美國安進 (AMGN) 2013 Q3 法說會逐字稿

My name is Marvin and I will be your conference facilitator today for Amgen's third-quarter 2013 financial results conference call.

All lines have been placed on mute to prevent any background noise.

There will be a question-and-answer session at the conclusion of the last speaker's prepared remarks.

In order to ensure everyone has a chance to participate we would like to request that you limit yourself to asking one question during the Q&A session.

(Operator Instructions)

I would now like to introduce Arvind Sood, Vice President of Investor Relations.

Mr. Sood, you may now begin.

Thank you, Marvin.

Good afternoon, everybody.

I'd like to welcome you to our conference call to review our third-quarter financial results.

This sure has been a busy year.

It's also been a great year so far as we have made remarkable progress against our strategic priorities.

I'm joined today by our Chairman and CEO Bob Bradway, who will provide a progress update on our accomplishments.

Following Bob, our CFO, John Peacock will review our financial results for the third quarter and provide an update on our guidance for the remainder of the year.

Tony Hooper, our Head of Commercial Operations, will then discuss our product performance during the quarter and trends that we see going forward.

And finally, Sean Harper, our Head of R&D, will provide a brief pipeline update, and after Sean's comments we should have ample time for Q&A.

We will use slides for our presentation today.

These slides have been posted on our website and a link was sent to you separately by e-mail.

Our comments today will be governed by our Safe Harbor Statement, which in summary says that through the course of our presentation and discussion today, we may make certain forward-looking statements and actual results may vary materially.

So with that, I would like to turn the call over to Bob.

Bob?

Thank you, Arvind.

We executed well through the third quarter and you can see that both in our financial and our strategic results for the quarter.

Financially, sales were up 11% and earnings per share were up 16%, and off the back of this performance we're raising our guidance for revenues and adjusted earnings per share for the full year.

A number of important pieces came together for our strategy over the past few weeks and I want to just quickly summarize them for you.

In Japan, our strategic alliance, which is known as the Amgen Astellas BioPharma KK, has now begun operations.

And we're developing five innovative molecules through the alliance, the first of which we expect to launch in 2016.

And then ultimately of course we expect to establish our own wholly owned subsidiary in Japan as early as 2020.

In China, our joint venture with Zhejiang Beta Pharma is now complete and we hope to launch Vectibix there together as early as 2015.

We also announced our plans to build research and translational capabilities in China at Shanghai Tech University, representing a step forward in our commitment to this market.

Consistent with our stated strategy of building a presence in some 75 countries, we've achieved that and more following the repurchase of rights to Neulasta and Neupogen from Roche in markets outside the US and EU.

These markets account for about $200 million in Neupogen and Neulasta sales and will provide a platform for future product launches.

And finally of course we completed the acquisition of Onyx at the beginning of the month.

And though it's still early days the transition is progressing smoothly and we're excited about the prospect of adding value and driving growth in multiple myeloma with Kyprolis, which we think has significant opportunity in earlier lines of therapy and in markets around the world as a best-in-class proteasome inhibitor.

Oprozomib looks attractive as well as a potential oral proteasome inhibitor for maintenance therapy in multiple myeloma, and of course we expect Nexavar, Stivarga, Palbociclib to contribute to growth also.

While we were busy laying the ground work for long-term growth with our strategic moves during the quarter our internal efforts were also progressing well.

In R&D with the addition of Kyprolis and ivabradine, the innovative medicine for heart failure we licensed from Servier in July, our pipeline now includes 10 late-stage innovative programs set to generate pivotal data over the next couple of years.

Separately, our portfolio of six biosimilars continues to advance as well and we now have a pivotal trial under way for our second of these molecules, this one a biosimilar to Humira.

Some of you have asked about the status of the patent infringement lawsuit we filed in the US versus Teva on their long acting Lipegfilgrastim product candidate.

Teva has advised us that they have withdrawn their PLA for the product and the FDA has confirmed this withdrawal so we've agreed to dismiss our lawsuit on this product.

Of course if circumstances change we can refile the lawsuit.

Before turning to John I want to thank my colleagues at Amgen and our new colleagues from Onyx for their efforts during this past quarter.

All of our focus on patients is evident in the strong operational and strategic results we produced over the last three months.

John?

Thanks, Bob.

This has been a busy quarter for us.

We've advanced several of our most important strategic priorities as Bob has outlined, but at the same time we've remained focused on our business and delivered a strong operating performance in the quarter.

Revenues advanced 10% compared to the third quarter of 2012 with product sales up 11%.

