Managing Risk Through Effective Supplier Relationship Management

Farryn Melton

Vice President Strategic Sourcing

Amgen

May 12, 2011

For Internal Use Only. Amgen Confidential.

Agenda

• About Amgen and Global Strategic Sourcing (GSS)

• Talking about Supply Chain Risk

• What are Leading Organizations Doing?

• Case study – Developing Risk Management Innovation: Raw Materials

• Q&A

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Safe Harbor Statement

This presentation contains forward-looking statements that are based on management’s current expectations and beliefs and are subject to a

number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described. All statements, other than

statements of historical fact, are statements that could be deemed forward-looking statements, including estimates of revenues, operating margins,

capital expenditures, cash, other financial metrics, expected legal, arbitration, political, regulatory or clinical results or practices, customer and

prescriber patterns or practices, reimbursement activities and outcomes and other such estimates and results. Forward-looking statements involve

significant risks and uncertainties, including those discussed below and more fully described in the Securities and Exchange Commission (SEC)

reports filed by Amgen, including Amgen’s most recent annual report on Form 10-K and most recent periodic reports on Form 10-Q and Form 8-K.

Please refer to Amgen’s most recent Forms 10-K, 10-Q and 8-K for additional information on the uncertainties and risk factors related to our

business. Unless otherwise noted, Amgen is providing this information as of November 18, 2010, and expressly disclaims any duty to update

information contained in this presentation.

No forward-looking statement can be guaranteed and actual results may differ materially from those we project. The Company’s results may be

affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments

(domestic or foreign) involving current and future products, sales growth of recently launched products, competition from other products (domestic

or foreign), difficulties or delays in manufacturing our products. In addition, sales of our products are affected by reimbursement policies imposed by

third-party payors, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and

guideline developments and domestic and international trends toward managed care and health care cost containment as well as U.S. legislation

affecting pharmaceutical pricing and reimbursement. Government and others’ regulations and reimbursement policies may affect the development,

usage and pricing of our products. Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by

domestic and foreign government regulatory authorities. We or others could identify safety, side effects or manufacturing problems with our

products after they are on the market. Our business may be impacted by government investigations, litigation and products liability claims. Further,

while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged,

invalidated or circumvented by our competitors. We depend on third parties for a significant portion of our manufacturing capacity for the supply of

certain of our current and future products and limits on supply may constrain sales of certain of our current products and product candidate

development. In addition, we compete with other companies with respect to some of our marketed products as well as for the discovery and

development of new products. Discovery or identification of new product candidates cannot be guaranteed and movement from concept to product

is uncertain; consequently, there can be no guarantee that any particular product candidate will be successful and become a commercial product.

Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers.

This presentation includes GAAP and non-GAAP financial measures. In accordance with the requirements of SEC Regulation G, reconciliations

between these two measures, if these slides are in hardcopy, accompany the hardcopy presentation or, if these slides are delivered electronically,

are available on the Company's website at www.amgen.com within the Investors section.

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About Amgen

• World’s leading independentbiotechnology company, with a mission to serve patients

• Amgen medicines have reached 20 million patients

• Presence in nearly 50 countries

• More than 30 years of pioneering science and vital medicines

• Focus solely on discovering, developing, and making human therapeutics

• Specializing in innovative medicines for serious illness

• Pioneer and world leader in protein therapeutic manufacturing

• Broad and deep pipeline of novel product candidates

Marketed Products

For additional information about Amgen products, including

important safety information, visit www.amgen.com

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Our sourcing organization creates value by leveraging the supply marketplace…

Leadership role as trusted advisors to influence Amgen strategies, leverage emerging trends and identify opportunity areas that deliver sustainable value

Strategic Business Partners

Integral key contributor applying market knowledge to drive internal and external innovative opportunities to enhance Amgen’s competitiveness

Business Transformation

Drive world-class sourcing strategies to deliver assurance of supply, ensure quality and service, optimize cost, leverage innovation and meet regulatory requirements

Sourcing Ownership

Operational excellence, compliance and continuous improvement, in everything we do

Execution

Supplier, Supply and Specification Management to realize full value from sourcingand continuous improvement aligned with Enterprise Risk Management

Strategic Supplier Relationship Management

Foster dynamic learning environment that recognizes people with broad contribution as highly skilled and fungible resources, with geographic flexibility

People

Vision

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$ End

Users

Supply

Market

PatientsSuppliers

Sourcing is uniquely positioned to influence every area across the value chain

Value Chain

…and by driving material value and productivity across the business

InnovationPipeline

SupportBusiness

Efficiency

Risk

Management

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Supply chains face significant risks due to volatile macroeconomic conditions

