Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Okay. Well, good morning, everybody, and thank you for joining us once again for the 42nd Annual Cowen Health Care Conference. I'm Yaron Werber, one of the biotech analysts here at Cowen. And it's a great pleasure today to moderate the fireside chat with Amgen. With us today, we have Peter Griffith, who is our EVP and Chief Financial Officer; Murdo Gordon, who is an EVP Global Commercial Ops, Head of Commercial Operations; Arvind Sood, VP of IR; and Omari Wise from Investor Relations as well. If you have any questions, by all means, feel free to e-mail me directly, and I'll be happy to read them on your behalf or use the Wall Street Webcasting portal and I can read those as well. So gentlemen, thanks so much for joining us. We appreciate it.

Thanks, Yaron.

Thank you, Yaron.

So Peter, I want to turn it over to you maybe for 2 or 3 minutes of introductory remarks, and then we'll go into Q&A.

Great. Well, thank you, Yaron, and we all thank the entire Cowen team for inviting Amgen to join the conference. We recently had an opportunity to discuss what we expect to deliver through 2030 with the investment community at our Business Review Day. We expect to deliver mid-single-digit revenue growth and more than double our EPS through the end of the decade, and this is through organic growth. We've outlined the drivers of our revenue growth over this decade. Multiple innovative growth products, notably Repatha, Otezla, Prolia and EVENITY. Biosimilars, we've launched 5 molecules to date and expect to launch an additional 6 through 2030. We expect to more than double our 2021 biosimilar sales by 2030, and we shared with you that biosimilars are not dilutive to our overall corporate margins. We recently launched products in our pipeline, and we have 2 new products that we recently launched, as you know, LUMAKRAS and TEZSPIRE. Otezla is now approved for a new indication mild-to-moderate psoriasis. We also have a robust pipeline of novel medicines that we'll discuss in more detail shortly. And finally, for our biologics with LOEs later in the decade, probably XGEVA in 2025 and Enbrel in 2029, we've highlighted that biologics historically erode at a slower rate than small molecules after patent expiry. A decade ago, we had about 40% of our revenue that was facing LOEs and these biologics today still account for about 10% of our revenue or about 25% of the amount that they were back then, generating meaningful cash flows for us to reinvest in innovation, both internal and external. Turning to 2022. Recall from our remarks, the last month's business review that we've guided to total revenue of $25.4 million to $26.5 million for 2022. This range reflects the impact of net selling price declines and no new contributions from biosimilar launches in 2022, some declining Neulasta sales and foreign exchange headwinds. Recall also that the first quarter is historically our lowest revenue quarter, which we reminded you about our Business Review Day. This reflects the effect of insurance, reverifications, copays and deductibles for patients. And this year, we believe Omicron has had an effect on our first quarter. And if you want, Murdo can certainly share some details on that with you. Just an important reminder that we book our share of BeiGene's results 1 quarter in arrears on the equity method of accounting. So we will be booking our share of BeiGene's Q4 '21 results in our first quarter of 2022. So with BeiGene recently reporting their fiscal year '21 results, we now expect other income and expense in the first quarter of 2022 to be approximately $400 million of expense as BeiGene reported a larger loss in Q4 '21 than we anticipated based upon the publicly available consensus information that we use to estimate their results for the year. For full year '22, we continue to expect OI&E in a range of $1.4 billion to $1.6 billion of expense as we said last month. Importantly, we see accelerating growth into 2023 with the U.S. launch of AMGEVITA in 2023, a key driver, continuing post launch momentum from TEZSPIRE and LUMAKRAS and sustained growth again from our key brands, Repatha, Otezla, Prolia and EVENITY. Let's turn to the pipeline for a moment. We have 10 innovative molecules, advancing through our mid- and late-stage pipeline in addition to TEZSPIRE and LUMAKRAS, TEZSPIRE ongoing launch and an important life cycle management program. It's got a Phase III program ongoing in chronic rhinosinusitis with nasal polyps, a planned Phase III study in eosinophilic esophagitis and 2 ongoing Phase II studies in chronic spontaneous urticaria and COPD. AMG 451 is a first-in-class molecule targeting OX40 where we're launching a broad Phase III program in atopic dermatitis that will initiate in mid-2022. In first-in-class molecules AMG 592 in lupus and ulcerative colitis and AMG 570 for lupus, both are in Phase II. In Oncology, importantly, tarlatamab, targeting DLL3 in small cell lung cancer with a potentially registrational Phase II study underway. Bemarituzumab targeting FGFR2b is enrolling 2 Phase III trials in first-line gastric cancer. And in LUMAKRAS, we have comprehensive combination programs with over 10 combinations being explored across non-small cell lung cancer, colorectal and pancreatic cancer. 3 assets being studied in prostate cancer that we shared with you last month, AMG 160 and AMG 340 targeting PSMA and AMG 509 targeting STEAP1. In General Medicine, Repatha as a Phase III trial of VESALIUS, potentially opening a path in primary prevention. Olpasiran in Lp(a) will have Phase II data coming later this year and AMG-133 multi-specific targeting GLP-1 and GIPR being studied in Phase I for obesity and other metabolic disorders. In our discovery research engine, we're building differentiated research capabilities in 3 areas: human data, multi-specific drugs and generative biology. It's going to be important for our growth engine beyond 2030 and will accelerate opportunities this decade. We've made important progress in our quest to expand internationally. Collaboration with BeiGene is going well. We expect sales outside the United States to account for about 35% of our total sales by 2030. And finally, we will continue to be predictable and responsible stewards of shareholders' capital. Hierarchy begins with investing in the best innovation, whether it's internal or external. We're going to continue to seek value-generating deals with a focus on those that create value for our shareholders, not just the shareholders the sellers, and we're going to continue our cash returns to shareholders through a competitive payout ratio of growing dividends and opportunistic share repurchases. And with that, Yaron, after my 2 or 3 minutes, I'll turn it back over to you.

