美國安進 (AMGN) 2015 Q4 法說會逐字稿

My name is Jake and I'll be your conference facilitated today for Amgen's fourth-quarter 2015 earnings Conference Call.

(Operator Instructions)

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

Mr. Sood, you may now begin.

Okay thank you, Jake.

Good afternoon, everybody.

I'd like to welcome you to our conference call to review our operating performance for the fourth quarter and full year 2015.

I would particularly like to acknowledge those who are new in their coverage of Amgen, including Steve Chesney of Atlantic Equities in London, Ronny Gal of Bernstein, Alethia Young of Credit Suisse, Hartaj Singh of BTIG, and Brian Scorney of Baird.

Welcome.

Each of us look forward to working with you and helping at your understanding of our Company.

We have a lot of ground to cover today so let me make some very quick introductions.

Leading the call today will be our Chairman and CEO, Bob Bradway, who will provide a strategic report on our performance in 2015 and outlook for 2016.

Following Bob, our CFO, David Meline, will review our Q4 and full year results and update you on our previous preliminary financial guidance for 2016.

Tony Hooper, our Head of Global Commercial Operations, will then discuss our product performance during the quarter, with a particular focus on newly launched products.

Following Tony, our Head of R & D, Sean Harper will provide a pipeline update.

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.

Okay, thank you, Arvind, and let me add my welcome to those of you who are joining our call.

Let me start off by saying that 2015 was an exceptional year for Amgen.

It was another year of consistent and reliable performance as we delivered for patients and shareholders.

I think you can see that first in our financial results.

8% revenue growth in 2015 reflects the strength and breadth of our products and our 19% adjusted earnings growth reflects the operating leverage we've created through our successful and ongoing transformation efforts.

The momentum of our products can be seen in the 17% growth we recorded from our in line brands including Enbrel, Prolia, XGEVA, Sensipar, Vectibix and Nplate.

Together these brands generated $11 billion for us.

Our legacy medicines also performed well and these continue to be strong cash flow generators for us, and we remain positioned to compete as new players enter the market.

While delivering these solid results for the year, we also laid important ground work for our future growth with four innovative launches in oncology and two in cardiovascular disease over the past 12 months.

As we've said before, we expect Repatha and Kyprolis to be significant opportunities for us and see these as great examples of innovative medicines that address big unmet needs by providing significant clinical benefits and demonstrable value propositions for patients and providers.

The importance of having value propositions such as these is only set to grow for the innovative biopharmaceutical industry, and we're well positioned to embrace that reality in our pipeline.

Developing innovative medicines to address serious illnesses is at the core of what we do.

Behind our six new product launches, are a number of additional exciting innovative pipeline opportunities, notably, Romosozumab in bone health and AMG334, which is directed at migraine and the neuroscience area.

Also of note is our nephrology product, Etelcalcedtide, which is under regulatory review and Omecamtiv Mecarbil which is an intriguing opportunity for us in cardiovascular disease.

In addition to our own pipeline of molecules we expect to remain active in Business Development.

When it comes to later stage opportunities we would expect this to revolve around our six core areas, which are hematology/oncology, cardiovascular, inflammation, bone health, nephrology, and neuroscience.

Focus will remain important to us and you'll see that reflected in our decision this week to out license our respiratory molecule AMG282.

While we're intrigued by the genetics behind this target and potential for the molecule in asthma and COPD, we feel the commercialization can be better optimized by Genentech, given their established presence in this field.

We continue to expand our global geographic reach, now with full ownership of our products and new markets in the very exciting approval of Repatha in Japan with our partner Astellas, which represents our first product approval for this Japanese partnership.

Our Biosimilar's program is also making tangible progress with one under regulatory review, one having completed Phase III, and another for which Phase III results are expected later this year.

We're making significant progress with our transformation efforts here at Amgen.

We've already reduced gross costs by $700 million, enabling our 2015 adjusted operating margin to grow by some four points.

We'll make further progress in 2016 and we're expecting another $400 million of gross savings as we expect to reduce adjusted operating expenses year-over-year.

Our transformation has also made us more agile and you'll see the benefits of that in our competitive performance across our products.

In manufacturing, our teams are significant contributors to our transformation efforts, driving down our cost of sales and making final preparations for the licensure of our Next Generation biomanufacturing facility in Singapore.

Improved drug delivery systems are an important differentiator of our medicines and we're delivering solid results with them.

The Neulasta Onpro kit has been extremely successful in the market place and we filed our Repatha once monthly dosing option globally.

We'll continue to innovate with patient and provider-friendly delivery systems to help differentiate our products.

We also remain focused on smart capital allocation through a combination of share buybacks, dividend and value creating Business Development activities that are aligned with our overall strategy, we expect to drive shareholder value.

We established a set of targeted financial commitments through 2018.

These metrics were chosen in part to provide evidence that we were making clear progress on our strategy through a period of patent expiration and new product launches.

I'm pleased to report that as we close 2015 we've made significant progress towards accomplishing these longer term metrics.

Finally as we enter 2016, our position is strong, our strategy is clear, and we're excited about the year ahead.

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 for our shareholders.

David, over to you.

Thanks, Bob.

Turning to the fourth quarter on page 5 of the slide deck, revenues at $5.5 billion grew 4% year-over-year with a 3% increase in product sales.

Other revenues at $207 million increased $50 million versus the fourth quarter of 2014, reflecting an increase in royalty income and a milestone payment recognized in the quarter.

Adjusted operating income at $2.4 billion grew 16% from the prior year.

Adjusted operating margin improved five percentage points to 44% for the quarter, reflecting the continued benefits of our transformation program.

On an adjusted basis, total operating expenses decreased 4% year-over-year, including a favorable foreign exchange impact of approximately two percentage points.

Cost of sales margin at 14.3% improved by 1.6 percentage points, driven by lower manufacturing costs, higher net selling price and lower royalties.

Research and Development expenses at $1.1 billion were down 10% year-over-year, reflecting Q4 2014 up front payment to Kite Pharma of $60 million for our cancer immunotherapy collaboration, as well as the benefit of R&D expense savings from transformation and process improvement efforts.

