Amgen's CEO Presents at Morgan Stanley Healthcare Conference (Transcript)

Seeking Alpha

Amgen Inc. (AMGN) Morgan Stanley Healthcare Conference September 11, 2013 8:35 AM ET

Executives

Robert A Bradway - Chairman and Chief Executive Officer

Analysts

David Friedman - Morgan Stanley

David Friedman - Morgan Stanley

All right, everyone. Thanks very much for joining us here. Dave Freedman, Biotech Analyst joined on stage by Bob Bradway, Chairman and CEO of Amgen and we'd love this to be interactive. So please feel free to raise your hand and we can get a microphone and you can ask any questions that you have.

So thanks so much for joining us here today, Bob and maybe if you can just start and just give a couple of minute overview of where Amgen is now and what you are excited about.

Robert A Bradway

Sure, first good morning. Thank you for joining us. Dave, thanks for hosting this event.

I will kick off by just summarizing where we are in executing against our strategy and let me first remind you what we are trying to do with our strategy, and that is to deliver earnings growth and return of capital for our shareholders. And so in the near term we expect to be able to do that. As you know we are on track this year for hitting our targets for growth in 2014.

Beginning at the end of this year our profit share arrangement with respect to Enbrel, which has been in place since we acquired the molecule lapses and so that is an important source of earnings growth for us over the next several years and helps to underscore our confidence in our ability to continue to increase the return on capital particularly in the form of dividend to our shareholders. So near term we are excited about the prospect of delivering on our objective of earnings growth and return on capital.

Longer term obviously we are also excited about the prospects for our business and the long term confidence we have starts with our conviction about our pipeline. We have nine medicines that are advancing through late-stage of clinical development and generate pivotal data by 2016. I will be happy to talk about those this morning, Dave.

In addition of course to those nine molecules we’ve recently announced the acquisition of Onyx and so subject to the constraints that we face this morning during an SEC registered acquisition process I’d be happy to share thoughts with you on that.

And beyond our pipeline of course we have beginning in 2017 we’ll launch six biosimilar molecules that we’re commercializing for global opportunities. And then of course we are executing on our strategy of expanding internationally. This year we’ve been successful in putting place two of the key building blocks for that which is first an important partnership in Japan and then second a stepping stone for us to launch our first medicine in China beginning in 2015.

So short-term we feel good about the progress we’re making on delivering earnings growth and the position we have to continue to return capital and as I said longer term we feel optimistic as well about what we can do for shareholders.

David Friedman - Morgan Stanley

Great, so maybe we can just start with just a higher level question. You’ve been in your seat now for a little while. How do you believe the company’s strategy has changed at all under your leadership and where do you think you’re going to be bringing Amgen in the next three, five years and beyond?

Robert A Bradway

Well as I tried to indicate Dave in my opening comments I think the company is evolving rapidly. We have a focus on return on capital in our investment philosophy and that reflects the commitments we make to operating expenses, capital expenses and strategic expenses.

So I think one of the big changes at Amgen has been a focus on the need to generate return on capital that we feel confident is attractive to our shareholders and I think that’s reflected in the operating decisions that we’re making. I think that’s reflected as well in the return on capital decisions that we’re making as well as the strategic investments that we’re making.

So I talked about Onyx, we’ve made a number of other investments that I think position us for long-term growth. Those include going to the very early opportunities, the investment acquisition that we made at deCODE Genetics which helps to position our early stage discovery research around targets that we think we have appropriate generic validation for.

And we’ve made other acquisitions as well, Micromet which brings to us a very attractive platform for treating oncology for reaching oncology targets, the most advanced of those programs as one for leukemia, Acute Lymphoblastic Leukemia, the data there look very attractive. But we are intrigued and interested in the Micromet platform for more than just Acute Lymphoblastic Leukemia but for other lymphoids and solid tumors as well. Of course we’ve acquired KAI and other transactions as well. So we’ve been very active in trying to reshape and reposition the company.

David Friedman - Morgan Stanley

So may be just since Onyx is the sort of one of the larger and more recent transactions and we can just talk about I guess first from a capital perspective does the Onyx acquisition impact your ability to allocate capital to other programs to dividend, I guess how important or impactful was that to your capital structure and capital allocation plan?

Robert A Bradway

Sure, well as we said at the time of the announcement it was important and we’ve looked at our strategic flexibility inside the umbrella of being able to continue to grow the dividend and return on capital to shareholders.

So we believe and we announced at the time of the acquisition that we’re in good position to continue to grow the dividend for shareholders. So while it clearly is an important transaction that’s reflected in the balance sheet impact of the acquisition, we still think we’re in good position to be able to grow the dividend and return capital to our shareholders.

