Amgen Q2 2021 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2021

There are 21 speakers on the call.

Operator

This is Erica, and I will be your conference facilitator today for Amgen's Second Quarter 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session at the conclusion of the last speaker's I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Speaker 1

Erica, thank you. Good afternoon, everybody. Welcome to our Q2 call. I think the 3 key themes for this quarter are great execution in a challenging environment, Pipeline Advancement and Smart and Strategic Business Development. Lots to cover, so let's jump right in.

Speaker 1

Slides are up. Quick reminder that we'll use non GAAP financial measures in our presentation and some of the statements will be forward looking statements. Our SEC filings identify factors that could cause our actual results to differ materially. So with that, I would like to turn the call over to our Chairman and CEO, Bob Bradway. Bob?

Speaker 2

Okay. Thank you, Arvind, and hello everyone and thank you for joining our call. Through the 1st 6 months of the year, Amgen has continued to execute well, driving demand for our current products globally, while also paving the way for growth from future products. Total revenues in the 2nd quarter increased 5% over the prior year and 11% over the prior quarter. We achieved this growth despite the lingering effects of COVID-nineteen and increased competition in many of our therapeutic categories.

Speaker 2

We continue to see strong volume driven growth from Repatha, Otezla, Prolia and EVENITY And a number of our oncology biosimilar or excuse me, oncology medicines as well, all of which address significant health challenges. We also saw strong growth in the quarter from our biosimilar supporting our commitment to deliver value to healthcare systems around the world. We generated volume growth of 22% outside the United States and we're particularly encouraged by our progress in the Asia Pacific region, Proless, which joins Vensyto and XGEVA in our oncology collaboration there. And in Japan, the approval of Aimovig for migraine marks another important milestone for us in that market. In the U.

Speaker 2

S, we're excited by the strong launch of LumaCrest, which is providing hope to lung cancer patients in need of new treatment options. Very pleased with the enthusiasm Lumicrast has generated in the oncology community. We're also excited that the FDA granted priority review to tezepelumab further confirming our belief that it offers Significant advantages over currently available treatment alternatives for people with severe asthma, debilitating disease that affects millions worldwide. We've long sought to complement our internal innovation efforts with the best Available external innovation and in the first half of this year, we've executed on several compelling business development transactions, which fits squarely in our stated areas of interest. The acquisition of 5 Prime Therapeutics And our partnership with Keio Kirin, for example, have added 2 potential 1st in class Phase 3 ready assets in cancer and inflammation 2 therapeutic categories where there remains high unmet need.

Speaker 2

The acquisition of Teneo Bio, which which Dave will address in a moment, will significantly strengthen our protein engineering capabilities across therapeutic areas. Our strong balance sheet and cash flows will enable us to take advantage of additional business development opportunities like these as they arise. All the work we do is focused on advancing our mission to serve patients and to do so in a way that helps to address the many challenges facing society. You may have seen our recently announced plans to invest approximately $1,000,000,000 to build 2 new manufacturing facilities, 1 in North Carolina and the other in Ohio to meet the demand for our medicine. Both facilities will utilize cutting edge technologies to be much more efficient and environmentally friendly than traditional plants, supporting our goal of achieving carbon neutrality by 2027.

Speaker 2

Both plants will also draw from very diverse talent pools as we along with A number of other large companies that are part of the 110 Coalition look to collectively hire 1,000,000 Black Americans into well paying jobs over the next 10 years. You can learn more about our commitment to good corporate citizenship by reading our ESG report, which can be found in the responsibility section of amgen.com. Finally, before I turn things over to Murdo, let me thank my Amgen colleagues for their continued commitment to serving patients around the world and delivering strong performance across all aspects of our business. Murdo, over to you.

Speaker 3

Thank you, Bob. 2nd quarter product sales increased 3% year over year. Volumes increased 8%, driven by double digit growth across a number of our products, including Prolia, Repatha and our biosimilar products in Bassi and KANJINTI. Our ex U. S.

Speaker 3

Business grew 18% with volume growth of 22% year over year. We continue to see gradual recovery from the impacts of the COVID-nineteen pandemic in Q2 when compared to Q1 2021. Patient visits and lab test procedure trends continue to improve but remain below pre COVID-nineteen levels. We remain focused on customer execution. Overall, U.

Speaker 3

S. Field activity improved quarter over quarter reaching 80% of pre COVID levels. Face to face Our interactions are increasing and accounted for 60% of activity during the Q2. Over the course of the pandemic, The cumulative decline in diagnoses has suppressed the volume of new patients starting treatment, which we expect will continue to impact our business during the second half of the Now let me review some product details beginning with our innovative portfolio. In bone health, Prolia increased 24% year over year driven primarily by volume growth.

Speaker 3

In the Q2, osteoporosis diagnosis rates remained at approximately 90% of pre pandemic levels. We remain focused on driving patient growth and are optimistic about Prolia's strength in the second half of the year. EVENITY sales increased 30% year over year driven by 32% volume growth. In the U. S.

Speaker 3

Sales nearly doubled year over year As we saw an acceleration in demand trends driven by new and continuing patients, we believe EVENITY's unique bone building attributes We'll continue to drive revenue growth. Moving to Repatha, which has reached more than 1,000,000 patients since launch. Repatha sales increased 43% year over year driven by 49% volume growth and we maintain U. S. And global share leadership in the PCS Volume growth in the quarter was partially offset by lower net selling price resulting from an increase in Medicare Part D patients receiving Repatha and entering the coverage gap.

