Analyst Conference Summary

biotechnology

conference date: August 4, 2022 @ 5:00 AM Pacific Time
for quarter ending: June 30, 2022 (second quarter, Q2)

Forward-looking statements

Overview: Hanging in as older drugs lose sales and newer drugs ramp sales.

Basic data (GAAP):

Revenue was $6.59 billion, up 6% sequentially from $6.24 billion and up 1% from $6.53 billion in the year-earlier quarter.

Net income was $1.32 billion, down 11% sequentially from $1.48 billion, and up 187% from $0.46 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.45, down 9% sequentially from $2.68, and up 202% from $0.81 year-earlier.

Guidance:

2022 total revenue guidance revised to $25.5 to $26.4 billion; EPS guidance revised to $11.01 to $12.15 on a GAAP basis, and reaffirmed at $17.00 to $18.00 on a non-GAAP basis.

Conference Highlights:

Robert A. Bradway, CEO said "We are advancing our pipeline and look forward to important readouts over the next few months." Amgen is disappointed by the proposed drug pricing laws in Washington. It does not make medicines more affordable for patients. Foreign exchange headwinds hurt results.

Amgen will be acquiring Chemocentryx for $4 billion.

The GAAP and non-GAAP y/y increase in net income and EPS was from a decrease in operating expenses due to the write-off of $1.5 billion in Acquired In-Process Research & Development (Acquired IPR&D) associated with our acquisition of Five Prime Therapeutics in Q2 2021 and lower weighted-average shares outstanding in Q2 2022, partially offset by an impairment charge related to the divestiture of Gensenta, a generics subsidiary in Turkey.

In Q2 2022 the Otezla Phase 3 pediatric study for moderate to severe plaque psoriasis met its primary and secondary endpoints.

In May reported postive top-line, Phase 2 data for Olpasiran (AMG 890) for lipoprotein(a), a siRNA molecule licensed from Arrrowhead Pharmaceuticals (ARWR). Full data will be reported later in 2022.

In July 2022 Tezspire received an EU CMP recommendation for severe asthma. A Phase 3 study in adults with oral corticosteroid dependent asthma was initiated. The Phase 3 chronic rhinosinusitis with nasal polyps continues. Data from the Phase 2b chronic spontaneous urticaria data is expected 1H 2023.

In June, 2022 data from the Phase 3 PARADIGM clinical trial of Vectibix in Japanese patients with previously untreated unresectable wild-type RAS metastatic CRC was presented at the ASCO annual meeting. These data demonstrated that the mFOLFOX6 + Vectibix combination provides a statistically significant improvement in overall survival over the mFOLFOX6 + bevacizumab combination in patients with a left-sided primary tumor or regardless of tumor locations.

Rocatinlimab (AMG 451) targetting OX40 Phase 3 initiated June 2022. For atopic dermatitis.

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

Lumakras NSCLC data was presneted at ASCO in June. Several studies are underway in various indications. Top-line results from the event-driven, confirmatory Phase 3 study comparing Lumakras to docetaxel in patients with KRAS G12C-mutated advanced NSCLC are expected in Q3-2022.

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

Non-GAAP numbers: net income was $2.50 billion, up 7% sequentially from $2.34 billion, and up 145% from $1.02 billion year-earlier. EPS was $4.95, up 16% sequentially from $4.25 and up 180% from $1.77 year-earlier.

Product sales were $6.28 billion, up 10% sequentially from $5.73 billion, and up 3% y/y from $6.11 billion. Non-product revenue was $313 million, down from $412 million year-earlier.

Cash and equivalents balance ended at $7.2 billion, up sequentially from $6.54 billion. Operating cash flow $1.9 billion. Free cash flow was $1.7 billion. At the end of quarter long-term debt was $36.5 billion. Capital expenditures $0.2 billion. No shares were repurchased in the quarter. Dividend payments were $1.0 billion.

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. The U.S. label for Amgevita has been modified to include pediatric Crohn's disease (ages 6 and above) and juvenile idiopathic arthritis (ages 2-3). Already on sale in Europe. The final analysis from a Phase 3 study evaluating the efficacy and safety of ABP 654 compared to Stelara (ustekinumab) in adult patients with moderate to severe plaque psoriasis is expected in 2022.

See also the Amgen pipeline.

GAAP cost of sales was $1.51 billion. Research and development expense was $1.04 billion; selling general and administrative expense $1.33 billion; and other income $542 million, for total operating expenses of $4.42 billion. Operating income was $2.18 billion. Interest expense was $328 million, other expense $317 million, income taxes $214 million.

Q&A selective summary:

Synergies for Chemocentryx? It is a good fit, but we are focussed on the opportunity at this point.

Chemocentryx team has been focused on rheumatology, we can expand that and add nephrology. We have other forms of institutional support to help with patients, physicians, and payers that should help Chemocentryx. We can accelerate what has already been a good launch.

Amgevita with payers? We are please to be the first biosimilar launcher. It has done well outside the US, is the market leader. We believe payer coverage will be good.

Amgevita competition, interchangeable designation? Interchangeability has not been a barrier with doctors or payers, but we are pursuing it. We expect a couple of later competitors will have interchangeability, so that could give them an advantage as we wait for ours.

Lumakras is getting a high percentage of second line patients, especially those that have biomarker tests, which should drive revenue growth in the U.S.

Myeloma franchise plans? Multiple Myeloma is a crowded space. We are prioritizing medicines that are first or best in class. We will continue to develop potential MM molecules.

AMG340 targetting PSMA was prioritized over our other potential prostate cancer drugs. AMG509 is also advancing. We are optimistic about what we may be able to do in prostage cancer.

Volume decline in Aimovig? Focus is on prevention treatment population at a reasonable price. We did lose a PDM, which hurt volumes. It is early in the market, we are promoting for the high-frequency, preventive patients.

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