Analyst Conference Summary

biotechnology

conference date: October 28, 2020 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2020 (third quarter, Q3)

Forward-looking statements

Overview: New products led great revenue growth.

Basic data (GAAP):

Revenue was $6.42 billion, up 3% sequentially from $6.21 billion and up 12% from $5.74 billion in the year-earlier quarter.

Net income was $2.02 billion, up 12% sequentially from $1.80 billion, and up 3% from $1.97 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.43, up 12% sequentially from $3.05, and up 5% from $3.27 year-earlier.

Guidance:

2020 revenue guidance narrowed to $25.1 to $25.5 billion; EPS to $11.53-$11.93 GAAP and $15.80-$16.15 non-GAAP.

Conference Highlights:

Robert A. Bradway, CEO said "We delivered another strong quarter." The base business is proving resilient in the fact of increased competition. We are worried a resurgence in the pandemic could become a headwind.

Volume grew 18% y/y, partly offset by price declines and pandemic effects.

Sotorasib has a lot of potential, so the program will be aggressively advanced [see Slide 6 for summary].

Now has evidence of activity in solid tumors by products in the BiTE program. SCLC data will be presented in November at SITC.

Non-GAAP numbers: net income was $2.57 billion, up 2% sequentially from $2.52 billion, and up 17% from $2.20 billion year-earlier. EPS was $4.37, up 3% sequentially from $4.25 and up 19% from $3.66 year-earlier.

Product sales were $6.10 billion, up % sequentially from $5.91 billion, and up 12% y/y from $5.46 billion, with $4.62 billion in the U.S. and $1.49 billion international. Non-product revenue was $319 million, up from $274 million year-earlier.

Cash and equivalents balance ended at $12.4 billion, up sequentially from $11.4 billion. Operating cash flow $3.4 billion. Free cash flow was $3.2 billion. At the end of quarter debt was $34.3 billion. Capital expenditures $0.1 billion. $752 million worth of shares were repurchased in the quarter. Dividend payments were $0.9 billion.

Amgen issued mixed 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 with data expecte 1H 2021. The Phase 3 CodeBreaK 200 study comparing sotorasib to docetaxel is enrolling patients with advanced NSCLC. 7 Phase 1b 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. The Company expects initial data from Phase 1 dose escalation studies in Q4 2020: AMG 701 targeting BCMA (B-cell maturation antigen) for relapsed or refractory multiple myeloma; AMG 757 targeting DLL3 (delta-like ligand 3) for relapsed or refractory small cell lung cancer, to be presented at the Society for Immunotherapy of Cancer Annual Meeting, November 9-14, 2020. But Phase 1 development of AMG 562, targeting CD19 for non-Hodgkin's lymphoma was stopped in Q3 due to portfolio prioritization.

Data are expected in Q4 2020 from the Phase 3 study evaluating tezepelumab in adults and adolescents with severe, uncontrolled asthma. Data also expected in Q4 from the Phase 3 study of tezepelumab for reduction of oral corticosteroid use in adults with oral corticosteroid dependent asthma.

In Q3 2020 Amgen advanced ABP 654, a biosimilar candidate similar to Stelara (ustekinumab), into Phase 3 development. The FDA action date for the Biologics License Application for ABP 798, a biosimilar candidate to Rituxan is December 19, 2020.

In Q3 2020 the FDA granted Fast Track designation for olpasiran (AMG 890), a lipoprotein(a) small interfering RNA licensed from Arrowhead currently in Phase 2 development for the treatment of atherosclerotic cardiovascular disease.

See also the Amgen pipeline.

GAAP cost of sales was $1.56 billion. Research and development expense was $1.06 billion; selling general and administrative expense $1.35 billion; and other expense $1 million, for total operating expenses of $3.97 billion. Operating income was $2.45 billion. Interest and other expense net was $357 million, income taxes $185 million.

Q&A summary:

Tezepelumab data view? The trial is very well powered to look at outcomes on the primary endpoint, the standard endpoint for asthma. We believe it will cover the entire range of patients with severe asthma, including low eosinophil population.

G12c (sotorasib), response rates, durability? The combination studies are important, with 7 cohorts now and 3 or 4 more coming soon. We should have data next year on a number of them. The goal is to increase effectiveness and durability. Should not read anything into cohorts of 3 or 4 patients whether in our trials or in competitors.

Biosimilar dynamics? We are pleased with our biosimilar business, did well in the quarter despite the pandemic. The U.S. market has become efficient, driving adoption of biosimilars. We understand because we had experience defending our own drugs like Neulasta. Biosimilars are used for both new and switching patients. Oncology penetration is moving faster than imflammation biosimilars. We are competing effectively in Europe and the U.S.

Repatha is seeing nice volume growth in the US and share gain outside the U.S. There are many more patients who need a better lipid lowering therapy.

The head to head v. docataxel trial is important to both approvals and reimbursements, particularly outside the US.

Otezla? Pleased, smooth transition, field force doing well. In quarter we saw about a 90% return to pre-covid activity. We are confident in double-digit growth going forward. Secured reimbursement in Australia, looking at authorization and reimbursement in other markets. That is even with the launch of competing oral agents anticipated in the U.S. Otezla is attractive because of its better safety and no need for lab monitoring.

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