(Mark One)

For the quarterly period ended March 31, 2018

OR

Commission file number 001-37702

(Exact name of registrant as specified in its charter)

(805) 447-1000

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☑  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes  ¨  No  ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

As of April 18, 2018 , the registrant had 661,706,007 shares of common stock, $0.0001 par value, outstanding.

AMGEN INC.

INDEX

PART I - FINANCIAL INFORMATION

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

See accompanying notes.

AMGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

See accompanying notes.

AMGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

1. Summary of significant accounting policies

Business

Amgen Inc. (including its subsidiaries, referred to as "Amgen," "the Company," "we," "our" or "us") is a global biotechnology pioneer that discovers, develops, manufactures and delivers innovative human therapeutics. We operate in one business segment: human therapeutics.

Basis of presentation

The financial information for the three months ended March 31, 2018 and 2017 , is unaudited but includes all adjustments (consisting of only normal, recurring adjustments unless otherwise indicated), which Amgen considers necessary for a fair presentation of its condensed consolidated results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.

The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2017 .

Principles of consolidation

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

Use of estimates

The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Property, plant and equipment, net

Property, plant and equipment is recorded at historical cost, net of accumulated depreciation and amortization of $7.7 billion and $7.6 billion as of March 31, 2018 and December 31, 2017 , respectively.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for the recognition of revenue from contracts with customers to transfer goods and services. The FASB subsequently issued additional, clarifying standards to address issues arising from implementation of the new revenue recognition standard. The new revenue recognition standard and clarifying standards require an entity to recognize revenue when control of promised goods or services is transferred to the customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted this new standard as of January 1, 2018, by using the modified-retrospective method. See Note 4, Revenues.

In January 2016, the FASB issued a new accounting standard that amends the accounting and disclosures of financial instruments, including a provision requiring that equity investments (except for investments accounted for under the equity method of accounting) be measured at fair value, with changes in fair value recognized in current earnings. With the exception of equity investments that were previously accounted for at cost, a modified-retrospective approach was used to reflect the cumulative-effect of adoption as an adjustment to retained earnings as of the beginning of the fiscal year. The new standard will be applied prospectively to investments that were previously accounted for at cost. Upon adoption, on January 1, 2018, we recorded an immaterial adjustment to Accumulated deficit from Accumulated other comprehensive income (loss) (AOCI), which represented the net unrealized gain on all equity investments with a readily determinable fair value as of December 31, 2017. The impact that this new standard has on our Condensed Consolidated Statements of Income after adoption will depend on the changes in fair values of equity securities in our portfolio in the future. See Note 7, Investments.

In October 2016, the FASB issued a new accounting standard that amends the income tax accounting guidance for intra-entity transfers of assets other than inventory. The new standard requires that entities recognize the income tax consequences of an intercompany transfer of an asset, other than inventory, in the period the transfer occurs. The current exception to defer the recognition of any tax impact on intercompany transfers of inventory until the inventory is sold to a third party remains unaffected.

We adopted this standard as of January 1, 2018, and will apply it prospectively to any transaction occurring on or after the adoption date. The adoption of this standard did not have a material impact on our condensed consolidated financial statements, however the impact on our condensed consolidated financial statements in future periods will depend on the facts and circumstances of future transactions.

In January 2017, the FASB issued a new accounting standard that changes the definition of a business to assist entities with the evaluation of when a set of assets acquired or disposed of should be considered a business. The new standard requires that an entity evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets; if so, the set of assets would not be considered a business. The new standard also requires that a business include at least one substantive process and narrows the definition of outputs. We adopted this standard as of January 1, 2018 and will apply it prospectively. Adoption of this new standard may result in more transactions being accounted for as asset acquisitions versus business combinations; however, the impact on our condensed consolidated financial statements in future periods will depend on the facts and circumstances of future transactions.

In February 2016, the FASB issued a new accounting standard that amends the guidance for the accounting and disclosure of leases. This new standard requires that lessees recognize the assets and liabilities that arise from leases on the balance sheet, including leases classified as operating leases under current GAAP, and disclose qualitative and quantitative information about leasing arrangements. The new standard requires a modified-retrospective approach to adoption and is effective for interim and annual periods beginning on January 1, 2019, but may be adopted earlier. We expect to adopt this standard beginning in 2019. We do not expect that this standard will have a material impact on our Condensed Consolidated Statements of Income, but we do expect that upon adoption, it will have a material impact on our assets and liabilities on our Condensed Consolidated Balance Sheets. The primary effect of adoption will be the requirement to record right-of-use assets and corresponding lease obligations for current operating leases. In addition, the standard will require that we update the systems, processes and controls we use to track, record and account for our lease portfolio. We have selected a lease accounting information system and engaged third-party consultants to provide system implementation services. System readiness, including the implementation and functionality of software procured from third-party providers, is essential to enable preparation of the financial information required for this standard.

