Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Good morning. Thanks, everyone, for joining us. Really pleased to have the Amgen team with us. We have Peter Griffith, CFO; and Dave Reese, Head of R&D. With that, earlier this year -- actually, I'm going to turn it over to you, Peter, first to start with any opening comments.

Great. Thank you, Salveen. Good morning, everyone. And thank you, Goldman, for the 43rd Healthcare Conference. That means I did my math. That means it must have started about when Gene Sykes graduated from college. So I know he's not here, so I can get away with that. So listen, at Amgen, we always begin with patience. Our mission at Amgen, we're a mission-driven company, is to discover, develop, manufacture and distribute and deliver first-in-class and best-in-class medicines to patients all over the world. And the first quarter was a great indicator that we're on track to deliver against our long-term objectives and, more importantly, against that mission that we communicated at the February business review meeting. We executed efficiently and delivered in the first quarter. We delivered 6% revenue growth year-over-year, and 15% non-GAAP earnings per share growth year-over-year. Now let me give you a couple of factors underlying our long-term growth objectives. Before I do that, let me remind you, at Amgen, we think about the current year and executing in 2022. We think about the forward 12 quarters and how we're going to dynamically reallocate capital and meet our objectives for our patient shareholders in that time period, and then we think about through 2030 and beyond, creating value over the long term. We've reaffirmed going to 2022 our revenue and non-GAAP EPS guidance ranges despite by headwinds. We noted on the first quarter call that our guidance ranges included unfavorable foreign exchange impacts of $400 million to revenue and about $0.35 to non-GAAP earnings per share. We also increased our full year OI&E guidance to $1.6 billion to $1.8 billion of net expense from the previous $1.4 billion to $1.6 billion range. This reflects our share of the BeiGene result and also reflects rising interest rates, which we may hear about more today from Chairman Powell, I think. We expect OI&E net expense of approximately $400 million in the second quarter. The second very important aspect of our journey towards meeting our objectives in 2030 is our strong volume growth from our innovative brands, which will be the key. Repatha was up 49% in volume in the first quarter. Prolia was up 10%. EVENITY, up 59% in volume. Otezla was up 7% in volume as well as we had 11% volume growth across our 6 innovative oncology drugs. We're pleased with the launches of LUMAKRAS in the second-line non-small cell lung cancer setting, and with TEZSPIRE for severe asthma. Our 5 commercialized biosimilars are performing in line with our expectations. As we've previously said, our biosimilars portfolio really will perform better and better when we're the new -- first product in or we're into a new market. We're continuing to make progress on our international growth strategy. Let me remind you that in 2021, we exceeded $1 billion in revenue from the Asia Pacific region. We had 15% ex U.S. volume growth in the first quarter and nearly 30% in the Asia Pacific region. As we always do, we like to remind ourselves and all of you that we have a strong balance sheet. We generate significant cash flow and retain significant financial flexibility when we evaluate strategic business developments. And we're committed to pursuing the best innovation available, whether it's internal or whether it's externally generated. And speaking of innovation, it's a good time to turn it over to my colleague, Dave Reese.

