61)
Other (145) (110)
Total deferred income tax liabilities (1,617) (1,222)
Total deferred income taxes, net $ (225) $ 246
[1] (1) In 2012, we reclassified certain prior period amounts to conform with current period reporting, primarily in connection with reclassifying prepaid taxes associated with intercompany profit in ending inventory from current deferred tax assets to prepaid taxes. Prepaid taxes are not included in the net deferred income tax table above; therefore, amounts related to these prepaid taxes which totaled $349 million for 2011 have been removed from the above table.
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Income taxes (Details 2) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Reconciliation of total gross amounts of unrecognized tax benefits (excluding interest, penalties, foreign tax credits and the federal tax benefit of state taxes related to unrecognized tax benefits)
Balance at beginning of year $ 975 $ 920 $ 1,140
Additions based on tax positions related to the current year 300 283 305
Reductions for tax positions of prior years (45) (7) (110)
Settlements (30) (221) (415)
Balance at end of year $ 1,200 $ 975 $ 920
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Income taxes (Details 3)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Reconciliation between the federal statutory tax rate applied to income before income taxes and effective tax rate [Abstract]
Federal statutory tax rate 35.00% 35.00% 35.00%
Foreign earnings, including earnings invested indefinitely (17.80%) (19.40%) (19.10%)
State taxes 0.60% 0.70% 1.60%
Credits, primarily federal R&D 0.00% (1.50%) (0.90%)
Audit settlements (federal, state, foreign) 0.30% 0.00% (3.10%)
Other, net 0.60% 0.80% (0.50%)
Effective tax rate 13.30% 11.30% 13.00%
Legal Settlements [Member]
Reconciliation between the federal statutory tax rate applied to income before income taxes and effective tax rate [Abstract]
Legal settlements (0.20%) 2.20% 0.00%
Puerto Rico Excise Tax [Member]
Reconciliation between the federal statutory tax rate applied to income before income taxes and effective tax rate [Abstract]
Credits, Puerto Rico Excise Tax (5.20%) (6.50%) 0.00%
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Income taxes Income taxes (Details Textual) (USD $)
12 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
Puerto Rico Excise Tax [Member]
Dec. 31, 2012
Investments in Foreign Subsidiaries and Foreign Corporate Joint Ventures that are Essentially Permanent in Duration [Member]
Dec. 31, 2012
State and Local Jurisdiction [Member]
Dec. 31, 2012
Internal Revenue Service (IRS) [Member]
Dec. 31, 2012
Foreign Tax Authority [Member]
Dec. 31, 2012
2011 [Member]
Dec. 31, 2012
2010 [Member]
Dec. 31, 2012
Settlement with Taxing Authority [Member]
Feb. 27, 2013
Subsequent Event [Member]
July 1, 2013 through 2017 [Member]
Puerto Rico Excise Tax [Member]
Feb. 27, 2013
Subsequent Event [Member]
Research Tax Credit Carryforward [Member]
Income Taxes (Textual) [Abstract]
Prepaid taxes related to intercompany profit in inventory $ 349,000,000
Increase (decrease) in valuation allowance for deferred tax assets 147,000,000 46,000,000
Interest and penalties related to unrecognized tax benefits recognized in income tax provision 30,000,000 23,000,000 41,000,000
Accrued interest and penalties associated with unrecognized tax benefits 102,000,000 105,000,000
Total foreign income before income taxes 3,300,000,000 3,000,000,000 3,500,000,000
Income taxes paid 502,000,000 595,000,000 1,344,000,000
Tax Credit Carryforward [Line Items]
Reclassification of prior year prepaid taxes associated with intercompany profit in inventory from deferred to current provision 71,000,000 16,000,000
Tax benefit of the retroactive extension of the 2012 R&D tax credit 65,000,000
Tax credit carryforwards available to reduce income taxes 242,000,000
Tax credit carryforwards for which a full valuation allowance has been provided 110,000,000
NOL carryforwards 301,000,000 233,000,000 383,000,000
Operating loss carryforwards requiring valuation allowance 48,000,000 75,000,000 383,000,000
Undistributed earnings of our foreign operations that are intended to be invested indefinitely outside of the United States 22,200,000,000
Additional income taxes required to be accrued and paid if earnings of foreign operations that are intended to be indefinitely invested outside of the United States were repatriated 7,900,000,000
Excise Tax Rate [Abstract]
Period of excise tax imposed 6 years
Effective excise tax rate for 2011 4.00%
Effective excise tax rate for 2012 3.75%
Effective excise tax rate for 2013 2.75%
Effective excise tax rate for 2014 2.50%
Effective excise tax rate for 2015 2.25%
Effective excise tax rate for 2016 1.00%
Excise tax rate effective July 1, 2013 through 2017 4.00%
Decrease in unrecognized tax benefits that is reasonably possible within the succeeding twelve months due to potential tax settlements $ 280,000,000 $ 185,000,000
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Earnings per share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income (Numerator):
Net income for basic and diluted EPS $ 788 $ 1,107 $ 1,266 $ 1,184 $ 934 $ 454 [1] $ 1,170 $ 1,125 $ 4,345 $ 3,683 $ 4,627
Shares (Denominator):
Weighted-average shares for basic EPS 775 905 960
Effect of dilutive securities 12 7 5
Weighted-average shares for diluted EPS 787 912 965
Basic EPS $ 1.03 $ 1.44 $ 1.63 $ 1.5 $ 1.09 $ 0.5 [1] $ 1.26 $ 1.21 $ 5.61 $ 4.07 $ 4.82
Diluted EPS $ 1.01 $ 1.41 $ 1.61 $ 1.48 $ 1.08 $ 0.5 [1] $ 1.25 $ 1.2 $ 5.52 $ 4.04 $ 4.79
[1] We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Earnings per share (Details Textual)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of diluted earnings per share, amount 6 33 43
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
Incremental Common Shares [Line Items]
Additional shares assumed to be issued for the purpose of computing diluted EPS 1 0 0
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Collaborative arrangements (Textuals) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
ENBREL sales $ 4,337 $ 4,201 $ 4,200 $ 3,901 $ 3,907 $ 3,877 [1] $ 3,893 $ 3,618 $ 16,639 $ 15,295 $ 14,660
Collaborative Arrangement With Pfizer Inc [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Period required to pay percentage of net sales, after expiration of agreement in years 3 years
Maximum percentage of annual net ENBREL sales payable to Pfizer for three years after expiration of the collaboration agreement in the fourth quarter of 2013 12.00% 12.00%
Minimum percentage of annual net ENBREL sales payable to Pfizer for three years after expiration of the collaboration agreement in the fourth quarter of 2013 10.00% 10.00%
ENBREL sales 4,200 3,700 3,500
Collaborative Arrangement With Pfizer Inc [Member] | Selling General and Administrative [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Profit share expenses 1,495 1,288 1,184
Cost recoveries $ 35 $ 84 $ 87
[1] We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Collaborative arrangements (Textuals 1) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Product sales $ 4,337 $ 4,201 $ 4,200 $ 3,901 $ 3,907 $ 3,877 [1] $ 3,893 $ 3,618 $ 16,639 $ 15,295 $ 14,660
Collaborative Arrangement With Glaxo Group Limited [Member] | Primary Territories [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Product sales 139 62 5
Collaborative Arrangement With Glaxo Group Limited [Member] | Selling General and Administrative [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Cost recoveries 10 30 46
Collaborative Arrangement With Glaxo Group Limited [Member] | Other Revenues [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Milestone payments received $ 75
[1] We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Collaborative arrangements Collaborative arrangements (Textuals 2) (Details) (Collaborative Arrangements With Astrazeneca Plc [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Percentage of related development costs for the 2012-2014 period will be funded by partner 65.00%
Other Revenues [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Milestone payments received 50
Research and Development Expense [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Cost recoveries 28
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Collaborative arrangements (Textuals 3) (Details) (USD $)
In Millions, unless otherwise specified
Jun. 29, 2012
Takeda Pharmaceutical Company Limited [Member]
Dec. 31, 2008
Takeda Pharmaceutical Company Limited [Member]
Japanese Market Products [Member]
Molecule
Jun. 30, 2012
Takeda Pharmaceutical Company Limited [Member]
Other revenues [Member]
Dec. 31, 2012
Takeda Pharmaceutical Company Limited [Member]
Other revenues [Member]
Dec. 31, 2010
Takeda Pharmaceutical Company Limited [Member]
Other revenues [Member]
Dec. 31, 2012
Takeda Pharmaceutical Company Limited [Member]
Research and Development [Member]
Dec. 31, 2011
Takeda Pharmaceutical Company Limited [Member]
Research and Development [Member]
Dec. 31, 2010
Takeda Pharmaceutical Company Limited [Member]
Research and Development [Member]
Dec. 31, 2008
Takeda Pharmaceutical Company Limited [Member]
Milestone payments deferred or capitalized [Member]
Jun. 30, 2012
License arrangement for Motesanib with Takeda Pharmaceutical Company Limited [Member]
Dec. 31, 2012
Vectibix [Member]
Takeda Pharmaceutical Company Limited [Member]
Dec. 31, 2011
Vectibix [Member]
Takeda Pharmaceutical Company Limited [Member]
Dec. 31, 2010
Vectibix [Member]
Takeda Pharmaceutical Company Limited [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Number of molecules developed and commercialized as per collaborations 12
Milestone payments received $ 55 $ 300
Amortization period of payments received and deferred under collaborative arrangements, in years 20 years
Deferred revenue as of the date of modification of the original arrangement 230
Milestone payments received under arrangements 3
Incremental cost to be recovered 21
Revenue previously deferred recognized as a result of a material modification to the agreement 206 24
Cost recoveries 74 83 91
Royalties received on sales $ 21 $ 20 $ 7
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Collaborative arrangements Collaborative arrangements (Textuals 4) (Details) (Research and Development Expense [Member], Collaborative Arrangements with UCB [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Research and Development Expense [Member] | Collaborative Arrangements with UCB [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Cost recoveries $ 71 $ 35 $ 28
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Related party transactions Related party transactions (Details Textual) (Kirin-Amgen [Member], USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Related Party Transaction [Line Items]
Ownership interest (in percent) in related party 50.00% 50.00% 50.00%
Payments that may be received upon the achievement of various substantive success-based development and regulatory approval milestones $ 85,000,000
Selling General and Administrative [Member]
Related Party Transaction [Line Items]
Company's share of profits (losses) of related party (24,000,000) 47,000,000 71,000,000
Cost of Sales Excludes Amortization of Certain Acquired Intangible Assets [Member]
Related Party Transaction [Line Items]
Royalties earned by related party from Amgen 274,000,000 298,000,000 322,000,000
Other Revenues [Member]
Related Party Transaction [Line Items]
Revenues earned by Amgen from related party 115,000,000 130,000,000 96,000,000
Research and Development [Member]
Related Party Transaction [Line Items]
Cost recoveries by Amgen from related party 142,000,000 85,000,000 88,000,000
Noncurrent Other Assets [Member]
Related Party Transaction [Line Items]
Approximate carrying value of the company's equity method investment net of dividends received 400,000,000 400,000,000
Accrued Liabilities [Member]
Related Party Transaction [Line Items]
Amount owed to related party $ 31,000,000 $ 75,000,000
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Cost savings initiatives and restructuring Cost savings initiatives and restructuring (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Cost Savings Initiatives (Textuals) [Line Items]
Impairment of fixed assets $ 178 $ 6 $ 118
Manufacturing operations optimization [Member] | Other operating expenses [Member]
Cost Savings Initiatives (Textuals) [Line Items]
Impairment of fixed assets 118
Manufacturing operations optimization [Member] | Cost of sales excludes amortization of certain acquired intangible assets [Member]
Cost Savings Initiatives (Textuals) [Line Items]
Impairment of fixed assets to be disposed of 118
Incremental depreciation in excess of what otherwise would have been recorded 42 42
Charges related to lease period beyond supply period 23
Other cost savings initiative [Member] | Other operating expenses [Member]
Cost Savings Initiatives (Textuals) [Line Items]
Severance and leave termination costs 175
Charges primarily related to severance $ 109
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Available-for-sale investments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost $ 23,455 $ 19,814
Gross unrealized gains 312 224
Gross unrealized losses (22) (35)
Total available-for-sale investments, fair value 23,745 20,003
U.S. Treasury securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 4,443 3,878
Gross unrealized gains 15 68
Gross unrealized losses 0 0
Total available-for-sale investments, fair value 4,458 3,946
Other government-related debt securities - U.S. [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 1,018 1,548
Gross unrealized gains 12 23
Gross unrealized losses 0 0
Total available-for-sale investments, fair value 1,030 1,571
Other government-related debt securities - Foreign and other [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 1,549 441
Gross unrealized gains 60 9
Gross unrealized losses (1) 0
Total available-for-sale investments, fair value 1,608 450
Corporate debt securities - Financial [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 3,266 2,493
Gross unrealized gains 96 30
Gross unrealized losses (1) (15)
Total available-for-sale investments, fair value 3,361 2,508
Corporate debt securities - Industrial [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 4,283 3,077
Gross unrealized gains 100 79
Gross unrealized losses (3) (10)
Total available-for-sale investments, fair value 4,380 3,146
Corporate debt securities - Other [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 441 280
Gross unrealized gains 11 9
Gross unrealized losses 0 0
Total available-for-sale investments, fair value 452 289
Residential mortgage-backed securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 1,828 518
Gross unrealized gains 9 3
Gross unrealized losses (8) (3)
Total available-for-sale investments, fair value 1,829 518
Other mortgage- and asset-backed securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 1,769 1,271
Gross unrealized gains 7 3
Gross unrealized losses (9) (7)
Total available-for-sale investments, fair value 1,767 1,267
Money market mutual funds [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 2,620 6,266
Gross unrealized gains 0 0
Gross unrealized losses 0 0
Total available-for-sale investments, fair value 2,620 6,266
Other short-term interest-bearing securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 2,186
Gross unrealized gains 0
Gross unrealized losses 0
Total available-for-sale investments, fair value 2,186
Total interest-bearing securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 23,403 19,772
Gross unrealized gains 310 224
Gross unrealized losses (22) (35)
Total available-for-sale investments, fair value 23,691 19,961
Equity securities [Member]
Amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of available-for-sale investments by type of security
Amortized cost 52 42
Gross unrealized gains 2 0
Gross unrealized losses 0 0
Total available-for-sale investments, fair value $ 54 $ 42
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Available-for-sale investments (Details 1) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Fair values of available-for-sale investments by classification in the Consolidated Balance Sheets
Cash and cash equivalents $ 3,257 $ 6,946 $ 3,287 $ 2,884
Marketable securities 20,804 13,695
Other assets - noncurrent 1,133 1,524
Total available-for-sale investments, fair value 23,745 20,003
Available-for-sale investments [Member]
Fair values of available-for-sale investments by classification in the Consolidated Balance Sheets
Cash and cash equivalents 2,887 6,266
Other assets - noncurrent $ 54 $ 42
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Available-for-sale investments (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Fair values of available-for-sale debt security investments by contractual maturity
Maturing in one year or less $ 7,175 $ 6,791
Maturing after one year through three years 5,014 5,855
Maturing after three years through five years 6,286 5,379
Maturing after five years through ten years 1,620 151
Mortgage-and asset-backed securities 3,596 1,785
Total available-for-sale investments, fair value 23,745 20,003
Total interest-bearing securities [Member]
Fair values of available-for-sale debt security investments by contractual maturity
Total available-for-sale investments, fair value $ 23,691 $ 19,961
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Available-for-sale investments (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Available-for-sale investments (Textual) [Abstract]
Cash $ 370 $ 680
Total realized gains 186 191 115
Total realized losses $ 54 $ 37 $ 25
