Earnings Call Transcript - AMGN Q4 2023

Operator, Operator

My name is Julianne, and I'll be your conference facilitator today for Amgen's Fourth Quarter 2023 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. I would now like to introduce Justin Claeys, Vice President of Investor Relations. Mr. Claeys, you may now begin.

Justin Claeys, Vice President of Investor Relations

Thank you, Julianne. Good afternoon, and welcome to our fourth quarter 2023 earnings call. Bob Bradway will lead the call and be followed by a broader review of our performance by Murdo Gordon, Vikram Karnani, Jay Bradner, and Peter Griffith. Dave Reese will also be available during the Q&A session. Given the timing of the Horizon Therapeutics acquisition close, the results as shown in our press release and slides include contributions from the Horizon business from October 6 onwards. For clarity, this will also serve as the basis for our filed financial results. Vikram will also provide sales information for these products for the full fourth quarter, including the first week of October, to give further context in his remarks. We will use non-GAAP financial measures to describe our performance and have provided appropriate reconciliations in the materials that accompany this call. We will also make some forward-looking statements, which are qualified by our safe harbor statement, and please note that actual results can vary materially. With that, over to you, Bob.

Robert Bradway, CEO

Okay. Thank you, Justin, and let me thank all of you for joining our call. 2023 was another year of performance and progress for Amgen, further positioning us to deliver attractive growth through the end of the decade and beyond. Last year, we delivered double-digit volume growth in all four quarters with balanced growth across products and geographies. Eighteen of our medicines generated record annual sales, including Repatha, Prolia, EVENITY, TEZSPIRE, BLINCYTO, KRYSTEXXA, and UPLIZNA. The acquisition of Horizon, which was completed on October 6, gives us a significant new rare disease business that now stands as a fourth pillar of growth alongside our leading general medicine, oncology, and inflammation businesses. The medicines we acquired are all very early in their life cycles and by leveraging Amgen's world-class biologics manufacturing, decades of experience in inflammation, and our extensive global presence, we believe these products have the potential to reach many more patients around the world. Last year, we also advanced the deepest and most diverse pipeline in our history with promising molecules at all stages of development across our four pillars of growth. We anticipate well over a dozen significant pipeline milestones this year. I'll touch on a few. In General Medicine, we'll generate Phase II data this year for our lead obesity molecule, MariTide, and we're excited to learn more about this asset. In oncology, we have a June 12 PDUFA date for the FDA to complete its priority review of Tarlatamab as a third-line treatment for small cell lung cancer. Tarlatamab is the first bispecific T cell engager shown to be effective in addressing a major solid tumor, which has had no new treatment in decades and which today has a 5-year survival rate of just 3%. We hope to serve tens of thousands of patients diagnosed with small cell lung cancer each year in the U.S. and major markets around the world. We’ve done this very successfully now with our first BiTE, BLINCYTO, which has steadily moved into earlier lines of treatment for acute lymphoblastic leukemia, and we’ll take the same approach with yet another promising BiTE at being Xaluritamig in prostate cancer. In inflammation, we’ll have Phase III data from Rocatinlimab in atopic dermatitis from the first of now 8 trials in the ROCKE program. And in rare disease, we’ll have Phase III data for UPLIZNA in myasthenia gravis and IgG4-related disease. At a time when a rapidly aging global population needs more innovation, Amgen is delivering, both with the medicines we have in the market today and those that are advancing in our pipeline. We’re also excited by the rapid convergence of biotech and tech, which is enabling us to innovate more quickly and confidently. We’ve been preparing for this hinge moment for more than a decade and recently named Dave Reese as our first-ever Chief Technology Officer to ensure that we’re capitalizing on technologies like generative artificial intelligence, not just in R&D, but across the entire company. Succeeding Dave is Amgen’s Head of R&D, Jay Bradner. Jay is a physician-scientist and a seasoned R&D leader, having served for many years as President of the Novartis Institute for Biomedical Research. We’re delighted to have Jay on board and excited by the work that he, Dave, and the rest of our team will do together to accelerate innovation at Amgen for the good of patients and for the long-term growth of our business. And with that, I want to thank our 27,000 employees worldwide for their many contributions to our success. Let me now ask Murdo to discuss our commercial performance in 2023.

