美國安進 (AMGN) 2015 Q3 法說會逐字稿

My name is Brian and I will be your conference facilitator today for Amgen's third-quarter earnings 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 would like to welcome you to our conference call to review our operating performance for the third quarter.

Based on our strong results in Q3 I think you'll agree that our business is performing well and we are on target to deliver against our long term objectives and commitment.

I think what's really exciting for us right now is that we are on the verge of a whole new product cycle that is beginning to unfold.

To discuss all these topics and more in much greater detail, our Chairman and CEO, Bob Bradway will lead the call today.

Bob will provide an overview of our strategic and operational progress followed by David Meline, our CFO, who will review our Q2 results and address guidance related issues.

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 an update on recent approvals and our pipeline.

So before I turn it over to Bob, I'll provide my customary comments and reminders.

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 could vary materially.

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

Bob?

Okay, thank you, Arvind.

Let me welcome our listeners to the call.

This is an exciting time at Amgen and once again this quarter it seems we have a healthy dose of information to share with you, so perhaps before jumping in I should provide some context.

Recall that we met with analysts and investors one year ago in New York to layout our long term strategy for growth and our objectives for the next few years.

Since then I'm pleased to report we've made steady progress towards achieving all of those objectives, as you'll hear on this call.

Our strategy for long term growth starts with innovation.

We set as an objective that we would launch six new products this year, and with the approval this week of IMLYGIC, our drug for melanoma, we're now delivering on the promise of those six opportunities.

And of course, we believe that two of these new products, Repatha for cardiovascular disease, and Kyprolis for multiple myeloma, represent particularly significant opportunities for patients and shareholders.

Sticking with innovation I'd like to point out that behind our six new launches, our innovative pipeline continues to advance with rapid Phase 3 progress in our migraine program, strong new data for romosozumab, and a successful Phase 3 program for etelcalcetide in kidney disease.

In addition, as we reported earlier this week, our innovative heart failure program, omecamtiv mecarbil, delivered promising results in Phase 2b testing, opening the prospect of another exciting opportunity for us in the field of cardiovascular disease.

Similarly, our biosimilar pipeline has advanced considerably over the past year with positive Phase 3 data for two of our nine programs, specifically our Humira and Avastin biosimilars, and Sean will provide more details on all this progress shortly.

In addition to delivering on the promise of innovation with our newly launched products we're also delivering strong financial performance across-the-board and making steady progress against our longer term financial growth and performance objectives.

You can see this in our third-quarter results today and in our year-to-date performance.

During the quarter we delivered 14% revenue growth and 18% adjusted earnings per share growth.

Our key revenue growth drivers, Enbrel, Prolia, XGEVA, Sensipar and Nplate, all performed well in the period as Tony will convey in his remarks.

Adjusted earning per share grew faster than revenues, reflecting improved expense discipline and operating leverage even as we invested in our new product launch cycle.

On a year-to-date basis, revenues are up 9% and adjusted earnings per share are up 19%.

Consistent with our long term financial objectives, our operating performance continues to improve as the benefits of our transformation are reflected across our business.

Our 49% adjusted operating margin through the first nine months of the year reflects meaningful progress against our longer term operating margin targets.

And based on our ongoing strong performance, we're once again raising our 2015 guidance as David will explain shortly.

With respect to capital allocation, here too our actions are solidly in line with our commitments.

Consistent with our resolve to return an average of 60% of adjusted net income to shareholders through 2018 with a growing dividend and share buybacks, we expect to increase our quarterly dividend to $1 per is share for 2016, an increase of 27%.

This comes on the back of a 30% increase for 2015.

Also, reflecting on our confidence in the outlook for our business, we recently increased our share repurchase authorization to $5 billion.

As we look towards 2016 we're focused on delivering continued strong performance while advancing our new flow of products.

Obviously we expect to face increased competition for our legacy products, but we've anticipated these changes and put ourselves in position to defend our legacy products while growing our newer franchises.

Given the many variables at play in our business and to help you in your planning we're providing preliminary guidance for 2016, which we'll update when we report our full-year results at the end of January 2016.

Finally, let me remind you that last October we laid out our financial objectives through 2018.

A year later we feel confident we're on track to meet or exceed these objectives.

These include $1.5 billion in savings from our transformation, double-digit adjusted earnings per share growth on average through 2018, and adjusted operating margin improvement from 38% in 2013 to in the range of 52% to 54% by 2018.

Before turning over to David I'd like to thank my Amgen colleagues, many of whom are listening to this call, for their unwavering commitment to deliver for patients and shareholders as we launch new products, expand internationally and continue from a position of strength to transform our Company for a great future.

David?

Okay, thanks, Bob.

Turning to the third quarter on Page 5 of the slide deck, revenues at $5.7 billion grew 14% year over year, with 14% product sales growth driven by continued momentum across our product portfolio.

Other revenues increased $24 million year over year due primarily to a milestone received for the filing of Kyprolis in Japan.

Total revenue and product sales were negatively impacted by approximately 2 percentage points year over year due to foreign exchange headwinds.

Adjusted operating income at $2.7 billion grew 19% from prior year.

Adjusted operating margin improved 2 points to 49% for the quarter, reflecting our continued growth and the benefits from our transformation program, along with significant investment in our launch activities.

