Amgen Inc. (NASDAQ:AMGN) Q4 2022 Earnings Call Transcript

Amgen Inc. (NASDAQ:AMGN) Q4 2022 Earnings Call Transcript January 31, 2023

Amgen Inc. misses on earnings expectations. Reported EPS is $4.09 EPS, expectations were $4.1.

Operator: My name is Jason and I will be the conference facilitator today for Amgen’s Fourth Quarter Full Year 2022 Financial Results Conference Call. I would now like to introduce Mr. Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Arvind Sood: Okay. Thank you, Jason. Good afternoon, everyone and welcome to our call to discuss the results for Q4 and full year 2022. 2022 was once again a year exemplified by great execution despite some of the macro challenges. Our Chairman and CEO, Bob Bradway, will make some opening comments, followed by prepared comments from other members of our senior leadership team. You should have received a link to our slides that we have posted. Through the course of our discussion, we will make some forward-looking statements and use non-GAAP financial measures to describe our performance and just a reminder that actual results can vary materially. So with that, I would like to turn the call over to Bob.

Bob Bradway: Okay. Thank you, Arvind and hello, everyone and thank you for joining our call. So beginning the year feeling confident about the long-term growth outlook for our business and let me offer 5 reasons why. First, we have a number of innovative volume-driven products that still have plenty of room to run and we saw that in 2022. Repatha, Prolia and EVENITY each generated double-digit sales and volume growth in the fourth quarter and for the full year. We expect continued growth from these products in 2023 and beyond with Repatha, in particular, helped by important new data from the FOURIER open-label extension study and new prescribing guidelines. OTEZLA delivered 7% volume growth in both the fourth quarter and the full year, benefiting from a label expansion that gives us the opportunity to reach millions of new patients in the U.S. with mild to moderate psoriasis.

LUMAKRAS and TEZSPIRE collectively contributed more than $450 million in full year sales and we’re pursuing additional indications for both products. We’re especially pleased to see TEZSPIRE being utilized by patients across all types of severe asthma. Murdo will share more about the performance of our in-line products in a moment. Second, we moved 6 first-in-class molecules into Phase III or potentially registration-enabling trials in 2022, including Olpasiran for LP(a), rocatinlimab for atopic dermatitis, TEZSPIRE in eosinophilic esophagitis and of course, bemarituzimab, tarlatimab in BLINCYTO in cancer. We’ve also begun enrolling patients in a Phase II trial for AMG 133. Based on early data, this molecule, with its unique mechanism of action, looks like it may have an attractive profile for the treatment of obesity.

And more on our pipeline from Dave Reese in a moment. Third, we have an industry-leading biosimilars business that will contribute to our growth over time. In 2022, we delivered positive Phase III data for our biosimilar candidates to EYLEA, SOLIRIS and STELARA, positioning us to be in the first wave of these launches which we know is critical to success. We’re also less than 24 hours into the launch of AMGEVITA in the U.S. and AMGEVITA is the leading biosimilar to HUMIRA internationally. And with a 5-month lead over the next entrant, we’re well positioned for success in the U.S. All told, we have 6 more biosimilar launches planned in the U.S. and markets around the world between now and the end of the decade, making this another source of long-term growth for us.

Fourth, we’ve often said that we would look to licensing and acquisitions in our stated areas of strategic interest. And that’s what we’ve done, building on our decades of experience in inflammation with 2 significant transactions that will strengthen our presence in this space. Through the acquisition of ChemoCentryx, we added TAVNEOS, a first-in-class treatment for ANCA-associated vasculitis and we’re off to a strong start there. Our announced acquisition of Horizon Therapeutics will add several additional first-in-class early in life cycle biologic medicines, including TEPEZZA, KRYSTEXXA and UPLIZNA that will add to our growth profile through 2030 and beyond. We’re working our way through the regulatory review processes for that deal and are confident that the deal poses no anticompetitive matters.

And we have received a second request from the U.S. FTC and we’ll work with them to answer their questions while remaining optimistic that we can complete the deal in the first half of the year. Finally, we’ve stayed true to our capital allocation priorities, investing in our business to drive long-term growth while also returning capital to our shareholders through share repurchases and a growing dividend. You’ll hear more from Peter on this shortly. And everything we achieved last year and everything we will achieve going forward is due to the hard work and commitment of our people. They’re passionate about our mission to serve patients. They’re clear on how their work contributes to our success and they’re ready to seize the opportunities and meet the challenges that await us.

