美國安進 (AMGN) 2014 Q4 法說會逐字稿

My name is Marvin, and I will be your conference facilitator today for Amgen's fourth-quarter earnings conference call.

(Operator Instructions).

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

Mr. Sood you may now begin.

Okay, thank you, Marvin.

Good afternoon, everybody.

I hope the blizzard, for those of you in the Northeast, wasn't too disruptive.

I would like to welcome you to our conference call to review our operating performance for the fourth quarter and full year 2014.

We accomplished a lot during 2014 on many fronts and we look forward to delivering once again for our shareholders in 2015.

While 2014 was characterized by significant clinical dataflow, 2015 will be characterized by regulatory submissions and new product launches.

So leading the call today will be our Chairman and CEO, Bob Bradway, who will provide a strategic report on our performance in 2014 and outlook for 2015.

Following Bob, our CFO, David Meline, will then review our Q4 and full-year results and address financial guidance for 2015.

Tony Hooper, our Head of Global Commercial Operations, will 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 pipeline update.

After Sean's comments, we should have ample time for Q&A.

We will use slides for our presentation today.

The slides have been posted on our website and a link was sent to you separately by email.

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.

Okay thank you, Arvind.

I thank all of you for joining our call this afternoon.

2014 was really an outstanding year for us, and let me start with the financial highlights, which include revenue growth of 7% enabling us to eclipse $20 billion for the first time.

Consistent with our international expansion objectives, sales outside of the US grew by double-digit rates in 2014.

Our adjusted operating income growth of 22% reflects our commitment to generating operating leverage from our business.

As you know, one of our objectives for 2014 was to deliver to shareholders $800 million of improved profitability from Enbrel.

We exceeded that objective in 2014.

In addition our free cash flow grew by 40% to $7.8 billion.

This strong financial performance,, and our confidence in the longer-term outlook, enabled us to increase our dividend by 30% in 2014 and by 30% again for 2015 while increasing our stock buyback plans as well.

Turning now to our progress with innovation, we had an extraordinary flow of data from our pipeline in 2014.

We generated positive pivotal data for six innovative programs and submitted four of them for regulatory approvals.

To remind you, this includes filings for two immuno-oncology molecules, BLINCYTO and TVEC; and two cardiovascular molecules, Evolocumab and Ivabradine.

In December we received FDA approval for two products, including BLINCYTO and our on-body injector for Neulasta.

BLINCYTO is an immuno-oncology agent which addresses an important need for acute lymphoblastic leukemia patients who currently have very limited options.

We are generally -- we are excited about the proof of concept represented by this approval and look forward to progressing our BiTE programs in other forms of cancer as well.

Our on-body injector for Neulasta also represents an important innovation for cancer patients and one which will help improve patient experience for those undergoing chemotherapy and at high risk of infection.

I'd like to point out of course that launches are now already underway for both of these products.

While 2014 was a watershed year for us in research and development, 2015 is sure to be another important year, starting with the prospects of launching three additional innovative products including Evolocumab of course for hypercholesterolemia, Ivabradine for heart failure, and TVEC for metastatic melanoma.

And in addition to these launches in 2015 we expect regulatory submissions for Kyprolis, which we announced earlier today, Brodalumab, and potentially AMG 416, as well as the start of a Phase III program for AMG 334 in migraine, and Phase III readouts from two of our biosimilar programs.

As we discussed in July and October, we began last year the process of transforming our Company and importantly we initiated this from a position of strength.

David will update you momentarily on our progress with that transformation and the benefits achieved in 2014.

We are on track, as reflected in our $1.5 billion growth in operating income and 6-point operating margin improvement last year, even while absorbing the full-year impact of Onyx and investing in our launch opportunities.

Across our Company, we will continue our transformation efforts in 2015 and deliver more progress against our long-term objectives.

Before I hand it over to David, let me thank my Amgen colleagues, many of whom are listening to this call, for their unwavering focus on delivering for patients and for shareholders.

David?

Okay thanks, Bob.

Turning to the fourth quarter on page 5 of the slide deck, revenues grew to $5.3 billion, 6% year over year, with 8% product sales growth driven by continued momentum across our product portfolio.

Other revenues at $187 million decreased by $55 million versus the fourth quarter of 2013 reflecting a reduced level of partnership payments received for Brodalumab compared to last year's fourth quarter.

Adjusted operating income at $2 billion grew 15% from prior year.

On an adjusted basis, the cost of sales margin at 15.9% improved by 0.1 points.

Research and development expenses at $1.2 billion were flat versus prior year and included the $60 million upfront payment to Kite Pharma for our cancer immunotherapy collaboration.

SG&A expenses were flat year on year.

On October 31, 2014, the Company passed the one-year anniversary of the first stepdown in Enbrel related payments.

This resulted in a year-over-year expense decline of approximately $100 million in Q4.

This compares to year-over-year expense declines of approximately $250 million per quarter in the first three quarters of 2014.

Additionally we incurred incremental expenses in Q4 in preparation for new product launches.

These increased investments were offset through savings from our transformation to a more focused operating model, as well as through the reduced Enbrel related payments.

Other income and expenses were flat year over year at $173 million in the quarter.

The tax rate was 10.2% for the quarter, a 2.5 point decrease versus Q4 2013.