In June 2016, the FASB issued a new accounting standard that amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the "incurred loss" model with an "expected loss" model. Accordingly, these financial assets will be presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The new standard is effective for interim and annual periods beginning on January 1, 2020, but may be adopted earlier, beginning on January 1, 2019. With certain exceptions, adjustments are to be applied by using a modified-retrospective approach by reflecting adjustments through a cumulative-effect impact on retained earnings as of the beginning of the fiscal year of adoption. We are currently evaluating the impact that this new standard will have on our condensed consolidated financial statements.

In March 2018, the FASB issued a new accounting standard to incorporate Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 118 (SAB 118), which addresses the accounting implications of the major tax reform legislation, Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Act (the 2017 Tax Act), enacted on December 22, 2017. SAB 118 allows a company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date and was effective upon issuance. We continue to analyze the 2017 Tax Act, and in certain areas, have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures. See Note 5, Income taxes.

2. Restructuring

In 2014, we initiated a restructuring plan to invest in continuing innovation and the launch of our new pipeline molecules, while improving our cost structure. As part of the plan, we closed facilities in Washington State and Colorado and are reducing the number of buildings we occupy at our headquarters in Thousand Oaks, California, as well as at other locations.

We estimate that we will incur $825 million to $900 million of pre-tax charges in connection with our restructuring, including: (i) separation and other headcount-related costs of $560 million to $600 million with respect to staff reductions and (ii) asset-related charges of $265 million to $300 million that consist primarily of asset impairments, accelerated depreciation and other related costs resulting from the consolidation of our worldwide facilities. Through March 31, 2018 , we incurred a total of $558 million of separation costs and other headcount-related costs and $243 million of net asset-related charges.

The amounts related to the restructuring recorded in the Condensed Consolidated Statements of Income during the three months ended March 31, 2018 and 2017 , were not significant. As of March 31, 2018 , the total restructuring liability was not significant.

3. Business combinations

Kirin-Amgen, Inc.

During the first quarter of 2018, we acquired the remaining 50% ownership of Kirin-Amgen, Inc. (K-A) from Kirin Holdings Company, Limited (Kirin), making K-A a wholly owned subsidiary of Amgen. Upon its acquisition, K-A's operations have been included in our condensed consolidated financial statements commencing on the share acquisition date. The acquisition relieved Amgen of future royalty obligations to K-A.

K-A is a corporation that was established in 1984 as a 50 - 50 joint venture with Kirin to fund the global development of EPOGEN ® (epoetin alfa). Over time, the scope of the collaboration was expanded to also include the products NEUPOGEN ® (filgrastim), Neulasta ® (pegfilgrastim), Aranesp ® (darbepoetin alfa), Nplate ® (romiplostim) and brodalumab. K-A held the intellectual property for each of these products and licensed the associated marketing rights in Asia to Kyowa Hakko Kirin (KHK), Kirin's pharmaceutical subsidiary, and in most other territories to Amgen. In return, Amgen and KHK paid royalties to K-A, and K-A reimbursed Amgen and KHK's research and development (R&D) expenses. K-A had also given Johnson & Johnson (J&J) exclusive licenses to manufacture and market recombinant human erythropoietin for all geographic areas of the world outside the United States, China and Japan. Under this agreement, J&J pays royalties to K-A based on product sales.

Prior to the share acquisition date, we owned 50% of K-A and accounted for our interest in K-A by using the equity method of accounting, which included recording our share of K-A's profits or losses in Selling, general and administrative expense in the Condensed Consolidated Statements of Income. The carrying value of our equity method investment in K-A was $570 million as of December 31, 2017, and was included in Other assets in the Condensed Consolidated Balance Sheet.

The transaction was accounted for as a step acquisition of a business in which we were required to remeasure our existing 50% ownership interest at fair value. In addition, we were required to effectively settle our preexisting relationships with K-A, which resulted in a loss. Together the gain on the remeasurement of our existing ownership interest and the loss from the settlement of the preexisting relationship resulted in a net gain of $80 million , which was recorded in Interest and other income, net, in the Condensed Consolidated Statements of Income.