On an adjusted basis the cost of sales margin at 13.5% improved by 2.2 points driven by net selling prices, lower royalties, and manufacturing efficiencies.

Research and Development expenses at $1.1 billion, were up 11% versus the prior year.

This increase was driven from upfront payments for deal activity in the quarter and increased investments in support of new product launches.

This increase was partially offset by savings from transformation and process improvement efforts.

SG&A expenses were up 17% on a year-over-year basis, driven by commercial investments in new product launches and Enbrel related payments, partially offset by savings from transformation and process improvement efforts.

Total operating expenses increased 10% year over year and increased 8% sequentially.

For the quarter, operating expenses benefited by approximately 3 percentage points from foreign exchange year over year.

We saw an increase of spending in Q3 versus the prior quarter.

This reflects the typical pattern from the business, plus our launch investments this year.

Other income and expenses declined by $18 million or 14% on a year-over-year basis to a net expense of $147 million in the quarter.

The adjusted tax rate was 18% for the quarter, a 0.9 point increase versus Q3 of 2014.

This increase was primarily due to the unfavorable tax impact of changes in the geographic mix of earnings.

As a result, adjusted net income and adjusted earnings per share increased 18% on a year-over-year basis.

Turning next to cash flow and the balance sheet on page 6. For the third quarter, we generated $2.7 billion in free cash flow, an increase of $0.2 billion over the prior year.

This increase was driven by higher operating income.

Total debt outstanding ended Q3 at $31.8 billion and cash and investments totaled $31.1 billion.

Additionally, our third-quarter 2015 dividend was $0.79 per share, an increase of 30% versus the prior year.

In the third quarter of 2015 we increased our share repurchase activity versus the prior year with $700 million of cash deployed to share repurchases, or approximately 4.6 million shares in the period.

Turning to the outlook for the business for the remainder of 2015 on page 7. We remain on track with our plans to grow the business and invest for the future while transforming to a more agile and efficient operating model, including delivering over $400 million of efficiency savings from the transformation, which is being reinvested this year in the business to fund our significant new product launches.

With regard to our updated outlook for 2015 revenue, we are increasing our guidance to $21.4 billion to $21.6 billion from our prior range of $21.1 billion to $21.4 billion, reflecting solid revenue performance.

Reported growth will moderate as we complete the year, reflecting the expected normalization of relatively high customer inventories as well as the affects of competition on our legacy products.

We are also increasing our 2015 adjusted earnings per share outlook to $9.95 to $10.10 a share, from the previous $9.55 to $9.80 forecast.

The revised earnings outlook reflects our strong year-to-date performance, including revenue growth and lower expenses due to cost discipline.

For the fourth quarter, we expect operating expenses to increase by around $0.2 billion sequentially, reflecting normal spending patterns as well as continued launch investments.

In terms of the adjusted tax rate, our guidance range of 18% to 19% is unchanged and is consistent with our year-to-date adjusted tax rate of 18.4%.

As a reminder, this guidance continues to exclude the possible benefit of the federal R&D tax credit in 2015.

We continue to expect capital expenditures of approximately $700 million this year, in line with our previous guidance.

As we approach the end of 2015, we are pleased with our progress again this year.

We expect to meet or exceed the commitments provided for the 2014 to 2018 period, including double-digit adjusted EPS growth on average, $1.5 billion of transformation savings, improving our adjusted operating margin from 38% to 52% to 54%, and returning at least 60% of adjusted net income on average to shareholders.

Turning to page 8, 2016 will be an important year as we continue progress towards our long term goals.

Given the number of moving pieces including new product launches, currency movements, and US biosimilar competition, as well as the continued evolution of our transformation program, we wanted to provide a preliminary planning framework for 2016.

As you'll note, the framework is generally in line with expectations, while individual components may differ.

In 2016, revenue is expected to range from $21.7 billion to $22.3 billion.

Adjusted earnings per share is expected to range from $10.35 to $10.75 per share.

Our adjusted tax rate is expected to range from 20.5% to 21.5%, and capital expenditures will be approximately $700 million.

I want to take a moment to highlight several key assumptions embedded in our outlook for next year.

First, our revenue guidance range for 2016 includes continued momentum from our growth brands as well as the meaningful contribution from our product launches.

We also assume our legacy products face new biosimilar competition in the US, which Tony will address in more detail.

Next, we expect an approximate 1 percentage point unfavorable impact to revenue and adjusted EPS growth, or $0.12 per share due to foreign exchange headwinds in 2016 versus 2015, assuming that current foreign exchange rates prevail through the end of 2016.

This represents an approximate 4 percentage point negative impact on our international sales.

In terms of our transformation program we expect continued progress in 2016, with an additional $400 million of savings.

These savings will be partially reinvested in the business and will also help drive a year-over-year reduction in total adjusted operating expenses.

Finally, our 2016 adjusted tax rate guidance reflects an increase versus 2015 and excludes the benefit of the federal R&D tax credit.

This increase was primarily due to a change in the mix of earnings as some of our newer products in Enbrel have a higher tax rate than our legacy products.

Also, US R&D spend is decreasing due to transformation program savings which has a negative impact on the tax rate.

We now expect the tax rate through 2018 to be in the low 20% range.

Regarding our capital allocation plan for 2016, we have continued to execute on the commitment to repurchase $2 billion of shares by year-end 2015.

