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Edited Transcript of AMGN.OQ earnings conference call or presentation 28-Oct-20 9:00pm GMT

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Q3 2020 Amgen Inc Earnings Call THOUSAND OAKS Oct 29, 2020 (Thomson StreetEvents) -- Edited Transcript of Amgen Inc earnings conference call or presentation Wednesday, October 28, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Arvind Sood Amgen Inc. - VP of IR * David M. Reese Amgen Inc. - EVP of Research & Development * Murdo Gordon Amgen Inc. - Executive VP of Global Commercial Operations * Peter H. Griffith Amgen Inc. - Executive VP & CFO * Robert A. Bradway Amgen Inc. - Chairman, CEO & President ================================================================================ Conference Call Participants ================================================================================ * Aaron Gal Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst * Alethia Rene Young Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research * Christopher Joseph Raymond Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Colin Nigel Bristow UBS Investment Bank, Research Division - Analyst * Cory William Kasimov JPMorgan Chase & Co, Research Division - Senior Biotechnology Analyst * Evan David Seigerman Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst * Geoffrey Christopher Meacham BofA Merrill Lynch, Research Division - Research Analyst * Jay Olson Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst * Ke Yuan SVB Leerink LLC, Research Division - Associate * Kennen B. MacKay RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research * Matthew Kelsey Harrison Morgan Stanley, Research Division - Executive Director * Michael Jonathan Yee Jefferies LLC, Research Division - Equity Analyst * Mohit Bansal Citigroup Inc. Exchange Research - Research Analyst * Robyn Kay Shelton Karnauskas Truist Securities, Inc., Research Division - Research Analyst * Terence C. Flynn Goldman Sachs Group, Inc., Research Division - MD * Umer Raffat Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research * Yaron Benjamin Werber Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- My name is April, and I will be your conference facilitator today for Amgen's Third Quarter 2020 Financial Results Conference Call. (Operator Instructions) I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin. -------------------------------------------------------------------------------- Arvind Sood, Amgen Inc. - VP of IR [2] -------------------------------------------------------------------------------- Okay. Thank you, April. Good afternoon, everybody. I, together with several members of our leadership team that you will hear from today, would like to welcome you to our Q3 call. The format of our Q2 call was very well received. So we'll stick to keeping our prepared comments to a minimum and limit the overall duration of the call to 1 hour. The slides have been posted. Just a quick reminder that we use non-GAAP financial measures in our presentation, and some of the statements will be forward-looking statements. Our 10-K and subsequent filings identify factors that could cause our actual results to differ materially. So with that, I would like to turn the call over to our Chairman and CEO, Bob Bradway. Bob? -------------------------------------------------------------------------------- Robert A. Bradway, Amgen Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Okay. Thank you for joining today's call. I'll take a few moments to discuss our performance in the third quarter and then share some thoughts on the overall operating environment in a COVID context. We delivered another strong quarter. And you can see that in our revenue growth of 12%. And in addition, once again, this quarter, our revenue growth exceeded expense growth, enabling us to report earnings per share growth well ahead of revenues. Putting the results in a broader context, our double-digit increase in revenues was driven by the continued volume-driven growth of many of our innovative products, the strong uptake of our high-quality biosimilars and the relative stability of our base business, which is proving resilient in the face of increased competition. We expect these 3 factors to be key for our long-term success. Turning to COVID-19. Clearly, the pandemic remains an important factor affecting performance for Amgen and for our industry. You'll recall that Amgen grew revenues by 11% in the first quarter of the year, with the first 10 weeks of performance largely unaffected by the pandemic. In the second quarter, when conditions were at their worst, revenues grew by 6%. Our performance in the third quarter reflects an encouraging recovery from the depths of the pandemic and was largely consistent with what we anticipated for you in our remarks at the time of our second quarter call. As regards to the fourth quarter, we see the current resurgence in cases as a potential headwind for our business. We are closely monitoring this to see what the impact may be for the rest of the year and if there might be any spillover into 2021. We don't expect anything like what we saw earlier in the year as global health care systems know much more about how to treat COVID-19 and are better prepared to do so than they were earlier in the year. However, on the margin, we're not ruling out that there will be some impact, and we've tried to incorporate this into our planning assumptions for the fourth quarter and into the beginning of next year. Overall, I remain optimistic that innovation from the biopharma industry will break the back of this pandemic, vaccines, antibodies and other therapeutics that are being developed with unprecedented speed and collaboration. One thing this pandemic has exposed is the importance of innovation. And that, of course, is at the core of our strategy, and it's reflected in the first-in-class molecules that are advancing rapidly in our pipeline. We are pleased, of course, with the Phase II results of our first-in-class molecule sotorasib, and we expect to see top line Phase III data for tezepelumab, our potential first-in-class treatment for severe asthma by year-end. We're also making good progress with several of our half-life extended BiTE molecules, particularly in solid tumors, like prostate and small cell lung cancer. All the work that we do is taking place at a time when more is expected of companies than ever before. We understand these expectations and are committed to good corporate citizenship and sustainable operations. Before I turn things over to the rest of the team, let me thank our staff members around the world for their unwavering commitment to serving patients during this challenging time. Their resilience, creativity and ability to execute give me great confidence in our long-term future. Dave? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [4] -------------------------------------------------------------------------------- Thanks, Bob. I'll begin with sotorasib, our first-in-class KRAS G12C inhibitor. Based on the data we have accumulated and the evolution of the field, we are extremely optimistic about the potential of sotorasib, and we'll continue to aggressively advance the development program. Earlier this month, we reported positive top line results from our Phase II monotherapy study in advanced non-small cell lung cancer, demonstrating an objective response rate consistent with our Phase I data at 960 milligrams and promising results on other measures of efficacy, including duration of response, with more than half of the responders still on treatment at the data cutoff. Safety and tolerability were similar to previously reported data for this population and have been remarkably consistent across the 160 patients treated with our Phase II dose. Our Phase I and Phase II data are based on protocol specified intent-to-treat criteria, as is our practice, and the scans to assess efficacy parameters in Phase II have been evaluated by independent central review. We look forward to presenting the Phase II results at the World Congress on Lung Cancer taking place in January. We also reviewed with interest of data presentation made a few days ago. Based on our assessment of available efficacy and safety data, including durability measures, we remain extremely confident in our molecule. To date, we have treated over 550 patients with sotorasib, and we are looking forward to discussions with the FDA and other regulatory agencies to determine the best path forward as monotherapy in patients with advanced lung cancer. We couldn't be more enthusiastic about our position as we move towards establishing sotorasib as a KRAS G12C foundational therapy. We also remain optimistic about our BiTE platform. We now have evidence of clinical activity in solid tumors, including recently presented prostate cancer data from AMG 160, which targets prostate-specific membrane antigen. The benefit risk profile of AMG 160 has continued to improve with additional dose optimization. AMG 757 is our half-life extended BiTE targeting DLL3, which is a very attractive target due to its differential expression in small cell lung cancers, and we look forward to presenting initial data at the Society for Immunotherapy of Cancer Annual Meeting next month. Small cell lung cancer is a large unmet medical need globally, and yet treatment options have not advanced significantly in decades. We will also investigate AMG 757 for the treatment of neuroendocrine tumors. We expect to present data from AMG 701 targeting BCMA for multiple myeloma later in the year as well. And before leaving the BiTE platform, I wanted to mention the Phase II publication in the New England Journal of Medicine that reported deep responses and a tolerable safety profile for dasatinib induction followed by BLINCYTO consolidation in adults with Philadelphia chromosome positive ALL. 60% of patients achieved a molecular response, and disease-free survival was 88% at 18 months, highlighting the potential of a chemotherapy-free regimen. If these results are confirmed in larger trials, this could lead to a potential paradigm shift in the treatment of this disease. In cardiovascular disease, we recently released the top line results from our omecamtiv mecarbil Phase III outcome study, and the results will be presented at the American Heart Association Scientific Sessions in November. In inflammation, along with AstraZeneca, we look forward to the top line results of the pivotal tezepelumab Phase III study, NAVIGATOR, in patients with severe uncontrolled asthma, which remains on track. We also expect the results from the oral corticosteroid-sparing Phase III study, SOURCE, by the end of the year, which should complement the pivotal data. I'm happy to announce that we will be advancing our third inflammation program into Phase II development next year with AMG 592, now named efavaleukin alfa, our IL-2 mutein for systemic lupus erythematosus. The trial was selected for inclusion in the FDA's complex innovative trial designs pilot program, which supports the development and regulatory review of novel clinical trial designs for new therapies. In closing, I would like to thank all of the Amgen teams for executing at such a high level during the ongoing pandemic. Murdo? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [5] -------------------------------------------------------------------------------- Thanks, Dave. We've seen volumes continue to improve from the initial stages of the pandemic with Q3 global revenues growing 12% year-over-year, driven by 18% volume growth. During Q3, physician-patient interactions increased to near pre-COVID levels. Across the industry, in the U.S., total prescriptions are still down approximately 2% and physician visits, either in person or remote, are down approximately 10% versus the pre-COVID baseline. While trends improved during the quarter, we are seeing infection rates rise in many parts of the world, which may bring additional quarter-to-quarter variability. Let me spend a few minutes to discuss our Q3 performance and outline our expectations for the remainder of 2020. In bone health, our efforts are focused on ensuring patient continuity. We grew Prolia volume by 10% year-over-year, even though osteoporosis diagnosis rates have returned to just 70% of pre-COVID levels in the U.S. COVID has also resulted in a change in historical quarterly trends for Prolia. Prior to the pandemic, the first and third quarters each year had lower sales than the second and fourth quarters. However, given the impact of the pandemic in the second quarter and the 6-month dosing regimen of Prolia, we would expect year-over-year growth rates in the fourth quarter to be lower than pre-COVID growth trends. With the current rise in COVID infection rates in the U.S. and Europe, there could be additional delays in patients receiving their Prolia treatment in Q4. EVENITY sales in the U.S. grew quarter-over-quarter, driven by 30% volume growth. This growth was offset by lower sales in Japan, which were partially related to timing of purchases by our partner, Astellas. We believe EVENITY's unique bone-building abilities will continue to drive growth in our business as physicians appreciate its benefit risk profile in treating their post fracture patients. Repatha sales increased 22% year-over-year, driven by 60% volume growth. And as the segment leader globally (inaudible) us. We remain confident in our ability to grow Repatha given the significant unmet medical need in treating high-risk cardiovascular patients, our comprehensive payer coverage, the convenient self-administration and established outcomes data in the label. Moving on to Parsabiv, which is an attractive treatment for secondary HPT, supported by the convenience of its IV administration. In January 2021, reimbursement for Parsabiv will move into the dialysis bundle payment system. We've already begun to see some negative impact on Parsabiv utilization in the U.S., and we would expect this impact to continue in Q4. Transitioning to our inflammation portfolio, total prescriptions for Otezla in the U.S. grew 11% year-over-year. Underlying volume trends remain strong. Sales were negatively impacted by lower inventory levels versus last year. We're confident that Otezla will continue its double-digit year-over-year volume growth based on its well-established safety and efficacy profile, convenient oral dosage, broad payer coverage and the lack of lab monitoring requirements. Enbrel remains the cornerstone of our inflammation franchise, and we continue to invest in Enbrel, along with our broader inflammation portfolio, including Otezla, AMGEVITA and recently launched AVSOLA. Enbrel was impacted by slowing growth in rheumatology prescribing in Q3 related to COVID and experienced some share loss in the quarter, while maintaining price stability year-on-year. Continued softness in rheumatology prescribing related to rising COVID infections could further impact Enbrel in the fourth quarter. Our