美國安進 (AMGN) 2016 Q1 法說會逐字稿

My name is Jake Wong and I will be your conference facilitator today for Amgen's first-quarter 2016 financial results conference call.

(Operator instructions)

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

Mr. Sood, you may begin.

Thank you, Jake.

Good afternoon, everybody.

I would like to actually begin by extending my gratitude to all of you for having to deal with the deluge of earnings reports from multiple companies reporting today.

I appreciate you being on our conference call to review our operating performance for the first quarter of 2016.

We're off to a great start for the year and to review our progress, Bob Bradway, our Chairman and CEO, will lead the call with a strategic overview.

Our CFO, David Meline, will then review our quarterly results and update you on our guidance for 2016.

Tony Hooper, our Head of Global Commercial Operations, is here to discuss our product performance during the quarter, followed by our Head of R&D, Sean Harper, who 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 email.

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

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

Bob?

Thank you, Arvind, and let me also thank our listeners for joining the call.

As Arvind said, we're off to a strong start in 2016 with 10% revenue growth and 17% adjusted earnings-per-share growth in the first quarter.

Our sales were strong in the US and internationally and that was true broadly across our products.

As you can see from these results, we've put the Company in a strong position to manage competition for our legacy products while investing for growth with our newly launched and late stage pipeline products.

Last year as you know, we had six launches in the US.

We expect these products and especially Kyprolis and Repatha to pave the way for our long-term growth.

We'll talk more about these launches and our priorities for them on this call.

If last year was a year of launches in the US, this will be a year of launches for us internationally as we take Repatha, Kyprolis and our other new products into countries around the world.

In total this year, we are expecting on the order of 80 new launches across our countries and products.

For example, Repatha is launching now in Japan, Brazil, in multiple countries in Europe, and the early signs are good.

Similarly, Kyprolis is off to a strong early start in its first markets in Europe.

Our oncology and cardiovascular franchises received a lot of visibility last year owing to the flow of data in our product launches in these areas.

This year we expect attention to focus on our other franchises as well as our pipeline advances with important new opportunities.

In bone health, for example, our Romosozumab opportunity is coming into focus with positive Phase 3 data.

In nephrology, we expect approval later this year for Parsabiv, a therapeutic for dialysis patients and we expect pivotal data in neuroscience for our migraine antibody, AMG 334.

In inflammation, we look forward later this year to establishing with the FDA that our adalimumab molecule is, indeed, biosimilar to Humira.

And while I'm speaking about our biosimilars programs, I'd also remind you that we expect to submit our bevacizumab or Avastin biosimilar file to regulators this year and to have Phase 3 data for our trastuzumab or Herceptin biosimilar as well.

Our transformation efforts are well underway and delivering results.

This includes cost savings which David will discuss but also improved speed to market and speed in the market.

And these attributes are every bit as important as cost savings as we grow our Company with new products and new territories and adapt to the changing environment for our industry.

Finally we've designed our capital allocation strategy to deliver value for shareholders through both an attractive return of capital and dividends and buybacks and vigorous investment for long-term growth.

This is an exciting time in the field of biology with promising clinical opportunities and breakthroughs arising in many of our areas of interest.

So with a strong balance sheet and a long-term investment outlook, we will continue to look for the most promising internal and external opportunities to advance.

To underscore our prior comments on this topic, our emphasis will be on focus and capital discipline as we do this.

Before turning to David, let me just congratulate my colleagues around the world for the quality of their execution and a very strong start to the year.

David?

Thanks, Bob.

Turning to the first-quarter financial results on page 6 of the slide deck, we are pleased with our strong performance driven by continued momentum across much of our product portfolio.

Total revenues at $5.5 billion grew 10% year-over-year.

Overall product sales increased 7%, reflecting continued strong performance from our growth products which more than offset the impact of competition on our legacy products, EPOGEN and NEUPOGEN.

Other revenues at $288 million increased $129 million versus the first quarter of 2015.

Other revenue benefited both from an upfront partner payment for a licensing transaction representing almost 40% of total other revenue for the quarter as well as higher Ibrance royalty income.

Total revenue and product sales were impacted 1% unfavorably due to foreign-exchange changes.

Adjusted operating income at $2.9 billion grew 17% from prior year.

Adjusted operating margin improved to 54.6% for the quarter, reflecting continued growth and progress from our transformation initiatives across all operating expense categories.

As in prior years, our operating margin will likely be lower in the remaining quarters of the year driven by the timing of expenses.

In 2016 we remain on track to deliver over $400 million of gross efficiency savings from the transformation versus prior year.

This enables continued investment in our pipeline and launch activities while delivering solid profitability.

On an adjusted basis, cost of sales as a percent of product sales at 13.5% improved by 1.6 points, driven by manufacturing efficiencies, higher net selling price and lower royalties.

Research and development expenses at $858 million were relatively unchanged in the first quarter of 2016 versus last year.

SG&A expenses increased 11% on a year-over-year basis as increased commercial investments in new product launches were enabled by savings from transformation and process improvement efforts.