And as of now, we have deployed a total of $1.9 billion to repurchase shares.

With an increased Board of Directors authorization to $5 billion in total, we expect to repurchase an additional $2 billion to $3 billion of shares by the end of 2016.

On a cumulative basis our repurchases will total $4 billion to $5 billion of shares by the end of 2016, since a year ago.

We also plan to increase the dividend to $1 per share in the first quarter of 2016, reflecting another 27% increase from current levels.

With these actions we are solidly on the path to meet our commitment to return 60% of adjusted net income to shareholders on average for the period 2014 to 2018, whilst continuing to invest in the long term growth of the business.

In summary, we are pleased with our performance thus far in 2015 and we look forward to delivering results in the remainder of this year, as well as in 2016 and beyond.

I will now turn the call over to Tony.

Thanks, David and good afternoon folks.

You will find a summary of our global sales performance for the third quarter on slide number 10.

This was an exciting quarter for Amgen, as we launched Repatha and continued to deliver strong performance with our growth products.

Globally, product sales grew 14% year over year and our US business delivered 20% year-over-year growth.

Our international business grew 3% year over year, excluding the negative impact of foreign exchange with a 7% unit growth in Europe.

Let me start with an update on Repatha.

The European approval of Repatha in July marked the first PCSK9 inhibitor approval in the world.

We're now also approved in the US and Canada.

Along with our Japanese partner, Astellas, we expect Japanese approval in the first half of next year.

We've designed Repatha's clinical program to demonstrate that a simple, single dose achieving maximal PCSK9 inhibition provides intensive and predictable cholesterol lowering.

This profile is resonating well with physicians.

In the US the launch is off to a good start.

We built our sales force with experienced cardiovascular professionals and we established our presence in the field with our polymer launch in the first quarter this year.

Upon approval our field force was trained and quickly in the field meeting with our prioritized Repatha customer targets.

Anticipating a period of negotiation for payers post-approval we launched the Repatha Ready program.

This program provides Repatha to appropriate patients if they wish during the insurance verification process, while plans finalize their fulfillment pathways.

The response to our launch is extremely encouraging, as the volume of requests to date is a clear indicator of the unmet need and physician belief in the benefits of Repatha.

With the recent formulary decision, Express Scripts recognized the value of Repatha and we continue to negotiate with other payers to expand access in the United States.

However, we expect payers' utilization management criteria, or UM, to remain fairly narrow pending the outcomes data.

In the European Union we continue to negotiate reimbursement with individual countries.

We already have patients on Repatha in Germany, in the UK, and some Scandinavian countries.

The cardiovascular outcomes data and the intravascular ultrasound data in 2016 will continue to expand Repatha's exciting profile.

Repatha also has dosing frequency flexibility, either every two weeks or monthly, and we have submitted our single injection monthly dosing option to regulators.

With the launch of Repatha, our continued progress with Corlanor, and the recently announced positive Phase 2 result on omercamtiv mecarbil we're building a strong foundation for Amgen's cardiovascular franchise.

Turning now to Kyprolis where sales grew 46% year over year and 15% sequentially.

The new indication for relapsed or second line multiple myeloma was launched in the US in July.

We're off to a good start and from our chart audits have already seen a doubling of the KRd regimen, which is the regimen in ASPIRE, in new to treatment second line patients.

Every month, there are about 1,000 new patients who require second line treatment.

We expect sales to grow as we increase share in these new second line patients and see a corresponding increase in the duration of Kyprolis therapy.

We also received priority review for the submission of the ENDEAVOR data, which demonstrated a doubling of progression free survival compared to Velcade treated patients.

We expect this to drive additional momentum next year and further strengthen Kyprolis as the best-in-class proteosome inhibitor.

We anticipate further approval for Kyprolis outside the US by the year end, including Canada, Europe, and parts of South America and Asia.

Let me now turn to Enbrel.

On Slide 15 you see that Enbrel delivered 30% growth year over year primarily driven by net selling price.

Just to clarify, net selling price includes the impact from list price changes as well as contracting and access changes that have occurred over the past 12 months.

Inventory growth was 11% which was driven by favorable year-over-year comparison, as inventory levels were abnormally low in the third-quarter 2014.

Segment growth remains strong in rheumatology and dermatology, growing 25% and 38% respectively year over year on a value basis.

Quarter on quarter, our rheumatology share was relatively stable at about 28% while our share in dermatology declined 2% to 24%, due to intensifying competition from new therapies.

I would remind you that rheumatology accounts for about 80% of Enbrel sales.

Sensipar grew 29% year over year driven by inventory, net selling price and unit growth in both the US and Europe.

Similar to Enbrel the inventory growth was driven by unusually low inventory levels in quarter three last year.

I'll now move to Prolia.

Prolia followed its normal seasonal pattern for the sequential decline in quarter three, but on a year-over-year basis delivered 25% growth, with unit growth exceeding 20% in both the US and Europe.

Growth was driven by continued share gains of about 3 percentage points in both the US and Europe.

XGEVA grew 19% year over year.

Unit share increased about 4 percentage points over the last year in the US and about 5 percentage points in Europe.

There were, however, some abnormally large purchases by some end customers in the US this quarter, adding to the volume growth.

We continue to focus on XGEVA's superior clinical profile versus the competition.