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Inventories (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Inventories
Raw materials $ 192 $ 158
Work in process 1,723 1,802
Finished goods 829 524
Total inventories $ 2,744 $ 2,484
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Property, plant and equipment (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Minimum [Member]
Building and Improvements [Member]
Dec. 31, 2012
Minimum [Member]
Manufacturing Equipment [Member]
Dec. 31, 2012
Minimum [Member]
Laboratory Equipment [Member]
Dec. 31, 2012
Minimum [Member]
Other [Member]
Dec. 31, 2012
Maximum [Member]
Building and Improvements [Member]
Dec. 31, 2012
Maximum [Member]
Manufacturing Equipment [Member]
Dec. 31, 2012
Maximum [Member]
Laboratory Equipment [Member]
Dec. 31, 2012
Maximum [Member]
Other [Member]
Property, Plant and Equipment [Line Items]
Useful life 10 years 8 years 8 years 3 years 40 years 12 years 12 years 15 years
Property, plant and equipment [Abstract]
Land $ 412 $ 366
Buildings and improvements 3,510 3,463
Manufacturing equipment 2,007 1,897
Laboratory equipment 1,056 1,016
Other 3,891 3,745
Construction in progress 1,071 744
Property, plant and equipment, gross 11,947 11,231
Less accumulated depreciation and amortization (6,621) (5,811)
Property, plant and equipment, net $ 5,326 $ 5,420
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Property, plant and equipment (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Property, Plant and Equipment [Abstract]
Depreciation and amortization charges associated with property, plant and equipment $ 689 $ 679 $ 594
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Goodwill and intangible assets (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Finite-lived intangible assets:
Gross carrying amount $ 6,400 $ 5,446
Accumulated amortization (3,934) (3,537)
Intangible assets, net 2,466 1,909
Indefinite-lived intangible assets:
Indefinite-lived intangible assets 1,502 675
Identifiable intangible assets 7,902 6,121
Accumulated amortization (3,934) (3,537)
Identifiable intangible assets, net 3,968 2,584
Acquired product technology rights - Developed product technology [Member]
Finite-lived intangible assets:
Gross carrying amount 2,872 2,872
Accumulated amortization (2,003) (1,811)
Intangible assets, net 869 1,061
Acquired product technology rights - Core technology [Member]
Finite-lived intangible assets:
Gross carrying amount 1,348 1,348
Accumulated amortization (940) (850)
Intangible assets, net 408 498
Acquired product technology rights - Trade name [Member]
Finite-lived intangible assets:
Gross carrying amount 190 190
Accumulated amortization (133) (120)
Intangible assets, net 57 70
Acquired Research and Development technology rights [Member]
Finite-lived intangible assets:
Gross carrying amount 1,094 350
Accumulated amortization (381) (350)
Intangible assets, net 713 0
Other acquired intangible assets [Member]
Finite-lived intangible assets:
Gross carrying amount 896 686
Accumulated amortization (477) (406)
Intangible assets, net 419 280
In-Process Research and Development [Member]
Indefinite-lived intangible assets:
Indefinite-lived intangible assets 1,346 675
Contract Assets [Member]
Indefinite-lived intangible assets:
Indefinite-lived intangible assets $ 156 $ 0
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Goodwill and intangible assets Goodwill and intangible assets (Details 1) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Goodwill and Intangible Assets Disclosure [Abstract]
Beginning balance $ 11,750 $ 11,334
Goodwill resulting from acquisitions of businesses 928 435
Currency translation (16) (19)
Ending balance $ 12,662 $ 11,750
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Goodwill and intangible assets (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization charges associated with finite-lived intangible assets $ 397 $ 380 $ 423
Total estimated amortization of finite- lived intangible assets for 2013 464
Total estimated amortization of finite- lived intangible assets for 2014 446
Total estimated amortization of finite- lived intangible assets for 2015 434
Total estimated amortization of finite-lived intangible assets for 2016 413
Total estimated amortization of finite-lived intangible assets for 2017 $ 271
Minimum [Member]
Goodwill [Line Items]
Finite-lived intangible asset, useful life 3 years
Maximum [Member]
Goodwill [Line Items]
Finite-lived intangible asset, useful life 15 years
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Accrued liabilities Accrued liabilites (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Accrued liabilities [Abstract]
Sales deductions $ 1,129 $ 1,326
Employee compensation and benefits 1,010 916
Sales returns reserve 346 339
Legal reserve 0 780
Other 2,306 1,667
Total accrued liabilities $ 4,791 $ 5,028
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Financing arrangements (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Carrying values of long-term borrowings
Other notes, including our zero- coupon convertible notes $ 109 $ 184
Total debt 26,529 21,428
Less current portion (2,495) (84)
Total noncurrent debt 24,034 21,344
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
Carrying values of long-term borrowings
Other convertible notes, current 2,488
Convertible notes, noncurrent 2,346
1.875% notes due 2014 (1.875% 2014 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,000 1,000
4.85% notes due 2014 (4.85% 2014 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,000 1,000
2.30% notes due 2016 (2.30% 2016 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 749 748
2.50% notes due 2016 (2.50% 2016 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 999 999
2.125% notes due 2017 (2.125% 2017 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,248   
5.85% notes due 2017 (5.85% 2017 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,099 1,099
6.15% notes due 2018 (6.15% 2018 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 499 499
4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 723 714
5.70% notes due 2019 (5.70% 2019 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 999 998
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 887   
4.50% notes due 2020 (4.50% 2020 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 300 300
3.45% notes due 2020 (3.45% 2020 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 897 897
4.10% notes due 2021 (4.10% 2021 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 998 998
3.875% notes due 2021 (3.875% 2021 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,745 1,745
3.625% notes due 2022 (3.625% 2022 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 747   
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 763 739
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,117   
6.375% notes due 2037 (6.375% 2037 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 899 899
6.90% notes due 2038 (6.90% 2038 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 499 499
6.40% notes due 2039 (6.40% 2039 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 996 996
5.75% notes due 2040 (5.75% 2040 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 697 697
4.95% notes due 2041 (4.95% 2041 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 595 595
5.15% notes due 2041 (5.15% 2041 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 2,232 2,232
5.65% notes due 2042 (5.65% 2042 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt 1,244 1,244
5.375% notes due 2043 (5.375% 2043 Notes) [Member]
Carrying values of long-term borrowings
Total noncurrent debt $ 1,000   
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Financing arrangements Financing arrangements (Details 1) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Schedule of 2013 convertible notes [Abstract]
Principal balance $ 5,000 $ 10,500 $ 2,500
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
Schedule of 2013 convertible notes [Abstract]
Principal balance 2,500
Net carrying amount 2,488
Net carrying amount 2,346
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member] | Liability Component [Member]
Schedule of 2013 convertible notes [Abstract]
Principal balance 2,500 2,500
Unamortized discount 12 154
Net carrying amount 2,488
Net carrying amount 2,346
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member] | Equity Component [Member]
Schedule of 2013 convertible notes [Abstract]
Net carrying amount $ 829 $ 829
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Financing arrangements Financing arrangements (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Maturities of Long-term Debt [Abstract]
2013 $ 2,507 [1]
2014 2,002
2015 0
2016 1,750
2017 2,350
Thereafter 18,017
Total $ 26,626
[1] This amount includes the$2.5 billion principal amount for our 0.375% 2013 Convertible Notes after full accretion of the debt discount.