Perfect. Thanks, Peter. So let me actually drill down a little bit on your fiscal year '30 guidance. So when we look at the LOE, the LOE is on the order of about $10 billion by 2030 or so. And it sounds like you're thinking that you'll capture -- you'll retain a portion of that, right? Is a portion of that based on what you've seen with Neulasta, EPO, Aranesp, Neupogen, it's kind of a 30% to 40% range been the right trajectory so far what you've been retaining from pre-biosimilar launches?

Look, that's a great question. We think, as we look at, again, the erosion curves on the biologics, we just think they run out longer. There's a longer tail. And so importantly, we just wanted to remind investors about that. So particularly with the bone franchise with denosumab in '25 and Enbrel in '29, we just want to make sure that they understand how we look at that. And that's why we go back as always, historically, look at the data on what happened last decade. So we continue to support that. The data supports the hypothesis, and we'll continue to defend those brands. We think it's really, really important. And the better we defend those in that erosion curve, the more capital we have to return into innovation, both internal and external.

And so when we look at the delta between -- based on the fiscal year '30 guidance, it's kind of back into it, it's around $38 billion in revenues or so. With the LOE, the LOE, as I mentioned, is about $10 billion between Enbrel and denosumab but obviously, there's Otezla in there, it's about 3 or so, so close to 13. So there is a delta of about 22 that you need to sort of make up maybe even 24. Where do you -- where does that come from? Can you give us a little bit of sense? You're mentioning doubling for biosimilars, so that's an incremental $2 billion, right? Give us a sense, how do you think about the rest?

Yes. I don't think we guided a specific number on biosimilars. I think we said it's more than double, 2021 and 2030. So we like that franchise a lot. And as I said to you, Yaron, we don't see it as dilutive to our corporate margins. We see it as an excellent use of shareholder capital. And I think Murdo and the commercial team do a great job incorporating that right into the therapeutic area, commercial delivery, and that works very efficiently. Look, we talked about the erosion curve on the biologics being slower, of course, than the small molecule. That's one. We expect Repatha to grow, as we mentioned, in a multibillion-dollar franchise through the decade. We shared with you that we expect EVENITY. It's a part of that broader bone franchise growing the low double digits through 2030, and we expect Otezla to continue to deliver low double-digit growth on average until the LOE. And then new launches. We've got LUMAKRAS, TEZSPIRE, mid- and late-stage pipeline portfolio that we believe are going to launch growth over the decade. So we plan for that on a risk-adjusted basis. We've not specifically disclosed which assets we're planning revenues for, but our business review highlighted by 10 novel medicines in mid- to late-stage pipeline with first-in-class potential. And those include the Phase III-ready assets of bemarituzumab or [ BMS ], we'd like to say, and AMG 451 in the atopic derm market. We feel good in inflammation. We talked about our couple of the lupus opportunities in the pipeline and in celiac, various tumor types in Oncology. We feel really good about prostate and lung. We've got 3 [ shots on goal ] on prostate. We're hoping that more than 1 [ would hit ] for patients. And then General Medicine, we think LP(a) is going to be very, very important as -- with its clinical benefit going forward as that comes in later in the decade. So we think there's a lot of opportunities there. We feel very confident about that. And I would just continue -- also just to remind our investors and our colleagues that this is an organic plan. And Amgen has a long history, distinguished history of business development activities. We want to find the best innovations. So that would all be accretive to what we've shared with you.

