美國安進 (AMGN) 2003 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen.

My name is Paul and I will your conference facilitator.

Today, at this time I would like to welcome everyone to Amgen's second 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 speakers' remarks.

You will be allowed to request one question and one follow-up question.

In order to ask a question, please press star, then the number one on your telephone key pad.

To withdraw your question, please press the pound key.

Thank you.

Ladies and gentlemen, I will now like to introduce Mr. Cary Rosansky, Senior Director of Investor Relations.

Mr. Rosansky, you may now begin.

Thank you, Paul.

Good afternoon, everybody.

Before we start, I need to make cautionary statements.

When we estimate revenues, operating margins, capital expenditures, cash, any adjustments and any financial metrics an discuss legal, arbitration, political, arbitrary or political result, such estimates and results are forward-looking statements.

And of course, no assurance can be given if these estimates will be accurate and actual results could vary materially.

On this call, we may discuss GAAP and nonGAAP financial measures.

In accordance with SEC Regulation G, you can find a reconciliation of these two measures on our web site at www.amgen.com within the Investor Center section.

Please refer to Amgen's most recent form 10-K and 10-Q reports for any additional information on the uncertainties and risk factors related to our business.

If you have not received our press release, please call Denise Burrell at 805-447-3433 and she will resend it.

If you have any further questions following the conference call, please contact Investor Relations at 805-447-4634.

This conference call is being web cast via the Amgen home page and will be archived for 72 hours following the call.

Now I would 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, Global Commercial Operations.

Roger Perlmutter, Executive Vice President Research and Development and Beth Seidenberg, Senior Vice President Clinical Development.

This month marks two important milestones for Amgen.

It has been a year since the approval of Aransep(TM) in the United States for the treatment of chemotherapy induced anemia.

And a year since the close of of the acquisition of Immunex Corporation.

Also in August we will mark the first anniversaries of the Aranesp and in Europe for the treatment of anemia in oncology and leukemia respectively.

The business has consistently demonstrated strong performance and we are again revising our projected 2003 sales guidance and adjusted EPS guidance, upward from our previous estimates.

We have for the first time in the Company's history reported $2 billion in total revenues for a quarter.

None of this would have been possible without the dedication of our employees and their commitment to patients.

Richard will provide additional financial details in a moment.

Aranesp continues to do exceptionally well both in the United States and Europe, as the primary reason we're raising 2003 guidance this quarter.

Neupogen and Neulasta combined remain very strong as new data support the therapeutic and economic value using growth factors earlier and more often to treat patients at risk, for neutropenia.

It is becoming commercially available five years ago, Enbrel has been used to treat over 180,000 patients worldwide across all indications.

George will update you on some of the market advances we've made this quarter.

And highlight some of the market dynamics for our products.

The second quarter was an especially busy and successful period for our R&D organization.

I would like to thank all those employees who worked so hard to put together the Enbrel psoriasis filling in a very timely manner.

We also received an FDA advisory committee recommendation in June for the approval of Enbrel and anglospondylosis, we presented data on the combination of Enbrel and Methotrexate showing an impressive response in the treatment of rheumatoid arthritis.

We continue to make progress toward a Cinacalcet Hydrochloride regulatory filing later this year.

Roger will provide highlights of recent R&D activities.

Now let's begin with Richard and a review of the financial performance for the quarter.

Richard?

Thanks, Kevin.

To start, I want to mention as I did last quarter that our comparisons to the second quarter of 2002 results reflect the fact that we had not yet acquired Enbrel or launched Aranesp in oncology.

As we progress throughout the remainder of the year, year over year comparisons will reflect these events in both periods.

I'm pleased to report that adjusted earnings per share for the second quarter were 49 cents per share, an increase of 29% over the same period a year ago.

Adjusted earnings per share and adjusted net income exclude certain expenses related to the acquisition of Immunex, a benefit of 74 million dollars related to the recovery of cost and expenses associated with the Company's arbitration with Johnson & Johnson for breach of the license agreement with the Company, and the excluded charitable contribution of $50 million made to the Amgen foundation.

This contribution will allow the foundation to increase its support of nonprofit organizations that focus on issues in health and medicine, science, education and other activities that strengthen our local communities.

Total product sales in the second quarter were $1.9 billion.

An increase of 72% over the second quarter last year.

Extruding Enbrel sales growth in the second quarter was 45% over the second quarter last year.

U.S. product sales were approximately 1.7 billion dollars, an increase of 64% versus the second quarter of last year, and accounted for 86% of total product sales.

International sales were $259 million, up 142% versus the same quarter last year.

Without the beneficial impact of foreign exchange in this quarter, international sales would have grown 102%.

Combined Epogen and worldwide Aranesp sales for the second quarter were $959 million, an increase of 53% versus the same quarter last year.

This increase was primarily driven by very strong worldwide Aranesp demand.

Epogen sales were $611 million for the second quarter, an increase of 7% versus the same quarter last year.

As in the first quarter, the second quarter year over year growth is substantially all due to favorable revised estimates of dialysis demand or spillover from prior quarters as a result of our contractual relationship with Johnson & Johnson.

Once again, I will refer to you our form 10-K for a more detailed discussion of in this relationship and the impact on the reported Epogen sales and the description of spillover.