This decrease was primarily due to the favorable tax benefit from the extension of the 2014 federal R&D tax credit which occurred in Q4 of 2014, which was offset partially by unfavorable tax impact of changes in the geographic mix of earnings.

As a result, adjusted net income increased 20% and adjusted earnings per share increased 19%.

In summary our fourth-quarter results from operations were in line with our previous expectations, while overall results in the quarter benefited from the extension of the R&D tax credit, which was approved in late December and had been removed from our previous guidance.

You'll find a summary of our 2014 full-year results on page 6 of the presentation.

Our 2014 full-year revenues grew 7% to $20.1 billion, and adjusted earnings per share grew 14% to $8.70 per share.

Product sales grew 6% year over year and other revenues increased by $252 million over the same period a year ago, primarily driven by our Nexavar and Stivarga partnerships.

For the full year, adjusted operating income grew to $8.5 billion, a 22% increase based on the combination of solid revenue growth along with stable operating expenses which were down 1% year over year.

On an adjusted basis, cost of sales margin was flat at 15.8% year over year.

Research and development expenses increased 5% driven by the addition of Onyx and support for later stage clinical programs.

These increases were offset partially by lower spending associated with marketed product support.

SG&A expenses were down 10% driven primarily by reduced Enbrel related expenses, offset partially by the addition of Onyx and increased commercial expenses in preparation for new product launches.

Other income and expenses were unfavorable 7% year over year due to higher interest expense and portfolio rebalancing, partially offset by higher interest income.

The tax rate was 14.9% for the full year, up 5.7 points versus 2013.

The year-over-year increase was primarily due to favorable resolution in 2013 of our federal income tax audit, as well as the retroactive extension of the 2012 federal R&D tax credit in 2013.

During 2014 the impact of the Puerto Rico excise tax was 1.9 points higher in cost of sales and 3.3 points lower in our adjusted tax rate.

We would expect a similar impact to continue through 2017.

Turning to page 7, I would like to take a moment to provide an update on Amgen's transformation initiatives which we previously discussed at our July and October 2014 investor events.

2015 marks an exciting year as we are in full execution mode towards our focused operating model.

We are advancing a number of key initiatives to streamline processes, increase agility and efficiencies, and improve operating performance.

We also have completed and largely implemented the first phase of reductions in workforce announced in July, which will total approximately 3,000, and have made significant progress on reducing our facilities footprint towards the 23% goal.

In terms of the 2014 impact, all areas of operating expense benefited as our transformation to a focused operating model began to generate cost efficiencies.

In 2014 we realized approximately $300 million of cost savings towards our $1.5 billion goal.

This includes lower labor costs from workforce reductions and sales force optimization.

It also includes lower external expenses from improved contracting and sourcing and rationalizing discretionary spend categories.

In 2015 we expect incremental savings of at least $400 million.

This will in large part be driven by the annualization of savings following the reductions in workforce, which occurred in late 2014.

It also includes greater use of shared services and further external spend improvements resulting from the rigorous transformation initiatives developed over the past year.

These savings will be redeployed to underwrite launch investments and one-time transition costs incurred as part of the transformation implementation.

As a result of revenue growth and expense discipline in 2015 we will further improve adjusted operating margins on the trajectory to our 2018 target of 52% to 54% through improved operating leverage.

We will continue to provide periodic updates on our transformation progress going forward.

Turning next to cash flow and the balance sheet on page 8. Based on our confidence in the performance of the business going forward, we announced a commitment to return 60% of adjusted net income to shareholders through 2018 while continuing to invest strongly in our business.

For the full year 2014 we generated $7.8 billion in free cash flow, an increase of $2.2 billion over the prior year.

This increase was driven by higher sales and profitability, as well as improvement in working capital, a portion of which are permanent.

As a result of the strong cash flow performance total debt outstanding declined to $30.7 billion and total cash and investments increased to $27 billion.

As a result, net debt improved by $5.6 billion to $3.7 billion at year end 2014.

Additionally for 2014, we increased our quarterly dividend per share by 30% to $0.61 with payments totaling $1.9 billion.

We also announced another 30% increase to the dividend to $0.79 per share, starting with our first quarter 2015 payment.

Finally, at our October meeting, we indicated the intent to accelerate the re-initiation of our share repurchase program with up to $2 billion of repurchases by the end of 2015.

In the fourth quarter we took a first step towards this commitment with $153 million deployed to repurchase approximately 900,000 shares in the period.

We intend to continue repurchases at a stepped up level in 2015.

At the end of 2014 we had approximately $3.8 billion remaining under our board-authorized share repurchase program.

I will now turn to guidance for 2015.

Please turn to page 9.

As you will recall, we provided preliminary 2015 guidance at our October business review.

In terms of what has changed since that time, we completed 2014 with solid in-line operating performance with full-year results of 7% revenue growth, 22% adjusted operating income growth, and 14% adjusted EPS growth.

With this background we remain confident in the outlook for 2015 despite additional potential foreign exchange headwinds.

Today we are reaffirming our 2015 revenue guidance of $20.8 billion to $21.3 billion, adjusted tax rate of 18% to 19%, which excludes the benefit of the federal R&D tax credit in 2015, and adjusted earnings per share of $9.05 to $9.40 a share.

Finally capital expenditures are planned at $800 million this year.

This concludes the financial update.

I now turn the call over to Tony.

Thank you David.

