Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Well, thanks so much, Bob and Peter, for joining us. I'm Terence Flynn, the biopharma analyst here at Goldman Sachs. And this afternoon to close out the CEO conference, we're very pleased to have Amgen joining us via video conference. Thank you to Bob and Peter. Bob Bradway is Chairman and CEO; Peter Griffith is the new CFO of the company, but thank you both for joining us today. First, I'm going to turn it over to Bob to make some opening remarks to kick it off, and then we'll go through a number of questions. But thanks, again, guys.

Well, thanks for having us, Terence. I hope your event has gone well. I'll just point out that Arvind is also here with us in the room. So we're delighted to be here and to be included in your conference. I'll be brief, because I know it's getting late in the day for you on your end. But let me just start by saying that we're feeling confident about the outlook for 2020. And we are ready for the challenges that await us in the year ahead, the challenge to demonstrate that we can continue to grow the company, continue to advance an innovative pipeline and continue to find ways to attractively invest capital for our shareholders. So as you know, Terence, we're entering a period now of revenue growth, which is of course driven by what is really a new product cycle across each of our 6 commercial areas of activity. So in bone health, of course we have both Prolia and EVENITY; in nephrology, Parsabiv continuing to grow; in cardiovascular medicine, obviously, Repatha continuing to grow significantly. In inflammation, we're excited to have Otezla now together with Enbrel, and so we'll see real growth in that franchise. Our oncology portfolio continues to grow. We have about a half dozen innovative assets that, together, generated about $5 billion of revenues. And we're growing at just under double digits. And then of course in neuro, our Aimovig franchise, is also delivering attractive growth. So we're pleased about how we're positioned there with those 6 commercial franchises. In our discovery and development focus, we're using to advance molecules in 3 areas: oncology, cardiovascular and inflammation. And we're happy to talk about the assets in those 3 areas if it would be of interest to you, Terence. Internationally, we continue to expand. We've cited that as an opportunity, an important strategic opportunity for us. And we were able to make progress in that front last year with the transaction we did with BeiGene. But I would also note that the acquisition of Otezla will help us grow internationally as that's a product that's still launching in a couple of dozen countries around the world. And then, finally, I would just say that we continue to have a strong balance sheet. And we maintain our commitment to delivering a return of capital to our shareholders through both our growing dividend and our buyback program. And we're able to do that and still maintain flexibility for business development. Terence, why don't I kick it back to you and let you ask any questions that you think your investors might like to hear us address.

Great. Well, thanks for framing everything up for us, Bob. Maybe to start, I'm just thinking back over the last 8 to 10 years since I've covered the company. We used to get a lot of pushback on R&D in the pipeline at Amgen. But obviously a lot has changed over the last 5 years, I'd say. You have a pretty rich pipeline. Maybe as you think about the next 10 years, what are some of the steps you've taken to stay ahead of the innovation curve here and really improve R&D productivity at the organization?

Well, thanks. We think we have improved significantly R&D productivity. But let me just remind you what we're trying to do, which is we focus on advancing innovative first-in-class molecules directed against significant illnesses. And I think if you look at our pipeline and look at the 9 products that we've launched over the last half dozen or so years, you see each of them fits that description. So innovation, first in class, big diseases are our focus. We have, in addition, emphasized the need to improve our cycle time in that process, and that we've reported that on average we've taken 3 years out of our cycle time for the development of new molecules. But I think 5, 10 really caught people off guard because of how quickly we moved there. And that's an example where we've shown we can take well more than 3 years out of a normal life cycle for the development of an innovative new drug. So we're moving quickly and we're moving quickly against the kinds of targets that we outlined as being of interest to us strategically. There are a couple of things perhaps to touch on, Terence, that we do differently from others in our industry. Nowhere is that more clear than in the field of human genetics, where as you know, we acquired in 2012 deCODE Genetics in Iceland. And we have continued to invest significantly in our understanding of human genetics. We entered into 2 important collaborations last year, which we think will further enhance the value of that insight for us. Of the 2 are first an agreement with Intermountain Healthcare in the U.S., and then second, an agreement with UK Biobank, whereby in both cases, we will sequence -- whole genome sequence, 500,000 patients for whom we have detailed phenotypic records to try to make sense of the genotype and see whether we can learn from that what new targets may make sense in our chosen areas of therapeutic focus. So human genetics is a big emphasis for us. It's one of the things that, again, we think we do better than anybody else in the industry. We see that as being of increasing value through time and feel the 2 pieces we added to the game board last year will be really value added. The more we do in human genetics, the more we want to expand into large-scale proteomics. And so we entered into a very large collaboration last year in this area. And we will continue to explore the intersection of genetics and proteomics to try to identify the course of disease and again, pathways that are of relevance for us in our drug discovery efforts. And then the other thing I just quickly want to flag is that we made a significant investment as well in the small molecule area when we acquired Nuevolution, which -- the motivation for which had a lot to do with our conviction that there is a new opening opportunity in our industry for what we're calling the induced proximity platform. But you may be familiar with it as targeted protein degradation, an area that is beginning to get more attention in the industry. But we think the acquisition of Nuevolution will give us a head start over where we otherwise would have been in trying to develop molecules that have the potential to be targeted protein degradation in nature. So we're excited about the pure discovery capabilities at the company and speed at which we're moving and the quality of the innovation that we see arising.