Epogen demand in the second quarter is up slightly compared to the prior year and for the full year we continue to believe dialysis patient growth in the 4-5% range will principally drive Epogen sales.

Worldwide Aranesp sales in the second quarter were 348 million dollars, versus 56 million dollars in the second quarter last year.

This substantial growth was driven by demand worldwide reflecting a mid 2002 year approval of Aranesp in the United States for the treatment of chemotherapy induced anemia, and the strong acceptance of Aranesp in Europe.

Second quarter U.S.

Aranesp sales were $217 million.

Versus $33 million last year.

And international sales were 131 million dollars versus $23 million last year.

International Aranesp sales were aided by $23 million due to the weaker U.S. dollar.

Due to strong Aranesp momentum in the U.S. and Europe we are raising our combined 2003 worldwide sales guidance for Epogen and Aranesp to a range between 3.7 and 3.9 billion dollars versus the prevention range of 3.4 to 3.6 billion dollars.

Combined worldwide Neupogen and Neulasta sales for the second quarter were 634 million dollars.

An increase of 34% versus the same quarter in the prior year.

U.S.

Neulasta sales were $291 million in the second quarter versus $110 million in the second quarter last year.

Neulasta has been available in certain European countries for a short period of time and as a result international sales in the second quarter for Neulasta were $13 million.

Worldwide Neupogen sales in the second quarter were $330 million and a 9% decrease versus the second quarter of the prior year, reflecting U.S. conversion to Neulasta.

On a geographic basis, second quarter Neupogen sales were $233 million in the U.S., versus $281 million last year, and outside the U.S., Neupogen sales were $98 million, versus $83 million last year.

International Neupogen sales were entirely driven by a weaker U.S. dollar.

We are pleased with the growth of Neupogen and Neulasta in the first half of the year.

But this rapid growth should slow some in the second half of the year because of conversion has naturally begun to slow.

However, additional growth for the franchise exist as we drive greater acceptance of growth factors and we successfully target at risk populations.

George will discuss this further in his commercial update.

We are raising our forecast for 2003 worldwide Neulasta and Neupogen sales and now expect sales to range between $2.4 and 2.6 billion versus the previous range of $2.3 to 2.5 billion.

Enbrel sales in the quarter were 304 million dollar, a 58% increase of second quarter sales reported by Immunex of $192 million.

Prior year sales were impacted by supply shortages experienced by Immunex.

Sales for this quarter were driven by demand, fueled by new patients in both rheumatology and dermatology.

For 2003, we continue to expect Enbrel sales to be in the range between $1.2 and 1.4 billion.

As a result of product guidance changes, we are raising our worldwide total product sales guidance by $400 million to a range of between $7.5 and 8 billion.

Versus our previous range of $7.1 to 7.6 billion for the year 2003.

Our revised guidance anticipates a product sales growth for 2003 ranging between 50 and 60%.

Our total revenue guidance is increased by $300 million to a range between 8 and 8 1/2 billion dollars, versus the previous range of $7.7 to 8.2 billion.

Total revenues are projected to increase to a lesser degree, due to lower projected royalty income, as Aranesp continues to gain market share in the U.S. oncology market.

Turning now to some expense items which I will discuss on an adjusted basis, cost of sales increased to $324 million, from $132 million in the second quarter of 2002, primarily due to increased sales which include Enbrel for the 2002 period only. 2003 period only, excuse me.

Cost of sales as a percentage of sales increased from 12% in the second quarter of 2002 to 17% in the second quarter of 2003.

As was the case in the first quarter, this increase is principally reflects the inclusion of Enbrel which has significantly higher manufacturing costs and higher royalty expenses compared to Amgen's other products.

Also, the manufacturing costs of the Enbrel production facility in Rhode Island are greater than those of Amgen's contract manufacturer.

R&D expenses were $385 million versus $284 million in the second quarter of 2002.

This increase was primarily due to the inclusion of head count in Seattle, additional R&D head count in other locations, increased clinical trial and clinical manufacturing activity, and higher licensing and milestone fees associated with collaborations.

SG&A expenses for the second quarter were $450 million, compared to $321 million in the second quarter of 2002.

This increase was primarily due to the support of Enbrel, the Wyeth profit share, and higher staff-related expenses to support our new product launches.

Regarding the trend in SG&A for the remainder of the year, consistent with prior years, we anticipate spending more of our sales and marketing dollars near the end of the year, as it becomes clear that we are hitting our sales projections.

For 2003, adjusted operating expenses are now expected to range between 4.6 and 4.8 billion dollars versus the previous estimate of a range between $4.4 and 4.7.

The increased guidance is due in part to higher anticipated costs of sales associated with the higher sales forecast as well as further investments in R&D and SG&A, where we see the opportunity to drive our marketed products and pipeline forward.

On a GAAP basis, EPS was 45 cents in the second quarter of 2003.

We continue to believe that adjusted earnings provide useful supplementary information to investors, we recognize the importance of earnings computed in accordance with GAAP and as we do every quarter, we provide a full reconciliation of GAAP versus adjusted EPS in the press release we issued earlier today.

It is also posted on our web site.