I’m grateful to all of them. I look forward to your questions a little later on but now let me turn the call over to Murdo.

Murdo Gordon: Thanks, Bob. 2022 was another year of strong execution of our mission to bring products to the millions of patients in the world who suffer from gravest illness. The evolution of our portfolio continue by record sales for 16 brands. We saw strong volume gains across our general medicine and hematology-oncology growth brands. Our inflammation therapeutic area expanded with the launch of TEZSPIRE and the acquisition of TAVNEOS, 2 first-in-class medicines that treat serious disease. In addition, our announced acquisition of Horizon Therapeutics will add several important medicines to our portfolio. In total, volume growth for 2022 was 9% with 7% growth in the U.S. and 14% growth ex U.S. as we continue to deliver on our international growth strategy.

Excluding the impact of foreign exchange, full year global product sales grew 4% as our volume increases were offset by a 5% decline in net selling price. Including the 2% negative foreign exchange impact, product sales increased 2% year-over-year. In the quarter, we also saw strong volume growth with a 10% increase year-on-year. Starting with our general medicine business which includes Prolia, EVENITY, Repatha and Aimovig, overall revenue for these 4 products grew 21% year-over-year for the fourth quarter and 18% for the full year, driven by 19% and 21% volume growth, respectively. In bone health, Prolia sales grew 14% year-over-year for the fourth quarter, driven primarily by 11% volume growth. EVENITY which complements Prolia in our bone portfolio, had record sales of $225 million for the quarter, driven by strong volume growth across markets.

Repatha sales increased 22% year-over-year for the fourth quarter with volume growth of 31%, partially offset by lower net selling price. In the U.S., we generated volume growth of 32% for the fourth quarter, aided by broad adoption of Repatha by cardiologists and increasing adoption by primary care providers. We saw declining net selling prices in the U.S. as we offered higher rebates to support broad Medicare Part D and commercial patient access. Looking ahead to 2023, we expect less year-over-year U.S. price erosion than we saw in 2022. Outside the U.S., fourth quarter sales of Repatha grew 36% year-over-year, driven by 31% volume growth. Globally, Repatha has treated over 1.5 million patients since launch. Repatha’s strong prescribing history in cardiology and expanding use in the primary care setting position us well to bring Repatha to more patients globally.

With the FOURIER long-term follow-up data, in addition to evolving and more aggressive treatment guidelines, there’s a clear rationale that lowering LDL cholesterol as much and as early as possible with Repatha will reduce cardiovascular risk for patients around the world. Transitioning to our inflammation portfolio. Otezla sales decreased 2% year-over-year for the quarter and increased 2% for the full year. We saw 7% volume growth in both periods. This was offset by lower net selling price, stemming from enhancements to our co-pay and patient assistance programs to support new patients starting treatment as well as additional rebates to improve the quality of coverage. During the fourth quarter, our U.S. Otezla business was impacted by new patient demand from 3 drug programs by newly launched topical and systemic competition.

We expect that impact to continue in Q1 of 2023. We also expect to see the typical pattern of lower sales in the first quarter relative to subsequent quarters due primarily to the effect of insurance reverifications, co-pays and deductibles for patients. The combined effect could lead to first quarter Otezla sales being similar to or below those from Q1 of 2022. Longer term, we continue to see strong growth potential for Otezla, given its established safety profile, strong payer coverage with limited prior authorization requirements and ease of administration. Otezla remains the only approved oral systemic therapy with a broad indication and is well positioned to help the 4 million U.S. patients with mild to moderate psoriasis, 1.5 million of whom have psoriasis that cannot be optimally addressed by a topical and can benefit from a first-line systemic treatment like Otezla.

ENBREL sales decreased 1% year-over-year for the fourth quarter, driven by declines in volume and net selling price, partially offset by higher year-end inventory levels. ENBREL remains an important product for patients due to its long track record of efficacy and safety. TEZSPIRE continues its strong launch with $79 million in sales in the fourth quarter and $170 million for the full year. Allergists and pulmonologists have prescribed TEZSPIRE across a broad range of patients with severe uncontrolled asthma. We’re also seeing initiation of TEZSPIRE in both biologic-naive and previously treated patients. Physicians acknowledge TEZSPIRE unique differentiated profile and has broad potential to treat the 2.5 million patients worldwide with severe uncontrolled asthma without any phenotypic and biomarker limitations.