Thanks, Peter. Thanks, Salveen. It's great to see you and everyone in person this year back at the beautiful setting. A lot going on in the pipeline. Let me recount a few of the highlights here, and then I'm sure we'll return to a lot of these themes in the course of the conversation. First, in our inflammation portfolio, TEZSPIRE launch is going well. We've initiated 2 new studies in asthma, and we are exploring or about to initiate trials in 4 additional indications, very nice progress there. We have made progress in the rocatinlimab, or AMG 451 program. This targets OX40 for atopic dermatitis. I'm pleased to announce that we have initiated enrollment in the first Phase III trial, what will be a suite of trials. That program is now up and running. In General Medicine, some nice announcements recently. You have seen top line results from the Repatha open-label extension study, several thousand patients studied for 5 years or more, up to 8.5 years, demonstrating long-term safety, tolerability and efficacy for Repatha. We hope to share those results at one of the major cardiology congresses later in the year. Likewise, we're looking forward to sharing results from the Olpasiran program. This is a small interfering RNA that lowers LP(a) levels. We had top line results from the Phase IIb study. I think exceptionally good results. I really like this molecule. It lowered. Most doses studied levels of LP(a) by greater than 90% with what appears to be a clean safety profile. So that program is moving along. In oncology, also progress. At the AACR meeting, we presented a combined analysis from our Phase I and Phase II data of LUMAKRAS monotherapy on lung cancer showing that roughly 1/3 of patients were alive at 2 years. I think a very compelling result. We are on track for the confirmatory trial against docetaxel to read out in the third quarter and remain on track to generate data from the dose comparison study in the fourth quarter of this year. I did want to take a minute and pause here because there's been an enormous amount of speculation in the last few years about how potential putative differences in pharmacokinetics, physicochemical properties, tissue penetration and the like would lead to clinical differentiation. We didn't think that would be the case. And in the event the data that we're seeing emerge, I think, justifies our belief in LUMAKRAS, both in terms of efficacy, particularly duration of response, where we look very strong, and a safety profile, 21% Grade 3 or 4 treatment-related adverse events, less than half the rate recently reported in the field. So I'm very, very confident in the clinical profile of this molecule. Now there's a lot of interest in combination therapy. We'll come back to that as we've announced both checkpoint inhibitor, PD-1 and SHIP2 combination data will be shared a little later this year. They've been submitted to one of the major congresses. Beyond LUMAKRAS in the oncology portfolio, the bemarituzumab program in gastric cancer is enrolling 2 Phase III trials now. We have a Phase Ib signal-seeking study in squamous non-cell -- small cell lung cancer that is also up and running. And then finally, in oncology in the bispecific portfolio, also forward momentum. Tarlatamab, or AMG 757, targeting DLL3 in small cell lung cancer, we continue to enroll, potentially registrational. Phase II trial enrollment is actually quite brisk in that study. We are investigating now tarlatamab in the first-line setting, and we are investigating it in neuroendocrine prostate cancer. I had a chance to talk to a number of investigators at ASCO recently within the last couple of weeks. I think a real wave of enthusiasm building behind that molecule, folks wanting more treatment slots for their patients, proposing investigator-sponsored studies, the sorts of things you see when people really get interested in the clinical profile. In the prostate cancer portfolio, AMG 509 that targets STEAP1 continues to move along nicely. We continue to see what I think are very nice clinical data there. That's a program to watch. And then as we have discussed previously, we have 2 molecules targeting PSMA, AMG 160, AMG 340. Based on the data we've seen across both of those programs, we have elected to prioritize AMG 340 and deprioritize AMG 160, and the AMG 340 program continues to move along briskly as well. And then finally, as Peter mentioned, the biosimilars portfolio is doing well. We had recent Phase III top line results of ABP 654, biosimilar to STELARA. Looked quite nice, and we're on track for the Phase III programs for biosimilars to EYLEA and SOLIRIS, and we're on track to launch AMGEVITA in January of next year. So a lot of, I think, very sort of crisp, top-notch execution across the portfolio right now.

Perfect. Peter, maybe we'll start with you. You hosted a business review meeting earlier this year and provided long-term guidance. When you looked at 2030 guidance, we got to about $38 billion in revenue at the midpoint of our math. What gives you confidence in achieving that number? And with Repatha, there were some questions as to what's embedded in your assumptions to get to that run rate that you provided?

Salveen, it's a great question. We are -- we indicated we anticipate mid-single-digit growth through 2030. And so with that, let's start with Repatha. Repatha we indicated will be a multibillion-dollar franchise. We've seen actually strong volume growth this year, as I mentioned just a few moments ago. We see in, for example, in the United States, by the end of the decade, about 50 million people with serious cardiovascular disease, maybe about half of those would be pretty good candidates for Repatha. So a large market there. Think about China and think about the same opportunity there, by way of example. And we did just go on NRDL over in China earlier this year. So we focus on that as a large part of the market. There's low PCSK9 penetration. We think that's really important to keep in mind. Third, we anticipate now moving from really a continuing focus on cardiologists down into the focus on the PCPs. And we think there's a great opportunity there to do a great job and bring them over and more importantly, their patients. We think that's really important. We've got access at a point we think that's been unlocked. So we've got the fixed copay we've talked about before, $50 or so under Medicare. We've got broad access, greater than 80% of the covered lives in the United States at this point. And then in 2025, we expect data on our outcomes trial on VESALIUS. And Dave could certainly give you some more details on that. But at least in my notes, I think that unlocks up to even more than 750,000 potential new patients. So Repatha is a key component. And 1 out of 3 people on the globe die because of a cardiovascular problem. So we're going to continue to move very forward aggressively in that and allocate capital to Repatha. It's on the top of our prioritized agenda. Biosimilars, we talked about that in 2021. You'll recall, we had about $2.2 billion or so in biosimilar revenue. And we've indicated that we expect that to more than double by 2030. We're excited about the launch of AMGEVITA in the United States next January, January 31. We have a 5-month head start on our competition, and we think that's going to be an important opportunity for us in our biosimilar portfolio. We have 3 more coming after that through 2025. We've got biosimilars to STELARA, to EYLEA and I think the other one is Rituxan, isn't it? And so -- and then we've got 3 more after that. So we have 5 in the market, and we'll have 6 between now and 2030. And so we're really looking forward to continuing to move that forward. We think that's really important. We'll continue to have new launches. Dave will talk about that. I'm sure you're going to ask him some questions about the great potential in our pipeline and what's coming along there. He just mentioned a number of those, which make up new launches. We include those with TEZSPIRE and with LUMAKRAS and so forth. And then finally, we wanted, during business review day, Salveen, to remind people that the erosion curves on our biologics tend to be quite a bit slower than those, of course, on small molecules. So when we look at those -- the larger molecules in the portfolio and the LOEs that come through the end of the decade, we feel strongly that the erosion curves are just different and they take longer. And we actually gave some examples going back to 2014 when we looked at our portfolio, about 40% of which at the time came from large molecules that were going to be under LOE expiration in the coming years. And out of that 40% that we looked at in 2014, 10% of that -- 10 percentage points, so 25% of those are still with us today generating significant important cash flow. I think in the first quarter, cash flow from our established products was over $1 billion, generates great cash flow for us to fund innovation, both internal and external. So as we make our way through to 2030, that's the journey we see. We're executing hard on it, as I said, and we're excited to be able to deliver for patients and for shareholders long-term growth.

