美國安進 (AMGN) 2015 Q1 法說會逐字稿

Hello, my name is Brian, and I will be your conference facilitator today for Amgen's first-quarter 2015 financial results conference call.

(Operator Instructions)

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

Mr. Sood, you may begin.

Okay, Brian, thank you.

Good afternoon, everybody.

I'd like to welcome you to our conference call to review our operating performance for the first quarter.

After you've had a chance to assess our performance, I think you will concur -- you will agree that we are off to a great start.

To further discuss our performance today, our Chairman and CEO, Bob Bradway, will lead the call.

Bob will provide a brief overview of our strategic and operational progress followed by our CFO, David Meline, who will review our Q1 results.

Following David, our Head of Global Commercial Operations, Tony Hooper, will discuss our product performance during the quarter, followed by our Head of R&D, Sean Harper, who will provide a brief update on our pipeline.

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.

Good afternoon, everyone, thank you for joining our call.

As you can see from our results we're off to a solid start so far in 2015.

And our performance during the quarter is a good indication that we are on track to deliver our long-term objectives as well.

Financially, we delivered a strong quarter really across the board.

Our US business delivered 15% growth, and internationally, we were up 10% at constant currency.

Product performance was solid across the portfolio, and I was especially pleased with the strong growth we delivered for Prolia, XGEVA, Kyprolis, Enbrel and Vectibix.

Heading into the balance of the year, we have good momentum in our base business, and Tony will have more to say about that in a few minutes.

Our earnings growth of 33% reflects the benefits of our transformation initiatives and our discipline in controlling expenses ahead of the launch investments that we will make later this year.

As David will share, based on this strong performance in the quarter, we are raising our 2015 earnings guidance.

With the Corlanor approval last week, we are excited to bring the first new heart failure medicine to the market in the US in almost a decade.

Corlanor was approved to reduce the risk of hospitalization for worsening heart failure in patients with chronic heart failure, which as you know is a significant economic burden on our society.

Through Corlanor, we look forward to establishing our presence in the cardiovascular field as we prepare to launch Repatha later this year.

In addition to Corlanor, we're launching BLINCYTO for patients with relapsed refractory acute lymphoblastic leukemia, and our Neulasta on-body injector, which addresses a real clinical problem with an innovative solution that enables the administration of Neulasta the day after chemotherapy.

R&D as you know is a core focus of Amgen, and our pipeline continues to deliver results that position us well for future growth.

We reported a third successful Phase III study for AMG-416, an intravenous calcimimetic for use in kidney disease, and a second successful Phase III study for our lead biosimilar product adalimumab.

In oncology, Kyprolis delivered impressive results showing a doubling of progression-free survival versus bortezomib in relapsed multiple myeloma patients in our ENDEAVOR study, and of course, these data come on the back of the unprecedented progression-free survival data that were generated in our ASPIRE trial.

Kyprolis is currently under accelerated review in both the US and Europe for multiple myeloma patients who've relapsed, and we are excited with the opportunity to bring this important medicine to many more patients globally.

Sean will speak more about progress in our pipeline in a few moments.

In summary, there's a lot to be pleased about with our progress so far this year.

Our strategy is working, and it's delivering results.

We're executing effectively across the Company, controlling the things that are ours to control.

Our focus and priorities have never been more clear.

Our launches are proceeding well, and we are ready to launch Repatha later this year.

We continue to grow key products including Enbrel, Prolia, XGEVA, Vectibix, Sensipar and Nplate.

We have strong momentum as we defend our base business against new competition, and our transformation efforts are delivering efficiencies and cost savings across the Company.

And we are being very disciplined about capturing them.

Finally, we continue to advance our robust pipeline of important medicines, setting the stage for long-term growth.

Before I hand it over to David, I would like to thank my Amgen colleagues, many of whom are listening to this call, for their unwavering commitment to delivering for patients and for shareholders.

David?

Okay, thanks, Bob.

Turning to the first quarter on page 5 of the slide deck, revenues at $5 billion grew 11% year over year with 12% product sales growth, driven by continued momentum across our product portfolio.

Total revenue and product sales were impacted 2% unfavorably due to foreign-exchange headwinds.

Adjusted operating income at $2.4 billion grew 32% from prior year.

Adjusted operating margin improved to 50% for the quarter, reflecting strong growth and continued progress from our transformation initiative.

On an adjusted basis, the cost of sales margin at 15.1% improved by 0.6 points, driven by lower royalties and higher average net sales price offset partially by product mix.

Research and development expenses at approximately $850 million were down 14% versus the prior year.

