Analyst Conference Summary

biotechnology

conference date: February 2, 2021 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2020 (fourth quarter, Q4)

Forward-looking statements

Overview: Although y/y revenue growth was good, the acceleration from acquiring Otezla has worn off. Increased the dividend for 2021. Sotorasib filings made.

Basic data (GAAP):

Revenue was $6.63 billion, up 3% sequentially from $6.42 billion and up 7% from $6.20 billion in the year-earlier quarter.

Net income was $1.62 billion, down 20% sequentially from $2.02 billion, and down 5% from $1.70 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.76, down 20% sequentially from $3.43, and down 3% from $2.85 year-earlier.

Guidance:

For the full year 2021 revenue is expected between $25.8 and $26.6 billion. GAAP EPS $12.12 to $13.17. Non-GAAP EPS $16.00 to $17.00. Cap ex about $900 million. Share repurchases $3 to $4 billion.

Conference Highlights:

Robert A. Bradway, CEO said "In a year marked by the disruption of COVID-19, we served patients around the world without interruption, advanced our pipeline and delivered strong financial performance, all while keeping our employees safe. As we move into 2021, we look forward to commercializing our pipeline successes."

Volume grew 13% y/y. Net selling prices declined.

This is a time of insense competition in the sector, so speed of execution is crucial. Will increase investment in R&D in 2021. Looking at degrading proteins and other biological targets. Committed to achieving carbon neutrality by 2027.

Non-GAAP numbers: net income was $2.23 billion, down 13% sequentially from $2.57 billion, and up 3% from $2.17 billion year-earlier. EPS was $3.81, down 13% sequentially from $4.37 and up 5% from $3.64 year-earlier. The main difference between GAAP and non-GAAP was the amortization of intangible Otezla acquisition assets.

Product sales were $6.33 billion, up % sequentially from $6.10 billion, and up 8% y/y from $5.88 billion, with $4.66 billion in the U.S. and $1.67 billion international. Non-product revenue was $300 million, down from $316 million year-earlier.

Cash and equivalents balance ended at $10.6 billion, down sequentially from $12.4 billion. Operating cash flow $2.2 billion. Free cash flow was $2.0 billion. At the end of quarter debt was $33 billion. Capital expenditures $0.2 billion. $1.2 billion 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.

Regulatory submissions for AMG 510, now sotorasib, have been completed in the U.S., EU, Canada, Australia, Brazil and the United Kingdom for the treatment of patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer (NSCLC), following at least one prior systemic therapy. The pivotal Phase 2 monotherapy study in advanced non-small cell lung cancer (NSCLC) reported positive data in January 2021. 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 data to be presented in February 2021. 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. Regulatory submissions planned for 1H 2021.

Amgen has 13 Bite programs in progress, including AMG 160, 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, were presented at the Society for Immunotherapy of Cancer Annual Meeting, November 9-14, 2020, and expansion cohorts are planned. AMG 160 is in dose expansion for prostate cancer.

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 $1.60 billion. Research and development expense was $1.23 billion; selling general and administrative expense $1.77 billion; and other expense $27 million, for total operating expenses of $4.63 billion. Operating income was $2.01 billion. Interest and other expense net was $130 million, income taxes $262 million.

Full year 2020 revenue was $25.4 billion. GAAP net income $7.26 billion, diluted EPS $12.31. Non-GAAP net income $9.80 billion, EPS $16.60.

Q&A summary:

KRAS combination programs? There is no generic answer. It depends on line of therapy and indication. Given our safety profile, we are looking at 10, 20, 30% increases in efficacy over standard of care.

MEC program timeline? We were pleased with safety portion enrollment, we could have some data released this year. Any arm could be enlarged to be a Phase 2 trial if the data are good.

Sustainability of operating margin, particularly given biosimilars? We intend to continue to be a top performer for margins. We are flexible as to internal and external opportunities, including expansion of manufacturing capability. We see biosimilars as a good place to allocate capital, given the margins and our expertise.

Bite program safety issues? Overall we are bullish. 160 and 757 are advancing rapidly. The cytokine release issue needs to be addressed. We should be able to adjust molecules to address that. This is part of a prudent shaping of our portfolio.

Tezepelumab? We feel the data are very strong and competitive. The steroid sparing study may have had design issues, so we could do a follow-on study. But that trial is not necessary for filing with regulators.

Business development, cash use? Focus is on investing in the business, including research. We continue to look at small and large external opportunities. Our balance sheet gives us strategic flexibility.

Tezepelumab respiratory? We chose to partner with AstraZeneca because of their expertise, and our lack of expertise, in respiratory diseases.

Evenity growth? We are pleased with its evolution, in Japan patients are on for 12 months. The osteoporosis market is large, in Japan we are seeing more new patients, less switching from older drugs. Some switches are from Prolia, and go back on prolia after their 12 months on evenity.

KRAS target group fo 25,000 figure? That is a U.S. number for all NSCLC, global is 120,000. We assume 13% KRAS incidence.

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