Amgen Inc. (AMGN) Presents at BofA Securities 2023 Health Care Conference (Transcript)
Amgen Inc. (NASDAQ:AMGN) BofA Securities 2023 Health Care Conference May 9, 2023 11:00 AM ET
Peter Griffith – CFO
Dave Reese – EVP, R&D
Conference Call Participants
Dan Lundquist – Ban of America
Hello. Good morning, everybody. Thank you for coming out to Las Vegas for the 2023 Healthcare Conference. You are at the first session with Amgen. I’m very pleased today to be joined by Peter Griffith, the CFO; and Dave Reese, Executive VP of R&D, here on stage today.
We do have a couple of prepared remarks from Peter and plenty of time for Q&A. We can go to the crowd for those that have any questions. I’m Dan Lundquist, the BofA health care specialist. So I’m very excited today to kick off the conference. And with that, let me hand it over to Peter.
Dan, thank you very, very much. Good morning, everyone. Great to see all of you. And thank you very much, Bank of America, for hosting us. We’re just delighted to be here.
Let’s start where we always do at Amgen, and that’s with patients. So our mission at Amgen is to discover, develop, manufacture and deliver first-in-class and best-in-class medicines to patients with serious and grievous illnesses all over the world.
And having said that, we’re delighted to report that unit volume growth, as you know, in the first quarter was strong across our global markets. Product sales growth of 2% year-over-year was — reflected 14% volume growth, and that was impacted itself by a 5% net price decline as well as some inventory declines, a little bit of unfavorable FX and some unfavorable changes to estimated sales deductions that we’ve shared with you before.
But I’d like to refresh your recollection. Record sales on 10 of our brands in the first quarter, and ex volume growth was 22% with 47% volume growth in JAPAC, where many of you would call it Asia Pacific region.
Second, based on that strong volume growth, we raised our ’23 guidance to $26.2 billion to $27.3 billion in revenues, non-GAAP EPS up to $17.60 to $18.70. By the way, remember that, that excludes any contribution from the announced Horizon acquisition.
Multiple priority products generated strong volume growth in the first quarter, Repatha, EVENITY, KYPROLIS, TEZSPIRE quarter-over-quarter was up 28%. TAVNEOS was up 27% in the U.S. quarter-over-quarter as well as our innovative heme/onc portfolio was up 21%, which we were delighted about in volume in the first quarter.
Biosimilars continue to be good for us. AMJEVITA delivered $51 million U.S. sales in the first quarter after launching on January 31 and benefited from some initial inventory build. Long-term growth in biosimilars is all about new molecules and new markets.
The announced acquisition of Horizon Therapeutics is going to augment our long-term growth potential. Their key products, TEPEZZA, KRYSTEXXA, and UPLIZNA will leverage our decades of leadership in inflammation and nephrology as well as our global scale, our research and development and our biologics manufacturing capability.
Horizon has referenced some positive trends in TEPEZZA’s leading indicators exiting the first quarter. We’re encouraged by the recently announced positive chronic thyroid eye disease or TED data and the associated label update.
As a reminder for TEPEZZA, it can take about 90 days for patient enrollment forms or PEFs, a key leading indicator, to move through the prior authorization process, then the patient’s infusion needs to be scheduled. So as a result, it takes some time for these patient enrollment forms to translate into sales.
We look forward to closing the transaction in the first half of 2023 and joining forces to reach more patients around the world with Horizon’s innovative medicines. We continued to execute on multiple capital allocation priorities in the first quarter. We invested over $1 billion in internal innovation. We invested $300 million in capital expenditures, including significant expenditures for our state-of-the-art facilities we’re building in Columbus, Ohio and Holly Springs, North Carolina. And we announced a 10% dividend increase.
Last, I’ll just remind you, we have multiple registration-enabling studies underway across general medicine inflammation and oncology position us well for the long term.