SG&A expenses were up 3% on a year-over-year basis, reflecting incremental expenses in Q4 for new product launches, partially offset by savings from transformation and process improvement efforts.

Other income and expenses improved by $53 million year-over-year to a net expense of $120 million in the quarter primarily due to cash investment portfolio activities, as well as higher interest income due to higher cash balances this year.

The tax rate was 11.6% for the quarter, a 1.4 percentage point increase versus Q4 of 2014.

This increase was primarily due to a decreased benefit from the R&D tax credit in 2015 versus 2014 due to higher pretax income and reduced R&D expenses.

As a result, adjusted net income increased 19% and adjusted earnings per share increased 21%.

You will find a summary of our full-year 2015 results on page 6 of the presentation.

Our 2015 full-year revenues grew 8% to $21.7 billion and adjusted earnings per share grew 19% to $10.38 per share.

For the full year, adjusted operating income grew to $10.1 billion, a 19% increase based on the combination of solid revenue growth along with flat operating expenses.

Operating margin improved by four percentage points to 48%.

On an adjusted basis, cost of sales margin improved by 1.3 percentage points year-over-year to 14.5% driven by lower royalties, higher net selling price, and lower manufacturing costs.

Research and Development expenses decreased 5%, driven by savings from transformation and process improvement efforts.

And SG&A expenses were up 6% primarily due to increased commercial expenses for new product launches, partially offset by savings from transformation and process improvement efforts.

Other income and expenses improved by $114 million year-over-year, primarily due to higher interest income due to higher cash balances, partially offset by higher interest expense due to higher debt balances.

The tax rate was 16.8% for the full year, up 1.9 percentage points versus 2014.

The year-over-year increase was primarily due to the unfavorable tax impact of changes in the geographic mix of earnings.

Turning next to cash flow and the balance sheet on page 7. For the full year 2015, we generated $8.5 billion in free cash flow versus $7.8 billion last year.

This increase was primarily driven by higher sales and profitability.

As a result of this strong cash flow performance, total cash and investments increased to $31.4 billion.

This balance included over $2 billion in the US and $29 billion outside the US.

Total debt outstanding increased slightly to $31.6 billion.

As a result, net debt decreased by $3.5 billion to $200 million at year-end 2015.

Our total debt portfolio has a weighted average interest rate of 3.6% and an average maturity of 10 years.

Additionally for 2015, we increased our dividend per share by 30% to $0.79 per quarter with payments totaling $2.4 billion.

We also announced the 27% increase to the dividend to $1 per share for our first quarter 2016 payment.

Finally at our 2014 business review, we indicated the intent to repurchase shares totaling up to $2 billion by the end of 2015, which we have now accomplished with repurchases of approximately 13 million shares since Q4 of 2014.

At the end of 2015, we had approximately $4.9 billion remaining under our Board-authorized share repurchase program.

We intend to repurchase an additional 2 to 3 billion of shares in 2016, and are on track to deliver our capital allocation commitments to shareholders.

I will now turn to guidance for 2016, summarized on page 8. As you will recall, we provided preliminary 2016 guidance on our October earnings call.

Today we are increasing our 2016 guidance, which reflects an improved revenue outlook due to revised timing of new biosimilar competition, as well as the inclusion of the R&D tax credit which has been permanently extended.

With this background, our 2016 revenue guidance is $22 to $22.5 billion versus prior guidance of $21.7 to $22.3 billion, and our adjusted earnings per share guidance is $10.60 to $11 per share.

In addition we now expect our adjusted tax rate to improve by one percentage point versus prior guidance, to 19.5% to 20.5%.

Finally, we continued to expect capital expenditures to be approximately $700 million this year.

As a result of our strong progress in 2015, and the 2016 outlook, we remain confident that we will meet or exceed commitments provided for the 2014 to 2018 period, including double digit adjusted EPS growth, adjusted operating margin improvement from 38% to 52% to 54%, $1.5 billion of transformation savings, with a net $800 million reduction in operating expense, and return to shareholders of at least 60% of adjusted net income during the period.

We also previously guided for total restructuring expense related to the transformation program of $935 million to a $1,035 million during the period through 2018.

Based on better than anticipated results from the exit of two of our closed facilities, we now expect to incur a total of $800 million to $900 million in restructuring expense through 2018, with nearly $700 million recognized already in 2014 and 2015.

In summary, we delivered another year of strong financial results in 2015 and we are increasingly confident in the outlook for Amgen's success in 2016 and beyond.

This concludes the financial update.

I will now turn the call over to Tony.

Thanks, David.

Good afternoon, folks.

You'll find a summary of our global sales performance for the fourth quarter on slide 10.

Globally, product sales grew 3% year-over-year for the fourth quarter and 8% for the full year.

Our US business delivered 5% year-over-year growth in the quarter and 12% for the full year.

The fourth quarter included the negative $100 million impact related to the large quarter-three end customer purchases as I described in our last earnings call.

Foreign exchange negatively impacted year-over-year sales by two percentage points in both the fourth quarter and the full year.

Excluding the negative impact of foreign exchange, our international business was up 5% year-over-year for the Fourth Quarter and up 6% for the full year.

By any measure, 2015 was a success for an operating, execution standpoint.

Our gross product lead the way as they continued with meaningful growth.

We also laid the foundation for future success with our new product launches, as well as further expansion into new countries, while transforming our customer-facing model and delivering significant cost savings, which we reinvested in the launches.

Let me now start with an update on our new cardiovascular franchise, where we had two launches in 2015, Repatha, of course being the biggest opportunity.

Repatha, is off to a strong competitive start.

In the US, Repatha's relative share of the segment is reflective in my mind of our launch preparations and execution in the field.

Brand recognition amongst cardiologists and primary care physicians is strong and Repatha's single dose, delivering intensive and predictable LDL-C level production is resonating well with prescribers.

We've made good progress with our payer negotiations.

More than 80% of commercial lives currently have access to Repatha.

The strict payer utilization management criteria are limiting the uptake as you'll see in the IMS scripts.

We continue to work with payers on evaluating the utilization management criteria to insure that appropriate patients are able to receive Repatha through their plans.