This included a $155 million Neupogen order from the US government.

It also reflected continued momentum with Prolia, with Xgeva, Enbrel, and Neulasta as well as important contributions from Sensipar, NPlate, and Vectibix.

Operating expenses were up 10% on the quarter overall.

Over the course of the last 12 months, we've been enrolling multiple clinical trials, which will enable a data rich year in 2014 as several of these trials start to read out.

At the end of the quarter, we had approximately 45,000 patients enrolled in our late-stage programs, compared to around 30,000 12 months ago, that's an increase of 50%.

Research and development costs in the quarter were also impacted by a $50 million up front payment to Servier to the US rights to ivabradine.

SG&A costs included 12% increase in Enbrel profit share payments which amounted to $430 million.

And as a reminder, the Enbrel profit share expires at the end of this month and is replaced by 12% royalty on sales leading to an anticipated net benefit of around $800 million in operating income in 2014 compared to 2013.

Net income increased by 13%.

Our tax rate in the quarter was lower compared to 2012, benefiting from the federal R&D credit and the change in the geographic mix of expenses and revenues.

This was partially offset by higher other income and expense.

The third-quarter charge for other income and expenses broadly representative of the charge that you should expect to see in the fourth quarter and into 2014.

Adjusted earnings per share growth of 16% also benefited from a lower average share count.

Turning to cash flow and the balance sheet on Page 5, we generated $1.6 billion of free cash flow in the quarter and paid a dividend totaling $400 million.

Our total cash and investments of $26.5 billion at the end of the quarter included a $3.1 billion bank loan to fund the Onyx acquisition, which was disbursed when the deal closed on October 1. The funding for the acquisition was completed with a further $5 billion bank loan received and disbursed on October 1. With this, total debt outstanding at the end of the fourth quarter is expected to be $32.2 billion.

And as a reminder, the $8.1 billion raised to fund the Onyx acquisition carries an interest rate linked to LIBOR, on a current rate this amounts to 1.3% pre-tax.

Share repurchases year-to-date amount to $800 million at an average price of $85.

And following the Onyx acquisition we don't expect any significant share repurchase activity in 2014 and 2015.

Turning to Page 6. We're raising our guidance for the full year and this includes the contribution of Onyx from October 1. We now expect revenues to be in the range of $18.3 billion to $18.5 billion and adjusted earnings per share to be between $7.35 and $7.45.

Our guidance on tax and capital expenditures remains unchanged.

Tony?

Thanks, John.

You'll find the summary of our global sales performance for quarter three on Slide number 7. I'm pleased to report we had a strong quarter three with product sales growing 11% year-over-year and 1% quarter-over-quarter.

We also saw strong top line contributions from all our geographic regions.

Our US business grew 12% year-over-year with wholesale inventory ending in the normal range.

Outside the US, sales grew 7% year-on-year or 9% excluding foreign exchange.

I'd like to start the review with our portfolio beginning with Enbrel.

Rheumatologists and dermatologists continue to recognize Enbrel with track record of efficacy, safety, and long-term experience.

We are committed to investing in Enbrel over the long term, given our prolonged exclusivity at the end of our profit share agreement with Pfizer at the end of this month.

Enbrel sales grew 7% year over year, primarily due to price.

We remain focused on demonstrating the value and benefits of Enbrel to physicians, payers, and most importantly patients.

Our direct-to-consumer advertising continued to emphasize the benefits for using Enbrel.

Enbrel consistently leads total brand awareness in the rheumatology segment and physicians continue to honor over 90% of Enbrel patient requests.

We remain the value share leader in both the rheumatology and dermatology segments and are confident in Enbrel's potential growth.

Moving now to Neulasta and Neupogen.

Please remember that Neulasta represents about 80% of the combined sales of these two products.

We continue to emphasize the addition of filgrastim to the first and every cycle of chemotherapy as the best way to reduce the risk of febrile neutropenia in appropriate patients.

Year-over-year, global sales for Neulasta increased by 9%.

This was mainly driven by price and a slight increase in unit demand.

For Neupogen, sales grew 50% year-over-year, including the $155 million order from the US government.

Epogen sales were flat year-over-year.

Quarter-over-quarter sales declined slightly due to a favorable Medicaid rebate adjustment for quarter two.

Unit demand in the quarter was stable.

Aranesp sales were down 10% year-over-year.

Quarter-over-quarter sales were negatively impacted by changes in estimates in both quarters, including the Medicaid rebate adjustment recorded in quarter two.

We expect Aranesp sales in both the US and Europe to continue trending slightly downwards.

Sensipar sales increased 7% year-over-year due to increases in overall unit demand driven by strong segment penetration.

NPlate and Vectibix sales in aggregate were higher by 19% year-over-year, due to increases in unit demand.

In Europe, we continue to pursue reimbursement with payers for the treatment of first and second line metastatic colorectal cancer.

And our European label now includes the new NRAS data, which allows more targeted treatment of patients based on their wild-type RAS status.

Turning now to the Denosumab franchise.

Prolia posted a 62% year-on-year growth.

We did see however some seasonal softness in the third quarter, something we've come to expect, but we continue to grow share in both the US and the rest of the world.

We also continue to improve repeat injection rates in the US and our latest data shows over 60% of patients returning for their second injection.

Earlier this month we launched Prolia in France, which is the largest PMO market in Europe.

Xgeva global sales grew 5% quarter-over-quarter, and in the US, our value share grew by 6 percentage points in the quarter.

On a unit basis our share grew by 2 percentage points while competing against numerous generic zoledronic acid competitors.

We now hold 42% unit share in the segment.

Outside the US, Xgeva grew 12% quarter-over-quarter, driven by share gains.

Recent launches in Europe continue their strong uptake.

In France, we've already achieved 50% segment value share since launching in quarter one.

Our commercial focus remains on reminding physicians and patients of the superior clinical profile of Xgeva.

Other products, which is comprised of our sales from our Brazilian and Turkish businesses, declined 13% year-on-year.

This was primarily due to Turkey, since this business is driven in part by government tenders where timing of awards tends to fluctuate.

We expect sales to significantly rebound in quarter four.

Let me now turn to our new and exciting business, Onyx Pharmaceuticals.

I'd like to start by thanking the entire Onyx team for their unwavering commitment during the acquisition period.

They remained focused and grew their business 6% quarter-over-quarter.

Importantly, I'd note that their US execution drove a 10% increase in the number of Kyprolis accounts during quarter as the depth of prescribing continued to grow.

We are excited to continue building on this important growth platform in multiple myeloma with potential expansion into earlier lines of therapy as well as launching in countries outside the United States.

In summary, I'm very pleased with the competitive strategies our team has developed and our execution against these strategies.

We remain focused on serving patients and bringing them vital medicines.

Our underlying business delivers another strong quarter and I believe we are well positioned to meet our full-year revenue growth objectives.

Let me now pass it to Dr. Sean Harper.

Thanks, Tony.

We continue to forge ahead on our existing pipeline efforts and I'd like to take this opportunity to also welcome our colleagues at Onyx.

The team has done an outstanding job advancing innovative multiple myeloma therapies and we're very optimistic about the long-term potential of Kyprolis and Oprozomib.

We're looking forward to the new Kyprolis data next year, including the final analysis of the FOCUS study in relapsed refractory multiple myeloma.

In addition, the independent data monitoring committee will review an interim analysis of the ASPIRE study in relapsed disease next year.

As many of you are aware, FOCUS is the registration enabling study for refractory relapsed multiple myeloma targeting the EU, and this virus, the confirmatory study for full US approval, as well as a registration-enabling study for relapsed patients in both the US and EU.

We will also be presenting additional data on Oprozomib, an oral proteasome inhibitor, at this year's American Society of Hematology meeting.

We are doing everything we can to help maintain momentum on these programs and to bring to bear any resources we can to further enable their success.

The mission and cultures of the two companies seem remarkably well aligned and I'm excited to have them on our team.

The lipid lowering program intended to be the basis of registration for AMG 145 now called evolucumab is completely enrolled and we eagerly await the results in 1Q 2014.

We plan to speak more about this program along with our other cardiovascular programs at an investor event at the American Heart Association meeting in November where we will be presenting one year data from over 1,100 subjects in our Phase II open label extension study.

For trebananib, we continue to estimate the final overall survival analysis from the ongoing pivotal study in recurrent ovarian carcinoma to occur in the second half of 2014.

We have decided to discontinue enrollment in our study of trebananib in combination with Doxil in the setting of recurrent ovarian carcinoma due to ongoing Doxil supply issues.

We've also determined that a much smaller study than initially planned can be utilized to adequately assess the effects of trebananib on progression-free survival in first line ovarian cancer.

In addition, the emerging therapeutic landscape in non-small cell lung cancer limits the potential utility of trebananib in the study so we're also discontinuing enrollment in this Phase II study.

There were no new safety findings related to these decisions.

Our psoriasis program for Brodalumab consists of three Phase III studies, one placebo-controlled and two head-to-head against ustekinumab, or Stelara.