So Dan, I’ll turn it back over to you, and I’m sure on that last point, you want to go through that with Dr. Reese, who’s joined us today.
Q – Dan Lundquist
Great. Thank you very much. So do you want to dig into the R&D portfolio? So maybe we’ll start with TEZSPIRE. So you’re in multiple Phase II and Phase III trials looking at label expansion, whether it’s chronic rhinosinusitis, COPD, et cetera. Can you maybe talk about the opportunities among these indications, potential launch timing that could drive further growth inflection?
Sure. Yes. So there are a couple of Phase II, a couple of Phase IIIs. Why don’t we start with chronic rhinosinusitis with nasal polyps. This is a disorder that has a lot of morbidity associated with it. Patients often undergo multiple surgical procedures for removal of nasal polyps.
We actually did an analysis of the Phase III NAVIGATOR trial in asthma with — and there were a subset of patients who had nasal polyps. And we saw actually very robust efficacy, about an 86% reduction in the exacerbation rate, the asthma exacerbation rate, a 22% improvement in clinical symptoms associated with nasal polyps. So that — which was considered very clinically meaningful by folks in that field.
So — and mechanistically, there’s a lot of reason to believe that the drug should be effective in that disorder. So that one’s moving forward. And as we get line of sight to when data timing will be, I’ll give guidance on that.
Eosinophilic esophagitis, another disorder in which we’re launching a Phase III. It’s an eosinophil-driven disease. So the upstream inhibition of TSLP by TEZSPIRE gives us mechanistic belief there. Eosinophilic esophagitis is a disorder that’s been recognized. There’s been a dramatic increase in diagnosis over the last couple of decades, and many academic medical centers now, it’s actually the most common cause of upper GI symptoms as opposed to reflux, for example, 20 or 30 years ago. So that’s moving forward.
And then there’s a large Phase II study in COPD that’s ongoing. Maybe I’ll end on that when — there is a lot of — there is evidence that the TSLP cascade plays a role in exacerbations of COPD, for example, TSLP is released in response to smoke, viruses, air pollution, other irritants. It can be found in the sputum, bronchial mucosa, bronchoalveolar lavage fluid in patients with COPD.
And so that trial is moving forward. It’s a trial that will take all comers, i.e., regardless of eosinophil level and regardless of smoking status. So we expect data from that trial in the first half of ’24.
We’ve seen a recent COPD trial readout with Dupixent positively. Can you maybe discuss the similarity, differences in terms of your trial design patient population with Phase II versus…
Yes. It’s always hard to do cross-trial comparisons, of course. The things I mentioned at the end, the enrollment of patients regardless of eosinophil level and smoking status are differences in trial and design. So of course, we’ll take a look at all of these subsets when we’ve got the data in the first half of next year.
Great. And what would you say the bar is versus Dupixent there, positive? Would you plan to run a head-to-head study versus Dupixent, maybe some thoughts there.
Yes. I think the Phase III plans will be driven by the data that we generate in Phase II. Their trial was restricted to the high eosinophil population. So depending on what we see across those populations, depending on smoking status, all of those things will drive Phase III design. And that’s very typical in this field.
Okay. Maybe switching gears to Otezla. So it’s been a pretty dynamic landscape in terms of I&I more broadly. Can you maybe talk about the 1Q year-over-year decline? How much of that was due to the inventory level versus net selling price? Maybe that’s also a question for Peter, too.
Yes. Sure, Dan. I’d be happy to take that. Look, we continue to be delighted with Otezla. We think it’s such a terrific medicine. And we’re after the 1.5 million patients in that mild to moderate category that could use a systemic agent as they come off a topical or just come into the category and need some treatment.
So we saw a 5% volume growth for Otezla in the first quarter. So we were pleased with continued volume growth. Sales were impacted by 9% year-over-year inventory decline as well as the year-over-year decline in net selling price.
