美國安進 (AMGN) 2002 Q1 法說會逐字稿

Good afternoon, my name is Mitch, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Amgen's First Quarter Earnings 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 speaker's remarks. You will be allowed to ask one question and a follow-up question. In order to ask a question, please press star one on your telephone keypad, and questions will be taken in the order that they are received. To withdraw your question, press star two. Thank you, ladies and gentlemen.

I would now like to introduce Mr. Carl [phonetic] Rosansky, Senior Director of Investor Relations. Mr. Rosansky, you may now begin.

Thanks, Mitch. Good afternoon, and welcome to Amgen's First Quarter Conference Call. I'm Cary Rosansky, Senior Director, Investor Relations.

Before we start this call, I need to make some cautionary statements. When we estimate revenues, operating margins, capital expenditures, cash and other financial metrics and discuss expected legal, arbitration, political, regulatory or clinical results, such estimates and results are forward-looking statements, and, of course, no assurance can be given if the estimates will be accurate, and actual results could vary materially. Please refer to Amgen's most recent Form 10-K report for additional information on the uncertainties and risk factors related to our business. If you have not received our press release, please call Denise Burrell [phonetic] at 805-447-3433, and she'll re-send it. If you have further questions after the conference call, please contact my office at 805-447-4634. As a reminder, this conference call is being webcast via the Amgen home page, and it will be archived for 72 hours following the call.

I'd now like to introduce Kevin Sharer, Amgen's Chairman and Chief Executive Officer.

Thanks, Cary. Good afternoon. With me today are Richard Nanula, Executive Vice President, Finance Strategy and Communications and Chief Financial Officer, George Morrow, Executive Vice President, Worldwide Sales and Marketing, and Roger Perlmutter, Executive Vice President, Research and Development. Over the past six months, Amgen's achieved major regulatory milestones, adding three newly approved products with the potential to help patients in a variety of settings. As you know, Aranesp and Kineret were approved by the FDA in the second half of 2001, and in the first quarter of this year, we were pleased to receive the approvals for Neulasta from the FDA and Kineret from the European Commission. The planned acquisition of Immunex, which will bring together two of the world's fastest-growing biotech companies, accelerating Amgen's long-term growth, is moving forward. The integration planning is well underway. We've mailed out the merger proxy statement to stockholders, and the stockholder vote for both companies is scheduled for May 16 at our respective annual stockholder meetings.

In the first quarter, our base business remained strong. We continued to make progress with the launches of Aranesp and Kineret. Neulasta was launched in early April, and the response so far has been excellent. You will remember that our previous guidance for 2002 did not include Neulasta. Richard will provide updated sales guidance for Amgen as a stand-alone company, which will include combined NEUPOGEN/ Neulasta expectations. George will provide details on our marketing progress, and Roger will provide an R&D update. Then we will take your questions. Richard?

Thanks, Kevin. I'm pleased to report that earnings per share in the first quarter was $0.32 per share, an increase of 14 percent over the same period a year ago. Total product sales were $909 million, also an increase of 14 percent over the first quarter last year. Combined EPOGEN/Aranesp sales for the first quarter were $551 million, an increase of 10 percent, versus EPOGEN sales for the same quarter of the prior year. This increase was primarily driven by Aranesp sales. EPOGEN sales were $512 million for the first quarter, an increase of 2 percent over the same quarter last year. We believe that demand decreased slightly in the quarter due to inventory drawdowns at the end-user. However, for the full year, we continue to believe EPOGEN sales will be driven by underlying dialysis patient growth in the 5- to 6-percent range and inflation-related price increases. Aranesp sales in the first quarter were 39 million, and we continue to expect combined sales of EPOGEN and Aranesp to grow in the low 20-percent range over 2001 sales. NEUPOGEN sales for the first quarter were $355 million, an increase of 21 percent versus the same quarter in the prior year. We believe sales were primarily driven by demand in the low double-digits, as well as wholesaler inventory changes. Year-over-year comparisons were affected by inventory drawdowns in the prior year that did not occur in the first quarter this year.

Last November, our financial guidance for the year did not include the approval of Neulasta because we could not predict the timing of regulatory approval. We now expect the combined NEUPOGEN/Neulasta grow rate for 2002 to be in the mid-teens range over 2001 versus our previous guidance of mid-single-digit growth for NEUPOGEN alone. With the addition of Neulasta, we now expect total product sales to grow in the low-20's range in 2002 versus our previous guidance of a high teen's growth rate. On the expense side, R&D expense was $203 million, 2 percent lower than the prior year, primarily due to lower outside expenses. With the acquisition of Immunex pending, we've delayed certain near-term investments in anticipation of the R&D infrastructure we will inherit from Immunex in the second half of the year. We thus anticipate R&D spending will be significantly accelerated in the second half of the year once the Immunex transaction has closed. SG&A expenses of 246 million was 25 percent higher than the prior year, as support for new products and new product launches was increased. As indicated in our previous guidance, we've made some changes to the structure and operational effectiveness of our Puerto Rico manufacturing operations, and, to a lesser extent, changes to our U.S. sales and distribution functions, to improve our after-tax performance starting in 2002. For the full year 2002, our effective tax rate is expected to be approximately 31 percent, excluding the impact of the Immunex acquisition. These initiatives will continue to reduce our tax rate beyond 2002.