Vectibix is showing flat volume, but this is solely due to the timing of shipments to our Japanese partner, Takeda, who holds the license in Japan.

The US delivered year-over-year growth of 16% and Europe 12%, both driven by the expansion of Vectibix in earlier lines of therapy and metastatic colorectal cancer.

Nplate continued to deliver solid growth of 15% year over year, driven by 17% unit growth.

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

Neulasta delivered year-over-year growth of 6%, driven by net selling price and inventory.

Similar to XGEVA, we saw signs of abnormally high purchases by some larger end customers in quarter three which we would expect to burn off in quarter four.

Meanwhile, the on-body injector for Neulasta, which we've now branded as part of the Neulasta Onpro kit, continues to gain adoption in the marketplace.

Over 60% of our Neulasta accounts have now purchased the Onpro at least once.

And Onpro achieved 19% share of Neulasta units in quarter three.

Neupogen declined 5% year over year driven by branded competition in the US.

Sequentially quarter over quarter, we held share against branded competition and saw minimal impact from the new biosimilar competition, given its launch late in the quarter.

Using our seven years of biosimilar defense experience in Europe, we will be competitive in the marketplace but expect share erosion in the near term due to the new competition.

Turning to our ESA products.

EPOGEN declined 6% year over year, including a 15% unit decline as dynamics continued to evolve in the US dialysis centers.

That 15% unit decline would have been deeper if not for abnormally high purchases by a large end customer in quarter three.

Fresenius has now moved more than half its patients from EPOGEN to Mircera, and we expect the trend to continue.

Please recall we that have a contract with DaVita through 2018 in which they will purchase 90% of their ESAs from Amgen.

We are also seeing strong Aranesp adoption with medium size and independent dialysis centers.

Of the over 400,000 dialysis patients in the US, about 50,000 patients have now transitioned to Aranesp, including about 20,000 in Fresenius.

EPOGEN sales in future quarters will be impacted by utilization at Fresenius, potential switching to Aranesp, and potential biosimilar competition.

Aranesp sales increased 4% year over year with a 32% growth in the US, driven by the shift in dialysis business from EPOGEN to Aranesp that I was just talking about.

International sales will be impacted by foreign exchange rates.

While we continue to see a decline in oncology ESA use, we are pleased with the response to Aranesp in the US dialysis business.

We are making good progress with our launch of BLINCYTO.

BLINCYTO saw rapid uptake in the most severe ALL patients, and as the ALL patients cycle through different therapies we will continue to grow patient penetration.

In summary, quarter three was an exciting quarter.

Our Repatha and Kyprolis launches began in earnest and we delivered strong results for our growth products and continued to defend our mature products in the marketplace.

Please keep in mind the additional inventory in the third quarter for EPOGEN, and XGEVA, as some of our larger end customers exceeded about $100 million, and we expect this to reverse in quarter four.

Looking ahead to 2016, our growth products including Enbrel, Prolia, XGEVA, Sensipar, Vectibix, and Nplate are continued -- are expected to continue to deliver solid growth as sales for these products have grown in double digits this year, and in some cases in excess of 20% on a base of over $9 billion.

We are also building momentum with our launch products including Repatha and Kyprolis, and we expect they will deliver more meaningfully to the top line in 2016.

We will defend against increase in competition to our mature franchises with an assumption of no additional biosimilar competition before the second half of 2016.

Before I close I'd like to thank our teams across the world who continue to work tirelessly, ensuring access for patients to our innovative drugs.

Let me now pass you to Sean.

Thanks, Tony.

Good afternoon.

Amgen's R&D efforts are rolling along nicely with six major regulatory approvals of innovative products for serious diseases over the last year.

This is the core of what we do, invest in true innovation in order to change the practice of medicine.

Today, I'll begin with some comments on our cardiovascular programs.

We recently submitted a supplemental BLA to offer patients a single dose option for the 420 milligram monthly dose of Repatha, utilizing an automated device as part of our previously announced collaboration with West Pharmaceutical Services.

And the FDA has communicated a July 2016 PDUFA date.

As we previously announced, based on our current modeling of our event driven cardiovascular outcome study, we anticipate the number of events required for final analysis to accrue by about the middle of 2016.

With the top line data expected to follow in the second half of the year.

We also anticipate the results of our coronary artery intravascular ultrasound study in the second half of 2016.

We believe that demonstrating a disease modifying effect on arthroscopic plaque burden would be a compelling result, complementary to our outcomes data.

In addition, we were very pleased at our Phase 2 oral dosing Study of AMG423, or omecamtiv mecarbil, an activator we are developing with Cytokinetics in the setting of chronic heart failure, met all its objectives.

We've already begun reviewing these data with our partners, key opinion leaders and soon with regulators, to better understand the potential role of omecamtiv in the treatment of chronic heart failure patients.

Regarding our CETP inhibitor, we have flexibility to gate our R&D investment going forward after a careful review of Lilly CETP outcomes data when they become available.

Turning to oncology.

Following on the US label expansion, Kyprolis has received a positive opinion by the EU CHMP for the ASPIRE submission and we will submit the ENDEAVOR file once the ASPIRE approval occurs.

In the US, the ENDEAVOR file is under priority review, with an action date in January of 2016.

Finally our Phase 3 Study of a weekly dosing regimen for Kyprolis in the relapsed refractory setting is actively enrolling.

