Amgen Inc. (AMGN) Management Presents at Morgan Stanley's 2022 Global Healthcare Conference (Transcript)

Sep. 13, 2022 2:19 PM ETAmgen Inc. (AMGN)
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Amgen Inc. (NASDAQ:AMGN) Morgan Stanley’s 2022 Global Healthcare Conference Transcript September 13, 2022 9:10 AM ET

Executives

Bob Bradway - Chief Executive Officer

Analysts

Matthew Harrison - Morgan Stanley

Matthew Harrison

Good morning, everybody. Thanks for joining us for the next session. I am Matthew Harrison, one of the Biotech Analysts here at Morgan Stanley. Really pleased to have Amgen with us here. Quickly before we get started, I just need to read a disclosure statement. Please note that all important disclosures including personal holdings disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures.

So very pleased to have Bob Bradway, the CEO of Amgen. Bob, I know you want to make some opening comments. So I will turn it over to you…

Bob Bradway

Yeah.

Matthew Harrison

… and then we can get going.

Bob Bradway

Sure. Thank you, Matthew. Thanks for having us again. It’s a pleasure to be here in person for a change. Let me just try to remind you what we are doing at Amgen and I will start by saying that building on our track record of execution.

We are focused on delivering long-term growth, which we define as solid mid-single digits revenue growth through the end of the decade. Off of which we expect to be able to deliver high to -- high single- to low double-digit earnings per share growth. So that’s our focus.

And as I say, builds on a track record of solid execution now over a period of time and a focus on growing the products that we think have substantial remaining volume growth opportunities. So products that are by now well familiar to many of you, Repatha in cardiovascular disease, for example, Prolia in osteoporosis, Otezla in inflammatory diseases. So those are three examples of the kinds of products for which we think there remains significant global demand and we think will fuel our growth through the end of the decade.

In addition to our marketed commercial products, we also have, as you know, an important biosimilar business. So I listened with interest to the question posed to our last presenter about the biosimilar business.

But we have launched five molecules already and we have another six to launch by the end of the decade, and we think if you look at those 11 molecules in aggregate, you will see that we have the opportunity to substantially grow our presence in biosimilars through the rest of this decade.

In addition then to our presence in biosimilars, we of course, have very important active innovative research and development portfolio. And I would remind you, we are most active in three areas, cancer, inflammatory disease and general medicine, and maybe I will just quickly touch base on what we are doing in those categories and then kick it back to you, Matthew, for questions.

But starting in cancer, we are active in lung cancer, of course, had some important data over the course of the last few weeks, including yesterday on LUMAKRAS, the first ever molecule for patients suffering from mutations of a gene known as the G12C gene and in particular non-small cell lung cancer.

So we are very active there, continuing to study that molecule, which again, yesterday, we reported had met its primary end point and the discussions described as a potential or an emerging new standard-of-care for patients with that disease.

In addition, in lung cancer, we are looking at small cell lung cancer program that we are very excited by. It’s a program that focuses on an antigen, which is present on small cell lung cancers, but absent on other tissues in the body.

So we think that lends itself very well to our BiTE therapy approach and we are excited about what we see there and that’s a molecule called tarlatamab. And in addition, we have another lung cancer molecule, which is Bemarituzumab, which is an antibody against the FGFR2b receptor and we think that may have applicability in squamous non-small cell lung cancer.

So quite a bit going on in lung cancer. In prostate cancer, again we are active with a number of programs. The -- a recent addition to that portfolio, but a fast moving and exciting program is our bispecific against what’s known as STEAP1. So we are very excited about what we are seeing there and I would just say stay tuned.

And then, of course, in gastric cancer, another solid tumor, we have which is the primary opportunity for us with a molecule known as Bemarituzumab, which again has demonstrated very promising data in Phase 2 clinical trials and is now advancing in a Phase 3 program for gastric cancer.

So quite a bit going on in solid cancers and also, as you would expect, we have quite a bit happening in our liquid tumor areas as well. So oncology remains an important activity for us and one that we think will contribute through the decade.

In inflammatory disease, again a very broad portfolio of marketed products both our innovative molecules like Enbrel and Otezla, but then, of course, a very broad biosimilars portfolio as well. So we are capitalizing on more than a decade -- nearly two decades of leadership in that field as we go to market with our biosimilars in that area.

In addition, we are studying our recently launched molecule, which is an anti-TSLP antibody known as TEZSPIRE. We are studying that in four diseases beyond the initial indication which is in asthma. So, we are excited about what that represents and then we have several molecules in the mid-stage pipeline, which we can turn to if you are interested, Matthew.

