Amgen Inc. (NASDAQ:AMGN)
The 30th Annual JPMorgan Chase Healthcare Conference
January 09, 2012 1:00 pm ET
Robert A. Bradway - President, Chief Operating Officer and Director
Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division
Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division
Okay. Welcome to the morning sessions of the 30th Annual J.P. Morgan Healthcare Conference. I'm Geoff Meacham, the senior biotech analyst here at J.P. Morgan. It's my pleasure to have Amgen speak. Amgen is one of the bellwethers of the biotech group with leading franchises in hematology, oncology, inflammation, as well as infectious -- I'm sorry, as well as bone disorders. And speaking on behalf of Amgen is Bob Bradway, President and COO and CEO Elect. Bob?
Robert A. Bradway
Well good morning and happy New Year. I'm delighted to have the opportunity to talk to you this morning about Amgen and to share with you the reasons why I'm excited about the new year at our company. But before I do that, I'd like to spend a few minutes talking about the year just past, 2011. And I'm pleased with how we ended 2011; in particular, pleased with the momentum that we had at the end of the year. We'll report results in a few weeks’ time and when we do, you'll see that our performance in 2011 was solid across the board. You'll see that we delivered revenue and adjusted earnings per share growth again this year, and we did that off the back of strength and growth in the newly launched products, in particular our denosumab franchise, which includes both XGEVA and Prolia. And in their first year on the market together, we generated in excess of $500 million of revenues from this new franchise.
So we're delighted with the performance, in particular of XGEVA, which as you know, launched very strongly in the United States early in the year. We demonstrated, once again, the power in this industry of a simple word, a single simple word and that word is superiority. So XGEVA has demonstrated again the power of being able to launch a medicine that's been demonstrated with 3 pivotal Phase III trials to be superior to the standard of care and physicians and patients have rapidly adopted XGEVA here in the U.S.
Prolia, for those of you who have been following Prolia closely, including in the fourth quarter, you'll know that the momentum for Prolia built again in the fourth quarter, and we're following the progress of this launch very carefully, as you would expect. And pleased with the growth that we saw for Prolia in the fourth quarter and we'll have more to say about that, obviously, on the earnings call in a few weeks’ time.
In addition, we're pleased with the progress of Neulasta in 2011. It's been an objective of ours for some time to grow the Neulasta franchise worldwide, and I'm delighted that we did just that in 2011. Filgrastim is about a $5 billion franchise for us worldwide. Neulasta comprises about 3/4 of that and we demonstrated solid unit volume growth for Neulasta last year as well as price growth. So Neulasta was a strong contributor to our results in 2011, and we have good momentum heading into 2012 for that franchise.
Enbrel. As you know, Enbrel is our leading molecule in the rheumatoid arthritis and psoriasis space, and we're delighted again with the progress that we demonstrated in maintaining leading market shares for Enbrel throughout 2011. But commercially, we feel very good about how we ended the year 2011. From a research and development perspective, 2011 was also a solid year for us. We expanded the pipeline early in the year by acquiring a company called BioVex, which brought to us an innovative and interesting molecule with potential to treat malignant melanoma, and I'll talk more about that in a moment.
In addition, we moved a few of our important oncology medicines towards Phase III trials and again, I'll talk about those, and generated the important Phase II data for our anti-sclerostin antibody in the setting of bone health and for our PCSK9 antibody in the setting of hypercholesterolemia. So we're pleased with the progress that we made in both expanding and advancing the pipeline in 2011.
Financially, 2011 was an important year for us as well. We initiated a dividend in 2011, announced that at our meeting with shareholders in April of last year. In addition, we announced and completed a major tender offer in the fourth quarter for our shares, and we're delighted at the results of the Dutch auction that we commenced in the fourth quarter. We provided, in April, long-term operating capital guidance as well for the business and I'm pleased by the progress that we made during the course of the year in advancing towards the achievement of those objectives.
And finally, at the end of the year, we announced an orderly and clear management succession plan. And obviously, I'm excited and humbled to be assuming the role of Chief Executive of Amgen beginning in May and I'm delighted and encouraged by the strength of the team that we have in place to help lead the company forward with me. So 2011 was a solid year, but I'm even more confident about the outlook for 2012. 2012 should be an even stronger year for us at Amgen than 2011. We enter 2012 with momentum for both XGEVA and Prolia, and we have catalysts that we think will enable us to increase the growth of both of these molecules during the course of the year.
Now remember that XGEVA was launched in the U.S., but we're only now launching XGEVA internationally. And of course, we also have the prospect of an important new indication for XGEVA, which we'll learn more about earlier -- early in the year and I'll say more about that in a moment; so ended the year with momentum. Clearly, have opportunities to build on that in 2012. Similarly for Prolia, we, in 2012, have the opportunity to continue to launch in new international markets, including some of what we think will be the larger international markets for Prolia. So we're excited about that opportunity, as well as the opportunity to continue to invest and to activate patients through a direct to consumer campaign during the course of 2012. So XGEVA and Prolia will clearly be important sources of growth for us in the new year.
Now in addition, our recently launched products, Sensipar, Vectibix and Nplate, all of which are growing at healthy double-digit rates, also enter the year with momentum and we have important potential catalysts for each of these molecules as well in 2012. Sensipar is a molecule for which we're running a very large Phase III trial, which we expect to read out in 2012. That trial is designed to show whether Sensipar improves cardiovascular mortality and morbidity for patients who are suffering from SHPT, and we think that has the potential to be a practice-changing opportunity for us if the Phase III results are indeed positive for Sensipar. So Sensipar is about a $1 billion -- or it's headed towards being a $1 billion franchise for us and again, this is a source of potential upside for us in 2012. Vectibix, we have the benefit of an expanded label in Europe, the benefit of being able to promote Vectibix now in the first and second line colorectal cancer setting. So we're excited about that as a source of potential growth for Vectibix. And then finally, Nplate, here in the U.S., we're pleased that the removal -- or pleased by the removal of the REMS for Nplate, and we think for those physicians who wish to use Nplate to treat patients with ITP, this will make it that much easier for them to adopt Nplate. So these 3 products all growing at healthy double-digit rates, all with interesting catalysts for us in 2012.
And our core franchises in 2012 are strong. We enter 2012, as I said earlier, with momentum for Neulasta and with a desire to continue to grow unit volume of this product in the setting of a chemotherapy. Now some of you are aware there are still in the U.S. alone more than 60,000 patients per year, who are hospitalized with febrile neutropenia. So the opportunity for Neulasta even in the U.S. continues to be considerable. And when you consider that 1 in 9 of those patients who are hospitalized with febrile neutropenia die from complications of their infection, the need for us to continue to grow Neulasta is considerable. And we're pleased that the Center for Disease Control has made it a focus of its efforts as well to spread the word about the importance of preventing infection during chemotherapy. So Neulasta, strong performance last year, strong momentum heading into 2012, important for us to continue to try to increase, in particular, our penetration of chemotherapy for CYCLO chemotherapy patients.
Enbrel. We maintain our leadership heading into 2012 in both rheumatoid arthritis and the psoriasis markets, and we will continue to focus on growing that important franchise and continue to invest in that important franchise in 2012. And I want to spend a moment on EPOGEN because, of course, 2011 was a year of considerable change for our ESA franchise owing to the implementation of bundling in the U.S., and then a significant change in the label for our ESA franchise. And so whereas 2011 was a year in which we experienced significant decrease in dose utilization for the ESAs, we think this is a year where we'll see much more stability.
We're pleased to have been able to agree a long-term exclusive arrangement with DaVita, and we announced that we had reached a 7-year partnership with them in the fourth quarter last year, and we're delighted about that contract and looking forward to building a close partnership with DaVita over the next 7 years.
In addition, we're pleased to have nonexclusive but multiyear contracts in place with Fresenius and other providers as well. So we enter 2012 feeling like the decrement that we told you to expect in 2011 for the ESA franchise has largely played out as we expected. Recall, we thought that we would experience on the order of a 20% to 25% decrease in utilization of EPOGEN in 2011, and there might be some spillover into the beginning of 2012. And the market has evolved pretty much as we expected it would, and we think these contracts will be very helpful here early in the new year. So again, from a commercial standpoint, we feel very good about the opportunity in 2012, and the bottom line for us on the commercial side is that we expect to see revenue acceleration in the new year.
Now from an R&D standpoint, our pipeline will continue to advance here in 2012. One of the early events for us in the year will be the review of XGEVA by the FDA, and I'll say a few more words about that in a moment. In particular, I'll talk about the ODAC hearing, which will take place on February 8 for XGEVA. In addition, I just want to reiterate that we will have during the course of the year, Phase III data on Sensipar. And again, that has the potential to be very important in the setting of patients who are on dialysis and suffering from secondary hyperparathyroidism.
And then finally, we would expect during the course of the year to be able to see Phase III data from the molecule that we acquired last year, which we're now calling T-Vec, which is the molecule that we're exploring in the setting of malignant melanoma. So those will be 3 of the important clinical events for us to share with you during the course of 2012 on the R&D side.
And let me just spend a moment more talking about XGEVA, which as I said, will be reviewed and at an ODAC on February 8. So this will be an early event for us this year, and it will be reviewed in the setting of whether XGEVA can prevent or be approved for the prevention or delay of the spread of prostate cancer to bone. Now bone metastases develop in about 90% of men who have advanced prostate cancer, so this is a significant important medical issue. There are no approved therapies for the prevention of bone metastases in men with castrate-resistant prostate cancer. So XGEVA is the first and only medicine to demonstrate that it can statistically significantly delay the progression of prostate cancer to bone. And so we're anxious and looking forward to having the opportunity to talk about this with the panel at the FDA in February. Again, to remind you, the SBLA is under review. The ODAC, as I said, February 8 and then of course, we will have a PDUFA date of April 26 for XGEVA.
So while this is an important new indication for XGEVA, bear in mind that the biggest opportunity by far and for us in 2012 is to continue to grow the market and continue to take share in the treatment of skeletal-related events for patients whose cancer has already spread to bones, and that's the bigger opportunity, the biggest opportunity for us in 2012. This is an important new opportunity, however, as well.
Now I'm confident about 2012, but I'm optimistic about our prospects beyond 2012 as well. When you think about 2013 and beyond, you should expect that Prolia and XGEVA will continue to grow. We'll be continuing to build momentum in the period of 2013 and beyond. And in addition, we would expect Sensipar, Vectibix and Nplate will also continue to grow through that period.
Now we’ve talked at length this year about our confidence in the long-term outlook for Enbrel, but I want to reiterate this morning that our confidence only grew in the long-term outlook for Enbrel in November when a patent was issued in favor of Enbrel that gives us patent protection extending now well into the future. So we believe we have a strong broad intellectual property estate covering Enbrel, and we intend to invest and try to maintain another decade of leadership for this important molecule for Amgen.
Now also recognize that the profit share that is currently in place for Enbrel, which requires that we share significant profits generated from Enbrel to Pfizer, expires in 2013. And as we have said before, the expiration of that profit-sharing agreement, which is replaced by a declining royalty agreement, will result in significant margin expansion for us beginning at the end of 2013 and carrying forward to '14, '15 and beyond.
So we're excited about the current flow of our recently-launched products for us, excited about the margin expansion that comes from our $4 billion, $3.5 plus-billion Enbrel franchise, but also excited about what will start to emerge from our R&D pipeline as we move beyond 2012 as well. So I want to talk a little bit about that as well as what the contribution to our business from international expansion and biosimilars could be in the longer-term as well.
We operate today commercially in about 52 countries. We're committed to expanding that to 75 countries by 2015 and we expected that, that expansion will be accretive both to the revenue growth rate, as well as earnings during that period. So international expansion will remain a focus of ours over the period beyond 2012.
Now let me talk about our R&D pipeline. As you're probably aware, 5 programs in our research and development pipeline will produce 5 -- I'm sorry, 5 programs will produce Phase III data over the next 5 years, and those 5 are listed here. T-Vec is the one I've already talked about a couple of times this morning. That's our program for malignant melanoma and again, we will have data on that in the Phase III setting this year. 386 and 479 are 2 more of our oncology molecules. 386 is our anti-angiopioetin peptibody and we expect to advance that in Phase III ovarian cancer trials this year. 479 is our anti-insulin-like growth factor antibody and we are advancing that in Phase III trials for pancreatic cancer, and anxious to see results on that molecule as well over the next several years. 827 is our anti-IL-17 antibody for which we generated very intriguing data in the psoriasis setting in 2011. We're still waiting for the asthma data, but the data in psoriasis looks very compelling for 827.
And I want to spend just a moment or two on AMG 785 and AMG 145. These are newer products in our pipeline, so they haven't had quite as much attention in the investment community as the others, but these represent very attractive opportunities for us as well. 785 is our antibody to the sclerostin molecule, and this is a product that looked very intriguing, again, in the setting of bone health. This is an anabolic agent for which we will report detailed Phase II data at the ASBMR in 2012.
And then finally, AMG 145 is our anti-PCSK9 antibody, which looks again very intriguing in the setting of hypercholesterolemia and we have 5 very significant Phase II trials underway now, and we look forward to generating and reporting on data from those trials during the course of 2012. So it'll be a busy year for us from a research and development standpoint in 2012.
Now late in the year, late in 2011, we announced a partnership with Watson in the biosimilar area, and I just want to spend a moment talking about this. This is our first opportunity to talk publicly about the partnership that we have struck with Watson to try to commercialize several molecules in the oncology space, several biosimilar molecules in the oncology space, and we're very pleased about the complementary nature of this partnership for us.
We think in order to be successful in biosimilars, a company will have to have strong biologics manufacturing, regulatory and commercial capabilities. And obviously, we think we have that and we expect that these biosimilar molecules will enable us to grow not just in the U.S. but in international markets as well. And we're delighted. The partnership with Watson, however, not just to reduce the financial risk, they will be contributing up to $400 million to help us codevelop several oncology molecules. But we're also pleased to have their insight and experience from their years of competing in the specialty pharma and generics segments as well. We also are excited about how their commercial and distribution capabilities are complementary with ours. So we're excited about this partnership. This is a growth potential for us though that is still several years out.
So I'll move on and talk about some of the other important things for 2012. I said that one of the important accomplishments for us in 2011 was that we began to -- we initiated a dividend and we aggressively returned capital to our shareholders and we will continue to do that in 2012. Again, our Dutch auction for $5 billion of shares underscores our confidence in the long-term value of Amgen. We would expect to continue to buy back shares in the open market. We announced in December that we have increased our dividend by 29% heading into 2012. And I want to point out that we believe we also retain significant strategic flexibility to grow the business by acquiring and licensing important innovative new medicines as well.
So our focus for the year in 2012, our focus will be on growing revenues. Again, accelerating revenues heading into 2012 is a very important objective for us, and it's one we're confident we can achieve. We expect to grow earnings per share and cash flow as well in 2012. An important feature of that will be accelerating the growth of Prolia and XGEVA. We will focus as well on advancing the pipeline. We're committed to returning at least 60% of our adjusted net income to you, our shareholders, in 2012. And finally, we’re committed to working closely with you to see that we deliver value for you as our shareholders. So I'm pleased about our progress and how we ended the year in 2011. I'm confident about the outlook for 2012 and optimistic about the longer term as well.
So thank you very much. I look forward to hearing your questions in the breakout session in a few minutes’ time. Thank you.
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