Turning to immuno-oncology in the realm of biospecific T-cell engagers, we've received a positive opinion in the EU from the CHMP for BLINCYTO, in the setting of Philadelphia negative relapsed refractory acute lymphoblastic leukemia.

Our next molecule based on the platform AMG 330, directed at CD33, has entered testing in patients with acute myeloma leukemia, an area of profound unmet medical need.

The treatment paradigm for this disease, which is approximately four times as common as adult ALL, has not changed meaningfully in 20 years and the prognosis for these patients remains bleak.

Finally we're excited to have licensed Xencor's bi-specific antibody platform for six targets, including particularly an anti CD38 T-cell engaging molecule in the preclinical stage, given our focus in multiple myeloma.

As we announced yesterday, the FDA approved IMLYGIC for the local treatment of unresectable cutaneous, subcutaneous and nodal lesions in patients with melanoma recurrent after initial surgery.

Despite the concept being around for more than a century, IMLYGIC is the first oncolytic viral therapy to be approved, and represents an important new treatment option for melanoma patients.

IMLYGIC also received a CHMP positive opinion for the treatment of adults with unresectable metastatic melanoma in the EU.

While this initial indication is for a relatively small population of melanoma patients, we believe the real promise of IMLYGIC is in the combination with other immunotherapies.

So we continue to advance the combination studies with the anti-CTLA4, anti-PD1 and anti-PDL1 antibodies that we've previously announced.

The safety data from the Phase 1b portion of the IMLYGIC-Keytruda combination melanoma study appeared quite favorable, and were recently presented at the European Cancer Congress.

We look forward to seeing the efficacy data from this study and continue to explore other possible combinations.

Leaving oncology, we've completed our US and EU submissions for our novel intravenous etelcalcetide, or AMG416, in patients with secondary hyperparathyroidism.

Turning to our bone franchise we've recently seen two data sets for romosozumab, our anti-sclerostin monoclonal antibody, in development with UCB for postmenopausal osteoporosis.

First we observed superiority to teriparatide in an open label Phase 3 study as the level of bone mineral density in patients heavily pretreated.

Second at the American Society of Bone and Mineral research, we presented data from an exploratory sub-study of a Phase 2 trial, demonstrating superior calculated bone strength versus teriparatide women with postmenopausal osteoporosis.

And of course we look forward to seeing the first of our two fracture outcome studies in the first half of next year.

Recall, this is a two year study with patients receiving either Romosozumab or placebo treatment in year one, followed by Prolia treatment in year two.

Our migraine prophylaxis program with our CGRP receptor antagonist antibody, AMG334, is actively enrolling two Phase 3 episodic migraine studies.

The enrollment rate suggests to me a very strong clinical need for an effective, well tolerated migraine prophylactic agent.

Our Phase 2b study in the chronic migraine setting is enrolling nicely as well, and we'll see those data next year.

Behind AMG334 in our migraine pipeline, our anti-PAC 1 receptor antibody, AMG301, is progressing through Phase 1. We're pleased about our partnership of this emerging franchise with Novartis.

Of course the other exciting aspect of our collaboration with Novartis is the base program for Alzheimer's disease.

It was scientists at Amgen who first cloned the BACE gene and Decode has provided compelling genetic validation of this target.

Here, we're taking a differentiated approach based on the concept that it may prove difficult to demonstrate a convincing disease modifying effect of BACE inhibition, when intervening in patients who have clinically detectable cognitive impairment.

By studying cognitively normal patients, genetically predisposed to late onset Alzheimer's by virtue of their APOE4 genotype, essentially intervening earlier in the disease course, we may be able to more effectively demonstrate the disease modifying effect.

This study is being conducted with the Banner Institute which has identified a large number of these patients and this, coupled with our human genetics platform, provides a unique opportunity to pursue this novel approach.

Finally, our biosimilar programs continue to advance.

The team is preparing for submissions for our biosimilar Humira by year-end and our biosimilar Avastin Phase 3 study in non-small cell lung cancer successfully completed.

Our biosimilar Herceptin study in breast cancer recently completed enrollment and we expect to see the data some time in the second half of next year.

In closing, I'd like to thank the Amgen R&D team for their dedication to patients during this remarkably busy and exciting time.

Bob?

Okay, thanks.

As Sean said this is an exciting time and a lot going on at the Company, so let's open it up for questions now.

If we can ask our Operator to remind everybody of the procedure.

(Operator Instructions)

Our first question comes from the line of Matt Roden from UBS.

Great, thanks very much for taking the questions.

Congrats on a very nice quarter.

I guess David, when I'm looking at your new preliminary 2016 guidance, we're seeing it fall just a touch below consensus.

Just wanted to get your sense for whether or not we should be looking at the revenue side or the margin side or tax side, what is it that you think the street is missing, and if it is the revenues is it related to biosimilar competition, or lower than the street expectations on PCSK9?

I'm just trying to get a sense for where you think we're off?

I'd say the one place that jumps out is if you look at the tax rate which is up year over year, more than actually we previously indicated the rate would go to, is probably the biggest area where we see some differences.

Which is frankly part of the reason why I thought it would be helpful to give you a preliminary view of what we think is going on in 2016.