As a result of higher expected product sales, partially offset by higher expected operating expenses, we are increasing our adjusted earnings per share guidance from an adjusted range between $1.80 and $1.90 to a new range between 1.85 and $1.95.

In the second quarter, we repurchased approximately 7 million shares, spending 449 million dollars to do so.

Second quarter capital expenditures were 276 million dollars, versus $111 million in the second quarter last year.

This increase was principally related to our Puerto Rico manufacturing expansion, the building of our permanent Seattle Research center and the continued construction of the new Rhode Island manufacturing plant.

Our cash and marketable securities were approximately $5 billion at the end of the second quarter.

Thanks, Richard.

Now, George will provide marketing updates of the quarter.

George?

Thanks, Kevin.

Two headlines characterize our start for the 2003 in commercial operations.

Number one, we are hitting on all cylinders.

Virtually every product franchise and virtually every country in which we compete is growing and gaining market share.

As Kevin said it is due to exceptional products and a tremendous effort by our colleagues around the world.

Secondly, our biggest opportunity going forward comes from driving market growth as opposed to share take away.

The anemia and nephrology oncology markets, rheumatoid arthritis, psoriatic arthritis and [anglospondylosis] markets all have substantial unmet needs.

Turning to the product overviews I will start with the Aranesp nephrology performance in the U.S.

We continue to gain share in the CKD or predialysis market for Aranesp, due largely to our longer dosing interval.

With Aranesp, CKD patients no longer have to suffer weekly visits to a nephrologists office for injections.

The CKD market has tremendous room for expansion given only two in ten anemic patients are currently being treated with an erythropoietic agent.

We have launched a national campaign called Anemia Counts directed initially at physicians to increase the clinical significance of anemia and its relevance as a cardio vascular risk factor.

Next is Aranesp oncology in the U.S.

New clinical studies coupled with a customer's actual use data has provided overwhelming evidence that Aranesp built at 200 mics every other week is as least effective as Procrit in terms of outcome while using fewer medical resources and offering patients greater convenience.

Our steady growth in market share reflects these advantages.

I should also point out that we are engaged with the CMS in a productive dialogue regarding all our data supporting Aranesp 200 mics every other week.

The chemotherapy induced anemia market is growing rapidly, about 20% in the first half of this year, and now that we have a sizable share, we will focus more of our resources and energy to growing this highly underpenetrated market.

Today, only four in ten anemic CIA patients are being treated.

Next, is Aranesp and EU.

And as you heard, Aranesp enjoyed exceptional growth in Europe this past quarter.

We now hold about a third of the nephrology mark where Aranesp has picked up about 80% of the patients switched to Eprism due to PRCA.

We estimate Aranesp now holds a quarter of the rapidly growing chemotherapy induced anemia market in Europe, about a year after launch and we recently received a CPND recommendation to extend the label to include the treatment of chemo induced anemia in adult patients with nonmyeloid malignancy.

And this should expand our market opportunity by about 15-20% in Europe.

Briefly on to Epogen, and our core Epogen business remains strong and we continue to work with customers aligning anemia management goals for the best outcome for patient.

Next is Neulasta and Neupogen in the U.S.

The exceptional growth of the combined Neulasta and Neupogen business has been driven by a marked acceleration in patient growth and a rapid conversion of Neupogen to Neulasta, especially in the clinic setting.

Of the total patient population currently receiving CSF therapy approximately 45 percent of patients receive Neulasta, 50% Neupogen and about 5% Leukine.

We believe less than half of the patients currently receives Neupogen are future candidates for conversion.

The conversion rate has naturally slowed due to the rapid adoption of Neulasta, particularly in clinics the availability of a new Q code for Neulasta, effective July 1st of this year will minimize the reimbursement barrier to switching.

Recent data present the at ASCO, supporting the economic and medical growth factors early for patients at risk especially in dose regimens along with the obvious benefits of once per cycle Neulasta should enable us to drive solid patient growth going forward.

Turning to Europe, Neulasta is now been launched in Germany, Sweden, the U.K., Holland, Spain and Greece and we will be launching Neulasta in additional EU countries throughout the year as we gain reimbursement.

Both Neulasta and Neupogen sales are on track.

Finally, Enbrel in North America.

As we mentioned during the April conference call.

First quarter '03 enjoyed an exceptionally high patient growth rate due to pent-up demand that stem from the supply situation in clearing our patient list, a waiting list.

At this point, our growth rate remains in line with our previous guidance of 1.2 to 1.4 billion.

There are several key drivers of Enbrel's performance in the near term.

First, a focused effort to expanse usage in moderate patients is the biggest near term opportunity.

Along these lines, the results of the tempo study proved at EULEA last week, indicate that Enbrel, when used in combination with methotrexate provides a level of symptomatic relief and suppression of disease progression never before seen with any treatment for RA.

Second, continued uptick by dermatologists for sore at arthritis where Enbrel is the only approved TNS inhibitor and the third driver is a an expected FDA approval for anglospondylosis for a positive recommendation from the arthritis society committee.

Down the road is an opportunity to further expand the patient base that we work with in dermatology for psoriasis patient with tremendous unmet need.

Thanks, George.