Speaker 3

Looking forward, we expect Some ongoing reduction in global net selling price on a sequential basis. Overall, we're confident in our ability to grow Repatha to help more patients at risk of developing a heart attack or stroke. Now on to Aimovig, which grew 24% quarter over quarter. On a year over year basis, net sales declined 16%. Volumes grew 11%, but were more than offset lower net selling price and unfavorable changes to estimated sales deductions.

Speaker 3

In the U. S, Aimovig TRx Looking ahead, we see continued rebate pressure as oral CGRPs compete for share in the market. To date, more than 500,000 patients worldwide have been prescribed Aimovig. We believe Aimovig has significant potential to help many more patients suffering from chronic migraine given the clinical data that will be published soon showing Aimovig superiority versus topiramate. Moving to our inflammation portfolio.

Speaker 3

Otezla sales were $534,000,000 in the quarter with 5% volume growth more than offset by unfavorable changes to estimated sales And lower net selling price. In the U. S, Otezla maintained first line share leadership in psoriasis. New to brand prescription volumes grew 10% year over year, even as patient visits to dermatologists remained 15% below pre pandemic levels. The number of new patients who started treatment with OTEZLA in Q2 was near pre pandemic levels, But those gains were largely offset by a lower percentage of 90 day prescription fills and lower prescription refill rates for Otezla.

Speaker 3

We expect that the recovery in the dermatology segment will progress over the coming quarters. Looking forward, we're preparing for approval of the mild to moderate psoriasis indication in the U. S. Later this year and for the launch of OTEZLA in China. Enbrel sales decreased 8% year over year, primarily driven by lower net selling price and favorable changes to estimated sales deductions.

Speaker 3

On a year over year basis, volumes declined 1% supported by Enbrel's long track record of efficacy and safety. Turning to biosimilars. Q2 sales were $567,000,000 driven by strong volume growth, which was partially offset by declines in net selling price. We continue to hold leading biosimilar shares in Europe for Amgevita and in the U. S.

Speaker 3

For Ambasi and KANJINCI. For the remainder of the year, we expect worldwide biosimilar volume growth to be offset by declines in net selling price due to increased competition. Longer term growth for biosimilars will come from expansion of existing products in new markets and launches of additional biosimilar molecules such as AMGEVITA in the U. S. And biosimilars for SOLIRIS, STELARA and EYLEA.

Speaker 3

In oncology, Neulasta Onpro remains the preferred long acting GCSF with 52% volume share in the quarter. Sales declined 18% year over year driven by lower net selling price and lower volume. This was partially offset by a 75 Kyprolis sales increased 11% year over year, primarily driven by volume growth and net selling price. Moving forward, we expect growth from Kyprolis use in combination with CD38 antibodies, including DARZALEX and Sarcliza. I'd like to take this opportunity to comment on our recent launch of lumikrazine, which is off to a strong start with unaided brand awareness increasing 20 points Since launch, KRAS testing in patients with metastatic non small cell lung cancer now stands at 70% And 46 of the top 50 testing labs now identify KRAS G12C as actionable in their lab reports.

Speaker 3

We're very pleased with the positive reaction from the oncology community and we'll be working closely with them to ensure access for patients who can benefit from this breakthrough medicine. Overall, I'm pleased with our Q2 execution given the sustained impact of COVID-nineteen on our business. We closely monitor the course of the pandemic and its impact on patient and physician behavior during the second half of the year. We'll maintain our focus on execution to ensure our medicines continue to reach And with that, I will turn it over to Dave.

Speaker 4

Thanks, Murdo, and good afternoon, everyone. We made several important advances in R and D last quarter. I will begin with our acquisition of Teneo Bio, which will strengthen Amgen's leadership in developing engineered Protein based medicines to treat patients with serious illnesses. There are 3 important components to the acquisition. First, Taneo Bio's core antibody technology will enable the development of multispecific biologics directed against targets in a wide range of diseases across our key therapeutic areas.

Speaker 4

TeneoBio's antibody It is genetically modified to express and stable and can be easily strung together like beads on a string to generate multispecific molecules. In addition, Taneo Bio also brings a novel lower affinity CD3 engaging technology that complements our BiTE platform. The availability of a second CD3 engager will allow us to broaden our bispecifics capabilities and enable customization of the T cell engaging domain depending on the disease and target. Finally, we are acquiring clinical and preclinical oncology programs directed against high value targets of interest, which we specifically selected based on our own discovery efforts and target validation. These include Phase 1 bispecific antibody for prostate cancer that complements acapadumab AMG 160 also targeting PSMA and AMG 509 targeting steep 1, which was recently granted fast track designation by the FDA.

Speaker 4

Turning to oncology, we continue to advance LumaCrest registration around the globe with regulatory reviews and progress in multiple jurisdictions, including Europe and Japan. Feedback from the medical and are heavily screening their patients for KRAS G12C mutations. I am pleased to report that more than 2,000 patients have We've seen lumacrass across more than 1,000 sites and 900 investigators or treating physicians, including through our global early access programs. In the lumacraft development program, we continue to advance our broad based combination efforts. Initial data from our vectabix combination in colorectal Cancer have been accepted for presentation at ESMO in September and the MEK and oral EGFR combination abstracts will be submitted to a medical meeting in the Q4.