Good afternoon, folks.

You'll find a summary of our global sales performance for the fourth quarter starting on slide number 11.

The underlying prescription demand remains strong as we enter 2015.

In 2014 the majority of products grew in volume terms across both US and ex-US markets in quarter four, as well as on a full-year basis.

Globally, product sales grew 8% year over year and 6% for the full year.

Our international business grew 11% in the fourth quarter, excluding the negative impact of foreign exchange.

Our new and emerging markets delivered just over $1 billion in sales in 2014.

So far, the first quarter of 2015 is playing out as anticipated.

We are on track for the full year.

And let me remind you that products like Prolia and Enbrel historically experience slower first quarters.

In assessing quarter-over-quarter performance it's important to note US wholesaler inventory dynamics.

On average, wholesaler inventory levels returned to normal from rather low levels at the end of quarter three.

There are some exceptions on a product basis which I will cover later.

Let me now turn to the fourth-quarter performance beginning with Enbrel.

Enbrel delivered strong growth of 11% year over year in the fourth quarter.

Underlying demand remains strong as both the rheumatology and dermatology segments grew on a value basis by 24%.

As expected, in the fourth quarter, we saw inventory levels increase from the relatively low levels we reported in quarter three.

Quarter four ended with approximately $40 million higher wholesaler inventories than normal.

We expect to see the drawdown of the slight build along with the typical seasonality in the first quarter.

We remain confident in the value potential of Enbrel and expect to continue to drive meaningful growth during 2015.

Now turning to our Filgrastim franchise starting with Neulasta.

Neulasta delivered year-over-year growth of 7% in the fourth quarter.

The growth was driven mainly by price and to a lesser extent unit demand, which included the benefit of the commercial rights we acquired outside the US from Roche as part of our international expansion strategy.

As Bob said, the FDA recently approved the Neulasta on-body injector and we look forward to bringing this innovative product to patients in the US shortly.

The Neulasta on-body injector better serves patient needs and provides important differentiation from potential future competition.

Next, Neupogen, which declined 11% year over year in the fourth quarter, due to branded short-acting competition in the US, as well as unfavorable changes in inventory levels and foreign exchange rates.

Like Neulasta, this was partially offset by the benefit of the commercial rights we acquired from Roche.

In the US, 15 months into the launch of its first new competitor, Neupogen has retained over 80% share of the short-acting segment.

The balance of the market is split between Granix and Leukine.

We continue to compete account by account and reinforce Neupogen's long track record of clinical efficacy and reliable supply to patients.

With potential competition from biosimilars expected in the US, we will leverage the success we've had in the US versus branded competition, as well as our considerable experience with Neupogen biosimilars in Europe.

I'll now move to our Denosumab franchise starting with Prolia.

Prolia delivered 33% growth year over year as we continue to capture share in both the US and Europe.

In the US, unit share grew 6 percentage points over the year, exiting at 19% in the fourth quarter.

We continue to see strong response from our DTC campaign with one in three patients who start postmenopausal osteoporosis treatment being prescribed Prolia.

In Europe we completed the buyback of the Prolia rights from GSK and transitioned the entire business to Amgen.

We now also have reimbursement across all EU countries.

Unit share grew 4 percentage points over the year, exiting at 13% in the fourth quarter.

Both the US and Europe have opportunity for continued growth.

XGEVA continues to capture share in the US and EU markets and we expect to see continued segment share growth throughout 2015.

US unit share increased 4 percentage points over the year and is now just under half the segment.

In Europe unit share increased 8 percentage points for the year and is now just over one third of the European market.

Our brand strategy continues to focus on XGEVA's superior clinical profile.

Vectibix grew 29% year over year and continues to show strong unit growth across all regions, gaining share in first-line metastatic colorectal cancer in both the US and Europe.

Now let's turn to Kyprolis, which delivered year-over-year growth of 25% following the acquisition of Onyx in quarter four 2013.

Quarter over quarter we saw continued unit growth at 6% in the US, but overall net sales declined slightly due to an inventory drawdown.

Kyprolis continues to maintain leading share in the third-line multiple myeloma setting.

As announced earlier, I'm delighted that we completed the submission of the regulatory applications for treatment of relapsed multiple myeloma in both the US and Europe.

Getting this into the label in the US and launching in Europe will be the next major inflection point for Kyprolis.

We look forward to enabling more patients to benefit from Kyprolis following these regulatory approvals.

Next is Epogen, which grew 3% year over year.

Increases in price were offset by unit declines.

Fourth-quarter 2013 volume included a few large customer buy-ins that did not occur in the fourth quarter of 2014.

Aranesp sales grew 2% year over year with unit growth from a few large customer buy-ins in the US.

Sensipar saw year-over-year growth of 3% as 10% unit growth and higher prices were offset by low inventory levels.

Nplate continues to grow in both the US and European markets driving 7% unit growth.

Quarter four was negatively impacted by inventory declines.

Lastly BLINCYTO, we are pleased with the initial launch of BLINCYTO following the swift FDA approval in December.

Physician and patient responses are indicative of the significant unmet need for patients with relapsed and refractory ALL.

Regarding our upcoming launches, I'd like to share with you that our cardiovascular specialty sales force is now in place focusing on disease state awareness and profiling target segments.

