Amgen Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2022

There are 13 speakers on the call.

Operator

My name is RJ, and I will be your conference facilitator today for Amgen's First Quarter 2022 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 prepared remarks. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question during the Q and A session. I would now like to introduce Arvind Sood, Vice President of Investor Relations.

Operator

Mr. Sood, you may now begin.

Speaker 1

Okay, RJ. Thank you. Good afternoon, everybody, and welcome to our Q1 call. I think our performance in Q1 exemplifies our continued focus on execution, while staying on track to Our continued focus on execution, while staying on track to deliver against our long term objectives. So let's get started.

Speaker 1

Slides have been posted. Quick reminder that we'll use non GAAP financial measures in our presentation and some of the statements would be forward looking statements. Our SEC filings identify factors that could cause our actual results to vary or 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. When we last spoke in February, we told you that we'd be focused on execution and that we have a number of opportunities in place that should enable us to deliver long term attractive growth. In the Q1 of the year, we executed well on these many opportunities, delivering 6% revenue growth and 15% earnings per share growth. We achieved this performance despite the effects of COVID During the 1st 2 months of the year, currency headwinds and of course, net selling price declines.

Speaker 2

The innovative brands that we highlighted in February Continued to generate strong volume growth in the Q1, including Repatha, which was up 49%, Promia, up 10%, EVENITY up 59% and OTEZLA up 7%, as well as several of our oncology products, which also generated attractive volume growth in the quarter. Our 2 newest innovative medicines, Lumicrast and TESPIR are off to a strong start, offering compelling new treatment options for patients suffering from non small cell lung cancer and severe asthma, We're also pursuing significant new indications for both of these products. Let me just say with respect to the 5 high quality biosimilars we have on the market that they're performing well and in line with our expectations. As we've noted previously, growth for the portfolio of biosimilar products over time will come through the steady introduction of new products, including the U. S.

Speaker 2

Launch of Amgevita, Our biosimilar to Humira in January of next year. AMGEVITA is the first of 6 new biosimilars that we expect to launch by the end of the decade. International growth is an important component of our long term strategy and we saw strong volume growth outside the U. S. Of 15% in the Q1 and nearly 30% volume growth in the Asia Pacific region.

Speaker 2

Turning to our pipeline, We're advancing, as you're aware, a number of mid to late stage potentially first in class opportunities in inflammation, oncology and general medicine, while continuing to invest in our innovative marketed brands and biosimilars. Since our business review, we've had important data readouts for lumacrafts, Repatha and AVP-six fifty four, which is our Phase 3 biosimilar candidate to STELARA. We have several more data milestones that come through the remainder of the year. Looking to the longer term, we continue to thoughtfully invest in an integrated set of and increase the probability of our success. As to our commitment to innovation, we're committed to pursuing the best Innovation available, whether it comes through our own efforts or is sourced externally and our strong balance sheet and cash flows Will enable us to continue to invest in innovation in both organically and through business development.

Speaker 2

Our work to serve patients comes at a time when Society is confronting many challenges, and we're doing our part to address these as we have throughout our history with a focus in 4 areas: Removing barriers that limit equitable access to healthcare, working toward a more just society, minimizing our environmental impact and ensuring that our actions and culture reflect Amgen values. If you're interested in learning more, our latest environmental, social and governance report for their commitment to serving patients and outstanding execution. Now Peter, over to you.

Speaker 3

Thank you, Bob. We're pleased with our execution and growth this quarter as we drive towards our long term goal. I will walk through our Q1 financial results before with year over year revenue growth of 6% and non GAAP EPS growth of 15%. For product sales, strong volume growth of 9% was driven by Repatha, Volume growth was partially offset by declines in net selling price and foreign exchange headwinds. Our established portfolio Generated almost $1,000,000,000 of product sales and continues to deliver Strong cash flows.

Speaker 3

Transitioning to our biosimilars, Amgenverita remains the most prescribed adalimumab biosimilar in Europe and looking forward, we will leverage this successful experience as we prepare to launch and grow this product in the United States in January of 2023. For Ambase and Camgente, as anticipated, we experienced year over year declines driven by net selling price reductions. We expect this trend to continue for these products. Murdo will discuss product sales in more detail in his remarks. Other revenues of $500,000,000 increased 64% year over year, primarily driven by our COVID-nineteen antibody collaboration.

Speaker 3

1st quarter total non GAAP operating expenses increased 2% year over year as we invest in our pipeline, execute product launches and drive digitalization across the company. On a non GAAP basis, cost of sales as a percent of product sales increased 1.1 percentage points on a year over year basis to 16.6%, primarily due to higher direct manufacturing costs, COVID-nineteen antibody manufacturing costs and increased royalties and profit shares. Non GAAP R and D spend in the quarter decreased 1% year over year. Recall that Q1 2021 included $53,000,000 related to our acquisition of Rodeo Therapeutics. Excluding the $53,000,000 for Rodeo in 2021, non GAAP R and D increased 5% year over year.

Speaker 3

Non GAAP SG and A expenses in the Q1 declined 1% year over year. We continue to focus on prioritizing key investments and activities and driving productivity. Non GAAP other income and expenses were a net $413,000,000 expense in Q1. This line item is driven by interest expense and our share of BeiGene results as a result of our use of the equity method of accounting. We have a strong balance sheet, Generate significant cash flow and retain excellent financial flexibility to evaluate strategic business development opportunities.

Speaker 3

We continue to execute on our capital allocation priorities. 1st, investing in the best innovation, internal and external 2nd, investing in our business through capital expenditures, including for our new environmentally friendly facilities under construction in Ohio and North Carolina and third, returning capital to shareholders through growing dividends, including $1.94 per share in the quarter, representing a 10% increase Q4 2021. And 4th, opportunistic share repurchases including 24,600,000 shares of common stock in the 1st quarter, which included 23,300,000 initial shares received and retired under the accelerated stock buyback of REIT. Turning to the outlook for the business for 2022. We're pleased with our growth to date in 2022 $5,400,000,000 to $26,500,000,000 and a non GAAP EPS range of $17 to $18 This non GAAP EPS guidance does not include upfront expenses that may occur from certain types of transactions in the future.

