Analyst Conference Summary

biotechnology

conference date: April 24, 2018 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2018 (first quarter, Q1)

Forward-looking statements

Overview: Revenue growth slow y/y, seasonally down sequentially, but strong earnings growth. Slightly revised upward the low end of 2018 guidance.

Basic data (GAAP):

Revenue was $5.55 billion, down 4% sequentially from $5.80 billion, but up 2% from $5.46 billion in the year-earlier quarter.

Net income was $2.31 billion, up sequentially from negative $4.26 billion, and up 12% from $2.07 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.25, up sequentially from negative $5.89, and up 16% from $2.79 year-earlier.

Guidance:

2018 full year EPS guidance $11.30 to $12.28 GAAP, $12.80 to $13.70 non-GAAP. Revenue between $21.9 and $22.8 billion. Capital expenditures about $750 million. 13.5% to 14.5% non-GAAP tax rate.

Conference Highlights:

Robert A. Bradway, CEO said "Amgen's strong first-quarter performance was driven by our new and recently launched products, all of which delivered double-digit, volume-driven growth. We look forward to further expanding our new product portfolio with the expected U.S. launch of Aimovig (erenumab), our first-in-class migraine prevention therapy, in the second quarter and the European launch of Amgevita (biosimilar adalimumab) our first biosimilar, later this year." Amgen plans to continue to return cash to shareholders while investing in volume-driven growth and new medicines.

The dividend of $1.32 to stockholders of record on May 17 will be paid out on June 8.

New products are rapidly approaching the market: Xgeva for multiple myeloma, Amgevita biosimilar to Humira, Evenity for osteoporosis, Aimovig for migraine (possibly this quarter), and Parsabiv for hyperthyroidism secondary to chronic kidney disease.

Whether Sensipar sees generic competition in 2018 depends on litigation & FDA outcomes.

Non-GAAP numbers: net income was $2.47 billion, up 18% sequentially from $2.10 billion, and up 6% from $2.33 billion year-earlier. EPS was $3.47, up 20% sequentially from $2.89 and up 10% from $3.15 year-earlier. Excludes acquisition related and tax-changes related and other charges. 56.9% operating margin.

Product sales were $5.34 billion, down 4% sequentially from $5.57 billion, and up 3% y/y from $5.20 billion, with $4.15 billion in the U.S. and $1.20 billion international. Non-product revenue was $211 million, down sequentially from $233 million and down from $265 million year-earlier.

Cash and equivalents balance ended at $32.2 billion, down sequentially from $41.7 billion. Operating cash flow $2.73 billion. Free cash flow was $2.57 billion. At the end of quarter long-term debt was $33.4 billion. Capital expenditures $155 million. $10.8 billion worth of shares were repurchased in the quarter. Dividend payments were $1.0 billion.

Blincyto was approved by the FDA in March for B-cell precursor acute lymphoblastic leukemia in remission.

Enrollment in a Phase 3 study to evaluate the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma began in December. Partnered with AstraZeneca.

Aimovig (Erenumab) for migraines regulatory submissions were made in Q2. Believes partnership with Novartis will enhance sales. PDUFA action date is May 17, 2018. Phase 3b data presented in January met endpoints.

Kanjinti, formerly ABP 980 (biosimilar trastuzumab or Herceptin) has an FDA action target date of May 28, 2018. It received a positive opinion in Europe for marketing authorization in March.

Mvasi (biosimilar bevacizumab, or Avastin) was approved in Europe in January.

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

Amgen has 12 Bite programs in progress.

See also the Amgen pipeline.

Cost of sales was $0.944 billion. Research and development expense was $0.76 billion; selling general and administrative expense $1.13 billion; and other expense $3 million, for total operating expenses of $2.83 billion. Operating income was $2.73 billion. Interest and other expense net was $107 million, income taxes $308 million.

Q&A:

Aimovig size of commercial organization, and reimbursement? We are going to market with Novartis, who have a salesforce in neuroscience. We will be launching before competitors. Patients have huge untreated symptoms.

Enbrel Q1 seasonality implies $5.5 billion for full year? Q1 is typically low because of resets. Ended being 21 to 22% instead of 20% you used, so our number is below your $5.5 billion.

AMG 592? It is a half-life extended construct. We have preclinical models, but it is such a different mechanism for RA, Lupus, etc., so our trust in the models is modest. We need to use humans to see if the mechanism can be useful.

In some indications we have both CAR-T and Bite programs, but keep in mind the preconditioning of patients is often different even for the same disease type. If you can get a similar efficacy and safety from Bite, there is little reason to use CAR-T because of the expense.

Express Scripts pricing model announced? We are taking affordability into our equation for setting the price for Aimovig, and in general. We have risk-based contracts on the table with Repatha, and would consider them for Aimovig, which is the only receptor antagonist in the clinic, so it does not provide loading doses.

We estimate about 100,000 multiple myeloma patients who could benefit from Xgeva.

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