Amgen Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2024

There are 20 speakers on the call.

Operator

My name is Julianne, and I will be your conference facilitator today for Amgen's Q3 2024 Financial Results 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 would like to request that you limit yourself to asking one question during the Q and A session. I would now like to introduce Justin Clays, Vice President of Investor Relations.

Operator

Mr. Clays, you may now begin.

Speaker 1

Thank you, Julianne.

Speaker 2

Good afternoon, everyone, and welcome to our Q3 2024 earnings call.

Speaker 3

Bob Bradway will lead the call

Speaker 2

and be followed by a broader review of our performance by Murdo Gordon, Vikram Karnani, Jay Bradner and Peter Griffith. Through the course of our discussion today, we will use non GAAP financial measures to describe our performance and have provided appropriate reconciliations within the materials that accompany this call. We will also make some forward looking statements, which are qualified by our Safe Harbor statement. And please note that actual results can vary materially. Over to you, Bob.

Speaker 4

Thank you for joining us today. Our performance this quarter reflects the strength of our business across our core therapeutic areas and geographies. Our in market medicines performed well in the quarter with 3rd quarter revenues up 23% to $8,500,000,000 and 10 of our products delivering double digit or better sales growth. We're also rapidly advancing our pipeline with a significant number of potentially first in class or best in class medicines positioning us for long term growth. Let me address Meritide directly.

Speaker 4

Our ongoing Phase 2 study is progressing well and we look forward to sharing results later this year. We're well advanced in preparing to launch a broad Phase 3 program for Miratide including obesity, obesity related conditions and Type 2 diabetes.

Speaker 5

You may have noted that

Speaker 4

we recently initiated a Phase 2 study in patients with Type 2 diabetes. As we shared after the interim analysis, we're confident that Meritide's differentiated profile will address important unmet medical needs across a number of diseases, including type 2 diabetes. Beyond obesity, we have momentum across each of our therapeutic areas and I'll start with oncology. In the Q3, we saw strong end market performance with 17% sales growth across the innovative oncology portfolio and several products experienced double digit growth including BLINCYTO, which of course is our first bispecific T cell engager or BiTE, which is now established as the standard of care in B cell acute lymphoblastic leukemia. The launch of our next BiTE, IMDELTRA, is also progressing well with strong clinical conviction and 3 Phase 3 studies underway in small cell lung cancer.

Speaker 4

In further demonstrating the strength and promise of this platform in solid tumors, we're pleased to announce today that we will advance valuritamib into Phase III clinical development and advanced prostate cancer in the Q4. Let me remind you to also keep an eye out for Phase III bimarituzumab data in gastric cancer, which we should have in the next few months. Our rare disease portfolio delivered $1,200,000,000 of sales in the quarter, growing 21% year over year, driven by TAPESZA, KRYSTEXXA, Upluzna and Tavneos. These medicines are highly innovative, are still in the early stages of their life cycles and have significant upside potential, including expansion into new indications and geographies. For example, TAPAZA was recently approved in Japan.

Speaker 4

Also in rare disease, the Plizna demonstrated compelling data in generalized myasthenia gravis and was granted breakthrough therapy designation in IgG4 related diseases. We're excited about the promise of inebilizumab in these settings and potentially in other B cell mediated autoimmune diseases. In inflammation, TESPIRE continues its strong trajectory with 67% growth year over year in the quarter. We're further encouraged by the potential of TESBIR in COPD and additional indications that we're also actively exploring. And finally, in general medicine, Repatha and EVENITY are each delivering strong volume growth again this quarter.

Speaker 4

These products are pivotal as we continue to serve more patients and meet the growing demand for therapies that address some of the most serious health challenges worldwide like heart disease and osteoporosis. Looking ahead, we remain confident that Amgen is well positioned to deliver long term growth and innovation across each of our therapeutic areas. Our balanced portfolio combined with the strength of our pipeline, we think will continue to drive our business forward. As always, I'd like to thank my colleagues across Amgen for their unwavering commitment to patients. And I want to now turn the call over to Murdo.

Speaker 6

Thanks, Bob. Execution was strong across our core therapeutic areas in the 3rd quarter, driving 24% year over year product sales growth. Each of our regions delivered double digit volume growth. And sales of 10 products grew by double digits or better, including Repatha, TESPYRE, BLINCYTO, EVENITY and TABNEOS, all brands that are important to our future growth trajectory. Starting with our general medicine portfolio, sales of Repatha, Evenity and Prolia collectively grew 18% year over year in the Q3 driven by volume growth.

Speaker 6

We serve large patient populations with these therapies. For example, we expect Repatha and Prolia alone will help over 11,000,000 patients in 2024. Repatha sales increased 40% year over year to $567,000,000 for the 3rd quarter, now annualizing at over $2,000,000,000 in sales. In the quarter, we saw year over year volume growth of 41% and favorable changes to estimated sales deductions of 8%, partially offset by lower net selling price of 10%. In the U.

Speaker 6

S, our expanded primary care field force efforts drove a 50% year over year increase in primary care physician prescribers. U. S. Volume growth was enabled by broad reimbursement and removal of prior authorization requirements by several payers. Outside the U.

Speaker 6

S, Repatha retains category leadership and continues to grow across major markets despite increased competition in the segment. EVENITY sales increased 30% year over year to almost $400,000,000 for the Q3. In the U. S, EVENITY continues to be the segment leader with 61% of the bone builder market. Strong U.

Speaker 6

S. Volume growth was supported by an increase in prescription volume from both established and new Evenity prescribers with a 34% quarter over quarter increase in new provider accounts ordering Evenity. In Japan, EVENITY continues to hold a leading position with 47 percent of the Bone Builder segment. Since launching in Japan in 2019, EVENITY has been prescribed to approximately 600,000 patients. EVENITY sales are now annualizing at approximately $1,500,000,000 We're encouraged by the growth momentum we are driving and have conviction in the potential for EVENITY to help the many more women globally who remain at risk of a fracture due to their postmenopausal osteoporosis.

Speaker 6

Prolia sales increased 6% year over year to $1,000,000,000 for the 3rd quarter, driven by 9% volume growth. In the U. S, we see broad prescribing base with more than 13,000 provider accounts using Prolia so far this year. In inflammation, Testfire continues a strong trajectory with 2 $69,000,000 in sales in the 3rd quarter. Sales increased 67% year over year supported by testbuyer's uniquely differentiated profile and increased adoption by pulmonologists.