Murdo Gordon, Executive Vice President of Global Commercial Operations

Thanks, Bob, and I'm very pleased with our performance in 2023. Execution was strong across the business, resulting in record sales in the year for 18 brands and robust volume growth across the four pillars of our business. Full-year product sales increased 9% year-over-year. Volume growth was 15% with strength across our regions. U.S. volume growth was 14%, and volume growth in our Europe, Latin America, Middle East, and Canada region was 10%. Asia Pacific continues to be our fastest-growing region with 41% volume growth. These results include $954 million of sales from the legacy Horizon portfolio from the period of October 6 through December 31. I'll start with our General Medicine business, which includes Repatha, Prolia, EVENITY, and Aimovig. Overall revenue for these four products grew 15% year-over-year in the fourth quarter and 17% for the full year, driven by 18% and 20% volume growth, respectively. Repatha sales increased 25% year-over-year in the fourth quarter with volume growth of 35%, partially offset by lower net selling price. Outside of the U.S., we saw 25% volume growth with strength across our regions. In the U.S., volume growth of 48% was driven by a 66% increase in the number of new patients starting treatment. We expect this additional coverage to lead to strong volume growth, which will more than offset declining net selling price. In addition, some payers have recently removed prior authorization for some patients, which will further ease their access to Repatha. We remain committed to educating physicians and patients on the importance of LDL-C lowering to reduce cardiovascular events. In the U.S., we activated more than 20,000 new prescribing physicians in 2023 in both primary care and cardiology settings. Transitioning to bone health, EVENITY had record sales of $318 million for the quarter, driven by 39% volume growth. Osteoporosis disproportionately impacts postmenopausal women, and the diagnosis and treatment rates for these patients are low. In the U.S., only 6% of very high-risk patients with osteoporosis are treated with a bone builder, creating an urgent need for effective therapy. Prolia sales grew 12% year-over-year to a record $1.1 billion for the fourth quarter. Moving to our oncology business, sales of our innovative products grew 5% year-over-year for the fourth quarter, with 3% volume growth. Full-year sales grew 12% year-over-year, driven by 12% volume growth. BLINCYTO sales grew 47% year-over-year to a record $241 million for the fourth quarter. Transitioning to inflammation, Otezla sales increased 2% year-over-year for the fourth quarter. Looking forward, we will continue to leverage our expertise in nephrology and inflammation to bring TAVNEOS to more patients with ANCA-associated vasculitis. Overall, our execution is strong across the business, underscored by our commitment to serve patients. The four pillars of our portfolio position us well to serve many more patients around the world who can benefit from our innovative therapies. I will now turn it over to Vikram, who will cover our rare disease portfolio.

Vikram Karnani, Executive Vice President of Rare Disease

Thanks, Murdo. I am glad to share an update on our rare disease business now that we are four months past the close of the deal. We are now fully operating as part of Amgen with integration activities ongoing. As Bob has mentioned before, we are excited to be Amgen's fourth pillar of long-term growth. I wanted to ensure you're aware that we are not reporting the full quarter in the press release and slides, which reflects sales from October 6 onwards and totaled $954 million. This excludes $41 million of sales that occurred in the first week of October prior to deal close. For the full quarter, our rare disease brands from Horizon delivered product sales of $995 million, representing 6% year-over-year sales growth. TEPEZZA, an IGF-1R monoclonal antibody for patients with thyroid eye disease, generated $467 million of sales during the entire fourth quarter, representing 3% quarter-over-quarter growth. We observed a number of positive leading indicators, including a record number of unique TEPEZZA prescribers, total patient enrollment forms, and patient starts in 2023. We've also been able to generate favorable medical policy changes for over 50% of U.S. covered lives, and we expect to continue this momentum throughout 2024. Given positive leading indicators and high unmet need, we see a long-term growth opportunity for TEPEZZA in the U.S., while also recognizing there is some time lag between our execution efforts and the realization of increased patient numbers. International expansion also remains a meaningful growth opportunity for TEPEZZA. Our expansion into both Japan and Europe is a high priority, with regulatory review underway in Japan and filings in the EU throughout the year. KRYSTEXXA, a PEGylated uricase enzyme for chronic refractory gout, delivered a record $280 million in sales for the entire fourth quarter, representing 30% year-over-year growth. UPLIZNA, an anti-CD19 monoclonal antibody, is now the fastest-growing biologic in NMOSD, delivering a record $70 million in sales for the entire fourth quarter, representing 68% year-over-year growth. Looking ahead at 2024, by leveraging Amgen's capabilities, we are ready to reach more patients than ever before. I will now turn it over to Jay.