Great. Maybe just one follow-up on the deCODE acquisition. You mentioned the strength of the genetic data that you're building out. You guys are very uniquely positioned there. As you think again forward over the next 5 to 10 years, do you guys have an internal set of targets, numbers that you're looking for to kind of generate? Or is it more following the science? How do you think about setting goals for that part of the organization and the genetics effort?

Well, I would say one of the things that gives us increasing confidence, Terence, is the extent to which we're able to find genetic validation for molecules in our pipeline. So on the order of 3/4 of the medicines that are in our pipeline, medicines for which we think we have genetic validation now based on the work that we're doing in human genetics. And the idea here is to try to start with an advantage over animal models. That is to say to try to find, through human genetics, reasons to believe that pathways are either relevant or irrelevant from a drug therapeutic standpoint. And we think we find it in both directions. So we think we have avoided investing in programs that would have turned out to be therapeutically irrelevant. And time will tell whether the things that we think are informed by human genetics and relevant, based on our understanding of human genetics, turn into important drugs or not. But this is discovery, so these are things that are a decade or more away, but 3/4 [ in ] of our portfolio find validation in the work that we're doing there.

Okay. Great. Maybe in your opening remarks, you also mentioned you're ready to face some of the challenges this year. I'd imagine one of those is just on the pricing and policy front. That's been an overhang across the whole sector. But obviously you're pretty plugged in, in D.C. So I would just be curious to get your latest view. From my perspective, it seems like things have bogged down, given a number of other maybe focal points. But would just be curious from where you sit how to think about the forward on the drug pricing and policy front for 2020.

Yes, I think it's clearly still a question mark. There's clearly a gray cloud out there, which is what's going to happen in Washington. I'd go up in altitude though for a second and say I think what you can see here, this politics of pricing in our industry is global. It's not just a U.S. phenomenon. Obviously, the U.S. is the largest profit pool, and so the risk there is greater than elsewhere. But I think it's just worth observing that this is a pressure that exists around the world. And it reflects 2 things: one, the aging demographics in the world that we live in, but also the quality of the innovation that's arising from the industry. The more innovation we have, the more pressure there's going to be on embracing that innovation. And every country of any significance in the world, including the U.S., picks up the tab for the medicines of the seniors. And it's the seniors that are growing in number more quickly than other segments of the population. And it's also the seniors who consume more drugs than other cohorts of the population. So this isn't a pressure that's going to go away overnight. It's not a pressure that's unique to the U.S. But there are clearly 3 big things for us to continue to have an eye on in the U.S. The first is the executive branch and the policy changes that the executive branch could bring forward. You're well familiar with it as are your investors, parallel importation, the so-called IPI, et cetera. That's still a risk that's out there. There are the proposals in the Senate, in particular, the Senate Finance Committee that got a lot of attention during the course of last year and could be resurrected in 2020. And then of course, the House and Speaker Pelosi's favorite bill, H.R. 3, which includes a variety of things that I think the innovative drug industry would find very difficult to -- not to accept, and I think would be very damaging to the long-term outlook for innovation in the country. But those are the 3 big buckets that I think we all need to keep our eyes on. As you're aware, we think there needs to be change in the way that drugs are paid for and consumed in our industry. But we would favor those things that improve access, in particular, those things that make medicines more affordable for the seniors. There's nothing worse than having an innovative medicine sitting on a shelf because somebody can't afford to use it. So the good news is as an industry and as a company, we have innovative medicines that can bend the curve on some tough diseases. The bad news is that too many people are struggling to be able to take those medicines home from the pharmacy counter, use them the way they're intended. So we'd like to see some progress, but there's a stalemate now. And the situation in Iran and the situation around the impeachment probably don't help resolve that stalemate anytime soon.

