Analyst Conference Summary

biotechnology

conference date: July 28, 2020 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2020 (second quarter, Q2)

Forward-looking statements

Overview: Solid revenue growth.

Basic data (GAAP):

Revenue was $6.21 billion, up 1% sequentially from $6.16 billion and up 6% from $5.87 billion in the year-earlier quarter.

Net income was $1.80 billion, down 2% sequentially from $1.83 billion, and down 13% from $2.68 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.05, down 1% sequentially from $3.07, and down 15% from $3.57 year-earlier.

Guidance:

2020 total revenue guidance reaffirmed at $25.0-$25.6 billion; EPS guidance increased to $10.73-$11.43 GAAP; $15.10-$15.75 non-GAAP. Cap ex about $600 million. Dividend to remain at $1.60 per share. Share repurchases planned near $3 billion. Operating expense to increase significantly in 2H.

Conference Highlights:

Robert A. Bradway, CEO said "We look forward to several significant pipeline updates in the second half of the year. . . We are still in the midst of a deep economic downturn." The situation is dynamic. Restarted most early stage trials that had been put on hold due to the pandemic. Financial strength allows us to invest in our long term growth while returning capital to shareholders. Believes the pandemic had a negative impact on sales early in Q2, but was recovering by the end of the quarter.

Volume grew 13% y/y, partly offset by price declines.

In April 2020, Amgen announced a collaboration with Adaptive Biotechnologies to discover and develop fully antibodies targeting SARS-CoV-2 to potentially prevent or treat COVID-19.

CVS removed Repatha from its national formulary, but confident can continue to grow sales despite that.

Expects more biosimilar competition in 2020, including against Amgen's biosimilar offerings. In December 2019, the FDA approved Avsola for all approved indications of the reference product, Remicade (infliximab). In December 2019, a BLA was submitted to the FDA for ABP 798, a biosimilar candidate to Rituxan (rituximab); the target action date has been set to Dec. 19, 2020.

Sees social distanceing continuing, but doctors and insurers encouraging use of services.

Non-GAAP numbers: net income was $2.52 billion, up 2% sequentially from $2.48 billion, and up 4% from $2.42 billion year-earlier. EPS was $4.25, up 1% sequentially from $4.17 and up 2% from $3.97 year-earlier.

Product sales were $5.91 billion, up 0.5% sequentially from $5.88 billion, and up 6% y/y from $5.57 billion, with $4.4 billion in the U.S. and $1.5 billion international. Non-product revenue was $298 million, up from $297 million year-earlier.

Cash and equivalents balance ended at $11.4 billion, up sequentially from $8.01 billion. Operating cash flow $2.8 billion. Free cash flow was $2.7 billion. At the end of quarter debt was $34.2 billion. Capital expenditures $0.2 billion. $591 million worth of shares were repurchased in the quarter. Dividend payments were $ billion. $1.75 billion Q2 2020 debt payment. Issued $4 billion in debt in May 2020.

Amgen continues to expect data from the Omecamtiv mecarbil Phase 3 GALACTIC-HF study in Q4 2020. In May 2020 the FDA granted Fast Track designation for omecamtiv mecarbil for the treatment of chronic heart failure with reduced ejection fraction.

Updated Phase 1 data for AMG 510, now sotorasib, a small molecule KRAS G12C inhibitor, in patients with solid tumors, was presented at ASCO in late May 2020. A potentially pivotal Phase 2 monotherapy study in advanced non-small cell lung cancer (NSCLC) completed enrollment and data are expected in 2020. A Phase 2 monotherapy study is enrolling advanced colorectal cancer patients. The Phase 3 CodeBreaK 200 study comparing sotorasib to docetaxel is enrolling patients with advanced NSCLC. A Phase 1b study in combination with MEK inhibition is enrolling advanced colorectal and non-small cell lung cancer patients. 6 Phase 1 combination cohorts are enrolling patients.

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.

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. In the second half of 2020 Amgen expects Phase 1 dose escalation data from AMG 160, 701, and 757. AMG 300 bispecific CD33 in AML Phase 1 dose escalation data presented at ASCO in late May 2020. In Q2 2020 the Phase 1 development of AMG 424, a CD38-CD3 XmAb antibody was stopped, with rights reverting to Xencor.

See also the Amgen pipeline.

GAAP cost of sales was $1.49 billion. Research and development expense was $0.96 billion; selling general and administrative expense $1.30 billion; and other expense $136 million, for total operating expenses of $3.88 billion. Operating income was $2.32 billion. Interest and other expense net was $299 million, income taxes $277 million.

Q&A summary:

Tezepelumab Phase 2 data? Some evidence of activity. Not much read through to the Phase 3 asthma trial.

Biosimilar competition, inventory? We are pleased with biosimilar sales. Providers are looking for value. Mvasi is in the high 30s, Kanjinti in the mid 30s, inventory is normal. We expect price competition rather than share loss.

We are doing what we can to get Prolia available outside of doctors' offices. Reimbursement for Part B is still an issue.

Bispecifics, haem vs. solid tumors? Two programs are moving along in solid tumors, in dose escalation, will see initial data at ESMO.

Drug pricing, executive orders? Too early, we have not seen the actual language yet. We believe the nation needs more innovation, not less. Bringing down out-of-pocket costs for patients is a good thing. But importing prices from socialist medicine countries would be problematic.

There is a huge unmet need with migraine. We are barely penetrating the market. Most patients are on older medicines that do not give the relief Aimovig can. Oral agents tend to be used as add-ons, which gives patients and neurologists experience. Our once a month injection and strong payer coverage is an advantage against additional entrants.

We believe some of the COVID-19 antibodies appear quite good. We could add an antibody with a variant epitope that would help in a cocktail.

Omecamtiv mecarbil mechanism, key points? Affects contractillity of cells. In the Phase 2 data there was internal consistency. The Phase 3 trial will have over 8,000 patients, it is well powered, so we will have our answer by the end of the year.

Pandemic reimbursements? We saw good results in the second half of Q2, requiring less subsidies from us. There are mechanisms allowing many patients to continue their healthcare coverage.

Inital population for Omecamtiv mecarbil? This is a slightly sicker population than usual in cardio trials. Aiming to reduce the amount of hospitalization for those patients. The trial includes both hospitalized and non-hospitalized patients. It has huge economic implications.

Aimovig prescriptions by family doctors? We do promote to primary care physicians. Those that treat migraine are quite open to Aimovig. We did see some disruption in March and April from the pandemic. We want to expand into community care more.

Psoriasis patients where large areas of skin are affected are looking for an alternative to topical treatments. Since Otezla is oral, post-topical and pre-biologic, it is well positioned.

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