Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Oppenheimer's 31st Annual Healthcare Conference. I'm Jay Olson, one of the biotech analysts at Oppenheimer. And I want to thank you all for joining us. It's my pleasure to welcome Amgen to our conference and it's an honor to introduce Arvind Sood, Head of Investor Relations; Rob Lenz, Head of Global Development; and David Reese, Head of R&D. We're really excited about all the progress at Amgen, and appreciate the opportunity to catch up with you today. So thank you for participating in our conference. And with that, I'll turn it over to you, Arvind.

Great. Thank you, Jay. Good morning, good afternoon, everybody. Hey, Jay, thank you for inviting us to your conference. I will briefly touch on some broad issues, and we can then jump into some specific R&D topics with Dave and Rob. So I've been thinking, Jay, about the one question you had raised previously, which is what will be same and what will be different in 2021? So first, our focus on execution won't change. Despite the pandemic, we delivered 15% volume growth last year and will continue to drive unit volume growth this year. Our focus on growing the growth drivers won't change, including Prolia, Otezla, which has been integrated very successfully, Repatha plus a strong contribution from biosimilars, which have now become a meaningful growth driver for us. Now as we have navigated through this pandemic, we have also learned a lot. We learned how to adapt to an ever-changing external market environment using digital means for customer engagement and advancing clinical trials, and we have employed those lessons learned and embedded them in the organization as we look to 2021 and beyond. Our assumption is that the COVID pandemic will be with us for the majority of this year and will be a headwind through at least the first 3 quarters of the year. When we see the pace of vaccinations accelerate, we are all hopeful. And we definitely see providers and patients coping better with the situation on the ground. In addition to driving our growth drivers, we are also making good progress on other strategic imperatives, including advancing our mid-stage and late-stage pipeline, a point we'll discuss in greater detail with Dave and Rob. We have also made good progress on our international expansion strategy, particularly in the Asia Pacific region, where sales exceeded $1 billion for the first time in 2020. We now have a full affiliate model in Japan and our collaboration with BeiGene is working well in China. To further add to our business internationally and in Asia Pacific in particular, as you know, we recently announced an agreement to acquire Five Prime Therapeutics for $38 per share in cash, which represents an equity value of about $1.9 billion. The lead asset of Five Prime is bemarituzumab, which is a fibroblast growth factor receptor inhibitor, which is a Phase III-ready asset with positive Phase II data in first-line gastric cancer. Bema as we now call it, offers us a mid- to long-term growth -- volume growth opportunity, strengthens our oncology portfolio and is complementary with our gastric cancer programs. We expect the deal to close by the end of the second quarter of 2021 and look forward to advancing this important new medicine into Phase III as quickly as possible. In 2021, our focus is on commercial execution of launch and growth products to sustain long-term volume-driven growth. We have 2 products that we're anticipating launching in the near future with sotorasib, which, as you know, is our KRAS G12C inhibitor in lung cancer and also tezepelumab in asthma. And I would now add bema to that late-stage pipeline that could be launched in the not-too-distant future. We have a strong balance sheet, continue to generate strong free cash flows with almost $10 billion of free cash flow in 2020 and with our commitment to dividends and share buybacks, retain significant financial flexibility to continue to evaluate strategic business development opportunities. So with that, Jay, I'm going to turn it back to you, and we can address any other questions that you might have.

Great. So much, Arvind. I wanted to follow-up on some of your comments about Five Prime. Really appreciate that deal. Can you share with us some of the key drivers that led Amgen to sign that deal? And then also maybe talk about the lead molecule bema targeting gastric patients -- gastric cancer patients with FGFR2b. How do you see the changing treatment landscape with the introduction of checkpoint inhibitors in gastric cancer?

Great. Thanks, Jay, and I'll take that question. This is Dave Reese, Head of R&D at Amgen. I think when we think about what motivated us to pursue this deal, there was -- there's a strategic component. Several years ago, we had articulated a general strategy in oncology, drug discovery and development, that the future was going to be a marriage between precision oncology and immuno-oncology. And this -- the lead molecule, bemarituzumab, fits squarely into that precision oncology rubric, the -- at a corporate level, in addition [indiscernible] growth over the next decade tezepelumab targeting gastric cancer which is a major public health problem in East Asia, in particular, I think, fits squarely within that strategy. Coupled with these strategic considerations were, of course, what we believe were the simple technical strength of the data, a large randomized Phase II trial that showed improvements in response rate, progression-free survival [indiscernible] gastric cancers after 2b -- FGFR2b, this is over-expressed in about [ 30% of HER2-positive ] gastric cancers, which represents a substantial population internationally every year. So that -- I think in a nutshell, those are the drivers here. We're fully aware that the treatment landscape may change a little here with the introduction of checkpoint inhibitors. We feel that number one, a number of tumors will not be PD-L1 positive, but FGFR2b over-expressing. And we plan to pursue as part of the development program triplet strategies where we combine bemarituzumab with a checkpoint inhibitor and standard backbone chemotherapy. So a lot of -- a constellation of factors that I think came together here, Jay, and made us very bullish on this particular deal.

