DEF 14A
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

  Filed by the registrant                      Filed by a party other than the registrant

 

 

Check the appropriate box:

 

 

               

 

 

 

Preliminary Proxy Statement

 

 

    

 

 

 

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))

 

 

    

 

 

 

Definitive Proxy Statement

 

 

    

 

 

 

Definitive Additional Materials

 

 

    

 

 

 

Soliciting Material Pursuant to Section 240.14a-12

 

AMGEN INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

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Table of Contents

LOGO

 

2018 Proxy Statement and Notice of Annual Meeting of Stockholders


Table of Contents
 

Robert A. Bradway

Chairman of the Board,

Chief Executive Officer and President                                            

 

LOGO

 
 

Amgen Inc.

One Amgen Center Drive

Thousand Oaks, CA 91320-1799

April 11, 2018

Dear Fellow Stockholder:

You are invited to attend the 2018 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc. to be held on Tuesday, May 22, 2018, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.

Our Company: At Amgen, our mission is to serve patients; this mission guides our unwavering commitment to deliver breakthrough treatments for unmet medical needs. In 2017, we secured 80 country/product launches of new medicines in new indications around the world. We advanced the largest early pipeline in Amgen’s history and set the stage for continued innovation in the years to come. Our products span six therapeutic areas – cardiovascular, oncology/hematology, neuroscience, inflammation, nephrology, and bone health – and we make a significant difference in the fight against serious illness. We continue to seek new treatments for serious diseases and lowering the cost burden that these diseases place on society.

Business Strategy: Our strategy is clear – in six focused therapeutic areas we seek to develop innovative medicines that address important unmet medical needs in the fight against serious illness. Our strategy includes an integrated set of activities we are pursuing to strengthen our competitive position in our industry. In addition to our significant commitment to innovative research and development, we are developing branded biosimilars, expanding our global geographic reach, deploying next-generation biomanufacturing facilities, improving drug delivery systems, adhering to a disciplined approach to capital allocation while investing for long-term growth, and transforming Amgen for the future. In the Compensation Discussion and Analysis section of this proxy, we further discuss our progress for 2017 against these objectives. In 2017, we had consistent, strong execution of our strategy and remained focused on generating long-term stockholder value and built on a strong record of delivering superior returns to our stockholders. A clear measure of our success is the number of patients reached and helped by our medicines throughout the world.

Stockholder Engagement: We are also guided by the perspectives of our stockholders as expressed through direct engagement with us throughout the year and at our Annual Meeting. Since our 2017 annual meeting of stockholders, in addition to our outreach by our executives and Investor Relations department to investors, we have engaged in governance-focused outreach activities and discussions with the governance teams for stockholders comprising approximately 52% of our outstanding shares. Topics discussed included our business and financial performance, our governance and executive compensation programs, including the direct link to our business strategy, and our corporate responsibility and sustainability initiatives. Feedback received during these meetings is shared with the full Board of Directors and informed Board decisions. The conversations held with our stockholders are beneficial, and we look forward to continuing our dialogue in the coming year.

I look forward to sharing more about our Company at the Annual Meeting. In addition to the business to be transacted and described in the accompanying Notice of Annual Meeting of Stockholders, I will discuss recent developments during the past year, the substantial progress we made on our strategic priorities for 2017, and respond to comments and questions.

On behalf of the Board of Directors, I thank you for your participation and investment in Amgen. We look forward to seeing you on May 22. As a final note and also on behalf of the Board of Directors, I would like to thank David Baltimore and François de Carbonnel who are not standing for re-election, for their years of wise counsel and guidance for Amgen.

Sincerely,

 

 

LOGO

Robert A. Bradway

Chairman of the Board,

Chief Executive Officer and President


Table of Contents

Amgen Inc.

One Amgen Center Drive

Thousand Oaks, California 91320-1799

Notice of Annual Meeting of Stockholders

To be Held on May 22, 2018

 

To the Stockholders of Amgen Inc.:

 

Date and Time:

 

Tuesday, May 22, 2018 at 11:00 A.M., local time

Location:

 

Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362

Record Date:

 

March 23, 2018. Amgen stockholders of record at the close of business on the record date are entitled to receive notice of, and vote at, the 2018 Annual Meeting of Stockholders, or Annual Meeting, and any continuation, postponement or adjournment thereof.

Mail Date:

 

We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April 11, 2018 to our stockholders of record on the record date.

Items of Business:
 

1.

 

To elect 13 directors to the Board of Directors of Amgen for a term of office expiring at the 2019 annual meeting of stockholders. The nominees for election to the Board of Directors are Dr. Wanda M. Austin, Mr. Robert A. Bradway, Dr. Brian J. Druker, Mr. Robert A. Eckert, Mr. Greg C. Garland, Mr. Fred Hassan, Dr. Rebecca M. Henderson, Mr. Frank C. Herringer, Mr. Charles M. Holley, Jr., Dr. Tyler Jacks, Ms. Ellen J. Kullman, Dr. Ronald D. Sugar and Dr. R. Sanders Williams;

 

2.

 

To hold an advisory vote to approve our executive compensation;

 

3.

 

To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2018;

 

4.

 

To consider one stockholder proposal for an annual report on the extent to which risks related to public concern over drug pricing strategies are integrated into our executive incentive compensation, if properly presented at the meeting; and

 

5.

 

To transact such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof.

 

Attendance: If you plan to attend the Annual Meeting, you will need an admittance ticket and proof of ownership of our Common Stock as of the close of business on March 23, 2018. Please read “INFORMATION CONCERNING VOTING AND SOLICITATION—Attendance at the Annual Meeting” in the accompanying proxy statement.

Voting: Your vote is important, regardless of the number of shares that you own. Whether or not you plan to attend the Annual Meeting in person, it is important that your shares be represented and voted. Please read the Notice of Annual Meeting of Stockholders and proxy statement with care and follow the voting instructions to ensure that your shares are represented. By submitting your proxy promptly, you will save the Company the expense of further proxy solicitation. We encourage you to submit your proxy as soon as possible by Internet, by telephone or by signing, dating and returning all proxy cards or instruction forms provided to you.

By Order of the Board of Directors

 

 

LOGO

Jonathan P. Graham

Secretary                   

Thousand Oaks, California

April 11, 2018


Table of Contents
       

 

 

 

 

Table of Contents

 

 

 

 

 

Table of Contents

 

Proxy Statement Summary      1  
Item 1—Election of Directors      7  
Corporate Governance      16  

Board of Directors Corporate Governance Highlights

     16  

Leadership Structure

     17  

The Board’s Role in Risk Oversight

     18  

Board Meetings

     19  

Communication With the Board

     19  

Board Committees and Charters

     20  

Governance and Nominating Committee

     20  

Director Qualifications and Review of Board Diversity

     20  

Regular Board and Committee Evaluations

     21  

Director Independence

     21  

Governance Committee Processes and Procedures for Considering and Determining Director Compensation

     22  

Audit Committee

     22  

Corporate Responsibility and Compliance Committee

     23  

About Our Compliance Program

     23  

Codes of Ethics and Business Conduct

     23  

Our Environmental Sustainability and Social Responsibility Efforts

     24  

Compensation and Management Development Committee

     24  

Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2017

     25  

Pay Ratio

     25  

Compensation Risk Management

     26  

Compensation Committee Report

     26  
Item 2—Advisory Vote to Approve Our Executive Compensation      27  
Executive Compensation      32  
Compensation Discussion and Analysis      32  

Our Named Executive Officers

     32  

Our Strategy

     33  

Aligning Pay With Performance and Execution of Our Strategic Priorities

     34  

Positive 2017 Say on Pay Vote Outcome and Engagement With Our Stockholders

     38  

LTI Equity Award Design Changes in 2017

     39  

Our 2017 Compensation Program Highlights and Objectives

     40  

Our Compensation and Governance Best Practices

     42  

How Compensation Decisions Are Made For Our Named Executive Officers

     43  

Elements of Compensation and Specific Compensation Decisions

     46  

Compensation Policies and Practices

     59  

Non-Direct Compensation and Payouts in Certain Circumstances

     61  

Taxes and Accounting Standards

     62  
Executive Compensation Tables      64  
Director Compensation      79  
Security Ownership of Directors and Executive Officers      83  
Security Ownership of Certain Beneficial Owners      85  
Item 3—Ratification of Selection of Independent Registered Public Accountants      86  
Audit Matters      87  
Annual Report on Form 10-K      88  
Item 4—Stockholder Proposal      88  
Certain Relationships and Related Transactions      91  
Information Concerning Voting and Solicitation      92  
Other Matters      96  
Appendix A: Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations      A-1  
Appendix B: Reconciliations of GAAP to Non-GAAP Measures      B-1  
 

 

LOGO   ï 2018 Proxy Statement       


Table of Contents
       

 

 

 

 

Proxy Statement Summary

 

 

 

 

 

Proxy Statement Summary

This summary contains highlights about our Company and the upcoming 2018 Annual Meeting of Stockholders, or Annual Meeting. This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement before voting.

2018 Annual Meeting of Stockholders

 

 

Date and Time:

  

Tuesday, May 22, 2018 at 11:00 A.M., local time

Location:

  

Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362

Record Date:

  

March 23, 2018

Mail Date:

  

We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April 11, 2018 to our stockholders.

Voting Matters and Board Recommendations

 

 

 

 

  Matter

 

  

 

Our Board Vote Recommendation    

 

 

  Item 1:

 

 

Election of 13 Nominees to the Board of Directors (page 7)

 

   FOR each Director Nominee

 

 

  Item 2:

 

 

Advisory Vote to Approve Our Executive Compensation (page 27)

 

   FOR

 

 

  Item 3:

 

 

Ratification of Selection of Independent Registered Public Accountants (page 86)

 

   FOR

 

 

  Item 4:

 

 

 

Stockholder Proposal For An Annual Report on the Extent To Which Risks Related to Public Concern Over Drug Pricing Strategies Are Integrated Into Our Executive Incentive Compensation (page 88)

 

   AGAINST

 

 

LOGO   ï 2018 Proxy Statement    1


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Proxy Statement Summary

 

 

 

 

 

9 new Directors since 2012 8 Experienced Current and Former Public Company 6 Directors w/ Scientific Research and/or CEO/CFO Healthcare Experience 5 Directors with Financial Industry Experience 3 Women PROXY ACCESS FOR DIRECTOR NOMINATIONS 92% INDEPENDENT DIRECTORS* LEAD INDEPENDENT DIRECTOR 9 NEW DIRECTORS SINCE 2012* ~4.8 YEARS AVERAGE TENURE*8 CURRENT/FORMER PUBLIC COMPANY CEO/CFOs

 

Item 1: Election of 13 Nominees to the Board of Directors (Page 7)

 

 

   

Nominee

     Age       

Director

Since

 

 

     Audit       

Governance

and

Nominating

 

 

 

     Executive       

Compensation

and

Management

Development

 

 

 

 

    

Equity

Award

 

 

    

Corporate  

Responsibility  

and  

Compliance  


 

 

Wanda M. Austin

 

    

 

63

 

 

 

    

 

2017

 

 

 

    

 

M

 

 

 

                

 

M

 

 

 

 

 

Robert A. Bradway

 

    

 

55

 

 

 

    

 

2011

 

 

 

          

 

C

 

 

 

       

 

M

 

 

 

  
 

 

Brian J. Druker(1)

 

    

 

62

 

 

 

    

 

Initial Election

 

 

 

                 
 

 

Robert A. Eckert

 

    

 

63

 

 

 

    

 

2012

 

 

 

       

 

M

 

 

 

    

 

M

 

 

 

    

 

C

 

 

 

    

 

C

 

 

 

  
 

 

Greg C. Garland

 

    

 

60

 

 

 

    

 

2013

 

 

 

       

 

C

 

 

 

    

 

M

 

 

 

    

 

M

 

 

 

    

 

M

 

 

 

  
 

 

Fred Hassan

 

    

 

72

 

 

 

    

 

2015

 

 

 

    

 

M

 

 

 

          

 

M

 

 

 

     
 

 

Rebecca M. Henderson

 

    

 

57

 

 

 

    

 

2009

 

 

 

    

 

M

 

 

 

                

 

M

 

 

 

 

Frank C. Herringer

 

    

 

75

 

 

 

    

 

2004

 

 

 

    

 

M

 

 

 

    

 

M

 

 

 

    

 

M

 

 

 

        
 

 

Charles M. Holley, Jr.

 

    

 

61

 

 

 

    

 

2017

 

 

 

    

 

C

 

 

 

                

 

M

 

 

 

 

 

Tyler Jacks

 

    

 

57

 

 

 

    

 

2012

 

 

 

    

 

M

 

 

 

          

 

M

 

 

 

     
 

 

Ellen J. Kullman

 

    

 

62

 

 

 

    

 

2016

 

 

 

    

 

M

 

 

 

    

 

M

 

 

 

           
 

 

Ronald D. Sugar

 

    

 

69

 

 

 

    

 

2010

 

 

 

       

 

M

 

 

 

    

 

M

 

 

 

          

 

C

 

 

 

   

 

R. Sanders Williams

 

    

 

69

 

 

 

    

 

2014

 

 

 

             

 

M

 

 

 

                               

 

M

 

 

 

 

“C”

indicates Chair of the committee.

“M”

indicates member of the committee.

 

(1) 

Dr. Druker is standing for initial election to the Board of Directors, or Board. Dr. Druker has been appointed to the Audit Committee and the Corporate Responsibility and Compliance Committee, effective as of the Annual Meeting and subject to his election to the Board by our stockholders.

 

 

LOGO

Corporate Governance Highlights and Best Practices

 

 

 

LOGO

 

*

For our director nominees.

 

2     LOGO   ï 2018 Proxy Statement


Table of Contents
       

 

 

 

 

Proxy Statement Summary

 

 

 

 

 

We Have Implemented Governance Best Practices

 

We continuously monitor developments and best practices in corporate governance and consider stockholder feedback when enhancing our governance structures. Below are highlights of our key governance practices:

 

 

Proxy Access (pages 17 and 96)

 

  -  

up to 20 eligible stockholders that own 3% of shares

  -  

for 3 years who meet the requirements set forth in our Bylaws

  -  

can nominate the greater of 20% or two nominees

 

 

Majority Voting Standard for Director Elections (pages 16 and 94)

 

 

Stockholders May Act By Written Consent (page 17)

 

 

Stockholders Have a Right to Call Special Meetings (15% threshold requirement) (page 17)

 

 

No Supermajority Vote Provisions in Articles or Bylaws (page 17)

 

 

Highly Independent Board – 12 of our 13 director nominees (page 21)

 

 

Strong Refreshment Practices With 9 New Directors Since 2012 – Average Board tenure of approximately 4.8 years for our director nominees (pages 8 and 16)

 

 

Annual Anonymous Board and Committee Evaluation Process (page 21)

 

 

All Directors Meet Our Board of Directors Guidelines for Director Qualifications and Evaluations (Appendix A)

 

 

Robust Lead Independent Director Role (page 17)

 

 

Significant Stock Ownership Requirements for Directors and Officers (pages 59 and 79)

 

 

Corporate Responsibility and Compliance Committee (page 23)

 

 

Enterprise Risk Management Program and Annual Detailed Compensation Risk Analysis – overseen by Board and Compensation and Management Development Committee, respectively (pages 18 and 26)

 

 

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF

THE 13 NAMED NOMINEES.

 

  
 

 

  

 

LOGO   ï 2018 Proxy Statement    3


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Proxy Statement Summary

 

 

 

 

 

Item 2: Advisory Vote to Approve Our Executive

Compensation (Page 27)

 

2017 Target Total Direct Compensation Mix

 

 

LOGO

 

 

We pay for performance, and pay outcomes reflect the achievements of our Named Executive Officers, or NEOs, against our strategic priorities.

 

 

We use median values as the reference point for each element of compensation at all levels, including our NEOs. We consider performance, job scope, and contribution in our final pay decisions.

 

 

Our compensation program is directly linked to our performance and strategy. Each year, our Compensation and Management Development Committee approves Company performance goals under our annual cash incentive programs that are designed to focus our staff on delivering financial and operational objectives to drive annual performance, advance strategic priorities, and position us for longer-term success. Based on our overall performance in 2017 compared to the pre-established Company performance goals of our annual cash incentive award program, we achieved 115% of our target bonus opportunity.

 

 

Performance units earned for the 2015-2017 (January 30, 2015 to January 30, 2018) performance period were based on an earned payout percentage of 93.4% reflecting the Company’s three-year Total Shareholder Return, or TSR, performance at the 46.7th percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, during the performance period. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively). Separately, but of note, Amgen’s 2015-2017 three-year TSR (30.0%) outperformed that of the average TSR of our 2017 peer group (11.6%).

 

Long-term Incentive Equity Awards Target Annual Cash Incentive Base Salary CEO 90% Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk 69% Performance based

 

4     LOGO   ï 2018 Proxy Statement


Table of Contents
       

 

 

 

 

Proxy Statement Summary

 

 

 

 

 

2017 Performance

 

2017 Annual Cash Incentive Program

 

Goal

 

  

Weighting

 

    

 

% of Target
Earned

 

 

1.    Financial Performance

 

 

Revenues

 

    

 

30%

 

 

 

  

110.6%

 

 

Non-GAAP Net Income(1)

 

    

 

30%

 

 

 

  

116.8%

 

 

2.    Progress Innovative Pipeline

 

 

Execute Key Clinical Studies and Regulatory Filings

 

    

 

20%

 

 

 

  

123.0%

 

 

Advance Early Pipeline

 

    

 

5%

 

 

 

  

201.7%

 

 

3.    Deliver Annual Priorities

 

 

Execute Critical Launches and Long-Term Commercial Objectives

 

    

 

10%

 

 

 

  

76.0%

 

 

Realize Functional Transformation Objectives

 

    

 

5%

 

 

 

  

90.4%

 

 

Composite Score

 

    

 

Achieved 115.0%

 

Long-Term Incentive Performance Award Program

 

Long-Term Incentive Program

 

 

 

Equity
Weighting

 

   

 

% of Target
Earned

 

   
       

Performance Units

    50%     93.4%

(2015-2017 performance period)

 

 

 

(1) 

Non-Generally Accepted Accounting Principles net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE

  ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE     

COMPANY’S NAMED EXECUTIVE OFFICERS.

 

  

 

LOGO   ï 2018 Proxy Statement    5


Table of Contents
       

 

 

 

 

Proxy Statement Summary

 

 

 

 

 

Item 3: Ratification of Selection of Independent Registered Public Accountants (Page 86)

 

 

 

The Audit Committee of the Board has selected Ernst & Young LLP, or Ernst & Young, as our independent registered public accountants for the fiscal year ending December 31, 2018.

 

 

Ernst & Young has served as our independent registered public accounting firm since the Company’s inception in 1980.

 

 

Each year, the Audit Committee evaluates the qualifications and performance of the Company’s independent registered public accountants and determines whether to re-engage the current independent registered public accountants.

 

 

Based on this evaluation, the Audit Committee believes that the continued retention of Ernst & Young is in the best interests of the Company and its stockholders.

 

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.

 

  
 

 

  

Item 4: Stockholder Proposal (Page 88)

 

 

 

Stockholders have informed the Company that they intend to present a proposal at our Annual Meeting.

 

 

The proposal relates to the request for an annual report on the extent to which risks related to public concern over drug pricing strategies are integrated into our executive incentive compensation.

 

 

The Board has thoroughly considered the proposal and believes that it is NOT in the Company’s or stockholders’ best interests for the reasons identified starting on page 89 of the proxy statement, which include the following:

 

  -  

The proposal’s underlying subject matter is our drug pricing and capital allocation decisions. Such decisions are integral to our ordinary course operations and the proposed report would put us at a competitive disadvantage and be unduly burdensome while not providing meaningful additional information to stockholders;

 

  -  

We already provide public disclosure regarding the factors that are integrated into our incentive compensation policies and the risks related to compensation; and

 

  -  

We remain focused on delivering breakthrough treatments for unmet medical needs and are committed to working with the entire healthcare community to ensure continued innovation and enable patient access to needed medicines.

 

 

THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST”

THE STOCKHOLDER PROPOSAL FOR AN ANNUAL REPORT ON THE EXTENT TO  WHICH RISKS

RELATED TO PUBLIC CONCERN OVER DRUG PRICING STRATEGIES ARE INTEGRATED

INTO OUR EXECUTIVE INCENTIVE COMPENSATION.

 

  

 

6     LOGO   ï 2018 Proxy Statement


Table of Contents
       

 

 

 

 

Item 1 — Election of Directors

 

 

 

 

 

Item 1

Election of Directors

 

 

Under our governing documents, the Board of Directors, or Board, has the power to set the number of directors from time to time by resolution. We currently have 14 authorized directors serving on our Board. Wanda M. Austin was appointed to serve on our Board effective December 11, 2017. Based upon the recommendation of our Governance and Nominating Committee, the Board has nominated each of the director nominees set forth below to stand for re-election, or in the case of Dr. Austin and Brian J. Druker to stand for initial election by our stockholders, in each case for a one-year term expiring at our 2019 annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier retirement, resignation,

disqualification, removal or death. David Baltimore and François de Carbonnel will retire from our Board and have not been nominated for re-election at the 2018 Annual Meeting of Stockholders, or Annual Meeting. The Board has fixed the authorized number of directors at 13 to be effective as of the close of the Annual Meeting and the election by stockholders of the nominees standing for election. The independent members of the Board have elected Robert A. Eckert to continue to serve as our lead independent director, subject to his re-election to the Board by our stockholders at the Annual Meeting. As lead independent director, Mr. Eckert will continue to have the specific and significant duties as discussed under “Corporate Governance.”