We look forward to launching Corlanor, the new brand name for Ivabradine in the US, and Repatha, the new global brand name for Evolocumab, later this year.

We see a significant opportunity to address unmet need with these two medicines.

In the US over 1 million medically eligible chronic heart failure payments would benefit from Corlanor treatment once approved.

In the US, Europe, and Japan over 25 million people at risk for cardiovascular disease have LDL above 100 g/dL, despite current treatments, and could benefit from Repatha once approved.

In closing I'm confident in the strength of our underlying business and I'd like to thank the Amgen teams around the world for their outstanding performance in 2014.

Looking forward, our focus in 2015 will be threefold.

Firstly, to build on the performance of growth products such as Enbrel, Prolia, XGEVA, Vectibix, Sensipar, and Nplate.

Secondly, to successfully defend our mature brands from potential new biosimilars and branded competition, and thirdly to launch several important new medicines.

Let me now pass it to Sean.

Thanks, Tony, and good afternoon.

2014 was a very productive year for R&D and the last several months have been eventful as well with one regulatory highlight being the FDA approval of BLINCYTO in a remarkable 2.5 months after initial submission.

I'd like to thank the FDA and Amgen staff who worked tirelessly to drive this outcome.

BLINCYTO provides patients with a breakthrough therapy for a terrible disease, relapsed refractory acute lymphoblastic leukemia, or ALL, and clearly validates our BiTE immuno-oncology platform.

We look forward to introducing our next BiTE, AMG 330, into the clinic directed at acute myelogenous leukemia later this year.

We were also very pleased to receive FDA approval for the novel on-body injection system for Neulasta, which will help address the issue of having to administer Neulasta no sooner than 24 hours following chemotherapy, which can be difficult for cancer patients and interfere with optimal use of the product.

As we announced today, we have submitted marketing applications for Kyprolis in the US and Europe in relapsed multiple myeloma, based on the Aspire data, which as you know was presented in detail at the ASH meeting and published in the New England Journal of Medicine late last year.

We look forward to working with regulators to make Kyprolis available to patients with earlier stage relapsed multiple myeloma globally.

Two of our submissions under review by FDA did receive three-month extensions to their target action dates, T-VEC for metastatic melanoma and Corlanor or Ivabradine for chronic heart failure.

In the case of T-VEC the agency requested additional manufacturing data for this very unique product which may require additional review time.

In the case of Corlanor, the agency requested more of the existing clinical data than were originally agreed to for our heart-failure specific submission, also potentially requiring the additional review time.

We provided the data for both programs as requested and we continue to work productively with regulators to bring these innovative medicines to the patients that need them as soon as possible.

For Repatha or Evolocumab our coronary intravascular ultrasound study, which is critical for the product, has completed enrollment.

And our outcomes study continues to enroll very well.

We're also working closely with regulators on our filings.

We will also be presenting some new analyses from our Evolocumab clinical program at the upcoming American College of Cardiology scientific session, including analyses of cardiovascular events in our ongoing open label extension studies.

AMG 334, our CGRP receptor antibody, performed very nicely in a Phase IIB dose ranging study, with patients with episodic migraines, resulting in our decision to move aggressively into Phase III later this year.

These data will be presented at the scientific forum in the first half of this year.

The Phase IIB dose ranging study in chronic migraine is currently enrolled.

We feel AMG 334 has a clear potential to be a best in class agent for migraine prophylaxis with a favorable dose and schedule as a result of blocking the receptor rather than the ligand.

We generated positive data from three Phase III psoriasis studies of Brodalumab, our IL17 receptor antibody, in 2014, including two studies that demonstrated superiority to Stelara, and we and our partners at AstraZeneca plan to file this data later this year.

We also expect Phase III head-to-head data for AMG 416, our intravenous calcimimetic, against Sensipar in the first half of this year.

This year we will also be reviewing the results of our Phase IIB study with the oral formulation of AMG 423, or omecamtiv mecarbil, the innovative cardiac myosin activator we are developing with Cytokinetics.

These data will be critical in informing our decision on advancing AMG 423 into Phase III.

Turning to our oncology pipeline, in addition to our T-VEC combination study with Ipilimumab, we've initiated a combination metastatic melanoma study with T-VEC and Merck's PD-1 antibody, and are in the planning stage for additional such combination checkpoint inhibitor studies in other tumor types.

We presented BLINCYTO phase II data for both minimal residual disease positive patients with ALL and our pivotal relapsed refractory study in ALL at ASH, along with Phase II data from our lymphoma study.

We also presented data from Vectibix Phase II PEAK study and Phase III PRIME studies supporting our approval for first-line use with FOLFOX in metastatic colorectal cancer at the ASCO annual meeting and ASCO Gastrointestinal Cancer Symposium.

And we terminated our Trebananib program directed against the angiopoietan axis in recurrent ovarian cancer, as well as our rilotumumab program directed against the MET axis in gastric cancer due to disappointing results.

Our recently announced collaboration with Kite Pharma on CAR-T cell technology complements our existing BiTE and oncolytic virus platforms broadening our overall immunotherapy capabilities.

We have a very robust antigen discovery program at Amgen and the Kite collaboration provides another modality we can employ against these targets in both liquid and solid tumors.

Our biosimilars programs are advancing with Phase III data for our Humira biosimilar in moderate to severe rheumatoid arthritis, expected this quarter, and Phase III data for our Avastin biosimilar in advanced non-small-cell lung cancer, expected in the second half of this year.