R&D spend was favorably impacted by the transformation and process improvements across the area.

SG&A expenses were flat on a year-on-year basis, as increased commercial investments in new product launches were enabled by savings from transformation and process improvement efforts.

Total operating expenses declined 3% year on year and 22% sequentially.

This performance reflects the combination of the first quarter being typically the lowest expense level during the calendar year plus a share of the $400 million of incremental savings expected during 2015 from our transformation initiative.

Going forward, we expect quarterly expenses to increase in line to modestly above historical trends, reflecting increasing launch and R&D investments through the balance of 2015.

Other income and expenses improved 9% on a year-over-year basis and $146 million in the quarter.

The adjusted tax rate was 17% for the quarter, a 1.6 point increase versus Q1 of 2014.

This increase was primarily due to the unfavorable tax impact of changes in the geographic mix of earnings, partially offset by a state audit settlement in the quarter.

As a result, adjusted net income and adjusted earnings per share increased 33% on a year-over-year basis.

Turning next to cash flow and the balance sheet on page 6. For the first quarter we generated $1.2 billion of free cash flow, an increase of $0.2 billion over the prior year.

This increase was primarily driven by higher sales and profitability.

Total debt outstanding ended Q1 at $30.3 billion, and cash and investments totaled $27.1 billion.

Additionally, our first quarter 2015 dividend increased to $0.79 per share, an increase of 30% versus the prior period.

Finally in the first quarter of 2015, we increased our share repurchase activity with over $450 million of share repurchases or approximately 3 million shares in the period.

We intend to continue repurchases at a stepped up level in 2015, consistent with the commitment to complete up to $2 billion of repurchases by the end of the year.

Turning to the outlook for the business for the remainder of 2015 on page 7. We remain on track with our plans to continue supporting growth of the business while transforming to a more agile and efficient operating model.

With regard to our updated outlook for 2015 revenue, we are raising the bottom end of the range, resulting in a revised guidance of $20.9 billion to $21.3 billion for 2015.

This reflects solid revenue performance in the first quarter partially offset by the effects of foreign currency headwinds which will exceed $200 million for 2015 at current rates versus our original planning framework.

Versus 2014 results, we expect over a $300 million revenue impact or 2% in 2015 at current foreign exchange rates.

Our revenue guidance also reflects progress on our product launch activities, as well as our latest view of the evolving competitive dynamics.

We're also increasing our 2015 earnings-per-share outlook to $9.35 to $9.65 from the previous $9.05 to $9.40 forecast.

The increased earnings outlook reflects continued conviction in our strategy and strong first-quarter performance along with an incremental expected headwind of $0.05 per share from foreign exchange.

Versus 2014 results, we expect a $0.12 EPS impact in 2015 at current foreign-exchange rates.

We would also expect our quarterly tax rate to increase throughout the balance of the year to be more in line with our guidance range of 18% to 19%, which as a reminder excludes the benefit of the federal R&D tax credit in 2015.

Finally, we continue to expect capital expenditures of approximately $800 million this year.

This concludes the financial update.

I will now turn the call over to Tony.

Thank you, David.

Good afternoon, folks.

You will find the summary of our global sales performance for the first quarter on slide number 9.

I'm pleased to report that we are off to a strong start in our first quarter of 2015.

We saw excellent execution across all aspects of our commercial strategy, launching products, growing our newer products, and defending our mature in-line brands.

Globally, product sales grew 12% year over year.

As Bob mentioned, our US business delivered outstanding results with 15% year-over-year growth.

And our international business grew 10% year over year, excluding the negative impact of foreign exchange.

Let me first update you on our new product launches.

In the US, our recent launches of BLINCYTO for acute lymphoblastic leukemia and the on-body injector for Neulasta are going very well with positive feedback from healthcare providers.

BLINCYTO as you know was approved in 2.5 months by the FDA, underscoring the unmet medical need in ALL patients.

We are seeing a broad acceptance of the product with orders from most major institutions and good reimbursement access.

We launched the on-body injector for Neulasta during quarter one.

Patients no longer have to return to the hospital 24 hours later after their chemo.

The on-body injector simply infuses Neulasta at home.

While still in the early phases of our launch, we have seen good breadth of prescribing with about 800 accounts ordering product to date.

And last Wednesday, we received the approval for Corlanor to reduce the risk of hospitalization in patients with chronic heart failure.

Corlanor is the first new medicine for chronic heart failure in the US in almost a decade.

Heart failure is a common condition that affects nearly 6 million people with annual costs of over $30 billion in the US.

