Analyst Conference Summary

biotechnology

conference date: January 30, 2020 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2019 (fourth quarter, Q4)

Forward-looking statements

Overview: Sequential revenue growth.

Basic data (GAAP):

Revenue was $6.20 billion, up 8% sequentially from $5.74 billion and down 0.5% from $6.23 billion in the year-earlier quarter.

Net income was $l.70 billion, down 14% sequentially from $1.97 billion, and down 12% from $1.93 billion year-earlier.

Earnings Per Share (diluted EPS) were $2.85, down 13% sequentially from $3.27, and down 5% from $3.01 year-earlier.

Guidance:

Full year 2020 revenue expected between $25.0 and $25.6 billion. GAAP EPS range of $10.85 to $11.65. Non-GAAP EPS range of $14.85 to $15.60. $700 million in capital expenses.

Conference Highlights:

Robert A. Bradway, CEO said "Ready for the challenges of a new year. Met and exceeded financial targets. 2019 was the transition year as many of our off-patent legacy products faced competition. Should return to revenue growth in 2020." Expects a significant amount of future growth to take place in Asia, including Japan and China.

Experienced a 5% global price decline in 2019, and expects some price decline in 2020. However, believes volumes will grow more than enough to compensate. Q1, as usual, is expected to be the slowest quarter. In Q4 units grew double digits or better for Repatha, Parsabiv, Blincyto, Aimovig, Prolia, Nplate and Vectibix.

Expects more biosimilar competition in 2020, including against Amgen's biosimilar offerings. In December 2019, the FDA approved Avsola for all approved indications of the reference product, Remicade (infliximab). In December 2019, a BLA was submitted to the FDA for ABP 798, a biosimilar candidate to Rituxan (rituximab).

Otezla launch is going well, $178 million in the 5 weeks after closing in Q4. Prospects are exciting. Amgen is very experienced with inflamation therapies. But terminating most of neurological program, except that having to do with inflammation. A sNDA to expand the label to include data from the Phase 3 scalp psoriasis study is under review by the FDA with a PDUFA target action date in April 2020.

Non-GAAP numbers: net income was $2.17 billion, down 1% sequentially from $2.20 billion, and down 1% from $2.19 billion year-earlier. EPS was $3.64, down 1% sequentially from $3.66 and up 6% from $3.42 year-earlier.

Product sales were $5.88 billion, up 8% sequentially from $5.46 billion, and down 2% y/y from $6.00 billion, with $4.37 billion in the U.S. and $1.5 billion international. Non-product revenue was $316 million, up from $229 million year-earlier.

Cash and equivalents balance ended at $8.91 billion, down sequentially from $11.4 billion. Operating cash flow $2.5 billion. Free cash flow was $2.3 billion. At the end of quarter debt was $27.0 billion. Capital expenditures $200 million. $1.1 billion worth of shares were repurchased in the quarter. Dividend payments were $0.9 billion.

In December 2019, the European Commission (EC) granted marketing authorization for Evenity for the treatment of severe osteoporosis in postmenopausal women at high risk of fracture

Phase 1 data for AMG 510, a small molecule KRAS G12C inhibitor, in patients with solid tumors, was presented at ESMO in September 2019. A potentially pivotal Phase 2 monotherapy study in advanced non-small cell lung cancer (NSCLC) completed enrollment and data are expected in 2020. A Phase 2 monotherapy study is enrolling advanced colorectal cancer patients. A Phase 1b study in combination with MEK inhibition is enrolling advanced colorectal and non-small cell lung cancer patients.

Amgen has 13 Bite programs in progress, including AMG 562, AMB 427, AMG 420, AMG 673, AMG 701, AMG 757, and AMG 330. A Phase 2 study of AMG 570, a bispecific inhibitor of ICOSL and BAFF, is enrolling patients with systemic lupus erythematosus.

A Phase 3 Study evaluating the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma has completed enrollment, with the primary analysis expected in late 2020. A Phase 2 study evaluating the efficacy and safety of tezepelumab in adults with moderate to very severe chronic obstructive pulmonary disease is enrolling patients.

See also the Amgen pipeline.

GAAP cost of sales was $ billion. Research and development expense was $ billion; selling general and administrative expense $ billion; and other expense $ million, for total operating expenses of $ billion. Operating income was $ billion. Interest and other expense net was $ million, income taxes $ million.

Full year 2019 revenue was $23.4 billion. GAAP EPS was $12.88. Non-GAAP EPS was $14.82.

Q&A summary:

Pricing for Aimovig? Pleased with market access, 92% for covered lives, affordable copay, added CVS at the beginning of 2020. 80% of patients now are paid. 4 million elligible US patients. There is a reduction in net selling price starting in Q1, to gain that access. Then price should be stable going forward.

AMG 510 first line lung strategy? For patients ineligible for other therapies, just started enrollment.

M&A priorities, renal, game changing criteria? We have nephrology as a franchise area. We are looking for business development opportunities there, with a large effect size.

Otezla and Enbrel synergies? Excited about the potential, no details yet.

Guidance? Base business will be stable. Expect Otezla to perform well. Biosimilars are annualized at $1 billion, it is early for the recently launched products.

Lack of growth in guidance despite the growing products? The picture does look quite strong. But the Neulasta stability with Onpro has required some price erosion. Also we expect single digit average price declines for the year. We hope with strong execution we can get a good growth profile in both the base business and Otezla.

Excited about Omecamtiv mecarbil, which directly affects heart cells. Phase 3 results by end of year.

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