Finally I'd like to recognize the strong execution of the R&D organization in delivering for patients.

2014 was an unprecedented year for Amgen in terms of the volume of pivotal data and regulatory submissions with multiple clinical and regulatory milestones ahead of us in 2015.

Bob?

Okay thank you, Sean.

All right, Marvin, I think we are ready for Q&A if you would like to remind our callers of the process for the question-and-answer session, please.

(Operator Instructions).

Matthew Harrison, Morgan Stanley

Great, everyone thanks for taking the question.

So, I have two things I want to ask.

First on Neupogen, I think in the past you've talked about having single-digit share, it sounds like it's double digits and if I look back on some of the other quarters where you have given us unit growth, the second and third quarter you were down maybe 7 to 8 percentage points in unit growth and you have grown to 11.

So I am just wondering what's happening there?

Are you seeing additional traction from competitors?

And separately, can you just comment a little bit on FX?

I know you're keeping your guidance in light of increasing FX, just walk us through from a top line and bottom line perspective any hedging that you do and any offsets that you have there.

Thanks.

Okay sure Matt, why don't we take that two-part question in two parts.

We will start with Tony and then David can answer your FX question.

This is Tony.

Some of the discussions we had in the past have referred to Granix's market share as a percentage of the overall Filgrastim market which was in the low single digits.

This quarter we have actually split it out for you, both the short acting and long-acting, so there's been no dramatic change in the fourth quarter.

The same trend has continued as we've seen throughout the year.

And the FX David?

Sure.

So framing the FX question, a couple of context points.

One is Amgen has about 75% of its sales currently are in the US and 25% are non-US, so vis-a-vis other global companies we have a relatively more limited level of exposure.

Secondly we have a three-year rolling hedge program so we're able to significantly offset in the short-term, foreign exchange movements either plus or minus.

If you then look at where we are in terms of rates on a current basis, if you look at the year-over-year effect on revenue if we were to stay at the current exchange rates through the balance of 2015, that would have about a $250 million impact unfavorable year over year so about 1 percentage point on revenue.

And about $0.05 a share versus what we've given as our original guidance.

So with that in mind we felt that it would be appropriate, given the range that we are working with and other developments, that we felt it appropriate to maintain our existing guidance despite those potential headwinds.

Mark Schoenebaum, Evercore ISI

Hi guys, thanks a lot for taking my question.

If I might for Sean on the migraine antibody 334, I noticed during the prepared comments you said you thought you may have a better dosing interval or schedule than competitors.

I think Teva -- that are targeting the ligand -- and I think Teva also has a Q-monthly dose ongoing.

So I was wondering maybe if you could expand on your rationale for that statement if possible Sean, please?

And then also the filing strategy for that molecule, can you discuss what the FDA requires for episodic versus chronic if those need to be linked in the filing or if you think you can do it separately.

Thanks so much

I think, I don't know the details of course of the Teva program beyond what's in the public domain, but the bottom line is it's just the science here is very clear in terms of the relative potency of these approaches.

And this has been true kind of on first principles, it is true in animal models, we're seeing the same thing in clinic.

So it's likely that that is difficult to overcome, a receptor antagonist is just a more efficient and potent way to address this particular biology.

And I think that will translate into situation where the amount of drug that has to be administered, presumably subcutaneously, will be an issue for the clinical approach profiles and I expect us to have the most favorable profile with respect to that just basically on those principles.

We'll see how it plays out, but that's what I would expect.

We haven't had our end of Phase II discussions with the agencies yet.

We just consolidated quite recently.

It's clear that both episodic and chronic migraine are separate regulatory entities in that you can have an approval, for example Botox is approved in chronic and not in episodic; you can have separate approvals.

Whether the programs can be prosecuted together with some kind of efficiencies and how to coordinate those activities is something that we will be exploring with regulators.

So it's a good question we just don't have the advice from those type of interactions yet.

Eric Schmidt with Cowen and Company

Thanks for taking my question.

Another one for Sean, it sounds like you are getting fairly deep in the FDA review process for Corlanor, T-VEC, and even Repatha.

Have you been informed for any of those three molecules that you'll need an ad comm prior to approval?

We had discussions with the agencies about the possibilities of ad comms, generally speaking when you are doing innovative new mechanism work in the United States the default would typically be to have them.

But we always agree with the agency not to disclose anything about their intentions until they are in the federal register so we can't comment on the direction they are going with those right now.

Thanks.

Michael Yee, RBC Capital Markets

Thanks for the question.

Obviously topical on mind is a lot of context around pricing and what managed care is doing these days.

So to the extent you have a multibillion-dollar product in the future, maybe you could comment to us on how discussions with payers works with that type of molecule, pre-outcomes versus post outcomes and so-called value or not value of so-called exclusive contracts.

Maybe you can offer some perspective around those debates?

Thanks Michael Tony will address that question.

Michael, so Amgen sees both payers and providers as being essential parts of our customer base and we interact with them on a daily basis both about our products and about the contracts with our products.

The payers often request information about Amgen's investigational products in anticipation of upcoming launches so they can make coverage decisions.

In these situations appropriate personnel from our medical team respond to the inquiries in a balanced, scientifically rigorous manner consistent with the FDA guidance.

