Analyst Conference Summary

biotechnology

conference date: October 31, 2023 @ 5:00 AM Pacific Time
for quarter ending: September 30, 2023 (third quarter, Q3)

Forward-looking statements

Overview: Return to growth, great pipeline lined up. But significant GAAP impairmnent charge, so GAAP EPS down y/y, non-GAAP EPS up y/y.

Basic data (GAAP):

Revenue was $6.90 billion, down 1% sequentially from $6.99 billion and up 3% from $6.65 billion in the year-earlier quarter.

Net income was $1.73 billion, up 29% sequentially from $1.38 billion, and down 19% from $2.14 billion year-earlier.

Earnings Per Share (diluted EPS) were $3.22, up 25% sequentially from $2.57, and down 19% from $3.98 year-earlier.

Guidance:

Raised 2023 guidance: revenue $28.0 to $28.4 billion; GAAP EPS $11.23 to $12.73; non-GAAP EPS $18.20 to $18.80; cap ex $950 million. Share repurchases less than $500 million.

Conference Highlights:

Robert A. Bradway, CEO said "We are excited about our pipeline progress and our operating performance in the third quarter. With the completion of the Horizon acquisition, Amgen has added rare disease medicines that fit well with our broad innovative portfolio." Q3 results included no contribution from the Horizon acquisition (completed 10/6/2023). Product sales growth was driven by 11% volume growth, offset by 3% lower net selling price and 3% unfavorable estimated sales deductions. GAAP hit by $650 million impairment charge for discontinuing AMG 340 development.

As of this date, completed acquisition of Horizon Thereapeutics and raised full year guidance. Horizon had $945 million sales in Q3. Amgen now has this signicant rare disease business that will add to growth. Current rare diseases sales are almost exclusively in the U.S., but will be expanded globally. Believes pieces are in place to increase revenue and earnings through the end of the decade.

The Q3 dividend of $2.13 per share will be paid, to stockholders of record on November 17, 2023, on December 8, 2023.

In Q3 or early Q4 2023 Tarlatamab (AMG 757), a bi-specific antibody, reported positive Phase 2 data for advanced small cell lung cancer (SCLC), third line, with a 40% objective response rate. The Phase 3 study is enrolling patients. Combination studies are also underway. Has received Breakthrough Therapy designation from FDA.

In Q2 2023 Blincyto was granted Breakthrough Therapy designation for CD19+, Ph-, B-cell precursor acute lymphoblastic leukemia (B-ALL) during the consolidation phase of multiphase therapy. Global regulatory submissions are planned in 2023 to early 2024. Studies continue in other indications.

In Q4 2023 Phase 3 positive data was released for Lumakras with Vectibix for KRAS metastatic colorectal cancer. Studies continue.

A Phase 1 dose-escalation study of AMG 340, a lower T-cell affinity BiTE molecule targeting prostate-specific membrane antigen (PSMA), in mCRPC will be discontinued, resulting in a substantial, $650 million impairment charge.

AMG 133, maridebard cafraglutide, a GIPR inhibitor for patients with or without type 2 diabetes, completed study entollment in Q3 2023 and now expects top-line data in late 2024.

In Q4 Otezla reported positive Phase 3 results for genital psoriasis and itch, and in a separate Japanese study for palmoplantar pustulosis.

In Q3 2023 the FDA accepted a BLA for ABP 938, an aflibercept biosimilar.

Many other studies are ongoing.

Non-GAAP numbers: net income was $2.67 billion, near flat sequentially from $2.68 billion, and up 6% from $2.53 billion year-earlier. EPS was $4.96, down 1% sequentially from $5.00 and up 6% from $4.70 year-earlier.

Product sales were $6.55 billion, down 2% sequentially from $6.68 billion, and up 3% y/y from $6.24 billion. Non-product revenue was $355 million, up sequentially from $303 million, and down from $415 million year-earlier.

Cash and equivalents balance ended at $34.7 billion, up sequentially from $34.2 billion. Operating cash flow $2.8 billion. Capital expenditures $0.2 billion. Free cash flow was $2.5 billion. At the end of quarter debt was $60.5 billion. No shares were repurchased in the quarter. Dividend payments were $1.1 billion.

A Phase 2b study of efavaleukin alfa in ulcerative colitis continues to enroll patients. In Q2 2023 a Phase 2b study of efavaleukin alfa (AMG 592), an interleukin-2 (IL-2) mutein Fc fusion protein, in SLE was stopped for futility.

In April 2023, the European Commission granted marketing authorization for Bekemv (eculizumab, formerly ABP 959), a biosimilar to Soliris (eculizumab). Bekemv is the first biosimilar to Soliris approved by the EC. Later in Q2 the FDA accepted the BLA for 959.

See also the Amgen pipeline.

GAAP cost of sales was $1.81 billion. Research and development expense was $1.08 billion; selling general and administrative expense $1.35 billion; and other operating expense $644 million, for total operating expenses of $4.88 billion. Operating income was $2.02 billion. Interest expense was $759 million, other income $685 million, income taxes $217 million.

Q&A selective summary:

Obesity, 133 profile, 786? With 133 we believe we have a differentiated mechanism of action. Rapidly enrolled Phase 2 arms, data next year. Pleased with Phase 1 data. AMG786 is orthogonal, will see some data next year, there is a high bar in the field. We have some preclinical molecules as well.

Guidance change, all from Horizon? Not breaking down the revenue, we continue to see strength in our base business.

Horizon revenue outlooks for specific therapies? Not providing 2024 guidance. But Horizon has a lot of positive leading indicators. Tepezza label update from FDA in April is getting traction with payers, opthalmologists, and endocrinologists. We are also expanding Tepezz outside the U.S., including our recent approval in Brazil. Krystexxa and Uplizna are doing really well.

AMG786 dropped cohort? We are not worried about suicide ideation. Dosing is adjusted as we move through Phase 1 trials.

Tepezza growth plan? Working on educating physicians, widening it from the base at launch. New prescribers are up 50% y/y. Working on improving payer policies.

Otezla dermatology strategy? Several new competitive launches this year, all with generous free drug programs. Topical patients who would normally moved to an oral switched to a free, new topical, or to a free oral. Now topicals are pulling back on free drugs. Beginning to see new growth from topical conversions. We should be able to give better guidance as we see the course of free program reductions.

Considerable conversation about details of the weight-loss market.

Believes has reached a tipping point for Repatha sales, with doctors and payers.

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