In March, Amgen received approximately $2.8 billion from the issuance of 30-year zero coupon senior notes that are convertible into shares of the Company's common stock. These notes have a yield to maturity of 1-1/8 percent and an initial conversion price of $80.61. Amgen used $650 million of the proceeds from the sale of these notes to repurchase approximately 11 million shares -- approximately 11.3 million shares of its common stock. The remainder of the proceeds will be used for general corporate purposes, and this will also allow Amgen cash balances to remain at historic levels following our financing of the cash portion of the Immunex acquisition. In total for the first quarter, Amgen's share repurchases were $715 million, representing the repurchase of approximately 12.5 million shares. Amgen is not updating expense and earnings-per-share guidance at this time. We understand that investors, given the positive -- recent positives in our business, may be inclined to raise Amgen 2002 earnings; however, you should be aware that we're in the process of determining the appropriate level of additional investment necessary to launch Neulasta, for Aranesp marketing, and for additional sales infrastructure to further ensure the success of all of our new product launches. Further, the timing of the closing of the Immunex deal will also affect Amgen's bottom line. We, therefore, think it's appropriate to assess all of these factors and expect to provide expense and EPS guidance following the close of the Immunex acquisition.

Thanks, Richard. Now, George will provide a marketing update. George?

GEORGE MORROW [phonetic]: Thanks, Kevin. I'll cover Aranesp in the U.S. first. The main headlines here are that first quarter sales are on track. Nearly all quarter-one sales were CRI, or Chronic Renal Insufficiency, about two-thirds of which came from nephrologists, about a third came from the Hemats [phonetic]. And a number of positive events in quarter one will lead to broader usage of Aranesp for the remainder of the year. So let me start with payers, the main points here being that two key events relating to payers occurred this quarter: Compendia [phonetic] acceptance of Aranesp on oncology and the introduction of an APC pass-through code, making payment available on a hospital outpatient setting.

Now, I'll look at the different areas by use area, starting with Chronic Renal Insufficiency, or pre-dialysis. Here, we have close to 100 percent of Medicare lives are covered; 100 percent of Medicaid lives are covered, and over 85 percent of managed care and private pay lives are covered. So payment in CRI is not an adoption barrier.

Turning to oncology, the U.S. Pediat [phonetic] Compendium has reviewed and listed Aranesp, which will now allow support for Medicare coverage for patients with chemotherapy-induced anemias. The final monograph was published April 1 and is available on the website. Carriers are now incorporating this decision into their local payment policies. Currently, close to half of Medicare lives have incorporated some type of policy which allows payment for Aranesp in the chemotherapy-induced anemia setting. We expect this to continue to grow throughout the year.

In the hospital setting, as of March 28, a program memorandum was sent from the CMS, which listed Aranesp as a hospital outpatient prospective payment system-covered drug. In other words, the C-code for pass-through payments. The new CMS software was operational as of April 8, and claims that were originated from that time forward are being processed and are paid for all that time. Many of the hospitals with whom we've contracted should now approve Aranesp for formulary access and expanded use in this setting, and, obviously, hospitals have been waiting for the C-code before they decided on formularies.

In the dialysis area, we're in discussions with the CMS on reimbursement in dialysis and anticipating obtaining guidance on a reimbursement in the second half of 2002.

Now, turning to prescribers, I'll start with the nephrology clinic customers. Great progress has been made at CRI at our targeted nephrology clinics using the Total Office Call Program. This is a comprehensive sales approach that emphasizes selling to the entire office; in other words, the medical staff, the office manager, the reimbursement manager, and the nephrologist. To date, virtually all of our initial target customers have participated in the Total Office Call, and based on the success of this program, we have the fast majority of targeted physician offices trying Aranesp and many offices expanding use to the majority of the CRI-treated patients.

Over 80 percent of patients are being dosed every other week or less frequently, reflecting nephrologists' preference for Aranesp's longer dosing interval and the benefits it provides patients -- fewer needle sticks, fewer transportation hassles, and less visits to the physician office. In fact, about 20 percent of nephrologists are dosing the product every third or fourth week.

Next, oncology customers -- we do not, as a reminder, have the oncology label, but we have been detailing Aranesp to Hemongsts [phonetic] for CRI, as the vast majority of this group treats some CRI patients. Nearly all use with oncology customers to date has been for Chronic Renal Insufficiency patients, which is providing a great platform for the future use in oncology. I'm really pleased to say that we've signed multi-year agreements with U.S. Oncology and Ion [phonetic], two large oncology networks, who wish to offer the benefits of NEUPOGEN, Aranesp and Neulasta to its members.

U.S. Oncology and Ion [phonetic] alone comprise over 2,800 Hemongst [phonetic] physician practices in the U.S. Access to clinical information on the use of Aranesp in this setting has improved since last quarter and will continue to increase as more publications and abstracts are available to the medical community throughout 2002. We're certainly looking forward to the ASCO meeting in May, and Roger will in a few moments give you some details about the data being present at ASCO.

We anticipate that experience with Aranesp in the oncology setting will ramp up with Compendium [phonetic] listing published and the APC pass-through code established. Our market research continues to indicate that the majority of Hemongst [phonetic] do plan to use Aranesp in the future, and if they're confident in getting claims-paid increases, sales will increase.

In conclusion, this has been an exciting quarter for Aranesp across all areas. We've built early momentum for Aranesp in quarter one and expect to continue to see a progressive ramp-up of sales throughout subsequent quarters. Reimbursement is on track, and we have the right programs and focus in place to bring in a strong 2002 performance. Now, we'll turn to Aranesp [indistinguishable] in Europe. Sales in Europe were on track, and steady progress continues against tough competition in dialysis. We've now launched and gotten reimbursement in 14 of 15 EU countries, with only Belgium expected later this year. These markets represent over 90 percent of total European dialysis markets.

Let me give you some specific market data. We have achieved penetration into approximately 50 percent of dialysis centers in the highly competitive German dialysis market. This is a center-by-center battle, where our competitors enjoy long-standing relationships. In the U.K., center-by-center formulary listings are the gating factor for uptake. We are now cleared for use in 27 of the 30 largest centers, representing approximately 75 percent of total dialysis use in the U.K. We have also achieved access in 75 percent of dialysis centers in France. Markets in Southern Europe have fewer dialysis center reimbursement hurdles after government clearance. We have exited quarter one with 10-percent market share in Italy, 13-percent in Spain, and 17-percent in Greece. And, again, these were mid- to late-fourth quarter launches last year. In the Netherlands, we have successfully converted several centers to 100-percent Aranesp use and see overall market share in the high teens.