You mentioned the 3 things you're focused on, Bob. I think most investors would probably put the Senate bipartisan bill at kind of the top of the list if you had to put a probability on likelihood of something advancing. Would you generally agree with that? Again, given -- recognizing there are some other more topical things in D.C. right now?

Yes, I'd emphasize the latter piece, that there are more topical things going on right now. But I think there was -- the encouraging thing about the Senate process was that there was bipartisan support for some change that, again, would have made medicines more affordable for seniors. So -- and I think there's a chance that could get picked up at some point during the course of the year, Terence. And the question is should we expect to see some focus on this before the election or not? I'll let you guys handicap whether you think there's anything before November or not on this front.

Okay. Great. One of the other things that you touched on briefly in your remarks was just your move to these -- some of these larger markets. So in particular, you made a concerted effort in cardiovascular presence, which Amgen didn't historically have, [ sTMS ] with the Aimovig launch in migraine. And so as you think about the decision to move into those markets, I think, obviously, large patient numbers, but there have been some headwinds on the pricing front and competition. So as you think about that decision, maybe just help frame for us how you think about the forward outlook in those markets, particularly for Repatha and Aimovig? And does that embolden you further to continue down that path at looking at these larger markets?

Well, again, let me remind you that what we were attracted to in cardio and in neuro was the prospect of a first-in-class innovative medicine that made a big difference against what is still a huge disease, an unmet medical need. So in cardio, heart disease is the leading killer of people on the planet, not just in the U.S., but everywhere in the world. And the reason for that is that LDL levels are too high in too many people. So we have an abundance of therapies available to lower LDL. But even after taking account of all those therapies, there are still too many people having heart attacks and strokes because their LDL levels are too high. And of course Repatha lowers by 2/3 the LDL levels in patients in all comers. And along with that, we're able to reduce the number of heart attacks and strokes. So our attraction there was novel biology, major effect size, huge societal need. Now the attraction to the large volume of patients reflects in part our conviction that to grow a pharmaceutical business, our biotech business over the next decade or 2 in our industry, will require something other than just year-over-year price increases. And what we've seen for example in bone health where we have also a very large global epidemic and a very large, therefore, patient population, is the opportunity to continue to serve more and more patients and grow by double digits, independent of year-over-year price increases. And we expect that we'll be able to achieve something like that in cardiovascular disease. So we have said for some time to our shareholders and to our staff that we think, to be successful, the company is going to need a mix of products, but that mix is going to have to include therapies that address large patient populations. And we'll facilitate growth driven by increased volume, not just as I said now a few times, not just by price. And in neuro, a similar thing, migraine is a huge unmet medical need. So we launched Aimovig. No therapy had actually been developed just for [ migraine ] nerves. And we developed Aimovig, which is an antibody to the CGRP receptor, specifically to address migraine. And the data that we have now, 4 years of safety and efficacy data, demonstrate a very meaningful benefit for people who are suffering from that debilitating disease. So the good news for us is that there are millions and millions of patients who can benefit from this. And access has not been a significant issue there, and we expect to continue to deliver benefit to those millions and millions of patients. I would point out that migraine of course is an acute disease. And so patients are a little less tolerant of not having access to a medicine that they hear and understand can make a big difference for them. So the uptake there has been a little different than for example in a silent disease like osteoporosis or in cardiovascular disease. So the challenges are a little bit different in a Repatha or in an Aimovig, but I think some of the attractions of our particular investments and of those markets are similar.

Great. And do you think all the pieces are in place now, maybe focusing first on Repatha, to grow on the forward? I know there's been some fits and starts here. But access, as you mentioned, has improved significantly. You guys have taken a lot of steps there. Do you think all the pieces are in place now on the Repatha front?