In total, adjusted operating expenses increased 3% year over year, including a favorable foreign exchange impact of approximately 1 percentage point.

Other income and expenses were relatively flat on a year-over-year basis at $144 million in the quarter as higher interest income was offset by higher interest expense.

The adjusted tax rate was 18.9% for the quarter, a 1.9 point increase versus Q1 of 2015.

This increase was primarily due to the unfavorable tax impact of changes in the geographic mix of earnings and a state audit settlement in the same quarter of last year.

These increases were partially offset by the adoption of Accounting Standards Update 2016-09, a new accounting standard that impacts how certain share-based compensation tax expense is recognized.

These impacts were previously reported on the balance sheet as a change in shareholders' equity.

The new rule requires these impacts to be recognized in the income statement and thus have a tax rate impact.

Future tax rate impacts will depend on the movement in our stock price between when we grant share-based compensation and when it vests.

The Q1 benefit of this change adds approximately $0.09 to our adjusted earnings-per-share.

Adjusted net income increased 15% and adjusted earnings per share increased 17% year over year.

Turning next to cash flow and the balance sheet on page 7. Free cash flow was $1.8 billion, an increase of $400 million over last year.

We deployed $0.7 billion to repurchase 4.6 million shares in the quarter at an average price of $147 per share.

And we are on track to achieve total share repurchase for this year in the range of $2 billion to $3 billion.

Additionally our first-quarter dividend increased to $1 per share, an increase of 27% of last year.

At the end of the first quarter, we had $4.2 billion remaining on our Board-authorized share buyback program and are on track to deliver on our capital allocation commitments to shareholders.

Cash and investments totaled $34.7 billion, an increase of $7.6 billion from last year's first-quarter level.

This increase reflects strong net cash flow and our first-quarter debt issuance of $2.9 billion of which approximately $2 billion will be used to repay debt maturities over the balance of this year.

Our debt balance stands at $34.3 billion as of March 31 of this year.

Our total debt portfolio has a weighted average interest rate of 3.7% and an average maturity of 11 years.

Turning to the outlook for the business for the remainder of 2016 on page 8, we remain on track with our plans to continue investing to grow the business while transforming to a more agile and efficient operating model.

Today we are increasing our 2016 guidance which reflects solid Q1 performance from revenue and expense as well as a revised tax outlook.

With this background, our 2016 revenue guidance is now $22.2 to $22.6 billion versus prior guidance of $22.0 billion to $22.5 billion.

And our adjusted earnings-per-share guidance is now $10.85 to $11.20 a share versus prior guidance of $10.60 to $11.

In addition, we now expect our adjusted tax rate to be 19% to 20%, including the impact of the previously mentioned Accounting Standards Update, versus prior guidance of 19.5% to 20.5%.

Finally we expect to invest capital expenditures of approximately $700 million this year.

This concludes the financial update.

I will now turn the call over to Tony.

Thank you, David, and good afternoon folks.

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

As Bob said, we had a great start with global product sales in the first quarter growing by 7% year over year.

Our US business delivered 9% year-over-year growth and sales growth in our international business was negatively impacted by 5 percentage points due to foreign-exchange.

Excluding the foreign-exchange impact, our international business was up 7% year over year.

I will structure my comments in three categories today.

Performance in our growth products, how we are managing the lifecycle of our mature brands and conclude with an update on the performance of our newly launched products.

First our six growth products: Prolia, XGEVA, Vectibix, Nplate, Sensipar and Enbrel aggregated nearly $3 billion in sales or over 50% of the first-quarter sales, growing 20% year-over-year.

Sustaining their growth continues to be priority for us.

Let me start with Prolia and XGEVA which are now annualizing at approximately $3 billion per year.

Prolia grew significantly at 29% year-over-year.

Continued share gains drove growth in both the US and Europe, with over 25% year-over-year unit demand growth in both regions.

We saw the typical seasonality in the first quarter.

In the US, our direct-to-consumer promotional efforts continue to drive increasing levels of new-patient adoption and we are sustaining repeat injection rates of over 65%.

We expect continued growth from Prolia to come for years.

XGEVA grew 11% year over year.

Unit share increased about 3 percentage points over last year in both the US and Europe.

The first quarter was positively impacted by increased levels of purchasing by some large end customers in the US which we expect to burn off in the next quarter.

We continue to focus on XGEVA's superior clinical profile versus the competition and look forward to potential new indications which will drive sustained long - growth.

Turning to Vectibix and Nplate, unit demand growth drove double-digit gains year-over-year across both products.

For Vectibix, we continue to make solid inroads into earlier lines of therapy in both the US and Europe.

Sensipar grew 10% year over year driven by net selling price as well as unit growth in the US and Europe.

With sales annualizing around $1.5 billion, Sensipar remains a growth driver.

We look forward to adding Parsabiv as another treatment option for patients with secondary hyperparathyroidism.

Our regulation filings for Parsabiv are currently under review in both the US and Europe.

Let me now turn to Enbrel.

Enbrel grew 24% year-on-year due to changes in net selling price and inventory, which was partially offset by competition.