The primary means of consideration for this transaction was a payment of $780 million in cash. The aggregate share acquisition date consideration to acquire the remaining 50% ownership in K-A and the fair value of Amgen's preacquisition investment consisted of the following (in millions):

In connection with this acquisition, we are obligated to make single-digit-percentage royalty payments to Kirin contingent upon sales of brodalumab. The estimated fair value of this contingent consideration obligation is $45 million as of the share acquisition date.

The fair values of assets acquired and liabilities assumed included cash of $977 million , licensing rights of $470 million , deferred tax liabilities of $102 million , other assets and liabilities of $131 million and goodwill of $6 million . The estimated fair value of acquired licensing rights was determined by using a probability-weighted income approach, which discounts expected future cash flows to present value by using a discount rate that represents the estimated rate that market participants would use to value the assets. The projected cash flows were based on certain assumptions, including estimates of future revenues and expenses and the time and resources needed to maintain the assets through commercialization. The licensing rights will be amortized over a weighted-average period of four years by using the straight-line method. The excess of the share acquisition date consideration over the fair values assigned to the assets acquired and the liabilities assumed of $6 million was recorded as goodwill, which is not deductible for tax purposes. The $131 million in other assets and liabilities represents primarily receivables for royalties earned by K-A, but not yet received, offset partially by payables representing R&D expenses incurred, but not yet reimbursed by K-A. The fair value estimates for the assets acquired and liabilities assumed were based on preliminary calculations and valuations, and our estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to

one year from the share acquisition date). The primary areas of those preliminary estimates that are not yet finalized relate to the valuation of licensing rights, contingent consideration and tax-related items.

Pro forma results of operations for this acquisition have not been presented because this acquisition is not material to our consolidated results of operations.

4. Revenues

Adoption of new revenue recognition standard

On January 1, 2018, we adopted the FASB's new accounting standard that amends the guidance for the recognition of revenue from contracts with customers to transfer goods and services by using the modified-retrospective method applied to those contracts that were not completed as of January 1, 2018. The results for the reporting period beginning after January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods. See Note 1, Summary of significant accounting policies, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017.

Upon adoption, we recorded a net decrease of $25 million to Accumulated deficit due to the cumulative impact of adopting the new standard-with the impact related primarily to the acceleration of deferred revenue, net of related deferred tax impact. The adoption of this new standard had an immaterial impact on our reported total revenues and operating income as compared to what reported amounts would have been under the prior standard, and we expect the impact of adoption in future periods to be immaterial. Our accounting policies under the new standard were applied prospectively and are noted below.

Revenues

Product sales

Revenue from product sales is recognized upon transfer of control of a product to a customer, generally upon delivery, based on an amount that reflects the consideration we expect to be entitled to, net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales deductions) and returns.

Other revenues

Other revenues consist primarily of royalty income and corporate partner revenues. Royalties from licensees are based on third-party sales of licensed products and are recorded when the related third-party product sale occurs. Royalty estimates are based on historical and forecasted sales trends. Corporate partner revenues are composed primarily of license fees and milestones earned and our share of commercial profits generated from collaborations. See Arrangements with multiple-performance obligations, discussed below.

Arrangements with multiple-performance obligations

From time to time, we enter into arrangements for the R&D, manufacture and/or commercialization of products and product candidates. Such arrangements may require us to deliver various rights, services and/or goods, including (i) intellectual property rights or licenses; (ii) R&D services; (iii) manufacturing services; and/or (iv) commercialization services. The underlying terms of these arrangements generally provide for consideration to Amgen in the form of non-refundable, up-front license payments, R&D and commercial performance milestone payments, cost sharing and/or royalty payments.

In arrangements involving more than one performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on their respective relative stand-alone selling price. The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is not available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred for the related goods or services. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.

Financing and payment

Our payment terms vary by the type and location of our customer and the products or services offered. Payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 120 days from date of shipment or satisfaction of the performance obligation.

For certain products or services and customer types, we may require payment before the products are delivered or services are rendered to the customer.

Practical expedients and exemptions

Taxes collected from customers and remitted to government authorities and that are related to the sales of the Company's products, primarily in Europe, are excluded from revenues.

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in Selling, general and administrative expense in the Condensed Consolidated Statements of Income.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.