Speaker 3

Similar to our peers, we have updated our non GAAP policy to no longer exclude such expenses from our non GAAP results in accordance with guidance recently issued by the SEC. For reference, the only impact as we recast 2021 to incorporate this change is that our non GAAP operating expenses will now include 2 items that were previously excluded in 2021. First, $1,500,000,000 recorded and acquired in process R and D associated with the 5 Prime acquisition in Q2 2021 and second, dollars 400,000,000 recorded in research and development related to an upfront payment to license rights to AMG 451 from Kiawah Kirin Corporation in Q3 2021. Important additional points to consider for the remainder of 2022. Foreign exchange had an adverse impact on our Q1 2022 sales and based on current rates, it is expected to create We note that while the results of our hedging program are reported in product sales, our hedging program is designed to partially mitigate the foreign exchange impact on our net income over the full year.

Speaker 3

In total, our 2022 non GAAP EPS guidance includes a negative impact from foreign exchange of approximately 2% or approximately 0 point $4,000,000,000 to $1,700,000,000 Q1 included a majority of our full year's projected revenue from our COVID collaboration And recall that these revenues in 2021 were recognized across Q2 to Q4. Our COVID collaboration revenue outlook Depends on the state of the pandemic and continued government support. Our expectations for total non GAAP operating Our first question comes from the last time we spoke. However, when comparing against our recast 2021 results, Total non GAAP operating expenses will now reflect a low double digit decrease year over year. We continue to expect 2022 operating margin as a percentage of product sales to be roughly 50%.

Speaker 3

We continue to expect cost of sales as a percent of product sales to be 15.5% to 16.5%. Our expectations for non GAAP R and D expenses in 2022 remain unchanged. Based on our recast 2021 results in response to the SEC guidance mentioned above, which increased non GAAP R and D expense in Our expected 2022 non GAAP R and D expense now equates to a decrease of 4% to 6% year over year. We continue to expect SG and A spend to be flat year over year as a percentage of product sales. And we now expect Other income and expenses to be in the range of $1,600,000,000 to $1,800,000,000 reflecting increasing interest rates and our share of BeiGene's results.

Speaker 3

This is a change from our previous range of $1,400,000,000 to $1,600,000,000 And for the full year, we anticipate a non GAAP tax rate range of 13.5% to 14.5%, up from our prior guidance of 13% to 14%. You've had an opportunity to read the update to our litigation and dispute with the IRS over the proposed adjustments for the period from 2010 to 2015 included in the press release. We firmly believe that the adjustments proposed by the IRS for that time period and the penalties proposed by the IRS for the 2013 The 2015 periods are without merit. Further, the amount of the adjustments proposed by the IRS for 20 10 The 2015 period overstates by 1,000,000,000 of dollars the magnitude of the dispute. We filed a petition in the U.

Speaker 3

S. Tax Court in July 2021 to contest the adjustments previously proposed for the 2010 to 2012 period. And we plan to file another petition in the U. S. Tax Court to contest the adjustments proposed in the notice for the 2013 to 2015 period.

Speaker 3

The dispute is expected to take several years to resolve. Amgen believes the IRS assertion Of approximately $2,000,000,000 in penalties for the 2013 to 2015 period is wholly unwarranted. We've applied a consistent transfer pricing methodology since 2002. We've documented that transfer pricing methodology is required under relevant And have extensively discussed that methodology with the IRS across multiple tax audits over multiple tax use. The IRS has never previously proposed transfer pricing penalties.

Speaker 3

Amgen also believes based upon the position Advanced by the IRS that the IRS adjustments for the 2010 to 2015 period are overstated by approximately $2,000,000,000 due to the IRS failure to account for certain income and expenses. Amgen has reported its income and expenses in a consistent manner for many years, and the IRS has that could be imposed for the 2010 to 20 15 period would be reduced by up to approximately $3,100,000,000 of repatriation tax previously accrued with respect to the company's Puerto Rico earnings. Amgen previously made advanced tax deposits to the IRS totaling $1,100,000,000 for the 2010 to 2015 period. These deposits would further reduce any additional cash tax that could be imposed. The IRS is currently auditing the 2016 to 2018 period.

Speaker 3

We expect the audit to continue for several years. And it is possible that the 2010 to 2015 dispute will be resolved before the conclusion of the 2016 2018 audit and administrative appeals process. Any transfer pricing adjustments the IRS may propose for this period will be lessened by the change in tax rates resulting from the 2017 tax reform law, which reduced The difference between the tax rates applicable in the U. S. And Puerto Rico by approximately 2 thirds beginning in 2018.

Speaker 3

We are highly confident in our positions in the litigation and dispute. We are grateful to all of our highly skilled colleagues in Puerto Rico and their important and ongoing contributions to Amgen's mission of serving patients. And now back to the mission of serving every patient every time. Our confidence in the long term growth of Amgen remains strong given the strength of the business and our outstanding This concludes the financial update. I'll now turn it over to Murdo.

Speaker 4

Thanks, Peter. 1st quarter product sales increased 2% year over year. We continued to progress our volume driven growth strategy, which led to a 9% volume increase globally in Q1. We delivered record quarterly sales for Repatha, Evenity and BLINCYTO and double digit volume growth for several additional including Prolia, Kyprolis and Amgevita. In the 1st 2 months of the year, COVID-nineteen affected our business In the U.

Speaker 4

S. And around the world as the omicron variant led to diminish capacity in the healthcare sector and reduced working days for our own sales forces. In March and continuing into April, the impact of Omicron in the U. S. Receded, which allowed us to engage in increased face to face customer interactions.

