Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Hey, everybody. Welcome to a great afternoon session, continuing on the theme here at the 2020 Jefferies Global Healthcare Conference. I'm Michael Yee, Managing Director, as you know. Really excited to have 2 great representatives of Amgen with us here in our virtual fireside. You know them as familiar faces: Arvind Sood, who heads up all of Investor Relations at Amgen; and fresh out of the virtual ASCO, Executive Vice President of R&D, David Reese there. Before I get into too much specifics, which I'm sure you're all chomping at the bit to have me ask, I wanted to turn it over briefly to Arvind and David. Maybe make some opening comments about Amgen in the state of 2020, given the COVID situation, coming out of the COVID situation. What does it mean for your guidance? And talk about the state of affairs just operationally for Amgen this year.

Excellent. Thank you, Mike. And thanks for inviting us to your conference. So I'll just tee up some high-level topics, and then I'm going to turn it over to Dave. So our execution in Q1, Mike, was solid with revenue growth of 11% and EPS growth of 17%. And our portfolio of products continues to transition with strong volume-driven growth from our newer products in particular, which includes Otezla, Repatha and EVENITY. And of course, we are also getting incremental contributions now from our biosimilars business. So growth from our newer products combined with that from biosimilars is outpacing declines in our more mature products. Now as for the impact of COVID-19 on our business, we expect to see the greatest impact here in Q2, with stabilization and then partial recovery in the second half of the year. So based on this, we have reaffirmed our revenue and non-GAAP EPS guidance for the year. I would just add that we have a strong liquidity position, with $8 billion in cash on our balance sheet at the end of Q1, with very good access to capital markets. We continue to generate strong cash flows with $2 billion in the most recent quarter. And with several pipeline readouts expected by the end of the year, I'm particularly excited to have our Head of R&D, Dave Reese, at your conference, who's going to make some comments. And following that, we can take your questions. Dave?

Well, thanks, Arvind. And good afternoon, everyone. Mike, as you mentioned, we just came out of ASCO, where we presented a fair amount of data, including updates on sotorasib or AMG 510 in tumors other than non-small cell lung cancer. I'll be happy to talk about that as we move along. We remain, obviously, in a fluid situation because of the COVID-19 epidemic, but we are, I think, starting to see signs of thaw and movement in the clinical trials portfolio. Critically, our key later-stage programs remain on track, so sotorasib, AMG 510, the potentially pivotal Phase II trial in non-small cell lung cancer, we'll read out in the second half of the year. We don't see any issues with trial integrity and/or data availability on time from that study. Likewise, the tezepelumab program in severe asthma as well as the omecamtiv mecarbil program in advanced heart failure remain on track for readouts in the second half of the year. Of course, we've already presented the Otezla Phase III study in mild to moderate psoriasis, at least top line results, and we're very pleased with those data. In terms of the earlier-stage pipeline, again, we are starting to see a thaw, as patient, investigator and staff safety remain our guiding principle here. But we are reinitiating a large number of studies now across the portfolio, including combination studies, for example, with sotorasib, and I'll be happy to address questions there. And then finally, I would mention that our own activities against COVID-19 continue. These include our collaboration with Adaptive Biotechnology to develop -- identify and develop on potentially therapeutic antibody as well as the investigation of Otezla as an immunomodulatory agent for patients with COVID-19. So with that, why don't we open it up for questions and further discussions, Mike?

Yes, a lot to go over there. Kind of a reflection of a lot of catalysts this year. But maybe I'll just start sort of fresh off of ASCO. Maybe two questions on 510. With the colorectal data that you presented there, you got a lot of questions on the Q&A about what the next steps are and all that. I mean, do you come away saying AMG 510 is a drug in colorectal cancer that should be better than other existing therapies, even though these are not huge step-ups, but that is better than some of the existing therapies like Stivarga? And let's confirm that in this 50-, 60-patient, whatever, study and maybe we do a pivotal. Or what is the takeaway from the profile in colorectal, I guess? What do you -- how do you come away from that?

