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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Amgen Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	7,802)	6,399)	6,412)	7,889)	8,504)
Cost of capital²	8.36%	8.65%	8.49%	8.58%	8.78%
Invested capital³	69,976)	39,722)	40,247)	38,776)	37,391)

Economic profit⁴	1,950)	2,964)	2,994)	4,562)	5,222)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,802 – 8.36% × 69,976 = 1,950

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Amgen Inc. economic profit decreased from 2021 to 2022 and from 2022 to 2023.

Amgen Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income	6,717)	6,552)	5,893)	7,264)	7,842)
Deferred income tax expense (benefit)¹	(1,215)	(1,275)	(434)	(363)	(304)
Increase (decrease) in allowance for doubtful accounts²	6)	(4)	(6)	6)	(22)
Increase (decrease) in equity equivalents³	(1,209)	(1,279)	(440)	(357)	(326)
Interest expense, net	2,875)	1,406)	1,197)	1,262)	1,289)
Interest expense, operating lease liability⁴	29)	19)	17)	14)	17)
Adjusted interest expense, net	2,904)	1,425)	1,214)	1,276)	1,306)
Tax benefit of interest expense, net⁵	(610)	(299)	(255)	(268)	(274)
Adjusted interest expense, net, after taxes⁶	2,294)	1,126)	959)	1,008)	1,032)
(Gain) loss on marketable securities	—)	—)	—)	(33)	(56)
Investment income, before taxes	—)	—)	—)	(33)	(56)
Tax expense (benefit) of investment income⁷	—)	—)	—)	7)	12)
Investment income, after taxes⁸	—)	—)	—)	(26)	(44)
Net operating profit after taxes (NOPAT)	7,802)	6,399)	6,412)	7,889)	8,504)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 810 × 3.60% = 29

⁵ 2023 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 2,904 × 21.00% = 610

⁶ Addition of after taxes interest expense to net income.

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

⁸ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Amgen Inc. NOPAT decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Amgen Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Provision for income taxes	1,138)	794)	808)	869)	1,296)
Less: Deferred income tax expense (benefit)	(1,215)	(1,275)	(434)	(363)	(304)
Add: Tax savings from interest expense, net	610)	299)	255)	268)	274)
Less: Tax imposed on investment income	—)	—)	—)	7)	12)
Cash operating taxes	2,963)	2,368)	1,497)	1,493)	1,863)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Amgen Inc. cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Amgen Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Current portion of long-term debt	1,443)	1,591)	87)	91)	2,953)
Long-term debt, excluding current portion	63,170)	37,354)	33,222)	32,895)	26,950)
Operating lease liability¹	810)	695)	670)	459)	528)
Total reported debt & leases	65,423)	39,640)	33,979)	33,445)	30,431)
Stockholders’ equity	6,232)	3,661)	6,700)	9,409)	9,673)
Net deferred tax (assets) liabilities²	(446)	(943)	(219)	201)	514)
Allowance for doubtful accounts³	28)	22)	26)	32)	26)
Equity equivalents⁴	(418)	(921)	(193)	233)	540)
Accumulated other comprehensive (income) loss, net of tax⁵	289)	231)	796)	985)	528)
Adjusted stockholders’ equity	6,103)	2,971)	7,303)	10,627)	10,741)
Construction in progress⁶	(1,550)	(1,213)	(987)	(915)	(907)
Marketable securities⁷	—)	(1,676)	(48)	(4,381)	(2,874)
Invested capital	69,976)	39,722)	40,247)	38,776)	37,391)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

⁷ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Amgen Inc. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Amgen Inc., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	155,454)	155,454)	÷	215,464)	=	0.72	0.72	×	10.24%	=	7.39%
Borrowings³	59,200)	59,200)	÷	215,464)	=	0.27	0.27	×	4.45% × (1 – 21.00%)	=	0.97%
Operating lease liability⁴	810)	810)	÷	215,464)	=	0.00	0.00	×	3.60% × (1 – 21.00%)	=	0.01%
Total:	215,464)					1.00					8.36%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in millions

² Equity. See details »

³ Borrowings. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	128,154)	128,154)	÷	163,849)	=	0.78	0.78	×	10.24%	=	8.01%
Borrowings³	35,000)	35,000)	÷	163,849)	=	0.21	0.21	×	3.74% × (1 – 21.00%)	=	0.63%
Operating lease liability⁴	695)	695)	÷	163,849)	=	0.00	0.00	×	2.70% × (1 – 21.00%)	=	0.01%
Total:	163,849)					1.00					8.65%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in millions