Q3 biosimilar revenues were $480 million, supported by share growth by MVASI and KANJINTI. We've achieved leading biosimilar shares for AMGEVITA in Europe and for MVASI and KANJINTI in the U.S. Our highly efficient operating model and full complement of patient services provide an important advantage as we face additional biosimilar competitors heading into 2021. In oncology, Neulasta Onpro remains the preferred long-acting G-CSF with 55% share of volume in the quarter. Neulasta sales decreased 22% year-over-year, driven by declines in volume and net selling price. Competitive activity and long-acting [filgrastim] is impacting average selling price. The most recent published average selling price for Neulasta in the U.S. declined 19% year-over-year and 6% quarter-over-quarter. Overall, I'm very pleased with our Q3 performance. We remain vigilant as the pandemic continues to create uncertainty and potential disruptions in the health care marketplace. Amgen employees around the world are focused on ensuring continuity of care for our patients, and we'll continue investing to drive growth of our innovative products, advance our geographic expansion and prepare for potential new product launches. And with that, I'll turn it over to Peter. -------------------------------------------------------------------------------- Peter H. Griffith, Amgen Inc. - Executive VP & CFO [6] -------------------------------------------------------------------------------- Thank you, Murdo. Consistent with the first half of the year, we executed effectively during the third quarter, delivering 12% revenue and 19% non-GAAP EPS year-over-year growth. As you heard Murdo say, revenue growth was driven by volume increases of 18%, consistent with our focus on volume driven growth. Third quarter non-GAAP operating expenses increased 10% year-over-year and 9% quarter-over-quarter as we accelerated our investments to drive growth and advance the pipeline. Although activity levels during Q3 were still partially impacted by COVID-19, most trials continue to enroll patients. Customer-facing commercial activity levels increased and launch preparations were in process. We see activity levels increasing in the fourth quarter of the year, resulting in increased investments. We have financial flexibility with $12.4 billion in cash and investments on our balance sheet and continue to generate stable free cash flow with $3.2 billion in the quarter. Additionally, our third quarter dividend was $1.60 per share, an increase of 10% over last year. Our capital allocation principles and plans remain unchanged and uninterrupted. Let me now share some thoughts on our 2020 outlook going forward. We are narrowing our revenue guidance to $25.1 billion to $25.5 billion from $25.0 billion to $25.6 billion. The range reflects the uncertainty created by the recent resurgence of COVID-19 infections globally, which Bob discussed in his remarks. And as you just heard Murdo say, our products, including Prolia, for the most at-risk COVID patients are most susceptible to the accelerated rate of infections. The lower end of our range takes into account a more accelerated impact from COVID globally. We are raising our non-GAAP earnings per share guidance to $15.80 per share to $16.15 per share versus our prior guidance of $15.10 per share to $15.75 per share. We continue to believe that we could experience fluctuations in our quarterly revenues and earnings over the duration of the pandemic. As we shared during our Q2 call, we expect full year total non-GAAP operating expenses to grow in the high single-digit percentage range year-over-year on an absolute basis. We expect fourth quarter non-GAAP operating expenses to grow at about 20% on a quarter-over-quarter basis. Now let me share a bit more detail on our non-GAAP expectations for the full year 2020. Cost of sales as a percent of product sales will be generally consistent with 2019. We plan to increase R&D investments in the fourth quarter of the year as clinical trial and laboratory activities continue to recover from COVID-related slowdowns. SG&A spend is projected to increase due to investments in Otezla and other growth brands, geographic expansion and launch preparations. We anticipate other income and expense to be a net expense of about $1.3 billion, which includes more than $130 million of benefit from mark-to-market gains on our equity investment portfolio in Q3. We are updating non-GAAP tax rate guidance to 13% to 14% versus prior guidance of 13.5% to 14.5%. Our expectation for share repurchases are unchanged, at the lower end of our previously disclosed range of $3 billion to $5 billion. Finally, recall that Q4 of 2020 will be comparing against a partial quarter of Otezla sales and expenses in Q4 2019. So as we approach the end of 2020, we are pleased with our progress and execution this year, including the successful integration of Otezla, collaboration with BeiGene and transition from Astellas in Japan. As is customary, we will provide full 2021 guidance on our January call. This concludes the financial update. I'll turn it back to Bob to get going on Q&A. -------------------------------------------------------------------------------- Robert A. Bradway, Amgen Inc. - Chairman, CEO & President [7] -------------------------------------------------------------------------------- Okay. April, why don't we open up the lines for questions. And perhaps you could start us by reminding our callers of the procedures for asking a question. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And your first question comes from the line of Michael Yee from Jefferies. -------------------------------------------------------------------------------- Michael Jonathan Yee, Jefferies LLC, Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- I had a question on tezepelumab, of course, a really important readout coming soon, and it's an important drug. Just wanted to understand David's perspective on the importance of the low eosinophil group and in the context of the overall data and how important that is to hit there? And how that would change the overall profile and outlook for that drug? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [3] -------------------------------------------------------------------------------- Thanks, Mike. Yes. Of course, we're greatly looking forward to that readout as well. What I can say is that the trial is very well powered to look at. Outcomes on the primary endpoint here is annualized. Exacerbation rates, the standard endpoint for asthma studies across the different subgroups, including the low eosinophil population. So we feel very comfortable that this will be a definitive test of tezepelumab across the entire range of patients with severe asthma. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- We have the next question that comes from the line of Matthew Harrison from Morgan Stanley. -------------------------------------------------------------------------------- Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [5] -------------------------------------------------------------------------------- I guess, another question for Dave. Could you maybe just comment -- I know you commented on your opening remarks here on G12C. I guess the question here is, as we think about moving the response rate higher in terms of the combination studies that you have ongoing, what's your relative confidence around those studies either improving response rates or improving durability? And how do you think about your ability to progress them rapidly now that you have a good sense of the monotherapy activity of the compound? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [6] -------------------------------------------------------------------------------- Yes. Thanks, Matt. That -- certainly, the combination studies are an important topic. They're moving forward quite briskly. We have, I think, 7 cohorts open now. 3 or 4 more are coming very soon. So we feel we are testing in a range of indications, the biologically plausible and clinically relevant combinations. We'll have data next year on a number of these. And to your point, the goal always in combination therapy beyond monotherapy is to enhance efficacy and potentially -- in terms of response rates, but also durability, if you are cutting off avenues of tumor resistance or escape. And that's certainly our goal. We're very much guided by the biology here. And as you look at those cohorts that are coming up, I think you'll see that that's the case. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- And next question comes from the line of Yaron Werber from Cowen. -------------------------------------------------------------------------------- Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [8] -------------------------------------------------------------------------------- David, I'm just going to maybe keep you on the spot on sotorasib. Some of the data or comments that we heard this week is that a computing product was well tolerated at the high dose with an EGFR inhibitor and pembro. If I remember correctly, at ESMO, I think your investigators said something along the lines, and correct me if I'm wrong, that it -- with your product with PD-1, there was tolerability that was -- it was addressed with dose reduction, something along those lines. I don't know if you don't mind, maybe exactly kind of correct what he said. And then secondly, on tezepelumab, our understanding is that the way the study is designed, it's actually incorporating the low eosinophil dose into one of the analysis in the primary endpoint, as a sub analysis. And so if you hit that, does that mean you get a broad label? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [9] -------------------------------------------------------------------------------- Yes. Sure. So let me take those in order. In terms of the combinations, the one thing I would caution everyone is let's not overread anything into cohorts of 3 or 4 patients, whether that's our trials or anyone else's trials. We're moving forward. We've been -- what we have is a foundation of tolerability in monotherapy, which is the critical thing to build on in combinations. And I think this was put into some perspective by an editorial in the New England Journal of Medicine that accompanied the publication of our Phase I trial a few weeks ago, and I'd refer you to that. And certainly, it's very common in combination therapy development in oncology to look at all sorts of dosing and scheduling regimens, and we fully intend to do that. And our priority, we would intend on doing that. And with regards to the analysis in tezepelumab. Yes, that's correct. I mean the analysis is powered and geared across the entire population, and with also a look at the low eosinophil population. So your suppositions there are correct. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- And your next question comes from the line of Jay Olson from Oppenheimer. -------------------------------------------------------------------------------- Jay Olson, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [11] -------------------------------------------------------------------------------- Congrats on the quarter. I just wanted to follow-up on the comments around KRAS G12C. The competing program that featured data over the weekend did report QT prolongation, including some cases of grade 3, 4. Is this a class effect? And have you seen any cases of QT prolongation with sotorasib? And how important is this cardiovascular safety finding and [disputation] (inaudible)? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [12] -------------------------------------------------------------------------------- Yes. While I can't speak directly to other's data, of course, I'll allow them to do that. I will say that we've, as I mentioned, treated over 550 patients. There's no evidence whatsoever of a QT signal to date, and we remain quite pleased with the overall tolerability of sotorasib. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Your next question comes from the line of Terence Flynn from Goldman Sachs. -------------------------------------------------------------------------------- Terence C. Flynn, Goldman Sachs Group, Inc., Research Division - MD [14] -------------------------------------------------------------------------------- Maybe I was just wondering if -- as you think about capital allocation, if the omecamtiv setback maybe changes anything on that front, particularly how you think about the cardiology opportunity for the company? And then a question for Peter. I was just wondering if you could give us a preliminary view of 2021 expenses just relative to this year. Just wondering if you're wrapping up a number of late-stage programs now. Why spend would grow next year? -------------------------------------------------------------------------------- Robert A. Bradway, Amgen Inc. - Chairman, CEO & President [15] -------------------------------------------------------------------------------- Okay. Terence, it's Bob. Why don't I take the first part of your question. The answer -- the short answer is no. The omecamtiv results don't change our thinking on capital allocation. We continue to look for business development opportunities and continue to look for internal programs in cardiovascular disease. As you know, we're moving rapidly with our Phase II program directed against Lp(a), so we're excited to have some advance studies going for that molecule. And we'll continue to look for ways to invest in that franchise. Cardiovascular disease, as you know, a leading killer of people on the planet. We continue to think what we need in that field is more innovation, not less. So we'll continue looking for that. -------------------------------------------------------------------------------- Peter H. Griffith, Amgen Inc. - Executive VP & CFO [16] -------------------------------------------------------------------------------- Terence, it's Peter. Thank you for your question. A good question. As you know, we'll guide on 2021 when we get to January. But I do want to just say, we always intend on continuing to be a top-performing biopharma firm looking at various financial metrics, always operating margin right there. So look, we're going to remain flexible and adaptable as attractive opportunities arise and with the underlying objective to grow our after-tax cash flow. So that's where we sit right now on expenses. We wanted to be clear on the fourth quarter and how that's going to sequence in, which is really on a normal historical basis, just at the upper end of it on an OpEx basis. So with that, I'll turn it over to the next question. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- The next question is from the line of Evan Seigerman from Crédit Suisse. -------------------------------------------------------------------------------- Evan David Seigerman, Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst [18] -------------------------------------------------------------------------------- Actually, one for Murdo, kind of on some of the dynamics in the biosimilar business. So you're talking about pricing headwinds as volumes increase. Are you seeing this more in the inflammation space? Or is this in oncology? And can you kind of provide some color as to how accounts generally, I guess, in the U.S. are using biosimilars? Is it more just totally for giving the brand and going all to the biosimilar? Or do you see some sort of a mix? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [19] -------------------------------------------------------------------------------- Thanks, Evan. Yes, look, we're really pleased with what we've been able to do with our biosimilars business in the quarter. We were -- the team has done a really nice job this year despite COVID in establishing strong penetration into the U.S. oncology market with MVASI, our Avastin biosimilar; and KANJINTI, our Herceptin biosimilar. I would say with respect to the dynamic in the market, a lot of people questioned whether or not we had an efficient functioning biosimilar market in the U.S. because I think they were over interpreting some of the early biosimilar launches. And I think what you can see now is that we have an efficient market that when there are -- when there's a clear value on the table, health care systems, providers and payers, are able to capitalize on it. And that's what's driving, of course, the uptake of our biosimilars. I also think that the experience we've had in defending against biosimilar erosion on products like Neulasta, has positioned us well to understand how accounts are looking to purchase biosimilars. So when we launched our own, we were able to take some advantage of that. And I would say that of the accounts that have opened up biosimilar usage, generally, initially, we thought they might be using biosimilars for new patients going forward, but we've actually seen them use our biosimilars, both for new patients and switching patients who are midcourse of treatment to biosimilars as well. So I'd say that the penetration at an account level has been deeper than we originally anticipated. And I think by now, there's fairly broad adoption in the U.S. at the 340B level, the non-340B level and, of course, within the clinics. Now that's oncology. It's a little different in inflammation. Depending on the biosimilar itself, whether it's an infused biosimilar or whether it's a self injected or self-administered biosimilar. And I think you need to watch that carefully because the 2 are not analogous. So I would treat each business segment as its own example and not draw comparisons from one to the other. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- All right. And your next question, sorry about that, is from the line of Chris Raymond from Piper Sandler. -------------------------------------------------------------------------------- Christopher Joseph Raymond, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [21] -------------------------------------------------------------------------------- Yes, I was wondering if I could maybe ask on sotorasib again and take the conversation back there. So I heard, David, your commentary on hopes on the response rate in combo, but I think you guys are also working on a BID dose and if memory serves, I think we were -- maybe we were expecting to see something by year-end or at least in the coming months. So I wonder if you could sort of talk about your hopes with respect to that, potentially as a monotherapy BID? And then also on the same topic, can you just sort of confirm, does sotorasib have CNS activity? Can you give us any indication on that one? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [22] -------------------------------------------------------------------------------- Yes. Thanks, Chris. Both important questions. It's standard in any new molecule as part of the clinical pharmacology program to examine different schedules. So we continue to do that with twice daily dosing. But one thing I'd urge everyone to do is kind of go back to basic pharmacokinetics here as we think about this field and what are the reasons to go to split dosing. While there are really 2 reasons: one, if you need split dosing in order to achieve target coverage; or two, if you need to split the dose because of tolerability issues. And with sotorasib, we're very convinced that we are getting target coverage throughout the dosing interval with our once-daily dosing. And of course, we've got very nice tolerability at once-daily dosing. And so that's really -- this is, I think, basic pharmacology and pharmacokinetics and the science underlying that, that has driven our clinical choices. In terms of CNS penetration, we did mention at ESMO, we have a couple of patients with -- 1 or 2 patients with CNS metastases who clearly had responses. So the question with small molecules or in CNS responses, in general, is always, is that due to true penetration or because there's typically a highly disrupted blood-brain barrier in that setting. You almost always get some exposure to drug. The third potential explanation, which we continue to explore is that it's a secondary immune activation that could potentially trigger activity in the central nervous system. We are exploring this question explicitly in a cohort that we're just opening for patients with brain metastases. And so I think in through next year, we'll have a good sense of potential activity in the central nervous system. Thank you. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- And your next question comes from the line of Geoffrey Porges from SVB Leerink. -------------------------------------------------------------------------------- Ke Yuan, SVB Leerink LLC, Research Division - Associate [24] -------------------------------------------------------------------------------- This is Andrew on for Geoff. So I have a question regarding tezepelumab's readouts. So if the study is successful, how might it be commercialized given the conflict that your partner has with (inaudible) for the same indication? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [25] -------------------------------------------------------------------------------- Yes. Thank you. I'll jump in on that one. We've obviously been very transparent with our partners on how we can commercialize tezepelumab. I have to say with the many years of experience that AstraZeneca has in this therapeutic area. We continue to believe they're an outstanding partner. We've worked through all the details of commercialization. AstraZeneca will indeed be putting up dedicated resources for the promotion of tezepelumab. So think about different sales reps literally in the market promoting the 2 different products. We will be handling many elements of the commercial process in the U.S. For example, we'll be lead on the market access, negotiations and relationships. While AstraZeneca will lead on consumer marketing and professional marketing. So I think we've really put the best of the best together here, and I continue to have a lot of confidence in the emphasis that our partner is placing on this really exciting molecule, both for the launch and also just strategic life cycle management ideas that they have as well. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- And your next question comes from the line of Ronny Gal from Bernstein. -------------------------------------------------------------------------------- Aaron Gal, Sanford C. Bernstein & Co., LLC., Research Division - Senior Research Analyst [27] -------------------------------------------------------------------------------- You've done really well with biosimilars, you're closing in on about $2 billion run rate from about $1 billion last year. I'm kind of wondering about the balance for next year, you're seeing significant competition coming in on both the Avastin and Herceptin biosimilars. You're launching to yourself and rituximab and infliximab, but the dynamic stem seem to be potentially tougher. If we're going to think about the next 12 months, should we -- can we expect the same kind of growth rate? Or is this asking for too much? And then separately, Murdo, I was wondering if you can comment on Repatha outlook? And how do you think about the competition with an RNA-based, physician office-based molecule? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [28] -------------------------------------------------------------------------------- Okay. Thank you. Overall, I think the biosimilars business, as I said, has evolved really nicely, and we've penetrated quite well. If I look at the oncology products in the U.S. running at 44% share currently on our Avastin biosimilar, I do think as you see additional competitors come in, the average selling price will come down. So that's a reality that competition brings. And it's related to my comment earlier about this being an efficient marketplace. I do think there's an appreciation, though, for what we've done at Amgen, which is to have a very effective provider-focused, commercial presence, the same people that are talking to accounts about our innovative portfolio are talking to those same customers about our biosimilars. So all of our services that we normally have on an innovative product are available on biosimilars. And that includes patient services for things like reimbursement or copay assistance. And I think that differentiates us. So I would anticipate us being able to continue to capture good volume, albeit at some price erosion as we go into the new year. But as I said, we're at 44% share of the total bevacizumab market and slightly less than that of the trastuzumab market. So there's still a lot of headroom for growth. And I think on the inflammation side, the dynamics are a little bit different depending on whether it's a product like our REMICADE biosimilar AVSOLA, or whether we're looking at a product like our Rituxan biosimilar. So I think we have to watch how we draw parallels on expectations. Overall, we made a big commitment to biosimilars. So we'll continue to advance new products through the clinic and into the market. And we compete effectively across Europe, and we're competing nicely so far in the U.S. Just transitioning to Repatha. Look, we've done, I think, an excellent job of converting to an affordable price of Repatha. We've got about 80% access coverage across Medicaid and commercial. And we're seeing really nice volume growth with 60% in the quarter. And I think we're also seeing some nice evolution outside of the U.S. where Repatha continues to gain share. The product really with Repatha, we are scratching the surface of those that need this. There's a lot of high-risk coronary event patients who require more aggressive lipid-lowering therapy. And in light of COVID, I actually think that Repatha is a unique solution. It's a self-administered product with excellent coverage, a well-demonstrated efficacy and safety profile, and we have event reduction data in the label. So I think compared to a product that might require patients to travel to a physician office for administration in light of COVID, that's going to be a tougher task for another product to come in. So I feel good about where we are, and I feel good about our growth prospects going forward. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- And your next question comes from the line of Colin Bristow from UBS. -------------------------------------------------------------------------------- Colin Nigel Bristow, UBS Investment Bank, Research Division - Analyst [30] -------------------------------------------------------------------------------- So another one on sotorasib. I'm just curious, like you have more data on this asset now. What's your current thinking around the potential to advance this to early or, I guess, first-line therapy in light of the strong data we've seen from IO agents in the G12C patients? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [31] -------------------------------------------------------------------------------- Yes. Thanks, Colin. Great question. And of course, as is typical in oncology development programs, you start in later lines of therapy where patients don't have much in the way of treatment options, but certainly moving into earlier lines of therapy will be part of the development program as we move forward. I'd also point out that an important part of the program in later lines is the head-to-head Phase III trial against docetaxel chemotherapy. That is very important outside of the U.S., in some jurisdictions for regulatory approval, but also in many jurisdictions for reimbursement. And so I wouldn't also overlook the potential of that. This is a global development program, and that's another important piece. Thank you. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- And your next question comes from the line of Mohit Bansal from Citibank. -------------------------------------------------------------------------------- Mohit Bansal, Citigroup Inc. Exchange Research - Research Analyst [33] -------------------------------------------------------------------------------- Great. Maybe one question on tezepelumab in asthma. So as the data are coming up, how important do you think is to show the benefit in low eos patients? In case if it doesn't work, do you think your partner may not be interested in commercializing this product, given that they already have a product for high eos patients, and they may have 2 competing products in that area? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [34] -------------------------------------------------------------------------------- Yes. Well, let me start, and then I'll hand things off to Murdo. As we discussed, the primary endpoint is powered across the entire population and also the analysis plan allows a look in the low eosinophil group. In our Phase II data, which is currently our best predictor, we showed relatively comparable efficacy regardless of eosinophil status, and it certainly would be our hope that we're able to replicate that in Phase III. In terms of commercialization, let me ask Murdo to weigh in. -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [35] -------------------------------------------------------------------------------- Yes. As I mentioned before, there's a strategic commitment here from our partners to teze. They've been very supportive, constructive and helpful as we work through the development plan. And now we look beyond that to commercialization and potential life cycle management ideas. And I think that there's a strong press from AstraZeneca to continue to really think about all of the patients that we can benefit with development of teze. I would just say that there's a large market opportunity here in severe asthma. Having alternative mechanisms in the market is a good thing. And I think that there's plenty of room for us to launch effectively there. And I'm pretty sure that's how our partners at AstraZeneca see it. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- And your next question comes from the line of Geoff Meacham from Bank of America. -------------------------------------------------------------------------------- Geoffrey Christopher Meacham, BofA Merrill Lynch, Research Division - Research Analyst [37] -------------------------------------------------------------------------------- Murdo, I feel like I asked this one a lot, but on Aimovig, what do you think it will take for this product to really break out? I mean, I get it, it's growing on units, but for a new product that looks range bound, is there a meaningful negotiation with -- renegotiation with payers like you guys did with Repatha that's going to be required? Or what do you think it could take? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [38] -------------------------------------------------------------------------------- Yes. Thanks, Geoff. Let's narrow or reframe the question. I don't think it's a payer issue. I think we've negotiated very good access for Aimovig. It's covered broadly with very little in the way of utilization management criteria. Physician requests are being filled very well. Our percentage of paid patients is very high now. We're in the high 80% range for paid patients. So it's not an access restriction that's reducing the uptick of the class. There are really 2 things. One is obvious, it's COVID. We are down substantially in new patients per week because of COVID, and a lot of migraine sufferers, unfortunately, are just not seeking care. And neurology as a prescribing specialty is down more than some others, like cardiology recovered nicely in the quarter. Neurology is still down in terms of total prescribing. And that's the COVID impact. And then there's another, I think, opportunity, which we're focused on, and that is to have both neurologists and patients moving quicker through older, less effective preventative agents and to try biologic CGRPs like Aimovig. And that's really where our focus is for growth. We've seen movement there, and it was going well. But we've got -- we've still got a lot of work to do, as you point out. But we've got a large volume of patients, over 4 million. I think we're 15% penetrated into that patient population. So there's really no doubt in my mind that it will move. I also think, by the way, the oral CGRPs are helping here with the promotional effort, communication to patients, awareness building of the benefits of the category. So their acute promotion is also helping in the preventive space. But yes, we're focused on that. I think we've done all the right things on the communication front to payers. Now we're focused on patients and -- providers and patients. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- And your next question comes from the line of Kennen MacKay from RBC Capital. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [40] -------------------------------------------------------------------------------- Congrats on the quarter. Wondering or hoping, rather, that you could set the record straight for plans with omecamtiv mecarbil. Are there plans to pursue a regulatory filing for the agent? And if so, what is the gating factor? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [41] -------------------------------------------------------------------------------- Thanks, Ken. I'll take that. With omecamtiv, we issued the top line results. We've got data coming out at the American Heart Association in just a couple of weeks. And I think in the wake of that, we'll be discussing next steps. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- And your next question comes from the line of Umer Raffat from Evercore ISI. -------------------------------------------------------------------------------- Umer Raffat, Evercore ISI Institutional Equities, Research Division - Senior MD & Senior Analyst of Equity Research [43] -------------------------------------------------------------------------------- I had two here, if I may. First, I know there's a lot of focus on the durational response data as it's evolving in your Phase I and Phase II trial with KRAS. But my question is, as we think about 1 step out in a possible first-line setting, possibly as a PD-1 combination, we know what KEYTRUDA does as a first-line regimen on a duration of treatment and duration response. I'm curious, what's your expectation that KEYTRUDA paired with a targeted therapy, how much improvement can we see realistically? That will be very helpful, number one. And also on that same note, as we head into the colorectal data in the first half, knowing that there were, I think, 3 out of 25 responses in colorectal previously. What are your expectations on what we need to see to be more constructive on colorectal? -------------------------------------------------------------------------------- David M. Reese, Amgen Inc. - EVP of Research & Development [44] -------------------------------------------------------------------------------- Yes. Thanks, Umer. So in terms of duration of response in moving in earlier lines of therapy, it's very clear what the checkpoint inhibitors do. I mean, typically, you're going to look for 25%, 30% improvements on these sorts of efficacy measures to get into the clinically meaningful range. So as we're designing programs, those are the sorts of targets that we would generally look at. In colorectal cancer, as I've mentioned before, we fully enrolled the Phase II trial data next year. That will inform a potential monotherapy path forward. I would want to see response rates perhaps a little better than we've observed now for monotherapy, but that will be a discussion with folks in the field. And here, I would say there's also just a huge amount of emphasis on combination therapy to both enhance the response rate and then, of course, to generate duration of response. As I mentioned earlier, we've got a number of combination trials, either up and running or about to launch, and some of them are directed specifically for colorectal cancer. So we're really looking forward to generating those data. But I think that's the kind of state of play right now. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- And your next question comes from the line of Alethia Young from Cantor Fitzgerald. -------------------------------------------------------------------------------- Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [46] -------------------------------------------------------------------------------- Congrats on the quarter and the progress. Can you just talk a little bit about Otezla and what you've seen in light of maybe COVID-19? Would it be an oral? And I know there's more kind of marketing, I guess, on the television, just wanted to get your outlook on price and kind of the volume over the next 12 months? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [47] -------------------------------------------------------------------------------- Yes. Thanks, Alethia. We've been pleased with Otezla. We continue to see all of our integration activities of bringing that product in, being smooth, uneventful, largely now under the management of Amgen employees around the world. And the field force continues to really do an outstanding job of making sure dermatologists understand the benefits of Otezla in the treatment of psoriasis and psoriatic arthritis. I think what we've seen in the quarter is a return to customer activity, largely about 90% of pre-COVID levels. The majority of those customer interactions are in the virtual realm about 60% of those. I think, overall, we're pleased with the growth in volume in the quarter. We did see some onetime events, accounting adjustments. We had a favorable accounting adjustment in 2019 in Q3 and an unfavorable accounting adjustment in Q3 this year, creating an unfavorable compare quarter-over-quarter from prior year. And we are also seeing a bit of softness in the dermatology prescribing volume year-on-year on the basis of COVID. But I think the differentiation of having an oral versus biologics versus topicals in psoriasis is really helping us hold up well. And we continue to feel confident about our double-digit growth going forward. We've also held price nicely as we go into 2021. That's a good effect of having a differentiated product. And then overall, I think as we look at sources of growth throughout the world, our international expansion plans have been going well. We secured reimbursement in Australia. Our Japanese business really is doing well, and we're looking at reimbursement and market authorization in other markets. So overall, it's been a really good growth story for us, and we continue to feel good about the future. And then we'll wait patiently to see if we're able to secure a mild to moderate indication next year because I think that's a patient population that could really benefit from the convenience of an oral and the safety profile that we've established of Otezla versus, say, more potent orals or even biologics. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- And your next question comes from the line of Cory Kasimov from JPMorgan. -------------------------------------------------------------------------------- Cory William Kasimov, JPMorgan Chase & Co, Research Division - Senior Biotechnology Analyst [49] -------------------------------------------------------------------------------- Wanted to follow-up on Otezla and ask about your baseline assumptions for TYK2, just given the proximity of that data in psoriasis. Those results are roughly consistent with the Phase II data that's been published. How do you think about this potentially slotting into the market and the potential impact it may or may not have on the future trajectory of Otezla? And can you remind us whether the double-digit CAGR expectation you put out there for Otezla contemplates U.S. competition? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [50] -------------------------------------------------------------------------------- Yes. So I'll answer your second part of your question first, Cory. The double-digit growth assumptions that we put out there did indeed assume the launch of other orals into the U.S. in a relatively similar time frame as to what's been publicly disclosed. I think, overall, as I was saying earlier, we feel really good about the position of Otezla in the market. It's a widely reimbursed product with really good market access, an affordable product from a patient perspective, very safe product from an overall profile perspective. And I just think that new entrants into the category will not necessarily differentiate on efficacy or on safety right out of the gate. I think it's going to take some time before dermatologists who are, quite frankly, leary of potent biologics for other products that might have efficacy, but they might travel with some safety concerns, and that's not the case with Otezla. So this familiarity with Otezla, the unique positioning of it being the first product they go to post topical and pre biologic I think is going to hold up really well, and we continue to invest. We continue to invest heavily. Somebody mentioned they noticed more television advertising. We have ramped up DTC, given COVID is somewhat disrupting patient behavior. And also in light of COVID, there are a lot of products in this category that require lab monitoring, and Otezla doesn't. So a really good profile, and I think one that will hold up well despite competition. -------------------------------------------------------------------------------- Arvind Sood, Amgen Inc. - VP of IR [51] -------------------------------------------------------------------------------- April it's getting to the top of the hour, so let's take one more question, after which Bob will make some closing comments. -------------------------------------------------------------------------------- Operator [52] -------------------------------------------------------------------------------- And your last question will come from the line of Robyn Karnauskas from Truist Securities. -------------------------------------------------------------------------------- Robyn Kay Shelton Karnauskas, Truist Securities, Inc., Research Division - Research Analyst [53] -------------------------------------------------------------------------------- I'll stay on Otezla. So I know that the current topicals are not ideal with the side effect profile. I wondered if you could comment on the recent data for [Pineros] with a PASI score that looked on par with Otezla. And my specific question is more what percentage of Otezla use is with low surface involvement patients? And do you see these new topicals that are coming out potentially disruptive on a share or price basis? -------------------------------------------------------------------------------- Murdo Gordon, Amgen Inc. - Executive VP of Global Commercial Operations [54] -------------------------------------------------------------------------------- Yes. Thanks, Robyn. We really see these as unique segments of the market. The topical segment doesn't necessarily compete with the oral segment. We do see -- right now, we do see some low surface area usage. But I think as we look at our mild to moderate indication in the future, I think there would be more potential overlap with say, let's say, more effective topicals for low surface areas and orals. But it's really -- it's not impeding our ability to grow, and I don't see them as overlapping sectors. I think when patients say they want the convenience of an oral, it's a very clear choice to go to Otezla. -------------------------------------------------------------------------------- Arvind Sood, Amgen Inc. - VP of IR [55] -------------------------------------------------------------------------------- Bob, would you like to make any short comment? -------------------------------------------------------------------------------- Robert A. Bradway, Amgen Inc. - Chairman, CEO & President [56] -------------------------------------------------------------------------------- Sure. Briefly just with 9 or so weeks left in the year. We're encouraged that we continue to execute well. I think you see that in the numbers and in the progress that we're making in our market shares and in our pipeline. But we know that this is a year unlike any other. So we're trying to be prudent as we look at the balance of the year and the beginning of next year, particularly as regards to the risks posed by COVID-19. So we appreciate you joining our call. We look forward to seeing you or speaking to you in the new year. And in the meantime, Arvind and his team are here for any questions that you might have. Thank you. -------------------------------------------------------------------------------- Arvind Sood, Amgen Inc. - VP of IR [57] -------------------------------------------------------------------------------- Thank you, everybody. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes Amgen's Third Quarter 2020 Financial Results Conference Call. You may now disconnect.