Speaker 6

We're encouraged by the growth of TESBIR to date and its potential to treat the 2,500,000 patients worldwide with severe uncontrolled asthma. Otezla sales decreased 1% year over year for the 3rd quarter with 5% volume growth. This volume growth was offset by 7% lower net selling price. Otezla remains the only approved oral systemic therapy with a broad indication and is well positioned to help the more than 1,500,000 systemic treatment naive U. S.

Speaker 6

Patients with milder psoriasis who cannot be optimally addressed by a topical treatment. Enbrel sales decreased 20% year over year for the Q3, primarily driven by 13% unfavorable changes to estimated sales deductions and 12% lower net selling price. Volumes grew 4% in the quarter. Going forward, we expect continued declining net selling price, relatively stable volume, providing strong cash flow for our business. Sales of our biosimilar products increased 9% year over year in Q3.

Speaker 6

We have fully deployed our team in support of the recent U. S. Launch of PAVLU, a biosimilar to EYLEA. Our teams moved quickly to engage retina specialists, and we're encouraged by the enthusiastic feedback from customers. Our teams are also ready for the upcoming U.

Speaker 6

S. Launches of Weslana, a biosimilar to Stelara and Bekemvi, a biosimilar to Stelaris, expected in the 1st and second quarters of 2025, respectively. Overall, our biosimilars portfolio continues to deliver attractive returns driven by our efficient business model. In oncology, sales of our 7 innovative products, BLINCYTO, LUMIKRAS, VECTIVIX, KYPROLIS, NPLATE, XGEVA and IMDELTRA grew 17% year over year for the Q3, driven by volume growth and higher net selling price. In total, these products contributed over $2,000,000,000 of sales in the 3rd quarter.

Speaker 6

BLINCYTO sales grew 49% year over year to $327,000,000 for the 3rd quarter. Growth was supported by the recent expansion of the BLINCYTO label, now approved by the U. S. Food and Drug Administration for use in patients with Philadelphia chromosome negative B cell ALL in the consolidation phase regardless of measurable residual disease status. Our U.

Speaker 6

S. Launch of Imdelta is progressing well, generating $36,000,000 of sales in the 3rd quarter. There's strong clinical conviction in both academic and community settings driven by Imdelta's breakthrough efficacy. We have a strong sense of urgency to bring Imdelta to patients living with this aggressive disease. LumaCrest sales increased 88% year over year to $98,000,000 for the 3rd quarter.

Speaker 6

Vectabig sales increased 12% year over year to $282,000,000 for the 3rd quarter, now annualizing at over $1,000,000,000 And Kyprolis grew 8% year over year to $378,000,000 in the quarter. Nplate sales increased 9% to $456,000,000 for the 3rd quarter. If we exclude government sales, nplate sales grew 18% year over year for the 3rd quarter, driven by 14% volume growth and higher net selling price. We've made significant progress in this quarter driving execution and accelerating performance of our most important growth brands. And with that, I'll turn it over to Vikram, who will cover our rare disease portfolio.

Speaker 5

Thank you, Murdo. I am pleased to provide an update on rare disease, which delivered product sales of $1,200,000,000 in Q3. Beginning with Tepesa for the treatment of thyroid eye disease, 3rd quarter sales were $488,000,000 reflecting growth of 8% year over year when compared to results from the legacy Horizon business. Recall, there are roughly 100,000 TED patients in the U. S.

Speaker 5

And penetration is currently only in the single digits. We are excited about the growth opportunity presented by the roughly 80% of TED patients who have a lower clinical activity score or CAS. As we have discussed previously, to more effectively reach these patients, we have recently reorganized and expanded our field force into 2 separate and dedicated teams, one focused on comprehensive ophthalmologists and ocular specialists and the other focused on endocrinologists. This approach reflects an optimized footprint to continue to serve patients with high calf disease, while expanding our reach to those patients with low cast disease who can benefit from TIPEZZA. We made this change in the Q3 and over the last few weeks, these teams have been actively focused on establishing new relationships with potential new prescribers.

Speaker 5

We expect this optimized focus to gain traction over the next few quarters as physicians become more experienced identifying the right patients for treatment and navigating the reimbursement process to enable access to TABEZZA. Following our 8% year over year growth this quarter, we remain confident in the long term potential for TEPEZZA in the U. S. As we expand our reach to patients with low cast disease and continue to work closely with payers to expand access. International expansion remains a key growth opportunity with regulatory filings completed or in progress across multiple regions.

Speaker 5

TEPEZZA's approval in Japan in September marked a key milestone ahead of its launch, which is expected by early 2025. We also initiated a Phase 3 subcutaneous study and see this as an opportunity to increase adoption and improve the patient experience with an alternative option to our current IV formulation. KRYSTEXXA for patients with chronic refractory gout delivered $310,000,000 in sales in Q3, representing 23% year over year growth driven by volume growth from strong commercial execution. KRYSTEXXA with immunomodulation has established a new standard of care for chronic refractory gout. Aplizna for patients with neuromyelitisoptica spectrum disorder or NMOSD delivered $106,000,000 in sales in Q3, representing 58% year over year growth.

Speaker 5

International expansion of ABLISNA is also underway with launches in multiple markets, including Canada, which launched earlier this year. Additionally, we're excited by the growth potential of Aplisna driven by the striking data in both IgG4 related disease, which affects over 20,000 patients in the U. S. And generalized myasthenia gravis or gMG, which affects nearly 80,000 to 100,000 patients in the U. S.

Speaker 5

Sales of TAVNEOS were $80,000,000 for the 3rd quarter. Sales increased 116% year over year driven by volume growth. In the U. S, more than 4,300 patients with ANCA associated vasculitis have been treated with TAVNEOS. Over 2,600 healthcare professionals have now prescribed TAVNEOS, a roughly 53% increase in the prescriber base so far this year.

Speaker 5

As we reflect on the past year, it's clear how far we've come in the integration and how well we're progressing. I want to take this opportunity to express my sincere gratitude to all the team members that are working tirelessly to serve the needs of patients suffering from rare diseases. Looking ahead, we're excited about the opportunities and confident in what we'll achieve in our rare disease business and beyond. Now I'll hand it over to Jay for our R and D update.