We’re now preparing for the anticipated U.S. approval of the prefilled pen in the first quarter which will offer patients the convenient option to administer TEZSPIRE at home. Sales of TAVNEOS were $21 million in the fourth quarter. Our integration of ChemoCentryx is proceeding smoothly, confirming our belief that Amgen’s deep experience in inflammation and nephrology and substantial market presence will allow us to bring TAVNEOS to more patients with ANCA-associated vasculitis. We’re also excited about our announced acquisition of Horizon Therapeutics. Our combined portfolio which will include will address serious inflammatory diseases and improve the lives of many patients. Amgen’s commercial capabilities and global presence in approximately 100 markets will allow our combined team to deliver important therapies that will make a meaningful difference for more patients globally.

Today, we announced the launch of AMGEVITA, the first U.S. biosimilar to HUMIRA, a medicine used by more than 1 million patients living with serious inflammatory diseases. With our track record of developing and manufacturing biologics and decades of experience in inflammation, Amgen is uniquely equipped to supply patients with this biosimilar medicine. AMGEVITA is the first significant U.S. biosimilar in the pharmacy benefit space and we expect gradual uptake in the coming months as this market evolves. Moving to our hematology and oncology business which includes LUMAKRAS, KYPROLIS, XGEVA, Vectibix, Nplate and BLINCYTO. These 6 innovative products grew 14% year-over-year with 17% volume growth for the quarter. Full year sales grew 13%, driven by volume gains.

KYPROLIS sales grew 14% in the fourth quarter. Nplate sales in the fourth quarter included $207 million related to a onetime order from the U.S. government. Given the strong performance of our hem/onc portfolio in 2022 and the recent positive data on both BLINCYTO and Vectibix, I look forward to the future growth potential of this portfolio. LUMAKRAS reported $71 million in sales in the fourth quarter and $285 million for the full year. Quarter-over-quarter sales declined 5% with 12% volume growth, more than offset by a lower net selling price driven by a $12 million unfavorable price adjustment resulting from a reimbursement approval decision in France and unfavorable changes to estimated sales deductions. Outside the U.S., LUMAKRAS has now been approved in over 45 countries.

We’ve launched LUMAKRAS in 30 markets and are rapidly pursuing reimbursement in the remaining countries. As we’ve noted before, the market for LUMAKRAS focused on the 7,000 U.S. and 20,000 ex U.S. patients in the second-line setting. Longer term, we expect LUMAKRAS growth to come from moving into earlier lines of therapy and expanding into additional tumor types. Sales of our oncology biosimilars declined 40% year-over-year for the fourth quarter and 30% for the full year, driven by lower price. While our biosimilars for MVASI and KANJINTI both hold leading shares, we expect continued net selling price deterioration and accelerating volume declines, driven by increased competition. The most recently published average selling price in the U.S. declined 38% year-over-year for MVASI and 51% for KANJINTI.

Over time, we expect long-term growth in our biosimilars business to be driven by the addition of new molecules and additional launches. And as we start the new year, I’m inspired by the hard work of the thousands of Amgen employees around the world who wake up every day to serve our patients. Our expanding international presence and diverse portfolio of products, further strengthened by the integration of ChemoCentryx and the announced acquisition of Horizon, position us well to serve many more patients globally. And with that, I’ll turn it to Dave.

David Reese: Thanks, Murdo. Good afternoon, everyone. For research and development, last year was one of high-quality execution and on-time delivery of results as we continued to progress our innovative pipeline. In general medicine, we strengthened our cardiovascular franchise and emerging portfolio of obesity assets, 2 areas of significant unmet need, affecting millions of patients globally. Repatha, of course, is the cornerstone of these efforts. And last November at AHA, we presented FOURIER open-label extension data. These data were recognized by the American College of Cardiology expert consensus decision pathway which indicated there appears to be no LDL cholesterol level below which benefit ceases. Additionally, LDL cholesterol recommendations were updated to reflect a reduction in target LDL levels in highest-risk patients from 70 to 55 milligrams per deciliter.