Now Roger will provide an update for R&D for the second quarter.

Roger Perlmutter, M.D., Ph.D.,: Thanks, Kevin.

In describing the research and development results for this quarter I would like to reemphasize the fact that July marks the one-year anniversary of the acquisition of Immunex by Amgen.

In the interim, all of the clinical development and regulatory activities associated with that have been successfully integrated to Thousand Oaks.

In June we received a recommendation from an FDA advisory committee for the use of Enbrel in the treatment of anglospondylosis.

Our data presented at that meeting demonstrate highly significant improvement in the signs and symptoms of the disease following Enbrel treatment.

We are currently pursuing label negotiations with the FDA for this indication.

Also in June, we completed clinical studies for the treatment of plaque psoriasis.

Through the efforts of nearly hundreds of dedicated Amgen employees we were also able to complete the supplemental for the indication and I am deeply proud of everyone from the combined and regulatory teams who made it possible.

The new Enbrel indications once approved will benefit tens of thousands of patients suffering from systemic inflammatory illnesses.

Also on the regulatory front, as was mentioned earlier, we received a recommendation from the CPMP to extent the Aranesp label to include the treatment of chemotherapy induced anemia with patients with nonmyeloid malignancies.

And we continue to make progress in the late stage development programs.

Cinacalcet Hydrochloride for the treatment of secondary hyper thyroidism have been completed arriving at comprehensive data set on which to base the worldwide filing.

In each of the studies Cinacalcet provided a significant benefit with respect with preidentified metabolic end points.

We expect to be in a position to file for Cinacalcet Hydrochloride in the near future.

Amgen had a presence at several major medical meetings this quarter.

The National Kidney Foundation meeting in April, data demonstrates that Aranesp dosed once monthly maintained hemoglobin levels in patients with chronic kiddie diseases presented.

In early June, at the American Society For Clinical Oncology, data were present on Aranesp, Neupogen, [INAUDIBLE] which is also known as KGF and the antibody, I will highlight some of the results.

And the Aranesp data demonstrated that when dosed once every other week, Aranesp increases hemoglobin and improves fatigue and reduces the need for transfusions in patients with chemotherapy induced anemia.

As George indicated, data from multiple sources now supports the view that Aranesp administered at 200 micro grams every other week provides results at least equivalent to those using Procrit of 40,000 units per week as judged by validated criteria.

Phase Three polythermen data in patients undergoing stem cell transplantation demonstrated patients had a lower incidence of the most serial form of [mucositis]. 20% versus 62% of the placebo and additionally patients had a reduction of almost one week in the number of days they suffered from severe [mucositis] is compared to those receiving a placebo. 3.7 days versus 10.4.

Furthermore, polytharmen treated patients had 60% less soreness of the mouth and throat, required substantially lower doses of pain killers, with median more equivalent to 212 milligrams compared to 552 milligrams for placebo and required less nutrition. 11% versus 40% with placebo.

Polythermen was well tolerated in this study.

Interim results of the phase two study of the TGF recept antibody were presented, demonstrating single agent antitumor activity in advanced colorectal cancer.

It was completed with 150 patients.

As George mentioned, data on Enbrel were presented at the European League Against Rheumatism or EULAR in June and the International Psoriasis Symposium in New York.

At EULAR, the data presented included the positive results of the combination of Enbrel plus methotrexate study and 80% of the patients treated with combination therapy experienced no radiographic progression through one year compared to 68% of patients treated with Enbrel alone and 57% treated with methotrexate alone.

These results provide powerful new evidence for a delay in joint distress for the patients treated with Enbrel plus methotrexate .

The clinical development and regulatory affairs groups clearly had an excellent quarter.

In addition, our research organization is putting paid to the promise that we will deliver more Amgen clinical candidates in the first three years of this decade, than in the previous decade combined.

We continue to build a stronger, more capable research organization.

Earlier this quarter, we announced that we had entered into a broad-based research collaboration.

This program will permit us to harness the superb oncology goals of Tularik and link it to the very capable development group.

Along these line, Amgen was fortunate to recruit Dr. David Parkinson a world authority in drug development at Novartis to lead the clinical oncology efforts and Dr. Willard Deer, similarly renowned in metabolic disease and inflammation in Eli Lilly to lead the clinical information therapeutic area.

Lastly I would like to comment on the evolving situation with the pure red cell alaisha.

I'm pleased to report that the Aranesp safety profile continues to be excellent.

We have now treated more than 230,000 patients with Aranesp.

Representing over 130,000 patient years of exposure.

To date there have been no reports of antibody mediates BRCA for patients treated solely with Aranesp.

As I previously noted the dramatic situation in PRCA cases since 1998 has been seen principally in Europe, Canada and Australia and has been associated primarily with the use of epotin alpha manufactured by ortho biologics and marketed as eprex.

Indeed Johnson & Johnson in their recent earnings announcement reported that a cumulative total of 166 cases of PRCA in association with the sole use of Eprex have been reported.

Based on the data provided by ortho biologics, we can exclude with 99.99% certainty that the underlying rate of PRCA in patients treated with Aranesp is the same as that observed with patients treated with Eprex.

We certainly hope in the interest of patient safety that the labeling changes agreed to for eprex by orthobiologics in their market will result in a decline in the incidents of PRCA.

On the other hand, since the underlying cause remains illusive, we believe the decline in patients exposed to eprex provides the greatest constant that PRCA levels can be reduced to their previous levels.

Thank you Roger, now we'll take your questions.

Ladies and gentlemen, if you would like to ask a question, please press star, then the number one on your telephone key pad.

As a remainder, you will be allowed to ask one question.

And one follow-up.

Your first question is from Mark Schoenebaum with Piper Jaffray.

Hi, guys.

Congratulations on a great quarter.

Can you make a comment as to on Cinacalcet to you plan to file for fast track status on that?

Can you give us an update and I will have one follow-up?

Roger Perlmutter, M.D., Ph.D.,: Mark, it is certainly our feeling that Cinacalcet, since it represents a completely novel approach to treatment of this disease, would be certainly worthy of consideration for fast track status.

And we of course are in discussions with the agency about the data and we will see as time goes on towards the filing.

Great.

And the 20% growth you gave in the overall epo market the first half of the year; that sequential growth year over year growth?

Can you just clarify that for us, please?

That is first half this year, first half last year.

Thank you very much.

Congratulations.

Thanks.

Your next question is from Jennifer Chao with RBC Capital Markets.

Congratulations on a fabulous quarter.

Just a couple of questions, though, with regard to Enbrel.

George, I was wondering if you could maybe just share insight into the 10,000 patients in the radius trial and how this is being parlayed to further increasing visibility in market share for Enbrel.

And then Roger, I just had a -- was wondering if you could comment on the timing of the filing for the 50 milligram lay off lized single injection and when we could expect to see that come to mark in the U.S. and Europe.

Yeah, I will have the comment as well but first of all the first 5,000 patients were not on Enbrel so it is good background data so we truly understand the disease.

The second 5,000 patients we have been in the process of converting over to commercial product and I believe that is pretty much done at this point.

But you want to comment on how we're using the information at this point?

Yeah, we -- we will get this study, as the largest opportunity to prospectively look at both safety and efficacy in patients with reflex A who are not receiving Enbrel remember sus those who are and we will have five years worth of prospective data.

We expect to continue to observe all portions of safety and efficacy from those patients.

Roger Perlmutter, M.D., Ph.D.,: And with respect to the 50 milligram filing, there are of course two parts to that.

One has to do with the actual filing for 50 milligrams, based on the treatment effect, which we previously announced.

And the other has to do with the availability of the file.

We are expecting later this year to have information from the FDA about our filing with respect to the 50 milligram treatment effect.

Great.

Thanks.

Your next question is from Matt Geller with CIBC World Markets.

Not to be redundant but really, really great quarter and great guidance.

On the pipeline front, OPG, when will we hear about that?

And what progress have you made?

With emap, are you planning to go ahead?

Are you making plans for a phase three trial?

And with ABXEGF and combo therapy, what plans are you making?

Hi, Matt.

Yeah, there is a lot of stuff to talk about in the pipeline but of course there are many other things to talk about this quarter.

We continue our studies in all of these areas.

For EMG 162.

The OPG program.

We are in the midst of studies that we will not have the opportunity to see the data from for a little while.

So we are hoping that we will have a lot more data towards the end of the year, first part of next year, but it is going to take a while.

And similarly, I guess I would say with respect to emav that we pursued combination studies, with emav, we are continuing to do those and we talked about those studies before.

And those will provide the basis for our trials that we would design later that would be registration enabling.

And obviously, the strong safety profile that we've observed thus far with respect to the engemic CGF antibody makes it an ideal part of a tool kit for oncology therapy in combinations and we are looking very seriously at that with a number of other groups.

Great, thanks a lot.

Your next question is from Caroline Copithorne with Morgan Stanley.

Thank you.

Just curious if there is any important data points or tallies that we should look to to speed the patients from Procrit to Aranesp and also increasing the market penetration, any kind of publications or drivers you're expecting.

No, I think it is basically blocking and tackling.

I think we've firmly established the 200 Mikes every other week which is what our change A has been attacking.

So I think it is just, you know, getting close to our customer, helping them out, and you know, making sure they realize the full utility of the product.

And I think the more they use Aranesp, the more the benefits of extending doses becomes real to them and to their patients.

I think that will continue to do that.

Do you have a specific trial that is going to be committed for the CMS that they are going to potentially base a ruling on?

Or is that just based on the accumulated data so far?

No specific trial.

But we've submited a lot of data and medical use evaluation data, clinical trial data that we've had and I think we've done an excellent job.

And Beth, I don't know if you want to comment on that.

Beth has really led our effort.

We've had an excessive research program, some of the results you saw at ASCO, and we will be publishing extensive amount of research now, with the 200 Mikes every other week.

And we are confident that CMS is carefully looking at that information.

Thanks.

Let me add my congratulations.

Thank you.

Your next question is from Elise Wang with Smith Barney.

Thank you.

And also nice execution on the business to you all.

Just two questions.

One is can you remind us, if I recall, you are conducting a head-to-head study of Aranesp versus Procrit.

If you can give us an update on the status in terms of number of patients enrolled, as well as the specific doses that you are studying over what period of time.