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Financing arrangements (Details Textual)
Share data in Millions, except Per Share data, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
Dec. 31, 2010
USD ($)
Feb. 28, 2011
0.125% convertible notes due 2011 (0.125% 2011 Convertible Notes) [Member]
USD ($)
Dec. 31, 2011
0.125% convertible notes due 2011 (0.125% 2011 Convertible Notes) [Member]
USD ($)
Dec. 31, 2010
0.125% convertible notes due 2011 (0.125% 2011 Convertible Notes) [Member]
USD ($)
Dec. 31, 2012
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Dec. 31, 2011
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Dec. 31, 2010
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Dec. 31, 2012
1.875% notes due 2014 (1.875% 2014 Notes) [Member]
USD ($)
Dec. 31, 2011
1.875% notes due 2014 (1.875% 2014 Notes) [Member]
USD ($)
Dec. 31, 2012
4.85% notes due 2014 (4.85% 2014 Notes) [Member]
USD ($)
Dec. 31, 2011
4.85% notes due 2014 (4.85% 2014 Notes) [Member]
USD ($)
Dec. 31, 2012
2.30% notes due 2016 (2.30% 2016 Notes) [Member]
USD ($)
Dec. 31, 2011
2.30% notes due 2016 (2.30% 2016 Notes) [Member]
USD ($)
Dec. 31, 2012
2.50% notes due 2016 (2.50% 2016 Notes) [Member]
USD ($)
Dec. 31, 2011
2.50% notes due 2016 (2.50% 2016 Notes) [Member]
USD ($)
Dec. 31, 2012
2.125% notes due 2017 (2.125% 2017 Notes) [Member]
USD ($)
Dec. 31, 2011
2.125% notes due 2017 (2.125% 2017 Notes) [Member]
USD ($)
Dec. 31, 2012
5.85% notes due 2017 (5.85% 2017 Notes) [Member]
USD ($)
Dec. 31, 2011
5.85% notes due 2017 (5.85% 2017 Notes) [Member]
USD ($)
Dec. 31, 2012
6.15% notes due 2018 (6.15% 2018 Notes) [Member]
USD ($)
Dec. 31, 2011
6.15% notes due 2018 (6.15% 2018 Notes) [Member]
USD ($)
Dec. 31, 2012
4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes) [Member]
USD ($)
Dec. 31, 2011
4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes) [Member]
USD ($)
Dec. 31, 2011
4.375% euro denominated notes due 2018 (4.375% 2018 euro Notes) [Member]
EUR (€)
Dec. 31, 2012
5.70% notes due 2019 (5.70% 2019 Notes) [Member]
USD ($)
Dec. 31, 2011
5.70% notes due 2019 (5.70% 2019 Notes) [Member]
USD ($)
Dec. 31, 2012
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
USD ($)
Dec. 31, 2012
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
EUR (€)
Dec. 31, 2011
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
USD ($)
Dec. 31, 2012
4.50% notes due 2020 (4.50% 2020 Notes) [Member]
USD ($)
Dec. 31, 2011
4.50% notes due 2020 (4.50% 2020 Notes) [Member]
USD ($)
Dec. 31, 2012
3.45% notes due 2020 (3.45% 2020 Notes) [Member]
USD ($)
Dec. 31, 2011
3.45% notes due 2020 (3.45% 2020 Notes) [Member]
USD ($)
Dec. 31, 2012
4.10% notes due 2021 (4.10% 2021 Notes) [Member]
USD ($)
Dec. 31, 2011
4.10% notes due 2021 (4.10% 2021 Notes) [Member]
USD ($)
Dec. 31, 2012
3.875% notes due 2021 (3.875% 2021 Notes) [Member]
USD ($)
Dec. 31, 2011
3.875% notes due 2021 (3.875% 2021 Notes) [Member]
USD ($)
Dec. 31, 2012
3.625% notes due 2022 (3.625% 2022 Notes) [Member]
USD ($)
Dec. 31, 2011
3.625% notes due 2022 (3.625% 2022 Notes) [Member]
USD ($)
Dec. 31, 2012
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2011
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2011
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
GBP (£)
Dec. 31, 2012
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2012
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
GBP (£)
Dec. 31, 2011
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2012
6.375% notes due 2037 (6.375% 2037 Notes) [Member]
USD ($)
Dec. 31, 2011
6.375% notes due 2037 (6.375% 2037 Notes) [Member]
USD ($)
Dec. 31, 2012
6.90% notes due 2038 (6.90% 2038 Notes) [Member]
USD ($)
Dec. 31, 2011
6.90% notes due 2038 (6.90% 2038 Notes) [Member]
USD ($)
Dec. 31, 2012
6.40% notes due 2039 (6.40% 2039 Notes) [Member]
USD ($)
Dec. 31, 2011
6.40% notes due 2039 (6.40% 2039 Notes) [Member]
USD ($)
Dec. 31, 2012
5.75% notes due 2040 (5.75% 2040 Notes) [Member]
USD ($)
Dec. 31, 2011
5.75% notes due 2040 (5.75% 2040 Notes) [Member]
USD ($)
Dec. 31, 2012
4.95% notes due 2041 (4.95% 2041 Notes) [Member]
USD ($)
Dec. 31, 2011
4.95% notes due 2041 (4.95% 2041 Notes) [Member]
USD ($)
Dec. 31, 2012
5.15% notes due 2041 (5.15% 2041 Notes) [Member]
USD ($)
Dec. 31, 2011
5.15% notes due 2041 (5.15% 2041 Notes) [Member]
USD ($)
Dec. 31, 2012
5.65% notes due 2042 (5.65% 2042 Notes) [Member]
USD ($)
Dec. 31, 2011
5.65% notes due 2042 (5.65% 2042 Notes) [Member]
USD ($)
Dec. 31, 2012
5.375% notes due 2043 (5.375% 2043 Notes) [Member]
USD ($)
Dec. 31, 2011
5.375% notes due 2043 (5.375% 2043 Notes) [Member]
USD ($)
Dec. 31, 2012
Warrants Issued Concurrent with Issuance of 2011 and 2013 Convertible Debt [Member]
Dec. 31, 2006
Convertible notes [Member]
USD ($)
Dec. 31, 2011
Zero coupon convertible notes due in 2032 [Member]
USD ($)
Dec. 31, 2012
8.125% notes due 2097 (Other) [Member]
USD ($)
Dec. 31, 2011
8.125% notes due 2097 (Other) [Member]
USD ($)
Dec. 31, 2012
Commercial Paper [Member]
USD ($)
Dec. 31, 2011
Commercial Paper [Member]
USD ($)
Dec. 31, 2012
Line of Credit [Member]
USD ($)
extension
Dec. 31, 2011
Line of Credit [Member]
USD ($)
Dec. 31, 2011
Rate Adjustment To Libor On Interest Rate Swap Agreements [Member]
Dec. 31, 2010
Rate Adjustment To Libor On Interest Rate Swap Agreements [Member]
Dec. 31, 2012
Interest Rate Swap [Member]
USD ($)
Feb. 27, 2013
Subsequent Event [Member]
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Feb. 27, 2013
Subsequent Event [Member]
Repayment of Debt [Member]
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Feb. 27, 2013
Excess Conversion Value [Member]
Subsequent Event [Member]
0.375% convertible notes due 2013 (0.375% 2013 Convertible Notes) [Member]
USD ($)
Dec. 31, 2012
MN [Member]
USD ($)
Dec. 31, 2012
Shelf Registration Statement [Member]
Medium-term Notes [Member]
USD ($)
Dec. 31, 2011
Shelf Registration Statement [Member]
Medium-term Notes [Member]
USD ($)
Financing arrangements (Textual) [Abstract]
Repayment of debt $ 123,000,000 $ 2,500,000,000 $ 0
Stated contractual interest rate on note 0.13% 0.38% 0.38% 1.88% 1.88% 4.85% 4.85% 2.30% 2.30% 2.50% 2.50% 2.13% 5.85% 5.85% 6.15% 6.15% 4.38% 4.38% 4.38% 5.70% 5.70% 2.13% 2.13% 4.50% 4.50% 3.45% 3.45% 4.10% 4.10% 3.88% 3.88% 3.63% 5.50% 5.50% 5.50% 4.00% 4.00% 6.38% 6.38% 6.90% 6.90% 6.40% 6.40% 5.75% 5.75% 4.95% 4.95% 5.15% 5.15% 5.65% 5.65% 5.38%
Repayments of convertible notes 2,500,000,000 2,500,000,000 99,000,000
Aggregate principal amount of notes issued 5,000,000,000 10,500,000,000 2,500,000,000 2,500,000,000 550,000,000 675,000,000 475,000,000 700,000,000 5,000,000,000
Total debt issuance costs 25,000,000 55,000,000 17,000,000
Redemption price as a percentage of the principal amount of notes that may be required to be paid in the event of a change in control triggering event 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00% 101.00%
Convertible notes conversion ratio into common stock 12.8809
Principal amount of notes to which the common stock conversion ratio is applied 1,000
Conversion price per share of convertible notes $ 77.63
Ratio of closing price of common stock to respective conversion price per share that needs to be exceeded in previous quarter to allow conversion 130.00%
Conversion of convertible notes before maturity period within one month
Cash settlement of convertible bond hedge 99,000,000
Potential settlements of warrants (In May 2013) (in shares) 31.5
Exercise price of warrants 105.48
Warrants to acquire shares of our common stock , expired (in shares) 31.3
Effective interest rate on convertible notes 6.24% 6.24% 6.35% 6.35% 6.35%
Interest expense, net 1,053,000,000 610,000,000 604,000,000 13,000,000 149,000,000 151,000,000 143,000,000 134,000,000
Non-cash interest expense 12,000,000 146,000,000 142,000,000 133,000,000 125,000,000
Total noncurrent debt 24,034,000,000 21,344,000,000 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 749,000,000 748,000,000 999,000,000 999,000,000 1,248,000,000    1,099,000,000 1,099,000,000 499,000,000 499,000,000 723,000,000 714,000,000 999,000,000 998,000,000 887,000,000    300,000,000 300,000,000 897,000,000 897,000,000 998,000,000 998,000,000 1,745,000,000 1,745,000,000 747,000,000    763,000,000 739,000,000 1,117,000,000    899,000,000 899,000,000 499,000,000 499,000,000 996,000,000 996,000,000 697,000,000 697,000,000 595,000,000 595,000,000 2,232,000,000 2,232,000,000 1,244,000,000 1,244,000,000 1,000,000,000    100,000,000 100,000,000 9,000,000
