Analyst Conference Summary

biotechnology

conference date: January 29, 2019 @ 2:00 PM Pacific Time
for quarter ending: December 30, 2018 (fourth quarter, Q4)

Forward-looking statements

Overview: Good y/y revenue growth. Weak 2019 revenue guidance.

Basic data (GAAP):

Revenue was $6.23 billion, up 6% sequentially from $5.90 billion and up 7% from $5.80 billion in the year-earlier quarter.

Net income was $1.93 billion, up 4% sequentially from $1.86 billion, and way up from negative $4.26 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.01, up 5% sequentially from $2.86, and way up from negative $5.89 year-earlier.

Guidance:

2019 total revenue $21.8 to $22.9 billion; GAAP EPS $11.55 to $12.75; non-GAAP EPS $13.10 to $14.30. Capital expenditures about $700 million. Range dependent of Sensipar litigation outcomes.

Conference Highlights:

Robert A. Bradway, CEO said "We are encouraged by our long-term growth prospects driven by our portfolio of newer products, pipeline and ongoing success in international expansion."

Lowered the price of Repatha by 60%. Not increasing prices on most revenue, driving revenue with volume, not price. Overall, net prices dropped 1% in 2018 and are expected to drop in mid-single digits 2019.

Started transformation in 2013 in anticipation of industry changes. Results of that five year plan include 14% EPS growth annually. Launched multiple products and achieved new capabilities. Allows for investment in new programs.

Amgen intends to continue to increase the dividend over time and repurchase stock.

Aimovig was approved by the FDA late in the second quarter. Reception has been enthusiastic. There have been over 150,000 patient starts. It has a majority of market share for the segment.

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

Neulasta is seeing biosimilar competition, which may increase in 2019. Onpro and reputation for quality may slow the erosion. Epogen will see competition from a biosimilar, so price may decline.

Amgen's first quarter 2019 dividend of $1.45 per share declared on Dec. 7, 2018, will be paid on March 8, 2019, to all stockholders of record as of Feb. 15, 2019, representing a 10 percent increase.

Non-GAAP numbers: net income was $2.19 billion, down 8% sequentially from $2.39 billion, and up 4% from $2.10 billion year-earlier. EPS was $3.42, down 7% sequentially from $3.69 and up 18% from $2.89 year-earlier.

For the full year 2018 revenue was $23.75 billion, GAAP net income was $8.39 billion and GAAP EPS was $12.62 diluted. Non-GAAP net income was $11.9 billion and EPS was $14.40. Free cash flow was $10.6 billion.

Product sales were $6.00 billion, up 8% sequentially from $5.55 billion, and up 6% y/y from $5.57 billion, with $4.66 billion in the U.S. and $1.35 billion international. Non-product revenue was $229 million down slightly from $233 million year-earlier.

Cash and equivalents balance ended at $29.3 billion, down sequentially from $29.9 billion. Operating cash flow $3.2 billion. Free cash flow was $3.0 billion. At the end of quarter debt was $33.9 billion. Capital expenditures $0.2 billion. $2.2 billion worth of shares were repurchased in the quarter. Dividend payments were $0.8 billion.

In January, the European Commission approved an expanded current indication for Blincyto to include adult patients with Philadelphia chromosome negative CD19 positive B-cell precursor acute lymphoblastic leukemia in first or second complete remission with minimal residual disease (MRD).

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.

In December, a Biologics License Application (BLA) for Kanjinti, a biosimilar Herceptin (trastuzumab), was resubmitted to the FDA. In December and January, the Company submitted a BLA to the FDA, and a Marketing Authorization Application to the EMA, respectively, for ABP 710, a biosimilar candidate to Remicade(infliximab).

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

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 presented first data (70% response rate) in Q4, as did AMG 330.

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

AMG 594, a cardiac troponin activator, is advancing to Phase 1 for heart failure. AMG 890 continued 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 $1.10 billion. Research and development expense was $1.18 billion; selling general and administrative expense $1.56 billion; and other expense $11 million, for total operating expenses of $3.85 billion. Operating income was $2.38 billion. Interest and other expense net was $197 million, income taxes $257 million.

Q&A:

Neulasta biosimilar competition? Assuming two competitors, then more before the end of 2019 in the U.S. More also outside the U.S.

M&A thoughts? First priority is to invest in the business. Then return excess cash to shareholders over time. Repurchase pace of 2018 is a reasonable guide to 2019.

Sensipar inventory? In all scenarios we expect a decline in sales, Parsibiv taking a larger share. We cannot comment on the amount of product put into the market by the competitor.

Price declines guidance? Arenesp and Epogen price declines should be steady going forward.

Repatha net price structure? We are optimistic we will make good inroads in 2019. The new low list price helped address the Medicare Part D patient out of pocket expense. Some price decline on average, offset with volume growth. We have seen some out of pocket costs reduced for patients.

Aimovig formulary dynamics? We are pleased with the launch. It has been well-received by most payers. Mostly reimbursed by physician attestation alone. Paid prescriptions jumped from about 35% in Q3 to about 50% in Q4. The monthly dosing schedule is under FDA review.

Amgen view on mega-mergers? We are looking at opportunities to invest in the business in the therapeutic areas we bring value to.

How long before new product income outweighs decline of older products? Our volume growth gives us confidence that the current, new drugs are offsetting legacy drugs. The emerging portfolio is encouraging, particularly our oncology pipeline.

Mylan says 18% to 20% share injectible Neulasta biosimilar, is Onpro protecting you? We have 60% penetration with Onpro, which should drive differentiation. But we expect to see some share erosion in 2019.

Enbrel IP scenarios? We are in District Court, we feel good, a judgement should come out later this quarter. Whoever wins there is likely to be an appeal.

Search

More Analyst Conference Pages: