Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Welcome to the second day of the Bank of America Healthcare Conference. My name is Geoff Meacham. I'm the senior biopharma analyst here. And we are thrilled to have with us on stage, Amgen. And speaking on behalf of Amgen, we have Peter Griffith, CFO; and Rob Lenz, Senior Vice President, Global Development. Welcome, guys.

Great to be here.

Great to be here.

Thank you so much to Bank of America, BofA, for inviting us.

Great to do the meeting in person, too, right?

Let's talk a little bit about -- let's start off with just the lingering as we move from pandemic to endemic, there's a lot of sort of questions on COVID. And you guys and a few other of the bigger biotechs or pharmas, you still have a little bit of a residual effect from COVID on the business. So where are you with respect to the return to normal flow of patient visits and drug volumes?

Well, again, thank you, Geoff, for having us here. And I might just interject a few comments, too, before we start. And I think Rob might, too. But let me just say on return to normal. I was laughing with my colleagues this morning. I don't mean to not take it seriously, but when 8 other people got on the elevator on the first 5 floors, I realized the world is back to normal. There's no -- when you're on there with 8 of your closest friends, you say, "You know what, the switch is switched." So thank you. Well, look, we talk about it as a continuing cumulative effect of COVID. I think our colleagues in the industry do, too. January and February, we certainly saw some lingering effects of Omicron there. We'll see what other surges come, variants of concern. Through the rest of the year, we watch that closely. But at the end of the day, in cardiology, for example, that feels like it came back a little bit faster. Oncology came back during last year and through the current phase, I would say some of the inflam category, probably a little bit slower than the other 2. But look, we're making our way through it. We've learned how to deal with it in 2.5 years. At Amgen, we're always thinking about the patients. We want to be resilient and work our way through that. So that's really important to us. I think -- so just pause for a minute. Maybe look at the first quarter and just say we were on track to deliver. 6% on revenue, up 15% on EPS, good execution. So we had the surge of Omicron, but we worked our way through that. And we also talked about in the first quarter, now we've got -- in addition to COVID, we've got foreign exchange headwinds for most companies. Last on my check, the euro was, I think, hanging around 105, 106, down a bit there. So we've got -- we've indicated $400 million of headwinds to revenue this year now, up from a couple of hundred million. Certainly, we've also increased our other income and expense guidance to $1.6 billion to $1.8 billion of net expense from our previous range just on kind of rising interest rates to go along with strengthening the dollar and certainly our share of BeiGene's results, which we recorded in the equity method. So there's a lot of different dynamics around COVID, and we're watching it. We'll continue to execute through it. I think Rob could speak a little bit to COVID and how we're working our way through the development side. He's -- and being a head of global development, he's done a great job on that for us, making sure we continue trials and make our way through that, too. So Rob, maybe I'll...

Sure. Well, I thought maybe it'd be helpful just to give a quick overview of the key assets within the clinical development pipeline and maybe just highlight those in particular that have what we think are particularly important, either study starts or data readouts, which I think will help be the foundation for some other questions. So focusing on inflammation first. We're continuing to pretty aggressively pursue life cycle development of TEZSPIRE. We now have 4 additional indications beyond the severe asthma indication. In addition, within severe asthma, we just announced we're kicking off 2 additional studies in that space. Moving into the pipeline, our OX40 program, that's our AMG 451 for moderate to severe atopic dermatitis, progressing well. It's a comprehensive program called ROCKET, and we're on track to initiate that comprehensive Phase III program this summer. And then in oncology, with LUMAKRAS recently announced -- or presented data, 2-year data at the AACR conference on these refractory non-small cell patients who after 2 years on LUMAKRAS were experiencing. About 1/3 of them are still alive. So continue to bolster our confidence in that product. In terms of sort of additional key data readouts this year with LUMAKRAS is notably the Phase III confirmatory versus docetaxel in non-small cell lung cancer, additional to dose comparison study as well. And then we actually just submitted some data that will be presented late summer. We anticipated a medical conference for our combination cohorts for PD-L1 or PD-1 combo as well as SHIP2. And then in the pipeline, in terms of oncology, bemarituzumab, that's our FGFR2b monoclonal antibody for gastric cancer in that Phase III program in first-line gastric cancer is underway. And then we're also just kicked off a signal-seeking study in squamous non-small cell lung cancer for bemarituzumab as well. And then across our BiTE or bispecific portfolio, we're actually seeing a number of molecules with some pretty compelling data in the solid cancer space. I'll mention Tarlatamab or AMG 757, this is being -- this is our DLL3 antibody for small cell lung cancer based on the Phase I data that we saw there, quite compelling. We advanced into potentially registration-enabling study in third-line small cell. And then we're doing -- initiating the combo combination work that would support advancing that molecule into earlier line, including frontline studies in small cell lung cancer. We have 3 assets targeting metastatic prostate cancer, looking at 2 different targets, including AMG 340. This is our low affinity, BiTE that's targeting PSMA, that's progressing well through dose escalation, as is AMG 509, which targets a novel target called STEAP 1, also in dose escalation. We shared some pretty encouraging data at the business update in February there and hope to progress that to expansion cohort soon. And then in -- just pivoting to general medicine. Quickly, we shared recently the top line results of the long-term safety of Repatha. This is -- where importantly, we demonstrated there were no new safety signals in patients who received the drug up to 8.5 years. So tremendous safety data set there. In addition, a large majority of those patients were able to achieve their LDL targets, less than 40 mg per deciliter. So I look forward to sharing more of that data. And then I'll just mention Olpasiran, that's our first siRNA program, targeting Lp(a). That Phase IIb is going to be reading out the first half of this year, and we're planning very much for success with that program and an ability to pivot quickly into Phase II should those data read out as we hope them to. And then I'll just end maybe with the biosimilars, we have 3 biosimilar programs that have Phase III readouts this year, one for EYLEA, one for SOLIRIS and one for Stelara, and we just recently announced positive results for the Stelara Phase III. So I think on the whole, we feel like we're pretty well positioned to be advancing the pipeline, delivering novel innovative therapies for patients and hopefully, shareholder return in the near and long term.