And then a second follow-up question will be, if you could tell us the growth for Aranesp, how much of that was driven by new patients, versus market share gains from other competitors.

We would rather not talk about exactly what we're doing with respect to Procrit.

But I think it is safe to say that we believe Aranesp is a product with great potential.

And we are focusing on trying to grow the market.

The market is talking to us about their preference for Aranesp, and we are just going to continue to do the things in a smart competitor would.

And I think that we don't pars what is market share growth and what is market growth.

But the market is definitely continuing to grow rapidly, and we also are pleased a year into it here with the yearly competitive results against Procrit.

J & J is a tough competitor and we sure don't underestimate them.

Okay and any comments on that head-to-head study in terms of an update, on the status?

No.

Okay.

Thank you.

Your next question is from Martin Auster with Wachovia Securities.

Hey, guy, wonderful quarter.

Thanks.

I have a quick question on Neupogen sales.

There was a nice sequential uptick between the first quarter and second quarter on the U.S. sales.

I was wondering if you could comment on what drove that.

Is ha just a function of corrective dosing and should we expect continued strength or is there maybe something as far as inventory that affected that number?

That's really not inventory.

I think the way to think about it is we continue to get conversion from Neupogen to Neulasta and that will decrease naturally because we've just penetrated so much of the Neupogen business that is available to us.

And so we've got probably mid teens, patient growth, right now, and that is what I look longer term to drive the growth of both these products.

Sequentially from the first quarter to the second quarter for the U.S.

Neupogen sales it grew from about 15% from the first quarter to the second.

What's behind that or is the first quarter number lower than it should have been on a normalized basis?

The first quarter for Neupogen tends to be a light quarter so I think it is more what you're suggesting.

Okay.

Your next question is from Joel Sendek with Lazard Freres & Company.

Thanks, I have a question on gross margins, have they bottomed out or stabilized?

Or do you expect further declines as sales pick up?

It is really just a question about mix of business.

So I think we're, you know, -- as Enbrel grows, our gross margin will decline somewhat.

And I think for this year you're looking at a number that looks reasonable for the year.

Okay.

So that's essentially my question, is there further declines, it is probably not as dramatic as have been over the last --

I think if you take our guidance with the individual product sales and then do the mix, I think you end up coming up with a reasonable estimate.

Okay.

And then quickly, you mentioned on Neulasta, the conversion about 50% of the patients are future candidates for conversion.

I'm wondering the 50% that aren't candidates, what's the patient profile of those patients?

Those are -- Neupogen has a number of indications that Neulasta does not.

So cancer patients with bone marrow transplants, patients with blood, patients with severe chronic neutropenia, weekly chemo will not a candidate for Neulasta.

Even dose intricate is not indicated for Neulasta.

So a number of issues that we will eventually get after most of it but not all of that.

Will those eventually be able to convert to Neulasta?

Roger Perlmutter, M.D., Ph.D.,: I think I will say that there is no reason to expect that Neulasta will behave any differently in a dose that's regimen but the fact that we don't have data on such regimens and it does take a long time for such data to accrue, means that most oncologists will want to adhere to a Neupogen included regimen.

Okay.

Thank you.

Your next question is from Robert Goldman with Buckingham Research.

Thank you.

A couple additional questions on market growth.

The one question really is on market growth.

The epo franchise seems to be growing the market 15-20% the first half of the year and the antiTNF franchise, amongst all the competitors, about 50%.

Can you give us some of your thoughts as far as a sustainable market growth for the rest of this year and the whole of next year?

It is hard to make that precise a judgment.

Here is what I point to.

In the epoetin alpha or the anemia market, let's take dialysis, the Epogen market aside which is growing at a growth rate of 4-5 % and thing of the other anemia opportunities the predialysis, the chronic renal in sufficiency, as well as the chemo therapy induced anemia market in oncology, those two markets have very substantial growth potentials.

And we believe that the combined products of Aranesp and Procrit still are not reaching even half of the potential market.

So we have seen in those two segments very strong growth for a long time to come.

And you notice, if you historically look at Procrit it's grown before Aranesp showed up a year ago, at a very, very rapid rate.

In Enbrel, we also see in rheumatoid arthritis, many, many, many untreated patients in psoriasis, severe psoriasis, in the many, many hundreds of thousands, perhaps more than that.

So in both of these segments across multiple indications, we see substantial growth.

And also, in the Neupogen, Neulasta market, perhaps not quite the same level, but we're not at the full penetration of that market, either.

So lots of running room.

Okay.

Thank you.

Your next question is from Roger deSylvia with Goldman Sachs.

Mr. DeSylvia, your line is open.

Let's take the next question, please.

Your next question is from Jamie Wise with Bank of Montreal.

Hello, there.

Excuse me this is the operator.

Does anyone need assistance?

Hello?

Yes, go ahead please.

Glad you can hear me.

I wonder if you can comment quickly on your policy with respect to dividends and if you have any plans to --

We've not paid a dividend historically.

Obviously, the new tax law in the United States is causing all companies to reconsider their dividend policy.

We have significant cash, significant cash generating ability.

But we also need the cash to fund the business and to give us strategic flexibility.