Speaker 4

Provider and patient activity have also increased, leading to improvements in demand for our products. Now let me review some product details beginning with our general medicine portfolio, which includes Prolia, Evenity, Repatha and Aimovig. Overall revenue for our General Medicine portfolio grew 19% year over year with 23% volume growth. In Bone Health, Prolia sales grew 12% year over year. Volumes grew 10% fueled by an increase in both new and repeat patients.

Speaker 4

EVENITY, which complements Prolia in our bone portfolio, had record sales of $170,000,000 for the quarter, driven by strong volume growth across our markets. Moving to Repatha, the global leader in the PCSK9 class. Repatha sales increased 15% year over year, driven by 40 And in the U. S, we saw 41% volume growth. Net selling prices declined as we offered Higher rebates to support broad Medicare Part D and commercial patient access.

Speaker 4

Outside the U. S, sales grew 12% with Strong volume growth coming from the inclusion of Repatha on China's national reimbursement drug list beginning January 1. We remain focused on increasing Repatha market penetration globally to address the significant unmet medical need in treating high risk Cardiovascular Patients. Moving to our inflammation portfolio. Otezla delivered 7% year over year volume growth in the Q1.

Speaker 4

In the U. S, we saw strengthening of the market with Otezla remaining the market leader, achieving a 30% share of patients who are new to We're seeing early signs of physicians using more systemic treatments for mild psoriasis patients. And the majority of dermatologists Otezla net price declines in the U. S. Were driven primarily by enhancements to our co pay and bridge programs to support new patients starting treatment.

Speaker 4

Looking forward, we expect lower year on year price erosion for the remaining quarters of 2022. We also expect continued volume growth driven by broader adoption of OTEZLA given our unique broad indication regardless of the severity of psoriasis. Enbrel sales decreased 7% year over year for the Q1, driven by declines in net selling price and inventory levels. Year over year volume remained flat in the Q1 supported by Enbrel's long track record of Efficacy and Safety. Our launch of test buyer is off to a strong start with $7,000,000 in sales in the Q1.

Speaker 4

Initial feedback from payers, providers and patients is very positive. Physicians' unaided awareness increased to greater than 65% Since launch, supported by our disease state education programs. On the access front, test fire is a medical benefit product which we expect permanent reimbursement coding as of July 1 this year. Both allergists and pulmonologists acknowledge test fire's unique Differentiated properties and its broad potential to treat the 2,500,000 patients worldwide with severe asthma who are uncontrolled We're biologic eligible without any phenotypic and biomarker limitations. Moving to the hematology and oncology business, Our 6 innovative products grew 17% year over year with 11% volume growth.

Speaker 4

We saw strong volume growth from Kyprolis, EnPlate And BLINCYTO, which we expect to continue throughout this year. XGEVA sales grew 7% year over year, while volumes declined 2%. Our launch of lumikraz is progressing well with revenues of $62,000,000 in the 1st quarter, representing 38% quarter over quarter growth. In the U. S, lumikraz has been prescribed to approximately 2,500 patients by over 1500 physicians in both academic While approximately 80% of patients in the U.

Speaker 4

S. Are tested for their KRAS The opportunity to improve care is to ensure the KRAS G12C status is available in the patient chart or electronic medical record and reviewed by the oncologist to ensure that lumikraz is discussed as an option for the patient. Lumacraft has strong payer coverage in the U. S. With 93% of patients having formulary access.

Speaker 4

Outside the U. S, Sotorasib has now been approved in nearly 40 countries around the world with recent reimbursement approvals in the United Kingdom and Japan. Sales of our oncology biosimilars declined 25% year over year. While our biosimilars, Amvasse and KANGINTY, both hold leading shares, We expect continued net selling price deterioration and volume declines driven by increased competition and ASP erosion. Over time, we expect long term growth in our biosimilars business to be driven by the addition of new molecules and additional launches, beginning with AmgeVita in the United States in January of 2023.

Speaker 4

Overall, we're executing well against our growth strategy with strong volume trends across our portfolio. With that, I'll turn it to Dave.

Speaker 5

Thanks, Murdo. Good afternoon, everyone. 1st quarter was one of continued execution in R and D where we focused on progressing our robust innovative clinical comprised of many potential 1st in class opportunities. Beginning with inflammation, we initiated 2 additional studies with TESBIR in severe asthma. Wayfinder Phase 3b study designed to demonstrate a reduction in oral corticosteroid use in adult participants on long term oral corticosteroid therapy In the PASSAGE Phase 4 real world effectiveness study designed to evaluate testifier in adult and adolescent participants, including underrepresented population such as Black Americans, smokers and patients with asthma COPD overlap.

Speaker 5

Phase 3 planning continues for roketinumab, Formerly AMG 451, an anti OX40 monoclonal antibody being investigated in patients with heterogeneous Moderate to severe atopic dermatitis. Rocatinumab binds activated pathogenic T cells expressing OX40. Unique mechanism of action, roketinlumab inhibits and prevents the expansion of activated pathogenic T cells and reduces their number. Thus, roketinlimab has the potential to lead to profound disease control. In addition, this provides a rationale for longer dosing intervals with the prospect of achieving disease modification.

Speaker 5

ROCCAT, the comprehensive roketinolumab Phase 3 program remains on track to initiate in mid-twenty 22. In our biosimilar portfolio, Last week, we announced preliminary results from a Phase 3 study evaluating the efficacy and safety of APP654 compared to TELARA wastakinumab in adult patients with moderate to severe plaque psoriasis. The study met the primary efficacy endpoint demonstrating no clinically meaningful differences between ABP654 and STELARA. Now turning to oncology. Earlier this month, we presented data at AACR on outcomes from a 2 year analysis of the LumaCrest CodeBREAK 100 trial, which demonstrated the long term clinical benefit, including overall survival of patients with KRAS G12C mutated advanced non small cell lung cancer treated with lumacraft.

