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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

(Mark One)

OR

Commission file number 000-12477

AMGEN INC.

(Exact name of registrant as specified in its charter)

One Amgen Center Drive, Thousand Oaks, California 91320-1799

(Address of principal executive offices) (Zip Code)

(805) 447-1000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(g) of the Act:

Common stock, $0.0001 par value; preferred share purchase rights;

Contractual contingent payment rights

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer.  x

The approximate aggregate market value of voting and non-voting stock held by non-affiliates of the registrant was $66,733,672,440 as of February 13, 2003 (A)

1,292,333,187

(Number of shares of common stock outstanding as of February 13, 2003)

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INDEX

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PART I

Item 1.    BUSINESS

Overview

Amgen Inc. (including its subsidiaries, “Amgen” or the “Company”) is a global biotechnology company that discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology. In July 2002, Amgen completed its acquisition of Immunex Corporation (“Immunex”). Immunex was a leading biotechnology company dedicated to developing immune system science to protect human health.

The Company markets human therapeutic products including, EPOGEN^® (Epoetin alfa), Aranesp^® (darbepoetin alfa), NEUPOGEN^® (Filgrastim), Neulasta^™ (pegfilgrastim), and Kineret^® (anakinra). Amgen acquired the rights to ENBREL^® (etanercept) as a result of the Immunex acquisition. ENBREL^® is marketed with Wyeth under a co-promotion agreement. EPOGEN^® stimulates the production of red blood cells and is marketed in the United States for the treatment of anemia associated with chronic renal failure in patients on dialysis. Aranesp^® stimulates the production of red blood cells and is marketed in the United States, most countries in Europe, Australia, and New Zealand for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. Aranesp^® is also marketed in the United States for the treatment of chemotherapy-induced anemia in patients with non-myeloid malignancies. Aranesp^® is approved in Europe for the treatment of anemia in adult cancer patients with solid tumors receiving chemotherapy, and has been launched in several countries in Europe for this indication. NEUPOGEN^® selectively stimulates the production of neutrophils, one type of white blood cell. The Company markets NEUPOGEN^® in the United States, certain countries in Europe, Canada, and Australia for use in decreasing the incidence of infection in patients undergoing myelosuppressive chemotherapy. In addition, NEUPOGEN^® is marketed in most of these countries for use in increasing neutrophil counts in various other treatment modalities. The Company began marketing Neulasta^™ in the United States in April 2002 to decrease the incidence of infection, as manifested by febrile neutropenia in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. In August 2002, the European Commission approved Neulasta^™ for the reduction in the duration of neutropenia and the incidence of febrile neutropenia in patients with cytotoxic chemotherapy for malignancy. In January 2003, the Company commenced launching Neulasta^™ in Europe on a country-by-country basis as reimbursement has been established. ENBREL^® blocks the biologic activity of tumor necrosis factor (“TNF”) by competitively inhibiting TNF, a substance induced in response to inflammatory and immunological responses. ENBREL^® is marketed in the United States and Canada for the reduction of the signs and symptoms in patients with moderately to severely active rheumatoid arthritis. Kineret^® blocks the biologic activity of interleukin-1 (“IL-1”), a substance that mediates inflammatory and immunological responses. Kineret^® is marketed in the United States for the reduction of the signs and symptoms of moderately to severely active rheumatoid arthritis, in patients 18 years of age or older who have failed one or more disease modifying antirheumatic drugs. Kineret^® is also approved for use in Europe and Canada. In addition, Amgen has entered into licensing and/or co-promotion agreements to market certain of its products including Aranesp^®, NEUPOGEN^®, and Neulasta^™ in certain geographic areas outside of the United States.

The Company focuses its research and development efforts on human therapeutics delivered in the form of proteins, monoclonal antibodies, and small molecules in the areas of nephrology, oncology, inflammation, neurology, and metabolic disorders. The Company has research facilities in the United States, and has clinical development staff in the United States, Europe, Canada, Australia, and Japan. In addition to internal research and development efforts, the Company has acquired certain product and technology rights and has established research and development collaborations.

The Company manufactures EPOGEN^®, Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^®. Amgen operates commercial manufacturing facilities located in the United States, Puerto Rico, and a packaging and distribution center in The Netherlands. Additional supply of ENBREL^® is produced by contract

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manufacturers. A sales and marketing force is maintained in the United States, Europe, Canada, Australia, and New Zealand.

The Company was incorporated in California in 1980 and was merged into a Delaware corporation in 1987. Amgen’s principal executive offices are located at One Amgen Center Drive, Thousand Oaks, California 91320-1799.

Products

EPOGEN^® (Epoetin alfa)

EPOGEN^® (proper name—Epoetin alfa) is Amgen’s registered trademark for its recombinant human erythropoietin product, a protein that stimulates red blood cell production. Red blood cells transport oxygen to all cells of the body. Without adequate amounts of erythropoietin, the red blood cell count is reduced, thereby diminishing the ability of the blood to deliver sufficient amounts of oxygen to the body, resulting in anemia. People with chronic renal failure suffer from anemia because they do not produce sufficient amounts of erythropoietin, which is normally produced in healthy kidneys. Amgen markets EPOGEN^® for the treatment of anemia associated with chronic renal failure for patients who are on dialysis. EPOGEN^® is indicated to elevate or maintain the red blood cell level (as determined by hematocrit or hemoglobin measurements) and to decrease the need for blood transfusions in these patients.

In the United States, Amgen was granted rights to market recombinant human erythropoietin under a licensing agreement with Kirin-Amgen, Inc. (“Kirin-Amgen”), a joint venture between Kirin Brewery Company, Limited (“Kirin”) and Amgen (see “Joint Ventures and Business Relationships—Kirin Brewery Company, Limited”). The Company received U.S. Food and Drug Administration (“FDA”) approval and launched EPOGEN^® in 1989 for the treatment of anemia associated with chronic renal failure. In November 1999, the FDA approved EPOGEN^® for the treatment of anemia in children with chronic renal failure who are on dialysis.

The Company has retained exclusive rights to market EPOGEN^® in the United States for dialysis patients. Amgen has granted Ortho Pharmaceutical Corporation (which has assigned its rights under the Product License Agreement to Ortho Biotech Products, L.P., a subsidiary of Johnson & Johnson, hereafter referred to as “Johnson & Johnson”) a license to commercialize recombinant human erythropoietin as a human therapeutic in the United States in all markets other than dialysis (see “Joint Ventures and Business Relationships—Johnson & Johnson”). Johnson & Johnson markets recombinant human erythropoietin under the trademark PROCRIT^® in the United States (see Note 1 to the Consolidated Financial Statements, “Summary of significant accounting policies—Product sales”).

EPOGEN^® sales for the years ended December 31, 2002, 2001, and 2000 were $2,260.6 million, $2,108.5 million, and $1,962.9 million, respectively.

Aranesp^® (darbepoetin alfa)

Aranesp^® (proper name—darbepoetin alfa) is Amgen’s registered trademark for its erythropoiesis stimulating protein, a protein that stimulates red blood cell production. A reduced red blood cell count can result in anemia (see “—EPOGEN^® (Epoetin alfa)”). Since this protein leaves the body more slowly, Aranesp^® should be administered less frequently than Epoetin alfa, thus simplifying anemia management for patients and health care providers.

The Company has an agreement with Kirin to jointly develop darbepoetin alfa through its joint venture, Kirin-Amgen (see “Joint Ventures and Business Relationships—Kirin Brewery Company, Limited”). Amgen was granted an exclusive license by Kirin-Amgen to manufacture and market darbepoetin alfa in the United States, all European countries, Canada, Australia, New Zealand, Mexico, and all Central and South American countries. In 2001, the Company received approval to market Aranesp^® in the United States,

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most countries in Europe, Australia, and New Zealand for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. In July 2002, the Company received approval to market Aranesp^® in the United States for the treatment of chemotherapy-induced anemia in patients with non-myeloid malignancies. In August 2002, Aranesp^® was approved in Canada for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. In August 2002, the European Commission approved Aranesp^® for the treatment of anemia in adult cancer patients with solid tumors receiving chemotherapy. Aranesp^® has been launched in several countries in Europe for this indication. Amgen markets darbepoetin alfa under the brand name Nespo^® in Italy.

Worldwide Aranesp^® sales for the years ended December 31, 2002 and 2001 were $415.6 million and $41.5 million, respectively.

NEUPOGEN^® (Filgrastim)

NEUPOGEN^® (proper name—Filgrastim) is Amgen’s registered trademark for its recombinant-methionyl human granulocyte colony-stimulating factor (“G-CSF”), a protein that selectively stimulates production of certain white blood cells known as neutrophils. Neutrophils defend against infection. Treatments for various diseases and diseases themselves can result in extremely low numbers of neutrophils, a condition called neutropenia. Myelosuppressive chemotherapy, one treatment option for individuals with certain types of cancers, targets cell types which grow rapidly, such as tumor cells, neutrophils, and other types of blood cells. Myelosuppressive chemotherapy can be administered with the intent to cure cancer (curative setting) or with the intent to reduce pain and other complications of cancer by managing tumor growth (palliative setting). NEUPOGEN^® is prescribed more frequently in the curative setting. Providing NEUPOGEN^® as an adjunct to myelosuppressive chemotherapy can reduce the duration of neutropenia and thereby reduce the potential for infection.

Severe chronic neutropenia is an example of disease-related neutropenia. In severe chronic neutropenia, the body fails to manufacture sufficient neutrophils. Daily administration of NEUPOGEN^® has been shown to reduce the incidence and duration of neutropenia-related consequences, such as fever and infections, in symptomatic patients with severe chronic neutropenia.

Patients undergoing bone marrow transplantation may be treated with NEUPOGEN^® to accelerate recovery of neutrophils following chemotherapy and bone marrow infusion. NEUPOGEN^® also has been shown to induce immature blood cells (progenitor cells, sometimes referred to as stem cells) to migrate (mobilize) from the bone marrow into the blood circulatory system. When these peripheral blood progenitor cells (“PBPC”) are collected from the blood, stored, and re-infused (transplanted) after high dose chemotherapy, recovery of platelets, red blood cells, and neutrophils is accelerated. PBPC transplantation may be an alternative to autologous bone marrow transplantation for some cancer patients.

In the United States, NEUPOGEN^® was initially indicated to decrease the incidence of infection as manifested by febrile neutropenia for patients with non-myeloid malignancies undergoing myelosuppressive chemotherapy. Subsequently, the FDA approved NEUPOGEN^® for additional indications: to reduce the duration of neutropenia and neutropenia-related consequences for patients with non-myeloid malignancies undergoing myeloablative chemotherapy followed by bone marrow transplantation; to reduce the incidence and duration of neutropenia-related consequences in symptomatic patients with congenital neutropenia, cyclic neutropenia, or idiopathic neutropenia (collectively, severe chronic neutropenia); for use in mobilization of PBPC for stem cell transplantation; and to reduce the recovery time of neutrophils and the duration of fever following induction or consolidation chemotherapy treatment in adult patients with acute myelogenous leukemia (“AML”). In Europe, Canada, and Australia, NEUPOGEN^® is marketed for these same indications. The Company also markets NEUPOGEN^® in Europe, Canada, and Australia for the treatment of neutropenia in HIV patients receiving antiviral and/or other myelosuppressive medications.

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Amgen was granted rights to market G-CSF under a licensing agreement with Kirin-Amgen in the United States, Europe, Canada, Australia, and New Zealand. The Company began selling NEUPOGEN^® in the United States in 1991. In May 2002, the Company acquired certain rights related to the commercialization of NEUPOGEN^® and GRANULOKINE^® (Filgrastim) and pegfilgrastim in the European Union (“EU”) from F. Hoffmann-La Roche Ltd (“Roche”). Prior to this acquisition, NEUPOGEN^® and GRANULOKINE^® were commercialized in the EU under a co-promotion agreement between Amgen and Roche. Roche will continue as the licensee for Filgrastim and pegfilgrastim in certain countries outside the United States and the EU (see “Joint Ventures and Business Relationships—F. Hoffmann-La Roche Ltd”). Amgen markets Filgrastim under the brand name GRANULOKINE^® in Italy.

Worldwide NEUPOGEN^® sales for the years ended December 31, 2002, 2001, and 2000 were $1,379.6 million, $1,346.4 million, and $1,223.7 million, respectively.

Neulasta^™ (pegfilgrastim)

Neulasta^™ (proper name—pegfilgrastim) is Amgen’s trademark for a protein that selectively stimulates production of certain white blood cells known as neutrophils and is based on the Filgrastim molecule. A polyethylene glycol molecule or “PEG” unit is added to enlarge the Filgrastim molecule, thereby extending its half-life and causing it to be removed more slowly from the body. This allows for administration as a single dose per chemotherapy cycle compared with NEUPOGEN^® which requires more frequent dosing.

Amgen was granted rights to market pegfilgrastim under a licensing agreement with Kirin-Amgen. In January 2002, the FDA approved Neulasta^™ for decreasing the incidence of infection, as manifested by febrile neutropenia, in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. The Company launched Neulasta^™ in the United States in April 2002 for this indication. In August 2002, the European Commission approved Neulasta^™ for the reduction in the duration of neutropenia and the incidence of febrile neutropenia in patients with cytotoxic chemotherapy for malignancy. In January 2003, the Company commenced launching Neulasta^™ in Europe on a country-by-country basis as reimbursement has been established. Amgen markets pegfilgrastim under the brand name Neupopeg^™ in Italy.

Neulasta^™ sales for the year ended December 31, 2002 were $463.5 million.

ENBREL^® (etanercept)

ENBREL^® (proper name—etanercept) is Amgen’s registered trademark for its TNF receptor fusion protein that inhibits the binding of TNF to TNF receptors, resulting in a significant reduction in inflammatory activity. ENBREL^® was launched in November 1998 by Immunex. Amgen acquired the rights to ENBREL^® in July 2002 as part of its acquisition of Immunex. In the United States, ENBREL^® is indicated for reducing the signs and symptoms and inhibiting the progression of structural damage in patients with moderately to severely active rheumatoid arthritis. In addition, the FDA approved ENBREL^® for the following indications: for reducing the signs and symptoms of moderately to severely active polyarticular-course juvenile rheumatoid arthritis in patients who have had an inadequate response to one or more disease-modifying antirheumatic drugs, and for reducing the signs and symptoms of active arthritis in patients with psoriatic arthritis.

As part of its acquisition of Immunex, the Company entered into a co-promotion agreement and co-development agreement with Wyeth. Under the terms of these agreements, Amgen and Wyeth market and sell ENBREL^® in the United States and Canada and develop certain future indications of ENBREL^® for use in these geographic territories. In return for these efforts, Wyeth is paid a share of the resulting profits on sales of ENBREL^®, after deducting the applicable cost of sales, including royalties paid to third parties, and associated research and development (“R&D”) and selling and marketing expenses (see “Joint Ventures and Business Relationships—Wyeth”).

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ENBREL^® sales for the period from July 16, 2002 through December 31, 2002 were $362.1 million.

Kineret^® (anakinra)

Kineret^® (proper name—anakinra) is Amgen’s registered trademark for its recombinant nonglycosylated form of the human interleukin-1 (“IL-1”) receptor antagonist. Kineret^® blocks the biologic activity of IL-1 by competitively inhibiting IL-1 binding to the interleukin-1 type I receptor, which is expressed in a wide variety of tissues. IL-1 production is induced in response to inflammatory stimuli and mediates various physiologic responses including inflammatory and immunological responses.

In November 2001, Amgen received FDA approval and began marketing Kineret^® in the United States for the reduction of the signs and symptoms of moderately to severely active rheumatoid arthritis, in patients 18 years of age or older who have failed one or more disease modifying antirheumatic drugs. In March 2002, Kineret^® was approved in Europe for the treatment of the signs and symptoms of rheumatoid arthritis in combination with methotrexate, in patients with an inadequate response to methotrexate alone. In May 2002, Kineret^® was approved in Canada to reduce the signs and symptoms of active rheumatoid arthritis in patients 18 years of age or older.

Worldwide Kineret^® sales for the years ended December 31, 2002 and 2001 were $69.9 million and $12.3 million, respectively.

Product Candidates

The Company focuses its research and development efforts on human therapeutics delivered in the form of proteins, monoclonal antibodies, and small molecules in the areas of nephrology, oncology, inflammation, neurology, and metabolic disorders (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)—Financial Outlook—Forward looking statements and factors that may affect Amgen—Our product development efforts may not result in commercial products”).

Nephrology

A focus of the Company’s R&D effort is in the area of hyperparathyroidism (“HPT”). HPT is a disorder that results from excessive secretion of parathyroid hormone (“PTH”) from the parathyroid gland. Symptoms of HPT include bone loss, muscle weakness, depression, and forgetfulness. Secondary HPT is commonly seen as a result of kidney failure, affecting a majority of dialysis patients. Primary HPT principally afflicts post-menopausal women. The Company has entered into a license agreement with NPS Pharmaceuticals, Inc. (“NPS”) for Amgen to develop and commercialize calcimimetic small molecules based on NPS’s proprietary calcium receptor technology for the treatment of HPT. The Company has conducted separate phase 2 clinical trials for primary and secondary HPT with a second generation calcimimetic compound (Cinacalcet hydrochloride). In 2000 and 2001, data from phase 2 studies with Cinacalcet hydrochloride were presented demonstrating that treatment with small-molecule calcimimetics results in dose-dependent decreases in PTH levels and control of elevated calcium levels. A phase 3 clinical trial with Cinacalcet hydrochloride in secondary HPT is ongoing and enrollment has been completed.

Oncology

Certain tissue growth factors are believed to play a role in tissue protection, regeneration and/or repair processes. Mucositis is a side effect often experienced by patients undergoing radiation therapy and chemotherapy and is characterized as the irritation or ulceration of the lining of the gastrointestinal tract. Amgen currently is conducting research with Keratinocyte Growth Factor (“KGF”) to prevent and treat mucositis. A phase 3 clinical trial evaluating the effects of KGF in decreasing the incidence and duration of oral mucositis in patients with hematologic malignancies undergoing chemotherapy and radiation therapy with autologous PBPC

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transplantation was completed in the latter part of 2002. In January 2003, the Company announced that preliminary analysis of the data suggested that KGF reduced the duration and incidence of severe mucositis in those who received it, as compared to placebo.

