美國安進 (AMGN) 2022 Q2 法說會逐字稿

My name is Jason, and I will be your conference facilitator today for Amgen's Second Quarter 2022 Financial Results Conference Call. (Operator Instructions)

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

Okay, Jason, thank you. Good afternoon, everybody, and welcome to our Q2 call. Lots to cover today, so we'll go ahead and jump right in.

Some of the key themes you'll hear about today include continued volume-driven growth, our strategy of seeking both internal and external innovation, the latter exemplified by our announcement this morning of acquiring ChemoCentryx. And lastly, navigating through a difficult macro environment. We have posted the slides for your background, we'll use non-GAAP financial measures in our presentation today and some of the statements will be forward-looking. Our SEC filings identify factors that could cause our actual results to differ materially.

So with that, I would like to turn the call over to our Chairman and CEO, Bob Bradway. Bob?

Okay. Hello, everyone, and thank you for joining our call. Today, we'll be discussing our second quarter performance as well as our planned acquisition of ChemoCentryx, which all of us here are very excited about.

Starting with our operating results. We delivered strong volume-driven growth in the second quarter with unit volumes increasing 10%. Our innovative products performed well globally. Repatha, Otezla, Prolia and EVENITY all delivered double-digit sales growth in the quarter, while KYPROLIS, Nplate and BLINCYTO in our innovative hematology/oncology portfolio, all generated record quarterly sales.

Our 2 newest products, LUMAKRAS and TEZSPIRE are both off to strong starts. LUMAKRAS is now being prescribed for patients with non-small cell lung cancer in 25 countries around the world. TEZSPIRE has made a big impact in a short period of time for a broad population of patients with severe asthma in the U.S. With our planned acquisition of ChemoCentryx, we'll be adding another newly launched innovative product to our portfolio, TAVNEOS, which is for ANCA-associated vasculitis, which is a serious and sometimes life-threatening autoimmune disease. TAVNEOS is a terrific medicine, the first innovation in this space in more than 10 years and very much needed given the harsh side effects of the older treatments and the seriousness of the disease. This product also fits right in Amgen's strategic sweet spot. Our decades of leadership in immunology and nephrology will enable us to add value to the TAVNEOS launch, reaching many more patients and much more quickly than would otherwise have been possible.

You'll hear from Murdo in a moment, but let me just say that opportunities like this don't come along often. We're really looking forward to working with the highly skilled and committed team from ChemoCentryx to realize the full potential of this very innovative product. We think we can make a difference for patients and earn an attractive return for our shareholders from this investment.

Dave will talk about the pipeline shortly. Our innovative and biosimilar molecules are proceeding well through the pipeline. Highlights, of course, include the really encouraging data for our cardiovascular molecule, olpasiran, which we expect to move into Phase III testing. On the oncology side, data from our BiTE or bispecifics in several solid tumors are giving us growing confidence in the role these molecules can play in diseases where there are still really big unmet medical needs like small cell lung cancer and prostate cancer. Across the board, our biosimilars are advancing to plan, setting us up for the growth of that business from future launches.

Let me now turn to the current drug pricing debate in Washington. By now, it won't surprise you to hear that we're disappointed by the proposed legislation. For some time, we've been advocating for reforms that respect innovation and provide improved access to it. The proposed bill does neither. The bill will impose price controls, and price controls will stymie innovation. At a time when our nation needs more innovation, the result of this bill will be less of it. Adding to the problem, the bill does precious little to improve the affordability of medicines for patients. So when it comes to innovation and affordability, this bill is lose-lose for patients.

Recent developments are no surprise, however. We've been positioning our business for some time for a world of compressed life cycles and prices. And if adopted, this legislation would accelerate those trends, and we'll adapt accordingly. We continue to believe that the world needs more innovation, not less, and our focus will remain on advancing more of it. Across inflammation, oncology and general medicine, we have a broad portfolio of innovative and biosimilar products meeting the needs of patients globally, and we remain encouraged by the prospects for our long-term growth. Through the first half of the year, our team performed well meeting the needs of the patients we serve. I'm grateful to them for their dedication to our mission.

And let me turn now over to Peter.

Thank you, Bob. The CFO organization welcomes ChemoCentryx to Amgen, and we're excited to help enable the teams to serve patients. We are pleased with our performance this quarter, and we're on track to deliver against our long-term objectives. We continue to see the company successfully navigate through foreign exchange headwinds, increasing interest rates, inflation, supply chain pressures and the war in Europe, all while working through COVID variant surges. We're grateful for the hard work of our 24,000 mission-driven colleagues at Amgen and serving our millions of patients around the globe.

I will present our second quarter financial results before discussing our 2022 guidance. The financial results are shown on Slide 6 of the slide deck. We effectively executed in the second quarter with year-over-year volume-driven revenue growth of 1% and product sales growth of 3%. Excluding the impact of foreign exchange, revenue growth and product sales growth were 3% and 5%, respectively. Our EPS growth of 163% versus our recast Q2 2021 is favorably impacted by the $1.5 billion Five Prime in-process R&D expense in 2021. Excluding the $1.5 billion charge for Five Prime, non-GAAP EPS grew 6%.

Turning to product sales. Strong volume growth of 10% was driven by Repatha, Prolia, LUMAKRAS and EVENITY as well as a number of other products in the portfolio. Year-over-year volume growth was partially offset by declines in net selling price of 6% and foreign exchange headwinds of 2%. Our established product portfolio generated almost $1 billion of product sales and continues to deliver strong cash flows to fund internal and external innovation, just like the ChemoCentryx deal today.

Transitioning to our biosimilars. AMGEVITA remains the most prescribed adalimumab biosimilar in Europe, and we are preparing and excited for the U.S. launch of this product in January 2023. Other revenues of about $300 million decreased 24% year-over-year, primarily driven by lower COVID-19 antibody collaboration revenues versus Q2 2021. Non-GAAP operating expenses decreased year-over-year, driven primarily by the $1.5 billion Five Prime related expense in 2021 that I previously mentioned. Recall from our Q1 discussion that we've updated our non-GAAP policy to no longer exclude such expenses from our non-GAAP results in accordance with guidance issued by the SEC this year.

For comparison purposes, our 2021 non-GAAP operating expenses will now include 2 items that were previously excluded. First, the $1.5 billion recorded in acquired in-process R&D associated with Five Prime in Q2 2021. And next, secondly, $400 million recorded in R&D related to an upfront payment to license rights to AMG 451 from Kyowa Kirin Corporation in Q3 2021. Excluding the impact of the Five Prime in-process R&D $1.5 billion charge in Q2 '21, second quarter total non-GAAP operating expenses declined 5% year-over-year, reflecting continuous improvement driven by digitalization, process simplification and automation, which more than offset investments to advance our pipeline and support product launches.

On a non-GAAP basis, cost of sales as a percent of product sales decreased 2.2 percentage points on a year-over-year basis to 14.7%, primarily due to lower COVID-19 antibody shipments and direct manufacturing costs, partially offset by evolving product mix. Non-GAAP R&D spend in the second quarter decreased 2% year-over-year, primarily due to lower marketed product support, partially offset by higher spend in research and early pipeline. Non-GAAP SG&A expenses in the second quarter declined 2% year-over-year. We continue to focus on prioritizing key investments and activities while driving productivity.

Non-GAAP other income and expenses were a net $410 million expense in Q2. This was driven by net interest expense and our share of BeiGene results as a result of our use of the equity method of accounting. We have a strong balance sheet, generate significant cash flow and retain significant financial flexibility to execute strategic business development opportunities. We continue to execute on our capital allocation priorities. First, today's announcement of the acquisition of ChemoCentryx is a great example of investing in the best innovation, whether internal or external. Second, investing in our business through capital expenditures, including for our new environmentally friendly facilities under construction in Ohio and North Carolina. Third, returning capital to shareholders through growing dividends, including $1.94 per share in the quarter, representing a 10% increase from the prior -- from last year's quarter. And fourth, opportunistic share repurchases. And while we had no share buybacks in the second quarter, Q1 2022 at $6.3 billion.

Let's turn to the outlook for the business for 2022. We are pleased with our progress through the first half of 2022, and we continue to be confident in the trajectories of our growth brands. For the full year, we now expect to absorb $500 million in foreign exchange headwinds against product sales based on recent foreign exchange rates, of which we absorbed $200 million in the first half of the year. Reflecting our effective execution to date, while considering the challenging foreign exchange dynamics, we're narrowing our 2022 revenue guidance range to $25.5 billion to $26.4 billion. Our non-GAAP EPS range of $17 to $18 remains unchanged. This range encompasses foreign exchange headwinds of approximately 3% or $0.45 for the full year, based on recent foreign exchange rates. Of that $0.45, we experienced approximately $0.20 in the first half of the year, so we anticipate an additional $0.25 in foreign exchange headwinds against EPS in the second half of the year. Our non-GAAP EPS range also encompasses costs associated with our acquisition of ChemoCentryx. Both foreign exchange and ChemoCentryx will influence our performance within the range.

I'll share a few additional points to consider for the remainder of 2022 with a particular focus on how these trends are likely to impact Q3 and Q4. First, we expect foreign exchange headwinds against product sales in Q3 and Q4 of approximately $150 million in each quarter, for a total of $300 million for the second half of the year. These headwinds are most pronounced in brands with significant ex U.S. scale, such as Prolia, Aranesp, AMGEVITA, Vectibix and XGEVA. Second, anticipated negative pricing trends for MVASI and KANJINTI are expected to continue in the second half of the year. And we expect quarter-over-quarter product sales declines in those products for the remainder of the year. We expect KANJINTI sales for the year of roughly $300 million and MVASI sales for the year of roughly $850 million. As we've noted, growth in biosimilars will be driven by the addition of new products and geographies, and we look forward to being the first biosimilar to HUMIRA, the launch in the United States, with AMGEVITA in January 2023. Third, we expect Q3 ENBREL product sales to approximate Q2 ENBREL product sales. Four, for the full year, we now expect Neulasta product sales to be between $1.0 billion to $1.1 billion. This is a change from our previous range of $0.9 billion to $1.0 billion. We expect the negative pricing trends for Neulasta will continue in the second half of the year. Fifth, although we expect the net impact of these factors will result in Q3 revenues and EPS lower than Q2, I would reiterate that our full year EPS guidance remains unchanged at $17 to $18. We now expect other revenue for 2022 to be in the range of $1.4 billion to $1.6 billion versus our prior range of $1.4 billion to $1.7 billion. Our expectations for total non-GAAP operating expenses for 2022 are unchanged from the last time we spoke. We continue to expect that operating expenses will increase in the second half of the year versus the first half of this year, including important investments in our pipeline as well as both current and upcoming launches, again, including AMGEVITA in January '23 and increasing R&D spend in the third and the fourth quarter. We continue to expect 2022 non-GAAP operating margin as a percent of product sales to be roughly 50%. We continue to expect non-GAAP cost of sales as a percent of product sales to be 15.5% to 16.5%. Our expectations for non-GAAP R&D in 2022 remain unchanged, based on our recast 2021 results, which now include $400 million of expense in Q3 related to the license with KKC for AMG 451, our expected 2022 non-GAAP R&D expense now equates to a decrease of 4% to 6% year-over-year. We expect non-GAAP SG&A spend to be flat to slightly down year-over-year as a percent of product sales. We continue to expect other income and expenses to be in the range of $1.6 billion to $1.8 billion, with an increase in Q3 over the run rate of the first 2 quarters due to both increasing interest rates and our share of BeiGene's results.