I think we have to keep chipping away at it, Terence. And clearly, the situation is much better heading into 2020 than it was heading into 2019. We made some important decisions, which you're well aware of, on pricing. And access is going to continue to be the challenge for us. But we think in the long run, the data of this model -- the data for this molecule are too strong to resist. But every passing day, it becomes more clear that the lower your LDL levels, the lower the risk you have of suffering from heart attack or stroke. And if you look at the data, for example, from the European Society of Cardiology, which is an influential group around the world, if you look at the data and their new guidelines, their new guidelines point at levels that are nearly impossible to achieve without the addition of a therapy like Repatha. So if we look at our clinical trial, say how many people in our clinical trial on the statin and ezetimibe and non-Repatha arm of the trial, were able to achieve the targets embedded in the guidelines from Europe, the answer is less than 5% for the first category risk and less than 1% for the second category of risk. So the European Society of Cardiology is effectively saying, everybody that's at very high-risk of cardiovascular disease ought to be on a product like Repatha. And so we just need to keep chipping away at this, Terence. And again, there are millions and millions of patients at risk. And I don't think we can give up our efforts on this product until we've reached those millions and millions of patients.

Okay. Great. Maybe moving on to cancer. You mentioned that you think folks were surprised by the speed at which you've moved on AMG 510. And again, it seems from my perspective, we see new breakthroughs every year in the treatment of cancer. There was an article recently talking about the reduction in mortality we've seen in the U.S. over the last several years on that front as well. So maybe just remind us where you sit with respect to your strategy in oncology. Again, should we expect more of the AMG 510s of the world? Is it a multifaceted approach? Just help us think through how you're staying competitive here?

Boy, we'd sure love more AMG 510s, absolutely. That's a target that we and others have been going at for years. For 30, 40 years, people have been trying to find a way to interact with the mutation that's relevant in these KRAS G12C patients. And we're 2 years or I guess away now from the moment where we figured out how to do it. And we're now racing along in a monotherapy trial for non-small cell lung cancer patients who have that mutation. And there's huge interest, as you know, in the clinical community in that idea. What it reflects is one of the 2 arms of our oncology strategy, Terence. The first is targeted therapies. So where we know the genetic lesion that is relevant for a tumor, we would love to be able to have a therapy that specifically addresses the mutation. And in the case of AMG 510, that's what we were able to achieve. So we have other targeted therapies that are first-in-class like AMG 510 is a first-in-class MCL-1 for example. And you will see, I think we have some other molecules that we've introduced to the clinic that are targeted therapies that will meet the test of being first-in-class. And we'll just need to generate the data to see whether they have the kind of effect size that we hope they might have. So that's the first arm. The second arm of what we're trying to do is, obviously, capitalize on the immunotherapy opportunity in oncology. And we're doing it in particular by trying to leverage our experience and success with bi-specific T-cell engaging antibodies. And this will be a really exciting year. We're going to learn a lot about our platform of bi-specific T-cell engaging antibodies, both in liquid tumors, so in blood tumors as well as in solid tumors. And we will learn whether we've been able to recapitulate in a long-acting product, the success that we engineered into a short-acting product. So right now, we have on the market a product called BLINCYTO, which is a continuous IV infusion product that's demonstrated an overall survival advantage versus other therapies in a particular form of leukemia. And the question that we're trying to answer this year is can we move from that continuous infusion to a longer-acting molecule and still have the same kind of safety and efficacy profile that we think we need in order to be successful. So 2020 will be a year where we get data on a lot of those programs. That, I think, will be the highlight of our immuno-oncology focus this year. But I would remind you, we have also the only approved oncolytic virus therapy in the form of IMLYGIC, and we have some important studies underway with that molecule. So we look forward to generating more data there as well. So all in all, this will be a year full of data for us on the cancer side, and we look forward to reporting that as it becomes available.

Great. And I think we'll come back to 510 a little later, but maybe just 2 separate follow-ups, on the bi-specific front. I know you guys have been focused here for a while. It sounds like we're going to see some data for the long-acting versions. The other areas, solid tumors, I know you guys had some data in prostate cancer. You're focused on some other solid tumor targets. Is that something else we can expect this year?