In 2002, as part of the Immunex acquisition, Amgen and Abgenix, Inc. (“Abgenix”) have an agreement providing for the joint development and commercialization of ABX-EGF, a fully human antibody created by Abgenix. ABX-EGF targets the receptor for human epidermal growth factor, or EGFr, which is overexpressed on some of the most prevalent human solid tumor types, including lung, colorectal, pancreatic, renal cell, prostate, and esophageal. Amgen and Abgenix have a series of Phase 2 clinical trials to evaluate ABX-EGF for the treatment of several types of cancer

In December 2000, the Company acquired the rights from Immunomedics, Inc. (“Immunomedics”) to develop and commercialize epratuzumab. Epratuzumab is currently being evaluated for the treatment of non-Hodgkin’s lymphoma (“NHL”). Epratuzumab is a humanized monoclonal antibody. Preliminary research and early-stage clinical trials showed epratuzumab has some level of anti-tumor activity, either directly or indirectly, against some B-cell malignancies. In July 2001, the Company initiated a phase 3 clinical trial. The phase 3 clinical trial was designed to evaluate epratuzumab for the treatment of low-grade NHL in patients who failed to respond, or who responded for less than six months, to rituximab, a monoclonal antibody approved for the treatment of certain types of NHL (see “Competition—Cancer”). In January 2003, the Company announced the closure of this phase 3 study as epratuzumab did not, as a single agent, provide sufficient benefit to meet protocol-specified criteria for continued evaluation using the regimen. A phase 1/2 clinical trial of epratuzumab in combination with rituximab to treat low-grade and aggressive NHL is ongoing. In 2001, the Company initiated a phase 2 clinical trial of epratuzumab in combination with rituximab in low-grade NHL patients and a phase 2 clinical trial of epratuzumab in aggressive NHL patients.

Osteoprotegerin (“OPG”) is implicated in the regulation of bone mass. Bone mass is maintained in the body by the regulation of the competing activities of bone forming cells (osteoblasts) and bone resorbing cells (osteoclasts). Cancer metastases (cancers which have spread from their original tumor site) to bone cause bone destruction, leading to fractures and bone pain. In preclinical studies, OPG has been shown to inhibit the osteoclast mediated bone destruction induced by invading cancer cells. The Company completed phase 1 studies with the initial molecule in its OPG program. Data from these studies validated the importance of this pathway in the pathology of bone disorders. The Company has selected a lead candidate and is currently conducting phase 1 studies in metastatic bone disease and a phase 2 study in osteoporosis.

Inflammation

The inflammatory response is essential for defense against harmful microorganisms and for the repair of damaged tissues. The failure of the body’s control mechanisms for the inflammatory response results in conditions such as rheumatoid arthritis. In September 2002, the Company submitted a supplemental Biologics License Application (“sBLA”) with the FDA for the use of ENBREL^® to improve physical function in patients with moderately to severely active rheumatoid arthritis. In October 2002, the Company submitted an sBLA with the FDA to further expand the use of ENBREL^® to inhibit the progression of structural damage in psoriatic arthritis patients. The filing was based on the results of a 12-month, double-blind, placebo controlled trial. In December 2002, the Company also submitted an sBLA with the FDA supporting once-weekly dosing of ENBREL^®. The filing was based on results from a phase 3 study demonstrating that patients treated with 50 mg of ENBREL^® once weekly achieved similar efficacy, tolerability, and pharmacokinetics when compared to patients receiving 25 mg of ENBREL^® twice weekly. Additionally, in January 2003, the Company submitted an sBLA with the FDA to expand the labeling of ENBREL^® to treat ankylosing spondylitis (“AS”), a chronic inflammatory disease predominantly affecting the spine that results in pain and stiffness and can result in partial or complete fusion of the spine. The filing was based on the results of a phase 3 study of patients with active AS, who were treated with ENBREL^® over a six month period. In January 2003, the Company announced positive results of a phase 3 clinical study assessing the efficacy and tolerability of ENBREL^® in the treatment of

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moderate to severe plaque psoriasis. Psoriasis is an inflammatory disease which is characterized by chronic inflammation of the skin that drives the formation of skin plaques.

In addition, in October 2002, the Company submitted an sBLA with the FDA for the use of Kineret^® to inhibit the progression of structural damage in adult patients with moderately to severely active rheumatoid arthritis. The filing was based on the results of a 12-month, double-blind, placebo controlled trial. In October 2002, the Company announced that the ENBREL^®/Kineret^® combination study was stopped as the combination resulted in increased safety concerns with no increased efficacy. The Company is in phase 2 development of a second generation inhibitor of tumor necrosis factor, pegylated soluble tumor necrosis factor-receptor type 1 (“PEG-sTNF-R1”) in patients with rheumatoid arthritis. In 2001, the Company initiated a phase 2 clinical trial of PEG-sTNF-R1 in combination with Kineret^® in patients with rheumatoid arthritis. This phase 2 clinical trial was stopped in February 2003 as the combination resulted in increased safety concerns with no increased efficacy.

Neurology and Metabolic Disorders

The Company has discovery programs in neurological and metabolic disorders. Neurotrophic factors are proteins which play a role in nerve cell protection and regeneration and which may therefore be useful in treating a variety of neurological disorders, including neurodegenerative diseases of the central and peripheral nervous systems, and also nerve injury or trauma. In 1999, the Company discontinued development of glial cell line derived neurotrophic factor (“GDNF”) after a phase 1/2 trial of GDNF in Parkinson’s disease failed to demonstrate a statistically significant benefit. However, based on favorable phase 1 clinical data from investigator-sponsored research, the Company is currently in clinical studies of GDNF using a different treatment protocol for possible use in the treatment of Parkinson’s disease.

Amgen continues to support investigator research in certain exploratory indications for Leptin which is a naturally occurring cytokine hormone secreted by fat cells that may act primarily at the hypothalamus to regulate food intake and energy expenditure. In 1995, the Rockefeller University granted the Company an exclusive license that allows the Company to develop products based on the obesity gene. The Company’s clinical trials of leptin failed to show clinical efficacy in normal obesity and diabetes, and development of this molecule was subsequently discontinued in these diseases.

Immunex Acquisition

On July 15, 2002, Amgen acquired all of the outstanding common stock of Immunex in a transaction accounted for as a business combination. Immunex was a leading biotechnology company dedicated to developing immune system science to protect human health. The Immunex acquisition is expected to further advance Amgen’s role as a global biotechnology leader with the benefits of accelerated growth and increased size, product base, product pipeline, and employees. The acquisition is also intended to enhance Amgen’s strategic position within the biotechnology industry by strengthening and diversifying its (1) product base and product pipeline in key therapeutic areas, and (2) discovery research capabilities in proteins and antibodies. The results of Immunex’s operations have been included in the consolidated financial statements commencing July 16, 2002.

Each share of Immunex common stock outstanding at July 15, 2002 was converted into 0.44 of a share of Amgen common stock and $4.50 in cash. As a result, Amgen issued approximately 244.6 million shares of common stock and paid approximately $2.5 billion in cash to former Immunex shareholders. Amgen also paid Wyeth $25 million at the closing of the merger for the termination of certain Immunex product rights in favor of Wyeth, as specified in the agreement regarding governance and commercial matters. In addition, each employee stock option to purchase Immunex common stock outstanding at July 15, 2002 was assumed by Amgen and converted into an option to purchase Amgen common stock based on the terms specified in the merger agreement. As a result, approximately 22.4 million options to purchase Amgen common stock were assumed, on a converted basis. The acquisition was structured to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

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The purchase price of approximately $17.8 billion was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair values of assets and liabilities acquired amounted to approximately $9.8 billion and was allocated to goodwill.

In May 2002, Immunex entered into an agreement to sell certain assets used in connection with its Leukine^® business to Schering AG Germany (“Schering”) for approximately $389.9 million in cash plus the payment of additional cash consideration upon achievement of certain milestones. The sale of the Leukine^® business was pursued in connection with Amgen’s acquisition of Immunex and was completed on July 17, 2002. In December 2002, the Company licensed the commercialization rights for Novantrone^® in the United States to Serono S.A. in exchange for royalties based on future product sales. Also, in connection with the acquisition, the Company initiated an integration plan to consolidate and restructure certain functions and operations of the pre-acquisition Immunex primarily consisting of the termination and relocation of certain Immunex personnel, termination of certain duplicative and non-strategic Immunex R&D programs, and consolidation of certain Immunex leased facilities. See Note 3 to the Consolidated Financial Statements for further discussion of the Immunex acquisition and the related purchase price allocation.

Joint Ventures and Business Relationships

The Company generally manufactures and markets its products. From time to time, the Company may enter into joint ventures and other business relationships to provide additional manufacturing, marketing and product development capabilities. In addition to internal R&D efforts, the Company has acquired certain product and technology rights and has established R&D collaborations.

Wyeth

Prior to the acquisition of Immunex, Wyeth and Immunex were parties to several agreements relating to business and corporate governance matters. As a result of the acquisition, some of these agreements were terminated, however, some agreements have survived the acquisition. In connection with the acquisition, Amgen entered into an agreement with Wyeth to amend and restate an existing long-term ENBREL^® co-promotion agreement between Wyeth and Immunex.

Under the amended and restated co-promotion agreement, Wyeth and Amgen market and sell ENBREL^® to all appropriate customer segments in the United States and Canada for all approved indications other than oncology. The rights to promote ENBREL^® in the United States and Canada for oncology indications are reserved to Amgen.

Under the amended and restated co-promotion agreement, an ENBREL^® management committee comprised of equal representation from Wyeth and Amgen is responsible for overseeing the marketing and sales of ENBREL^® including strategic planning, approval of an annual marketing plan, product pricing, and establishing an ENBREL^® brand team. The ENBREL^® brand team, with equal representation from each party, prepares and implements the annual marketing plan and is responsible for all sales activities. The agreement provides that Wyeth and Amgen:

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The amended and restated co-promotion agreement further provides that Amgen:

Under the co-promotion agreement between the parties, Wyeth has agreed to reimburse Amgen for a defined percentage of the clinical and regulatory expenses Amgen incurs in connection with the filing and approval of any new indications for ENBREL^® in the United States and Canada, excluding oncology and rheumatoid arthritis indications. The Wyeth reimbursement for clinical and regulatory expenses under this agreement, a portion of which is payable upon regulatory filing of any new indication and the remainder of which will be payable upon regulatory approval of any new indication, if any, applies for that part of the United States and Canada’s clinical and regulatory expenses for ENBREL^® for which Amgen would otherwise be financially responsible under the cost-sharing provisions in the pre-existing co-development agreement. Wyeth will also provide reimbursement for a defined percentage of specified patent expenses related to ENBREL^®, including any up-front license fees, as well as patent litigation and interference expenses.

Subject to specified limitations, Wyeth will also be responsible for a defined percentage of the liabilities, costs, and expenses associated with the manufacture, use, or sale of ENBREL^® in the United States and Canada.

Immunex and Wyeth have also entered into a collaboration and global supply agreement related to the manufacture, supply, inventory, and allocation of defined supplies of ENBREL^® produced at the Rhode Island manufacturing facility, and a new Rhode Island manufacturing facility under construction as well as particular supplies of ENBREL^® produced by Boehringer Ingelheim Pharma KG (“BI Pharma”) in Germany and Wyeth at a manufacturing facility Wyeth is constructing in Ireland.

Johnson & Johnson

Amgen granted Johnson & Johnson a license to commercialize recombinant human erythropoietin as a human therapeutic in the United States in all markets other than dialysis. In the United States, all recombinant human erythropoietin sold by Johnson & Johnson is manufactured by Amgen and sold by Johnson & Johnson under the trademark PROCRIT^® (Epoetin alfa). PROCRIT^® brand Epoetin alfa is identical to EPOGEN^® brand Epoetin alfa, which is manufactured by Amgen and sold by Amgen in the United States dialysis market. Pursuant to the license agreement with Johnson & Johnson, the Company earns a 10% royalty on sales of PROCRIT^® by Johnson & Johnson in the United States. Outside the United States, with the exception of the People’s Republic of China and Japan, Johnson & Johnson was granted rights to commercialize recombinant human erythropoietin as a human therapeutic for all uses under a licensing agreement with Kirin-Amgen. With respect to its sales outside of the United States, Johnson & Johnson manufactures its own brand of Epoetin alfa which is then sold throughout the world by Johnson & Johnson under various trademarks such as EPREX^® and ERYPO^®. The Company is not involved in the manufacture of Epoetin alfa sold by Johnson & Johnson outside of the United States.

Kirin Brewery Company, Limited

The Company formed a 50-50 joint venture (Kirin-Amgen) with Kirin in 1984. Kirin-Amgen develops and commercializes certain of the Company’s and Kirin’s technologies which have been transferred to this joint venture. Kirin-Amgen has given exclusive licenses to Amgen to manufacture and market: 1) recombinant human

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erythropoietin in the United States, 2) darbepoetin alfa in the United States, all European countries, Canada, Australia, New Zealand, Mexico, all Central and South American countries, and certain countries in Central Asia, North Africa, and the Middle East, and 3) G-CSF and pegfilgrastim in the United States, Europe, Canada, Australia, and New Zealand. Kirin-Amgen has also licensed to Amgen and Kirin the rights to develop darbepoetin alfa.

Kirin-Amgen has also given exclusive licenses to Kirin to manufacture and market: 1) recombinant human erythropoietin in Japan, 2) darbepoetin alfa in Japan, the People’s Republic of China, Taiwan, Korea, and certain other countries in Southeast Asia, and 3) G-CSF and pegfilgrastim in Japan, Taiwan and Korea. Kirin markets recombinant human erythropoietin and G-CSF in the People’s Republic of China under a separate agreement. Kirin markets its recombinant human erythropoietin product in Japan under the trademark ESPO^®. Kirin markets its G-CSF product in its respective territories under the trademark GRAN^®. Kirin-Amgen has licensed to Johnson & Johnson rights to recombinant human erythropoietin in certain geographic areas of the world (see “—Johnson & Johnson”). Under its agreement with Kirin-Amgen, Johnson & Johnson pays a royalty to Kirin-Amgen based on sales. Kirin-Amgen and Roche have an agreement to commercialize Filgrastim and pegfilgrastim in those territories not licensed to either Amgen or Kirin as described above. Under this agreement, Roche markets Filgrastim and pegfilgrastim in these countries and pays a royalty to Kirin-Amgen on these sales.

In connection with its various license agreements with Kirin-Amgen, the Company pays Kirin-Amgen royalties based on product sales. For the years ended December 31, 2002, 2001, and 2000, Amgen paid Kirin-Amgen royalties of $168.2 million, $147.1 million, and $140.8 million, respectively, under such agreements, which are included in “Cost of sales” in the Company’s Consolidated Financial Statements.

Pursuant to the terms of agreements entered into with Kirin-Amgen, the Company conducts certain R&D activities on behalf of Kirin-Amgen and is paid for such services at negotiated rates, which is included in “Corporate partner revenues” in the Company’s Consolidated Financial Statements. For the years ended December 31, 2002, 2001, and 2000, Amgen recognized $174.6 million, $210.1 million, and $221.0 million, respectively, related to these agreements.

F. Hoffmann-La Roche Ltd

In May 2002, the Company acquired certain rights related to the commercialization of NEUPOGEN^® and GRANULOKINE^® (Filgrastim) and pegfilgrastim in the EU, Switzerland, and Norway from Roche. Roche will continue as the licensee for Filgrastim and pegfilgrastim in certain countries outside the United States and the EU (see Note 12 to the Consolidated Financial Statements).

Prior to the acquisition of these commercialization rights, Amgen and Roche had an agreement providing for the commercialization of Filgrastim and pegfilgrastim in the EU. Under this agreement, the companies collaborated in the EU on the commercialization and further clinical development of the product, and Amgen had a majority share in the related costs and profits from sales. Amgen had substantially all of the responsibilities for marketing, promotion, distribution, and other key functions relating to product sales, and primarily distributed the product to the EU countries from its European Logistics Center in Breda, The Netherlands.

ENBREL^® manufacturing relationships

In November 1998, Immunex and Wyeth entered into a long-term supply agreement with BI Pharma to manufacture commercial quantities of ENBREL^®. Amgen’s supply of ENBREL^® is largely dependent on product manufactured by BI Pharma. Amgen has made significant purchase commitments to BI Pharma (see “MD&A—Liquidity and Capital Resources—Contractual obligations”). Under the supply agreement, BI Pharma has reserved a specified level of production capacity for ENBREL^®, and Amgen’s purchase commitments for ENBREL^® are manufactured from that reserved production capacity. Amgen is required to submit a rolling three-year forecast for manufacturing the bulk drug for ENBREL^®, and a rolling forecast for a shorter period for

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the number of finished vials of ENBREL^® to be manufactured from the bulk drug. Amgen has submitted firm orders for the maximum production capacity that BI Pharma currently has reserved for ENBREL^®. Amgen will be responsible for substantial payments to BI Pharma if Amgen fails to use a specified percentage of the production capacity that BI Pharma has reserved for ENBREL^® each calendar year, or if the BI Pharma supply agreement is terminated prematurely under specified conditions. In June 2000, Immunex, Wyeth and BI Pharma amended the BI Pharma supply agreement to offer BI Pharma financial incentives to provide additional near- term production capacity for ENBREL^®, to facilitate process improvements for ENBREL^®, and to extend the term of the agreement (see “—Wyeth”). The parties further amended the ENBREL^® supply agreement as of June 2002, to reflect the transfer of production to a new BI Pharma manufacturing facility, to provide for the use of an improved manufacturing process, to extend the term of the agreement, and to offer BI Pharma additional financial incentives to provide additional near-term production capacity for ENBREL^®. A significant portion of all finished dosage forms of ENBREL^® are currently manufactured by BI Pharma. Amgen also relies on a third-party contract manufacturer to perform fill and finish services for ENBREL^® that is manufactured at its Rhode Island manufacturing facility, as well as a third-party to perform packaging services for ENBREL^® manufactured by BI Pharma and at the Company’s Rhode Island facility. The third-party fill and finish plant was approved by the FDA in December 2002. In December 2002, the parties again amended the ENBREL^® supply agreement to take advantage of additional ENBREL^® production capacity made available by BI Pharma.

In April 2002, Immunex announced that it had entered into a manufacturing agreement with Genentech, Inc. (“Genentech”) to produce ENBREL^® at Genentech’s manufacturing facility in South San Francisco, California. The manufacturing facility is subject to FDA approval, which the parties hope to obtain in 2004. Upon approval, the Genentech facility will become a licensed manufacturing site for commercial supply of ENBREL^®. Under the terms of the agreement, Genentech will produce ENBREL^® through 2005, with an extension through 2006 by mutual agreement.