I'm pleased to report all these are now fully enrolled and we expect to see the data next year.

Velcalcetide, or AMG 416, is our novel IV calcimimetic being investigated for the treatment of secondary hyperparathyroidism in patients with chronic kidney disease who are on hemodialysis.

Phase III data are expected next year and we will be presenting Phase II data at the American Society of Nephrology meeting next month.

Just to close the loop with you on an outstanding Xgeva filing, after extensive discussions with EU regulators we've decided not to pursue further our requests for a bone metastasis free survival indication in castrate resistant prostate cancer in Europe.

Our biosimilars unit continues to make good progress, and as Bob mentioned, enrollment has commenced in our biosimilar Humira pivotal study in psoriasis.

Finally, I'd just like to take a moment and acknowledge my colleagues in R&D who continue to innovate and execute at a very high level.

We've made great progress this year and as you can see from my last slide, eight of our late-stage programs will achieve significant milestones next year.

We'll be very busy in 2014 but our organization is ready and we look forward to continuing our track record of delivering novel therapies for patients in need.

Bob?

Okay, thank you, Sean.

Marvin, we're ready for questions if you'd remind our listeners of the procedure, we'll open up the line for questions.

(Operator Instructions)

Our first question comes from the line of Robyn Karnauskas with Deutsche Bank.

Thanks for taking my question.

So I guess, I think big picture, it seems like your base business continues to be more stable than a lot of people on the street expected, and you're continuing to grow your pipeline, like you did a deal today going into emerging markets.

I'm struggling with understanding the impacts the new businesses have on margins and what the real revenue opportunity is for global expansion.

So, I know you haven't given guidance but maybe in a general sense, can you help me think about when you think global expansion will contribute meaningfully?

And how do we think about book ends for margin impacts?

And then lastly, when do you think it's appropriate to give guidance on these businesses, more detailed financial guidance?

Okay, thanks Robyn, there are a couple questions.

Why don't we try and answer that in two parts.

First you're right.

We've continued to make progress in laying the ground work for our future growth.

We felt for some time that an important ingredient for our long-term success was international expansion.

And, in particular, a clear path forward in Japan, China, and the other key emerging markets.

And we've made tangible progress as reflected in the items that we reviewed from this quarter.

So we feel good about the presence that we created and the ability to leverage that presence for our innovative molecules when they're ready to be launched.

As regard your question about margins and returns, why don't I ask Tony to share his thoughts?

We're obviously not going to provide individual market guidance.

And I think, Robin, the next opportunity for us to talk more generally about guidance will be in connection with our fourth-quarter results, which is scheduled for January of course of next year.

Tony do you want to offer any general thoughts on how we're thinking about markets and the criteria for profitability that we're holding the teams accountable to?

So as we think about Amgen presence at the moment we do have a fairly decent presence already in the Middle East, North Africa, and Latin America.

Our business in this part of the world is really well in excess of $500 million and growing rapidly double digit.

The products we have in the portfolio also are highly sophisticated biotech-type products.

So pricing is pretty much in line with the type of product we bring to market.

So we're not competing in these markets in the mass part of the market, but clearly around high medical need, with prices that allow us margins that are fairly close to the type of business we run in Europe at the moment.

Okay, let's go to the next question?

Our next question comes from the line of Terence Flynn with Goldman Sachs.

Hi, thanks for taking the questions.

Was just wondering first if you can provide us on your thoughts on the Kyprolis development program.

Now that the deal has closed particularly would be curious in your outlook for both FOCUS and ASPIRE.

And then in the event that FOCUS does not have a positive read out, how comfortable are you that ASPIRE will be enough to secure a label there?

And then the second question I had was just can you remind us of your strategy for your Humira biosimilar if the trial you're running is designed to support worldwide filings, including the US?

Thanks.

Okay, Terence, a couple questions there.

Let's try to answer those.

Sean, I suppose you might want to just share with Terence your thoughts about the global development plan at Onyx.

Yes, I think that the FOCUS and ASPIRE trials will read out next year, FOCUS in its final form and ASPIRE will have an interim analysis reviewed by the data monitoring committee.

And if positive, we'll see it.

Otherwise we'll see the final analysis.

I think that in the case that -- FOCUS is really focused on a third plus line indication for Europe, and we feel that it's quite an independent thing from the goals of ASPIRE, which are to allow a relapsed population, or if you will, a second line population to have a registration path in both the US and EU.

And we're pretty confident that assuming the results are what we're hoping for, that that stands on its own from a regulatory perspective.