Jay Bradner, Chief Research and Development Officer

Thank you, Vikram, and good afternoon, everyone. I'm thrilled to join the Amgen R&D organization and its leadership team. The creativity of our discovery research, expert and expedited clinical development, and biomanufacturing organization are well-known to me. I appreciate the strong sense of service toward patients facing serious illness and the commitment to our medicines and our business. In 2023, we executed with speed across our clinical pipeline, achieving excellent enrollment in key programs. Key highlights in 2023 included promising data from four key oncology assets and the attainment of three breakthrough therapy designations in oncology. We initiated pivotal Phase III studies for Tarlatamab in small cell lung cancer, LUMAKRAS in non-small cell lung cancer and colorectal cancer. Our planning for a comprehensive Phase III program across multiple indications remains on track. The Phase III outcome study of Olpasiran has enrolled more than 7,000 patients globally. We are on track to complete enrollment in the first half of 2024. In oncology, we’re pleased to announce the FDA granted priority review for BLINCYTO in early-stage CD19-positive B-ALL with a PDUFA date of June 21, 2024. Our focus is on key targets with differentiated therapies for large effect sizes. We are ahead of schedule with the monotherapy dose expansion of Xaluritamig and making significant progress in dose range-finding studies. We’re excited to report on our progressive innovations and look forward to sharing more milestones through 2024. I’ll now turn it over to Peter.

Peter Griffith, Chief Financial Officer

Thank you, Jay. We're pleased with our strong execution and performance in the fourth quarter and for the full year 2023. In the fourth quarter, total revenue of $8.2 billion grew 20% year-over-year and non-GAAP EPS of $4.71 grew 15% year-over-year. For the full year, we delivered total revenue of $28.2 billion, growing 7% year-over-year and non-GAAP EPS of $18.65, growing 5% year-over-year. As a reminder, both Q4 and the full year results include Horizon's results beginning October 6. I'll review the details of our financial results before discussing our outlook for 2024. Turning to our fourth quarter's total revenue of $8.2 billion, we saw product sales increase 20% year-over-year, driven by volume growth of 23%, offset by a net selling price decline of 3%. Excluding Horizon's impact, product sales increased 5% year-over-year driven by volume growth of 9%. For 2024, we are expecting revenue of $32.4 billion to $33.8 billion and non-GAAP earnings per share of $18.90 to $20.30. We expect the acquisition to be accretive to non-GAAP EPS in 2024 and are on track to meet the synergies target previously communicated. Our revenue range reflects our strong growth outlook driven by numerous opportunities across our four therapeutic area pillars. We expect continued volume-driven growth in our priority products. Overall, we continue to efficiently manage operating expenses and forecast significant cash flow generation with the addition of Horizon. In summary, we delivered another strong year of financial results in 2023. Our confidence in the long-term growth of Amgen is strong and we believe that our new rare disease pillar will be an important additive source of growth for the company.

Robert Bradway, CEO

Okay. Thank you. Let's open the line, and we'll take questions from our callers. Julian, why don't you remind them of the procedures so we can get through these questions here efficiently for everyone.

Michael Yee, Analyst at Jefferies

Hey, guys. Good afternoon, and thanks for good results and guidance. We had a question on obesity. On 133, of course, you had the publication yesterday I feel like it was the most scrutinized Phase 1 publication. But maybe you could just talk to - maybe Jay could talk to your interpretation of some of the markers, for example, lipids, A1C, blood pressure, etc., and maybe talk about your confidence about the profile versus competitors? Thank you so much.

Jay Bradner, Chief Research and Development Officer

Yes. Thanks a lot, Michael. We really appreciate the consideration the Phase 1 paper is receiving from the community. It's exciting to report these data. For those who haven't seen it, this was a randomized, double-blind, placebo-controlled study. We were quite pleased with the outcome. Looking at the 420-milligram dose as an example, which was the highest dose studied, we observed 14.5% weight loss at only day 85, and moreover, it was quite durable coming off of that medicine out to 150 days, all with relatively mild gastrointestinal side effects. And so to answer your last question first, we find the Phase I data, which we're pleased to share with the community to be quite supportive of our ongoing work to develop this medicine to the greatest possible benefit of patients suffering from obesity. Now you've asked questions around some of the measurements on this study: lipid levels, blood pressure, and A1C. I would just caution that this is a Phase I trial; the numbers are very small, and the duration of treatment is rather short. But even with those caveats, while hard to draw conclusions from such small numbers, especially labile measurements like blood pressure and lipids, all are directionally favorable. We take no concern whatsoever from those measurements on the study.

Michael Yee, Analyst at Jefferies

Okay. Thank you. Those are the questions. Yeah.

Salveen Richter, Analyst at Goldman Sachs

Good afternoon. Thanks for taking my question. Another one here on the obesity program. So post-published Phase I data, how are you thinking about differentiation on GI tolerability? Is the dose range being evaluated in the Phase II study similar to that in the Phase I? Thank you.