So the first quarter net price decline reflected some additional rebates to improve the quality of coverage as we covered on our first quarter call. So going forward, we’re going to continue to provide co-pay patient assistance programs to support new patients, but that happens in the first quarter. So the first quarter tends to seasonally be off, and we would just remind everybody about that.
Historically, year-over-year net price erosion because of that will slow as the year goes along, given the fact there is an increased impact in the first quarter. So all in all, over 750,000 patients treated with Otezla over the years, ease of administration, well-established safety profile, well understood by physicians, no lab monitoring.
We think — as we like to remind our investors that it’s a post-topical prebiologic place in the market that we want to be. So we’re very pleased with it. We’re going to continue to be very strong. And why systemic and get into that as the first stop for patients that have psoriasis. I don’t know if you would like to…
Yes, I think that’s exactly right. And there’s a huge spectrum of disease. As Peter said, there are probably 1.5 million patients who should be on systemic therapy. This is a systemic disease. I’m sure in 2 or 3 decades, folks will look back and wonder why topicals were used in patients were so long as a sole therapy.
It is a systemic inflammatory disease. And our goal, as Peter said, is reaching those patients who could really use an initial systemic therapy but maybe don’t want to reach for a biologic yet.
And how would you say the landscape has been evolving with some of the competition in the oral space? What would you say your share has trended in moderate to severe psoriasis? And what are you seeing in terms of any changing prescribing patterns amongst physicians?
Yes, we don’t characterize share in that moderate to severe. We don’t segment that. But one key metric we do look at is new to systemic patients. And we feel that, that’s a good spot for us. As we just said, it’s important to get to these 1.5 million potential patients that could use systemic therapy.
We’re seeing an impact on the new patient demand from free drug programs, both from a couple of new topicals and new systemic. And so we’re dealing with that. That we think creates perhaps a little bit of noise in the numbers right now.
But we’re at it. We’re sourcing the majority of our new business from a post-topical prebiologic new to systemic patients, which Dave just mentioned. And we talked about the 1.5 million mild to moderate patients out there. So we continue to have great confidence in the process. And we think most importantly, it’s an excellent, excellent medicine for patients and especially addressing the mild to moderate category.
I know there was some buzz recently with the oral IL-23 space in AAD presentations. Can you talk about the potential impact?
I think it’s a little too early for — to understand oral IL-23s. And these patients, they tend to cycle through therapies over time. And so I think there’s going to be room for a large number of agents going forward.
Okay. Maybe shifting to obesity with AMG 133 and AMG 786. What would you say the target product profiles you’re looking for are? And would you say that they need to be superior versus Wegovy, Mounjaro?
Yes. So obviously, if we step back, kind of level up for a second, this is a field in my view that’s just getting started. It’s in its infancy. There are hundreds of millions, potentially billions of patients over the next few decades around the world who will suffer from obesity, which is a disorder rooted in human evolution, and it’s not going away anytime soon.
The — what we also know for sure is that it’s not the same disorder in everyone. So there are multiple drivers or diseases tucked under this kind of crude clinical categorization that we call obesity. And one of the things that we will do in our development program is really start to use our ability in multiomic profiling and molecular characterization of disease to try to start identifying patient populations that can benefit.
In terms of AMG 133 itself, this is a molecule that was designed very specifically as GLP-1 agonist peptide moieties with the GIP receptor antagonist antibody as a backbone. That was based in genetic data that showed that variant — genetic variants that associate with reduced signaling through that pathway associate with a lower weight or body mass index. So it was very deliberately designed.
What we will look for as we generate the Phase II data are the kinetics of weight loss, in other words, the rapidity. That looked quite good in Phase I. What is the maximum weight loss? And certainly, we would want to see something at least equivalent to what’s been observed with the current agents.
And then ultimately, one of the real challenges in the field is maintenance of weight loss. There’s certainly now an enormous amount of anecdotal evidence that when you stop these agents, it’s a relatively short half life.