Could we -- or could you also speak to business development? You talked about external growth. Maybe 2 questions here. One, you're already 2.5x levered, would you go higher than that? And then two, what is the urgency? If you look at your LOEs, they're more towards the back end of the second half of the decade, so what is the urgency to do something today?

I'm glad you asked the question about business development because I forgot to remind all of us that our plan is organic only that -- so we gave guidance on what we call our cards in hand. And so we feel like we've got the assets. And if we execute on it, we execute on the pipeline, which we're feeling very confident about, we get to 2030. Now let's get to business development. So when you think about our capital structure, we like our efficient capital structure. It's been fairly consistent the past number of years. I've indicated that I think it works for us. It might go up a little bit, it might go down a little bit. But it provides us an efficient capital structure. We want to yield kind of an optimal WACC, weighted average cost of capital. We don't want to minimize WACC. We like our ratings. We have strong investment-grade ratings. We think that's important for us. We accessed the market -- in the last 2 years and 3 months, we accessed the market 4x for a total of $18 billion at very favorable rates. We were fortunate to get into the market at the right time. We think that's important. So when we look at opportunities, Salveen, and how we would finance them, we'll continue to go with an efficient capital structure. There have been times when Amgen levered up a little bit more. And I think historically, if somebody wanted to look at that and kind of consider how that feels, that's about what we -- those are probably a decent guide. But on the other hand, in that instance, when we did lever up, there was a clear plan within 24 months or so to get back down to where we were. We like that. We like to use our cash flow to kind of stay where we're at, if in the event we did something like that. But then kind of more broadly on business development and thinking about where we go on it. We haven't changed our methodology, our process. We've got a very strong way we interrogate this with Dave in research and development, with Murdo in Commercial, and with Rachna Khosla, who's taken over business development from Dave Piacquad on January 1, strong team. We want to have a view on just about everything out there. I'm sure we'll get a lot of questions on small and mid-caps and so forth. We work to interrogate everything and look at it. That team looks at it. And we want to make sure we're the best buyer. We want to make sure, number two, we always say we're prudent. We look at cash-on-cash returns, make sure they're above our hurdle rate. Three, we feel really strongly about being in one of kind of our 3 discovery areas, where we have research and where that kind of supplements what we acquire. And fourth, we think it's important to acquire opportunities that we can, on a very timely basis, integrate into what we do. We're agnostic on structure. Last year, we did any number of structures. Acquisitions, we did a licensing with Kyowa Kirin. We did an out-licensing with [ Novero ] where we put some money into it. And then we did some early stage investing in collaboration work with Generate Biosciences and Arrakis. So kind of a -- I figured I'd give you a little longer drive, which in Los Angeles and traffic happens, through kind of how we think about our capital structure and our business development opportunities.

Great. So Dave, you talked about LUMAKRAS and the data sets that have come out recently, and we're going to see combo data in the second half of the year. How do you think about, I guess, when you look at the profile of your drug, it seems like, and correct me if I'm wrong, but tolerability seems to be the focus for doctors. So when you think about the combination approach here and you're doing combination and sequencing, how do you think about getting that optimal profile? And what's your conviction that you can get that over the goal line here?