The majority of these costs are related to hospitalizations.

And we at Amgen estimate that as many as 1 million patients could be candidates for Corlanor therapy.

Since our approval last week, our manufacturing team have worked through the weekend printing labels, packaging product and made our first shipment to wholesalers yesterday.

Product will be in pharmacies later this week, and our sales force are trained and in the field.

We are excited about the opportunity and ready to bring this innovative new medicine to cardiologists and patients.

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

On slide 12, you will see that Enbrel delivered strong growth of 13% year over year, primarily driven by price.

Segment growth remained strong in both rheumatology and dermatology, growing 23% and 30% respectively.

Competition continues to intensify, particularly in dermatology, where Enbrel has lost 5 points of value share over the last year but still retains 27% share.

Enbrel continues to be a logical choice for patients starting treatment with a biologic.

On slide 13, you will see that sequentially Enbrel sales declined 17%.

Units declined 7%, reflecting normal Quarter 1 seasonal patterns, and price growth of 9%, and there was a 17% unfavorable impact on inventory.

You may recall from our conference call in January that wholesale inventories ended 2014 at a higher than normal level by about $40 million, and we expect the level to return to normal in quarter one.

However in the first quarter, the days on hand dropped to the low end of the range.

Additionally, revised prescription data revealed that there was a modest end customer buy-in in the fourth quarter, which then burnt off in quarter one.

To summarize, in quarter one, the lower than normal wholesale inventory level, coupled with the end customer burnoff, negatively impacted sales.

We expect Enbrel to deliver significant growth in 2015, and as we have said before, we remain committed to Enbrel becoming a $5 billion brand.

I will move now to Prolia.

Prolia delivered 39% growth year over year, with 30% unit growth in the US and 44% in international.

Over the last year, Prolia market share grew 3 percentage points in the US and about 4 percentage points in Europe.

This performance is driven by a program to support access, improve adherence, along with direct-to-consumer marketing in the US.

Prolia is now capturing one in three patients starting postmenopausal osteoporosis treatment in the United States.

As you can see from the March prescription data, the expected Q2 pickup is underway.

XGEVA continued its solid performance with a 22% growth year over year.

US unit share increased 4 percentage points over last year, and in Europe, unit share increased about 7 percentage points.

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

Over time, Vectibix has received expanded indications into earlier lines of therapy in metastatic colorectal cancer in both the US and Europe.

This delivered an 18% year-over-year growth with exceptionally strong unit demand.

We've also recently received an additional first-line indication in combination with FOLFIRI in Europe.

Let me now turn to Kyprolis, which delivered year-on-year growth of 59% and quarter-over-quarter growth of 19%.

In the US, we received priority review for label expansion into second line, based on the ASPIRE data with a late July PDUFA date.

We have submitted application in Europe, and it is currently under review.

These data, together with our compelling ENDEAVOR data, should position Kyprolis as the best-in-class proteasome inhibitor.

Sensipar grew 24% year over year, driven by 14% unit growth, price, and inventory levels compared to quarter one in 2014.

Nplate grew 12% year over year with strong unit growth in all regions across the world.

Now I will turn to our mature brands, starting with the filgrastim franchise.

Neulasta delivered year-over-year growth of 4% in the first quarter, driven mainly by price and inventory changes.

As I mentioned earlier, we launched the on-body Neulasta injector during the quarter with very positive feedback from both providers and patients.

NEUPOGEN declined 15% year over year, mainly due to branded short-acting competition in the US.

But strong execution by our US NEUPOGEN team resulted in relatively stable quarter-on-quarter sequential market share in the short-acting market around 80%.

GRANIX share was about 15%, and Leukine about 5%.

We continue to compete account by account and reinforce NEUPOGEN's long track record of clinical, efficacy and safety, as well as our ability to reliably supply patients.

With potential competition from biosimilars expected in the US this year, we will leverage the success we have had in the US versus branded competition, as well as our considerable experience with NEUPOGEN biosimilars in Europe.

Next up is EPOGEN, which had an unusual 16% year-over-year growth in the quarter.

On top of price gains of 7%, EPOGEN's year-over-year growth benefited from a favorable compare to quarter one 2014 where end customers drew down inventory levels significantly.

In addition, quarter one 2015 benefited from favorable accounting and discount adjustments, as well as higher end customer inventories, due to an SKU conversion.

From an underlying business perspective, dosing and hemoglobin levels remain relatively stable, and the unit demand is relatively flat.

Aranesp sales grew 4% year over year for unit growth of 6%.

A portion of this growth reflects the timing of early tender orders in the Middle East versus 2014.