 

 

Nominees to the Board

 

 

Nominee

  Age    

Director

Since

    Audit  

Governance

and

Nominating

  Executive  

Compensation

and

Management

Development

 

Equity

Award

 

Corporate  

Responsibility  

and  

Compliance  

 

Wanda M. Austin

 

   

 

63

 

 

 

   

 

2017

 

 

 

  M

 

          M

 

 

Robert A. Bradway

 

   

 

55

 

 

 

   

 

2011

 

 

 

      C

 

    M

 

 

 

Brian J. Druker(1)

 

   

 

62

 

 

 

   

 

Initial Election

 

 

 

           

 

Robert A. Eckert

 

   

 

63

 

 

 

   

 

2012

 

 

 

    M

 

  M

 

  C

 

  C

 

 

 

Greg C. Garland

 

   

 

60

 

 

 

   

 

2013

 

 

 

    C

 

  M

 

  M

 

  M

 

 

 

Fred Hassan

 

   

 

72

 

 

 

   

 

2015

 

 

 

  M

 

      M

 

   

 

Rebecca M. Henderson

 

   

 

57

 

 

 

   

 

2009

 

 

 

  M

 

          M

 

 

Frank C. Herringer

 

   

 

75

 

 

 

   

 

2004

 

 

 

  M

 

  M

 

  M

 

     

 

Charles M. Holley, Jr.

 

   

 

61

 

 

 

   

 

2017

 

 

 

  C

 

          M

 

 

Tyler Jacks

 

   

 

57

 

 

 

   

 

2012

 

 

 

  M

 

      M

 

   

 

Ellen J. Kullman

 

   

 

62

 

 

 

   

 

2016

 

 

 

  M

 

  M

 

       

 

Ronald D. Sugar

 

   

 

69

 

 

 

   

 

2010

 

 

 

    M

 

  M

 

      C

 

 

R. Sanders Williams

 

   

 

69

 

 

 

   

 

2014

 

 

 

      M

 

              M

 

 

“C”

indicates Chair of the committee.

“M”

indicates member of the committee.

 

(1)

Dr. Druker is standing for initial election to the Board. Dr. Druker has been appointed to the Audit Committee and the Corporate Responsibility and Compliance Committee, effective as of the Annual Meeting and subject to his election to the Board by our stockholders.

 

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Item 1 — Election of Directors

 

 

 

 

 

LOGO

 

*

For our director nominees.

 

Vacancies on the Board (including any vacancy created by an increase in the size of the Board) may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal or death.

Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve. However, if any nominee should become unavailable for election prior to the Annual Meeting (an event that currently is not anticipated by the Board) the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or, alternatively, the number of directors may be reduced accordingly by the Board.

 

 

Summary of Director Nominee Core Experiences and Skills

 

Our Board possesses a deep and broad set of skills and experiences that facilitate strong oversight and strategic direction for a leading global innovator in biomedicine. The following chart summarizes the competencies of each director nominee to be represented on our Board. The details of each director’s competencies are included in each director’s profile.

 

 

LOGO

The lack of a “” for a particular item does not mean that the director does not possess that qualification, characteristic, skill or experience. Each of our Board members have experience and/or skills in the enumerated areas, however, the is designed to indicate that a director has particular strength in that area.

 

9 new Directors since 2012 8 Experienced Current and Former Public Company 6 Directors w/ Scientific Research and/or CEO/CFO Healthcare Experience 5 Directors with Financial Industry Experience 3 Women Experience / Skills Austin Bradway Druker Eckert Garland Hassan Henderson Herringer Holley Jacks Kullman Sugar Williams Healthcare Industry, Providers and Payers Science/Technology Public Company CEO/COO/CFO Regulatory Compliance Financial/Accounting Government/Public Policy International

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NAMED NOMINEES. PROXIES WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES UNLESS OTHERWISE SPECIFIED.

Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills and experiences which led our Board to conclude that each nominee should serve on the Board at this time. All of our directors meet the qualifications and skills of our Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement as Appendix A. There are no family relationships among any of our directors or among any of our directors and our executive officers.

 

 

Wanda M. Austin

 

Director since: 2017

 

Age: 63

 

Committees:

  Audit

  Corporate Responsibility and Compliance

 

Other Public Company Boards:

  Chevron Corporation

 

 

 

Wanda M. Austin has served as a director of the Company since December 11, 2017. Dr. Austin was first identified to the Governance and Nominating Committee as a potential director candidate by a non-employee member of the Board. She is the retired President and Chief Executive Officer of The Aerospace Corporation, a leading architect of the United States’ national security space programs, where she served from 2008 until her retirement in 2016. From 2004 to 2007, Dr. Austin was Senior Vice President, National Systems Group of The Aerospace Corporation. Dr. Austin joined The Aerospace Corporation in 1979 and served in various positions from 1979 until 2004.

 

Dr. Austin has served as an Adjunct Research Professor at the University of Southern California’s Viterbi School of Engineering since 2007. She is the co-founder of MakingSpace, where she serves as a motivational speaker on STEM education. Dr. Austin has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2016, serving on its Board Nominating and Governance  Committee  and  Public  Policy  Committee.  Dr.  Austin  is  a  trustee  of  the  University  of  Southern

California and previously served on the boards of directors of the National Geographic Society and the Space Foundation. Dr. Austin received an undergraduate degree from Franklin & Marshall College, a master’s degree from the University of Pittsburgh and a doctorate from the University of Southern California. She is a member of the National Academy of Engineering.

 

Qualifications

 

The Board concluded that Dr. Austin should serve on the Board based on her leadership and management experience as a chief executive officer, her extensive background in science, technology, and government affairs in a highly regulated industry, and her public board experience.

 

 

Robert A. Bradway

 

Director since: 2011

 

Age: 55

 

Committees:

  Equity Award

  Executive (Chair)

 

Other Public Company Boards:

  The Boeing Company

 

 

 

Robert A. Bradway has served as our director since 2011 and Chairman of the Board since 2013. Mr. Bradway has been our President since 2010 and Chief Executive Officer since 2012. From 2010 to 2012, Mr. Bradway served as our Chief Operating Officer. Mr. Bradway joined Amgen in 2006 as Vice President, Operations Strategy and served as Executive Vice President and Chief Financial Officer from 2007 to 2010. Prior to joining Amgen, he was a Managing Director at Morgan Stanley in London where, beginning in 2001, he had responsibility for the firm’s banking department and corporate finance activities in Europe.

 

Mr. Bradway has been a director of The Boeing Company, an aerospace company and manufacturer of commercial airplanes, defense, space and securities systems, since 2016, serving on its Audit and Finance committees. From 2011 to May 2017, Mr. Bradway was a director of Norfolk Southern Corporation, a transportation  company.  He  has  served  on  the  board  of  trustees  of  the  University  of  Southern  California

since 2014 and on the advisory board of the Leonard D. Schaeffer Center for Health Policy and Economics at that university since 2012. Mr. Bradway holds a bachelor’s degree in biology from Amherst College and a master’s degree in business administration from Harvard Business School.

 

Qualifications

 

The Board concluded that Mr. Bradway should serve on the Board based on his thorough knowledge of all aspects of our business, combined with his leadership and management skills having previously served as our President and Chief Operating Officer and as our Chief Financial Officer.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

Brian J. Druker

 

Director since: Standing for initial election to the Board

 

Age: 62

 

Committees: If elected by stockholders, Dr. Druker is expected to serve on the following committees:

  Audit

  Corporate Responsibility and Compliance

 

 

 

 

Brian J. Druker is standing for initial election to the Company’s Board and will be appointed as a director effective as of the Company’s 2018 Annual Meeting of Stockholders subject to his election by stockholders. Dr. Druker was first identified to the Governance and Nominating Committee as a potential director candidate by non-employee members of the Board. He joined Oregon Health & Science University, or OHSU, in 1993 and is currently a physician-scientist and professor of medicine. Dr. Druker has served as the director of the OHSU Knight Cancer Institute since 2007, associate dean for oncology of the OHSU School of Medicine since 2010, and the JELD-WEN chair of leukemia research at OHSU since 2001. He has been an investigator with the Howard Hughes Medical Institute, a nonprofit medical research organization, since 2002.

 

Dr. Druker has served on the scientific advisory boards of Aptose Biosciences Inc., a biotechnology company, since 2013, and Grail, Inc., a biotechology company, since 2016. In 2011, he founded Blueprint Medicines Corporation, a biopharmaceutical company, and remains as a scientific advisor to this company. In 2006, he founded MolecularMD, a privately-held molecular diagnostics company.

 

Dr. Druker has received numerous awards, including the Lasker-DeBakey Clinical Research Award in 2009, the Japan Prize in Healthcare and Medical Technology in 2012, and the Albany Medical Center Prize in 2013, for influential work in the development of STI571 (Gleevec®) for the treatment of chronic myeloid leukemia. He was elected to the National Academy of Sciences in 2012 as well as the National Academy of Medicine in 2007. Dr. Druker received both an undergraduate degree and his doctorate from the University of California, San Diego.

 

Qualifications

 

The Board concluded that Dr. Druker should serve on the Board based on his extensive scientific research and expertise leading an important academic institution, conducting highly significant research in the area of oncology, and directly managing the care of cancer patients.

 

 

Robert A. Eckert

 

Lead Independent Director

 

Director since: 2012

 

Age: 63

 

Committees:

  Compensation and Management
Development (Chair)

  Equity Award (Chair)

  Executive

  Governance and Nominating

 

Other Public Company Boards:

  McDonald’s Corporation

 

 

Robert A. Eckert is our lead independent director. Mr. Eckert has been an Operating Partner at Friedman Fleischer & Lowe, a private equity firm, since 2014. Mr. Eckert was the Chief Executive Officer of Mattel, Inc., a toy design, manufacture and marketing company, having held this position from 2000 through 2011, and its Chairman of the Board from 2000 through 2012. He was President and Chief Executive Officer of Kraft Foods Inc., a consumer packaged food and beverage company, from 1997 to 2000, Group Vice President from 1995 to 1997, President of the Oscar Mayer Foods Division from 1993 to 1995 and held various other senior executive and other positions from 1977 to 1992.

 

Mr. Eckert has been a director of McDonald’s Corporation, a company which franchises and operates McDonald’s restaurants in the global restaurant industry, since 2003, serving as the Chair of the Public Policy and Strategy Committee and a member of the Executive and Governance Committees. Mr. Eckert was a director of Smart & Final Stores, Inc., a warehouse store, from 2013 until 2014 prior to it becoming a publicly-traded company. Mr. Eckert also has served as a director of Levi Strauss & Co., a privately-held jeans and casual wear manufacturer, since 2010. He was appointed director of Eyemart Express Holdings LLC, a privately-held eyewear retailer and portfolio company of Friedman Fleischer & Lowe, in 2015. Mr. Eckert is on the Global Advisory Board of the Kellogg School of Management at Northwestern University and serves on the Eller College National Board of Advisors at the University of Arizona. Mr. Eckert received an undergraduate degree from the University of Arizona and a master's degree in business administration from the Kellogg School of Management at Northwestern University.

Qualifications

The Board concluded that Mr. Eckert should serve on our Board because of Mr. Eckert’s long-tenured experience as a chief executive officer of large public companies, his broad international experience in marketing and business development, and his valuable leadership experience.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

Greg C. Garland

 

Director since: 2013

 

Age: 60

 

Committees:

  Compensation and Management Development

  Equity Award

  Executive

  Governance and Nominating (Chair)

 

Other Public Company Boards:

  Phillips 66(1)

 

 

 

Greg C. Garland is the Chairman and Chief Executive Officer of Phillips 66, an energy manufacturing and logistics company with midstream, chemical, refining and marketing and specialties businesses created through the repositioning of ConocoPhillips, having held this position since 2012. Mr. Garland chairs the Executive Committee of Phillips 66.(1) Prior to Phillips 66, Mr. Garland served as Senior Vice President, Exploration and Production, Americas of ConocoPhillips from 2010 to 2012. He was President and Chief Executive Officer of Chevron Phillips Chemical Company (now a joint venture between Phillips 66 and Chevron) from 2008 to 2010 and Senior Vice President, Planning and Specialty Chemicals from 2000 to 2008. Mr. Garland served in various positions at Phillips Petroleum Company from 1980 to 2000. Mr. Garland is a member of the Engineering Advisory Council for Texas A&M University. Mr. Garland received an undergraduate degree from Texas A&M University.

 

Qualifications

 

The Board concluded that Mr. Garland should serve on our Board because of Mr. Garland’s experience as a chief executive officer and his over 30 years of international experience in a highly regulated industry.

 

 

(1)

Mr. Garland also serves as Chairman and Chief Executive Officer of Phillips 66 Partners LP, a master limited partnership and wholly-owned subsidiary of Phillips 66 without any employees.

 

 

Fred Hassan

 

Director since: 2015

 

Age: 72

 

Committees:

  Audit

  Compensation and Management
Development

 

Other Public Company Boards:

  Intrexon Corporation

  Time Warner Inc.

 

Audit Committee financial expert 

 

 

 

Fred Hassan is Special Limited Partner at Warburg Pincus LLC, a global private equity investment institution, since 2017. Mr. Hassan was Partner and Managing Director at Warburg Pincus LLC from 2011 to 2017 and, prior to that, served as Senior Advisor from 2009 to 2010. Mr. Hassan was Chairman of the Board and Chief Executive Officer of Schering-Plough Corporation from 2003 to 2009. Prior to this, Mr. Hassan was Chairman, President and Chief Executive Officer of Pharmacia Corporation, from 2001 to 2003. Before assuming these roles, he had served as President and Chief Executive Officer of Pharmacia Corporation from its creation in 2000 as a result of the merger of Pharmacia & Upjohn, Inc. with Monsanto Company. He was President and Chief Executive Officer of Pharmacia & Upjohn, Inc. beginning in 1997. Mr. Hassan previously held senior positions with Wyeth (formerly known as American Home Products), including that of Executive Vice President with responsibility for its pharmaceutical and medical products businesses, and served as a member of the board from 1995 to 1997. Prior to that, Mr. Hassan held various roles at Sandoz Pharmaceuticals and headed its U.S. pharmaceuticals businesses.

 

Mr. Hassan has been a director of Time Warner Inc., a media company, since 2009, serving on its Nominating and Governance and Compensation and Human Development Committees; and Intrexon Corporation, a synthetic biology company, since 2016, serving on its Compensation Committee. Mr. Hassan was a director of Avon Products, Inc., a manufacturer and marketer of beauty and related products,

 

from 1999 until 2013 and served on its Compensation and Management Development, Nominating and Corporate Governance and Audit Committees, as lead independent director from 2009 to 2012, and Chairman of the Board between January and April 2013. Mr. Hassan was Chairman of the Board of Bausch & Lomb, from 2010 until its acquisition by Valeant Pharmaceuticals International, Inc., a pharmaceutical company, in 2013. Mr. Hassan served on the board of directors and Compensation and Audit Committees of Valeant Pharmaceuticals International, Inc. from 2013 to 2014. Mr. Hassan received an undergraduate degree from Imperial College of Science and Technology, University of London and a master’s degree in business administration from Harvard Business School.

 

Qualifications

 

The Board concluded that Mr. Hassan should serve on the Board based on his global experience as a public company chief executive officer, his particular knowledge and experience in the healthcare and pharmaceutical industries, including overseeing businesses with significant research and development operations, his diversified financial and business expertise, as well as prior public company board experience. Given his financial and leadership experience, Mr. Hassan has been determined to be an Audit Committee financial expert by our Board.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

Rebecca M. Henderson 

 

Director since: 2009

 

Age: 57

 

Committees:

  Audit

  Corporate Responsibility

   and Compliance

 

Other Public Company Boards:

  IDEXX Laboratories, Inc.

 

 

Rebecca M. Henderson has been the John and Natty McArthur University Professor at Harvard University since 2011. From 2009 to 2011, Dr. Henderson served as the Senator John Heinz Professor of Environmental Management at Harvard Business School. Prior to this, she was a professor of management at the Massachusetts Institute of Technology, or MIT, for 21 years, having been the Eastman Kodak LFM Professor of Management since 1999. Since 1995, she has also been a Research Associate at the National Bureau of Economic Research. She specializes in technology strategy and the broader strategic problems faced by companies in high technology industries.

 

Dr. Henderson has been a director of IDEXX Laboratories, Inc., a company which provides diagnostic and information technology-based products and services for veterinary, food and water applications, since 2003, chairing its Finance Committee and serving on its Nominating and Governance Committee. Dr. Henderson has also served as a director of the Ember Corporation, a privately-held semiconductor chip manufacturer,  and  on  its  Compensation  Committee,  from  2001  to  July  2009.  She  has  further  been a

director of Linbeck Construction Corporation, a privately-held facility solutions company, from 2000 until 2004. Dr. Henderson has published articles, papers and reviews in a range of scholarly journals. Dr. Henderson received an undergraduate degree from MIT and a doctorate from Harvard University.

Qualifications

The Board concluded that Dr. Henderson should serve on the Board because Dr. Henderson’s study of the complex strategy issues faced by high technology companies provides valuable insight into the Company’s strategic and technology issues.

 

 

Frank C. Herringer

 

Director since: 2004

 

Age: 75

 

Committees:

  Audit

  Executive

  Governance and Nominating

 

Other Public Company Boards:

  The Charles Schwab Corporation 

 

Audit Committee financial expert 

 

 

Frank C. Herringer has been a director of the Board of Transamerica Corporation, a financial services company since 1986, serving as Chairman of the board of directors from 1995 to 2015. Mr. Herringer was an executive with Transamerica for 20 years, including its Chief Executive Officer from 1991 until its acquisition by Aegon N.V., a life insurance, pensions and asset management company, in 1999, subsequently serving on Aegon’s Executive Board for one year. Mr. Herringer was a director of Aegon U.S. Holding Corporation from 1999 until its merger into Transamerica Corporation in 2015.

 

Mr. Herringer has been a director of The Charles Schwab Corporation, a brokerage and banking company, since 1996, serving on its Compensation Committee and chairing its Nominating and Corporate Governance Committee. Mr. Herringer is a member of the Board of Trustees of the California Pacific Medical Center Foundation, a not-for-profit organization which develops philanthropic resources for the California Pacific Medical Center, a privately-held, not-for-profit academic medical center, since 2013. Mr. Herringer was a director of Safeway Inc., a food and drug retailer, from 2008 until 2015, serving on its Executive Compensation and Executive Committees and chairing its Nominating and Corporate Governance Committee. Mr. Herringer was a director of Cardax, Inc., a biotechnology company, from 2014 to 2015, serving on its Compensation Committee and chairing its Governance and Nominating Committee,

and was a director of its parent company, Cardax Pharmaceuticals, Inc., from 2006 until 2015. From 2002 to 2005, Mr. Herringer was a director of AT&T Corporation, and a member of its Audit and Compensation Committees. In 2004, Mr. Herringer was named an Outstanding Director of the Year by the Outstanding Directors Exchange. Mr. Herringer received an undergraduate degree and master’s degree in business administration from Dartmouth College.

 

Qualifications

 

The Board concluded that Mr. Herringer should serve on the Board based on his background as chief executive officer and board chair of a public company, his management and leadership skills, and his career-long focus on corporate financial performance, prospects and strategy. Given his financial and leadership experience, Mr. Herringer has been determined to be an Audit Committee financial expert by our Board.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

Charles M. Holley, Jr.

 

Director since: 2017

 

Age: 61

 

Committees:

  Audit (Chair)

  Corporate Responsibility

   and Compliance

 

Audit Committee financial expert 

 

 

 

Charles M. Holley, Jr. is the former Executive Vice President and Chief Financial Officer for Wal-Mart Stores, Inc., or Walmart, where he served from 2010 to 2015 and as Executive Vice President between January 1, 2016 and January 31, 2016. Prior to this, Mr. Holley served as Executive Vice President, Finance and Treasurer of Walmart from 2007 to 2010. From 2005 to 2006, he served as Senior Vice President. Prior to that, Mr. Holley was Senior Vice President and Controller from 2003 to 2005. Mr. Holley served various roles in Wal-Mart International from 1994 through 2002. Prior to this, Mr. Holley served in various roles at Tandy Corporation. He spent more than ten years with Ernst & Young LLP. Mr. Holley is an Independent Senior Advisor, U.S. CFO Program, Deloitte LLP, a privately-held provider of audit, consulting, tax, and advisory services, since 2016.

 

Mr. Holley serves on the Advisory Council for the McCombs School of Business at the University of Texas at Austin and the University of Texas Presidents’ Development Board.

 

Qualifications

 

The Board concluded that Mr. Holley should serve on the Board based on his experience as a chief financial officer of a global public company, his financial acumen, and his management and leadership skills. Given his financial and leadership experience, Mr. Holley has been determined to be an Audit Committee financial expert by our Board.

 

 

Tyler Jacks

 

Director since: 2012

 

Age: 57

 

Committees:

  Audit

  Compensation and Management

   Development

 

Other Public Company Boards:

  Thermo Fisher Scientific, Inc.

 

 

 

Tyler Jacks joined the faculty of Massachusetts Institute of Technology, or MIT, in 1992 and is currently the David H. Koch Professor of Biology and director of the David H. Koch Institute for Integrative Cancer Research, which brings together biologists and engineers to improve detection, diagnosis and treatment of cancer, a position he has held since 2007. Dr. Jacks has been an investigator with the Howard Hughes Medical Institute, a nonprofit medical research organization, since 1994.

 

Dr. Jacks has been a director of Thermo Fisher Scientific, Inc., a life sciences supply company, since 2009, serving on its Strategy and Finance Committee and scientific advisory board and chairing its Science and Technology Committee. In 2006, he co-founded T2 Biosystems, Inc., a biotechnology company, and served on its scientific advisory board until 2013. Dr. Jacks has served on the scientific advisory board of SQZ Biotech, a privately-held biotechnology company, since 2015. He was a consultant scientific advisor to Epizyme, Inc., a biopharmaceutical company, from 2007 to 2017. Dr. Jacks served on the    scientific advisory   board   of   Aveo   Pharmaceuticals   Inc.,   a   biopharmaceutical   company,   from   2001 until 2013. In 2015, Dr. Jacks founded Dragonfly Therapeutics, Inc., a privately-held biopharmaceutical company, and serves as co-Chair of its scientific advisory board. He was appointed to the National Cancer

Advisory Board, which advises and assists the Director of the National Cancer Institute with respect to the National Cancer Program, in 2011 and served as Chair until 2016. In 2016, Dr. Jacks was named to a blue ribbon panel of scientists and advisors established as a working group of the National Cancer Advisory Board and served as co-Chair advising the Cancer MoonshotSM Task Force. Dr. Jacks was a director of MIT’s Center for Cancer Research from 2001 to 2007 and received numerous awards including the Paul Marks Prize for Cancer Research and the American Association for Cancer Research Award for Outstanding Achievement. He was elected to the National Academy of Sciences as well as the National Academy of Medicine in 2009 and received the MIT Killian Faculty Achievement Award in 2015. Dr. Jacks received an undergraduate degree from Harvard University and his doctorate from the University of California, San Francisco.