As a reminder, net selling price change comprised several components, including list price increases as well as rebates we provide to payers and the impact of formulary decisions.

In the third quarter 2016, inventory was at a normal level.

The year-over-year inventory growth is as a result of prior-year dynamics.

The climbs in inventory levels in the first quarter last year make for an approximately $100 million favorable comparison this quarter.

As we think about the second quarter this year, we expect to see a reverse effect of a similar magnitude.

In other words, the significant inventory build in the second quarter of 2015 will create an unfavorable comparison assuming inventory levels remain normal next quarter.

Turning to underlying performance for Enbrel, we saw 14% year-on- year growth in the rheumatology segment for the first quarter and Enbrel held quarter-over-quarter value share at 28%.

In dermatology, competition from new entrants, primarily non-biologics, helped drive year-on-year segment growth of 29%.

Enbrel's share in dermatology declined 1 percentage point quarter over quarter to 21%.

If you'll recall, rheumatology comprises about 80% of Enbrel sales.

Given Enbrel's exclusivity through 2029, it remains a critical growth driver that we are continuing to invest behind.

Let me now turn to how we're managing the lifecycle of our mature brands, starting with our ESA products.

Aranesp sales increased 11% year over year, driven by 15% unit growth.

In the US we are successfully transitioning our medium size and independent dialysis centers from EPOGEN to Aranesp.

Aranesp now represents over 70% of ESAshare of these providers.

International sales were negatively impacted by pricing pressures and foreign exchange rates.

EPOGEN declined 44% year-over-year.

About one-third of this decline is a shift from EPOGEN to Aranesp in the dialysis setting I mentioned above.

Most of the reigning decline comes from the shift from Amgen ESA to Mircera at Fresenius.

We understand that Fresenius, which represents about one-third of the US dialysis business has converted over 70% of their patients to Mircera.

If you remember, we have a contract with DaVita which represents another one-third of the dialysis business through 2018 to purchase at least 90% of their ESAs from Amgen.

I'd like to point that we also do not expect biosimilar competition to EPOGEN in 2016.

NEUPOGEN declined 13% year over year and 19% quarter over quarter with the competitive landscape playing out as we generally expected.

NEUPOGEN exited the quarter with a 64% share of the short-acting segment which now consists of Zarxio, GRANIX and Leukine.

As we said before, we'll continue to compete account by account as competition intensifies.

We continue to emphasize the value of NEUPOGEN, built on its track record of safety, efficacy and reliable supply.

Neulasta grew 4% during the quarter.

Unit growth of 3% included purchases by some large US end customers which we expect to burn off next quarter.

Let me now turn to our launches, beginning with the Neulasta Onpro kit.

The Neulasta Onpro kit has been an extremely successful launch achieving about one-third share of Neulasta units in the first quarter and approaching $1 billion in cumulative sales in the 12 months since launch.

Patients undergoing myelosuppressive chemotherapy regimens are at-risk of serious infections.

One of the biggest challenges physicians face in preventing these infections is patient compliance.

Both ensuring patients get the Neulasta injection after each course of chemo and at the right time, 24 hours after chemo.

These are critical steps in order to ensure maximum benefit of Neulasta.

With the Neulasta Onpro kit, we're able to address this important unmet need.

This innovation also provides meaningful differentiation versus the traditional pre-filled syringe and potential future competitors.

We also see the compliance rates improving with the use of Neulasta Onpro based on patient level data.

This is a great example of our strategy to identify and develop innovative delivery systems to improve the patient experience.

By all measures, this is a highly successful launch and the value it brings to patients and the healthcare system is translating into strong performance.

We remain focused on increasing adoption to benefit more patients.

Kyprolis grew 20% year over year on a sequential basis.

US unit growth was offset by unfavorable changes to inventory and to net selling price.

The addition of ENDEAVOR data, which demonstrated superiority versus Velcade, to the US label in January further solidifies Kyprolis's profile as a backbone of multiple myeloma therapy.

We expect sales to continue to grow as we treat more second-line patients and they stay on therapy longer to achieve deeper and more durable responses.

In markets outside the US, we're making good progress with our launches.

Initial results have been very positive as we bring this important therapy to these patients.

Blincyto continues to increase patient penetration in the US and launches are underway across Europe as reimbursement is secured.

Sean will discuss developments of our bi-specific antibody platform in a moment.

IMLYGIC, our Oncolytic immunotherapy for metastatic melanoma is currently indicated as monotherapy in the US and Europe and is playing an important role in addressing the needs for this small patient population.

We believe that true potential for IMLYGIC lies in combination with other immunotherapies across different tumor types.

Turning now to Repatha, which I continue to believe is one of our largest opportunities.

I'm pleased with our competitiveness to date.

Our robust clinical development program clearly demonstrated Repatha's ability to deliver intensive and predictable LDL-C reduction.

This message continues to resonate well with physicians and coupled with strong execution in the marketplace we continue to lead prescribing in the US as seen in the IMS data.

In Europe reimbursement are negotiations on track and we are in early launch in several countries, including Germany, Spain, the Netherlands and Scandinavia.