In Europe, reimbursement negotiation is ongoing and we expect to add reimbursement in many countries over the course of the year.

I'm pleased to report that earlier this month we secured national reimbursement in Spain, well ahead of expectations.

In Japan, Repatha was approved last week.

Along with our partner Astellas, we are looking forward to launching the product in the next few months after securing reimbursement.

Sean will discuss our [Conry] imaging and cardiovascular outcome study shortly and we look forward to data from these two trials strengthening Repatha's profile.

Also in cardiovascular disease our innovative heart failure medicine Corlanor, is making steady progress with prescribers after its launch early in 2015.

Let me now move to oncology, starting with our other large new opportunity, Kyprolis.

Kyprolis grew 63% year-over-year and 8% sequentially.

Our chart orders indicate that we more than doubled KRB patient share in [nutra treatment] second line patients since our label expansion in July, based on the Aspire data.

We are very excited too, about the recent FDA approval to add Endeavor data to our US label, demonstrating that Kyprolis doubled progression free survival versus Valcade.

Our teams are trained and in the marketplace the day after the Endeavor approval.

With both the Aspire and Endeavor data now in our US label, we have strengthened Kyprolis' profile as a backbone of multiple myeloma therapy.

Kyprolis is now the only approved therapy for relapsed multiple myeloma, with proven efficacy as a single agent, doublet, or triplett combination with different doses to meet individual patient needs.

Sales will continue to grow as we treat more second line patients and they stay on therapy longer, driven by the deep, durable responses to Kyprolis.

In Europe, Kyprolis was approved in November for second line therapy based on the Aspire data.

We are launching across Europe on a country by country basis as reimbursement is secured.

It is already reimbursed in Germany and the launch there is under way.

Continuing now with oncology, XGEVA grew 10% year-over-year in the fourth quarter and delivered $1.4 billion in sales for the year, driven by unit share gains in both the US and Europe.

The fourth quarter was negatively impacted by some large purchases in the third quarter.

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

Vectibix grew 2% year-over-year, but had a 10% unit growth.

With over 60% of Vectibix sales outside of the US, foreign exchange negatively impacted Vectibix growth by about seven percentage points.

Nplate continued solid growth of about 15% year-over-year, driven by 17% unit growth.

Turning now to the filgrastim franchise, the launch of the Neulasta Onpro kit continued its strong momentum achieving 24% share of all Neulasta sales in the fourth quarter.

This innovative delivery system is applied during a patient's chemotherapy visit so they can avoid returning to the doctor the next day, as this is the normal requirement for Neulasta injections.

This will also be an important differentiator versus future long acting Progastin biosimilar competition.

Quarter-over-quarter, Neulasta was negatively impacted by the burn off of some larger US customer purchases in the third quarter that were described in our last call.

We expect Neulasta to grow modestly in 2016 as we don't expect a biosimilar launch in the US until the end of the year at the earliest.

Neupogen declined 4% year-over-year.

Sequentially it lost 3 points of market share in the US, split between the biosimilar and the branded competitors, but still retains 76% share.

Share loss of Neulasta result in 11% unit decline in the US, but the US sales also benefited from a revision to accounting estimates in quarter four.

And as I said previously, we will compete account by account, using our many years of experience competing against biosimilars in Europe and branded competitors globally, but do expect some share loss.

We launched two other medicines in oncology, BLINCYTO which continues to make in roads with AL patients.

And Imlygic, where we are pleased with initial response of key institutions with next indication, as well as its future potential in combination with other immunotherapies.

Let me now turn to inflammation with Enbrel.

On slide number 19, you'll see that Enbrel grew 8% year-over-year driven by net setting price.

You'll recall net setting price includes the impact from list price changes, as well as contracting and access changes that have occurred over the past 12 months.

Year-over-year segment growth remains strong as rheumatology grew 27% and dermatology grew 46% on a value basis.

Quarter-on-quarter our rheumatology value share was stable at 28%, while our share in dermatology declined two percentage points to 22%, due to intensifying competition from new therapies.

I'll remind you that rheumatology accounts for 80% of Enbrel sales.

Given Enbrel's exclusivity through 2029, we continue to invest in the brand and its outlook for further growth remains strong.

I'll now move to bone health and Prolia.

Prolia grew 21% year-over-year in the fourth quarter with about 20% unit growth in both the US and Europe, delivering $1.3 billion of sales for the year.

Growth is driven by continued share gains in both the US and Europe and we expect this momentum to continue in 2016.

With our recent agreement with GSK, we look forward to transitioning Prolia, as well as XGEVA and Vectibix, back on to Amgen's control in 48 countries and continuing to drive growth.

This is another important step in delivering our international expansion strategy.

We're also looking forward to a potential important addition to our bone health franchise with Romosozumab, which will soon have it's Phase III data and Sean will be discussing it in a moment.

Turning now to our nephrology franchise, starting with Epogen.

Epogen declined 37% year-over-year driven by a shift in ESA use.

This decline was three primary components.

First, around 30% of the decline is due to the shift from Epogen to Aranesp in the dialysis setting.

We continue to see uptake of Aranesp with medium size and independent dialysis centers.

Second, roughly 20% is a result of the burn off from the large customer purchase in quarter three that we discussed in our last call.

The remaining 50% of the decline comes from the shift from VaSera and [Persinius].

Prosinias represents about a third of the US dialysis business.

In October, they disclosed it just over half of the dialysis patience utilizing ESA's had switched to Masera.

EPOGEN sales in 2016 are likely to be impacted by further share declines of Persinius and the potential for additional switching to Aranesp.

Just a reminder, we have a very good business partnership with Davita, and our agreement with them extends through 2018 to purchase at least 90% of the ESAs from Amgen.

Aranesp sales increased 4% year-over-year with a 25% unit growth in the US, driven by the continued shift in dialysis business from EPOGEN to Aranesp.

International sales were negatively impacted by foreign exchange rates.

Sensipar grew 21% year-over-year for the fourth quarter and delivered $1.4 billion in sales for the year, driven by net selling price and unit growth in both the US and Europe with good growth prospects for 2016.