Now we also said at the time of the acquisition that we expect the transaction to be accretive, accretive to net income in 2015 and we think that this has the potential to be an important part of our long-term growth story at Amgen.

So as I hope, you are aware Dave, oncology is a core part of what we do at Amgen. Our oncology revenues are in excess of $7 billion a year. So we think this is a transaction that fits right down the middle of our strategic fairway in that regard. We think the multiple myeloma space is an increasing interesting area for us to be active in. We think Kyprolis is a very attractive molecule, very potent would appear to be attractive from a side effect profile as well.

So we think that this is an attractive molecule through which we can either help develop an important multiple myeloma franchise. And we think we are acquiring this at a time in the lifecycle of Kyprolis where we can help make a difference by virtue of the experience that we have in oncology.

And if you look at the work that we’ve done for example around XGEVA I think we’ve been able to demonstrate through the success of XGEVA which was one of the more successful launches in the oncology space in the last five years that this is an area where we can add value particularly at an early stage in the lifecycle of molecule.

David Friedman - Morgan Stanley

So maybe if we can just talk a little bit more about Kyprolis, and maybe if you can just remind people where that drug is now in terms of revenue? And then what are the most important next steps for that drug?

Robert A Bradway

Yeah. I’m going to talk about Onyx in general and Kyprolis at a high level, given as I said earlier Dave, we’re in middle of a process that I think your guests are familiar with, which is an SEC registered process. So I want to avoid getting into too much detail about a pending acquisition. But Kyprolis obviously has launched in late stage multiple myeloma. The early indications from the key opinion leaders remain very favorable for a profile that it brings to that marketplace.

We think there is an important role for proteasome inhibition in that disease state. And based on the work that we’ve done and the interaction that we’ve had with key opinion leaders we think this has the potential to be the most potent and have attractive side effect profile relative to other proteasome inhibitors. So we like what we see with Kyprolis and we look forward to having more to say about it after we’ve completed the acquisition.

David Friedman - Morgan Stanley

And as you sort of take your first step into myeloma, which is a disease that has a lot of opportunities, a lot of classes of drugs that play, is this a market that you think you can build into even more and use Kyprolis as a first step or is Kyprolis you think enough for you in this market and it’s a good source of diversification?

Robert A Bradway

Well, I mentioned earlier that we’re active in a wide range of cancers at the moment. And we will look to see whether there are opportunities for us to expand beyond proteasome inhibition that Kyprolis represents for multiple myeloma. But generally, multiple myeloma, this is an exciting time to be looking at improvements in the therapy for patients suffering from multiple myeloma, real progress is being made. And again we think that the opportunity for a potent and less toxic proteasome inhibitor is attractive right now.

David Friedman - Morgan Stanley

Anyone have any additional questions around Onyx? Okay. So maybe if we can talk a little bit about cardiovascular. This is an area that you guys have made, clearly, made sort of concerted effort to move into. And so I guess first, if you could just talk a little bit about, what it is about the cardiovascular world that you found appealing? And then if you can just describe the two deals that you have done of Cytokinetics and Servier to give you some entry into this, in to this world.

Robert A Bradway

Sure. Well, starting at high altitude obviously cardiovascular disease remains a leading cause of death in United States, Western Europe and the developed world. So this is still a serious illness for which there are large unmet medical needs despite the considerable progress that’s been made.

The cornerstone of our interest in cardiovascular disease obviously is our antibody the PCSK9, an antibody for which we have high conviction base in large part around the genetic data that are available to suggest that this is an important access, both to lower LDL abut also to reduce cardiovascular mortality and morbidity obviously. That’s what we’re trying to do with this antibody.

And as you know we have four very large Phase III programs that are underway. And we expect to be reporting out data from those programs in the first quarter next year. We have as well a very large fifth trial which is an outcomes trial that will generate data thereafter. But we’re very excited about the clinical data that we’ve seen so far.

We’ve recently reported pooled data at a European conference for our Phase II trials which reported very significant 40% to 59% reduction in LDL levels, including for very high risk patient. So, we’re excited about the profile of this molecule and confident that if we’re able to recapitulate that in Phase III trials that we ought to also have a significant benefit from a mortality and morbidity standpoint.

And while statins and other therapies have been very successful in this area there are still literally tens of millions of patients in the U.S., the EU5 and Japan alone that aren’t able to reach their LDL goals despite available therapies. So we think this is an attractive add-on particularly for patients who are at high risk.