Perfect. Thank you, Rob. Yes. So well, let's kick off the pipeline sort of question with LUMAKRAS. And so the launch has gone well so far, but maybe just help us with your comfort level or your confidence in G12C testing overall. Is that still a gating factor to rolling a patient on? What's the awareness that will look like for that? And then beyond that combination is the next sort of leg up, are you guys thinking more beyond PD-1 combinations? There is there a potential for other targeted therapy combinations looking to long and other tumor types.

Yes. So I can start off. Peter, do you want to start off with the financials? I'll let you cover the financials. So yes, I mean, I think there's some foundational aspects on the LUMAKRAS launch that we're very comfortable with, and Peter can certainly address the financials. One is we have now approvals in almost 40 jurisdictions and countries around the world. Within the U.S., we have very broad coverage, greater than 90% coverage. And the testing rate, specifically that you mentioned, is greater than 80%. So those are, we think, are sort of important or foundational. And we have a broad prescriber base, over 1,500 unique prescribers. So those all, we think, bode well for the program, specifically around the G12C testing that you mentioned. So greater -- 80%, that's great. The key is now to enable the physicians who are the prescribers who are literally sitting in the office when that patient progresses from frontline in the second line, that they have immediate access within the EHR, within the health care system to that testing data. And that's an opportunity that we see for improvements. Our medical and commercial teams are squarely focused on helping enabling that literally on an institution by institution. So Peter, I don't know if you want to add in any of the...

I would just add in, like we were very pleased with $62 million in product sales in the first quarter. It's on track to where we want it to be. I think Rob's point about making sure when they get to second line, they see the report on the mutation. That will be helpful, and commercial is very focused on that. We want to make sure as many patients as can get to LUMAKRAS get there. It's just a fabulous treatment for patients, and so we're doing everything we can, and the financials will take care of themselves on that. We're very confident in that.

And other nuances between different geographies that you see as you roll it out in testing rates and patient sort of capture?

I can speak to the epidemiology at least. So we see about non-small cell lung cancer being 12% and 13% of patients have G12C, harbor that mutation. And that's very similar in Europe in terms of the overall epidemiology which represents a meaningful opportunity, we think, in Europe as well. When you look into the Asia population, it's less. It's around 3% to 4%. So we think that's still an important contributor, but not on the same sort of scale as the U.S. and Europe.

But there's not a barrier, for example, in Europe, to G12C testing per se?

Not the -- no, not that we've heard of. Still early days, but not that we've heard of.

And then the combination, there's a lot of excitement on the potential for PD-1 combinations, but there's a lot of other targeted therapies. And so I know you guys did the CodeBreaKer study, where you looked at a bunch of different tumor types. Is there sort of a basket trial down the road that you could do looking at other targeted therapy like RAS or other 2, 3 drug combos that LUMAKRAS could be a part of that?

Yes, yes. So the combination approach is really part of what I think is a broader strategy, and that's how do we develop the data to advance LUMAKRAS into earlier lines of therapy across different indications to start on non-small cell, and so there's sort of a multipronged approach that we're taking there. One is the combination. Another is to look at where the highest unmet need is, where the patient -- what's the patient population, that really is sort of what I'll call sub-optimally treated today. And that is, in the non-small cell space, is really in the patients who have no PD-L1, what we call no PD-L1 expression, right? And that represents about 1/3 of the total non-small cell patient population. So there's an opportunity there that has compelled us to initiate quite a while back a monotherapy study looking at those patients that are not expressing PD-L1 or who also have another co-mutation that we know is generally more refractory to available therapy. So in that case, it's STK11. That trial is ongoing. It also creates opportunities for combinations outside of PD-1 like chemotherapy. So we have a chemotherapy combination cohort ongoing. We're encouraged by the data that we've seen there that might represent an opportunity to go into, again, that PD-L1 low or negative. And then in terms of the combination, we actually have -- we're taking a science-based approach but will ultimately be driven by the clinical data, and so that's why we've taken such a broad approach. We actually have over 10 combination cohorts that are underway, of which the PD-1 -- PD-L1 is one of those cohorts as is the SHIP2 and a number of others. So that's -- we've taken this multipronged approach, trying to get into that earlier line of therapy.

Makes sense. Well, let's talk about TEZSPIRE. You mentioned the investments you're making there, but maybe take a step back. And with the asthma market, there -- a lot of these inflammation markets, right, are intensely competitive. Just give us maybe some anecdotes of the early part of the launch, so far this year, the level of awareness of the drug and just kind of the marketing, blocking and tackling as it stands now.

Well, let me just jump in. First quarter, we had $7 million of product sales. We disclosed the number. We wanted to make sure people understood we're making good progress. We are extremely excited about this. It's a great opportunity for us. And let me let Rob get into kind of the eosinophilic levels and how the pulmonologists and the allergists are dealing with it both in the same way but slightly differently since the pulms don't tend to want to test quite as much or don't test quite as much as the allergists do. They find this to be a wonderful therapy, I think, at least as we understand it, to prescribe for any of their patients with severe asthma, which is such a difficult situation for -- many of us have relatives or colleagues or friends with this. I mean this is a very serious situation, emergency room visits and so forth. So it's a great medicine for that. And then over on the allergist side, they're doing more testing, but I think as Rob will explain. And as I said in my words, those eosinophilic levels can go up and down and vary during the person's life. So it's a wonderful therapy for that, at least certainly to get them on as quickly as possible. So Rob, I'll throw it over to you.

Yes. I mean it's obviously early days in the launch, but I'd say there's some early indicators that give us some high degree of encouragement. One is this idea of awareness, so the unaided awareness since launch has increased to greater than 65%. So clearly, physicians are becoming more comfortable and aware of the product. And when we've talked with a number of them, I'd say uniformly, the message there is they're very encouraged with the broad profile that it brings, right? And then the allergists and the pulmonologists sort of remind us that it's actually often the case that there aren't these sort of clear distinctions of patient is either allergic or eosinophilic or nonallergic, that actually there is a large portion of patients that manifest both of those as drivers of their disease. And even if you take a given patient at a given time who may look eosinophilic or predominantly eosinophilic and then test them again in 6 months, they may not, right? So these patients ebb and flow. So the idea of having a single solution that's targeting the broader population and then importantly that same patient over the course of time is something that they've found very compelling and to not have to sort of chase the biomarker has been a recurring theme that we've heard there. So encouraged by what we're hearing from those physicians.

Perfect. Okay. There's a lot to cover, so let me just go sort of product by product. So Otezla, very impactful to the P&L. The contribution is pretty meaningful. I think the -- like a lot of inflammation products, there was a bit of a COVID sensitivity to it. But now we're like you said, Peter, just getting close to back to normal. But I think investors have been asking a lot on the competitive landscape with respect to sort of the TYK2 threat. So I wanted to kind of get your perspective as we get close to ducravacitinib launching, what is your confidence level and Otezla, what investments are you making commercially to try to continue to grow that brand?