And then, finally, in general medicine, let me just highlight that we have a couple of molecules that we are often asked about by investors and those include an siRNA molecule for a target known as Lp(a), which is an important contributor to atherosclerosis.

We revealed Phase 2 data that showed our ability to reduce levels of Lp(a) by 90% or even 90% plus quite consistently over a wide range of doses. So we are looking forward to being able to take that into Phase 3 development now very rapidly.

And then, in addition, we have a molecule directed at obesity and it’s in early-stage clinical development. We reported some data to you earlier in the year. We think we will have more data in the fourth quarter that will show that our approach, which is unique and it’s an approach that targets GLP-1 like many of our competitors.

But in addition, it’s a molecule that antagonizes something known as the GIPR. So it’s a GIPR receptor antagonist in addition to agonizing GLP-1 and we think that combination has the potential to be very efficacious and tolerable. So quite a lot going on in general medicine as well.

And then, finally, Matthew, let me just remind you that we will remain very disciplined as regard to capital allocation. Our starting point is always to look for innovation to invest capital in whether that’s internal or external.

We are agnostic, we want to invest in best innovation and we were thrilled to announce the acquisition a few weeks ago of ChemoCentryx, a molecule that will we think will be able to add a lot of value to in the rheumatology and nephrology areas. So it’s a molecule known as TAVNEOS, recently approved with the treatment of a rare disease called ANCA vasculitis. So that’s a good example of the kind of M&A activity that we look for.

And as I said, our first focus is on investing in innovation, and then, after that, we are committed to returning significant capital to our shareholders, which we have once again done this year through the first six months of the year.

Question-and-Answer Session

Q - Matthew Harrison

Great. Great. Thank you, Bob. So, maybe a handful of strategic questions to start us off, but first one, so earlier this year, government passed an act called the Inflation Reduction Act, other people have different monikers for it, but...

Bob Bradway

Give me your best. What’s your best other moniker for it?

Matthew Harrison

I know. I call...

Bob Bradway

Innovation Reduction Act maybe or okay.

Matthew Harrison

I guess three-pointed questions around that; one, impact on innovation; two, impact on how you think about business development opportunities; and three, impact on how it might have or are there certain therapeutic areas or projects within Amgen that are definitely changing because the NPV because of that?

Bob Bradway

Yeah. Well, I would say early days, but no surprise. We are disappointed by the legislation, which we think was a missed opportunity. Again, not only do we believe that the legislation will be deleterious to innovation or to the investment in innovation.

But we also think it was a missed opportunity. It doesn’t really address the issue that I think our citizens are focused on, which is the out-of-pocket cost of drugs. So we think it’s unfortunate. It was a big missed opportunity and we wonder how many of the sponsors of the legislation really appreciate what the long-term consequences are for the investment in innovation.

And so specifically the issue is that the legislation includes provisions that will fix prices on small molecules and large molecules that dates certain in the future, which dates are in many cases going to be well before what patent exploration otherwise would have been. So what that means for innovators then is that they will have to see a way to earning a return in a more uncertain environment.

You won’t know for sure when you begin developing a molecule and even when you launch a molecule, you won’t know for sure whether it’s going to get marked for price control later, but you will know that if it is marked for price control. You will know that in the case of small molecules that happens at nine years and in the case of large molecules either year 11 or year 11 or year 13 depending on a variety of circumstances.

So, in both cases, that has the potential of truncating the effective life cycle of the medicine, and therefore, diminishing the cash flows available to the innovator, and of course, the legislation will be focused on the most successful, and therefore, probably the most innovative drugs.

But the inside baseball issue here is that the way cancer drugs, for example, are developed. Cancer drugs are developed first in late-stage patients. So patients who have failed all the other approved therapies and are looking for an experimental therapy that might help them with their disease. So you start in what is a smaller later-stage line of disease and then through the years...

Matthew Harrison

Here we go.

Bob Bradway

Is that a drill, Matthew?

Matthew Harrison

I have no idea.

Bob Bradway

Is just a live exercise? Why don’t we wait a moment…

Matthew Harrison

Yeah. I guess we will wait and find out.

Bob Bradway

Is it something I said?

Matthew Harrison

I think it’s something you said.

Bob Bradway

Something like as a morning or like something else...

Matthew Harrison

I would say this is…

Bob Bradway

…about to say. Yeah.

Matthew Harrison

…not happy with it. Yeah.

Bob Bradway

Yeah. This happened also with your conferences maybe?

Matthew Harrison

Yeah. Definitely.

Bob Bradway

Matthew, thanks.

Matthew Harrison

Just a brief intermission.

Bob Bradway

New York. New York. So, anyway, I was trying to explain that, we think it will be deleterious to innovation. And in particular because of -- and I am sorry, in particular in cancer, where the nature of how we develop drugs will be have to change to reflect the implications of this legislation.

So I think that’s obviously unfortunate and the other thing is it may lead to a series of behaviors that are just different from what exist in the marketplace today and it will take patients and others a while to adjust to that.

So, behaviors, for example, where sponsors may decide to hold the launch of a drug in a smaller disease population, while waiting for data from larger, and therefore, more economically important cohorts of patients.

So it -- make no mistake, this will stymie the investment in innovation, and we as an industry and as individual companies will have to adapt to it now and that’s what we will do. But, overall, I would be very surprised that this doesn’t have an impact on the overall allocation of capital to innovation.

So as regards specific programs, it’s a little bit early, but I -- no secret that we and others have already begun evaluating our portfolio with a question of the new legislation in mind and without a doubt, there will be some programs now that we will switch off and reallocate resources to other places or return capital to our shareholders as a result of this.

And again, back to the missed opportunity for patients, the real pain I think that people in our society experience when it comes to medicines is the out-of-pocket costs associated with them and this legislation helps very few people with their out-of-pocket costs for medicines and that’s unfortunate.

I think what we and others -- other leading innovators would have liked to see is a more comprehensive way to help people afford those innovative medicines like our Repatha that can help significantly reduce the risk of heart attack and stroke.

So we still have 600,000 plus cardiovascular events, heart attacks every year in this country and a large number of those can be prevented, same thing with stroke. But many patients find even with the improved coverage and reset price for Repatha that the out-of-pocket costs are considerable and those are the patients that we would rather have seen this legislation address than what has happened.

So, anyway, we will adapt and we will continue to thrive as an innovative company, but we will have to do it differently from what we would have done prior to this legislation.

Matthew Harrison

Okay. Great. BD environment, I want to ask a ChemoCentryx specific question, but maybe first, just what the outlook on the environment, is it getting more competitive, we have seen more acquisitions recently by other companies. Just what’s your outlook on the potential availability of interesting transactions out there?

Bob Bradway

Well, I don’t know whether it’s getting more competitive or not, I haven’t seen any evidence of that. I think your colleagues and your firm might be in a better position to judge the or to provide an answer to that to me.

But I think speaking for Amgen we are very clear on the kinds of companies that are of interest to us. So we have said and I will repeat that we are focused on innovative medicines that we think we can add value to in the areas where we have demonstrated expertise and capabilities so cancer, inflammatory diseases and general medicine.

And we will continue to look for opportunities there across the Board, early-stage and later-stage, even marketed products like the recent acquisition of ChemoCentryx, which to repeat brings with it a recently approved molecule called TAVNEOS.

So, we are active, we are looking across the Board, but I wouldn’t say that that’s different from what we have been doing for the past few years and I don’t particularly sense a change in the competitive environment for those transactions, no.

Matthew Harrison

Okay. Great. And then on ChemoCentryx specifically and I think we have heard you say in the past that you have rigid criteria or not rigid, but you have strong criteria on how you think about you doing a return above your cost of capital, and then importantly, an acquisition, there needs to be something that you can do with that company in your hands that they couldn’t do on their own. So as we think about ChemoCentryx specifically, what is it that you can do with that molecule that they couldn’t do and how does that lead to probably a change and what you see as the sales potential of that drug?

Bob Bradway

Well, I think the simple answer is that we have decades of experience in calling on the rheumatologists and nephrologists who tend to manage the patients that have ANCA vasculitis. So we have an existing infrastructure in across the Board talking to the kinds of physicians who see and manage these patients.

And we have enormous respect for our friends at ChemoCentryx and for Thomas Schall and his team on what they did in advancing this first in many, many years innovation for those patients. But I think we felt we could bring capabilities, particularly on what we call the access side, which is the payer reimbursement coverage side and the sales and marketing side that it would have been hard for them to duplicate efficiently.

So that’s a great example of where we thought that innovation that they were responsible for makes a big difference, innovative, big effect size for patients, a serious unmet medical need and requires the kind of focused commercial expertise that Amgen has decades of experience with.

Matthew Harrison

Okay. Great. Biosimilars?

Bob Bradway

Yeah.

Matthew Harrison

You talked a little bit about the beginning, I think an area, so if you ask the average investor, they say, biosimilars sounds like generics. We want to value it at a low multiple because we don’t think it’s a durable business. I think you internally probably would dispute some of those points. So…

Bob Bradway

Yeah.

Matthew Harrison

… maybe just talk to us about how you think about that business, the sustainability of that business and really what sort of return you are earning on that business?

Bob Bradway

Well, again, from our perspective, we think that we are earning returns in our biosimilar business that are well above our cost of capital. So we think these are -- these investments are accretive to shareholder value. We believe that based on our analysis of the cash flow potential of these molecules both individually and collectively and so when we look at the future for our biosimilars business.

As I said earlier, we have five molecules on the market already. We have a very important opportunity ahead of us in January -- on January -- the end of January next year, we have the opportunity to enter the market with a biosimilar to HUMIRA.

We expect to be the first competitor to do that in the United States. We expect to have a lead over other potential entrants with biosimilar HUMIRA agents next year. So we think that represents a really important growth opportunity for us and then we have five others coming behind it. So for us we look at it as molecules one stacking on the other.

Now the nature of a biosimilar is that, it may launch quickly, but then as new entrants come in, price erodes and even while we have been able to retain and grow volume, we have seen revenues churn over for those individual molecules. But if you add the 11 molecules in sequence, we think that what you will find is a profile of growing revenues and cash flows well through the end of the decade.

So we think it’s, again, the investments that we are making in biosimilars are ones that we will earn more than our cost of capital on, and we think that you will see that translate into growing revenues and growing cash flows from that business through the decade.

Matthew Harrison

And maybe specifically on HUMIRA, obviously, a big focus for investors just given the size of the opportunity…

Bob Bradway

Yeah. Yeah.

Matthew Harrison

Any -- just any thoughts you would share on how people should think about what a biosimilar launch could look like there versus many of the other products you have had which are Part D products? This is obviously a different way of delivery, a different pricing aspect and also a different amount of competition after you have your period of exclusivity?

Bob Bradway

Well, I think, this -- I think it will be an important test of the strength of the biosimilar market in the U.S. We expect that the biosimilars will equip themselves well through this test period, by which I mean, we think there will be several biosimilars available.

And we think these will be seen to have provided improved choice and better price and cost options for payers and patients than what was otherwise the case during the period of exclusivity for HUMIRA.

And again, we think we are well positioned given our presence in the anti-inflammatory space to be able to deliver the kind of service that patients and physicians and payers are going to need and expect for any molecule that seeks to replace a market leader like HUMIRA.

So, I’d say stay tuned, Matthew. I think I understand why you and others are watching the space very closely and rest assured so are we. We will be doing our level best to try to help build on the success of the biosimilar industry with the successful launch of our molecule, which is known as AMGEVITA early next year.

Matthew Harrison

And Otezla?

Bob Bradway

Yeah.

Matthew Harrison

And I think maybe just addressing some recent news, right, that the market was probably a little bit concerned about the TYK2 label that came out and what competition that may represent. How do you think about Otezla and how do you think about the sort of broad guidance you gave for Otezla in terms of its growth opportunity especially into earlier-stage patients?

Bob Bradway

Well, I would say, we remain very enthusiastic about Otezla. We think Otezla’s safety and efficacy profile is compelling. We have years of experience, now repeated clinical trials, lots of experience in the marketplace demonstrating the efficacy of this agent across a broad range of psoriasis needs from mild to moderate to severe psoriasis.

And again, we have a track record that we expect to be able to build off of through the rest of the patent life for this molecule. So there’s nothing in the data that you referred to from earlier this week that changes our perspective or that is very different from what we expected competitively for Otezla. So our view remains very upbeat and optimistic about what we can do for psoriasis patients with that oral therapy.

Matthew Harrison

Can we talk about the outlook for LUMAKRAS? We haven’t talked about oncology, obviously, talked about a lot of oncology products?

Bob Bradway

How will that look in the transcript?

Matthew Harrison

I think it’s going to look very interesting.

Bob Bradway

Yeah. I think that…

Unidentified Analyst

[Inaudible]

Bob Bradway

That’s a relief. Thank you. Yeah.

Matthew Harrison

All right. So back to LUMAKRAS, I guess, the real question is, I think, we understand how this molecule can perform and how it can behave in late line patients. I think the hope originally when you started developing this is that it could be a very large molecule in earlier-stage patients. I think the outlook there is a bit more uncertain in terms of combinations or other things. So how do you think about the long-term prospects for LUMAKRAS and what’s your hope in terms of what you can achieve with that molecule?

Bob Bradway

Well, let’s take a step back for a moment and just recognize that LUMAKRAS represents what was a 40-year quest in our industry. So for decades investigators have been trying to figure out whether there’s a way to provide a drug for those patients whose KRAS status includes a mutation of the G12C site on the protein.