Other

In 2002, as part of the Immunex acquisition, Amgen and Abgenix have an agreement providing for the joint development and commercialization of ABX-EGF. Under the agreement, development and commercialization costs are shared equally, as would any potential profits from sales of ABX-EGF. Amgen and Abgenix are responsible for the ongoing and future phase 2 clinical trials and Amgen has primary responsibility for future phase 3 clinical trials. If clinical trials for ABX-EGF are successful and regulatory approval is received, Amgen would play the primary role in implementing marketing and product launch activities for ABX-EGF, while Abgenix will participate in co-promotion.

In June 2001, Amgen licensed to InterMune the exclusive rights to develop and commercialize INFERGEN^®, as well as an early stage pegylated interferon product candidate being developed by Amgen, in the United States and Canada. Pursuant to the license agreement, Amgen supplies INFERGEN^® to InterMune. In 1996, Amgen licensed to Yamanouchi the rights to develop, manufacture, and commercialize Interferon alfacon-1 for the treatment of hepatitis C viral infection and any additional indications around the world except in the United States and Canada. Amgen has earned certain milestones from Yamanouchi and will receive royalties on sales. Yamanouchi has granted to Amgen certain co-development and co-promotion/co-marketing rights in Japan.

In 2000, Amgen licensed epratuzumab, a therapeutic antibody for the treatment of NHL, from Immunomedics. Under this agreement, Amgen has the rights to develop and commercialize epratuzumab in North America and Australia. Amgen has paid and will make additional payments if certain clinical and commercial milestones are achieved and will make royalty payments based on sales.

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Marketing

Amgen maintains a sales and marketing force in the United States, Europe, Canada, Australia, and New Zealand. The Company’s sales force markets EPOGEN^®, Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^® to healthcare providers including clinics, hospitals, and pharmacies. The Company also markets certain products directly to consumers through direct-to-consumer print and television advertising. ENBREL^® is marketed under a co-promotion agreement with Wyeth in the United States and Canada. The Company’s customers primarily consist of wholesale distributors of pharmaceutical products. With the exception of ENBREL^®, the Company utilizes these wholesale distributors as the principal means of distributing the Company’s products to healthcare providers such as clinics, hospitals, and pharmacies. With respect to ENBREL^®, the Company primarily drop-ships wholesaler orders directly to pharmacies for end-users. The Company monitors the financial condition of its larger distributors and limits its credit exposure by setting appropriate credit limits and requiring collateral from certain customers. Sales to three large wholesalers each accounted for more than 10% of total revenues for the years ended December 31, 2002 and 2001. Sales to AmerisourceBergen Corporation were $2,084.4 million and $1,470.1 million for the years ended December 31, 2002 and 2001, respectively. Sales to Cardinal Distribution were $988.6 million and $535.8 million for the years ended December 31, 2002 and 2001, respectively. Sales to McKesson Corporation were $843.9 million and $459.8 million for the years ended December 31, 2002 and 2001, respectively. For the year ended December 31, 2000, sales to two wholesalers each accounted for more than 10% of total revenues. In 2000, sales to Bergen Brunswig Corporation were $1,233.4 million and sales to Cardinal Distribution were $445.2 million. Outside the United States, Aranesp^®, NEUPOGEN^®, Neulasta^®, and Kineret^® are principally distributed to wholesalers and/or hospitals depending upon the distribution practice in each country for which the product has been launched.

Amgen was granted exclusive licenses by Kirin-Amgen to market: 1) erythropoietin in the United States, 2) darbepoetin alfa in the United States, all European counties, Canada, Australia, New Zealand, Mexico, all Central and South American countries, and certain countries in Central Asia, North Africa, and the Middle East, and 3) G-CSF and pegfilgrastim in the United States, Europe, Canada, Australia, and New Zealand. The Company has retained exclusive rights to market EPOGEN^® in the United States for dialysis patients. Amgen has granted Johnson & Johnson, a license to commercialize recombinant human erythropoietin as a human therapeutic in the United States in all markets other than dialysis. Johnson & Johnson markets recombinant human erythropoietin under the trademark PROCRIT^® in the United States. Under the amended and restated co-promotion agreement with Wyeth, Wyeth and Amgen market ENBREL^® to all appropriate customer segments in the United States and Canada for all approved indications other than oncology. The rights to promote ENBREL^® in the United States and Canada for oncology indications are reserved to Amgen.

In the United States, dialysis providers are primarily reimbursed for EPOGEN^® by the federal government through the End Stage Renal Disease Program (“ESRD Program”) of Medicare. The ESRD Program reimburses approved providers for 80% of allowed dialysis costs; the remainder is paid by other sources, including Medicaid, private insurance, and to a lesser extent, state kidney patient programs. The ESRD Program reimbursement rate is established by Congress and is monitored by the Centers for Medicare & Medicaid Services (“CMS”). Most patients receiving Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^® for approved indications are covered by both government and private payors health care programs. Therefore, sales of Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^® are dependent on the availability and extent of reimbursement from third-party payors, including governments and private insurance plans. Primary reimbursement for ENBREL^® is obtained from private payors. Generally, worldwide use of our products may be affected by cost containment pressures from governments and private insurers on health care providers in response to ongoing initiatives to reduce health care expenditures, and to a lesser extent, competition. See “MD&A—Financial Outlook—Forward looking statements and factors that may affect Amgen—Our sales depend on payment and reimbursement from third-party payors, and a reduction in the payment rate or reimbursement could result in decreased use or sales of our products.”

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Competition

Competition among biotechnology, pharmaceutical, and other companies that research, develop, manufacture, or market pharmaceuticals is intense and is expected to increase (see “MD&A—Financial Outlook—Forward looking statements and factors that may affect Amgen—We face substantial competition, and others may discover, develop, acquire or commercialize products before or more successfully than we do”). Some competitors, principally large pharmaceutical companies, have greater clinical, research, regulatory, and marketing resources and experience than Amgen, particularly in the area of small molecule therapeutics. In addition, certain specialized biotechnology firms have entered into cooperative arrangements with major companies for the development and commercialization of products, creating an additional source of competition. The Company faces product competition from firms in the United States, Europe, Canada, Australia, and elsewhere. Additionally, some of the Company’s competitors, including biotechnology and pharmaceutical companies, are actively engaged in R&D in areas where the Company is also developing product candidates, as more fully discussed below.

The introduction of new products or the development of new processes by competitors or new information about existing products may result in product replacements or price reductions, even for products protected by patents. In addition, the timing of entry of a new product into the market can be an important factor in determining the product’s eventual success and profitability. Early entry may have important advantages in gaining product acceptance and market share. Accordingly, in some cases, the relative speed with which the Company can develop products, complete the testing, receive approval, and supply commercial quantities of the product to the market is expected to be important to Amgen’s competitive position. Competition among pharmaceutical products approved for sale also may be based on, among other things, patent position, product efficacy, safety, reliability, availability, and price.

A significant amount of R&D in the biotechnology industry is conducted by small companies, academic institutions, governmental agencies, and other public and private research organizations. These entities may seek patent protection and enter into licensing arrangements to collect royalties for use of technology or for the sale of products they have discovered or developed. Amgen also may face competition in its licensing or acquisition activities from pharmaceutical companies and large biotechnology companies that also seek to acquire technologies or product candidates from these entities. Accordingly, the Company may have difficulty acquiring technologies or product candidates on acceptable terms. Additionally, the Company competes with these entities and with pharmaceutical and biotechnology companies to attract and retain qualified scientific and technical personnel.

Nephrology

Any products or technologies that are directly or indirectly successful in addressing anemia could negatively impact the market for EPOGEN^® and Aranesp^®. Aranesp^® directly competes with other currently marketed products which treat anemia, including EPOGEN^® and the recombinant human erythropoietin product marketed by Johnson & Johnson (see “Products—EPOGEN^® (Epoetin alfa)” and “Products—Aranesp^® (darbepoetin alfa)”). Aventis Pharmaceuticals Inc. (“Aventis”) is developing gene-activated erythropoietin for the treatment of anemia (see “Item 3. Legal Proceedings—Transkaryotic Therapies and Aventis litigation”). Baxter International Inc. (“Baxter”) is developing epoetin omega for the treatment of anemia. Roche is developing a pegylated erythropoietin product for the treatment of anemia.

The calcimimetic program could face competition from products currently marketed by Abbott Laboratories (“Abbott”), Bone Care International, Inc., Genzyme Corporation, and Roche which treat secondary HPT. In addition, another product to treat HPT is currently being developed by Chugai Pharmaceuticals Co., Ltd. (“Chugai”).

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Oncology

Any products or technologies that are directly or indirectly successful in addressing anemia associated with chemotherapy could negatively impact the market for Aranesp^®. Aranesp^® directly competes with other currently marketed products which treat anemia associated with chemotherapy, including the recombinant human erythropoietin product marketed by Johnson & Johnson (see “Products—EPOGEN^® (Epoetin alfa)”). In Europe, Aranesp^® directly competes with other erythropoietin products marketed by Ortho Biotech/Janssen-Cilag/Johnson & Johnson and Roche in the oncology setting. Aventis is also developing its gene-activated erythropoietin for the treatment of anemia (see “Item 3. Legal Proceedings—Transkaryotic Therapies and Aventis litigation”). Baxter and Roche are also developing their products for the treatment of anemia in the oncology setting.

Any products or technologies that are directly or indirectly successful in addressing neutropenia associated with chemotherapy could negatively impact the markets for NEUPOGEN^® and Neulasta^™. NEUPOGEN^® and Neulasta^™ currently face market competition from a competing CSF product, granulocyte macrophage colony stimulating factor (“GM-CSF”), and from the chemoprotectant, amifostine. Potential future sources of competition include other G-CSF products, GM-CSF products, FLT-3 ligand, myelopoietin, PGG-glucan, promegapoietin, and progenipoietin, among others. Neulasta^™ impacts NEUPOGEN^® sales as health care providers in the United States transition from administering NEUPOGEN^® to Neulasta^™. Since the launch of Neulasta^™ in April 2002, NEUPOGEN^® patients have been converting to Neulasta^™. This trend is expected to continue, and will impact future NEUPOGEN^® sales (see “MD&A—Financial Outlook—Trends expected to impact future operations”).

Chugai markets a G-CSF product in Japan as an adjunct to chemotherapy and as a treatment for BMT patients. Chugai and Aventis market a G-CSF product in certain EU countries as an adjunct to chemotherapy and as a treatment in BMT settings. Chugai, through its licensee, AMRAD, markets this G-CSF product in Australia as an adjunct to chemotherapy and as a treatment for BMT patients. Under an agreement with Amgen, Chugai is precluded from selling its G-CSF product in the United States, Canada, and Mexico.

Berlex Laboratories, Inc., a division of Schering (“Berlex”) markets GM-CSF under the trademark Leukine^® in the United States for BMT and PBPC transplant patients and as an adjunct to chemotherapy treatments for acute non-lymphocytic leukemia (“ANLL”) and AML. Berlex is also pursuing other indications for its GM-CSF product including as an adjunct to chemotherapy outside the limited settings of ANLL and AML. Novartis AG (“Novartis”) markets another GM-CSF product for use in BMT patients and as an adjunct to chemotherapy in Europe and certain other countries. This GM-CSF product is currently being developed for similar indications in the United States and Canada. Nartograstim, a modified G-CSF protein, is sold by Kyowa Hakko Kogyo Co., Ltd. in Japan.

Many companies are developing products that promote wound healing, soft tissue regeneration, and chemoprotection. Companies such as Human Genome Sciences, Inc., Genetics Institute, Inc., MedImmune, Inc., and IntraBiotics Pharmaceuticals, Inc. are currently among many companies that are developing products, which could be potential competitors for KGF.

NHL is primarily treated with standard chemotherapy agents, monoclonal antibodies, or a combination of the two modalities. Epratuzumab could face competition from rituximab, another monoclonal antibody marketed jointly by Genentech and Idec Pharmaceuticals Corporation (“Idec”). However, it is also possible that epratuzumab may be used in combination with rituximab (see “Product candidates—Cancer”). In addition, other monoclonal antibodies are being investigated for the treatment of NHL including those in development by GlaxoSmithKline plc (in collaboration with Beckman Coulter, Inc.) and Idec.

Currently solid tumors are treated primarily with surgery, chemotherapy and/or radiotherapy depending upon tumor type, stage of disease, and the status of the patients. The ABX-EGF program could face competition from products under development by Astra-Zeneca, Imclone/Bristol Myers Squibb/Merck KgA, OSI/Genentech/Roche, Pfizer, and GlaxoSmithKline plc.

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The OPG program could face competition from a product currently marketed by Novartis for the treatment of cancer metastases to the bone.

Inflammation

ENBREL^®, Kineret^® and sTNF-RI could face competition in some circumstances from a number of companies developing or marketing rheumatoid arthritis and psoriatic arthritis treatments. Current anti-arthritic treatments include generic methotrexate and other products marketed by, among others, Centocor, Inc./Johnson & Johnson, Abbott, Merck & Co., Inc. (“Merck”), Pharmacia Corporation (“Pharmacia”), Novartis, Aventis, and Sanofi-Synthelabo. In addition, a number of companies have cytokine inhibitors in development including GlaxoSmithKline plc, Pharmacia, and Taisho Pharmaceutical Co., Ltd. Amgen is currently developing ENBREL^® for the treatment of psoriasis. If ENBREL^® is approved for this indication, it may compete with products marketed by Biogen, Genentech, and Johnson & Johnson.

Research and Development

Amgen’s product candidates come from internal research, acquisitions, and licensing from third parties. Amgen’s internal research capabilities include an expertise in secreted protein therapeutics. The Company’s discovery program may yield targets that lead to the development of therapeutics delivered as proteins, small molecules, or monoclonal antibodies. Amgen has only recently entered the small molecule field. In July 2002, the Company acquired Immunex, a leading biotechnology company dedicated to developing immune system science to protect human health. Immunex was a leading biotechnology company with scientific expertise in the fields of immunology, cytokine biology, vascular biology, antibody-based therapeutics, and small molecule research. The acquisition is intended to enhance Amgen’s strategic position within the biotechnology industry by strengthening and diversifying its (1) product base and product pipeline in key therapeutic areas, and (2) discovery research capabilities in proteins and antibodies. To supplement the Company’s small molecule discovery program, in December 2000, Amgen acquired Kinetix Pharmaceuticals, Inc. (“Kinetix”), a privately held company that focused on the discovery of small molecule drugs that inhibit protein kinases, a key class of biological regulators (see Note 11 to the Consolidated Financial Statements). R&D expenses for the years ended December 31, 2002, 2001, and 2000 were $1,116.6 million, $865.0 million, and $845.0 million, respectively. In 2002, the Company also recorded a $2,991.8 million write-off of acquired in-process research and development (“IPR&D”) resulting from the Immunex acquisition (see Note 3 to the Consolidated Financial Statements). In 2000, the Company recorded a $30.1 million write-off of IPR&D resulting from the Kinetix acquisition.

Government Regulation

Regulation by governmental authorities in the United States and other countries is a significant factor in the production and marketing of the Company’s products and its ongoing R&D activities (see “MD&A—Financial Outlook—Forward looking statements and factors that may affect Amgen—Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval”).

In order to clinically test, manufacture, and market products for therapeutic use, Amgen must satisfy mandatory procedures and safety and effectiveness standards established by various regulatory bodies. In the United States, the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated there under, and other federal and state statutes and regulations govern, among other things, the testing, manufacture, labeling, storage, record keeping, approval, advertising, and promotion of the Company’s products on a product-by-product basis. Product development and approval within this regulatory framework takes a number of years and involves the expenditure of substantial resources. After laboratory analysis and preclinical testing in animals, an investigational new drug application is filed with the FDA to begin human testing. Typically, a three-phase human clinical testing program is then undertaken. In phase 1, small clinical trials are conducted to determine the safety of the product. In phase 2, clinical trials are conducted to assess safety, acceptable dose, and gain preliminary evidence of the efficacy of the product. In phase 3, clinical trials are conducted to provide sufficient

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data for the statistically valid proof of safety and efficacy. The time and expense required to perform this clinical testing can vary and is substantial. No action can be taken to market any new drug or biologic product in the United States until an appropriate marketing application has been approved by the FDA. Even after initial FDA approval has been obtained, further clinical trials may be required to provide additional data on safety and effectiveness and are required to gain clearance for the use of a product as a treatment for indications other than those initially approved. In addition, side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing approval. Similarly, adverse events that are reported after marketing approval can result in additional limitations being placed on the product’s use and, potentially, withdrawal of the product from the market. Any adverse event, either before or after marketing approval, can result in product liability claims against the Company.

In addition to regulating and auditing human clinical trials, the FDA regulates and inspects equipment, facilities, and processes used in the manufacturing of such products prior to providing approval to market a product. If after receiving clearance from the FDA, a material change is made in manufacturing equipment, location, or process, additional regulatory review may be required. The Company also must adhere to current Good Manufacturing Practice and product-specific regulations enforced by the FDA through its facilities inspection program. The FDA also conducts regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval. If, as a result of these inspections, the FDA determines that the Company’s equipment, facilities, or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal, or administrative sanctions and/or remedies against Amgen, including the suspension of the Company’s manufacturing operations.

In the European countries, Canada, and Australia, regulatory requirements and approval processes are similar in principle to those in the United States. Additionally, depending on the type of drug for which approval is sought, there are currently two potential tracks for marketing approval in the European countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval in all EU countries, but each method grants all participating countries some decision-making authority in product approval.

The Company is also subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. The federal government has published regulations that identify “safe harbors” or exemptions for certain payment arrangements that do not violate the anti-kickback statutes. The Company seeks to comply with the safe harbors where possible. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing some of the Company’s practices, it is possible that the Company’s practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Amgen’s activities relating to the sale and marketing of its products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). If the government were to allege against or convict the Company of violating these laws, there could be a material adverse effect on the Company, including its stock price. The Company’s activities could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities.

Since 1991, the Company has participated in the Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, and under amendments of that law that became effective in 1993. Participation in this program has included extending comparable discounts under the Public Health Service (“PHS”) pharmaceutical pricing program. Under the Medicaid rebate program, the Company pays a rebate for each unit of its product reimbursed by Medicaid. The amount of the rebate for each product is set by law as a

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minimum 15.1% of the average manufacturer price (“AMP”) of that product, or if it is greater, the difference between AMP and the best price available from the Company to any customer. The rebate amount also includes an inflation adjustment if AMP increases faster than inflation. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The rebate amount is recomputed each quarter based on the Company’s reports of its current average manufacturer price and best price for each of its products to the CMS. The terms of the Company’s participation in the program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in an overage or underage in the Company’s rebate liability for past quarters, depending on the direction of the correction. In addition to retroactive rebates (and interest, if any), if the Company were found to have knowingly submitted false information to the government, in addition to other penalties available to the government, the statute provides for civil monetary penalties in the amount of $100,000 per item of false information.