Labor DisputesNatural

Disasters

Demand /

Exchange Rate

Volatility

Political Turmoil

Potential

Inflationary

Trends

Anemic Economic

Environment

Supply Disruption Risk

Commodity Price

Increases

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These risks are further accentuated as supply chains have become more complex and interdependent

There is a significant potential for erosion in business value if supply chain risks are

not managed effectively

Source: Right-Shoring: Claiming Competitive Advantage by Managing Complexity Across the Global Supply Chain. White Paper, DHL Supply Chain 2010

Material Supplier Manufacturing Distribution Contamination Process

Potential Risk Elements Across the Supply Chain

In the past three years, many supply chain executives have seen an increase in supply chain risk…

2010 Global Survey of Supply Chain Risk – McKinsey & Company

Key Questions

What can you do to prepare

to manage increased supply

chain risks in the future?

How do you plan to reduce

supply chain complexity and

stay nimble?

How can you push your

organizations to develop

innovative risk management

solutions to stay competitive?

Source: McKinsey Global Survey Results: The challenges ahead for supply chains, McKinsey Quarterly, Nov 2010

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…and continued increases may be expected in the near future

For Internal Use Only. Amgen Confidential.10

Leading organizations have increased focus on strategic supply chain risk solutions

Low

High

Imp

act

to t

he E

nte

rpri

se

FuturePresentPast

Evolution of Supplier Risk

Management

Develop transparent and trusted

partnerships with customers, key

suppliers, and the business to

mitigate risk and drive value :

Innovation Driven

Relationship Centric

Risk/Value Focused

Risk management via strategic partnerships is one of many innovative approaches that enable value-driven risk strategies

Reactive Reactive and non-strategic

Lack of formal processes to

assess risk

Primarily cost focus

Proactive Proactive risk mitigation

Established process to

indentify root-causes

Metrics to report on risks

Strategic Risk management integrated into

operations

Leveraging strategic partnerships

Focus on value/innovation

Risk Management Continuum

For Internal Use Only. Amgen Confidential.11

Strategic relationships between the business, sourcing, and suppliers drive unique risk management solutions

Business Suppliers

Shared Vision

Relationship Alignment

Risk Management Innovation

For strategic relationships to succeed, shared vision, relationship alignment and innovation are critical

Three-Way Linkage for

Generating Business Value Sourcing

Strategic Relationship Management

Source: “We’re in this together” , D. A. Lambert & A. M. Knemeyer, HBR Article R0412H – The 21st Century Global Supply Chain, Dec 2004

These key enablers may help to minimize overall supply chain risks

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Continued

Executive Focus

Strategic partnerships established

and monitored at highest levels

Multi-disciplined

Risk Management teams

Cross-functional teams from the

business and supply base

working together

Key Indicators with

Dashboard

Risk audit and

governance via scorecards

and dashboard

Effective

Communication

Well-defined lines of communication

for efficiency and relationship-

building

Ensure that operational excellence/lean principles are used to facilitate these activities

Case Study – Developing Risk Management Innovation: Raw Materials

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For Internal Use Only. Amgen Confidential.

Assessing and planning for raw materials risk -Partnering with the business, sourcing and suppliers

This is a journey! Drawing on innovation and collaboration is essential to evolving even the most mature risk programs

Supplier Risk

Sourcing, Supplier Quality

Material Risk

Subject Matter Expert, Safety

Process Impact

Process/Product Development

Business continuity Material safety Quality

Supplier quality Material complexity Process performance

Technical capability Handling Facility fit

• Raw materials risk managed by executive leadership through a cross functional Supplier Governance Council – part of

an Enterprise Risk Management program.

• Monitor suppliers for supply risk and performance

• Utilize risk assessment models, performance scorecards, and other metrics as a fundamental part of enterprise-level

supplier risk management

Preparing for success

Why are raw materials so important?

• We operate in a highly regulated industry

• Our products are injected into people

• We run very complex manufacturing processes

Understanding Risk Across Multiple Dimensions

For Internal Use Only. Amgen Confidential.

Key mechanisms for driving collaboration and innovation

Supplier Forums

Three-Way LinkageRisk Assessment Model

Idea Harvesting

Continually Collaborative Process

Alternative sources

Technology

Alternative sites and locations

Hedging Green materials

Collaborative planning

Supplier ownership

Governance

Supplier Stratification

Output: Tangible Ideas

Thank you!

Q&A

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