Speaker 4

To expand our lumacraft experience with SHIP 2 inhibition, Along with our ongoing collaboration with Revolution Medicines, we have also entered into a collaboration with Novartis for a SHIP-two combination trial. Updates from our monotherapy, non small cell lung cancer study, including additional biomarker analyses as well as data in patients Stable brain metastases have been accepted for presentation at the World Congress on Lung Cancer. Recall that we are also investigating lumacrass in patients with Active Brain Metastases. We also plan on initiating a Phase 2 first line non small cell lung cancer study in patients with In the bamaretuzumab program, we are having good discussions with regulators on the Phase 3 gastric cancer development path and plan to initiate a registrational program by year end. This will include 2 Phase 3 trials, 1 investigating utility of bamaretuzumab in combination with chemotherapy and the other evaluating the addition of bamaretuzumab to chemotherapy and the checkpoint inhibitor.

Speaker 4

We are also planning a potentially pivotal Phase 2 study with tarlatanab, AMG 757, Our half life extended BiTE molecule targeting DLL3 for small cell lung cancer and we look forward to discussing next steps with regulators in the coming weeks. I'm also pleased to report that we have completed enrollment in the castrate resistant prostate cancer expansion cohort for acapadumab for AMG 160. In inflammation, continuing our leadership in dermatology, We are working closely with Kiowa Kirin to advance AMG 4,000 and 51 also known as KHK-four thousand and eighty three, as well as initiating discussions with regulators on our Phase III development plans in the coming months. In addition, the FDA accepted the OTEZLA supplemental filing for mild to moderate psoriasis. Finally, we and our partners, AstraZeneca, We're very pleased that the FDA granted tezepelumab priority review for the treatment of asthma, reflecting significant unmet medical need.

Speaker 4

In closing, I would like to thank the entire organization for continuing to advance important medicines for our patients. Peter?

Speaker 5

Thank you, Dave, and good day, everyone. I will briefly walk through our Q2 financial results before discussing 2021 guidance. The 2nd quarter marked another period of solid performance as we grew volumes 8%, increased investment in both internal and external innovation and delivered 4% year over year non GAAP EPS growth. As stated earlier, Q2 revenues at 6 $500,000,000 increased 5% year over year. Other revenues at $412,000,000 increased 38% year over year, primarily driven by shipments of the COVID-nineteen antibody therapy to Lilly.

Speaker 5

We continue to expect full year 20 21 other revenues to be in the range of $1,400,000,000 to 1,500,000,000 We expect full year operating expenses, including approximately $200,000,000 of operating expenses related to the Rodeo, 5 Prime and Taneo Bio acquisitions and also to the Keyua Kirin collaboration on an absolute basis to increase about 6% to 7 over last year, while delivering a full year operating margin of roughly 50%. On a non GAAP basis, Cost of sales as a percent of product sales increased 4.1 percentage points on a year over year basis to 16.9%, driven primarily by product mix, including COVID-nineteen antibody shipments to Lilly as well as profit share and royalties. For the full year, we continue to expect cost of sales as a percent of product sales to be 16% to 17%. Our cost of sales has increased as products with royalties and product share profit share payments have increased. As a reminder, a few of our products subject to royalties are Aimovig and biosimilars such as IMVASI, RIABNI and KANJENTI.

Speaker 5

Those subject to profit sharing arrangements are EVENITY and tezepelumab upon approval and launch. Non GAAP R and D spend increased 11% year over year due to investments in Beema acquired in Q2 as part of the 5 Prime acquisition and increased investments in discovery research. For the full year, we continue to expect non GAAP R and D spend will increase as we progress our innovative early and late stage pipeline programs. For the full year, we expect non GAAP SG and A spend to decline. Non GAAP other income and expenses were favorable by $146,000,000 on a year over year basis, due primarily to our portion of BeiGene's results, which we record 1 quarter in arrears.

Speaker 5

Q1 BeiGene results reflect the front payment BeiGene received in connection with a collaboration agreement. We expect our Q3 and Q4 non GAAP other income and expense to be more in range with our Q1 and expect full year net expense in the range of $1,300,000,000 to 1,500,000,000 Now turning to the outlook for the business for 2021. We are excited by our pipeline. This innovation is augmented and balanced by the business development that we have announced this year. Based on underlying market dynamics and our investment plans, We are reaffirming our 2021 revenue guidance range of $25,800,000,000 to $26,600,000,000 and our non GAAP EPS guidance range of $16 to $17 Notwithstanding absorbing the roughly $200,000,000 of operating expenses mentioned above related to business development activities, including 5 Prime, Rodeo, Teneo Bio and the Keyua Kirin collaboration.

Speaker 5

These ranges reflect uncertainty continuing in the second half of the year related to emerging variants. Patient visits and lab test procedure trends in the United States continue to improve, but still remain below pre COVID-nineteen levels. Our non GAAP tax rate guidance remains unchanged at 13.5% to 14.5%. Our capital expenditure guidance remains unchanged at $900,000,000 and our capital expenditures continue to reflect our investments In our manufacturing and related facilities, including improving their environmental footprints, investments in digital technologies throughout our business and increasing ESG Investments. We expect share repurchases for 2021 to be in the upper range of $3,000,000,000 to $5,000,000,000 This concludes the financial update.

