Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Well, hello, everyone, and good afternoon, and thank you for joining us on another great session here at the Jefferies at Global Health Care Conference. We have a great team here from Amgen on with us. Certainly a lot to talk about. Members of the team here include Murdo Gordon, Executive Vice President of Global Commercial Operations. We have the pleasure of having Susan Sweeney on, who's SVP of Global Marketing Access and Capabilities and probably a good tag team to talk about a lot of drugs that are launching around the world. And of course, we all know Vice President of Investor Relations, Arvind Sood. To that extent, I'd love that, Arvind, maybe just kick off perhaps with some high-level comments about the state of affairs, and that will be a good icebreaker to perhaps lead off into some other additional topics. So Arvind, tell us about what's going on at Amgen.

Thank you very much, Mike, and thanks for having us. Really appreciate this opportunity. So we have been busy as we near the first half of the year, Mike, as particularly on the capital allocation front. We have announced 3 deals this year, beginning with Five Prime and the Rodeo acquisitions and of course, most recently, an agreement with Kyowa Kirin to jointly develop and commercialize a unique OX40 antibody for atopic dermatitis. Now of course, if our CFO was here, he would tell you that our capital allocation hierarchy begins with investing in both internal and external innovation. And with this focus on investing in internal innovation has yielded approval of LUMAKRAS, the first KRAS G12C inhibitor. LUMAKRAS, as you know, Mike, has demonstrated improvement in overall response rate and duration of response, and we are going to be presenting some data at the upcoming ASCO on overall survival. Other pipeline progress includes a submission of teze or tezepelumab for severe asthma and a submission of Otezla for the mild-to-moderate psoriasis indication, and we now have a PDUFA date for that, which is December 19. As far as our overall business is concerned, Q1 was impacted by the pandemic, but we began to see a recovery in March, which continued into April. And as we pointed out when we communicated our Q1 results, we expect these trends to continue throughout the year. We'll stay very much focused on volume-driven growth. And several of our growth drivers, including Repatha, Prolia, EVENITY, Otezla, Aimovig, I mean, all these products are generating decent volume growth. Biosimilars, we have advertised these as a meaningful growth opportunity, while they are generating about $2 billion in revenue. So they're an important growth driver for us. But going forward, growth in this business is going to be driven by the addition of new products and new markets that we can commercialize our products in. And I would just conclude my comments by saying that we continue to retain significant financial flexibility. We have a strong balance sheet. We continue to generate significant cash flows. And we'll continue to look for opportunities that align well with our business development strategy as we continue to execute that with a degree of discipline that we have showed. So with that, Mike, I'm going to turn it over to you, and we'll be happy to address any questions that you might have.

Well, absolutely. Thanks, Arvind. And I think I would emphasize the creative and smart external BD because unlike many other companies that do super large transactions, you guys definitely sort of do all these different tuck-ins rather than doing mega deals. Maybe I'll just start with Murdo. We start off with KRAS, LUMAKRAS. I asked a question about the general launch dynamics of a new targeted therapy oncology drug. Can you just speak to how that should look? How are you preparing for that U.S. and Europe? And talk about that because I think a lot of people haven't looked at and expect pretty rapid ramps for a drug like this, particularly if you look at some of the other targeted oncology launches that have gone on, and I'm sure you've looked at some of those.

Yes. It's a really important question just because of the dynamics in the market right now, Mike, we are seeing some residual impact of the COVID pandemic in multiple markets around the world. Here in the U.S., where we have our first approval, we are seeing patient movement improve, and that is patients who are getting the right diagnostic visits; the right follow-up; and then obviously, the right care. If you look at IQVIA data, last year, there was about 1 billion missed visits between patient and health care provider, and it takes about 3 visits for a diagnosis. So that's about 300 million misdiagnoses in the marketplace last year, and we expect about 100 million misdiagnoses this year. So that's really Q1, Q2 improving in the back half of the year. Oncology is a little bit better, as you would expect, because of the high morbidity, mortality nature of the disease. But the barriers are still there, nonetheless, are all patients seeking the right amount of care? Are all oncologists able to maintain the throughput or the patient volumes that they need to do? So that's just the one caveat that I would put out there that's a little bit different. Overall, we are able to reach our customers. So we've -- through Susan's leadership, we've put a lot of capabilities together over the last couple of years. We started in advance of the pandemic to look at better ways of reaching our customers through digital channels and through nonpersonal means. And I think we've done very, very well through the pandemic on that. Our face-to-face interactions with customers are rising. So that is good news with increased vaccinations and particularly, the older population. And lung cancer tends to be an older population of patients. Vaccination rates are quite high across the country. So we're hopeful that we will have a launch that will look somewhat like some of those pre-COVID targeted oncology product launches. In the marketplace in non-small cell lung cancer, we are seeing about 55% of non-small cell lung cancer patients have been tested for their KRAS G12C status as part of an NGS test or a lung panel where broad RAS testing is done. So that's also a good signal for early uptake because that population is actionable, if you will, because they know their status. We've been driving against that number to try and improve testing with a number of initiatives. We've put a program called biomarker assist out there, which helps with the out-of-pocket expenses and reimbursement of the test. And then, of course, there's the -- just the dynamics of what are the other choices that you have in second-line therapy and really...

Which are not very good.

Which are not very good. So that -- I think that's where we are highly differentiated and obviously, very good response rates demonstrated by this product, highly tolerable on once-a-day oral regimen. So this is a good-looking product for a launch into a second-line opportunity that, quite frankly, isn't really well served by current standard.