 

Qualifications

 

The Board concluded that Dr. Jacks should serve on the Board based on his extensive scientific expertise relevant to our industry, including his broad experience as a cancer researcher, pioneering uses of technology to study cancer-associated genes, and service on several scientific advisory boards and membership in the National Cancer Advisory Board.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

Ellen J. Kullman

 

Director since: 2016

 

Age: 62

 

Committees:

  Audit

  Governance and Nominating

 

Other Public Company Boards:

  Goldman Sachs Group, Inc.

  United Technologies Corporation

 

Audit Committee financial expert  

 

 

 

Ellen J. Kullman is the former President, Chair and Chief Executive Officer of E.I. du Pont de Nemours and Company, or DuPont, a science and technology-based company, where she served from 2009 to 2015. Prior to this, Ms. Kullman served as President of DuPont from 2008 to 2009. From 2006 through 2008, she served as Executive Vice President of DuPont. Prior to that, Ms. Kullman was Group Vice President, DuPont Safety and Protection. Ms. Kullman has been a director of United Technologies Corporation, a technology products and services company, since 2011, serving on its Committee on Compensation and Executive Development and chairing its Committee on Governance and Public Policy. Ms. Kullman has been a director of Goldman Sachs Group, Inc., an investment banking firm, since 2016, serving on its Compensation, Corporate Governance and Nominating, and Risk Committees. Ms. Kullman served as a director of General Motors, from 2004 to 2008, serving on its Audit Committee.

 

Ms. Kullman has also served as a director of Carbon3D, Inc., a privately-held 3D printing company, since 2016. Ms. Kullman has served on the Board of Trustees of Northwestern University since 2016 and on the Board of Overseers of Tufts University School of Engineering since 2006. She served as Chair of the US-China  Business  Council  from  2013  to  2015.  In  2016,  Ms. Kullman  joined  the  board  of  directors  of  Dell

Technologies, a privately-held technology company, and the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a privately-held investment company based in Singapore. Ms. Kullman received a bachelor of science in mechanical engineering degree from Tufts University and a master’s degree from the Kellogg School of Management at Northwestern University.

 

Qualifications

 

The Board concluded that Ms. Kullman should serve on the Board based on her lengthy global experience as a public company chief executive officer and board chair, her management and leadership skills, and her experience with scientific operations, all of which provide valuable insight into the operations of our Company. Given her leadership and financial experience, Ms. Kullman has been determined to be an Audit Committee financial expert by our Board.

 

 

Ronald D. Sugar

 

Director since: 2010

 

Age: 69

 

Committees:

  Corporate Responsibility

   and Compliance (Chair)

  Executive

  Governance and Nominating

 

Other Public Company Boards:    

  Air Lease Corporation

  Apple Inc.

  Chevron Corporation

 

 

 

Ronald D. Sugar is the retired Chairman of the Board and Chief Executive Officer of Northrop Grumman Corporation, a global aerospace and defense company, having held these posts from 2003 through 2009.

 

Dr. Sugar has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2005, serving as the lead director and on the Management Compensation Committee and chairing the Board Nominating and Governance Committee. Dr. Sugar has been a director of Apple Inc., a manufacturer and seller of, among other things, personal computers, mobile communication and media devices, since 2010, chairing the Audit and Finance Committee. Dr. Sugar has been a director of Air Lease Corporation, an aircraft leasing company, since 2010, chairing the Compensation Committee and serving on the Nominating and Corporate Governance Committee. Since 2010, he has been a senior advisor to Ares Management LLC, a privately-held asset manager and registered investment advisor. In 2014, Dr. Sugar joined the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a privately-held investment company based in Singapore. Dr. Sugar is a member of the National Academy of Engineering, trustee of the University of Southern California, member of the UCLA Anderson School of Management Board of Advisors, and director of the Los Angeles Philharmonic Association.

 

 

Qualifications

 

The Board concluded that Dr. Sugar should serve on our Board because Dr. Sugar’s board and senior executive-level expertise, including his experience as chief executive officer and board chair of a large, highly regulated, public company and his insight in the areas of operations, government affairs, science, technology and finance.

 

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Item 1 — Election of Directors

 

 

 

 

 

 

R. Sanders Williams

 

Director since: 2014

 

 

Age: 69

 

 

Committees:

  Corporate Responsibility

   and Compliance

  Governance and Nominating

 

 

Other Public Company Boards:

  Laboratory Corporation of America Holdings

 

  

 

R. Sanders Williams is the Chief Executive Officer of Gladstone Foundation, a not-for-profit organization supporting the Gladstone Institutes, a non-profit biomedical research enterprise, and President Emeritus of Gladstone Institutes since 2018. Dr. Williams has been a Professor of Medicine at the University of California, San Francisco since 2010. Dr. Williams was both President of Gladstone Institutes and its Robert W. and Linda L. Mahley Distinguished Professor of Medicine, from 2010 to 2017. Prior to this, Dr. Williams served as Senior Vice Chancellor of the Duke University School of Medicine from 2008 to 2010 and Dean of the Duke University School of Medicine from 2001 to 2008. He was the founding Dean of the Duke-NUS Graduate Medical School, Singapore, from 2003 to 2008 and served on its Governing Board from 2003 to 2010. From 1990 to 2001, Dr. Williams was Chief of Cardiology and Director of the Ryburn Center for Molecular Cardiology at the University of Texas, Southwestern Medical Center.

 

Dr. Williams has been a director of the Laboratory Corporation of America Holdings, a diagnostic technologies company, since 2007, serving on the Audit Committee and chairing the Quality and Compliance  Committee.  Dr.  Williams  was  a  director  of  Bristol-Myers  Squibb  Company,  a  pharmaceutical

company, from 2006 until 2013. Dr. Williams has served on the board of directors of the Gladstone Foundation, a non-profit institution that is distinct from Gladstone Institutes, since 2012 and on the board of directors of Exploratorium, a non-profit science museum and learning center located in San Francisco, since 2011. Dr. Williams was elected to the National Academy of Medicine in 2002. Dr. Williams received his undergraduate degree from Princeton University and his doctorate from Duke University.

 

Qualifications

 

The Board concluded that Dr. Williams should serve on the Board because of his broad medical and scientific background, including his leadership roles in domestic and academic science settings, his deep experience in cardiology, oversight of governance of multi-hospital healthcare provider systems, leadership and development of international medical programs in Asia, and prior industry board experience.

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE 13 NAMED NOMINEES.

 

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Corporate Governance

 

 

 

 

 

Corporate Governance

 

Board of Directors Corporate Governance Highlights

 

 

Our Board of Directors, or Board, is governed by our Amgen Board of Directors Corporate Governance Principles which are amended from time to time to incorporate certain current best practices in corporate governance. Our Corporate Governance Principles may be found on our website at www.amgen.com and are available in print upon written request to the Company’s Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. The Board’s corporate governance practices and stockholder rights include the following:

Board Governance Practices

 

 

Lead Independent Director. The independent members of the Board elect a lead independent director on an annual basis. The lead independent director has robust responsibilities and authorities as discussed below. Robert A. Eckert currently serves as our lead independent director.

 

 

Regular Executive Sessions of Independent Directors. Our independent directors meet privately on a regular basis. Our lead independent director presides at such meetings.

 

 

Majority Approval Required for Director Elections. If an incumbent director up for re-election at a meeting of stockholders fails to receive a majority of affirmative votes in an uncontested election, the Board will adhere to the director resignation policy as provided in the Amended and Restated Bylaws of Amgen Inc., or Bylaws.

 

 

Board Access to Management. We afford our directors ready access to our management. Key members of management attend Board and committee meetings to present information concerning various aspects of the Company, its operations and results. The Corporate Responsibility and Compliance Committee, or Compliance Committee, members also have regular meetings in executive session with our Chief Compliance Officer, and the Audit Committee members have regular meetings in executive session with our internal and external auditors and separate meetings in executive session with our head of Corporate Audit.

 

 

Board Authority to Retain Outside Advisors. Our Board committees have the authority to retain outside advisors. The Audit Committee has the sole authority to appoint, compensate, retain and oversee the independent registered public accountants. The Compensation and Management Development Committee, or Compensation Committee, has the sole authority to appoint, compensate, retain and oversee compensation advisors for senior management compensation review. The Governance and Nominating Committee, or Governance Committee, has the sole authority to appoint, retain and replace search firms to identify director candidates and compensation advisors for our directors’ compensation review.

 

Director Limitation on Number of Boards. A director who is currently serving as our Chief Executive Officer, or CEO, should not serve on more than two outside public company boards. No director should serve on more than five outside public company boards.

 

 

Director Tenure. Our average Board tenure is approximately 4.8 years for our director nominees.

 

 

Director Retirement Age. The Board has established a retirement age of 72. A director is expected to retire from the Board on the day of the annual meeting of stockholders following his or her 72nd birthday. After due consideration, the Board has waived the retirement age with respect to Fred Hassan and Frank C. Herringer based on its determination that it would be beneficial to have Messrs. Hassan and Herringer continue to serve as directors due to their Company knowledge and experience as well as financial acumen in the case of Mr. Herringer and deep industry experience in the case of Mr. Hassan.

 

 

Director Changes in Circumstances Evaluated. If a director has a substantial change in principal business or professional affiliation or responsibility, including a change in principal occupation, he or she shall offer his or her resignation to the chairman of the Governance Committee. The Governance Committee determines whether to accept the resignation based on what it believes to be in the best interests of the Company and our stockholders.

 

 

Director Outside Relationships Require Pre-Approval. Without the prior approval of disinterested members of the Board, directors should not enter into any transaction or relationship with the Company in which they will have a financial or a personal interest or any transaction that otherwise involves a conflict of interest.

 

 

Director Conflicts of Interest. If an actual or potential conflict of interest arises for a director or a situation arises giving the appearance of an actual or potential conflict, the director must promptly inform the Chairman of the Board, or Chairman, or the chairman of the Governance Committee. All directors recuse themselves from any discussion or decision found to affect their personal, business or professional interests.

 

 

Regular Board and Committee Evaluations. The Board and the Audit, Compensation, Compliance and Governance Committees each have an annual evaluation process. We provide more information regarding the Board and committee evaluations on page 21.

 

 

Solicitation of Stockholder Perspectives. The Board believes that engagement with stockholders is the source of valuable information and perspectives on the Company. The Board has requested that management solicit input from investors on behalf of the Board and the lead independent director may also meet directly with stockholders when appropriate. We provide more information regarding the stockholder engagement program on page 38.

 

 

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Stockholder Rights

 

 

Proxy Access. Our Bylaws permit proxy access for director nominations. Eligible stockholders with an ownership threshold of 3% who have held their shares for at least 3 years and who otherwise meet the requirements set forth in our Bylaws may have their nominees consisting of the greater of 20% or two nominees of our Board included in our proxy materials. Up to 20 eligible stockholders may group together to reach the 3% ownership threshold. In the course of designing our proxy access provisions, we carefully considered each element in the interest of our stockholders as a whole, including that the number of stockholders who may group together (20) would afford those stockholders likely to utilize proxy access with the opportunity to do so.

 

 

Written Consent. Our Amgen Inc. Restated Certificate of Incorporation, or Certificate of Incorporation, permits stockholders to act by written consent in lieu of a meeting upon the request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements of our Certificate of Incorporation.

 

 

Special Meetings. Our Bylaws permit stockholders to call a special meeting upon the written request of the holders of at least 15% of our outstanding common shares who otherwise meet the requirements set forth in our Bylaws.

 

 

No Supermajority Vote Provisions in Certificate of Incorporation or Bylaws. We have a simple majority voting standard to amend our Certificate of Incorporation and Bylaws and to approve major mergers and acquisitions.

 

 

Leadership Structure

 

 

Our current leadership structure and governing documents permit the roles of Chairman and CEO to be filled by the same or different individuals. The Board has currently determined that it is in the best interests of the Company and our stockholders to have Robert A. Bradway, our CEO and President, serve as Chairman, coupled with an active lead independent director. As such, Mr. Bradway holds the position of Chairman, CEO and President, and Mr. Eckert has served as the lead independent director since the May 19, 2016 annual meeting of stockholders, or 2016 Annual Meeting.

Corporate Governance Structure. The Board believes our corporate governance structure, with its strong emphasis on Board independence, an active lead independent director and strong Board and committee involvement, provides sound and robust oversight of management.

Lead Independent Director. The lead independent director is elected by the independent members of the Board on an annual basis. Mr. Eckert has been elected as the lead independent director effective since the 2016 Annual Meeting and was re-elected by our Board on March 7, 2018 to continue to serve as lead independent director subject to his re-election to the Board by our stockholders at the Annual Meeting.

In such position, the lead independent director serves as a means for regular communication between the independent directors and Mr. Bradway, keeping Mr. Bradway apprised of any concerns, issues or determinations made during the independent sessions, and consults with Mr. Bradway on other matters pertinent to the Company and the Board. The lead independent director’s additional responsibilities include:

 

 

Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;

 

 

Serving as a liaison between the Chairman and the independent directors;

 

 

Previewing the information to be provided to the Board;

 

Approving meeting agendas for the Board;

 

 

Assuring that there is sufficient time for discussion of all meeting agenda items;

 

 

Organizing and leading the Board’s evaluation of the CEO;

 

 

Being responsible for leading the Board’s annual self-assessment;

 

 

Having the authority to call meetings of the independent directors; and

 

 

If requested by major stockholders, ensuring that he/she is available for consultation and direct communication.

Key Committees Composed of Independent Directors. The Audit, Compensation, Compliance and Governance Committees are each composed solely of independent directors and provide independent oversight of management. In addition, the Audit, Compensation and Compliance Committees meet in executive session on a regular basis with no members of management present (unless otherwise requested by the committee). Each of our committees effectively manages its Board-delegated duties and communicates regularly with the Chairman and members of management. In addition, the Compensation Committee has an effective process for monitoring and evaluating Mr. Bradway’s compensation and performance. Each committee chair provides a report on committee meetings held to the full Board at each regular meeting of the Board.

Independent Directors Sessions. On a regular basis, the independent directors meet in an executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programs and transactions and the Board meeting agenda items. These independent sessions are organized and chaired by our lead independent director.

Annual Assessment. As part of the Board’s annual self-evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders.

 

 

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Benefits of Combined Leadership Structure. The Board believes that the Company and our stockholders have been best served by having Mr. Bradway in the role of Chairman and CEO for the following reasons:

 

 

Mr. Bradway is most familiar with our business and the unique challenges we face. Mr. Bradway’s day-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters.

 

 

Mr. Bradway has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Bradway’s knowledge and extensive experience regarding our operations and the highly-regulated industries and markets in which we compete position him to identify and prioritize matters for Board review and deliberation.

 

 

As Chairman and CEO, Mr. Bradway serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Bradway brings a unique, stockholder-focused insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value.

 

 

The strength and effectiveness of the communications between Mr. Bradway as our Chairman and Mr. Eckert as our lead independent director result in effective Board oversight of the issues, plans and prospects of our Company.

 

 

This leadership structure provides the Board with more complete and timely information about the Company, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making.

Flexibility of the Leadership Structure. The Board is committed to high standards of corporate governance. The Board values its flexibility to select, from time to time, a leadership structure that is most able to serve the Company’s and stockholders’ best interests based on the qualifications of individuals available and circumstances existing at the time. As such, the Board regularly evaluates whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board believes that a policy limiting its flexibility to choose a leadership structure that will enable the Company to most effectively execute its strategy and business plans to maximize stockholder value would be detrimental to the Company and our stockholders.

 

 

The Board’s Role in Risk Oversight

 

 

Our Board oversees an enterprise-wide approach to risk management, which is designed to support the achievement of the Company’s objectives, including strategic priorities to improve long-term financial and operational performance and enhance stockholder value. Our Board believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks and adopting appropriate control and mitigation of these risks. We believe that the risk management areas that are fundamental to the success of our annual and strategic plans include the areas of product development, safety, supply, quality, value and access, sales and promotion, business development, as well as protecting our assets (financial, intellectual property and information (including cybersecurity)), all of which are managed cross-functionally by senior executive management reporting directly to our CEO.

We have implemented an Enterprise Risk Management, or ERM, program, which is a Company-wide effort to identify, assess, manage, report and monitor enterprise risks and risk areas that may affect our ability to achieve the Company’s objectives. The ERM program involves our Board and management and is overseen by one of our senior executive officers. Enterprise risks are identified and managed by management and the business functions and, as discussed below, are overseen by the Board or the appropriate Board committee.

The Board discusses enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process, annual budget review and approval, capital plan review and approval and through reviews of compliance issues in the applicable committees of our Board, as appropriate.

 

 

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While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board are structured to oversee specific risks, as follows:

 

 

  Committee

 

  

Primary Risk Oversight Responsibility

 

    

  Audit Committee

  

   Oversees financial risk, such as capital risk, financial compliance risk and internal controls over financial reporting.

 

 

  Corporate Responsibility and Compliance Committee

  

   Oversees non-financial compliance risk, such as regulatory risks associated with the requirements of the Federal health care program, Food and Drug Administration, and the Corporate Integrity Agreement, and risks associated with pricing and access, information security, including cybersecurity, and our reputation. Also oversees staff member compliance with the Code of Conduct.

 

 

  Compensation and Management Development Committee

  

   Evaluates whether the right management talent is in place and oversees succession planning. Also oversees our compensation policies and practices, including whether such policies and practices balance risk-taking and rewards in an appropriate manner as discussed further below.

 

 

  Governance and Nominating Committee

  

   Oversees the assessment of each member of the Board’s independence, as well as the effectiveness of our Corporate Governance Principles and Board of Directors’ Code of Conduct.

 

 

 

At each regular meeting, or more frequently as needed, the Board considers reports from each of the committees set forth above, which reports may provide additional detail on risk management issues and management’s response.

Board Meetings

 

 

The Board held seven meetings in 2017 and all of the directors attended at least 75% of the total number of meetings of the Board and committees on which they served. Wanda M. Austin was appointed to the Board effective in December 2017 and attended all meetings of the Board and committees on which she served after the date of her

appointment. It is the Company’s policy that all current directors attend our annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. Thirteen of the then-current members of the Board were present at our 2017 annual meeting of stockholders, or 2017 Annual Meeting.

 

 

Communication With the Board

 

 

Our annual meeting of stockholders provides an opportunity each year for stockholders to ask questions of, or otherwise communicate directly with, members of the Board on appropriate matters. In addition, stockholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Secretary, to be inappropriate for submission to the intended recipient(s). Examples of stockholder communications that would be considered inappropriate for submission to the Board include, without limitation, customer complaints, solicitations, communications that do

not relate directly or indirectly to our business or communications that relate to improper or irrelevant topics. The Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the Governance Committee.

For information on our engagement with our stockholders since the 2017 Annual Meeting, please see page 38 of our Compensation Discussion and Analysis.

 

 

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Board Committees and Charters

 

 

The Board has four key standing committees: Governance Committee; Audit Committee; Compliance Committee; and Compensation Committee. The Compensation Committee has delegated certain responsibilities to an Equity Award Committee. In addition, an Executive Committee of the Board has all of the powers and authority of the Board in the management of our business and affairs, except with respect to certain enumerated matters, including Board composition and compensation, changes to our Certificate of Incorporation or any other matter expressly prohibited by law or our Certificate of Incorporation.

The Executive Committee did not meet in 2017. The Board maintains charters for each of these standing committees. In addition, the Board has adopted a written set of Corporate Governance Principles and a Board of Directors’ Code of Conduct that generally formalize practices we have in place. To view the charters of our standing Board committees, our Corporate Governance Principles and the Board of Directors’ code of conduct, please visit our website at www.amgen.com.

 

 

 

Governance and Nominating Committee

 

Current Members:

Greg C. Garland (Chair)

David Baltimore

Robert A. Eckert

Frank C. Herringer

Ellen J. Kullman

Ronald D. Sugar

R. Sanders Williams

 

Number of Meetings Held in 2017: 5

 

Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the Securities and Exchange Commission, or SEC.

      

 

Description and Key Responsibilities:

 

   Determines Board membership qualifications and maintains, with the approval of the Board, guidelines for selecting nominees to serve on the Board and considering stockholder recommendations for nominees. Such guidelines are included in this proxy statement as Appendix A.

 

   Selects, evaluates and recommends to the Board nominees to stand for election at the annual meeting of stockholders and to fill vacancies as they arise as more fully described in “Director Qualifications and Review of Board Diversity” below.

 

   Reviews the performance of the Board and its committees and is responsible for director education.

 

   Recommends to the Board nominees for appointment as executive officers and certain other officers.

 

   Evaluates and makes recommendations to our Board regarding compensation for non-employee Board members. Any Board member who is also an employee of the Company does not receive separate compensation for service on the Board.

 

   Oversees the Board’s Corporate Governance Principles and a code of conduct applicable to members of the Board and monitors the independence of the Board.

 

Director Qualifications and Review of Board Diversity

 

 

Our Governance Committee is responsible for determining Board membership qualifications and for selecting, evaluating and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. The Governance Committee reviews periodically with the Board the composition and size of the Board, each committee’s performance and makes recommendations, as necessary, so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity advisable for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.

