Analyst Conference Summary

biotechnology

conference date: October 28, 2015 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2015 (third quarter 2015, Q3)

Forward-looking statements

Overview: Strong revenue growth and profits too. Gave preliminary 2016 guidance. Will raise the dividend significantly in 2016.

Basic data (GAAP):

Revenue was $5.72 billion, up 7% sequentially from $5.37 billion, and up 14% from $5.03 billion in the year-earlier quarter.

Net income was $1.86 billion, up 13% sequentially from $1.65 billion, and up 50% from $1.24 billion year-earlier.

Earnings Per Share (EPS) were $2.44, up 13% sequentially from $2.15, and up 52% from $1.61 year-earlier.

Guidance:

For the full year 2015: total revenues in the range of $21.4 billion to $21.6 billion and adjusted EPS in the range of $9.95 to $10.10. Previously, the Company expected total revenues in the range of $21.1 billion to $21.4 billion and adjusted EPS in the range of $9.55 to $9.80.

Adjusted tax rate to be in the range of 18% to 19%. This excludes the benefit of the federal R&D tax credit, which has not yet been extended for 2015. Capital expenditures to be approximately $700 million.

2016 Preliminary Guidance

Total revenues in the range of $21.7 billion to $22.3 billion and adjusted EPS in the range of $10.35 to $10.75. Adjusted tax rate to be in the range of 20.5% to 21.5%, excluding the federal R&D tax credit.

2016 Capital expenditures to be approximately $700 million. Dividend planned to be increased 27 percent to $1.00 per share in the first quarter of 2016. Share repurchases of $2 billion to $3 billion in 2016.

Conference Highlights:

Q3 results were strong. Amgen is on the verge of a new product cycle. Delivering on promise of 6 new launches this year, and substantial pipeline progress.

Repatha was launched after European, U.S., and Canadian approvals. Negotiations with payers continue. The response to the launch was very encouraging. Data due in 2016 should expand the criteria used by payers, which is currently "narrow."

Kyprolis label was extended to relapsed multiple myeloma.

Quarterly dividend is expected to be increased to $1 per share in 2016. 2016 guidance includes a contribution from new products, and a drag from competition with new biosimilars.

Non-GAAP numbers: net income was $2.08 billion, up 5% sequentially from $1.98 billion, and up 18% from $1.77 billion year-earlier. EPS was $2.72, up 6% sequentially from $2.57 and up 18% from $2.30 year-earlier. Excludes acquisition related and stock-based compensation expenses and other charges.

Product sales were $5.52 billion, up 6% sequentially from $5.23 billion, and up 14% y/y, with $4.43 billion in the U.S. and $1.09 billion international. Other revenue $207 million, up sequentially from $145 million and up from $183 million year-earlier.

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

Cash and equivalents balance ended at $31.1 billion. Operating cash flow was $2.9 billion. Free cash flow was $2.7 billion. Capital expenditures $0.1 billion. $0.7 billion worth of shares were repurchased in the quarter. Dividend payments were $0.6 billion. At the end of quarter outstanding debt was $31.8 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 showed statistically significant improvements in pre-specified measures of cardiac function.

Blincyto (blinatumomab) received a positive CHMP EU opinion for relapsed or refractory acute lymphoblastic leukemia that is Philadelphia chromosome negative.

AMG 416 for secondary hyperparathyroidism is under review in the U.S. and E. U.

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

AMG 334 for migraine Phase 3 trial is enrolling well.

Imlygic [formerly T-vec (Talimogene laherparepvec)] for metastatic melanoma was approved by the FDA. Also received a positive opinion from the CHMP in Europe.

See also the Amgen pipeline.

Cost of sales was $1.03 billion. Research and development expense was $1.12 billion; selling general and administrative expense $1.24 billion; and other expense benefit $13 million, for total operating expenses of $3.38 billion. Operating income was $2.34 billion. Interest and other expense net was $147 million, income taxes $329 million.

$0.79 dividend will be paid on December 7, 2015 to shareholders of record on November 16, 2015.

Q&A:

2016 guidance a touch below consensus? The one place The Street may be off, is that the tax rate is up more y/y than expected. We are excluding the R&D tax credit. Also our operating performance in 2016 may be better than analysts are projected.

Repatha sales in quarter, color? We launched in September. We will see more in Q4. Utilization criteria payers are putting into place are pretty well in line with Europe. We do have patients already in Europe.

Biosimilar assumptions in 2016? We see a lot of dynamics going on in 2016, with 6 new products and a changing competitive environment, foreign exchange, and our own efforts to improve competitiveness.

U.S. pricing environment outlook? We develop innovative medicines. The 6 new launches are in this category. We are not surprised at questions about the prices and values of medicines, but ours have real value for patients.

Epogen share losses? Our price increases reflect the value of our therapies. Fresenius (FMS) represents about a third of the marketplace and they are converting to Roche's Mircera.

Biosimilar Humira launch timing? We are confident in our clinical data, which we are preparing to file. We realize there is intellectual property that needs to be respected.

Enbrel 2016 pricing trend? Enbrel is in a highly-competitive market. Rebates differ by plan, with hundreds of different plans.

Are rebates and discounts quarterly drivers for Enbrel revenue is a quarter? Contract changes can impact the net selling price in Q3 or other quarters.

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