Many patients have rapid rebound, weight gain. Because of the long half-life of AMG 133, one of the things we will be exploring going forward are maintenance regimens where you have relatively infrequent dosing every 2 months, every 3 months. And so there may be a treatment paradigm that emerges where you’ve got an induction phase and a maintenance phase.
We’re investigating multiple doses and scheduling regimens in Phase II really to give us broad optionality as we then think about the Phase III program in a field that’s going to evolve quite a bit over the next decade.
And atopic dermatitis, it’s obviously a crowded space, but there’s been a big emphasis on I&I. How should we think about your OX40 versus competitors from a positioning standpoint?
Yes. I like this molecule a lot based on the mechanism of action. This is another disorder, atopic dermatitis that to me is very reminiscent of psoriasis 20 or 25 years ago.
You may remember when a drug called ENBREL was introduced. There were 2 questions. One, would anyone ever use a biologic in these sorts of disorders? And then after ENBREL was developed, could the world possibly accommodate more than one agent?
And of course, we’ve seen a plethora of mechanisms be introduced. I think the same thing will happen in atopic dermatitis. There are at least 30 million individuals around the world that suffer from the disorder. It has very significant quality of life impairments often associated with it. And so again, patients move through therapies. And I think there will be a very big opportunity if you can demonstrate the right sort of efficacy.
Great. Maybe shifting to oncology. You continue to invest in tarlatamab, including a recently announced Phase III study in small cell — second-line small cell lung cancer. Can you comment on the reasons you’re excited about this molecule and kind of the plans you have?
Yes. I really like this molecule. It’s one that I think should get more attention. And just to remind everyone, this is a half-life extended bispecific T cell engager that targets DLL3. DLL3 is present in the large majority of cases of small cell lung cancer, a disorder where there hasn’t been a lot of treatment advance in decades.
In fact, I’m a medical oncologist by way of background. The drugs used to treat that disease are pretty much the same ones that I used in training as a fellow 3 decades ago.
We just published the Phase I data in the Journal of Clinical Oncology. If you haven’t, I’d urge you to read that paper and the associated editorial that was quite nice and actually puts in perspective some of the data.
What was most interesting beyond the roughly 25% response rate was the duration of response, which was over a year in patients who have third, fourth line small cell lung cancer. That’s almost unheard of. And that’s the thing that really made me sit up and take notice, both the lack of progression and the overall survival number in that trial.
So we fully enrolled — are enrolling a Phase II trial that will read out in the second half of the year that can be potentially registrational. We’ve just launched a Phase III trial in second-line disease comparing it against standard chemotherapy. So I’m really looking forward to that data set in the second half of the year. But if that replicates Phase I, then this is a molecule, I think, will be one to watch.
Definitely something to look out for. Maybe in gastric cancer, you acquired bemarituzumab in 2021. It’s now in Phase III studies. Can you update us on the status of the program and comment on that potential?
Dan, finance guys like you may call it bema.
I’m always quizzing Peter.
Especially before noon, Dan.
So bemarituzumab targets FGFR2b, which is expressed in 20% to 30% of gastric cancers. Gastric cancer, of course, is a major global public health challenge in East Asia, in particular. It’s highly prevalent.
We’re enrolling 2 Phase III trials. Those are moving along. One is a chemotherapy bema combination. The other is chemotherapy, checkpoint inhibitor bema. I’ll give guidance as those enroll and as we start to get a sense of the event rates when we can expect data from those trials.
In addition, there will be 1b studies going on in squamous non-small cell lung cancer, where there’s also an appreciable overexpression of the target receptor. And then there’s a basket study for sort of smattering of solid tumors, some of which will have FGFR2b overexpression. So a lot of data coming out over the next few years.
Excellent. Maybe shifting gears to biosimilars. Can you talk about the importance of interchangeability for AMJEVITA, timing of that designation?
Yes. Thank you, Dan. And look, we’re delighted in what we’re able to deliver to patients with biosimilars and frankly, help the health care system by moving that along in our portfolio. So AMJEVITA has all the attributes needed for a successful launch here, which we’ve started in the United States.
