美國安進 (AMGN) 2016 Q2 法說會逐字稿

My name is Zirmarcus Ross, and I will be your conference facilitator today for Amgen's second quarter 2016 earnings conference call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session at the conclusion of the last speaker's prepared remarks.

(Operator Instructions)

I would now like to introduce Arvind Sood, Vice President of Investor Relations, Mr. Sood, you may now begin.

Thank you, Zirmarcus. Good afternoon, everybody. I would like to welcome you to our conference call to discuss our second-quarter financial results. I would like to particularly extend a warm welcome to those who are new in their investment coverage of Amgen, including Ronny Gal and Vincent Chen of Bernstein.

Our second-quarter once again is a continuation of great execution of how we are effectively managing the life cycle of legacy products while launching new products. Of course there is much more to our execution, so to have that broader discussion, I am joined today by Bob Bradway, our Chairman and CEO, who 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. Following David, our Head of Global Commercial Operations Tony Hooper will discuss our product performance during the quarter, followed by our Head of R&D Sean Harper, who will provide a pipeline update. We should leave plenty of time for Q&A after Sean's comments.

Before I turn the call over to Bob, I would like to note that we have reviewed the Security and Exchange Commission's recent guidance regarding the use of non-GAAP financial measures, and our press release incorporates this revised guidance.

As in the past, we will use slides for our presentation today, which have been posted on our website, and a link was sent to you separately by email.

We plan on using non-GAAP financial measures in today's presentation to provide information which may be useful to understanding our ongoing business performance. However, these non-GAAP financial measures should be considered together with GAAP results. Reconciliations of these measures are available in the schedule accompanying today's press release of Form 8-K, and also on the Investor Relations section of our website.

Just a reminder that some of the statements made during the course of our presentation are forward-looking statements, and our 2015 10-K and subsequent filings identify factors that could cause our actual results to differ materially. With that, I would like to turn the call over to Bob. Bob?

Thank you, Arvind, and thank you all for joining our call. Our business continues to perform well. As you can see through the results the first six months of the year, with our revenues up 8%, and our adjusted earnings per share up 13%. While delivering strong and consistent quarter-to-quarter performance, we're also investing successfully for the long term, and the elements of our long-term strategy for growth are clearly progressing, as well.

We launched six new products last year, two in the cardiovascular arena and four in cancer. These products are still in the early stages of their life cycle globally. We remain particularly excited about the long-term prospects of Repatha, and look forward to important clinical data set to emerge later this year and early next year, which we think will fully illuminate the value of this product.

Kyprolis is also a top priority. Based on the very strong clinical profile of Kyprolis, we expect this product to be a backbone of multiple myeloma therapy for the foreseeable future, and as such for it to be used in combination with many of the new agents that are emerging in the field. Both of these products are making progress internationally, with additional regulatory approvals, and reimbursement negotiations proceeding well.

Behind the recent launches of our six drugs for cardiovascular disease and cancer, we have programs nearing key regulatory milestones in four other therapeutic areas: Neurology, where we are excited about Erenumab as a potential first-in-class therapy for migraine; bone health, where we recently submitted our bone-building Romosozumab to FDA for regulatory review; nephrology, with the prospect of an imminent launch of Parsabiv; and of course in inflammation, where we were pleased with the recent FDA panel review of our biosimilar to Humira.

With an expected 80 new launches across countries and products this year, and the recent re-acquisition of rights to many of our existing products outside the United States, we're meaningfully expanding our global footprint. To that end, we recently announced that we had partnered with Daiichi Sankyo in an effort to bring Amgen biosimilars to the Japanese market.

I would also note we are excited about the scientific progress we are making in our early research labs. For example, we continue to harness the power of our human genetics platform to uncover fundamental links to human disease.

As you saw this quarter, we published research pointing to the role of the ASGR1 gene in cardiovascular disease. While this is still early stage, it highlights our unique ability to generate insights like this, and to move them forward quickly in the drug development process. We expect insights such as this to be central to our ability to innovate, and continue to deliver long-term growth and returns for our shareholders.

While we're focused on the long term, we're committed to delivering in the short and medium term, as well. Our consistent strong performance has placed us well on our way towards delivering the long-term commitments we made to shareholders for 2018. The transformation program which we began some two years ago continues to deliver savings, enabling us to invest in our business and deliver results for our shareholders.

Similarly, the commitment we made to effectively manage the life cycle of our legacy products is bearing fruit, as reflected in the success of our Neulasta Onpro launch, and the success we're having in offering Aranesp and Epogen to our dialysis customers.

Our balance sheet remains strong, and we're active in looking for ways to build our business across our six therapeutic focus areas. We expect to be patient and disciplined in looking for opportunities that we think we can add value to for our shareholders.

Before passing to our Chief Financial Officer David Meline, let me just thank our staff worldwide for their ongoing dedication to our mission of serving patients, and for the results they've once more delivered for our shareholders. David?