In Japan we have now received pricing approval and launch activities with our partner Astellas are well underway.

Before handing over to Sean, I thought I would provide some color on the Repatha launch.

In my personal experience, I have seen a number of examples of successful, high-value, slow-ramping products that share a few common traits with Repatha.

First, these products often contribute to changes in treatment paradigms such as new mechanism of action and new routes of administration.

In the case of Repatha, inhibition of PCSK9 is a novel mechanism and it is the first injectable biologic addressing chronic cardiovascular disease.

I'm excited about the prospect of launching the Repatha monthly dosing option later this year, reducing the number of required injections and creating another potential point of differentiation from the competition.

Second, these products often have significant development programs that improve the product profile, expand their patient pools or extended duration of therapy over time.

With Repatha, our GAUSS-3 study in statin intolerant patients was very well received by physicians at the recent American College of Cardiology meeting.

Our coronary imaging study will read out later this year was designed to demonstrate that Repatha reduces patients' plaque burden.

And most significantly, of course, we expect the readout of a large 27,500 patient outcomes trial later this year, which we expect will establish a clear benefit in cardiovascular outcomes based on Repatha's profound effect on lowering LDL cholesterol.

Lastly access and reimbursement hurdles, while intense, should be overcome with a demonstration of superior clinical benefits versus the current standard of care.

We expect to establish this with Repatha through the outcome study I just mentioned.

You might have seen this dynamic successfully play out for the Factor Xa's as they displaced warfarin.

I am unwavering in my commitment and in the belief of Repatha.

We will continue to work with payers to improve access to Repatha for appropriate patients and expect its strong value proposition to benefit patients with ASCVD who are at risk of heart attack or stroke.

In closing, I'm pleased with our execution this quarter and our strong start to the year.

We've maintained focus on our growth brands while defending our mature portfolio and launching new products.

We recognize that our launch products are an important long-term value driver and are working relentlessly to make them a success.

Let me close by recognizing that none of this would have been possible without the dedication of our staff and thanking them for their commitment to delivering to patients.

Let me now pass to Sean.

Thanks.

Good afternoon.

We've made a lot of exciting progress in Q1 as we continue to advance our pipeline of innovative programs.

I'll begin my remarks with our cardiovascular franchise starting with Repatha.

Statin-associated muscle symptoms represent a major unresolved challenge to the treatment in patients with cardiovascular disease and often result in the use of therapies that provide less LDL-cholesterol reduction than desired.

In our recently completed Phase 3 study, GAUSS-3, we evaluated Repatha and ezetimibe in a group of patients whose statin intolerance was verified by rigorous blinded statin re-challenge where only those patients that experienced muscle-related side effects on statin, but not on placebo, were studied.

As presented at the ACC meeting and simultaneously published in the Journal of American Medical Association, the study demonstrated that Repatha resulted in a significantly greater reduction in LDL cholesterol after 24 weeks as compared to ezetimibe with low levels of muscle-related adverse events.

We believe this is an important result for those high-risk patients that are unable to effectively manage their LDL-cholesterol due to muscle symptoms from statins.

Looking ahead as Tony mentioned, we continue to look forward to the results of our coronary imaging study and cardiovascular outcome studies in the second half of this year.

We also continue to work closely with regulators on their reviews of our Repatha monthly dosing option.

Feedback from cardiologists on our innovative myosin activator Omecamtiv mecarbil, has been consistent that we have a very compelling mechanism of action in the Phase 2 data set.

We are currently working with our partners at Cytokinetics and Servier, as well as global regulators to define a potential path to Phase 3 outcome studies.

Turning to oncology, our Phase 3 open label study evaluating BLINCYTO versus standard of care in patients with Philadelphia chromosome negative relapsed or refractory ALL was stopped at a pre-specified interim analysis after successfully achieving the primary endpoint of overall survival.

This is a first for an immunotherapy in this population and we look forward to discussions with regulators as we seek convergence to full approval.

In Q1, we also filed an sBLA for BLINCYTO in the US to include new data supporting the treatment of pediatric and adolescent patients with ALL.

We feel BLINCYTO could be an important treatment option for younger patients, potentially avoiding the complications later in life such as secondary malignancies that can arise with the use of cytotoxic chemotherapies.

We are advancing our bispecific T-cell engager or BiTE platform including AMG 330 which continues to enroll patients in its Phase 1 dose escalation study.

Recall that AMG 330 is our CD33 BiTE for Acute Myelogenous Leukemia or AML.

AML remains an area of profound unmet medical need.

Despite adult AML being about four times as prevalent as adult ALL and with a very poor prognosis, there have been no significant advances approved in the last 20 years.

Staying with our immuno oncology platforms, we recently initiated enrollment in the Phase 3 portion of our melanoma study of IMLYGIC in combination with KEYTRUDA, Merck's PD-1 inhibitor.

And we look forward to presenting the results from the Phase 1B portion of this study at the upcoming ASCO meeting.

We also recently presented some encouraging first-in-human data at the American Association for Cancer Research annual meeting from one of our early stage immuno-oncology programs, AMG 820.