Yes. You're right. We're running experiments in a number of different solid tumors. So the prostate cancer has attracted some attention because one of our investigators showed data that showed a very startling response to therapy in the setting of bone metastasis for that particular patient. And we're also looking at the question for small cell lung cancer with an agent targeted at an antigen known as DLL3, which is prevalent in the small cell lung cancer tumors. We're looking at the question in the setting of glioblastoma, which is a devastating neuro -- neurology tumor. And there we're targeting a specific mutation, which is the EGFRvIII. And again, there's been some data reported on our progress there. So we want to get more data and see whether we can have a level of effect that would warrant moving that into advanced study. So those are 3 examples in solid tumors of the things that we're looking at. And then we're also looking at a number of different myeloid tumors. Obviously, the one that attracted most excitement was the work that we did in multiple myeloma with BCMA. We demonstrated a substantial effect size using our continuous infusion product, the AMG 420, in relapsed multiple myeloma patients by targeting their BCMA antigen. Now we're seeking to recapitulate that with a longer half-life molecule known as AMG 701, and we should have some data on that this year. And then we have a couple of different approaches to AML, which is an aggressive and larger form of leukemia than the form that we already have on the market with BLINCYTO. And we'll expect some data there during the course of the year also. So a lot going on there. We're moving quickly across those platforms. As you pointed out in your original question, AMG 510, I think, demonstrates how fast we're capable of moving as an organization. But I'd remind you, we were the first to market with Aimovig. Again, some of the lessons that we learned advancing through the clinic that you see in 510 helped us achieve that with Aimovig and before that, Repatha. So this idea being first to market with first-in-class therapies is something that we take seriously.

Great. And maybe the second follow-up was just, do you think you've got all the assets and tools you need in oncology right now? I mean you have a pretty robust portfolio. It sounds like you've got some earlier stage stuff too. But how do you think about the business development opportunity in oncology?

Oh, I think you never feel you have enough or that what you have is never good enough. So I'd say that we are not complacent in any part of our business, Terence. And that's not meant to sound glib. I mean that's genuinely how we feel. And I think there's a deep sense of competition across the molecules in the portfolio and across what we're doing organically versus what's happening externally. So we try to be very vigilant about watching what's happening outside our 4 walls. And to the extent that we can find better innovation that might have a bigger effect externally than what we're doing internally, we want to be open to look into that. We have the cell-based therapy programs. I think your investors are well familiar with that. We have our, again, our own small molecule efforts like 510. And then we have our biologic efforts like the BiTE program as well.

Great. I was just going to say that's a good segue to Peter. First, congrats on being named Amgen's new CFO. Best of luck in the new role, and welcome the opportunity to speak with you here in front of investors for the first time. Would just be great to hear from you on any potential changes to how you think about capital allocation and some of the priorities as we enter a new year here?

Well, Terence, thank you very much. I always appreciate the well wishes. And a happy new year to you and certainly nice to be with you and the investors there. So what I would say around capital allocation is that I just am really impressed and have -- always have been impressed with the company and how it's moved through that over the past few years. So our capital allocation priorities are unchanged. We're going to continue to grow the business through internal investments and business development, number one. Number two, we're going to continue to maintain an optimal capital structure to minimize our weighted average cost of capital, be thoughtful and mindful of that at all times. And we're going to continue to provide capital returns to shareholders through a growing dividend as we've announced and continued share repurchases. And as we've talked about before and as David has talked about in the past, based on the strength of our balance sheet and our continuing strong cash flow generation, our substantial financial capacity and flexibility, we're going to continue to pursue these priorities without interruption. And as you can imagine, we continue to look for opportunities across our therapeutic areas of focus to drive long-term growth. And maybe just to take a moment and kind of think about capital allocation in light of business development, I think Otezla and certainly BeiGene were examples of where the company's strengths are highlighted, which I continue -- which I intend on continuing to push forward, which is patience, making sure that we're the right and one of the very best buyers when we see an opportunity, that we're prudent that when we see an opportunity that it provides returns for our shareholders and it meets our minimum hurdle, our weighted average cost of capital, and that it's precise. As Bob said, that it's going to be in one of our therapeutic areas. So I just think Otezla is a wonderful example of that. It falls right in that inflammation franchise and fits in wonderfully there. I actually add too at the end of that. We're going to be prompt in this. We're going to promptly integrate these and work hard on that. I think the Otezla integration is going to go well. And so I really look forward to that. And it's been great being here, and I'm looking forward to working with an exciting company here at Amgen.

Great. Maybe just with respect to business development, I think Bob and again David had been pretty forward about being open to deals of any sizes. Just curious as we think through, obviously, Otezla, BeiGene were different sized deals, different priorities. But how do you think about size of deal now with the current balance sheet? And as we enter the next year, any changes on that front?