And Tony on Humira, do you want to answer Terence's question?

Sure.

Our biosimilar strategy is clearly a global strategy, we are working closely with the FDA to understand requirements, we understand what's required in Europe, and then we're working with other countries outside those two regions to try and understand where the pathway is going forward, but we think globally, on a consistent basis, yes.

Okay Marvin, let's take the next question and maybe you can just remind the audience to limit themselves to one question, please, so we can get through everybody.

(Operator Instructions)

Our next question comes from the line of Eric Schmidt with Cowen and Company.

Thanks.

Maybe just a quick one on Bob's comments around Teva and IP dispute around long acting GCSF.

Can you remind us when your patent actually expires and whether Teva withdrew the PLA because of the patent, or for some other issue?

Eric, our IP on Pegfilgrastim extends through the end of 2015, and as I said in my remarks we understand that they've withdrawn the product from -- or withdrawn the file rather from the FDA, and that's the reason why we dropped our lawsuit.

Do you know why, Bob?

You'd have to ask them that question.

Thank you.

Thanks.

Our next question comes from the line of Mark Schoenebaum with ISI Group.

Hi guys.

Thanks for taking the question.

I know that CMS has proposed cuts to reimbursement rates to dialysis providers.

I think this came up on the 2Q call.

I think at the time, we were in the comment period.

I was wondering if you could update us on what's going on there.

And if you could help us all understand that issue and what impact it could have to models.

And if you could just comment on the Neupogen government purchase?

Should we think of that as one-time?

Thank you.

Tony?

Let me talk about the bundle.

The time to comment CMS has now expired and we have assumed CMS would make some type of ruling earlier in November.

We're not quite sure how the government shutdown will impact that timing, but we're standing by to wait to hear what's going to happen.

Now the decision could be to implement immediately, it could be to implement over a period of time, or to implement at a time in the future.

We don't know yet what the impact will be or how much the proposed reduction will in fact be, so we are just waiting for that at the moment.

On Neupogen?

Sure, the government order, Mark, I think at this point we can't predict whether there will be future orders from the government or not.

I think we would notice that we've got a strong track record of being able to supply customers with safe, reliable, quality Neupogen, Neulasta product, and if the government wants to order more, we're prepared to supply it.

But at this point I wouldn't want to speculate as to whether there will be future orders.

Thanks.

Our next question comes from the line of Michael Yee with RBC Capital Markets.

Just to confirm one, the Pegfilgrastim application was withdrawn, but are we still expecting both a Neupogen-like and a non-peg Neulasta-like product to come from Teva soon and both under settlement?

Maybe you could clarify if you expect both of those to come and how we should as investors be expecting your franchise to look once those do arrive to market.

Okay couple things, Michael.

Just to remind you, we expect that there will not be a Neupogen-like product on the market before mid-November.

After that time, when our intellectual property expires on Neupogen, we would expect to see Teva launch a product, though I would note it won't be a biosimilar and it won't be a product that has the same label as Neupogen.

With respect to other long acting products, again so far as I'm aware, none are registered.

And so, rather than speculate on what they might do, I think we'll wait and see what the regulatory reaction is to products that they have on file.

Okay.

Our next question comes from the line of Matt Roden with UBS.

Great, thanks for taking my question, as well.

Sean, as you know I've been interested this ovarian program with trebananib, and just want to ask you about the Doxil shortage, which necessitated the closing of enrollment for Trinova-2.

Just wondering if you could talk about whether or not that impacts your statistical power to hit PFS and OS, whether or not the second study is required for approval in the indication, and whether there are other implications we should consider here, thanks.

Yes, Matt, I don't think the Doxil study was always a non-registration trial to just generate data in the setting of a very commonly used agent in ovarian cancer, and so there really are two problems.

One is that it's not really a very commonly used agent in ovarian cancer anymore because it's so unreliable in its supply, and we can't get the drug.

This is the second time we've had to do this, and it's just very disruptive to not have supply for patients in a clinical trial setting.

So, that should have no bearing at all on our ability to register the product, to assess OS in the existing independent study with the Paclitaxel background that we're waiting for some time next year, nor would it effect an ability to assess PFS in the first line study, which has always been the primary goal of the first line study.

Great.

Thanks very much.

Our next question comes from the line of Geoff Meacham with JPMorgan.

Hi guys, thanks for taking the question.

So Sean highlighted on Slide 9 all of the events, the data events for next year, but I wanted to ask Tony the commercial perspective on this.

Is there an ROI that you're looking for for the various Phase II or III assets that you have that are maturing?