Other convertible notes, current 2,488,000,000 84,000,000
Interest rate swap contracts - fair value hedge - notional amounts 3,600,000,000 3,600,000,000
Derivative lower range variable interest rate 0.30% 0.30%
Derivative higher range variable interest rate 2.60% 2.60%
Maximum borrowing capacity under commercial paper program 2,500,000,000
Amount outstanding under commercial paper program 0 0
Maximum current borrowing capacity under a syndicated, unsecured, revolving credit agreement 2,500,000,000
Amount by which the borrowing capacity under a syndicated, unsecured, revolving credit agreement maybe increased upon our request at the discretion of the banks 500,000,000
Initial commitment term of each bank which is a party to the agreement 5 years
Number of additional extensions 2
Additional period for extension of commitment term 1 year
Annual commitment fees for syndicated, unsecured, revolving credit agreement 0.10%
Interest rate charged over LIBOR on any amounts borrowed under the facility 0.90%
Amount outstanding under syndicated, unsecured, revolving credit facility 0 0
Previous revolving credit facilities, terminated in period 2,300,000,000
Amount that may be issued under a medium term note program established under the shelf registration statement 400,000,000
Amount outstanding under medium term note program 0 0
Interest costs capitalized 26,000,000 22,000,000 33,000,000
Interest paid, net of interest rate swaps 406,000,000 446,000,000 323,000,000
Receipt from counterparties upon termination of interest rate swap contracts $ 397,000,000
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Stockholders' equity (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Stock repurchase program
Stock repurchases (in shares) 14.2 9.7 17.4 21 86 45.4 12.9 0 20.5 6.6 10.3 29.1 62.3 144.3 66.5
Stock Repurchase Program [Member]
Stock repurchase program
Stock repurchases 1,233 797 1,203 1,429 5,154 [1] 2,421 732 0 1,136 364 616 1,684 4,662 8,307 3,800
[1] Includes the repurchase of 83.3 million shares of our common stock at an average price paid per share of $60.08, including related expenses, for an aggregate cost of $5.0 billion, under a modified Dutch auction tender offer.
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Stockholders' equity Stockholders' equity (Details 1) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Increase (Decrease) in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance, Foreign currency translation $ 21 $ 22 $ 40
Beginning balance, Cash flow hedges 43 3 (82)
Beginning balance, Available-for-sale securities 120 135 95
Beginning balance, Other (13) (7) (8)
Beginning balance, AOCI 171 153 45
Other Comprehensive Income (Loss), Net of Tax [Abstract]
Foreign currency translation adjustments (13) (6) (29)
Unrealized gains (losses), Cash flow hedges 15 (51) 186
Unrealized gains (losses), Available-for-sale securities 233 125 155
Unrealized gains (losses), Other (1) 2 1
Unrealized gains (losses), Accumulated other comprehensive income 247 76 342
Reclassification adjustments to income, Cash flow hedges (134) 112 (46)
Reclassification adjustments to income, Available-for-sale securities (132) (154) (90)
Reclassification adjustments to income, Accumulated other comprehensive income (266) (42) (136)
Other (8)
Other, Accumulated other comprehensive income (8)
Income taxes, Foreign currency translation 4 5 11
Income taxes, Cash flow hedges 41 (21) (55)
Income taxes, Available-for-sale securities (38) 14 (25)
Income taxes, Other 0 0 0
Income taxes, Accumulated other comprehensive income (loss) 7 (2) (69)
Ending balance, Foreign currency translation 12 21 22
Ending balance, Cash flow hedges (35) 43 3
Ending balance, Available-for-sale securities 183 120 135
Ending balance, Other (14) (13) (7)
Ending balance, AOCI $ 146 $ 171 $ 153
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Stockholders' equity (Details Textual) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended
Dec. 13, 2012
Dec. 07, 2012
Oct. 10, 2012
Sep. 07, 2012
Jul. 19, 2012
Jun. 07, 2012
Mar. 15, 2012
Mar. 07, 2012
Dec. 15, 2011
Dec. 08, 2011
Oct. 13, 2011
Sep. 08, 2011
Jul. 28, 2011
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2010
Sep. 30, 2010
Jun. 30, 2010
Mar. 31, 2010
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Stock Repurchase Program [Line Items]
Stock repurchases (in shares) 14,200,000 9,700,000 17,400,000 21,000,000 86,000,000 45,400,000 12,900,000 0 20,500,000 6,600,000 10,300,000 29,100,000 62,300,000 144,300,000 66,500,000
Share repurchase authorized amount $ 2,000,000,000
Amount available for stock repurchases under a board approved stock repurchase plan 2,300,000,000
Common stock, dividends declared per share (in usd per share) $ 0.47 $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.28 $ 0.28
Dividends paid per share (in usd per share) $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 0.28 $ 0.28
Income taxes expense or (benefit) for unrealized gains and losses for cash flow hedges 8,000,000 (20,000,000) 71,000,000
Income tax expense or (benefit) reclassification adjustments to income for cash flow hedges (49,000,000) 41,000,000 (16,000,000)
Income taxes expense or (benefit) for unrealized gains and losses for available-for-sale securities 87,000,000 45,000,000 60,000,000
Income tax expense or (benefit) for reclassification adjustments to income for available-for-sale securities (49,000,000) (59,000,000) (35,000,000)
Preferred stock shares authorized (in shares) 5,000,000 5,000,000
Preferred stock, par value (in usd per share) $ 0.0001 $ 0.0001
Preferred stock, shares issued (in shares) 0 0 0 0
Preferred stock, shares outstanding (in shares) 0 0 0 0
Modified Dutch Auction Tender Offer [Member]
Stock Repurchase Program [Line Items]
Stock repurchases (in shares) 83,300,000
Stock repurchased price per share (in usd per share) $ 60.08
Stock repurchases $ 5,000,000,000
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Fair value measurement (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Assets:
Total available-for-sale investments $ 23,745 $ 20,003
Fair Value, Measurements, Recurring [Member]
Derivative Assets:
Interest rate swap contracts 377
Total assets 23,856 20,552
Derivative Liabilities:
Contingent consideration obligations in connection with a business combination 221 190
Total liabilities 286 264
Fair Value, Measurements, Recurring [Member] | Foreign currency contracts [Member]
Derivative Assets:
Foreign currency contracts 46 172
Derivative Liabilities:
Foreign currency contracts 59 48
Fair Value, Measurements, Recurring [Member] | Cross currency swap contracts [Member]
Derivative Assets:
Foreign currency contracts 65
Derivative Liabilities:
Foreign currency contracts 6 26
Fair Value, Measurements, Recurring [Member] | U.S. Treasury securities [Member]
Assets:
Total available-for-sale investments 4,458 3,946
Fair Value, Measurements, Recurring [Member] | Other government-related debt securities - U.S. [Member]
Assets:
Total available-for-sale investments 1,030 1,571
Fair Value, Measurements, Recurring [Member] | Other government-related debt securities - Foreign and other [Member]
Assets:
Total available-for-sale investments 1,608 450
Fair Value, Measurements, Recurring [Member] | Corporate debt securities - Financial [Member]
Assets:
Total available-for-sale investments 3,361 2,508
Fair Value, Measurements, Recurring [Member] | Corporate debt securities - Industrial [Member]
Assets:
Total available-for-sale investments 4,380 3,146
Fair Value, Measurements, Recurring [Member] | Corporate debt securities - Other [Member]
Assets:
Total available-for-sale investments 452 289
Fair Value, Measurements, Recurring [Member] | Residential mortgage-backed securities [Member]
Assets:
Total available-for-sale investments 1,829 518
Fair Value, Measurements, Recurring [Member] | Other mortgage- and asset-backed securities [Member]
Assets:
Total available-for-sale investments 1,767 1,267
Fair Value, Measurements, Recurring [Member] | Money market mutual funds [Member]
Assets:
Total available-for-sale investments 2,620 6,266
Fair Value, Measurements, Recurring [Member] | Other short-term interest-bearing securities [Member]
Assets:
Total available-for-sale investments 2,186
Fair Value, Measurements, Recurring [Member] | Equity securities [Member]
Assets:
Total available-for-sale investments 54 42
