Analyst Conference Summary

biotechnology

conference date: April 27, 2022 @ 5:00 AM Pacific Time
for quarter ending: March 31, 2022 (first quarter, Q1)

Forward-looking statements

Overview: Making good progress on sales volumes and revenue.

Basic data (GAAP):

Revenue was $6.24 billion, down 9% sequentially from $6.85 billion and up 6% from $5.90 billion in the year-earlier quarter.

Net income was $1.48 billion, down 22% sequentially from $1.90 billion, and down 10% from $1.65 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.68, down 20% sequentially from $3.36, and down 5% from $2.83 year-earlier.

Guidance:

Guidance was unchanged at 2022 revenue of $25.4 to $26.5 billion, but tax rate was revised up to non-GAAP 13.5% to 14.5%.

Conference Highlights:

Robert A. Bradway, CEO said "We achieved strong, volume-driven growth in the quarter, while launching two very promising first-in-class medicines. We are also advancing a robust pipeline with data for several mid-to-late stage candidates expected during the year."

Volume grew 9% y/y, but was partly offset by declining net prices and foreign exhange. Lower share count was the main driver of EPS growth. Expects continued foreign exchange headwinds in 2022. Addition of Repatha to approved China list helped. Otezla gained 30% of new psoriasis patients, leading in market share in the U.S. But prices declined and inventories declined.

Is in a dispute with the IRS for the period 2010 to 2015. Filed petition in tax court. Expects several years to resolve the dispute. Main issue is transfer pricing methodology. IRS is also auditing 2016 to 2018.

In January 2022, Amgen and Generate Biomedicines announced a research collaboration agreement to discover and create protein therapeutics for five clinical targets across several therapeutic areas and multiple modalities.

In January 2022, Amgen and Arrakis Therapeutics announced a research collaboration focused on the discovery and development of RNA degrader therapeutics against a range of difficult-to-drug targets in multiple therapeutic areas. This new class of targeted RNA degraders consists of small molecule drugs that selectively destroy RNAs encoding disease-causing proteins by inducing their proximity to nucleases. In February 2022, Amgen and Plexium announced a research collaboration and license agreement to identify novel targeted protein degradation therapeutics toward historically challenging drug targets.

Rocatinlimab (AMG 451) targetting OX40 Phase 3 planning continues, with initiation expected mid-2022. For atopic dermatitis.

Bemarituzumab Phase 3 study for first-line FGFR2b gastric cancer continues to enroll, as do several Phase 1b trials.

Following a priority review by the FDA, Tezspire (tezepelumab) was approved early in December 2021 for the add-on maintenance treatment of adult and pediatric patients aged 12 years and older with severe asthma. Regulatory reviews are underway in the EU, Japan, and other jurisdictions. Believes could be 2.5 million patients globally.

Expects increased competition to continue to erode results of certain established products like Neulasta and Neupogen.

Non-GAAP numbers: net income was $2.34 billion, down 5% sequentially from $2.46 billion, and up 9% from $2.15 billion year-earlier. EPS was $4.25, down 3% sequentially from $4.36 and up 15% from $3.70 year-earlier.

Product sales were $5.73 billion, down 9% sequentially from $6.27 billion, and up 3% y/y from $5.59 billion. Non-product revenue was $507 million, up from $309 million year-earlier.

Cash and equivalents balance ended at $6.54 billion, down sequentially from $na billion. Operating cash flow $2.2 billion. Free cash flow was $2.0 billion. At the end of quarter long-term debt was $36 billion. Capital expenditures $0.2 billion. $6.3 billion worth of shares were repurchased in the quarter. Dividend payments were $1.94 per share.

In December 2021, Otezla was approved by the FDA for the treatment of adult patients with plaque psoriasis who are candidates for phototherapy or systemic therapy.

In January 2022, the European Commission granted conditional marketing authorization for Lumykras, for the treatment of adults with advanced non-small cell lung cancer (NSCLC) with KRAS G12C mutation and who have progressed after at least one prior line of systemic therapy. Lumakras (AMG 510 or sotorasib) was approved in May 2021 for treating KRAS G12C-mutated NSCLC in the U.S. , following at least one prior systemic therapy. In Q1 2022 received reimbursement approvals in U.K. and Japan. Launch is strong, so far.

Amgevita (biosimilar to Humira) should launch in the U.S. in early 2023 (already on sale in Europe).

See also the Amgen pipeline.

GAAP cost of sales was $1.56 billion. Research and development expense was $0.96 billion; selling general and administrative expense $1.23 billion; and other income $10 million, for total operating expenses of $3.74 billion. Operating income was $2.50 billion. Interest expense was $295 million, other expense $530 million, income taxes $199 million.

Q&A summary:

KRAS competition, Lumakras readout? If we replicate earlier trials, it is likely to have positive results vs. docataxel. Can't comment on effects on competitive landscape.

Cardiovascular strategy? It remains the number 1 public house burden. We see tremendous opportunity for LDL cholesterol and LPa therapies. Expect Phase 2 data soon, if positive hope to move to Phase 3 quickly.

We are looking for attractive external opportunities.

Do you expect tax reserves to change before resolution of dispute. Can't discuss litigation. We are confident in the level of reserves we have established. It is about Puerto Rico where we manufacture and the transfers from that.

Lumakras Keytruda combo study? We submitted data to a summer oncology conference. We are beginning to look at the types of NSSLC patients. We are also looking at Lumakras plus chemotherapy for certain types of NSSLC.

We hope to be the only Humira biosimilar on the market for a time in 2023. We have six new biosimilars coming to the market starting in 2023.

Lumakras is getting over 80% of the patients with KRAS mutations who graduate from first line to second line. Rate of KRAS mutations varies by country, is about 13% in US, only 4% in Japan. It is too early to determine typical duration of therapy, especially since earliest patients had had multiple lines of therapy, whereas most new patients will have had only one prior line.

Repatha sales growth continues to be encouraging as physicans continue to learn about its benefits. Our event reduction data is a good sales point, and there are many more patients that need better lipid lowering.

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