And finally, for the full year, we anticipate a non-GAAP tax rate range of 14.0% to 15.0%, up from our prior guidance of 13.5% to 14.5%. We will effectively execute throughout the remainder of 2022, despite the continuing headwinds. We will continue investing in the best innovation. We look forward to the launch of AMGEVITA in January '23, driving the launches of TEZSPIRE and LUMAKRAS, progressing our pipeline, successfully integrating ChemoCentryx and delivering on our 2030 objectives.

This concludes the financial update. I'll turn it over to Murdo. Murdo?

Thanks, Peter. Second quarter product sales increased 3% year-over-year, driven by a 10% volume increase. Excluding the impact of foreign exchange, global product sales grew 5%. We delivered record quarterly sales for Prolia, EVENITY, AMGEVITA, KYPROLIS, Nplate and BLINCYTO, and delivered double-digit volume growth for several additional products, including Repatha and LUMAKRAS. Our ex U.S. business grew 5% with volume growth of 20% year-over-year. In addition to the strong second quarter, I'm also personally excited about our announcement to acquire ChemoCentryx and the opportunity to help patients with severe active ANCA-associated vasculitis, a serious and potentially life-threatening autoimmune disease. I'll say more about TAVNEOS as I comment on the performance of our inflammation portfolio.

I'll start with our general medicine business, which includes Prolia, EVENITY, Repatha and Aimovig. Overall revenue for this portfolio grew 17% year-over-year, driven by 24% volume growth. In bone health, Prolia sales grew 13% year-over-year. Volumes grew 12%, driven by an increase in both new and repeat patients. EVENITY had record sales of $191 million for the quarter, driven by 60% volume growth in the U.S. and 37% volume growth outside of the U.S. ENBREL sales decreased 8% year-over-year for the second quarter, primarily driven by declines in net selling price and volume. ENBREL remains a frequently prescribed therapy due to its long track record of efficacy and safety.

Our launch of TEZSPIRE is off to a very strong start with $29 million in sales in the second quarter. I'm encouraged to see that both allergists and pulmonologists have prescribed TEZSPIRE across a broad range of patients with severe uncontrolled asthma. We're also seeing initiation in both biologic-naive and previously treated patients. On the access front, TEZSPIRE is a medical benefit product for which we received permanent reimbursement coding as of July 1. Physicians acknowledge TEZSPIRE's unique differentiated profile and its broad potential to treat the 2.5 million patients worldwide with severe asthma who are uncontrolled or biologic-eligible without any phenotypic and biomarker limitation.

Now our agreement to acquire ChemoCentryx brings a compelling opportunity into our leading inflammation and nephrology portfolio with TAVNEOS, a recently launched first-in-class treatment for ANCA-associated vasculitis, or AAV. Let me take a minute to talk about how important I think TAVNEOS will be for patients. AAV is a serious systemic autoimmune disease. It leads to inflammation and eventual destruction of small blood vessels. And this inflammatory process can lead to permanent organ damage and, in some severe cases, can be life-threatening. TAVNEOS represents a significant advance in the treatment options for the 8,000 to 10,000 U.S. patients a year who develop severe active disease or experience major relapses of AAV. We're looking forward to meeting and working with the talented team at ChemoCentryx and I'm confident that by applying Amgen's deep experience in inflammation and nephrology and substantial market presence, we can help many more patients with AAV with TAVNEOS.

Moving to our hematology and oncology business. Our 6 innovative products grew 14% year-over-year with 11% volume growth. This was driven by strong volume growth for KYPROLIS, Nplate and BLINCYTO, which we expect to continue throughout this year. XGEVA volume declined 2% in Q1 and was flat year-over-year in Q2. Our launch of LUMAKRAS is progressing well with revenues of $77 million in the second quarter, representing 24% quarter-over-quarter growth. In the U.S., LUMAKRAS has been prescribed to over 3,000 patients by over 1,900 physicians, and we've seen broad adoption in the community setting where the majority of non-small cell lung cancer patients are treated. Unfortunately, while 85% of patients in the U.S. are tested for their KRAS G12C status, only 50% of the time do oncologists have these test results available to support second-line treatment decisions. And our teams are removing barriers to ensure that the oncologist is able to review KRAS G12C status when the patient progresses beyond first-line therapy. And we've seen that when the KRAS G12C status is known in the second-line setting, 85% of patients receive LUMAKRAS. Outside the U.S., LUMAKRAS has now been approved in over 40 countries, and we're actively launching in 25 markets and rapidly pursuing reimbursement in the remaining countries.

Sales of our oncology biosimilars declined 24% year-over-year, while our biosimilars for MVASI and KANJINTI both hold leading shares. We expect continued net selling price deterioration and volume declines, driven by increased competition. In total, our biosimilars portfolio has become an industry-leading franchise, which has contributed $5.5 billion of product sales cumulatively. Looking forward, we're excited about the upcoming launch of AMGEVITA in the United States in January of 2023, followed by the next wave of biosimilar launches to STELARA, EYLEA and SOLIRIS.

Overall, I'm very pleased with our execution and volume growth in the quarter, our expanding international presence and diverse portfolio of products, including the exciting addition of TAVNEOS position us well to deliver on our long-term growth strategy.

And with that, I'll turn it over to Dave.

Thanks, Murdo. Good afternoon, everyone. I'd like to start by sharing my excitement for the transaction we announced today. As you've heard, ANCA-associated vasculitis is a serious and sometimes life-threatening disorder. Having treated these patients personally, I fully appreciate the challenges they face and the benefits of TAVNEOS in addressing this significant unmet need. I look forward to working with the team at ChemoCentryx.

For research and development, the second quarter was one of continued execution where we announced new data on several programs and continued to progress our robust innovative clinical pipeline.