I think the good news in that regard is while we're generally in line with consensus overall it would imply I think that we've got somewhat better operating performance we see for the business next year than perhaps the analysts have in their models right now.

David do you want to reiterate your R&D tax credit point as well, just to make sure?

Yes, so the rate that we've got out there for next year as is the case with this year, again we've chosen to exclude the R&D tax rate from the R&D tax credit because of the ongoing uncertainty of that eventually being passed and impacting unfavorably on the rate.

Okay, next question?

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

Hi, thanks for taking the question.

Congrats on all of the progress.

Maybe just two quick ones for me.

First on the Repatha launch can you give us the sales number for the quarter?

And then any comments on the breadth of prescribing you're seeing and types of patients?

And then on the pipeline, Sean, you mentioned omecamtiv, what are the key outstanding questions there and timing of next steps for that program, thank you?

It's Tony.

So let me respond.

Obviously we launched in September, so it was not much of a quarter, so I think you'll probably see a better reflection of sales in the fourth quarter and once we finish all our negotiations.

The utilization criteria the payers are putting to place are pretty much in line with the label at the moment, so high-risk patients with diagnosed athero disease who have LDL above 130, that's where we see the patients.

Tony, do you want to talk about the European piece of the launch as well?

Sure, so we have launch in Europe as we know, and we do have patients at the moment in the UK, some Scandinavian countries and Germany.

Great, and with respect to omecamtiv mecarbil, what I would say is that we're in the usual stage of having just seen these data.

We have partners to review the data with, we're working with really the top key experts in heart failure from around the world and have been for years on the program.

So we have to review the data with them and of course talk with regulators through the usual and the Phase 2 sort of meetings before we can reach a formal decision about whether to proceed and in what exactly format, in terms of study designs and that sort of thing.

So it's all the usual steps that we have to go through for a very significant decision to advance into a outcomes trial in a setting like congestive heart failure, but we are very pleased with the data that we generated from the study.

And our next question comes from the line of Michael Yee from RBC Capital Markets.

Hi, thanks, good afternoon.

I wanted to ask a little bit more in the guidance.

I guess just broadly speaking can you be more clear on what actually spurred you to talk about 2016 already?

And in terms of the biosimilar assumptions there, is it safe to say to be more specific you don't expect a GCSF -- a long acting GCSF any time before at least second half of 2016?

And with that, do you therefore expect to assume a high penetration of the on-body device and where do you think that can go to in terms of penetration, thanks?

Yes, so Michael in terms of why we decided to provide a preliminary framework today, it's really as we looked at it, as we look into 2016, what we observe is there's a lot of dynamics going on.

And as I mentioned, we've got a number of new products that we see launching as you know, we are now approved for the sixth one as we had hoped.

So what's going on with that, what's going on with the competitive environment in terms of our legacy portfolio, obviously foreign exchange and then our own efforts to improve the competitiveness of the business.

So my feeling was that it would be useful to you guys in that at the end of October, you're starting to look more specifically at 2016, so I thought it would be useful to provide that initial indication today.

And as I said earlier, the sort of the expectations are generally in line with what we said today, but there's some differences, so we just thought it would be helpful to you guys to get something out there.

So maybe Tony wants to comment on the other piece?

Sure, let me just add that as we look at the assumptions in place by 2016 numbers, we don't assume any new additional biosimilars until the second half of 2016.

As regard the on-body injector for Neulasta, we continue to be very excited about the launch and the uptake in the marketplace.

And as I said, just over 60% of our customers or accounts have actually purchased at least once and the average market share was about 19% in the third quarter, and that market share keeps growing.

Brian next question?

Our next question comes from the line of Eric Schmidt from Cowen & Co.

Maybe for Tony or even Bob, just kind of curious on the US pricing environment whether you think there's been any real or perceived changes in that outlook?

Eric obviously that's a topical question.

I guess the important thing from our perspective is to reflect on what our business model is, which is to develop innovative medicines directed against serious diseases and we try to advance medicines that have a big effect for patients.

And with that, big effects for society.

So if you look at the six medicines we're launching, that's exactly what the medicines represent and we think medicines that have a big effect size for patients, medicines that create value and so we've anticipated at this moment and the development work that we've been doing, anticipated it in our strategy and the molecules that we've chosen to advance.

So again, it doesn't come as a surprise to us that there are questions about the value of the medicines and the price and we think the more we can do to help focus on the economic burden that diseases like cardiovascular disease, cancer, degenerative disease and the significant prospect or opportunity that our medicines represent against those, the more appropriate framing for the discussion.

So I wouldn't say there's anything particularly precipitous changing for those of us that are at the innovative biopharmaceutical end, other than the fact that we're at an incredibly exciting window of time here with lots of important new innovative medicines against, again, some of the most vexing tough diseases that we all face.

Our next question comes from the line of math use had from Morgan Stanley.

Hi, this is Vikram on for Matthew.

Two quick questions from our side.

First, could you talk about the sustainability of price increases that you saw with Enbrel and EPOGEN?

Especially with EPOGEN if you could touch on the share losses that would be helpful.

And then secondly, you touched on this a little earlier during the call, but if you could quantify the impact of end-user purchasing patterns on Neulasta, that would also be very helpful.

I think there are three questions there.

So Tony do you want to try and tackle the EPOGEN?

So just to Bob's point again, right?