The Governance Committee maintains guidelines for selecting nominees to serve on the Board and for considering stockholder recommendations for nominees. The Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations are included in this proxy statement as Appendix A. Among other things, Board

members should possess demonstrated breadth and depth of management and leadership experience, financial and/or business acumen or relevant industry or scientific experience, integrity and high ethical standards, sufficient time to devote to the Company’s business, the ability to oversee, as a director, the Company’s business and affairs for the benefit of our stockholders, the ability to comply with the Amgen Board of Directors Code of Conduct and a demonstrated ability to think independently and work collaboratively. In addition, although the Governance Committee does not maintain a diversity policy, the Governance Committee considers diversity in its determinations. Diversity includes race, ethnicity, age and gender and is also broadly construed to take into consideration many other factors, including industry knowledge, operational experience and scientific and academic expertise, geography and personal backgrounds.

 

 

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Regular Board and Committee Evaluations

 

The Board and the Audit, Compensation, Compliance and Governance Committees each have an annual evaluation process which focuses on their roles, effectiveness, and fulfillment of their fiduciary duties.

 

  1.  

   Initiation   

 

Formal annual anonymous evaluations of the full Board as well as the Audit, Compensation, Compliance, and Governance Committees are compiled and distributed

  Overseen by the Governance Committee

 

   

  2.

   Evaluation and  Assessment   

 

Directors provide feedback regarding Board or committee –

  Composition and structure

  Role and effectiveness

  Fulfillment of fiduciary duties

  Meetings and materials

  Board interaction with management

 

   

  3.

   Review   

 

  The lead independent director speaks with each member of the Board for one-on-one discussion

  Each committee and the full Board conduct separate discussions in executive session

 

   

  4.

   Incorporation of Feedback   

 

Follow-up items are addressed at subsequent Board or committee meetings and any committee actions are reported back to the full Board

 

 

 

The Audit, Compensation, Compliance and Governance Committees each completed their assessments in October 2017 for further evaluation by the Governance Committee in December 2017. The Board completed  its  evaluation  in  December  2017.  Each  committee  and  the

Board was satisfied with its performance and each was considered to be operating effectively, with appropriate balance among governance, oversight, strategic and operational matters.

 

 

Director Independence

 

 

At least annually, the Governance Committee reviews the independence of each non-employee director and makes recommendations to the Board and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence.

The Board has determined that each of our non-employee directors is and Frank J. Biondi, Jr. and Judith C. Pelham, who served as directors during part of 2017, were independent during 2017 under The NASDAQ Stock Marketing listing standards and the requirements of the SEC. The Board also determined that Brian J. Druker, who is standing for initial election to the Board, is independent. Mr. Bradway is not independent based on his service as our CEO and President. Mr. Bradway is the only director who also serves us in a management capacity. In making its independence determinations, the Board reviewed direct and indirect transactions and relationships between each director, or any member of his or her immediate family, and us or one of our subsidiaries or affiliates based on information provided by the director, our records and publicly available information.

All of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the business transactions, donations or grants involved an amount that (i) exceeded the greater of

5% of the recipient entity’s revenues or $200,000 with respect to transactions where a director or any member of his or her immediate family or spouse served in any capacity or (ii) exceeded $10,000 with respect to professional or consulting services provided by entities at which directors serve as professors or employees. The following types and categories of transactions, relationships and arrangements were considered by our Board in making its independence determinations:

 

 

Each of the independent directors (or their immediate family members) currently serves or has previously served within the last three years as a professor, trustee, director, or member of a board, advisory board, council or committee for one or more colleges, universities or non-profit, charitable organizations, including research or scientific institutions, to which The Amgen Foundation, Inc. has made matching donations under our Amgen matching gift program that is available to all of our employees and directors, or has made grants.

 

 

Each of the independent directors (or their immediate family members) currently serves or has previously served within the last three years as a member of the board of directors or the board of trustees or an advisory board for an entity with which Amgen has business transactions or to which Amgen makes donations or grants. The business transactions include, among other things,

 

 

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purchasing supplies, equipment and software licenses, payment of fees and expenses relating to repair and maintenance, utilities, clinical trials, research and development and training, sponsorship of healthcare programs and conferences and investment management, financial advisory and consulting services.

 

 

Drs. Baltimore, Druker, Henderson, Jacks and Williams currently serve as professors for universities to which Amgen has made payments for certain business transactions such as symposiums, conferences and exhibits, postdoctoral research programs, clinical

   

trials, training and research and development, software licenses and maintenance, as well as for grants.

None of the directors directly or indirectly provides any professional or consulting services to us and none of the directors currently has or has had any direct or indirect material interest in any of the above transactions and arrangements. The Board determined that these transactions and arrangements did not warrant a determination that the director was not independent.

 

 

Governance Committee Processes and Procedures for Considering and Determining Director Compensation

 

 

The Governance Committee has the authority to evaluate and make recommendations to our Board regarding director compensation.

 

 

The Governance Committee conducts this evaluation periodically by reviewing our director compensation practices against the practices of an appropriate peer group and the Governance Committee may determine to make recommendations to our Board regarding possible changes to director compensation. The Governance Committee conducted such an assessment in 2017 and no changes were made to director compensation.

 

 

The Governance Committee has the authority to retain consultants to advise on director compensation matters. During 2017, the

   

Governance Committee engaged Frederic W. Cook and Co., or Cook & Co., to provide advice regarding director compensation. Cook & Co. reported directly to the Governance Committee and attended the Governance Committee meeting to evaluate director compensation. No executive officer has any role in determining or recommending the form or amount of director compensation.

 

 

The Governance Committee has authority to delegate any of these functions to a subcommittee of its members. No delegation of this authority was made in 2017.

 

 

 

Audit Committee

 

Current Members:

Charles M. Holley, Jr.* (Chair)

(since February 2017 and appointed Chair October 2017)

Wanda M. Austin (since December 2017)

François de Carbonnel*

Fred Hassan*

Rebecca M. Henderson

Frank C. Herringer* (served as Chair from 2017 Annual Meeting to October 2017)

Tyler Jacks

Ellen J. Kullman*

 

*Audit Committee financial expert

 

Others Who Served in 2017:

Frank J. Biondi, Jr. (Chair until retirement at 2017 Annual Meeting)

Judith C. Pelham (until retirement at 2017 Annual Meeting)

 

Number of Meetings Held in 2017: 9

 

Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the SEC, including the requirements regarding financial literacy and sophistication.

 

      

 

Description and Key Responsibilities:

 

   Oversees our accounting and financial reporting process and the audits of the financial statements, as required by NASDAQ.

 

   Assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of our financial accounting and reporting, the underlying internal controls and procedures over financial reporting, and the audits of the financial statements.

 

   Has sole authority for the appointment, compensation, retention and oversight of the work of the independent registered public accountants.

 

   Reviews and discusses, prior to filing or issuance, with management and the independent registered public accountants (when appropriate) our audited consolidated financial statements to be included in our Annual Report on Form 10-K and earnings press releases.

 

   Approves all related party transactions, as required by NASDAQ.

        

 

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Corporate Responsibility and Compliance Committee

 

Current Members:

Ronald D. Sugar (Chair)

Wanda M. Austin (since December 2017)

David Baltimore

François de Carbonnel

Rebecca M. Henderson

Charles M. Holley, Jr. (since February 2017)

R. Sanders Williams

 

Number of Meetings Held in 2017: 5

 

Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the SEC.

      

 

Description and Key Responsibilities:

 

   Oversees our compliance program and reviewing our programs in a number of areas governing ethical conduct including:

 

-  U.S. Federal health care program requirements;

 

-  U.S. Food and Drug Administration requirements and other regulatory agency requirements, including good manufacturing, clinical and laboratory practices, drug safety and pharmacovigilance activities;

 

-  interactions with members of the healthcare community;

 

-  the Company’s Corporate Integrity Agreement;

 

-  anti-bribery/anti-corruption activities;

 

-  environment, health and safety;

 

-  information security, including cybersecurity; and

 

-  human resources and government affairs.

 

   Receives regular updates on pricing and access, political, social and environmental trends, and public policy issues that may affect our reputation, including our business or public image, and reviews our sustainability, political and philanthropic activities.

 

About Our Compliance Program

 

 

Amgen’s Compliance Program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. The key objectives of our compliance program operations include:

 

 

developing policies and procedures;

 

 

providing ongoing compliance training and education;

 

 

auditing and monitoring of compliance risks;

 

 

maintaining and promoting avenues for staff to raise concerns, including anonymously through a business conduct hotline;

 

conducting investigations;

 

 

responding appropriately to any compliance violations; and

 

 

taking appropriate steps to detect and prevent recurrence.

Our Chief Compliance Officer, who reports to the CEO, oversees the ongoing operations of the compliance program.    

 

 

Codes of Ethics and Business Conduct

 

 

Our Board has adopted two codes of business conduct and ethics, one that applies to our directors and a second that applies to our directors and all of our staff members, including our executive officers. We also have a code of ethics for senior financial officers. To view our codes of business conduct, please visit our website at www.amgen.com. We intend to disclose any future amendments to

certain provisions of our codes of business conduct and ethics, or waivers of such provisions, applicable to our directors and executive officers, at the same location on our website identified above. There were no waivers of any of the codes of business conduct or the codes of ethics in 2017.

 

 

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Table of Contents
       

 

 

 

 

Corporate Governance

 

 

 

 

 

Our Environmental Sustainability and Social Responsibility Efforts

 

 

We have demonstrated our commitment to environmentally responsible operations by reducing our impact on the environment in multiple areas of our global business. Our next-generation biomanufacturing facility in Singapore dramatically reduces the scale and costs of making biologics, vastly reduces water and energy use, while maintaining a reliable, high-quality, compliant supply of medicines. We earned placement on the Dow Jones Sustainability World Index for the fourth year in a row and on the North America Index for the fifth year in a row. Our Responsibility Highlights Report is available online on the Company’s website at www.amgen.com/responsibility. Further, we are a signatory to the United Nations Global Compact, a voluntary initiative based on commitments to implement universal sustainability principles and take steps to support United Nations goals.

Amgen is committed to assisting patients with no or limited drug coverage to access the medicines they need. We provide patient support and education programs and help patients in financial need access our medicines. We partner with payers to share risk and accountability for health outcomes, and help patients access the medicines they need without significant financial burden. We have been at the forefront of developing innovative contracting and

partnerships designed to improve population health and patient access, as well as outcomes-based and risk-sharing approaches that directly link the price of our medicines to their effectiveness.

Through our Amgen Foundation, established in 1991, we seek to advance excellence in science education to inspire the next generation of innovators, and invest in strengthening communities where our staff members live and work. The Amgen Foundation has contributed approximately $300 million to non-profit organizations across the world that reflect our core values and complement Amgen’s dedication to impacting lives in inspiring and innovative ways. We have also provided support following devastating disasters, including, for example, the contribution of immediate relief and reconstruction efforts in Puerto Rico to address the impact of Hurricane Maria. Moreover, through a twelve-year, $50 million commitment from the Amgen Foundation, the Amgen Scholars Program makes it possible for young scientists across the globe to engage in cutting-edge research experiences and learn more about biotechnology and drug discovery. Additionally, the Amgen Foundation supports the Amgen Biotech Experience, an innovative science education program that empowers high school and middle school teachers to bring biotechnology into their classrooms.

 

 

 

Compensation and Management Development Committee

 

Current Members:

Robert A. Eckert (Chair)

Greg C. Garland

Fred Hassan

Tyler Jacks

 

Others Who Served in 2017:

Frank C. Herringer (Chair until 2017 Annual Meeting)

Frank J. Biondi, Jr. (until retirement at 2017 Annual Meeting)

Judith C. Pelham (until retirement at 2017 Annual Meeting)

 

Number of Meetings Held in 2017: 5

 

Independent Compensation Consultant: Frederic W. Cook & Co., or Cook & Co.

 

Each member has been determined by the Board to be independent under The NASDAQ Stock Market listing standards and the requirements of the SEC.

 

       

 

 

 

Description and Key Responsibilities:

 

   Assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of the Company’s compensation plans, policies and programs with a focus on encouraging high performance, promoting accountability and adherence to Company values and aligning with the interests of the Company’s stockholders.

 

   Reviews all executive officer compensation.

 

   Responsible for ensuring that the executive management development processes attract, develop and retain talented leadership to serve the long-term best interests of the Company and overseeing succession planning for senior management.

 

   Oversees the Board’s relationship with stockholders on executive compensation matters, including stockholder outreach efforts, stockholder proposals, advisory votes, communications with proxy advisory firms and related matters.

 

     

 

Executive Compensation Website

We maintain a website accessible throughout the year at www.amgen.com/executive  compensation, which provides a link to our most recent proxy statement and invites our  stockholders to fill out a survey to provide input and feedback to the Compensation Committee  regarding our executive compensation policies and practices.

 

     
     

 

Equity Award Committee – 4 Meetings Held

Determines equity-based awards to non-Section 16 officers, vice presidents and below  consistent with the equity grant guidelines established by the Compensation Committee.

 

Current Members:

Robert A. Eckert (Chair), Robert A. Bradway, Greg C. Garland

Frank C. Herringer (Chair and member until 2017 Annual Meeting)

 

         

 

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Corporate Governance

 

 

 

 

 

Compensation Committee Processes and Procedures for Considering and Determining Executive Compensation in 2017

 

 

 

With respect to our CEO, by the first calendar quarter of each year, the Compensation Committee reviews and approves Company performance goals and objectives for the current year and evaluates the CEO’s performance for the previous year in light of the Company performance goals and objectives established for the prior year. The Compensation Committee evaluates the performance of the CEO within the context of the financial and operational performance of the Company, considers competitive market data and establishes the CEO’s compensation based on this evaluation. The values of each component of total compensation (base salary, target annual cash incentive awards, and equity awards) for the current year, as well as total annual compensation for the prior year (including the value of equity holdings, potential change of control payments and vested benefits under our Retirement and Savings Plan, Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan as of the end of the last fiscal year) are considered at this time. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session.

 

 

During 2017, the Compensation Committee engaged Cook & Co. to provide advice regarding executive compensation and executive compensation trends and developments, compensation designs and equity compensation practices, market data as requested, and opinions on the appropriateness and competitiveness of our executive compensation programs relative to market practice. Cook & Co. reported directly to the Compensation Committee and attended regularly scheduled meetings of the Compensation Committee (including meeting in executive session with the Compensation Committee, as requested). Each year the Compensation Committee reviews the independence of Cook & Co., an independent compensation consultant, and whether any conflicts of interest exist. After review and consultation with Cook & Co., the Compensation Committee has determined that Cook & Co. is independent and there is no conflict of interest resulting from retaining Cook & Co. currently or during the year ended December 31, 2017. In performing its analysis, the Compensation Committee considers the factors set forth in the SEC rules and The NASDAQ Stock Market listing standards.

 

 

In cooperation with management, Cook & Co. assesses the potential risks arising from our compensation policies and practices. Management interacts with the consultant to provide information or the perspective of management as requested by the consultant or Compensation Committee, coordinates payment to the consultant out of the Board’s budget, notifies the consultant of upcoming agenda items and makes the consultant aware of regular or special meetings of the Compensation Committee.

 

 

In setting executive compensation, the Compensation Committee compares the Company’s pay levels and programs to those of the Company’s competitors for executive talent and uses this comparative data as a guide in its review and determination of compensation. Our Compensation Committee considers and selects an appropriate peer group (consisting of biotechnology and pharmaceutical companies), based, in part, on the recommendations of Cook & Co., and, for each Named Executive Officer, or NEO, the Compensation Committee reviews the compensation levels and practices of our peer group, which for our NEOs, other than the CEO, are based on reports prepared by management from information contained in compensation surveys and proxy statements. Cook & Co. provides the Compensation Committee with market data, the practices of our peer group and recommendations for the CEO position.

 

 

Our Compensation Committee determines compensation for the executive officers (other than the CEO) based, in part, on the recommendations of our CEO regarding base salary, annual cash incentive awards, and equity awards. In determining his compensation recommendations for each NEO, our CEO reviews comparative peer group data. The Compensation Committee has typically followed these recommendations.

 

 

The Compensation Committee generally holds executive sessions (with no members of management present, unless requested by the Compensation Committee) at its regular meetings.

 

 

The Compensation Committee has authority to delegate any of the functions described above to a subcommittee of its members. No delegation of this authority was made in 2017.

 

 

Pay Ratio

 

 

Following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our other staff members, calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. The Company determined our median employee based on total direct compensation paid to all of our staff members worldwide (consisting of approximately 20,600 individuals) recorded in our global systems as of November 1, 2017. Total direct compensation included base salary (wages earned based on our payroll records), annual cash incentive awards  earned  for  the period (and target sales incentive awards for our sales force), and the

annual grant value of long-term incentive, or LTI, equity awards during 2017. Earnings of our staff members outside of the U.S. were converted to U.S. dollars using the currency exchange rate as of November 1, 2017. No cost-of-living adjustments were made. We then determined the annual total compensation of our median employee for 2017 which was $132,930. As disclosed in the “Summary Compensation Table” appearing on page 64, our CEO’s annual total compensation for 2017 was $16,899,789. Based on the foregoing, the ratio of the annual total compensation of our CEO to that of the median staff member was 127 to 1.

 

 

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Table of Contents
       

 

 

 

 

Corporate Governance

 

 

 

 

 

Compensation Risk Management

 

 

On an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company. The results of this assessment are reviewed and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and our Company performance goals, our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on us. In evaluating our compensation policies and practices, a number of factors were identified which the Company, the Compensation Committee and its independent consultant believe discourage excessive risk-taking, including the factors described below:

 

 

Our compensation programs consist of a mix of incentives that are tied to varying performance periods and are designed to balance our need to drive our current performance with the need to position the Company for longer-term success.

 

 

Of this mix of incentives, Company-wide results are the most important factor in determining the amount of an annual cash incentive award for each of our staff members. Additionally, we cap short-term incentives and make LTI equity awards a component of compensation for nearly all of our full-time staff members. In particular, the CEO and the other executive officers participate in compensation plans that are designed so that the largest component of their compensation is in the form of LTI equity awards to ensure that a significant portion of their compensation is associated with long-term, rather than short-term, outcomes, which aligns these individuals’ interests with our stockholders.

 

 

We employ appropriate practices with respect to equity awards: we do not award mega-grants, discounted stock options or immediately vested stock options to staff members; we have grant guidelines that generally limit the grant date for our equity grants to the third business day after our announcement of quarterly earnings.

 

 

We have robust stock ownership guidelines for vice presidents and above that require significant investment by these individuals in our Common Stock.

 

 

We require that each officer who has not met his or her required ownership guidelines retain shares of our Common Stock acquired through the vesting of restricted stock units, the payout of performance units, and the exercise of stock options awarded on or after December 15, 2015, net of shares retained by us to satisfy associated tax withholding requirements and exercise price amounts, until such officer has reached his or her required stock ownership level.

 

 

Our Company values and leadership behaviors are an integral part of the performance assessments of our staff members and are particularly emphasized in our assessment tools at higher positions. These evaluations serve as an important information tool and basis for compensation decisions.

 

 

The Compensation Committee retains full discretion to reduce or eliminate annual cash incentive awards to our executive officers and can and has modified awards downwards.

 

 

We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.

 

 

We have recoupment provisions that expressly allow the Compensation Committee or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award.

 

 

Our Insider Trading Policy prohibits pledging or purchasing of our Common Stock on margin and hedging the economic risk of our Common Stock.

 

 

Compensation Committee Report

 

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the

Company’s 2018 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

 

Compensation Committee of the Board of Directors

Robert A. Eckert, Chairman

Greg C. Garland

Fred Hassan

Tyler Jacks

 

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Item 2 — Advisory Vote to Approve Our Executive Compensation

 

 

 

 

 

Item 2

Advisory Vote to Approve Our Executive Compensation

 

 

This advisory stockholder vote, commonly known as “Say on Pay,” gives you, as a stockholder, the opportunity to endorse or not endorse our executive pay program and policies. Accordingly, you are being asked to vote on the compensation of our Named Executive Officers, or NEOs, as disclosed in the Compensation Discussion and Analysis (pages 32 through 63) and related compensation tables and the narrative in this proxy statement (pages 64 through 78).

Our executive compensation program is designed to achieve the following objectives:

 

 

Pay for performance in a manner that strongly aligns with stockholder interests by rewarding both our short-and long-term measurable performance.

 

Drive implementation of our business strategy and position our staff to execute on our strategic priorities in the near- and longer-term.

 

 

Attract, motivate and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success and their contributions to this success.

 

 

Mitigate compensation risk by maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value.

 

 

Consider all Amgen staff members in the design of our executive compensation programs, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success.

 

 

We Have Implemented Compensation Best Practices

 

 

 

What we do

 

 

 

A substantial majority of NEO compensation is performance-based and at-risk

 

 

Clawback policy tied to financial restatement

 

 

Recoupment in the case of misconduct causing serious financial or reputational damage

 

 

Robust stock ownership and retention guidelines

 

 

Minimum vesting periods

 

 

Double-trigger for stock options and restricted stock units in the event of a change of control

 

 

Long-term performance-based equity awards (80% of total equity)

 

 

Independent compensation consultant

 

What we don’t do

 

 

×  

No re-pricing or backdating

 

×  

No tax gross-ups (except in connection with relocation)

 

×  

No excessive perks

 

×  

No employment agreements

 

×  

No dividends paid on unvested equity

 

×  

No defined benefit pension or supplemental executive retirement plan (SERP) benefits

 

 

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Item 2 — Advisory Vote to Approve Our Executive Compensation

 

 

 

 

 

2017 Executive Compensation Was Aligned With Our Strategy and Performance

 

As discussed more fully in our Compensation Discussion and Analysis starting on page 32, a significant majority of each NEO’s compensation is at-risk and dependent on our performance and execution of our strategic priorities and the compensation objectives discussed above.