Speaker 5

I'll turn it over to Bob for Q and A.

Speaker 2

Okay, Erica. Let's open the lines for questions. Maybe you could remind our callers the procedure and our And I feel sure our callers would like to know that it's Arvind's birthday today. So bear that in mind when you ask questions of us here this afternoon. Okay, Erica, open them

Operator

up. And your first question is from Yaron Werber with Cowen and Company.

Speaker 6

Hi, this is Gabe on for Yaron. Thanks for taking my question and congratulations on the quarter. My question is focused on the LumaCrest Study in first line lung cancer in patients with low PL-one and or a CK11. Could you just kind of talk about the, I guess, your benchmarks for historical comparisons in the CK11 and G12C co mutants and what you would use as your reference there and any updates on your discussions with regulators. In the past you mentioned that There could be a need for head to head studies in the future and what those could look like, what the comparison arms would be?

Speaker 6

Thank you.

Speaker 4

Yes. Thanks, Dave. Yes. So as we mentioned, as you pointed out, this study in first line non small cell lung cancer will be conducted in patients who are either PD L1 negative or STK11 mutant, these are populations of patients, of course, Patients who don't typically benefit from checkpoint inhibitors, where there's really, We think a lot of residual unmet medical need, in fact, STK11 mutational status may Help confer resistance to checkpoint inhibition. So that is the population We're targeting whether this can be potentially registration enabling or not, I think it's too early to speculate.

Speaker 4

The FDA has generally been Clear that in first line lung cancer, they wish to see randomized trials. So, one would have to anticipate having a If we saw compelling data, we would have the appropriate conversations going forward.

Operator

Your next question is from Umer Raffat with Evercore ISI.

Speaker 7

Hi, guys. Thanks for taking my question. I just really wanted to focus on Arvind's age today.

Speaker 2

You and me both. Turn 30.

Speaker 7

My question today was on KRAS and really around whether there's Any if you could just remind us what the plan for the interim is for the ongoing Phase 3 study as well as whether There is any primary analysis limited to PD L1 negative subset in particular. I'm quite intrigued that the first line Phase 2 trial is Limited to PD L1 negative or STK11? Thank you

Speaker 8

very much.

Speaker 4

Yes. In terms of the Phase 3 trial, I think the best way to think about that, Umer, is that we expect data in the first half of next year. And given the General rapidity of progression of patients historically in second and third line Lung cancer 2 standard therapy, the utility of an interim analysis may not be particularly Useful meaning the primary analysis often falls very quickly after an interim analysis. So, of course, we'll take a look Pat, you got a better sense in the second half of the year of the event rates, but I would really point to the primary analysis in the first half of And then in first line, as I said, we think that there is significant unmet medical need In the PD L1 negative STK11 mutant and or STK11 mutant population given the relative refractoriness of those tumors, 2 currently available treatments. And so we're very much looking forward to getting that study launched shortly on and Seeing the data readout, we'll provide guidance on timelines as soon as enrollment is really underway.

Operator

Thanks. Your next question is from Jay Olson with Oppenheimer.

Speaker 4

Hey, happy birthday, Arvind, and thank you so much for taking the questions. I'm curious about the combination data of lumacraft with vectabix. Will that be in Colorectal cancer only or should we expect to see combination data in non small cell lung cancer? And related to that, can you comment on the potential for that combination data to drive incremental use of Vectabix? Thank you.

Speaker 4

Thanks, Jay. Given the regimen that we're studying, you can expect that most of the patients that have been enrolled on that combination of Lumicrast and Vectabix will have colorectal cancer given the backbone of Vectabix here. Although the trial is open across malignancies for treating physicians to enroll patients if they feel that regimen Maybe appropriate. In terms of driving uptake of Vectabix, I don't want to speculate on that. Our job here is really to Generate these combination data and see if we think we can really drive things forward, particularly in colorectal cancer.

Operator

Your next question is from Salim Syed with Mizuho.

Speaker 9

Great. Thanks so much for the question, guys. And I'll add my happy birthday, Arvind. Me and you were both 30. So I just wanted to focus on the tax petition, if I can.

Speaker 9

So it seems like This notice of deficiency was not just for 1 year, but it was for 3 years, 2010, 2011 2012. So I'm just curious if there Is a pattern here in how you guys are doing the accounting that's triggering these notice of deficiencies? And I guess the underlying question here is, should we be expecting a notice of deficiency or ease for 2013 through 2020? And then just curious, what the interest rate is that the IRS would impose here? Thank you.

Speaker 5

Salim, thank you. It's Peter. And on your question around the IRS matter, the dispute, look, these notices are related to a transfer pricing dispute with the IRS regarding the allocation of the profits between the U. S. And the territory of Puerto Rico.

Speaker 5

So you can see we have a difference of opinion on the value of The significant risk and the complexity we undertake with activities performed at our Puerto Rico facility. We Strongly believe the IRS's position is without merit and we have appropriate tax reserves and this dispute will take several years to resolve. I would like to note, Selim, that Puerto Rico is our flagship manufacturing facility, responsible for the majority of Amgen's global manufacturing. We're proud of our Puerto Rico operations, very proud of them and our colleagues there. We've had a major manufacturing presence in Puerto Rico for About 30 years, we have more than 2,200 highly skilled colleagues in Puerto Rico and who produce very We've invested nearly $4,000,000,000 to expand and modernize those facilities in Puerto Rico.

