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 prepared remarks. To ensure everyone has a chance to participate, we kindly ask that you limit yourself to one question during the Q&A session. I would now like to introduce Arvind Sood, Vice President of Investor Relations. Mr. Sood, you may now begin.

Thank you, Erica. Good afternoon, everybody. Welcome to our Q2 call. I think the three 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. Slides are up. A quick reminder that we will 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?

Okay. Thank you, Arvind, and hello everyone, and thank you for joining our call. Through the first six 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 second quarter increased 5% over the prior year, and 11% over the prior quarter. We achieved this growth despite the lingering effects of COVID-19 and increased competition in many of our therapeutic categories. We continue to see strong volume-driven growth from Repatha, Otezla, Prolia, and EVENITY, and a number of our oncology medicines as well, all of which address significant health challenges. We also saw strong growth in the quarter from our biosimilars, 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, where two notable approvals in the second quarter should provide additional growth moving forward. In China, our partner BeiGene secured approval for Kyprolis, which joins BLINCYTO 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.S., we're excited by the strong launch of LUMAKRAS, which is providing hope to lung cancer patients in need of new treatment options. We’re very pleased with the enthusiasm LUMAKRAS 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, a 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 Five Prime Therapeutics and our partnership with Kyowa Kirin, for example, have added to potential first-in-class phase 3 ready assets in cancer and inflammation, two therapeutic categories where there remains a high unmet need. The acquisition of Teneobio, 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 billion to build two new manufacturing facilities, one in North Carolina and the other in Ohio, to meet the demand for our medicines. 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. 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 OneTen coalition, look to collectively hire 1 million 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.

Thank you, Bob. Second-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 MVASI and KANJINTI. Our ex-U.S. business grew 18% with a volume growth of 22% year-over-year. We continued to see a gradual recovery from the impacts of the COVID-19 pandemic in Q2 when compared to Q1 2021. Patient visits and lab test procedure trends continued to improve but remained below pre-COVID-19 levels. We remain focused on customer execution. Overall, U.S. field activity improved quarter-over-quarter reaching 80% of pre-COVID levels. Face-to-face customer interactions are increasing and accounted for 60% of activity during the second quarter. 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 year. 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. In the second quarter, osteoporosis diagnoses 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., 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 will continue to drive revenue growth. Moving to Repatha, which has reached more than 1 million patients since launch. Repatha sales increased 43% year-over-year driven by 49% volume growth, and we maintained U.S. and global share leadership in the PCSK9 class. In the U.S., total volumes grew 37% year-over-year, and outside the U.S., volumes grew 66% year-over-year. 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. 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 a 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 by lower net selling price and unfavorable changes to estimated sales deductions. In the U.S., Aimovig TRx volume grew 7% year-on-year, and the brand maintained total prescription share leadership among subcutaneous CGRPs. Looking ahead, we see continued rebate pressure as oral CGRPs compete for a share in the market. To date, more than half a million 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's superiority versus topiramate. Moving to our inflammation portfolio, Otezla sales were $534 million in the quarter, with 5% volume growth more than offset by unfavorable changes to estimated sales deductions 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. We expect the post-pandemic recovery in the dermatology segment will progress over the coming quarters. Looking forward, we're preparing for the anticipated approval of 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 prices and unfavorable changes to estimated sales deductions. On a year-over-year basis, volumes declined by 1% supported by ENBREL's long track record of efficacy and safety. Turning to biosimilars, Q2 sales were $567 million 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. for MVASI and KANJINTI. 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 Soliris, STELARA, and EYLEA. 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 million year-over-year benefit from favorable changes in reimbursement mix. Neulasta's U.S. average selling price declined 35% year-over-year and 12% quarter-over-quarter. We expect this trend will continue throughout 2021 driven by intensifying competition. 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 SARCLISA. I'd like to take this opportunity to comment on our recent launch of LUMAKRAS, 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 laboratories. We're very pleased with the positive reaction from the oncology community, and we will 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-19 on our business. We closely monitor the course of the pandemic and its impact on patients and physician behavior during the second half of the year, maintaining our focus on execution to ensure our medicines continue to reach the patients who can benefit. And with that, I will turn it over to Dave.