So like all companies, we're re-evaluating our policy, but we're not in a position to update here.

I would observe that investors have been clear that they would wish us to use our cash to grow the Company, but we're evaluating.

Are there any specific time line that we can expect a definitive answer from the Company?

We haven't put that out, but I would guess that it is a matter for deliberation the rest of this year at least.

Okay, thank you very much.

Your next question is from Craig Parker with Lehman Brothers.

Good afternoon.

Two questions, I think one for Roger and one for George.

George, I've been surprised at how well Remecade has been doing.

What are your AT use show you about physicians, preference for Enbrel over Remecade and what product attributes are really driving the selection of those drugs right now?

I think taking the economics out of it, and obviously they've got a big advantage in Medicare, efficacy, sustained efficacy, symptomatic relief, is really important there.

And I think we're in great shape with Enbrel.

And also, I think the idea of administration is something that the patients really don't like and so that is certainly favors or administration as well.

So we feel very confident that our position vis-a-vis Remecade.

And Roger could you provide an update on the dose ranging study with KGF and any outlook on the filing strategy for that?

Roger Perlmutter, M.D., Ph.D.,: Well, as you know, with KGF, and as I just said, we have disclosed our phase three data with respect to transplant, and we are engaged in a number of other studies designed to broaden the potential set of indications for KGF, we've indicated that we plan to file next year, sometime, but we're not providing any additional detail.

Okay.

And am I remembering correctly from your analyst meeting that one of the next steps was a dose ranging study, you were just looking at mucosal epithelial cells?

Roger Perlmutter, M.D., Ph.D.,: We actually had completed that study.

I presented the data at the analyst meeting.

So we have done that study.

Okay.

Roger Perlmutter, M.D., Ph.D.,: The issue at this point is the other studies in other settings where there is substantial mucosal entry.

Thank you.

Your next question is from Sena Lund with Cafe Financial.

Hi, good evening.

Congratulations on a good quarter.

My question is focused on Enbrel.

And the rest of the world or ex-United States.

It seems like it has been capped in the last couple of quarters.

Is it due to lack of supply in Europe?

Or a difficult competitive environment?

As you might know, Amgen does not participate in Enbrel sales outside of North America, so I would direct that question to Wyeth.

Thank you.

Thank you.

Your next question is from Chris Raymond with Robert Baird and company.

Hi, thanks.

Two questions.

First one, back along with the tack of inventory, a couple quarters back, you explicitly called out wholesaler changes for Epogen and Neupogen.

Silent on it the last two quarters.

Could we assume if you're silent on it that there is really no discernible change?

Correct, you should assume if we are silent it wasn't a factor with respect to our financial results, yes.

Okay.

Great.

And then just as a follow-up in terms of what you're seeing in the field, can you give us some sort of range for the level of uptake among physicians treating breast cancer in terms of dose dense as a therapy?

The data that we would use to look at that lags significantly and I haven't seen the latest data on that.

So unfortunately, I don't have any current information on that.

I don't know if Beth or Roger, you've seen anything.

Okay.

Thanks very much.

Your next question is from Mike King with Banc of America Securities.

Thanks very much.

Let me get back to the congratulations roll-out.

Two quick questions.

First from your FDA briefing documents for anglospondylosis.

You had filed the SBLA in January so can we assume your date is coming up very soon and would you be willing to disclose ha?

You can assume that it is coming up soon.

And we've talked about that before.

Okay.

And then, with regard to balance sheet item for Richard, there was an increase in the line item other assets by almost $230 million.

Can you tell us what that was due to?

Lets see.

Other assets?

Yeah in the first quarter, it was 530 and in this quarter, I had it for a second.

It was 700.

But it was up by 228 million sequentially.

I think part of that would be our investment in Tularik.

Okay.

And then probably some odds and ends but that is probably the majority of the item.

Okay.

So that should just be a one time item?

Yah, 758 in this quarter versus 530 last quarter.

Correct.

So the majority of that is Tularik?

Yes, sir.

Your next question is from Eric Schmidt with SG Cowen.

Congratulations from me as well.

First question is on CMS reimbursement.

Beth do I understand that you are therefore the mystic in getting CMS to change the way it reimburses Aranesp or at least change the conversion factor?

As early as this month or in the next 30 days when the OPPS guidelines for 2004 come out?

And if so, what do you think is the appropriate conversion factor for the product?

Let me, this is Kevin, let me comment a little bit on CMS and then I will ask Beth to give you that second question.

I think the message we want to convey is that we've had a lengthy and very wholesome dialogue with CMS on the technical and medical and usage patterns of the drug.

And we're very confident that we have made the case compellingly, that the dose that is being used in the market is 200 every other week, which is what we strongly believe reimbursement rates should be based upon.

As you will recall, a year ago, when the CMS made this decision, the product had just been approved for use in oncology and the amount of actual patient use data and medical records were not nearly as robust as now.

And we've had that full exchange.

It is difficult to predict the timing of when CMS might make a decision.

But we of course would wish it soon.

But know that they have their own deliberations to make, and I would be disappointed if we didn't have a positive decision by the end of the year.

But we can't predict when a government agency will take action.