Terence Flynn, Goldman Sachs

Hi, how are you doing?

Maybe just one for me, it's a two-part question.

Just wonder if you can offer your perspectives on the bar for interchangeability following the FDA panel on the biosimilar Neupogen product earlier this month?

And wondering if that's something you'd pursue for your drugs?

And then any thoughts on indication extrapolation for both Humira and Avastin, your biosimilars, and what can you tell us there?

Thanks.

Okay thanks Terrence.

Sean, why don't you get those questions.

I think the interchangeability in the United States is clearly going to take a little bit longer than achieving biosimilarity through a regulatory process and the agency has been pretty clear about that.

I think that all companies, including us, will of course seek to have that kind of status for the product.

It's just a question of what are the rules and guidance and how onerous is it to go through the process of trying to achieve that.

The indication extrapolation is something that we do expect to be the general rule.

There may be exceptions to it but we found generally in Europe that it was the way that things shook out and it is a reasonably scientifically sound concepts to have extrapolation across indications.

But sometimes there are indications in which the pharmokinetic exposure response relationship is not as clear and in those cases some additional data can be required.

Robyn Karnauskas, Deutsche Bank

Robyn are you there?

Yes I'm so sorry.

I am very glad you are not hearing, let it go, because I muted the phone on my daughter singing, Let it go.

I apologize.

[Laughter] We've all heard that.

No problem.

Go ahead.

So one housekeeping.

Is PCSK9 included in your guidance and how do we think about Enbrel given the call you gave going to fourth quarter?

And the big picture question for biosimilars.

There was a company discussing how you haven't had IP around your Humira drug and manufacturing process and that could hurt you on the filing against Abbvie during the 180 day period where you -- they could assert their IP.

How do we think about your filing time lines for Humira and how you decide to protect yourself against filing against the formulation?

Thanks.

Lots of questions in there, Robyn.

Let's see whether we can get those.

First is PCSK9 included in our outlook for the year?

Yes it is.

Second, I wasn't clear what you were asking for on Enbrel, can you rephrase the question?

You said how should we think about Enbrel given the guidance we gave from the fourth quarter, is that right Robyn?

Robyn, did we lose you again?

(Operator Instructions)

By our math Enbrel sales were positively impacted about $200 million this quarter for inventory, so where does the inventory stand for Enbrel versus normal ranges.

That's what I was asking about for the year.

Okay.

So let me answer that one Robyn, it's Tony.

As I said, we think there's about $40 million of additional inventory that happened in the fourth quarter and that $40 million will work its way out of the first quarter but we continue to have very positive views on Enbrel through 2015.

With respect to our biosimilar program for Humira and the other molecules that we're seeking to advance.

The other eight molecules, we are obviously very attentive to the intellectual property and the statutes that exist to enable us to advance the biosimilar program, and you should expect we'll be compliant with those statutes and we provided the guidance that we think we'll be launching our first biosimilar by 2017.

Does that mean you will file ahead?

Thank you, sorry.

Let's take the next question please.

Ying Huang, Bank of America

Thanks for taking my question.

First one is, to what extent does your 2015 guidance bake in the potential biosimilar competition for Neupogen?

And then will your litigation against Novartis Sandoz delay or even prevent marketing of Zarxio?

And then another question is for your PCSK9 Evolocumab, during your discussion with the payers would you actually go down the path of pursuing exclusive formulary against the other payer?

Thank you.

Let's take that in 2 parts.

Why don't I take the first part.

Our 2015 guidance includes our expectations across the product portfolio including the prospect of competition for Neupogen.

With respect to your specific question about the lawsuit versus Novartis and Sandoz, their subsidiary Sandoz, we're not going to speculate on the outcome of that litigation, as you know that's going to make its way through the courts.

And Tony if you want to address the PCSK9?

I mean, I don't think we're going to be talking about our rebating strategy or contracting strategy at this particular stage.

We come to market with a drug that has a unique and definitive value proposition.

We'll price it accordingly and obviously the rebating contracts are essential to get a preferred position on the formulary.

Marvin, let's take the next question, but before you do, I would like to request that everybody limit themselves to one question just to be sure we can get through with everybody that's lined up.

Let's go ahead with the next question, please.

Geoffrey Porges, Bernstein

The question, David, could you just comment on your tax rate guidance?

For the last 2 years you've kind of had a windfall in the fourth quarter from the reinstatement of the R&D tax credit.

Could you give us a sense of what your full-year tax rate guidance would be if we assume that the R&D tax credit was indeed reinstated?

Sure.

So, if you look at the impact on an annual basis of the R&D tax credit it's about 1 percentage point for Amgen, so hence this quarter the gross positive impact was about four points which then netted to 2 1/2 points as I mentioned in the call.

But I think at from a planning perspective we said 18% to 19% for 2015 ex-R&D, so that would be 1 point less if the R&D credit were to be approved again this year.

Thanks very much.

Matt Roden, UBS

Great, thanks very much for taking the question.

Tony you mentioned your confidence in Enbrel outlook for 2015.

Can you talk a little bit about the dermatology and rheumatology market share, where it stands, how it's changed on a year-on-year basis, and how you would expect Enbrel could be potentially impacted by the IL-17 launching in derm.

Okay.

Sure.

As you've seen over the last couple of years the market continues to grow double digit, Enbrel has been losing market share in both rheumatology and dermatology.