Speaker 5

And we're proud to be consistently recognized as one of the island's best and most responsible employers. So on the matter of interest rate, I'll have to refer you to the IRS for that, but that's the IRS matter in brief.

Speaker 9

Okay. Thanks so much.

Operator

Your next question is from Terence Flynn with Goldman Sachs.

Speaker 10

Great. Thanks so much for taking the question. Maybe another one for Peter. I was just wondering if you can Comment on margins longer term. I noticed you called out that royalty and profit splits are going to be increasing here Given some of the newer products you're launching, but how should we think about that 50% operating margin this year and the cadence on the forward?

Speaker 10

Thank you.

Speaker 5

Terrence, thank you. And as always, we don't give long term margin guidance. But what I'd and I'd really like to say our North Star around We always pause and think about our objective is to grow our after tax cash flows for the enterprise versus targeting So I would just note we're continuing to invest in internal and external innovation. You've seen the fruits of that In the Q2, the launches of new products brought our digitalization efforts. Secondly, we highlighted our expectation that R and Prostate and small cell lung cancer.

Speaker 5

We have 3 biosimilars in Phase 3, 3 inflamed assets in Phase 2. 3rd, I'll just note, Terrence, that we're absorbing the upfront costs related to the acquisition of Rodeo as well as the cost of The 5 Prime acquisition, our recent collaboration with Kiawakiren and our recently announced acquisition of Teneo Bio, which we do expect to close in the second half of twenty twenty one. We also plan to rapidly progress these Phase 3 ready molecules in development BMN KHK-four thousand and eighty three. We began seeing higher manufacturing costs in Q2. Those were related to the Lilly COVID antibody efforts, that adds to the OpEx build for the rest of the year too.

Speaker 5

But on a year over year basis, remember, we're comparing it to Depressed spend in Q2 and Q3 2020 due to COVID. So at the end of the day, there's any number of financial metrics that We expect to be measured on by our investors and the analysts and we take pride in knowing that we want to end up really in the top of The group in terms of our operating efficiency. So that's very important to us. So you can rest assured that we'll continue to stay focused on that.

Operator

Your next question is from Matthew Harrison with Morgan Stanley.

Speaker 11

Great. Good afternoon. Thanks for taking the question. Dave, I was wondering if you could just comment on the IL-two mutant. I know we're going to I see some of the data here for SLE towards the end of the year, but it looks like you started a Phase 2 and you're also looking at UC.

Speaker 11

Just Maybe broadly on the profile and what you think you need to generate out of Phase 2b to have that be a competitive asset?

Speaker 4

Yes. Thanks, Matt. I'm glad you brought up MG 592, our IL-two mutine. Just to remind everyone, This is a molecule designed to enhance the number and function of T regulatory cells, some of the key Modulatory cells in the immune system, in many autoimmune diseases, the T regulatory axis is out of whack. As you mentioned, we anticipate sharing Phase Ib data in lupus At a medical meeting towards the end of the year and we'll look forward to being able to share those data with you.

Speaker 4

In addition, a Phase II trial in lupus is actively enrolling now. And then finally, as you mentioned, Matt, we are Launching a study in ulcerative colitis, another autoimmune disorder, in which there's quite a bit of evidence of dysregulation of the Treg access. So I think it's really the Phase 2 readouts here that will be critical as we As always, we'll look to make sure that we are adding something to what It is standardly available. In lupus, there remains very large residual unmet medical need. There was an approval within the last Day or 2, of course, but only the second drug in 40 years.

Speaker 4

And a very large patient population there still Requiring active medicines, ulcerative colitis, particularly for long term remission, is also an area with substantial unmet medical So it's full speed ahead in the IL-two mutine program and we'll look forward to sharing these data with you.

Operator

Your next question is from Geoff Meacham with Bank of America.

Speaker 6

Afternoon, guys. Thanks for the question and happy birthday, Arvind.

Speaker 12

Commercial question on Otezla for Murdo. So when you look at the growth in the first half of this year, How much of a factor was COVID versus say competition or pricing?

Speaker 13

And do

Speaker 12

you think any of these headwinds could impact the upcoming launch when you look

Speaker 3

Yes, thanks, Jeff. I would say throughout the course of last We saw a slowdown in the number of bio naive psoriasis patients moving into The market is based on COVID disruption to patient visits and given that Otezla is an early option in The treatment of psoriasis, we were impacted by that, I would say, more than the biologics, which tend to gain growth from OTEZLA and from each other. So that slowdown in the new patient diagnosis last year compounds into our growth rate this year. The good news on the quarter is we So new patient trends tick up. So we did see 10% growth in new patient New to brand prescriptions in the quarter.

Speaker 3

However, this was somewhat offset by an increase In the number of patients that switched away from OTEZLA to another treatment and we think that that was pent up treatment decision making that didn't happen Because patients weren't going to see their dermatologists last year, there were some price reductions mostly related to our Co pay programs, but that's usually a good indication of new patients starting. So overall, I would say it's primarily COVID impact. With respect to other products coming in, I'm not sure how to answer that. What I can say is, we continue to like our share position. Our share has held in the share of bio naive psoriasis patients and we continue to feel optimistic about the growth of OTEZLA given Pending indication in mild to moderate patients, which should come hopefully by the end of this year.