2017 Target Total Direct Compensation Mix

 

 

LOGO

2017 Award Allocation and Performance

2017 Annual Cash Incentive Program

Our annual cash incentive award program compensation is tied directly to our performance based on pre-established financial and operating performance goals that support execution of our strategic priorities. The table below illustrates the weighting of each goal and our actual performance for 2017. Based on our overall performance in 2017 compared to the pre-established Company performance goals, we paid annual cash incentive awards at 115% of target bonus opportunity, a decrease of 44.5 percentage points from our 2016 payout of 159.5% of target bonus opportunity. The following is a summary of our progress against these goals and our strategic priorities. See the Compensation Discussion and Analysis for an expanded discussion.

 

Goal    Weighting      % of Target 
Earned 
 

 

1. Financial Performance

 

 

Revenues

 

  

 

 

 

 

30%

 

 

 

 

  

 

 

 

 

110.6%

 

 

 

 

 

Non-GAAP Net Income(1)

 

  

 

 

 

 

30%

 

 

 

 

  

 

 

 

 

116.8%

 

 

 

 

 

2. Progress Innovative Pipeline

 

 

Execute Key Clinical Studies and Regulatory Filings

 

  

 

 

 

 

20%

 

 

 

 

  

 

 

 

 

123.0%

 

 

 

 

 

Advance Early Pipeline

 

  

 

 

 

 

5%

 

 

 

 

  

 

 

 

 

201.7%

 

 

 

 

 

3. Deliver Annual Priorities

 

 

Execute Critical Launches and Long-Term Commercial Objectives

 

  

 

 

 

 

10%

 

 

 

 

  

 

 

 

 

76.0%

 

 

 

 

 

Realize Functional Transformation Objectives

 

  

 

 

 

 

5%

 

 

 

 

  

 

 

 

 

90.4%

 

 

 

 

 

Composite Score

  

 

 

 

Achieved 115.0%

 

 

 

(1) 

Non-Generally Accepted Accounting Principles, or non-GAAP, net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

 

10% 75% 15% At Risk 18% 64% 18% At Risk Long-term Incentive Equity Awards Target Annual Cash Incentive Base Salary CEO 90% Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk 69% Performance based

 

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Item 2 — Advisory Vote to Approve Our Executive Compensation

 

 

 

 

 

ª   We Delivered on Our Financial Performance Goals.

 

   

Our non-GAAP net income(1) grew 5% to $9.2 billion in 2017, driven by lower expenses, including transformation and process improvement savings, and increased interest income from higher cash balances partially offset by investments to grow our business, including launching and maintaining new products, building out new therapeutic areas, advancing our biosimilars business and increasing our global presence.

 

   

Revenues were $22.8 billion in 2017, a slight decrease from 2016 despite increased competition for many of our largest products, several of which have lost patent protection. Actual performance was strong as 2017 reported product sales declined by less than $100 million (0.4%) compared to 2016 reported sales.

ª    We Progressed Our Pipeline.

Our medicines treat serious illnesses. In 2017, we have progressed important product candidates in all six of our therapeutic areas.

Executing Key Clinical Studies and Regulatory Filings.

Innovative Portfolio Developments.

 

   

Bone Health. For Prolia®, our medicine for patients with osteoporosis, we filed a supplemental BLA(2) with the FDA(3) based on Phase 3 study data that demonstrated that Prolia treatment led to greater increases in bone mineral density in patients with glucocorticoid-induced osteoporosis compared with risedronate.

 

   

Cardiovascular. For Repatha®, this therapy was approved by the FDA:

 

  -  

as the first PCSK9 inhibitor to prevent heart attacks, strokes, and coronary revascularizations in adults with established cardiovascular disease; and

 

  -  

to be used as an adjunct to diet, alone or in combination with other lipid-lowering therapies, such as statins, for the treatment of adults with primary hyperlipidemia to reduce low-density lipoprotein cholesterol.

In 2018, the CHMP(4) of the EMA(5) adopted a positive opinion for the Marketing Authorization to include similar indications.

 

   

Oncology/Hematology.

 

  -  

For KYPROLIS®, our medicine for patients with relapsed or refractory multiple myeloma, we reported three positive Phase 3 studies – two of which demonstrated that different KYPROLIS regimens improved overall survival as compared to other therapeutic regimens. One set of overall survival data has been approved by the FDA for inclusion in the label and recommended for inclusion by the CHMP of the EMA and the other set is under consideration for inclusion by both regulators.

 

  -  

For XGEVA®, our medicine for the prevention of fractures and other skeletal-related events, in 2018 the FDA approved a supplemental BLA for the prevention of skeletal-related events in patients with multiple myeloma and the European Commission approved a variation to the Marketing Authorization to include a similar indication.

 

  -  

For BLINCYTO®, our medicine for patients with acute lymphoblastic leukemia, or ALL, the FDA approved a supplemental BLA to include overall survival data from the Phase 3 TOWER study and expanded the indication to the treatment of relapsed or refractory B-cell precursor ALL in adults and children. In 2018, the FDA approved a supplemental BLA for the treatment of minimal residual disease in adults and children with B-cell precursor ALL.

 

  -  

For Vectibix®, our medicine for patients with colorectal cancer, the FDA approved a supplemental BLA for Vectibix as a first-line therapy in combination with FOLFOX and as a monotherapy following disease progression after prior treatment with chemotherapies for patients with wild-type RAS metastatic colorectal cancer.

 

   

Neuroscience. For Aimovig(6), our medicine being developed to prevent migraine, based on multiple positive studies demonstrating that Aimovig reduced the number of migraine days for patients with episodic and chronic migraine, we submitted a BLA to the FDA.

 

   

Inflammation. For tezepelumab(7), our medicine being developed for asthma, we reported that Phase 2b trial results demonstrated that tezepelumab significantly reduced asthma exacerbations in patients with uncontrolled asthma and initiated a Phase 3 study in early 2018.

 

   

Nephrology. For Parsabiv, we received FDA approval for the treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease on hemodialysis. We launched Parsabiv in the U.S. in January 2018 and continue to launch in new markets throughout the world.

 

(1)

Non-GAAP net income is reported and reconciled in Appendix B.

(2)

Biologics License Application.

(3)

U.S. Food and Drug Administration.

(4)

Committee for Medicinal Products for Human Use.

(5)

European Medicines Agency.

(6)

Jointly developed in collaboration with Novartis AG.

(7)

Jointly developed in collaboration with AstraZeneca plc.

 

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Item 2 — Advisory Vote to Approve Our Executive Compensation

 

 

 

 

 

Biosimilars Portfolio Developments.

 

   

The FDA approved MVASI(1) (biosimilar bevacizumab (Avastin®)) for the treatment of five types of cancer, the first ever biosimilar to fight cancer approved by the FDA, and the European Commission granted Marketing Authorization in January 2018.

 

   

The European Commission granted Marketing Authorization for AMGEVITA (biosimilar adalimumab (HUMIRA®)) in all available indications. We expect to begin launching AMGEVITA in Europe in 2018.

 

   

We submitted a BLA to the FDA and, in 2018, the CHMP of the EMA adopted a positive opinion for the Marketing Authorization for ABP 980(1) (biosimilar trastuzumab (Herceptin®)).

ª   We Advanced Our Early Pipeline.

 

   

Generated 11 product teams (formed when a molecule has the potential to be safe and effective in humans), a record number for our Company.

 

   

Initiated 4 first-in-human studies.

 

   

Advanced AMG 301(2), our medicine being investigated for migraine prevention, into Phase 2.

 

ª    

We Delivered on Our Annual Priorities to Execute Critical Launches and Long-Term Commercial Objectives.

 

   

Prolia worldwide sales increased in 2017 by 20% year-over-year. Prolia is the leading osteoporosis therapy today. There are 3.5 million patients worldwide taking Prolia, and the demand for it continues to grow.

 

   

We increased Repatha U.S. net sales and average annual total prescriptions share, as well as E.U. average annual market share. Our focus remains on enabling access to Repatha for appropriate patients as hurdle rates for access and reimbursement for patients remain high.

 

   

We increased KYPROLIS U.S. and ex-U.S. net sales. Our clinical development program has delivered overall survival results in support of KYPROLIS as a backbone therapy for multiple myeloma.

ª    We Realized Our Functional Transformational Objectives.

 

   

We realized approximately $400 million in savings as a result of initiatives at the Company level as well as activities within each function designed to transform approaches and improve processes with specific savings targets established for each area.

 

   

Together with our progress this year, since 2014, we have realized approximately $1.5 billion of transformation and process improvement savings. These savings were reinvested in product launches, clinical programs and external business development. Consequently, net savings in the same period have not been significant.

Further Progress on Our Strategic Priorities

 

 

Capitalizing on our expansion activities, we secured 80 product country launches.

 

 

While investing $3.6 billion in research and development, we also returned a total of $6.5 billion of capital to our stockholders through dividends and stock repurchases.

 

 

We have built leading patient- and provider-friendly device capabilities to enhance patient experience and to differentiate our product, including the Enbrel Mini™ single-dose prefilled cartridge with AutoTouch™ reusable auto-injector and the Neulasta® Onpro® kit.

 

 

We made investments in next-generation biomanufacturing that build on our existing industry leadership in biologic manufacturing. This next-generation biomanufacturing dramatically reduces the scale and costs of making biologics while maintaining a reliable, high-quality, compliant supply of medicines. In 2017, our new Singapore facility that utilizes the next-generation biomanufacturing approach was approved for certain commercial scale production by multiple regulatory agencies, including the FDA and the EMA.

Long-Term Incentive Performance Award Program

Our long-term incentive, or LTI, equity award compensation is tied directly to our stock performance and aligns with the interests of our stockholders.

 

Long-Term Incentive Program

 

  

 

Equity
Weighting

 

    

% of Target 
Earned 

 

 

 

Performance Units

 

  

 

 

 

50%

 

 

  

 

93.4% 

 

(2015-2017 performance period)

 

             

 

(1) 

Jointly developed in collaboration with Allergan plc.

(2) 

Jointly developed in collaboration with Novartis AG.

 

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Item 2 — Advisory Vote to Approve Our Executive Compensation

 

 

 

 

 

 

Performance units earned for the 2015-2017 performance period (January 30, 2015 to January 30, 2018) were based on an earned payout percentage of 93.4% reflecting the Company’s three-year total shareholder return, or TSR, performance at the 46.7th percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, since the beginning of the performance period. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively). Separately, but of note, Amgen’s 2015-2017 three year TSR (30.0%) outperformed that of the average TSR of our 2017 peer group (11.6%).

 

 

The 2015-2017 performance period of the performance award program is the last performance period that is earned based solely on our relative TSR performance. Commencing in 2016, and continuing in 2017 and 2018, our outstanding LTI equity award performance units are earned based on our financial performance as measured under annual financial measures, equally weighted with the resulting average earnout percentage increased or decreased by our relative TSR performance against the companies in the S&P 500 for the performance period that commences with the grant date and continues through December 31 of the last year of the relevant three-year performance period. The annual financial performance goals for each of the three years in the performance period are established at the commencement of the three-year performance period.

 

 

While retaining most of the elements of the 2016-2018 performance period goal design, the Compensation and Management Development Committee, or Compensation Committee, replaced non-GAAP operating expense with non-GAAP return on invested capital, or ROIC, for the third year (2019) of the 2017-2019 performance period. The Compensation Committee’s replacement of non-GAAP operating expense with non-GAAP ROIC as one of the three financial performance measures (in addition to non-GAAP earnings per share and non-GAAP operating margin) in the third year of the 2017-2019 performance period is designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018.

Positive 2017 Say on Pay Vote Outcome and Engagement With Our Stockholders

 

 

In 2017, we received approximately 95% stockholder support on our say on pay advisory vote. Consistent with our broad direct stockholder outreach over the past several years, since our 2017 annual meeting of stockholders, in addition to our outreach by our executives and our   Investor   Relations   department   to   investors,   we   have   engaged in   governance-focused   outreach   activities   and   discussions   with

stockholders comprising approximately 52% of our outstanding shares. The compensation-related feedback is reviewed by our Compensation Committee. We have made a number of compensation changes in response to past discussions with our stockholders and have implemented the compensation best practices discussed below. For more detail regarding our stockholder engagement, see page 38.

 

 

Board Recommends a Vote “FOR” Our Executive Compensation

 

 

Our Board believes that our current executive compensation program aligns the interests of our executives with those of our stockholders and compensation outcomes are primarily based on the performance of our Company. We intend that our compensation programs reward actions and outcomes that are consistent with the sound operation of our Company, advance our strategy and are aligned with the creation of long-term stockholder value.

For the reasons discussed above and more fully in the Compensation Discussion and Analysis, the Board recommends that stockholders vote “FOR” the following resolution:

“Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as

disclosed pursuant to Securities and Exchange Commission rules in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure of this proxy statement.”

Although this vote is advisory and is not binding on the Board, our Compensation Committee values the opinions expressed by our stockholders and will consider the outcome of the vote when making future executive compensation decisions.

We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 2019 annual meeting of stockholders.

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Executive Compensation

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis describes our compensation strategy, philosophy, policies, programs and practices, or compensation program, for our Named Executive Officers, or NEOs, and the positions they held in 2017 below.

Table of Contents

 

 

Our Named Executive Officers

     32  

Our Strategy

     33  

Aligning Pay With Performance and Execution of Our Strategic Priorities

     34  

Positive 2017 Say on Pay Vote Outcome and Engagement With Our Stockholders

     38  

LTI Equity Award Design Changes in 2017

     39  

Our 2017 Compensation Program Highlights and Objectives

     40  

Our Compensation and Governance Best Practices

     42  

How Compensation Decisions Are Made For Our Named Executive Officers

     43  

Elements of Compensation and Specific Compensation Decisions

     46  

Compensation Policies and Practices

     59  

Non-Direct Compensation and Payouts in Certain Circumstances

     61  

Taxes and Accounting Standards

     62  

Our Named Executive Officers

 

 

Name    Title

Robert A. Bradway

  

Chairman of the Board, Chief Executive Officer and President

Anthony C. Hooper

  

Executive Vice President, Global Commercial Operations

Sean E. Harper

  

Executive Vice President, Research and Development

David W. Meline

  

Executive Vice President and Chief Financial Officer

Jonathan P. Graham

  

Senior Vice President, General Counsel and Secretary

 

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INNOVATIVE MEDICINES TRANSFORMING AMGEN FOR THE FUTURE GLOBAL GEOGRAPHIC REACH NEXT-GENERATION BIOMANUFACTURING IMPROVED DRUG DELIVERY SYSTEMS CAPITAL ALLOCATION AND INVESTING FOR LONG-TERM GROWTH BRANDED BIOSIMlLARS Innovative Medicines Transforming Amgen for the Future Global Geographic Reach Next-Generation Biomanufacturing Improved Drug Delivery Systems Capital Allocation and Investing for long-Term Growth Branded Biosimilars

 

Our Strategy

 

Six therapeutic areas form the core of our business—cardiovascular, oncology/hematology, neuroscience, inflammation, nephrology, and bone health. Our strategy in these therapeutic areas includes a series of integrated activities to strengthen our long-term competitive position in the industry. These activities include the following strategic priorities:

Our Strategic Priorities

 

 

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Key 2017 activities that align our NEO pay with performance and support the execution of these strategic priorities are summarized in the following pages.

 

 

  Strategic Priorities

 

  

Description

 

 

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Our focus on developing innovative, “breakaway” medicines to address important unmet needs guides how we allocate resources across internal and external program possibilities. This results in a productive balance of internal development and external programs and collaborations reflected in our current product portfolio and pipeline.

 

 

 

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We continue to improve our business and operating model through significant transformation and process improvement efforts. Among these programs, we have reduced the time it takes to bring new medicines to market, reengineered internal processes to make them more efficient, and explored new technologies with potential to further enhance the value we deliver to patients. Further, these transformation and process improvement efforts have resulted in significant costs savings and improved return on capital.

 

 

 

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We have been actively expanding our presence by opening new affiliates and locations around the world, pursuing appropriate acquisitions and acquiring global rights to market our products. Amgen medicines are now available to patients in approximately 100 countries worldwide. We are leveraging our global presence to deliver the potential of our products to patients globally.

 

 

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Our first next-generation biomanufacturing facility in Singapore has been constructed in less than half the time, at a quarter of the cost of a traditional facility while using 75% less space and having a much smaller impact on the environment. This facility was approved for certain commercial scale production by multiple regulatory agencies, including the FDA(1) and the EMA(2) in 2017. We are expanding our application of next-generation manufacturing in our organization. We announced in 2018 that we will invest in greater manufacturing capacity to support the volume growth that we foresee and plan to build a new drug substance manufacturing plant using our next-generation biomanufacturing capability in the U.S.

 

 

 

 

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Biologic medicines are, for the most part, injected subcutaneously or administered intravenously. Innovations that make the delivery of our medicines easier and less costly offer important opportunities for differentiation, are good for patients and also have positive economic benefits to the healthcare system overall.

 

 

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We recognize that stockholders who support investment in developing innovative medicines require an appropriate return on the capital they commit to Amgen. In 2017, we returned $6.5 billion in capital to our stockholders ($3.4 billion in dividends and $3.1 billion in stock repurchases).

 

 

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We believe our deep experience in biologics development and unparalleled capabilities in biotechnology manufacturing make entry into the emerging biosimilars market attractive and position us for leadership.

 

 

(1)

U.S. Food and Drug Administration.

(2)

European Medicines Agency.

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Aligning Pay With Performance and Execution of Our Strategic Priorities

 

 

A significant majority of each NEO’s compensation is dependent on our performance and execution of our strategic priorities. Our annual cash incentive and long-term equity incentive programs together promote focus on both near- and long-term stockholder value creation by providing incentive compensation that is earned based on our financial, operating, and stock price performance and is “at risk.” We have been pleased with the level of stockholder support we have received on our say on pay advisory vote over time, receiving in excess of 95% support over the last three years (2015-2017). In 2017, we made significant progress on our 2017 performance goals and advancing our strategic priorities, which facilitate execution of our strategy.

 

Annual Cash Incentive Program Results

 

 

Our annual cash incentive compensation program is tied directly to our performance based on pre-established financial goals (revenues (30%) and non-GAAP net income(1) (30%)), and operating performance goals (progressing our pipeline (25%) and delivering on annual priorities (15%)):

 

 

   
Goal   

Weighting

 

 

   

 

% of Target
Earned

 

Financial Performance

 

 

Revenues

 

    

 

30%

 

 

 

 

110.6%

 

 

Non-GAAP Net Income(1)

 

    

 

30%

 

 

 

 

116.8%

 

 

Progress Innovative Pipeline

 

 

Execute Key Clinical Studies and Regulatory Filings

 

    

 

20%

 

 

 

 

123.0%

 

 

Advance Early Pipeline

 

    

 

5%

 

 

 

 

201.7%

 

 

Deliver Annual Priorities

 

 

Execute Critical Launches and Long-Term Commercial Objectives

 

    

 

10%

 

 

 

 

76.0%

 

 

Realize Functional Transformation Objectives

 

    

 

5%

 

 

 

 

90.4%

 

 

Composite Score

 

    

 

Achieved  115.0%

 

1. Our financial performance was strong.

 

 

Our non-GAAP net income(1) grew 5% to $9.2 billion in 2017, driven by lower expenses, including transformation and process improvement savings, and increased interest income from higher cash balances partially offset by investments to grow our business, including launching and maintaining new products, building out new therapeutic areas, advancing our biosimilars business and increasing our global presence.

 

 

Revenues were $22.8 billion in 2017, a slight decrease from 2016 despite increased competition for many of our largest products, several of which have lost patent protection. Actual performance was strong as 2017 reported product sales declined by less than $100 million (0.4%) compared to 2016 reported sales.

2. We progressed our pipeline.

 

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We develop innovative medicines in six focused therapeutic areas that meet unmet medical needs in addressing serious illnesses. (For complete information of all of our material pipeline advancements, please refer to our Form 10-K for the year ended December 31, 2017.) In 2017, we have progressed important products and product candidates in all six of our therapeutic areas.

Bone Health Therapeutic Area

 

 

For Prolia® (our medicine for patients with osteoporosis), in 2017 positive Phase 3 study data demonstrated that Prolia treatment led to greater increases in bone mineral density in patients with glucocorticoid-induced osteoporosis compared with risedronate. We filed a supplemental BLA(2) and the FDA set a PDUFA(3) target action date of May 28, 2018.

 

 

For EVENITY™(4) (our medicine for patients with osteoporosis), the EMA accepted the Marketing Authorization Application for the treatment of osteoporosis in postmenopausal women and in men at increased risk of fracture.

 

 

 

(1)

Non-Generally Accepted Accounting Principles, or non-GAAP, net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

(2)

Biologics License Application.

(3)

Prescription Drug User Fee Act.

(4)

Jointly developed in collaboration with UCB.

 

INNOVATIVE MEDICINES

 

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Cardiovascular Therapeutic Area

Cardiovascular disease is the most costly disease for society today. In the absence of new therapies to reduce the risk of cardiovascular events for the millions of high risk patients in the U.S. and around the world, the burden of this disease is set to rapidly rise.

For Repatha® (our medicine for certain patients who are unable to get their low-density lipoprotein, or LDL, cholesterol (bad cholesterol) under control):

 

 

In early 2017, we reported results from our Phase 3 cardiovascular outcomes study of approximately 27,500 patients with atherosclerotic cardiovascular disease that demonstrated that adding Repatha to optimized statin therapy resulted in a statistically significant 20 percent reduction in major adverse cardiovascular events represented in the composite endpoint of time to first heart attack, stroke, or cardiovascular death and that the magnitude of risk reduction grew over time (an exploratory analysis showing a reduction in risk of 25 percent beyond the first year). Further, the study also demonstrated that Repatha reduced the risk of heart attack by 27 percent, the risk of stroke by 21 percent and the risk of coronary revascularization by 22 percent. Based on this data and following an expedited review by the FDA, the FDA approved Repatha as the first PCSK9 inhibitor to prevent heart attacks, strokes and coronary revascularizations in adults with established cardiovascular disease. The FDA also approved Repatha to be used as an adjunct to diet, alone or in combination with other lipid-lowering therapies, such as statins, for the treatment of adults with primary hyperlipidemia to reduce LDL cholesterol. In 2018, the CHMP(1) of the EMA adopted a positive opinion for the Marketing Authorization to include similar indications; and

 

 

Also during 2017, we performed additional analyses of the cardiovascular outcomes study that demonstrated that reducing LDL cholesterol levels with Repatha also reduced:

 

  -  

cardiovascular events in patients with diabetes;

 

  -  

the risk of cardiovascular events in a sub-group of patients with a history of stroke;

 

  -  

the risk of cardiovascular events in a sub-group of patients with a history of heart attacks; and

 

  -  

cardiovascular events in high-risk patients with peripheral artery disease.

