Analyst Conference Summary

biotechnology

Amgen
AMGN

conference date: July 30, 2019 @ 2:30 PM Pacific Ti
for quarter ending: June 30, 2019 (second quarter, Q2)


Forward-looking statements

Overview: Revenue down slightly y/y, but new products are ramping nicely.

Basic data (GAAP):

Revenue was $5.87 billion, up 6% sequentially from $5.56 billion and down 3% from $6.06 billion in the year-earlier quarter.

Net income was $2.18 billion, up 10% sequentially from $1.99 billion, and down 5% from $2.30 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.57, up 12% sequentially from $3.18, and up 3% from $3.48 year-earlier.

Guidance:

Full year 2019 revenue guidance increased slightly to $22.4 to $22.9 billion. EPS narrowed to $12.10 to $12.71 GAAP or $13.75 to $14.30 non-GAAP. $700 million in capital expenditures.

Conference Highlights:

Robert A. Bradway, CEO said "We are making clear progress on our strategy for long term growth." Despite pressure following patent expirations we are keeping cash flows strong, and returning cash to shareholders while investing in long-term opportunities.

We expect most revenue growth through volume gains rather than price increases. Evenity and Prolia show our leadership in bone density products. Still a place for Repatha for cardiovascular, so for further revenue growth. Blincyto and Evenity are doing well in Japan.

In July the Company completed the acquisition of Nuevolution and is rapidly integrating its world-class DNA-encoded library and other technologies.

Many of the therapies in the pipeline have potential to be either first-in-class or best-in-class. We are excited by what we are seeing in our oncology pipeline.

Aimovig was approved by the FDA late in Q2 2018.In March, 2019 the FDA approved a supplemental BLA to add 140 mg/mL single-dose autoinjector and pre-filled syringe dosing options.

Neulasta is seeing biosimilar competition, which will increase in 2019. Onpro and reputation for quality may slow the erosion.

Aranesp revenue is expected to decline more rapidly in 2019 due to competition.

Repatha is launching in China.

Income taxes in Q2 increased due to the ex-US repatriation tax.

Non-GAAP numbers: net income was $2.42 billion, up 9% sequentially from $2.23 billion, and down 4% from $2.53 billion year-earlier. EPS was $3.97, up 12% sequentially from $3.56 and up 4% from $3.83 year-earlier.

Product sales were $5.57 billion, up 5% sequentially from $5.29 billion, and down 2% y/y from $5.68 billion, with $4.14 billion in the U.S. and $1.43 billion international. Non-product revenue was $297 million, down from $380 million year-earlier.

Product sales
$ millions
Q2 2019
Q1 2019
Q2 2018
y/y %
Aimovig
$83
$59
$2
na
Evenity
28
0
0
na
Neulasta
824
1,021
1,100
-25%
Neupogen
75
73
102
-26%
Enbrel
1,363
1,151
1,302
5%
Arenesp
436
414
472
-8%
Epogen
223
219
250
-11%
Sensipar
122
213
420
-71%
Vectibix
196
170
173
13%
Nplate
201
189
179
12%
Xgeva
499
471
452
10%
Prolia
698
592
610
14%
Kyprolis
267
245
263
2%
Blincyto
78
69
60
30%
Repatha
152
141
148
3%
Parsabiv
168
126
73
130%
biosimilars
82
55
2
na
other
79
78
71
11%

Cash and equivalents balance ended at $21.8 billion, down sequentially from $26.3 billion. Operating cash flow $1.4 billion. Free cash flow was $1.3 billion. At the end of quarter debt was $30.6 billion. Capital expenditures $144 million. $2.3 billion worth of shares were repurchased in the quarter. Dividend payments were $0.9 billion.

In April 2019 the FDA approved Evenity for the treatment of osteoporosis in postmenopausal women at high risk for fracture.

In April 2019, Corlanor (ivabradine) was approved by the FDA for the treatment of stable symptomatic heart failure due to dilated cardiomyopathy in pediatric patients aged 6 months and older, who are in sinus rhythm with an elevated heart rate.

In December 2018, a Biologics License Application (BLA) for Kanjinti, a biosimilar Herceptin (trastuzumab), was resubmitted to the FDA. In December and January, the Company submitted a BLA to the FDA, and a Marketing Authorization Application to the EMA, respectively, for ABP 710, a biosimilar candidate to Remicade(infliximab).

Results from a Phase 3 study of ABP 798, a biosimilar candidate to Rituxan (rituximab), in patients with Non-Hodgkin's lymphoma are expected in Q3 2019. The FDA has set a Dec. 14, 2019, Biosimilar User Fee Act target action date for the Biologics License Application of ABP 710, a biosimilar candidate to Remicade (infliximab).

Dose escalation data of AMG 510, a small molecule KRAS G12C inhibitor, in patients with solid tumors, was presented at ASCO in June 2019. Had a 50% response rate, so program is moving forward rapidly. Also presented were updated dose escalation data of AMG 420, a BiTE (bi-specific T-cell engager) immunotherapy targeting B-cell maturation antigen (BCMA), in patients with relapsed/refractory multiple myeloma. Dose escalation data of AMG 212, a BiTE immunotherapy targeting prostate-specific membrane antigen (PSMA), in patients with metastatic castration-resistant prostate cancer, were encouraging.

Amgen has 13 Bite programs in progress, including AMG 562, AMB 427, AMG 420, AMG 673, AMG 701, AMG 757, and AMG 330. AMG 420 presented first data (70% response rate) in Q4, as did AMG 330.

Seven first in class studies were initiated in Q3 2018: AMG 119, 397, 424, 427, 510, 562, 1n3 890. 510 first data should come in by midyear 2019.

AMG 594, a cardiac troponin activator, is advancing to Phase 1 for heart failure. AMG 890 continued a Phase 1 study for cardiovascular patients with elevated Lp(a). It is an siRNA molecule.

See also the Amgen pipeline.

GAAP cost of sales was $1.01 billion. Research and development expense was $0.92 billion; selling general and administrative expense $1,26 billion; and other expense $0.0 million, for total operating expenses of $3,19 billion. Operating income was $2.68 billion. Interest and other expense net was $114 million, income taxes $385 million.

Q&A summary:

Biosimilar timeline for lower dose? We are not seeing much resistance in the market from hospitals or payers, without the lower dose. October 28, 2019 is the FDA due date for the decision on the lower dose.

Neulasta v. biosimilar trends? See in 340b channel and in businesses where we are not contracted. OnPro is helping hold a majority of accounts.

AMG 510 CRC tumor responses and dosing? Colorectal patients going forward will be at 960 mg. The ASCO data had only 1 patient at that level. Lung cancer will be the lead indication going forward, we should start Phase 2 enrollment soon. Discussion with regulators has been productive.

Half-life expanded Bite expectations? We will prefer the half-life program, all other things being equal. Based on emerging data we are gaining confidence in the program.

Biosimilar strategy in the US? We are seeing a healthy biosimilar market evolve. We see competition with our drugs, and we believe our biosimilars will be competitive. Physicians can rely on Amgen biosimilars given our experience. Pricing is fluid, but not as much of a barrier as in the past. We have years of experience in Europe with biosimilars.

German court Praluent ruling? Repather IP upheld by EU patent office. Sanofi is appealing the German ruling.

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. These are my personal notes that I use as the basis for my Seeking Alpha articles. They are not advice.

Copyright 2019 William P. Meyers