Speaker 3

Teams continue to execute well.

Operator

Your next question is from Ronny Gal with Bernstein.

Speaker 13

Gene? Good afternoon and thank you for taking my question. Let's start with the immunology theme here. You guys are developing both Stelara and Eumayer for 2023, 2024 as biosimilars. And given you're going to be on both sides Of the Innovator Biosimilar World, I was wondering if you had a thought about kind of like the long term trajectory of pricing In the immunology market, that is without giving specific numbers, do you kind of should we begin to see something along the lines of what we see with Diabetes with an ongoing gradual price decreases, so how do you think about this market longer term?

Speaker 2

Greg Murdo, do you want to respond

Speaker 3

to Ronny? Sure. Thanks for the question, Ronny. I'm hesitant to go out too far. What we are seeing of course in inflammation right now is A lot of new entrants, a lot of new mechanisms and a lot of competition, which is increasing the gross to nets That new entrants have to pay to secure access.

Speaker 3

We're also seeing increased management by the large national PBMs of National formularies as to which mechanisms get placed in a preferred status versus being held in reserve after Patients fail in earlier lines of therapy. So if we take rheumatoid arthritis as an example, I do see TNS continuing to Entrenched themselves in that first line position and novel mechanisms are likely to be in second and perhaps even third line after patients Have failed to have resolution of their RA symptoms or improve their the progression of their disease. In the biosimilar dynamics, I think we're seeing now the increase in interest from both payers and PBMs and providers, given some of the trends that we're seeing with the early biosimilars In the inflammation category and I do think that interest in biosimilars will increase and I think that Biosimilar penetration of parent molecule or originator molecule will accelerate with New entrants. So we're expecting that to be the condition on the ground by the time we launch AMGEVITA in the U. S.

Speaker 3

But overall, I would just come back to the strength that we have as a company, given our portfolio of Innovator and originator molecules enhanced with the presence of our biosimilar portfolio and I think that affords us an opportunity Serve providers, payers and PBMs with a lot of value to deliver to the healthcare system.

Operator

Your next question is from Geoffrey Porges with SVB Leerink.

Speaker 14

Thank you very much for taking the question. I'll continue with the biosimilar vein. Specifically on denosiran, What are you thinking in terms of the first biosimilar coming in for denosinab? And then Would you expect the erosion trajectory for branded Prolia and XGEVA to be similar to, for example, Neulasta or to the erosion of the oncology Biologics or would you expect it to be more gradual or faster? Just wondering what you think the trajectory will look like?

Speaker 3

Thanks, Jeffrey, for the question. I would say it's again hard to project into the future as to how Healthcare systems, payers and providers will change in their adoption of biosimilars, but I think Given that denosumab is a Part B product, the oncology biosimilar curves would be a close approximation of what we

Speaker 14

Thank you.

Operator

Your next question is from Michael Yee with Jefferies.

Speaker 6

Hi, guys. Thanks for the question. We had a 2 parter for David. On KRAS, you have upcoming data for MEK plus or minus EGFR. Just wanted to understand in the context for how to interpret that data, what is good data and Is the goal to significantly increase response rate in PFS beyond lumacraft alone?

Speaker 6

Maybe just Help us right size how to think about that study. And you also announced that you expanded a combination with the Novartis SHIP-two. Is that just diversifying and spreading it around? Or how to think about Shift 2 if you have done a second collaboration there? Thank you.

Speaker 4

Yes. Thanks, Mike. Let me start with the second part first. You're exactly right. That's simply diversifying our experience.

Speaker 4

We're moving forward, as I noted, with both Revolution Medicine's combination as well as this new collaboration with Novartis and we'll look forward to both data sets. In terms of the MEK or EGFR combinations, as I've said before, in terms of Response rate is going to vary by line of therapy and indication in terms of what sort of increments that you want See, but generally, 10%, 20%, 30% relative improvement in response rates and progression free survival, Certainly, beyond first line is typically what we would want to see and those are the rough sort of benchmarks that we'll use. Now on these first Of course, the critical thing upfront is safety in determining appropriate doses and then moving into expansion cohorts for Efficacy. Thanks again.

Speaker 15

Thank you.

Operator

Your next question is from Alethia Young with Cantor Fitzgerald.

Speaker 15

Hey, guys. Thanks for taking my question and happy birthday to one of the best in the IR games. Here's to you Arvind. I wanted to get a little bit of flavor on Repatha. And I know you're seeing very nice volume growth, but like continued kind of Pricing pressure or discounting pressure, do you think we're kind of hitting a stabilization point?

Speaker 15

I know you talked about a little bit sequential acceleration, but if you can give us some flavor on how to think about When that might start to right size and stabilize and see real growth from the volume that you're generating?

Speaker 3

Yes. Thanks, Alethia. We're quite happy with to really treat a large number of patients. We've Reached a 1000000 patients now with Repatha, so quite a milestone. The overall dynamic that is dragging price down It's really a U.