The Company also makes its products available to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration. Since 1993, as a result of the Veterans Health Care Act of 1992 (the “VHC Act”), federal law has required that product prices for purchases by the Veterans Administration, the Department of Defense, Coast Guard, and the PHS (including the Indian Health Service) be discounted by a minimum of 24% off the AMP to non-federal customers (the non-federal average manufacturer price, “non-FAMP”). The Company’s computation and report of non-FAMP is used in establishing the price, and the accuracy of the reported non-FAMP may be audited by the government under applicable federal procurement laws. Among the remedies available to the government for infractions of these laws is recoupment of any overages paid by FSS users during the audited years. In addition, if the Company were found to have knowingly reported a false non-FAMP, the VHC Act provides for civil monetary penalties of $100,000 per item that is incorrect.

Amgen is also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, and other current and potential future federal, state, or local regulations. The Company’s R&D activities involve the controlled use of hazardous materials, chemicals, biological materials, and various radioactive compounds. The Company believes that its procedures comply with the standards prescribed by state and federal regulations; however, the risk of injury or accidental contamination cannot be completely eliminated. Amgen’s research and manufacturing activities also are conducted in voluntary compliance with the National Institutes of Health Guidelines for Recombinant DNA Research.

Additionally, the U.S. Foreign Corrupt Practices Act, to which the Company is subject, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. The Company’s present and future business has been and will continue to be subject to various other laws and regulations.

Patents and Trademarks

Patents are very important to the Company in establishing proprietary rights to the products it has developed or licensed. The patent positions of pharmaceutical and biotechnology companies, including the Company, can be uncertain and involve complex legal, scientific, and factual questions. See “MD&A—Financial Outlook—Forward looking statements and factors that may affect Amgen—If our intellectual property positions are challenged, invalidated or circumvented, or if we fail to prevail in present and future intellectual property litigation, our business could be adversely affected.”

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The Company has filed applications for a number of patents, has been granted patents, or has obtained rights relating to erythropoietin, G-CSF, darbepoetin alfa, pegfilgrastim, anakinra, etanercept, consensus interferon and various potential products. In the United States, the U.S. Patent and Trademark Office (the “USPTO”) has issued to the Company or the Company has obtained rights to patents relating to erythropoietin that generally cover DNA and host cells (issued in 1987); processes for making erythropoietin (issued in 1995 and 1997); certain product claims to erythropoietin (issued in 1996 and 1997); cells that make certain levels of erythropoietin (issued in 1998); and pharmaceutical compositions of erythropoietin (issued in 1999). These patents have varying expiration dates, with the latest erythropoietin related patents expiring in 2015; all other patents expire earlier. The USPTO has also issued to the Company or the Company has obtained rights to patents relating to aspects of DNA, vectors, cells, and processes relating to recombinant G-CSF (issued in 1989); other aspects of DNA, vectors, cells, and processes relating to recombinant G-CSF (issued in 1991); G-CSF polypeptides (issued in 1996); methods of treatment using G-CSF polypeptides (issued in 1996); methods of enhancing bone marrow transplantation and treating burn wounds (issued in 1997); methods for recombinant production of G-CSF (issued in 1998); and analogs of G-CSF (issued in 1999). The last to issue G-CSF patents expire in 2013; all other patents expire earlier. Additionally, the U.S. and European patents pertaining to pegylated G-CSF (pegfilgrastim) expire in 2015. The patent relating to erythropoietin for Europe expires in 2004. The patent relating to G-CSF for Europe expires in 2006. The Company has been granted or has obtained rights to two patents in Europe relating to darbepoetin alfa and hyperglycosylated erythropoietic proteins which expire in 2014 and 2010, respectively. The Company has been granted or has obtained rights to patents relating to etanercept in the United States that generally cover DNA, host cells and processes for making proteins (issued in 1995 and 2000); products (issued in 1999 and 2001); and processes for using (issued 1997). These patents have varying expiration dates, with the latest United States etanercept related patent expiring in 2014. The Company has been granted or has obtained rights to patents relating to etanercept in Europe. The latest European patent relating to etanercept expires in 2011. The Company has been granted or has obtained rights to a patent on DNA encoding anakinra in the United States which expires in 2008 and has been granted or has obtained rights to patents in the countries adhering to the European Patent Office on anakinra and the DNA encoding it which expire in 2009; the Company has applied, or plans to apply, for extensions of anakinra patents.

There can be no assurance that Amgen’s patents or licensed patents will afford legal protection against competitors or provide significant proprietary protection or competitive advantage. In addition, Amgen’s patents or licensed patents could be held invalid or unenforceable by a court, or infringed or circumvented by others, or others could obtain patents that the Company would need to license or circumvent. Competitors or potential competitors may have filed patent applications or received patents, and may obtain additional patents and proprietary rights relating to proteins, small molecules, compounds, or processes competitive with those of the Company. Additionally, for certain of the Company’s product candidates, competitors, or potential competitors may claim that their existing or pending patents prevent the Company from commercializing such product candidates in certain territories.

In general, the Company has obtained licenses from various parties which it deems to be necessary or desirable for the manufacture, use, or sale of its products. These licenses generally require Amgen to pay royalties to the parties on product sales. In addition, other companies have filed patent applications or have been granted patents in areas of interest to the Company. There can be no assurance any licenses required under such patents will be available for license on acceptable terms or at all. The Company is engaged in various legal proceedings relating to certain of its patents. See “Item 3. Legal Proceedings”.

Trade secret protection for its unpatented confidential and proprietary information is important to Amgen. To protect its trade secrets, the Company generally requires its employees, material consultants, scientific advisors, and parties to collaboration and licensing agreements to execute confidentiality agreements upon the commencement of employment, the consulting relationship, or the collaboration or licensing arrangement with the Company. However, others could either develop independently the same or similar information or obtain access to Amgen’s proprietary information.

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The Company has obtained registrations of its EPOGEN^®, NEUPOGEN^®, Aranesp^®, ENBREL^®, and Kineret^® trademarks in the United States. In addition, these trademarks have been registered in other countries. The Company also has trademark protection for its product name Neulasta^™ and is currently seeking registration of this trademark in the United States.

Manufacturing and Raw Materials

Amgen has manufacturing facilities which produce commercial quantities of Epoetin alfa, Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^® (see “Item 2. Properties”). Additionally, the Company supplies Epoetin alfa in the United States to Johnson & Johnson under a supply agreement. There can be no assurance that the Company will be able to accurately anticipate future demand for Epoetin alfa, Aranesp^®, NEUPOGEN^®, Neulasta^™, ENBREL^®, and Kineret^® or maintain adequate manufacturing capacity (see “MD&A—Financial Outlook—Forward looking statements and factors that may affect Amgen—We plan to grow rapidly, and if we fail to adequately manage that growth our business could be adversely impacted”).

As part of the Immunex acquisition, Amgen entered into a long-term supply agreement with BI Pharma to manufacture commercial quantities of ENBREL^®. Amgen’s supply of ENBREL^® is largely dependent on product manufactured by BI Pharma. Amgen has made significant purchase commitments to BI Pharma under the BI Pharma supply agreement to manufacture commercial inventory of ENBREL^®. Also as a part of the acquisition, Amgen assumed a large-scale biopharmaceutical manufacturing facility in West Greenwich, Rhode Island (the “RI Facility”). Prior to the acquisition, Immunex and Wyeth had invested substantial sums to retrofit the Rhode Island manufacturing facility to accommodate the commercial production of ENBREL^® bulk drug. Amgen also utilizes third-party contract manufacturers to perform fill and finish services for ENBREL^® manufactured at the RI Facility, and packaging services for ENBREL^® manufactured by BI Pharma and at the RI Facility. The RI Facility and the related third-party fill and finish facility were approved by the FDA in December 2002 (see —“Joint Ventures and Business Relationships—Wyeth”).

Certain raw materials necessary for the Company’s commercial manufacturing of its products are proprietary products of other companies, and in some cases, such proprietary products are specifically cited in the Company’s drug application with the FDA such that they must be obtained from that specific, sole source. The Company currently attempts to manage the risk associated with such sole sourced raw materials by active inventory management and alternate source development, where feasible. Amgen attempts to remain apprised of the financial condition of its suppliers, their ability to supply the Company’s needs and the market conditions for these raw materials. Also, certain of the raw materials required in the commercial manufacturing of the Company’s products are derived from biological sources. The Company is investigating screening procedures with respect to certain biological sources and alternatives to them. Raw materials may be subject to contamination and/or recall. A material shortage, contamination, and/or recall could adversely impact or disrupt Amgen’s commercial manufacturing of its products.

Human Resources

As of December 31, 2002, the Company had approximately 10,100 employees, including: 1) approximately 110 part-time employees, and 2) approximately 150 employees previously employed by Immunex who are on transition assignments for Amgen ending in 2003. Most of the employees retained from Immunex, receive additional compensation payable under the Immunex short-term retention plan, which employees may be eligible for through 2004. Of the total employees as of December 31, 2002, approximately 3,400 were engaged in R&D, approximately 2,200 were engaged in selling and marketing, approximately 2,500 were engaged in commercial manufacturing activities, and approximately 2,000 were engaged in other activities. There can be no assurance that the Company will be able to continue attracting and retaining qualified personnel in sufficient numbers to meet its needs. None of the Company’s employees are covered by a collective bargaining agreement, and the Company has experienced no work stoppages. The Company considers its employee relations to be good.

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Executive Officers of the Registrant

The executive officers of the Company, their ages as of February 21, 2003 and positions are as follows:

Mr. Kevin W. Sharer, age 54, has served as a director of the Company since November 1992. Since May 2000, Mr. Sharer has been Chief Executive Officer and President of the Company and has also been Chairman of the Board since December 2000. From October 1992 to May 2000, Mr. Sharer served as President and Chief Operating Officer of the Company. From April 1989 to October 1992, Mr. Sharer was President of the Business Markets Division of MCI Communications Corporation, a telecommunications company. From February 1984 to March 1989, Mr. Sharer held numerous executive capacities at General Electric Company. Mr. Sharer is a director of Unocal Corporation and 3M Company.

Dr. Fabrizio Bonanni, age 56, became Senior Vice President, Quality and Compliance in April 1999. From December 1997 to April 1999, Dr. Bonanni served as the Corporate Vice President for Regulatory/Clinical Affairs for Baxter, a pharmaceutical company and from November 1994 to December 1997, as Corporate Vice President, Quality System. Beginning in 1974, Dr. Bonanni held a variety of quality, regulatory and manufacturing positions with Baxter in Europe and in the United States.

Dr. Hassan Dayem, age 55, became Senior Vice President and Chief Information Officer in May 2002. From December 1998 to May 2002, Dr. Dayem served as Vice President, Information Services and Chief Information Officer at Merck, a pharmaceutical company. From June 1997 to December 1998, Dr. Dayem served as Vice President Research Information Services at Merck. From February 1977 to May 1997, Dr. Dayem was at Los Alamos National Laboratory where he held several positions including Division Director, Computing, Information and Communications Division from July 1993 to May 1997.

Dr. Dennis M. Fenton, age 51, became Executive Vice President in March 2000, having served as Senior Vice President, Operations, from January 1995 to March 2000, as Senior Vice President, Sales and Marketing from August 1992 to January 1995, and as Vice President, Process Development, Facilities and Manufacturing Services from July 1991 to August 1992. From October 1988 to July 1991, Dr. Fenton also served as Vice President, Pilot Plant Operations and Clinical Manufacturing and from 1985 to October 1988, he served as Director, Pilot Plant Operations.

Mr. Brian McNamee, age 46, became Senior Vice President, Human Resources in June 2001. From November 1999 to June 2001, Mr. McNamee served as Vice President of Human Resources at Dell Computer Corp. From 1998 to 1999, Mr. McNamee served as Senior Vice President Human Resources for the National Broadcasting Corporation (“NBC”). From July 1988 to November 1999, Mr. McNamee held human resource positions at General Electric.

Dr. Joseph P. Miletich, age 51, became Senior Vice President, Research & Preclinical Development in April 2002. From January 2001 to March 2002, Dr. Miletich served as Senior Vice President, Worldwide Preclinical Development, at Merck, a pharmaceutical company, and from December 1998 to December 2000 he served as Vice President, Safety Assessment at Merck. From July 1996 to December 1998 Dr. Miletich served as Director of Laboratories at the Barnes-Jewish Hospital. From July 1992 to December 1998, Dr. Miletich served as Professor of Internal Medicine and Pathology at Washington University School of Medicine.

Mr. George J. Morrow, age 50, became Executive Vice President of Worldwide Sales and Marketing, in January 2001. From January 1999 to December 2000, Mr. Morrow was President and Chief Executive Officer of Glaxo Wellcome Inc. (“Glaxo”), a subsidiary of GlaxoSmithKline plc. From January 1997 to December 1998, Mr. Morrow was Managing Director of Glaxo Wellcome U.K., also a subsidiary of GlaxoSmithKline plc. From May 1993 to December 1996, Mr. Morrow was Group Vice President for Commercial Operations of Glaxo.

Mr. Richard D. Nanula, age 42, became Executive Vice President, Finance, Strategy and Communications in May 2001 and beginning in August 2001, Mr. Nanula became Chief Financial Officer. From November 1999

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to February 2001, Mr. Nanula was Chairman and Chief Executive Officer of Broadband Sports, Inc., an internet media company. From March 1998 to May 1999, Mr. Nanula was President and Chief Operating Officer of Starwood Hotels & Resorts Worldwide, a worldwide hotel and gaming company. From August 1986 to March 1998, Mr. Nanula was at the Walt Disney Company where he held several positions including Senior Executive Vice President and Chief Financial Officer and President of Disney Stores Worldwide.

Mr. Steven M. Odre, age 53, became Senior Vice President, General Counsel and Secretary in March 2000, having served as Vice President, Intellectual Property, and Associate General Counsel since October 1988, and as Associate General Counsel from March 1988 to October 1988. From May 1986 to March 1988, Mr. Odre served as Director of Intellectual Property.

Dr. Roger M. Perlmutter, age 50, became Executive Vice President of Research and Development in January 2001. From July 1999 to December 2000, Dr. Perlmutter was Executive Vice President, Worldwide Basic Research and Preclinical Development of Merck Research Laboratories. From February 1999 to July 1999, Dr. Perlmutter served as Executive Vice President of Merck Research Laboratories, and from February 1997 to January 1999 as Senior Vice President of Merck Research Laboratories. From May 1989 to January 1997, Dr. Perlmutter was also Chairman of the Department of Immunology, University of Washington, and from January 1991 to January 1997, Professor in the Departments of Immunology, Biochemistry and Medicine, University of Washington. From October 1991 to January 1997, Dr. Perlmutter served as Investigator at the Howard Hughes Medical Institute at the University of Washington. Dr. Perlmutter currently serves on the Board of Directors of Stem Cells, Inc.

Mr. Barry D. Schehr, age 47, became Vice President, Financial Operations and Chief Accounting Officer in May 2000. From March 2000 to May 2000, Mr. Schehr served as Vice President, Accounting and Financial Operations, and from February 1997 to February 2000 as Director of Internal Audit. From October 1989 to January 1997, Mr. Schehr was a partner with Ernst & Young LLP, an accounting firm.

Dr. Beth C. Seidenberg, age 45, became Senior Vice President, Development of the Company in January 2002. From September 2001 to December 2001, Dr. Seidenberg served as Senior Vice President, Global Development of Bristol-Myers, a pharmaceutical company. From May 2000 to September 2001, Dr. Seidenberg served as Senior Vice President, Clinical Development & Life Cycle Management of Bristol-Myers. From April 2000 to May 2000, Dr. Seidenberg served as Vice President, Clinical Immunology/Pulmonary/Dermatology of Bristol-Myers. From July 1998 to March 2000, Dr. Seidenberg served as Vice President, Pulmonary-Immunology of Merck Research Laboratories. From June 1989 to June 1998, Dr. Seidenberg held several director positions at Merck Research Laboratories, including Executive Director.

Geographic Area Financial Information

For financial information concerning the geographic areas in which the Company operates, see Note 9 to the Consolidated Financial Statements.

Factors That May Affect Amgen

Amgen operates in a rapidly changing environment that involves a number of risks, uncertainties, and assumptions, many of which are beyond our control. For a discussion of some of these risks, see “—Financial Outlook—Factors that may affect Amgen” in the MD&A section of this report included under Item 7. Other risks are discussed elsewhere in this Form 10-K.

Investor Information

The Company is subject to the information requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). Therefore, the Company files periodic reports, proxy statements, and other information with

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the Securities and Exchange Commission (the “SEC”). Such reports, proxy statements, and other information may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site  (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

Financial and other information about the Company is available on its website (http://www.amgen.com). The Company makes available on its website, free of charge, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

Item 2.    PROPERTIES

Amgen’s principal executive offices and a majority of its administrative, manufacturing, and R&D facilities are located in forty buildings in Thousand Oaks, California. Thirty-six of the buildings are owned and four are leased. Adjacent to these buildings are facilities that are under construction and additional property for future expansion. The Thousand Oaks, California properties include manufacturing facilities licensed by various regulatory bodies to produce commercial quantities of Epoetin alfa, NEUPOGEN^®, Aranesp^®, and Neulasta^™.

Amgen owns seven buildings and leases two buildings in Boulder, Colorado, housing process development research and manufacturing facilities capable of producing commercial quantities of Kineret^® bulk drug substance. The Company has a manufacturing complex in Longmont, Colorado, that is licensed to produce commercial quantities of Epoetin alfa and Aranesp^® bulk drug substance. The Company has acquired approximately 159 acres of undeveloped land adjacent to the Longmont site to accommodate future expansion.

As part of the Immunex acquisition, Amgen assumed ownership of four buildings and leases for thirteen buildings in the Seattle, Washington area, which house R&D, manufacturing, and administrative facilities. In connection with the acquisition, the Company initiated an integration plan to consolidate certain Immunex leased facilities (see Note 3 to the Consolidated Financial Statements). The Company is currently constructing the Seattle inflammation research headquarters. The Company also owns additional property for future expansion in the Seattle, Washington area.

As part of the Immunex acquisition, Amgen assumed ownership of two buildings in West Greenwich, Rhode Island, including a manufacturing facility which produces commercial quantities of ENBREL^®. The Company is also currently constructing a new manufacturing plant to be built adjacent to the existing manufacturing facility in Rhode Island to produce commercial quantities of ENBREL^® with completion expected in 2005.