Yes. No, it's a great question and obviously, intense interest in the field in combinations. I'd start by reminding everyone, we've got more than 10 combinations under investigation, all of which have biologic and clinical rationale. I think those questions have to be answered empirically now in the clinic, and we're moving along quite quickly to do that. The -- when we think about lung cancer, in particular, where there's a lot of focus right now and how you might move into earlier lines of therapy. Historically, it's been hard to combine small molecules with checkpoint inhibitors. In fact, most have washed out for one reason or another. As we mentioned, we'll present what we think is a comprehensive look at that question a little later in the year. It's also important to think about that patient population, which is divided roughly 1/3, 1/3, 1/3 into tumors that are negative for PD-L1 expression, low to intermediate for PD-L1 expression and then high expressers. Because the clinical approach, I think, over time, and those that also have the G12C mutation, may vary. In the PD-L1 negative population, for example, we have interesting early data on chemotherapy-LUMAKRAS combinations, and in fact, have had very good discussions with regulatory agencies, and we'll be launching a Phase III trial in that population in combination with chemotherapy. We are defining the checkpoint inhibitor approach. And like I said, we will present that a little later in the year. There are multiple other combinations shipped to other small molecules, cytotoxic chemotherapy, not restricted to lung cancer, but targeting, in particular, some of the GI malignancies. Colorectal cancer at the top of the list, but pancreatic cancer and others where there is some frequency of G12C mutations.

And there was -- I think, coming out of ASCO, there was a presentation looking at chemo in G12C patients, KRAS patients. And so there's been some question as to how to think about the risk to the confirmatory study. I guess, just posing that to you, how confident are you that, that confirmatory study...

Yes. I mean the confirmatory study, to remind everyone, is a head-to-head trial against docetaxel in the second-line setting. We're confident in that trial. It is powered on progression-free survival. That was after extensive discussions with the FDA and regulatory authorities. So a 90% power to detect a meaningful difference in progression-free survival. I think if we see something like the results we saw in the pivotal trial, I'm quite confident there. I think the adverse event profile should be, if anything, better based on everything we've seen. We now have 6,500 patients treated with LUMAKRAS across the clinical development program, expanded access programs around the world now and with commercial product. There are 3,000 patients in the expanded access programs. We hope to share those data as well later in the year. But we're really seeing an adverse event profile in the real world that mimics what we saw in the CodeBreaK 100 trial.

Is the impact on active brain metastases a key differentiating factor? I'm just curious. We've never seen that data from your side.

Sure. As I mentioned, a lot of putative differentiated factors have come and gone. I'm quite comfortable with our profile. We're actively enrolling a trial with a decent sample size in patients with active brain metastases. I fully expect that we will be very competitive in that domain as well. Everything we understand about the biochemistry suggests that will be the case. We've got lots of anecdotal reports of responses in the brain. So I think one of the keys here is to be wary when you look at a handful of patients followed for a very short period of time. And in general, our approach is to give you a more robust look at the data.

Peter, can we talk about the biosimilar business here and your assumptions on durability and new entrants from your portfolio? What is your strategy when you take into account? Or where is the upside when you talk about doubling the revenue by the end of the decade, but why couldn't it be more?

Well, I like the premise of your question. But what I would say, Salveen, is the way we think about it is where I started, which is you want to be first in the market if you can be and you want to enter new markets. If you can do both at the same time, that's great. So by way of example, when we think about the biosimilar market, take adalimumab with the largest selling biosimilar in Europe on that. We have good experience there. We were first to market. We're going to be first to market in the United States with that January 31 of next year. We think that's really important as we think about it. So we are fully prepared as a company and very prioritized on achieving that objective and making sure that it gets to as many patients as we can. In response to your question on kind of a more overall basis, we think about the biosimilar portfolio, as I said earlier, 5 in market, 6 coming, 3 we've talked about, 3 we haven't. And I think we've talked about the 3 that haven't come here that they're on innovative molecules of tens of millions of -- tens of billions of dollars. And so we think there's a very robust market for us to go at. We intend to go at it very thoughtfully. But we think the 11 create an analog to a super blockbuster. So some will stay with us longer. So the erosion curve may be a little bit less steep and some may have a steeper erosion curve. But overall, we expect those 11 to aggregate into a kind of a super blockbuster look. The margins we've indicated are not dilutive to our overall corporate margins. And so we think there's really an opportunity to kind of shape that together. And so that's what excites us about the biosimilar market. And certainly, it addresses a need in the health care system. And so we like to be there. Amgen has been working on biologics for decades. Probably we'd like to think of ourselves as the leader in the world. We've got great patient experience. We've got a supply chain that matches everyone in that, if not exceeds it. So there's certainly suppliers certainly. So we've got all the key ingredients to build this great portfolio of biosimilars. We've indicated we think it will be more than double what it was in 2021. And probably the one last point I would make that we think has been a differentiating point and helps in our efficiency is we commercialize these in the therapeutic area into which they fall. And so for us, that's worked out to be really helpful, not just in terms of kind of addressing formulary desires and kind of demand there, but also in terms of just efficiency and being able to get them out. And that's worked well. And so we look forward to having biosimilars as a key component of this mid-single-digit growth on the way to 2030.

