Analyst Conference Summary

biotechnology

conference date: April 27, 2021 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2020 (first quarter, Q1)

Forward-looking statements

Overview: Lower revenue driven by lower prices and delays in diagnoses due to pandemic.

Basic data (GAAP):

Revenue was $5.90 billion, down 11% sequentially from $6.63 billion and down 4% from $6.16 billion in the year-earlier quarter.

Net income was $1.65 billion, up 2% sequentially from $1.62 billion, and down 10% from $1.83 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.83, up 3% sequentially from $2.76, and down 8% from $3.07 year-earlier.

Guidance:

2021 total revenue guidance reaffirmed at $25.8 to $26.6 billion; EPS guidance revised to $9.11 to $10.71 on a GAAP, and reaffirmed at $16.00 to $17.00 non-GAAP. Cap ex $900 million. Share repurchases $3 to $5 billion.

For Q2 2021 expects revenue to grow 7% to 10% sequentially. Also, recovery from pandemic expected to be weighted towards the second half of 2021.

Conference Highlights:

Robert A. Bradway, CEO said "While our business continued to be impacted by the COVID-19 pandemic particularly in the first two months of the quarter, we are encouraged by strong volume trends in many of our newer products and remain confident in the outlook for the full year. We also continue to advance key pipeline opportunities, including three late-stage assets that have earned Breakthrough Therapy Designation from the FDA." Q1 is expected to be the seasonally lowest for revenue for 2021. January and February revenue was weak due to the pandemic, improved in March and April.

Volume grew 4% y/y. Net selling prices declined 7%. Some newer products are showing strong revenue growth, offsetting older drugs in decline. Y/Y growth was negatively impacted due to $150 million favorable Q1 2020 changes to estimated sales deductions, which were not seen in Q1 2021.

Continues to pursue external business development activities.

Non-GAAP numbers: net income was $2.15 billion, down 4% sequentially from $2.23 billion, and down 14% from $2.51 billion year-earlier. EPS was $3.70, down 3% sequentially from $3.81 and down 12% from $4.22 year-earlier.

Product sales were $5.59 billion, down % sequentially from $6.33 billion, and down % y/y from $5.89 billion. Non-product revenue was $309 million, up from $267 million year-earlier.

Cash and equivalents balance ended at $10.6 billion, flat sequentially from $10.6 billion. Operating cash flow $2.1 billion. Free cash flow was $1.9 billion. At the end of quarter debt was $32.7 billion. Capital expenditures $ billion. $865 million worth of shares were repurchased in the quarter. Dividend payments were $1.0 billion. In Q2 $2 billion used to acquire Five Prime.

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 Lumakris (AMG 510 or 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. In February 2021 granted FDA priority review, PDUFA date August 16, 2021. 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 completed enrolling patients with advanced NSCLC in Q1 2021. Several Phase 2 trials are enrolling patients with other cancer types and in combination with other therapies.

A Phase 3 Study evaluating the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma data was presented in February 2021. Regulatory submissions expected in Q2 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. Was designated a Breakthrough Therapy.

In Q2 2021 began Phase 3 planning and expects to commence discussions with regulators for bemarituzumab, a first-in-class anti-fibroblast growth factor receptor 2b (FGFR2b) antibody for the treatment of patients with human epidermal growth factor receptor 2 (HER2) negative, FGFR2b-positive gastric and gastroesophageal junction cancer. This came with the Five Prime Therapeutics acquisition in April 2021.

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.

Dose escalation for AMG 757, an HLE BiTE molecule targeting delta-like ligand 3 (DLL3), in patients with relapsed or refractory small cell lung cancer began and expected initiation of expansion phase by H2 2021. A Phase 1b study of AMG 757 has initiated for patients with neuroendocrine prostate cancer expressing DLL3. A Phase 1b study of AMG 757 in combination with AMG 404 is planned to initiate in Q3 2021 for patients with small cell lung cancer.

Several bispecifics continue dose escalation studies.

See also the Amgen pipeline.

GAAP cost of sales was $1.49 billion. Research and development expense was $0.97 billion; selling general and administrative expense $1.25 billion; and other expense $61 million, for total operating expenses of $3.77 billion. Operating income was $2.13 billion. Interest and other expense net was $272 million, income taxes $211 million.

Q&A summary:

Otezla new data change psoriasis positioning? Otezla is idealy positioned in first-line pre biologic, post-topical market. Holding a 30% market share. With pending mild-to-moderate, compelling data, expect to expand to that population. But there is still a lot to be understood about potential competition.

Combination therapies timeline? The Lumakras combination trials are moving along rapidly. Also looking to see if a lower dose will be as effective, despite the tolerability at the higher dose.

AMG 890, olpasiran? Completed Phase 2 enrollment. Looking for longer-term efficacy in same range as Phase 1 data. Looking for a dose for Phase 3, planning already. A goal may be relatively infrequent dosing.

Repatha trend? Good, but could be a drag from Medicare Part D gap. Expect to continue to penetrate that patient population.

PD-1 combination data timing? Lumakras experiments with PD-1 may not have data this year, will release data as available. Low dose study is not for combinations, so far.

Puerto Rico tax benefit? Premature to speculate on potential US tax changes. We favor competitive tax that favors manuracturing in the US and its territories.

Negative price effect details? Going forward? Mid single digit y/y price decreases are what we expect. Part of it is the renewal of benefits hitting our copay assistance programs. We expect Q1 to be the lowest campare, with gradual improvement for the rest of the year.

Re drug price reform, drawing attention to the fact that currently about 50% of the price of a drug ends up in the hands of middlemen, not the pharmaceutical companies.

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