In conclusion, I'd like to firstly thank our Amgen customer-facing teams across the world.

This is a unique moment in our Company's history where we are simultaneously launching, growing and defending more brand than ever before.

I know our team is embracing the Amgen value of competing intensely to win and has a clear focus on delivering value for shareholders, Amgen, and most importantly for patients.

Let me now pass it to Sean.

Thanks, Tony.

Good afternoon.

It continues to be a very busy time for Amgen R&D, and today I'd like to start with our cardiovascular programs, specifically the recent US approval of Corlanor or ivabradine for chronic symptomatic systolic heart failure.

Chronic heart failure is on the rise in the United States and represents a very large and growing healthcare expenditure burden, primarily due to the cost of repeated hospitalizations in these very fragile patients.

In fact, reducing hospitalizations in these patients is a specific focus of many healthcare systems including Medicare.

A resting heart rate of 70 or more appears to be a maladaptive response in the setting of chronically reduced cardiac pump function.

Yet despite the availability of beta blockers, many heart failure patients in the United States maintain such an elevated heart rate at rest.

For these patients, Corlanor's unique mechanism of action may potentially benefit them with respect to reducing their risk of hospitalization for worsening heart failure.

In the large outcome study performed by our colleagues at Servier called SHIFT, that risk was reduced by 26% compared to placebo on top of standard of care including beta blockade.

Obviously reduction in hospitalizations reflects patients doing better overall in terms of their heart failure management.

We are not only thrilled with the prospect of making Corlanor available to chronic heart failure patients in the US, but we also view this as an excellent way to introduce ourselves as a company to the US cardiology community as we prepare for the launch of our PCSK9 inhibitor, Repatha.

Of course, Repatha continues to be a main focus for us, and we were very pleased to see the enthusiasm for this agent at the recent American College of Cardiology meetings in response to the data we presented there and published in the New England Journal of Medicine.

It's quite remarkable to see so much depth of understanding and appreciation of the potential benefit risk profile of a novel mechanism by cardiologists and lipid specialists.

We were also pleased to have filed Repatha in Japan with our partners at Astellas.

The last thing I would like to mention on our cardiovascular portfolio is omecamtiv mecarbil, or AMG-423, the novel mechanism agent we are advancing in systolic heart failure with Cytokinetics.

We look forward to seeing the data in the second half of this year from our Phase II chronic oral strategy, which has now completed enrollment.

Turning to oncology, we were pleased to receive priority review from FDA on our Kyprolis SNDA for relapsed multiple myeloma based on the ASPIRE data, and we look forward to continued interactions with regulators to bring Kyprolis to patients in need.

Also in the relapsed setting, we were quite encouraged by the ENDEAVOR data demonstrating a doubling of progression-free survival in patients randomized to Kyprolis as compared to Velcade.

We look forward to providing the details of these results at ASCO in the Multiple Myeloma oral session on Tuesday morning.

We are also initiating a Phase III study of a weekly dosing regimen for Kyprolis which we feel will be quite important for patients and caregivers.

I'd also note that, during the first quarter, Vectibix was approved in the EU for first-line metastatic colorectal cancer in combination with FOLFIRI and was also granted full approval in the EU.

Turning to T-VEC, we completed the Phase Ib portion of the T-VEC combination study we are performing in metastatic melanoma in collaboration with Merck and their PD-1 antibody Keytruda, and we expect to advance next into the Phase III portion of this exciting study.

We're in the final planning stages of the similar Phase Ib III study in head and neck cancer with Merck and Keytruda as well.

Clearly the vast majority of the potential value of T-VEC lies in priming the immune system in combination with checkpoint inhibitors and other mechanisms that modulate the immune system's discrimination between self and non self.

We continue to explore such opportunities both within our own pipeline as well as in collaboration with others.

In the meantime, despite the very rapidly evolving therapeutic landscape since the design of the T-VEC monotherapy study in melanoma, including the approval of multiple agents with proven overall survival, we continue to believe that it is important to make T-VEC monotherapy available to the patient segments in which meaningful rates of durable response were observed in Phase III.

We therefore look forward to our discussions on this topic at the FDA advisory committee meeting scheduled for April 29.

Finally, we have decided to stop administration of blinded investigational product in the Phase III study of trebananib in first-line ovarian cancer based on a recommendation by the Data Safety Monitoring Committee, who deemed the study unlikely to achieve its primary PFS endpoint.

In the inflammation space, our Phase III psoriasis data from brodalumab, our IL-17 receptor antagonist, was very well received at the recent American Academy of Dermatology meeting as we discussed in detail at our Investor Relations event.