Great. And I want to follow up on the comment that you made about combining bemo with chemo. Can you talk about the Phase III study design? And what are some of the incremental benefits that you expect to realize when you combine bemo with checkpoint inhibitors?

Yes. The -- so our belief is that standard chemotherapy combination regimens will remain a standard of care in much of the world going forward. And so our expectation is that a Phase III program, which we, of course, need to discuss with regulators will resemble the randomized Phase II FIGHT study, which was backbone chemotherapy with or without bemarituzumab. So our expectation at this point is that, that's what the lead Phase III study will look like. As I mentioned, we, of course, plan on investigating other combinations, either triplet regimens, potentially other combination therapies. And then beyond gastric cancer, we plan signal-seeking studies in other indications, such as small cell -- or excuse me, on squamous cell carcinoma of the lung. Where there is evidence that FGFR2B over-expression occur. So a lot of work to do and a lot of potential, we believe, here, based on the Phase II data that have been demonstrated to date.

Okay. Great. And then since FGFR2b over-expression occurs in about 30% of HER2-negative gastric cancer patients. Can you share with us the number of patients the U.S. and Asian countries? And how would you...

Yes. In the U.S., it's probably on the order of 25,000 to 30,000 patients a year -- patients per year. In East Asia, there's a very, very large patient population. Gastric cancer is one of the most common malignancies. It's a public health challenge in East Asia, just for a way of context in China, Japan and Korea, there are nearly as many cases of gastric cancer each year as there are all solid tumors in the U.S. So clearly, East Asia will be an important part of the development program and the market opportunity here. As you're aware, we recently stood up our independent business in Japan, Japan affiliate. And our expectation is that, for instance, will play an important role in advancing bemarituzumab.

Excellent. We'll look forward to future updates there. Maybe we could shift gears for a moment over to sotorasib. And congratulations on all the progress you've made and record speed going from clinical trial initiation to NDA submission. So I guess with the potential FDA approval on the horizon, can you just talk about how lung cancer patients with G12C mutations are currently being diagnosed, both in academia and in community settings? And what percent of patients with the G12C mutation are currently being identified?

Yes. Thanks, Jay. That's a great question. Our best estimate right now is that roughly 50% of patients as part of standard tumor profiling have KRAS assay and the KRAS G12C mutation can be identified. In academic centers, that's higher where multi-gene panels are very common and almost always include KRAS assessment. Our belief also is that as a therapeutic is introduced, and you have an actionable mutation as we've seen with other mutations, such as EGFR, ALK, RAS, et cetera, that testing rate will increase quickly. We're also working with partners for both -- on both tissue-based as well as liquid biopsy diagnostics and would intend on moving those forward as well. So while there is some education and some work to do to increase KRAS G12C ascertainment, I think this is an imminently solvable problem, and it's when oncologists are quite familiar with.

Great. That's helpful. And then at the World Congress on Lung Cancer, you showed some interesting biomarker data associated with PD-L1 and STK11. Can you remind us what the implications are of those biomarker findings? What have we learned so far? And how they might influence your thinking about first-line opportunity for sotorasib?

Yes. It's a good question. And let me start by placing this in the broader context, which is one of our great interest here, of course, is developing signatures, molecular signatures of response and resistance. And 2 of the key genes that we've analyzed our STK11 and KEAP1. The former may signal enhanced responsiveness to sotorasib, the latter perhaps in a slight resistance. But I think there's one very key finding is that outside of the KRAS G12C mutation itself, we have not identified a single marker that predicts response or resistance. And this may actually vary either tumor to tumor within an indication or across indications, like comparing, for example, non-small cell lung cancer and colorectal cancer, where the downstream molecular wiring can be quite different. So we've got a very comprehensive biomarker program ongoing and are generating additional data to determine whether we can really ascertain these sorts of signatures of response and resistance. More to come there. But I would urge everyone to understand right now that there is no single predictor outside of the G12C mutation itself that has yet been identified.