Speaker 7

Thank you, Vikram, and good afternoon, everyone. In the Q3, we made significant progress advancing our broad clinical pipeline, which includes a number of potentially 1st in class or best in class therapies. Since our last update, we have initiated a Phase 2 study of miratide in type 2 diabetes and delivered positive, potentially practice changing Phase 3 data with aplisma in generalized myasthenia gravis. Additionally, the FDA granted breakthrough therapy designation for aplizna in IgG4 related diseases, underscoring the important potential impact of this medicine. We also showcased promising data from several oncology programs at major conferences, including Imdelta, zalaritamig and AMG 193, while reporting positive results from the first of 8 Phase 3 studies evaluating rocatinlimab in atopic dermatitis.

Speaker 7

Let's begin with general medicine. As previously mentioned, based upon the interim analysis of the ongoing Phase 2 study of Meritide in chronic weight management, we are seeing a differentiated profile and are confident Meritide will address important unmet medical needs in obesity, obesity related conditions and type 2 diabetes. We remain on track and look forward to top line 52 week data from the Meritide Phase 2 study in late 2024. We are actively planning and expect to initiate a broad Phase 3 program in obesity, obesity related conditions and type 2 diabetes. This quarter, we initiated a dedicated Phase 2 trial investigating Meritide in patients with type 2 diabetes living with and without obesity.

Speaker 7

Meritide has the potential to be the 1st therapy in this setting with monthly or even less frequent dosing. Beyond meritide, our Phase I trial of AMG five thirteen is actively enrolling patients. We also continue to advance our preclinical obesity programs, which include both oral and injectable approaches comprising both incretin and non incretin mechanisms. Also in general medicine is opaciran, our potentially best in class Lp targeting small interfering RNA medicine. The fully enrolled Phase 3 cardiovascular outcomes trial of opaciran continues to progress.

Speaker 7

In oncology, IMDELTRRA, a 1st in class bispecific T cell engager or BiTE molecule targeting DLL3 for small cell lung cancer is rapidly advancing into earlier lines of therapy with 3 Phase 3 studies underway in both extensive stage and limited stage disease. To further enhance the patient experience, we are evaluating reduced monitoring protocols as part of the Phase 3 program and we have initiated a Phase 1b study evaluating subcutaneous tarlatanab in patients with second line or later extensive stage small cell lung cancer. In September, we presented impressive follow-up data from our DELPHY-three zero one Phase 2 study of Imdeltra in patients with extensive stage small cell lung cancer demonstrating sustained anticancer activity and a manageable safety profile. We also presented data from Delphi-three zero three, a Phase 1b study of Hemdelta combined with a PD L1 inhibitor as maintenance therapy, following 4 cycles of chemotherapy in first line extensive stage small cell lung cancer. This design is similar to our ongoing Phase 3 study, DELFI-three zero five, which tests the efficacy of Imdelta and PD L1 inhibition versus PD L1 inhibition alone in first line extensive stage small cell lung cancer following platinum based chemotherapy.

Speaker 7

With the median follow-up of 10 months, INVELTRA has demonstrated a manageable safety profile, median duration of disease control of 9.3 months, median progression free survival of 5.6 months and a 9 month estimated overall survival of 89%. Moving to our 1st in class steep-one CD3 bispecific molecule, zalaritamig, we are pleased to announce that following consultation with regulatory authorities, we will initiate a Phase 3 study in post taxane metastatic castrate resistant prostate cancer or mCRPC this quarter. The promise of zalaritamig was recently evidenced by data presented in September from a Phase 1 dose exploration cohort evaluating monotherapy in patients with mCRPC. With the median follow-up of 27.9 months, the median overall survival was 17.7 months across all cohorts, a potential improvement upon the historical median survival of 12 to 15 months in this patient population. Additional data from a Phase 1 randomized dose expansion and optimization cohort has identified the recommended dose and schedule for Phase 3 clinical investigation.

Speaker 7

Additionally, we are studying zalaritamig in earlier lines of therapy in combination and in earlier stages of prostate cancer. Our Phase 1 study of zalaritamig in combination with enzalutamide and abiraterone is ongoing. Recently, we have initiated 2 additional Phase 1b studies investigating zalaritimig in the upfront management of more localized disease. The first study evaluates neoadjuvant zalaritimig therapy that is prior to radical prostatectomy in patients with newly diagnosed localized intermediate or high risk prostate cancer. The second study evaluates zelaritamig in high risk non metastatic hormone sensitive prostate cancer after definitive therapy.

Speaker 7

We are particularly excited about the potential of zelaritimig, now our 3rd bispecific T cell engager entering late stage clinical development. Beyond our T cell engagers, we have completed enrollment of FORTITUDE-one hundred and two, a Phase 3 study of bamrituzumab, our 1st in class fibroblast growth factor receptor 2b directed monoclonal antibody combined with chemotherapy and nivolumab in first line gastric cancer. In the coming months, we expect to read out the results of FORTITUDE-one hundred and one, a Phase 3 study of bamiratuzumab combined with M FOLFOX6 chemotherapy versus chemotherapy alone in first line gastric cancer. This study was designed based on the successful Phase 2 FIGHT study, which reported numerically longer progression free survival and overall survival. Lastly, we are also rapidly advancing AMG 193, our oral PRMC5 inhibitor developed for MTAP Null solid tumors.

Speaker 7

We recently initiated a Phase 2 study of AMG 193 in patients with MTAP Null previously treated advanced non small cell lung cancer. This study will help to address regulatory agency requirements for dose optimization and selection. In September, we presented encouraging data from a Phase 1 dose escalation and initial dose expansion study demonstrating promising monotherapy activity and an acceptable safety profile. Turning to inflammation. Based upon encouraging Phase 2 data from TESPIRE in patients with COPD, we are planning to initiate Phase 3 studies in collaboration with AstraZeneca.

Speaker 7

These trials will target patients with moderate to very severe COPD with blood eosinophil counts greater than or equal to 150 cells per microliter. We expect to begin enrollment in the first half of twenty twenty five. TESBIR is also being investigated in separate Phase 3 studies of patients with eosinophilic esophagitis and in chronic rhinosinusitis with nasal polyps, where top line data are expected later this year. In September, we announced positive results from the Phase 3 horizon study of rocatinlimab in atopic dermatitis. The study met its co primary endpoints and all key secondary endpoints.