Thanks, Murdo. And good afternoon, everyone. We made several important advances in R&D last quarter. I will begin with our acquisition of Teneobio, which will strengthen Amgen's leadership in developing engineered protein-based medicines to treat patients with serious illnesses. There are three important components to the acquisition. First, Teneobio's core antibody technology will enable the development of multi-specific biologics directed against targets in a wide range of diseases across our key therapeutic areas. Teneobio's antibody platform offers capabilities complementary to our existing technologies. It is genetically modified to express human IgG molecules comprising only a heavy chain. A small single-chain antigen-binding domain from these molecules is soluble and stable, and can be easily strung together like beads on a string to generate multispecific molecules. In addition, Teneobio 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 bi-specific capabilities and enable customization of the T-cell engaging domain, depending on the disease and target. Finally, we're acquiring clinical and pre-clinical oncology programs directed against high-value targets of interest, which we specifically selected based on our own discovery efforts and target validation. These include a Phase 1 bispecific antibody for prostate cancer that complements Acapatamab AMG 160, also targeting PSMA and AMG 509 targeting steep one, which was recently granted fast-track designation by the FDA. Turning to oncology, we continue to advance LUMAKRAS registration around the globe, with regulatory reviews and progress in multiple jurisdictions, including Europe and Japan. Feedback from the medical community on the LUMAKRAS launched in the U.S. has been overwhelmingly positive, and I've heard personally from oncologists who are excited to have LUMAKRAS available and are heavily screening their patients for KRAS G12C mutations. I'm pleased to report that more than 2,000 patients have received LUMAKRAS across more than 400 sites, and 900 investigators or treating physicians are treating these patients, including through our global early access programs. In the LUMAKRAS development program, we continue to advance our broad-based combination efforts. Initial data from our Vectibix 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 fourth quarter. To expand our LUMAKRAS experience for SHP2 inhibition along with our ongoing collaboration with Revolution Medicines, we have also entered into a collaboration with Novartis for our SHP2 combination trial. Updates from our monotherapy non-small cell lung cancer study, including additional biomarker analyses, as well as data in patients with stable brain metastases, have been accepted for presentation at the World Congress on lung cancer. Recall that we are also investigating LUMAKRAS in patients with active brain metastases. We also plan on initiating a Phase II first-line non-small cell lung cancer study in patients with PD-L1 negative and/or STK11 mutant tumors in the third quarter. In the Bemarituzumab program, we are having good discussions with regulators on the Phase 3 gastric cancer development path and plan to initiate a registration program by year-end. This will include two Phase 3 trials, one investigating the utility of Bemarituzumab in combination with chemotherapy and the other evaluating the addition of Bemarituzumab to chemotherapy and the checkpoint inhibitor. We are also planning a potentially pivotal Phase II study with AMG 757, our half-life extended BiTE molecule targeting DLL3 for small cell lung cancer. And we look forward to discussing the next steps with regulators in the coming weeks. I am also pleased to report that we have completed enrollment in the castrate-resistant prostate cancer expansion cohort for AMG 160. In inflammation, continuing our leadership in dermatology, we are working closely with Kyowa Kirin to advance AMG 451, also known as KHK4083, a first-in-class OX40 antibody, into Phase 3 for atopic dermatitis. We look forward to the presentation of the Phase 2 atopic dermatitis data at the annual meeting of the European Academy of Dermatology and Venereology at the end of September, as well as initiating discussions with regulators on our Phase 3 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, are very pleased that the FDA granted Tezepelumab priority review for the treatment of asthma, reflecting significant unmet medical need. In closing, I would like to thank the entire organization for continuing to advance important medicines for our patients. Peter?

