Analyst Conference Summary

biotechnology

conference date: October 25, 2017 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2017 (third quarter, Q3)

Forward-looking statements

My Seeking Alpha article based on this summary:
BiTE Amgen for Long-term Returns [December 16, 2017]

Overview: Weak revenue, down 1% y/y. EPS was up due to decreased share count. Guidance was raised a bit.

Basic data (GAAP):

Revenue was $5.77 billion, down 1% sequentially from $5.81 billion, and also down 1% from $5.81 billion in the year-earlier quarter.

Net income was $2.02 billion, down 6% sequentially from $2.15 billion, and flat from $2.02 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.76, down 5% sequentially from $2.91, and up 3% from $2.68 year-earlier.

Guidance:

Updated full 2017: revenue between $22.7 and $23.0 billion (up slightly at the low end). GAAP EPS $10.96 to $11.20, up. Non-GAAP EPS $12.50 to $12.70, up.

Conference Highlights:

Robert A. Bradway, CEO said "We are effectively managing our business during a period of transition." Raised guidance despite absorbing the costs of hurricane Maria. Believe Repatha will become a significant product; "improving patient access remains a top priority." Repatha outcomes data in the label is set to happen in a matter of weeks.

Amgen has over 2000 employees in Puerto Rico and almost all are back at work. No impact to product supply is expected.

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 coming closer to market.

Non-GAAP numbers: net income was $2.40 billion, down slightly sequentially from $2.41 billion, and up 5% from $2.28 billion year-earlier. EPS was $3.27, flat sequentially from $3.27 and up 8% from $3.02 year-earlier. Excludes acquisition related and stock-based compensation expenses and other charges. 55.6% operating margin.

Product sales were $5.45 billion, down 2% sequentially from $5.57 billion, and down 1% y/y from $5.52 billion, with $4.30 billion in the U.S. and $1.16 billion international. Non-product revenue was $320 million, up 36% sequentially from $236 million and up 8% from $295 million year-earlier.

Cash and equivalents balance ended at $41.4 billion, up slightly sequentially from $39.2 billion. Operating cash flow $3.5 billion. Free cash flow was $3.3 billion. At the end of quarter long-term debt was $35.8 billion. Capital expenditures $200 million. $0.8 billion worth of shares were repurchased in the quarter. Dividend payments were $0.8 billion.

New Blincyto and Kyprolis data and possible label expansions should contribute to future growth. Prolia has about a 20% market share, which leaves considerable room for growth. December 2 is the PDUFA date for the label change for Repatha.

Tezepelumab Phase 2b data showed positive results for uncontrolled asthma. Data supported targeting a broader set of patients. Phase 3 design is being considered.

AMG 301 began Phase 2 enrollment in September for migraine prevention.

Aimovig (Erenumab) for migraines regulatory submissions were made in Q2. Believes partnership with Novartis will enhance sales. PDUFA action date is May 17, 2018.

Xgeva for prevention of SREs (skeletal related events) in multiple myeloma has been assigned a February 3, 2018 PDUFA date by the FDA.

Mvasi, formerly ABP 215 (Avastin biosimilar) for non-small cell lung cancer (NSCLC) completed global regulatory submissions. Received approval form the FDA in September.

ABP 980 (biosimilar trastuzumab or Herceptin) marketing authorization application was submitted in Europe in March, with a submission to the FDA in September and an action target date of May 28, 2018.

Amgevia (biosimilar adalimumab, or Humira) was granted commercial approval in March for sale in Europe. But in late September Amgen settled with . . . and is set to launch in 2018.

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

Romosozumab (Evenity) for postmenopausal osteoporosis received a complete response letter (CRL) from the FDA in July. There was a new (negative) safety signal for some patients. But in September Phase 3 ARCH results showed superior fracture reduction in postmenopausal women with osteoporosis.

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

See also the Amgen pipeline.

Cost of sales was $990 million. Research and development expense was $877 million; selling general and administrative expense $1.17 billion; and other expense $297 million, for total operating expenses of $3.33 billion. Operating income was $2.44 billion. Interest and other expense net was $58 million, income taxes $360 million.

Q&A:

Neulasta onpro kit, growth rate and market share? Not happy with 56%. Kit brings a lot of value to patients.

Margins beyond Q4? Plan was to get to 52% to 54% by 2018, which we hit early. We have done that despite record levels of R&D spend. We feel good about the sustainability of our margin performance.

Repatha market and formularies? We are working with payers to help more patients.

Use of capital if repatriation allowed? We return significant capital to shareholders, and will take tax changes into account, if they occur.

Expecting generic Sensipar in March 2018? We are in litigation over the pediatric extension. We are bring Parsabiv to market.

Erenumab for migraine, pre-launch activities, reception? Key opinion leaders were very enthusiastic. First new migraine drug in two decades. We understand patient needs and are working with payers, but have not yet established a price.

Migraine market in term of payers? The magnitude is about 3.5 million patients. A lot of patients fail, from lack of effectiveness or side effects. Patients are more aware of the disease; they want access to therapy. It has huge value to society.

The $67 million hurricane costs? Partly it was product that was damaged, but that did not result in inventory changes.

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