Analyst Conference Summary

biotechnology

conference date: April 26, 2017 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2017 (first quarter, Q1)

Forward-looking statements

Overview: 1% y/y revenue decline, but high hopes for newer therapies. Repatha revenue down sequentially. But earnings were up. Enbrel, once a backbone, was down 15% y/y due to generic competition. Raised 2017 EPS guidance.

Basic data (GAAP):

Revenue was $5.46 billion, down 9% sequentially from $5.97 billion, and down 1% from $5.53 billion in the year-earlier quarter.

Net income was $2.07 billion, up 4% sequentially from $1.94 billion, and up 9% from $1.90 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.79, up 8% sequentially from $2.59, and up 12% from $2.50 year-earlier.

Guidance:

updated full year 2017 guidance to: revenue $22.3 to $23.1 billion, unchanced. GAAP EPS raised to $10.64 to $11.32 per share. Non-GAAP EPS raised to $12.00 to $12.60. Cap ex about $700 million.

Conference Highlights:

Robert A. Bradway, CEO said "We are well positioned for the long term with our newer products demonstrating volume growth around the world and our tight operational expense management of the company." Still believes Repatha is an important drug that can ramp revenue. Believes growth will be driven by unit volumes (not price increases).

Three new products are rapidly approaching the market: Evenity (romosozumab) for osteoporosis, Erenumab for migraine, and Parsabiv for hyperthyroidism secondary to chronic kidney disease. Biosimilars are also comming closer to market.

Supports the creation of a level (vs. national) corporate tax playing field.

Excluding foreign exchange impacts, revenue was flat y/y rather than down 1%.

Non-GAAP numbers: net income was $2.33 billion, up 8% sequentially from $2.16 billion, and up 6% from $2.20 billion year-earlier. EPS was $3.15, up 9% sequentially from $2.89 and up 9% from $2.90 year-earlier. Excludes acquisition related and stock-based compensation expenses and other charges. 57.6% operating margin.

Product sales were $5.20 billion, down 8% sequentially from $5.66 billion, and down 1% y/y from $5.24 billion, with $4.10 billion in the U.S. and $1.10 billion international. Non-product revenue was $265 million, down sequentially from $302 million but down from $288 million year-earlier.

Prolia and Kyprolis sales increases were driven by higher unit demand. Overall survival interim analysis for Kyprolis should drive increased use in second-line multiple myeloma.

Cash and equivalents balance ended at $38.4 billion, up slightly sequentially from $38.1 billion. Operating cash flow $2.4 billion. Free cash flow was $2.2 billion. At the end of quarter outstanding debt was $34.1 billion. Capital expenditures $0.2 billion. $0.6 billion worth of shares were repurchased in the quarter. Dividend payments were $0.8 billion.

AMG 334, or Erenumab for migraines regulatory submissions are expected in Q2. Believes partnership with Novartis will enhance sales.

ABP 215 (Avastin biosimilar) for non-small cell lung cancer (NSCLC) completed global regulatory submissions.

ABP 980 (biosimilar trastuzumab or Herceptin) marketing authorization application was submitted in Europe in March.

Amgevia (biosimilar adalimumab, or Humira) was granted commercial approval in March for sale in Europe.

Biosimilar to Rituximab, ABP 798 continued enrolling its Phase 3 trial. ABP 710, Infliximab also continued Phase 3.

Romosozumab (Evenity) for postmenopausal osteoporosis has a PDUFA date on July 19, 2017. Also primary analysis of a Phase 3 fracture study of osteoporosis in postmenopausal women expected in Q2 2017.

CNP520 is in a Phase 3 study for Alzheimer's disease for patients with a strong genetic predisposition to it. Partnered with Novartis.

Parsabiv was granted marketing authorization in February for secondary hyperparathyroidism (sHPT) for patients on hemodialysis.

AMG 157 (MEDI9929) tezepelumab for asthma had postive results reported in February for the Phase 2b study.

See also the Amgen pipeline.

Cost of sales was $1.00 billion. Research and development expense was $769 million; selling general and administrative expense $1.06 billion; and other expense $44 million, for total operating expenses of $2.87 billion. Operating income was $2.59 billion. Interest and other expense net was $13 million, income taxes $389 million.

A dividend of $1.15 per share for stockholders of record as of May 17, 2017 will be paid on June 8, 2017.

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