No. I would want to be really clear. I think the company has been very thoughtful and certainly has considered all ranges of transactions. But there aren't going to be any changes in how we look at things. We're going to do it in a very careful and thoughtful way. And as I said, we'll be patient. I think when I think about patience, just to speak to that for a moment, Terence, regardless of the size of the deal, we look at what happened with how we ended up with Otezla. Basically, it bounced out of the Bristol-Celgene deal. And so patience was rewarded. So I think this industry, there'll be opportunities for us if we are patient, more thoughtful and evaluate everything very carefully and thoughtfully. With our therapeutic areas in mind and with our shareholders in mind, and I think it's going to work out quite well.

There's a lot of -- there's capital everywhere in this industry, Terence. And there's great innovation arising around the industry, it's not just in the large players. It's not just in the U.S. So we think this point about being patient and finding opportunities when we can create value for our shareholders and not just to target shareholders is really important.

Terence, maybe just to cap off, one thing I really think is important, and I think Bob says it and I'd just like to reiterate it is, capital allocation at Amgen is a forethought. It's not an afterthought. And I can assure you, I intend on continuing to support that policy.

Okay. Great. Maybe just one follow-up for Bob is, you have had this focus on 6 therapeutic areas for some time. Would you be open down the road to looking at a new therapeutic area? Or do you think you're kind of set on where you are right now in terms of those therapeutic areas?

Oh, no. I mean we're active and strong commercially in 6 therapeutic areas, Terence. But if you take a couple of those, for example, bone, we don't see the scale of unmet need today in bone that we did when we got into it. So we've pioneered a completely new understanding of the biology of bone with denosumab, which is of course Prolia and XGEVA and now EVENITY romosozumab. And we don't see as much unmet need today in bone as we did when we committed to those -- to that area more than a decade ago. Same thing in neph, we'd love to find some incremental new opportunities in nephrology, but we just don't see it right now. And we made the tough decision to pull back our neuroscience discovery efforts. We're still very committed, obviously, to migraine and very committed to building out our migraine presence. But we didn't see an opportunity to advance novel, big-effect size medicines in neuroscience in the same way that we see it in cardiovascular, inflam and oncology. So those are the 3 areas that we're going to be most focused on from the standpoint of our own innovation. In terms of business development, it would have to be something very unusual or very attractive for us to bring in another therapeutic category or a different therapeutic category. So I think you should expect that we're going to be concentrating in our early and late-stage business development in those areas where we feel we have a demonstrated expertise. And Peter used the phrase best buyer. One of the things we try to understand is what makes us the best buyer? Why can we create more value from a target than they can do on their own or from what some others in our industry can do?

Okay. You mentioned the BeiGene deal. And we talked about it this afternoon at our lunch panel a little bit with our bankers. But China has obviously been an increasingly important player here in the global biopharma landscape. And this was, again, I think an interesting way for you to accelerate your presence in that geography. So maybe you could just give us a little bit more of the background on the rationale here and then why you chose BeiGene? And then how you're thinking about the longer-term commercial opportunity in this market?

Yes. So the rationale is very consistent with what we've been saying now for several years, Terence, which is that we believe the Asia Pacific region is a growth opportunity for Amgen. We have or had a limited presence in Asia Pacific, but we've built a more significant presence over the last half dozen or so years. We're beginning to reap already the benefits of that, for example, in Japan, whereas you see Japan was the first market where we launched EVENITY and it's off to a great start. We entered into a partnership about a half dozen years ago with Astellas, which reverts to us in 2020. So we're going to have control of our independent entity in Japan in 2020. And we feel that we have a portfolio of drugs that's really well suited to that population, and that, that would be a growth area for us. Similarly, we have felt that China as a market will be an important market for medicines like those that we're advancing, but we also see China as an important source of innovation. And I think that's where the question of BeiGene really comes into focus. Many people, I think, started paying attention to China in a different way when BeiGene first out-licensed its PD-1 molecule now a couple of years ago to one of our major competitors. And that for some was a watershed moment signaling that the biotech innovation in China had arrived and that we need to think about China not just as a place for the marketing and sale of our medicines, but also as a place where there's important innovation taking place. And with respect to BeiGene in particular, we know one of its founders very well. It's somebody who my Amgen colleagues have had collaborations with going back many, many years. That's Xiaodong Wang, who's one of the leading scientists of his generation, was a principal investigator at UT Southwestern. And we had a good dialogue with him when he was there, and we retained that dialogue when he moved back to China and set up a lab there. And so we saw them as a leading company in China biotechnology. And when the Bristol-Celgene deal created a need for them to find a new partner, we were really excited to be able to have that discussion because we have high regard for that company, for their science, for their leadership, for the entrepreneurial understanding of the market that they've shown. And as I said, we think the market itself is very attractive. So we like the deal. We like the fact that we own 20% of that company. We like the fact that we'll work together with them in cancer. And we think it'll give us a chance to have a head start over where we would have been able to go on our own with molecules like BLINCYTO, KYPROLIS, XGEVA. So I think that will give us a head start. And as with Astellas, we'll have the opportunity down the road to get the rights back to our products. And in the meantime, we can see whether there are other products to collaborate on or other things that we can do together with our partner to try to create value for them and for us. Yes. We're -- again, Terence, I mean you know it's a relatively small deal and after all, still a loss-making company. But we're very excited about what that represents. We think that was really, again, a unique opportunity. And I'm sure it's not lost on you or others that this and Otezla both arose from our patience and capitalizing on transactions that were helping -- happening elsewhere in the industry.