For those of you who were not able to participate, in addition to the very compelling efficacy data including superiority over Stelara or ustekinumab, along with an overall balanced safety profile, we did note that we have seen suicidal ideation and behavior in our brodalumab program in these patients known to be at risk for these events.

However, we believe the evidence today does not suggest a causal relationship between IL-17 inhibition and suicidal ideation and behavior.

Data have been provided to regulatory authorities, and we will be discussing it with them on an ongoing basis.

This topic will be an important and appropriate focus of regulators in their analysis of the risk/benefit profile during their review of the applications we plan to file for brodalumab.

Along with our partners at AstraZeneca, we do anticipate submitting this agent globally midyear.

We also recently decided to stop a Phase II asthma study with brodalumab based on futility at a planned interim analysis.

In other areas, our Phase III head-to-head study of AMG-416 versus Sensipar in hemodialysis patients with secondary hyperparathyroidism was positive, and we anticipate initiating global regulatory submissions in the second half of this year.

Our biosimilars programs also continue to advance with positive Phase III data for our Humira biosimilar in rheumatoid arthritis.

We view our migraine prophylaxis program with our CGRP receptor antagonist antibody AMG-334 as a top priority, and we will strive to be both first and best in class in this field.

We expect to present data from our Phase IIb episodic migraine study at the International Headache Society congress next month and to initiate Phase III later this year.

Finally, I'd like to thank the R&D team at Amgen for their continued focus on innovation and execution of our key programs.

In particular, recently it was very nice to see the level of acknowledgment paid to the remarkable breakthroughs in human genetics by deCODE in Iceland celebrated at both the scientific and lay press.

There will certainly be much more to come in this very exciting era of biology.

Bob?

Okay, thanks, Sean.

Before we move to Q&A, let me just repeat that we are focused on executing against a strategy for long-term growth that we laid out during our business review meeting last October.

We are successfully executing on our new product launches, while continuing to grow key products such as Enbrel, Prolia, XGEVA, Vectibix, Sensipar and Nplate.

Of course, we continue to advance our robust pipeline as you heard from Sean, and our transformation efforts are delivering efficiencies and cost savings which we are capturing across the Company.

This quarter's results prove to us that we are delivering progress against our long-term objectives.

And with that, we would like to take your questions.

Brian, do you want to remind our callers of the procedures for the Q&A?

(Operator Instructions)

Geoffrey Porges from Bernstein.

I will try and be brief.

There've been some questions about a partnership to support the launch of Repatha.

It seems as though it's a fairly late hour, but is that something you can now help us rule out definitively, given that you have a pretty short interval into the launch?

Thanks.

Geoff, we are excited about launching Repatha, and we are well along as you say in our plans to launch the molecule.

And we own the rights to this product globally, and we look forward to commercializing it globally.

Of course, we are sharing -- we have a partnership in Japan with Astellas, but otherwise the rights are ours.

Perfect, take that as a no.

Thanks.

Thanks.

Michael Yee from RBC Capital Markets.

Thanks.

You hit on the Neulasta on-body device briefly, but maybe you could give some color as to the launch, how fast you think you can convert and whether or not there is anything else that we should be thinking about as to why that would be different than the NEUPOGEN competition that we saw there and that we can get comfortable with potential competition for Neulasta.

Thanks.

This is Tony.

Let me respond.

Obviously it's pretty early in the launch period itself, but we've seen pretty good uptake across the 800 institutions.

The early debate was around reimbursement and access, and we are locking that down, and then the product starts to move quite fast.

We are exceeding our own internal expectations at this particular stage, and we continue to see very good feedback from patients who really see this as a distinctive and definitive advantage.

Nurses are also very keen to utilize the product and to help patients as they go home, and last but not least, more and more institutions are stepping in to buy product.

We continue to see an ongoing conversion of the business to the on-body injector.

Chris Raymond from Robert W. Baird.

Question on Repatha.

I know you don't want to go too much into the patent infringement case against Sanofi Regeneron, but just noticing that the proposed scheduling order is out there, and it has -- some of the key events, the Markman hearing for example and the jury trial slated for after launch of both of these drugs, I know you've talked about in the past -- in fact you have a press release I think from last year highlighting a potential preliminary injunction: is that still on the table, or how should we think about that given the scheduling order here that is out there?

Thanks.

Thanks for your question, Chris.

We are focused on having this matter reviewed on the merits, and as you point out, we are fortunate that it looks like we are going to be able to do that early in the new year.