Jay Bradner, Chief Research and Development Officer

Yes. Thanks for the question. I'll take this one as well. The Phase II study, which is ongoing at present and going very well, explores 11 dosing cohorts with relevant placebo controls. Through that study, we'll have a chance to gain an experience with longer exposure to MariTide dosed in different ways. We've recently added a part 2 to this study that will allow us to explore even more durable weight loss beyond 52 weeks.

Robert Bradway, CEO

The only thing I would add is we're starting from a basis of a monthly dosing cadence and schedule. And these additional dosing cohorts would look at potential dosing schedules beyond monthly. We see opportunities to improve tolerability in our program based on our studies so far. And so we are excited about the further developments in the Phase II program.

Justin Claeys, Vice President of Investor Relations

Thanks, Julianne. We'll go to the next question.

Jay Olson, Analyst at Oppenheimer

Hey, thank you so much for taking a question, and congrats on the progress. Another question on 133. Talk about whether or not that we see later this year will include patients from two of the studies? And do you think it's possible that 133 could be dosed twice every 2 or 3 months? And also, if you could just comment on the rollover rate of patients from Part 1 to Part 2? Thank you.

Jay Bradner, Chief Research and Development Officer

Yes. Thank you for the question, Jay. In Part 2, the intent is to look at durable weight loss beyond 52 weeks. By durable weight loss, patients eligible for Part 2, starting at the end of 52 weeks, will be those responding to this medicine. And then they’ll be rerandomized to cohorts testing dose levels, including less frequent dosing schedules. We haven’t disclosed the granularity on the dosing schedule just yet. The rate of patients rolling over to Part 2 will be established as the Phase II study continues to progress this year.

Justin Claeys, Vice President of Investor Relations

Thank you, Julianne. Next question.

Chris Schott, Analyst at JPMorgan

Great. Thanks very much. Just maybe to pivot over to TEPEZZA for a question. Can you just talk a little bit about the dynamics for 2024? It seems like the product has come back to growth. What are your top priorities, and how do you think about continuing to grow the new patient base here? Thank you.

Robert Bradway, CEO

Sure, Chris. Vikram, share your thoughts first.

Vikram Karnani, Executive Vice President of Rare Disease

Yes. Thanks for the question. If you focus on the underlying factors that are driving TEPEZZA growth, we saw a record number of unique prescribers, increased patient enrollment forms, and patient starts. Significant progress on payer coverage has also contributed to growth, with covered lives exceeding 50% in the U.S. However, there is still a time lag between these efforts and the realization of increased patient numbers. We're optimistic about the execution we have seen coming out of last year.

Robert Bradway, CEO

Building on what Vikram said, we're also excited about ongoing opportunities to invest in innovation for the benefit of TED patients. Overall, I feel excited about the rare disease pillar we've established and the role that TEPEZZA will play in that.

Justin Claeys, Vice President of Investor Relations

All right. Next question, Julianne?

Evan Seigerman, Analyst at BMO Capital Markets

Hi, guys. Thank you for taking my question. I wanted to touch on TEZSPIRE, specifically in COPD. How are you planning to differentiate given the competitive data we saw from Dupixent? Are there nuances in this trial that need to be clarified that might make it harder to do an apples-to-apples comparison?

Robert Bradway, CEO

Thanks for the question, Evan. Murdo, why don't I start and then you add on.

Murdo Gordon, Executive Vice President of Global Commercial Operations

The Phase II COPD study of TEZSPIRE is expected to have results in the first half of this year. This was a big study, 337 patients with moderate to severe COPD. Reflecting the current unmet need, we want to understand if they would be responders to TEZSPIRE.

Justin Claeys, Vice President of Investor Relations

Okay. All right. Thank you, Julian. Next question?

Umer Raffat, Analyst at Evercore ISI

Hi, guys. Thanks for taking my question. I wanted to touch on AMG 133 as well. First, on the discontinuations at the high dose, we know five out of eight did not finish the full duration of the study. But there was a second arm also of this high dose 420-milligram with 10 patients, which was not reported. Could you speak to the discontinuation rate in that arm? Additionally, could you perhaps speak to the timing of liver enzyme elevation relative to the COVID episode?

Robert Bradway, CEO

I won’t be able to provide patient-level insights on the Phase I study right now, but I appreciate your question and interest. Regarding the discontinuations at the 420-milligram dose, four out of eight patients dropped out primarily for logistical reasons. All characteristics were comparable to other patients in the study. The second question around the digital group, I don’t have insight into that and will need to get back to you on it.