This is our antibody against colony stimulating factor 1 receptor, also known as c-fms, which simulates the activation of tumor associated macrophages.

There is great interest in the role that tumor-associated macrophages play in tumor immunosuppression and we're hoping to lead this field with AMG 820, which is now enrolling patients in a Phase 1-2 study in combination with KEYTRUDA in advanced solid tumors.

Before I leave oncology, I would note we continue to have productive interactions with regulators in Europe on the Kyprolis ENDEAVOR submission.

And I'm also pleased to announce that our Phase 3 study of XGEVA versus zoledronic acid for the prevention of skeletal-related events in patients with newly diagnosed multiple myeloma has completed its enrollment.

This is an event-driven study and based on the current event rate we estimate the data will be available in the second half of this year.

In bone health we were pleased to report, along with our partners at UCB, the positive results from two Phase 3 Romosozumab studies in Q1.

Most importantly, our placebo-controlled pivotal fracture study met both of its primary vertebral fracture end points as well as the important secondary endpoint of clinical fracture reduction.

This latter endpoint consists of symptomatic vertebral fractures plus non-vertebral fractures, an endpoint increasingly recognized by physicians, payers and regulators as these are the symptomatic fractures that can be life altering.

Our Phase 3 study of Romosozumab in men with osteoporosis also successfully completed in Q1 with Romosozumab treatment resulting in significant gains in bone mineral density versus placebo.

We look forward to our pre-BLA meeting with FDA as we pull together our initial filing package in the US.

We also await the results from the event-driven fracture study evaluating Romosozumab in comparison to alendronate which we expect to see in 2017 and will be part of our European filing.

Switching to neuroscience, we had the opportunity to present the 52-week data from our Phase 2 episodic migraine study with our CGRP receptor antibody AMG 334 at the American Academy of Neurology meeting earlier this month.

After one year of treatment with the 70 milligram monthly dosing regimen, more than 60% of patients experienced at least a 50% reduction in their monthly migraine days and about 20% of patients had no migraine days in month 12.

These are patients that were having on the order of eight migraine days per month so this is quite a clinically meaningful result.

We believe the efficacy, tolerability and administration profile of AMG 334 could be an attractive option for migraine patients considering the lack of well-tolerated prophylactic options currently available.

We are rapidly advancing this program through the clinic with our partners at Novartis.

We now expect to have the results from our Phase 2B chronic migraine study midyear and we intend to use this study to potentially gain an indication in chronic migraine in our initial BLA filing.

We've also completed enrollment in both of our Phase 3 episodic migraine studies and expect the results from both of these in the second half of this year.

Also in migraine we believe that AMG 301, our PAC1 receptor antibody could complement AMG 334 and we continue to progress this asset through Phase 1.

In other regulatory activities, we continue to work with global regulators on their review of Parsabiv, our novel intravenous calcimimetic for the treatment of secondary hyperparathyroidism in patients on hemodialysis.

FDA has also accepted our sBLA for the expanded use of Enbrel to treat pediatric patients with chronic severe Plaque Psoriasis.

Finally with several pivotal data sets and regulatory decisions ahead of us, we have a lot to look forward to this year and I'd like to take a moment to thank all of my colleagues at Amgen for their unwavering focus on delivering innovative new medicines for patients in need.

Bob?

Okay.

Thank you, Sean.

Let's turn it over now to questions.

And, Arvind, why don't you remind our callers of the procedure.

Yes, Jake, if you go ahead and open it up for Q&A and review the procedure for asking questions, please.

(Operator instructions)

Matthew Harrison, Morgan Stanley.

Just a couple for Tony.

You mentioned the end customer purchases for Neulasta and XGEVA.

Can you tell how large they were?

And then second maybe if you could expand around your comments for Repatha.

I think it's our understanding that 70%, 80% scripts are abandoned at the pharmacy.

What's your view on what needs to change to lower that rate?

And how should we think about the change that outcomes data, if positive, could have there and is there a rate, a hazard ratio, for example, in the outcomes data that you think would cause a significant shift in some of those utilization management criteria?

Okay.

So let me try and go through this.

On the large end customer user purchases for XGEVA and Neulasta, in the range of 30 million to 50 million, so not a large amount but they will clearly burn off during the second quarter.

When I look at Repatha, it is about a 77% rejection rate, not abandonment, that's happening at pharmacy.

So a lot of the prescriptions are being denied because they don't quite fit the prior op process which has been required.

Talking to cardiologists, it's clear they are extremely frustrated at the moment because the patients they are sending in are appropriate patients who have not being properly managed on a maximally-tolerated statin at the moment.

We're spending quite a bit of time with payers at the moment and helping them see what I would imagine is the unintended consequences of a rather onerous paper-based prior authorization system which is resulting in some new patients not getting access to drugs when they should.

So I think with a bit more discussion, people will understand the importance of getting appropriate patients on drug.

I think some of the question in terms of narrowing the population is around what will the outcomes show.

And there's no doubt in my mind that once we have definitive proof that this drug actually results not only in lowering LDL but in actually reducing the risk of heart attack and stroke, that more patients will gain access to the drug.

Let's go with the next question, please.

Jeff Meacham, Barclays.

Good afternoon.

Thanks for taking the question.

I just wanted to talk a little bit about Romo, looking at the non-vertebral fracture data, do you think this could be a big variance competitively?

And what's the outlook for the European filing based on the PMO data?

Do you think there is a risk that secondary endpoints may have to be hit on that?

Thank you.

Thanks, Jeff Sean, why don't you take those questions.

In terms of results, the second part of the question relates, I think to the ability to file the data set in Europe and we do believe that data will support registration as is in Europe, but we also have always planned to file both outcomes, fracture studies.

So we have the alendronate controlled study in which the primary endpoint is clinical fracture that will be part of that.

Part of that file.

I think that when you step back, there's a couple things.

One is that we need to present these data at the appropriate scientific congresses and publish them so that the experts in the field can look at the data.

Because the paradigm for the study design is so different than what people are used to with a three-year placebo-controlled portion rather than a one-year placebo-controlled portion.

And in the end, the most important endpoint to look at with these therapeutics we've hit, which again is the symptomatic vertebral fractures plus non-vertebral.

And we had quite a significant effect size there, as well as the transition from treatment with Romosozumab on to Prolia where we continue to see benefit of Romosozumab into the second year on Prolia.

Overall, I think the data will be well-received when people are able to look at it in some detail.

Terence Flynn, Goldman Sachs.

Maybe first I was wondering if you could comment on the Treasury notice on intercompany debt and any potential impact to your longer-term tax rate, and any potential for an FDA panel on Etelcalcetide.

Thank you.

On the first ones, first of all Amgen, of course, is not a Company that is inverted so we are US-based company.

And all of our debt is issued and received from third parties so we don't see any impact on our business in terms of our ability to finance and the ability to deduct the interest expense from our earnings.

So right now we don't see any impact but it's a pretty detailed and lengthy ruling, so we continue to look at it, but we don't foresee any right now.

Terrance, this is Sean.

We don't anticipate the need for an advisory, an FDA advisory committee for Parsabiv.

Okay, Jake.

Let's take the next question.

Alethia Young, Credit Suisse.

Thanks for taking my questions.

I just wanted to ask about Kyprolis and if you're seeing any competition with like Darzalex or any of the other new regimens on the market?

If you could give color there, that would be great.

Okay, so let me answer that question.

This is Tony.

Clearly, as I said, the addition of the ENDEAVOR data to our label giving us both a doublet and a triplet regimen in second line, both with clinical data showing great efficacy versus the prior regimens has put us in a good position to give patients in second line plus a better opportunity.

The data in the market is quite shallow because we happened to look at the patient chart audits.

But as I look at the audits for the first quarter, I see Kyprolis continue to hold market share in the third line.

I see continued growth in the second line and I see the newer entrants with very low single-digit market shares and predominantly being used in fourth line plus.

Cory Kasimov, JPMorgan.

Good afternoon.

Thanks for taking the question.

With regard to Repatha access.

Assuming you get positive CVOT data later this year, what's your understanding of the process you will need to follow in order to ease current utilization management.

I'm wondering how fast things could open up or if you're going to need to get the data on the label and renegotiate with payers first before you're able to detect a noticeable difference on that front?

Thanks.

As Sean said, we're expecting the data in the latter end of this year.

Once the data becomes clear, it will become public and people have to make up their minds what that actually means.

It will be presented then in a peer-reviewed publication and presented at one of the large congresses where the data will become clear to all the prescribing cardiologists.

We, of course, from a commercial perspective, are not in a position to negotiate or talk to payers about the data until the FDA has approved it in our label.

In the interim, however, our medical affairs organization can respond to questions we receive from the payers in a balanced and medical way.

But I'm assuming once this becomes clear, the details will clarify the unique value of this particular product.

Sean?

This is Sean.

I think the other comment I would make is that you may have seen that some of the US-based guidelines for treatment of hyperlipidemia and cardiovascular risk were recently updated and included the concept of using the PCSK9 inhibitors after stepping through some other therapeutic options that have the cardiovascular outcomes data.

It's my understanding from talking with many of the key opinion leaders who are either involved in the guidelines or just thought leaders in the field, there's a clear desire to update these guidelines as fast as possible when the cardiovascular outcomes data are available.

So that's an independent process from anything to do with getting drug data into the label and can be a very important thing that payers look at when they make access decisions.

Jake, let's take the next question.

Mark Schoenebaum, Evercore ISI.

Maybe a question for Bob.

In this environment biotech prices have obviously come down.

I'm wondering what your current feelings, Bob, are around hostile acquisitions.

Thank you very much.

Well, Mark, I don't know that I would make any comments about hostile acquisitions but as you've heard us say before, valuations in some areas are more attractive this year than they were last.

And we have a strong balance sheet and we continue to look carefully, both internally and externally, for the most attractive programs that we can advance.

But we look at all range of transactions, licensing as well as M&A and we consider them each individually.

So I wouldn't speculate, Mark, about anything more than that at this point.