From an actual unit perspective we continue to show positive year end growth and we're in a position to drive some of the pricing in the marketplace.

From a derm perspective we take all competition seriously.

But Enbrel, as you know, has been in the market for 13 years now, and when you are treating psoriasis it's a long-term chronic disease; and then both efficacy and safety are important for patients.

And patients do switch backwards and forwards.

So we continue to see a clear place for Enbrel in the marketplace in spite of the new competition.

Cory Kasimov JPMorgan

Good afternoon guys and thanks for taking my question.

Following up on this Derm subject, this morning we heard Novartis talk a lot, at least relatively speaking, about the potential of Cosentix and the IL-17 pathway.

So can you remind us of the differences you see between it and Brodalumab and how you see that competitive dynamic playing out there?

Thanks.

Sean, why don't you field that question.

I think that the data that we generated with Brodalumab will be included in our filing, both head-to-head to Stelara and in placebo-controlled trials, have generated the best skin clearance data that has existed for any agent that has been tested in the disease.

Now that said, we don't obviously have head-to-head data against the other IL-17 molecules.

But I think that the general impression that the experts in the field that look at the data sets have, is that the efficacy of Brodalumab is unmatched in the class so far with the data that's been generated.

So I think that's probably the key kind of differentiating.

Remember this, of course, is a receptor blocking antibody rather than a ligand sequestering.

We know there are multiple ligands for the receptor so it is possible that one would see differences in efficacy.

That was always our hope was that this would be the most efficacious approach to this particular axis.

So, we'll have to get all of our data packaged together into a label and obviously, Tony could talk about the competitive environment.

But my sense is there may be some differentiation largely on efficacy.

I think we'll see once we see the labels of all products in the marketplace.

Yaron Werber with Citi.

Thanks for taking my question.

I have a question sort of on the EPO franchise.

Roche is now currently testing Mircera at various clinics, sort of what Affymax did back in the days, and Hospira just filed their generic EPO for approval.

So can you just remind us your agreement with DaVita does it, if I remember correctly, guarantees them the best price in the market for EPO based on share for 2018?

If you don't mind refreshing us on that.

And then just your thoughts on what happens for biosimilars when you're looking at two different indications like CKD dialysis and oncology?

Is that something they can get a single label across all three diseases?

Thank you.

Let me answer those questions one by one and probably have Sean take the last one.

From a contract perspective we haven't made the details of our contract with DaVita public but the contract is an exclusive contract which extends to 2018.

As regards to Mircera, we understand from public statements that Roche has said that they have made the product commercially available.

We have not seen any impact on our business yet as regards to Mircera entry to the marketplace.

Sean?

Again, it will differ case-by-case by different molecules, what the agency holds as the approval standards.

In general again, the default would be indication extrapolation but it won't be true in all circumstances.

Josh Schimmer, Piper Jaffray

Thanks for taking the questions.

I was hoping you could discuss the expected cadence of adoption and eventual penetration levels you would be looking for the new Neulasta auto-injector and for Corlanor into their respective markets.

Thanks.

On-body injector.

He's asking the penetration for the on- body injector for Neulasta.

And then for Corlanor penetration.

Let me take those two together.

As we look at the marketplace we know that there are a number of patients that really struggle to come back for injections of Neulasta post-chemo, including patients who received drug on a Friday.

We estimate, I think, patients get in the region of about 4.4 cycles per chemo, which is way beyond what it should be.

So it's a fairly large group of patients who'll benefit definitively from access to the on-body injector.

We'll be launching this in the not-too-distant future and be looking to switch as much of the business as possible to the injector.

When I think about Corlanor -- Corlanor, as you know, is an interesting product that will be used as an add-on to existing standard of care.

Irrespective of what the standard of care is, the product will augment the value and help manage patients with heart failure.

We know exactly where the heart failure clinics are and we know how large the unmet medical need is.

The cardiovascular teams that are presently in place are busy segmenting the market as we speak.

Geoff Meacham Barclays

Hi guys, thanks so much for taking the question.

Sean, I have a couple related ones on Kyprolis.

When you look beyond the label expansion, would you say that ENDEAVOR represents the next inflection point for the product?

And does recent data at the ASH meeting change your view on the hurdle for that study or other head-to-head studies?

Thank you

ASPIRE was of course really an important study for the molecule in and of itself and it performed as well as we could reasonably expect.

Always the question has been, how they compare head-to-head to Velcade and I think it never will be the first example of that question.

And then of course we'll see CLARION which will look at that same question in the first-line setting.

I think we continue to have the same point of view that we've had since we acquired Onyx, and even before we acquired Onyx, is that we believe that Kyprolis is the best in class proteosome inhibitor and so we are looking forward to seeing the results of these studies over time.

Thank you.

Chris Raymond, Robert Baird and Company

Thanks.

Wanted to just expand a little bit on your comments to an earlier question on the ESA franchise and specifically on EPO.

I know you guys have talked pretty openly about the Fresenius pilot program going on right now.

But it seems from what they are saying that they are moving on pretty quickly here.

I can't imagine you'd want to talk about specific customer discussions, but given that they're such a big player in the US, I wonder if you could frame the situation for us.

I know it's probably within the realm of your guidance but, come July 1 is there any scenario perhaps where you might want to revisit what your thinking is on Epo and just put some brackets around the range of outcomes here.