Our nephrology franchise has another exciting opportunity with [Posibeth] the new trade name for Etelcalcetide, our Intravenous Calcimimetic, currently under regulatory review in both the US and Europe.

I'd like to close by outlining our expectations for 2016.

We do not expect Neulasta or EPOGEN biosimilars in the US until the end of 2016 at the earliest.

Assuming potential competitors provide us 180 days notice between approval and launch.

EPOGEN is likely to face continued competition with Persinias and the conversion to Aranesp.

Neupogen continues to face headwinds with new competition, while we expect Neulasta sales to continue to grow given the assumed delay of US biosimilar competition.

We expect Enbrel, Prolia, XGEVA, Sensipar, Vectibix, and Nplate will all see continued growth in 2016, and our recently launched products notably Repatha and Kyprolis will contribute meaningful growth in 2016.

Kyprolis' improved label in the US coupled with our launches around the world will continue to drive solid growth.

Repatha growth is expected to be steady in the near term with breakaway potential once we have the outcomes data on our label.

This sure has been a busy and very exciting time for our teams across the world and I'd like to thank them for their hard work and dedication to delivering for patients.

Let me now pass it to Sean.

Thanks, Tony and good afternoon.

2015 was an unprecedented year for Amgen with a record number of regulatory submissions and approvals and 2016 promises to be another very busy year.

We've already announced two regulatory approvals and there are a lot more R&D events to come.

Beginning with our cardiovascular franchise last week Repatha was approved in Japan for the treatment of patients with familial hypercholesterolemia and patients who are at high risk of cardiovascular events who are not adequately responding to statins.

This is the first approval of PCSK-9 inhibitor in Japan and the very first approval by our joint venture Amgen Astellas BioPharma.

I'm also happy to report our outcome study remains on track as we continue to expect the data in the second half of this year, along with the results of our coronary imaging study we're conducting with the Cleveland Clinic.

We believe that demonstrating a reduction in plaque burden with Repatha will resonate with cardiologists and complement the outcomes data.

We've also been reviewing in detail along with our partners at Cytokinetics and Servier, the Phase 2 data from Omecamtiv Mecarbil, our novel myacin activator for heart failure.

We've been extremely encouraged by the feedback we've received from our discussions with experts in the field as we prepare to meet with regulators to discuss a potential path forward.

Turning to oncology, last week in the US we also received a new indication for Kyprolis in combination with Dexamehtoasone in the relaxed multiple myeloma setting.

This was based on the Endeavor data, which demonstrated clear superiority over Velcade, as Kyprolis doubled the amount of progression free survival time.

This FDA decision also converted the initial accelerated approval to full approval and added important dosing flexibility.

The Kyprolis, Endeavor data are currently under review in the EU.

Sub-group analysis of Aspire and Endeavor were presented at the American Society of Hematology meeting last month and the response from physicians reinforced our view that Kyprolis will be a backbone of multiple myeloma therapy, as physicians pursue deeper, more durable responses for their patients in search of cure.

In support of this we're exploring the use of Kyprolis in combination with newer therapies for multiple myeloma and announced an initial agreement late last year in which we are providing drugs to Janssen for combination study with deratulimab.

In the fourth quarter, we also received three marketing authorizations in Europe, including Kyprolis in combination with revlimid plus Dexamethasone for relapsed multiple myeloma, based on the Aspire data.

Imlygic was approved for the treatment of adults with unrespectable melanoma that is regionally or distally metastatic with no bone, brain, lung, or other visceral disease.

And BLINCYTO was approved for the treatment of Philadelphia chromosome-negative, relapsed or refractory B cell precursor acute lymphoblastic leukemia.

We recently conducted an analysis of the events occurring in our large ongoing Phase 3 trial of XGEVA in the setting of skeletal related events prevention in multiple myeloma patients.

And with the usual caveat that this is an event driven trial, we currently estimate we'll see the data towards the end of this year.

We also continue to expand our immuno oncology platform and announced new collaborations with Merck combining their PD1 inhibitor with BLINCYTO in the setting of diffused large B cell lymphoma and AMG 820, our anti colony-stimulating factor 1 receptor antibody in advanced solid tumors.

Finally in oncology, our Phase I Study of AMG 330, our anti-CD33 bite continues to enroll acute myeloid leukemia patients.

In the area of bone health, we along with our partners at UCB are awaiting the results from our registrational Phase 3 study for sclerostin antibody Romosozumab for postmenopausal osteoporosis.

We expect these data this quarter.

In this study we are assessing the effect of Romosozumab dosed monthly for 12 months, compared to placebo dose for 12 months, after which both cohorts are treated with Prolia for 12 months.

The co-primary endpoints are the incidents of vertebral fracture at 12 and 24 months.

And important secondary end points include clinical and non-vertebral fractures.

We're also conducting a Phase 3 study of similar design comparing Romosozumab to alendronate in year one followed by both cohorts being treated with alendronate in year two.

We expect Romosozumab to be used in high risk osteoporosis patients and with a total of 12 monthly doses, we believe the most effective way to insure proper dosing and maximum benefit in this patient population, at least initially, is through administration by a health care provider.

We'll continue to evaluate the development of potential indications, formulations, and delivery options that could be attractive for certain patient populations.

In fact we will be seeing data from a Phase 3 study assessing the improvement in bone mineral density in men with osteoporosis in the first half of this year.

While osteoporosis and osteoporosis-related fractures are more commonly associated with post-menopausal women, as many as one in four men over the age of 50 will suffer a fragility fracture in their remaining lifetimes.

Before I leave our bone franchise, I'd point out we're also be receiving data from a Phase 3 Prolia study, in glucacorticoid-induced osteoporosis.

Millions of patients are on glucocorticoid therapy around the world, which can result in significant bone loss and fracture.

In neuroscience, our Phase 3 study in episodic migraines, with our CGRP receptor antibody AMG 334, continues to enroll extremely well across two studies.

The testament to the unmet need and desire by patients for an effective prophylactic therapy.

In the chronic migraine setting, our Phase 2b study is expected to read out on the second half of this year.

Meanwhile, the Phase 1 study of our anti-PAC 1 antibody for migraine AMG 301 is currently enrolling patients.