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member]
Derivative Assets:
Interest rate swap contracts 0
Total assets 7,132 10,254
Derivative Liabilities:
Contingent consideration obligations in connection with a business combination 0 0
Total liabilities 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Foreign currency contracts [Member]
Derivative Assets:
Foreign currency contracts 0 0
Derivative Liabilities:
Foreign currency contracts 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Cross currency swap contracts [Member]
Derivative Assets:
Foreign currency contracts 0
Derivative Liabilities:
Foreign currency contracts 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | U.S. Treasury securities [Member]
Assets:
Total available-for-sale investments 4,458 3,946
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Other government-related debt securities - U.S. [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Other government-related debt securities - Foreign and other [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Corporate debt securities - Financial [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Corporate debt securities - Industrial [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Corporate debt securities - Other [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Residential mortgage-backed securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Other mortgage- and asset-backed securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Money market mutual funds [Member]
Assets:
Total available-for-sale investments 2,620 6,266
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Other short-term interest-bearing securities [Member]
Assets:
Total available-for-sale investments 0
Fair Value, Measurements, Recurring [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | Equity securities [Member]
Assets:
Total available-for-sale investments 54 42
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member]
Derivative Assets:
Interest rate swap contracts 377
Total assets 16,724 10,298
Derivative Liabilities:
Contingent consideration obligations in connection with a business combination 0 0
Total liabilities 65 74
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Foreign currency contracts [Member]
Derivative Assets:
Foreign currency contracts 46 172
Derivative Liabilities:
Foreign currency contracts 59 48
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Cross currency swap contracts [Member]
Derivative Assets:
Foreign currency contracts 65
Derivative Liabilities:
Foreign currency contracts 6 26
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | U.S. Treasury securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Other government-related debt securities - U.S. [Member]
Assets:
Total available-for-sale investments 1,030 1,571
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Other government-related debt securities - Foreign and other [Member]
Assets:
Total available-for-sale investments 1,608 450
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Corporate debt securities - Financial [Member]
Assets:
Total available-for-sale investments 3,361 2,508
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Corporate debt securities - Industrial [Member]
Assets:
Total available-for-sale investments 4,380 3,146
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Corporate debt securities - Other [Member]
Assets:
Total available-for-sale investments 452 289
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Residential mortgage-backed securities [Member]
Assets:
Total available-for-sale investments 1,829 518
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Other mortgage- and asset-backed securities [Member]
Assets:
Total available-for-sale investments 1,767 1,267
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Money market mutual funds [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Other short-term interest-bearing securities [Member]
Assets:
Total available-for-sale investments 2,186
Fair Value, Measurements, Recurring [Member] | Significant other observable inputs (Level 2) [Member] | Equity securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member]
Derivative Assets:
Interest rate swap contracts   
Total assets    0
Derivative Liabilities:
Contingent consideration obligations in connection with a business combination 221 190
Total liabilities 221 190
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Foreign currency contracts [Member]
Derivative Assets:
Foreign currency contracts 0 0
Derivative Liabilities:
Foreign currency contracts 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Cross currency swap contracts [Member]
Derivative Assets:
Foreign currency contracts 0
Derivative Liabilities:
Foreign currency contracts 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | U.S. Treasury securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Other government-related debt securities - U.S. [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Other government-related debt securities - Foreign and other [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Corporate debt securities - Financial [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Corporate debt securities - Industrial [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Corporate debt securities - Other [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Residential mortgage-backed securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Other mortgage- and asset-backed securities [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Money market mutual funds [Member]
Assets:
Total available-for-sale investments 0 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Other short-term interest-bearing securities [Member]
Assets:
Total available-for-sale investments 0
Fair Value, Measurements, Recurring [Member] | Significant unobservable inputs (Level 3) [Member] | Equity securities [Member]
Assets:
Total available-for-sale investments $ 0 $ 0
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Fair value measurement (Details Textual) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Biovex Group Inc [Member]
ContingentConsideration
Mar. 04, 2011
Biovex Group Inc [Member]
Dec. 31, 2012
Other Operating Expense [Member]
Dec. 31, 2012
Corporate Debt Securities [Member]
Dec. 31, 2012
Other government-related debt securities [Member]
Fair Value Measurement (Textual) [Abstract]
Investment maturity period 5 years 5 years
Length of time hedged in foreign currency contracts three years
Maximum additional consideration due contingent on certain milestones $ 575,000,000 $ 575,000,000
Maximum number of contingent consideration payments for achieving regulatory and sales related milestones 8
The number of payments that will potentially be made that each equal the largest potential contingent consideration payment 3
Largest potential contingent consideration payments 125,000,000
Change in fair values of contingent consideration obligations 31,000,000
Aggregate fair value of long-term debt, including current portion 29,900,000,000 23,000,000,000
Carrying value of long-term debt, including current portion $ 26,529,000,000 $ 21,428,000,000
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Derivative instruments Derivative Instruments (Details) (Cash flow hedge [Member], Cross currency swap contracts [Member])
In Millions, unless otherwise specified
Dec. 31, 2012
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
USD ($)
Dec. 31, 2012
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
EUR (€)
Dec. 31, 2012
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2012
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
GBP (£)
Dec. 31, 2012
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
USD ($)
Dec. 31, 2012
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
GBP (£)
Dec. 31, 2012
Interest rate paid [Member]
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
Dec. 31, 2012
Interest rate paid [Member]
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
Dec. 31, 2012
Interest rate paid [Member]
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
Dec. 31, 2012
Interest rate received [Member]
2.125% euro denominated notes due 2019 (2.125% 2019 euro Notes) [Member]
Dec. 31, 2012
Interest rate received [Member]
5.50% pound sterling denominated notes due 2026 (5.50% 2026 pound sterling Notes) [Member]
Dec. 31, 2012