Oncology Therapeutic Area

 

 

For KYPROLIS® (our medicine for patients with relapsed or refractory multiple myeloma), in 2017 we reported three positive Phase 3 studies:

 

  -  

ENDEAVOR(2)—confirming that a combination regimen including KYPROLIS dosed at 56 mg/m2 twice weekly extended overall survival in patients with relapsed multiple myeloma. The FDA approved adding the overall survival data from the ENDEAVOR study into the label in 2018. The CHMP of the EMA adopted a positive opinion recommending a label variation to include the ENDEAVOR overall survival data;

 

  -  

ASPIRE(3)—showing that a different combination regimen including KYPROLIS dosed at 27 mg/m2 twice weekly also significantly improved overall survival in patients with relapsed multiple myeloma. We submitted a supplemental New Drug Application to the FDA and a variation to the Marketing Authorization Application to the EMA to include the overall survival data from the ASPIRE study in the product label; and

 

  -  

ARROW(4)—showing a weekly KYPROLIS regimen dosed at 70 mg/m2 significantly improved progression free survival compared to a twice weekly regimen including KYPROLIS dosed at 27 mg/m2 in relapsed and refractory multiple myeloma patients.

 

 

For XGEVA® (our medicine for the prevention of fractures and other skeletal-related events), in 2017 we reported results from a study that demonstrated that XGEVA is non-inferior to zoledronic acid in delaying the time to first skeletal-related event in patients with multiple myeloma and in January 2018 the FDA approved XGEVA for this indication, providing a new treatment option for multiple myeloma patients for prevention of skeletal-related events without the associated kidney toxicity of currently available therapies. In 2018, the European Commission approved a variation to the Marketing Authorization to similarly expand XGEVA’s indication.

 

 

For BLINCYTO® (our medicine for patients with acute lymphoblastic leukemia, or ALL), in 2017 the FDA approved a supplemental BLA to include overall survival data from the Phase 3 TOWER study and expanded the indication to the treatment of relapsed or refractory B-cell precursor ALL in adults and children. In 2018, the CHMP of the EMA adopted a positive opinion recommending a label variation to include the same overall survival data and supported the conversion of the conditional Marketing Authorization to a full Marketing Authorization in adult patients with relapsed or refractory B-cell precursor ALL. In 2018, the FDA approved a supplemental BLA for the treatment of minimal residual disease in adults and children with B-cell precursor ALL.

 

 

 

(1)

Committee for Medicinal Products for Human Use.

(2)

RandomizEd, OpeN Label, Phase 3 Study of Carfilzomib Plus DExamethAsone Vs Bortezomib Plus DexamethasOne in Patients with Relapsed Multiple Myeloma.

(3)

CArfilzomib, Lenalidomide, and DexamethaSone versus Lenalidomide and Dexamethasone for the treatment of PatIents with Relapsed Multiple MyEloma.

(4)

RAndomized, Open-label, Phase 3 Study in Subjects with Relapsed and Refractory Multiple Myeloma Receiving Carfilzomib in Combination with Dexamethasone, Comparing Once-Weekly versus Twice-weekly Carfilzomib Dosing.

 

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Compensation Discussion and Analysis

 

 

 

 

 

 

For Vectibix® (our medicine for patients with colorectal cancer), in 2017 the FDA approved a supplemental BLA for Vectibix as first-line therapy in combination with FOLFOX and as monotherapy following disease progression after prior treatment with chemotherapies for patients with wild-type RAS metastatic colorectal cancer.

Neuroscience Therapeutic Area

 

 

For Aimovig(1) (our medicine to prevent migraine), based on multiple positive studies demonstrating that Aimovig reduced the number of migraine days for patients with episodic and chronic migraine, in 2017 we submitted a BLA to the FDA.

Inflammation Therapeutic Area

 

 

For tezepelumab(2) (our medicine being developed for asthma), we reported that Phase 2b trial results demonstrated that tezepelumab significantly reduced asthma exacerbations in patients with uncontrolled asthma. In 2018, tezepelumab advanced into Phase 3 study to evaluate its efficacy and safety in adults and adolescents with severe uncontrolled asthma.

Nephrology Therapeutic Area

 

 

For Parsabiv, in 2017 we received FDA approval for the treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease on hemodialysis.

 

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Our deep experience in biologics development and capabilities in biotechnology manufacturing positions us for success in the emerging biosimilars market. In our biosimilars portfolio in 2017, we reported:

 

 

The European Commission granted Marketing Authorization for AMGEVITA (biosimilar adalimumab (HUMIRA®)) in all available indications. We expect to begin launching AMGEVITA in Europe in 2018;

 

 

The FDA approved MVASI(3) (biosimilar bevacizumab (Avastin®)) for the treatment of five types of cancer, the first ever biosimilar to fight cancer approved by the FDA, and the European Commission granted Marketing Authorization in January 2018;

 

 

We submitted a BLA to the FDA for ABP 980(3) (biosimilar trastuzumab (Herceptin®)) and the FDA has set a Biosimilar User Fee Act target action date of May 28, 2018. In 2018, the CHMP of the EMA adopted a positive opinion for the Marketing Authorization for ABP 980; and

 

 

We are in Phase 3 for two other biosimilars – ABP 710 (biosimilar infliximab (REMICADE®)) and ABP 798(3) (biosimilar rituximab (RITUXAN®)).

3. We delivered on our annual priorities to execute critical launches and long-term commercial objectives and realize our transformational objectives.

 

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   Prolia worldwide sales in 2017 increased 20% year-over-year. Prolia is the leading osteoporosis therapy today. There are 3.5 million patients worldwide taking Prolia,

and the demand for it continues to grow by double-digit percentages.

 

 

Our focus remains on enabling access to Repatha for appropriate patients as hurdle rates for access and reimbursement for patients remain high.

 

  -  

We increased U.S. net sales and average annual total prescriptions (TRx) share, as well as E.U. average annual market share.

 

  -  

The FDA’s priority review of Repatha’s cardiovascular outcomes data resulted in changes in our label that allowed us to start promoting Repatha’s ability to reduce heart attacks and strokes with both physicians and patients in December 2017.

 

  -  

We have entered into outcomes-based contracts which provide refunds for the cost of Repatha for eligible patients who have a heart attack or stroke while on Repatha.

 

 

Our clinical development program has delivered results in support of KYPROLIS as a backbone therapy for multiple myeloma.

 

  -  

We increased U.S. and ex-U.S. net sales.

 

  -  

The addition of overall survival data to the U.S. KYPROLIS label and the CHMP of the EMA adopted a positive opinion recommending the inclusion of overall survival data from the ENDEAVOR study discussed previously.

 

  -  

KYPROLIS has established strong share in second and later lines of multiple myeloma therapy, and we expect the addition of overall survival data to strengthen its appeal to physicians, payers, and patients.

 

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We have built leading patient- and provider-friendly device capabilities to enhance patient experience and to differentiate our products. This year:

 

 

We launched the Enbrel Mini™ single-dose prefilled cartridge with AutoTouch™ reusable auto-injector, a device that is ergonomically designed to meet the needs of rheumatoid arthritis patients; and

 

 

In the U.S., the Neulasta® Onpro® kit represented approximately 60% of Neulasta sales at the end of 2017. The CHMP of the EMA issued a positive opinion in 2018 recommending a label variation for Neulasta to include the Neulasta Onpro kit – a device that combines the efficacy of Neulasta with an innovative on-body injector delivery

 

 

Branded Biosimilars INNOVATIVE MEDICINES Improved Drug Delivery Systems

 

 

 

(1)

Jointly developed in collaboration with Novartis AG.

(2)

Jointly developed in collaboration with AstraZeneca plc.

(3)

Jointly developed in collaboration with Allergan plc.

 

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system which has the potential to deliver better adherence to therapy and more convenience for patients and oncology practices.

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In 2017, capitalizing on our expansion activities, we secured 80 country product launches.

 

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Our commitment to improve our business and operating model through significant transformation and process improvement efforts announced in 2014 delivered results in 2017. These transformation and process improvement efforts across Amgen are continuing to re-shape the expense base and enable us to reallocate resources to fund many of our pipeline and growth opportunities that deliver value to patients and stockholders.

 

 

Non-GAAP operating margin(1) improved by 1.2 percentage points in 2017 to 53.5%, reflecting continued favorable expense impacts from our transformation initiatives across all operating expense categories.

 

 

Since 2014, we have realized approximately $1.5 billion of transformation and process improvement savings. These savings were reinvested in product launches, clinical programs and external business development. Consequently, net savings in the same period have not been significant.

 

 

Through our next-generation biomanufacturing capability, as well as other efforts to optimize our fixed capital infrastructure, we are on track to meet our 2018 goal of reducing our facility footprint by 23%.

In 2017, we also made strong progress on other strategic priorities:

 

  We invested for long-term growth while returning substantial capital to our stockholders.

 

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Our strong cash flows and balance sheet allowed continued investment for long-term growth through internal research and development  ($3.6 billion  in 2017) and external

business development transactions, while simultaneously providing substantial returns to stockholders.

 

In 2017, while investing $3.6 billion in research and development, we also returned $6.5 billion of capital to our stockholders ($3.4 billion in dividends and ~18.5 million shares

in stock repurchases)

Annual Dividend Increases

 

 

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  *

Represents annualized dividend

 

 

We increased our quarterly dividend per share 15% over 2016 (to $1.15 per share for 2017).

 

 

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act, or the 2017 Tax Act, resulting in our having global access to our $41.7 billion balance of cash, cash equivalents and marketable securities as of December 31, 2017. Based on our confidence in the long-term outlook for our business, enhanced by the 2017 Tax Act, and consistent with our ongoing objective to return capital to our stockholders, we executed a tender offer of $10 billion in shares. In addition to this approximately $10 billion share repurchase, we are evaluating other ways to deploy our balance of cash, cash equivalents and marketable securities and invest in our business.

 

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We     made investments     in     next-generation biomanufacturing     that build    on our    existing expertise      in      human     biology   and protein

manufacturing. This next-generation biomanufacturing dramatically reduces the scale and costs of making biologics while maintaining a reliable, high-quality, compliant supply of medicines.

 

 

In 2017, our new Singapore facility was approved for certain commercial scale production by multiple regulatory agencies, including the FDA and the EMA. At this facility, next-generation biomanufacturing vastly reduces water use and energy use, in turn, significantly reducing our carbon footprint. We are leveraging our global presence to deliver the potential of our products to patients globally.

 

 

We announced in 2018 that we will invest in greater manufacturing capacity to support the volume growth that we foresee. As a result, we plan to build a new drug substance manufacturing plant using our next-generation biomanufacturing capability in the U.S. and add highly skilled jobs.

 

 

Global Geographic Reach Transforming Amgen for the Future Capital Allocation and Investing for long-Term Growth $1.12 $0.68 29% $1.44 31% $1.88 30% $2.44 30% $3.18 27% $4.00 15% $4.80 2011 † 2012 2013 2104 2015 2016 2017 Next-Generation Biomanufacturing

 

 

(1)

Reported and reconciled in Appendix B.

 

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Compensation Discussion and Analysis

 

 

 

 

 

Performance Under Our

 

Long-Term Incentive Program

Our long-term incentive, or LTI, equity award compensation is tied directly to our stock performance and aligns with the interests of our stockholders.

80% of our annual LTI equity award grants are performance-based, thus aligning compensation with value creation for our stockholders. Our performance units for the three-year performance period ending January 30, 2018 were earned based on our relative total shareholder return, or TSR. Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively), representing a three-year TSR of 30%.

Payout under our LTI performance award program for our 2015-2017 performance period at 93.4% reflects our three-year TSR performance at the 46.7th percentile relative to the TSRs of the companies in the Standard & Poor’s 500 Index, or S&P 500, for this performance period.

The 2015-2017 performance period is the last LTI performance unit program that is earned based solely on our relative TSR performance. Commencing in 2016, and continuing in 2017 and 2018, our outstanding LTI performance awards are earned based on our financial performance as determined under annual financial measures equally weighted with the resulting average earnout percentage increased or decreased by our relative TSR performance against the companies in the S&P 500 for the performance period that commences with the grant date and continues through December 31 of the last year of the relevant three-year performance period. The annual financial performance goals for each of the three years in the performance period are established at the commencement of the three-year performance period.

 

 

Positive 2017 Say on Pay Vote Outcome and Engagement With Our Stockholders

 

 

In 2017, we received approximately 95% stockholder support on our say on pay advisory vote. We have engaged consistently in broad direct stockholder outreach over the past several years. Since our 2017 annual meeting of stockholders, in addition to our outreach by our executives and our Investor Relations department to investors, we have engaged in governance-focused outreach activities and discussions with stockholders owning approximately 52% of our outstanding shares. These discussions have been valuable and informative and we

will continue to engage with our stockholders to further enhance our understanding of the perspectives of our investors.

In 2017, the predominant feedback from investors with respect to our compensation and governance practices was that they are satisfied with our compensation program and governance practices. We are pleased with our say on pay results and stockholder feedback, and will continue to engage with our stockholders to be sure we understand and address any concerns.

 

 

 

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Annual Meeting of Stockholders Executive compensation website available year-round that invites stockholders to provide feedback directly to the Compensation Committee www.amgen.com/executivecompensation Post-Proxy Filing for Annual Meeting Post-Annual Meeting Targeted outreach to investors requesting follow-up pre-proxy filing or related to key issues •Discuss vote outcomes •Consider existing governance and compensation practices in light of feedback Year-Round Stockholder Outreach and Engagement Pre-Proxy Filing for Annual Meeting •Compensation-related feedback reviewed by Compensation Committee •Governance-related feedback reviewed by Governance Committee •Insights from investors provided to the full Board •Appropriate committees and Board (as necessary) evaluate potential changes in light of stockholder feedback

 

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LTI Equity Award Design Changes in 2017

 

 

In 2017, the Compensation and Management Development Committee, or Compensation Committee, constructed the 2017-2019 performance period award goal design to take into account feedback from dialogue with our stockholders and was designed to drive operating performance and increase performance hurdles. The 2017-2019 performance period performance award goal design mirrors much of the 2016-2018 performance period goal design. While retaining most of the elements of the 2016-2018 performance period goal design, the Compensation Committee replaced non-GAAP operating expense with non-GAAP return on invested capital (or

ROIC) for the third year of this performance period. The other two financial measures that apply for the full three-year period are annual non-GAAP earnings per share, or EPS, and non-GAAP operating margin. The Compensation Committee’s replacement of non-GAAP operating expense with non-GAAP ROIC as one of the three financial performance measures in the third year of the 2017-2019 performance period is designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018.

 

 

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Compensation Discussion and Analysis

 

 

 

 

 

Our 2017 Compensation Program Highlights and Objectives

 

 

 

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Total Target Direct Compensation Focuses on “At Risk” Compensation All preceding pie charts are calculated using (i) the “Salary” column from tile “Summary Compensation Table” in our Executive Compensation Tables (ii) the target annual caSh incentive caSh incentive award in the “estimated Possible Payouts under non-Equity incentive Plan Awards- Target” column in the table in footnote 2 to the Grants of Plan-based Awards” table in our Executive Compensation Tables and (iii) the grant date fair value of annual grants of performance units RSUs and stock options In the “Grant Date Fair Value of Stock and Option Awards” column of the “Grants of Plan-Based Awards” table in our Executive Compensation Tables. CEO 90o/o Pay at Risk 75% Performance based Other NEOs 82% Pay at Risk    69% Performance based Purpose LTI Equity Awards provide a direct link to the creation of shareholder value and execution of our strategy All NEO’s interests with stockholders foster long-term focus and retention Annual Cash Incentives Measure NEO’s performance pre-established company performance goals Align all staff members the same company performance goals as all such annual cash incentive awards are based on these on these goals Motivate NEO’s to meet or exceed our annual Company performance goals to drive annual performance and position us for longer-term success via our strategy Base Salary Provides a degree or financial certainty that helps us retain talent Recognizes competitive market condition sandlot rewards individual performance through periodic increases LTI Equity Award alloction:80% performance based 50% performance units 30% Stock Options 20% Restricted stock units

 

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LTI Equity Awards (“At Risk”)

 

 

Performance Units (50%). The Compensation Committee establishes the performance award goal design at the commencement of each three-year period of the performance award program. There is no guarantee of any value realized from the grants as they are earned only if specific long-term performance goals are achieved.

 

 

Stock Options (30%). Aligned with stockholder interests as they only have value if the Company’s stock price increases after grant.

 

 

Restricted Stock Units, or RSUs (20%). Designed to encourage retention and long-term value creation.

 

 

Stock options and RSUs vest in three approximately equal installments on the second, third and fourth anniversaries of the grant date. The delay in the commencement of vesting further emphasizes the long-term performance focus of our LTI equity award program and enhances retention.

Performance Units Earned for the 2015-2017 Performance Period

 

 

Our payout for the most recent 2015-2017 performance period was at 93.4% of target because our TSR for this performance period (30%) resulted in our 46.7th percentile ranking relative to the TSRs of the companies in the S&P 500 since the beginning of the performance period (January 30, 2015).

 

 

 

Annual Cash Incentive Awards (“At Risk” and Designed to Drive Execution of Our Strategic Priorities)

 

 

Our Compensation Committee annually approves Company performance goals that are designed to focus our staff on delivering on our financial performance, operational objectives and specific strategic priorities to drive annual performance and position us to execute on our strategy in the near- and longer-term. Our Executive Incentive Plan, or EIP, establishes a maximum award possible for each participant and annual cash incentive awards are generally made to our NEOs under the EIP based on the Company’s performance against the pre-established Company performance goals.

 

 

Our annual cash incentive awards are earned based on achieving financial performance, operational objectives that drive near- and long-term growth, stockholder value and support our strategy. In 2017, we established annual Company performance goals of revenues (30%), non-GAAP net income(1) (30%), and a number of operational measures supporting “Progress Innovative Pipeline” (25%) (composed of “Execute Key Clinical Studies and Regulatory Filings” (20%) and “Advance Early Pipeline” (5%)) and “Deliver Annual Priorities” (15%) (composed of “Execute Critical Launches and Long-Term Commercial Objectives” (10%) and “Realize Functional Transformation Office Objectives” (5%)). Based on our overall performance in 2017 compared to these pre-established Company performance goals, we paid annual cash incentive awards at 115% of target bonus opportunity.

 

 

 

Base Salaries (the smallest component of compensation for our NEOs)

 

 

Based on data provided to the Compensation Committee, including recommendations of Frederic W. Cook & Co., or Cook & Co., the Compensation Committee’s independent consultant, the Compensation Committee approved an overall merit increase of 2% for our NEOs, adjusted to align with the Market Median for each position.



 

 

 

(1) 

Non-GAAP net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

 

LOGO   ï 2018 Proxy Statement    41


Table of Contents
         

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Our Compensation and Governance Best Practices

 

  What we do

 

 

 

Majority of compensation is performance-based: A substantial majority of NEO compensation is performance-based and at-risk.

 

 

Clawback policy: Our Board is required to consider the recapture of past cash or LTI equity award payouts to our NEOs if the amounts were determined based on financial results that are later restated and the NEOs’ misconduct is determined by the Board to have caused the restatement.

 

 

Recoupment: Our incentive compensation plans contain recoupment provisions applicable to all staff members that expressly allow the Compensation Committee to determine that annual cash incentive awards are not earned fully or in part where such employee has engaged in misconduct that causes serious financial or reputational damage to the Company.

 

 

Robust stock ownership and retention guidelines: We have a six times base salary ownership requirement for our CEO. Officers are required to retain shares of our Common Stock acquired through the vesting of RSUs, the payout of performance units, or the exercise of stock options until they have reached the required stock ownership level.

 

 

Minimum vesting periods: Our equity incentive plan provides that our equity awards are subject to a minimum vesting period of no less than one year on 95% of equity awards granted and our grants generally vest over four years, with no vesting in the first year and vesting in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date.

 

 

Double-trigger in the event of a change of control: We do not have “single-trigger” equity vesting acceleration upon a change of control for RSUs and stock options and do not provide tax gross-ups on change of control payments.

 

 

Performance-based equity: Our LTI equity award grants are primarily (80%) performance-based.

 

  What we don’t do

 

 

×

 

No hedging or pledging: With respect to our Common Stock, our staff members and Board are prohibited from engaging in short sales, purchasing or pledging our Common Stock on margin, or entering into any hedging, derivative or similar transactions.

 

×

 

No re-pricing or backdating: We have strong LTI equity award plans and policies that prohibit re-pricing or backdating of equity awards.

 

×

 

No tax gross-ups: We do not provide tax gross-ups, except for business-related payments such as reimbursement of certain relocation expenses on behalf of newly-hired and current executives who agree to relocate to work on the Company’s behalf.

 

×

 

No excessive perks: Our perquisites are limited to those with a clear business-related rationale.

 

×

 

No employment agreements: We do not have employment contracts or guaranteed bonuses, other than in countries where they are required by law.

 

×

 

No dividends paid on unvested equity: Dividends accrue on our performance units and RSUs, but are paid only when and to the extent the underlying award is earned and vested.

 

×

 

No defined benefit pension or supplemental executive retirement plan (SERP) benefits or “above market” interest on deferred compensation.

 


 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

How Compensation Decisions Are Made For Our Named Executive Officers

 

 

 

LOGO

  Roles and Responsibilities

 

 

Compensation Committee

Composed solely of independent directors and reports to the Board

 

 

   Evaluates the performance of our CEO within the context of the financial and operational performance of the Company.

