Analyst Conference Summary

biotechnology

conference date: October 30, 2018 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2018 (third quarter, Q3)

Forward-looking statements

Overview: Relatively good revenue for Amgen, non-GAAP EPS up 13% y/y. Increased guidance. Good first revenue quarter for Aimovig.

Basic data (GAAP):

Revenue was $5.90 billion, down 3% sequentially from $6.06 billion and up 2% from $5.77 billion in the year-earlier quarter.

Net income was $1.86 billion, down 19% sequentially from $2.30 billion, and down 8% from $2.02 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.86, down 18% sequentially from $3.48, and up 4% from $2.76 year-earlier.

Guidance:

Full 2018 revenue increased to $23.2 to $23.5 billion. EPS $12.23 to $12.55 GAAP or $14.00 to $14.25 non-GAAP. Cap ex about $700 million.

Conference Highlights:

Robert A. Bradway, CEO said "We are in the early stages of launching several new products that offer innovative solutions for patients suffering from serious diseases. Our newer products continue to deliver strong growth in unit volumes."

Aimovig was approved by the FDA late in the second quarter. Reception has been enthusiastic. Started patients on bridging programs prior to payer approval. Q3 revenue generated was $22 million.

New products are rapidly approaching the market: Xgeva for multiple myeloma, Amgevita biosimilar to Humira (which launched in EU), Evenity for osteoporosis.

Competition is increasing, particularly with generics to Neulasta. Europe was strong, with 13% volume growth. Reduced price of Repatha should increase revenue after an initial dip.

Non-GAAP numbers: net income was $2.39 billion, down 6% sequentially from $2.53 billion, and down slightly from $2.40 billion year-earlier. EPS was $3.69, down 4% sequentially from $3.83 and up 13% from $3.27 year-earlier.

Product sales were $5.55 billion, down 2% sequentially from $5.68 billion, and up 1% y/y from $5.45 billion, with $4.26 billion in the U.S. and $1.25 billion international. Non-product revenue was $394 million, up sequentially from $380 million and up from $320 million year-earlier.

Cash and equivalents balance ended at $29.9 billion, up sequentially from $29.4 billion. Operating cash flow $3.3 billion. Free cash flow was $3.1 billion. At the end of quarter debt was $34.4 billion. Capital expenditures $0.2 billion. $1.7 billion worth of shares were repurchased in the quarter. Dividend payments were $0.9 billion. Average diluted shares ended at 649 million, down 84 million y/y.

The FDA approved Kyprolis expanded label for once-weekly dosing for multiple myeloma.

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

Blincyto label expanded in Japan to relapsed or refractory B-cell ALL. In EU expanded to pediatric patients with Philadelphia chromosome-negative ALL.

Kanjinti, formerly ABP 980 (biosimilar trastuzumab or Herceptin) was issued a complete response letter by the FDA in late May, resulting in a delay before possible approval. It received an approval in Europe for marketing authorization in March.

Tezepelumab was granted breakthrough therapy designation by the FDA in September for severe asthma.

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

ABP 710, biosimilar to infliximab, in June showed Phase 3 data matching Remicade.

Amgen has 13 Bite programs in progress, including AMG 562, AMB 427, AMG 420, AMG 673, AMG 701, AMG 757, and AMG 330. AMG 420 should present first data in Q4, as will AMG 330.

Seven first in class studies were initiated in Q3 2018: AMG 119, 397, 424, 427, 510, 562, 1n3 890.

AMG 594, a cardiac troponin activator, is advancing for Phase 1 for heart failure. AMG 890 started a Phase 1 study for cardiovascular patients with elevated Lp(a). It is an siRNA molecule.

See also the Amgen pipeline.

GAAP Cost of sales was $1.04 billion. Research and development expense was $0.93 billion; selling general and administrative expense $1.29 billion; and other expense $325 million, for total operating expenses of $3.58 billion. Operating income was $2.32 billion. Interest and other expense net was $229 million, income taxes $235 million.

Q&A:

Biosimilar outlook in Europe? We launched our two products, we have 8 more in the clinic. So far so good. We have done particularly well in Germany. We do see competitive activity. For oncology biosimilars we will embed with our current portfolio, giving us access to decision makers.

Growth outside the U.S.? We have been demonstrating double-digit volume growth internationally. We are just getting into Asia and emerging markets. We got Repatha approved in China.

Trump Part B proposal? It is just a proposal. We want to work with the administration and Congress, we believe there are things that can be done to help with costs.

Aimovig positioning? We are seeing good provider, payer and prescriber response, and it is the only receptor antagonist. Patients are responding well so far, payers are paying for it. We have over 100,000 patients so far, with a strong bridging to payment program, putting us in a really strong position.

2019 dynamics, pricing? We are running efficiently. We have a very exciting pipeline, and are increasing investments in Aimovig and other new products, including international sales. New product growth will lead revenue, we have uncertainty on the legacy side with Neulasta and Sensipar.

We are trying to position the company for long term growth for shareholders. We plan to manage through our own patent expirations and any pricing issues.

In an aging society, we need more innovation, not less, and rapid access to it.

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