And we believe if the CMS uses the usage data that we've presented, that in fact they will recognize that the cost of the government Aranesp in this set something a good value proposition for the government and in fact superior to that offered by Procrit.

But Beth, you can give the exact dose and economic implications.

Yeah, it is -- as mentioned earlier, we've collected a significant amount of data on the use of Aranesp at 200 Mikes every other week.

We're confident in the clinical outcomes of that dose.

And that's the dose that is being used in the marketplace.

We have confidence with the comparability of the clinical outcomes of 200 Mikes every other week compared to Procrit of 40,000 units per week and as Kevin mentioned we have been in active discussion with CMS, and have reviewed all of our results with them and we will wait for their deliberation.

And then a follow-up question, maybe just more broadly on CMS legislation that is being discussed in Congress.

Kevin, do you have any thoughts on the impact to your franchises, if Aranesp, Enbrel, et cetera?

We would be pleased if Enbrel ended up being covered under new legislation.

We're not predicting that.

And it is difficult to predict where it is going to come out.

But we think that the single most significant item in this legislation that could potentially affect us is modification in the EWP system and we are optimistic that the Congress and CMS will make a good judgment, so from our point of view, this legislation looks like it is heading down a good track.

I think from a national policy point of view, though, the consideration in the house bill for the possibility of a drug importation provision from Canada and Europe is extremely troubling.

While biologics are excluded from this importation possibility, and therefore Amgen is not directly affected, two troubling issues surface with this provision.

One is in past attempts at this, the FDA has been told by Congress that they need to certify that the drugs so imported would be safe.

And across two administrations, the FDA has said we cannot do that.

So patient safety is a real issue.

The second issue is the importation of drugs from nonresearch-based R&D countries which basically undermine a very, very important U.S. industry, and when you look at what has happened to the European drug company or drug industry, over the years, I think it is a troubling outcome.

But as I said, this particular item does in the directly affect Amgen but it does affect an important industry, and I am hopeful that the Congress comes to a good conclusion on that.

Your next question is from Dennis Harp with Deutsche Banc.

Congratulations on a great quarter.

On Neulasta, once you achieve the remaining conversion of the Neupogen patient, about half of them, you believe, would be eligible, what will then be the growth driver for Neulasta?

Are there new indications being vaulted?

Do you want to try to pick up that other 50% for conversion?

I think it is going to be patient growth.

Remember, these products are designed to use during first cycle prophylactic use.

And probably only about 15% of the product is used that way.

I think those dense regimens will drive more first line use and so I think we will continue to hammer away at the appropriate way to use these products, and that will kind of weave into the overall patient growth.

We still are focusing on all the stage graph, lymphoma, the elderly, so there are a lot of people who are to be receiving these products up front.

On Aranesp in the U.S., you indicated that the CKD patient population, the predialysis population, only two out of 10 patients are getting therapy today.

How do you expect to grow that market?

How will you address getting more of those patients onto Aranesp?

I think the first thing we have to do is really establish the medical imperative.

We have just been initiated a large trial, Beth may want to comment on it, which will really isolate the impact that anemia has on a patient's well-being.

In fact, Beth do you want to comment on what we're doing there very quickly?

Yeah we're looking at a trial with patients who have underlying kidney disease.

And really looking at their long-term outcomes, with respect to cardiovascular impact and treating their anemia.

And very exciting trial that was just initiated.

Yeah, anemia by the way is as big a risk factor cardiovascular risk fact at hyper tension, hyper cholesterol anemia diabetes, things like that so we need to show correcting anemia will lead to better results so once we have that kind of data and we have modeled as database now as opposed to a prospective study we are getting -- in the process of getting the key opinion leaders behind the global and communicating with nephrology and to patients themselves, so it is going to be a large and sustained campaign that hopefully will fuel the growth of this marketplace for years to come.

We will take one last question.

Your next question is from May-Kin Ho with Goldman Sachs.

Hi, I have most of my questions answered.

On details.

I have two broad questions.

One is what do you expect to happen next Monday on the TKD trial?

And how might it affect not just TKT but other competitors?

For example Roche because Roche has indicated they believe they have a 70% chance of coming into the U.S. marketplace.

And the second question is for Richard.

On my calculation, I think that I found that maybe a about 40 some million dollars on the sales this quarter was due to foreign currency impact is.

That correct?

That is approximately correct May Kin.

A little more than 40.

Okay.

Monday, in Boston, I can't make a prediction on Monday per se, but we remain confident in our patent estate, we expect to prevail against TKT in these matters.

I think we just saw Roche's product candidate at ASCO.

We would expect in the future to see other product candidates.

This is a very large fast-growing market.

People will continue as they have over the last decade, to take probing shots.

The patent estate.

And we are confident we have a strong estate, and we will ultimately prevail.

And that has been our -- I think our decade-long position on this matter.

And we stick to it.

And time will tell.

Thanks a lot everybody for your questions and we are very happy with the progress of the business.

We know we have lots of challenges ahead.

But we could not be more optimistic about the future.

Thank you very much.

Ladies and gentlemen, we've reached the allotted time of our Q&A session.

I would like to call back over to management for any further comments or closing remarks.

Ladies and gentlemen, you may now disconnect at any time.