Speaker 7

We anticipate additional data readouts from the ROCKET program will deepen our understanding of rocatinlimab's profile. Beyond atopic dermatitis, we continue to explore rocatinlimab in moderate to severe asthma and prurigo nodularis. To expand the impact of our CD19 direct therapeutics for even more patients suffering from serious inflammatory diseases, we have initiated Phase 2 studies of blinatumomab, our CD19 targeting BiTE molecule approved as BLINCYTO and ineboluzumab, our CD19 targeting monoclonal antibody approved as aplizna. These studies build on mounting evidence of therapeutic benefit for B cell depletion in autoimmune diseases from small investigator sponsored trials of blinatumomab and systemic sclerosis and refractory rheumatoid arthritis. Our initial focus will be on systemic lupus erythematosus with nephritis with plans to expand into additional indications.

Speaker 7

Shifting to rare disease, we recently presented potentially practice changing results from the Phase 3 MINT study, the largest placebo controlled trial for a biologic therapy in generalized myasthenia gravis. MINT evaluated aplisma in both acetylcholine receptor autoantibody positive, ACHR positive and muscle specific kinase autoantibody positive or MuSK positive populations. At the reported 26 week time point, Aplisna demonstrated clinically meaningful and statistically significant improvements in the myasthenia gravis activities of daily living score after just two doses compared to placebo. This efficacy was observed in the combined ACHR and musk positive populations as well as in each population separately. Aplizna also achieved statistically significant improvements in the quantitative myasthenia gravis score compared to placebo at week 26 in the combined populations.

Speaker 7

Importantly, in the MINT study, patients taking corticosteroids were tapered down starting at week 4 to a 5 milligram per day dose by week 24. MINT is the 1st and only Phase 3 placebo controlled myasthenia gravis trial for a biologic that tapered corticosteroid use. As such, the efficacy observed with aplizna in patients with generalized myasthenia gravis offers a chance for meaningful benefit without the burden and toxicity of chronic steroid use. We look forward to 52 week data for the ACHR positive cohort and results from both ACHR positive and MuSK positive patient populations in the open label period of the MIN study, where aplisna has the potential to demonstrate durable efficacy. Moving beyond generalized myasthenia gravis in August, the FDA granted aplizna breakthrough therapy designation for the treatment of immunoglobulin G4 related diseases or IgG4 related disease based upon data from the Phase 3 MITIGATE study.

Speaker 7

This data will be presented at the American College of Rheumatology Conference in November. We are extremely encouraged by the potential of aplizna in both myasthenia gravis and IgG4 related disease and are actively working to file these data with regulatory authorities. In closing, I want to thank my Amgen colleagues for their unwavering commitment to patients facing grievous illnesses for the focus and for the collaboration during this productive year. I'll now turn it over to Peter for the financial update.

Speaker 3

Thank you, Jay. We're pleased with our strong Q3 performance and are on track with our 2024 full year goals and long term objectives. We have a strong long term growth outlook with breadth and depth across each of our 4 therapeutic areas, including our innovative pipeline and end market products serving patients with serious illnesses around the globe. We will continue to allocate capital to innovation first and with our strong cash flows also intend to fund our other capital allocation priorities. Starting with our Q3 results as shown on Slide 28 of the slide deck, we delivered $8,500,000,000 in total revenues, a 23% year over year increase.

Speaker 3

Excluding the addition of Horizon, product sales increased 8% year over year driven by 12% volume growth. In the U. S, our sales in the quarter were impacted by $173,000,000 and unfavorable changes to estimated sales deductions. In the Q3, we delivered a non GAAP operating margin of 49.6% as a percentage of product sales, with total non GAAP operating expenses increasing 27% year over year largely driven by the addition of Horizon. Non GAAP R and D spending in the 3rd quarter increased 35 percent year over year to $1,400,000,000 as we invested in the rapidly advancing late stage pipeline including Meritide, Bimarituzumab and opaciran as well as Horizon acquired programs.

Speaker 3

Non GAAP SG and A expenses increased 21% year over year, primarily driven by the addition of Horizon. Excluding the addition of Horizon, non GAAP SG and A expenses were relatively flat year over year. The Horizon integration is progressing well and we expect to reach $500,000,000 in pre tax cost synergies by year 3 post acquisition with more than 50% to be realized by the end of this year. The acquisition is accretive to non GAAP EPS year to date and we expect it to be for the full year as well. Our non GAAP OI and E resulted in a $554,000,000 expense, up $329,000,000 year over year, almost entirely due to increased interest expense from the Horizon acquisition.

Speaker 3

We continue to strengthen our balance sheet with $2,500,000,000 of debt retired in the 3rd quarter and expect to return to our pre Horizon acquisition capital structure by the end of 2025. Our non GAAP tax rate decreased 2.7 percentage points year over year to 13.4%, primarily due to the change in earnings mix from the inclusion of Horizon. In the Q3 of 2024, the company generated $3,300,000,000 of free cash flow, an increase of $2,500,000,000 from the previous year. Our strong cash flows enable investing in our business for long term growth, including advancing our exciting pipeline opportunities and expanding capacity in our state of the art manufacturing processes and facilities. Our past investments enable us to serve a significant number of patients today.

Speaker 3

For example, with over 43,000,000 units expected for Repatha and Prolia alone in 2024. Ongoing and future investments will support Meritide and other products across the portfolio. In addition, we returned capital to shareholders as we paid competitive dividends of $2.25 per share in the 2nd quarter. This represented a 6% increase compared to 2023. Let's turn to the outlook for the business for 2024 on Slide 30.

Speaker 3

We expect our 2024 total revenues in the range of $33,000,000,000 to $33,800,000,000 and non GAAP EPS between $19.20 to $20 We do expect Q4 non GAAP EPS to be lower than Q3 non GAAP EPS because of planned investment increases in our business, including key assets in our innovative pipeline beginning with Meritide and elpasiran and other strategic business investments. This sequential pattern is consistent with historical trends. Let me mention a few considerations as you model the remainder of 2024. We now project full year Neulasta sales at approximately $400,000,000 and other revenue at approximately $1,400,000,000 We expect Tepesza sales in Q4 to be flat to slightly down versus the Q3, resulting in full year sales being up roughly 5% year over year as compared to the full year of Tepesa sales in 2023. Consistent with prior years, we expect Q4 non GAAP operating expenses to be the highest of the year and expect approximately 28% of our full year operating expenses to be in the Q4.