Interest rate received [Member]
4.00% pound sterling denominated notes due 2029 (4.00% 2029 pound sterling Notes) [Member]
Derivative [Line Items]
Notional Amount $ 864 € 675 $ 748 £ 475 $ 1,122 £ 700
Fixed Interest Rate 2.60% 5.80% 4.30% 2.13% 5.50% 4.00%
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Derivative Instruments (Details 1) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Effective portion of the unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges contracts [Abstract]
Unrealized gain (loss) on derivative instruments recognized in Other Comprehensive Income, effective portion, net $ 15 $ (51) $ 186
Foreign currency contracts [Member]
Effective portion of the unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges contracts [Abstract]
Unrealized gain (loss) on derivative instruments recognized in Other Comprehensive Income, effective portion, net (63) (25) 191
Cross currency swap contracts [Member]
Effective portion of the unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges contracts [Abstract]
Unrealized gain (loss) on derivative instruments recognized in Other Comprehensive Income, effective portion, net 85 (26) 0
Forward interest rate contracts [Member]
Effective portion of the unrealized gain (loss) recognized in Other Comprehensive Income for our derivative instruments designated as cash flow hedges contracts [Abstract]
Unrealized gain (loss) on derivative instruments recognized in Other Comprehensive Income, effective portion, net $ (7) $ 0 $ (5)
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Derivative instruments (Details 2) (Derivatives in cash flow hedging relationships [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Location in the Consolidated Statements of Income and the effective portion of gain/(loss) reclassified from Accumulated Other Comprehensive Income into earnings for our derivative instruments designated as cash flow hedges contracts [Abstract]
Total $ 134 $ (112) $ 46
Foreign currency contracts [Member] | Product sales [Member]
Location in the Consolidated Statements of Income and the effective portion of gain/(loss) reclassified from Accumulated Other Comprehensive Income into earnings for our derivative instruments designated as cash flow hedges contracts [Abstract]
The amount of gain (loss) recognized in product sales 74 (108) 47
Cross currency swap contracts [Member]
Location in the Consolidated Statements of Income and the effective portion of gain/(loss) reclassified from Accumulated Other Comprehensive Income into earnings for our derivative instruments designated as cash flow hedges contracts [Abstract]
The amount of gain (loss) recognized in interest and other income, net 61 (3) 0
Forward interest rate contracts [Member]
Location in the Consolidated Statements of Income and the effective portion of gain/(loss) reclassified from Accumulated Other Comprehensive Income into earnings for our derivative instruments designated as cash flow hedges contracts [Abstract]
The amount of gain (loss) recognized in interest expense, net $ (1) $ (1) $ (1)
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Derivative instruments (Details 3) (Foreign currency contracts [Member], Interest and other income, net [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Foreign currency contracts [Member] | Interest and other income, net [Member]
Location in the Condensed Consolidated Statements of Income and the amount of gain (loss) recognized in earnings for our derivative instruments not designated as hedging instruments
Derivatives not designated as hedging instruments $ 19 $ (1) $ 32
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Derivative instruments (Details 4) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Assets
Total derivative assets, fair value $ 111 $ 549
Liabilities
Total derivative liabilities, fair value 65 74
Derivatives designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 110 549
Liabilities
Total derivative liabilities, fair value 64 74
Derivatives not designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 1 0
Liabilities
Total derivative liabilities, fair value 1 0
Interest rate swap contracts [Member] | Other current assets/Other noncurrent assets [Member] | Derivatives designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 377
Interest rate swap contracts [Member] | Accrued liabilities/Other noncurrent liabilities [Member] | Derivatives designated as hedging instrument [Member]
Liabilities
Total derivative liabilities, fair value 0
Cross currency swap contracts [Member] | Other current assets/Other noncurrent assets [Member] | Derivatives designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 65 0
Cross currency swap contracts [Member] | Accrued liabilities/Other noncurrent liabilities [Member] | Derivatives designated as hedging instrument [Member]
Liabilities
Total derivative liabilities, fair value 6 26
Foreign currency contracts [Member] | Other current assets/Other noncurrent assets [Member] | Derivatives designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 45 172
Foreign currency contracts [Member] | Other current assets [Member] | Derivatives not designated as hedging instrument [Member]
Assets
Total derivative assets, fair value 1 0
Foreign currency contracts [Member] | Accrued liabilities/Other noncurrent liabilities [Member] | Derivatives designated as hedging instrument [Member]
Liabilities
Total derivative liabilities, fair value 58 48
Foreign currency contracts [Member] | Accrued liabilities [Member] | Derivatives not designated as hedging instrument [Member]
Liabilities
Total derivative liabilities, fair value $ 1 $ 0
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Derivative instruments (Details Textual) (USD $)
12 Months Ended 3 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
Interest expense, net [Member]
Dec. 31, 2011
Interest expense, net [Member]
Dec. 31, 2010
Interest expense, net [Member]
Dec. 31, 2012
Foreign currency option contracts [Member]
Dec. 31, 2011
Foreign currency option contracts [Member]
Dec. 31, 2010
Foreign currency option contracts [Member]
Dec. 31, 2012
Foreign currency and cross currency swap contracts [Member]
Dec. 31, 2012
Forward interest rate contracts [Member]
Dec. 31, 2011
Rate adjustment to LIBOR on Interest Rate Swap Agreements [Member]
Dec. 31, 2010
Rate adjustment to LIBOR on Interest Rate Swap Agreements [Member]
Dec. 31, 2012
Foreign currency forward contracts [Member]
Dec. 31, 2011
Foreign currency forward contracts [Member]
Dec. 31, 2010
Foreign currency forward contracts [Member]
Jun. 30, 2012
Net Cash Provided By Operating Activities [Member]
Derivative instruments (Textual) [Abstract]
Notional amount $ 200,000,000 $ 292,000,000 $ 398,000,000 $ 3,700,000,000 $ 3,500,000,000 $ 3,200,000,000
Ineffective portions of cash flow hedging instruments (approximately), Gain (loss) (1,000,000) 1,000,000 (1,000,000)
Amounts expected to be reclassified from accumulated other comprehensive income into earnings over the next 12 months - gains on foreign currency and cross currency swap (20,000,000)
Amounts expected to be reclassified from accumulated other comprehensive income into earnings over the next 12 months - gain (loss) (1,000,000)
Derivative lower range variable interest rate 0.30% 0.30%
Derivative higher range variable interest rate 2.60% 2.60%
Interest rate swap contracts - fair value hedge - notional amounts 3,600,000,000 3,600,000,000
Receipt from counterparties upon termination of interest rate swap contracts 397,000,000
Unrealized gain (loss) on the hedged debt (20,000,000) (182,000,000) (105,000,000)
Offsetting unrealized gain (loss) on related interest rate swaps 20,000,000 182,000,000 105,000,000
Foreign currency open contracts - not designated as hedges - notional amounts $ 629,000,000 $ 389,000,000 $ 670,000,000
Length of time hedged in foreign currency contracts three years
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Contingencies and commitments (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Minimum future rental commitments under non-cancelable operating leases
2013 $ 121
2014 97
2015 90
2016 79
2017 67
Thereafter 287
Total minimum operating lease commitments $ 741
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Contingencies and commitments Contingencies and commitments (Details Textual) (USD $)
In Millions, unless otherwise specified
12 Months Ended 0 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2012