Speaker 5

These data showed that roughly a third of patients were still alive at 2 years and the prolonged tumor response was The 41% objective response rate by central review. While this was a single arm trial without a control arm, The efficacy data compared favorably with anticipated outcomes in this patient population based on historical data. There were no new safety signals reported over the course of this 2 year follow-up analysis. We have Submitted data from the lumacraft PD-one combination and SHP-two combination cohorts to a medical congress taking place in the late summer, Our top line results from the lumacraft confirmatory Phase 3 study versus docetaxel and the dose comparison study are on track for Q3 and Q4 respectively. Also in the lung cancer setting, we have submitted updated Phase 1 data of tarlatanab, Our DLL3 targeting half life extended BiTE molecule being used in patients with relapsed refractory small cell lung cancer to a medical congress taking place in the late summer.

Speaker 5

And we plan to initiate Delphi-three zero three, A Phase 1b study testing tarlatanab in combination with standard of care in first line small cell lung cancer this quarter. Finally, in squamous non small cell lung cancer, we are enrolling patients in a Phase Ib study of bamiratuzumab Monoclonal antibody directed against FGFR2b. Turning to gastrointestinal cancers, We presented data at the ASCO plenary series in February where lumacraft demonstrated a centrally confirmed objective response rate of 21% And disease control rate of 84% across 38 heavily pretreated advanced pancreatic cancer patients. We continue to explore the benefit of lumacrass as a monotherapy and when combined with other agents in this setting. In 3rd line colorectal cancer, a Phase 3 study of lumacraft in combination with Fectabix is enrolling patients.

Speaker 5

In gastric cancer, a Phase 1b study of the bromarotuzumab plus oral chemotherapy regimens in tumors with FGFR2b overexpression has initiated. In general medicine, we were pleased to announce the results from 2 Repatha open label extension The Fourier OLE studies designed to assess the long term safety and tolerability of Repatha in more than 6,600 high risk adults with clinically evident atherosclerotic cardiovascular disease unstable effective statin therapy. In the OLE studies, Patients receive Repatha for approximately 5 years, with some patients receiving Repatha for up to 8.5 years in aggregate across for the full year and OLE studies. The combined results from these studies reinforce the long term safety and tolerability of Repatha in lowering LDL cholesterol. We are extremely encouraged by the sustained benefit of this medicine in patients with cardiovascular disease who still struggle to get their LDL cholesterol level below the recommended targets.

Speaker 5

These extended results for patients on Repatha are consistent with what the healthcare community has learned over the past 7 decades about the benefits of lowering cholesterol. That is robust and sustained LDL cholesterol reduction affects the spectrum of important cardiovascular outcomes. We look forward to sharing these data at a medical Congress later this year. In conclusion, we continue to With that, I'll turn it back to Bob for Q and A.

Speaker 2

Okay. Thank you, Dave. RJ, could you remind our callers of the process for Submitting a question. We're happy to answer questions now.

Operator

Yes, sir. Please standby while we compile the Q and A roster. Your first question comes from the line of Michael Yee from Jefferies. Your line is open.

Speaker 6

Hey, good afternoon. Can you hear me okay?

Speaker 2

Yes, Mike. Go ahead.

Speaker 6

Very good. Hey, question for Dave. Obviously, the KRAS field is quite competitive and you have a very important Phase 3 LumaCrest confirmatory study reading out. I just wanted to know your confidence around the expectations for a positive result there against docetaxel, how fast you could file that and whether that changes the paradigm for accelerated approvals for competitors around you. So maybe just comment on that study and the ramifications.

Speaker 6

Thank you.

Speaker 5

Yes. I mean, what if we replicate what we've observed so far with LumaCrest, I Mike, we'd be quite confident in the likelihood that the Phase 3 trial against docetaxel, which of course has been around for decades, will be positive. We would of course discuss with the FDA and other regulatory bodies How to file these data and move forward with full approvals. In terms of effects on the competitive landscape, I'll leave that 40 countries around the world program is moving forward very briskly, and that's our focus right now.

Operator

Your next question comes from the line of Jay Olson from Oppenheimer. Your line is open.

Speaker 6

Hey, thanks for the update and thanks for taking the question. As you continue to generate important new clinical data for Repatha, You have data coming for opaciran AMG133. I saw you recently published data for AMG 986 for heart failure. It seems like you're building an increasingly strong cardiovascular portfolio. Can you just talk about your strategy in Cardiovascular disease and what are the large opportunities there?

Speaker 6

And are there any gaps in your cardiovascular portfolio where you may want to

Speaker 2

Why don't I take the last piece of that and Dave, why don't

Speaker 5

you respond first, I'll start. I think Myrtle wanted to comment as well and then Jump in. Thanks, Jay. I think you raised an incredibly important question. As you're all aware, It remains the number one public health burden in terms of morbidity and mortality across the globe.

Speaker 5

And that In part is what spurs our commitment here with Repatha. Murdo will comment in a minute, but we believe there is tremendous opportunity To serve patients on a hypothesis that's probably the best proved in medicine in terms of LDL cholesterol. You mentioned the LP program, opaciran or AMG 890. Just to remind everyone, Lp is probably the single most important driver outside of LDL cholesterol in terms of the pathogenesis Of atherosclerotic cardiovascular disease, as I noted, we're looking forward to over the next couple of months If those data replicate what we saw in Phase 1. In addition, we have a very active preclinical Our research portfolio, I think indicating our ongoing strategic commitment to this area.

Speaker 5

Murdo, maybe I'll turn it to you next and then Bob can talk about the business development after that.

Speaker 4

Thanks, Dave. Underpinning obviously the huge Unmet medical need of cardiovascular diseases, our ability to reach that global population Patients and we've built the medical and commercial capabilities and global footprint to support that business. We reported 49% volume growth on 15% sales growth year on year. So we clearly have momentum now and we continue to feel that There's more for us to do for these patients. We're also very clear that we're focused on improving the affordability of our medicines And I think that that's another area we've made great progress.