Michael Yee, RBC Capital Markets.

Great, thanks.

Question for Sean.

The pivotal CGRP data is coming in and there is a wealth of data coming.

You've talked in the past about your hypothesis about your mechanism and some differentiation.

Can you maybe update us on your thoughts about how you still see that playing out as some more data has come out and as more data played out.

Could you maybe list one or two things where you specifically see some differentiation or how that plays in the future?

Thanks.

I don't think much has really changed in terms of the fact that there are fundamental scientific principles here around the difference between a receptor antagonist and the ligand.

We've always felt that the receptor antagonist would be more potent and we're seeing that play out.

We've always thought that might result in a situation in which the administration profile of the product was better than it would be if larger amounts of protein were necessary for delivery, for example, on a monthly basis in a subcutaneous delivery device.

So I continue to think that it's a relative advantage to have a more potent agent when you're trying to administer infrequent dosing subcutaneously.

But whether that will really play into being an important clinical differentiator when these products are out in the marketplaces, I think it's too soon to know.

Otherwise, we continue to push very hard on the product to get it to patients as fast as we can because there are about 26 million people with migraines in the United States.

And among them there's somewhere on the order of eight million to 10 million who have had attempts or are currently on and off of therapy for prophylaxis.

So there's clearly a very large unmet medical need and some proportion of that population would be an appropriate population potentially for this sort of therapeutic.

Joshua Schimmer, Piper Jaffray.

Thanks for taking the questions.

Maybe one for Sean.

Amgen had such a strong track record advancing to Phase 3 programs through commercialization.

I'm curious as to what there is in the Phase 2 or earlier pipeline that you're most enthusiastic to move into Phase 3?

You mentioned omecamtiv.

I'm curious as to what else.

Sure.

I like to talk about that sort of thing.

Certainly omecamtiv is very exciting.

We also, as I mentioned, have another migraine prophylaxis antibody and of course the potential to actually develop a bi-specific antibody that would address both of those pathways is a product behind that.

Heart failure does remain a real focus for us and we actually are introducing a completely novel heart failure medicine into the clinic in a matter of days from now, which is exciting.

And have quite a few early discovery level programs in that area.

Cardiovascular more broadly we have some very interesting things we're working on in the early and mid-stage pipeline.

And, of course, the BiTE platform has a very large number of products in preclinical phases that are moving toward the clinic and we're seeing a situation in which we're going to be introducing into the clinic multiple different therapies in some cases with different targets directed at the same hematological malignancy, for example, and they are having to envision some interesting multi-armed clinical trials to try to get some efficiency in the testing when we have so many things coming forward simultaneously.

So there's a lot going on.

Because of everything that happened it's happening at the commercialization interface, we don't get a lot of time to talk about that and perhaps we'll have an opportunity in an upcoming business review setting to go through some of this in some more detail.

Robyn Karnauskas, Citi.

Thanks for taking my question.

Just thinking a little bit big picture on Repatha launch, I think you called it a slow launch and you were talking about working with payers.

How much are you willing to participate and deal with price versus, say, mortality outcomes?

So what's the balance of lowering price and mortality outcomes as far as opening up access?

Thanks.

Robyn, it's Tony.

Clearly, as we said, we bring our products to market with a clear debate and discussion around the pharmacoeconomic value of the products.

There was an extrapolated value that these drugs would actually result in reduction of both stroke, heart attack and early untimely death.

And I think we will continue to bring the value to market.

There are rebates in the marketplace at the moment and that dynamic will continue over time as we jostle for formulary positions.

But I think what we bring to market at the moment is a pretty decent and acceptable value proposition to treat patients at high risk.

Eun Yang, Jefferies.

A question on Parsabiv.

With the bundled payment in dialysis, what do you think could the pricing power could be for the product like this, particularly when Sensipar is expected to go generic in a couple of years?

Thanks.

It's Tony.

Let me answer this one.

As you know, CMS have granted a two-year period that this product will operate outside the bundle under the ASP pricing method which will give CMS two years to evaluate the product value and then to make a decision how much value is put into the bundle when the product moves from ASP into the bundle.

Ying Huang, BofA Merrill Lynch.

Thanks for taking my question.

First one for Sean to talk about a CV outcome trial here.

I know you never disclose the powering assumption or the assumption for event rate but should we assume that it's probably similar to what your competitor has talked about?

And secondly I have a question on the Epo market.

First Fresenius switching to Mircera for Roche, you have a long-term contract with DaVita.

What is your thought of the other one- third of the market with Epo and Aranesp going forward?

I will take this in two parts.

Sean will take your first question and Tony can address your Epo question.

Actually both we and Regeneron and Sanofi have published papers on the design of these studies where there's quite a bit of detail in the way they were constructed.

And in the end, these studies, types of studies differ largely in the issue of how long it takes to enroll the population and what the event rate is once you get patients enrolled.

We don't believe -- we would not anticipate large differences in the event rates between the two populations.

But there will be some difference in event rate.

And I think both companies have set their studies up so that they would be able to detect what was considered to be a clinically meaningful minimum effect size, so typically one would set these kind of trials up so that you wouldn't miss a 20% reduction in risk.

Obviously you may be looking for more, but that would be the way you powered the trial.

There's more similarities than there are differences.

So let me answer your question on the dialysis market.

You're right, the market is broken into three.

DaVita is responsible for about one-third of the market.

We have contract with them that is exclusive and runs through 2018.

Fresenius, who is another one-third of the market, are in the process of converting a lot of their patients.

The last time they made any numbers public, they were talking about just over 70% conversion to Mircera.

The other one-third of the market is the independent, medium and small dialysis units.

In that setting we have converted about 70% of the EPOGEN usage to Aranesp.

Geoff Porges, Leerink Partners.

Thank you.

I appreciate the question.

Tony, a couple for you.

Could you talk a little bit about price and Enbrel?

The contribution of price.

Should we just infer that it's a difference between the growth, the units and the inventory?

It looks about 20%.

And could you just talk about whether that looks to be sustainable given the market environment?

And on a related note, could you talk about the value proposition for AMG 334?

Certainly millions of patients out there with migraine, but you can imagine payers preparing to do some of the things that they did for Repatha.

How do you think you're going to approach the value proposition, that indication to avoid the really tight restrictions you've encountered?

Let's go back to the pricing.

Just to reconfirm again.

What we report and what we talk about in terms of net price.

And really that's a combination of the list price minus the rebates and/or formulary positions you have in the marketplace.

I think as a Company we are acutely aware of the issues facing the industry in the US at the moment.

But Amgen's all about innovation, right?

So we price our drugs around the pharmacoeconomic value of the products as we bring them to market.

Enbrel itself, of course, is competing in a highly competitive marketplace where several large players are competing for formulary position to enable patient access.

At the same time, the health plans and the PBMs are negotiating price concessions and large rebates to set up formulary placement and it's because of the magnitude of these rebates that price increases have become part of this overall dynamic.

So it's an integrated process flow as we go forward.

Talking about 334, as Sean has said again and again, this is a huge unmet medical need in the marketplace where existing therapies have side effects that are sometimes as bad as the disease itself.

Unlike most other diseases, patients with chronic migraine really know about it.

It's debilitating.

It is devastating.

And some of the initial research we've done have shown a much higher inclination or preparedness to pay a co-pay because patients really want to get rid of the disease as quick as they can.

I think most of the patients who are available to us have been on therapy for some time and were able to show they've been on therapy, so step edits I'm sure will be there.

But there's a large bolus of patients who failed consistently on existing treatment in the marketplace.

I'm noticing it is fast approaching 6:30 on the East Coast.

Why don't we take two last questions.

Jim Birchenough, Wells Fargo Securities.

Thanks for squeezing us in.

This is actually Yanan Zhu in for Jim.

I wanted to ask a question on the CGRP program, specifically on the regulatory path.

As you know, it's a competitive space with four players.

You have the clear lead, the first Phase 3 data readout for that frequent episodic migraine indication.

However, in a chronic migraine indication it's a little less clear because others have Phase 3 programs ongoing.

You interest me.

You just mentioned -- you commented that you might use the Phase 2 data that is going to read out, the Phase 2-B data in chronic migraine to support a BLA.

Our question is, do you think you will seek a chronic migraine indication based on the Phase 2-B data?

Has there been any discussion with regulators on that?

Thanks.

This is Sean.

I think that the things you have to take into account is that the chronic migraine Phase 2-B study is quite a large study.

And it explores doses that are used in the two large Phase 3 episodic migraine studies.

These are obviously -- there is a spectrum of disease here and while there is a separate regulatory entity of chronic migraine and episodic migraine, the pathophysiology is probably quite shared across these as evidenced by the fact that all the CGRP antagonists are having similar efficacy in the different patient populations.

So it's our feeling that, taken together, the data could potentially support both indications being granted, at least by some of the global regulators.

And I would not typically go into the discussions about the specific conversations we've had with regulators, but I'd just say that we feel that it's a very reasonable approach to attempt to get both indications based on the aggregate data package.

Great.

Let's take one last question.

Jeff Chen, Cowen and Company.

Thanks for taking my question.

For Tony.

Can you just discuss a little bit more about Repatha in the EU and Japan in terms of your experience of access and reimbursement?

And if you think that the CVOT outcomes data will change the negotiation or would that be a new round of negotiations?

Thanks.

I think you've heard people talk about the Entresto performance in Europe where once the price has been set and reimbursement is agreed, there is no longer an economic decision around every prescription, so uptake happens quite fast.

I believe that as we get into growing into this marketplace, pricing is just about set.

When you come in with larger expanded patient population groups, there's a chance in Europe you have to go back into a country-by- country negotiation.

In Japan, historically, that hasn't happened as much and the pricing we received in Japan seems to be a longer play-through from pricing.

Great.

Thank you, everybody, for your participation on this busy, busy day.

Of course, I'll be around together with the rest of my team so if we can offer any further assistance, please give me a call.

Have a good day.

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

You may now disconnect.