Okay. In terms of the ASR -- the $6 billion ASR, which is happening essentially in Q1, what was the decision to do that right away? I know you also did a financing in the meantime, right? You've brought in about $4 billion or so of debt. And then when you think about doing deals and there's different size of deals, right? Some of them could be $400 million, some of them could be bigger. How much bandwidth do you have? And is it going to be typically driven by cash? Or is it going to be potentially driven by equity as well?

Yes. Look, we have a long history. We'll continue to keep what we call an efficient capital structure. So we think there's a prudent amount of leverage. We -- first and foremost, with ASR, we see our stock as a fabulous long-term investment, so we wanted to step in. We did -- and I would remind everyone, we did about $5 billion last year in share repurchases. So this year, we've indicated between $6 billion and $7 billion, so a moderate increase, it's hugely significant, and we accelerated that. Because we felt like as the company continues to perform and execute through 2022 and long into the future, it's going to be very, very attractive. So we feel great about executing on the ASR, and we feel really good about the timing of that. Now to the financing, look, we raised $4 billion on excellent terms and conditions, great prices for us, raised our first green bond, had a little [ greenium ] in there. And so I guess they like to say now. And so we feel really good about where the balance sheet is, we feel we've got the firepower and the flexibility to execute on what we need to execute on from a business development standpoint going forward. We think we've got very strong, stable, predictable cash flows. And you'll note that the rating agencies reaffirm where they were at on us in connection with the $4 billion debt offer.

Murdo, let me maybe ask you a question relating to what Peter mentioned as well. AMJEVITA, fiscal year '23 launch. HUMIRA is a -- U.S. sales are about $17 billion in fiscal year '21. So even if we give it a 40%, 50% haircut on pricing, we're still talking about an $8 billion to $9 billion opportunity for biosimilars. Amgen is going to be the first, if not one of the first, obviously launch in Jan next year. And that sort of also, Peter, on what you said that of more than doubling biosimilar growth. Give us a sense how big can that opportunity be for AMGEVITA? And is it sort of just like in Oncology, a very fast uptake and then a defensive mode as new entrants come in? Or how do you think about -- how that brand works out long term?

Yes. Thanks, Yaron. The first thing I'd do is go back to what Peter had mentioned in his opening remarks, is this is a very efficient business for us. 40 years of biologics manufacturing experience. We've had no interruptions in our ability to supply patients on the innovative side of our business nor on the biosimilars business. We continue to make sure that we build all of the attributes that we need into our biosimilar portfolio. So when we talk to pharmacy benefit managers and to payers, they want to know how we're going to help providers and patients from transitioning from a brand to a biosimilar product. And we have field forces that call on rheumatologists, GI docs, derms. We have patient support programs that will handle and call centers that will handle that patient volume. So we've got a very seamless approach to helping patients who may be switched from the brand to the biosimilar. And again, that's using people who have been in the Rheumatology and inflammation market for decades now. So an experienced organization that will pick up this launch. So we're very bullish on what we'll be able to do to help any concern payer -- any concern PBM be able to affect that transition in a very, very smooth way and ultimately have a great patient experience. Your numbers are roughly right from how I heard you describe the market, Yaron. So I think you've kind of got the math right in terms of what the opportunity is. I think it will be a little bit different than what we saw in buy and bill in Oncology. So here, obviously, we're going to be very dependent on the payer and PBMs thinking on how much biosimilar penetration they want to affect in their book of business and the lives that they cover and in the pharmacy benefit that they manage. I do think employers are interested in this one because it's so big, as you described. So I think employers are going to want to know what the PBMs are going to do to keep cost down in the largest drug spend category, which is the inflammation space. I also think that the curve will look a little different. I would expect a fairly good evolution of sales. So when you're talking about rapid, it's going to be more rapid than you would expect an innovative product. It may not be as rapid as you saw in the buy and bill space in Oncology. But I do think our lead, as you described, is critical being first or at least one of the first to launch is going to be an absolute -- absolutely important aspect of what we're doing here. And I do think we've got the experience, the leadership, the experience from Europe where we are, the AMGEVITA leader, the biosimilar leader to HUMIRA in Europe, we've been able to show consistent reliable supply. We've been competitive on price and we've done what we needed to do to secure that position. And I think we'll take a similar approach. The other thing to think about in our biosimilar business is it grows because of success of the launches. So as you see that rise and fall in a single asset, we'll be launching additional assets. We'll be launching STELARA, EYLEA, Soliris and other undisclosed biosimilars throughout the course of the decade, that continue to grow that biosimilar's total business. So as one is decaying, another one is rising. And that's really how we think of the business as a sustainable growth driver and why we said we can more than double by the end of the decade.