So we will look forward to again this being reviewed in its entirety.

And as you know and as we have said before, we feel we have a very strong intellectual property patent estate on this product.

And we demonstrated in the past our determination to assert our IP rights and defend them, and that's what we look forward to doing for this product early next year.

Mark Schoenebaum from Evercore ISI.

Hey, thanks for taking the question.

First, congratulations on all the progress in the last 6 to 12 months on margins and on Kyprolis.

So congratulations on that.

My question is actually on margins in the quarter.

David, you talked about how you printed a 50% operating margin, which is dangerously close to the lower end of the 2018 margin guidance you gave.

And it sounds like you expect that margin to deteriorate throughout this year.

And I was wondering if you can talk through some of those dynamics as the year goes on.

I think your guidance implies a full-year operating margin of maybe 44%, 45%.

Talk about why your guidance implies deterioration throughout the year.

And I recognize this is deterioration from a surprisingly great number this quarter.

Thanks.

Yes, so first of all in Q1 as we said, we are really encouraged by the performance in the business, which was obviously a combination of solid topline growth, as well as the fact that we had very good expense management in the quarter.

If you frame that as to how that evolves through the year then, what I would say is a couple things.

One is we had indicated previously that we expect this year our transformation to deliver about $400 million of incremental savings.

And certainly we saw a share of -- a proportionate share of that already land here in Q1, and those savings will continue pretty steadily through the year.

The second dynamic on cost then is around the cost trends.

In particular if I look at SG&A and the sales and marketing area as well as R&D, we do expect to see rising costs, which is a combination of the fact that we inevitably -- normally for the business, the first quarter is the low point for expenses overall for the year.

But I think importantly for us right now, we do have these launches that are coming up, we do expect to underwrite those launches significantly with this transformation savings, and we do expect the trend of spending to increase through the year.

So I think you have basically framed it correctly as now we are thinking about this evolving in the year.

Mark, not to miss the opportunity to talk about the long-term, as I said and as David said in his remarks, we feel we are clearly making progress towards our long-term objectives, including that margin objective.

Brian, let's take the next question.

Matthew Harrison from Morgan Stanley.

Great, thanks for taking the question.

I wanted to ask one on ivabradine.

You have highlighted potentially a million patients that you think could potentially be candidates for ivabradine therapy.

That's a pretty big market number when you look at how you have priced that at about $4500 on an annual basis and well below where forecasts are.

Can you maybe help us think about either why consensus is too low on ivabradine, or why not all of that patient population you highlight is actually accessible?

Thanks.

So we did the initial analysis based around looking at the number of patients with cardiac heart failure and specifically looking at the subset with heart rates of 70 and above.

And that started to help us hone down the size of the particular market.

The pricing is a pricing that is made based on the value proposition we think that we are bringing to market.

Obviously we come to market for the first time as a cardiology company, and we intend to try and get to as many of those million patients as possible.

Robyn Karnauskas from Deutsche Bank.

Hi.

Thanks for taking my question.

Given the recent outcome of the BPCIA case about the ruling, the first ruling was that you do not have to go through this patent dance, and your confidence in 2017 launch of biosimilar Humira.

Can you help me understand what gives you confidence that the time lines if you were to go through this patent dance won't go longer?

Many consultants say that this could go -- the BPCIA discussion could go for many years beyond like a two-year period or a one-year period.

So help me understand given your knowledge of that process, why it won't take an extremely long time.

Thanks.

Robyn, based on our understanding of the legislation, based on the progress we're making in developing adalimumab, we still expect we will be in position in to launch that in 2017.

And of course with respect to the Sandoz matter, we are expecting that that will be heard in the appeal courts later in the year.

Tony, do you want to add anything?

Basically we're basing the concept on 180 days notice.

So that is the debate of the month.

Once we get to a point in time that we would agree to with Sandoz, they have the right to come to market at risk.

Eric Schmidt from Cowen and Company.

Thanks for taking my question.

Maybe a follow-up to Mike's question on the on-body injector for Neulasta.

Tony, I have no idea how to put the 800 accounts into context.

Can you tell us how many accounts you have in general for Neulasta before all, and is there a target conversion rate that you are hoping to get, say over the next 12 months?

What would you define as a successful conversion, if you could share that with us?

The 800 accounts are about 25% of our large customers.

And we clearly have a target that we are aiming for.

I am not point to be disclosing that at the moment, but we are driving hard to get as much of our business onto the on-body injector as possible.

Thank you.

Terence Flynn from Goldman Sachs.

Hi, thanks for taking the question.