So while we're on track, we continue to take steps to enhance our competitive position. Beginning in quarter two, key data from our Phase 3-B trials will be available, which demonstrate Aranesp's convenience, IV, sub-Q [phonetic] dose selectability and power to achieve higher outcomes. In Germany, Amgen and Fracinias [phonetic] will launch the first co-sponsored scientific symposium on renal care next month. Further joint activities have been mapped out, and we'll continue to build that partnership.

Now, turning to EPOGEN, we continue to invest in EPOGEN business, delivering on the Company mission to dramatically improve patients' lives. We are providing additional services to dialysis centers without the specialists who provide current and comprehensive clinical knowledge and effectively communicate the benefits of the product. And we continue to explore, through DOPS [phonetic] and the Anemia Management Demonstration Project practice patterns and intervention that will maximize clinical outcomes and improve patient longevity.

Kineret was launched in late 2001 in the U.S., so, really, we just had stocking last year. Awareness and tracking studies indicate a high awareness of Kineret and the IO-1 mechanism of action, strong physician support for the safety profile of Kineret, and a growing recognition of the efficacy benefits of Kineret, and we're very pleased with the kind of response we've seen from patients. Our SimpleJect delivery device makes self-injection easier for patients, and Kineret is generally being used when a patient's symptoms are not controlled by an anti-T&F agent. Also, Kineret has been launched in some countries in Europe; however, reimbursement across Europe will take time.

So let me finish up with NEUPOGEN and Neulasta. We are really pleased with NEUPOGEN's performance. Physician acceptance of our core messages associated with NEUPOGEN are well received and appear to be driving the growth in NEUPOGEN demand seen in quarter one. Field personnel is doing a terrific job in helping physicians recognize patients who are at risk of developing febrile neutropenia to ensure that they receive NEUPOGEN support from the first cycle of chemotherapy. In particular, patients being treated for early-stage breast cancer, the elderly, and non-Hodgkin's lymphoma are at high risk of developing febrile neutropenia. And NEUPOGEN SimpleJect continues to simplify NEUPOGEN administration for many providers and patients.

Finally, the approval of Neulasta as a single fixed dose for chemotherapy cycle represents a real advance for cancer chemotherapy patients at risk for infections. Neulasta will make it simple for physicians to help protect patients against neutropenia and its consequences. We launched Neulasta at the beginning of April, reimbursement is progressing, and we're happy with the initial response shown by oncologists.

Thanks, George. Now, Roger will provide an R&D update.

Thanks, Kevin. During the first quarter, as was already mentioned, we were pleased to receive two new product approvals; first, the FDA approval of Neulasta for decreasing the incidence of infection, as manifested by febrile neutropenia in chemotherapy patients with non-myeloid malignancies, and, second, the final approval of Kineret for the treatment of the signs and symptoms of rheumatoid arthritis in combination with Methotrexate by the European Commission. Also on the regulatory front, U.S. and European agencies are reviewing the use of Aranesp for the treatment of chemotherapy-related anemia. We are pleased with our progress to date.

Our key late-stage clinical development programs continue to progress. The Phase 3 clinical program for AMGO-73, an orally available Halthamametic [phonetic] small molecule, is studying the treatment of renal dialysis patients with secondary hyperparathyroidism in the United States and Europe and is enrolling well. Data from our Phase 2 studies of AMGO-73 were recently published in the "Journal of the American Society of Nephrology," accompanied by an editorial that really placed the efficacy of AMGO-73 in perspective.

In addition, we continue to evaluate KGF, Keratinocyte Growth Factor, for the treatment of mucacytis [phonetic] in patients with hematologic malignancies undergoing transplantation. This is also a Phase 3 study.

Epratuzumab, an monoclonal antibody to CD22, is being evaluated in several clinical trials for the treatment of patients with indolent or aggressive forms of non-Hodgkin's lymphoma, both alone and in combination with the [technical difficulty]. By the end of the study, despite the reduction in Aranesp dosing for the maintenance phase, the change in hemoglobin was about 30 percent greater in patients receiving Aranesp. Optimizing anemia management in patients with cancer may improve the time to response and increase the proportion of patients responding to treatment relative to current standard anemia therapy.

Significantly, the ASCO presentations reinforce the safety profile of Aranesp. More than 10,000 patients now have participated in Aranesp clinical trials, and no neutralizing antibodies have been seen. Presentations will further demonstrate the safety and effective of Neulasta to decrease the incidence, severity and duration of febrile neutropenia in cancer patients receiving mild or suppressive chemotherapy and that a single dose of Neulasta is comparable to daily administration of NEUPOGEN. A poster presentation will update data previously presented at the American Society of Hematology meetings last December evaluating the use of Epratuzumab in combination with Rituximab to treat patients with non-Hodgkin's lymphoma.

On the staffing front, earlier this month, Dr. Joseph Milatetch [phonetic] joined Amgen as Senior Vice-President, Research and Pre-Clinical Development. Previously at Merck as head of Worldwide Pre-Clinical Development, Dr. Milatetch [phonetic] is an internationally recognized biochemist with a keen grasp of the complexity of drug discovery.

Although we do not talk extensively about our early-stage programs, I want to assure you that progress is being made there as well. By the end of April, we expect to dose the first patient in a Phase 1 clinical trial of an internally derived small molecule. This will be the first small molecule to advance from Amgen's inflammation research programs into the clinic and demonstrates our commitment to building our inflammation portfolio. Along these lines, I would also like to mention that Dr. Paul Rider [phonetic], previously ahead of process research at Merck and a world leader in synthetic chemistry, has joined our team as overall Head of Chemistry Research.