Got it, Murdo. That's very useful because that's, I guess, the 1 thing that language has always caught my eye because I would have thought that doubling is not where you're going to end up at all. I was thinking you're probably tripling if not, the TAM could be higher. It's a question of what the defense looks like later on in the life of those brands?

There's a few variables in there, Yaron. I think what we can control will be of a very high quality and will be effective in the market. There are aspects that you don't control. You don't control price erosion. You don't control the number of competitors that are eventually going to launch into a specific asset. From what we can see today, though, we think it's a very healthy and efficient business because of the way we've approached it. And we've approached it differently than others. We've embedded these products in our innovative portfolio alongside innovative products with experienced medical and sales professionals that know the category. And I think that obviously works effectively in Oncology in the U.S. It's worked effectively in inflammation outside the U.S., and we expect it to work similarly in '23.

Next year, at the same time when AMJEVITA, et cetera, get to market, what's potential impact on Enbrel?

Yes. So I think we would expect to see some price erosion on Enbrel in the category to maintain formulary positions. But I would expect also for -- given what we're seeing in the overall inflammation class with JAK safety issues and pricing dynamics already, we would expect to see Enbrel be -- still be an important choice on many formularies. So that if you don't respond to HUMIRA or there's a desire to try Enbrel in psoriatic arthritis patient or an RA patient, I think most PBMs are going to want to see that as an option given that there are fewer now frontline options to treat RA. So I feel like some price concession will be required given the biosimilar intrusion, but very durable revenue stream for Enbrel.

Great. Let's move to LUMAKRAS. I think prelaunch of LUMAKRAS, I think there was a thinking from your initial work that the market in second line, third line, fourth line, et cetera, in lung cancer is going to be on the order of about 12,000. Now that you've been probably about 8 months in the market or so, you're thinking that the market really is more on the 7,000 side on second line and the patients are inevitably going to come in the second line. They're obviously not going to get retreated then in third line and fourth line. Give us a sense what -- there was a haircut to the overall opportunity. I think the Street was thinking 7,000 and then 6,000 and then no matter what, it's going to be a 12,000 number. What was the delta due to? Is it -- the epidemiology is different? It sounded like that wasn't the case. It sounded like it was more about patient progression and actual availability for uptake. So if you can help us understand what you're saying?

Yes. I mean, I don't want to sound like the historian, Yaron, but bear with me just a little bit given that you and I have been following lung cancer launches for a long time. But very often, when you launch a novel treatment into a category like lung cancer, the addressable population is second line and beyond the day of launch effectively, second line and beyond. And then within a very short time frame, you find yourself -- you've gone through any of the patients that were sitting quite frankly in hospice who were asked to come out of hospice and be challenged with LUMAKRAS, you've treated that population. So that's no longer in your addressable population. What you're then working on is the incident second-line population rather than the prevalent second line and beyond. That's really what we were guiding to because what we saw is in some of the modeling work, we saw that initial epidemiology number that we gave as being used as the incident epidemiology. And it's not -- wasn't the incident. The incident second line number is the 7,000. So that's really why we brought the 7,000 and underscored that and said, "Hey, that's a second-line addressable population on an incident basis, roughly how many patients progress into second line each year." And that's what we see as addressable labeled population right now. So KRAS G12C mutation incidents still 13% by our estimates in the U.S. population, a little different outside the U.S. But that was really the rationale for being clear on the 7,000.

And what about in China? What's the incidence of G12C there?

Yes, it's lower, primarily because of the higher EGFR incidents. So -- but not hugely lower. I think we're thinking 10% to 11% potentially.

Okay. So still fairly sizable?

Yes.

Okay. I'm going to move to TEZSPIRE. And maybe give us -- I know it's obviously fairly early. We're talking about sort of 2 months into the launch at this point or so. What's the initial feedback in terms of access? And how do you see the drug actually being used?

We're very pleased with the initial feedback from payers, providers and quite frankly, patients for those patients that have been treated already. As you say, it's super early. We do it day by day, week by week on launches. I think what we're seeing is a good appreciation of the unique differentiated properties of TEZSPIRE, first-in-class novel mechanism, broad ability to address severe uncontrolled asthma. We are seeing appreciation from, I would say, pulmonologists in particular, for the simplification of the care of the workup of a severe asthmatic patient. So we're seeing that playback to as very, very nicely. And the way we've divided the customer audience in the U.S. is we are taking a lead on the allergist physician population and AstraZeneca is taking the lead on the rest of the provider population, primarily pulmonologists given their experience there. And even with allergists, we're seeing an appreciation for the unique attributes of this product and the fact that they can now offer a biologic solution for more patients. So I would say we're very pleased with that. On the access front, it's less an issue of people appreciating that this is a drug that should be covered. It's more just administrative process that we're going through, being that it's a Part B benefit product. Obviously, we've got a secured permanent coding for it, which we're expecting sometime in the latter half of this year. But so far, I'm very pleased with the early launch dynamics. We do think that there is probably -- there is decent awareness of the product, given that we had been out talking about the TSLP mechanism through various disease state education programs for a year prior to launch. So there was anticipation of this mechanism being available in the form of TEZSPIRE. And I do think there is a little bit of a bolus of patients waiting to receive treatment. So we'll watch the early uptake, but I think it will be several months before we know what the launch trajectory is.

Let me -- I'm just taking some questions from the audience. One of the questions that I haven't asked yet goes back to LUMAKRAS and the combo with KEYTRUDA or PD-1 obviously, of your own PD-1 as well. The data that we're expecting midyear, just remind us from the CodeBreaK study, that's mostly second-line lung in combination with PD-1, is that correct? And do you -- are you actually testing in first line now with KEYTRUDA?

I think we'll show you a mix of data when the data come out later, but primarily a combination of frontline and second-line patients.

That's correct. Yes.

And the original part of the study, right, was more second line. So the first line is probably -- that arm was open more toward the latter half of the -- latter back of last year?

The 2 combination trials, Yaron, that we are expecting data on towards midyear. One is a combination with the PD-1 and the other 1 is with a SHP2 inhibitor. And the idea of looking at these various combinations is to see if we can move LUMAKRAS further up kind of in the treatment paradigm in terms of first-line therapy. So to Murdo's point, it includes both first-line and second-line patients.

Okay. Got it. Okay. Last question for me to go back to TEZSPIRE. And the -- Peter, you mentioned a few indications, so maybe it's for you, Murdo, or whoever wants to take it. In terms of -- what do you think is going to be the next data readout? Is it going to be chronic rhinosinusitis Phase III or the EO is only planned? And then you have obviously the 2 Phase IIs ongoing, the chronic spontaneous and the COPD?

So I can address that, Murdo, if you'd like, and then feel free to add anything else. So the 2 studies that we have ongoing, Yaron, which are in Phase II trials, are the chronic spontaneous urticaria and then also the COPD study. And both of those -- I think we have mentioned this at the EADV. They are expected to read out within the next year or so. The ongoing Phase III trial that we have in chronic rhinosinusitis with nasal polyps, that probably won't read out for a couple of years yet. And then as far as the eosinophilic esophagitis study is concerned, that's still in the planning stage for the Phase III trial. So we haven't announced as to when the data would be available.

And the EO sudy will commence this year?

That's the plan. Yes.

Okay. Well, terrific. Gentlemen, thanks so much for joining us. I think we're right at the end mark. Really insightful. Great to have you as always, and really appreciate the interest.

Yaron, thank you very much, and thank you, everybody, for joining. We're always grateful to be at the Cowen conference and to see you, Yaron, and we wish everyone good health. Have a great 2022. Thank you.

And in person next.

Yes. Hopefully.

Thank you.

Yes. Bye-bye.