Elsewhere in North America, the Company owns a distribution center in Louisville, Kentucky, and a research facility in Cambridge, Massachusetts. The Company leases administrative offices in Washington, D.C. and Canada, and five regional sales offices in the United States.

Outside North America, the Company has a fill and finish manufacturing facility in Juncos, Puerto Rico, and a European packaging and distribution center in Breda, The Netherlands, which have been licensed by various regulatory bodies. Adjacent to the Company’s current Juncos manufacturing facility, the Company is constructing a new warehouse and new manufacturing facilities with completion dates for various structures expected in late 2003 and beyond. Adjacent to these buildings in Puerto Rico is additional property owned by the Company for future expansion. The Company leases facilities in thirteen European countries, Australia, New Zealand, and Japan, for administration, marketing, and/or research and development.

Amgen believes that its existing facilities plus anticipated additions are sufficient to meet its current needs.

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Item 3.    LEGAL PROCEEDINGS

Certain of the Company’s legal proceedings are discussed below. While it is impossible to predict accurately or to determine the eventual outcome of these matters, the Company believes that the outcome of these proceedings will not have a material adverse effect on the annual financial statements of the Company.

Genentech litigation

On October 16, 1996, Genentech filed suit in the United States District Court for the Northern District of California (the “California Court”) for infringement of U.S. Patent Nos. 4,704,362, 5,221,619, and 4,342,832 (the “‘362, ‘619, and ‘832 Patents”), relating to vectors for expressing cloned genes and the methods for such expression. Genentech alleged that Amgen infringed its patents by manufacturing and selling NEUPOGEN^®. On February 10, 1997, Genentech served an additional counterclaim asserting U.S. Patent No. 5,583,013 (the “‘013 Patent”), issued December 10, 1996.

At a hearing held on May 29, 1998, the parties stipulated to the dismissal with prejudice of claims with respect to the ‘832 Patent. The judge issued a final claim construction ruling interpreting the ‘362, ‘619, and ‘013 Patent claims which, among other things, essentially limited the claim term “control region” to DNA taken from a single operon and not constructed from control elements derived from various operons. On October 12, 2000, the California Court entered Final Judgment in the Company’s favor on the basis of no infringement. Genentech filed a notice of appeal. The parties filed briefs before the Federal Circuit Court of Appeals. Oral arguments were heard on October 9, 2001.

The Court of Appeals for the Federal Circuit issued a decision April 29, 2002 vacating summary judgment of no literal infringement and affirming Genentech’s non-compliance with the local rules, thereby precluding Genentech from proceeding on a theory of infringement under the doctrine of equivalents. The Federal Circuit Court of Appeals remanded the case to the United States District Court for the Northern District of California to determine the issue of literal infringement under a revised claim construction, as well as the validity and enforceability of Genentech’s patents. The District Court issued an order dated January 24, 2003 denying the Company’s Motion for Summary Judgment of No Literal Infringement. The District Court issued an order dated February 10, 2003 granting Genentech’s Motion for Summary Judgment of No Inequitable Conduct, dismissing that defense with prejudice. A trial date has been set for September 2, 2003.

Transkaryotic Therapies and Aventis litigation

On April 15, 1997, Amgen filed suit in the Massachusetts District Court against Transkaryotic Therapies, Inc. (“TKT”) and Hoechst Marion Roussel, Inc. (“HMR”—now Aventis Pharmaceuticals Inc., together with TKT, the “Defendants”) alleging infringement of three U.S. patents owned by Amgen that claim an erythropoietin product and processes for making erythropoietin. Amgen sought an injunction preventing the Defendants from making, importing, using, or selling erythropoietin in the United States. On October 7, 1999, Amgen filed an amended complaint, which added two additional patents to the litigation. Defendants’ amended answer asserted that all five of the patents-in-suit were not infringed, were invalid, or were unenforceable due to inequitable conduct.

Amgen’s motion for summary judgment of literal infringement was granted by the Massachusetts District Court on April 26, 2000 with respect to claim 1 of U.S. Patent No. 5,955,422 (the “‘422 Patent”). On May 15, 2000, trial began in the Massachusetts District Court. On June 9, 2000, the Massachusetts District Court granted Defendants’ motion for non-infringement of U.S. Patent No. 5,618,698 (the “‘698 Patent”), removing the ‘698 Patent from this action. On July 21, 2000, the Massachusetts District Court granted Amgen’s motion for judgment on the Defendants’ defenses of invalidity based upon anticipation and obviousness.

On January 19, 2001, the Massachusetts District Court ruled that claims 2-4 of the ‘080 Patent, claims 1, 3, 4, and 6 of the ‘349 Patent and claim 1 of the ‘422 Patent were valid, enforceable, and infringed by TKT’s EPO product and the cells used to make such product. The Massachusetts District Court also held that claim 7 of the ‘349 patent and claims 1, 2, and 9 of the ‘933 Patent were not infringed, and that if infringed the claims of the ‘933 patent would be invalid.

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On January 26, 2001, TKT and HMR filed a Notice of Appeal and on February 14, 2001, Amgen filed a Notice of Cross-Appeal, to the U.S. Court of Appeals for the Federal Circuit. On March 22, 2001, Amgen filed an Amended Notice of Cross-Appeal to include claim 9 of the ‘698 patent. After the parties briefed the issues on appeal, oral arguments were heard on May 7, 2002 by the U.S. Court of Appeals for the Federal Circuit.

On January 6, 2003, the U.S. Court of Appeals for the Federal Circuit upheld the District Court’s decision that TKT and HMR infringe the ‘349 and ‘422 patents. The court further upheld the enforceability and validity of all of the asserted claims except for validity over two references which was vacated and remanded to the District Court. The court vacated and remanded to the District Court of Massachusetts for further consideration of (i) the finding of infringement of the ‘080 patent, (ii) the holding of non-infringement of the ‘698 patent, and (iii) the effect of two references on the validity of the asserted claims of the patents. On January 20, 2003, TKT and HMR filed a Combined Motion for Panel Rehearing and Rehearing En Banc with the Federal Circuit regarding the court’s affirmance of the validity of the asserted claims under 35 U.S.C. § 112. On March 3, 2003, the Federal Circuit denied TKT and HMR’s Motions for Panel Rehearing and Rehearing En Banc.

Average Wholesale Price Litigation

Amgen has been served with complaints in ten separate civil actions broadly alleging that it, together with a large number of other pharmaceutical manufacturers, reported prices for certain products that overstate the Average Wholesale Price (“AWP”), allegedly inflating reimbursement, including co-payments paid to providers who prescribe and administer the products. An additional civil complaint naming Amgen as a defendant has been filed against the Company, but not formally served upon the Company. In addition, Immunex has been served with eight civil AWP actions and has been named in a ninth complaint that has not been formally served upon Immunex.

The complaints assert varying claims under the federal RICO statutes, their state law corollaries, as well as state law claims for deceptive trade practices and common law fraud. The complaints seek an undetermined amount of damages, as well as other relief, including declaratory and injunctive relief. The cases include the following:

Citizens for Consumer Justice, et al., v. Abbott Laboratories, Inc., et al. (U.S. District Court, District of Massachusetts). Amgen was served with this complaint on January 7, 2002. Immunex was served with this complaint on January 3, 2002. This action, along with others, was consolidated as In Re Pharmaceutical Average Wholesale Price Litigation, MDL No. 1456 (“the AWP MDL”), in the U.S. District Court, District of Massachusetts (Judge Patti Saris) (the “Massachusetts District Court”). On September 9, 2002 a Master Consolidated Class Action Complaint (“MCCAC”) was served upon Amgen and Immunex. Amgen and Immunex, as well as the other defendants, filed a motion to dismiss the MCCAC. On January 13, 2003 the Massachusetts District Court conducted a hearing on the motion to dismiss, but has yet to issue a ruling on the motion.

Teamsters Health & Welfare Fund of Philadelphia, et al., v. Abbott Laboratories, Inc., et al. (U.S. District Court for the Eastern District of Pennsylvania). Amgen was served with this complaint on May 7, 2002. Immunex is not a named defendant in the case. This action, along with Citizens for Consumer Justice, was consolidated into the AWP MDL and transferred to the Massachusetts District Court. The parties are awaiting a decision on the defendants’ motion to dismiss the MCCAC.

Action Alliance of Senior Citizens of Greater Philadelphia v. Immunex Corp., (U.S. District Court for the Western District of Washington). Immunex was served with this complaint on December 10, 2001. Amgen is not a named defendant in the case. This action, along with Citizens for Consumer Justice, was consolidated into the AWP MDL and transferred to the Massachusetts District Court. The parties are awaiting a decision on the defendants’ motion to dismiss the MCCAC.

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State of Nevada v. American Home Products Corporation, et al. (removed from Nevada state court to the U.S. District Court for the District of Nevada). Amgen was served with this complaint on March 25, 2002. Immunex was served with this complaint on March 22, 2002. This action was consolidated into the AWP MDL, and transferred to the Massachusetts District court. Plaintiff State of Nevada has filed a Motion to Remand the case to Nevada state court. The Massachusetts District Court has scheduled a hearing on this Motion to Remand for March 7, 2003.

State of Montana ex rel. Mike McGrath, Attorney General v. Abbott Laboratories, et al. (removed from Montana state court to the U.S. District Court for the District of Montana). Amgen was served with this complaint on March 28, 2002. Immunex was served with this complaint on April 5, 2002. This action was consolidated into the AWP MDL, and transferred to the Massachusetts District Court. Plaintiff State of Montana has filed a Motion to Remand the case to Montana state court. The Massachusetts District Court has scheduled a hearing on this Motion to Remand for March 7, 2003.

John Rice, et al. v. Abbott Laboratories, Inc., et al. (removed from California Superior Court, Alameda County to the U.S. District Court for the Northern District of California). Amgen was served with this class action complaint on July 30, 2002. Immunex was served with this complaint on July 25, 2002. This action was conditionally transferred by the Judicial Panel on Multi-District Litigation (“JPML”) to the AWP MDL in the Massachusetts District Court.

Constance Thompson, et al. v. Abbott Laboratories, Inc., et al. (removed from California Superior Court, San Francisco County to the U.S. District Court for the Northern District of California). Neither Amgen nor Immunex have been formally served in this case, but both companies have entered a limited appearance in the case for the purpose of removing the matter to federal court. Both accepted service of the complaint and have appeared in the case. This action was conditionally transferred by JPML to the AWP MDL in the Massachusetts District Court.

Ronald Turner, et al. v. Abbott Laboratories, Inc., et al. (removed from California Superior Court, San Francisco County to the U.S. District Court for the Northern District of California). Amgen was served with this class action complaint on September 26, 2002. Immunex was served with this complaint on September 24, 2002. This action was conditionally transferred by the JPML to the AWP MDL in the Massachusetts District Court. Plaintiff has filed a Motion to Vacate the JPML’s conditional transfer order. A hearing has been scheduled before the JPML for March 27, 2003.

Congress of California Seniors v. Abbott Laboratories, et al. (removed from California Superior Court, Los Angeles County to the U.S. District Court for the Central District of California). Amgen and Immunex were each served with this class action complaint on September 26, 2002. This action was conditionally transferred by the JPML to the AWP MDL in the Massachusetts District Court. Plaintiff did not oppose the conditional transfer and the parties are awaiting the transfer of the case record to the AWP MDL.

Peter Virag v. Allergan, Inc., et al. (removed from California Superior Court, Los Angeles County to the U.S. District Court for the Central District of California). Amgen was served with this class action complaint on October 11, 2002. Immunex is not a named defendant in the case. This action was conditionally transferred by the JPML to the AWP MDL in the Massachusetts District Court. By joint stipulation and order, the case was voluntarily dismissed with prejudice on February 21, 2003.

Robert J. Swanston v. TAP Pharmaceutical Products, Inc., et al. (removed from Arizona Superior Court, Maricopa County to the U.S. District Court for the District of Arizona). Amgen was served with plaintiff’s second amended class action complaint on January 8, 2003. Immunex was served with plaintiff’s second amended complaint on January 7, 2003. On January 10, 2003 defendants filed a Notice of Related Action to the

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AWP MDL and on January 13, 2003 filed a Motion to Stay all proceedings pending a decision by the JPML to transfer the case to the AWP MDL.

County of Suffolk v. Abbott Laboratories, Inc., et al. (U.S. District Court for the Eastern District of New York). Amgen was served with this complaint on January 29, 2003. Immunex is not a named defendant in the case. On January 24, 2003 defendants filed a Notice of Related Action to the AWP MDL.

Johnson & Johnson arbitrations

The Company filed a demand in an arbitration with Johnson & Johnson to terminate Johnson & Johnson’s rights under a license agreement (the “License Agreement”) relating to certain patented technology and know-how of the Company to sell Epoetin alfa throughout the United States for all human uses except dialysis and diagnostics and to recover damages for breach of the License Agreement based on the Company’s claim that Johnson & Johnson has intentionally sold PROCRIT^® (the brand name under which Johnson & Johnson sells Epoetin alfa) into the Company’s exclusive dialysis market. The trial commenced in January 2002.

On October 18, 2002 the arbitrator issued his ruling in the arbitration. He found that Johnson & Johnson had breached the License Agreement. While the arbitrator ruled that Johnson & Johnson’s conduct did not warrant termination of the License Agreement, he found Johnson & Johnson’s conduct was illegal. As a consequence, the arbitrator awarded the Company $150 million in damages.

On January 24, 2003 the arbitrator determined that Amgen was the prevailing party in the arbitration and ordered Johnson & Johnson to pay Amgen’s costs and expenses, including its reasonable attorneys’ fees, incurred by Amgen in the arbitration. On March 7, 2003, the Company filed a petition for recovery of its costs and fees in the amount of approximately $91.2 million. Such petition and the amount requested is subject to the approval of the arbitrator. Additionally, Johnson & Johnson may contest some or all such costs and fees. At December 31, 2002, no amounts have been recorded related to the reimbursement for costs and expenses.

Israel Bio-Engineering Project litigation

On September 3, 2002, Israel Bio-Engineering Project (“IBEP”), filed a patent infringement lawsuit against the Company, the Company’s wholly-owned subsidiary, Immunex Corporation, Wyeth and Wyeth Pharmaceuticals in the U.S. District Court for the Central District of California, relating to a U.S. Patent No. 5,981,701. Although not the title owner of record, IBEP alleges that it owns the patent. IBEP asserts that the manufacture and sale of ENBREL^® (etanercept) infringes claim 1 of this patent. IBEP seeks an accounting of damages and of any royalties or license fees paid to a third-party and seeks to have the damages trebled on account of alleged willful infringement. IBEP also seeks to force the defendants to take a compulsory non-exclusive license.

ZymoGenetics litigation

On March 7, 2002, ZymoGenetics, Inc. (“ZymoGenetics”) filed a patent infringement lawsuit against Immunex Corporation in the U.S. District Court for the Western District of Washington, relating to six U.S. patents having claims directed to certain fusion proteins and processes for making these proteins. The patents-in-suit are the following U.S. patents: 5,843,725; 6,018,026; 6,291,212 BI; 6,291,646 BI; 6,300,099 BI; and 6,323,323 BI. Although not specified in the complaint, in its public statements, ZymoGenetics asserted that the manufacture, importation, and sale of ENBREL^® infringed these patents. ZymoGenetics sought a declaration of infringement and available remedies under the patent laws, including monetary damages and injunctive relief. On December 10, 2002, the parties to this litigation entered into a settlement agreement terminating the litigation whereby Amgen and Wyeth received a non-exclusive, worldwide license to the ZymoGenetics patents claiming immunoglobulin fusion proteins in exchange for a one-time payment to ZymoGenetics.

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Securities Litigation

Shareholder Litigation

On December 14, 2001, David Osher, an alleged shareholder of Immunex, filed a purported class action on behalf of Immunex shareholders against the members of the Immunex board of directors (the “Immunex Board”) and Wyeth in King County Superior Court of Washington (the “Washington Court”). The complaint alleges that Wyeth and the Immunex Board breached fiduciary duties owed to Immunex shareholders by stalling the merger discussions with Amgen as a result of positions taken by Wyeth in the negotiations relating to its control of Immunex and its marketing rights in future Immunex products. The complaint further alleges that Wyeth and the Immunex Board were favoring their own interests and not acting in good faith toward plaintiff and the purported class. On March 25, 2002, plaintiff filed an amended complaint, alleging that Wyeth and the Immunex Board breached their fiduciary duties owed to Immunex shareholders by approving the merger with Amgen with terms that do not allow consideration of competing offers and by failing to disclose to Immunex shareholders certain information concerning the benefits to be received by Wyeth and certain Immunex directors/officers upon the completion of the merger. The amended complaint further alleges that Amgen aided and abetted Wyeth and the Immunex Board in the breach of their fiduciary duties owed to Immunex shareholders by offering Wyeth and certain Immunex directors/officers disproportionate consideration for approval of the merger with Amgen. Plaintiff seeks: certification as a class action and certification of plaintiff as class representative; preliminary and permanent injunction against proceeding with, or closing, the merger or any transaction that improperly favors the interests of Wyeth; rescission of the merger if it is consummated; and an award of the costs including attorneys’ and experts’ fees.

On April 29, 2002, Immunex announced the settlement, which settlement is subject to court approval among other things, of three lawsuits against Immunex and certain of Immunex’s former directors and officers, and in the Osher matter, against Amgen relating to the acquisition of Immunex by Amgen: (i) a suit filed by David Osher, on behalf of a class of Immunex shareholders, against Immunex, all former members of Immunex’s board of directors, Wyeth and Amgen; (ii) a suit filed by Adele Brody, on behalf of a class of Immunex shareholders against Immunex, Wyeth, all former members of Immunex’s board of directors and the marital community of each named individual; and (iii) a suit filed by Edwin Weiner, on behalf of a class of Immunex shareholders, against Immunex, Wyeth, all former members of Immunex’s board of directors and the marital community of each named individual.

In connection with the settlement, (i) Immunex and Amgen agreed to reduce the termination fee payable by Immunex or Amgen under certain circumstances set forth in the Amended and Restated Agreement and Plan of Merger dated December 16, 2001 between Amgen, AMS Acquisition Inc., and Immunex by $20 million, (ii) Immunex obtained an updated opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated regarding the fairness of the merger consideration from a financial point of view to be received by Immunex shareholders, and (iii) Immunex agreed to provide certain additional disclosures regarding the merger in a Current Report on Form 8-K, which was filed with the SEC on April 30, 2002.