 

   Determines and approves compensation packages for our CEO, other NEOs, Executive Vice Presidents, Senior Vice Presidents and Section 16 officers (collectively, “Senior Management”).

 

   Reviews and approves all compensation programs in which our NEOs participate.

 

   Oversees the development and effective succession planning of our CEO and other members of Senior Management annually.

 

   Exercises the sole authority to select, retain, replace and/or obtain advice from compensation consultants, legal counsel and other outside advisors and assesses the independence of each such advisor, taking into consideration the factors set forth in the Securities and Exchange Commission, or SEC, rules and The NASDAQ Stock Market listing standards.

 

   Oversees the Board’s relationship with and response to stockholders on executive compensation matters and the Compensation Discussion and Analysis.

 

 

 

Consultant to the Compensation Committee

Frederic W. Cook & Co., Inc., Independent consultant retained directly by the Compensation Committee

 

 

   Regularly attends Compensation Committee meetings, including meeting in executive session with the Compensation Committee.

 

   Provides advice and studies on the appropriateness and competitiveness of our compensation program relative to market practice for our NEO compensation.

 

   Provides advice and studies on our equity programs.

 

   Provides advice on the selection of our peer group.

 

   Consults on executive compensation trends and developments.

 

   Consults and makes recommendations, when requested, on various compensation matters and compensation program designs and practices to support our business strategy and objectives.

 

   Coordinates and reviews the appropriateness of market data compiled by management.

 

   Works with management to assess the potential risks arising from our compensation policies and practices.

 

 

 

CEO

Assisted by the Senior Vice President, Human Resources and other Company staff members

 

   Conducts performance reviews of the other NEOs and makes recommendations to the Compensation Committee with respect to compensation of Senior Management other than himself.

 

   Provides recommendations on the development of and succession planning for the members of Senior Management other than himself.

 

 

Management reviews the Company’s compensation programs CEO conducts performance reviews for the other NEOs and recommends Senior Management compensation to the Compensation Committee Compensation Committee evaluates the CEO’s performance within the context of the financial and operational performance of the company Cook & Co. advises the Compensation Committee regarding the appropriateness of Amgen’s NEO compensation and compensation programs relative to market practice Compensation Committee reviews and approves all NEO compensation and compensation programs in which our NEOs participate and oversees succession planning for our senior management

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Use of Independent Compensation Committee Consultant

To assist the Compensation Committee in its review and determination of executive compensation, the Compensation Committee retained and sought advice from Cook & Co., an independent consultant. George B. Paulin, the Chairman of Cook & Co., worked directly with the Compensation Committee in the roles and undertaking the responsibilities previously described in “How Compensation Decisions Are Made For Our Named Executive Officers” and specifically in 2017 provided consultation regarding regulatory updates, selection of our peer group, consultation on market competitiveness for our LTI equity award practices, competitive practice for CEO compensation and general market practices for NEO compensation.

On a periodic basis, the Company purchases proprietary executive compensation survey data from Cook & Co. to inform the Compensation Committee’s decisions, but does not engage Cook & Co. for any other services to the Company. During 2017, the Compensation Committee, as in past years, had responsibility for engaging Cook & Co. and directed the nature of the activity and interchange of data between Cook & Co. and management. In addition, during 2017, the Governance Committee engaged Cook & Co. to provide advice regarding director compensation. Cook & Co. reported directly to the Governance Committee in its evaluation of director compensation.

The Compensation Committee recognizes the unique demands of our industry, including its complex regulatory and reimbursement environment, and the challenges of running an enterprise focused on the discovery, development, manufacture and commercialization of innovative treatments to address serious illness. The Compensation Committee believes that these unique demands require executive talent that has significant industry experience as well as, for certain key functions, specific scientific expertise to oversee research and development activities and the complex manufacturing requirements for biologic products. Further, the Compensation Committee believes that these very particular skills and capabilities limit the pool of talent from which we can recruit and also cause our employees to be highly valued and sought after in our industry.

On an annual basis, Cook & Co. reviews our peer group with the Compensation Committee to determine whether it remains appropriate. Based in part on recommendations from Cook & Co., as well as a review of the objective criteria described in the following chart, the Compensation Committee determined that no changes were necessary in 2017 as the peer group remained appropriate and continued to meet the criteria.

 

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

How We Establish Our Peer Group

 

    

2017 Peer Group Companies

Biotechnology and pharmaceutical companies with which we compete for executive talent.

    

Objective Criteria Considered

 

 

 

2017 Peer Group

(Companies in blue also list Amgen as a peer)

 

   

 

  GICS codes of biotechnology (352010) and pharmaceuticals (352020);

 

  12-month average market capitalization between 0.25 and 4.0x that of Amgen’s average market capitalization for the same period(1);

 

  Trailing four-quarter revenues between 0.25 and 4.0x that of Amgen’s revenues(1);

 

  Non-U.S. peers limited to those commonly identified as a “peer of peers”;

 

  Competitors for executive talent;

 

  Companies of comparable scope and complexity;

 

  Competitors for equity investor capital;

 

  Companies that identify us as their direct peer; and

 

  Companies with similar pay practices.

 

 

•  AbbVie Inc.

 

•  Allergan plc

 

  AstraZeneca plc

 

•  Biogen Inc.

 

•  Bristol-Myers Squibb Company

 

•  Celgene Corporation

 

•  Eli Lilly and Company

 

•  Gilead Sciences, Inc.

 

•  GlaxoSmithKline plc

 

•  Johnson & Johnson

 

•  Merck & Co., Inc.

 

•  Novartis AG

 

•  Pfizer Inc.

 

•  Roche Holding AG

 

  Sanofi S.A.

 

(1)

For purposes of the 2017 peer group analyses:

 

     

 

2016 Market Capitalization

 

  

 

2016 Revenues(a)

 

 

 

  Amgen

 

  

 

$109 billion

 

  

 

 

 

 

$23 billion

 

 

 

 

 

  Relative Peer Group Position

 

  

 

3rd Quartile (above median)

 

  

 

 

 

 

2nd Quartile

 

 

 

 

 

  (a)

Revenues for GlaxoSmithKline plc, Roche Holding AG and Sanofi S.A. were converted into U.S. dollars using the average of daily exchange rates for 2016 as provided by Bloomberg L.P.

Our market capitalization as of July 28, 2017 (the date on which the Compensation Committee considered our peer group) was as follows:

 

 

LOGO

 

$B Market Capitalization 355 J&J 221 Novartis 217 Roche 198 Pfizer 175 Merck 127 Amgen 121 Sanofi 112 Abbvie 105 Celgene 99 Gilead 98 GSK 91 Eli Lilly 91 BMS 85 Allergan 74 Astra Zeneca 61 Biogen Position shown as of July 28, 2017 Currency in USD

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Peer Group Data Sources

Our primary data sources for evaluating all elements of compensation for our CEO is data compiled by Cook & Co. from SEC filings of our peer group for the 25th, 50th and 75th percentiles of the specific compensation elements paid to CEOs in our peer group (and the 85th percentile for LTI equity awards). For our other NEOs, our primary data sources for evaluating all elements of compensation are the Willis Towers Watson Pharmaceutical Human Resources Association Executive Compensation Survey, or PHRA Survey, which provides peer company pharmaceutical data, augmented by the available data from proxy statements filed with the SEC for biotechnology companies in our

peer group. Solely for the determination of LTI equity awards, we also provide data from the Cook & Co. Survey of Long-Term Incentives (Cook & Co. Survey). Based on this data, the Compensation Committee is presented with a comparison of each NEO on a position or pay rank basis with an analysis of each element of direct compensation for such NEO at the 50th and 75th percentile of the peer group. Because PHRA Survey and proxy statement data is only available for the previous calendar year, consistent with generally accepted practice, base pay data is aged forward to the current year based on expected salary movement. Annual cash incentive award and LTI equity award market data are not adjusted for aging.

 

 

The “Market Median” is determined for our CEO and our other NEOs based on the prior year’s compensation and is reviewed by the Compensation Committee to inform compensation decisions made in March of each year as follows:

 

 

Market Median

 

 

 

CEO (compiled by Cook & Co.)

 

  

 

Other NEOs

 

        

 

   50th percentile of each compensation element paid to CEOs in our peer group in the previous year from proxy statements.

  

 

   Average of the 50th percentile of each compensation element of our peer group from the PHRA Survey (pharmaceutical peers) and proxy statements (biotechnology peers) in the previous year (with base pay data aged forward to the current year).

 

        

Elements of Compensation and Specific Compensation Decisions

 

Described below are our three primary elements of executive compensation in order of magnitude: LTI equity awards; annual cash incentive awards; and base salaries.

 

Long-Term Incentive Equity Awards

Our compensation program aims to achieve the appropriate balance of compensation elements relative to the responsibilities of our staff members, with the result that the largest proportion of compensation for our CEO and the other NEOs is in the form of LTI equity awards that are risk-based and closely aligned with the creation of long-term stockholder value. Equity-based compensation represents 75% of our CEO’s target compensation and 64% of target compensation for our

other NEOs. In addition, while being mindful of dilution (see below), we also grant LTI equity awards each year to nearly all of our staff members worldwide to increase individual awareness of how our performance impacts stockholder value. We believe that our capacity to grant equity-based compensation has been a significant factor in achieving our strategic priorities by rewarding execution of our strategy and stock price appreciation, aligning our NEOs’ and staff members’ interests with stockholders and fostering long-term focus and retention.

 

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Company Continues to Exercise Discipline in the Grant of Long-Term Incentive Equity Awards – Monitoring Dilution and Annual Equity Usage

Our compensation philosophy, practices and approach balance the use of equity to align employees with our stockholders while being mindful of the level of dilution that our stockholders experience. LTI equity award grant guidelines are established for each job level within the Company targeting the 50th percentile of our peer group for levels for which equity data is broadly available. For certain lower job levels where data is not as comprehensive, we have developed guidelines that trend in-line with available data and consider internal equity. The Compensation Committee sets an LTI equity award budget at approximately the 50th percentile of our peer group. The Compensation Committee periodically reviews the Shareholder Value Transfer (SVT) associated with the aggregate LTI equity award grants to ensure that our SVT is aligned with our peer group practices because, while the Compensation Committee supports a broad-based equity plan to align our staff members with our stockholders, the Compensation Committee also strives to limit the amount of stockholder dilution to that which stockholders would expect to experience with our peer group. We regularly review dilution and the rates at which we grant LTI equity awards and the resulting potential dilutive effect has decreased over the last five years and is consistent with that of our peer group.

 

 

LOGO

Long-Term Incentive Equity Award Composition

As part of its annual evaluation of our LTI equity award practices, the Compensation Committee reviewed our LTI equity award mix with Cook & Co. and maintained the current LTI equity award allocation.

LTI Equity Award Allocation

 

 

LOGO

On a value basis, in 2017 80% of our annual equity award value continued to be delivered in the form of performance-based LTI equity awards consisting of 50% in the form of performance units (earned at the end of a generally three-year performance period) and 30% in the form of stock options. Time-vested RSUs, designed to incentivize retention, continued to make up the remaining 20% of value. Both stock options and our time-vested RSUs generally vest over four years, with no vesting in the first year and vesting in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. The delay in the commencement of vesting further emphasizes the long-term performance focus of our LTI equity award program and enhances retention.

The Compensation Committee believes that this equity award mix presents a balanced approach to executive LTI equity awards and is well aligned with stockholder interests and pay for performance.

 

 

amgen historical outstanding potential dilution (% shares outstanding)

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Value of Long-Term Incentive Equity Awards

Granted to Named Executive Officers in 2017

2017 Annual Long-Term Incentive Equity Awards

Based on a review of Company and executive performance and market data, the Compensation Committee determined to grant the following LTI equity awards to our CEO and the other NEOs in March 2017, with an effective grant date of May 1, 2017, the third business day after the announcement of our first quarter 2017 earnings results. For more information regarding the determination of the Market Median, see “How Compensation Decisions Are Made For Our Named Executive Officers—Peer Group Data Sources” previously discussed.

 

  Named Executive Officer   

Performance

Units(1)

($)

    

Stock

Options

($)

    

Restricted

Stock

Units

($)

    

Total Equity

Value

Granted

($)

    

2016

Market

Median

($)

    

Difference vs.

Market Median

Over/ (Under)

(%)

 

 

  Robert A. Bradway

 

    

 

6,000,000

 

 

 

    

 

3,600,000

 

 

 

    

 

2,400,000

 

 

 

    

 

12,000,000

 

 

 

    

 

11,500,000

 

 

 

    

 

4.3

 

 

 

 

  Anthony C. Hooper

 

    

 

2,000,000

 

 

 

    

 

1,200,000

 

 

 

    

 

800,000

 

 

 

    

 

4,000,000

 

 

 

    

 

3,981,529

 

 

 

    

 

0.5

 

 

 

 

  Sean E. Harper

 

    

 

1,850,000

 

 

 

    

 

1,110,000

 

 

 

    

 

740,000

 

 

 

    

 

3,700,000

 

 

 

    

 

3,701,010

 

 

 

    

 

0

 

 

 

 

  David W. Meline

 

    

 

1,750,000

 

 

 

    

 

1,050,000

 

 

 

    

 

700,000

 

 

 

    

 

3,500,000

 

 

 

    

 

3,409,511

 

 

 

    

 

2.7

 

 

 

 

  Jonathan P. Graham

 

    

 

1,250,000

 

 

 

    

 

750,000

 

 

 

    

 

500,000

 

 

 

    

 

2,500,000

 

 

 

    

 

2,614,622

 

 

 

    

 

(4.4

 

 

 

(1) 

The 2017-2019 performance period runs from January 1, 2017 through December 31, 2019.

 

Based on the March 2017 Compensation Committee review of the market data, the Compensation Committee awarded Mr. Bradway a 2017 LTI equity award grant valued at $12 million, which is approximately 9% higher than the value of his grant in 2016 of $11 million and slightly above the Market Median (4.3%) to increase the proportion of the CEO’s compensation “at risk” (resulting in his total direct compensation at approximately the Market Median). After considering the effect of the 2017 LTI equity award grant on Mr. Bradway’s target total direct compensation, the Compensation Committee determined that awarding a grant value for 2017 LTI equity slightly above the Market Median was appropriate as it ensures the substantial majority of Mr. Bradway’s compensation is “at risk” and performance-based and also achieved the intent of the Compensation Committee for the CEO’s target total direct compensation to increase over time to approximate the Market Median. At the time Mr. Bradway was promoted to the role of CEO in May 2012, the Compensation Committee targeted Mr. Bradway’s total direct compensation below the Market Median to enable Mr. Bradway’s compensation to grow over time subject to his performance and advancement in his role as CEO.

The March 2017 Compensation Committee review of the market data also supported increased 2017 LTI equity award values for Executive Vice President roles as Market Median LTI equity award grant values had increased for these roles among our peer group. While the Compensation Committee believes that internal equity is an important consideration for building a team approach, in reviewing the market data, the Compensation Committee noted the higher LTI equity award Market Median value for the Executive Vice President, Research and

Development role. As a result, the Compensation Committee approved a higher grant value for Dr. Harper that was matched to the Market Median for his role of Executive Vice President, Research and Development. The Compensation Committee determined that an increase of approximately 5.7% (from $3.5 million in 2016) was appropriate, not only because of its Market Median competitiveness, but also because of the scope and span of Dr. Harper’s responsibility and the level of importance of his role to the Company. Messrs. Hooper’s and Meline’s LTI equity award grant for 2017 remained unchanged from 2016 as it still approximated the Market Median. Mr. Graham’s LTI equity award grant was increased from $2.3 million to $2.5 million to more closely approximate the Market Median for his role, but remains slightly less than Market Median for his position.

Performance Units (50% of LTI Equity Awards)

Performance units are rights to earn shares of our Common Stock, based on pre-established performance goals achieved over a performance period of generally three years. The number of performance units earned is determined by our performance as measured against the pre-established performance goals at the end of the related performance period. Each performance unit earned entitles the participant to one share of our Common Stock. Given the design of our performance award program, there is no guarantee of any value realized from grants of performance units.

 

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Performance Award Program—Performance Units Earned for the 2015-2017 Performance Period

Performance units for the 2015-2017 performance period, which ended January 30, 2018, were earned, certified and converted into shares of Common Stock in March 2018 based on an earned payout percentage of 93.4% resulting from the Company’s three-year TSR of 30% ranking in the 46.7th percentile relative to the TSRs of the

companies in the S&P 500 as of the beginning of the performance period (January 30, 2015). Our beginning stock price and ending stock price for purposes of the 2015-2017 performance period are each the average daily closing price of a share of our Common Stock for the beginning and last twenty trading days of the performance period ($154.49 and $186.61, respectively). During the same period, the Company’s market capitalization also increased by approximately 20%.

 

2015-2017 Performance Period Program Design

 

 

LOGO

 

 

Payout Calculation for the 2015-2017 Performance Period

 

 

LOGO

 

 

2015-2017 Performance Period Performance Units Earned

Our actual performance results (the 46.7th percentile, or below the median) for the 2015-2017 performance period that ended January 30, 2018 resulted in the following number of shares of Common Stock being earned under our performance award program for this performance period. Each earned performance unit converted to one share of Common Stock upon the payout date of March 23, 2018.

 

  Named Executive Officer       

Performance Units Value

Granted (Target)

($)

 

 

 

      

Number of Performance

Units Granted

(#)

 

 

 

      


Number of Shares of our

Common
Stock Earned
(1)

(#)

 

 
 

 

 

  Robert A. Bradway

 

      

 

8,160,000

 

 

 

      

 

51,179

 

 

 

      

 

51,766

 

 

 

 

  Anthony C. Hooper

 

      

 

2,800,000

 

 

 

      

 

17,561

 

 

 

      

 

17,762

 

 

 

 

  Sean E. Harper

 

      

 

2,400,000

 

 

 

      

 

15,052

 

 

 

      

 

15,224

 

 

 

 

  David W. Meline

 

      

 

2,400,000

 

 

 

      

 

15,052

 

 

 

      

 

15,224

 

 

 

 

  Jonathan P. Graham

 

      

 

            

 

(2)  

 

      

 

            

 

(2)  

 

      

 

            

 

(2)  

 

 

(1) 

Includes dividend equivalents earned on these amounts rounded down to the nearest whole number of shares (excluding fractional shares paid in cash).

(2) 

Mr. Graham commenced employment with the Company after the participants for the 2015-2017 performance period had been determined and, as such, he did not receive any performance units for the 2015-2017 performance period.

 

200% 150% 100% 50% 0% Threshold Target Maximum Achieved 93.4% Linear interpolation throughout performance zone 0%ile 25th%ile Median 75th – 100th %ile Performance Zone 0% 50% 100% 150% Target Award (Performance Units Granted) Relative Total Shareholder Return Multiplier (Amgen vs. S&P 500) Maximum (150%) payout for performance at and above the 75th percentile. Target (100%) payout for median, or 50th percentile, TSR performance. 50% payout for 25th percentile TSR performance. Final Payout 93.4% of Target Liner interpolation throughout performance zone

 

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Table of Contents
       

 

 

 

 

Compensation Discussion and Analysis

 

 

 

 

 

Performance Units Granted in 2016 for the 2016–2018 Performance Period

The Compensation Committee approved the 2016-2018 performance period performance award goal design that contained relative TSR as a modifier and had the following annual operating performance measures to drive operational performance and increase performance hurdles:

 

 

Non-GAAP earnings per share(1) (EPS) growth;

 

 

Non-GAAP operating margin(1); and

 

 

Non-GAAP operating expense(1).

The three operating measures are weighted equally (one-third per measure) and calculated against pre-established targets for each year in the 2016-2018 performance period. All operating goals (for each year) were established at the commencement of the three-year

performance period. At the end of the performance period, the final average operating measure percentages for each of the three years are averaged, resulting in a total operating measures score that can range from 50% to 150% for maximum performance. The total operating measures score is then modified up or down by up to 50 percentage points based on our TSR performance ranking relative to the TSRs of the companies in the S&P 500 from the grant date of May 3, 2016 through the end of the performance period (the relative TSR modifier) resulting in a payout range of 0% to 200% of target awards granted. The TSR modifier is limited to target (zero, or no increase) where our absolute TSR is less than zero to limit reward in a performance period in which we perform better than the S&P 500 for the period but investors do not recognize stock price growth.

The 2016-2018 performance awards have a performance period that commences on January 1, 2016 and ends on December 31, 2018.

 

 

(1) 

2017 operating measures have been adjusted by $147 million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2016-2018 goal document. Otherwise, Non-GAAP EPS, Non-GAAP Operating Margin and Non-GAAP Operating Expense for purposes of 2016 and 2017 with respect to the 2016-2018 performance period are as reported and reconciled in Appendix B. Non-GAAP for purposes of each of the years of the 2016-2018 performance period was defined as earnings per share, operating margin and operating expense under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes.

 

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Compensation Discussion and Analysis

 

 

 

 

 

2016-2018 Performance Period Performance Award Goal Calculation

 

 

 

LOGO

All operating goals (for each year) are established at the commencement of the three-year performance period.

 

 

(1)

2017 operating measures have been adjusted by $147 million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2016-2018 goal document. Otherwise, Non-GAAP EPS, Non-GAAP Operating Margin and Non-GAAP Operating Expense for purposes of 2016 and 2017 with respect to the 2016-2018 performance period are as reported and reconciled in Appendix B. Non-GAAP for purposes of each of the years of the 2016-2018 performance period was defined as earnings per share, operating margin and operating expense under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes.