Speaker 3

This includes additional investments to drive momentum into 2025, for example, in key brands like Repatha and EVENITY. For the full year, our total non GAAP operating expenses are expected to grow approximately 25% year over year, including from the addition of Horizon. We still expect full year non GAAP R and D growth of more than 25% year over year. We now expect OI and E to be approximately $2,400,000,000 to $2,500,000,000 which includes the interest expense related to the $28,000,000,000 of debt raised for the Horizon acquisition. We now expect the non GAAP tax rate to be in the 14% to 15% range, including the full year benefits associated with the inclusion of the Horizon business and favorable items in the quarter identified in the return to provision process.

Speaker 3

Finally, our capital expenditures guidance remains at $1,300,000,000 for 2024. Our long term growth outlook remains strong and I'm grateful to our colleagues worldwide for their dedication to serving patients. This concludes our financial update. I'll now hand it back to Bob for our Q and A session.

Operator

Thank you. Our first question comes

Speaker 4

from Salveen Richter from Goldman Sachs. Please go ahead.

Operator

Our first question comes from Salveen Richter from Goldman Sachs. Please go ahead. Your line is open.

Speaker 8

Good afternoon. Thanks for taking my question. The Phase 2 maritime data clearly remains the key update into year end. Can you help us understand what you will share with regard to this update in terms of actual data and also the Phase III developmental plan and time lines and when we might get an update from the other obesity programs? Thank you.

Speaker 4

Okay. It sounds like a few questions there, Salveen. As we said, we're continuing to be very excited about the prospects for, maritime. And we added the disclosure on this call that we have begun the Phase 2 study in Type 2 diabetes. The conduct of the trial is continuing to progress well and we're expecting to have the data here by the end of the year and when we have those data we'll obviously look forward to being able to share that with our investors.

Speaker 1

Julien, let's go to next question please.

Operator

Thank you, Salveen. Our next question comes from Olivia Breyer from Cantor Fitzgerald. Please go ahead. Your line is open.

Speaker 9

Hi, good afternoon. Thank you for the question. You are getting a lot closer to kicking off a Phase 3 maritime program. So how do you think about the level of spend that will go into that kind of undertaking? I mean, I assume we're looking at 1,000,000,000 as it relates to investments just around R and D, but also manufacturing.

Speaker 9

But yes, hoping you guys can put some numbers around it or at least better characterize how you're thinking about things from here. Also hoping you can clarify whether or not you have seen those Phase 2 data in house?

Speaker 4

So with respect to the Phase 3 trial, we would reiterate that we are expecting to pursue a broad Phase 3 trial in obesity, obesity related conditions and Type 2 diabetes. It will be we would expect a large global trial fully exploring the molecule. And Jay, I'd invite you to add any color you'd like about the Phase 3 program. But obviously, our investment in it will reflect our view that this is a differentiated molecule and we look forward to having the full characterization of

Speaker 5

its safety and efficacy profile.

Speaker 7

Yes. Thanks, Bob. We're fully on track, actively planning and expect to initiate a broad Phase 3 program. This will include obesity, obesity related conditions and Type 2 diabetes. As you've heard already, we're progressing the Phase 2 study to characterize dose response, tolerability, efficacy in patients, importantly, without obesity but having type 2 diabetes.

Speaker 7

So we're fully on track, actively planning the broad program.

Speaker 4

And Will, as part of our normal guidance process in the coming year, I'm sure we'll give an updated perspective then that reflects our plans for the Phase 3 trial and then we'll also add any perspective that may be helpful on the capital expenditure front. I think what I just would remind you is that this molecule is designed on our existing antibody platform. It fits very well with our network as currently configured. And so again, we'll have more to say about that through time as necessary.

Speaker 3

And maybe to suggest, Bob, Olivia, it's Peter here. I would just remind you of Amgen's long history of being a leader in the science of manufacturing and process development. That creates opportunities in terms of how we might view yield going forward. So while it might not just be bricks, mortar and steel, yields really important and we've got a really strong history in that. And we did raise the CapEx guide this year as you know to about 1,300,000,000.

Speaker 3

Dollars We're very thoughtful about that. And you also heard me mention that research and development spend up 35% quarter over quarter to the prior year. We expect it to be up over 25% for the year. So we certainly are investing where we always say we will in innovation and Meritide is right at the front of that. And we look forward to investing to be a key player in this global public health crisis.

Speaker 1

Julien, let's take the next question, please.

Operator

Thank you, Olivia. Our next question comes from Michael Yee from Jefferies. Please go ahead. Your line is open.

Speaker 6

Great. Thanks so much. Maybe for Jay, it sounds like you guys are quite confident about Meritide, and yet you are also building a greater portfolio. I think you've announced 513 and yet you also don't have an oral. I don't believe so.

Speaker 6

Can you just comment about your philosophy or thinking about the totality of the portfolio given 133 is so far in Phase 3, but the other things are so early and whether you believe you have the portfolio today to be competitive with everybody else who have so many things late stage? Thank you.

Speaker 7

Yes. Thanks, Mike. I really appreciate the question. With Miratide, we're really pleased with the execution of the study await data later this year, fully focused as I shared on setting up the broad Phase 3 program. The development of additional medicines for obesity and obesity related conditions is a source of really active investigation here pre clinically and clinically now with 513 as you nicely mentioned.

Speaker 7

We've not as yet disclosed the mechanism of action of 513 which is a very interesting program. And as you note and this is on clinicaltrials.gov, the SAD MAD ascending dose study has been announced, is enrolling and features subcutaneous or intravenous administration. To reach the smaller segments, other segments within the obesity landscape to serve all the patients with obesity and its related conditions, we like many others are interested in both injectable as well as oral non injectable medicines. We're very interested in creatine pathway as well as non creatine pathway mechanisms of action and our portfolio reflects each of these.

Speaker 1

Julien, next question please.

Operator

Thank you, Michael. Our next question comes from Courtney Breen from Bernstein. Please go ahead. Your line is open.