Speaker 4

So adding to that portfolio with our own internal pipeline It's a welcome thing and I think Dave's team is working very hard not only on the pipeline assets, but also to improve the profile of Repatha with the VASELIUS trial, which is ongoing. And of course, the recently announced long term follow-up Trials that were continued. So the profile of Amgen and cardiovascular disease is strong and I'll turn it over Bob on the business development. Yes.

Speaker 2

And there it's very simple, Jay. We've challenged our business development and research teams to find Attractive innovation externally that we can add to our portfolio. So we're looking for things that we can add value to every day In cardiovascular disease as well as in inflammatory diseases and in cancer.

Speaker 6

Super helpful. Thank you very much.

Operator

Your next question comes from the line of Geoff Meacham from Bank of America. Your line is open.

Speaker 7

Hey, guys. Thanks so much for the question. Peter, a lot more commentary on the tax dispute with the IRS On this earnings call, compared to when you first talked about it last year, I think probably a higher number of The investors expected. So the question is, has there been a recent discussion with the agency or The service that prompted broader language today, and I know it's going to take years to fully resolve, but would you expect your tax reserves to change over the course of That discussion or is that just something that's going to be a stagnant number and then when you fully resolve it, then you'll appropriately Make that change. Thanks.

Speaker 3

Yes, Jeff. Thank you for the question. Look, we wouldn't we're in litigation, so we wouldn't comment on discussions With the IRS first. And then secondly on reserves, as you can understand, we don't comment on where we're at in terms of the size of reserves other than we would just simply say That we're very confident in our position and the level of reserves that we've established. And as we said, This is about Puerto Rico and the allocation of profits between the United States and the U.

Speaker 3

S. Territory of Puerto Rico, where we perform a majority of our global Puerto Rico is home to our flagship manufacturing complex, 30 year presence, 2,400,200 Highly skilled employees over $4,000,000,000 in capital investments. And as we said, we believe that the IRS positions are without merit. We're going to vigorously contest those adjustments proposed for 2010 through 2015.

Speaker 7

Okay, makes sense. Thanks.

Operator

Your next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open.

Speaker 8

Good afternoon. Thank you for taking my question. On LumaCRAFT, what steps can you take to ensure that G12C status is recognized by physicians to drive The prescriptions here and could you also frame the outlook for the combo study with KEYTRUDA that's reading out in late summer?

Speaker 4

Thanks, Salveen. Maybe I'll start and then turn it over to Dave on the data question. We're obviously working We are extremely closely with all of the oncology providers to improve their own internal systems whereby they have that KRAS G12C status with literally fingertip ready for making treatment choices for their patients. What we are seeing is a little bit of a COVID hangover effect. Many of these large oncology networks in the U.

Speaker 4

S. Our short staffed and constrained in the resources that they can deploy against things like EMR enhancements, against things like better work flows for diagnostics and biomarkers, particularly new biomarkers. So we are working literally account by account Across the country, we've made huge improvements and we've seen some very large community oncology network, which is where 80% of the patient base is treated. They're treated in the community centers. I think in the academic institutions, the testing is very strong, robust, The care is clear and the test results are available for patients who progress.

Speaker 4

So it's really in the U. S. Community setting where we're working. As we look ex U. S, we see a different pattern by country.

Speaker 4

So countries that have advanced biomarker technology and very clear systems Like Germany and France, we expect good uptake there and we're already seeing early indicators of that. France, as you may recall, has An early access program called an ATU program, where we can actually charge for the product and it's being used already fairly broadly. And in Germany, we are just launching and are few weeks old as we are in Japan. So I think it's a network by network project that we're working intensely with our medical colleagues, with our commercial teams to make sure that no patient slips through.

Speaker 5

Dave? Great. And Salveen, thanks for the question. In terms of data availability, as we noted, we've submitted the data For one of the summer oncology conferences, we are looking at both combination and sequential approaches with PD-one inhibitors. I'd also point out that one of the things we're beginning to examine is the whole population of patients with non Small cell lung cancer, you can divide them roughly into thirds.

Speaker 5

A third are PD L1 negative tumors, a 3rd have low to intermediate PD L1 expression, and the 3rd have high PD L1 expression. In the PD L1 Negative population, for instance, the effect of checkpoint inhibitors is quite modest, and that's an area where we are looking at Combinations of lumacraft with straight chemotherapy. So one thing to keep in mind, as this

Operator

Your next question comes from the line of Matthew Harrison from Morgan Stanley. Your line is open.

Speaker 7

Great. Thanks. Good afternoon. I was hoping a question for Murdo. Murdo, can you just maybe comment I know you commented a business review around your thoughts around contracting and Specifically, biosimilar contracting as we think about both the HUMIRA launch and some of the other products.

Speaker 7

Any updated thoughts in terms of How that's going or your expectations on specifically HUMIRA for 2023 versus 2024? Thanks.

Speaker 4

Thanks, Matthew, for the question. No, I don't really have a lot of new information to update you on. We continue We feel like we're extremely well positioned for the opportunity to be among the first, if not the first and Potentially only biosimilar for a period of time in the market in 2023 as of January 31. We like Our profile, competitively, given that we as you'll recall, we use the existing Inflammation commercial organization that currently commercialize Enbrel and Otezla that have relationships intact with Rheumatologists and dermatologists, we actually have a GI footprint as well supporting Absol. So We feel that we've got the customer relationships.

Speaker 4

We definitely have the payer relationships. We have obviously 40 years of biologics Manufacturing and supplying every patient every time to provide the confidence for pharmacy benefit managers to make The decision to make our product available as early as possible. So we're excited about the opportunity. And then of course, after The launch of AMGEVITA in the U. S, we have several other launches, STELARA, EYLEA, SOLIRIS and then Additional launches thereafter.

Speaker 4

So 6 new biosimilars coming into the market. So this is an area where we're very focused. We've invested In this area, it's important to us for our long term growth, and we have the capabilities in the market to ensure success. Let's go with the next question.