 

Non-GAAP(1) Operating Measures (Scoring 50%-150%) Operating Expense 1/3rd Operating Margin 1/3rd EPS 1/3rd S&P 500 Relative TSR Modifier (Scoring +/- 50%) Maximum (50%) for 75th percentile and above Target (0%) for median, or 50th percentile Minimum (-50%) for 25th percentile or below Linear interpolation for performance along the payout curve Payout no greater than target (0%) if Amgen’s absolute TSR is less than 0 (Scoring 0%-200% of Target) Final Payout Multiplier) 2016-2018 Operating Measures Score (Operating Measure Percentages 50%-150% subject to linear interpolation along the payout curve) Operating Measures Percentages are Measured Annually and Equally Weighted for Each of the Three Years of the Performance Period Non-GAAP EPS(1) Growth (1/3rd) Non-GAAP Operating Margin(1) (1/3rd) Non-GAAP Operating Expense(1) (1/3rd) Average Operating Measure Percentages 2016 137% 129% 94% 120% 2017 129% 135% 116% 126% 2018 TBD TBD TBD TBD Three Year Average Operating Measure 2016 Targets 2016 Actual 2017 Targets 2017 Actual Non-GAAP EPS(1) ($) Minimum (50%) Less than or equal to $10.64 $11.65 (137%) Less than or equal to $10.89 $12.74 (129%) Target (100%) $10.90 $11.63 Intermediate (125%) $11.52 $12.66 Maximum (150%) More than or equal to $11.79 More than or equal to $13.19 Non-GAAP Operating Margin(1) (%) Minimum (50%) Less than or equal to 48% 52.3% (129%) Less than or equal to 48% 54.2% (135%) Target (100%) 50% 51% Intermediate (125%) 52% 53% Maximum (150%) More than or equal to 54% More than or equal to 56% Non-GAAP Operating Expense(1) ($B) Minimum (50%) More than or equal to $11.9 $11.45 (94%) More than or equal to $11.7 $11.0 (116%) Target (100%) $11.5 $11.2 Maximum (150%) Less than or equal to $11.1 Less than or equal to $10.7

 

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Compensation Discussion and Analysis

 

 

 

 

 

Performance Award Goal Design—Performance Units Granted in 2017 for the 2017–2019 Performance Period

To ensure that the performance award program continues to strongly align with the interests of our stockholders and motivates management to create long-term value, the Compensation Committee regularly reviews and considers whether to update the performance award goal design with input from management and Cook & Co. Based on review and deliberation in December 2016 and March 2017, and having considered the performance award goal designs of our peer group and stockholder feedback, the Compensation Committee approved the 2017-2019 performance period (January 1, 2017 to December 31, 2019). The Compensation Committee constructed the 2017-2019 performance period performance award goal design to leverage the 2016-2018 performance period goal design, retaining all of the elements of the 2016-2018 performance period goal design for 2017 and 2018, but changing one operating measure for the last year of the three-year performance period. For the first and second years of the 2017-2019 performance period, the Compensation Committee retained the three annual non-GAAP operating measures:

 

 

Non-GAAP earnings per share(1) (EPS) growth;

 

 

Non-GAAP operating margin(1); and

 

 

Non-GAAP operating expense(1).

For the third year of this performance period, the Compensation Committee replaced non-GAAP operating expense with non-GAAP return on invested capital, or ROIC. The Compensation Committee’s replacement of non-GAAP operating expense with non-GAAP ROIC was made in part in response to stockholder feedback, and is

designed to support our transformation strategic priority to deliver an efficient, disciplined business model beyond 2018 with focused management of our return on deployment of invested capital.

The operating performance measures were chosen to:

 

 

Drive operating performance in alignment with our operating performance commitments to stockholders through 2018;

 

 

Focus our executives on the transformation of our business and our operating efficiency, productivity, and profitability; and

 

 

Address the challenges of a single performance metric for a full three-year period.

The three annual operating measures are weighted equally (one-third per measure) and calculated against pre-established targets for each year in the 2017-2019 performance period. All operating goals (for each year) are established at the commencement of the three-year performance period. At the end of the performance period, the final average operating measure percentages for each of the three years are averaged, resulting in a total operating measures score that can range from 50% to 150% for maximum performance. The total operating measures score is then modified up or down by up to 50 percentage points based on our TSR performance ranking relative to the TSRs of the companies in the S&P 500 from the grant date of May 1, 2017 through the end of the performance period (the relative TSR modifier) resulting in a payout range of 0% to 200% of target awards granted. The TSR modifier is limited to target (zero, or no increase) where our absolute TSR is less than zero to limit reward in a performance period in which we perform better than the S&P 500 for the period but investors do not recognize stock price growth.

 

 

(1) 

2017 operating measures have been adjusted by $147 Million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2017-2019 goal document. Otherwise, Non-GAAP EPS, Non-GAAP Operating Margin and Non-GAAP Operating Expense for purposes of the 2017-2019 performance period are as reported and reconciled in Appendix B. Non-GAAP for purposes of each of the years of the 2017-2019 performance period was defined as earnings per share, operating margin, operating expense, and ROIC under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes.

 

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Compensation Discussion and Analysis

 

 

 

 

 

2017-2019 Performance Period Performance Award Goal Calculation

 

 

LOGO

All operating goals (for each year) are established at the commencement of the three-year performance period.

 

 

 

(1)

2017 operating measures have been adjusted by $147 Million in operating expense ($0.16 in EPS) for the impact of Hurricane Maria as prescribed by the terms of the 2017-2019 goal document. Otherwise, Non-GAAP EPS, Non-GAAP Operating Margin and Non-GAAP Operating Expense for purposes of the 2017-2019 performance period are as reported and reconciled in Appendix B. Non-GAAP for purposes of each of the years of the 2017-2019 performance period was defined as earnings per share, operating margin, operating expense, and ROIC under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes.

 

Non-GAAP(1) Operating Measures (Scoring 50%-150%) EPS 1/3rd Operating Margin 1/3rd Operating Expense Years 1 & 2 ROIC Years 3 1/3rd S&P 500 Relative TSR Modifier (Scoring +/- 50%) Maximum (50%) for 75th percentile and above Target (0%) for median, or 50th percentile Minimum (-50%) for 25th percentile or below Linear interpolation for performance along the payout curve Payout no greater that target (0%) if Amgen’s absolute TSR is less than 0 (scoring 0%-200% of Target) Final Payout Multiplier 2017-2019 Operating Measures Score (Operating Measure Percentages 50%-150% subject to linear interpolation along the payout curve) Operating Measures Percentages are Measured Annually and Equally Weighted for Each of the Three Years of the Performance Period Non-GAAP EPS(1) Growth Non-GAAP Operating Margin(1) Non-GAAP Operating Expense(1) Years 1 & 2 Non-GAAP ROIC(1) Year 3 Average Operating Measure Percentages 2017 134% 115% 107% N/A 118% 2018 TBD TBD TBD TBD 2019 TBD TBD N/A TBD TBD 1/3rd 1/3rd 1/3rd Three Year Average Operating Measure 2017 Targets 2017 Actual Non-GAAP EPS(1) ($) Minimum (50%) Less than or equal to $11.80 $12.74 (134%) Target (100%) $12.00 Intermediate (125%) $12.60 Maximum (150%) More than or equal to $13.00 Non-GAAP Operating Margin(1) (%) Minimum (50%) Less than or equal to 51% 54.2% (115%) Target (100%) 53% Intermediate (125%) 55% Maximum (150%) More than or equal to 57% Non-GAAP Operating Expense(1) ($B) Minimum (50%) More than or equal to $11.5 $11.0 (107%) Target (100%) $11.1 Maximum (150%) Less than or equal to $10.7

 

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Compensation Discussion and Analysis

 

 

 

 

 

Change to Performance Award Goal Design—2018–2020 Performance Period

As part of its regular review and consideration of the performance award program, the Compensation Committee evaluated potential performance award goal designs for the 2018-2020 performance period (January 1, 2018 to December 31, 2020) with input from management and Cook & Co. at its December 2017 and March 2018 meetings. The Compensation Committee constructed the 2018-2020 performance period performance award goal design to leverage the current design of the Company’s performance awards, retaining a combination of operating measures and the relative TSR modifier. The Compensation Committee retained the same non-GAAP operating measures (EPS growth, operating margin, and operating expense) for the first year of the 2018-2020 performance period as is used for 2018 in the 2017-2019 performance period. For the second and third years of the 2018-2020 performance period, the Compensation Committee moved to two non-GAAP operating measures (EPS growth and ROIC), reflecting our continued focus on remaining disciplined in our management of the business as we move beyond our 2018 operating performance investor commitments. The operating measures are weighted equally in each year (one-third per measure for 2018 and one-half per measure for 2019 and 2020) and are measured against established targets for each year in the 2018-2020 performance period; all such operating goal targets are established at the commencement of the three year performance period. The operating measures percentages are calculated for each year of the 2018-2020 performance period and are averaged at the end of the performance period, resulting in a total operating measures percentage that can range from 30% for minimum to 170% for maximum performance. The total operating measures percentage is then modified by an increase or decrease of up to 30 percentage points based on the TSR modifier. The Compensation Committee believes that rebalancing the weighting in favor of the operating measures relative to the TSR modifier further emphasizes the Company’s operational priorities over the performance period while maintaining alignment of our performance with the experience of our stockholders. Consistent with the design of our 2016-2018 and 2017-2019 performance period performance awards, the total operating measures score and the relative TSR modifier result in a payout range of 0% to 200% of target awards granted and, in the event our absolute TSR is less than zero, the TSR modifier shall not add any percentage points notwithstanding our ranking.

Stock Options

Stock options comprise 30% of our LTI equity award grants for NEOs to emphasize the importance of achieving long-term growth and align with stockholder interests as stock options only have value if the Company’s stock price increases after the grant.

Restricted Stock Units

Consistent with our focus on performance-based equity, time-vested RSUs comprise only 20% of our LTI equity award grants for NEOs. They

result in one share of Common Stock being delivered for each vested RSU and serve as an important and cost-effective retention tool because RSUs have intrinsic value on the grant date and going forward.

Dividend Equivalents

RSUs and performance units have dividend equivalent rights. Such dividend equivalents are payable only when, and to the extent, the underlying RSUs and performance units are earned and converted to shares of Common Stock. The dividend equivalents may be paid in stock (with cash paid for fractional shares) or in cash at the Compensation Committee’s election. Stock options do not have dividend equivalent rights.

Plan Minimum Vesting Period of One Year; Actual Minimum of Two Years

Mindful of stockholder concerns and best practices, our equity incentive plan requires that at least 95% of all equity awards, including RSUs, restricted stock, stock options, performance awards, and dividend equivalents granted to staff members (including NEOs) will be subject to a minimum vesting period of no less than one year. Our annual stock option and RSU grants generally vest over four years in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. This delayed vesting schedule further underscores the long-term focus of our LTI equity award program and enhances the retention of staff members.

Long-Term Incentive Equity Awards Granted to Named Executive Officers in 2018

In March 2018, the Compensation Committee reviewed the LTI equity award grant values proposed to be granted to NEOs in 2018. The Compensation Committee approved an increase in Mr. Bradway’s LTI equity award from $12 million to $12.5 million to reward Mr. Bradway for strong performance and leadership of the Company in a year of transition for the Company. In making its decision, the Compensation Committee noted that the Market Median had declined because of turnover in leadership at a number of our peer group companies while LTI awards for CEOs who had remained in place at peer companies were increased by 10%. The Compensation Committee granted Mr. Hooper the same LTI equity award value that he had received in 2017 as this aligned him with the Market Median. The Compensation Committee determined to increase Dr. Harper’s and Mr. Meline’s LTI equity award grant value from $3.7 million and $3.5 million, respectively, in 2017 to $4 million in 2018 and Mr. Graham’s LTI equity award value from $2.5 million in 2017 to $2.8 million in 2018 as these increases positioned their respective target total direct compensation closer to the Market Median for their respective roles.

 

 

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Compensation Discussion and Analysis

 

 

 

 

 

Annual Cash Incentive Awards

Executive Incentive Plan

Annual cash incentive awards to our NEOs are generally made under our stockholder-approved EIP, which employs a formula that establishes a maximum award possible for each participant based on our non-GAAP net income(1). Our EIP is an umbrella plan intended to satisfy the performance-based requirements of Section 162(m) of the Internal Revenue Code as in effect in 2017. This year, and in the past, actual awards under the EIP are determined by the Compensation Committee using their negative discretion under the EIP, based on the pre-established Company performance goals for the year designed to advance our strategic priorities. In confirming this approach, the Compensation Committee also considers the contributions of each participant’s role to our success during the year.

In March 2017, the Compensation Committee determined for the EIP participants, the definition of non-GAAP net income(1), the maximum award payable for each participant, the target annual cash incentive award opportunities and, for the EIP, Global Management Incentive Plan, or GMIP, and Global Performance Incentive Plan, or GPIP, the Company performance goals and the weightings and percentages payable for threshold, target and maximum performance.

For 2017, each of our NEOs was a participant in the EIP and the maximum award continued to be expressed as the EIP non-GAAP net income(1) definition and, consistent with past years, was 0.125% for our CEO, 0.075% for each of the Executive Vice President NEOs and 0.05% for the Senior Vice President NEO. Historically, and in 2017, the Compensation Committee has paid well below the maximum award permitted under the EIP based on a practice of exercising negative discretion from the calculated EIP maximum award payable to each participant by using the Company performance goals composite score as applied to the participant’s target annual cash incentive award for actual awards.

Target Incentive Opportunity

The target annual cash incentive award opportunity for each of our NEOs remained the same in 2017 as it was for 2016. Mr. Bradway’s target annual cash incentive award opportunity remains 150% of base salary in 2017. For our Executive Vice Presidents, to also align with the Market Median, continue to emphasize compensation that is “at risk” and performance-based, and promote internal equity and treat our Executive Vice Presidents as a team, each Executive Vice President target annual cash incentive award opportunity for 2017 also remained at 100% of base salary. As a Senior Vice President,

Mr. Graham's target annual cash incentive award opportunity of 80% of base salary was also maintained for 2017 as it aligned with the Market Median for his role.

2017 Company Performance Goals

The 2017 Company performance goals approved by the Compensation Committee were:

 

 

“Deliver Results” goals (60%):

 

  -  

“Revenues” and “Non-GAAP Net Income(2)” are equally focused on top- and bottom-line growth and were assigned the largest target weighting with each element contributing up to 30% each, consistent with the fundamental importance of financial performance to us and our stockholders in both the near- and longer-term.

 

 

“Progress Innovative Pipeline” goals (25%):

 

  -  

“Execute Key Clinical Studies and Regulatory Filings” (20%) and “Advance Early Pipeline” (5%) which measure progress on both early- and later-stage product candidates to focus us on executing key clinical studies and delivering a robust product pipeline at all stages of the development continuum, which we believe is critical to our continued success over both the near- and longer-term.

 

 

“Deliver Annual Priorities” goals (15%):

 

  -  

“Executive Critical Launches and Long-Term Commercial Objectives” (10%) focused on executing on our key innovative product and delivery systems launched.

 

  -  

“Realize Functional Transformation Office Objectives” (5%) focused on target savings in connection with our transformation.

While all of the goals measure single–year performance, taken as a whole, they are intended to positively position us for both near- and longer-term success, delivery on our strategic priorities and create stockholder value. There are no payouts for below-threshold performance on the two financial metrics. Measurements of performance for the non-financial primary metrics, which are often expressed in milestones, are more subjective in nature than are the financial metrics and could result in a very small payout percentage (less than 1% of annual cash compensation). Maximum performance under each metric results in earning 225% of target annual cash incentive award opportunity for that metric. Annual cash incentive awards are paid in March of the year following the annual performance period and certification of the resulting payouts by the Compensation Committee.

 

 

 

(1) 

For 2017, Non-GAAP net income for purposes of the EIP has been adjusted by $116 million ($147 million in operating expense less the related income tax effects) for the impact of Hurricane Maria. Otherwise, Non-GAAP net income for purposes of the EIP is as reported and reconciled in Appendix B. Non-GAAP for purposes of net income was defined as net income under GAAP, excluding certain items, net of tax, related to acquisitions, restructuring and certain other items, and the impact of tax law changes.

(2) 

Non-GAAP net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

 

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Compensation Discussion and Analysis

 

 

 

 

 

2017 Company Performance Goals and Results

The table below illustrates the weighting of each goal, the goals established and our actual performance for 2017. No amounts can be earned for below threshold performance for our financial metrics. For a more detailed description of our performance under each of the non-financial measures, please see the “Executive Summary” section above.

 

 

  Deliver Results (60% weighting)

 

             

 

 

 

 

Weighted Score Achieved 68.2%

 

 

 

 

 

  Financial Goals (60%) ($ In Millions)

 

  

 

 

 

 

Threshold

 

 

 

 

    

 

 

 

 

Target

 

 

 

 

    

 

 

 

 

Maximum

 

 

 

 

    

 

 

 

 

Weighting

 

 

 

 

    

 

 

 

 

Achieved

 

 

 

 

 

Revenues

  

 

 

 

$21,085

 

 

    

 

 

 

$22,525

 

 

    

 

 

 

$24,325

 

 

    

 

 

 

30%

 

 

    

 

 

 

$22,849

110.6%

 

 

 

Non-GAAP Net Income(1)

     $8,000          $8,890          $9,955          30%         

$9,246

116.8%

 

 

 

 

 

  Progress Innovative Pipeline (25% weighting)

 

 

 

Weighted Score Achieved 34.7%

 

 

 

  Goals

 

 

 

Results                                                                          

 

  

 

            Weighting

 

    

 

            Achieved

 

 

 

Execute Key Clinical Studies and
Regulatory Filings

 

 

   Executed key clinical studies for KYPROLIS, BLINCYTO, EVENITY, IMLYGIC®, omecamtiv mecarbil, AMG 301, and ABP 980 (biosimilar trastuzumab (Herceptin®)).

  

 

 

 

20%

 

 

  

 

 

 

123.0%

 

 

 

   Completed regulatory filings for Repatha, XGEVA, BLINCYTO, EVENITY, Aimovig, Prolia, Parsabiv, ABP 980 and AMGEVITA (biosimilar adalimumab (HUMIRA®)).

     

Advance Early Pipeline

 

   Generated a total of 11 product teams (formed when a molecule has been judged to have the potential to be safe and effective in humans), a record number for our Company, initiated four first-in-human studies, and advanced AMG 301 through the early-to-late stage portal.

 

     5%        201.7%  

 

  Deliver Annual Priorities (15% weighting)

 

 

 

Weighted Score Achieved 12.1%

 

 

 

  Goals

 

 

 

Results

 

  

 

Weighting

 

    

 

Achieved

 

 

 

Execute Critical Launches and Long-Term Commercial Objectives

 

 

   Prolia—increased worldwide net sales.

  

 

 

 

10%

 

 

  

 

 

 

76.0%

 

 

 

 

   Repatha—increased U.S. net sales, U.S. average annual total prescriptions (TRx) share, as well as E.U. average annual market share. While we increased net sales, we did not achieve our overall sales target.

     
 

   KYPROLIS—increased U.S. and ex-U.S. net sales. While we increased net sales, we did not achieve our overall sales target.

     
 

   We did not meet our launch timelines for Parsabiv and EVENITY.

     

Realize Functional Transformation Office Objectives

 

   We introduced a program to drive additional savings across the Company. For this program, we realized approximately $400 million in savings as a result of initiatives at both the Company level as well as activities within each function designed to transform approaches with specific savings targets established for each area.

 

     5%        90.4%  

 

 

   

 

2017 Company Performance Goals Composite Score

 

       

 

 

 

 

Achieved 115.0%

 

 

 

 

 

(1) 

Non-GAAP net income for purposes of the 2017 Company performance goals of our annual cash incentive award program is reported and reconciled in Appendix B.

 

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Compensation Discussion and Analysis

 

 

 

 

 

2017 Annual Cash Incentive Awards

As shown in the table above, our performance against the 2017 Company performance goals yielded a composite score of 115% and the Compensation Committee awarded actual annual cash incentive awards under the EIP to our NEOs based on this composite score. No further discretion was employed.

 

  Named Executive Officer   

 

Target Opportunity
(% of Base Salary)

       Target 2017 Award($)        Actual 2017 Award($)(1)   

Robert A. Bradway

 

    

 

150

 

 

 

      

 

2,333,077

 

 

 

      

 

2,683,000 

 

 

 

Anthony C. Hooper

 

    

 

100

 

 

 

      

 

1,049,769

 

 

 

      

 

1,207,000 

 

 

 

Sean E. Harper

 

    

 

100

 

 

 

      

 

970,308

 

 

 

      

 

1,116,000 

 

 

 

David W. Meline

 

    

 

100

 

 

 

      

 

970,308

 

 

 

      

 

1,116,000 

 

 

 

Jonathan P. Graham

 

    

 

80

 

 

 

      

 

745,785

 

 

 

      

 

858,000 

 

 

 

 

(1) 

Calculated in accordance with the 2017 Company performance goals composite score based on actual 2017 earnings.

 

2018 Company Performance Goals

In March 2018, the Compensation Committee established Company performance goal categories for 2018 performance as follows:

 

   

 

2018 Company Performance Goals

 

60% 

 

 

Deliver Results

   

 

   Revenues (30%)

 

   Non-GAAP Net Income (30%)

 

25% 

 

 

Progress Innovative Pipeline

   

 

   Execute Key Clinical Studies and Regulatory Filings (20%)

 

   Advance Early Pipeline (5%)

 

15% 

 

 

Deliver Annual Priorities

 

 

   Execute Critical Launches and Long-Term Commercial Objectives (10%)

 

   Achieve Transformation Objectives (5%)

In March 2018, the Compensation Committee reviewed the target incentive award opportunity for each NEO. Mr. Graham’s target annual cash incentive award opportunity was increased from 80% of base salary to 90% of base salary to align with the Market Median for his role. No changes were made to the target incentive award opportunity for any other NEO.

Base Salaries

Generally, in March of each year, the base salaries for the NEOs are set based, in part, upon the Compensation Committee’s review of the peer group data compared with the Market Median as previously described under “How Compensation Decisions Are Made For Our

Named Executive Officers—Peer Group Data Sources.” In addition, the Compensation Committee considers our performance, market conditions, retention and such other factors deemed relevant. Further, the Compensation Committee receives management’