Okay, great. And it seems like, so far, we haven't seen CNS activity data for sotorasib. Can you maybe comment on the percentage of your target patient population with brain metastases? And since you're conducting a separate trial for patients with brain metastases, maybe if you could comment on the size of that trial, and when we might expect to see data?

Yes. So roughly 20% of the patients in the large Phase II study had the presence of brain metastases, which are quite common, as you know, in non-small cell lung cancer. Now they have to be stable metastases, which is a very common inclusion ccriterion for these sorts of oncology trials. We have anecdotal reports of responses in the brain with clear shrinkage. And so as you noted, we have opened a cohort and enrolling patients as we speak with brain metastases to understand what the true activity is. I won't provide further guidance as we enroll patients there. We want to enroll a meaningful number to really get a good assessment of the efficacy of sotorasib in this particular population. So guidance to come over the course of the year as to when we can expect a large enough data set.

Okay. Great. And now that everyone's looking forward to combination data, is there an internal benchmark or threshold for the overall response rate or the PFS for sotorasib in a combination that you'll be looking for before you progress to the next trial? And then with, I guess, about 10 different combination studies ongoing, which one do you think we'll see first?

Yes. No, very good questions, Jay. It's hard to answer the first part of this question generically, independent of the indication and the line of therapy in terms of what sort of incremental improvement would be judged to be clinically meaningful. Generally, in oncology, we're looking for at least 15%, 20%, 30% relative improvements in endpoints such as response rate, progression-free survival or overall survival. But that depends a lot on the setting and how effective standard therapies are. So I'm a little bit reluctant to generalize beyond that general approach that I just described. The combinations, as you mentioned, there are 10 in the master protocol they are enrolling. And we expect that they'll enroll asynchronously depending on how we generate safety data. We've already announced that the MEK combination has moved into the expansion phase. What you can expect here, in general, is that the first part of the trial will be safety. And then when we feel that we have a safe combination, we open that up to expansion, which is really intended to determine efficacy with any given population. So we'll provide guidance. But as we've mentioned before, over the course of the year, we expect meaningful amounts of combination data to begin an emerging.

Jay, we can actually see you now, but I think you may have us muted. And I can't hear you.

Yes. So we heard you before, but didn't see you now we see you...

There you go. I think you just came off mute.

Okay.

There you go.

All right. So I guess, just as far as colorectal cancer, I'm going to shift gears now from long over to colorectal cancer. How are you thinking about single-agent sotorasib in colorectal cancer? And what -- I guess, what other tumor types are you considering? We saw some data in other tumor types what -- I guess, sort of what are you thinking of -- I think we saw appendiceal? What are you thinking of for colorectal and then beyond colorectal, other tumor types, monotherapy and combination?

Yes. So in colorectal cancer, we've fully enrolled a Phase II trial. We expect the data readout from that over the course of this year. That is monotherapy. So that will tell us if we feel that there's a viable path forward in monotherapy, again, with clinically meaningful improvements over potential standard of care. Also some of the combination arms that are going forward clearly are built on colorectal cancer regimens and will be possible to take forward as well if those look good. So I think this will be a decision-making year as these data emerge in terms of what the optimal path forward is in colorectal cancer. As you mentioned, we've seen responses in 4, 5, 6 other tumor types, other solid tumors where there's 1%, 2% background rate of KRAS G12 mutations such as pancreatic cancer, endometrial cancer, appendiceal cancer. We've got basket cohorts enrolling. And our goal is to get, again, a large enough number of those patients to get a true sense of the activity. Some of these malignancies, there's really very little standard of care available. And so once we have enough data, I think we can decide what an appropriate development path would then be.

Great. That's super helpful. And I want to make sure we have time to talk about some of the other exciting developments in the pipeline at Amgen. So maybe just going over to teze, at AAAAI, you had the full study results from NAVIGATOR, which I think a lot of people were excited about. And the data really highlights the benefits of teze in patients regardless of phenotypes and biomarker status. You had a really nice KOL event, but can you share some of the feedback that you've gotten from physicians, and how they're expecting to use teze in their clinical practice?