And for decades, investigators felt that it was impossible, there was no way to drug that target until we demonstrated with LUMAKRAS that we could drug the target and that drugging it was effective for those patients and tolerable safe and that the medicine was tolerable to them. So it represents a really important breakthrough for us and for the field and so we remain very excited about that.

Now the question is, what is the right way to treat patients with this disease and we have a very broad ongoing comprehensive clinical trial program to try to answer that question. So we are looking at patients and with all sorts of different agents in combination, looking at them across the different states of the disease and over time we will get the data.

And we will help figure out what is the right way to use this agent for patients who face this challenge, but there’s no question that this is a very important innovation for those patients and for their physicians and we remain optimistic that we will find ways to be able to treat more patients and in earlier lines of therapy, but we need to have the data, and that’s what we are seeking to gather.

So we have been on the market now a little over a year and we were pleased to meet the primary end point in the confirmatory trial that we just reported on. And as I said earlier, I was pleased to hear the discussions reviewing that at the conference where it was or the data were presented saying this has emerged as a standard-of-care for these patients and that’s what we want to try to build on, that opportunity of having it become the standard-of-care.

Matthew Harrison

You also talked about some of the BiTEs in lung cancer specifically small cell. What’s the outlook there, how excited are you about that molecule specifically and we haven’t seen a lot of innovation in small cells, so what do you think about the opportunity there?

Bob Bradway

Yeah. So, again, let’s start with that observation, Matthew, that there really hasn’t been any innovation or there have been no major breakthroughs for patients that suffer from small cell lung cancer over the last several decades.

So if we are able with our BiTE molecule to advance something that achieves a meaningful overall survival benefit, for example, or progression free survival benefit, we think that has the potential to be very, very significant in the field.

And what we have demonstrated -- what we have reported are data that show that we are able to see overall survival periods beyond 12 months. So I think the latest we reported was beyond 13 months for patients being treated with this agent. So that’s very, very unusual in the field.

These are patients unfortunately who normally die in a very short period of time measured in a couple of months, for example. So this is a drug that looks to be very active and tolerable in the early-stage testing that we have done of it for patients.

Again, what we are doing here is we have found a marker on the surface of small cell lung cancer patients that is expressed really almost exclusively on small cell lung cancer cells and that we then redirect T-cells to those molecules and the T-cells are proving very effective at destroying those cancer cells and leaving other normal tissue unaffected and so if we are able to recapitulate what we have seen in early studies in our later trials, this I think, will be a very exciting development for the field.

So still early days, but an area of big unmet medical need, a lot of eager anticipation, I think, from clinical investigators who have patients that are advancing with this disease, because there just are no other promising evidence available right now for those patients.

Matthew Harrison

In the last couple of minutes, we haven’t talked about obesity, obviously, an area that investors are focused on now just given the success of some of the GLP-1s there. You talked about 133. So I guess the first question is, what kind of data should we expect towards the end of this year and how much of that derisk that molecule or what -- how much investment do you think is reasonable for you to put forward in this space, which is already fairly competitive?

Bob Bradway

Well, we will have data in the fourth quarter. I think we should revisit the question of what the development program is for this molecule after we have published those data. So you can see them for yourselves.

But if we didn’t feel we had a molecule that had the potential to be differentiated in important ways from those that are ahead of us in the field, we wouldn’t advance it. So we will need to believe that we have a combination of attributes that will be attractive in the marketplace.

So we will be paying close attention to efficacy and tolerability. But to state the obvious and tip my hat to you, Matthew, and the team to your firm for the research you did on obesity. This is an enormous global problem and it’s not getting any better.

And we are increasingly as are others convinced that obesity plays a role in a variety of chronic diseases and that the excess adipose tissue that is obesity is a problem, which is going to overwhelm our healthcare systems if we don’t do something about it and so the idea that we might be able to have a very safe, effective, tolerable medicine to address what is a huge global societal burden is something that remains very exciting to us.

But, again, to state the obvious, there’s no point jumping in with a molecule that’s just like others. We are going to have to believe that we have a differentiated approach and therefore a differentiated reason to continue to invest in that program.

But I would say that I think our knowledge of and the field’s knowledge of obesity is evolving very rapidly, and again, we are becoming more and more convinced of the importance of the biology of adipose tissue and the pathologic consequences of having too much of it in our bodies and it shows up in all kinds of other diseases downstream that are going to be very hard and difficult to manage and can be prevented we think by tackling obesity earlier.

Matthew Harrison

Perfect. Well, thanks for being here.

Bob Bradway

Thank you.

Matthew Harrison

Thanks for…

Bob Bradway

Thank you, Matthew.

Matthew Harrison

… playing along with our fire alarm game we introduced today and look forward to see you soon.

Bob Bradway

Great. Thank you.

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