Thank you, Dave. And good day, everyone. I will briefly walk through our second-quarter financial results before discussing 2021 guidance. The second 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 $6.5 billion increased 5% year-over-year. Other revenues at $412 million increased 38% year-over-year, primarily driven by shipments of the COVID-19 antibody therapy to Lilly. We continue to expect full-year 2021 other revenues to be in the range of $1.4 billion to $1.5 billion. The second quarter's non-GAAP operating expenses increased 15% year-over-year as we continue to make investments to drive growth and maximize shareholder value. We expect full-year operating expenses, including approximately $200 million of operating expenses related to the Rodeo, Five Prime, and Teneobio acquisitions, and also to the Kyowa 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, the 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-19 antibody shipments to Lilly, as well as profit share and royalties. For the full year, we continue to expect the 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 MVASI, RIABNI, and KANJINTI. Those subject to profit-sharing arrangements are Evenity and Tezepelumab upon approval at launch. Non-GAAP R&D spending increased 11% year-over-year due to investments in acquired companies in Q2 as part of the Five Prime acquisition and increased investments in discovery research. For the full year, we continue to expect non-GAAP R&D spend to increase as we progress our innovative early and late-stage pipeline programs. For the full year, we expect non-GAAP SG&A spend to decline. Non-GAAP other income and expenses were favorable by $146 million on a year-over-year basis, due primarily to our portion of BeiGene's results, which we record one quarter in arrears. Q1 BeiGene results reflect the upfront payment BeiGene received in connection with a collaboration agreement. We expect our Q3 and Q4 non-GAAP other income and expenses to be more in line with our Q1 and expect full-year net expense in the range of $1.3 billion to $1.5 billion. 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 $25.8 billion to $26.6 billion, and our non-GAAP EPS guidance range of $16 to $17. Notwithstanding absorbing roughly $200 million of operating expenses mentioned above related to business development activities, including Five Prime, Rodeo, Teneobio, and the Kyowa Kirin collaboration. 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-19 levels. Our non-GAAP tax rate guidance remains unchanged at 13.5% to 14.5%. Our capital expenditure guidance remains unchanged at $900 million and our capital expenditures continue to reflect our investments in our manufacturing and related facilities, including improving their environmental footprint, 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 billion to $5 billion. This concludes the financial update. I'll turn it over to Bob for Q&A.

Okay. Erica, let's open the lines for questions. Maybe you could remind our callers of the procedure and our guidelines for them to ask one question so that we have the opportunity to get through everybody who has a desire to ask a question of us. 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 here this afternoon. Okay. Erica, open them up.

Hi. This is Gabe on for Yaron. Thanks for taking my question and congratulations on the quarter. My question is focused on the LUMAKRAS study in first-line lung cancer in patients with low PD-L1 and/or STK11. Could you just talk about the, I guess, your benchmarks for historical comparisons in the STK11 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 can look like, what the comparison arms would be. Thank you.

Thanks, Dave. 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, who typically do not 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 that we're targeting. Whether this can be potentially registration enabling or not, I think it's too early to speculate. 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 pretty spectacular efficacy readout to lead to registration based on a single-arm Phase 2 trial. Obviously, if we saw compelling data, we would have the appropriate conversations going forward.

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

You and me both.

Turned 30.

You and me both. All right, what can we do for you?

Congratulations. My question today is about KRAS, specifically regarding the plan for the interim analysis of the ongoing phase 3 study and whether there is any primary analysis focused on the PD-L1 negative subset in particular. I find it interesting that the first-line Phase 2 trial is restricted to PD-L1 negative or STK11. Thank you very much.

Yes. Regarding the Phase 3 trial, we expect data in the first half of next year. Given the historical rapid progression of patients in second and third-line lung cancer to standard therapy, an interim analysis might not be very useful, as the primary analysis typically occurs shortly after. We will assess the event rates in the second half of the year. However, I want to emphasize that the primary analysis in the first half of next year will be the key event. In the first-line setting, we believe there is a significant unmet medical need in the PD-L1 negative and/or STK 11 mutant population due to the limited effectiveness of current treatments for those tumors. We are eager to launch that study soon and look forward to the data readout. We will provide updates on timelines once enrollment begins.

Thank you.

Hey, happy birthday, Arvind, and thank you so much for taking the questions. I'm curious about the combination data of LUMAKRAS with Vectibix. 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 Vectibix? Thank you.

Thanks, Jay. Most of the patients enrolled in the study involving the combination of LUMAKRAS and Vectibix will likely have colorectal cancer due to the use of Vectibix. However, the trial allows for enrollment of patients with other types of cancer if their physicians think the regimen is suitable. Regarding the promotion of Vectibix, I prefer not to speculate. Our main focus is to generate data on these combinations and assess our potential to advance treatment, especially in colorectal cancer.

Thank you for your question, and happy birthday, Arvind. We're both turning 30. I want to address the tax petition. It appears that the notice of deficiency pertains to three years: 2010, 2011, and 2012. I'm interested in knowing if there is a recurring issue and what accounting practices prompted this notice. Additionally, should we anticipate similar deficiencies or resolutions for the years 2013 through 2020? Also, what interest rate might the IRS apply in this situation? Thank you.

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. So, you can see we have a difference of opinion on the value of the significant risks and the complexity we undertake with activities performed at our Puerto Rico facility. We strongly believe the IRS' position is without merit, and we have appropriate tax reserves, and this dispute will take several years to resolve. I would like to note, Salim, 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 sophisticated biologic medicines for patients all over the world with serious diseases. We've invested nearly $4 billion to expand and modernize those facilities in Puerto Rico, 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.