Thanks, Roger. These are exciting times at Amgen, and we look forward to the future with confidence and enthusiasm. We're focused on insuring that our new products succeed. The sales and marketing teams have done a great job and made significant progress in building the foundation necessary to ensure patient access to our new products. The research and development teams have made great strides in R&D productivity. Amgen is poised to introduce more products into clinical development in 2002 and 2003 combined than we have in the past 10 years. I'm very pleased with the integration planning, and we look forward to welcoming to Amgen our colleagues from Immunex in the near future.

Now, we will take your questions.

Your first question comes from Carolyn Kupperthorn [phonetic] of Morgan Stanley.

CAROLYN KUPPERTHORN [phonetic]: Thanks. The question has to do with your comment that you're not updating the guidance, that you're making decisions regarding additional support. Other than the changes obviously related to the Immunex acquisition and Neulasta, I was wondering kind of what metrics you're looking at and what the issues are that are making you reconsider what kind of support the new products need?

We have decided that we want to give Aranesp absolutely full support in the oncology area. So the place that we're considering whether we want to add support is principally in the Aranesp area. And I might add, Carolyn, that our decision to leave the EPS guidance where it is is based on all of the factors that we listed, and we're not signaling any particular concern about any aspect of the business. In fact, I think the increase in the sales growth rate to the low 20-percent range to from the high teens is a signal of our confidence in the future. And we expect as soon as we can, probably the first quarterly call, after the Immunex transaction concludes, to give you a combined, complete, what's-the-rest-of-the-year-going-to-look-like set of numbers.

CAROLYN KUPPERTHORN [phonetic]: Just following up on that, are there any additional reimbursement steps that need to be taken or, you know, major next hurdles? Or are we pretty much set now for Aranesp?

Yeah, I think the oncology label's probably the next step. I think we're pleased with the Medicare coverage and the progress on Aranesp oncology. Managed care progress has been very good, so I think we're well positioned, you know, on track, if not slightly ahead of track.

The last time we talked with you all, Carolyn, we were anticipating the Compendia [phonetic] listing, which we received, as you know, shortly thereafter. And each of the other reimbursement steps that we needed to have happen have been proceeding at pace, so the big next step in Aranesp is in the label area for oncology, and as you probably remember, the anemia of oncology in the U.S. market is roughly 70 percent of the opportunity for Aranesp worldwide. So that's a real important step.

Your next question comes from Matt Geller [phonetic] of CIBC World Markets.

MATT GELLER [phonetic]: Thank you. Could you discuss whatever you feel comfortable saying for Calcimemetic [phonetic] [phonetic] and Epratuzumab, what the Phase 3 is like or going to be like, your strategy for those products, and the timing in which we'll get data?

Matt, for the AMG-073 program, I think, as we've indicated, we're in Phase 3 in secondary hyperparathyroidism. These are worldwide studies, U.S. and Europe, in which we are looking, of course, at the reduction in parathyroid hormone and, as well, at other metabolic indices to demonstrate the effectiveness of the calcimemetic product. For Epratuzumab, we are in the midst of evaluating both in Rituximab refractory relapsed patients, and, in combination with Rituximab, the efficacy of this anti-CV22 monochrome antibody in non-Hodgkin's lymphomas. And until we have the data set much more complete, we have not defined what our registration strategy will be, and we haven't discussed that previously.

MATT GELLER [phonetic]: Is there a timeline on calcimemetic [phonetic] that you can give us for data?

Well, the Phase 3 studies are large, Matt, and so they're enrolling well, but we are -- we will need to accumulate a lot of patients. We're not giving any guidance on when we expect to perform the data analysis or be in a position to file.

MATT GELLER [phonetic]: Thank you very much.

Your next question comes from Mirav Hovav [phonetic] of Credit Suisse First Boston.

MIRAV HOVAV [phonetic]: Hi, Kevin. It seems that the FDA is recently in a surprisingly approving mode. That is, six new products were approved for biotech companies that I could count in the first quarter. I was wondering what feedback can you give us about the official label for R&S in oncology? Do you think there's going to be a committee, and what's there to do for that? Thanks.

We've noticed the same thing, Mirav, and for us, Neulasta was one of those pleasant surprises. I've decided to stick with my policy of never predicting at what time the government's going to do anything, and we're confident we have a very good file. I don't know, but maybe Roger does, the Padufa [phonetic] date. Roger, have you got that date, or Cary, anybody?

Yeah, the Padufa [phonetic] date is -- I won't give you the exact date. It's in July, but we are -- we're making good progress, Mirav [phonetic], and we're on track in terms of our discussions, but, again, we don't want to predict what they're going to do.

MIRAV HOVAV [phonetic]: So, July, that means it's a 10-month approval clock?

That's correct.

MIRAV HOVAV [phonetic]: Thank you.

Your next question comes from Elise Wong [phonetic] of Salomon Smith Barney.

ELISE WONG [phonetic]: Thank you. Obviously, you indicated that Aranesp sales were mainly in the CRA--I by area, but can you also give us a breakdown in terms of whether -- what it was in regional terms between the U.S. and Europe?