This is a level that is not attainable for a large number of patients without PCSK9 inhibitor therapy. Another molecule that we are excited about is Olpasiran. At AHA, we presented Phase II data where Olpasiran dosed 75 milligrams or higher every 12 weeks reduced Lp(a) concentrations by 95% to 100% in patients with established atherosclerotic cardiovascular disease with baseline Lp(a) levels of approximately 260 nanomolars per liter. Olpasiran appeared both safe and well tolerated in this study. We are encouraged by these data, particularly our dosing frequency, safety and tolerability profile and degree of Lp(a) reduction. We have initiated a Phase III outcome study and 6,000 subjects with atherosclerotic cardiovascular disease and significantly elevated Lp(a) levels of at least 200 nanomolars per liter.

Now turning to obesity. In December, we presented data from a Phase I study where AMG 133 appeared safe, well-tolerated and demonstrated a 14.5% reduction in body weight at day 85 following 3 monthly subcutaneous injections. Body weight reductions were observed up to 150 days after the final AMG 133 administration. Given these favorable attributes, we are now enrolling a 570-subject Phase II study to explore AMG 133 in patients with obesity with or without diabetes and related comorbidities. The study will also investigate different dosing levels and regimens

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Q&A Session

Peter Griffith: applying 4%. Recall our Q4 2021 results included approximately $200 million of favorable impact to other income and expense resulting from a gain on our Beijing investment. Full year non-GAAP EPS of $17.69 grew 27% versus our re-GAAP 2021 result. Non-GAAP Q4 operating expenses were unchanged year-over-year while full year non-GAAP operating expenses declined 12%. The full year includes the impacts in 2021 of the $1.5 billion 5-prime IP R&D charge and the $400 million licensing payment that KKC for rocatinlimab. We advanced our pipeline and invested in product launch activities in 2022 while delivering a 51% non-GAAP operating margin as a percentage of product of sale. On a non-GAAP basis, Q4 cost of sales as a percent of product sales decreased 1.2 percentage points on a year-over-year basis, down to 16.3%.

For the full year, cost of sales as a percentage of product sales decreased by 0.5 percentage points, down to 15.9%. Both the quarter and full year improvements were primarily due to fewer COVID-19 antibody shipments and lower manufacturing costs, partially offset by changes in our product mix. Non-GAAP R&D spend in the fourth quarter decreased 2% year-over-year, primarily due to higher business development activity in 2021, including our upfront payments in connection with our Genera Biomedicines and Iraqis Therapeutics collaborations, along with lower marketed product support. This was partially offset by higher support for key assets in early- and late-stage programs. However, adjusted for 2021 BD activity, Q4 2022 R&D investment increased 7% year-over-year.

And for the full year, non-GAAP R&D spend declined 8% based on the same drivers of the fourth quarter. However, adjusted for BD activity, full year 2022 R&D investment increased by 5%. Q4 non-GAAP SG&A expenses increased 2% year-over-year, driven by higher marketed product support, including investments in our priority products, TEZSPIRE, EVENITY and Repatha. For the full year, SG&A expenses were unchanged year-over-year as increased investments for all priority brands were offset by productivity gains, continuous improvement and reallocation for mature brands. Non-GAAP other income and expenses were about $470 million in expense in the fourth quarter, a $250 million increase year-over-year, primarily driven by the previously mentioned gains in 2021 that we recognized from our investment in BeiGene.

For the full year, non-GAAP other income and expenses were approximately $1.7 billion. So now turning to the outlook for the business for 2023. Our outlook is Amgen-only on a stand-alone basis without any adjustments for the announced Horizon acquisition. It’s important to remember that currently — that current publicly available consensus estimates are derived from a combination of estimates of Amgen as a stand-alone company, along with estimates from some analysts who have already added Horizon into their estimates. So our 2023 revenue guidance is $26.0 billion to $27.2 billion and our non-GAAP earnings per share guidance is $17.40 to $18.60 per share. So now let me review several key points related to our guidance. For total revenue, we expect the year-over-year comparison will not include about $700 million related to several items from 2022 that we do not expect benefit from in 2023.

We assume we will not generate COVID-19 antibody revenues in 2023. We also assume a lower amount of Nplate sales in 2023 compared to 2022. Recall, 2022 included a significant purchase of Nplate by the United States government in the second half of the year. Also several favorable changes to estimated sales deductions that occurred in 2022 and the sale of our generics business in Turkey which closed late in 2022. For product sales, we project volume growth at a portfolio level, driven by strong growth in our priority products, TEZSPIRE, EVENITY, Repatha, Prolia and TAVNEOS. Consistent with industry trends and our recent history, we expect mid-single-digit price declines in our portfolio in 2023. Turning to Neulasta and our oncology biosimilars.