In re Amgen Inc. Securities Litigation [Member]
complaints
Dec. 31, 2012
Larson v. Sharer, et al [Member]
complaints
Dec. 31, 2012
Federal Derivative Ligiation [Member]
Dec. 31, 2012
Ramos v. Amgen Inc., et al. [Member]
defendants
Dec. 31, 2012
Harris, et. al. v. Amgen Inc. [Member]
plaintiffs
Sep. 01, 2009
Massachusetts Qui Tam Action [Member]
states
May 07, 2009
Massachusetts Qui Tam Action [Member]
states
Oct. 30, 2009
Amended Complaint, Massachusetts District Court [Member]
states
Dec. 19, 2012
Original Qui Tam Actions [Member]
actions
Dec. 31, 2012
Original Qui Tam Actions [Member]
actions
Oct. 31, 2011
Additional Qui Tam [Member]
actions
Dec. 19, 2012
Qui Tam Litigation, Civil Liability [Member]
Dec. 19, 2012
Qui Tam Litigation, Criminal Liability [Member]
Dec. 31, 2012
U.S. ex rel. May v. Amgen, et al. [Member]
actions
Dec. 31, 2012
Settled Litigation Related to Sales and Marketing Practices [Member]
Dec. 19, 2012
Settled Litigation Related to Sales and Marketing Practices [Member]
states
Dec. 31, 2012
U.S. District Court, Eastern District of New York [Member]
Original Qui Tam Actions [Member]
actions
Dec. 31, 2012
U.S. District Court, Western District of Washington [Member]
Original Qui Tam Actions [Member]
actions
Loss Contingencies [Line Items]
Number of stockholder complaints 6 3
Length of time Federal Derivative Litigation cases stayed after Amgen Inc. Securities Litigation 30 days
Number of defendants 4
Number of plaintiffs 2
Number of states with complaints 17 14
Number of states 49
Number of pending claims 8 1
Number of states with notice of intervention 14
Number of claims settled 9 2
Number of claims including pending and settled claims 10
Number of claims filed 1
Settlement agreement, consideration to resolve case $ 612 $ 150
Compliance program and integrity obligations period 5 years
Future rental commitments for abandoned leases 331
Rental expense on operating leases 117 131 115
Minimum contractual purchase commitments with third party manufacturers through 2014 39
Purchases under contractual purchase commitments $ 123 $ 87 $ 68
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Segment information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Revenues [Abstract]
Product sales $ 4,337 $ 4,201 $ 4,200 $ 3,901 $ 3,907 $ 3,877 [1] $ 3,893 $ 3,618 $ 16,639 $ 15,295 $ 14,660
Other revenues 626 287 393
Total revenues 17,265 15,582 15,053
Neulasta [Member]
Revenues [Abstract]
Product sales 4,092 3,952 3,558
NEUPOGEN [Member]
Revenues [Abstract]
Product sales 1,260 1,260 1,286
ENBREL [Member]
Revenues [Abstract]
Product sales 4,236 3,701 3,534
Aranesp [Member]
Revenues [Abstract]
Product sales 2,040 2,303 2,486
EPOGEN [Member]
Revenues [Abstract]
Product sales 1,941 2,040 2,524
Sensipar Mimpara [Member]
Revenues [Abstract]
Product sales 950 808 714
Vectibix [Member]
Revenues [Abstract]
Product sales 359 322 288
Nplate [Member]
Revenues [Abstract]
Product sales 368 297 229
XGEVA [Member]
Revenues [Abstract]
Product sales 748 351 8
Prolia [Member]
Revenues [Abstract]
Product sales 472 203 33
Other [Member]
Revenues [Abstract]
Product sales $ 173 $ 58 $ 0
[1] We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Segment information (Details 1) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Geographical Information With Respect To Revenues [Abstract]
United States $ 13,415 $ 11,985 $ 11,636
ROW 3,850 3,597 3,417
Total revenues $ 17,265 $ 15,582 $ 15,053
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Segment information (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Long Lived Assets [Abstract]
United States $ 2,906 $ 3,144
Property, plant and equipment, net 5,326 5,420
Puerto Rico Excise Tax [Member]
Long Lived Assets [Abstract]
International countries 1,908 1,993
ROW [Member]
Long Lived Assets [Abstract]
International countries $ 512 $ 283
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Segment information (Details 3) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
AmerisourceBergen Corporation [Member]
Revenues Earned from Major Customers [Abstract]
Gross product sales $ 7,556 $ 7,574 $ 7,678
Gross product sales to major customer (as defined) as a percentage of total gross revenues 34.00% 36.00% 38.00%
Gross product sales to major customer (as defined) as a percentage of U.S. gross product sales 43.00% 45.00% 47.00%
McKesson Corporation [Member]
Revenues Earned from Major Customers [Abstract]
Gross product sales 5,898 4,591 3,913
Gross product sales to major customer (as defined) as a percentage of total gross revenues 27.00% 22.00% 19.00%
Gross product sales to major customer (as defined) as a percentage of U.S. gross product sales 32.00% 27.00% 24.00%
Cardinal Health, Inc. [Member]
Revenues Earned from Major Customers [Abstract]
Gross product sales $ 3,245 $ 3,021 $ 2,813
Gross product sales to major customer (as defined) as a percentage of total gross revenues 15.00% 14.00% 14.00%
Gross product sales to major customer (as defined) as a percentage of U.S. gross product sales 19.00% 18.00% 17.00%
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Segment information (Details Textual)
12 Months Ended
Dec. 31, 2012
customer
Dec. 31, 2011
customer
Dec. 31, 2010
customer
Segment Information (Textual) [Abstract]
Number of major customers (as defined) accounting for more than 10% of total revenue 3 3 3
Threshold as a percentage of total revenues for determining a major customer for additional disclosures 10.00% 10.00% 10.00%
Percentage of worldwide gross revenues derived from major customers (as defined) on a combined basis 76.00%
Percentage of United States gross product sales derived from major customers (as defined) on a combined basis 94.00%
Major customers (as defined) accounting for more than 10% of gross trade receivables 3 3
Combined trade receivables for all major customers (as defined) as a percentage of net trade receivables 61.00% 60.00%
Percentage of net trade receivables due from customers located outside the United States, primarily in Europe 36.00% 39.00%
AmerisourceBergen Corporation [Member]
Revenue, Major Customer [Line Items]
Amount due from major customer (as defined) as a percentage of gross trade receivables exceeded 10% exceeded 10%
McKesson Corporation [Member]
Revenue, Major Customer [Line Items]
Amount due from major customer (as defined) as a percentage of gross trade receivables exceeded 10% exceeded 10%
Cardinal Health, Inc. [Member]
Revenue, Major Customer [Line Items]
Amount due from major customer (as defined) as a percentage of gross trade receivables exceeded 10% exceeded 10%
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Quarterly financial data Quarterly financial data (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2011
Sep. 30, 2011
Jun. 30, 2011
Mar. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Quarterly Financial Information Disclosure [Abstract]
Product sales $ 4,337 $ 4,201 $ 4,200 $ 3,901 $ 3,907 $ 3,877 [1] $ 3,893 $ 3,618 $ 16,639 $ 15,295 $ 14,660
Gross profit from product sales 3,485 3,496 3,518 3,222 3,251 3,272 [1] 3,291 3,054
Net income $ 788 $ 1,107 $ 1,266 $ 1,184 $ 934 $ 454 [1] $ 1,170 $ 1,125 $ 4,345 $ 3,683 $ 4,627
Earnings Per Share [Abstract]
Basic $ 1.03 $ 1.44 $ 1.63 $ 1.5 $ 1.09 $ 0.5 [1] $ 1.26 $ 1.21 $ 5.61 $ 4.07 $ 4.82
Diluted $ 1.01 $ 1.41 $ 1.61 $ 1.48 $ 1.08 $ 0.5 [1] $ 1.25 $ 1.2 $ 5.52 $ 4.04 $ 4.79
[1] We recorded a $780 million legal settlement charge ($705 million, net of tax) in connection with an agreement in principle to settle allegations related to our sales and marketing practices.
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Quarterly financial data Quarterly financial data (Details Textual) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Sep. 30, 2011
Quarterly Financial Information Disclosure [Abstract]
Legal settlement charge associated with proposed settlement of allegations $ (780)
Legal settlement charge associated with proposed settlement of allegations (net of tax) $ (705)
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Valuation Accounts Valuation Accounts (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Allowance for doubtful accounts [Roll Forward]
Balance at beginning of period $ 54 $ 42 $ 32
Additions charged to costs and expenses 7 17 10
Other additions 0 0 0
Deductions 0 5 0
Balance at end of period $ 61 $ 54 $ 42
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