Well, look, I would say that when people go back and look at some of the other targeted oncology launches in lung cancer, either, a, it was for really rare mutations, which you may not have been so aware of and testing was not as prevalent and people would not all have found out or [ rows ] for any of these others. So you framed by saying a lot of the KRAS G12C is sort of known. You just need to bring awareness of that. Now you mentioned that call, just last question on this. What does that mean? That just means, look, these people are diagnosed with lung cancer. Half of them know it, but they need to either reconfirm or they just need to get it tested. Is that the thing? And they should be [ worried ].

Yes. The majority of the testing today is done on solid tissue. And so it's a mutational test that you don't need to retest for. Like so if you're KRAS G12C status upon diagnosis of your cancer in frontline is known, then you're an actionable patient. And we've also been able to commercialize a liquid biopsy test with our colleagues over at Guardant. So we have the QIAGEN solid tissue test and the Guardant liquid biopsy test. So you can retest if patients don't have a KRAS G12C result. So there's also that opportunity for patients that don't have that. Just one other thing on this, Mike. It's kind of important because the vast majority of patients are treated in the community setting, but 80% of all lung cancer patients are treated in the community setting. And there, they rely on commercial pathology reports coming back to them. The RAS testing results were buried in the back of that pathology report, and there's kind of a cover page that gives you the actionable mutations and EGFR. We're working to make sure that the pathology companies are putting KRAS G12C status on the front now in that long panel test. That's another behavior change because it just keeps it top of mind in the busy oncology practice where that oncologist isn't treating lung cancer patients all day, they're treating everybody. And we want to...

And so they just don't see that as an actionable sort of obvious one? Okay.

Yes. Exactly.

Okay. Maybe just a quick comment before I move on to another product around Europe and China. Can you just make a quick comment on that? To be fair, a competitor just did a big China deal, too. So these are big markets. I just want to make a comment on Europe and China, if you could.

Yes. We're really pleased with being part of the Orbis regulatory process. So we have a number of markets around the world where we expect fairly rapid regulatory approval. Europe is -- the EMA is looking very good. We have EAP programs open up in many markets around the world, which allow us to treat patients early and also accumulate real-world data on how patients do on LUMAKRAS. And that will help me in reimbursement discussions with the different European markets, particularly HTA markets where they might be looking for data that go beyond your clinical trial that you have in your label. And then in Asia, we are working very rapidly to be ready to launch in Japan. And in China, we're looking to commercialize the product as well.

Okay. Let me ask on the Kirin deal. I would argue, and I thought a lot about this yesterday. I mean you just added essentially presumably a Phase III-ready new atopic dermatitis firm. So while you got to get their studies up and going, everyone is going to try and handicap the probabilities here. Can you just make a comment around the positioning profile, what type of drug this would look like? And how you thought about the position in a large and somewhat competitive market?

Yes. I wouldn't mind asking Susan Sweeney to comment on this. Susan Sweeney, our Head of Global Marketing and our Customer Capabilities, has worked very, very closely on this deal and actually led it on the commercial side for Amgen.

Okay. What stuff do you have on this new product decision?

Yes. Thanks, Mike. We're really excited about it. As you know, Amgen brings a lot into this partnership with our history in inflammation dating back 20 years as well as the products that we have in market right now with the Otezla, ENBREL and AMGEVITA. And we really feel like we can leverage our commercial know-how in this space to partner with Kyowa Kirin, who is actually a partner that we worked with for many years. So we feel like we're off to the races starting off well with a good collaboration with them. On atopic dermatitis, specifically, huge unmet medical need, very few systemic therapies in the marketplace today. And a market that's growing quite rapidly, and we're projecting it to be over $25 billion by '29, the OX40 asset as an asset coming into the market, first-in-class coming in, we're excited about that. It is a Phase III-ready asset with the Phase II data. We were very excited about progressing forward with Kyowa Kirin. And we're right now working with them on the regulatory approach and still really in the -- we haven't closed all of the deal yet. We're going to be working with them immediately after to get ready with the Phase III program, which we'll then set forward how we're going to enter the marketplace.

From a -- so that data will be presented. Now obviously, we can take a look at the data in a couple of months. It's a September-October conference. But competitively, without getting specific to numbers, is this -- this is supposed to be -- should be as a biologic, I guess, a high efficacy product that could -- that should be very infrequently dosed on a chronic basis? Can you just talk about that?

Yes. I mean, Mike, I think you're hitting on what's going to be important in the AD market for a systemic therapy is, of course, efficacy, right? Bringing in patients, being able to have relief from their symptoms of atopic dermatitis, which could be quite debilitating, but also ensuring that it has a good safety profile coming into the marketplace. We're expecting, of course, bringing it in as monotherapy is the area that we're focused on coming in. But we'll -- data is going to be presented in the Phase II and then, of course, talking with regulators and then moving forward.

Okay. All right. Well, we'll take a look at that. We look forward to that data presentation. But I -- presumably, you probably have a very high probability of success to be replicated in and probability that you have another blockbuster again in a couple of years. Is that fair?

Yes, yes.

With the [indiscernible] dosing profile particularly.

Yes, exactly. We're -- as I said, we're excited. Again, having another Phase III-ready asset from a business development standpoint and look across a number of different areas. This was one, of course, also the other one that we had recently done with Five Prime as a Phase III-ready asset as well is bemarituzumab is a nice one to add to the portfolio, too.