Operator

Your next question comes from the line of Yaron Werber from Cowen and Company. Your line is open.

Speaker 9

Great. Thanks for taking my question. I guess, Peter, maybe for you and for the rest of the team. I guess, Peter, for you first, the tax rate is increasing incrementally this year. Is that relating to the underlying litigation with With the IRS or is that for a different reason?

Speaker 9

And then maybe, Murdo, for you, in the U. S, LumaCrest is growing, but it's We're probably a little bit lower than we expected. Are you expecting ex U. S. To be bigger or similar in size to the U.

Speaker 9

S?

Speaker 1

Thank you.

Speaker 3

Yes. Let me jump in first here. I don't think Murdo wants to take the tax part of that. So look, we're only moving it up by 50 basis points, Yaron. It's not related at all to the Tax litigation.

Speaker 3

And just maybe that highlights a point that I should make in response to Jeff's good question a little bit earlier, which is Yes. Why more commentary now? I think this is exactly why, because this is a complicated area for all of you, for the analysts. And we want to make sure You understand our position. We think that it's been a struggle to understand for folks This is on prior conference calls.

Speaker 3

So we just want to be more specific on it. But in the case of that question itself, It's not related at all. And again, Yaron, thanks for the question. We're confident in our position and the level of reserves where we're at, but We're wanting to provide some more background for you on it. So hopefully that's helpful.

Speaker 3

And now I'll turn it over to Muro to get back

Speaker 4

to business. Thanks, Peter. Yaron, I would say in the U. S, what we're seeing with lumikraz is when that KRAS G12C status is known at the point of progression from first line treatment to second line. We're getting over 80% of those patients to be treated by Wimecrest.

Speaker 4

So we're penetrating the population when the identification of the KRAS G12C status So that's clearly the lever that we need to ensure is improved. And as I answered So, Bean's question earlier, this is really an account by account book of work. And we're doing it with urgency because we really can't have Patients progressing from 1st line to 2nd line and not have the choice of lumacraft. So this is really important work that we're doing for When we look at the epidemiology of disease in the U. S.

Speaker 4

Versus ex U. S, I would say that the overall Incidents of non small cell lung cancer is similar between the U. S. And Europe In terms of size, now one thing just to think about as you go into Asia is the incidence of KRAS G12C Patient status is a bit lower. If you take Japan as an example, it's about 4% of patients Who have non small cell lung cancer that also have a KRAS G12C mutation compared to 13% in the U.

Speaker 4

S. So The mutational epidemiology does change a little when you go outside of U. S. And Europe. So we would expect The business to be slightly bigger in the U.

Speaker 4

S. Than it will be in Europe and rest of the world.

Speaker 1

Okay. The next question.

Operator

Your next question comes from the line of Umer Raffat from Evercore ISI. Your line is open.

Speaker 10

Hi, guys. Thanks for taking the question. I guess 2, if I may. First, perhaps on KRAS. There's an interesting disclosure on the slide on how 2,500 patients have taken it in U.

Speaker 10

S. Commercially. And 3rd party data sets would suggest perhaps 1200 patients were on the drug in March, and I'm trying to square those 2. About 1200 patients were on therapy in March And 2,500 is total exposure. Crude math would suggest that duration of therapy has tracked 5 ish months or so.

Speaker 10

Is that And then secondly, Peter, on the tax court side, can you guide us through what the timelines could look like? Because I feel like this is one of those topics. Now there's 2 sets of liabilities that people will put in their model somehow at certain probability and having a sense for what the timelines could look like for resolution Or at the very least on when a hearing is or when a key court date is coming up on the tax court? That would be very helpful. Thank you.

Speaker 4

Yes. Perhaps on the first question regarding patient numbers and duration of therapy, I think it's a little bit Premature to be able to draw conclusions from numbers on drug versus numbers treated To get to DOT or duration of therapy. What you need to understand, I guess, in the 2,500 patients is we've got a combination of patients who We're very late stage disease, 3rd line and beyond potentially who were challenged with the product and didn't do very well. Whereas the steady state will be more second line patients having experienced maybe one prior line of therapy, who Could do quite well as indicated by the long term follow-up data that we just put out at AACR where you see A third of patients being alive at the 2 year follow-up mark. So I think It's too early to infer from existing in market patient numbers to understand what the effective And in fact, I often say this is you really actually need 24 months in market to understand what your look back period is to understand what your duration of therapy is.

Speaker 4

So it's going to be quite some time before we know what our real world duration of therapy will be.

Speaker 3

Peter? Kumar, Peter here. So on the tax side, thank you. In terms of next steps and timeline, we will We'll be filing a petition with the U. S.

Speaker 3

Tax Court within 90 days. And as I mentioned, we will vigorously contest the 20 13 through 2015 notice through the judicial process. We plan to see consolidation of the 2013 to 2015 period With the ongoing 2010 to 2012 Tax Court case. And as I said, it will Several years for this to resolve itself. So that's the current timeframe as we see it.

Speaker 5

Thank you. Thank you. Thank you.

Speaker 1

Go with the next one.

Operator

Your next question comes from the line of Carter Gould from Barclays. Your line is open.

Speaker 5

Good afternoon. Thanks for taking the question. Maybe to focus for a second on TestSpire. I was looking to get a little bit more color there, specifically how you think about the In the past, you guys kind of talked down the importance of the source results. So as we think about Wayfinder, is that sort of critical in addressing that gap or

Speaker 4

Thanks Carter. On the question regarding Testfire, we're really excited about the market Severe uncontrolled asthma, particularly for pulmonologists who have so much else to do that they're looking for a simple solution that can treat their patients Without being limited by phenotypic or biomarker status. So overall, we think it's going really well. It's Clearly a benefit to have a permanent J code in the market, which as I mentioned will Coming July 1, that gives confidence to providers and to their billing staff that they can code the product appropriately and have A high degree of assurance on reimbursement. I think they know the reimbursement is happening now, but it's also time to reimbursement for some of these practices, some of them run pretty tight cash flows and knowing that the permanent J code should expedite the time to reimbursement will actually help.