And finally we received a target action date from the FDA on ABP 501, our biosimilar Humira of September 25, of this year.

As I said at the outset, 2015 was a very productive year and we have a lot in store for 2016.

I would like to thank all of my colleagues at Amgen for continuing to deliver for patients.

Bob?

Okay thank you, Sean.

Jake we're ready now for questions, so if you could just remind our callers of the procedures we'll open the lines.

(Operator Instructions)

Your first question comes from Matthew Harrison of Morgan Stanley.

Great, good afternoon.

Thanks for taking the question.

Maybe if I could just start with one for Sean.

On Romo, people are obviously focused on this data and focused on the potential safety of that molecule.

Could you just address for us how you think about the potential for some imbalances in falls or hearing loss or some of the brain volume growth that make people worried about neurological symptoms?

And in addition to that, just talk about what, to the extent you can, what the DSMB has looked for, what sort of monitoring you have in the study around those issues?

Thanks.

Yes, so I think, obviously, when one looks, this is a genetically validated target, and when one looks at the rare familial forms of absence of sclerostin, or partial absence of sclerostin, activity such as van Buchem disease (inaudible).

These individuals from conception are deficient in sclerostin, and so as a consequence of course, over time, often in their third or fourth decade, they begin to have some untoward effects from this, such as very thick skull plates and the (inaudible) in which cranial nerves exit from the skull, can impinge on the nerves due to overgrowth of bone.

I think that this is something that isn't an effect of developing from conception with the absence of sclerostin, and I would just contrast it sharply with giving a one year of therapy to generally quite elderly, at least middle aged at minimum, osteoporotic patients.

So I think that, of course, in an abundance of caution we are doing testing on hearing and some other things that are designed to assess these kind of theoretical risks.

But I would certainly be very surprised to see a pharmacodynamic response from the drug that would result in those kind of complications.

The DSMB, of course, is fully aware, as all of our investigators are out doing the trials and patients through informed consent.

All the theoretical and established potential risks of these kind of investigative products.

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

Maybe for Tony on Repatha's uptake, you noted the happiness on your part with the share gains, but are you disappointed overall with the size of the pie at this stage?

I know you're seeing reimbursement headwinds, but nonetheless, I guess is this on a more shallow trajectory than you thought?

And, assuming we do get the positive outcomes data toward the second half of the year, should we see an immediate benefit from that or would you think it would still take time to work with payers to work through these headwinds?

Thanks, Eric.

So I'm glad you see the performance in the marketplace.

The hub we put together was clearly done because we understood there was going to be a little bit of time before the payers made a decision around formulary approval.

And to me, the hub has therefore been a surrogate to the level of prescriptions that cardiologists and primary care physicians are prepared to prescribe.

We are seeing a really robust level of prescriptions coming through the hub.

So to me that continues to give me great confidence in terms of physician willingness to prescribe this drug for patients who fit inside the label.

The prescriptions themselves in terms of the NBRx and TRx are continuing.

It's clear that the utilization management criteria in place is restricting the number of prescriptions that get dispensed and we are working with payers at the moment to make sure that patients who are eligible actually get access to these drugs.

And on the outcome?

Oh, so the outcome study, clearly, I think once it is clear what the value of this drug is, physicians, patients and payers will realize a tremendous amount of value.

Now I think there will be a time between the data becoming present and the data moving into the label that will be negotiating with payer by payer, but once it's in the label it's clear that we should see some dramatic uptake.

Then, yes.

Your next question comes from the line of Geoff Meacham from Barclays.

Afternoon, guys, thanks for taking the question.

A couple on Repatha as well.

So when you look at the subtleties, either reimbursement or populations or clinical practice, can you compare, kind of the EU and Japanese markets to the US, assuming you'd do it in outcomes data this year?

Then just a follow-up to Eric's question on the US market.

What can you tell us in terms of leading indicators of demand, in other words like physician prescribers or visits to your hub or things like that?

I want to get some demand metrics beyond TRx.

Thanks.

I think I understand your question about access outside the US.

So one has to remember that outside the United States, once access is granted, physicians are not making a decision on anything other than a clinical decision around the value for patients.

So there's no economic decision once you have access in Europe and in Japan.

So the negotiation there is to get access as quickly as possible and then to move patients on to the drug as physicians prescribe.

From an inside-the-US perspective, yes, the number of prescriptions we have seen across the range of physicians who have been prescribing is encouraging.

I'm not quite sure what more you want to hear about, Geoff, sorry.

Did I answer your question?

Or did I miss a question there?

Your next question comes Alethia Young from Credit Suisse.

Hang on, Jake, before you move on to Alethia.

Tony was asking if he had addressed Geoff's question.

Geoff, was that okay?

Was there anything else?

Okay, it looks like we might have lost him.

Okay, let's go on with the next question from Alethia.

Alethia, go ahead.

Alethia, we can hear you, go ahead.

On NEUPOGEN, I know you said you were going to compete account by account, and so far you have share still have 76% share, but can you give us a little flavor on like the progress that you've done there?

Have you spoken to the majority of accounts?

Just help us think about how much defense you're playing and how much success you're having.

And then on Neulasta, I guess I wanted to think about with the on pro device, do you think that kind of business is now sticky and we should think about that as share that's now protected, if there were a biosimilar to emerge in 2017?

Okay, NEUPOGEN, tough to answer your question.

We clearly segment the NEUPOGEN accounts between large, medium and small, and we decide which ones we are going to defend and which ones we are going to be letting go.

As you know, we've had competition on the market for over a year now, plus a biosimilar competitor for close to six months and we still hold 76% of the market share.

As regard to the On-body injector for Neulasta, the main reason we brought to market is the unique distinctive value this drug or this device brings to patients and to the physicians and clinics and institutions.

Most patients try to get the chemo on Friday, then they can spend the weekend recovering before they go back to work.

Neulasta requires them to come back on a Saturday morning to get their last injection, so sometimes what was happening is patients were getting an injection too early, which is actually not good.

It actually reduces the effects of the drug quite dramatically.

Or two, they were not coming back for the injection at all, so exposing themselves to potential febrile neutropenia.

