Amgen Inc. (NASDAQ:AMGN) Goldman Sachs 43rd Annual Global Healthcare Conference June 15, 2022 4:40 PM ET
Company Participants
Peter Griffith – Executive Vice President, Chief Financial Officer
Dave Reese – Executive Vice President, Research & Development
Conference Call Participants
Salveen Richter – Goldman Sachs
Salveen Richter
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 for us to start with any opening comments.
Peter Griffith
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 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 patients. 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 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 and staff 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 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 results 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 six innovative oncology drugs. We’re pleased with the launches of LUMAKRAS and the second line non-small cell lung cancer setting and with TEZSPIRE for severe asthma. Our five 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 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.
Dave Reese
Thanks, Peter. Thanks, Salveen. It’s great to see you and everyone in person this year back at a beautiful setting. A lot going on in the pipeline, let me recount 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 two new studies in asthma and we are exploring or about to initiate trials in four additional indications, very nice progress there. We have made progress in the rocatinlimab or AMG 541 program, this targets OX40 for atopic dermatitis, pleased to announce that we have initiated enrollment in the first Phase 3 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 studies several thousand patients are studied for five years or more up to eight and a half 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 little A levels. We had top line results from the Phase 2b study, I think exceptionally good results, I really like this molecule. It lowered in most doses studied levels of LP, little 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 1 and Phase 2 data of LUMAKRAS monotherapy on lung cancer showing that roughly a third of patients were alive at two 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, physical chemical 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 three or four treatment related adverse events, less than half the rates 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 two Phase 3 trials now. We have a Phase 1b 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 2 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 recenlty, you know, 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 two 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 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 3 top line results of AVP 654, biosimilar to STELARA looked quite nice and we’re on track for the Phase 3 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.
Salveen Richter
Perfect. Peter, maybe we’ll start with you. You hosted a business review meeting earlier this year end 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?
Peter Griffith
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 it’ll be a multibillion dollar franchise. We’ve seen actually strong volume growth this year, as I mentioned just a few moments ago. We’ve seen 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 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 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 one out of three people on the globe, you know, die because of a cardiovascular problem. So we’re going to continue to move very forward aggressively in that capital 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 five month head start on our comp petition. We think that’s going to be an important opportunity for us in our biosimilar portfolio.
We have three 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 three more after that, so we have five in the market and we’ll have six 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 a 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 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.
Salveen Richter
Could we or could you also speak to business development. You talked about external growth. Maybe two questions here, one, you’re already 2.5 times 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?
Peter Griffith
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 access the market in the last two years and three months, we access the market 4 times for a total of $18 billion and 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, with Rachna Khosla who’s taken over business development from Dave Packard 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 three discovery areas where we have research and where that kind of supplements what we acquire. And forth, we think it’s important to acquire opportunities that we can, on a very timely basis to 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 Navarro, 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.
Salveen Richter
Right. So, Dave, you talked about LUMAKRAS and the datasets that have come out recently, and we’re going to see combo data in the and half of the year. How do you think about, I guess, when you look at the profile of your drug, it seems like, incorrectly, we’ve got wrong, but tolerability seems to be the focus for doctors. So when you think about the combination approach here and you’re doing combination in 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?
Dave Reese
Yes. No, it’s a great question and obviously intense interest in the field in combinations. I’ll start by reminding everyone we’ve got more than 10 combinations under investigation, all of which have, you know, 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 a third, a third, a third 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 3 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.
Salveen Richter
And there was, I think, coming out of ASCO, there was 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 confirmatory study —
Dave Reese
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 are 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.
Salveen Richter
Is the impact on active brain metastases a key differentiating factor? I’m just curious, we’ve never seen that data from your side?
Dave Reese
Sure. As I mentioned, a lot of putative differentiative factors have come and gone. I’m quite comfortable with our profile, we are actively enrolling a trial with a decent sample size and 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.
Salveen Richter
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?
Peter Griffith
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 in the 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 31st 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 gets to as many patients as we can.
In response to your question on a kind of a more overall basis, we think about the biosimilar portfolio, as I said earlier, five in market, six coming, three we’ve talked about, three we haven’t. And I think we’ve talked about the three that, that haven’t come here that they’re on innovative molecules of tens of millions of dollars — 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 analog to a superblock buster, so some will stay with us longer. So the erosion curve maybe 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 the need in the healthcare 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 a 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 supplier, certainly. So we’ve got all the key ingredients to build this great portfolio 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 as 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 you’ll 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.
Salveen Richter
When we look at your portfolio of Otezla and TESSPIRE and OX40 and other programs in the clinic, maybe a two-fold 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 ask effect in, you know, versus what’s out there?
Peter Griffith
Let’s start with the science.
Dave Reese
Sure. So, you know, TESSPIRE, you know, 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, 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 eosinophil’s as well. There are 2.5 million people around the world with severe asthma currently underserved more than a 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 and 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 what I like quite a bit rocatinlimab, as I mentioned, the Phase 3 program is now launched, enrolling patients, there’ll be roughly half a dozen studies as part of that program, which we’re calling ROCCAT. It — will address a wide swath of patients with atopic dermatitis. Those who are biologics naive or experience, those are JAK inhibitors naive or experience 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 were introduced, now there are multiple mechanism of action — mechanisms of actions, 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 3 program along.
Peter Griffith
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 grow 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 say it’s kind of a post topical prebiological medicine. Dermatologists find it very attractive to prescribe the awareness is very high of it. 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 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.
Salveen Richter
Dave, lastly, what are you most excited about in the pipeline?
Dave Reese
You know, 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 [indiscernible], this is again the program targeting DLL3 in small cell lung cancer. We should be presenting updated data from the Phase 1b 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 and IL-2 mutein also being investigated on lupus and all sort of colitis are worth watching and then AMG 133 obesity, dual mechanism of action, a 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.
Salveen Richter
Great. So with that, thank you so much, Peter. Thank you, Dave.
Peter Griffith
Thank you, Salveen.
Dave Reese
Thank you.
Peter Griffith
Nice to see you. Thank you.
Question-and-Answer Session
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