Yes. No. It's a great question, Mike. And we are seeing clear monotherapy activity in colorectal cancer. I think that's indisputable. The response rate, of course, is not as high as we've observed in non-small cell lung cancer, although a fair number of patients are actually having some degree of tumor shrinkage and prolongation of stable disease. This is in a patient population where median progression survival often is on the order of a few months, 4 months, at most, 6 months. And in fact, overall survival is often 6 months only in this population. So to me, the jury's still out on monotherapy utility of sotorasib in colorectal cancer. We've fully enrolled a Phase II trial, and that will be reading out later this year, early next year. And I think that will guide our thinking about potentially pursuing a monotherapy indication or pursuing combination therapy in colorectal cancer. Big picture, we're certainly interested in development of the drug in colorectal cancer, and we've got combination therapy trials moving along as we speak.

Because as soon as you get the monotherapy data from 40, 50, 60, I want to just take a guess because I know you didn't state the numbers, you're going to have combo data. Shortly thereafter, you'll put that together and say what is the best next step from there.

Yes, I think that's exactly right. We'll look at all of those data sets. And that's really what will guide our decision-making about where we think the utility of the drug will lie and what's going to provide the best patient benefit in colorectal cancer.

Before I ask a question about -- shift gears quickly to lung cancer. In colorectal, just from an expectation standpoint -- and it is fair to have investors appreciate, it is a smaller part of colorectal cancer. So obviously, it's very important to get treatments for colorectal. This is for about 2% to 3% of colorectal patients who have...

Yes. It's -- depending on the study that you look at, it's anywhere from 2% to 4% of colorectal cancers will carry the G12C mutation specifically.

Right. So it is a smaller subsegment for those models.

Yes, absolutely.

Okay. And then in lung cancer, we'll get this data potentially pivotal Phase IIb. I think you said you'll miss ESMO for that, but you'll have an announcement whether that's a top line press release because of the importance or at a medical meeting to whatever degree. What should investors expect there? Typically, the more n you treat, the bigger the study, the more sites. Data usually typically declines a little bit from Phase II, but you certainly expect very robust response rates in. And how important is durability as well there in terms of clinical?

Yes. I want to draw a line in the sand around response rate alone because I think that's only part of the answer and part of the package, of course, that we would discuss with regulatory authorities. As you're pointing out, duration of response, but I think critically, progression-free survival in this patient population will be very important. Again, these are patients all of whom have had prior combination chemotherapy. And the vast majority, typically, meaning over 90%, will have had a checkpoint inhibitor. And one of the things that I think is important for everyone to keep in mind to contextualize those data is compared to what and what are the alternative therapies. And in fact, single-agent Taxotere, for example, is often used in that setting. Your response rates are on the order of 10%, at best, 20%, that's depending on the study that you look at, and durability not particularly long. And based on what we've seen so far, we need to confirm this in the larger study, but we believe that the tolerability profile of AMG 510 or sotorasib should compare favorably to cytotoxics.

Right. And when you look at the Phase IIa, I guess, or that the prior data, what -- a PFS is going to be lower than duration of response, right? Because PFS is everybody, duration response is just responders. What is meaningful versus chemo? Is it -- what do people -- what do you think doctors want to see? I mean, you've asked about that actually. But 4 months PFS -- what was the PFS in the prior study you think is good, should be good, sort of?

Again, I don't want to draw lines in the sand here. It's also possible, particularly in this setting, that PFS and duration of response could be much closer than they typically will be because one thing that we're seeing, and this you can kind of glean from the swim lane plots or the waterfall plots that we've published, that there are a fair number of patients who aren't meeting the formal criteria for response but clearly have some degree of tumor shrinking that's lasting for a while. And that's why I think progression-free survival is going to be so informative here.

That's kind of going back to the whole idea in colorectal, where it's just a tougher tumor type. But the whole host of idea of stable disease and the biology of what's going to -- may or may not be a direct tumor shrinkage or by RECIST criteria, but you're having a biological effect to delay the progression of the cancer.

Yes, in a patient with 25% tumor shrinkage, he doesn't meet the criteria for a response but has durability. How is that patient different from someone with 35% shrinkage? Obviously, these are arbitrary. They're important boundaries, but that's -- again, that just underscores the importance of the totality of the efficacy of data.

Very good. Okay. So we'll look forward to that in the second half, I guess, again, post-ESMO. And you'll file right away. I mean, how do you think about that? Have you guided to filing? Or that should be a quick filing because you...

No. I mean, we -- typically, we don't guide to filing or time line. Certainly, we would announce if we do file. But our goal is to be fully mobilized, ready to talk to regulatory authorities and ready to move forward with filing as quickly as we can.