Justin Claeys, Vice President of Investor Relations

Next question, please.

Colin Bristow, Analyst at UBS

Good afternoon and thanks for taking the questions. Could you provide some insight into MariTide's dosing? And do you think the ultimate clinical profile will closely resemble that of a long-acting GLP-1 versus competitive agents?

Robert Bradway, CEO

I don’t regard these doses as high. We have all the capabilities necessary to deliver this medicine at whichever dose and schedule we arrive at. Regarding the pharmacology balance, mechanistically the core antibody of MariTide inhibits the GIP receptor while others agonize it. We feel secure in our choice to inhibit that receptor based on extensive data available.

Murdo Gordon, Executive Vice President of Global Commercial Operations

From a patient experience perspective, we've learned a lot from other biologics, and we have a world-class process development team. We're anticipating a very positive patient experience with our biologic injectables.

Jay Bradner, Chief Research and Development Officer

As we go to the next question, let me observe that we're nearing the hour we set aside, but we still have quite a few questions in the queue. We'll do our best to get through them efficiently, but I know some of you may need to drop.

Justin Claeys, Vice President of Investor Relations

Julianne, next question please.

Brendan, Analyst at TD Cowen

Great, thanks. Just a quick one from us on UPLIZNA. Where do you see UPLIZNA fitting into the MG treatment paradigm given the competition? How do you view its longer-term growth?

Vikram Karnani, Executive Vice President of Rare Disease

UPLIZNA is growing nicely and is the fastest-growing biologic in NMOSD. We continue to drive growth with newer prescribers and depth with existing prescribers. The product is well-positioned in the competitive environment, and we're working on indication expansion opportunities.

Jay Bradner, Chief Research and Development Officer

We are working through indication expansion priorities presently. CD19 is a terrific target that could provide benefits for many diseases beyond NMOSD, and our team is actively pursuing these opportunities.

Justin Claeys, Vice President of Investor Relations

Thank you, Julianne. Next question.

Mohit Bansal, Analyst at Wells Fargo

On TEPEZZA's subcutaneous delivery, what technology are you using? Are you using Halozyme's technology for this development?

Robert Bradway, CEO

We're not commenting on the provider right now, but we are moving forward with the subcutaneous form of TEPEZZA.

Justin Claeys, Vice President of Investor Relations

Next question, please.

Geoff Meacham, Analyst at Bank of America

When you think about the Phase III program for 133, what sort of informs the next indications you're going to pursue?

Robert Bradway, CEO

As you know, obesity is a major public health crisis. We have a strong offering for obesity-related diseases and a plan for an expansive Phase III program once we have the requisite data.

Jay Bradner, Chief Research and Development Officer

We're planning a very expansive Phase III program. Expect to see multiple indications move forward in parallel as we start to see data.

Justin Claeys, Vice President of Investor Relations

Next question, please.

David Risinger, Analyst at Leerink Partners

I have another question on AMG 133. Could you add color on your expectations for the impact on blood pressure and lipids in Phase II?

Robert Bradway, CEO

I cannot forecast the outcome of that pharmacology at this time. We’re making all those measurements in the active Phase I.

Jay Bradner, Chief Research and Development Officer

Yes, and the best extrapolation comes from the preclinical data that were published. I urge you to take a look at those.

Justin Claeys, Vice President of Investor Relations

Next question, please.

Ege, Analyst at Guggenheim Securities

Can you talk about your plan for data disclosure this year and your current thoughts on the potential registration path for Daxdilimab?

Robert Bradway, CEO

Daxdilimab is in early clinical investigation, so we’ll proceed cautiously while aiming for clear benefits for patients.

David Reese, Chief Technology Officer

Our efforts are primarily toward generating clinical data and understanding the potential pathways to market.

Justin Claeys, Vice President of Investor Relations

Next question, please.

James Shin, Analyst at Deutsche Bank

I hope you can comment on the lipid metrics from the Phase I data while considering the context of GIP antagonism versus agonism.

Jay Bradner, Chief Research and Development Officer

It's too early to attribute any findings specifically to antagonism versus agonism as these are early-stage studies.

Justin Claeys, Vice President of Investor Relations

Thank you all for joining the call. As you heard, we're excited about the opportunities across all four of our pillars. We plan to give an in-depth look at oncology and further updates on our rare diseases soon. In the meantime, thank you for your support, and we look forward to talking to you at the Rare Disease Day at our first-quarter results call.

Robert Bradway, CEO

Thank you, everyone. Goodbye.

Operator, Operator

This concludes our 2023 Q4 earnings call. You may now disconnect.