Okay, thanks, Bob. Turning to the second-quarter financial results on page 6 of the slide deck, revenues at $5.7 billion grew 6% year over year, with 5% product sales growth driven by continued momentum across much of our product portfolio. Other revenues at $214 million increased $69 million versus the second quarter of 2015. Other revenue benefited from higher Ibrance royalty income, as well as an up-front partner payment. As a reminder, we receive an 8% royalty on Ibrance revenue, which was acquired as part of the Onyx transaction.

Changes in foreign exchange had an immaterial impact on total revenue and product sales in the quarter. Non-GAAP operating income at $2.8 billion grew 10% from prior year. Non-GAAP operating margin improved to 51.4% for the quarter, reflecting continued growth and progress from our transformation initiatives across all operating expense categories.

In 2016, we remain on track to deliver over $400 million of incremental gross efficiency savings from the transformation versus prior year, with half of incremental gross efficiency savings from the transformation occurring in the first half. Delivering on this transformation enables continued investment into our pipeline and launch activities, while also achieving solid profitability.

On a non-GAAP basis, cost of sales as a percent of product sales at 13.5% improved by 1.6 points, driven by manufacturing efficiencies and higher net selling price. Research and development expenses at $878 million decreased by 4% versus last year, driven primarily by transformation and process improvement efforts, and lower spending required to support certain later-stage clinical programs.

SG&A expenses increased 13% on a year-over-year basis, as increased commercial investments in new product launches for the US and global launch activities were enabled by savings from transformation and process improvement efforts.

In total, non-GAAP operating expenses increased 2% year over year. Other income and expenses were a net $176 million expense in Q2. This is an increase of $97 million on a year-over-year basis. This year-over-year net expense increase was primarily due to gains in the second quarter of 2015 from our strategic and venture investment portfolio. We expect our other income and expenses to continue at the current year-to-date trend level.

The non-GAAP tax rate was 18.6% for the quarter, a 1.4-point decrease versus Q2 of 2015. This decrease reflects discrete benefits associated with tax incentives, and the adoption of accounting standards update 2016-09, partially offset by unfavorable changes in the geographic mix of earnings. Non-GAAP net income increased 9%, and non-GAAP earnings per share increased 11% year over year.

Turning next to cash flow and the balance sheet on page 7. Free cash flow was $2.5 billion for the quarter, compared to free cash flow of $3.2 billion in the second quarter of 2015. This year-over-year decline reflects timing impacts of income tax payments to the IRS, and cash gains realized last year from foreign exchange contracts which benefited from a strengthened US dollar.

We deployed $0.6 billion to re-purchase 3.9 million shares in the quarter, at an average price of $153 per share, and are on track to achieve total share re-purchase for this year in the range of $2 billion to $3 billion. Additionally, our second-quarter dividend was $1 per share, an increase of 27% over last year, which results in a dividend yield of over 2.5% on an annualized basis. At the end of the second quarter, we had $3.6 billion remaining on our Board-authorized share buy-back program.

Cash and investments totaled $35 billion, an increase of $5 billion from last year's second-quarter level. This increase reflects continued solid net cash flow, and the first-quarter debt issuance of $2.9 billion, of which approximately $900 million was used to re-pay debt maturities during the second quarter. Our debt balance stands at $33.2 billion as of June 30, 2016. Our total debt portfolio has a weighted average interest relate of 3.6%, and an average maturity of 12 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 continued conviction in executing on our strategy, and solid first-half performance of the business.

In particular, our overall revenue guidance reflects our recent product launch activities, plus continued progress on our growth brands, which grew 13% year over year in Q2, and accounted for over 50% of all product sales. All of this is while absorbing the impact of competition on our legacy Epogen and Neupogen brands.

With this background, our 2016 revenue guidance is now $22.5 billion to $22.8 billion, versus prior guidance of $22.2 billion to $22.6 billion. Our non-GAAP earnings-per-share guidance is now $11.10 to $11.40 a share, versus prior guidance of $10.85 to $11.20.

Finally, we continue to expect our adjusted tax rate to be in the range of 19% to 20%, and capital expenditures to be approximately $700 million this year. This concludes the financial update. I will now turn the call over to Tony.

Thanks, David. You'll find a summary of our sales performance for the second quarter on slide number 10. We continued our strong performance in the second quarter, with global product sales growing 5% year over year. Our US business delivered 5% year over year growth, and our international business grew 3%, or 5% year over year, excluding the impact of foreign exchange. Europe was a strong contributor, with 11% unit growth.

My comments will be in three parts today. First, the performance of our growth products, followed by an update of our life cycle management with the mature brands, and then I'll conclude with highlights on the performance of our newly launched products.

Our six growth products, Prolia, Xgeva, Enbrel, Sensipar, Vectibix, and Nplate, continue to drive our overall performance, with 13% year-over-year growth. As David said, they aggregated to $3 billion of sales, well over 50% of second-quarter sales. We continue our investments in these brands to achieve their full potential.

Both Prolia and Xgeva are now annualizing at over $3 billion per year. Prolia grew 30% year over year, with a 24% unit growth, and continued share gains in both the US and Europe.

Post-menopausal osteoporosis remains a widely undertreated disease. In the US alone, 10 million people are affected, and 4.5 million of those are considered at high risk of fracture. Unfortunately, nearly 60% of these patients are not treated. We are investing in Prolia to reach these unserved patients and also to remind current Prolia patients about the important of returning every six months for their treatment.

Xgeva saw a 15% year-over-year growth, driven by unit-share gains of around two percentage points in both the US and Europe. Quarter-over-quarter growth was negatively impacted by heavier purchasing from some larger end customers in the US during the first quarter.

Enbrel grew 10% year over year, driven by changes in net selling price, partially offset by competition. As a reminder, changes in net selling price comprised several components, including changes in list price, as well as the impact from rebates we provide to payers, and formulary decisions.

Turning now to the underlying performance of Enbrel, growth within both rheumatology and dermatology segments continues. Sequentially, Enbrel lost two points of value share in each segment. Recall that rheumatology comprises about 80% of Enbrel sales. Enbrel has a long track record of safety, efficacy, and a very competitive profile. We are focused on maintaining our position, particularly in the rheumatology segment.

Sensipar grew 13% year over year, driven by net selling price, as well as a strong unit growth in the US and Europe. We look forward to expanding our presence in the nephrology market with Parsabiv, which is currently being reviewed by the US and European regulators as a new treatment option for secondary hyperparathyroidism.

Next, Vectibix. We delivered strong unit growth in our core markets; however this performance was masked by comparing against a second quarter in 2015 that benefited from an additional shipment to our Japanese partner.

Nplate grew 14% year over year, driven by double-digit unit growth.

I would now like to focus on how we are managing the life cycle around mature brands. Neulasta sales decreased 1% year over year. The second quarter was negatively impacted by heavier purchasing by some large end customers in the US in the first quarter.

I am pleased to report that the Neulasta Onpro delivery kit continues its strong up-take. Adoption is growing due to its ability to ensure maximum benefit of Neulasta, while improving the patient experience versus the traditional pre-filled syringe. We exited the second quarter with Onpro representing about 40% of Neulasta units, and still growing. We do not expect long-acting pegfilgrastim biosimilar competition this year, so there remains a significant opportunity to further increase the adoption of Onpro.

As regards Neupogen, we see the short-acting segment playing out as expected. We ended the second quarter with around 60% share. We continued to compete account by account, emphasizing Neupogen's sustained track record of safety, efficacy, and of course reliable supply.

Now to ESAs. Aranesp's sales increased 5% year over year, driven by 13% unit growth. In the US, we've been successfully transitioning about 75% of patients from Epogen to Aranesp in our medium-size and independent dialysis centers.

Epogen declined 33% year on year. About 1/3 of this decline is the shift from Epogen to Aranesp in the dialysis setting I just mentioned. Most of the remaining decline is due to a shift by Fresenius from Amgen ESAs to their own product. We understand that Fresenius, which has about 1/3 of the US business, has converted about 80% of their patients. You'll recall that our contract with DaVita, who represent another 1/3 of the dialysis business, runs through 2018. We do not expect biosimilar competition against Epogen in 2016.

Lastly, I would like to update you on Repatha and Kyprolis. Both products represent substantial opportunities in addressing serious diseases with significant un-met needs.

First, Repatha. Our cardiovascular teams have executed well in the marketplace, with strict utilization management criteria, and processes employed by the insurers and PBMs continues to be the biggest hurdle. We're working diligently to address these restrictions so the appropriate patients are able to access the treatment their doctors prescribe for them.

We look forward to the coronary imaging data from the GLAGOV study reading out later this year, and then the FOURIER outcomes data in the first quarter of 2017. We expect that both these studies will further underscore the value of Repatha.

We are also excited to now offer a new monthly dosing treatment option with our recently improved Repatha Pushtronex, the first and only single monthly injection of a PCSK9 inhibitor. Like the Neulasta Onpro delivery kit, this is another example of our ability to identify and develop innovative delivery systems to improve the patient experience.

Outside the US, we continue to make good progress with Repatha's reimbursement negotiations on a country-by-country basis. In Europe, we are now in early launches in several countries, including Germany, Netherlands, Spain, the UK, Austria, and Sweden. Repatha is an extremely important medicine for high-risk cardiovascular patients, and we are committed to realizing its significant potential over time.

Now to Kyprolis, where we have made great progress in the quarter. We continue to grow volume in an intensely competitive environment with three new competitors, all approved in the US late last year. This growth is encouraging, as we continue to educate the physicians on the benefits of Kyprolis as a backbone of multiple myeloma therapy. Our focus is on continuing to drive adoption of Kyprolis in relapsed patients, based on the compelling ASPIRE and ENDEAVOR data.

The early launches from our European organization into second line are very encouraging. Kyprolis has been well received, and we continue to gain reimbursement approval country by country. The EU label now includes Kyprolis in both a three-drug regimen, based on the ASPIRE data, as well as a two-drug regimen based on the ENDEAVOR data.

In summary, the second quarter was another strong quarter for Amgen. Our growth products led the way, while we defended our mature products. We've made good progress on bringing new launch products to more patients in both existing and new countries. We remain convinced about the long-term growth potential of our launch brands, and are working intensely to ensure their 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 for patients. Let me now pass you to Sean.

Thanks, Tony. Good afternoon. We continued to make good progress advancing our pipeline in both innovative and biosimilar molecules. Let me begin with cardiovascular. We don't believe there is any compelling evidence that supports treating high-risk ASCVD patients with anything but aggressive LDL cholesterol-lowering therapy. Our approach with Repatha differs from that taken by the other marketed PCSK9 inhibitor, in that we only maximally inhibit PCSK9 and LDL cholesterol.

Our clinical program demonstrated that we could achieve this effect with either 140 milligrams of Repatha delivered every other week, or 420 milligrams delivered monthly. As is reflected in our label, these two dosing schedules were clinically equivalent. Now that we have received approval in the United States for the innovative Pushtronex delivery system, we can offer patients the choice of an auto-injector pen for every other week, or single monthly dose administration with Pushtronex.

As we announced last month, we expect the results from our Phase III cardiovascular outcome study to be available in 1Q of 2017, in time for submission to the American College of Cardiology meeting in March. I would remind you this is an event-driven study, and at the time we had accrued in excess of 85% of the requisite events, which allowed us to more accurately predict the timing for the study completion.

This is a large study of 27,500 patients, and we remain focused on generating the most robust data set possible in this field from an analysis of the completed study. Ahead of this, we also expect the coronary imaging study results later this year, which we expect to complement the cardiovascular outcomes data.

In heart failure, after discussions with regulators on Omecamtiv mecarbil, our novel cardiac myosin activator from Cytokinetics, we have submitted our heart failure outcome study protocol for special protocol assessment, or SPA, to FDA, and continue to work with our partners toward advancing this novel therapy.

Turning to oncology, we were pleased to receive European approval for Kyprolis in combination with dexamethasone in the relapsed refractory multiple myeloma setting, based on the ENDEAVOR data. In the first-line setting, we are conducting CLARION, an approximately 900-patient head-to-head superiority study of Kyprolis versus Velcade, both administered concomitant with melphalan and prednisone in transplant-ineligible subjects with newly diagnosed multiple myeloma. This has a primary end-point of progression-free survival. Based on the current event rates, we now expect the primary analysis and top-line results of the completed study in the second half of this year.

Before I leave multiple myeloma, I would like to remind you that we remain on track to complete our Phase III study of Xgeva versus zolendronic acid in the prevention of skeletal-related events.

In the quarter, we announced that FDA had granted priority review status to Blincyto for the treatment of pediatric Philadelphia chromosome-negative relapsed refractory ALL, with a PDUFA action date of September.

In the adult population, we had the opportunity last month at ASCO to present the results of our confirmatory Phase III study of Blincyto. In this study, Blincyto demonstrated an almost two-fold increase in median overall survival compared to the standard of care. We will be discussing these data with regulators as we seek conversion to full approval in our current indication.

As we announced last week, along with our partners at UCB, we have submitted our romosozumab BLA to FDA for the treatment of osteoporosis in post-menopausal women at increased risk for fracture. We'll be presenting the data from the pivotal Phase III frame study at the annual meeting of the American Society of Bone and Mineral Research in September, and we look forward to sharing the results with the medical community.

Recall we are also running a Phase III fracture study of romosozumab compared to alendronate, which will contribute to our submission in Europe, and we expect these data in 2017.

For Prolia, later this year we will be reviewing the data from our Phase III study in the setting of glucocorticoid-induced osteoporosis, a relatively small but medically important indication.

Our neuroscience programs continue to advance. In our migraine collaboration with Novartis, we were pleased to receive positive results from erenumab, or AMG 334, our CGRP receptor antibody, and our Phase II-b chronic migraine study. These data will be presented at the European Headache and Migraine Trust International Congress in September.

This was a large, robust study, and we believe these data, together with our two Phase III studies in episodic migraine reading out later this year, could support registration in some jurisdictions, so we intend to seek both indications in our initial submission.

Our other clinical migraine program is our PAC-1 antibody, AMG 301, which is currently proceeding nicely through Phase I development. PAC-1 is a receptor for PACAP, a neuropeptide implicated in migraine. We believe that AMG 301 has the potential to be additive or synergistic to erenumab, given that PAC-1 is mechanistically differentiated from CGRP, and we are therefore pursuing the concept of a bi-specific PAC-1 CGRP receptor antibody, as well.

In our nephrology franchise, we continue to work with regulators on our Parsabiv applications, and look forward to our PDUFA data in the US next month. Parsabiv provides an opportunity to offer a novel intravenous calcimemetic option that's administered by health care providers three times a week, coincident with the patient's dialysis session. Parsabiv would be the first therapy approved for the treatment of secondary hypoparathyroidism in over a decade.

Finally, within our biosimilars program, last week we announced results from our Phase III study evaluating the efficacy and safety of ABP 980 compared to trastuzumab or Herceptin in patients with HER2-positive early breast cancer. Based on the overall bioanalytics, efficacy, safety, and immunogenicity, we believe there are no clinically meaningful differences between ABP 980 and trastuzumab, and we look forward to discussing these data with regulators.

As always, I'd like to thank my Amgen colleagues for their continued advancement of important new medicines for patients around the world. Bob?

Okay, thank you, Sean. As you can see, it's another active quarter here at the Company; but hopefully you'll agree another quarter of solid execution, as we make progress towards our short, medium, and long-term goals of delivering growth for shareholders. With that, why don't we turn it over to a question-and-answer session. Perhaps we could ask our operator to remind you of the procedure for asking questions.

Absolutely.

(Operator Instructions)

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

Hi, thanks for taking the questions. Maybe two for me. First on the COGS, pretty impressive versus a year ago. Just wondering if that level's sustainable longer-term. Then on Repatha, Sean, can you remind us what you want to see out of the IVUS trial, and if there's any potential read-through to the outcomes data coming next year? Thank you?

Okay, Terence, we will try and take those in two parts. I will ask David to speak first about the question about COGS; and then Sean can talk about Repatha.

Big picture, as you know, we've been working towards improving the efficiency and productivity of our manufacturing organization for some time. You have heard us say before, Terence, we think manufacturing is a source of competitive advantage for Amgen, and we're excited about what we've achieved to date, and where we're going next with the introduction of our next-generation bio-manufacturing. Generally, the trend is positive. You see that reflected in the quarter. David, do you want to provide any more specific guidance on that?

No, very much the same, Bob. What we're seeing is we, as you would know, we consolidated our manufacturing activity to try to improve the efficiency. You're now seeing that coming through into the results. I would say through time we'll seek to maintain our cost of sales at that very competitive level, recognizing there will be some pressure on us in terms of the cost of sales as we introduce the new portfolio. But we think it's a reasonable trajectory overall.

Terence, I think with regard to the IVUS study and the outcomes, the way to think about this is what we're pursuing here in both studies is the hypothesis that, as we continue to lower LDL, the relationship between LDL and outcomes will be maintained that we have observed with statin therapy over the last 20 years.

Within the IVUS dimension, there has been a clear relationship between the lowering of LDL and the volume of plaque. That linear relationship looks remarkably similar to the one that you see when you look at outcomes versus LDL. There is a known relationship between that IVUS-type effect and outcome.

It all does tie together. I think that we would be expecting to see conceptually, we believe that the benefits that are observed, both with respect to impact on slowing the progression of plaque volume, or causing regression of plaque volume, as well as in the outcomes dimension, that these are all mediated in the case of statins by the lowering of LDL cholesterol. We expect that pound for pound, if you will, with the LDL cholesterol lowering, we will see very similar sort results.

I think those are the hypotheses we are testing with the two studies.

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

Congrats on a really solid quarter. Maybe a couple quick ones for Tony. Could you talk about the impact that Darzalex is having on Kyprolis? It does look like from the monthly IMS data that we get that there's been a little competitive impact there. Second, I was surprised to see that Amgen's branching out into the ultra-orphan space, at least with an eculizumab biosimilar. Can you talk about how that program might fit commercially with your current capabilities?

Okay, thanks Eric. As you know, the data inside the multiple myeloma market is a bit more complicated to try and segment between first, second, and third-line plus. We often have to use chart audits for that. But based on the data we've seen, I mean, clearly a good product; but we truly see the combination potentially of this product and Kyprolis as a future regimen in treating multiple myeloma. Most of the usage we've seen with Darzalex at the moment is fourth-line-plus, however.

Your question on our new biosimilar opportunity, I think Amgen has specialized for many years in specialty drugs with a focused target population, with low resources required to get to prescribers, and to identify patients. I think that one fits quite well with our model.

Your next question comes from the line of Matthew Harrison with Morgan Stanley.

Great, thanks for taking the question. If I could ask, maybe if you could comment broadly on biosimilars, you've got three that are at regulatory submission or in regulatory submission. Could you walk through what your thoughts are around when you might be able to launch those products, some of the remaining legal hurdles that you're going to have to get through, and how you see that revenue stream developing over the next year or two? Thanks.

Well, Matthew, a couple things. First, as you know, we have some nine programs that are under development. Over time, we think those can be an important source of growth and a revenue opportunity for us at Amgen. We think that our commitment to developing these biosimilars reflects our belief the capabilities we have established for our innovative business will lend themselves well to developing a branded biosimilar portfolio, as well.

The next step for us on the three that are in the advanced regulatory stages, the same path for each of the three, it starts with needing to get a regulatory approval. We hope and expect that we will have an opportunity to get a regulatory approval for our first, which is the biosimilar to Humira, at the end of our -- later this year. With the benefit of that, then with that approval in hand, we'll turn to the questions of commercialization, as we will for the other two. The first thing we need to do is get approvals, and that is what we're working on securing right now.

As to your question about revenue profile and what we are going to do with approvals in hand, we'll wait and comment on those issues at the appropriate time, Matthew.

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

Afternoon, guys. Thanks for taking the question. Sean, I have a couple for you on erenumab. First one for the chronic migraine data last month, how would you view the baseline migraine data relative to, just put that in context of the real world? The second point is as we look forward to the episodic data, obviously a more variable population, maybe help us with how you would characterize a result as being clinically meaningful in this population? Thanks.

Sure. I think when we look at the data from the chronic migraine study, it appears to us as though we have enrolled there a very representative population of this type of afflicted group. As you know, these people are suffering with just an unimaginable number of these headaches per month. As we talk to the experts in the field, it seems that the population that we enrolled there in terms of the baseline level of headache, and the kind of response that we saw in comparison to other product candidates in this axis are all as we might have expected.

In the episodic migraine setting, of course, the baseline number of headache days are by definition less; but the treatment effect is still quite robust and reproducible. I think that's been the case. It's within the world of neuroscience products, quite remarkable when you look at the data across the small molecules that have been entered into this space -- the ligand-sequestering antibodies and erenumab, that you see a remarkably consistent treatment effect.

One comment I would make is that it's the case that this treatment effect is robust, it's reproducable; but there also is quite a large placebo effect that patients get that comes along with the treatment effect. It's durable over a long period of time. This is actually what the patient experiences, which is -- it's not unique to neuroscience, but it's particularly potent in this setting. A little hard to get your mind around that some times, but this is what people who actually care for these patients emphasize to us when we look at the data.

Your next question comes from the line of Alethia Young with Credit Suisse.

Hi, guys. Thanks for taking my question, congrats on the quarter. One, can you give us a little bit more color on the timing around biosimilar eculizumab data for the study in New Zealand. Then also on a second point, can you just frame for us how you think about some of the competitors in the migraine space, and how your drug may stack up, or is it a matter of differentiation, or is it just a commercial battle in your mind?

Okay, a couple different questions there. Why don't we -- let's start with the migraine question. Sean, do you want to talk about the field?

What I would say again, and I just made this comment, that when you look at what's gone on, where mainly companies have been driving for proof of concept and/or dose ranging their products, they've used doses or either small molecules like anti-sequestering antibodies or receptor antibodies, in our case, that are saturating the system. When that happens, that's how across all these different studies across different companies and so on you're seeing a very consistent result, because you're maxing out the impact that inhibiting CGRP can have in migraines. That's nice to see.

Then really it comes down to the question of what is the minimal dose that is effective in achieving that effect. I think then the devil gets into the details really around the issue of how easily administratable is that particular amount of antibodies. There's going to be a certain milligram amount of an antibody that has to be administered. Let's say we believe a monthly subcutaneous disposable auto-injector would be a very nice solution to this otherwise healthy, active type of population.

I think others of course are pursuing strategies that are different than that. I think it will be interesting, obviously, to see how that all plays out. Tony, you could comment, but I think scientifically I have not seen any data to suggest that these products are different from one another with respect to what they can achieve when they are dosed in the saturating quantity.

True, so we've seen the good clinical data. I think there will be clearly a need for a good marketing plan, a good strategy, a good share of voice, and understanding what makes patients move to request this type of medication. The market is hugely un-met at the moment. There are a large amount of patients who are clamoring consistently and looking for help to try and treat this terrible disease. It's a combination of both the clinical science and a good strategy.

With respect to your biosimilar question, Alethia, we've disclosed that we've begun the program, and that's all we're disclosing at this point.

Your next question comes from the line of Michael Yee with RBC Capital Markets.

Hi, good afternoon. A question on Parsabiv, which has a PDUFA date -- the Sensipar franchise is over $1 billion. Can you remind us how to think about the new product versus the loss of exclusivity for Sensipar. There's a swapping. How do we think about that line item as that product comes on?

Then a follow-up on Repatha. Can you remind us how much usage is once monthly now? I assume it's small, but what do you expect that to be over time, once monthly? Thanks.

Michael, we're having a little trouble hearing you, but I think you had two questions that Tony can address. The first about Parsabiv, which as you know is the subject of a PDUFA date later this summer. Then with respect to the once-monthly Repatha, I think that's the question Mike was asking.

Let's start with the Parsabiv question. As you know, Sensipar has been extremely successful in treating patients, both in the US and around the world. But in spite of the efficacy of Sensipar, we probably only have about a 26% penetration. Compliance or patient persistency in this particular market is always an issue, to ensure patients who are on dialysis three times a week actually take their tablets every day, as well.

Parsabiv brings a combination of potentially a better level of persistency, because you're being infused while you're having your dialysis. But the second thing is that you're seeing from the clinical data, in fact, there appear to be a much more robust level of efficacy of Parsabiv.

CMS have granted us a two-year period that this product will exist outside the bundle while they determine the medical value to determine the value of putting it back in the bundle. We continue to be excited about the product. There are patients who will take oral. There are patients who will take an injectable, and we will see how many patients we can assist with both products.

As regards to Repatha, very little usage at the moment on the monthly dose. We have not had a patient-friendly dose up until now. There appear to be a fair amount of patients who would prefer to have a convenient once-a-month dose. We're spending quite a bit of time talking to cardiologists about this, and we will be coming to market in the next couple weeks.

Your next question comes from the line of Robyn Karnauskas with Citigroup.

Hi, guys, thanks for taking my question. I have a question for David. On M&A, a lot of questions we're getting across the board in biotech on M&A, how are you thinking about how competitive the space is right now for M&A, given that many players are thinking about talking about actually buying things? Do you find the space competitive, and how do you think about time lines? Are people being more realistic about evaluations? Thanks.

Sure, yes. I think what I would say about M&A right now is indeed, first of all we have been consistent in indicating that we have a broad set of interests, in particular around the six therapeutic areas where we are particularly focused. We have said that we are open to look at transactions that could range from early to late stage.

I think the point is, we want to make sure we see everything that might be of interest to us, and I think we're seeing that, first of all. Certainly, we're in a financial position to be able to be competitive. Secondly, it's true. We're not the only people out there who are in the market looking for opportunities.

I think the point for us is we need to make sure that we first of all look at things as to the scientific insight that we can bring to bear, including with our insight from a human genetic perspective. Then secondly, we are very clear that we're going to be disciplined in terms of the financial returns that we can expect. We're interested in doing deals that will create returns for Amgen, not just the sellers. We continue to be active, and we've got a number of pretty interesting prospects that we think could come to closure, including still this year.

Your next question comes from the line of Geoffrey Porges with Leerink Partners.

Thanks very much for taking the question. A two-part question on biosimilars and then government effects. Could you talk a little bit about how the proposed Part B changes might play out and potentially affect your business? Secondly, how might that alter the landscape for some of the biosimilars that you're developing, or influence that? Thanks.

Let me take that one, if I can. This is Tony. Clearly, Amgen has raised some strong objections and questions to the proposed pilot, together with about at least three hundred other organizations. The concern as always when you do something based on acquisition cost and ASP adjustment, are you ensuring the patient safety and patient concerns are included. It's difficult to make a comment at the moment, Geoff, about something that's not been put into place yet. It's a proposal. It's up there for comment. We're working with other people to make sure if there is a change, patients are protected all the way through.

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

Hi, Arvind. Do you actually like Ronny Gal, because I've known him for years, and we should chat. (laughter) I had a question for -- I love Ronny, by the way, total joke. This was touched on here and there, but your margin guidance, David, goes through 2018. We're now dangerously close to 2017. I understand you can't give us any guidance, but can you just talk to us about your latest thoughts qualitatively about where margins could go after the plan that you have announced? Should we expect further modest margin expansion? Should we be modeling something right along the lines you're doing now? Anything like that, I would love to hear you riff on that.

Then, Bob, what's your appetite for an at-risk Humira biosimilar launch? Sean, I'd just be curious real fast to get your opinion, you guys have a CETP. I would love to know what your opinion on that class is now, like 30 seconds. Thank you.

Yes, on the first one, on the margin, the margin walk for the Company, I would say as we've been seeing, we're very pleased with the progress that we have made towards the goals we set out for ourselves in 2018. You look at the combination of continued growth of the business. You look at the progress we're making, which by the end of this year we expect to be delivering a $1.1 billion improvement on our cost base versus 2013, and we see us certainly achieving the $1.5 billion that we set out.

Likewise, if you look at the progress on the margins where we started at a 38% margin in 2013, you have now seen us this quarter again deliver over 50% on the way to 52% to 54%. First of all, I would say we're pleased with the progress. We're running the Company in an agile and efficient manner while still investing significantly for the long-term health of the business.

The second point I would make is, we are exactly as of mid-year 2016, now we're halfway through the period through 2018. Quite frankly, while we're making very good progress, I think it would be a mistake for us to take our eye off the ball to continue to focus on delivering against those goals that we have set out for the Company.

First and foremost, we're looking at delivering on those goals. In due course, we'll be looking then in terms of financial performance beyond that. I think the important point is we think we've got a business that's sustainably delivering very good performance financially, and investing in the innovation and long-term pipeline for the Company.

Sean, do you want to briefly comment on CETP?

Sure. I think that at this point in the game, most folks are really just waiting now to see the Merck CETP study readout. I assume mid-year next year is what we have most recently heard. Before making any final judgments, I would say that the Lilly data did cause folks who were believers in the mechanism to take significant pause. Certainly what we've done is to suspend any investment in this area until we see the Merck data.

Mark, it won't surprise you to know that we're not going to comment on your question about our launch plans for Humira. As I said earlier on the call, the next step is for us to get a regulatory approval for our molecule, and that's what we're focused on securing.

Just to make sure that we don't exceed the one hour of our allocated time here, may I request that we limit -- that you limit yourself to just one question so we can get through everybody's questions. Zirmarcus, let's go ahead with the next one, please?

Yes, your next question is from the line of Ian Somaiya with BMO Capital.

Thanks for sneaking me in there. Just a question for Tony. How should we think about the launch of yet another oral for -- in the RA market? Are there any parallels to your experiences with an oral in psoriasis, and the impact it's had on Enbrel sales there?

The first launch of an oral was obviously not that successful. The launch into psoriasis was interesting, because it expanded the market place and brought into the market a number of patients who perhaps were earlier in their disease, who weren't quite ready yet to move onto an injectable biologic. It's quite possible that there are a bunch of patients between methotrexate and a biologic that could become eligible for this opportunity. But if you look at even in psoriasis, the overall market for the TNFs have remained; just the overall market has grown.

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch.

Ying, are you there? Maybe you have us on mute. Okay, let's go on to the next question.

The next question comes from Josh Schimmer with Piper Jaffray.

Thanks very much for taking the question. I'm just wondering if there is any difference in the dynamics for share loss to Neupogen biosimilar in the 340-B hospital setting versus the non-340-B setting? Can you discuss a little bit how the dynamics there might differ between those two? Thanks.

Again, sorry Josh, it was hard to hear you.

Josh, I think you were talking about the difference between the PHS and the non-PHS, right?

Correct.

Clearly, I think anyone who has come new into the market has gone after non-PHS hospitals first.

What share is PHS versus non-PHS?

I couldn't give you that off hand. It's tough to pull that type of data off hand. If you need it, we'll come back to you on that one.

Your next question comes from the line of Ying Huang with Bank of America Merrill Lynch.

Looks like Ying is still absent. Okay, let's go on to the next one.

The next question is from the line of Brian Skorney with Robert W. Baird.

Hi, this is Nina on for Brian. I had a question about omecamtiv. I know you said the Phase III protocol has been submitted, but we were just wondering what the gating factors are to starting a Phase III trial? We know the Phase II data has been out for a while now. Are there regulatory issues, or something that's holding it up, or something else?

Yes, no, what I would say is we have been moving aggressively with this program. We had to of course go through some meaningful discussions with regulators around things like the dosing algorithms that would be used, the safety of the product and so on, because of the fact that just based on the mechanism there is a narrow therapeutic window for the product.

We're assessing drug levels and have a titration scheme. That's moved along. I think we've been able to design a very robust study, and have decided that we should put it through the special protocol assessment and FDA. Things are actually moving along as fast as I would have expect to on a complex program like this.

As it's getting close to 6PM on the East Coast, Zirmarcus, let's take two more questions.

Okay, your next question comes from the line of Ronny Gal with Bernstein.

Good afternoon, and thank you for taking my questions. My question is about indication-based pricing in anti-TNF and the broader anti-inflammatory market. How do you guys think about this? Is this good, is this bad? Will it impact Enbrel in a positive way? Are you willing participants, or less so? If you can give us some color?

It's Tony. Let me respond to that one as best I can. First of all, Amgen has been really at the forefront of innovative solutions to improve patient access, including innovative contracting such as outcomes-based and risk-based contracting. We are partnering with payers on patient-centered approaches to ensure that patients get access to the best available medications, and that physicians make the right choice for the right patient; and at the same time, the patient share of cost is manageable. As regards indication-specific contracts, I think it's too early at this stage to actually give any comment about what the impact could be.

Your final question comes from the line of Cory Kasimov with JPMorgan.

Hi, good afternoon, guys. Thanks for squeezing me in. I wanted to ask about pricing, as well. Really curious on how you think we should be -- how we should be thinking about the sustainability of price increases in this environment? Most specifically when thinking about Enbrel and the four meaningful increases you've had in the last couple years, I assume you're not getting much push-back at the payer level to be able to push these through. But are you comfortable with us modeling this pace of increases to continue, as I think many were assuming this would tail off across the space, given the retort that's out there? Thanks.

Cory, that question that a lot of people are asking, I'm sure. As you know, we price our products based on the value in the market place, taking into account the value they bring to the payers, the providers, the patients; the competitive landscape itself.

Enbrel, in particular, of course competes in a highly competitive market place where several large players are competing for form replacements to enable patient access. The health plans and the PBMs negotiate price concessions and large rebates to gain formulary replacement. Because of the magnitude of these rebates, price increases have become part of the competitive dynamic. That's about all I can tell you at the moment.

Great. Thanks, Tony. I would like to also thank everybody for your participation in our call. As you go through our results, if you have added questions, observations, feel free to reach out to me. Myself and my team will be around for several hours. Thanks again.

Ladies and gentlemen, this concludes Amgen's second-quarter financial results conference call. You may now disconnect.