Elise [phonetic], you know, we'd rather just keep it in the combined number. I think George's summary probably gave you all we've got right now. I think one way to think about it is the overwhelming market opportunity for Aranesp is in the U.S. ultimately. When you think about anemia of oncology, CRI in the U.S. and then dialysis oncology in Europe, I've got to believe that 80 to 85 percent of the gain's going to be in U.S. We've also got patent expiry of Epo, in, I guess -- what, Cary, 2004? 2004 in Europe, so the gain for Aranesp is going to mostly be here. ELISE WONG [phonetic]: Okay, and then just as a follow-up, I'm sure you are well aware of the comments that we all heard from Immunex in regards to the Rhode Island plant and the filing for that, perhaps now going to a current Q3, and my question is if, in fact, sales of ENBREL were to be more in the 850 to 900 million range this year, what -- how does that impact your outlook for ENBREL for next year? Your guidance or at least your target has been 1.6 billion for next year.

Let me comment on the plant, and then I'll let George talk a bit about our thinking about ENBREL. As you, I think, know, we had told you all that when we did the deal that we thought this plant was going to be approved in early '03. That's still what we believe. We are appropriately participating with Immunex in trying to get the plant started. Nothing is happening that is unexpected from a new plant start-up point of view, and we think that Immunex made a prudent call in their moving the date. And, obviously, Immunex did somewhat come back on their numbers for ENBREL this year, and this is a ramp product, and so this is going to have some effect next year. Not sure what right now, but let me have George kind of take you through our current thinking.

You know, I think, Elise [phonetic], the bottom line is we're not in a position to change guidance on ENBREL for next year, but let me just go back to the December road show and the assumptions that underpinned our $1.6 billion forecast, and then you can kind of judge which ones have changed, which ones have not, and then I'll tell you what our way forward is. Rhode Island, we expect to be on board in January of '03 -- remember, we were a little more conservative -- but also having ample inventory that was built up during the FDA review process. We also reviewed during the road show the 2002 exit penetration rates in rheumatoid arthritis, psoriatic arthritis in psoriasis, and, also, we gave you penetration rates for '03, and I think Cary's got the slides if you need to refresh that. We also said that psoriatic arthritis claim would come in the first quarter, which it did, and the psoriasis data would be presented in the first half, which it was, of this year. We also said that we expected 200,000 patients in their database, a pretty sizable waiting list and radius two up and running. And then, lastly, we said we expect a D2-E7 at the end of '03. So a couple of these sections have deteriorated, but the reality, Elise [phonetic] is that we really can't sit down with our new colleagues in Seattle and with Wyeth and do a really high-quality analysis until we clear certain FTC hurdles. And so we certainly want to look at the DTC campaign, the waiting list, the dermatology reception, which we understand was very good, and how pairs are receiving the products. So all of that combined, we'll do the right analysis and give the appropriate guidance once we've finished that.

ELISE WONG [phonetic]: Okay, thank you very much.

Your next question comes from Joel Sendik [phonetic] of Lazard.

JOEL SENDIK [phonetic]: Thank you. When do you expect significant sales of Aranesp in a cancer setting?

What we've been guiding, and basically rather than just giving you kind of quantitative guidance, we've been trying to work you through the process, we really expect to see a ramp-up in the second half of this year. We're in the process now of having oncologists test claims. Their experience with Procrit over the last years was they filed a lot of claims and got a very high percentage rejected. So they were a little gun-shy. So what they want to do, and it's happening now, there are hundreds of claims being tested by oncologists in oncology every week. They want to have their confidence built up that they will get reimbursement, and once they get reimbursement, then they'll start using the product on a more regular basis. There is a lot of latent demand there. We know they want to use the product. Our market research suggests that they view Aranesp as at least as good if not better than Procrit, so everything's lined up. We just have to work and hold their hands through reimbursement, exactly the same way we did with CRI. And that's -- unfortunately, it takes some time, but we do think you'll see an acceleration towards the latter half of the year. JOEL SENDIK [phonetic]: And a quick follow-up on CRI. Given the fact that you've made a lot of progress in the first quarter, I'm just wondering why that wasn't reflected better in the sales, which were mostly CRI sales in the first quarter, versus the fourth quarter last year?

Again, as we guided three months ago, this has been a slow process as well. You know, we've got temporary J Codes, it's a paper system, and we're actually very pleased with the progress. We're focused on the long-term in building this market the right way, and I think we're on track to do that.

JOEL SENDIK [phonetic]: Thank you.

Your next question comes from Macon Hoe [phonetic] of Goldman Sachs.

MACON HOE [phonetic]: I have a question about Aranesp in cancer, and specifically on the compendium. So assuming that you have data at ASCO that shows that one could use Aranesp once every three weeks or once every four weeks for cancer patients, how do that data get into the compendium?

The compendium -- Macon, the compendium likes to see peer-reviewed literature, and once they feel that it really is a good scientific approach, then they've been very willing to incorporate that into their -- the Web site, the compendium. So we will continue to --

MACON HOE [phonetic]: Is there a -- some period that they wait and -- before they would do that or periodic review?

No, I think once they feel they've got ample scientific evidence -- peer review journals, things like that -- they move pretty quickly. It's not instantaneous, but they've got a process. Pretty much what you saw with the oncology claim.

MACON HOE [phonetic]: Okay. And I think that you went -- just a follow-up question on the ENBREL question. You indicated that there were -- some data were given to us, given [indistinguishable], and I pulled out the slides, as a mater of fact, looking at it right now, and for 2002 on the slide, says about 70,000 patients -- rheumatoid arthritis, going up to 120,000 patients in 2003. Can you go through your thinking on that at that time? And, also, based on what you discussed on the drivers, what has changed that would affect those numbers?

Macon, the --

MACON HOE [phonetic]: Because if I look at the drivers, the only thing that's really major changed on your thinking maybe would be the E2-E7 timing.

I think E2-E7 may change. That remains to be seen, obviously. I didn't catch the numbers you cited in terms of penetration.

MACON HOE [phonetic]: I think, Cary, if you -- correct me if I'm wrong -- I thought it was 70 -- it was number of patients. It was 70,000 in '02 and 120,000 in '03?