So the real value we picked up from patients, from nurses, physicians and from institutions has been, we are increasing the opportunity to give patients the right number of cycles at the right time and really reduce the possibility of febrile neutropenia dramatically.

This is the benefit we sell the device consistently, which I'm sure will continue and stick.

Great, thanks.

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

I was wondering you talked about the label expansions and some of the benefit there, but I was just wondering if you could comment on the potential future contribution from once-weekly dosing?

Is that really one of the key drivers of an inflection here?

And then, any commentary you can provide on average treatment duration trends for Kyprolis?

Thanks.

So I think with Kyprolis we have to start with our true belief that driving deep remission is where clinical practice is going to go.

And the combination is using Kyprolis as one of the products in the backbone is clearly showing us these huge extended periods of PFS, which by definition is helping us drive deep remission.

Patient convenience down the line will become important, and I think the once-a-week dose will certainly help with patient convenience to ensure that patients stay on the drug for as long as we can.

With regards to duration, when we look at the chart audits we see that products in this category in second line are probably being used between about seven to eight months at the moment.

It's difficult to quote Kyprolis data yet because we only got approval for the second line in July, so we are hoping to see some extended data into the next couple of quarters.

Your next question comes from the line of Matt Roden from UBS.

Great, thanks very much for taking my question.

Let me go back to Romosozumab.

This one a little bit more from the commercial side, because if the trial works, we're all going to be interested the opportunity for the product.

So to that end, I was wondering if you could elaborate a little bit more on the strategy to, at least initially, administer the drug in the doc offices by a healthcare provider.

Can you just talk about why you think that's beneficial for the patient and whether or not you think that's the best way to maximize the potential to impact patients?

And then, I guess the related follow on to that would be, can you talk about what work you're doing to maybe provide a self-injection option down the line?

Thanks.

Let's start with Prolia because we spent the last four or five years now building a level of expertise on Prolia, and we were the first injectable biologic to launch into a GP-type market.

A complex process, which I think the team got their hands around, and as you'll see the data in the US, Prolia continues to grow in leaps and bounds as we get both breadth and depth of prescribing happening.

It's clear to us that a lot of these patients are elderly and coming back to the doctor is important to ensure they get the injections.

When I think about any other potential competition to Romo, the biggest complaint they have is the difficulty of daily injections of course.

So we do see the same targets that are prescribing Prolia would be targeted to go to, to talk about Romo.

And we think with the large unmet opportunity in the marketplace, this is quite a large opportunity for us to go to market with.

Do you want to say anything about future plans on administration?

We are always looking to advance and improve in the way we bring to market a combination device product, and we will continue to look at effective and efficient ways for those patients who decide that self-injection could be an option.

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

Thanks.

I had a question for Sean regarding Romo.

I think certainly we think that should work.

But actually wanted to ask scientifically, you remind us how confident you are in translating that superior BMD data to superior fracture data, particularly against a high-efficacy drug like Forteo, is similar or to what magnitude it could be much better numerically?

And then in year two, I know you're testing the hypothesis of that design in your study, but what would you expect in year two and is there any reason that it would not be maintained across year two?

Thanks.

Yes, well what I would say is that the confidence level we have about the BMD, which as you know is the most impressive sort of BMD increase that's been seen in humans with any treatment, translating into fracture resistance, that confidence is high.

I think that the genetic validation that exists for the pathway is very convincing to people in the field.

Also, we saw, and this is one of the few areas where the pre-clinical models, particularly those performed in non-human primates, are really quite predictive of what you'll see in humans.

And then, in the non-human primate, we were able to do biomechanical testing of bone, of course, after animals are sacrificed.

So we know that we achieved extremely high bone strength in these animals commensurate with BMD increases.

And finally, we've done very advanced imaging of humans that have been treated with Romosozumab and compared head-to-head to what we see with Forteo.

And as you probably know, Forteo has its major impact on trabecular bone and has a relatively limited impact on cortical bone.

And cortical bone really what matters for the majority of long bone fracture risk, which is really where the clinical need is.

And so we have multiple reasons to believe the genetics, the pre-clinical information and the imaging that we've done in humans that we should have not only a greater BMD increase, but that the quality of bone that we're producing is of a higher quality than what one gets using PTH analogs.

One way of thinking about this is there really are two master regulatory switches for controlling BMD.

One of them is RANK-ligand, which controls osteoclast function that we direct denosumab there, and the other is sclerostin, which controls osteoblast function, and there, sclerostin is the key mediator.

So what you're doing here, like with denosumab, is throwing a master of physiologic regulatory switches.

So what you're expecting to get and what we see in everything that we've observed is physiologic high-quality bone formation.

You were talking about year two, Sean?

Yes, year two.

I think that the thing that is interesting here in this paradigm is that this is a one-year treatment and so the first year of the study very important because it's a placebo-controlled period.

We know from our experience with humans that we can't just withdraw the product and leave patients on no therapy, so the gains that are so impressive will melt away relatively quickly.

And so it is necessary to lock in these gains with antiresorptive agents.

So what we expect to see is, we obviously know a lot about Prolia.

We expect the placebo group to respond well to Prolia in the second year, but the patients on Romosozumab will also get substantial benefit.

So if there's a meaningful difference in fracture risk at the end of year one, that should persist more or less out to the second year, and even in theory, well beyond that.

But this is a new paradigm in osteoporosis, this relatively short period, and study designs are quite different than what people are used to be seeing in the field.

So we'll all be fascinated to see the results.

Jake, before you go on to the next question, Tony had an additional comment on Geoff Meacham's question about the Repatha demand indicators.

Tony?

Sure, so, Geoff, I think I better understand your question now with more around in addition to TRxs, what else would we be looking at to see for future growth in the marketplace.

Like always, to me TRxs and NBRxs in terms of new naive patients are the most important thing to measure in terms of the growth.

But with a new launch like this where the plans are put into place, what one has to remember is that IMS only reports dispense prescriptions, i.e., prescriptions that come to a pharmacy or specialty pharmacy and the patient actually walks away with a drug.

What you have to be able to look at inside that data, is how many prescriptions get to the pharmacy and how many are rejected versus how many are abandoned.

