Analyst Conference Summary

biotechnology

conference date: October 29, 2019 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2019 (third quarter, Q3)

Forward-looking statements

Overview: Y/Y revenue decline, but better than expectations as new drugs ramp sales while some older drugs had sales impacted by biosimilar or generic competition. But Amgen's own biosimilars are seeing a rapid revenue ramp.

Basic data (GAAP):

Revenue was $5.74 billion, down 2% sequentially from $5.87 billion and down 3% from $5.90 billion in the year-earlier quarter.

Net income was $1.97 billion, down 10% sequentially from $2.18 billion, and up 6% from $1.86 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.27, down 8% sequentially from $3.57, and up 14% from $2.86 year-earlier.

Guidance:

Revised full 2019 guidance: revenue revised to $22.8-$23.0 billion; EPS guidance to $12.50-$12.80 GAAP and $14.20-$14.45 non-GAAP. This excludes the impact of the Otezla (apremilast) acquisition. Noted Q4 expenses are seasonally about 15% above Q3 expenses.

In 2020 expects expenses to increase by $600 to $700 million due to Otezla, plus most increase for rest of business, including expanded international sales. Expects base business to be steady, and with Otezla revenue will grow.

Conference Highlights:

Robert A. Bradway, CEO said "We continue to advance numerous first-in-class medicines in our pipeline, while also pursuing external opportunities that will contribute to our long-term growth, such as our pending acquisition of Otezla." The Otezla acquisition should complete in Q4 2019.

In September, the Company announced that it joined a consortium to perform the whole genome sequencing of approximately 500,000 participants in the UK Biobank. deCODE Genetics, a wholly-owned subsidiary of Amgen, will provide sequencing for the project, along with the Wellcome Sanger Institute.

Expects sales outside the U.S. to become more important over time. Launched Repatha in China. Japan is also an important new opportunity.

Otezla prospects are exciting. Amgen is very experienced with inflamation therapies. But terminating most of neurological program, except that having to do with inflammation.

Believes will grow the dividend over time.

Net selling prices declined 4% y/y in Q3 2019. Neulasta is seeing biosimilar competition, which will increase throughout 2019. Onpro and reputation for quality may slow the erosion.

Aranesp revenue is declining more due to competition.

Non-GAAP numbers: net income was $2.20 billion, down 9% sequentially from $2.42 billion, and down 8% from $2.39 billion year-earlier. EPS was $3.66, down 8% sequentially from $3.97 and down 1% from $3.69 year-earlier.

Product sales were $5.46 billion, down 2% sequentially from $5.57 billion, and down 1% y/y from $5.51 billion, with $4.03 billion in the U.S. and $1.43 billion international. Non-product revenue was $274 million, down from $394 million year-earlier.

Cash and equivalents balance ended at $20.9 billion, down sequentially from $21.8 billion. Operating cash flow $3.4 billion. Free cash flow was $3.2 billion. At the end of quarter debt was $29.8 billion. Capital expenditures $ million. $1.2 billion worth of shares were repurchased in the quarter. Dividend payments were $0.9 billion.

In April 2019 the FDA approved Evenity for the treatment of osteoporosis in postmenopausal women at high risk for fracture.

In April 2019, Corlanor (ivabradine) was approved by the FDA for the treatment of stable symptomatic heart failure due to dilated cardiomyopathy in pediatric patients aged 6 months and older, who are in sinus rhythm with an elevated heart rate.

In December 2018, 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).

A Phase 3 study of ABP 798, a biosimilar candidate to Rituxan (rituximab), in patients with Non-Hodgkin's lymphoma was positive. Submission of a Biologics License Application in the U.S. for ABP 798 is expected in Q1 2020. The FDA has set a Dec. 14, 2019, Biosimilar User Fee Act target action date for the Biologics License Application of ABP 710, a biosimilar candidate to Remicade (infliximab).

Phase 1 data for AMG 510, a small molecule KRAS G12C inhibitor, in patients with solid tumors, was presented at ESMO in September 2019.

Amgen has 13 Bite programs in progress, including AMG 562, AMB 427, AMG 420, AMG 673, AMG 701, AMG 757, and AMG 330. A Phase 2 study of AMG 570, a bispecific inhibitor of ICOSL and BAFF, is enrolling patients with systemic lupus erythematosus.

A Phase 3 Study evaluating the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma has completed enrollment, with the primary analysis expected in late 2020. A Phase 2 study evaluating the efficacy and safety of tezepelumab in adults with moderate to very severe chronic obstructive pulmonary disease is enrolling patients.

Blyncyto for pediatric ALL at first relapse met primary endpoint early at an interim analysis.

See also the Amgen pipeline.

GAAP cost of sales was $1.04 billion. Research and development expense was $1.00 billion; selling general and administrative expense $1.22 billion; and other expense $199 million, for total operating expenses of $3.26 billion. Operating income was $2.48 billion. Interest and other expense net was $ million, income taxes $309 million.

Q&A summary:

Ending neuroscience decision? It was a difficult decision. A lot of the competitive pipeline is in orphan drugs, we prefer larger markets. We believe genetics will ultimately drive progress in this area, so we will continue to explore some options.

Otezla transition challenges? We have met with out future potential employees, they seem very interested in joining Amgen, so we expect minimal disruption.

Repatha pricing, could it work for other products? Yes, we applied that model to Aimovig. It is still a work in progress. Half of the medicare part D should have an affordable co-pay next year, more plans should add Repatha as a preferred benefit.

Why is Aimovig not hitting a tipping point to the large potential? We are pleased with the uptake so far. We are just starting to see good reimbursement practices. We are investing in direct to consumer promotions and a digital campaign. Patients are enthusiastic, so we expect the market to evolve.

510 as monotherapy or in combination? We have a clinical program designed to answer that question. We will look at response, duration of response. So far most patients in the trials are fourth or fifth line, so we would like to see data with patients in earlier lines of therapy as well.

Our biosimilar sales benefit from our reputation for high quality products, including in the oncology market.

510 dosing details? One critical quality we were looking for was the ability to inhibit a target over 24 hours. We will explore alternative doses and BID. The KRAS field is exploding, we may bring other molecules forward. Re AUC, small samples can create large error bars. Our focus is on the CMAX parameter, where we are well above our target threshold, which we belive is enough to extinguish signalling.

We see no reason to pause our business development activities given the Otezla acquisition.

Search

More Analyst Conference Pages: