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Amgen, Inc. (NASDAQ:AMGN)

Q1 2014 Results Earnings Conference Call

April 22, 2014 05:15 PM ET

Executives

Arvind Sood - VP of Investor Relations

Bob Bradway - Chairman and CEO

Michael Kelly - Interim CFO

Tony Hooper - Head of Global Commercial Operations

Sean Harper - Head of R&D

Analysts

Matt Roden - UBS

Terrence Flynn - Goldman Sachs

Matthew Harrison - Morgan Stanley

Eric Schmidt - Cowen and Company

Robyn Karnauskas - Deutsche Bank

Josh Schimmer - Piper Jaffray

Geoffrey Porges - Sanford Bernstein

Yaron Werber - Citi

Mark Schoenebaum - ISI Group

Geoff Meacham - JP Morgan

Ian Somaiya - Nomura

Michael Yee - RBC Capital Markets

Ravi Mehrotra - Credit Suisse

Eun Yang - Jefferies

Chris Raymond - Robert Baird

Joel Sendek - Stifel

Howard Liang - Leerink

Boris Peaker - Oppenheimer

Operator

My name is Marvin, and I’ll be your conference facilitator today for Amgen’s First Quarter 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. In order to ensure that everyone has a chance to participate, we’d like to request that you limit yourself to asking one question during the Q&A session (Operator Instructions).

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

Arvind Sood

Thank you, Marvin. Good afternoon, everybody. I’d like to welcome you to our conference call to review our operating performance for the first quarter of this year. Our performance gives us confidence that we are on track to deliver our full year guidance. In addition, consistent with our expectations that 2014 will be a data rich year, we’ve already reported significant data on evolocumab and T-VEC and expect Phase III data on four other programs in the remainder of the year.

Our Chairman and CEO, Bob Bradway will lead the call today. Bob will provide a brief review of our operational progress followed by our interim CFO Michael Kelly who will review our Q1 results. Following Michael, our Head of Global Commercial Operations, Tony Hooper will discuss our product performance during the quarter and trends that we see going forward. Sean Harper, our Head of R&D will then provide a brief update on the many late-stage opportunities that we have in our pipeline. After Sean’s comments, we should have plenty of time for Q&A.

We will use slides for presentation today. These slides have been posted on our website and a link was sent to you separately by email. Our comments today will be governed by our Safe Harbor statement, which in summary says that through the course of our presentation and discussion today, we may make certain forward-looking statements and actual results may vary materially.

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

Bob Bradway

Okay, thank you Arvind. The first quarter of the year completes and we’re confident that we’re on track to deliver our financial and operational targets for the year.

Revenues were up 7% for the quarter, reflecting strong performance in Europe and the benefit of our international expansion including having acquired back from Roche our rights to Neulasta and NEUPOGEN in number of emerging markets.

In the U.S. while underlying demand for our products remained strong, sales were affected by inventory draw downs across the portfolio, as Tony will describe shortly. We maintained discipline around our capital and operating expenses in the quarter, as reflected in our 18% growth in operating income and strong cash flows on the quarter.

Turning to our operational progress, we said in January that we expected 2014 to be a data rich year for us and that’s certainly what it has been so far. We are excited about evolocumab and the data we generated in our pivotal programs and we are moving rapidly now to file our regulatory submissions in the U.S. and Europe this year.

We have both once monthly and twice monthly dosing options; we believe evolocumab would be an important advance for patients with high levels of LDL cholesterol. Onyx is performing well and we are encouraged by the prospect of Kyprolis moving into earlier lines of therapy in multiple myeloma, as further data become available later this year. We would be presenting data on T-VEC and blinatumomab at the upcoming ASCO meeting and expect to report on four other Phase 3 programs during the course of the year.

In addition to our innovative portfolio, our biosimilar portfolio continues to progress favorably with three of our six programs in pivotal trials currently. Heading into the balance of the year, we feel we’re in strong position to continue investing in the long-term growth of our business, while returning capital to shareholders in the form of increased dividend payments.

Before turning to Michal Kelly to walk us through financials, let me thank my Amgen colleagues for their focus on delivering for our shareholders and the patients we serve. Michael?

Michael Kelly

Thanks Bob. Let me start by highlighting a few important points on our financial results. The underlying operating performance of the company is tracking well against our plans for 2014 and accordingly our revenue and EPS guidance remain intact. Our full ownership of Enbrel in the U.S. and Canada drove 18% operating income growth as we were able to keep operating expenses flat even after absorbing the operations of Onyx.

Turning to page four of the presentation, you will see revenues grew by 7% with 5% product sales growth and $78 million of growth in other revenues primarily due to our Nexavar and Stivarga partnerships. Revenues declined on a quarter-over-quarter basis, which was consistent with our historical pattern for the first quarter. However, the decline was a bit exacerbated this year by the wholesaler and end user inventory dynamic at the ended 2013.

As I mentioned, operating income grew 18% as operating expenses were flat year-over-year. Within operating expenses cost of sales margin improved by 0.5 points to 15.7% driven by lower royalties, research and development expenses increased by 17% year-over-year with roughly half of that growth driven by the addition of Kyprolis and the balance due to other late stage clinical programs, SG&A expenses decreased by 14% driven by a significant reduction of [inward] related expenses. Other income and expenses were $160 million in the quarter, unfavorable to the first quarter of 2013 due to realized gains on our cash investment portfolio a year ago.

Despite 13% growth in pre-tax income net income declined 4% and earnings per share declined 5% due to favorable tax items in the year ago period. Specifically you will recall that last year we recognized the full amount of the 2012 federal R&D credit and resolved federal RS which enabled us to release provisions we held against potential tax liabilities.

The tax rate in the first quarter of this year was 15.4% inline with our full year tax rate guidance. Finally, our share count increased 1% as we did not repurchase any shares over the last 12 months.

Now turning next to cash flow and the balance sheet on page 5. We generated $1 billion in free cash flow in the first quarter of 2014, a year-over-year increase of 9% ahead of revenue growth. We also increased our quarterly dividend per share by 30% with payments totaling a $0.5 billion in the quarter.

At the end of the quarter we held $23.2 billion in cash, short-term and restricted investments, up approximately $2 billion versus a year ago. And our debt balance was $32 billion, reflecting the financing of the Onyx acquisition and our commitment to maintain a solid investment grade credit rating.

Lastly, turning to page 6, we are reconfirming our revenue guidance of $19.2 to $19.6 billion for the year and our earnings guidance of $7.90 to $8.20 earnings per share. Our guidance on tax and capital expenditures remains unchanged as well. On the tax rate, let me remind you that our guidance assumes that the R&D tax credit will be extended in 2014 and retroactively apply to the full year.

Let me now turn to Tony. Thank you.

Tony Hooper

Thanks Michael and good afternoon folks. You’ll find a summary of our global sales performance for the first quarter on slide number 7. Product sales grew 5% year-over-year. Our international business grew 9%, driven by strong performance in the Europe and the acquisitions are progressing right in several new and emerging markets. In the U.S., our business grew 4% year-over-year.

As Michael said, quarter-over-quarter global sales were down 9%, a trend which is consistent with the first quarter last year. This was driven predominantly by U.S. inventory draw-downs in the first quarter following wholesaler and end-customer inventory builds in the fourth quarter of last year. This affected maybe all products, but most notably Enbrel. Total U.S. wholesaler days on hand declined from 15 days at the end of the 2013 to 13 days at the end of this quarter.

Our underlying business however, as evidenced by the IMS in-market prescription demand data across our products remained strong and inline with our expectations. As Bob mentioned, we are confident that we’ll achieve our full year revenue guidance.

Let’s review our first quarter product performance beginning with Enbrel. As I said, sales were impacted by wholesaler and end customer end results at the end of 2013. The end market IMS data shows underlying demand in rheumatology continues to be strong, while we have seen a slight decline in the dermatology segment. Both of these segments however are growing at double-digits. These demand trends for Enbrel have continued into second quarter. With extrinsic exclusivity of Enbrel and its established track record of long-term efficacy and safety, we will continue to invest in growing this important brand.

Turning now to Neulasta and Neupogen. As a reminder, Neulasta represents over 75% of combined sales of these two products. As I noted earlier, this quarter includes sales in several new and emerging markets where we acquired commercialization rights effective January 1. This is a further step in our strategy to expand globally.

On a year-over-year basis, Neulasta increased 5%, while Neupogen declined 3%. We’ve seen nominal impact from recently launched short acting competition in the U.S. and long acting competition in Europe. Nevertheless, we have taken this competition seriously and responding accordingly to maintain our leadership position across both brands.

Neupogen and Neulasta have a long history of safe, efficace and reliable high quality supply.

Moving on to Aranesp. Aranesp sales were down 2% year-over-year. Looking forward we continued to expect pricing pressure and competition in Europe. EPOGEN increased 6%. We continue to monitor hemoglobin levels and dose utilizations within the new bundled payment system.

Sensipar sales increased 2% year-over-year, driven by higher units demand from continued segment growth.

Next, Nplate and Vectibix; sales in aggregate were higher by 18% year-over-year driven by strong unit demand. For Vectibix, we continued to gain share in both Europe and the U.S. In Europe which represents over 50% of Vectibix sales, we continue to highlight the recent addition of first-line metastatic colorectal cancer to our label. And we're excited about the opportunity to serve these patients.

Now a few comments on our denosumab franchise. Let me start with Prolia. Sales grew 38% year-over-year driven by segment share gains in both the U.S. And Europe. We do see some seasonality that we have come to expect during the first quarter. The second quarter is off to a good start though.

Our new direct-to-consumer campaign on television launched in January this year, led to a significant increase in unaided awareness from 10% to 23% as well as driving a fourfold increase in traffic to the prolia.com website.

As announced earlier this month, we've also ended our collaboration with GSK in Europe and selected modules. We're in the process of transitioning all commercial activities. We believe this will definitely enable us to leverage our experience, of successfully launching Prolia in other parts of the world to drive greater growth in these markets. Further it will build experience and capacity in countries that will be important in accelerating future growth of our pipeline products.

XGEVA sales increased 25% year-over-year driven by strong unit demand growth in both the U.S. and European markets. In the U.S. we continue to see share gains despite generic [lunatic] competition. Outside the U.S. sales grew 76% driven by the momentum of several successful launches in Europe during 2013. Our focus remains on highlighting the superior clinical profile in XGEVA.

Let me now turn to our newest product, Kyprolis. Underlying demand trends remain consistent. Kyprolis continues to be the therapy of choice in third line multiple myeloma in the U.S. We expect the next major revenue inflection point for Kyprolis would be when second line data is included in the label.

Lastly the other products category which includes our businesses in Turkey and Brazil decreased 36% year-over-year. This is a $250 million business with annual growth inclusive of negative foreign exchange impact in mid single digits, they are contract or tender driven businesses and therefore fluctuate quarter-by-quarter.

In conclusion we feel very confident in the strength of our underlying business. With the first quarter inventory draw down behind us, we expect the second quarter to be in line with underlying demand. We remained confident that we will deliver on our full year revenue guidance.

Let me now pass you to Sean.

Sean Harper

Thanks, Tony, good afternoon. 2014 is a data rich year for us and more optimally exciting start. The reception by cardiologists and [lymphoid] experts to our pivotal Phase III evolocumab studies at The American College of Cardiology was remarkable. The data themselves coupled with the flexibility of every two week and monthly delivery options were overwhelmingly [views] positive. In addition positive results from our Phase II evolocumab study in Japanese patients were recently presented at Japan Circulation Society. We are working diligently on our 2014 evolocumab global filing packages including the U.S. submission.

Further within our cardiovascular portfolio, FDA recently granted fast track status to ivabradine in chronic heart failure and we are on track to make this submission in 2Q. Together, these two innovative molecules evolocumab and dyslipidemia now fabricating chronic heart failure represent very meaningful potential value to patients at cardiovascular risk.

Turning to our oncology programs, we continue to look forward to new Kyprolis data including a review by an independent data monitoring committee of an interim analysis of the ASPIRE study in relapsed multiple myloma patients and the final analysis of the FOCUS study in relapsed refractory multiple myloma. In both of these event driven studies, making precise estimates of the timing of the analysis is quite challenging. Our best estimates are that one or both of these analysis could occur in 2Q although either of these analysis could instead occur in 3Q.

Our immunooncology programs continue to advance. In 2013 we reported that our Phase III TVEC study in metastatic melanoma met its durable response rate primary endpoint. We recently announced that with the p value of 0.51 we narrowly miss the statistical significance on the secondary endpoint of overall survival, a pretty strong result given that the study was not statistically [paddling] for survival. These data will be presented at ASCO and we are currently reviewing the results with clinicians, regulators and payers to determine the best course forward. In addition, we continue to believe that there is an opportunity for T-VEC to primary immune system with checkpoint inhibitors. We’re currently investigating T-VEC in combination with ipilimumab or Yervoy in a Phase 1b2 metastatic melanoma study the 1b portion will be presented at ASCO this year.

Moving forward with our collaborative efforts with Merck on PD-1 antagonism and exploring other such collaborations. We also recently reviewed the Blinatumomab confirmatory Phase 2 results in relapsed/refractory adult acute lymphoblastic leukemia. These data which will also be presented at ASCO continue to support a positive benefit risk profile in these patients who have exhausted other therapeutic options. We’re therefore initiating discussions with regulators on the potential for filing based on these data.

Our psoriasis program for Brodalumab, which we’re developing with our partners with AstraZeneca/Medimmune, consists of three Phase 3 studies, one placebo controlled and two head-to-head studies comparing to ustekinumab or STELARA. We expect to see the data from the placebo controlled study in the second quarter with the other two studies moving out during the course of the year.

We look forward to seeing into the programs and we hope it would be not only remarkable efficacy but also paramount important to psoriasis a strong safety profile. I am also pleased to announce that we’ve initiated our Phase 3 program psoriatic arthritis. As you may recall we’ve developed the only monoclonal antibody antagonist of the CGRFP receptor in the clinic AMG 334 which has demonstrated a potent ability to block this access in humans. We therefore move directly into Phase 2b dose ranging studies in the setting of migraine prophylaxis with what we feel is the most optimal mortality of receptor antagonism using the monoclonal antibody.

We expect to see the results of our episodic migraine Phase IIb study by the end of this year and the results of our recently initiated chronic migraine Phase IIb dose ranging for [psoriatic] next year.

Finally I would like to take a moment to thank my colleagues in R&D and many other parts of the company for helping to make possible the data flow we're experiencing this year to help patients in these. Bob.

Bob Bradway

Okay. Thank you, Sean. Marvin why don’t we open up the call to questions and would you please remind our listeners to the process for the Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from the line of Matt Roden with UBS.

Matt Roden - UBS

Thanks very much for taking the question. At ACC it sounded like you guys were not quite sure if you would be able to file evolocumab in the U.S. this year, but now you are talking about global filings in 2014. So the question is what’s changed that based on the FDA interactions and how confident are you that you can get that done this year. The way that once you have, now that you have the data how do you think this product is going to be used to ahead outcomes data, where are docs selling it? Thanks.

Bob Bradway

Thanks Matt. Those are good questions. Sean why don’t you respond?

Sean Harper

Yes, I will take the first part. Yes, I think this is clearly an evolving situation which we assess on an ongoing basis, our interactions with regulators as well as where the program stands or with respect to the accumulation of the weight of evidence required for a file. And all around I think at this point, we have a good degree of confidence in our ability to file this year including the United States. So that’s why we're making that statement.

Tony would you want to -- from a medical perspective it’s clear to me that there are individuals who have a high cardiovascular risk residual despite the use of existing therapies, particularly [statin], either despite full dose intensive statin therapy they still have a modifiable risk factor in elevated LDL or they are unable to be subjected to a intensive or even moderate intensity statin regim. And it is clear to me that those patients are viewed by the physicians that I talk to as patients who would be appropriate for a therapy like evolocumab, even prior to the availability of outcomes data.

So, from just a pure medical doctor to doctor interaction, that's the sense I get, there is a real patient population out there indeed.

Tony Hooper

So, the only thing I would add to for sure just is that we have physicians talking about patients in three buckets. Obviously the [FX] patients are the unique subpopulation. And then secondly, the high risk patients, and the high risk patients those are either contact statin or can no longer tolerate to statin or those were on statin but not yet at the global level. So those continue to be the areas, physicians see this drugs will bring the greater (inaudible) truly against all around high risk cardiovascular patients.

Bob Bradway

Okay. Let's go to the next question.

Operator

The next question comes from the line of Terrence Flynn with Goldman Sachs.

Terrence Flynn - Goldman Sachs

Hi, thanks. Just two quick ones from me. First on Enbrel, Tony, I was wondering if you can quantify the inventory impact in the quarter for us. And then on the PCSK9 outcomes trial, Sean I was just wondering if you can give us any sense of enrollment at this point. And then any inside on powering of the interim and final analysis? Thank you.

Tony Hooper

So, let me take Enbrel first then. As you look at our base it’s clear that our fourth quarter is always slightly larger than the first quarter. And during the fourth quarter of last year we did have some strange snow storms in the East Coast, which resulted in about $120 million of product that moved from one year to another. When I look at the Enbrel data itself and what I was looking at this morning that was the NRXs from IMS. And to me the NRXs which account for about 35% of total RXs are the true indicator of where that brand is going in the future.

On the rheumatology side, NRXs grew quarter-on-quarter 14% and on the dermatology side the NRXs grew 11% quarter-on-quarter. So just to give you an idea of what -- the brand fully large growing segment areas with Enbrel itself getting new prescriptions as well. Sean?

Sean Harper

Yes. We are quite pleased with the outcome study enrollment. This study is very adequately powered to detect an affect side that would be clinically relevant to patients and to physicians’ arm and this of course is a product that we think has great potential. So, we spread (inaudible) on the design of the trial. There is no interim analysis, formal interim analysis outcome study thus far.

Arvind Sood

Okay. Let’s move on.

Operator

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

Matthew Harrison - Morgan Stanley

Great, thanks for taking the question. I want to ask on the cost side and you guys had talked a little bit about this on the call. But it looks like quarter-over-quarter, year-over-year you were up, you were down about $160 million and you had suggested Enbrel was about 800 for the year in terms of savings, there is $40 million delta. I am just wondering if that was all Onyx-related expenses and if we should expect to see that amount of the Enbrel savings drop to the bottom-line for the rest of the year? Thanks.

Bob Bradway

Thank you, Matthew. I think yes you should assume that you will see sort of this run rate and Enbrel dropped to the bottom-line offset by the Onyx expenses.

Matthew Harrison - Morgan Stanley

Thank you.

Arvind Sood

Okay. Let’s go through to the next question.

Operator

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

Eric Schmidt - Cowen and Company

Thanks for taking my question. Maybe for Tony on the GCSF business, I thought you pulled in about $200 million from the Roche acquisition in terms of ex-U.S. sales, didn’t look like we recognized nearly as much in Q1. Is that $200 million on annual basis $50 million on a quarterly basis? Is this a tender business also that’s quite lumpy going forward?

Tony Hooper

The acquisition looks like it was about $200 million acquisition obviously broken into the quarters. The quarters tend to trend sort of about 25% each, I think the first quarter was slightly lighter than that normal 25% and above 23%.

Eric Schmidt - Cowen and Company

Okay. So that’s offset by some share losses then?

Tony Hooper

Well, as I said, we have (inaudible) in the marketplace competing against NEUPOGEN in the U.S. and we have long acting competition in Europe. We haven’t seen huge impact from them, but of course there was a small impact, yes.

Eric Schmidt - Cowen and Company

Okay. Thank you.

Arvind Sood

Okay. Let’s take the next question.

Operator

Our next question comes from the line of Robyn Karnauskas with Deutsche Bank.

Robyn Karnauskas - Deutsche Bank

Yes. Thanks for taking my question. So, just trying to get drilled down a little bit more on inventory versus what’s going on with some of the products. So, are you seeing any impact from generic in NEUPOGEN and are you seeing any impact -- in the market on Enbrel?

Bob Bradway

Okay. Ron will try and those two points. First Tony on NEUPOGEN, [Garrett] you want to address?

Tony Hooper

So as I said, with NEUPOGEN we have GRANIX in the market from Teva they’ve been in the market from late last year. We have seen a nominal impact from the product in the marketplace. As regards to Enbrel, we think only exit inventory is not being worked out system and as I said, (inaudible) the NRXs those are showing double-digit growth as they go from quarter-to-quarter.

Arvind Sood

All right Marvin, can we take the next question?

Operator

Our next question comes from the line of Josh Schimmer with Piper Jaffray.

Josh Schimmer - Piper Jaffray

Thanks for taking the questions, just a couple on the CGRP receptor antibody program for migraine. First, do you have any data from the decode dataset what phenotype is for patients with CGRP or CGRP receptor mutations? And then second who do you think is on the lead amongst the CGRP antibodies receptor -- how close to lead are you? Thanks.

Bob Bradway

Yes. So there are not the sort of the validation for this particular drug target is less from human genetics and more from the works that’s been done with small molecule receptor antagonist. And now reportedly by a couple of the [ligand] sequestering antibodies where we haven’t seen detailed data, but there has been releases of positive results of that kind of have a reverse pharmacology level of human validation of the target.

With respect to an antibody that locks the receptor, we’re fairly well in the lead. We have the only antibody locking receptor it’s very difficult very difficult to engineer. In the case of just any antibody, I would say that I think we're in a very strong position right now to potentially make it first to market then at the antibodies, but that’s a little hard to say when you are still at the Phase 2.

Tony Hooper

We were excited about this program, Josh and excited about the early data, but as was the case we were locking out, we wanted to just keep our head down and keep executing against the program and it looks exciting to us, but with the competitive profile, here is not completely transparent.

Arvind Sood

So, we’ll take next question.

Operator

The next question comes from the line of Geoffrey Porges with Sanford Bernstein.

Geoffrey Porges - Sanford Bernstein

Thanks very much for taking question. A question for Bob, look there is a lot going in pharma and some larger biotech and [speck] pharmas in terms of asset swaps, relocation of assets. And I’m just wondering in the outside Amgen has two businesses; legacy product and growth product and with all of the restructuring going on has Amgen considered any different structures or ownership of the assets that might enhance shareholder value? Thanks.

Bob Bradway

Sure Geoff, as you would expect, we continually review things that we can do to drive shareholder value and that’s absolutely what we are focused on. We continue to believe that the strategy that we're following is the one that will enable us to drive most value for our shareholders and that obviously includes executing against the innovative programs in our pipeline and we talked about a few high profile programs here on this call already and continuing to advance our similar programs and we have six programs that we think we're competitively positioned for that we begin to launch in 2017. And of course international expansion we think is opportunity for further growth process well. So, we're focus on executing our strategy, but we obviously pay close attention what’s going on in our industry and we continue to look for opportunities that may offer us a chance to drive incremental value for our shareholders.

Geoffrey Porges - Sanford Bernstein

Thanks very much.

Operator

Our next question comes from the line of Yaron Werber with Citi.

Yaron Werber - Citi

Thanks for taking my question. Actually, I believe a question on Kyprolis and just trying to understand a little bit, what are you guys expecting from FOCUS and ASPIRE, I mean based on our analysis, ASPIRE maybe unlikely to stop at the next loop, FOCUS has been taking quite a long time. So, I'm trying to get a sense, what should we read into your comments that you're not expecting much in terms of acceleration until label extension into second line, that's technically in ASPIRE program not a FOCUS program?

And then just a follow up question on (inaudible) you are really buying to the same sub-unit my understanding as is obviously your thoughts about potential heart failure and also what you guys are seeing on the GI side tolerability wise for the new formulation? Thank you.

Bob Bradway

All right. We may take these questions in two parts, I think there is a piece of the first question for Sean on the time tables in FOCUS and ASPIRE, I think Tony you can talk about really the earlier lines of patients.

Sean Harper

I think it's always tempting when we see these events driven studies take longer than as expected through the original kind of estimates that are may to read into that. That there is something going on that the therapeutic is having a bigger effect than what's anticipated and what have you. And I sort of learned through experience that's not a wise thing to do generally that whatever is going on with the kinetics of collecting last events that are necessary to do these studies, which is at this point we're talking about single-digit number, that's coming in for month and it can be quite to catch that month in both the studies.

This is fairly typical that these studies grew up to their final numbers. So, I don’t think it’s wise to try to read anything scientifically into that around whether the agents are having the desired effect or not in the trials.

Bob Bradway

And touch on oprozomib Sean and…

Sean Harper

Yes, on the oprozomib, yes, I mean with oprozomib we are in still in early stages and with this product we now can have GI toxicity at some doses. And so we are developing the product with that in mind working on formulations, working on dosing schedule to try and make sure we can deliver the greatest therapeutic benefit without having any tolerable GI safety profile. So that’s kind of the name of the game with developing an oral version of this class drug.

Tony Hooper

And then my comment about the next infection that has no hidden meaningful at all, we’d always assume that the ASPIRE data would give us the second line indication in the U.S. first which will be followed our launches outside the U.S. because we have to post registration, negotiate pricing.

Bob Bradway

Okay, let’s go to next question.

Operator

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

Mark Schoenebaum - ISI Group

In the question, number one, has the commercial performance of Kyprolis since the acquisitions Onyx, has it met your expectations, exceeded your expectations, or coming below your expectation? And number tow, I am sorry to beat this horse guys, I still don’t understand, it’s a late night over in the East Coast, I still don’t understand what exactly happened with Enbrel in the quarter. You said NRXs are up, but is it your assertion that total patient demand increased 1Q sequentially over the 4Q? Thank you very much.

Bob Bradway

Okay. Thanks, Mark. We’ll get to both those questions. Tony, let’s just start with Kyprolis.

Tony Hooper

Okay. So starting Kyprolis, I think the Onyx team going through the transition and the acquisition has a done a superb job in maintaining focus and keeping the people’s attention locked to the business. We continue as we speak now to be the number one drug of choice for third line which is exactly where the label is. Our market share in this particular indication, we estimate to be at least double that of our nearest competitor. So in terms of our ability to deliver value linked to label, we have continued to deliver what we expected. We continue to believe in drug that this particular class will be the backbone of the treatment to this disease and we look forward to expanding the label with the second line and perhaps the first line data.

Let me go back to Enbrel. Enbrel, as you know what happened was clearly an additional buy in because we’re shipping biologic, we want to make sure that the product will reach the customer within 48 hours, so that we will be very careful about when we ship product. The snow delayed some shipments, we held them back and there was an additional demand from wholesalers, about $120 million that took place in the last week of 2013, the majority of that was Enbrel.

When I look at the end market data to-date in fact, I see growth in both rheumatology and in the dermatology business. To me, I look at the NRX that has been a predictor of how the business is growing in this particular area for Enbrel, NRX is at about 35% of total TRXs. And I do see a distinctive growth between the fourth quarter and the first quarter. So although the first quarter exactly looks more than the fourth quarter, I see a 14% growth in rheumatology and an 11% growth quarter-on-quarter in dermatology.

Mark Schoenebaum - ISI Group

Thank you.

Bob Bradway

Sharing a lot of data with you there Mark but fundamentally we think the demand is intact for Enbrel and rest of base business. Okay let’s go to the next question.

Operator

Our next question comes from the line of Geoff Meacham with JP Morgan.

Geoff Meacham - JP Morgan

Good afternoon guys and thanks for taking the question. So, one for Tony on Kyprolis. So, is there anything on the demand side either post the ASH meeting or the market share that you can talk about on a sequential basis? And then one for Sean also on Kyprolis, that does the slower event rate for focus ASPIRE, does that change your assumption and make you think differently about the head-to-head study that’s ongoing with Velcade? Thanks.

Tony Hooper

Geoff, thanks for the question. When we look at our business, we’re looking to read in market demand; we do see positive growth between the fourth quarter 2013 and the first quarter of 2014, yes. It’s low single-digit growth.

Sean Harper

Yes. And with respect to reading again anything through from the time it takes to accrue the last of these events and these types of trials, it is very difficult for me to read anything through scientifically that would project anything about the design or strategy of having the head-to-head studies with Velcade. I think that those will remain kind of unrelated in my mind.

Geoff Meacham - JP Morgan

Okay. Thank you.

Sean Harper

Sure.

Bob Bradway

Okay, Marvin?

Operator

Our next question comes from the line of Ian Somaiya with Nomura.

Ian Somaiya - Nomura

Thanks. Just another question on Kyprolis and maybe just to follow-up to Geoff. What would lead to you maybe reconsidering the size of the head-to-head studies versus Velcade, just what would you need to see in the ASPIRE study or the Focus study to maybe have rethink the sizing or maybe trying to get the data set before Velcade ultimately goes generic?

Bob Bradway

That’s a tough question to answer, Ian. You’re asking us to respond to a sort of hypothetical. Sean, I don’t whether you have anything you can add to help Ian?

Sean Harper

No, I don’t, I think it’s relatively unlikely that we’ll see anything from these two studies that would change what we’re doing in head to head studies. And they are moving along right now at considerable pace and changing the designs would be potentially challenging to do at this point anyway. But I don’t, I would doubt that the results would warrant that.

Bob Bradway

Can we just go to the next question?

Operator

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

Michael Yee - RBC Capital Markets

Yes, thanks. A question on Focus and ASPIRE from an expectation standpoint what the street and maybe from your expectations, do you believe that focus is a higher risk study than ASPIRE, and Focus for some reason has not hit on survival, how confident are we that ASPIRE would still support a European approval given (inaudible) walk through some of that thinking?

Sean Harper

Yes, so I think probably with focus you’re looking at Kyprolis mono therapy against a combination therapy as some older drugs that are not used as frequently these days but do represent kind of standard of care in many of the European countries. And that is one picture, the other picture is of course you are taking Kyprolis and you are adding it on top of Rev-Dex and comparing it to Rev-Dex alone. So I suppose I would say that the ASPIRE study is the one that is mostly likely to have a positive result, because we know what happens if we put Velcade on top of Rev-Dex, you get a pretty reasonable additional clinical benefit. So from the scientific perspective that would be how I’d look at that.

We do believe that the ASPIRE study will stand alone in leading to an indication for the population that it's stays. It won't cover the later line type patients who would be the subject of FOCUS. But we do believe that in Europe it will stand alone, PSF is very low accepted surrogate endpoint in this particular type of malignancy.

Michael Yee - RBC Capital Markets

Thank you.

Operator

Our next question comes from the line of Ravi Mehrotra with Credit Suisse.

Ravi Mehrotra - Credit Suisse

Thanks for taking my question. You touched on this briefly, but just to get back to the Prolia ex-U.S. buy back from GSK, was that deal mainly driven by the wants and need to change the trajectory of the product, also lay down operational bedrock? And if the operational bedrock comes in, can you just remind us what other ROW infrastructure you've brought in or acquired recently.

Sean Harper

Yes. I'm going to just take a crack at the high level on that Ravi and then Tony you can speak to the details on those questions. Obviously our business has changed a lot Ravi since the time we formed that venture Glaxo. We've been very successful in expanding internationally over the past several years, including with the transactions that we referred to on this call, bought back NEUPOGEN and Neulasta in the number of markets around the world from Roche. So, we have a presence down in regions of the world that we didn't previously and we remain very excited about the potential portfolio and so this was a good opportunity for us to take full control back of that product.

And we had designed the deal in such a way that we could exit the partnership, if we felt that was in our interest to do that. And I think both we and Glaxo felt that we found a fair way to transition full ownership back to us. But Tony, why don’t you talk a little bit about some of the specifics in the marketplace and why we’re optimistic for the growth potential of both?

Tony Hooper

So, there were a couple of things, I mean one the final level for (inaudible) was slightly different to what was in visits when we first did the negotiation. So it’s a slightly more focused target audience we call on [demand]. Number two, we have been very successful on our own in developing strong markets here for the product and truly working in a partnership not as effective as [digging] ourselves. So we truly believe that the clear focus by ourselves results supporting on the defined targeted audience and have the ability to pick up and to grow this business more effectively. Secondly that will then result in us having a broader footprint in this particularly area.

The progress acquisition gave us rights in quite a large number of countries around the world, but predominantly increased the size of our businesses in the Middle East, Russia Latin America, Mexico and South East Asia those were the big ones.

Ravi Mehrotra - Credit Suisse

All right, that’s very good. Thanks.

Sean Harper

Sure.

Operator

Our next question comes from the line of [Yin Wong] with Barclays.

Unidentified Analyst

Hey guys, thank you for taking my questions as well. First of all, I guess Tony mentioned that inventory for this quarter went down from 15 days from last quarter to 13 days. Do you guys see that stabilizing at this level or you continue to see a declining level in inventories and wholesalers?

And then secondly maybe for Sean, so you mentioned that we can’t just take dig deeper that Kyprolis’ outperforming expectation given that the timeline has been delayed already. So, just confirm your view on this? Does that mean also the compared arm, which is (inaudible) is also doing better than the expectation when the trial was designed? Thank you.

Tony Hooper

So let me take that inventory question first. When we look at the average days on hand for 2013 they already fall around 13 days. So, we don’t think the 13 days is going to be changing much as we go forward that should be up average days as we expect them.

Sean Harper

Yes. And again with the situation with these trials again you know when we make these, these are event driven studies and always when we make these estimates of when we expect the events to accrue there is pretty big component around that and as you get closer they narrow. But then as you get towards the end, it becomes really again very -- so you might have one month you will have nine events, the next month you have two then you have seven then you have one. It’s that kind of thing where drawing a projection from those kind of data is very difficult.

I don’t think there is what I have learned over the years 20 years of doing this is you can speculate a lot when you are blinded to this kind of thing and say well all this could be happen because the treatment effect of the drug is bigger or the control arm is doing better or the base line population is just sicker or less sick than you expect, but you actually have no way of figuring out that based on a blinded situation that we are in.

And I think it’s just, you just have wait to get the data. It’s frustrating I know, but you just have to wait and to look the data when we get it.

Unidentified Analyst

Thank you.

Operator

Our next question comes from the line of Eun Yang with Jefferies.

Eun Yang - Jefferies

Thank you. So, based on what we hear from docs, the average baseline LDL levels in the outcome study for PCS skin inhibitor that could be lower than 100 milligram per deciliter. The question is, are there ultra low LDL levels where no further CD benefits can be gained?

Sean Harper

So, first of all I don’t know where that information comes from because it’s difficult for anybody to know what the average LDL level is accruing in these trials by running individual studies centers and lab theaters may have their own individual experiences. But in general what you want to be doing here is targeting people who are still well above the range of the sort of 70 or below that are still the target that people are looking for even the new guidelines that are not suppose to be target based mentioned repeatedly 70 and the reason for 70 is largely because when you get below 70 you start to seeing the reversal of that (inaudible) is relevant just hoping it’s progression. So the question of whether I mean certainly in absolute terms as you begin to go lower and lower in LDL the absolute amount of benefit that you’d expect to gain with (inaudible) for example does go down. But in percentage terms it’s been maintained as far as it’s been possible to push LDL.

And then large outcome studies with intensive therapy there as you might imagine is the big bell curve of response in terms of LDL lowering and the lower end of that bell curve, the tail of that bell curve those individuals get push down quite low in terms of LDL. And those individuals appear for us to have to the extent that you can make these assessments in a subgroup like that they appear to have the same degree of benefit and they appear not to suffer any adverse effects.

