Analyst Conference Summary

biotechnology

conference date: November 2, 2021 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2021 (third quarter, Q3)

Forward-looking statements

Overview: Solid quarter.

Basic data (GAAP):

Revenue was $6.71 billion, up 3% sequentially from $6.53 billion and up 5% from $6.42 billion in the year-earlier quarter.

Net income was $1.88 billion, up sequentially from $464 million, but down 7% from $2.02 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.31, up sequentially from $0.81, and down 3% from $3.43 year-earlier.

Guidance:

Full 2021 revenue $25.8 to $26.2 billion; GAAP EPS $9.55 to $10.21; non-GAAP EPS $16.50 to $17.10.

Conference Highlights:

Robert A. Bradway, CEO said "Our newest product, Lumakras, a first-in-class lung cancer treatment, is off to a strong start and our robust pipeline of potential new medicines across all stages of development sets us up well to drive growth over the long term."

Revenenue was driven by higher unit demand, offset by lower pricing. Prolia, Evenity, Repatha and Mvasi led sales growth.

Expects increased competition to continue to erode results of certain established products like Neulasta and Neupogen.

Non-GAAP numbers: net income was $2.66 billion, up 6% sequentially from $2.52 billion, and up 8% from $2.47 billion year-earlier. EPS was $4.67, up 7% sequentially from $4.38 and up 11% from $4.19 year-earlier.

Product sales were $6.32 billion, up 3% sequentially from $6.11 billion, and up 4% y/y from $6.10 billion. Non-product revenue was $386 million, up from $319 million year-earlier.

Cash and equivalents balance ended at $12.9 billion, up sequentially from $8.1 billion. Operating cash flow $2.4 billion. Free cash flow was $2.2 billion. At the end of quarter long-term debt was $33.3 billion. Capital expenditures $0.2 billion. $1.1 billion worth of shares were repurchased in the quarter. Dividend payments were $1.0 billion.

Otezla has been given a PDUFA date of December 21, 2021 for mild to moderate plaque psoriasis patients who are candidates for phototherapy or systemic therapy.

Lumakras (AMG 510 or sotorasib) was approved in May 2021 for treating KRAS G12C-mutated NSCLC in the U.S. , following at least one prior systemic therapy. Applications made in EU, Canada, Australia, Brazil and the United Kingdom. Trials in other indications continue. Launch is strong, so far.

In July 2021 THE FDA accepted the BLA for tezepelumab. A Phase 3 Study evaluating the efficacy and safety of tezepelumab in adults and adolescents with severe uncontrolled asthma data was presented in February 2021. 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. Regulatory submissions planned for 1H 2021. Was designated a Breakthrough Therapy.

In Q2 2021 began Phase 3 planning and expects to commence discussions with regulators for bemarituzumab, a first-in-class anti-fibroblast growth factor receptor 2b (FGFR2b) antibody for the treatment of patients with human epidermal growth factor receptor 2 (HER2) negative, FGFR2b-positive gastric and gastroesophageal junction cancer. This came with the Five Prime Therapeutics acquisition in April 2021.

See also the Amgen pipeline.

GAAP cost of sales was $1.61 billion. Research and development expense was $1.42 billion; selling general and administrative expense $1.31 billion; and other expense $0 million, for total operating expenses of $4.33 billion. Operating income was $2.38 billion. Interest and other expense net was $223 million, income taxes $271 million.

Q&A summary:

How are thinking about 2022 at a high level? We continue to manage the business effectively. We will continue to invest in growth opportunities, and plan to deliver growth for our shareholders.

Lumakras patient numbers, paying v. non-paying? About 75% of early access program is trial patients converting to commercial supply.

Aimovig/neurology plans? It is still an important product for migraine. We believe there are many sufferers who are not yet being helped by its category (CGRPR agonists) of therapies. We have a leadership share position. We are waiting for head-to-head data, which we hope to promote if positive. We are still building our neurology franchise.

KRAS competition for Lumakras? They are lined up. We believe we are in a good position, including with expansions to more nations including Japan. We are interested in other KRAS mutation targets as well.

Drug pricing reform? Premature to speculate on the legislation language. We hope the proposal will provide better access for patients while keeping the inovation ecosystem healthy. If there were a Part D out of pocket cap, that would help with sales of parts of our portfolio, like Repatha.

Pandemic has affected visits to doctor offices, and so our guidance and results.

Repatha volume has grown with the price increase, but in Q3 we were hit because many were in Medicare, and hit by the donut hole.

We are seeing much more testing of lung cancer for KRAS and G12C status.

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