Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Great. Let's go ahead and get started with our next session. Thanks, everybody, for dialing in. My name is Chris Raymond. I'm one of the biotech analysts here at Piper Sandler. It's my pleasure to introduce our next company, which needs no introduction. We have with us Amgen today. With us from the company is Peter Griffith, EVP and CFO; Murdo Gordon, who's the Executive Vice President of Global Commercial Operations. And of course, we also have Arvind Sood, who heads up the Investor Relations group at Amgen. So thanks, guys, for joining us. For folks who are dialing in just some really quick housekeeping. We do have an option on your Zoom link to ask a question, I think it should be hopefully easy to understand. If you want to ask a question, please register it. I'm monitoring that as we go through our session. You don't want to do that and you just want to do an old school, just hit me on e-mail. I'm monitoring that as well. And I'll make sure your questions get asked and answered. So thanks, guys, for joining us. We have 25 minutes. And I've got about 2 hours worth of questions. So we're going to try to run through this pretty quickly. Peter, maybe just to start off, as we exit 2021, you guys have been pretty upfront about some of the pricing and competitive pressures you're seeing across the business. I think it's impacting the branded products and also your biosimilar offering. As we look at the key franchises that are facing some loss of exclusivity, again, we've got a few years yet here on some of these. But we've gotten a lot of questions from investors around what you do strategically here. And I know that's a pretty well-traveled topic. But just I think if any management team deserves maybe the benefit of the dollars, you guys, especially given just all the execution you've done -- you've demonstrated over the years. Just maybe frame this issue for investors, why should folks not be sort of more worried about some of these signals we're seeing.

Well, Chris, thank you, first of all, very much for having us back. It's great to see you and we thank Piper for the opportunity to come visit with investors and you and the team today. So first of all, in Amgen, we've taken proactive steps to well position the company for long-term growth with multiple product growth drivers and certainly a diverse pipeline. So first, we continue to invest in Prolia, a medicine which addresses a very large unmet need for patients. And given the severe impact of fractures on lives of postmenopausal women, EVENITY provides an excellent therapy to build bone first, which should then be followed by treatment with Prolia. So our bone franchise is doing very well. Beyond that demand franchise, we expect continued growth from Repatha, volume-driven growth from further market penetration, and Otezla. And Murdo will share with you some of the additional indications and the geographic expansion there, which we find very exciting, especially for patients that it will open up to. And Chris, we just wanted to share perhaps some additional information today about our biosimilar portfolio. We expect our biosimilars business to be a very steady growing business through the end of this decade. You may recall that back in 2014, we'd estimated, this could be a $3 billion opportunity at peak. We now estimate that we can more than double our 2021 biosimilars revenue by the end of the decade. Dynamics are different than the branded business. Growth will be driven by new product launches and launches in additional geographical global markets. We had a steady flow of new biosimilar launches through 2021, and that will pick up again in 2023 with the launches of AMGEVITA in the United States, and timely launches of our biosimilar candidates thereafter for STELARA, EYLEA and SOLIRIS. We'll continue to position ourselves in the first wave of biosimilar launches. We expect Phase III data for our STELARA EYLEA and SOLIRIS candidates in 2022, and will launch AMGEVITA in the United States on January 31, 2023. Over the long term, we expect to add additional candidates to our biosimilars portfolio. Biosimilars will be accretive to our long-term revenue growth and operating margins for biosimilars will not be dilutive to overall corporate operating margin. We benefit from a cost-efficient manufacturing and selling model as we utilize our existing capacity to manufacture an existing infrastructure to commercialize biosimilars alongside our branded medicines. And moving then to our recent business development activities that have augmented our portfolio, bema from the Five Prime acquisition, and AMG 451 from the Kyowa Kirin collaboration are both derisked assets that will initiate Phase III studies in the near term. And I might add bema recently initiated Phase III and AMG 451 should be in the first half of 2022. We're going to continue to evaluate BD opportunities where we can. And as we like to say, we'll be the best buyer when we get involved, and we're going to make sure it clears our hurdle rate. It's in an area that makes sense to us. and there are opportunities that we know we can successfully integrate.

Awesome. Okay. Well, there's a lot of -- go ahead.

Yes. Just a couple more things, Chris. I'm going to talk about sequential launch opportunities through '25 LUMAKRAS. We've talked about you can certainly go through that, and I would encourage you to with Murdo. We're excited about that, and first and foremost, for patients with the KRAS G12C mutation non-small cell. The Otezla mild to moderate, tezepelumab is very exciting, and we talked about biosimilars. Additionally, in the pipeline, Phase I and II, we've got tarlatamab, AMG 757 in small cell lung cancer that we think shows some promising data, and we'll get that -- we believe that's going to be moving forward in the clinic. AMG 890 and siRNA for cardiovascular disease; AMG 570 in lupus; AMG 714, celiac disease. And then just finally, wrapping this up and then you can probably turn over to Murdo and get into some questioning with him, too, would be strong discovery research. We don't like to lose sight of that or multi-omics, including our genomics capabilities with deCODE, multispecifics from the Teneobio deal, induced proximity platform, targeted protein degradation. It's an area we're in discovery research, and we're not sitting still in the world of generative biology. We understand we're in that, and we're going to continue to augment what we've got there. So that's among some other opportunities and what we're doing to execute for our shareholders here at Amgen right now.

Awesome. Yes. an awful lot impact. So let's try to maybe jump into those. Maybe first, though, for Murdo, maybe more of a -- and since you bring up the biosimilar business and the growth there. I'd like to ask a question maybe on this drug pricing framework. I'm kind of curious maybe to dig into this. I know we're still talking in terms of hypotheticals. It's still a bill. It's still a framework I think Bob referred to it as maybe sculpting fog in your last call, which I love. It is true, right? It's still unknown. But even with its preliminary nature, you've got some exposure there with ENBREL at least on the top 10 list. But as that list expands, the exposure obviously becomes greater. And so I know you guys were thinking about the broader framework as a net -- or where you could see some positives, especially on the Part D exposure part of it with reducing out-of-pocket expenses, et cetera. But -- a long-winded question. I guess how should investors be thinking about this in terms of net negative, net neutral at this point across your portfolio? And specifically, one of the questions, I guess, that kind of came up from a session we had yesterday with some drug pricing experts. They were talking about this provision essentially with respect to Part B drugs really potentially disincentivizing the uptake of biosimilars, if you're going to see this erosion, right? in some of these branded products, maybe perhaps earlier than possible. So a lot of moving parts to that question. But Murdo, just any thoughts on that?

The question might be longer than the answer. Look, at Amgen, I think you've seen us be extremely patient-focused, and very concerned about affordability issues for our portfolio, and we've taken measures like dropping the list price of Repatha to ensure that broad populations of patients have access to our medicines. So we'll support policies that improve patient affordability. And that also, though, preserve future innovation and the incentives to take risk in investing in developing that future innovation. And as you know, most of this framework still is hypothetical. It's fluid. I mean I talked to my DC team 3, 4 times a week just to see what the latest running total is. So if there's an out-of-pocket capture Part D patients, we said that, that could help patients in the -- particularly in the donut-hole structure that unfortunately causes some cessation of therapy or some drop off of therapy, but it could help products like Repatha, which serves a large Medicare Part D population. But it's really premature to comment on all of the hypothetical impact because there are so many different elements timing, the extent of the criteria, whether product comes into "negotiation" or government intervention on price. But we're tracking it closely. I don't think that Amgen is any more or less exposed than the rest of the sector, but we're watching it extremely closely, Chris.

Okay. Great. Well -- so Peter, since you brought up the -- perhaps the discussion on biosimilars. Any thoughts there? And what are the push and pull on maybe being a little bit more incrementally bullish, I guess, on that business going forward?

Chris, I think I'd probably invite Murdo to jump in. I mean he's -- that's worked really well, and he and the commercial team have done such a great job in biosimilars, and we think it's so important to what we have in the portfolio. I'd invite Murdo to jump in here and address that. I think it's a great question.