Beginning with inflammation. In July, TEZSPIRE was recommended for approval in the European Union by the Committee for Medicinal Products for Human Use for severe asthma and also approved in Canada. We initiated the SUNRISE Phase III study designed to assess the efficacy and safety of TEZSPIRE in reducing oral corticosteroid use in adults with oral corticosteroid-dependent asthma. The ROCKET Phase III program evaluating rocatinlimab, an innovative anti-OX40 monoclonal antibody, in patients with moderate to severe atopic dermatitis was initiated in June. Following additional discussions with regulators and our partner, we are amending the studies to further improve patient convenience and investigate a range of doses. No safety or efficacy issues have arisen. We continue to remain very excited about the broad potential of this program in atopic dermatitis.

In oncology, we will present data from two of our thoracic programs at the upcoming World Conference on Lung Cancer. The first is tarlatamab, a DLL3-targeting HLE BiTE molecule, being studied in heavily pretreated patients with small cell lung cancer, a population with few treatment options. In this setting, tarlatamab demonstrated promising antitumor activity with notable response durability. We look forward to presenting an updated data set at World Conference and continue to enroll patients in a potentially registrational Phase II trial in this study -- in this setting.

We're also investigating tarlatamab in combination with standard of care in first-line small cell lung cancer in combination with AMG 404, a PD-1 inhibitor, in patients with second line or later small cell lung cancer and in neuroendocrine prostate cancer.

I'll also present data from our LUMAKRAS checkpoint inhibitor and SHIP2 combination studies. Data from the former are embargoed until August 7, so we can't discuss the results today. What we can say is that PD-1s have been challenging to combine with other targeted agents due to tolerability issues. We will present a comprehensive data set from this study. As a reminder, we are investigating multiple potential paths to first-line treatment of non-small cell lung cancer with LUMAKRAS potentially segmented by PD-L1 expression levels, where the non-small cell lung cancer population breaks down into roughly 1/3's across PD-L1 high expressers, low expressers and PD-L1 negative expression. We've seen promising early data in the PD-L1 negative population. And based on discussions with regulators, we are planning to initiate a Phase III study of LUMAKRAS plus chemotherapy in first-line advanced or metastatic non-small cell lung cancer.

While a smaller data set, we are very encouraged by both the efficacy and safety of the LUMAKRAS combination with Revolution Medicines' SHIP2 inhibitor RMC-4630. In patients without prior KRAS G12C inhibitor treatment, 3 of 4 patients with non-small cell lung cancer who received the highest 2 doses of RMC-4630 in combination with LUMAKRAS had a confirmed partial response and all 4 had disease control.

In gastrointestinal cancer, we are also pleased to announce the data from the full dose expansion Phase Ib study of LUMAKRAS in combination with Vectibix in refractory KRAS G12C mutated colorectal cancer were accepted for presentation at the European Society for Medical Oncology Congress taking place in September. The final analysis of the FIGHT study, Phase II randomized, double-blind, controlled trial evaluating bemarituzumab, a fibroblast growth factor receptor 2b, FGFR2b, targeting monoclonal antibody, and modified FOLFOX6 in patients with previously untreated advanced gastric and gastroesophageal junction cancer was completed. These results continue to demonstrate the bemarituzumab plus modified FOLFOX6 improves the clinical outcome of patients with FGFR2b-expressing tumors with no new safety concerns. A greater survival benefit was observed with increasing levels of FGFR2b expression.

In general medicine, we announced top line data from a Phase II study of Olpasiran, our small interfering RNA targeting Lp(a). These data demonstrated a significant reduction from baseline in Lp(a) of up to or greater than 90% at week 36, the primary endpoint, and week 48, the end of treatment period, for the majority of doses, which range from once every 12 weeks to once every 24 weeks in dosing frequency. No new safety concerns were identified during this treatment period. Presentation of these results is expected at a medical congress in the second half of this year. We're very excited about this innovative molecule and are moving to rapidly initiate a Phase III outcome study.

AMG 133, our multispecific that inhibits the gastric inhibitory polypeptide receptor, GIPR, and activates the glucagon-like peptide 1, GLP-1 receptor, has completed enrollment. We are planning to submit data from the initial cohorts of this Phase I study for medical congress occurring late this year and are actively planning the Phase II program for this molecule.

In conclusion, with an innovative portfolio where approximately 3/4 of our clinical stage programs have first-in-class potential and a growing portfolio of biosimilars, we are well positioned to continue to deliver important new medicines for patients and growth for shareholders over the near and long term.

And with that, I'll turn it back to Bob for questions and answers.

Okay. Thank you, Dave. Jason, could you remind our callers of the process for asking a question?

(Operator Instructions) Our first question comes from Jay Olson with Oppenheimer.

Congrats on the ChemoCentryx deal. It looks like a really exciting opportunity to treat patients with high unmet medical need in AAV. Can you just talk about the synergies, in particular, revenue synergies potential and then the strategic fit for ChemoCentryx within your organization?

Yes. Thanks, Jay. We -- as you can tell, we're excited about the fit. We expect our teams in inflammation and in nephrology will be excited to have this product added inside Amgen. And in terms of synergies, obviously, it's a very good fit, but we're focused on investing and growing this opportunity. We think we see some opportunities to help the team at ChemoCentryx reach even more patients than they have so far. So our focus will be on that. And so I don't think we really have much more to say at this point other than reiterating that we're excited about it. I think it addresses an important need in the marketplace. It makes a big difference for patients who otherwise don't have great alternatives available to them.

Our next question comes from Chris Raymond with Piper Sandler.

Maybe just on -- also another question maybe digging in to TAVNEOS. And also, if I can touch on, Bob, your comments on the drug pricing legislation as it relates to this deal. So I think you guys pointed out having a nephrology and inflamm presence is kind of unique for you guys on the commercial side. Maybe just give a bit more color how you intend to leverage these 2 forces and the specific roles they'll have.

And then maybe the second part, this drug pricing language, there's a decent amount of angst, specifically around provisions, targeting small molecules and allowing CMS to negotiate in year 9. So ChemoCentryx is predominantly a small molecule company. Just maybe square those 2 issues there, if you will.

Sure. Murdo, why don't you start on the first question?

Yes. Thanks for the question, Chris. We are obviously pleased with the very nice strategic fit of TAVNEOS in our portfolio. The ChemoCentryx team have been mostly focused on rheumatology, and there are subspecialties of rheumatologists who treat a lot of these AAV patients. So they've been quite focused in their commercial efforts so far. We can scale that much more broadly. We have a national footprint on rheumatology given our current in-line inflammation business. And we can also add nephrology. About 1/3 of these patients end up getting diagnosed by nephrologists given that one of the presentations of AAV is renal impairment or renal inflammation, I should say. So that's the immediate benefit.

But we've also got resources like our patient support programming, our medical teams, our institutional key account managers, our ability to work with payers to ensure that the medical policies and prior authorizations are seamless for providers and patients. So there's a lot we can bring to the table beyond just a very focused but very effective so far ChemoCentryx effort.

And with respect to Washington, Chris, obviously, we evaluated this in the context of the legislation, the potential legislation that's making its way through the Senate at the moment. And while as you point out, this is a small molecule product, we don't expect that there's any particular risk for this product as compared to other small molecules that could become subject to the price controls implied or implicit in the legislation. So again, we think this is an attractive product. The clinical profile looks really well suited to the needs of the marketplace, and we're excited to be joining the team with them.

Our next question comes from Salveen Richter with Goldman Sachs.

Maybe just a follow-up here. I'd love to dig a little deeper into what you said in the prepared remarks about the passage of this legislation accelerating trends to reposition the business and manage life cycles. Do you think this increases the urgency for M&A given your financial strength? And if so, what types of targets probably would make sense given the debate about non-orphan products versus orphan products? And just a second question here on AMJEVITA, being first to market, maybe you could just give us a sense of how that positions you and early payer discussions here?

Yes, you're going to catch the second piece of that, Murdo? And I'll address the first, which is with respect to Washington, again, Salveen, as you know, this is still a potential legislation. So we'll watch carefully to see if it gets passed and, if it does, exactly what gets passed. So I don't think at this point, we'll say anything more specific than what I said in my opening remarks, which is that we've been advocating for reform that would promote innovation and improve patient access to it, and we'll be concerned to the extent that the legislation that passes doesn't do those 2 things.

And Salveen, on AMJEVITA, obviously, we're pleased that we're first out of the gate with the AMJEVITA launch in the U.S. at the end of January next year. We were pleased with our performance outside the U.S. with AMGEVITA where we've established market leadership with the high share, and we've been able to hold that despite competition. Obviously, the U.S. market is a different market given payer and reimbursement structure, but we feel confident that we'll be able to establish good access and coverage for AMJEVITA early in the launch life cycle. And we think that PBMs and payers are interested in ensuring that their patients and members have biosimilar availability and options. So all going well and according to plan. Thanks.

Our next question comes from Umer Raffat with Evercore ISI.

I'll ask 2 today, if I may. One on your deal and one on the quarter. Maybe starting with the quarterly update. I saw your partner as well as your press release talked about the safety issue in the -- sorry, talked about the lack of safety issue on the OX40 program, however, the need to perhaps change the dosing regimen. I guess my question is, if there's no safety issue, is it fair to assume there's a biomarker change, maybe a severe TH drop in the subset of patients, which could be prompting this regulatory feedback? And if you could remind us what dose were you currently using every 2 weeks in Phase III?

And then on ChemoCentryx deal, I think it's an interesting case study on sort of where the clinical data stood versus how good the commercial receptivity has been. But is it fair to assume that you wouldn't have moved forward with the deal unless they were already at perhaps 700-plus patients by now and their peak patient guidance was 6,000?

Okay. Dave, do you want to take the first?

Yes. So -- yes, thanks, Umer. In regards to OX40, yes, no safety issue, no biomarker issue either, no change in any kind of patient subset. As I said in my prepared remarks beginning -- this is really driven by ongoing discussions with the FDA to explore broader range of doses, and we took that opportunity to, we think, improve patient convenience. I wouldn't overthink it or read anything more into it than that. And we don't think that this will affect overall program time lines.

Yes. And, Umer, I'm not exactly sure what you're looking for in your specific question. But Murdo, go ahead and feel free to jump in.

Yes. Umer, we've been following the TAVNEOS journey for a while. And I think what everybody has to remember here is the nature of this disease. I mean this is a severe acute autoimmune inflammation that involves the lungs, the kidneys and sometimes skin and other organs and can cause permanent end organ damage, if not treated effectively and efficiently and quickly. And the current standards of care are difficult treatments for patients to tolerate. And if you can intervene and improve that patient's potential to remain relapse-free over the first 52 weeks, as a rheumatologist or a nephrologist, if you -- all you have to do is add TAVNEOS to their base regimen, you're going to do that. So I think the behavioral change here is one that many physicians are choosing to do. And that, as you alluded to, has been encouraging to see in the early phase of this launch.

But the reason we like TAVNEOS is it helps reduce the potential relapse for patients by adding TAVNEOS to the current standard of care and potentially reducing glucocorticoid use. So this is a disease area that, if we were doing the development on our own, it would fit squarely in our strategy. And so it comes into a strong inflammation portfolio, and it's one that we think our scale and commercial and medical capabilities will allow us to accelerate what has already been a good launch.

And I'd say, Umer, that we're obviously attractive in the fact that it's still in an early stage of its launch, and we think we can add value to that, and the feedback from the marketplace has been encouraging. The prescriber and patient-based marketplace that is.

The next question comes from Michael Yee with Jefferies.

Maybe for David. I know the upcoming data, you talked about a challenge in combination with PD-1. So maybe you could just right size your expectations. Is the bar fairly high there to move forward due to tox? And is your focus on frontline really in the combination with chemo? So maybe just make a comment there.

And if you could just sneak in a second one. You actually talked about AMG 133 on your slide deck. I know there's a lot of focus, obviously, on obesity. Can you just comment on what we're supposed to know there to be advancing that forward?

Yes, sure. So in terms of the LUMAKRAS/PD-1 combination, obviously, I can't say much because of the embargo. We're presenting these data Sunday afternoon in Vienna. As you -- as we think about development in first line, I like to think of kind of 3 buckets of patients, those whose tumors are PD-L1 negative, those who are PD-L1 low to intermediate and those that are PD-L1 high expressers. As I mentioned and as you picked up on in the PD-L1 negative population, we're moving forward with a LUMAKRAS plus chemotherapy Phase III trial. And then we will disclose the results of the checkpoint inhibitor data in Vienna and outline our plans for further development in this space. I think that's probably all I can say right now. But I would really think about this as different groups of patients where the therapy will be tailored to their particular tumor based on PD-L1 expression.

And on AMG 133, yes, very pleased with our progress there. As I mentioned, we completed enrollment in the Phase I. We hope to present that. We're submitting -- in the process of submitting that to a medical congress. And we're very actively planning what the Phase II program will look like, and we'll have more to say about that as our plans are finalized over the coming months.

Our next question comes from Matthew Harrison with Morgan Stanley.

Great. Bob, if I could just ask your sort of outlook on BD and M&A. We see you do 2 modestly sized deals for assets with a bit of a pipeline over the course of the last year. How do you think about continuing to do more deals of that size versus something larger and more transformational? And just how do you think about where you are in terms of adding assets versus where you'd like to be?

Matt, I don't think anything has changed. We continue to look for ways to invest in the business. And our focus is on trying to find the best innovation and to try to advance that particularly in the areas where we've been clear about our stated interest, so inflamm, oncology and in the general medicine area. So we continue to look. There are obviously many more opportunities in the small and medium size than there are in the large size. But we, as I've said consistently through my tenure, Matt, we feel responsibility to look at all the options to add value for our shareholders, and we'll continue to do that.

Our next question comes from David Risinger with SVB Securities.

So my question is related to understanding interchangeable biosimilars. And there are 2 parts, please. So first, obviously, AMJEVITA is in a great position in the first half of next year. But could you talk about that product's ability to compete with interchangeable biosimilars that are launching in the second half of '23 since AMJEVITA won't have that designation?

And then the other part is news just hit a couple of days ago that the FDA-approved biosimilar Lucentis as interchangeable even though there was never a switching study conducted. So I'm wondering if that's a sign that your ABP 938 or biosimilar EYLEA is likely to also be approved as an interchangeable?

Thanks, David, for the question. I would say right now that in our conversations with payers and insurers and, for that matter, physicians, interchangeability has not been a barrier to have them consider AMGEVITA as an option and an alternative to the innovator. We are pursuing interchangeability with AMGEVITA, and we'll expect those data to read out later on in the launch. So I think our incumbent position being first to launch will help weather additional competition as they enter if they have interchangeability. And our expectation is at least a couple will. But we'll follow quickly with our own interchangeability data. So it will be a short period in time where that competitive advantage may exist or persist in the market. As for ABP 938, I won't speculate on what the FDA might say about that. Thank you.

Our next question comes from Mohit Bansal with Wells Fargo.

And maybe a question on LUMAKRAS Phase III study. So Dave, what do you think could be clinically meaningful benefit over docetaxel in this particular study? And the other question, the other part of the question is basically, if you think about chemo post IO, chemo tends to do well. Do you think placebo response could be better than historical in this particular trial?

So yes, in terms of the Phase III study, it's on track to report out this quarter. It's an event-driven trial. If we see behavior of LUMAKRAS consistent with what we've observed really across the program to date in advanced lung cancer, I think we'll be well positioned there. The trial has 90% power to detect a significant difference in progression-free survival. So it's very well powered. I'm sure it will be a well-conducted study. And so we look forward to having those data soon.

In terms of the placebo response, that -- I think it's hard to speculate on that. The trial that we are conducting in the PD-L1 negative is chemotherapy plus LUMAKRAS against what would be considered a standard therapy arm, where the addition of checkpoint inhibitors has a relatively modest additive benefit. So based on preliminary data that we've seen looking at LUMAKRAS in combination with chemotherapy, that's what's given us the confidence to move into Phase III, and we've had productive discussions with regulators about that trial design.

Our next question comes from Geoff Meacham with Bank of America.

I had one on LUMAKRAS, I guess, Murdo, for you commercially. When you look at the U.S. trends over the past, say, 3 quarters or so, maybe just help us with kind of are you reaching peak sort of saturation for G12C testing. How do you think about that in terms of the timing of getting to that same level outside the U.S.? And then maybe a lot of people have asked about kind of the Phase III combo studies that maybe if there is at a high level kind of an incremental opportunity that you would envision as you look to the combination study data.

Yes. Thanks for the question, Geoff. I would say it's less about peak testing in the U.S., where we've already got about 85% of frontline patients being tested and receiving a KRAS G12C status. Right now, what we know is only half of the tested patient population in second line has the test result available when they're progressing. So that's really what we're focused on. We're focused on where is that test result for that progressing patients so that treating oncologist can give the patient the benefit of LUMAKRAS. And when they have that test is, again, half the time, 85% of those patients get LUMAKRAS. So we're getting a very high percentage penetration of those second-line patients when the prescribing physician knows their test result. So we are not peaking yet. We've got headroom for more improvement there. Currently, about half of those patients are not getting their KRAS G12C test result reviewed upon progression. So that's an important thing that teams are focused on. That's what we think we can do to continue to drive some revenue growth in the U.S.

Now outside the U.S., what we're seeing is really, again, a tale of 2 types of markets. In markets like Germany, Switzerland and France, where biomarker testing is very well developed and their clinical information systems are also very well developed so that, that test is available and retrievable upon progression in second line, we're seeing very rapid lift and uptake. In places where that's not quite as well developed, think Spain, Italy, to some extent, the U.K., the uptake resembles more what we've seen in the U.S. So...

And just to clarify, this is in our expanded access programs.

Yes. In our expanded access programs where we've seen clinical utilization, but I'm also talking about other experience with other targeted therapies. You're going to see a slower uptake in some markets than you will and others because of that testing infrastructure. So we're working on that with those markets. We're changing that behavior with clinicians. And I think we'll be able to successfully grow this product in second line. And then, of course, if we get confirmatory data in Phase III, what that does is it makes it easier to promote because we're no longer on an accelerated approval. And hopefully, the data set are compelling and continue to reinforce the value of LUMAKRAS.

The next question comes from Yaron Werber with Cowen.

Great. David, it's for you. With respect to TAVNEOS, the drug was tested in C3 glomerulopathy and also severe HS, in ACCOLADE and AURORA. And that data was a bit mixed. I think they were looking for FDA feedback on C3G, and they're thinking about lupus nephritis as well, potentially starting another study. Any thoughts of that --are these indications that you are supportive of?

Yes. Thanks, Yaron. Yes. So there are other disorders, as you're indicating, in which TAVNEOS has been investigated where activation of this limb of the complement cascade may play a role in the inflammatory disease process such as C3 glomerulopathy and hidradenitis suppurativa. We'll look at all of those data, look at the programs with our new colleagues from ChemoCentryx and determine what the best path forward is to potentially address, again, diseases where there's currently very little effective therapy.

Our next question comes from Carter Gould with Barclays.

Great. So I wanted to come to your heme/onc franchise. You still have BLINCYTO and KYPROLIS, but we saw the discontinuation of the latest kind of BiTE you had in myeloma. Amgen had a multiyear effort to try to extend its myeloma franchise. Is that still -- where does that rank in terms of priorities? And I guess, just speaking more broadly, what does this say about the sort of the innovation jumps required to compete in heme/onc going forward?

We can take this in 2 parts. I think, with respect to KYPROLIS, obviously, we're encouraged by the ongoing performance of that. And more generally, the heme/onc portfolio, as you referred to, you talk about ongoing success of BLINCYTO. Again, we're very encouraged by what we see and what we think we can continue to do for patients in relapsed/refractory ALL. But I think you also raised the important point, which is that multiple myeloma is a very crowded space. And our decision with respect to 701 had a lot to do with our ability to get to market ahead of the competition or not. So we're prioritizing on those medicines where we think we can be best in class and first in class. And we have other programs underway that may be useful in multiple myeloma. And Dave, why don't you jump in.

Yes. So as an area, look, we're guided by the science and the biology that we uncover. AMG 701, that was a strategic decision of multiple agents targeting BCMA. And we chose to focus our efforts on, for example, tarlatamab, the DLL3 program, where we've got a substantial lead. We've got a molecule that's extremely active. Same platform is AMG 701, and so I think you'll see this kind of prioritization going forward.

Our next question comes from Evan Seigerman with BMO.

Congrats on the deal earlier today. I actually want to touch on your prostate cancer efforts. Can you just walk me through some of the details around you deprioritizing 160 for the lower affinity T-cell BiTE? And just given the recent data we've seen in this space with maybe newer technologies, bispecific targeting CD28 and PSMA, how do you think your efforts can remain competitive here?

Yes. Thanks for the question. So we've got now a pair of molecules targeting prostate cancer, actually 3, if you include neuroendocrine prostate cancer where we're conducting a tarlatamab study where DLL3 expression is quite frequent in neuroendocrine tumors. But first, AMG 509 targeting STP1 continue to be impressed with the data we're generating in that trial, and we are moving ahead with all deliberate speed to advance that program. We hope to be able to share data either late this year or sometime into next year from that dose escalation in first-in-human study.

And then as we -- as I had indicated all along, we would take a look at the accumulating data from AMG 160, Acapatamab and AMG 340, which came to us through the TeneoBio acquisition. And based on what we saw, we elected to prioritize AMG 340 targeting PSMA going forward. The data you're alluding to from a few days ago is a handful of patients. We've seen similar things in early phases. I think what you need is more patients and, in particular, prolonged follow-up, especially in this disease. And in that regard, I'm quite encouraged with what I'm seeing from AMG 509, for example. So that portfolio of 3 medicines is advancing. I feel actually very optimistic about what we may be able to do in prostate cancer.

Our next question comes from Michael Schmidt with Guggenheim.

I had one on Aimovig. Just wondering if you could comment on market dynamics here, just given the 11% volume decline. Is that a function of competitive dynamics? Or does it have to do with pricing? And how should we think about peak potential given those trends?

Yes. Thanks for the question, Michael. I think our focus on Aimovig has been one where we're making sure that we address the patient population, the prevention patient population in a way in which we provide good access but at a reasonable net price. And I think, strategically, we've been able to do that well. We did lose 1 major PBM to the -- at the end of last year into this year, and that's affected the volume evolution. But we've also been able to improve our net pricing year-on-year. So from a profitability standpoint, Aimovig is doing better. And I think longer term, it's early in the marketplace. CGRP class should be growing faster than it is given that the antibodies are much, much better than what's available in the market and the older non-CGRP class. And of course, we've got the advent of the orals. So it's early days. We're still watching it play out. We continue to focus on promoting for the preventive patients that have high-frequency migraine, and we continue to do well there. So longer term, I think there's just a lot to wait and see.

Our next question comes from Robyn Karnauskas with Truist.

I Just had 1 question on Otezla and a follow-up question on the BiTE platform. So for Otezla, just talk a little bit about, given the lower price topicals and some of the data, new drugs that are going to be approved in September, I mean, your thoughts on pricing and how we should think about that over the next year or 2 because I know you need more volume on those new drugs, but they could put some pricing pressure.

And then on the BiTE platform in general, just to follow-up to Evan's question, I mean, so at what point do you -- seeing the new bispec data coming out across the board from other companies at the Co-stim from Regeneron as well, like at what point you deprioritize BiTE versus, say, the new bispec that are out there and put the money toward other things?

So thanks for the question, Robyn. I'll start with the Otezla question on how the topical entry into the market is affecting our business. I think, overall, we've been really pleased with the expansion of our own label to include the mild patient population. And what I'm encouraged by is in our conversations with payers and PBMs, we were able to have that label expansion, include those patients in our current contracted coverage without adding any value to our deals with the payers. So we didn't have to increase our rebate rate to have the mild patient population included. And in fact, what we've seen is more and more PBMs and plans are removing prior authorization requests for Otezla. So overall, I'd say our access is improving quite a bit without a deterioration in the rates having to pay for it. Where I think you'll see continued price pressure, net price pressure, is in our co-pay assistance that we provide to patients in affordability. That's really what we see as a dynamic on the net price of Otezla in the U.S.

What we're not seeing, though, is pressure on the net price because of the topical entrants. The challenge with the topical entrants is they don't have broad payer coverage yet. And so until that happens, I think Otezla will continue to do well on the access coverage and rate that we pay for it. Longer term, I think it remains to be seen whether these are in direct competition or complementary to the patient types that we treat. If you talk to the dermatologists, patients fall into categories where they don't want to move into a systemic treatment and stay on topicals and those that are willing to try a topical because the body surface area involvement, the location of their psoriasis, many factors come into play. And that's really where we are competing is people who have already decided they want a systemic agent. So I think they're nonoverlapping populations for the most part, and we don't necessarily see the topicals as applying pricing pressure.

Dave, do you want to address Evan's question?

Yes. Thanks, Robyn. Yes, in regards to the BiTE platform, we've been working for some time on new-generation technologies that will incorporate things like logic gates with multiple targets where either an and gate or an or gate is engineered into the BiTE for activation. The real goal here is to do 2 things: one, try and enhance efficacy; and two, increase the therapeutic window so that you have as little normal tissue targeting as possible from the agent. So first molecules are moving towards the clinic, and we'll have more to say about that as we get ready to launch.

Okay, Jason. I know we're a little bit past the top of the hour, but we've got a couple of more questions in the queue. So why don't we take a couple more? And then if we don't get to you, Arvind and his team will be around this evening for some time.

Our next question is from Dane Leone with Raymond James.

I just wanted to get at what's obviously a focus of everyone of estimating what the real opportunity for LUMAKRAS is in the U.S. here. Could you maybe just define your understanding of patients that might be eligible for LUMAKRAS that are in the current studies, the current clinical studies or other patients that might be in assistance co-pay or other schemes where they would be on drug, but just not on commercial paid for a drug? I think that would be helpful is, again, obviously, the run rate is well below what the estimates would be and people are just trying to triangulate over time what the peak sales could really be here in the U.S.

Yes, Dane, I think I understand your question, but please ask for clarification if I don't address it. The clinical trial [steel] rate, if you will, patients who are not in commercial drug treatment but are enrolled in other clinical trials, is relatively small as a percentage of the total second-line non-small cell lung cancer patients. I'd say less than 10% would be an estimate. It does vary. It goes up and down depending on the clinical activity of other investigational drugs and trials that are happening. As I was answering a question earlier, the major challenge in growing LUMAKRAS in second line is ensuring that the prescribing physician has the KRAS G12C test result available to them when the lung cancer patient is progressing from frontline to second line. That's the gap in the treatment patient journey. And right now, our estimate is that, that happens about 50% of the time, and we are working to increase that. When that does occur when the prescribing physician has the KRAS G12C result, 8.5x out of 10, that patient gets LUMAKRAS. So we know that the profile of the product is conducive to that second-line treatment choice. We just have to make sure we close down the administrative challenges of having that test result and patient in second-line meet at the same time.

We're also driving awareness and usage of our liquid biopsy for retesting and reassessment of that patient as they progress to second line. I hope that answers your question.

Our next question comes from Tim Anderson with Wolfe Research.

Can I go back to AMJEVITA and biosimilar HUMIRA in the U.S.? Our sense is that payers may view the imperative is simply being to offer the best-priced product to their constituents. And I'm wondering whether with enough additional rebate, maybe branded HUMIRA ends up being that lowest-priced product. So my question -- 2 questions, really. Do you agree that the most important driver of what product payers choose to prioritize going to be net price? Or are there other factors at play? And then is it in the realm of possibilities that branded HUMIRA ends up being that lowest-priced product?

Yes, thanks. It's an important driver, obviously. Net price is definitely something that the pharmacy benefit managers are focused on as are the upstream insurers, but not the only one. And I think this is where we've been able to successfully differentiate our biosimilars in the past, and we are confident we'll be able to do that on a go-forward basis. And what I would describe, and I've described this before, is that we can go to a pharmacy benefit manager and say, "We can make the transition from brand HUMIRA to AMJEVITA as seamless as possible." We have field force deployed that call on prescribing rheumatologists and GI physicians that treat these patients. We have patient programs that rival the innovative compound because we're also in the marketplace with innovative compounds, and we've designed these programs over many years. We have patient support to help that patient understand how to administer the product and use their device. We have world-class manufacturing of biologics and sustainability of supply. And we have a really good additional benefit coming with the interchangeability that I mentioned in progress. So that actually does improve confidence on the part of the PBM and the payer because they don't want to have their patients have a bad experience transitioning from brand to biosimilar.

Now is it possible that the biosimilar -- that the brand retains a substantial share even with biosimilars in the market? Yes, of course, that's possible, but we'll wait and see how that plays out.

Closing comments?

Yes. Thank you, Arvind. And again, thank you all for joining our call. We feel we've been executing well through the first half of the year, and we're looking forward to carrying that momentum into the second half of the year and obviously excited about the ChemoCentryx announcements and what that represents for the future of our inflamm and nephrology franchises as well. So thanks for joining. We look forward to catching up with you after the third quarter.

Great. Thanks, everybody.

This concludes our 2022 Q2 earnings call. You may now disconnect.