Is this coming off of the slide presentation that we did on the road show? Is that what you're looking at Macon [phonetic]?

MACON HOE [phonetic]: I believe so, yeah.

What we have, for example, we had it broken out by rheumatoid arthritis, psoriatic arthritis, and psoriasis.

MACON HOE [phonetic]: That's right. The rheumatoid arthritis was 70 and 120.

Yeah, okay. I just have -- what I have on the slide is the number of actively treated moderate to severe patients and then a penetration rate. So we had at the end of '02 about 13 percent of moderate to severe RA patients being treated going to about 18 percent of 950,000 patients next year. And so they'll probably fall a little bit short of that this year, for example, if they don't increase their supply this year. We had about 2 percent of the psoriatic arthritis patients being treated this year, going to 11 percent next year, less than 1 percent of the psoriasis patients going to 2 percent of the psoriasis patients being treated next year. And so it really remains to be seen how much supplies they'll get out there this year. It looks like they may fall short of our assumptions this year.

MACON HOE [phonetic]: And then it would affect the '03 number then?

It would probably affect the '03 number with ramp-up, but obviously I want to look at a lot of other data to see how steep we can ramp those penetration sets.

MACON HOE [phonetic]: Thank you.

Your next question comes from Stephan Lauren [phonetic] of Legg Mason.

STEPHAN LAUREN [phonetic]: Thank you very much. Very quickly, will your delays in R&D expenditure touch any of the clinical products at all?

Stephan [phonetic], it's Roger. No -- no, they won't. What we're doing here is really clearing the decks in light of the upcoming Immunex acquisition. We're looking carefully at the -- how we will align our R&D expenditures when this big event takes place. Obviously, we're adding a lot of R&D capacity, and so the way that's played out, along with some decreases reflecting one-time charges of last year, the way that's played out is an apparent decrease in the first quarter. But you shouldn't use that as a way of thinking about how R&D expenditures will proceed through the year, and we're certainly not in any way compromising our clinical program.

STEPHAN LAUREN [phonetic]: Okay, got it. And, also, quickly, on Kineret, at about 2.6 million, were we just seeing some de-stocking? Is that why the number was there? Are we seeing a little bit better end-user?

Yeah, we loaded the pipeline at end of last year, and I'm pleased with the take-off of the product right now. We're getting a good trial, a good persistence on the product. A couple of weeks ago, we cracked the 1,000-prescription mark per week, so nice steady progress there. But too soon to tell.

STEPHAN LAUREN [phonetic]: Okay, great. And congratulations on picking off Paul Rider [phonetic].

Thank you.

Your next question comes from Matt Murray [phonetic] of Alliance Capital.

Oh, thanks. Actually, my question's already been asked and answered.

Your next question comes from Mike King [phonetic] of Robertson Stephens.

MIKE KING [phonetic]: Thanks for taking my question. Would you care to comment -- I know you've got a temporary J Code; you've got the APC code. When do you think you might get a permanent J Code for Aranesp?

We're hoping January of next year.

MIKE KING [phonetic]: January of next year, okay. And just separately on the NEUPOGEN franchise, could you perhaps characterize a little bit quantitatively the wholesaler inventory changes that you saw in the quarter?

Really can't -- I don't have those numbers, but I think about two-thirds of our increase was due to demand.

MIKE KING [phonetic]: And one-third wholesale -- wholesaler stocking?

Correct. We actually indicated that the NEUPOGEN business, the demand grew in the low double-digit in the quarter.

MIKE KING [phonetic]: Right.

I can tell you the inventory build-up was a wholesaler who was going -- who was changing the number of distribution centers, and so they had to put some redundancy in, and that'll come out this quarter.

MIKE KING [phonetic]: Okay, it wasn't in response to anticipated price increase, was it?

No.

MIKE KING [phonetic]: Okay, thanks a lot.

Your next question comes from Joe Dougherty [phonetic] of Lehman Brothers.

JOE DOUGHERTY [phonetic]: Hi, guys. Say, last year, you showed us some pretty tantalizing data that was retrospective showing a survival benefit from Aranesp in some cancer patients, and surely you're pursuing this and surely your competitors are, as well. Could you give us a notion of how you stand relative to them, and can you give us any visibility on when we might see data?

Joe, the data are tantalizing, just as you say. As I'm sure you also appreciate, survival studies are very challenging in this setting. We are performing a whole series of studies in cancer patients with Aranesp, and the -- aimed at trying to understand this effect in more detail. I can't give you a timing in terms of when we would actually have the results of these studies, but suffice it to say we're pursuing it aggressively.

JOE DOUGHERTY [phonetic]: And those are actively enrolling well now, could you say?

Yes, we have a whole series of studies of Aranesp being used in cancer, and the enrollment on those studies is in accord with what we expect.

JOE DOUGHERTY [phonetic]: Okay, thanks.

Your next question comes from Dennis Harp [phonetic] of Deutsche Bank.

DENNIS HARP [phonetic]: Thanks for taking the question. George, in your prepared remarks, you provided some penetration information regarding Aranesp in Europe. Can you provide us with an assessment of the overall market share as a percent of total sales of that market currently and your own benchmark of where you would like to be in terms of market share by the end of the year?

No, we really don't give out the market share data, nor do we give out targets there, Joe -- or Dennis.

I can say, Dennis, and I know George is all over this, I just took a swing through Europe two weeks ago, and we're making good progress. Some of the markets we're getting into really fast. Others of them were having more of a struggle, and it's early going and we're learning as we go, but so far so good. DENNIS HARP [phonetic]: If I can just ask a follow-up, since the patent in Europe will be expiring the end of '04, what do you think -- or what are your plans, rather, to mitigate the introduction of other products, some of which have already received a recommendation for approval in Europe or, in fact, approval in Europe?