Great, thanks so much for taking the question. Maybe another one for Peter. I was just wondering if you can comment on the 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 going forward? Thank you.

Terence, thank you. And, as always, we don't give long-term margin guidance, but I would really like to say, our Northstar around this, we always pause and think about our objective, which is to grow our after-tax cash flows for the enterprise versus targeting specific operating margin or OpEx growth rates. So, we're going to continue to make prudent investments that lead to that objective. So, I would just note that we're continuing to invest in internal and external innovation. You've seen the fruits of that in the second quarter, the launches of new products, and broader digitalization efforts. Secondly, we highlighted our expectation that R&D expenses are going to grow year-over-year as we increase our spend on AMG 160 and AMG 757 and dose-expansion. We're going to rapidly advance those assets in the prostate in small cell lung cancer. We have three biosimilars in Phase III and three inflammation in Phase II. Third, I'll just note, Terence, that we're absorbing the upfront costs related to the acquisition of Rodeo, as well as the cost of the Five Prime acquisition, our recent collaboration with Kyowa Kirin, and our recently announced acquisition of Teneobio, which we do expect to close in the second half of 2021. We also plan to rapidly progress these Phase 3 ready molecules in the development of bema and KHK4083. We began seeing higher manufacturing costs in Q2. Those were related to the Lilly COVID antibody effort. Net adds to the OpEx build for the rest of the year or two. But on a year-over-year basis, remember, we're comparing to depressed spend in Q2 and Q3 2020 due to COVID. So, at the end of the day, there are 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 at 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.

Great. Good afternoon. Thanks for taking the questions. Dave, I was wondering if you could just comment on the IL-2 mutein. I know we're going to see some of the data here for SLE towards the end of the year, but it looks like you've started Phase 2 and you're also looking at UC, just maybe broadly on the profile and what you think you need to generate on Phase 2b to have that be a competitive asset?

Yeah, thanks, Matt. I'm glad you brought up AMG 592, our IL-2 mutein. 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 access is out of whack. As you mentioned, we anticipate sharing Phase 1b 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. 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 T regulatory cells. So, I think it's really the Phase 2 readouts here that will be critical as we accrue those data. As always, we'll look to make sure that we are adding something to what is standardly available. In lupus, there remains a very large residual unmet medical need. There was an approval within the last day or two, of course, but only the second drug in 40 years and a very large patient population still requiring active medicines are ulcerative colitis, particularly for long-term remission, is also an area with substantial unmet medical needs. So, it's full speed ahead in the IL-2 mutein program. We'll look forward to sharing this data with you.

Afternoon guys. Thanks for the question and happy birthday, Arvind. Commercial question on Otezla for Murdo. And 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? And do you think any of these headwinds could impact the upcoming launch when you look at the mild to moderate disease-patient population? Thank you.

Yes. Thanks, Geoff. I would say throughout the course of last year, we saw a slowdown in the number of bio-naive psoriasis patients moving into the market 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 diagnoses last year compounds our growth rate this year. The good news of the quarter is we saw new patient trends tick up. So, we did see 10% growth in new patients, prescribed new-to-brand prescriptions in the quarter. 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, that our share has held in the share of bio-naive psoriasis patients, and we continue to feel optimistic about the growth of Otezla given the pending indication in mild-to-moderate patients, which should come hopefully by the end of this year. Teams continue to execute well. Our field execution, as I mentioned in my opening remarks, is improving. And we're very focused on making sure we continue to grow Otezla over the long haul.

Hi. Good afternoon. And thank you for taking my question. Let's start with the immunology team here. You guys are developing both STELARA and other products for 2023 2024's biosimilars. And given you're going to be on both sides of the innovation in a similar world, I was wondering if you had a thought about the long-term trajectory of pricing in the immunology markets. That is, without giving specific numbers, should we begin to see something along the lines of what we see with diabetes with ongoing gradual price decreases? It's like how do you think about this market long-term?

Murdo, do you want to?

Sure. Thanks for the question, Ronny. I'm hesitant to go out too far. What we are seeing, of course, is that in inflammation right now, there 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. 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 entrench themselves in that first-line position, and novel mechanisms are likely to be in the second and perhaps even third line after patients have failed to resolve their RA symptoms or improve the progression of their disease. In the biosimilar dynamics, I think we're seeing now the increase in interest from both payers, PBMs, and providers, given some of the trends that we're seeing with early biosimilars in the inflammation category. And I do think that interest in biosimilars will increase. I think that biosimilar penetration of the parent molecule or originator molecule will accelerate with the new entrants. So, we're expecting that to be the condition by the time we launch AMGEVITA in the U.S. But overall, I would just come back to the strength that we have as a Company given our portfolio of innovator or originator molecules enhanced with the presence of our biosimilar portfolio. And I think that affords us an opportunity to serve many patients across a host of autoimmune diseases, as well as serve providers, payors, and PBMs with a lot of value to deliver to the healthcare system.