Stockholder Derivative Lawsuit

On March 14, 2002, Linda Blatchly, an alleged stockholder of Amgen, filed a purported stockholder derivative lawsuit against all members of the Amgen board of directors (the “Amgen Board”) and nominally against Amgen in the Ventura County Superior Court of California. The complaint alleges, among other things, that, after the filing with the SEC of the Annual Report of Immunex on Form 10-K on March 8, 2002 which contained disclosure regarding the lease for the new Immunex facility in Seattle, the Amgen Board members breached their fiduciary duties to Amgen by refusing to renegotiate or terminate the acquisition of Immunex, failing to disclose the true value of the financial condition of Immunex and seeking to acquire Immunex without conducting adequate due diligence. The complaint seeks: a declaration that the Amgen Board members have breached and are breaching their fiduciary and other duties to Amgen and the Amgen stockholders; preliminary and permanent injunction against proceeding with the merger; an order requiring an independent evaluation as to

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(a) the true worth of Immunex, and (b) if it is determined that the acquisition of Immunex is in the best interests of Amgen, requiring an adjustment of the merger consideration; compensatory damages against defendants in favor of Amgen; and costs including attorneys’ fees.

The plaintiff in the purported stockholder derivative lawsuit filed against all members of the Amgen board of directors has tentatively agreed to a dismissal without prejudice for no consideration.

Governmental Investigations

According to press reports, approximately 20 pharmaceutical companies are under investigation by the U.S. Department of Justice, U.S. Department of Health and Human Services, and/or state agencies related to the pricing of their products. Immunex has received notice from the U.S. Department of Justice requesting it to produce documents in connection with a Civil False Claims Act investigation of the pricing of Immunex’s current and former products for sale and eventual reimbursement by Medicare or state Medicaid programs. Immunex Corporation also received similar requests from the U.S. Department of Health and Human Services and state agencies. Several of Immunex’s current and former products are or were regularly sold at substantial discounts from list price. The Company does not know what action, if any, the federal government or any state agency will take as a result of their investigations.

No matters were submitted to a vote of the Company’s security holders during the last quarter of its fiscal year ended December 31, 2002.

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PART II

Item 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s common stock trades on The NASDAQ Stock Market under the symbol AMGN. As of February 21, 2003, there were approximately 16,000 holders of record of the Company’s common stock. No cash dividends have been paid on the common stock to date, and the Company currently intends to utilize any earnings for development of the Company’s business and for repurchases of its common stock.

The following table sets forth, for the fiscal periods indicated, the range of high and low closing sales prices of the common stock as quoted on The NASDAQ Stock Market for the years 2002 and 2001:

Recent Sale of Unregistered Securities

In March 2002, Amgen issued $3.95 billion in aggregate face amount at maturity of ($1,000 face amount per note) 30-year, zero-coupon senior convertible notes (the “Convertible Notes”) with a yield to maturity of 1.125%. The Convertible Notes were sold in a private placement under Section 4(2) of the Securities Act of 1933, as amended, (the “Securities Act”) in connection with an offering to qualified institutional buyers pursuant to Rule 144A of the Securities Act. Merrill Lynch & Co. was the initial purchaser and received an underwriting discount of $56.3 million in connection with the offering. The resale of the Convertible Notes by note holders was subsequently registered with the SEC in May 2002. The gross proceeds from the offering were approximately $2.82 billion (a $714.23 per note original issue price). The original issue discount of $1.13 billion (or $285.77 per note) is being accreted to interest expense over the life of the Convertible Notes using the effective interest method. Debt issuance costs totaled approximately $56.5 million and are being amortized on a straight-line basis over the life of the notes. Simultaneous with the issuance of the Convertible Notes, the Company repurchased 11.3 million shares at a total cost of $650 million. The remainder of the proceeds are available for use for general corporate purposes, including acquisitions, additional share repurchases, capital expenditures, and working capital. See Note 8 to the Consolidated Financial Statements for further discussion of the terms of Convertible Notes.

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Item 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Acquisition of Immunex Corporation

On July 15, 2002, the Company acquired all of the outstanding common stock of Immunex Corporation (“Immunex”) in a transaction accounted for as a business combination. Immunex was a leading biotechnology company dedicated to developing immune system science to protect human health. The acquisition of Immunex is expected to further advance Amgen’s role as a global biotechnology leader with the benefits of accelerated growth and increased size, product base, product pipeline, and employees. The acquisition is also intended to enhance Amgen’s strategic position within the biotechnology industry by strengthening and diversifying its (1) product base and product pipeline in key therapeutic areas, and (2) discovery research capabilities in proteins and antibodies.

Each share of Immunex common stock outstanding at July 15, 2002 was converted into 0.44 of a share of Amgen common stock and $4.50 in cash. As a result, Amgen issued approximately 244.6 million shares of common stock and paid approximately $2.5 billion in cash to former Immunex shareholders. Amgen also paid Wyeth $25 million at the closing of the merger for the termination of certain Immunex product rights in favor of Wyeth, as specified in the agreement regarding governance and commercial matters. In addition, each employee stock option to purchase Immunex common stock outstanding at July 15, 2002 was assumed by Amgen and converted into an option to purchase Amgen common stock based on the terms specified in the merger agreement. As a result, approximately 22.4 million options to purchase Amgen common stock were assumed, on a converted basis. The acquisition was structured to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

Unless otherwise indicated, the discussions in this report of the results of operations for the year ended December 31, 2002 and financial condition at December 31, 2002 include the results of operations of Immunex commencing from July 16, 2002. Comparisons are made to the results of operations for the years ended December 31, 2001 and 2000 and financial condition at December 31, 2001, which include only the historical results of Amgen.

Liquidity and Capital Resources

Cash, cash equivalents, and marketable securities

The Company had cash, cash equivalents, and marketable securities of $4,663.9 million and $2,662.2 million at December 31, 2002 and 2001, respectively. Of the total cash, cash equivalents, and marketable securities at December 31, 2002, approximately $2.0 billion represents cash generated from operations in foreign tax jurisdictions and is intended for use in such foreign operations (see “Results of Operations—Income taxes”). If these funds are repatriated for use in the Company’s U.S. operations, additional taxes on certain of these amounts would be required to be paid. The Company does not currently anticipate a need to repatriate these funds to the United States.

The primary objectives for the Company’s fixed income investment portfolio are liquidity and safety of principal. Investments are made to achieve the highest rate of return to the Company, consistent with these two objectives. The Company’s investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.

Cash flows

Cash provided by operating activities has been and is expected to continue to be the Company’s primary recurring source of funds. In 2002, operations provided $2,248.8 million of cash compared with $1,480.2 million in 2001. The increase in cash provided by operating activities in 2002 resulted primarily from higher earnings,

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excluding the one-time, non-cash write-off of in-process research and development, and depreciation and amortization.

In July 2002, the Company paid the cash portion of the merger consideration of approximately $2.5 billion upon close of the Immunex acquisition. Also as a result of the acquisition, the Company received:

Capital expenditures totaled $658.5 million in 2002 compared with $441.8 million in 2001. The increase in capital expenditures in 2002 resulted primarily from capital expenditures related to the Puerto Rico manufacturing expansion, the Seattle inflammation research headquarters, and the Rhode Island manufacturing facilities.

The Company receives cash from the exercise of employee stock options and proceeds from the sale of stock by Amgen pursuant to the employee stock purchase plan. Employee stock option exercises and proceeds from the sale of stock by Amgen pursuant to the employee stock purchase plans provided $427.8 million and $277.7 million of cash in 2002 and 2001, respectively. Proceeds from the exercise of employee stock options will vary from period to period based upon, among other factors, fluctuations in the market value of the Company’s stock relative to the exercise price of such options.

The Company has a stock repurchase program primarily to reduce the dilutive effect of its employee stock option and stock purchase plans. In 2002, the Company repurchased 28.0 million shares of its common stock at a total cost of $1,420.4 million. In 2001, the Company repurchased 12.7 million shares of its common stock at a total cost of $737.5 million. Stock repurchased in 2002 includes 11.3 million shares of common stock repurchased simultaneously with the issuance of the 30-year, zero-coupon senior convertible notes (the “Convertible Notes”, discussed below) at a total cost of $650 million. In June 2002, the Board of Directors authorized the Company to repurchase up to an additional $2.0 billion of common stock through June 30, 2004. At the time of the additional authorization, the Company had approximately $257.1 million remaining under the previous authorized stock repurchase program. The amount the Company spends on and the number of shares repurchased varies based on a variety of factors, including the stock price and blackout periods in which the Company is restricted from repurchasing shares. As of December 31, 2002, $1,842.1 million was available for stock repurchases through June 30, 2004.

Debt financing

In March 2002, the Company issued $3.95 billion in aggregate face amount at maturity of Convertible Notes with a yield to maturity of 1.125%. The gross proceeds from the offering were approximately $2.82 billion. The original issue discount of $1.13 billion is being accreted to interest expense over the life of the Convertible Notes using the effective interest method. Debt issuance costs were approximately $56.5 million and are being amortized on a straight-line basis over the life of the notes. The holders of the Convertible Notes may require the Company to purchase all or a portion of their notes on March 1, 2005, March 1, 2007, March 1, 2012, and March 1, 2017 at a price equal to the original issuance price plus the accrued original issue discount to the purchase dates. In such event, the Company may choose to pay the purchase price in cash and/or shares of common stock (see Note 8, “Debt—Convertible notes” to the Consolidated Financial Statements).

To provide for financial flexibility and increased liquidity, the Company has established several other sources of debt financing. As of December 31, 2002, the Company had $200 million of unsecured long-term debt securities outstanding. These unsecured long-term debt securities consisted of: 1) $100 million of debt securities that bear interest at a fixed rate of 6.5% and mature in 2007 under a $500 million debt shelf registration (the “Shelf”), and 2) $100 million of debt securities that bear interest at a fixed rate of 8.1% and mature in 2097. In

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addition, the Company has $23 million of debt securities that bear interest at a fixed rate of 6.2% and mature in 2003, which are classified as current liabilities. The Company’s outstanding long-term debt is rated A2 by Moody’s and A+ by Standard & Poor’s. Under the Shelf, all of the remaining $400 million of debt securities available for issuance may be offered under the Company’s medium-term note program with terms to be determined by market conditions.

The Company’s sources of debt financing also include a commercial paper program which provides for unsecured short-term borrowings up to an aggregate face amount of $200 million. As of December 31, 2002, commercial paper with a face amount of $100 million was outstanding. These borrowings had maturities of less than one month and had effective interest rates averaging 1.4%. In addition, the Company has an unsecured $150 million committed credit facility with five participating banking institutions that expires on May 28, 2003. This credit facility supports the Company’s commercial paper program. As of December 31, 2002, no amounts were outstanding under this line of credit.

Contractual obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities which the Company cannot reasonably predict future payment. The following chart represents the Company’s contractual obligations, aggregated by type (in millions):

The Company believes that existing funds, cash generated from operations, and existing sources of debt financing are adequate to satisfy its working capital and capital expenditure requirements for the foreseeable future, as well as to support its stock repurchase program (see “Financial Outlook—Liquidity and capital resources”). However, the Company may raise additional capital from time to time.

Results of Operations

Product sales

Product sales in 2002 primarily consisted of sales of EPOGEN^® (Epoetin alfa), Aranesp^® (darbepoetin alfa), NEUPOGEN^® (Filgrastim), Neulasta^™ (pegfilgrastim), and ENBREL^® (etanercept). In 2002, product sales were

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$4,991.2 million, an increase of $1,480.2 million or 42% over the prior year. This increase was principally driven by Neulasta^™, Aranesp^®, and ENBREL^® sales. Product sales for 2002, excluding sales from products acquired from Immunex, were $4,589.4 million, an increase of $1,078.4 million or 31% over the prior year. Product sales were $3,511.0 million in 2001, an increase of $308.8 million or 10% over the prior year. Product sales are influenced by a number of factors, including demand, wholesaler inventory management practices, foreign exchange effects, new product launches, and acquisitions.

EPOGEN^®/Aranesp^®

In June 2001, the Company received approval to market Aranesp^® in most countries in Europe, Australia, and New Zealand for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. In September 2001, Amgen received approval in the United States for the same indication. In July 2002, the Company received U.S. Food and Drug Administration (“FDA”) approval to market Aranesp^® for the treatment of chemotherapy-induced anemia in patients with non-myeloid malignancies. In August 2002, the European Commission approved Aranesp^® for the treatment of anemia in adult cancer patients with solid tumors receiving chemotherapy. Aranesp^® was launched in several countries in Europe for this indication.

Combined EPOGEN^® and Aranesp^® sales for 2002 were $2,676.2 million, an increase of $526.2 million or 24% over combined 2001 sales. EPOGEN^® sales for 2002 were $2,260.6 million, an increase of $152.1 million or 7% over 2001 EPOGEN^® sales. The Company believes that EPOGEN^® sales growth for 2002 was principally driven by demand, which includes the effect of higher prices and growth in the dialysis patient population. Worldwide Aranesp^® sales for 2002 were $415.6 million, including U.S. sales of $284.7 million. The Company believes that worldwide Aranesp^® sales for 2002 were driven primarily by demand, and reflect the benefit of receiving the oncology indication in the United States in July 2002.

Combined EPOGEN^® and Aranesp^® sales in 2001 were $2,150.0 million, an increase of $187.1 million or 10% over 2000 EPOGEN^® sales. This increase was primarily due to higher EPOGEN^® demand, which includes the effect of higher prices and growth in the dialysis patient population, and to a lesser extent, the launch of Aranesp^® in the United States and Europe. The reported sales growth was negatively impacted to a slight degree by wholesaler inventory changes. Worldwide Aranesp^® sales in 2001 were $41.5 million.

NEUPOGEN^®/Neulasta^™

The Company launched Neulasta^™ in the United States in April 2002 to decrease the incidence of infection, as manifested by febrile neutropenia in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. In August 2002, the European Commission approved Neulasta^™ for the reduction in the duration of neutropenia and the incidence of febrile neutropenia in patients with cytotoxic chemotherapy for malignancy. In January 2003, the Company commenced launching Neulasta^™ in Europe on a country-by-country basis as reimbursement has been established.

Combined Neulasta^™ and worldwide NEUPOGEN^® sales in 2002 were $1,843.1 million, an increase of $496.7 million or 37%, over NEUPOGEN^® only sales in the prior year. The Company believes that the increase in combined sales for Neulasta^™ and NEUPOGEN^® for 2002 was primarily driven by demand for Neulasta^™, which reflects the conversion of NEUPOGEN^® patients to Neulasta^™ and patient population growth. Combined sales also benefited, to a lesser extent, from wholesaler inventory changes and higher NEUPOGEN^® prices in the United States.

Neulasta^™ sales in 2002 were $463.5 million. Worldwide NEUPOGEN^® sales in 2002 were $1,379.6 million, an increase of $33.2 million or 2% over the prior year NEUPOGEN^® sales. In 2002, U.S. NEUPOGEN^® sales were $1,041.7 million, a decrease of $8.9 million or 1% over 2001 sales. This decrease was

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primarily due to lower U.S. NEUPOGEN^® demand, partially offset by favorable wholesaler inventory changes. The Company believes that U.S. NEUPOGEN^® demand declined at a mid-single digit rate from 2001. The decrease in U.S. demand was primarily impacted by the conversion of NEUPOGEN^® patients to Neulasta^™, partially offset by higher NEUPOGEN^® prices in the United States. The Company believes that, as demand for Neulasta^™ increased subsequent to its U.S. launch, U.S. NEUPOGEN^® demand decreased at an accelerated rate due to the conversion of patients to Neulasta^™. In the fourth quarter of 2002, combined Neulasta^™ and worldwide NEUPOGEN^® sales were $514.0 million, an increase of 53% over worldwide NEUPOGEN^® only sales in the prior year period. The Company believes this increase in combined sales was negatively impacted by a decline in U.S. NEUPOGEN^® demand in the low-20% range, driven by conversion of patients to Neulasta^™ (see “Financial Outlook—Trends expected to impact future operations”).

Worldwide NEUPOGEN^® sales in 2001 were $1,346.4 million, an increase of $122.7 million or 10% over the prior year. This increase was primarily due to worldwide demand growth, which includes the effect of higher prices in the United States.

ENBREL^®

The Company began recording ENBREL^® sales on July 16, 2002, subsequent to the close of the Immunex acquisition. For the period from July 16, 2002 through December 31, 2002, ENBREL^® sales were $362.1 million. In 2002, ENBREL^® sales were impacted by supply constraints.

Corporate partner revenues

Corporate partner revenues were $200.3 million in 2002, a decrease of $51.7 million or 21% over the prior year. Corporate partner revenues include $174.6 million related to amounts earned from Kirin-Amgen, Inc. (“Kirin-Amgen”) in 2002. The overall decrease in corporate partner revenues was primarily due to lower revenues earned from Kirin-Amgen, and to a lesser extent, lower revenues earned under other collaboration agreements.

In 2001, corporate partner revenues were $252.0 million, an increase of $5.8 million or 2% over the prior year. Corporate partner revenues include $210.1 million related to amounts earned from Kirin-Amgen in 2001. The overall increase in corporate partner revenues was due to slightly higher revenues, primarily related to INFERGEN^®, substantially offset by lower amounts earned from Kirin-Amgen.

Royalty income

Substantially all royalty income earned by Amgen relates to amounts received from sales of Epoetin alfa by Johnson & Johnson in the United States for use in non-dialysis settings. Royalty income was $331.5 million in 2002, an increase of $78.8 million or 31% over the prior year. This increase was principally due to higher royalties earned from Johnson & Johnson relating to its sales of Epoetin alfa.

In 2001, royalty income was $252.7 million, an increase of $71.7 million or 40% over the prior year. This increase was primarily due to higher royalties from Johnson & Johnson relating to its sales of Epoetin alfa.

Cost of sales

Cost of sales as a percentage of product sales was 14.7%, 12.6%, and 12.8% for 2002, 2001, and 2000, respectively. The increase in 2002 was principally due to the impact of higher manufacturing costs and royalty expense related to ENBREL^® compared to Amgen’s other products. In addition, during 2002 the Company recorded the inventory acquired from Immunex at its estimated fair market value (see Note 3, “Immunex acquisition” to the Consolidated Financial Statements). The increase in fair market value was recognized as cost of sales as the acquired inventory was sold. Cost of sales for 2002 reflects a charge of $38.7 million related to the

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fair value adjustment to inventory, and $7.5 million of compensation costs payable under the Immunex Corporate Retention Plan.

In 2001, cost of sales as a percentage of product sales decreased from 2000 primarily due to reduced royalty obligations, substantially offset by the impact of the $39.5 million write-off of certain inventory in the fourth quarter of 2001.