Speaker 4

So yes, I'd say it's going to be helpful. But I would say that the in market response currently is really good. And we're clearly providing Product to patients who are going through that reimbursement step in that process, so that they can get on therapy and have access to the medicine. But yes, we'd be looking for additional sales force sales growth in the back half of the year.

Speaker 5

Yes, Carter. And in terms of WayFinder, This trial, we believe, will address some of the methodologic limitations we believe we saw in the source trial. The sample size is much larger. It's a single arm trial. Sample size over 300 patients.

Speaker 5

Patients can be on a higher dose of steroids. There can be a more rapid corticosteroid taper, and we're looking At the effects at earlier time points, all of these, I think, give us confidence that we will see Quad AI meeting updated data from Navigator and other trials showing a very Profound reduction in exacerbations in patients on oral corticosteroids. Again, I think this is going to be a really important drug For the treatment of asthma across a range of phenotypes and we're quite confident in the development program going forward.

Speaker 1

We'll take the next question.

Operator

Your next question comes from the line of Robyn Karnauskas from Truist. Your line is open.

Speaker 8

Hi, thanks for taking my questions. So just couple on Repatha. So just your thoughts on inclisiran with the permanent J code coming in July and your thoughts on The impact on Repatha in the second half of the year? And then just a second, you have impressive growth with Repatha. Maybe you could give a little bit more color On script trends by doctor, are you seeing more scripts by cardiologists?

Speaker 8

There's some trends that give you confidence that, that growth can continue as far as who is prescribing the drug versus, I think, previously in the early days, there was lipidologists mainly.

Speaker 4

Thanks. Thanks, Robin. We are pleased with the evolution of Repatha. The growth is actually Fairly consistent across the broad cardiology community. So it's not just your Hepatologists, variety of cardiologists, we're seeing general community cardiologists.

Speaker 4

We also have a large effort focused on Integrated Delivery Networks and Hospital Systems, where we have been successful in establishing a more Standardized way of treating the some 25,000,000 high risk ASCVD patients in the U. S. That end up in an acute care facility for their MI or other events that they've been admitted for. And unfortunately, many of them don't even get a lipid panel and many of them get discharged without appropriate recommendations Or initiation of treatment. So we've stepped that up quite a bit, and we're seeing improvements in quality of care.

Speaker 4

And those patients are being discharged then to the Community cardiologists and or primary care physicians with clearer intent on more aggressive lipid lowering therapy or cardiovascular risk reduction. So That's definitely helping. For future growth, we're obviously going to continue that effort and we're going to continue to expand that IDN work that we're going to do in the U. S, but we're also going to invest incrementally in primary care given that we're seeing some spontaneous Prescribing with Primary Care. So we're very pleased with the growth of Repatha ex U.

Speaker 4

S. The other thing I would mention is we got the Jan First listing for Repatha is the China National Reimbursement Drug List, which has been a good launch for us there. And our team in China is doing a nice job of ensuring that Repatha is an option for high risk CBD patients in that country. Really, I think we've got a large amount of headroom for growth on this product. There's a large patient population and we've got good momentum now in cardiology and we need Continue to build that into primary care and around the world.

Speaker 4

With respect to inclisiran, obviously, They're a competitor in the market, but given that they don't yet have event reduction data, even with The reimbursement coding, I think they're still limited in what they can promote. But again, there's tons of patients out there that need More aggressive lipid lowering therapy and more aggressive cardiovascular risk reduction. And we see that the market can bear A lot of people talking about this severe disease, number 1 killer in the world for everybody that's concerned about patients and What we can do about it? So overall, we're still very

Speaker 1

bullish. Okay.

Speaker 2

RJ, I know we've got several callers still hoping to ask questions. And I just want to give the callers a heads up that we'll probably go a few minutes over the top of the hour. So while we take the next question, we'll do our best to get to everybody. And If we're unable to do that, then we'll obviously, Arvind and his team will be available later. Let's take the next question.

Operator

Your next question comes from the line of Mohit Bansal from Wells Fargo. Your line is open.

Speaker 9

Great. Thanks for taking my question. Maybe a question on TESPAYRE. So given that right now it needs To be administered by a provider, do you what kind of reservation do you expect from the doctors at this point In terms of prescribing the agent, given that DUPI is available for self administration, the question is, is there a Possibility in the future that you could come up with a self administration injection which could actually help this help it become a self administered at home product. Thank you.

Speaker 4

Thanks, Mohit. Unfortunately, because severe asthma, especially uncontrolled severe asthma is such An acute condition, many of these patients are under frequent care of a pulmonologist or an allergist. And so they're seeing their physician on a very regular basis. And I think given our very convenient once month dosing, It's seen as a fairly easy product to administer. And of course, it's early days in the launch, but Feedback has been that the physician administration is not a barrier to initiation of test fire.

Speaker 4

And Allergists in particular are used to physician administered products. What I think the benefit side of this is really playing out is that they have much Less work to do on the biomarker side or the phenotypic assessment side. And so we've simplified their workflow in that regard. I do think over the long haul, we'll continue to evaluate what we need to do to ensure that there's convenience and maintenance for patients. And Obviously, we're looking at other indications and other life cycle opportunities for Testfire.

Speaker 4

So we'll continue to assess whether or not we want to

Speaker 6

Thank you.

Operator

Your next question comes from the line of Dane Leone from Raymond James. Your line is open.

Speaker 11

Thank you for taking the And congrats on the quarter. One question for me. Presuming the dose equivalency study of lumacrass Actually demonstrates that 2 40 milligram Q days is equivalent to 960. How are you playing On managing that transition at the end of the year. And the reason we get this question a lot from investors is obviously that will coincide With the presumed launch of a competitor in the KRSG-twelve C space, maybe to frame it From a script being given, 30 day script being given at the end of the year, if this dose equivalency does show that the lower dose is equivalently effective, That 30 day script turns into a 120 day script.

