Analyst Conference Summary

biotechnology

conference date: January 31, 2023 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2022 (fourth quarter, Q3)

Forward-looking statements

Overview: Stagnant, with new drug ramps just offsetting old drug off-ramps.

Basic data (GAAP):

Revenue was $6.84 billion, up 3% sequentially from $6.65 billion and flat from $6.85 billion in the year-earlier quarter.

Net income was $1.61 billion, down 25% sequentially from $2.14 billion, and down 15% from $1.90 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.00, down 25% sequentially from $3.98, and down 11% from $3.36 year-earlier.

Guidance:

For the full year 2023 revenue between $26.0 and $27.2 billion. GAAP EPS $13.16 to $14.41. Non-GAAP EPS $17.40 to $18.60. Cap ex $925 million. Share repurchases under $500 million. Guidance does not include any adjustments for the Horizon acquisition. Q1 2023 expected to be the lowest revenue quarter of the year and down y/y due to the end of Covid antibody sales revenue, which was $225 million in Q1 2022.

Conference Highlights:

Robert A. Bradway, CEO said "We executed effectively in 2022, delivering strong volume growth, advancing numerous first-in-class medicines in our pipeline, and staying on track to achieve our long-term growth objectives. The announced acquisition of Horizon Therapeutics, which we expect to complete in the first half of this year, represents a compelling opportunity to serve more patients and strengthen our growth profile." Feeling confident about long-term growth. Has new products that have plenty of room to grow, particularly Repatha, based on new data. Advancing the pipeline. Has 6 new biosimilars to bring to market in the remainder of the decade. But expects the usual Q1 negative sales effects from payers.

Amjevita, biosimilar to Humira, became available in the U.S. on January 31, 2023. It has long been available in Europe.

Y/y product volume growth was 10%, but was offset by 3% lower pricing and 2% negative foreign exchange impact.

In November 2022 new Repatha data from open-label extension studies showed no lower limit in reducing cardiovascular risk. New America College of Cardiology agreed on benefits and reduced target LDL-C levels to 55 mg/dl.

In November 2022 positive Phase 2 Olpasiran (AMG 890) data showing 95% or greater Lp(a) reduction was reported. A Phase 3 trial for cardiovascular outocmes has begun enrollment.

In January 2023 the CHMP issued a positive opinion on Texspire pens for sever asthma. Studies continue in asthma, chronic thinosinusitis with nasal polyps, eosinophilic esophagitis, urticaria and chronic obstructive pulmonary disease.

The final analysis from a Phase 3 study evaluating the efficacy and safety of ABP 938, biosimilar to Eylea (aflibercept), in patients with neovascular age-related macular degeneration, is expected this H1 2023.

In Q1 2023 A Phase 2 trial of AMG 133 for overweight adults was initiated. In Q3 2022 a Phase 1 study of AMG 133, a multispecific that inhibits the gastric inhibitory polypeptide receptor (GIPR) and activates the glucagon-like peptide 1 (GLP-1) receptor, completed enrollment. Data from this Phase 1 study was presented at the 20th World Congress on Insulin Resistance, Diabetes, and Cardiovascular Disease (WCIRDC) Conference in December 2022.

Many other studies are ongoing.

Non-GAAP numbers: net income was $2.20 billion, down 13% sequentially from $2.53 billion, and down 11% from $2.49 billion year-earlier. EPS was $4.09, down 13% sequentially from $4.70 and down 7% from $4.40 year-earlier.

Product sales were $6.55 billion, up 5% sequentially from $6.24 billion, and up 4% y/y from $6.27 billion. Non-product revenue was $287 million, down from $575 million year-earlier.

Cash and equivalents balance ended at $9.3 billion, down sequentially from $11.5 billion. Operating cash flow $2.6 billion. Free cash flow was $2.3 billion. At the end of quarter long-term debt was $38.9 billion. Capital expenditures $0.3 billion. No shares were repurchased in the quarter. Dividend payments were $1.0 billion.

In Q3 2022, Amgen announced positive top-line results from the DAHLIA study, a Phase 3 study evaluating the efficacy and safety of ABP 959, a biosimilar candidate to Soliris (eculizumab), for adult patients with paroxysmal nocturnal hemoglobinuria (PNH).

In September 2022 Tezspire was approved in the EU and Japan for severe asthma. A Phase 3 study in adults with oral corticosteroid dependent asthma and the Phase 3 chronic rhinosinusitis with nasal polyps continues. Data from the Phase 2b chronic spontaneous urticaria data is expected 1H 2023.

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

See also the Amgen pipeline.

GAAP cost of sales was $1.75 billion. Research and development expense was $1.32 billion; selling general and administrative expense $1.57 billion; and other income $34 million, for total operating expenses of $4.61 billion. Operating income was $2.23 billion. Interest expense was $415 million, other expense $67 million, income taxes $132 million.

For the full year 2022, Amgen generated $8.8 billion in free cash flow; $26.3 billion in revenue; $6.55 billion GAAP net income; $12.11 GAAP EPS; $9.57 billion non-GAAP net income; and $17.69 non-GAAP EPS.

Q&A selective summary:

BeiGene accounting? Amgen will record, in GAAP income, the mark-to-market. But that won't be recorded for non-GAAP income. So we will not include any earnings or losses as our share of BeiGene going forward, in our non-GAAP income statement.

Amjevita launch in U.S.? Product is going into the channel, there is interest from payers, prescribers and patients. We are selling the older, original concentration equivalent, but ours is citrate-free, so less painful. We also don't have an auto-injector. But we do not see this is a barrier to the market. We are supporting the launch with nurses, financial assistance and reimbursement support.

Enbrel and Otezla? We made small concessions on net price for 2023, but expect broad insurance coverage to continue through 2023. Otezla is positioned as a first-line therapy, post topical therapy, becasue it is indicated for a broad range of psoriasis patients. We are seeing some effect from competition offering free drugs to enter the market, which we expect to work through in Q1. Remains confident in long-term growth of Otezla, expects gradual price decreases in Enbrel.

Amjevita dual pricing? we have a high list price at 5% below HUMIRA, and then we have a low list price at 55% below Humira. The high price would typically be discounted, the low price not. We are also providing co-pay assistance.

Many more Amjevita questions, usually for details that could not be provided.

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