So we view interchangeability as just one of several important success factors. But we look at all the attributes that matter to patients, payers and providers. So we think about affordability. We think about supply chain reliability. We think about patient experience. We think about needle. We think about quality. We think about assurance.
And so we’ll continue to build on our track record in each one of those categories and reinforce that. We’re first to market. So we’re several months ahead of the competition there. We feel good about that. We feel good that we’re establishing a leadership position. We don’t have a date certain for adding interchangeability to label, but we’ll get — we’re continuing to engage with the regulatory agencies, and we’ll be back on that at the right time.
Great. And can you talk about the pricing volume dynamic that you expect in July post the entrance of other biosimilars? Or are there any changes to your expectations given Teva’s issues that they’ve had and the recent complete response letter there?
Yes. So just to recap, we’ve got broad access on AMJEVITA at the 3 national PBMs. So — but it’s parity formulary positioning. So it does imply a more gradual uptake, which we discussed for AMJEVITA then you would expect if we had exclusive formulary positioning on it. It implies the uptake curve, again, will be more gradual than a buy-and-bill biosimilar like our MVASI or KANJINTI in oncology.
On the pricing side, we don’t comment on potential changes in contracting or access, but we’ll work through those in the future as you can imagine we do at Amgen. And on the volume side, we have all the attributes, again, in place to position well against subsequent entrants into the market. Again, reliable supply, patient experience, our history in biologics.
And we also — we go to market with the same commercial team as we — in biosimilars as we do with our innovative products. And we think that’s really important, not just from an efficiency standpoint, but being able to be reliable and deliver to patients.
So we think we have a lot of things going for us in biosimilars. Teva situation doesn’t change our expectations. We’ll continue to push really hard to serve patients, payers and providers through our biosimilar portfolio.
I know you’re — you’ve been quite excited about the biosimilar portfolio, and there’s a couple of big LOEs that are going to be coming up over the next, call it, 18 months. What would you — what is the latest on biosimilar STELARA, biosimilar EYLEA? Would you expect to launch immediately upon the LOEs? Maybe just some color and comments there?
Well, I think we reported positive Phase III data, top line results for STELARA. SOLIRIS and EYLEA biosimilars, we plan to follow that data with timely launches. We endeavor to be in the first wave of biosimilars. As I said earlier, it’s kind of new molecules, new markets.
So our anticipated U.S. SOLIRIS launch is March of 2025. We can’t comment on launch timing more specifically than that on some of the other ones for competitive reasons, but we expect them to contribute to our growth outlook.
I would remind you that those 3 molecules themselves address over $20 billion in innovative medicines on the market in 2022. So again, we continue to think this is a really important category for Amgen and for most importantly, for our patients, but also for providers and payers.
Great. And maybe a couple of capital allocation, balance sheet questions and typical Wall Street, you do one deal, and we’re asking about the next. But would you say what is the capability for you to do this development deals, partnerships, et cetera, in the near term given the existing acquisition you work in close?
Well, I think actually, today, I think we just put a release out with TScan. So that’s frankly an answer to the question is we’re in the market. We’re Amgen. We expect to have an opinion or a thought on all different types of transactions. We want to know what’s going on and understand it, and we’ll continue to do that.
So a reminder on our capital allocation hierarchy, first and foremost is investing in the best innovation, whether it’s internal or external. Secondly, we’re going to invest in our business as I talked about with North Carolina and Ohio. We’ll continue to do that in our capital expenditures. We’ll continue to return capital to our equity investors.
Now with our debt, we’ll continue to return it to our debt investors. And then, of course, we go down the hierarchy, and last would be opportunistic share repurchases, which we’ve guided this year to less than $500 million.
But the long answer is we don’t change that. So as we look at what’s out there, we’ll continue to interrogate opportunities. We’re agnostic on structure, partnerships, collaborations.