I guess, said another way just given your top line, is there a threshold that these assets have to cross to really move the dial for you guys?

Thanks.

Geoff, it's Bob.

I may jump in there on the question you directed at Tony.

Our intention is to advance molecules for which we think we can exceed the cost of our capital.

So, when we look at our late and early stage programs, we want to have a clear view to what it's going to take to beat our cost of capital, and we think we're in good shape in that regard on the late stage molecules and we continue to watch that carefully on the mid stage and early stage programs.

Got you, okay.

Our next question comes from the line of Ravi Mehrotra with Credit Suisse.

Thanks for taking my question.

Another big picture question on your biosimilar assets.

When can we expect more news flow on the other five projects you've previously identified?

And given the changes in the biosimilar competitive environment since your business review day, do you view this opportunity as bigger than you guided to at that point?

Thank you.

Ravi, why don't we answer this in two parts.

With respect to communications.

Again, as our biosimilar molecules enter pivotal trials, we'll plan to call them out on our quarterly calls as we did today, so we've done that for both the molecules that are now in pivotal trials.

And Tony if you want to talk more generally about the quality of the opportunity here jump in.

So, as we monitor the six assets we've identified, all of them continue to grow globally, so the medium-term opportunity of playing in this market continues to be a lucrative market.

We continue to believe that our ability to bring to market a high quality, reliable supply of product will be a unique benefit that Amgen has, so we continue to see it as an opportunity, yes.

Thank you.

Our next question comes from the line of Yaron Werber with Citi.

Thanks for taking my question.

I have also a little bit of a strategy question relating to cardiovascular franchise.

If you don't mind, on 145 just give us a little bit of an update where you are on formulation.

And are you thinking that the concentration will remain the same, but the device is going to change into an auto injector?

And then what is Ivabradine?

Where does that fit in?

And is it based on you're going to be looking for a CAD and chronic heart failure indication, or what's the strategy?

Sounds like you're going to be using previous data to file, thank you.

So regarding 145, as I've said many times before, this is a very competitive situation and we're not wanting to get into that level of specificity around how we're going to be presenting the agent.

Suffice it to say that we think we're going to have good ways of delivering to patients the every two week and every four week presentations of the product.

Ivabradine is a really interesting molecule that is unique in its mechanism and has a really critical role in the management of heart failure outside the United States.

We have data sets which are very robust supporting chronic heart failure where there's a large outcome study that was done not too long ago, put into the labels around the world.

European heart failure guidelines include the use of Ivabradine in patients who can't be adequately rate controlled with beta blockers.

So our desire is to see the agent registered ultimately in both of these indications, in congestive heart failure, as well as in patients with coronary artery disease and stable angina.

There is also a large outcomes trial within patients with coronary artery disease, approximately 20,000 patients that's going to read out next year, which should be potentially quite supportive to the use of the agent in the angina indication, so that's --

Tony did you want to add?

Yes, so as we think about Amgen launching 145, which is one of our largest exciting opportunities we have, that would have been the first time Amgen competes in the cardiovascular field.

And therefore, Ivabradine, which as Sean is saying, being a unique opportunity, a unique mode of action in an area of high unmet medical need will allow us prior to the 145 launch to build competency, skills, in our organization, both a relationship with a cardiology group, make sure we understand the hospital interaction with the P&T committees, discharge protocols, all of which will play in line with the launch of 145.

So really setting us up, getting us the experience at the same time, driving a rather exceptional product in a large unmet medical need.

Our next question comes from the line of Rachel McMinn with Bank of America Merrill Lynch.

Question, I wanted to go back to Kyprolis.

I was hoping Sean, you might be a little bit more granular on your development plans on two fronts.

One, with the head-to-head studies it seems like for Endeavor and Clarion they are going to be important for front line approval, but also potentially for EU reimbursement given the cost concerns with Revlimid and Kyprolis.

I guess my view is that these studies are fairly risky.

Do you plan to make any changes to the design of these studies or add additional supplemental studies?

And then just on the cardiac pulmonary safety profile given the recent events with [area viclucic], I'm just wondering what your comfort level is on the safety profile?

How confident are you, based on the data that you have today, that there's not going to be a safety imbalance that stops either of those studies early, thanks.

Sean?

Well first, I'd say that generally, as we looked at the Onyx opportunity, we were very impressed with the development program, and I see the development program as being quite well thought out.

Of course we'll work with our colleagues at Onyx and think about details of the way that statistical analysis plans are done and this sort of thing at a technical level for sure, there will be a process of looking together at things.

