Analyst Conference Summary

biotechnology

conference date: July 30, 2015 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2015 (second quarter 2015, Q2)

Forward-looking statements

Overview: Revenue and earning growing slowly, but pipeline could fix that. Increased guidance.

Basic data (GAAP):

Revenue was $5.37 billion, up 7% sequentially from $5.03 billion, and up 4% from $5.18 billion in the year-earlier quarter.

Net income was $1.65 billion, up 2% sequentially from $1.62 billion, and up 6% from $1.55 billion year-earlier.

Earnings Per Share (EPS) were $2.15, up 2% sequentially from $2.11, and up 7% from $2.01 year-earlier.

Guidance:

Updated full year 2015: raised revenue $21.1 billion to $21.4 billion. Non-GAAP EPS $9.55 to $9.80. Both increased. Adjusted tax rate 18% to 19%, excluding R&D tax credit. $700 million cap ex, down from prior guidance of $800 million.

Conference Highlights:

Unfavorable exchange rates impacted y/y revenue by 2.5 percentage points. Kyprolis was approved for relapsed multiple myeloma in the U.S. and Repatha (evolocumab) for dyslipidemia (high cholesterol) got EU approval. Repatha decision by FDA is expected in August. First nation launch in Europe expected in Q3, in process of obtaining reimbursement approvals.

"It is an exciting time at Amgen," with 6 product launches underway or expected this year. Confident in long term growth of the business.

Non-GAAP numbers: net income was $1.98 billion, up 4% sequentially from $1.91 billion, and up 9% from $1.82 billion year-earlier. EPS was $2.57, up 4% sequentially from $2.48 and up 8% from $2.37 year-earlier. Excludes acquisition related and stock-based compensation expenses and other charges.

Product sales were $5.23 billion, up 7% sequentially from $4.87 billion, and up 6% y/y, with $4.11 billion in the U.S. and $1.12 billion international. Other revenue $145 million, down sequentially from $159 million and down from $231 million year-earlier.

Preparing for biosimilar competition for several therapies; expects to continue significant sales for years. Enbrel has U.S. exclusivity until 2029.

Blincyto for ALL launch progressing; over 250 patients treated to date. Corlanor for chronic heart failure in launch phase.

Cash and equivalents balance ended at $30.0 billion. Operating cash flow was $2.8 billion. Free cash flow was $2.7 billion. Capital expenditures $0.1 billion. $0.5 billion worth of shares were repurchased in the quarter. Dividend payments were $0.6 billion. At the end of quarter outstanding debt was $32.0 billion.

AMG 334 for chronic migraines should have Phase 2b data available in 2016. A Phase 3 study for episodic migraines was started.

Omecamtiv mecarbil for heart failure Phase 2 data should be available in the later half of 2015.

AMG 416 for secondary hyperparathyroidism BLA will be submitted to the FDA in Q3.

Phase 3 data for ABP 215 for non-small cell lung cancer should be available before the end of 2015.

T-vec (Talimogene laherparepvec) for metastatic melanoma has an FDA PDUFA date of October 27, 2015. Sees T-vec as a candidate for combo therapy with CPMs.

See also the Amgen pipeline.

Cost of sales was $1.09 billion. Research and development expense was $964 million; selling general and administrative expense $1.16 billion; and other expense $81 million, for total operating expenses of $3.29 billion. Operating income was $2.08 billion. Interest and other expense net was $79 million, income taxes $344 million.

$0.79 dividend will be paid on Sept. 8, 2015 to shareholders of record on August 17, 2015.

Q&A:

Repatha, similar label to competitor, effect of imaging data? The data from the 2 types of studies are quite complementary. Being able to understand disease modification and regression is important. The timing is hard to judge. It should be differentiating data for the cardiology community.

Repatha label more like your EU label, or more like competitor's FDA label? We will not speculate on what the FDA will decide at this time. Arenesp is clearly being used

Dialysis franchise, Epo and Arenesp, competition? About 45,000 at FMC patients were moved to ?Macera? product in the 2nd quarter. Arenesp use in dialysis in the quarter, they have a 15 thousand patients on it at the moment, and are growing their business.

Kyprolis duration and patient base? In third line average is 5 to 6 months. In second line we expect therapy to at least double over time.

Balance sheet? We want to return capital to shareholders by dividends and buybacks. Our focus is on earlier stage transactions that bring value to the company, but we have the ability to do larger transactions.

M&A environment in general? We are focused on our long-term plan for growth.

Remicade biosimilar pricing, Amgen margins? 2017 to 2021 biosimilar product launch margins, it's just too early. We expect price erosion when there are multiple biosimilar competitors. It is worst in small countries that use a tender process.

Romosozumab details? The primary analysis would be at the 24 month time point. We would file as fast as we could after that. It is a high priority program for us. We believe it can be delivered in a single monthly injection.

Enbrel pricing? We see ability to move prices in the future.

Repatha, do you need to negotiate exclusive contracts with payers? We have had broad discussions with payers, but cannot have specific discussions before FDA approval. Our position is we prefer to compete and allow physicians choice.

PCSK9 class, will it be class labeling, or specific label claims? There will be some similarity in labels across products. But they don't have the same studies or safety profiles, so you will see some differences.

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