Okay. All right. Great. So there's a lot of focus on that. But interestingly, with as much focus on 510, you have a major Phase III readout in what I would think is a multibillion-dollar [ indication ] in tezepelumab. And it's almost a bit of a, shall I say, a pipeline in a pill. I know it's not a pill, but I use that acronym. And maybe just talk about Amgen's enthusiasm about this program and your confidence in the opportunity, specifically for asthma because it's both high eosinophil and low eosinophil so people are just -- may not appreciate that and why that's a bigger opportunity. And why it could almost be a pipeline in a pill-type of idea?

Yes. No, it's a great question. This is a program that I like quite a bit. It does one that went into the clinic when I was the Head of Early Development at Amgen. So I've been fortunate to be involved in its development really across its entire lifespan to date. It targets TSLP, which is released by epithelial cells. It's an indicator basically of epithelial damage. It signals recruitment of the immune system. TSLP levels in a normal tissue state are quite, quite low, unmeasurable in many tissues. And so one of the things that I like is that it's got a mechanism of action that's different than our standard approaches which directly target the immune response, at least in terms of biologics in asthma. TSLP is also a very upstream initiator of that inflammatory response. And then finally, as you pointed out, in the Phase II study, we were able to demonstrate efficacy in patients with both the allergic or high eosinophil form of the disease as well as those with a low eosinophil form of the disease. For that patient population, there are really no currently effective biologic therapies, and that is a population we're looking at and is obviously part of the opportunity here.

Do you think that there's anything that you would draw me back off of, even though we're just going from Phase II to Phase III, so without that obvious boilerplate-type of understanding that, that either biology or clinical things that would make it, let's say, not as confident that low eosinophil would be replicated again in the Phase III? Or you just feel like, no, that biology makes sense and should be fairly replicated, and the results were so robust, you feel obviously very high on a probability success factor?

Yes. I mean, it's obviously always hard to handicap these sorts of settings where it's a brand-new mechanism of action. But I haven't seen anything to dissuade me from date to having hope for the eosinophil low population. And if we're able to replicate the Phase II results in Phase III, we would be quite pleased. Of course, the reason we do Phase III studies is to generate a definitive answer, and we're very confident with our partners, AstraZeneca, that we've got a very robust Phase III program that will deliver the answer.

All right. Great. So point there being not only an unmet need, certainly for more therapies in high eosinophil, but in low, you have confidence it should replicate. And there's no alternative -- no new recent alternative options for those patients.

Yes. Exactly. I'd say no new data, and we're hoping to replicate Phase II.

Two other questions. There was, I think, some hypothetical or, I guess, biological rationale for some sort of rare one-off side effects by hitting anti-TSLP, think it might have been mentioned in editorial or not, but it was rare or there wasn't seen. Can you just remind me about that and whether there's any concern about that? And just broadly a comment about, obviously, safety in terms of...

Yes. I mean, the safety profile that we observed through Phase II was quite good. There are these rare events that always happen in drug development programs. And when there are single events, of course, it's very difficult to disentangle them from background, random occurrences. What I can say to date, of course, there's a data monitoring committee that oversees, is in charge with overseeing the safety of the trial. And obviously, they have -- they review data periodically in the Phase III studies that have continued to date, and we fully expect them to continue till readouts later in this year. So it's very hard to comment on these extremely low-frequency events without generating a larger body of evidence.

I haven't read the editorial in a while, but I think -- and I can't remember, unless you do, what that event was or [ signed ] or proposed.

Yes, there were a couple of events. I can -- I'd be happy to talk to you offline about that. But again, hard to know in background of patients who also have a sort of autoimmune phenotype, one of -- which is one of -- asthma is an autoimmune disease [ by basis ].

Right. Yes, as to whether or not hitting the anti-TSLP is having -- exactly.

Yes.

Okay. And then what about -- to wrap up on Otezla, atopic derm. That was a restarted Phase II. You've done some work saying, wait a second, we think we're on to something here. People initially thought okay, didn't work there. Remind us about how confident you did in terms of what analysis you've done there to make you feel better about atopic to run another study. And when could we get that data? That could be important.

Yes. So there's some genetic evidence, there's biologic evidence that TSLP, again, may be one of the initiators of the cascade that occurs in atopic dermatitis. I think we learned a lot from the first study. Obviously, standards of care have changed, the control of background therapies. And this is a disease that waxes and wanes naturally. And so it poses challenges from a clinical design perspective. I think we're doing a very robust Phase II trial. And probably, my guess is that sometime next year is when we'll have the readout from those data.