Revenues by product and by geographic area

We operate in one business segment: human therapeutics. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting. Revenues by product and by geographic area, based on the customer's location, are presented below. Rest of world (ROW) revenues relate to products that are sold principally in Europe. Revenues were as follows (in millions):

(1) Total product sales includes $34 million related to hedging losses and $57 million related to hedging gains for the three months ended March 31, 2018 and 2017, respectively.

(2) Prior-period amounts are not adjusted under the modified-retrospective method of adoption.

Sales deductions

Product sales are recorded net of sales deductions and returns, which are established at the time of sale. We analyze the adequacy of our accruals for sales deductions quarterly. Amounts accrued for sales deductions are adjusted when trends or significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. Accruals for sales deductions are based primarily on estimates of the amounts earned or to be claimed on the related sales. These estimates take into consideration current contractual and statutory requirements, specific known market events and trends, internal and external historical data and forecasted customer buying patterns. Sales deductions are substantially product specific and therefore, for any given period can be affected by the mix of products sold. Included in sales deductions are immaterial net adjustments related to prior-period sales due to changes in estimates. Historically, such amounts have represented less than 1% of the aggregate sales deductions charged against product sales.

Product returns

Returns are estimated through comparison of historical return data to their related sales on a production lot basis. Historical rates of return are determined for each product and are adjusted for known or expected changes in the marketplace specific to each

product, when appropriate. Historically, sales return provisions have amounted to less than 1% of gross product sales. Changes in estimates for prior-period sales return provisions have historically been insignificant.

5. Income taxes

The effective tax rates for the three months ended March 31, 2018 and 2017 , were 11.8% and 15.8% , respectively.

The decrease in our effective tax rate for the three months ended March 31, 2018 , was due primarily to the impacts of U.S. tax reform, including the reduction in the U.S. statutory tax rate, offset partially by U.S. tax on foreign earnings.

On December 22, 2017, the United States enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreign subsidiaries, implements a territorial tax system together with a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In March 2018, the FASB issued a new accounting standard to incorporate SAB 118, which permits us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We continue to analyze the 2017 Tax Act, and in certain areas, have made reasonable estimates of the effects on our condensed consolidated financial statements and tax disclosures.

The 2017 Tax Act includes U.S. taxation on certain foreign earnings, referred to as Global Intangible Low-Taxed Income (foreign intangible income), effective January 1, 2018. The FASB allows an entity to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as foreign intangible income in future years or provide for the tax expense related to the foreign intangible income as a period expense in the year it is incurred. We have recorded no provisional amount for deferred taxes on the foreign intangible income because more time is needed to analyze the data in order to make an accounting policy election.

We consider our key estimates on the repatriation tax, the net deferred tax remeasurement, the impact on our unrealized tax benefits and the accounting policy election on temporary basis differences related to the foreign intangible income to be incomplete due to our continuing analysis of final year-end data and tax positions. We are still accumulating and processing data to update our underlying calculations and we expect the U.S. Treasury and regulators may issue further guidance, among other things, therefore our estimates may change during 2018. However, we expect to complete our analysis within the measurement period.

The U.S. territory of Puerto Rico imposes an excise tax on the gross intercompany purchase price of goods and services from our manufacturer in Puerto Rico. The rate of 4% is effective through December 31, 2027. We account for the excise tax as a manufacturing cost that is capitalized in inventory and expensed in cost of sales when the related products are sold. For U.S. income tax purposes, the excise tax results in foreign tax credits that are generally recognized in our provision for income taxes when the excise tax is incurred.

One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely audited by the tax authorities in those jurisdictions. Significant disputes may arise with authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws, regulations and the interpretation of the relevant facts. As previously disclosed, we received a Revenue Agent Report (RAR) from the Internal Revenue Service (IRS) for the years 2010, 2011 and 2012. The RAR proposes to make significant adjustments that relate primarily to the allocation of profits between certain of our entities in the United States and the U.S. territory of Puerto Rico. On November 29, 2017, we received a modified RAR that revised the IRS calculations but continued to propose substantial adjustments. We disagree with the proposed adjustments and are pursuing resolution through the IRS administrative appeals process, which we believe will likely not be concluded within the next 12 months. Final resolution of the IRS audit could have a material impact on our results of operations and cash flows if not resolved favorably, however, we believe our income tax reserves are appropriately provided for all open tax years. We are no longer subject to U.S. federal income tax examinations for years ended on or before December 31, 2009. We are currently under examination by a number of other state and foreign tax jurisdictions.