That's a great question, Geoff. Thank you. Now Otezla is a strong part of our priority growth brands. 7% volume growth in the first quarter we'll continue to push really hard on volume growth. We felt January and February were probably modest to moderately affected by the variant to some -- to a degree, but now we're feeling like we're seeing some demand trends that are stronger in Otezla. We continue to be very optimistic about Otezla and its new indication, mild to moderate broadly across psoriasis, and we think that's going to be very helpful. So in the first quarter, we also took advantage of being stronger on the co-pay. You'll see pricing was down a little bit, patient assistance programs. We want to make sure we're very well positioned and establish ourselves in a strong way in that space, as you say, as the competition begins to come in. We're fully expecting, although it's hard to know what the label will be on the competition, but we just assume it's going to be a good label. And we've always planned with Otezla to be going up against a good label on that. We think we've got a great systemic product, no lab monitoring, very safe. I think we're up around 700,000 patients or so now that have been through Otezla. So we're very optimistic and looking forward to continuing to push really hard on it. So it's right up there in terms of our priorities and our growth brands with Repatha and Prolia and EVENITY. And so we're excited about it, and we're optimistic for the rest of the year. Subject to surges of the -- of COVID and variants of concern, we'll just see what happens, but we're certainly working very hard. And we're expecting the competition to be stiff, but we've always expected that since -- when we announced this opportunity and this transaction in August of 2019.

I'd just add, Peter. Late last year, we expanded the label into the mild to moderate patient population, which will, of course, be unique across the systemic therapies. And Peter mentioned safety and physicians' sort of comfort level with safety. Physicians are always thoughtful around safety across all diseases, but I think it's particularly true when you think about some of the dermatologic diseases like psoriasis. And when you start to move into a more mild patient population or mild even to moderate, one could argue that will become even more important. So that's where we think Otezla is well established and well positioned in terms of the overall risk benefit in the broad patient population.

Makes sense. Okay. That's helpful. So biosimilars, you guys have had a growth franchise for several years. And coming up, you have biosimilar HUMIRA for next year, and that could be a pretty high-impact product, but there are a number of biosimilars launching. So maybe help us with how your -- you want to maximize that initial period looking to next year. And do you agree that, that could be one of the bigger assets over time in your biosimilar portfolio?

Well, thank you for that question. As we indicated at Business Review Day, we think AMJEVITA, our biosimilar at HUMIRA is going to be a really important part of an inflection on growth for us beginning on January 31, 2023. So the company is pulling all the stops, and we'll be fully prepared to be ready to go on January 31, 2023. First and foremost, at Amgen, it's always for the patients but also we think it's a great opportunity for a thoughtful deployment of capital. We are very excited in commercial. We're going to be ready to go. It's -- look, it's an opportunity for us. We have a 5-month head start, just to be clear. The next competitor will be in July of 2023. Our history with patient experience, our history with devices, our history with supply chain stability and strength, Amgen is every patient, every time for 40 years, and we just haven't missed on delivering medicine to patients, our reputation in biologicals for all those years. So we feel really confident that we're going to be able to establish ourselves in a very strong position there. And so we intend on, as we do at Amgen, competing intensely and winning, and we're looking forward to that.

To some degree, though, you have to tread lightly with respect to the pricing equation, the indirect effect right on ENBREL.

We do -- what I would like to point out on ENBREL is we now have a nice portfolio, a very, we think, constructive portfolio of inflam between ENBREL and Otezla and TEZSPIRE that Rob was just articulating, the great strengths of and then now down in AMJEVITA. And that actually, Geoff, thank you. You bring up a point that I meant to make as I was articulating that. We go to market with our biosimilars in the commercial therapeutic area, which I think is different than with a lot of companies. We find that to be efficient. We find it to be effective. And we think that's a key to our success with biosimilars. We think it will be a key to our success with AMJEVITA, having it tucked in there with the other inflam drugs.

Right. Perfect. Let's talk a little bit about external BD. It's a question that comes up a time especially given the current environment. So Amgen, when you did the Micromet deal, it brought you a platform of bispecifics that allowed multiple assets, multiple drugs for a lot of different indications. Is there -- as you look across the landscape, is there a technology that you feel could also serve that role, for example, gene therapy, cell therapy, editing, things of that nature that could scale into multiple indications? Or is Amgen thinking about BD more just at a higher level of what sort of P&L impact it could have in several years? So is it sort of technology-based? Or is it sort of high level? You're probably going to say both.