But I think that generally speaking we feel very good about the development program, which has been developed with a lot of input from the experts in the field from around the world and regulatory authorities, of course.

It's always possible that we would add studies.

I wouldn't think that there's anything that glares out as a missing piece, but there are lots of opportunities to do additional studies with these molecules with both Kyprolis and Oprozomib and we'll just have to think about that in a big picture perspective in terms of return on investment and overall portfolio management.

Safety, I think, I can't give you any guarantees about safety.

I mean the data that we see to date with the agent is reassuring and appears that the benefit that's being derived from the use of the products in a setting exceeds the safety concerns.

There are, of course, especially in oncology safety issues with virtually every therapeutic agent.

So, I still see a very strong benefit/risk profile here, and I think that the opportunity to let these studies play out and see what we learn from them is in front of us.

Okay, let's go to the next question, Marvin?

Next question comes from the line of Geoffrey Porges with Sanford Bernstein.

Thanks for taking the question.

I just had a question about the Onyx acquisition.

If we look back at Onyx, they had about $200 million in operating expenses in Q2, and now you've had a chance to integrate the two organizations.

Could you give us a sense of what that operating expense might be looking like in Amgen's hands say a year from now once you've bedded everything in?

Thanks.

Sure, Geoff.

I guess we're 21 days into this transition.

What I'd observe is, as I said earlier the transition is moving smoothly and there clearly are going to be some opportunities for us to think about synergies, and as you'd expect we're down the road already in that regard with our colleagues at Onyx, but I'm not going to provide guidance at this point.

We'll have an opportunity to do that next year in January when we talk about the fourth quarter in the way that we typically do.

But again I think the big picture, Geoff, is that we're three weeks into this, we feel good about what we've seen, I think feel good about the way in which we're working together and comfortable about the opportunity to help drive growth here and create value both from things that we can do to grow the brand and grow access, as well as things that we can do to provide cost synergies.

Okay.

Our next question comes from the line of Chris Raymond with Robert W. Baird.

Another cardiovascular question for AMG 145.

So we've picked up a lot more investor interest recently on Merck's upcoming IMPROVE-IT trial.

And I know this is not your trial, not your product, but there's I think a fairly decent chance that there's going to be a read-through at least from investor standpoint, if that trial fails, and I know these mechanisms are very different.

But can you maybe just give us a sense how should we be thinking about how the FDA might be thinking if indeed that trial doesn't show a long-term benefit, and what the implications are for what they might require for the entire PCSK9 class?

Thanks.

Yes, I think it's obviously difficult to speak for the FDA in terms of how they might view LDL as a surrogate end point based on the results from one of dozens and dozens of studies that have been done that have shown that reducing LDL has had a salulatory effect on cardiovascular outcomes.

I think it's just going to depend enormously on the actual interpretation -- detailed scientific interpretation of studies like IMPROVE-IT.

I think those studies will be looked at carefully, any studies that come out over the next few years will be looked at carefully by regulators and the scientific community, but it's really down to the detailed assessment as to whether the results actually call into question whether LDL is a reasonable surrogate for cardiovascular outcomes while one waits for cardiovascular outcomes results to come from a trial which is well under way.

And it's just tough to speculate on that at this stage.

But I think that it's clear to me that LDL is looked at differently than other lipid parameters by regulators with respect to being the most robust of those.

Thank you.

Our next question comes from the line of Tony Butler with Barclays Capital.

I have a question, Tony you have commented about how well Enbrel has done not only in this quarter but in past quarters.

Yet in the last quarter you made a reference to some slowdown in the derm market, so I wondered if you could actually break apart how you're looking at the growth rates around each indication for Enbrel, would be very helpful.

And if I could sneak in a second really quickly, it's again around 145.

In your comments earlier, around Ivabradine, you made some references to the cardiologist, and I wondered if in fact your assumption was that 145 would not be used by the primary care physician?

Or did I simply misread that from your statements in chronic heart failure?

Thanks very much.

Tony, with regards to Enbrel, about two-thirds of our business is in rheumatology and about one-third in dermatology.

Net-net we've seen both these markets just slowdown a little bit in terms of growth, and still growing fairly healthily.

In rheumatology, we clearly continue to hold market share.

In dermatology we've seen a slight decline in market share over the last couple of quarters or so.

But we do believe that the product profile both in rheumatology from an efficacy and a safety perspective, as well as our profile in dermatology specifically here around safety will allow us to continue to maintain a fairly large market share as we go forward.