So the price increases we take in the marketplace are based on the value our products bring to market and the competitive environment in which they operate.

In the EPOGEN situation, it represents about one-third of the marketplace in the US and they are in the process of converting a large amount of their business to Mircera.

I think they will probably be announcing within the next couple days how much of their business they have converted.

And I didn't get the question on Neulasta, sorry.

Repeat the third question you had there?

End-user purchasing patterns on Neulasta.

So what was the question about end-user?

Just how much end-user inventory?

Oh, okay, so specific.

Net-net as I said the end-user purchases for Neulasta, XGEVA and EPOGEN were just in excess of $100 million in the third quarter and we expect that to burn off in the fourth quarter.

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

Hi guys, thanks for taking the question.

Congrats on a great headline print.

I had a couple questions.

Number one, for Fresenius has taken much more share as has been mentioned in other questions.

I'm wondering why.

Is it simply that you will not match price?

Because I think last quarter, you mentioned something about how, and when do such contract negotiations happen?

And so it sounds like you're sort of guiding us to give up on Fresenius and I want to know is that because is offering a price that Amgen just doesn't think is economical to match?

My second question was on biosimilar humira, is it still your expectation Bob that you're going to launch in 2017?

Because Rick Gonzalez, AbbVie, your counterpart, absolutely insists like table pounding, heavy breathing, that there's no way that's going to happen before like 2019 or so.

So I'd just like to get your updated thoughts on that?

And finally can you give us any indication whatsoever, any, about what our expectations should be for gross to net discounting for the PCSK9 class, either right now early days or more steady state level.

Because that's what we need obviously in our models, thank you.

Okay, let's see whether we can tackle those.

I think there were three questions there Tony.

The first one is about Fresenius, do you want to respond to Mark's question?

So we have no idea what the agreement is between Fresenius and Roche who supplies Mircera to them.

And our pricing decisions are clearly made not just on our contract for Fresenius, but the overall dialysis market in the US.

And so we are balancing existing customers and customers who were possibly changing their portfolio.

And gross to net Tony?

On gross to net, we don't make public any of the contract negotiations we have with the payers.

Obviously, the negotiations continue to be under way here in the US and internationally.

And with respect to Humira, Mark, we are excited about confidence in the clinical data that we have, and as you would expect we're preparing to file those data with regulators.

We recognize that there is intellectual property here that needs to be respected, but we will continue to advance our molecule and continue to assess the intellectual property that's in place.

And if we have a dispute, well the good news is there's a process for resolving that dispute and we will push forward on that basis.

Our next question comes from the line of Cory Kasimov from JP Morgan.

Hi, good afternoon guys.

Thanks for taking the questions.

I wanted to follow up on the 2016 guidance questions and ask if you can at least qualitatively speak to your comfort level with the street's Repatha expectations for next year?

And then also on PCSK9 front, should we expect the deal with express scripts to set a precedent for comparable agreements with other payers going forward?

Thanks a lot.

I've got two questions there, Cory, with respect to guidance for 2016 we're not giving individual product line revenue guidance.

Again, I think David addressed pretty comprehensively what our thinking was in general about the P&L for 2016 and we hope it's helpful for you to have it at this stage in the game.

And with respect to what to expect from other payers again, Tony do you care to comment on that?

We were delighted that Express Scripts left the option of which drug to use to physicians and patients, and we continue to believe that's the best place to be in the marketplace.

That's our position as we go out to market, but we are in the middle of negotiations so we don't know where we are going to land.

Okay, understood thank you.

Our next question comes from the line of Ying Huang from Banc of America.

Thank you for taking my questions as well.

Specifically I have one for Enbrel.

When you provide 2015 guidance, what's your assumption for the pricing trend?

I know you can't spell out then details, but can we expect somewhat similar level of pricing for 2016?

And then in the market for dialysis, obviously we know what happened, but what's your expectation for the other one-third independent dialysis centers of the market?

And then I guess lastly, given the recent biotech correction in the market, what's your thought of M&A in terms of being opportunistic here?

Thanks.

Well let me answer the question around the independent and the dialysis units.

Right now they receive the supply from us.

We are delighted to see the level of switching that's taking place from EPOGEN to Aranesp amongst both the independents or both the medium and small dialysis centers, so we'll continue to work with them as we go forward.

On Enbrel, the net price always depends on a combination of price increases on list versus large amounts of contracting.

Enbrel competes in a highly competitive environment where payers make decisions around where products are on their in terms of a preferred tier or a non-preferred tier, based on the rebates.

And when you're on a preferred tier you pay the rebate, if you're not on a preferred tier you don't pay a rebate, so there's a huge amount of dramatic changes inside hundreds of different plans.

Okay and on the M&A question, Ying, as we said a year ago that we would focus on early stage transactions and if you look at the activity that we engaged in over the past 12 months you can see we brought in a lot of earlier stage innovative new products and technology opportunities.

And we said more recently that we're opening the aperture a little bit and beginning to look at a broader range of things, including potentially some larger things.

We think obviously that the valuations in the sector are probably more favorable now for the later stage assets than they were a year ago.

And so we're continuing to look and I think it may be some time, however, before the owners of those late stage assets adjust their pricing expectations to reflect the current trading environment.

But we're continuing to look, but nothing to report on the call.

Our next question comes from Eun Yang from Jefferies.

Thanks for the question.