Speaker 3

S. Part D patient dynamic as patients enter into the coverage gap or as we sometimes refer to the donut hole. And as we expand our percentage or share of business in the Part D or Medicare Part D business and segment of the We will see some net negative price drag quarter over quarter. Now it's Not going to be as precipitous as the price changes that we've made historically. So our volumes outpacing that and we will See that drop to the net sales line.

Speaker 3

So overall, good evolution. We're also seeing nice growth on Repatha ex U. S. Where price is relatively stable year on year. That part of the mix is helping bolster price evolution over time as well.

Speaker 3

But some slight drag will continue, But again, it's a good sign because it means we're expanding that Medicare pool of patients, much more rapidly than we did historically.

Speaker 15

Great. Thank you.

Operator

Your next question is from Kennen MacKay with RBC Capital Markets.

Speaker 8

Hey, thanks for taking the question. Maybe just would love to get a perspective on which combinations you're most excited about currently for Whether it's more in line with previously with the oral and antibody MEK inhibitors or the mTOR inhibitor maybe or with the Novartis collaboration, does Does ship to now take the top seat? And then just one quick question on the biosimilar pipeline. When do you see it the earliest that you might be able to launch your biosimilar Samir Eylea, ABP 938. Thanks so much and congrats on the birthday, Ervin.

Speaker 4

Yes. Maybe I'll start With the question on combinations, of course, the ones we like the best are the ones that work, and that's what We're testing right now. It would actually all of these combinations have been selected for one Or another reason for both. 1, most importantly, biologic plausibility. So reason to believe in either additive or synergistic effects.

Speaker 4

And then 2, if the Combining molecules are part of a background regimen. And so we think we're really covering the waterfront In terms of indications of interest with relevant combinations here and at this point, Kennen, I think it's really an empirical matter of Generating the data and of course, we'll share that as we've outlined.

Speaker 3

And Kennen, we haven't announced our timing on EYLEA, but we are moving

Speaker 8

Fair enough. Thanks, Murdo. Thank you very much.

Operator

Your next question is from Carter Gould with Barclays.

Speaker 16

Good afternoon. I'll pass on my happy birthday wishes to Arvind too. I wanted to ask on your OX40 program. I know it's moving into Phase 3 next year. Just wanted to see any further color on the population or dosing you're looking to move forward within that Phase 3?

Speaker 16

And if The lingering uncertainty over the JAKs has in any way changed or I guess evolved your underlying assumptions around that market Would be helpful. Thank you.

Speaker 4

Yes. Thanks, Carter. We're very enthusiastic about this molecule. Opic dermatitis is a disease widespread prevalence actually in global populations. Despite existing therapies, we think there A very large amount of residual unmet medical need.

Speaker 4

Patients often cycle through therapies. Given the novel mechanism of action targeting the OX40 pathway, we think there is quite a big to have a real impact in this field. As I mentioned, we'll be presenting the Phase 2b data at the end of September at one of the major European dermatology meetings. And I think there you'll get a sense of our thoughts On dosing and what things may look like going forward. And of course, as we have discussions with regulators, we'll outline our plans on the Phase 3 program, which will in all likelihood be a suite of studies.

Speaker 4

Let me ask Murdo to comment a little further here. Yes.

Speaker 3

And Carter, we obviously pay close attention to the JAK safety concerns as raised on the XELJANZ data And applied some reduction in jack penetration assumptions to the AD market when we were Evaluating the attractiveness of the OX40 asset and I think that was one of the drivers here. We think the biologics still have a large role to play. We think initially, the Ox Forte asset will establish perhaps a second line opportunity in the market and we can expand from there. But the portion of the market that we think will be addressed by JAKKS is probably smaller than was once considered.

Operator

Your next question is from Cory Kasimov with JPMorgan.

Speaker 4

Hey, good afternoon, guys. Thanks for taking my question. Most Importantly, happy birthday to Arvind. I wanted to go back to the line of questioning around the lumacraft combination work and ask Specifically, about what you're doing with PD-1s at this point and when you expect to have an update there? And it really still just about trying to figure out the dosing currently before you move forward?

Speaker 4

Thank you. Yes. Thanks, Corey. As we've discussed before, we're looking at both direct combinations and sequential therapy here. So I think you can see you can expect to see data from both of those sometime through the first half of next year or so as we accumulate enough data to define what the relevant path forward is with checkpoint inhibitors.

Speaker 4

So more to come there, but we continue to actively work On these development programs. Okay. Thank you, David.

Operator

Your next question is from Chris Raymond with Piper Sandler.

Speaker 17

Hi. This is Ali Bratzel on for Chris this afternoon. And just on BD, you've had a lot of activity in the oncology and inflammation space. Just any color on how you're prioritizing other areas of interest On the development side versus opportunities that bolster some of your more legacy commercial franchises like renal? And then maybe more specifically on renal, how are you thinking about Your longer term strategy or prioritization for investing in the franchise, be it through internal or external innovation?

Speaker 17

Thanks.

Speaker 2

Yes. So Ali, I'll just repeat what I've said many times before, which is that our business development efforts are focused In the areas where we have ongoing strong research presence and or commercial presence. So You're right, we've been active in oncology and in the immunology area. We continue to look for opportunities in both As well as in general medicine and to the extent that we see things that we think we can add value to in nephrology or bone health or in the migraine area, We'll look there as well. So, we have active efforts underway and we look again across the marketplace actively and I want to focus on how we can earn a return from our shareholder for our shareholders from the assets that we might license or acquire.