So we are seeing the majority of prescriptions getting to the pharmacy at the moment, are being rejected.

Rejected, because of the prior authorization process had not been properly completed or there's some outstanding information and patients have to go back and get some more data.

All patients are seeing co-pay at this particular stage because the product is not properly on formulary yet, as being too high a co-pay and they abandon the prescription and they walk away.

The data you're seeing it's really important, but you have to understand the majority of prescriptions getting to the pharmacy are being rejected or abandoned at the moment while the plans complete their process.

Which is why we spent so much time with the plans at the moment showing them the number of eligible patients who are unlabeled getting to pharmacy and not getting product.

It really is a concern that when you think about the potential Repatha patient, these are patients that are at risk right now for a cardiac event, and therefore, early intervention is essential, so we are spending quite a bit of time with the payers.

Great, thanks, Tony.

Jake, let's take the next question please?

Your next question comes from the line of Joshua Schimmer from Piper Jaffray.

Hi, thanks for taking the questions.

Just wanted to come back to the Repatha management criteria that are limiting uptake.

Can you elaborate a little bit on what the primary causes for rejection are?

Give us any sense as to the evidence you are making progress in addressing some of these issues?

And then, given what those issues are, what gives you the confidence that cardiovascular trial data may ultimately resolve that as a barrier?

Thanks.

It's Tony here, Josh.

The utilization management criteria obviously differ plan by plan, but they include things such as patient must have reached their maximally tolerated statin dose or some require you to be on one or two statins.

Some of them require you to have done statins plus a step through to Zetia.

There's clearly a requirement around your LDL-C levels that have to be a certain level.

But probably the more complex thing is the prior authorization documents, five pages of handwritten stuff that physicians have to find out about, and most of the rejections are because the form is not properly completed and there's just the time to collect the data.

So as we get the process running a bit more efficiently and hopefully moving from paper to an electronic process, the prior authorizations could go faster.

And then as we show the payers the impact of to draconian, a utilization management criteria, not getting to the right patients, we will see some changes there.

The outcomes data, of course, will dramatically change the value of this particular drug, and we do expect to see some changes in the utilization criteria once we have that term.

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

Hi, guys.

Thanks for taking the question.

Three questions.

First, I'd like to know where Arvind buys his ties?

Second question, is Pfizer's made the decision to enroll primary prevention patients, I believe, into their Phase 3 PCSK9 outcomes trial, Sean and Tony.

And I was wondering, and they expect to have a labeled indication for that, and they believe that's very important for the payers.

Why did you make the decision not to design your trial that way, maybe that's a Sean question?

And for Tony, what commercial implications, if any, is this going to have in your mind?

And then, third, just to follow-up on someone else's question just to be more direct.

I think what's going on in the Street right now is people are concerned that the Romo fracture reduction magnitude may look optically less than what is contained, for example, in the Forteo label or some of the data that Radius has produced for their PTH analog.

Primarily because at two years you're comparing obviously your (inaudible) to an active comparator versus these other agents which were compared to placebo I believe.

So the question is should we be expecting, Sean, can you just talk about it, is this an apples-to-apples comparison or apples-to-oranges comparison when we actually see that number?

Thank you.

Sean, why don't you do Romo and then the Pfizer PCSK9 question, and then, Tony, you can talk about --

We respect to Romo, what I'd say is that you're right, that this will not be so straightforward as to make cross comparisons of those sorts.

They are froth with difficulty always, these kind of cross trial comparisons, but in osteoporosis because the trials are very large and a very similar design, in general, people have felt pretty conformable doing that.

And you've seen that, for example, when we had our three-year fracture data for Prolia, people compared it to three-year fracture data (inaudible) or IV, et cetera.

And I think in this case, it's going to be much more difficult to make those kind of simple comparisons.

I think what will happen here is that the data will be interpreted by the experts in the field.

And as always is the case with the specialty product like this that's targeted at a very specific patient population, the experts in the field will make the determination whether they think that the data are impressive and who ought to be getting the product and that will influence prescribing outside the expert community.

With respect to the primary versus secondary prevention strategies, I think that the companies that were in the lead on PCSK9 wanted to get outcomes data for these products as fast as was possible.

And the fastest way to get the outcomes data is to study a patient population that has a fairly high event rate.

And that generally is achieved, or one of the main levers you can pull is to have patients who have suffered a prior event.

That's one of the strongest predictors of a subsequent event.

And as you know, there have been slightly different flavor variance on that, that have been pursued by us and by Regeneron, but that's been the basic approach.

Moreover, it's never been necessary in this field to do outcomes trials in various different populations in order to have a label that covers broad patient populations.

So what you really need to do is demonstrate convincingly the LDL level reductions that you're achieving with your agent translate unequivocally into reductions in cardiovascular outcome risk.

That's all you need to do, and we feel that these studies will do that.

Obviously a company coming behind, it has to think about what they're going to do to try to differentiate their position.

So I think that the payers will be locking at high-risk patients, physicians will be making decisions around patients prescribed that have a high risk.

And I think the clinical trials we have will take into account all patients of high risk, and those who have an event or who have (inaudible) will be a higher chance of getting a drug and getting prescribed.

Jake, let's take the next question.

Your next question comes from the line of Eun Yang from Jefferies.

Thank you.

So when you look at Forteo sales, ex-US sales are higher than US sales despite limited aggressive price increases, but when you look at Prolia, US sales account for 64% of total sales.

Why do you think there is a difference in usage between anabolic and antiresorptive agents?

Or do you think it's due to several administration versus (inaudible) at the administration?

And follow on that is, Romosozumab is going to be used one-year treatment, whereas the PTH analogs are going to be used to three year -- two years, so how do you think about the pricing of Romosozumab?

Thank you.

Let me try and answer the first piece about the difference in the sales globally.

I think Prolia was simply a timing around coming to market.

We came to market during a fiscal crisis and the implied reimbursement process outside the United States took a number of years.

In fact, in France, it took us 4 1/2 years from approval to get to the final decision made on pricing.

So outside the US, they are running to catch up in terms of the patient usage.

And then we are sure that eventually we should get to a decent balance.

Sean?