Okay. Great. Well, maybe just in the interest of time, I'll move on to the next topic, which a big year for you on the pipeline side with 2 pivotal readouts for AMG 510. We talked about this a little bit for lung cancer and then tezepelumab for asthma partnered with AstraZeneca. But maybe just remind us why you're confident for success here, first for 510, and then how you think about the commercial opportunity for that asset, before we move on to tezepelumab.

Well, I think with 510, all the data we've seen so far, preclinical and clinical data, suggest that we've threaded the needle, which is to say we have a molecule that binds very well the particular pocket that's available for us to bind in the G12C mutant tumors. And so we think that by achieving this covalent attraction between our molecule and the mutant proteins in those tumors, we can shut down the signaling that has otherwise been such a difficult thing to achieve for patients that have this particular mutation. This is, quickly, moves to your question about the commercial opportunity, but this is a mutation which is prevalent in some 13% of small cell lung cancer patients. And it's prevalent in some amount less than that, but about 4% or 5% in colorectal. And then it appears in a variety of other tumors as well. So again, our preclinical data very attractive to us. Our clinical data in non small cell in particular demonstrates that this molecule is active, and it looks to be safe. And then we've had responses in several other tumors as well, Terence, which encourages us to explore question in more and more settings. So we're moving forward with our monotherapy study, and we're beginning -- have begun combination therapies. And we're continuing, again, to look at other tumors with that particular mutation to see whether we can help make a difference for those patients. But this has been a long time coming. And the clinical community of physicians who treat patients and look at these mutations, very excited to work with us and see whether we can make the difference that we hope we can. Ultimately, we need the data. But if the data are what we hope, this is going to be an important addition to cancer therapy.

And I think you guys have previously said that enrollment is going really well in that monotherapy lung study. So it's reasonable to expect that we might see some data from that program sometime later this year. Is that on track?

I -- what is certainly on track, Terence, is that the interest in that clinical trial is very high.

Okay. And I think the other thing you guys said is we would see some combination data. I know that's the other part of the approach. You have the monotherapy study in lung, but you're also exploring a number of different combinations with different targets. So again...

Yes. That's right. We have a MET combination. We have a SHIP2. We have PD-1s. So those trials and those combinations are moving forward as well. I don't know what we said publicly about when to expect data on those, but we will report as soon as we have data that is relevant to report. We look forward to sharing it.

Okay. And then maybe on tezepelumab, kind of a similar question, we'll see pivotal data for the asthma indication, but this does seem to be, maybe it's going to be a pipeline and a product. So maybe just remind us why you're excited here. And then, again, as you think about the longer-term opportunity commercially, what could differentiate this drug versus maybe some of the other options out there for patients?