Yes. Thanks, Peter. Chris, I'm actually very pleased with what we've been able to do with our biosimilars portfolio. First off, who better to produce high-quality biosimilars than Amgen, one of the pioneers in biotechnology. And I think that position, that reputation in the market has helped us compete already. I mean, I used to get a lot of questions on, do you think the biosimilar market is ever going to function in the U.S.? And of course, only 2 years later, here we are, we're seeing good, strong biosimilar uptake with our oncology biosimilars and [indiscernible]. We've seen really good competitive performance with our biosimilar portfolio outside of the U.S., where we enjoy market leadership with AMGEVITA. It is true that the life cycle of a biosimilar product is a little bit different. We've seen that we have an ability to rapidly penetrate conversion of the originator, and then you eventually see other biosimilar competitors bringing price down. So the shape of the biosimilar product life cycle is different. But when you compound multiple biosimilar launches, on top of one another, it becomes a growing business. As Peter highlighted, we expect to be able to double our 2021 revenues by the end of the decade, and that's going to be done primarily by launching a sequence of high-quality biosimilars, AMGEVITA launch in the U.S. in 2023, followed by STELARA EYLEA and SOLIRIS biosimilars, and then additional biosimilars towards the latter half of the decade. And we're very selective when we think about biosimilars. First off, we want to be first or in the first wave when we launch biosimilars. We want to target biosimilars where we think there's price headroom. We want to target biosimilars where we think we have boots on the ground where we already covered those customers, and we can weave those products into our field teams, our commercial organizations that already carry our innovative products, and that allows us to achieve competitively superior positions and performance in the market. So we're expecting a series of Phase III data readouts on some of the products that I mentioned. Over the longer term, we'll add additional products to that mix. And these products in this portfolio is going to be accretive to our long-term revenue growth and operating margins. So it's a very welcome component to our business.

Excellent. Okay. Well, let's maybe jump around a little bit. And if you excuse me asking an R&D question of a commercial guy and a finance guy, just LUMAKRAS and the of the KRAS program may be a bit large. I was kind of struck by a comment David made on your recent earnings call, sort of recognizing competition behind LUMAKRAS but also you've got work going on in G12D and G12V and it was too early to say anything specifically. Just kind of wondering if you can talk about how some of this early work is factoring into your long-term sort of strategic objectives.

Yes. It's great that you picked that up, Chris. I think what you heard from Dave is that we're very focused on lung cancer as a tumor area of interest for Amgen. And we have multiple opportunities here. So obviously, we have the LUMAKRAS launch, which is progressing really well. I was out recently with customers in the U.S. talking to some of the largest community cancer networks. And just trying to understand how they are ensuring that patients have KRASG12C test result available that LUMAKRAS has in their pathways and that they're driving uptake and providing patients that opportunity should they progress beyond first line. But back to the portfolio, we've also announced that we're going to take a look at bemarituzumab in lung cancer, our FGFR2b product that we picked up from the Five Prime deal. We also have a small cell lung cancer program with tarlatamab or formerly known as AMG 757, targeting DLL3. So we have multiple opportunities here. So it only makes sense, I think, for us to also interrogate other KRAS mutations. It's super early. We can't really comment on what that work looks like. But I think you'll hear more from us in our overall approach and strategy to developing a lung cancer portfolio.

Yes. And so you brought up bemarituzumab a couple of times. And so maybe just -- I'll ask another question on this. So I think when you guys did the deal and we, like everyone sort of dug into the data on that molecule. I think the mechanism, I think, is pretty well known in terms of the efficacy side in treating, but you did have that ocular signal at a relatively high 34% or so discontinuation rate. I know you guys have talked about mitigation strategies in the Phase III. But maybe just from your perspective, Murdo, help us understand how this -- assuming that you're able to get the sort of results you're looking for out of that Phase III with those mitigation strategies, how does it sort of factor into your lung strategy that you're talking about?