Research and development

In 2002, research and development (“R&D”) expenses increased $251.6 million or 29% over the prior year. This increase was primarily due to higher staff-related costs and higher outside R&D costs, and to a lesser extent, higher clinical manufacturing costs as a result of the acquisition. In 2002, staff-related costs and outside R&D costs increased approximately $120 million and $90 million, respectively, excluding the impact of clinical manufacturing activities. In 2002, clinical manufacturing costs increased approximately $38 million. Staff-related costs in 2002 include approximately $18.1 million of compensation costs payable under the Immunex Corporate Retention Plan.

In 2001, research and development expenses increased $20.0 million or 2% over the prior year. This increase was primarily due to higher staff-related costs necessary to support ongoing research and product development activities, partially offset by lower clinical manufacturing and product licensing-related costs.

Selling, general and administrative

In 2002, selling, general and administrative (“SG&A”) expenses increased $491.4 million or 51% over the prior year. This increase was primarily due to higher staff-related costs and outside marketing expenses as the Company increased its support for newly launched products and ENBREL^®, and to a lesser extent, higher outside services. In 2002, staff-related costs increased approximately $225 million, outside marketing expenses increased approximately $217 million, and other outside services increased approximately $34 million.

Staff-related costs increased in 2002 principally to support new product launches, from incremental expenses from the addition of Immunex staff, and approximately $14.8 million of compensation costs principally payable under the Immunex Corporate Retention Plan. Outside marketing expenses in 2002 increased principally due to the launch of new products, marketing costs related to ENBREL^®, and the impact of the profit share with Wyeth under the co-promotion agreement (see Note 13, “Agreements with Wyeth” to the Consolidated Financial Statements).

In 2001, SG&A expenses increased $143.8 million or 17% over the prior year. This increase was primarily due to higher outside marketing expenses, staff-related costs, and consulting expenses as support for new product launches was increased. In 2001, outside marketing expenses and staff-related costs each increased approximately $60 million and consulting expenses increased approximately $20 million.

Acquired in-process research and development

In the third quarter of 2002, the Company incurred a one-time expense of $3.0 billion associated with writing off the acquired in-process research and development (“IPR&D”) related to the Immunex acquisition. The amount expensed as IPR&D represents an estimate of the fair value of purchased in-process technology for projects that, as of the acquisition date, had not reached technological feasibility and had no alternative future use. The estimated fair value of these projects was determined based on the use of a discounted cash flow model. For each project, the estimated after-tax cash flows were probability weighted to take into account the stage of completion and the risks surrounding the successful development and commercialization. These cash flows were then discounted to a present value using discount rates ranging from 12% to 14%. In addition, solely for the

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purposes of estimating the fair values of these IPR&D projects as of July 15, 2002, the following assumptions were made:

The major risks and uncertainties associated with the timely and successful completion of these projects consist of the ability to confirm the safety and efficacy of the technology based on the data from clinical trials and obtaining necessary regulatory approvals. In addition, no assurance can be given that the underlying assumptions used to forecast the cash flows or the timely and successful completion of such projects will materialize, as estimated. For these reasons, among others, actual results may vary significantly from the estimated results.

Amortization of intangible assets

In 2002, amortization expense related to the intangible assets acquired in connection with the Immunex acquisition was $155.2 million. Amortization of intangible assets is provided over their estimated useful lives ranging from 7 to 15 years on a straight-line basis.

Other items, net

In 2002, other items, net consisted of three items: 1) a one-time, non-recurring benefit of $40.1 million related to the recovery of certain expenses accrued in the fourth quarter of 2001 related to terminating collaboration agreements with various third parties, 2) a legal award associated with the product license arbitration with Johnson & Johnson of $151.2 million, and 3) a charitable contribution to the Amgen Foundation of $50 million.

In 2001, other items, net primarily consisted of costs associated with the termination of collaboration agreements with various third parties, including PRAECIS PHARMACEUTICALS INCORPORATED and certain academic institutions totaling $203.1 million.

In 2000, other items, net consisted of two items: 1) a legal award associated with the spillover arbitration with Johnson & Johnson of $73.9 million, and 2) a charitable contribution to the Amgen Foundation of $25 million.

See Note 4 to the Consolidated Financial Statements for a discussion of the 2002, 2001, and 2000 items.

Interest and other income, net

In 2002, interest and other income, net decreased $24.5 million or 15% over the prior year. This decrease was principally due to higher realized losses related to equity securities and higher losses on foreign currency transactions. The decrease was partially offset by higher interest income generated from the Company’s investment portfolio as a result of higher average cash balances. Higher average cash balances during 2002 offset the impact of lower average interest rates.

In 2001, interest and other income, net increased $22.5 million or 15% over the prior year. This increase was due to higher interest income generated from the Company’s investment portfolio as a result of higher average cash balances, partially offset by lower interest rates in 2001 and higher gains on the sale of equity investments that occurred in 2000.

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Income taxes

The Company’s effective tax rate was (103.3%), 33.6%, and 32.0% for 2002, 2001, and 2000, respectively. The Company’s negative effective tax rate for 2002 was primarily due to the pre-tax loss resulting from the write-off of IPR&D costs in connection with the Immunex acquisition which is not deductible for income tax purposes. Excluding the effect of the IPR&D write-off, the 2002 effective tax rate would have been 30.7%. This effective tax rate was lower than the 2001 effective tax rate of 33.6% primarily due to the Puerto Rico restructuring described below.

During 2002, the Company restructured its Puerto Rico manufacturing operations using a controlled foreign corporation. As permitted in APB Opinion No. 23, “Accounting for Income Taxes,” the Company does not provide U.S. income taxes on the controlled foreign corporation’s undistributed earnings that are intended to be permanently reinvested outside the United States. Therefore, the Company’s effective tax rate for 2002 reflected the permanent reinvestment of foreign earnings outside the United States.

In addition, the Puerto Rico manufacturing operations were entitled to a possession tax credit for a portion of 2002. This credit is capped based on the 1995 income level and expires in 2005. The higher effective tax rate in 2001 versus 2000 was a result of increased taxable income combined with the cap on the possession tax credit.

Summary of Critical Accounting Policies

The preparation of the Company’s 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 financial statements and the notes to the financial statements. Some of those judgments can be subjective and complex, and therefore actual results could differ materially from those estimates under different assumptions or conditions.

EPOGEN^® revenue recognition

The Company has the exclusive right to sell Epoetin alfa for dialysis, certain diagnostics, and all non-human, non-research uses in the United States. Amgen has granted to Johnson & Johnson a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. Pursuant to this license, the Company and Johnson & Johnson 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, Amgen does not recognize product sales it makes into the exclusive market of Johnson & Johnson and does recognize the product sales made by Johnson & Johnson into Amgen’s exclusive market. Sales in Amgen’s exclusive market are derived from the Company’s sales to its customers, as adjusted for spillover. The Company is employing an arbitrated audit methodology to measure each party’s spillover based on independent third-party data on shipments to end users and their estimated usage. Data on end user usage is derived in part using market sampling techniques, and accordingly, the results of such sampling can produce variability in the amount of recognized spillover. The Company initially recognizes spillover based on estimates of shipments to end users and their usage, utilizing historical third-party data and subsequently adjusts such amounts based on revised third-party data as received. Differences between initial estimates of spillover and amounts based on revised third-party data could produce materially different amounts for recognized EPOGEN^® sales. However, such differences to date have not been material.

Immunex purchase price allocation

The purchase price for Immunex was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. An independent third-party valuation firm was engaged to assist in determining the fair values of in-process research and development, identifiable intangible assets, and certain property, plant, and equipment. Such a valuation requires significant estimates and assumptions including but not limited to: determining the timing and expected costs to complete

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the in-process projects, projecting regulatory approvals, estimating future cash flows from product sales resulting from completed products and in-process projects, and developing appropriate discount rates and probability rates by project. The Company believes the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. However, these assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. Additionally, estimates for the purchase price allocation may change as subsequent information becomes available.

Deferred income taxes

The Company’s effective tax rate reflects the impact of undistributed foreign earnings for which no U.S. taxes have been provided because such earnings are intended to be permanently reinvested in international operations based on the Company’s projected cash flow, working capital, and long-term investment requirements of its U.S. and foreign operations. If future events, including material changes in estimates of cash, working capital, and long-term investment requirements necessitate that certain assets associated with these earnings be repatriated to the United States, an additional tax provision and related liability would be required which could materially impact the Company’s effective future tax rate.

Financial Outlook

Liquidity and capital resources

The Company currently estimates spending on capital projects and equipment to be approximately $1.3 billion to $1.5 billion in 2003, which reflects higher spending on capital projects including the Puerto Rico manufacturing expansion, the Seattle inflammation research headquarters, and the new Rhode Island manufacturing plant, which will be adjacent to the existing manufacturing facility.

Results of operations

In the future, the Company expects growth of its businesses to be driven by new products, primarily Neulasta^™, ENBREL^®, and Aranesp^® (see “Forward looking statements and factors that may affect Amgen”).

EPOGEN^®

EPOGEN^® is approved in the United States for the treatment of anemia associated with chronic renal failure. The Company believes EPOGEN^® sales growth will come primarily from patient population growth and price increases. Patients receiving treatment for end stage renal disease are covered primarily under medical programs provided by the federal government. The Company believes future EPOGEN^® sales growth may also be affected by future changes in reimbursement rates or a change in the basis for reimbursement by the federal government. EPOGEN^® may compete with Aranesp^® in the United States as health care providers may use Aranesp^® to treat anemia associated with chronic renal failure instead of EPOGEN^®.

Aranesp^®

In 2001, Aranesp^® was approved in the United States, most countries in Europe, Australia, and New Zealand for the treatment of anemia associated with chronic renal failure, including patients on dialysis and patients not on dialysis. In July 2002, Aranesp^® was approved in the United States for the treatment of chemotherapy-induced anemia in patients with non-myeloid malignancies. In August 2002, Aranesp^® was approved in Europe for the treatment of anemia in adult cancer patients with solid tumors receiving chemotherapy. The Company has launched Aranesp^® in several European countries and will expand into other countries as reimbursement is finalized.

The Company believes future Aranesp^® sales growth will be dependent, in part, on such factors as: the effects of competitive pressures, penetration of existing and new market opportunities, and changes in foreign

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currency exchange rates. In addition, future worldwide Aranesp^® sales growth may be affected by cost containment pressures from governments and private insurers on health care providers, as well as the availability of reimbursement by third-party payors, including governments and private insurance plans. For example, effective January 1, 2003, the Centers for Medicare and Medicaid Services (“CMS”) instituted certain changes to its payment system that included a rule setting a significantly reduced reimbursement rate for Aranesp^® for Medicare patients in the hospital outpatient setting. While we believe that this new rule is based on inaccurate information, we cannot predict whether we will be successful in correcting inaccuracies underlying this rule, or if such reimbursement changes for Aranesp^® in this setting may impact reimbursement in other settings, by other payors, or for our other products. The hospital outpatient Medicare setting accounted for approximately 10% of our U.S. revenues of Aranesp^® for the year ended December 31, 2002. U.S. sales of Aranesp^® for the year ended December 31, 2002 were $284.7 million.

NEUPOGEN^®/Neulasta^™

In January 2002, Neulasta^™ was approved in the United States to decrease the incidence of infection, as manifested by febrile neutropenia in patients with non-myeloid malignancies receiving myelosuppressive anti-cancer drugs associated with a clinically significant incidence of febrile neutropenia. The Company launched Neulasta^™ in the United States in April 2002. In August 2002, Neulasta^™ was approved in Europe for the reduction in the duration of neutropenia and the incidence of febrile neutropenia in patients with cytotoxic chemotherapy for malignancy. In January 2003, the Company commenced launching Neulasta^™ in Europe on a country-by-country basis as reimbursement has been established.

NEUPOGEN^® is approved in the United States to: decrease the incidence of infection, as manifested by febrile neutropenia, in chemotherapy patients with non-myeloid malignancies (the same use for which Neulasta^™ is approved); to reduce the duration of neutropenia for patients undergoing myeloablative therapy followed by bone marrow transplantation; to reduce the incidence and duration of neutropenia-related consequences in patients with severe chronic neutropenia; for use in mobilization of peripheral blood progenitor cells for stem cell transplantation; and to reduce the recovery time of neutrophils and the duration of fever following chemotherapy treatment in patients being treated for acute myelogenous leukemia. NEUPOGEN^® is approved in Europe, Canada, and Australia for these same indications as well as for the treatment of neutropenia in HIV patients receiving antiviral and/or other myelosuppressive medications.

The Company believes future NEUPOGEN^® and Neulasta^™ sales growth will depend on penetration of existing markets, the conversion of NEUPOGEN^® patients to Neulasta^™, patient population growth, price increases, the effects of competitive products or therapies, the development of new treatments for cancer, and changes in foreign currency exchange rates. In addition, future worldwide sales growth may be affected by cost containment pressures from governments and private insurers on health care providers, as well as the availability of reimbursement by third-party payors, including governments and private insurance plans. Further, chemotherapy treatments that are less myelosuppressive may require less NEUPOGEN^®/Neulasta^™. NEUPOGEN^® competes with Neulasta^™ in the United States and Europe. The Company believes that U.S. NEUPOGEN^® sales have and will continue to be adversely impacted by the launch of Neulasta^™, however the Company cannot accurately predict the extent to which healthcare providers will use Neulasta^™ instead of NEUPOGEN^® or the timing of this conversion.

ENBREL^®

As a result of the Immunex acquisition in July 2002, the Company acquired the rights to ENBREL^® in the United States and Canada. ENBREL^® is approved in the United States for: the reduction of the signs and symptoms in patients with moderately to severely active rheumatoid arthritis (“RA”); treating moderately to severely active polyarticular-course juvenile RA in patients who have had an inadequate response to one or more disease modifying antirheumatic drugs; inhibiting the progression of structural damage in patients with moderately to severely active RA; and for reducing the signs and symptoms of active arthritis in patients with

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psoriatic arthritis. The Company believes that future sales of ENBREL^® will depend on: limits on the current supply of and sources of ENBREL^®, penetration of existing and new market opportunities, the availability and extent of reimbursement by third-party payors, the effects of competing products or therapies, and any potential adverse developments discovered with respect to ENBREL^®’s safety.

ENBREL^® is currently marketed in the United States and Canada under a co-promotion agreement with Wyeth and, accordingly, Wyeth receives a share of the profits from sales of ENBREL^®. In late December 2002, the FDA approved the manufacturing facility and the related third-party fill and finish facilities. Because of these plant approvals, additional supply of ENBREL^® is available to patients.

Trends expected to impact future operations

Future operating results of the Company may be impacted by a number of factors. The following trends in our business are expected to impact our future liquidity and results of operations:

Forward looking statements and factors that may affect Amgen

This report and other documents we file with the Securities and Exchange Commission (“SEC”) contain forward looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business or others on our behalf, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward looking statements in press releases or written statements, or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, and conference calls. Words such as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume,” “continue”, variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. We have based our forward looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied, or forecast by our forward looking statements. Reference is made in particular to forward looking statements regarding product sales, expenses, earnings per share, liquidity and capital resources, and trends. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions, or otherwise.

The following items are representative of the risks, uncertainties and assumptions that could affect the outcome of the forward looking statements.

Our sales depend on payment and reimbursement from third-party payors, and a reduction in the payment rate or reimbursement could result in decreased use or sales of our products.

In both domestic and foreign markets, sales of our products are dependent, in part, on the availability of reimbursement from third-party payors such as state and federal governments, under programs such as Medicare

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and Medicaid in the United States, and private insurance plans. Medicare does not cover prescriptions for ENBREL^®. In certain foreign markets, the pricing and profitability of our products generally are subject to government controls. In the United States, there have been, and we expect there will continue to be, a number of state and federal proposals that could limit the amount that state or federal governments will pay to reimburse the cost of drugs. In addition, we believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of our products, which may adversely impact product sales. Further, when a new therapeutic product is approved, the availability of governmental and/or private reimbursement for that product is uncertain, as is the amount for which that product will be reimbursed. We cannot predict the availability or amount of reimbursement for our recently approved products or product candidates, including those at a late stage of development, and current reimbursement policies for marketed products may change at any time; we believe that sales of Aranesp^® and Neulasta^™ are and will be affected by government and private payor reimbursement policies. Effective January 1, 2003, CMS instituted certain changes to its payment system that included a rule setting a significantly reduced reimbursement rate for Aranesp^® for Medicare patients in the hospital outpatient setting. While we believe that this new rule is based on inaccurate information, we cannot predict whether we will be successful in correcting inaccuracies underlying this rule, or if such reimbursement changes for Aranesp^® in this setting may impact reimbursement in other settings, by other payors or for our other products.

If reimbursement for our marketed products changes adversely or if we fail to obtain adequate reimbursement for our other current or future products, health care providers may limit how much or under what circumstances they will administer them, which could reduce the use of our products or cause us to reduce the price of our products. This could result in lower product sales or revenues which could have a material adverse effect on us and our results of operations. For example, in the United States the use of EPOGEN^® in connection with treatment for end stage renal disease is funded primarily by the U.S. federal government. In early 1997, CMS instituted a reimbursement change for EPOGEN^® which materially and adversely affected our EPOGEN^® sales until the policies were revised.

Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.

We conduct research, preclinical testing, and clinical trials and we manufacture and contract manufacture our product candidates. We also manufacture and contract manufacture, price, sell, distribute, and market or co-market our products for their approved indications. These activities are subject to extensive regulation by numerous state and federal governmental authorities in the United States, such as the FDA and CMS, as well as in foreign countries, including Europe. Currently, we are required in the United States and in foreign countries to obtain approval from those countries’ regulatory authorities before we can market and sell our products in those countries. In our experience, obtaining regulatory approval is costly and takes many years, and after it is obtained, it remains costly to maintain. The FDA and other U.S. and foreign regulatory agencies have substantial discretion to terminate clinical trials, require additional testing, delay or withhold registration and marketing approval, require changes in labeling of our products and mandate product withdrawals. All of our marketed products are currently approved in the United States and most are approved in Europe and in other foreign countries for specific uses. We currently manufacture and market all our approved products, and we plan to manufacture and market many of our potential products. Even though we have obtained regulatory approval for our marketed products, these products and our manufacturing processes are subject to continued review by the FDA and other regulatory authorities. In addition, ENBREL^® is manufactured both by us at our Rhode Island manufacturing facility and by a third-party contract manufacturer, BI Pharma, and fill and finish of bulk product produced at our Rhode Island manufacturing facility is done by third-party service providers. BI Pharma and these third-party service providers are subject to FDA regulatory authority. See “—Our sources of supply for ENBREL^® are limited.” In addition, later discovery of unknown problems with our products or manufacturing processes or those of our contract manufacturers or third-party service providers could result in restrictions on such products or manufacturing processes, including potential withdrawal of the products from the market. If regulatory authorities determine that we or our contract manufacturers or third-party service providers have

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violated regulations or if they restrict, suspend, or revoke our prior approvals, they could prohibit us from manufacturing or selling our marketed products until we or our contract manufacturers or third-party service providers comply or indefinitely. In addition, if regulatory authorities determine that we have not complied with regulations in the research and development of a product candidate, then they may not approve the product candidate and we will not be able to market and sell it. If we are unable to market and sell our products or product candidates, our business and results of operations would be materially and adversely affected.