Thanks

This is Tony.

The guidance we gave in October included the knowledge that Mircera will be coming to market.

We have competed with Mircera in the European market now for about 5 years and they hold between 8% and 10% of the marketplace.

As I said we saw no impact yet at all our business in the fourth quarter of 2014.

Eun Yang, Jefferies

In 2011 you guys expected total Denosumab sales to be around $3 billion to $4 billion in 2015 and current sales and run rate are tracking below $3 billion, so can you comment on what changed sort of your vision or expectation?

Sure we'll take it in 2 parts, Eun.

Obviously, as you know, we are pleased with the progress we are making with Denosumab both in the Prolia setting for osteoporosisand of course Xgeva in oncology.

I think the international pricing took longer than we thought for Prolia.

So if anything has changed since the original guidance it was that, but fundamentally we still think this is going to be a big product and its continues to grow the way Tony described.

Tony, I will invite you to elaborate on the outlook for Prolia and Xgeva from there.

As we continue to watch the marketplace and look at the new naive or bio naive patients, our market share on new patients is to drive consistently continually higher than our normal TRx share.

We see our share of new patients at about 30% of the market and our actual in market share of about 19% in the US.

So as you extrapolate those two, there continues to be room for growth as these patients move in and get their second and third injections.

Furthermore the long-term safety and efficacy data continue to be very encouraging for the product, so we continue to think this is a source of growth in the way we outlined earlier in the call.

We now have our eighth year of safety data in the label, just confirming what Bob just said.

Ravi Mehrotra.

Credit Suisse

Thanks for taking my question, which regards biosimilars.

Given your relatively unique position as being both the hunter and prey, I would be very interested in your view on the defense mechanism of the originators from a regulatory and legal perspective.

And then flipping that on its head, how your biosimilars programs could circumvent these defense mechanisms and link to that very specifically.

On Humira there's been a little bit of chatter on the frequency of dosing patterns that Abbvie has, your comments on that as a defense mechanism would be appreciated as well.

Ravi, I guess a couple points.

First we've said for some time we thought there was benefit for both our innovative products and our new potential biosimilar products that we participate in both aspects of the market.

So through time, what we have found is we continue to learn about our own innovative process development efforts et cetera by the virtue of the work we're doing in our biosimilars program.

I think our dialogue with the regulators around the world is enhanced by the fact we are recognized to be both an innovator and a Company that is seeking to advance biosimilar molecules; so we're continuing to work both sides of this.

As you know we have nine biosimilar molecules that are advancing successfully through the clinic and we continue to believe that this will be a large revenue opportunity for us.

So again, with respect to any individual program, the biosimilar to Humira in particular, as you know we generated positive Phase III data already.

We added on this call that we expect another data set early in the year and we look forward to having all of that data and filing that as an attractive biosimilar alternative to proprietary adalimumab.

We think we are in good shape there and we look forward to having the data and being able to file with the regulators.

Marvin as we're going past the hour, why don't we take two more questions.

Ian Somaiya, Nomura Securities

Thanks, just a question on the biosimilars, maybe more specifically on potential for interchangeability.

I think you had mentioned a couple of weeks ago that the FDA might require switch studies in the originator drug to the biosimilar drug to get comfortable immunogenecity and potential for immunogenecity.

I was wondering if there any other clinical trial requirements that you feel the FDA could place before allowing a drug to get interchangeability.

This is Sean.

I think that the agency is still very much working internally on their thoughts about interchangeability.

That's the sense I have, they have not put out the same level of clear-written guidance that they have, for example, for achieving biosimilarity.

I think they are in discussions about this with various sponsors.

And the switching issue is one that they have identified and that makes certain first principle sense.

It's hard for me to speculate really about what other requirements they might put in place beyond demonstrating that it is possible to switch patients back and forth between the agents without any untoward effects.

Howard Liang, Leerink

Thanks very much.

I have a question on the proteasome inhibitor franchise.

With regard Takeda's Ixazomib, my understanding is they will likely report data sometime this year.

How do you see it impact Kyprolis and then how you feel about your own oral protease inhibitor, Oprozomib?

This is Sean.

I think we're interested in pursuing Oprozomib as an agent that may deliver a level of efficacy in a chronic maintenance setting, particularly that would be above and beyond what we are imagining is going to come from the Takeda product.

I think these are difficult molecules to develop, this oral molecules, because of the GI toxicities that can be associated with them; so there is dose limiting toxicity.

It can be difficult to manage around that.

We're working on that problem.

Tony obviously would be the appropriate person to comment on the competitive environment.

When we think about multiple myeloma we are talking about a disease that patients will die from and they are facing -- every single physician and patient in the setting thinks about efficacy first and our belief and commitment to Kyprolis has been around the deep science of this product and we truly believe will be the best in class in this category.

I think our ability based on the ASPIRE data and potentially other data coming to show the definitive improvement on progression-free survival with regimens including Kyprolis, stand us in very good stead to maintain a large part of the market.

Excellent.

Thank you Tony.

I would like to thank all of you for your participation in our call this afternoon.

Of course, if you have any follow-up questions or comments the investor relations team will be standing by.

Thanks again.

Ladies and gentlemen this concludes Amgen's fourth-quarter and financial results conference call.

You may now disconnect.