Now in addition, while that’s the cornerstone of our cardiovascular therapy, you’re right to point out that we have a couple of other innovative programs. And one in heart failure, which we have had running for some time with Cytokinetics, an innovative molecule in a very important large disease state, a high risk potentially high return opportunity for patients and clinicians who treat patients with heart failure and this is a milestone activating product, Omecamtiv Mecarbil.

And then we recently announced the licensing transaction with Servier as you reflected in your question. We’ve licensed a molecule from Servier which has been improved in 100 countries around the world for treatment of unstable angina and for heart failure. And so we are optimistic that we can register this product in the U.S. without benefit of any further clinical trial data given the very extensive data that already exists. And we think that this is also an interesting and novel mechanism, and novel way to treat heart failure with statistically significant data demonstrating a reduction, 26% plus reduction in hospitalization for these heart failure patients who as you know are chronically ill and very often re-admitted in hospital.

So that’s an attractive opportunity for us and one which we think fits very well with our two innovative program, the LDL cholesterol lowering program as well as the Cytokinetics heart failure product.

David Friedman - Morgan Stanley

So may be just a little more on our PCSK9. The first question is how important do you believe the outcome study is to getting that drug launched well and if it’s not important or sorry, not, not important, but if it’s not crucial to the initial launch what are you looking to bring in the Phase III program that will be impactful you think for patients?

Robert A Bradway

Well several questions there but obviously we have a very broad Phase III program and the data that we seek to generate from that program I think will be very comprehensive and very impressive. But as to the outcomes data, personally I believe the outcomes data will be very important to the widespread acceptance of this medicine on top of therapies that are already available.

So while we believe there is a pathway to register this medicine in advance of the availability of outcomes data, I think that in order for this medicine to achieve its full potential we are going to have to generate outcomes data along the lines of what we expect to see in the trial that we are running but that’s why we are running the trial. If we knew the answer we might have done something different.

But we are running the trial we think we structured it in an effective way to generate the data and we’ll see. But again just to remind you in the first quarter of next year we will have comprehensive data on tens and thousands of patients in the setting of hypercholesterolemia and we will answer the question as to whether PCSK9 can meaningfully reduce the LDL level in those patients.

David Friedman - Morgan Stanley

The other question on PCSK9 is there are other companies looking at this target in Phase II and Phase III and so how do you believe you are going to be able to differentiate your drug in the marketplace?

David Friedman - Morgan Stanley

Well I think the amount of attention focused on PCSK9 both in the investment community, the media and from our competitors reflects how attractive this access seems to be, looks to be in cardiovascular disease. So we are excited about it obviously. And we think we have lot to bring to the space. This is an antibody-based therapy and requires that kind of protein engineering that I think as an organization we are very good at.

If this molecule and if this diseases class goes on to be what we hope it can be, the demand for protein will be considerable and this is an antibody that we are going to have to make in sizable quantity and again I think that’s something that we’ve demonstrated to do safely, reliably and efficiently through time.

I will remind you that one of the challenges faced in the TNF space was manufacturing suitable amount of products to help meet the needs of patients. And some of you will remember that there were even tens of thousands of patients on a waiting list once upon a time for TNF therapy.

So the kind of skill that we developed in commercializing and scaling Enbrel overtime I think will serve us well. And in addition I think the experience that we had in commercializing Prolia will also be useful because as with Prolia this is an antibody therapy that’s going to be used by general practitioners in some cases for whom this may be their first interaction with a monoclonal antibody. So we are conscious of that and think that our experience with other products will serve us well in that regard.

David Friedman - Morgan Stanley

Yeah, I was actually asking what do you think the key learnings are from Prolia given a lot of the similarities that are taking place and what you are trying to do with that market versus what you and others are going to try to do with this cholesterol market? I mean what were the sort of one of two key things that you guys learned from the Prolia experience and ongoing experience that you think will help inform a better PCSK9 launch.

David Friedman - Morgan Stanley

Let me just remind your guests Dave, maybe less familiar with Prolia than you are, Prolia is the most potent anti-resorptive available to treat osteoporosis. It also is a monoclonal antibody therapy and was a completely new paradigm for physicians treating osteoporosis. So there were seven other therapies available at the time that we launched Prolia to treat osteoporosis, and so that the challenge that we faced first was educating the physicians about the need and the benefit from a new approach to treating the disease.

And I think we’ll see parallels with that in the setting of cardiovascular disease. And then of course when you’re talking about patients requiring an injection, the fulfillment challenge is very different from what physicians are used to in dispensing or prescribing pills.

So I think the two big areas that we’ll be focused on are helping the clinical community understand the appropriate use of the therapy and then making sure that it's easy for the patients in the clinical community to get the therapy and use the full benefit of patients.