If our intellectual property positions are challenged, invalidated or circumvented, or if we fail to prevail in present and future intellectual property litigation, our business could be adversely affected.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and often involve complex legal, scientific, and factual questions. To date, there has emerged no consistent policy regarding breadth of claims allowed in such companies’ patents. Third parties may challenge, invalidate, or circumvent our patents and patent applications relating to our products, product candidates, and technologies. In addition, our patent positions might not protect us against competitors with similar products or technologies because competing products or technologies may not infringe our patents. For certain of our product candidates, there are third parties who have patents or pending patents that they may claim prevent us from commercializing these product candidates in certain territories. Patent disputes are frequent, costly and can preclude commercialization of products. We are currently, and in the future may be, involved in patent litigation. For example, we are involved in ongoing patent infringement lawsuits against Transkaryotic Therapies, Inc. (“TKT”) and Aventis with respect to our erythropoietin patents. If we ultimately lose these or other litigations we could be subject to competition and/or significant liabilities, we could be required to enter into third-party licenses for the infringed product or technology, or we could be required to cease using the technology or product in dispute. In addition, we cannot guarantee that such licenses will be available on terms acceptable to us.

Our success depends in part on our ability to obtain and defend patent rights and other intellectual property rights that are important to the commercialization of our products and product candidates. We have filed applications for a number of patents and have been granted patents or obtained rights relating to erythropoietin, recombinant G-CSF, darbepoetin alfa, pegfilgrastim, etanercept, and our other products and potential products. We market our erythropoietin, recombinant G-CSF, darbepoetin alfa, pegfilgrastim, and etanercept products as EPOGEN^®, NEUPOGEN^®, Aranesp^®, Neulasta^™, and ENBREL^®, respectively. In the United States, we have been issued or obtained rights to several patents relating to erythropoietin that generally cover DNA and host cells, processes for making erythropoietin, various product claims to erythropoietin, cells that make levels of erythropoietin, and pharmaceutical compositions of erythropoietin. We have also been issued or obtained rights to U.S. patents relating to G-CSF that cover aspects of DNA, vectors, cells, processes, polypeptides, methods of treatment using G-CSF polypeptides, methods of enhancing bone marrow transplantation and treating burn wounds, methods for recombinant production of G-CSF, and analogs of G-CSF. We have been issued or obtained rights to U.S. and European patents pertaining to pegfilgrastim (pegylated G-CSF). We also have been granted or obtained rights to a patent in Europe relating to erythropoietin, a patent in Europe relating to G-CSF, two patents in Europe relating to darbepoetin alfa and hyperglycosylated erythropoietic proteins, and a patent in the United States and a patent in Europe relating to anakinra. We have been granted or have obtained rights to patents relating to etanercept in the United States that generally cover DNA (issued in 1995 and 2000); products (issued in 1999 and 2001); and processes for using (issued 1997). These patents have varying expiration dates, with the latest United States etanercept related patent expiring in 2014. We have been granted or have obtained rights to patents relating to etanercept in Europe. The latest European patent relating to etanercept expires in 2011.

Limits on supply for ENBREL^® may constrain ENBREL^® sales.

U.S. and Canadian supply of ENBREL^® is impacted by many manufacturing and production variables, such as the timing and actual number of production runs, production success rate, bulk drug yield, and the timing and outcome of product quality testing. For example, in the second quarter of 2002, Immunex Corporation, (the prior

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owner of ENBREL^®), experienced a brief period where no ENBREL^® was available to fill patient prescriptions, primarily due to variation in the expected production yield from BI Pharma. Once supply of ENBREL^® became available, Immunex resumed filling orders on a first come, first served basis. If we are at any time unable to provide an uninterrupted supply of ENBREL^® to patients, we may lose patients, physicians may elect to prescribe competing therapeutics instead of ENBREL^®, our ENBREL^® sales will be adversely affected, any of which could materially and adversely affect our results of operations. See “—We are dependent on third parties for a significant portion of our supply and the fill and finish of ENBREL^®.” and “—Our sources of supply for ENBREL^® are limited.”

We are dependent on third parties for a significant portion of our supply and the fill and finish of ENBREL^®.

We currently manufacture ENBREL^® at our Rhode Island manufacturing facility. However, we also depend on third parties for a significant portion of our ENBREL^® supply as well as for the fill and finish of ENBREL^® that we manufacture. BI Pharma is currently our sole third-party supplier of ENBREL^®; accordingly, our U.S. and Canadian supply of ENBREL^® is currently significantly dependent on BI Pharma’s production schedule for ENBREL^®. We would be unable to produce ENBREL^® in sufficient quantities to substantially offset shortages in BI Pharma’s scheduled production if BI Pharma or other third-party manufacturers used for ENBREL^® production were to cease or interrupt production or services or otherwise fail to supply materials, products, or services to us for any reason, including due to labor shortages or disputes, due to regulatory requirements or action, or due to contamination of product lots or product recalls. This in turn could materially reduce our ability to satisfy demand for ENBREL^®, which could materially and adversely affect our operating results. Factors that will affect our actual supply of ENBREL^® at any time include, without limitation, the following:

In addition, we are dependent on third parties for fill and finish of ENBREL^® bulk drug manufactured at our Rhode Island facility. If third-party fill and finish service providers are unable to provide sufficient capacity or otherwise unable to provide services to us, then supply of ENBREL^® could be adversely affected. See “—Limits on supply for ENBREL^® may constrain ENBREL^® sales,” and “—Our sources of supply for ENBREL^® are limited.”

Our sources of supply for ENBREL^® are limited.

ENBREL^® supply for the United States and Canada is produced by us at our Rhode Island facility and by BI Pharma, currently our sole source third-party supplier. See “—We are dependent on third parties for a significant portion of our supply and the fill and finish of ENBREL^®.” In addition, our current plan includes construction of a new large-scale cell culture commercial manufacturing facility at the site of the current Rhode Island manufacturing facility. We have entered into a manufacturing agreement with Genentech, Inc. (“Genentech”) to produce ENBREL^® at Genentech’s manufacturing facility in South San Francisco, California. The manufacturing facility is subject to FDA approval, which the parties hope to obtain in 2004. Under the terms of the agreement, Genentech will produce ENBREL^® through 2005, with an extension through 2006 by mutual agreement. In addition, Wyeth is constructing a new manufacturing facility in Ireland, which is expected to increase the U.S.

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and Canadian supply of ENBREL^®. If additional manufacturing capacity at the Rhode Island site, or pursuant to the Genentech agreement, or if the Ireland manufacturing facility is not completed, or if these manufacturing facilities do not receive FDA approval before we encounter supply constraints, our ENBREL^® sales would be restricted which could have a material adverse effect on our results of operations.

We face substantial competition, and others may discover, develop, acquire or commercialize products before or more successfully than we do.

We operate in a highly competitive environment. Our products compete with other products or treatments for diseases for which our products may be indicated. For example, ENBREL^® competes in certain circumstances with rheumatoid arthritis products marketed by Abbott Laboratories/Knoll, Centocor Inc./Johnson & Johnson, Aventis, Pharmacia, and Merck as well as the generic drug methotrexate and may face competition from potential therapies being developed by Biogen, among others. Further, we believe that some of our newly approved products and late stage product candidates may face competition when and as they are approved and marketed. For example, in the United States, Aranesp^® competes with an Epoetin alfa product marketed by Johnson & Johnson in certain anemia markets and Kineret^® competes in certain circumstances with rheumatoid arthritis products marketed by Abbott Laboratories/Knoll, Centocor Inc./Johnson & Johnson and others. Additionally, some of our competitors, including biotechnology and pharmaceutical companies, market products or are actively engaged in research and development in areas where we are developing product candidates. Large pharmaceutical corporations may have greater clinical, research, regulatory, manufacturing, and marketing resources than we do. In addition, some of our competitors may have technical or competitive advantages over us for the development of technologies and processes. These resources may make it difficult for us to compete with them to successfully discover, develop, and market new products.

Certain of our raw materials, medical devices and components are single-sourced from third parties; third-party supply failures could adversely affect our ability to supply our products.

Certain raw materials necessary for commercial manufacturing and formulation of our products are provided by single-source unaffiliated third-party suppliers. Also, certain medical devices and components necessary for fill, finish, and packaging of our products are provided by single-source unaffiliated third-party suppliers. Certain of these raw materials, medical devices, and components are the proprietary products of these unaffiliated third-party suppliers and, in some cases, such proprietary products are specifically cited in our drug application with the FDA so that they must be obtained from that specific sole source and could not be obtained from another supplier unless and until the FDA approved that other supplier. We would be unable to obtain these raw materials, medical devices, or components for an indeterminate period of time if these third-party single suppliers were to cease or interrupt production or otherwise fail to supply these materials or products to us for any reason, including due to regulatory requirements or action, due to adverse financial developments at or affecting the supplier, or due to labor shortages or disputes. This, in turn, could materially and adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

Also, certain of the raw materials required in the commercial manufacturing and the formulation of our products are derived from biological sources, including bovine serum and human serum albumin, or HSA. We are investigating screening procedures with respect to certain biological sources and alternatives to them. Such raw materials may be subject to contamination and/or recall. A material shortage, contamination, and/or recall could adversely impact or disrupt our commercial manufacturing of our products or could result in a mandated withdrawal of our products from the market. This too, in turn, could adversely affect our ability to satisfy demand for our products, which could materially and adversely affect our operating results.

Our product development efforts may not result in commercial products.

We intend to continue an aggressive research and development program. Successful product development in the biotechnology industry is highly uncertain, and very few research and development projects produce a

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commercial product. Product candidates that appear promising in the early phases of development, such as in early human clinical trials, may fail to reach the market for a number of reasons, such as:

Several of our product candidates have failed at various stages in the product development process, including Brain Derived Neurotrophic Factor (“BDNF”) and Megakaryocyte Growth and Development Factor (“MGDF”). For example, in 1997, we announced the failure of BDNF for the treatment of amyotrophic lateral sclerosis, or Lou Gehrig’s Disease, because the product candidate, when administered by injection, did not produce acceptable clinical results for a specific use after a phase 3 trial, even though BDNF had progressed successfully through preclinical and earlier clinical trials. In addition, in 1998, we discontinued development of MGDF, a novel platelet growth factor, at the phase 3 trial stage after several people in platelet donation trials developed low platelet counts and neutralizing antibodies. Of course, there may be other factors that prevent us from marketing a product. We cannot guarantee we will be able to produce commercially successful products. Further, clinical trial results are frequently susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians, and others which may delay, limit, or prevent further clinical development or regulatory approvals of a product candidate. Also, the length of time that it takes for us to complete clinical trials and obtain regulatory approval for product marketing has in the past varied by product and by the intended use of a product. We expect that this will likely be the case with future product candidates and we cannot predict the length of time to complete necessary clinical trials and obtain regulatory approval. See “—Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.”

We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market.

If we or others identify side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products, and changes to or re-approvals of our manufacturing facilities may be required, any of which could have a material adverse effect on sales of the affected products and on our business and results of operations.

For example, because ENBREL^® has only been marketed since 1998, its long-term effects on the development or course of serious infection, malignancy, and autoimmune disease are largely unknown and more rarely occurring side effects may not be known. In May 1999, Immunex announced an update to the package insert for ENBREL^® to advise doctors not to start using ENBREL^® in patients who have an active infection, and for doctors to exercise caution when considering using ENBREL^® in patients with a history of recurring infections or with underlying conditions that may predispose patients to infections. In October 2000, Immunex again revised the package insert for ENBREL^® in response to spontaneous adverse events reported to Immunex, including rare cases of hematologic and central nervous system disorders. The causal relationship between these adverse events and therapy with ENBREL^® remains unclear. In January 2001, Immunex revised the package insert for ENBREL^® to advise doctors that rare cases of central nervous system disorders, including seizures, and

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rare cases of tuberculosis have also been reported in patients using ENBREL^®. It is possible that additional spontaneous adverse events will be reported to us as experience with ENBREL^® continues. If we or others identify new adverse events for patients treated with ENBREL^®, additional precautions, warnings, or other changes in the label for ENBREL^® may be required.

We may be required to defend lawsuits or pay damages for product liability claims.

Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and divert management’s attention, and adversely affect our reputation and the demand for our products.

Our operating results may fluctuate, and this fluctuation could cause financial results to be below expectations.

Our operating results may fluctuate from period to period for a number of reasons. In budgeting our operating expenses, we assume that revenues will continue to grow; however, some of our operating expenses are fixed in the short term. Because of this, even a relatively small revenue shortfall may cause a period’s results to be below our expectations or projections. A revenue shortfall could arise from any number of factors, some of which we cannot control. For example, we may face:

Of these, we would only have control over changes in our product pricing strategies and, of course, there may be other factors that affect our revenues in any given period.

We plan to grow rapidly, and if we fail to adequately manage that growth our business could be adversely impacted.

We have an aggressive growth plan that includes substantial and increasing investments in research and development, sales and marketing and facilities. Our plan has a number of risks, some of which we cannot control. For example:

Of course, there may be other risks and we cannot guarantee that we will be able to successfully manage these or other risks.

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Our stock price is volatile, which could adversely affect your investment.

Our stock price, like that of other biotechnology companies, is highly volatile. For example, in the fifty-two weeks prior to December 31, 2002, the trading price of our common stock has ranged from a high of $62.94 per share to a low of $30.57 per share. Our stock price may be affected by such factors as:

In addition, if our revenues or earnings in any period fail to meet the investment community’s expectations, there could be an immediate adverse impact on our stock price.

Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable federal and state regulations.

The development, manufacturing, pricing, sales, and reimbursement of our products, together with our general operations, is subject to extensive federal and state regulation. See “—Our current products and products in development cannot be sold if we do not obtain and maintain regulatory approval.” and “—We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market.” While we have developed and instituted a corporate compliance program based on current best practices, we cannot assure you that we or our employees are or will be in compliance with all potentially applicable federal and state regulations. If we fail to comply with any of these regulations a range of actions could result, including, but not limited to, the termination of clinical trials, the failure to approve a product candidate, restrictions on our products or manufacturing processes, including withdrawal of our products from the market, significant fines, or other sanctions or litigation.

Our marketing of ENBREL^® will be dependent in part upon Wyeth.

Under the amended and restated co-promotion agreement, we and Wyeth market and sell ENBREL^® in the United States and Canada. An ENBREL^® management committee comprised of an equal number of representatives from us and Wyeth is responsible for overseeing the marketing and sales of ENBREL^®, including strategic planning, approval of an annual marketing plan, product pricing, and establishing an ENBREL^® brand team. The ENBREL^® brand team, with equal representation from us and Wyeth, will prepare and implement the annual marketing plan and will be responsible for all sales activities. If Wyeth fails to market ENBREL^® effectively or if we and Wyeth fail to coordinate our efforts effectively, our sales of ENBREL^® may be adversely affected.

Guidelines and recommendations published by various organizations can reduce the use of our products.

Government agencies promulgate regulations and guidelines directly applicable to us and to our products. However, professional societies, practice management groups, private health/science foundations, and organizations involved in various diseases from time to time may also publish guidelines or recommendations to

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the health care and patient communities. Recommendations of government agencies or these other groups/organizations may relate to such matters as usage, dosage, route of administration, and use of concomitant therapies. Organizations like these have in the past made recommendations about our products. Recommendations or guidelines that are followed by patients and health care providers could result in decreased use of our products. In addition, the perception by the investment community or stockholders that recommendations or guidelines will result in decreased use of our products could adversely affect prevailing market prices for our common stock.

We may not realize all of the anticipated benefits of our merger with Immunex.

On July 15, 2002, we merged with Immunex Corporation. The success of our merger with Immunex will depend, in part, on our ability to realize the anticipated synergies, cost savings, and growth opportunities from integrating the businesses of Immunex with the businesses of Amgen. Our success in realizing these benefits and the timing of this realization depend upon the successful integration of the operations of Immunex. The integration of two independent companies is a complex, costly, and time-consuming process. The difficulties of combining the operations of the companies include, among others:

In addition, even if we are able to integrate Immunex’s operations successfully, this integration may not result in the realization of the full benefits of the synergies, cost savings, or sales and growth opportunities that we expect or that these benefits will be achieved within the anticipated time frame. For example, the elimination of significant duplicative costs may not be possible or may take longer than anticipated and the benefits from the merger may be offset by costs incurred in integrating the companies. We cannot assure you that the integration of Immunex with us will result in the realization of the full benefits anticipated by us to result from the merger. Our failure to achieve these benefits could have a material adverse effect on our results of operations.

Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest income earned on the Company’s investment portfolio is generally affected by changes in the general level of U.S. interest rates. In 2001, the Company entered into interest rate swap agreements on a portion of its available-for-sale investment portfolio, effectively converting these fixed income investments to variable income investments. The Company’s short-term borrowings bear interest at variable rates and therefore, changes in U.S. interest rates affect interest expense incurred thereon. Changes in interest rates do not affect interest expense incurred on the Company’s medium and long-term notes and Convertible Notes because they bear interest at fixed rates. The following tables provide information about the Company’s financial instruments that are sensitive to changes in interest rates. For the Company’s investment portfolio and debt obligations, the tables present principal cash flows and related weighted-average interest rates by expected maturity dates. Additionally, the Company has assumed its available-for-sale debt securities, comprised primarily of corporate debt instruments and treasury securities, are similar enough to aggregate those securities for presentation purposes. For the interest rate swaps, the tables present the notional amount and weighted-average interest rates by contractual maturity date. The notional amount is used to calculate the contractual cash flows to be exchanged under the contract.

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Interest Rate Sensitivity

Principal Amount by Expected Maturity as of December 31, 2002

(Dollars in millions)

Average Interest Rate

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Interest Rate Sensitivity

Principal Amount by Expected Maturity as of December 31, 2001

(Dollars in millions)

Average Interest Rate