Obviously following the approval of ivabradine and the upcoming approval of, just wondering if you can talk about longer-term thoughts on your cardiovascular franchise because you will be putting a fair number of sales reps behind the other two products, but is there an appetite to continue to add there?

Thanks

It was a little bit hard to hear your question, but I think you were asking about Corlanor and Repatha.

We are excited as we have said to get launched in the cardiovascular field with Corlanor, and we think again an innovative medicine that will require some work to educate the cardiologists about the appropriate use of this medicine with heart failure patients, but we are excited about that.

And we are excited also about the innovative biology behind Repatha and the opportunity for that medicine to make a big difference for patients who are at risk of heart attack and stroke.

So our focus is on those two medicines right now.

To the extent that we have other opportunities to advance innovative biology with big effects in cardiovascular disease, we will look carefully at those.

And as you know, we have one such medicine that is in late stage of development, now which is our omecamtiv mecarbil program which Sean referred to in our earlier remarks.

And those constitute three pretty exciting innovative opportunities for us right now, and if we find opportunities to build on those, we will look at them carefully.

Matt Roden from UBS.

Great, thanks very much for taking the question and congratulations on a very nice quarter here.

Sean, I wanted to ask on the ENDEAVOR trial with Kyprolis that you reported this quarter.

Should we assume that the benefit that you saw with Kyprolis over Velcade was observed in both the Velcade experienced and the Velcade naive patients?

I think the trial allowed both.

Can you also elaborate on differences that you observed in cardiovascular safety between the agents?

And putting it together based on the expert feedback, how do you think these results will impact the standard of care in myeloma here?

Thanks.

Okay.

Few questions in there.

I'd say that yes, we did see a pretty consistent treatment effect of Kyprolis independent of the baseline characteristics of these patients, whether they had experienced transplant before or whether they had been treated previously with Velcade.

The CV safety data, I don't have anything additional to say than the information we put in the press release until we would be presenting at ASCO.

And I do think that this -- my view on it is that while there's always lots of exciting innovation going on in oncology these days, backbone therapies in this particular disease are going to include a proteasome inhibitor for a good long time, and it's becoming pretty clear that the best agent is Kyprolis.

Yaron Werber from Citigroup.

Hi, this is Joel Beatty on for Yaron.

For Repatha, what do you expect the label to look like?

Do expect statin intolerance to be a specific indication on the label or something broader than that?

Of course, it's very hard to predict what regulators will decide to do there.

I think it is possible to write an indication which speaks to patients who are not adequately treated with respect to their LDL-cholesterol response with statins or intolerant to statins.

So if you look at a lot of the recent labeling indications that have been used by the agency, they have this structure.

And that's in my mind the base case what you would expect to hope to get in the various jurisdictions that we're going to be negotiating the labels.

But it's really hard to predict exactly where the language will land.

Howard Liang from Leerink Partners.

Thanks very much and congratulations.

Regarding the FDA panel for T-VEC next week, in recent cases FDA has approved drugs for a narrow indication when the package is less than perfect.

I don't know if it applies in this case, but can you talk about whether there is any population where the risk/benefit is especially compelling for T-VEC?

Also, will you show the new -- some of the new checkpoint inhibitor combination data at the FDA panel?

First question, which implies the package is less than perfect, I think is probably true, that's true of almost everything we do.

And I think in this case, it is clear that the population we are studying in the Phase 3 trial included a fairly broad range of patients with local regional and metastatic melanoma disease.

And if you have seen the data that we've presented in various scientific forums the durable response rates, and the subgroup analyses looking at survival for that matter have the biggest impact in the earlier stages of the disease.

So it is possible that that's where the conversation will go in the advisory committee and with FDA.

But at this point, we do have a positive trial for the whole population that was studied, and so that's the logical place to start the conversation.

And then with respect to the checkpoint inhibitor, all we would be doing at the advisory committee meeting would be to have a slide that will indicate of course the various studies that are going on and going with the product that include the ones I referenced in my prepared remarks as well as certainly being capable of presenting the publicly available data with the ipilimumab combination in the Phase Ib data we have presented previously at scientific forums.

Ying Huang from Bank of America.

Hi, thanks for taking my questions.

First of all, I have a question on your biosimilar Humira program here.

Now that you finished both Phase 3 trials already, what is your timeline for submission plans?

And then secondly, do you plan to seek a broad label including other indications that you did not try in Phase 3?

And quickly for David, R&D cost is coming much faster than SG&A this quarter compared to a year go.

Should we expect that to continue, and is that driven by research or development?

Thank you.