As with regards to 145, the assumption we are making is the initial launch of 145 will be more specifically on high risk patients, which will be treated by cardiologists.

As always there will be a smattering of general practitioners who do a fair amount of cardiovascular work, but we don't see us going in the early stages to a large GP market, no.

Thanks very much.

Next question comes from the line of Eun Yang with Jefferies.

Thanks, a question on brodalumab.

I'm assuming two Phase III trials are designed to show superiority with Stelara in psoriasis, and the fact that Novartis issued a superior efficacy over Enbrel with their IL17 antibody.

Why did you use Stelara as a compare versus Enbrel?

Well I think the choice of Ustekinumab as the comparator for brodalumab was really a matter of just putting ourselves up against the molecule that we thought has the increasingly is becoming the agent of choice from an efficacy perspective in the disease.

We wanted to set a high, as high a bar as we could really from the competition perspective, and so that was in part why we made the choice.

We could have chosen other comparators but that was the choice that we made.

Next question?

Our next question comes from the line of Joel Sendek with Stifel Nicolaus.

Thanks a lot.

So, I had a question on the Kyprolis sales and obviously you seem pretty happy about the $65 million.

But it looks to me pretty flat over the last couple quarters.

I'm wondering if now that the drug is in your hands whether we should expect, or if there's any significant growth embedded in your guidance for the fourth quarter?

Or do we need to wait for the new studies to come out next year?

Thanks.

Joel, it's Tony.

So, let me just say a couple of things.

The first leak of a potential acquisition started to come out in late June, so there's a fair amount of uncertainty amongst Onyx employees for a period of time.

And as I said in my remarks earlier, I'm pretty impressed that in spite of this terrible disruption that happened in their lives, they maintained the business as well as they did, including third quarter is normally a fairly soft quarter even for oncology.

14 days after the close we had in the hands of every single field-based employee a letter of employment confirming employment.

We've looked at this team.

This team has obviously been put together with a clear knowledge of where the multiple myeloma market is, where the treatment physicians are, and we've hired through the Onyx team a top class oncology sales organization and medical field organization.

We are certainly hoping that with certainty now reigning in their lives that performance will improve over the fourth quarter.

But clearly, as you look to the medium to long term, the next major expansion of the Kyprolis label will come with both the FOCUS and the ASPIRE data, yes.

Okay thanks.

Our next question comes from the line of Howard Liang with Leerink Swann.

Thanks very much.

Regarding the changes in the trebananib program, can you comment on whether these represent in any way a deemphasis of this compound, specifically regarding focusing, the focus on front line study on PFS, are you still pursuing a regulatory filing in the US for front line?

And then the second Trenova 1 study can help your outlook for a quick filing given the interim overall trend that you presented.

Yes, no I think we're still quite interested in trebananib's potential, and see it as an agent which could gain registration globally in both first line and recurring disease.

So, in the first line, I think we've recognized that it's extremely difficult, as I'm sure you know to try and achieve an overall survival result in the first line, and our general thought is that if we can achieve an OS result in a significant line of therapy-like in the recurrent study that we're awaiting for OS data now, that that would be sufficient for the molecule to allow us to move forward with attempts to register in first and second line globally.

So that's really the strategy, and the change in the size of the first line study doesn't diminish in any way our ability to assess the progression-free survival there.

Marvin I think we have exhausted a lot of topics here so why don't we take one last question.

Last question comes from the line of Gene Mack with Brean Capital.

Thank you so much for taking the question.

Just on Oprozomib and the strategy there.

Wondering if you guys can give us a sense of, just given how fast Millennium moved their oral compound 9708 into Phase III testing, I'm just wondering how soon do you think you might be able to get into a pivotal program with Oprozomib?

Is it too early to tell at this point?

Or can you like Millennium go from Phase I to -- really they went from Phase I to Phase III?

Thanks.

Yes, I think it's probably just too early in the process for me to speculate about that right now.

The agent is really at the threshold between Phase IB and II at the moment.

And I'm sure there's an ability to be aggressive with the development of the molecule, but we also want to do it right.

And skipping phases of development isn't always the best idea.

So, we'll have to noodle through that and decide how we're going to proceed.

Great.

Thank you Sean, so let me thank everybody for your participation in our call this afternoon.

As you sift through all of this information if you have any questions or any other comments, let's continue the dialogue.

I, together with the rest of my team will be around for the next several hours so feel free to call.

Thanks again.

Thank you.

Ladies and gentlemen thank you for joining us for Amgen's third-quarter 2013 financial results conference call.

This concludes today's conference call.

You may now disconnect.