Speaker 10

Thank you so much for the question today. Just anchoring on some of the conversation that you shared around the Horizon product and specifically to PEZA. Can you please provide some more context on the path to growth and when you expect to see the impact of the sales team there, particularly in the context of the final comments that were shared in terms of expectations to Q4 relative to Q3?

Speaker 4

Yes. Let's take it in a couple of pieces. First is, as you heard us say, the quarter grew 8%. Vikram, why don't you just remind our investors of the plan for expanding sales force and then also perhaps speak to Japan or international more general? Yes.

Speaker 4

Thanks, Bob.

Speaker 5

So as Bob just said and as I said in my prepared remarks, it was 8% year over year. And as we have also said previously, we're continuing to focus on growth coming not only from the high cast patients, but also the 80,000 roughly 80,000 patients that suffer from low cast disease. What we have learned over our time serving these patients and these prescribers is that in order to most effectively reach these low cast patients, we need to have a dedicated effort towards both comprehensive ophthalmologists and ocular specialists as well as endocrinologists. And what we have found is that type of coverage is necessary in order to serve the 80,000 or so low cast disease patients that we have discussed previously. This approach reflects an optimized footprint.

Speaker 5

We believe that this approach will allow us to not only help the right physicians and new prescribers find the right patients for TEPEZZA, but also help to enable access to TEPEZZA in the most appropriate way. Finally, what I would say here is, this is something that has been we've been working on for a little bit here and this change occurred in the Q3. So we do expect the momentum to play out here in the next several quarters. In the last few weeks, the teams have been actively focused on establishing new relationships with these new prescribers and we look forward to updating you as we go. Final point on the global aspects of TEPEZZA.

Speaker 5

As you're aware beyond the U. S, we're also looking forward to bringing TEPEZZA to patients around the globe, including Japan. Japan is a really important country for us in terms of our next launch. Let me remind you that we received approval in Japan for TEPEZZA with high cast patients in September and we're actively working to a early 2025 launch there as well.

Speaker 1

Julien, next question please.

Operator

Thank you, Courtney. Our next question comes from Umer Raffat from Evercore ISI. Please go ahead. Your line is open.

Speaker 11

Hi, guys. Thanks for taking my question. I had a 2 part question on Meritide, if I may. Perhaps first, from a vomiting profile perspective, I recall in the Phase 1 trial, specifically in Phase 1, the vomiting profile was generally fairly consistent between low and high doses, which would imply perhaps titration in and of itself may not solve for vomiting. But Jay, I'm curious, is there anything super important in the design of Phase 1, which wasn't incorporated that could have addressed that vomiting?

Speaker 11

That's number 1. And then secondly, on the cadence of weight loss, is there any reason to expect the plateau in weight loss to not happen before to not happen past month 7 or so because we've seen other GLP trials kind of do that in 6 to 7 months post titration? Thank you very much.

Speaker 7

Yes. Thanks, Umer. I really appreciate it. The Phase 1 study published now in January has been pretty thoroughly considered. This was a standard Phase 1 dose escalation study that did not have antecedent dose titration.

Speaker 7

So if that answers your question, I suppose there's only so much that can be learned from the Phase 1. We're honestly just really focused on these Phase 2 data, where at the interim we saw the differentiated profile. And as you know, we're in Phase 3 planning. Regarding weight loss plateau, this will be an interesting thing to observe and learn from the data, which we await later this year.

Speaker 1

All right, Julian, next question please.

Operator

Thank you, Umer. Our next question comes from Jay Olson from Oppenheimer. Please go ahead. Your line is open.

Speaker 12

Hey, congrats on the quarter and thank you for taking the question. Maybe I'll shift gears to oncology. Congrats on all the progress and impressive growth, especially for BLINCYTO. For subcuBLINCYTO, it looks like the registrational study is now going to initiate in the second half of next year. Can you talk about what may have changed there and maybe share some color on the plans for that study?

Speaker 12

Thank you.

Speaker 7

Yes. Thanks, Jay. This is Jay. The subcutaneous development of BLINCYTO is a major priority for us. We're very encouraged by the efficacy that we've seen with subcutaneous BLINCYTO in prior studies.

Speaker 7

We did a Phase 1 study back in 2022 at ASH with striking data among 21 evaluable patients, we saw 67% CR rate within one cycle. There's been further data in the American Journal of Hematology since that time, 27 patients with an 85% CR rate, 75% of whom were MRD negative. And this is all without any grade 4 CRS. The subcutaneous blood cell was a major priority for us. It is progressing in clinical investigation and there's really nothing to read into the time that you allude to in your excellent question.

Speaker 7

Thank you.

Speaker 1

All right, Julian, next question please.

Operator

Thank you, Jay. Our next question comes from Terence Flynn from Morgan Stanley. Please go ahead. Your line is open.

Speaker 13

Hi, thanks for taking the question. 2 part on Meritide as well. Just wondering if you can confirm if the data disclosure will be a press release or it will be at a conference. I think the Phase 1 data were presented at the Insulin Resistance Conference in December. So just wondering the venue.

Speaker 13

And then for the Phase 3, Jade, do you think you're going to have to make any changes to the titration schedule you employed in Phase 2? I know Lilly had extended their tirzepatide titration schedule when they move from Phase 2 to Phase 3. Do you think that's something that could be necessary here? Thank you.

Speaker 4

In terms of the release, Terrence, and how we share that with investors, well, again, we're focused on getting the data in hand. And when we have them, we'll try to do whatever is in best interest to the shareholders. So stay tuned as soon as we have them. We'll look forward to being able to report those. And Jay, do

Speaker 7

you want to address the question on Phase 3? The Phase 3 planning as we've shared is fully on track and we won't today give any news or insights into our approach to dosing. But we feel confident it will be well informed by the Phase 2 study that is ongoing and we'll read out later this year.

Speaker 1

Great. Next question please, Julian.

Operator

Thank you, Terence. Our next question comes from Carter Gould from Barclays. Please go ahead. Your line is open.

Speaker 14

Good afternoon. Thanks for taking the question. I want to maybe switch it up a little bit and ask you around the PAVBlue launch. Amgen biosimilars have some have gone really well, others a little bit less. So you've historically talked about the importance of being first.

Speaker 14

But how do you think about adoption ahead of a Q code and if and discussions with any payers, your expectation around step edits for biosimilars ahead of some of the other newer entrants? Thank you.

Speaker 4

Yes. Thanks, Carter. Murdo, why don't you share your thoughts in general on the biosimilar franchise. We don't often get a chance to talk about it, but please also on PadBlue.

Speaker 6

Thanks, Bob. We're obviously quite excited about the next wave of launches, not just PAVBlue, but our other biosimilar launches that we are expecting in the not too distant future, as I mentioned in my opening remarks, with Weslana and Bekemvi. On Pablo, as you mentioned, Carter, it's important to be 1st store in the 1st wave. And clearly, we're in that position now as we're launching this product as we speak. And we expect there to be strong interest in PadBlue pretty much early on in the launch phase.

Speaker 6

Obviously, having permanent Q codes in this case given that it's a biosimilar are important, but there's a lot of interest out there even as we may have a temporary reimbursement code.

Speaker 4

And generally, Carter, as you know, we've built what we think is industry leading biosimilar franchise. It's a franchise that is performing very well and we think it's earning attractive returns for our shareholders. Next question please.

Operator

Thank you, Carter. Our next question comes from Chris Schott from JPMorgan. Please go ahead. Your line is open.

Speaker 15

Great. Thanks so much. Can I just a quick question on Tezpyre in COPD, obviously, some really nice Phase 2 data earlier this year? But just was there sort of how you think about the potential landscape here as we consider both Dupixent, essentially the IL-33s coming to market ahead of you? It seems like you might have a broader program and some interesting data.

Speaker 15

But just tell me a little bit about how you're just commercially seeing that fitting into the landscape? Thank you.

Speaker 7

Well, Chris, why don't I start and this is Jay and Murdo hand off to you. So Ted Spire is all here knows our TSLP monoclonal antibody that we're developing with AstraZeneca. And recently we had a chance to read out a very compelling Phase 2 study in moderate to very severe COPD. This was a 337 patient study. These patients were having exacerbations despite triple therapy.

Speaker 7

And we went head to head against placebo over a 52 week period of time, a population actually broader, even than DUPI. And Murrah, I perhaps invite you to reflect on that. The data were quite positive with a numerically reduced exacerbation rate by 17%. We learned a lot from biomarker studies of blood eosinophils as to which subsets of patients all preplanned stand to benefit the most. And with these learnings, we're now pleased to announce that we're planning to initiate Phase 3 studies together with AstraZeneca.

Speaker 7

This trial is well structured and set up to definitively answer the question around efficacy of TezSpire in COPD. And Murdo, would you like to reflect a little bit about our competitive posture?

Speaker 6

Yes. Thanks for the question, Chris. We're obviously really pleased with the performance of Tezspire so far in uncontrolled severe uncontrolled asthma. We're actually now the 2nd most prescribed product when it comes to new to brand prescriptions in that category. So I think it's clear now that allergists and pulmonologists appreciate the differentiated profile and the unique mechanism of action that test fire.

Speaker 6

We also believe as Jay has highlighted that that ability to address a broader population of patients because of the unique mechanism of action in the upstream way in which it intervenes in the immuno inflammation cascade. We are hopeful that that differentiation will continue to play out in COPD and we feel really good about the opportunity to compete there. With the combined resources of our partners at AstraZeneca and Amgen, we have a very strong share of voice currently in severe uncontrolled asthma and we expect to be able to affect that same strong share of voice on the successful completion of the Phase 3 trial.

Speaker 1

Julien, take the next question please.

Operator

Chris, our next question comes from Evan Seigerman from BMO Capital Markets. Please go ahead. Your line is open.

Speaker 16

Hi, guys. Thank you so much for taking my question. I want to touch on the biosimilar launch for the ecosmosimilar. Maybe talk about some of the launch strategy and more specifically how you can stimulate demand among ophthalmologists who would otherwise choose a branded product? Are you able to offer rebates or extended invoicing for these practices?

Speaker 16

Thank you so much.

Speaker 4

Mario, do

Speaker 6

you want to? Thanks for the question. Obviously, I'm not going to talk about what we're doing commercially with respect to contracting. I will just say that we have a very broad deployed field force covering the key customers in this therapeutic area. We have a very strong institutional organization that covers the purchasing groups and the large networks that treat a large percentage of the populations here.

Speaker 6

And the receptivity has been high. This isn't our first biosimilar launch and we've been preparing effectively and we're excited to be in the market.

Speaker 1

Julien, next question please.

Operator

Thank you, Evan. Our next question comes from Mohit Bansal from Wells Fargo. Please go ahead. Your line is open.

Speaker 8

Great. Thank you very much for taking my question and congrats on the quarter. Maybe a question for Jay. Given that you have diabetes patients with obesity in the ongoing Phase II trial, do you think you would be able to look into the A1C profile of the drug as well? Or is it just too small a trial to make any conclusion about that at this point?

Speaker 7

Yes. Thank you, Mohit. As you know, type 2 diabetes runs regrettably with obesity and with overweight. And so we do hope and expect to have some insights into anti diabetic activity from the Phase 2 study. But we need to have an experience in a dedicated Phase 2 study of diabetes in particular in patients without obesity.

Speaker 7

So more to follow there towards later this year.

Speaker 1

Next question please, Jillian.

Operator

Thank you, Mohit. Our next question comes from Yaron Werber from TD Cowen. Please go ahead. Your line is open.

Speaker 17

Great. Myrtle, I got maybe a couple of questions for you. One just on Enbrel. This quarter was we didn't see the normal Q3 bounce back. Is just a new normal now or is there any particular one timers in the quarter?

Speaker 17

And then secondly, you mentioned 12,000 accounts or 13,000 accounts ordering Prolia. I presume you're mentioning that on purpose is relating to the upcoming biosimilar launches late May next year. Can you talk about maybe just that dynamic in Prolia versus XGEVA, what to expect next year? Thank you.

Speaker 6

Thanks for the questions, Jeroen. Yes, as you picked up, Enbrel was impacted by 2 negative trends in the quarter. 1, of course, the regular decline in net price and then another one, which was a 30% adjustment in the quarter. So the quarter is a little softer than you normally see. Volume was up 4% in the quarter.

Speaker 6

So Enbrel continues to do quite well in terms of prescribers treating patients. But we are expecting continued net price declines going forward. When we look at Prolia, I mentioned that we have 13,000 provider accounts having treated patients with Prolia so far this year. This is just to give an idea of the breadth and utility of this important product. The other thing that we enjoy with Prolia is it's an important way for us to source potential patients for EVENITY, which we continue to see very strong growth in.

Speaker 6

So our presence in the bone community and the treating physician population that treat the many women who are trying to reduce their risk of fracture despite the effect of their osteoporosis, we feel really good about it. And yes, it could end up becoming something that helps us in terms of market presence in the face of biosimilar competition in the future.

Speaker 1

All right, Julien. Let's take the next question please.

Operator

Thank you, Yaron. Our next question comes from Gregory Renza from RBC Capital Markets. Please go ahead. Your line is open.

Speaker 18

Great. Good afternoon and thanks for taking my question. Bob, maybe just looking at the rare disease franchise and we've always mentioned you've mentioned that it's certainly a different approach in this space. And to that, what is Amgen's approach on pipeline replenishment when it comes to the rare disease pillar? Certainly, being filpacoparents discontinuation in IPF, just curious how to think about specific disease areas in rare disease and also how you think about kind of supporting and following your current marketed products in the rare disease franchises?

Speaker 18

Thanks so much.

Speaker 1

Yes. We

Speaker 4

can take this in a couple of pieces. And we're obviously very excited about rare disease and what we think we can bring to the field. With respect to the molecules that are already on the market, each of them, as you know, is in early stage of this life cycle and involve either diseases or molecular attributes that we think we can add a lot of value to over time. So we're excited about what we think we can do with those domestically and in international markets. And we're also excited about frankly how our genetics resource which you're familiar with has enabled us to glean insights both from existing molecules in the rare disease portfolio as well as potentially others that we might be able to add to it.

Speaker 4

But I'd invite Jay to share his thoughts as he's already brought a lot of energy to this topic with our rare disease organizations. So Jay, fire away.

Speaker 7

Yes. Thanks Bob and thanks Gregory for the question. The acquisition of Horizon has really activated and energized our staff in R and D. I think inspired by the mechanistic repositioning of a TAPAZA for thyroid eye disease, the capacity to bring rare disease medicines expertly to patients around the world has really activated the imagination of our R and D colleagues and we've had multiple new project launches since the acquisition of Horizon. 2nd, I would say that the integration has gone very smoothly and the staff who've joined us through the Horizon acquisition have both seamlessly executed the development priorities for the rare disease portfolio and also have brought a lot of really interesting ideas.

Speaker 7

We have now a rare disease initiative with dedicated leadership. We have dedicated leadership in rare disease drug development. And we hope and expect to continue just the best in class external innovation that Horizon was really known for in this space. So a blend of internal and external innovation will, I think more than replenish the rare disease mid and early stage pipeline in the years to come.

Speaker 4

We're also very excited about the talent that joined us from Horizon, particularly on the research and the medical side. So we feel really well equipped now to continue to invest in this area and make a difference for patients.

Speaker 1

So Julie Ann Singh, as we're getting to the half hour here, maybe we'll take 2 more questions.

Operator

Certainly. Thank you, Gregory. Our next question comes from Matt Phipps from William Blair. Please go ahead. Your line is open.

Speaker 19

Good afternoon. Thanks for taking my question. Just wanted to confirm if the 4 20 mg dose is what's going to be taken forward into the COPD trials? And is that something that you can formulate into a single injection given it's twice, I believe, the current size? And then this just to confirm, this is 2 separate Phase 3 trials, will they be identical in design?

Speaker 19

Thank you.

Speaker 7

Yes, Matt, thanks for the question. They're good questions, but none that we can address here today. Together with our colleagues from AstraZeneca, we'll have a chance to describe in full the design of the Phase 3 program that will support the consideration of test buyer and COPD soon to come.

Speaker 1

All right, Julien, I think we have time for one more.

Operator

Our last question today will come from Chris Raymond from Piper Sandler. Please go ahead. Your line is open.

Speaker 17

Hey, thanks for squeezing me in. Just back on PAVBlue, we've gotten some interesting doc feedback on this with a decent amount of receptivity to this option. And one thing that's kind of a new development, I think at least in the U. S. Market has been a recent supply disruption to Avastin, which may actually provide maybe more of an opening for this launch.

Speaker 17

Maybe just curious, as you looked at the market, talk about how you looked at the role of biosimilars in this predominantly buy and bill market with a very inexpensive option in Avastin, but one that seems to be fading at least in terms of suppliers when to provide the drug. I guess bottom line does this Avastin supply issue make this even more interesting to you guys? Thanks.

Speaker 6

Thanks for the question, Chris. 1st and foremost, obviously, when you're treating serious illness, you want to have as a provider, you want to have a reliable supply of the product that you and your staff get used to handling. And I can say, we are very fortunate to have world class manufacturing here at Amgen and we continue to have a highly reliable supply chain and manufacturing capability. We have benefited from shortages with other biosimilars including Avastin. As I'll remind you, we have Envasi, our own biosimilar to that product.

Speaker 6

So we are seeing customers coming to us given some shortages here in the U. S. And around the world. And again, I'm thankful for our manufacturing colleagues here at Amgen who are putting us in a very strong position to be able to speak to institutional customers, to individual providers and obviously communicate with patients about the ability for us to supply and the reliability of that over time. That being said, I think we're definitely looking at our own opportunity here in the market with pad blue.

Speaker 6

I think you mentioned that there's high interest in the customers that you've talked to. These retina specialists are sophisticated customers. They understand that if they're going to go with a manufacturer, they're going to want a relationship that is persistent over time and we believe we're well positioned for that. We have a great device in a pre filled syringe. We also have vials.

Speaker 6

So we're able to supply this demand in this market and that's what we intend to do and that's what our teams are in the field establishing right now. But thanks for your interest.

Speaker 4

Okay, Julian. Thanks for moderating our call. Thank you all for joining us. If there were any of you who didn't get a chance to ask your questions, Justin and his team will be around still for a few more hours. So we look forward to gathering with you when we next have relevant information.

Speaker 4

Thank you very much. Bye bye.

Operator

This concludes our 2024 Q3 earnings call. You may now disconnect.

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Earnings Conference Call
Vericel Q3 2024
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