² Equity. See details »

³ Borrowings. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	124,028)	124,028)	÷	162,598)	=	0.76	0.76	×	10.24%	=	7.81%
Borrowings³	37,900)	37,900)	÷	162,598)	=	0.23	0.23	×	3.66% × (1 – 21.00%)	=	0.67%
Operating lease liability⁴	670)	670)	÷	162,598)	=	0.00	0.00	×	2.50% × (1 – 21.00%)	=	0.01%
Total:	162,598)					1.00					8.49%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Borrowings. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	136,681)	136,681)	÷	176,540)	=	0.77	0.77	×	10.24%	=	7.93%
Borrowings³	39,400)	39,400)	÷	176,540)	=	0.22	0.22	×	3.68% × (1 – 21.00%)	=	0.65%
Operating lease liability⁴	459)	459)	÷	176,540)	=	0.00	0.00	×	3.10% × (1 – 21.00%)	=	0.01%
Total:	176,540)					1.00					8.58%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Borrowings. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	133,886)	133,886)	÷	168,114)	=	0.80	0.80	×	10.24%	=	8.15%
Borrowings³	33,700)	33,700)	÷	168,114)	=	0.20	0.20	×	3.88% × (1 – 21.00%)	=	0.61%
Operating lease liability⁴	528)	528)	÷	168,114)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.01%
Total:	168,114)					1.00					8.78%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Borrowings. See details »

⁴ Operating lease liability. See details »

Amgen Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	1,950)	2,964)	2,994)	4,562)	5,222)
Invested capital²	69,976)	39,722)	40,247)	38,776)	37,391)
Performance Ratio
Economic spread ratio³	2.79%	7.46%	7.44%	11.76%	13.97%
Benchmarks
Economic Spread Ratio, Competitors⁴
AbbVie Inc.	-3.97%	5.45%	4.84%	-3.02%	7.26%
Bristol-Myers Squibb Co.	1.99%	-0.71%	1.55%	-14.02%	-3.70%
Danaher Corp.	-7.58%	-2.63%	-1.98%	-3.38%	-6.79%
Eli Lilly & Co.	3.21%	10.54%	12.24%	18.90%	15.73%
Gilead Sciences Inc.	5.91%	2.40%	8.94%	-4.12%	7.18%
Johnson & Johnson	0.02%	5.25%	10.32%	5.09%	4.00%
Merck & Co. Inc.	-8.53%	11.66%	11.79%	4.63%	11.21%
Pfizer Inc.	-8.89%	18.69%	11.84%	-2.87%	5.74%
Regeneron Pharmaceuticals Inc.	21.04%	24.16%	67.16%	39.03%	28.28%
Thermo Fisher Scientific Inc.	-4.52%	-2.74%	-0.91%	0.09%	-3.80%
Zoetis Inc.	9.00%	3.77%	6.55%	3.30%	4.27%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,950 ÷ 69,976 = 2.79%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Amgen Inc. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Amgen Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	1,950)	2,964)	2,994)	4,562)	5,222)
Product sales	26,910)	24,801)	24,297)	24,240)	22,204)
Performance Ratio
Economic profit margin²	7.25%	11.95%	12.32%	18.82%	23.52%
Benchmarks
Economic Profit Margin, Competitors³
AbbVie Inc.	-4.98%	7.72%	8.26%	-6.83%	13.69%
Bristol-Myers Squibb Co.	2.99%	-1.10%	2.68%	-29.73%	-14.18%
Danaher Corp.	-24.89%	-6.54%	-4.96%	-9.92%	-22.00%
Eli Lilly & Co.	2.76%	8.97%	11.30%	18.91%	15.15%
Gilead Sciences Inc.	10.05%	4.05%	15.81%	-8.51%	10.21%
Johnson & Johnson	0.03%	6.30%	10.80%	6.07%	4.72%
Merck & Co. Inc.	-9.92%	14.54%	17.13%	5.52%	12.85%
Pfizer Inc.	-23.55%	20.63%	12.77%	-7.11%	13.42%
Regeneron Pharmaceuticals Inc.	19.19%	24.32%	45.41%	38.03%	23.48%
Thermo Fisher Scientific Inc.	-9.03%	-5.06%	-1.86%	0.17%	-7.83%
Zoetis Inc.	12.17%	5.85%	9.78%	5.71%	6.71%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Product sales
= 100 × 1,950 ÷ 26,910 = 7.25%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Amgen Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

Amgen Inc. (NASDAQ:AMGN)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin