Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Hey, everybody. It's Alethia Young here. I cover large-cap, small, mid-cap biotech here at Cantor. Very happy to have Amgen with us this afternoon. We have Peter Griffith, who's the Executive Vice President and CFO. We have Susan Sweeney, who is SVP of Global Marketing, Access and Capabilities. We have Arvind Sood, who needs no introduction but VP of IR; and we have Omari Wise, who's the Executive Director in the IR team as well. So we'll be doing a fireside chat for the next 30 minutes, and I'm just going to dive right on in.

And so maybe this one is for Susan, perhaps. Just talk a little bit about how you collaborate with the commercial team to drive solutions that improve outcomes for patients and customers overall.

Yes. Thanks, Alethia. Thanks for having us today. Digitization, especially in the time of COVID, is an area that we have been focusing on and continue to develop the work that we're already doing in digitization across our commercial organization. Some areas, specifically with regards to artificial intelligence and how we use that, a number of our agents are -- a number of the products that we have in the market, the ones that are in there today as well as other ones that are in development, are targeted therapies in which -- particularly in oncology of being able to identify patients who can benefit from the product. And then from a commercial standpoint, how do we make sure that we get the right information to those customers at the time that they're making decisions? So with partnering with lab companies and other type of data sources that we can get, using AI to be able to target where we need to provide information and in what time frame. Another area that I think we do with digitization is with regards to just our field-facing teams across the world and getting them prepared, making sure that they have the right knowledge so that they can have a conversation about the products in the portfolio. And that in its simplest form, it goes down to how we train them and how we use AI to identify places where we might need to improve upon or other areas for focus. And then lastly, Amgen recently has centralized our commercialization model on bringing together our digital capabilities in a more of a central structure. Previously, we were decentralizing countries and brands, and this does a couple of things for us. One, it creates efficiencies because we're not doing the same things over and over again in each market, but it also creates a lot of room for innovation in which we can identify quickly where something that we're doing works really well in one area of the world, and then we can scale it and bring it to other areas of the world.

Awesome. That's very interesting. I guess maybe just a follow-up to your comments, again, how has COVID changed that? Was -- has it increased the priority of these efforts here, just because I feel like we all are so much more digital?

Absolutely. Right. Moving down the path of the digital world, we were already there. But like many companies and industries, it came full on fast with COVID. And so having this centralized capability in which we can quickly be able to supply the field teams around the world with information that they can share in a digitized format is one of the areas. As well, if you look across the different therapeutic areas that we're in, COVID has had different impact in those therapeutic areas. And specifically, just think about the field teams that are interacting, medical personnel, or field staff, or people in our access teams that are interacting with them. Oncology has been an area that has continued to be very protective of the frail patients that are in their offices, and so we've had to pivot to a much more digital interaction model to make sure that we can get information out. Whereas we're seeing in some of the other sectors that you are seeing an increase in being able to visit physicians in the office, which is also good news, though, because it means that we're also seeing patients being able, I think, which is the highest priority -- of being able to get back into the offices, being able to get their diagnosis done and treatment in the office. And one of the areas that you see that really has picked up recently, it is in cardiovascular. Dermatology is about in the middle. I would say that in the dermatology sector, we see that there was definitely an impact of COVID very early on in the pandemic with less visits into the dermatology office. We still see that hanging through. And coming into the back half of the year, we're have to have to see as we're finishing out how that's going to change with the Delta variant being prevalent throughout the world.

Awesome. I guess just another follow-up to some points you were making there. Just, I guess, how do you guys approach matchup to maybe some of like your peers as far as like really making a focus here, a concerted effort?

I think the peer set that we're with are also doing similar things to what we're doing, which is looking at ways that we can use digital channels to augment what we're doing, both in person or in mass media. I think with our peer group, we focus on this, of course, on a worldwide basis overall. But I would say that the centralization of these capabilities and also large data sets that we've been acquiring over time help us with better ability to farm through them to be able to identify ways that we can make a better impact.

Awesome. So moving on to LUMAKRAS, I'm just kind of curious about feedback in the early days of the launch. Clearly, you guys are investing significantly in this product combination regimen. So just kind of talk about your strategy to drive this business toward a multibillion-dollar business ultimately.

Yes. So we're really excited about how LUMAKRAS has been doing in the market, and I'm thrilled that we're starting to see the international approvals, starting with the U.K. and Canada being approved recently. In the U.S. and across the world, we have an experienced medical field, access teams that have been working in oncology for quite some time. And so interactions with customers has been great, and we've really heard positive feedback from customers and opinion leaders about having this targeted therapy available for patients that didn't have very many other options. Unaided awareness for LUMAKRAS has increased 20% in the U.S. since we launched. Likewise, also, we got on the NCCN guidelines, which is also moving in a positive direction. KRAS testing has now increased to above 70%, which is really quite remarkable that it's moved so quickly. And right now, 46 of the top 50 labs report KRAS G12C actionable mutation, which is great for patients so that they know if they have a mutation and are in need of therapy. Having both a blood test, as well as a tissue test, I think, helps with that as well. And then otherwise, with LUMAKRAS, besides what's going on with the launch, we had data presentations at ESMO on colorectal cancer data with the combination with Vectibix,, and we're starting to move forward with a third-line trial initiating in that setting, as well as we're continuing to look at multiple combinations in CRC, PD-1, MEK, oral EGFRs, just to name a few, to make sure that we're covering the bases and that when we continue to advance in colorectal cancer, we have the right combination that we're putting into the market. So overall, again, on the launch of LUMAKRAS, we're really happy about how the launch is going. We have an experienced team in the marketplace. We're ready to go in the next markets that are coming up to launch soon.

That's exciting. Since we have a lot of topics, we'll keep running through. The highlight real here. So I guess how do you think about the biosimilars business, which has grown nicely, annualizing like $2 billion. Should we look at it more as like a growing business over the next 5 years? Or is it more stable stream of revenues? And then -- because there seems to be tons of drug exclusivity in the biopharma world. And I guess also maybe just make a comment on the potentially big launch in biosimilars or biosimilar HUMIRA with AMGEVITA coming up in 2023.

Yes. So yes, we're -- again, for the biosimilar business, as you had mentioned, in the short term, we expect volume growth to be offset by net selling price due to the increased competition for the remainder of the year. But longer term, we see growth from our biosimilar with expansion of our biosimilar portfolio, both in markets around the world as well as new biosimilars that we're continuing to develop. You mentioned AMGEVITA, expected to launch in '23. But as well, we have SOLIRIS, a Stelara biosimilar and an EYLEA biosimilar in development. The thing about Amgen of bringing our biosimilars to market that I think is unique is having the biosimilars as part of our overall innovative portfolio. So there's a lot of efficiencies we get out of that as well, being able to use footprints that we have in place. If you think about it in our inflammation area with the number of products that we have in there, AMGEVITA fits very nicely within that portfolio and from a discussion with payers, then we have the full gamut of the inflammation portfolio. And then as well from a selling model standpoint, it's the same team that will go in with that product.

Interesting. So you guys have made, I think it might be, a very good headway internationally in China and Japan from when you first started announcing moving into those markets. And so I'm just curious like on the plan right now kind of currently to drive growth there, is it more selling the commercial products? Or is it kind of doing deals to supplement that business, like BeiGene, for example?

Yes. Thanks, Alethia, for bringing that up. We're really pleased with what we saw in the second quarter where we delivered 22% ex U.S. volume growth. We also surpassed $1 billion in Asia Pacific sales in 2020, and we expect 25% of our long-term growth to come out of our international expansion. And there's a number of different parts to that. First, leveraging partnerships. Amgen has done a really nice job of establishing partnerships throughout the world. And specifically, our deal with BeiGene allows us to supplement the work that we're already doing in the Chinese market with the knowledge and know-how of the BeiGene partnership. And similar to our partnership that we have with Astellas in Japan, those products eventually that are part of that partnership come back over to our team for promotion. Also, recently, bemarituzumab and the acquisition of Five Prime brings in good geographic expansion with a drug that will go into gastric cancer, a disease that has higher prevalence outside of the United States. And then the other thing to note is just in the mix of our business. If you look at our innovative products in the pipeline that we already have a full geographic footprint because some of our products are partnered. We're actually moving towards a split of our business that is 60-40, 60% U.S., 40% ex U.S., whereas the full business is at like a 75-25, but we expect that to move from all of these different type of activities, partnerships and movement of the products over, as well as continued of our products that we have full rights around the world and being able to leverage those infrastructures that we've already created to be able to have the future pipeline launched in these international markets as well.

So how do you think at this time now you kind of match up and compete internationally with like some of your pharmaceutical peers like Merck or Pfizer?

Yes. So as I said, about 75% of our business has historically been in the U.S., but we're continuing to expand our ex U.S. footprint from -- actually, from 2018 to 2020, our ex U.S. sales increased 23% from $5.1 billion to $6.3 billion. We have -- I think it goes back to some of the fundamentals, which is having differentiated products, and Amgen has a number of differentiated products that we're bringing into the market. Repatha, of course, is one of our products that are in the cardiovascular disease that's making impact around the world, and it's continuing to see good and consistent growth rates. But also the acquisition of Otezla, of bringing that into the portfolio is another area with a highly differentiated product that has -- that we've been able to accelerate the launch of those products -- that product in markets that Celgene had not gone into. So we're getting growth from that, as well as just the profile of Otezla as a truly differentiated agent in the market. And then lastly, I've already mentioned the partnerships that we have in place I think do give us a unique space as we build out our international footprint of models like we did with Astellas in Japan, and likewise, as we're doing with BeiGene in China.

That was a good segue for me. I was going to ask about Otezla and just kind of how you see the oral TYK2s as competition. And do you see that as something that will be challenging for growth in the U.S. and ex U.S.? And then also, as we head toward the mild to moderate psoriasis approval, do you think that's a market where there could be a significant driver as well? I feel like there's -- it's ripe for some new medicines there.

Yes. So Otezla, yes, absolutely. Otezla, we really have conviction about our ability to continue to grow Otezla in the market as the first choice, first-line systemic positioning. And mild to moderate coming in, hopefully with approval at the end of the year, really does solidify that place as the first agent to be indicated in that indication. And for that group of patients, it's really about the patients in that group that have forms of psoriasis that may have larger body surface areas that we believe Otezla can help with or awkward places on the body that topicals are really not a good option. With regards to TYK2 and competition from TYK2, Otezla comes with a lot of really beneficial areas as tickets coming into the market. It is a well-known, well-prescribed product with thousands of patients around the world that have been treated. So the efficacy is known and the safety is known. And just on the safety side of it of not having lab monitoring and -- we'll have to see -- wait to see what happens with TYK2 with regards to what the safety profile actually reveals itself as, as well as how the agency labels the product when it's launched. But for Otezla, what we do know is the physicians are very well aware of the safety profile. They have been using Otezla for many years. And it has multiple indications, of course, that it has been approved in and we've expanded the label over time. The last thing that I'll say about that also is access is absolutely critical. In the United States, we have greater than 90% of commercially insured lives covering Otezla today. We have a very widely used and expansive patient assistant program of making sure that patients can get access to affordable medicine, and I think all of those will be able to help us continue to have Otezla as the leading oral biologic in the category.

Yes. It's going to be interesting to see what happens with -- in light of all this JAK stuff with TYK2, how that all shakes out since they all are in the same family.

That's right. Well, you may have even seen that even the topical JAKs have some labeling associated with them now, too.

Yes, definitely. Just pivoting -- just given you had a nice rebound in the past quarter in your base business, like for ENBREL and Otezla, how much of it was kind of COVID-driven recovery? And do you expect those trends to continue? Or is it kind of just -- kind of largely based on the impacts that Delta had earlier in the year?

Yes. I think you hit on it. The -- we continue to see uncertainty in the second half of the year really depending on how things play out with COVID across the world. I mean, as I had mentioned earlier, in the dermatology space, we definitely saw the impact of the pandemic early on in suppressing the number of new patients starting treatment, which we expect will be volatile going into the end of the year because we'll have to see how the resolution of the virus or actually the continuing evolution of the virus affects our business. For Otezla NBRx, our new brand restriction was up 10% in the second quarter. However, dermatologist visits were down. So we're going to continue to monitor how patients are going back into the office and get ready for our mild to moderate launch, which we think is going to make an impact to the business and a real benefit to patients.

Definitely. So one thing I find just very, very cool about you guys over -- covering you guys for a long time is that just I have like a great diversity of assets. You have some that are losing exclusivity. You have some there in the growth phase, and you have some that are stable. And I guess just maybe talk a little bit about how you guys think about managing such a large portfolio and keeping that balance intact. But I think you do it probably almost best in class.

Yes. Thank you. And Peter, I don't know if you want to add to this, or Arvind. But our mature products continue to generate attractive cash flows. And for biologics will -- and for biologics, as a portfolio that has a number of biologics in our portfolio, the loss of exclusivity is different, and we are expecting that the curves will continue to look different than small-molecule LOE curves. For products that are in the growth phase, we have a number of things that we're excited about. As I said, Otezla launching the mild to moderate indication. For tezepelumab, I haven't mentioned that yet, but we're anticipating a launch in 2022 with a unique position in the marketplace of being able to help patients across the broad spectrum of severe asthma. And then, of course, LUMAKRAS, not only LUMAKRAS with the launch in the U.S. and expansion into other indications, but also the expansion across the world. So I think that being able to have both the growth of our -- as you said, of our more mature product portfolio, new launches coming in really set us up. And then if you look at our pipeline a little bit longer out, we have a number of interesting things coming through the pipeline, either in our inflammation side or gen med area, as well as oncology. On the gen med side, in inflammation, we have, future out, 2 assets that are being developed in lupus, 1 in celiac disease that are continuing to progress forward. On the oncology side, a PSMA BiTE, our 160 asset is continuing to move forward as well in dose escalation. And then the DLL3 asset 757, which is being developed in small cell lung cancer disease with high unmet medical need and moving that one forward as quickly as we can. And then lastly, of course, bemarituzumab, I shouldn't forget about that, getting ready for -- moving forward with our Phase III program in that, as well as with OX40, 451 of also getting ready for -- moving forward with our Phase III program with our partner, Kyowa Kirin.

So the payer world changing, and I'm just kind of curious how Amgen is working with -- in there within your current and future portfolio to kind of get greater access to medicines, collaborate with payers on innovative models, it seems to be kind of a major focus right now.

Yes. So definitely, access is absolutely critical to our business and that we've had a long history and strong capabilities and contracting and access. Again, it comes back to making sure that you have differentiated products in the market. And so working -- our clinical teams are actively, not only developing new things coming out of our discovery team, but getting ready to commercialize these differentiated profiles to be able to show the value of the product in the marketplace. We have -- we also have a broad suite of patient access programs because it's not only about payer coverage, governmental coverage but also ensuring that our patients' out of pockets are affordable on and a number of different programs. I mean, for example, on LUMAKRAS right now, we have over 3,000 patients that have had experience with LUMAKRAS, either through our clinical program, commercial impact as we're in the market selling right now, but also we put a number of early access programs around the world where patients were able to get early access to LUMAKRAS. And so just in summary then, we'll continue to focus on the payer area. Net selling price is likely to be negative for us in the U.S. for the short period. So we need to make sure we're just focused on differentiated medicines to products that are creating a meaningful benefit that will continue to allow more patients to benefit.

Interesting. So Aimovig is a great drug. And I guess how do you -- I mean, there's obviously some competition there. But how do you think about driving more market share there? And then what have been the factors that have been potentially most challenging?

Yes. So it's early days, and we continue to monitor the marketplace. Being the market leader, we definitely do observe that there is some switch to Nurtec recently launching in the marketplace, and it's an incredibly competitive marketplace. The subcu market of that also gets -- is also continued to be impacted by COVID on new patient starts, and we don't think that the -- that segment has made full recovery yet. With that said, though, we are proud of Aimovig's robust history of 5 years of safety and efficacy data, and we're going to continue to watch the evolution in the marketplace.

Definitely. So you've touched on it before, but there's a lot going on with you guys in inflammation over the next 12 months, which tezepelumab launch probably being the biggest one. But can you also just talk about other late- and early-stage investments that you've made that you're kind of particularly excited about?