Yes. And I'll ask Rob to comment in a minute here because he's worked extensively on this program. I'd say, in general, we're thrilled with the data across a range of phenotypes, irrespective of eosinophil count. The investigators are quite enthusiastic about the potential of tezepelumab as a first-line agent to treat a range of patients. Let me ask Rob to lend a little color to this. He's worked quite extensively on the program, as I mentioned.

Yes. Sure, Dave. So yes, we've connected with several of our OLs as well as the -- some of the investigators, Jay, as you mentioned, and they've been quite enthusiastic. I think it's the broad efficacy profile that we've seen, together with the favorable safety profile that we've seen today has led them to conclude that teze could be a first-line biologic treatment for those severe patients. And that was certainly reiterated during the recent investor call that you alluded to, where they also agreed that they would see this first line, whether it's in patients with high baseline eosinophils or low. And it's -- another point that was raised that I think is interesting to share is that most patients with asthma, especially the severe patients, sort of don't fall neatly into one category, either high eosinophils or low eosinophils. It's usually the case they've got multiple drivers for their symptoms. So it's unusual to have in their clinic a purely, say, eosinophilic patient in the absence of any of the kind of underlying cytokine drivers as well. So to have a therapy like tezepelumab that blocks that upstream signaling cascade at the level of PFLT, they view is very logical and attractive. And the other point that we hear pretty consistently when we speak to the clinicians is even in the high eosinophil patient population for whom the approved biologics are effective, there's really a large number of those severe patients who are suboptimally controlled. In general, if you think about those therapies in that population, having efficacy in the back exacerbation rate reduction in the 50% to 70% range. That means, say, in a given patient, 30% to 50% of their exacerbations are not adequately being prevented by the current therapy. So they definitely see an opportunity there and a pretty large residual unmet need in both that overall population, high use with also low eosinophilic patients.

Great. That's super helpful. And I know one of the things that we've heard a lot of excitement about is the potential for disease modification. Have you seen any signals, clinical or preclinical data that could support the idea that teze might be disease-modifying? And if it were, what do you think the significance of that could be? And could teze benefit a larger patient population like patients with less severe asthma for prevention of airway remodeling?

Yes. I mean prevention of airway remodeling is one of the holy grails in asthma investigation and therapy as one of our collaborators noted previously. We've got a study called CASCADE that's ongoing right now that is looking at that, and we expect that to read out and be reported over the course of this year. So I think we're doing the sort of biomarker and tissue study that will help us get directly at that question, Jay, no one has yet demonstrated that you can substantively affect tissue remodeling.

Okay. Understood. Maybe just quickly, since we're coming close to the end of our time. I wanted to make sure we talk about your BiTE program. You've got quite a few BiTE in various stages of development, and you've shown some really interesting clinical data for 757 and 160. Could you maybe just remind us about the next steps for these 2 molecules?

Yes. And just so everyone is level set here, 757 targets DLL3 over-expressed in small cell lung cancer and potentially other neuroendocrine-derived tumors. AMG 160 targets PSMA in advanced prostate cancer. With both of these molecules, we demonstrated what we think is proof of principle in the clinic with clear bonafide clinical responses. The prostate cancer program has now moved into an expansion phase of enrollment. So we have a target dose and regimen, and we expect those data to be available over the course of this year. And of course, we'll be eager to share those updated results when they're available. 757 in small cell lung cancer is just a step or 2 behind. I expect in the not-too-distant future, we will have the take forward dosing and scheduling for that molecule, and we'll be opening an expansion cohort as well. And then I think it's just generating the clinical data for decision-making purposes.

Okay, great. We'll look forward to that. And maybe just one recent development I wanted to ask you about there. I think we've seen the withdrawal of checkpoint inhibitors for small cell lung cancer. Does that change the opportunity for 757 or the way you're thinking about clinical development pathway?

Yes. I mean the initial studies with the checkpoint inhibitors seem to show a measurable but pretty modest benefit. So I would say, small cell lung cancer is a disease where immunotherapy has yet to demonstrate a significant clinical impact. And so we think there's a lot of opportunity for the BiTE if we can demonstrate real efficacy here. And we're hopeful based on the early signals.

Okay. Great. All right. Well, I think that brings us just about to the end of our time. It's been great catching up with you. Thank you so much for making time to chat with us here today. It's a real pleasure to get updated on the impressive work you're doing at Amgen. So thank you.

Well, thanks, Jay. And have a good rest of your conference.

Thank you.

Thanks a lot, Jay. Bye-bye.

Take care, everyone.

Bye.

Bye.