When we look at your portfolio of Otezla and TEZSPIRE and OX40 and other programs in the clinic, maybe a twofold question here. One, how comfortable are you with the growth outlook for the commercial assets? And then two, the science in terms of the competitive aspect and versus what's out there?

You want to start with the science?

Sure. So TEZSPIRE, as I've said, I think is a great molecule. It's one I've been involved with since it went into the clinic. We're seeing, I think, a very pleasing launch. We are seeing use by both allergists and pulmonologists. And we're seeing use in both patients with low eosinophil counts where we thought might be the initial headway, but actually in those with high eosinophils as well. There are 2.5 million people around the world with severe asthma currently underserved, more than 1 million in the United States. So we're very pleased with our partners, AstraZeneca, where we sit there. And as I said, we've got a very robust life cycle plan in place in other indications where there is evidenced biology behind the TSLP pathway being a potential initiating event. When we turn to the OX40 program. Again, this is one I like quite a bit. Rocatinlimab, as I mentioned, the Phase III program is now launched, enrolling patients. There will be roughly half a dozen studies as part of that program, which we're calling ROCKET. It will address a wide swath of patients with atopic dermatitis. Those who are biologics-naive or experienced, those who are JAK inhibitors-naive or experienced, range of ages, range of ethnic populations. If we step back, I sort of think about atopic dermatitis is taking an evolution. As we saw with psoriasis, 25 years ago, there were no biologics for psoriasis. The TNF inhibitors are introduced. Now there are multiple mechanisms of action, pathways in a very robust market. I think you're going to see the same thing play out in atopic dermatitis, which is a more, in my view, more prevalent disease, and we currently appreciate. And as additional effective therapies become available, that patient pool will grow. And many of these patients will cycle on therapy. So we like rocatinlimab. It both inhibits signaling through the OX40 pathway and reduces the number of pathogenically activated OX40-bearing T cells, which is a fundamental driver of the pathogenesis of the disease. And we're looking forward to pushing that Phase III program along.

Maybe just a quick add on Otezla. Otezla is a really important medicine. We received that mild to moderate indication, very important label for patients, in December. And so we see that as a really important component of our inflammation growth through most of the decade. We've indicated, kind of on average, low double digit growth through its expiry in 2028. And so we think it's a great medicine. It's -- as we way, it's kind of a post-topical, prebiologic medicine. Dermatologists find it very attractive to prescribe. The awareness is very high of it. And we're working very hard, very focused on Otezla to keep the volume up and continue to make sure it's getting out to as many patients as possible. And we've conceded some price on that to move it in the first quarter, just to make sure it's getting out there and the new indication is taking hold, and we'll continue to work on that. But we feel strongly that it's going to be a very, very attractive component of our inflammation immunology portfolio through its expiry in '28.

Dave, lastly, what are you most excited about in the pipeline?

I've mentioned a lot of the molecules, I would probably come back to tarlatamab as well, one that gets maybe a little less attention than it ought to. This is again the program targeting DLL3 in small cell lung cancer. We should be presenting updated data from the Phase Ib dose escalation and dose expansion study at a medical meeting in the coming months. That's worth paying attention to. I think additional programs in the inflammation portfolio, AMG 570, which targets both T and B cell pathways in lupus as well as AMG 592, an IL-2 mutein, also being investigated on lupus and ulcerative colitis are worth watching. And then AMG 133 in obesity, dual mechanism of action. Very interesting early clinical data, some of which I shared at our business review in February, that one's worth keeping an eye on as well.

Great. Well, with that, thank you so much, Peter. Thank you, Dave.

Thank you, Salveen.

Thank you.

Thank you.

Nice to see you. Thank you.