Speaker 11

Just how is your team thinking of managing this? And is there any expected Change to pricing that would be enacted if the lower dose is seen as equivalent? Thank you.

Speaker 4

Yes, it's a pretty detailed hypothetical. What I would say is, first off, we remain confident The 960 milligram dose is the right dose and clearly the safety and efficacy benefit of that product Looks very good. And given the long term follow-up data, clearly, it's a high bar for us to be able to see If it can be approved upon at a lower dose. So that's the one question that remains to be answered. The way I guess I can't directly answer your question because are so many different complicated variables to it.

Speaker 4

But what I would say is, we continue to look at The best way to provide the right treatment for continuing patients. So if you're A second line non small cell lung cancer patient, you've been prescribed lumacrass at 960. You're taking it. You've responded and you're stable. I'm not sure any oncologist is going to want to lower your dose if you're a continuing patient.

Speaker 4

Now we've seen that in other disease areas where there might have been a dose change either to go up Or to go down, where patients who are on a stable dose usually stay on that. So that would be my one bit of additional commentary to your question, but We'll wait and we'll see the data and we'll handle it according to what the data say and what the FDA guides us to do.

Speaker 1

Very helpful. Thank you. Okay. We'll take the next question.

Operator

Your next question comes from the line of Evan Seigerman from BMO Capital Markets. Your line is open.

Speaker 1

Hi, all. Thank you for taking my questions and squeezing me in. I wanted to ask one for Murdo on OTEZLA now that we Have the full label or kind of the full spectrum approval as of last December. So have you seen any sort of barriers for the more mild patients? Do these patients need to go through any sort of step edits or are they able to get it free freely?

Speaker 1

Do you expect that to change over the course of the year? Just love to get some color on how you're pushing it for marketing in those patients? Thank you.

Speaker 4

Thanks for the question, Evan. No, we're really pleased with the response Prius is that patients can have strong access and good affordability for the product. In fact, we've actually improved access This year versus last year. So we've been able to use some of the prior authorization criteria, things like Percentage of body surface area, there are some medical policies prior authorizations where that's described as a percentage. We've had many of those removed.

Speaker 4

So we've actually opened up access for those patients. And I think that it's I was at the American Academy of Dermatology meeting in March and spoke to many Dermatologists and asked them what their prescribing experience was like and what the reimbursement experience was. And I think Many of them played back to us that OTEZLA was easier than it had been in the past to prescribe for that milder patient. The other thing we did was we enhanced our co pay assistance and our own bridging programs to ensure that, that Launch would go well. So far so good, off to a good start, but I don't anticipate access being an impediment.

Speaker 1

Hey, RJ, in consideration for the folks on the East Host, it's past the hour. So why don't we take 2 more questions, please.

Operator

Your next question comes from the line of Cory Kasimov from JPMorgan. Your line is open.

Speaker 6

Hi, this is Gavin on for Cory. Thanks for taking our question. I just had a follow-up from a question earlier in the queue on lumacraftpembro combo data late in the summer. I guess just on the lung cancer patients, can you remind us if this is predominantly second line plus? Or will there be And then should we also look for multiple doses and our different dosing administration?

Speaker 6

I think you've discussed in the past sequential dosing versus other strategies. Thank you.

Speaker 5

Yes. Thanks, Corey. Most of those patients will be second line and beyond. There is a limited experience in first line. And we are looking across a range of doses with both combination and sequential therapy.

Speaker 5

So you can expect to see all of that When the data are presented.

Speaker 1

Okay. Let's take one last question, RJ, and after that, Bob's just going to make a couple of concluding comments.

Operator

Your next question comes from the line of Colin Bristol from UBS. Your line is open.

Speaker 12

Good evening and thank you for squeezing me in. I'll keep this quick. Just quickly on the tax issues, could you just talk about whether we should view this As being essentially limited to 2015? Or is there a scope for this really to permeate through to Effectively 2021. And then just quickly on LumaCrest, there was a small investigator led data set presented at ELCC A few weeks ago, we saw some relatively high rates of LFT elevations with MIMO class dose in close sequence with PD-one.

Speaker 12

I'm just curious how this compares to your own experience with the combo versus sequential dosing, and anything else you can say about the path forward there? Thank you.

Speaker 3

Colin, thank you. Look, on the case, we're very confident in the We've had in our structure and how we've allocated profits between Puerto Rico and the United States. So We're very confident in those reserves. If you did think about going forward, I did suggest in the press release articulated The IRS is currently auditing 2016 through 2018. If they did propose any transfer pricing The magnitude of those adjustments will be lessened by the change in tax rate from the 2017 Tax Act, which reduced the differences between the tax rates applicable in the United States and Puerto Rico by approximately 2 thirds beginning in 20.

Speaker 3

But once again, we're very confident

Speaker 5

in our structure

Speaker 3

and we're very confident in the level of our reserves. So we don't anticipate any changes going forward.

Speaker 2

Dave, you want to get to the second piece of that? Yes. In regards to the ELCC

Speaker 5

These were uncontrolled data from an investigator in France, Patients receiving monotherapy potentially after checkpoint inhibitors, I can tell you that the rates of Hepatic toxicity were higher than we've observed in our clinical trials program and through our ongoing comment any further on those data.

Speaker 1

Bob, do you want to comment?

Speaker 2

Let me just thank all of you for dialing in. We appreciate your support and your interest in the company. As we've tried to convey through this call, we feel we're executing well here into the 2022 calendar year and We look forward to being back together with you after the Q2 to report on our progress through the mid year. Thank you. Sorry, we won a few minutes over.

Speaker 2

Thanks.

Speaker 1

Thank you, everybody.

Operator

Ladies and gentlemen, this concludes today's conference call and we thank you all for participating. You may now disconnect.

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Earnings Conference Call
Amgen Q1 2022
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