So we’re continuing to learn our lessons with Prolia. Prolia continues to gain share; it’s growing worldwide. We’ve benefited from very rapid acceptance of it, particularly in international markets and here in the U.S. again demand for Prolia continues to grow steadily. So we’re learning but I think there is appropriate role for biotechnology on main street and that’s what Prolia has reflected.

David Friedman - Morgan Stanley

And in terms of your Prolia experience U.S. versus outside of the U.S. has there been any key differences that you picked up?

Robert A Bradway

Yes, and every market is different and the access reimbursement outside of the U.S. is so vastly different from what we deal with inside the U.S. that the answer of your question is yes there are significant differences but fundamentally what the market had in common is a desire to try to prevent unnecessary fracture in women who suffer from osteoporosis post menopause.

So again World Health Organization declared osteoporosis to be a public health problem and this is a problem for which there are good tools to help prevent and avoid fracture and Prolia is one of them. So the need is for us to help payors and to help physicians and patients recognize that there is an opportunity and Prolia represents an important opportunity to help prevent those fractures.

I should mention as well Dave, that while Prolia is a product that prevents resorption of skeleton in women who have transitioned through menopause, we have another program advancing through our clinical pipeline that a number of you are very excited about and we certainly are as well. And that’s an antibody to sclerostin. And sclerostin antibody looks to be very effective in building bone and we hope will also prove to be very effective in preventing fracture.

So we think we have the makings of a very dynamic and profound approach to treating osteoporosis with biologic therapies, one to prevent resorption and another to help build bones. So I think those two have the potential to travel in tandem very effectively together.

David Friedman - Morgan Stanley

And when we’ll see the next sclerostin data point?

Robert A Bradway

What we said in terms of, Dave, 2015 is next cohort of data.

David Friedman - Morgan Stanley

So may be while we’re just on sort of Prolia and XGEVA in this area if you could talk about two things. Number one is expected impact of generic Zometa, and then number two is what are the next steps of sort of building out the datasets and the growth profile for Prolia and XGEVA?

Robert A Bradway

Okay. So the gold standard prior to Xgeva the gold standard for the treatment of cancer that had spread to bone, was zoledronic acid or Zometa. Zoledronic acid is now off patent and that gave rise to concern among many that, that might lead to patients switching from XGEVA to generic zoledronic acid.

We are watching the data very closely so far as we said on our second quarter conference call we haven’t seen that happen. I think we’re benefiting from a very, very strong clinical profile for XGEVA and we were able to demonstrate in randomized clinical trials that XGEVA was superior to zoledronic acid in preventing skeletal events for patients whose cancer had spread to bone.

And I think we’re benefiting from that in the real world setting now even after the expiration of zoledronic acid patents. So far so good and XGEVA continues to grow globally. We continue to launch it in new markets and we’re seeing very rapid acceptance of the molecule within those markets.

Our development program for XGEVA is ongoing. Some may recall that the one disease state in our Phase III program for which the data were less robust was the setting in multiple myeloma. So we have a very large ongoing clinical trial in multiple myeloma looking to ascertain whether XGEVA is not inferior or even superior zoledronic acid in that setting. So those data are underway now and will be available later in the decade.

And with respect to Prolia again we continue to enjoy success and growth for Prolia here in U.S. and around the world and we are just still at the very early stages of the launch of that molecule in Asia and other developing markets.

David Friedman - Morgan Stanley

So may be if we can switch gears on, unless anyone has any questions on Prolia or XGEVA. Maybe if we can switch gears to the biosimilar business and sort of the world of biosimilars. First if you could just talk about biosimilars in Europe have been a much bigger force than in the U.S. So what have you learned from the biosimilar sort of competition that you’ve had in Europe and how do you think about your own biosimilar business going forward?

Robert A Bradway

You are right we have faced biosimilar competition now in Europe for more than a handful of years across several products and so we feel we have the benefit of learning quite a bit market-by-market about how competitors enter this field and how physicians and payors decide which products to use.

So it’s different market-by-market and in some cases that’s even different within regions in a country. So I won’t get bogged down in the detail other than to say that I think there are few common elements that have been important to our ongoing success there and ongoing success is reflected in our market share and our ability to retain a premium price versus the new biosimilar entrants.

And the common denominators have been clinical profile of our medicines and in the case of our Filgrastim franchise, physicians and payors have a very long standing track record that reflect when it comes to our quality and reliability of our supply and the efficacy and safety of the medicine.

And similarly I think we’ve seen that as we’ve competed against ESA biosimilars in Europe. So our ability to reliably supply the market to never short a patient, has proven to be an important source of differentiation for us.