A question on Kyprolis.

I understand that Kyprolis has a greater path of improvement versus but some physicians commented the mix of different degrees overlaps the patient population, makes it difficult to compare cross study data.

So now with elotusumab entering the market we're in next year, can you share with us what you are hearing as to how physicians who utilize Kyprolis versus elotuzumab in the relapsed setting?

Yes, I think t is just I think very early days in my view to assess that and I think that there's in general the theme that I continue to hear when I talk to experts in this area is the concept that they don't view molecules like elotuzumab as things that are likely to displace a proteasome inhibitor from the backbone therapy in multiple myeloma, but rather looking at them as adjunct therapies.

So our strategy is to be the preferred best-in-class proteasome inhibitor and to have adequate combination data, of course, with a lot of these new molecules as they come along to make sure that we are part of the best-in-class regimens for the disease.

And I think just to add to that Sean, I think what we demonstrated in the ASPIRE study was unprecedented in terms of PFS in the second line relapse setting.

And the data that was presented on elotuzumab was so-called ELOQUENT study, yet again difficult to make cross trial comparisons but it certainly was not comparable to what we saw.

Certainly not.

I think the question presumed that you can't make the comparison as well across the studies, and of course we all recognize that there are limitations to making study, cross study comparison.

Just remind everyone that the product is not approved in the US yet, so I think we should wait until the FDA makes a decision and we can see a label.

Okay, let's go to the next question?

Yes, our next question comes from the line of Geoff Meacham from Barclays Capital.

Hi guys, thanks for taking the question.

One, Repatha, obviously the tipping point in utilization is going to come from the outcomes data but that speaks I think to the sickest patients getting access today.

And so I know it's early, but any common features so far in new starts beyond LDL, things like prior statin experience or cardiac events and then would you expect this to differ in the EU looking out say 6 to 12 months?

Thanks.

Okay, thanks for the question.

Tony, why don't you answer Geoff's question?

So Geoff, let me just reiterate having launched a number of cardiovascular drugs in my life, this one feels pretty good.

The level of discussion we're getting amongst cardiologists and high prescribing primary care physicians is more than what I would have expected.

They really understand the value of lowering LDL and understand what the statins have delivered in terms of the outcomes data, so in my mind, the understanding is there, the demand is there and the need is there.

The slow march we are taking with payers in the US of course, is reducing the opportunity for patients to get access to these drugs early.

With the likelihood of Express Scripts having made this decision and we work actively with the other guys to get product up and running.

The utilization criteria at the moment they've said in places it's fairly tight to ensure that patients step through a number of situations.

But I continue to believe that what we are seeing in terms of patients being referred to the hub for insurance verification, I feel pretty confident about that.

In Europe of course, the label is slightly broader, but we do take longer to negotiate with the various countries, country by country in Europe.

Brian as we are at the top of the hour why don't we take two more questions.

And we do have a question from the line of Brian Skorney, Baird.

Hi, this is Colleen on the line for Brian.

Thanks for taking the question.

I know we're still early in the launch but can you comment on how many patients have started on Repatha?

And can you also comment on the regulatory pathway for oral LDL lowering drugs like CTEP inhibitors or other mechanism for statin lowering and the need for cardiovascular outcome studies versus the more accelerated paths you're able to take with Repatha?

Thank you.

So, this is Tony.

The IMS data has not been very clear in terms of actual prescriptions up until about a week or two ago, so I would imagine the data that's starting to come in now is accurately representing the number of patients receiving a prescription from a pharmacy.

This of course doesn't take into account that the patients that are moving through the hubs either run by ourselves or by our competitors assisting patients during the verification process, as plans go through their formulary and guideline pathway process to decide how and when to allow the usage of these PCSK9s.

With respect to the regulatory environment for other mechanisms such as CTEP inhibition, I think what I would say we're going to observe is what we saw with the PCSK9 class, which is regulators really taking into account in their determinations around what evidence base would be necessary to gain market access and what kind of population should be included in initial labeling prior to outcome studies.

And that's going to be predicated very much on the mechanism and I think in the case of PCSK9 there was a certain value placed on the science that underlies that mechanism.

And the fact that thus far we've not had a situation for example, where the mechanism had been tested and failed in large outcomes trials.

So it's going to be a case-by-case determination by regulators, based on the mechanism and the evidence base that exists and whether or not there is safety and that sort of thing, so it's not a simple question to answer I think, but I think that the parameters that will be weighed are fairly clear.

And we have a question from the line of Chris Raymond from Raymond James.

Question on Enbrel.

So I'm looking at the math on slide 15 and it seems to make some sense with respect to price making up the difference when you factor in inventory and units, but just want to clarify.

Do you see and is it also possible that a quarterly driver could be changes in rebates and discounts?

Is that a measurable impact at all quarter on quarter, especially this quarter?

So normally contracts are for annual period but by definition, any change in a contract will then impact your year-over-year calculations for four quarters in a row.

So clearly, there are contract changes that impact the net selling price in quarter three, yes.

Thank you.

Okay, great.

Well thanks, everybody for participating in our call and you know myself and my team will stick around for a while, so if you have any other questions or thoughts feel free to give us a call.

Have a good day.

Ladies and Gentlemen, this concludes Amgen's third-quarter and financial results Conference Call.

You may now disconnect.