I'm going to say E, all of the above. So at Amgen, we've got a long history using strategic business development, all types of transactions, all stages of development, different modalities. So let's go back. I think history is always a great indicator of the future. Go back to last year, 7 strategic transactions. We start with an acquisition of Rodeo early in the year, a preclinical inflammation asset, delighted with that. We go to Five Prime, which is an acquisition of a derisked wonderful drug, Bema, addressing gastric cancer now in Phase III. Then we go to Kyowa Kirin, a licensing transaction. Derisked asset, very excited about AMG 451. If you want the new name of it, Rob is going to pronounce that. I am not going to do it.

Rocatinlimab.

Rocatinlimab.

Just flows right out.

This flows right out. I call it roca. And so -- and then we went to Teneobio. And Teneobio, interestingly enough, you talked about Micromet. Well, Teneobio gave us a multispecific kind of new platform that we like that tucks right into the bispecific platform, and we thought it was a nice advance there. In addition to the SMA molecule, it's AMG 340. And then we go to 2 early-stage collaborations, computational biology and targeted protein degradation with Generate Bio and with Arrakis. And then we had kind of the out-licensing and the investment in Neumora with some of our neuro assets. So Geoff, we are all stages, all time lines. We have Amgen Ventures, so we could certainly keep in touch with and in contact with different modalities, and we'll continue to do that. We'll be thoughtful. Last year, we spent over $3 billion on upfront payments in addition to thoughtfully executing about $5 billion of opportunistic share repurchases. So we're thoughtful about capital allocation. Strategic business development is important. Acquiring the best innovation, whether internal and external, is #1 in our capital allocation hierarchy, and it will continue to be there. So a long answer to your question, but a really important question for us. All hands on deck. Rob in Research and Development, Dave Reese worked closely with Murdo Gordon in commercial with Rachna Khosla who took over business development from Dave Piacquad on January 1. He's doing a great job, and we're a company fully committed to finding that best innovation internal or external.

And Rob, along those same lines, are there technologies that you feel like Amgen still needs to have access to or could be more impactful going forward? Or is there enough sort of tools that you have at your disposal per Peter's talk about all the deals that you've done.

Well, it's been a great strategic set of investments to build out our platform capabilities, particularly in the research side over the last year. I mean, it's really -- I think just a really nice cohesive strategy there. That being said, we're always looking, right, to the outside to bring in external innovation, be it on a molecule -- particular molecule that we think is going to address a meaningful unmet need or in a platform that will be a capability build. And so the ones that come up a lot, and I'm not surprised, I think you mentioned, Geoff, gene therapy, RNA therapy. The one you didn't mention is antibody drug conjugate in the oncology space. These are areas that there's a lot of investment. We're starting to see those move in a meaningful way. I'd say we're constantly surveilling that landscape. And when we think the time is right from a scientific perspective to jump in, we have that freedom -- the financial freedom that Peter gives us to be able to act on those. But I'd say nothing immediate, but those are some areas that we're keeping a close eye on.

Perfect. In addition to looking at sort of external opportunities, one of the things to -- that investors talk about with respect to just overall growth is the whole BeiGene relationship and the Asian opportunity. Where -- you think about the -- what are the challenges in some of those regions? And just give us sort of a 30,000-foot view, Peter, about how you would sort of grade the access on the BeiGene collaboration thus far. And looking forward, how much do you think you could really impact the P&L looking out 5-plus years?

Well, look, we're pleased with the collaboration. Let me start with what's in market right now. So they're in market with BLINCYTO, XGEVA and KYPROLIS. And we're very pleased with the results on those 3. So they're handling that on -- those in-market oncology products for us. At the same time, kind of thinking about China broadly, we've still got our general medicine portfolio there. Repatha just got on the NRDL. So we're excited about that. So that's going well. And so we're pleased in the relationship in that. We continue to work on a collaboration on the oncology products with them as we articulate on a regular basis, and so we're pleased with what's going forward. China is the second largest pharmaceutical market in the world. We intend on continuing to be focused on it, but it's always helpful and constructive to have a relationship with -- like that with somebody on the ground there with BeiGene and work our way through it with them. So we're pleased where we sit with that. We'll continue not just in China with BeiGene, but also things are going very well for us in Japan. We're excited about that. So Asia Pacific will be, as we've indicated, a strong area of growth for us overall through 2030 and really help lead us towards the company that, as we indicated at Business Review Day, we increase outside the United States to 35% or more where we are today and continue to globalize. We've got great medicines that treat large effect sizes and people with serious illnesses. So we want to make sure we're getting them out across the world.

Perfect. Okay. Well, with that, we're out of time. So guys, thank you very much to you.

Geoff, thank you and thank BofA Securities.