Yes. As you said, so we're excited about the tezepelumab launch in the first quarter. And then as well for tezepelumab, we continue to look for with our partner, AstraZeneca, other indications to pursue there. We are initiating soon our Phase III study with Kyowa Kirin for OX40 for atopic dermatitis, our 451 asset. And you had also mentioned from our biosimilar portfolio, getting ready for an AMGEVITA biosimilar to HUMIRA launch.in January '23, as well as other biosimilar candidates, including STELARA, a little bit further out. From a pipeline standpoint, for inflammation, we have our AMG 592, which is our IL-2 mutein being studied in lupus and ulcerative colitis, as well as 570 also being studied in lupus. So we have a very -- and then, of course, needless to say, Otezla, end-to-end role in the inflammation space. So we have a pretty strong portfolio that's currently in the space made of both innovative and biosimilar products but then as well a healthy pipeline to follow on that, which we think puts us in a good position in that space.

Alethia, I would just add that in conjunction with our AMG 451 data presentation at EADV, we are going to be hosting a call for the investment community next Monday, just to highlight the data as well as the broader inflammation portfolio.

That's awesome. We'll be on it. So we've seen a big picture, I guess, I mean, how do you guys think about managing such a big portfolio of assets? I mean, are there like kind of percent allocations you like to keep around where you are in late stage or mid? Or is it just the vast portfolio of demand. So I'm just curious what goes on under the hood here.

Well, I'll jump in, Alethia. Thank you. Susan has done a terrific job, sharing with you our excitement about the long-term growth prospects and some of the sequential launch opportunities we have coming up with next year, early next year forward. So when we think about managing the portfolio, historically, about half of our revenue has been from internal innovation and then about half from external innovation. We like that balance. Lately, as you've seen and our investors have seen, we've been accelerating that balanced innovation externally. So 4 very attractive transactions this year, recent deals like Teneobio and later-stage pipeline deals like Five Prime and, as Susan referred to, AMG 451 or KHK4083 with Kyowa Kirin in the atopic derm space. We also think about the allocation of resources between the early pipeline and the late-stage commercial pipeline. Those percentages vary, just depending where the pipeline is at any given point in time, but we think about that a lot. And our R&D and commercial teams working close -- they work closely together systemically to prioritize investments, drive up success in the market. One example is the LUMAKRAS diagnostics that Susan referred to. It's helped drive up that KRAS testing rate north of 70%. We also think, finally, really important to think about life cycle management opportunities. We continue to prosecute those when they make sense, investigation, for example, of other tumor types beyond gastric indication in the bema. As an example, we plan to initiate a Phase II study there in squamous cell lung cancer. So we actively manage it. It's a joint effort between commercial and Susan and Murdo and the team and research and development. And certainly, our external business development group is actively involved. And so we're very, very excited about that and how the portfolio is coming along and the pipeline and how that currently looks for our investors over the long haul.

And so you guys have done a mix of deals this year on the acquisition front, so I'm just curious how we should broadly think about deal activity over the coming year but like the next 12 months of sorts.

Well, we never like to kind of predict the business development area. What we can predict is we'll see a lot of deals, and we do. We're Amgen. We've got very strong financial flexibility. We've got good firepower, so we'll continue to move forward in that. We'll be patient. We'll wait until we're the best buyer or best collaborator, best partner, best licensee for a situation. We want to make sure that, that models well in our system. And so that means commercial and ops and R&D are all very involved to make sure we're the right party for that situation. We want to be prudent. We're always looking for clearing our hurdle rate comfortably so that it accrues benefits to our shareholders, not just the shareholders on the other side of the transaction. And we think about being in an area that we're good at, and that means discovery research areas. Cardio, in plan, we've talked a lot about that today; in oncology. And then finally, we like to find transactions where we know we'll, post deal, whatever the deal might be, that we'll be able to integrate them or collaborate or partner, license on optimally, that we're one of the best available. So it's all built on our capital structure, which is efficient, optimizes our WACC, and we're ready. Certainly within the next year, we're certainly open, and we'll look at everything. And we've got a great team that does it. Susan, Murdo and the commercial team partnering with R&D, with business development in the middle, we're really excited about it. So I'd just say I see we're out of time. Thank you so much for inviting us to Cantor's Healthcare Conference. We're delighted to be here. We thank you very much, Alethia. And from all of us at Amgen, thank you so much for your interest in the company.

Thank you, team Amgen.

Thank you, Alethia.