Speaker 2

Sorry, just quickly, I don't think I addressed your nephrology question. We don't have as much Active research in nephrology and bone at the moment. And because we haven't seen internally opportunities to advance novel There are therapies there and we think the medicines we have are addressing the needs in the marketplace very effectively. But To the extent that there are things outside of Amgen that fit well with our 30 years of leadership, for example, nephrology or with our Global Leadership in Bone, we pay close attention to that as well.

Operator

Your next Question is from Dane Leone with Raymond James.

Speaker 18

Hi, thank you for taking the questions and my congratulations to Arvind, hope you have a fun birthday tonight after the call. So I'll keep it brief. My question is on tarlatanab. Question for me here is what you guys think you need to see as you're planning for this Phase 2 study? Obviously, initial data seemed encouraging from the first 52 patients you had earlier this year.

Speaker 18

But where Do you want to think about positioning this drug in the different lines of small cell lung cancer now? And what have you maybe seen as the dose escalation studies progressed since maybe we've seen the last data update that has you thinking about a pivotal study now? Thank you.

Speaker 4

Yes. Thanks, Dane. I think to take the last part of your question first, What we've seen are ongoing response rate consistent with the data that you saw from the later cohorts that We presented a month or 2 ago. And in addition, we've actually been impressed with duration of response. Most of these patients are And the durable responses here are vanishingly rare.

Speaker 4

So that I think is In addition, what really gives us encouragement here, as we discuss potential registrational path With the FDA in the coming weeks, I think we'll focus on the patient population, but I think the initial foray is likely to be those Later lines of therapy, we are moving forward in our development program now and are actively investigating earlier lines of therapy as well. That is clearly the end game that we're pointing for with tarlatanab given that's the sort of activity that we're seeing in the clinic right now.

Operator

Thank you. Your next question is from Michael Schmidt with Guggenheim.

Speaker 19

Hey, guys. I have one more on Lumicrest. Thanks for taking my question and Harlan congrats Rubin as well. So I guess, should hypothetically, should the efficacy safety profile of the lumacraft PD-one inhibitor combinations Turned out to be insufficient, which I guess could be possible. What are other likely avenues to possibly enable access So a broad first line KRAS non small cell lung cancer indication.

Speaker 19

Should we think about potential chemo combination or are there others that Thanks so much.

Speaker 4

Yes. Thanks, Michael. I think you're exactly right. Therapy combinations, number 1. And then going into biomarker selected populations, as we've discussed in terms of Our planned upcoming first line study, which we'll be launching shortly.

Speaker 4

And so should checkpoint inhibitor combinations not be feasible, I would expect that we would

Speaker 2

Great. Thanks so much. Eric, as we're pushing up against the top of the hour, why don't we take our final two questions?

Operator

Okay. Your next question is from Brian Skorney with Baird.

Speaker 20

Hey, good afternoon, everyone. Thanks for taking the question and happy birthday, Arvind. Digging a little more on the disclosed notice of deficiency today, I think last year you also received an RIR and modified RIR related 2013 through 2015 and are also under investigation for 2016 through 2018 by the IRS. It It seems like there's all related issues around profit allocation in Puerto Rico. So I was wondering if you could just kind of like walk through the next steps in terms of the Tax Court petition, can they can the petition to be heard in Tax Court fail?

Speaker 20

And if it does go to court and Decision goes against you. Did that sort of establish precedence for the other years as well? And based on the IRS calculation methodology for 2010, for 2012, have you run that same calculation to establish what number bound of liability for 2013 through now would be?

Speaker 5

Yes, Brian, thanks for the question. Look, we filed a petition with the U. S. Tax Court. In this case, it could take several years to resolve.

Speaker 5

The IRS is also proposing significant adjustments to 2013 to 2015 related to the similar issues as you know. We disagree, Strongly disagree with the proposed adjustments. We're pursuing resolution with the IRS Administrative Appeals Office on that. The IRS, As you noted, they're currently auditing years 2016 through 2018. So yes, we're sure they'll take the same position for the other periods under audit.

Speaker 5

We believe that we have adequate reserves for that. Great.

Speaker 13

Thank you.

Speaker 2

Okay. Let's go to the final question.

Operator

Your final question is from Tim Anderson with Wolfe Research.

Speaker 20

Hi, this is Andrew Geller on for Tim, I just wanted to ask one question on Tassie. So given your partner AstraZeneca officially discontinued atopic dermatitis last week, Do you think this will have any impact on your competitive positioning, especially in eosinophilic asthma compared to DUKI given the high coincidence of these atopic conditions?

Speaker 4

Yes. I mean, I think the short answer there is no. And we remain extremely bullish about tezepelumab given its activity across a range of Patients with asthma regardless of eosinophil count, as we mentioned, we were granted priority review by the FDA clearly an acknowledgment of the Potential 5th of this medicine with a large residual unmet medical need. So that doesn't really give us pause at all, Tim.

Speaker 2

Okay, Erica. Well, let me just thank our callers for joining the call today. We're excited about the second half of the year, a lot going on here. And so we look

Speaker 4

Thanks everybody.

Operator

And this concludes Amgen's 2nd quarter 2021 Financial Results Conference Call. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Amgen Q2 2021
00:00 / 00:00