Why don't we break that into two parts.

Sean will talk about the Humira question first.

We do intend to submit Humira later this year, the biosimilar later this year, and in fact, we would be seeking the broader label set of indications through the extrapolation mechanism that is consistent with the current guidance.

David?

Yes.

In terms of the cost savings, what I would first say is that if you look at the savings we expect this year as well as through the whole program, as we have said before, those are savings that are being accrued across all of the areas of cost.

So it's not concentrated in one versus the other.

Secondly, if you look at the particular pattern of savings in the first quarter, what you can observe as I mentioned is that -- and as we have talked before, we are investing freeing up flexibility to invest in our launch portfolio.

So you can expect that a substantial share of what we save in SG&A will be reinvested toward the launches.

And then I think the third thing I would comment as to R&D, that was a combination in the quarter of R&D tends to be rather lumpy in terms of the spend.

So you saw a combination of savings that we are getting from our transformation in the quarter, as well as some of the inevitable lumpiness that occurs from quarter to quarter in that area.

I think bottom line is that we expect going forward through the year to see rising costs, which you typically see in the pattern through the year, but see it a little more accentuated as a combination of rising cost with launch activities, as well as in the case of R&D, we still are continuing to invest in clinical trials.

And we will see some increases there.

And then as to -- if I may, one final comment -- R versus D, as we have talked before, we have done work to look at all the processes across all of our business activities, and so we are seeing efficiencies in both of those areas broadly.

Eun Yang from Jefferies.

Thank you.

Question on romosozumab.

In the STRUCTURE trial comparing to Forteo, is the change in BMD at hip sufficient enough to differentiate it from Forteo, or are you following the patient longer to see a difference in non-vertebral fracture risk reduction?

The studies that are being done with romosozumab versus Forteo are all designed to look at BMD, and as you have seen probably the data that I presented at the business review shows that in fact those differences are quite substantial.

But of course, we are also looking at the quality of bone, and in particular the cortical bone thickness, which we are looking at using fairly advanced imaging technologies.

There is no plan for us to do comparative fracture studies against teriparatide at this time.

Geoff Meacham from Barclays.

Hi.

This is Carter on for Geoff.

Tony, can you provide the NEUPOGEN share of the short-acting G-CSF market for the quarter, and more broadly, what are your expectations regarding potential timing of a potential biosimilar in Neulasta?

I know some biosimilar companies have disclosed plans to file for approval later this year, potentially just on a PK-PD study without a Phase 3 study.

Your thoughts there would be appreciated.

Thank you.

Just to remind you, in fourth quarter 2014, NEUPOGEN's market share was 80%.

First quarter 2015, NEUPOGEN's market share was 80%.

As regard to Neulasta, they come into the market towards the end of 2015 when our patent expires.

Brian, why don't we take one last question as we are getting to the top of the hour.

Cory Kasimov from JPMorgan.

Good afternoon.

Thanks for squeezing me in.

Wanted to follow up on Matt's question regarding Kyprolis, and with the impressive results now in hand for ENDEAVOR as well as ASPIRE for that matter, how do you think about the implications for the frontline CLARION study?

Perhaps more importantly, what does your market research suggest about the relative use of proteasome inhibitors in the frontline multiple myeloma setting relative to later stages of treatment?

Thanks.

Why don't I start and Tony can follow-up.

I think with respect to the CLARION study, which of course is a head-to-head study against Velcade in the first-line setting, we feel that that study has been significantly de-risked by seeing the ASPIRE data and the ENDEAVOR data.

The extent to which you can read through results from ENDEAVOR to CLARION is something people sit around and debate, but certainly we feel good about the likelihood that we will see a favorable result from the trial.

And Tony, do you want to respond?

We've done a fair amount of work, it all comes down again to what the potential outcome of the CLARION trial will be.

But as Sean just said, if we continue the thread from ASPIRE to ENDEAVOR, we assume we will have a positive result versus the competition in the marketplace.

The objective in multiple myeloma is to drive progression free survival for as long as possible before you have to go on to your second and third line.

And therefore, we assume that we will be seeing usage in the first-line too once we got the indication.

Cory, thanks for your question.

As you point out, things are going very well for Kyprolis, and we are excited about the data that we have in hand, as well as the data we may generate.

Thanks for joining our call.

Arvind and his team will be around if there are questions you didn't have a chance to ask on the call, and we look forward to connecting with you on the next quarterly call.

Thanks.

Thank you, everybody.

Ladies and gentlemen, this concludes Amgen's first-quarter 2015 financial results conference call.

You may now disconnect.