Yes. Well, to start, it's a first-in-class, right? So this is an antibody to TSLP, and we're first-in-class and well ahead of any potential followers in this access. The Phase I data, which were reported in the New England Journal of Medicine, attracted a lot of attention and excitement. The Phase II data did as well. And the reason is that asthma is such a global burden. Respiratory disease, believe it or not, is the sixth leading killer of people on the planet. It's a problem that's growing in significance with increased urbanization, particularly in Asia and other rapidly urbanizing markets. And so there is a need for a therapy like this, which treats patients whose asthmatic exacerbations are otherwise uncontrolled. But I think the thing that really caught the attention of the field, Terence, is that unlike other therapies or other biologics, this is one which seems to work equally well in allergic asthmatics as well as nonallergic asthmatics. And so you see that described in some places as eosinophilic high, eosinophilic low patient settings. But the point is, this is an inflammatory molecule that occurs high on the inflammatory cascade. And we think that by blocking it, we can help treat patients independent of whether they're suffering from an allergic form of the disease or a nonallergic form of the disease. And so the Phase III trial is underway. As you pointed out, we should have the answer to the question by the end of the year. And if it is successful, this will represent a very major step forward in the use of biologics for patients that are at risk of asthmatic disease or suffering from asthmatic disease. And then you mentioned pipeline in a product. There are obviously a couple of other inflammatory-related diseases that we're going to look at this end. And we have some mid-stage clinical work underway, exploring those as well. But the exciting thing for us in inflammation right now is we have renewed momentum with Enbrel. We have the exciting addition of Otezla. And then we have tezepelumab and we have our IL-2 mutein, and we have a bi-specific that looks intriguing against lupus as well. So Phase III, Phase II, Phase I, in each of those stages of development in inflammation, we have a cascade of products that we think look pretty attractive. Our IL-2 mutein also looks like it could be a portfolio and a product. If we're able to restore immune tolerance for a balance between the effector T-cells and the regulatory T-cell populations, that, again, has a potential to be a very attractive and important opportunity.

Okay. And could we see some data for the mutein program this year?

Yes. We may have some proof-of-concept data during the course of 2020. Again, I don't know what was said publicly about timing and what to expect there, but we have clinical studies underway for that program.

Okay. Also in immunology, you have some biosimilars. That's the other part of your footprint. And you guys are in a unique position here, being able to provide perspective on kind of both sides of the market. Obviously, the European market is much more robust than the U.S. market thus far. But I would just be curious how you see this evolving, both from an opportunity set and also from a risk perspective.

Well, it's clearly emerging as an attractive growth opportunity for us. You mentioned inflammation in Europe. We are the leading AMGEVITA -- or AMGEVITA is the leading biosimilar for Humira now in Europe. So we're excited about the progress we're making there, but the same is true around the world. And I think we've talked about it annualizing, this business annualizing at $750 million at the third quarter. So that's the whole of our biosimilars franchise. We think we're off to a strong start, and I think people will begin to recognize this as an important potential growth stream for us. And it's -- again, it's another example, Terence, where we haven't -- we haven't done a lot of beating of the drums. We just -- we told our shareholders in 2012 and '13 what we were going to do. I mean we said we were going to advance a portfolio of molecules, and we laid out the reason why we thought we could earn a return from them. And right now, I think the prospect looks like pretty healthy returns there. And we want to continue to stick to our execution when it comes to biosimilars, getting molecules approved, getting them launched and earning a return from them.

And do you think in terms of the opportunity for -- in the immunology side that we've seen in Europe, do you think we'd see something similar evolve here in the U.S., particularly on the Humira front, once the -- once you guys are able to launch in 2023?

I think that we will be very pleased that we have a portfolio of products to offer customers in inflammation. One of the things that we're doing, Terence, is we're integrating these molecules alongside our innovative products in their respective therapeutic areas. That's serving us well in oncology. I think it will serve us well in inflammation as well.

Great. And maybe just as the last question that we've asked everyone today, is just would love your thoughts on one potential change that could happen in the biopharma industry, specifically, in the new decade that maybe is underappreciated by investors.

Well, clearly, I think we have to have U.S. pricing on the table for that discussion. But maybe that's a topic that's been so well discussed that I should move beyond it to something a little bit more aligned with our discovery interest. I think the intersection of genetics and proteomics is going to give us an opportunity as a -- certainly as a company, and I think, increasingly as an industry, to predict which patients are most likely to benefit from which therapies. And to really begin to talk about predict and prevent, as opposed to waiting to break and waiting to fix that which is broken. So we don't need to live in a country where there's a heart attack every 40 seconds and a stroke every 38 seconds. We can predict which patients are at risk of heart attack and stroke. We have therapies that can prevent those from happening. But I think that the data that we have in human genetics and proteomics is going to make us better able to do that in more narrow time windows. And I think it's going to be harder and harder to deny access to those patients who you know are going to break a bone, or who you know are going to have a cardiovascular event, when there's an alternative. And the alternative is to prevent these things from happening in the first place. So I think that's, probably on a 10-year horizon, is something that we'll see more of.

Great. Well, thank you so much, Bob and Peter. I really appreciate the time, and best of luck for 2020.

Okay. Thanks, Terence. Thanks for having us.

Thank you very much, Terence. Thank you.