Are you referring to the TKT [phonetic] product?

DENNIS HARP [phonetic]: Yes, that's correct.

Okay. As you know, I think the TKT product indicated they have no plans for launch, and we believe they have serious manufacturing issues based on their U.S. problems. But I think the broader issue is generic biologics. And while the patents for the Epoetin Alfas expire in '04, I think it's unclear when generic biologics are going to actually get on the market. And I think that that remains to be seen. I think our plan is that Aranesp is a superior product and we're going to keep marketing it that way. We've staffed up in a way that we can be a strong competitor under any circumstances, but the generic biologics is an evolving issue. My own hunch is that we won't have generic biologics the day that these patents expire.

DENNIS HARP [phonetic]: Thanks.

Your next question comes from Martin Auster [phonetic] of SunTrust Robinson Humphrey [ph].

MARTIN AUSTER [phonetic]: Thanks. Good afternoon. It's kind of a two- or three-part question. First, could you provide any update on the Epo litigation with J&J? Secondly, do you have any full-year 2002 guidance for Kineret sales? And, finally, could you comment on timing or potential magnitude of an EPOGEN price increase domestically for me, please?

I'll take the Epo Procrit litigation, and I'll let George talk about Kineret and Epo price increase.

The trial proceeds in Chicago. We have presented our case. J&J is now presenting their case. We would expect the trial to be complete before mid-year, and we'll have a decision from the judge by year-end, and there's really not too much more to say than that. We don't comment on price increases. We have certainly had some in the past, but, George, you might want to talk about how Kineret's going for the year.

Yeah, we don't -- we didn't give guidance and we're not going to give guidance on Kineret right now, but, as I said, I think we're off to a very solid start. And we actually did take a EPOGEN price increase about 45 minutes ago.

MARTIN AUSTER [phonetic]: Okay, thanks. That's all [indistinguishable].

Your next question comes from Shamly Sako [phonetic] of Redmond Capital [ph].

STAN GROSSMAN [phonetic]: Hello, it's Stan Grossman [phonetic].

Yes, ask your question, please.

STAN GROSSMAN [phonetic]: Yes, are you doing Kineret and ENBREL in Phase 2 yet?

Stan, it's Roger. We're doing a series of studies in which we look at TNS sequestrants, along with Kineret, trying to evaluate the safety and efficacy of combinations. As you know, we were concerned about the issue that the combination of both the TNS sequestrant and an IO-1 receptor antagonist might pose a safety risk, and we had only a small database initially. And so we are building that up. We are currently pursuing those studies in RA, and we hope to have some data -- well, it will be a little while. They take a long time to do. But we are doing the study.

STAN GROSSMAN [phonetic]: Okay, one other question. On Aranesp, in oncology, I saw the abstracts, Q3, Q4 studies, and were they submitted for the FDA labeling?

We are in the midst of discussions with the FDA about what appropriate dosing would be for Aranesp but in the oncology setting. The study that you refer to, the ASCO study, was not included as part of the specific registration.

STAN GROSSMAN [phonetic]: Right. Okay, thank you.

Your next question comes from Mark Carbousky [phonetic] of Prudential Securities.

JOHN SONYAY [phonetic]: Hi, it's actually John Sonyay [phonetic]. Thanks for taking my question. George, congratulations on a lot of good progress in CRI. There had been a lot of discussion a while back about going direct to payers with a campaign to help identify patients and kind of dialing up the magnitude of this whole market. Can you just update us on where that is and whether or not that's still kind of a priority in this stage in the launch?

Well, John, we certainly want to work through the providers to do that, so we do have some pilots out there right now working with some of the larger freestanding dialysis centers doing that sort of thing. And we continue to gather data that creates the medical imperative to treat anemia sooner in the ramp-up period to end-stage renal disease, and that's becoming increasingly powerful data. So, you know, a lot of work going on in that regard. And I really think the pre-dialysis market can expand markedly over the next few years, and we're going to certainly dedicate resources to do that.

JOHN SONYAY [phonetic]: But I guess the identification of those patients is the issue, right?

Yes.

JOHN SONYAY [phonetic]: Which is why you were going to try to go to payers. And I didn't know if that was what -- something you had pursued aggressively or not.

Well, you have to go to the people who have the data, and I'm not sure if all the payers would have all the data. So, you know, we continue to look for opportunities to do that. And, obviously part of that is getting the patients to identify themselves and drive them into the doctor's office through direct consumer efforts.

JOHN SONYAY [phonetic]: That makes sense. Thanks a lot.

Your next question comes from Phil Madoe [phonetic] of SG Cowen.

PHIL MADOE [phonetic]: Hi, good afternoon. I was wondering if you could update us on the status of your discussions with the FTC? Have those discussions finished, or are there still outstanding issues?

The discussions with the FTC are proceeding. We're making very good progress. We think we're close to the end of the staff review, and one issue, which we've highlighted before, is the disposition of Lukime [phonetic], Immunex's product. Immunex is managing that sale. But our understanding is that very good progress is being made, and they're in final discussions with two very serious bidders.

PHIL MADOE [phonetic]: Great. And one follow-up. On EPOGEN, you mentioned that there was drawdown at the end-user level this quarter. Could you tell us what the end-user inventories look like now and how you expect that to change in the future?

You know, it's tough to predict inventory swings, and that's a large part of the quarter-to-quarter variation in business. It has to do with contracting periods, their own policies. I think the thing we'd point you to is that the underlying patient demand, we still believe, is in the 5- to 6-percent range, and we get, on occasion, some very small realized price movement. But that's still the best way to think about that particular market.

PHIL MADOE [phonetic]: Okay, thank you.

Your next question comes from Arial Lechter [phonetic] of Roth [phonetic] Capital Management.