Yes. Well, first and foremost, we obviously interrogated the data fairly closely when we were in diligence on this deal, and we looked very closely at the safety profile. So this is an on-target toxicity of bema. But let's just make sure everybody listening is clear and understanding what the ocular side effect is. It's a corneal adverse event. It's an irritation of the cornea. So it's like dry eye. It's not a vision or retinal issue. So that's really important for people to understand. And in the FIGHT trial, there was no prophylactic or mitigation plan that was implemented in that protocol. So the data in the FIGHT trial are kind of like your natural organic toxicity profile without prophylaxis. A couple of things about this toxicity. It shows up approximately 24 weeks -- within that 24-week time frame. So you've got a bit of time to run a prophylactic regimen. So what we're doing is -- We're going to add a proactive ocular monitoring of lubrication, so it drops in the eye into the Phase III trial to reduce the risk of these adverse events to reduce discontinuation. And we've agreed upon ocular monitoring and prophylaxis plans with FDA and other regulatory agencies. So we're very much on track here, and we have initiated our Phase III first-line gastric cancer setting registrational program. So we're in good shape on this product. And I do think that we talk about the competitiveness of oncology. And if you look at KRAS, we've got lots of other companies chasing KRAS as a mechanism. Here with FGFR2b, we're quite unique and we're quite differentiated and out ahead of many others -- a few others, I should say, because there are very few people with an FGFR2b targeting assets. So beyond gastric, we are looking at non-small cell lung cancer squamous histology, and we're going to be running basket trials to look at other areas like breast, ovarian, colorectal, then also express FGFR2b. So it's an exciting product. lots still to understand and a lot of trials to do. But I think as was mentioned, it's largely derisked in gastric, and we feel good about our ability to manage the toxicity.

Awesome. Okay. Well, let's maybe transition then, if we can to the inflammation franchise. And I know there's a lot going on there. You guys mentioned the mild-to-moderate psoriasis PDUFA for Otezla outside of Amgen's 4 walls. Jack's obviously have taken a bit of a step back in terms of labeling and then teze coming up. Maybe just a couple of questions on how you're prioritizing, maybe first start off with tezepelumab. Murdo, you'd expressed a lot of enthusiasm for this drug every time you guys are -- have an earnings call. I know it's top of mind, maybe tee up the opportunity there, and how investors should be thinking about that launch is going to contribute to the top line?

Yes. We are excited about tezepelumab with hopefully a imminent approval in the next few weeks here. We are clearly establishing this product as a very novel mechanism in severe asthma, highly differentiated, being able to treat a broad population of patients, both high and low eosinophilic phenotypes, and really helping a significant unmet need. I mean, severe asthma, we talk about it like it's just another medical condition, but this is a very scary thing for patients to experience. And we're still -- we still see a large unmet medical need here. Roughly 1 million U.S. severe asthma patients are eligible for -- or will be eligible for tezepelumab treatment between the low and the high eosinophilic population. And it's roughly 50-50, 60-40, depending on which epidemiology source you look at between low yields and high yields. So we're able to address roughly double the market that any other biologic treatment indicated for severe asthma is able to address. So that's exciting. We're also excited about having this unique mechanism, the TSLP mechanism allows us to go to the P&T committees and medical committees at payers and say, you need to have a TSLP mechanism on your formulary. So that should allow us to be a little more differentiated in how we negotiate payer coverage. Now I will say that will take time the new world is you've got to work very carefully through that process to get your product to get reimbursement coverage. We have a great team here at Amgen that does that extremely well. We've been educating them on the disease state and on the mechanism. But it will take us a little bit of time to secure that access, and that's key to the launch, obviously. So we're looking forward to this one with our partners at AstraZeneca. I think we've got the best of both companies applied to this launch. And we've had our medical and our sales organization and our access teams in the field for several months now, reaching out to customers and preparing them for the pending approval. So I think it's a significant opportunity for us, a really good long-term growth driver, and one that's going to help a lot of patients.

Excellent. All right. Let's maybe switch to atopic derm in your view. I know you've got the OX40 program. It looks really interesting. I'd love to get your sense, Murdo, how you're viewing that market? And just full disclosure, I've had maybe sort of a pet thesis that both AbbVie and Regeneron have kind of told me I'm wrong. But the thesis is that atopic derm is looking more and more like a combo market, at least that's what some of the physician survey feedback comes back as is that docs are looking for stuff to combine with DUPIXENT even patients that are optimally managed on the biologics, something to combine and make them -- responding better is a desire. But it appears that maybe that's not a universally held sort of view. So maybe just give me a sense of how you see that market evolving. One of the things that's been interesting is how many -- how much AD drives the derm practice now versus, say, 10 years ago? It's a really -- at least in terms of patient traffic, it's a big driver. So it seems like it's big enough to support all kinds of different therapies and biologics and other approaches, but how are you viewing that market today?