During the three months ended March 31, 2018 , the gross amounts of our unrecognized tax benefits (UTBs) increased $75 million as a result of tax positions taken during the current year. Substantially all of the UTBs as of March 31, 2018 , if recognized, would affect our effective tax rate.

6. Earnings per share

The computation of basic earnings per share (EPS) is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which include primarily shares that may be issued under our stock option, restricted stock and performance unit award programs, as determined by using the treasury stock method (collectively, dilutive securities).

The computations for basic and diluted EPS were as follows (in millions, except per-share data):

The decrease in weighted-average shares during three months ended March 31, 2018 compared to the prior period, was due to share repurchases. See Note 11, Stockholders' equity. For the three months ended March 31, 2018 and 2017 , the number of anti-dilutive employee stock-based awards excluded from the computation of diluted EPS was not significant.

7. Investments

Available-for-sale investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair values of available-for-sale investments by type of security were as follows (in millions):

The fair values of available-for-sale investments by location in the Condensed Consolidated Balance Sheets were as follows (in millions):

Cash and cash equivalents in the above table excludes bank account cash of $502 million and $509 million as of March 31, 2018 and December 31, 2017 , respectively. Other assets as of December 31, 2017, consisted of equity securities, which are no longer classified as available-for-sale.

As a result of the adoption of the new accounting standard related to the classification and measurement of financial instruments on January 1, 2018, equity investments (except for investments accounted for under the equity method of accounting) are now measured at fair value, with changes in fair value recognized in earnings. These investments were previously measured at fair value, with changes in fair value recognized in AOCI. Accordingly, these securities are no longer classified as available-for-sale and their presentation is not comparable to the presentation as of December 31, 2017. See Note 1, Summary of significant accounting policies, as well as Equity securities discussed below.

The fair values of available-for-sale interest-bearing security investments by contractual maturity, except for mortgage- and asset-backed securities that do not have a single maturity date, were as follows (in millions):

For the three months ended March 31, 2018 and 2017 , realized gains on interest-bearing securities were $17 million and $31 million , respectively, and realized losses on interest-bearing securities were $151 million and $84 million , respectively. The cost of securities sold is based on the specific-identification method.

The fair values and gross unrealized losses of available-for-sale investments in an unrealized loss position aggregated by type and length of time that the securities have been in a continuous loss position were as follows (in millions):

The primary objective of our investment portfolio is to enhance overall returns in an efficient manner while maintaining safety of principal, prudent levels of liquidity and acceptable levels of risk. Our investment policy limits interest-bearing security investments to certain types of debt and money market instruments issued by institutions with primarily investment-grade credit ratings, and it places restrictions on maturities and concentration by asset class and issuer.

We review our available-for-sale investments for other-than-temporary declines in fair value below our cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below our cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security, and the intent to sell, or whether we will more likely than not be required to sell, the security before recovery of its amortized cost basis. Our assessment of whether a security is other-than-temporarily impaired could change in the future based on new developments or changes in assumptions related to that particular security. As of March 31, 2018 and December 31, 2017 , we believe the cost bases for our available-for-sale investments were recoverable in all material respects.

Equity securities

We held investments in equity securities with readily determinable fair values of $155 million and $149 million as of March 31, 2018 and December 31, 2017 , respectively, which are included in Other assets in the Condensed Consolidated Balance Sheets. As a result of the adoption of the new accounting standard related to the classification and measurement of financial instruments on January 1, 2018, equity investments (except for investments accounted for under the equity method of accounting) are now measured at fair value, with changes in fair value recognized in earnings. These investments were previously measured at fair value, with changes in fair value recognized in AOCI. Accordingly, these securities are no longer classified as available-for-sale and their presentation is not comparable to the presentation as of December 31, 2017 . See Note 1, Summary of significant accounting policies, as well as Available-for-sale investments discussed above. Gains and losses recognized on equity securities, including gains and losses recognized on sales, were not material for the three months ended March 31, 2018 and 2017. Unrealized gains and losses on equity securities held as of March 31, 2018 , were not material.

Limited partnership investments

We held limited partnership investments of $254 million and $213 million as of March 31, 2018 and December 31, 2017 , respectively, which are included in Other assets in the Condensed Consolidated Balance Sheets. These investments are measured by using the net asset values of the underlying investments as a practical expedient. These investments are typically redeemable only through distributions upon liquidation of the underlying assets. As of March 31, 2018 , unfunded additional commitments to be made during the next several years for these investments were approximately $90 million .