And I think in general what we’ve seen is that regulators have a high standard particularly as relates to analytical comparability and high standard when it comes for safety for these medicines and we think that’s appropriate. And it’s a high standard that we think makes this a market in which we can earn an attractive return on capital for our shareholders.

And as I said earlier for our proprietary innovative pipeline we have nine programs now with data available maturing between now and 2016 but beginning in 2017 we have six of our own biosimilar molecules that we expect to begin launching and commercializing around the globe.

And our confidence in these molecules is based on the challenges that we expect companies to face that seek to enter this in demonstrating a robust analytically comparable package of data and in having reliable safe supply and then can supply globally.

So we think that this remains an attractive market opportunity for us. We are going after medicines which in aggregate generate more than $40 billion of revenues and we think the market opportunity here is sizable and we think it enables us to capitalize on some of our organizational strengths which include again experience in protein engineering.

And I’ll tell you we’ve been humble. This is a challenge each one of these molecules has presented challenges for us that perhaps we didn't fully anticipate. And we’ve learned, we continue to move quickly with these molecules. But again the regulatory standard in my judgment is very appropriate. It ought to be high, the ability to produce medicines that are genuinely biosimilar is, I think there will be a high mark for people to hit. So that underscores a large part of our enthusiasm for that opportunity for us.

David Friedman - Morgan Stanley

And is there any details you can provide on what those six opportunities are?

Robert A Bradway

Well we have shared some data on that, we’ve talked about four oncology programs that we have in development with our partners, Actavis and that partnership is working very well by the way. We are excited about the value that they are bringing to the partnership and I hope that they would tell you the same, that they are very excited about value that we are bringing to it.

So we have four oncology programs that we are working on together. We’ve disclosed the fact that we are in a pivotal Phase III trial for Herceptin biosimilar and we’ve also disclosed that we have two important anti-inflammatory molecules which are not partnered or that we are advancing through our pipeline.

David Friedman - Morgan Stanley

And what are your expectations for how the U.S. biologic market evolves with biosimilars in Europe with single payor system, it’s sometimes probably a little easier for a biosimilar to make some inroads. So do you believe that the reimbursement system in the U.S. will push people towards biosimilars and if not what is the selling point to have a physician adopt a biosimilar version of a drug?

Robert A Bradway

I think physicians, patients and payors in the U.S. are all aware that there is a role for biosimilar medicines, there is a role for companies to bring to market medicines that benefit from the innovator molecules that replicate what the innovator molecule has done. And in some cases the benefit will be price.

And so I think there will be an opportunity in the U.S. I would expect there will be very robust competition here but again, it’s robust competition inside of framework of high analytical area. There are still some important legislative frameworks to be developed and couple of the key ones interchangeability, substitutability are yet to play out.

So I think it’s hard today to predict what the nature of the competition here in the U.S. will be except my belief is that again there will be robust competition for biosimilar medicines here in the U.S.

David Friedman - Morgan Stanley

And even without sort of direct substitutability, you believe there is an opportunity to make a case either on price or something else that there is a role for multiple players in any given space.

Robert A Bradway

We do believe that, yes.

David Friedman - Morgan Stanley

So, maybe just in the last minute, you’ve sort of mentioned a very deep pipeline which you guys have, is there kind of one or two programs in the earlier stage pipeline that you would specifically highlight as interesting to you or sort of more prominent or interesting within the organization?

Robert A Bradway

There are. I think that we are very excited in general about the Micromet platform. So there are number of targets that are advancing through our internal work now, which benefit from the technology that’s available to us through Micromet. And again just to remind you, the data that we’ve see in the acute lymphoblastic leukemia are truly striking. And if we’re able to replicate that and other cancers that would be very, very exciting.

In addition, I guess I would just observe as we said on the second quarter conference call that we made an investment in deCODE, because we wanted to try to line up our development programs with pathways for which we felt we had a genetic basis, genetic validation. And there are several in our pipeline now for which by virtue of the investment in deCODE, we have enriched genetic validation that we’re very excited about and moving quickly on.

But since the clock has just struck I’ll hold off elaborating on those at this time. But I think at some point during the course of the next 12 months we’ll have a session where we layout in more detail what’s happening in the early pipeline. But we’re excited about our ability to follow pathways for which we have clear genetic insight.

David Friedman - Morgan Stanley

That sounds great. Well listen, thanks everyone for joining us.

Robert A Bradway

Thank you.

David Friedman - Morgan Stanley

Thanks Bob for joining us.

Earnings Call Part 2:

Rates

View Comments (0)

Recommended for You