Yes. I think it's an interesting hypothesis, Chris. One thing I would agree with you is that you've got a very heterogeneous population. We call it 1 disease, but the reality is there are probably multiple phenotypes to the disease that just haven't necessarily been subcategorized. And I think that will evolve over time. But that also says to me that you need multiple ways of targeting the disease and multiple mechanisms. As to the combination piece, I don't think I'd address that yet because there's a lot of payer barriers to that kind of a market evolving. So I would say that, that may take time and may not even happen until you might have some biosimilars to some of these products, but that could be a problem. But if we look at our own program and what we've got running here with AMG 51, it's a novel mechanism coming into that market. It has some real interesting differentiation versus dupi. We've got the potential for much less frequent dosing, potentially monthly or maybe even spaced out beyond monthly. We've got the kind of the dual mechanism of OX40 inhibition and T-cell depletion, and that sustains that efficacy in between dosing periods. We've seen efficacy in our trial in the Phase II in dupi failures. So that tells me that the mechanisms are different, and therefore, you'll get different response profiles. And obviously, we've got a different kind of safety profile here with no conjunctivitis to speak of. So there's -- I think we're in the stage of atopic derm being a market where you need multiple modalities to treat a broad population of patients who are probably quite heterogeneous in the etiology of their disease.

Got it. Okay. I think I have time for maybe one more question. So maybe what I'll do is I'll use this time to circle back to the biosimilar portfolio since it is an interesting growth area. And I hesitate to ask this question, Murdo, because I know it's kind of like asking you, which one of your kids is your favorite, but I'll ask it anyway. You guys mentioned proactively a number of these efforts, STELARA, EYLEA, SOLIRIS. Can you maybe give us a sense of which one or ones you're most excited about?

Well, I'd be remiss if I didn't start with the opportunity to be the first biosimilar entrant in 2023 with AMGEVITA or biosimilar to HUMIRA in the U.S. I'm very proud of what commercial and medical teams have done around the world to establish AMGEVITA is the leader in that category. We continue to lead in major markets in Europe. We're still launching in many markets around the world with AMGEVITA. And so this launch in the U.S. is a very important one. We understand this category very well from our innovative experience. We have seasoned teams of people on the ground who can explain the quality of our biosimilar and the convenience of it for patients. All of our programs that we extend to ENBREL in the market will be extended to AMGEVITA. So I think really good quality co-pays really good quality staff and billing staff support. So we know how to do this really, really well. I think it differentiates us versus the other biosimilars that are coming. And I think that our relationships with the payers and the PBMs also help. So very excited about that opportunity. I won't pick favorites between the remaining 3 major launches, STELARA, EYLEA and SOLIRIS. But again, having a nice sequence of launching these through a period of 2, 3 years affords us to maintain a nice growth trajectory through that time period. I really do think that our strength in manufacturing operations, our understanding of the market, what's important for PBMs, what's important for providers and what's important for patients allows us to put a full offering out there in the marketplace. And it's -- sometimes it shades a gray that differentiate you from another biosimilar. By definition, these products are all alike, but you'd be amazed how concerned a PBM might be with ability to supply the market or what's the needle gauge in your device. How easy is it to self-administer. So we do all of that really well as Amgen. And I think it's going to be what shows up as a competitive advantage in the market when the time comes, much like it has been in Europe.

Great. Well, thanks. I've got tons more questions, but no more time, unfortunately. So thanks, guys. I know you have a busy week, and I appreciate you spending some time with us today.

Great. Thank you, and we wish you and everyone at Piper a really safe holiday season and be careful. And we always are glad to be with you and our investors, and visit with you about the long-term growth opportunities at Amgen. Thank you.

Thank you.

Thank you, Chris.