8. Inventories

Inventories consisted of the following (in millions):

9. Goodwill and other intangible assets

Goodwill

Changes in the carrying amount of goodwill were as follows (in millions):

Other intangible assets

Other intangible assets consisted of the following (in millions):

Developed-product-technology rights consist of rights related to marketed products acquired in business combinations. Licensing rights consist primarily of contractual rights acquired in business combinations to receive future milestone, royalty and profit sharing payments; capitalized payments to third parties for milestones related to regulatory approvals to commercialize products; and up-front payments associated with royalty obligations for marketed products. During the three months ended March 31, 2018, licensing rights increased due to the K-A share acquisition. See Note 3, Business combinations. Marketing-related intangible assets consist primarily of rights related to the sale and distribution of marketed products. R&D technology rights consist of technology used in R&D with alternative future uses.

In-process research and development (IPR&D) consists of R&D projects acquired in a business combination that are not complete at the time of acquisition due to remaining technological risks and/or lack of receipt of required regulatory approvals. As of March 31, 2018 , IPR&D consists primarily of the oprozomib project, acquired in the acquisition of Onyx Pharmaceuticals, Inc., in 2013.

All IPR&D projects have major risks and uncertainties associated with the timely and successful completion of the development and commercialization of product candidates, including our ability to confirm safety and efficacy based on data from clinical trials, our ability to obtain necessary regulatory approvals and our ability to successfully complete these tasks within budgeted costs. We are not permitted to market a human therapeutic without obtaining regulatory approvals, and such approvals require the completion of clinical trials that demonstrate that a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans as well as competitive product launches, affect the revenues a product can generate. Consequently, the eventual realized value, if any, of the acquired IPR&D projects may vary from their estimated fair values. We review IPR&D projects for impairment annually, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and upon the establishment of technological feasibility or regulatory approval.

During the three months ended March 31, 2018 and 2017 , we recognized amortization expense associated with our finite-lived intangible assets, included primarily in Cost of sales in the Condensed Consolidated Statements of Income, of $320 million and $373 million , respectively. The total estimated amortization expense for our finite-lived intangible assets for the remaining nine months ending December 31, 2018 , and the years ending December 31, 2019 , 2020 , 2021 , 2022 and 2023 , are $1.0 billion , $1.3 billion , $1.2 billion , $1.0 billion , $0.9 billion and $0.9 billion , respectively.

10. Financing arrangements

Our borrowings consisted of the following (in millions):

There are no material differences between the effective interest rates and coupon rates of any of our borrowings, except for the 4.563% 2048 Notes and the 4.663% 2051 Notes, which have effective interest rates of 6.3% and 5.6% , respectively.

11. Stockholders' equity

Stock repurchase program

Activity under our stock repurchase program, on a trade date basis, was as follows (in millions):

In January 2018, our Board of Directors authorized an increase of $10.0 billion available under our stock repurchase program. Repurchase activity for the three months ended March 31, 2018, included 52.1 million shares of our common stock acquired under a tender offer at an aggregate cost of $10.0 billion . As of March 31, 2018 , $3.6 billion remained available under our stock repurchase program. In April 2018, our Board of Directors increased the amount authorized under our stock repurchase program by an additional $5.0 billion .

Dividends

In March 2018, the Board of Directors declared a quarterly cash dividend of $1.32 per share of common stock, which will be paid in June 2018. In December 2017, the Board of Directors declared a quarterly cash dividend of $1.32 per share of common stock, which was paid in March 2018.

Accumulated other comprehensive income (loss)

The components of AOCI were as follows (in millions):

See Note 1, Summary of significant accounting policies, for additional information regarding the adoption on January 1, 2018, of the new accounting standard related to the classification and measurement of financial instruments and the related cumulative effect from the change in accounting principle.

The reclassifications out of AOCI and into earnings were as follows (in millions):

12. Fair value measurement

To estimate the fair value of our financial assets and liabilities, we use valuation approaches within a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing an asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is divided into three levels based on the source of inputs as follows:

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used for measuring fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level of input used that is significant to the overall fair value measurement.

The fair values of each major class of the Company's financial assets and liabilities measured at fair value on a recurring basis were as follows (in millions):