Okay. Okay. Great. It's okay. But look, importantly and potentially, continue to grow these indications. That's how these drugs get big, is multiple indications. So we'll pay attention to that. Okay. And then the other major Phase III event is omecamtiv mecarbil. I mean, look, a long time coming to finally get this data, has passed multiple DSMB analyses. I think people seem to be skeptical either based on the mechanism, or certainly, safety would need to be brought out, but also just to replicate Phase II data into Phase III in a heart failure. So maybe it's high risk, high reward. Remind me when do you think this data is coming. And what do you need to see to define success? Is there -- yes, so talk to that.

Yes. No. Thanks. So we expect to see data by the end of the year. This will be one of the largest trials ever conducted in advanced heart failure, well over 8,000 patients. We think we will have very high-quality data. Again, no concerns that we'll be able to deliver that on time or with rigorous trial integrity. The -- as you mentioned, the mechanism of action is different. It's the first agent that has advanced this far in the clinic that's a direct -- has a direct effect on the contractility, the cardiomyocyte, the heart cell, to improve contractility, which is of course the core defect in heart failure. It can be added to other therapies. So there's no sort of complex titration off of other therapies and layering in of omecamtiv. I think that's a potential advantage. And then I would just remind everyone that there are well over 60 million people globally with advanced heart failure, about half of whom have so-called heart failure with reduced ejection fraction or HFrEF. The mortality rates at 5 years are -- for those with advanced disease are worse than some solid tumors now. And so this is a major public health challenge globally, and we're hoping we'll be able to help contribute to that.

Do you think it's a question of to what magnitude this results in? Like it could be stat sig, but maybe it's not a magnitude of effect that will blow people away. And that's almost a commercial thing, but -- or it's either going to work or it's not going to work. How do you think about those scenarios?

Well, I think the magnitude will have some importance. And we're certainly targeting -- our view is that we would want to see, hopefully, a 15% improvement in the primary endpoint, which is a composite of heart failure hospitalizations and cardiac mortality on a very standard composite endpoint for these kinds of trials. We're powered to detect these sorts of advantages, given the sample size. And that we think is what provides a clinically relevant improvement.

Yes. Okay, fantastic. So we'll look for that. One tidbit on that. Everyone's looking at the Phase II. Do you think -- is it the BNP data? Is it the ejection -- what do you think are maybe the 2 most important things that give you confidence if you had to take a swing at that?

Yes. I think it was some of the physiologic parameters that you're mentioning, ejection fraction, clearly, but some of the other physiologic parameters that we measured, and then I would say some of the quality of life improvements that we saw. When you talk to patients with heart failure, they're not concerned so much about their ejection fraction, but their breathlessness, swelling and other things that compromise quality of life, and so that's -- those endpoints have been built into -- with robust instruments into the Phase III program and could be very important as well.

Fantastic. In the last couple of minutes, I want to maybe get -- sneak in a couple on the BiTE platform. I feel like this is an underappreciated platform. There's obviously a huge amount of focus on cell therapy. It seems pretty clear that Amgen has taken that -- a strong stance to invest and leverage the BiTE platform. Maybe 2 questions. One is tell me how confident you are about BCMA and being able to move forward in the Phase III for the long-acting form. And then do you think that we'll get solid tumor data later this year that people will be very intrigued at? Because you made a comment on the Q4 earnings call, one of the 2 core -- and people feel caught onto that, so say well, well, well, what's still the same on solid tumor?

Yes. So I'm becoming increasingly confident in our half-life extended program. We will have BCMA data, we hope, later this year almost certainly. And in addition, we expect data from a couple of the solid tumor programs. I would call out, in particular, AMG 160, which targets PSMA in advanced prostate cancer, and DLL3 targeting advanced small cell lung cancer. And I'm pleased with some of the emerging data we're seeing there. We're still moving through dose escalation, but we expect that we will present those data in the second half of the year.

You guys still there?

Yes.

Yes. Okay. Fair enough.

Yes. Okay, yes. Fantastic. All right. Good. With that, I think, moderator is telling us I am short on time. So with that, guys, thank you very much. Very exciting second half of the year with a lot of catalysts coming up, and we couldn't fit it all into 25 minutes. So thank you very much, and look forward to the updates to the rest of this year.

Well, thanks for having us, Mike.

Thank you, Mike.

Thanks, guys.