You asked Dave about rocatinlimab by way of example, the atopic dermatitis drug. That’s a licensing arrangement with Kyowa Kirin. You’ve asked him about bema. That was a full acquisition of Five Prime back, I believe, in April of ’21.
We’ve had — we have any number of collaborations right now in generative biology with Generate Biosciences by way of example. So we’re agnostic on that. We’re out. We’re busy. I think the press release today speaks for itself that we’ll continue to be busy out there and look for the best innovation, both internally and externally.
I said earlier, we’ve spent over $1 billion in the first quarter in internal innovation. So we’re excited about what’s going on, and we’ll continue to interrogate it. And we’ve got a company, and we think once combined with Horizon, a company with even more power to be able to execute on multiple capital allocation priorities.
Excellent. And it took me 25 minutes to ask a single question on KRAS. But what would you say your thoughts are on the competitive landscape there? How can — how do you anticipate maintaining the leadership position given other rising competition there?
Yes. I mean, the field is evolving. I feel very good about LUMAKRAS. It’s approved in a roughly 50 countries now. It’s launched in 30 and increasing. So it’s got global reach, continue to get — I talk to investigators and treating physicians around the world, continue to get really good feedback.
We are really pushing forward with the combination therapy development programs. Now that’s the key in both non-small cell lung cancer and colorectal cancer. So Phase III trial in colorectal cancer with Vectibix should read out over the course of this year. I’m really looking forward to that.
We’re going to be presenting some data at ASCO of LUMAKRAS chemotherapy combination in non-small cell lung cancer, which forms the basis for a Phase III trial that we’re going to be conducting in PD-L1-negative tumors and then also some data looking at the LUMAKRAS, Vectibix chemotherapy combination in earlier lines of colorectal cancer.
So it’s all systems go there. There are a lot of molecules coming behind. Many of them are early days. I think we need to see more data to get a sense of what they look like mechanistically.
Excellent. And maybe in the closing minutes here, just Horizon recently had the first quarter. Maybe just remind us on the timelines there and then just any thoughts around performance there.
Well, look, Horizon, we’ve indicated we expect Horizon to close in the first half of the year. We’re looking forward to that. As I said earlier, we’re looking forward to having Horizon join with us and augment our long-term growth. And so that’s exciting to us.
We’re excited about their 3 key products, certainly TEPEZZA, UPLIZNA and KRYSTEXXA. And we would also suggest we’re excited about TAVNEOS, which we acquired from ChemoCentryx back in October. So a lot of the strength in our rare disease area. So that’s a great place for us to be.
And with just a couple of minutes left in, I’d also just suggest we have Dave speak for a minute about BLINCYTO and what’s happened there because this is a — this medicine is — the importance of this, you can’t overstate it right now for patients with acute lymphoblastic leukemia.
Yes. So most of you are familiar with BLINCYTO. This drug continues to have a huge impact in — if you look at its usage based on what we just reported in the — at the earnings call. It’s going up, driven by data that were presented at the ASH meeting, American Society of Hematology meeting last December showing that insertion of BLINCYTO into the first line in adults with MRD-negative disease substantially improved the overall survival rate.
There was a paper just published in the New England Journal of Medicine within the last few weeks or so looking at infants with ALL, again, incorporating BLINCYTO into first-line therapy, showing — compared to historical controls of a cooperative group that’s got a lot of experience doing these studies over the last few decades a very substantial improvement in survival with great tolerability.
So I mean, it’s not often that we can say we’re curing kids with less toxicity, which will play out over decades in terms of its importance. So this is a drug that I think is going to be used in the coming few years broadly across first-line therapy, and it’s one to keep an eye on as well. It’s really changing the treatment paradigm in ALL.
Great. I think that is all that we have. Thank you very much, Peter. Thank you very much, Dr. Reese. Enjoy the conference.
Thank you, Dan. Thank you, BofA.