Thank you. Thank you very much for taking the question. I'll continue with the biosimilar guidance. Specifically, on Denosumab, what are you thinking in terms of the first biosimilar coming in for which? And then would you expect the erosion trajectory for a brand of Prolia and XGEVA to be similar 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?

Thanks, Geoffrey, for the question. I would say it's again, hard to project into the future as to how the healthcare system's payors 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 might define for it.

Hi, guys. Thanks for the questions. We had a two-parter for David, on the combination of therapies. You have upcoming data for MEK plus or minus EGFR. Just wanted to understand in that context how to interpret that data, what is good data, and is the goal to significantly increase response rate and PFS beyond monotherapy alone? Maybe just help us right-size how to think about that study. And you also announced that you expanded a combination with the Novartis SHP2. Is that just diversifying and spreading it around or how to think about SHP2 if you have done a second collaboration there? Thank you.

Thanks, Mike. Let me start with the second part first. You're exactly right. That's simply diversifying our experience. We're moving forward as I noted with both Revolution Medicines on combination as well as this new collaboration with Novartis, and we look forward to both datasets. In terms of the MEK or EGFR combinations, as I've said before, in terms of response rate, it's going to vary by line of therapy and indication in terms of what sort of increments that you want to 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. And on these first cohorts, of course, the critical thing upfront is safety and determining appropriate doses, and then moving into expansion cohorts for efficacy. Thanks again.

Hey, guys. Thanks for taking my question. And happy birthday to one of the best in IR games. And cheers to you, Arvind.

Thank you, Alethia.

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

Yes. Thanks, Alethia. We're quite happy with the performance of Repatha and us now to really treat a large number of patients; we reached a million patients now with Repatha. So quite a milestone. The overall dynamic that is dragging price down is really a U.S. Part D patient dynamic, as patients enter into the coverage gap or as we sometimes refer to it, the donut hole. And as we expand our percentage or share of business in the Part D or Medicare Part D segment of the market, 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 volume is outpacing that, and we will see that drop to the net sales lines. Overall, good evolution. We're also seeing nice growth on Repatha ex-U.S., where the price is relatively stable year on year. So, that part of the mix is helping bolster price evolution over time as well. 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.

Thanks for taking the question. Maybe just would love to get a perspective on the combinations you're most excited about currently for LUMAKRAS, whether it's more in line with previously with the oral and antibody MEK inhibitors, to the M2 inhibitor, maybe, or with the Novartis collaboration. Does the SHP2 now take the top seat? And then just one quick question on the biosimilar pipeline, when do you see the earliest that you might be able to launch your biosimilar EYLEA, its ABP 938? Thanks so much and congrats on the accomplishments.

Yeah. 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. All of these combinations have been selected for one or another reason or both. One, most importantly, is a biological possibility, so a reason to believe in either additive or synergistic effects. And then two, if 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. At this point, Ken, I think it's really an empirical matter of generating the data. And of course, I will share that as we've outlined.

And, Ken, we haven't announced our timing on EYLEA, but we are moving quickly in the enrollment of that program and we anticipate being early in the sequence of launches for that product.

Good afternoon. I'll pass on my happy birthday wishes to Arvind too. I wanted to ask about your OX40 program. I know it's moving into Phase III next year. Just wanted to see any further color on the population or dosing you're looking to move forward with it in Phase III. And if the lingering uncertainty over the JAKS, in any way changed or evolved your underlying assumptions around that market, would be helpful? Thank you.

Thanks, Carter. We're very enthusiastic about this molecule. Atopic dermatitis is a disease with widespread prevalence across global populations despite existing therapies. We think there is a very large amount of residual unmet medical need, as patients often cycle through therapies. Given the novel mechanism of action, we're targeting the OX40 pathway. We think there is quite a big opportunity 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.

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

Yeah. Thanks, Cory. As we've discussed before, we're looking at both direct combinations and sequential therapy here. So, I think you can expect to see data from both of those sometime through the first half of next year as we accumulate enough data to define what the relevant path forward is with a checkpoint inhibitor. So, more to come there, but we continue to actively work on these development programs.