I think the other question --

The other question had to do with pricing.

I would imagine it's premature.

I think the price we will be able charge will be clearly linked around the value proposition we see coming out of the clinical trials.

Okay, Jake, let's take the next question please?

Your next question comes from the line of Cory Kasimov from JPMorgan.

Hey, good afternoon, guys.

Thanks for taking my question.

I wanted to go back to Kyprolis for a minute, and just wondering if you have an efficacy interim look built into Clarion, similar to what you had for Endeavor?

And if you do, what triggers it and what kind of action can be taken?

Could we stop for either futility or overwhelming efficacy?

Thanks.

Yes, so these trials were all designed more or less at the same time by the same group of people, and they all have generally similar design and they have interim analyses.

Obviously that interim analysis has in it the ability to stop the trial for clear futility and to stop the trial for overwhelming efficacy.

And if you, I'm sure will recall, both Aspire and Endeavor were stopped for overwhelming efficacy.

I think this is a reasonable design, but I don't think that we are in any way planning on seeing a first-line study stopped for overwhelming efficacy at the interim, but it is a possibility.

Cory, we're expecting this in 2017.

Your next question comes from the line of Ying Huang from BofA Merrill Lynch.

Hi, good afternoon, guys.

Thanks for taking my question.

If you don't mind, can you spell out the sales of Repatha last quarter?

I know it's small number, but just a housekeeping question there.

And secondly, on Romosozumab regulatory path, do you believe firmly that the first Phase 3 trial that would read out in 1Q this year should be sufficient for FDA approval?

Thanks.

So did you get the second question?

Why don't you go ahead on the second question.

Yes, on the Romo study, yes.

We believe, based on the published guidances by regulators around the world and our interactions with the regulators around the world, that if successful, the placebo-controlled study we were just talking about earlier, that the first of these studies reads out, will be sufficient for global registration.

Okay, and as to the Repatha, you're right, we aren't breaking those out by line item at this time.

Your next question comes from the line of Brian Skorney from Robert W. Baird.

Good afternoon, guys, thanks for taking the question.

Just thinking a little bit more about the outcomes data for Repatha expected later this year.

Where do you think the range of outcomes can fall in terms of how we extrapolate the reduction in LDL capability of the drug to what we've classically seen in terms of CV reduction, and maybe think about what the range should be based on that?

And how it could deviate from that classical extrapolation, whether it's due to different types of patients or just the trial design, how we can think about that, thanks.

Yes, this is the kind of subject that one can sit around and talk about for many hours with experts, which I've done.

And I think the best thing I can say is that we have a remarkably linear relationship that we've established, most recently with Improveit, extending that line in just a remarkably linear fashion, extending the line that was created by statins and by other interventions, such as illegal bypass surgery and so on, and the genetics of course.

And so when you put it all together, what you have to believe scientifically, is that what truth is that you're going to fall right on that line in the same way as if you achieved that additional LDL lowering with the statin or with ezetimibe, were that possible.

Obviously it's not.

Could it deviate from the line?

Sure, you know, it's always possible that some of the foibles of the way that the clinical trials are designed and conducted, there is, of course, for example, a treatment lag of some sort that occurs when you start therapies.

And so when the study reads out very quickly, instead of over a longer period of time that has a bigger influence, et cetera.

That could make it come off the line slightly in one direction.

We also know that the agent does have some activities that statins don't have, for example, there is an effect on Lp(a), which is present in some individuals, and seems to be a strong prognostic factor that could make the dot come off the line a little bit the other direction.

There's some variability that you could expect, but from a scientific perspective, based on the human genetics and everything we know, one would expect that you're going to see a reduction that would be proportional and similar.

And that would be roughly ballpark around 1/3 level reduction of the risk.

That's the kind of number that many people -- keep in mind, I think that 50% reduction in risk, that was suggested by the analyses that were published in the New England Journal, that there's a very wide confidence interval around those.

And while you can't rule out the possibility that you'll see that big of a reduction, that's a bigger reduction than you would expect to get if you were achieving the LDL lowering that we're achieving with the statin.

So it requires some other biology like Lp(a) or something to be going on, and I can't tell you that's not happening, but it sure wouldn't be my base case.

We'll know in a few months.

Lots to talk about today, so we have exceeded our prescribed hour.

Why don't we take two last questions.

Your next question comes from Jim Birchenough from Wells Fargo.

It's Nick in for Jim this afternoon.

We spent a lot of time talking about very late-stage pipeline and clearly have done a pretty impressive job developing those molecules, but what are you pointing investors to in terms of the early stage?

If I look at the Phase 2 pipeline, half of those AMGs are with Astra.

There's the CTEPH inhibitor that you're wondering what to do and many of those Phase 1 molecules have been around for a long time.

So, Phase 3 looks really good, but what about Phase 2 and Phase 1, what should we be focused on?

Yes, you know, we're actually really excited.

I think it's fair that we had so much going on in the later stages that we haven't spent as much time focusing on talking about what's going on in the earlier pipeline, but we're really excited about quite a number of things in the earlier pipeline.

Obviously, Omecamtiv mecarbil is very exciting.

We have the migraine, new migraine antibody Path 1 that I mentioned.

We have a novel heart failure molecule which will be entering the clinic this year.

That's something we've developed in house.

We have a completely novel inflammation mechanism that no one else is pursuing that I think that is extremely interesting that's entering Phase 1 now.

We have quite a range of bite targets that are moving forward into the clinic, either now or in the relatively near future.

So I think there's plenty to look forward to in that space.

And you know, we also have, earlier than that, really the most exciting stuff which is some of the targets that we believe we are uniquely working on because they've arisen from our advanced population-based human genetics efforts, like the Gene X example that some of you may recall from our business review, which is moving along very nicely.

So I think at a future, business-review type setting we will probably talk a little bit more.

Its been hard to do that with everything that's been going on in the late-stage work.

Jake, let's take one last question, please.

There are no further questions at this time, sir.

Okay, great.

In that case, let me thank everybody for your participation in our call.

Between myself and my team, we'll be around for awhile, so if there are any other questions feel free to call us.

Have a good day.

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

You may now disconnect.