FARIA GRAZIAN [phonetic]: Yes, hi, it's Faria Grazian [phonetic]. I wanted to ask two questions with regard to rheumatoid arthritis. One is has there been any antitrust issues regarding the combined company having both ENBREL and Kineret? And the second questions relate to the data that recently came from Vertex Aventis [phonetic], similar target IO-1 and similar data in term of ACR-20, but, obviously, it's an oral drug. What is your view in term of the competitive risk?

I'll let Roger talk about that particular data. I'd rather not comment on the details of the FTC discussions regarding our transaction with Immunex, only to say that we're very pleased with the pace and the progress of discussions, and we expect them to be successfully completed. Roger, could you comment on the Vertex data?

Yeah, I think you're referring to the Vertex 745 P38 inhibitor data?

FARIA GRAZIAN [phonetic]: Yes, yeah.

Yeah, and, you know, I think it's very interesting. Of course, P38 inhibitors have been something that everyone's been looking for in a clinical setting. That particular molecule has been a development, as I understand it -- from their announcements, has been stopped because of concerns about pre-clinical toxicities of -- time will tell whether or not a P38 inhibitor really does have the appropriate balance of safety and efficacy, but right now, we don't know.

FARIA GRAZIAN [phonetic]: No, no, no, sorry. It was the ACE inhibitor, the data that they just announced, with regard to the oral drug they are developing with Aventis for rheumatoid arthritis.

Yeah, I'm not sure I know this -- these data, so I guess I probably shouldn't comment.

Let us follow up. If you could call Cary, we'd rather give you a considered answer here, and we will do so. Thank you. We have time here for one more question.

Yes, sir, your final question comes from Erin Shay [phonetic] of State Street's Research [phonetic].

ERIN SHAY [phonetic]: Hi, thank you for taking the question. Could you guys comment on the appropriate dosage for Aranesp in the oncology setting and how the economics compare with Procrit? I'm sure you guys have heard J&J talking about the pricing as less favorable for Aranesp comparing with Procrit.

We have -- we are aware of the efforts that J&J has been making. They're certainly premature, and they're not informed by the data, but I'll let Roger and George comment on dosage and, to the degree that we can, on the relative economics.

Yeah, you know, I think I mentioned one study which is one of the ASCO abstracts with respect to the administration of Aranesp, as compared to Epoetin Alfa, demonstrating that in this particular dosing paradigm, where you have head-to-head comparison between Aranesp and Procrit, that Aranesp was more effective in terms of raising hemoglobin, both at a four-week and a twelve-week time point. Now, the only way to fairly compare these molecules is in a head-to-head context. However, you can go back and look retrospectively in similar indications as long as you're careful to try to look at the totality of the data set. When we look at the totality of the data set, there's no question that Aranesp is cost effective with respect to raising hemoglobin levels, and at least equal to Epoetin Alfa in terms of its effects. And I'll let George comment with respect to the specific commercial issues.

Well, let me tell you what's exactly going on in the marketplace. Where we are getting oncology usage, if a doctor wants to use Aranesp once a week, they're using a 100-microgram vial. If they want to use it every other week, they're using a 200-microgram vial. It's very simple dosing. In AWP terms, that's about $400 a week. Procrit, in contrast, at 40,000, is $445 per week, and 60,000 is about $670 per week. So we think we've got very simple dosing. The 200 mic has clearly been shown to be equivalent to the 40,000 units, through the studies that Roger mentioned, so we think we're very competitively priced here.

ERIN SHAY [phonetic]: Oh, could you just remind me of the dosage of Aranesp in the head-to-head trial?

Yeah, there are -- the head-to-head studies that have been reported involved a priming dose, followed by a maintenance dose, and there were several different subgroups which were -- had priming doses of 4.5 micrograms per kilogram per week going to a maintenance dose of 1.5, or going to a maintenance dose of 2.25, or going to a maintenance dose of 3, which are, in that case, given every two weeks. And, of course, that's being compared with Epo given in its standard regimen. And the data, as I say, are presented in the glass -- the abstract at ASCO, so you can look at them in more detail there. We don't have time on the call to go through all of those.

ERIN SHAY [phonetic]: Right. And, obviously, the 4.5 is going to be more expensive than the 40,000. Is that going to be the economic issue over there?

Right, this is -- again, this is -- I'm presenting these data because they represent a head-to-head comparison performed comparing Aranesp with Epo -- Epoetin Alfa in the same patient population. This was done using a priming dose regimen, but it demonstrates that with the maintenance dose, a much lower maintenance dose thereafter, you still get the sustained effect, which is superior to Epoetin Alfa.

Yeah, let me just sort of clarify because there has been some confusion, I think, created by J&J out there. What I think's going to happen is 200 micrograms every other week is going to be the standard dose. When doctors feel they're not getting an adequate response either in terms of getting the hemoglobin up or how quickly they're getting it up, they're going to have another option, which will be this priming dose. This priming dose will, of course, be more expensive for the first few weeks, but then you'll be able to go to every three-week dosing, we believe, and then over the course of the whole chemotherapy for the patient, that's going to be very competitive with Procrit or our other dosing. So, really, we're going to give doctors a choice. Kind of the standard every-other-week dose very competitively priced, or maybe a slight premium, but you're going to get faster and better response. And we -- our -- the reception from doctors that we tested this with has been very favorable. That's what they're looking for.

ERIN SHAY [phonetic]: Great. Just one last quick question. Is the -- is Aranesp cannibalizing Epo sales in the dialysis area?

No.

59:44 ERIN SHAY [phonetic]: Great. Thank you.

Okay. Thank you very much, and good to be with you today, and we look forward to a discussion in three months. Good afternoon.

Ladies and gentlemen, this concludes today's Amgen First Quarter Earnings Conference Call. You may now disconnect.