Hi. This is Alli Bratzel on for Chris this afternoon. Thanks for taking our question. Just on PD, 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 to 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 via internal or external innovation? Thanks.

So Alli, I want to reiterate what I've mentioned before: our business development efforts are concentrated in areas where we have a strong ongoing research or commercial presence. We've been active in both oncology and immunology, and we are continuously seeking opportunities in those fields as well as in general medicine. If we identify potential areas where we can add value, such as nephrology, bone health, or migraines, we're open to exploring those as well. Our efforts are proactive, and we are actively monitoring the marketplace. Our primary focus will be on generating returns for our shareholders from any assets we might license or acquire. As for your nephrology question, we currently do not have extensive active research in nephrology and bone health. Since we haven't identified internal opportunities for developing novel therapies in those areas, we believe that our existing medications are effectively meeting market needs. Nevertheless, we remain attentive to external opportunities that align with our longstanding expertise in nephrology and our global leadership position in bone health.

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 Tarlatamab. Question from me here is what you guys think you need to see as you're planning for this Phase 2 study? Obviously, initial data seems encouraging from the first 52 patients you had earlier this year. 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 been seeing 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.

Yes, thanks, Dane. I think to take the last part of your question, what we've seen are ongoing response rates consistent with the data that you saw from the later cohorts that we presented a month or two ago. And in addition, we've actually been impressed with the duration of response. Most of these patients are third line plus, which, as you know, is a very aggressive disease in small cell lung cancer, and durable responses here are very rare. So that I think is an additional factor that gives us encouragement here. As we discuss the potential registrational path with the FDA in the coming weeks, I think we will 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 Tarlatamab and given the kind of activity that we're seeing in the clinic right now.

Hi, guys. I have 1 more on LUMAKRAS. Thanks for taking my question. And Arvind, congrats as well. So, I guess, hypothetically, should the efficacy-safety profile of the LUMAKRAS inhibitor combinations turn out to be insufficient, which I guess could be possible? What are other likely avenues to positively enable access to a broad first-line KRAS non-smoker lung cancer indication? Should we think about potential chemo combinations or are there others that are logical that come to mind? Thanks so much.

Thanks, Michael. I think you're exactly right. With the chemotherapy combinations, number one, and then going into biomarker-selected populations. As we've discussed in terms of our planned upcoming first-line study which will be launching shortly. And so, should checkpoint inhibitor combinations not be feasible, I would expect that we would piece together other routes to first-line to find patients who are most likely to benefit.

Erica, as we're pushing up against the top of the hour, why don't we take our final two questions.

Hey, good afternoon, everyone. Thanks for taking my question and happy birthday, Arvind. Thinking a little more on the disclosed notice of deficiency today. I think last year you also received an adjustment and modified agreement related to 2013 through 2015 and are also under investigation for 2016 through 2018 by the IRS and just seems like this all-related issue is around profit allocation in Puerto Rico. So, I was wondering if you could just walk through the next steps in terms of the tax for a petition. Can the petition to be heard in tax court fail? And if it does go to court and the decision goes against you, does that sort of establish precedence for the other years as well? And based on the IRS calculation methodology for 2010 and 2012, have you run that same calculation to establish what number bound of liabilities for 2013 through now would be?

Yes, Brian, thank you for the question. Look, we filed a petition with the U.S. tax court. In this case, it could take several years to resolve. The IRS is also proposing significant adjustments to 2013 and 2015, related to similar issues. As you know, we strongly disagree with the proposed adjustments. We're pursuing a resolution with the IRS Administrative Appeals Office on that. The IRS, as you notice, is currently auditing the years 2016 through 2018, so yes, we're sure they'll take the same position for the other periods under audit. We believe that we have adequate reserves for that.

Hey, let's go to the final question.

Hey, this is Andrew Galler on for Tim. I just wanted to ask one question on tezepelumab. So, given your partner AstraZeneca officially discontinued the program in atopic dermatitis last week, can you talk about any impact on your competitive positioning? The decision Eastern availed to look asthma, given the high coincidence of atopic conditions?

I mean, I think the short answer here 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 fit of this medicine with a large residual unmet medical need. So, that's our perspective. That doesn't really give us positive feedback.

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 forward to having the opportunity to gather with you in October and update you on the next quarter. Appreciate your interest in Amgen. Thank you.

Thanks, everybody.

This concludes Amgen's Second Quarter 2021 Financial Results conference call. You may now disconnect.