Certainly the genetic data all suggest strongly in humans that there would not be a breakdown this relationship between LDL and outcomes or that the safety would be problematic because it is clear humans can have a very low LDL levels and be just fine most of us are born just to remind you with LDL levels in the 20s and they climb over time with diet, so on. So, I think we’re exploring new frontiers here, push LDL levels down to and test whether the lower is better, hypothesis continues to be true as you get into uncharted water. My prediction is that it will, but we have to generate the data to see.

Bob Bradway

Can we have couple more questions, Marvin?

Operator

Our next question comes from the line of Chris Raymond with Robert Baird.

Chris Raymond - Robert Baird

Thanks. Just a question on XGEVA, you guys have mentioned in your prepared remarks that you are still seeing some generic, Zometa sort of impact. I think it’s been over a year, I think now since the first generic Zometa launch and at least, as far as I understand, the impact is most acute in the first two, full quarters of that availability, which I would have thought might have washed out. Can you maybe sort of talk about what other impact you are seeing here?

Tony Hooper

Chris, this is Tony. So in the U.S., we saw market share in units grow from about 42% to 43% quarter-on-quarter and we saw the dollar value market share growth from 70% to 76% quarter-on-quarter. Zometa went generic in about March last year. When you think about the ASP plus 6 reporting situation, it’s calculated on a rolling 12-month reported two quarters in areas. So by definition, your ASP impact is anywhere between 12 months to 18 months.

Chris Raymond - Robert Baird

Okay. Thank you.

Tony Hooper

Sure.

Bob Bradway

Yes, go ahead.

Operator

Our next question comes from the line of Joel Sendek with Stifel.

Joel Sendek - Stifel

Hi, thanks. Sorry, if you might have already mentioned this, but what’s the total inventory draw down for the quarter? And then when might you start or restart the share repurchase?

Bob Bradway

Okay. Why don’t we take that in two parts, Joe. Tony has talked about inventory, but let’s go back through for him.

Tony Hooper

Let me remind you again that historically our fourth quarter has always been slightly higher than the first quarter. What we did see in 2013 at the end was a strange week at the end with about $120 million of additional buying by both wholesalers and end user customers. We think all of this has worked through the system during quarter one and we entered quarter two without any excess inventory.

Sean Harper

Joel with respect to buybacks, we’re not expecting any major activity this year. But again cash flow growth was attractive in the first quarter and we'll continue to look for ways to return that to our shareholders as appropriate through a mix of dividend growth and buybacks.

Bob Bradway

Marvin, let's take two more questions.

Operator

The first question comes from the line of Howard Liang with Leerink.

Howard Liang - Leerink

Thanks very much. Couple of questions for Sean, first is on Europe thoughts and about filings for T-VEC given the OS data. I know you're still talking to regulators, but your thoughts on that would be great. Second, blinatumomab, you already have all the data to potentially file, I know you’re presenting at ASCO, would that be the registrational data?

Sean Harper

Yes. So T-VEC, we really are fresh with the data and I think that there is little question that we could file, the questions we have to understand more about the product in its current form with the formulation and the data that we have in hand from a single study in monotherapy with physicians, regulators, payers and figure out what the best way to proceed is. We have a lot of sense of value to this product over time as an important potentially kind of cornerstone therapy and immuno-therapy. So we want to make sure that we proceed in the best way possible for this from a long term view stance.

With blinatumomab, we clearly feel at this point that the data set that we’ve generated is worthy of consideration for the filing data we have in hand for filing an approval and that’s the discussion we are begging to have with regulators is around data set that we actually have in hand. Now that said, of course we’re always stimulating more data. As you might the recall, we actually started a randomized control Phase III in the same population and that will be accruing and we have pediatric program et cetera, et cetera. So all of those data continue to accrue and all of that information would be submitted in the filing whenever we determine that data cut-off date.

Bob Bradway

Okay. Let’s take our final question, Marvin.

Operator

Final question comes from the line of Boris Peaker with Oppenheimer.

Boris Peaker - Oppenheimer

Thank you for squeezing me in. I just have a question on GCSF franchise, specifically how are the competitors in the U.S. and Europe positioning themselves in the market and what you see their strategy for gaining share in the future over the next few years? And do you see them talking or you are aware of them talking to insurance companies or is that coming back to you in some way in any kind of discussion, just kind of general thoughts on that market intelligence?

Tony Hooper

So it’s tough for me to comment on the competitive strategy bars, I mean [propose better] to talk to them. But obviously as you know in the U.S. (inaudible) is not a biosimilar, it has a very different label to our product and their positioning has been around different product, different price. In Europe they have the same situation, they are having to lean upon their label which is different to ours and in both cases, the Amgen’s label is broader. Amgen label has more years of experience, much more data around, both efficacy and safety and we have an incredible track record of delivering quality product on plan every time.

Boris Peaker - Oppenheimer

Have you adjusted your marketing method to some extent to counter detail to (inaudible)?

Tony Hooper

No, we still talk about the fact that we have the longest level of data available, we have the highest quality product available.

Bob Bradway

Well thanks for dialing in. Arvind will be around to take questions that you didn’t get anything on the call. We appreciate your interest. Thanks.

Operator

Ladies and gentlemen, this concludes Amgen’s first quarter and financial results conference call. You may now disconnect.

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